City to deposit $75 million with Sacramento banks Friday. Here's how it could help local businesses
Three Sacramento banks will get an infusion of $50 million in deposits on Friday, Nov. 16 through the City’s sale of bonds to finance the Convention Center expansion.
The deposits represent a major increase in the City’s commitment to the Responsible Investment for a Stronger Economy Initiative (RISE), under which Sacramento-area governments target deposits to local banks that in turn commit to lending at least half of those deposits out to local businesses.
City Treasurer John Colville said the $50 million deposited on Friday will be split among three banks: Five Star ($15 million), River City ($25 million) and American River ($10 million). It adds to the $25 million that the City deposited in February with Five Star Bank. The newly deposited money will remain in bank-issued Certificates of Deposit for 12 to 18 months, at which point it will be withdrawn to pay contractors on the Convention Center project.
Mayor Darrell Steinberg has consistently advocated expanding the City’s participation in RISE, which was launched in October 2017 by Region Finance, a trade association of community banks affiliated with the Sacramento Region Business Association.
“It makes sense for the City to deposit its money at home instead of sending it to fund business loans in other parts of the country and world,” Mayor Steinberg said. “This is a win-win for the City and for the Sacramento economy.”
Colville said the City’s existing deposits with Five Star are being put to work in the community. As of July 31, the bank reported $25.8 million in loans approved for Sacramento businesses in 2018. They included loans for the construction, purchase and refinancing of commercial and industrial buildings and the construction of affordable housing near Del Paso Boulevard.
Councilman Rick Jennings, who initially proposed that the City participate in RISE, said he is “pleased that the initial $25 million the City invested in Five Star Bank has resulted in local lending and increased affordable housing development.”
“When I first approached the City Treasurer about this program we agreed that the City investing in our local community banks made good business sense,” Jennings said. “It’s now time for the City to expand its investments in our local banks By doing so, our community and city benefits.”
Colville said making the deposits with local banks won’t affect the investment returns of the City’s Investment Pool A, which has been the highest performing municipal investment fund in California for the past eight years. The fund manages assets not only for the City but also for entities such as the Sacramento Public Library and the Capitol Area Development Authority.
Josh Wood, CEO of Sacramento Region Business, said the group devised the first-in-the-nation RISE program after it started looking at how much local governments in the Sacramento region were investing with overseas banks.
“As we compete for high-wage jobs, our region needs to stay laser focused on increasing access to capital,” Wood said.
Elk Grove was the first local government to join the RISE program. It said in November that it would place up to $15 million with River City Bank as a way to stimulate economic growth. Rancho Cordova followed suit by placing $5 million each into deposit accounts at Five Star Bank and American River Bank.
Region Finance has set a goal of getting $1 billion invested with local banks so that the money can be recycled into the Sacramento economy.
At an October City Council meeting, Mayor Darrell Steinberg asked that the City expand its involvement in the RISE program.