SB 5188, sponsored by Sen. Patty Kuderer (D–Bellevue), establishes a Washington state public bank in efforts to provide greater local government capital financing.

The bill attempts to address the multibillion-dollar deficit local governments face in constructing, maintaining, replacing, and improving critical infrastructure and economic development projects. The state bank would act as a financial conduit without creating state debt and receive deposits from state and local governments to issue low-interest loans.

The creation of a state bank has been a focus of heated debate within infrastructure funding circles. In May 2020, the Evans School of Public Policy released a report detailing the framework, business plan, and potential legislation needed to create such a bank.

It is worth noting that based on the Evans School’s research and stakeholder discussions, roughly one third of state governments and political subdivisions indicated interest in a public bank, while two thirds of respondents indicated no interest or uncertainty of benefit. Additionally, its analysis found that many of the services the proposed state bank would provide are already available (either entirely or in part) through existing state government programs or private financial institutions.

One such state government program is the Public Works Trust Fund (PWTF)—a revolving loan program that AWC has championed for years. Cities have voiced their overwhelming support in the preservation of these funds, as many of our small and medium cities rely on the program for critical infrastructure safety improvements.

However, as a result of the McCleary decision, the available funds for PWTF are chronically diverted: in the 2019 legislative session, legislators diverted an additional $160 million. That year, the fund received loan applications totaling over $250 million. Only $81 million in projects were funded.

AWC supports efforts to allocate greater funds for city infrastructure but is concerned with costs and the potential financial burden imposed on cities, unmitigated risks, and outstanding questions about how a bank would be structured and funded.

Dates to remember

SB 5188 is scheduled for public hearing in the Senate Business, Financial Services and Trade Committee on January 28 at 8 am.