BILL ANALYSIS
AB 2581
Page 1
Date of Hearing: May 12, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2581 (Bradford) - As Amended: April 26, 2010
Policy Committee: Banking and
Finance Vote: 8-4
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill creates a Banking Development District (BDD) program
to encourage the establishment of bank branches and services in
locations with a demonstrated need for access to mainstream
financial services. Specifically the bill:
1)Establishes the Banking Development District Program within
the Treasurer's Office.
2)Requires the Treasurer, in collaboration with the Department
of Financial Institutions, to develop and provide incentives
to banks participating in the program. Range of incentives may
include, but not be limited to, deposits of public funds at
below- market interest rates, and other incentives deemed
appropriate by a local agency.
3)Requires the Treasurer and Department of Financial
Institutions to develop a performance review process to ensure
the effectiveness of BDDs.
FISCAL EFFECT
1)The magnitude of state and local costs and/or revenue
reductions depends on the incentive package ultimately adopted
for the program. Incentives packages similar to those provided
in New York State's BDD program would result in GF revenue
reductions/costs exceeding $1 million annually.
2)Significant costs, likely totaling $300,000, to the Treasurer
and Department of Financial Institutions combined for
administration, marketing, performance reviews, and
AB 2581
Page 2
examination costs related to the BDD program.
COMMENTS
1)Rationale . The bill is intended to reduce the number of
Californians who lack access to checking and savings accounts,
by encouraging banks to locate and expand operations in
underserved areas of the state. Supporters assert that too
many Californians are disconnected from the financial
mainstream, citing studies by the U.S. Census Bureau showing
that nearly 28% of adults in California do not have a checking
or savings account. They also indicate that those not using
banking services face greater personal risks, pay more for
financial services, and lose opportunities to build financial
wealth and security.
2)Background . This bill is patterned after the New York BDD
program, which was implemented in 1994 and currently includes
about 24 individual districts. In return for locating or
expanding operations in designated underserved communities,
participating banks receive various financial incentives. For
example the New York program makes over $100 million in public
funds available for deposits in participating branches at
interest rates that are one-half percentage point (and in some
cases up to 0.9 percentage points) below comparable market
rates. Participating financial institutions are also eligible
for partial property tax exemptions and, in certain instances,
various enterprise-zone tax and jobs incentives. Approval of
similar incentives in California would require subsequent
legislation.
In October of 2009, the Los Angeles City Council approved a
motion to establish a local BDD program by requiring the City
Attorney and City Treasurer to draft an ordinance establishing
the program. Additionally, the City Treasurer must set up a
task force with department heads and council members to
determine what modifications may be needed to adapt the New
York BDD model program to Los Angeles.
3)Related legislation . This bill is similar to the April 30
version of AB 1502 (Lieu) of 2007. The BDD provisions of that
measure were subsequently deleted and replaced with provisions
creating a financial literacy program.
AB 2581
Page 3
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081