Will Los Angeles Solve the Cannabis Banking Problem First?
Big cities have lots of problems to solve and LA is no different. The City is taking an interesting approach to lassoing a few at once by discussing the creation of a public bank, a little-used financing structure recently explored by Santa Fe, New Mexico, and whose only successful implementation might have been a bank set up for North Dakota farmer's in 1919.
Interestingly, an LA version of the public bank could be designed to handle legal cannabis cash as well as affordable housing projects.
In an article in the Los Angeles Daily News, "Los Angeles city leaders are looking into the possibility of setting up a public bank that would do business with marijuana dispensaries, as well as cater to affordable housing developers." [City Council President Herb Wesson is expected to officially introduce a motion instructing the Budget and Finance Committee, chaired by Councilman Paul Krekorian, to begin looking into the feasibility of the idea.]
Now this might be a bit of Ironic Inside Baseball, but the LA proposal was made in a speech by Wesson, whose office has also proposed that cannabis businesses are not granted business licenses come January 1st - a move that the LA Cannabis Task Force says goes against the wishes of both Governor Jerry Brown and the explicit wishes of voters. As Executive Director Ruben Honig says, "There's still a lot of work to do."
A similar community bank idea is also being explored in Oakland, where city leaders say such a local financial institution could provide:
secure and legal cash management for cannabis entrepreneurs (which are cash businesses because of the current banking issue)
low-cost financing that would enhance job creation
much-needed credit for small- and medium-sized businesses to grow
loans for community objectives such as supporting low- and moderate-income housing, energy conservation, solar panel installation, and water-conservation efforts.
(American Cannabis Report readers will know that Federally insured banks are challenged to work with cannabis businesses because cannabis is a Schedule I drug by the Drug Enforcement Administration; proceeds from a cannabis business - even in states where cannabis is legal - are considered on the federal level to be drug-related.)
Though most believe banks will not serve or keep cannabis-related clients (see here, here, and here) there are banks that work with cannabis businesses (for now). Wesson's draft motion notes that, as of March 2017: "Federal records show that 368 banks, credit unions and other institutions work with cannabis businesses on a limited basis, while the Partner Colorado Credit Union has a “safe harbor private banking program” that accepts cannabis business clients which have become 80 percent of the institution’s customer base."
According the MJ Biz Daily, "... the cities of Oakland and Santa Rosa, California; Santa Fe, New Mexico, and Philadelphia have considered or are considering creating municipal banks to serve marijuana businesses," as well as "...the states of Arizona and Maryland are also studying how to provide banking services for the cannabis industry."