Check Out The Latest News On Our Blog

The Public Bank Parcel Tax: From Regional Cost Sharing to a $58.3 Million Berkeley Taxpayer Obligation

How a Regional Partnership Became a Berkeley-Only Financing Model

Methodology

This report reviews the policy history leading up to the 2026 Public Bank Parcel Tax measure. The review draws upon Berkeley City Council actions, the Public Bank East Bay Feasibility Study, a City of Berkeley-commissioned review of the business plan, the proposed parcel tax ordinance, and publicly available materials published by Friends of the Public Bank East Bay. Most materials are contained in the public record; others were obtained through Public Records Act requests and are available through the links provided in this document. The report examines how the bank's financing strategy evolved over time, comparing the regional cost-sharing approach contemplated during 2017–2024 with the financing model presented to Berkeley voters in 2026.

Introduction:

In November 2026, Berkeley voters are being asked to approve a new tax on homes and businesses to create a regional bank. Since its inception, public policy deliberations have envisioned and promoted the East Bay Public Bank as a “multi-jurisdictional” regional partnership to finance business development.

2017 – 2024 The Promise of a Regional Cost-Sharing Partnership

In 2017, the Berkeley City Council contributed $25,000 to develop such a partnership. These funds were used to develop a preliminary financing framework for the bank. In 2021, City Council contributed $50,000 toward the Public Bank East Bay (PBEB) Viability Study. Published in 2022, the study proposes a plan for a regional bank capitalized through contributions from multiple jurisdictions—including Berkeley, Oakland, Richmond, and Alameda County—with the costs and benefits shared across the region. The premise was simple: a regional bank should be financed by regional partners.

The financial projections accompanying this report assume that the Bank begins with a commitment of $40M in pledged deposits from the initial four member governments: Oakland, Berkeley, Richmond, and Alameda County. (PBEB Feasibility Study, p.18)

In April 2023, before the Berkeley City Council, the bank’s proponents stated the capitalization costs would be proportional to a jurisdiction’s “wealth.” City Council expressed support for the cost sharing proposal, in concept, and appropriated $50,000 to consultants to “advise city staff” in collaboration with regional partners on the “production” of a business plan. The City subsequently contracted with HR&A Advisors to perform this work. 

The HR&A report reiterated that successful capitalization would depend on attracting investments from multiple public agencies and institutional partners.

Exponential Growth and Millions in New Deposits

For nearly a decade, Bank proponents consistently argued that a comparatively small level of capitalization from public jurisdictions would catalyze financial independence. They maintain that funds for lending will “grow exponentially,” and will “deliver benefits worth many times the initial investment,” (PBEB Feasibility Study, p 3).

As the loans are repaid, that money will return to the community through the form of new loans for more initiatives. … Over time, available funds for lending will grow exponentially. (https://www.publicbankeastbay.org/accessed July 17, 2026)

In addition to this organic growth, the HR&A evaluation of the Friends of the Public Bank East Bay business plan suggests that private funds will be a major source of bank revenue.

A considerable amount, totaling $36 million, is projected to come from private contributors such as foundations and unions. (HR&A Advisors p. 10)

The PBEB is positioned to require significant additional deposits mechanisms to maintain liquidity and facilitate lending. The business plan indicates that 85% of the deposits are expected to come from the Community Reinvestment Act (CRA) and other private sources. (HR&A Advisors p. 2)

2026 Parcel Tax Measure: A Departure from the Regional Financing Approach

In January of 2026, banking proponents submitted ballot language (reposted here). The financing mechanism established by the measure represents a fundamental departure from the regional cost-sharing model. Rather than sharing costs among multiple participating jurisdictions and leveraging private capital, the measure requires Berkeley homes and businesses alone to provide a projected $58.3 million in tax revenue.

Critical policy departures from the prior approach include:

·       100% of the financing responsibility is placed on Berkeley homes and businesses (representing about 45% of city residents) with no guarantees that any of the funds will be spent in the City of Berkeley

·       The parcel tax is projected to cost residents $58.3 million, representing a 45% increase over the $40 million figure presented in the viability study and business plan, and twenty-three times the historic contribution contemplated for Berkeley

·       There is no way for the Berkeley City Council to modify the tax based on actual financial needs because the measure contains no provisions that allow for amendments or reconsideration of the tax rate. Under the previous plan, proponents promised shared governance among participating jurisdictions. (PBEB Feasibility Study, p 33).

Concentrated Costs with Regional Benefits (the Free-Rider Effect)

The Berkeley-only financing approach is difficult to reconcile with established principles of finance and collective action theory, which hold that regional public goods are most sustainable when the costs of providing them are aligned with those who benefit. Otherwise, jurisdictions have a rational incentive to free ride on the contributions of others.

By concentrating the initial capitalization burden on Berkeley while allowing the bank to serve the broader East Bay, the measure creates a “free-rider incentive structure” that undermines cost sharing and proportional benefits – the historic policy objective. As noted above, the ordinance contains no requirement for a minimum percentage of Berkeley taxpayer funds to be invested in the city.

Berkeley Taxpayers Pay More—Even if the Bank is an Economic Success 

If the bank performs as its supporters suggest—attracting millions of dollars from foundations, unions, Community Reinvestment Act (CRA)-motivated deposits, and other private sources—Berkeley taxpayers would receive no financial relief. In fact, they would be required to pay more because the ordinance mandates automatic annual increases tied to the maximum allowable inflation adjustment, regardless of the bank's financial condition.

Annually in May, the City Council shall increase the previous year’s rate by up to the greater of the cost of living in the immediate San Francisco Bay Area or per capita personal income growth in the state. (7.03.020 – B Adjustments for Inflation)

The measure contains no mechanism to suspend, reduce, or terminate the tax if the bank becomes fully capitalized, achieves its financial objectives, attracts substantial outside investment, or no longer requires additional taxpayer support. Likewise, it provides no mechanism to reduce Berkeley's tax burden if the bank exceeds its financial projections, generates significant retained earnings, or residents are experiencing unusually high inflation. The taxpayer obligation grows automatically, while any financial upside accrues to the institution rather than to the residents who capitalized it.

A Case of Political Expediency Over Principled Policy

Several observers interviewed for this report suggested that the new approach reflects political considerations rather than principled public policy.  They argue that concentrating the financing burden on Berkeley property owners may be viewed as a more politically achievable path than securing financial commitments from multiple jurisdictions. They note that Berkeley has historically approved numerous parcel taxes and that the tax burden falls on owners of taxable property rather than the public at large.

By contrast, expanding the measure county wide or to multiple jurisdictions would require building broader political support across a more diverse electorate that has been less accepting of new parcel taxes. Observers further note that using the initiative process, which requires only a simple majority for approval, may have influenced the decision to bypass negotiations with other local governments, despite Berkeley having already invested approximately $125,000 in developing a regional concept through City Council action.

Economic Development is a Public Good

Financing regional economic development is a laudable public policy objective and, if thoughtfully designed, has the potential to generate both broad economic benefits and social equity. The issue raised in this report is therefore not what the measure seeks to accomplish, but how it proposes to accomplish it.

The measure departs from the original regional financing model by assigning the bank's initial capitalization exclusively to a minority segment of Berkeley taxpayers while preserving a regional mission. A financing model that more closely aligns contributions with expected benefits would better reflect principles of equity, regional cooperation, and progressive policy.

The Promise of a Regional Cost-Sharing Partnership Could Have Been Preserved

The concern raised in this report is not the bank's mission (what), but the financing structure chosen to support it (how). Numerous provisions could have been included to (1) encourage equitable cost sharing, (2) protect taxpayers, and (3) align revenues with the bank's actual capitalization needs.

1. Encourage Equitable Cost Sharing, Example Provision

The Bank shall ensure that, over any rolling five-year period, not less than seventy-five percent (75%) of the aggregate principal amount of loans financed with funds originating from a participating city or incorporated jurisdiction shall be made to eligible borrowers or projects located within that same jurisdiction. Any shortfall shall be remedied within the following fiscal year.

Proponents have argued that the Public Bank will generate substantial economic benefits throughout the East Bay. Yet the ordinance contains no requirement that Oakland, Richmond, Alameda County, or any other participating jurisdiction contribute capital. That responsibility lies exclusively with Berkeley taxpayers. Nor does it guarantee that a meaningful share of Berkeley's investment will be reinvested in the city. A provision such as the one above would align costs with benefits, encourage broader regional participation, and reduce the incentive for jurisdictions to free ride on Berkeley residents. 

2. Protect Taxpayers from Escalation, Example Provision

To protect taxpayers during periods of elevated inflation or economic stress, the annual adjustment to the parcel tax shall not exceed five percent (5%) in any fiscal year, regardless of any higher inflation measure otherwise permitted by law.

Unlike previous Berkeley parcel taxes, which authorize the City Council to determine whether inflationary adjustments are appropriate, this measure mandates annual increases tied to the highest available inflation index. During periods of unusually high inflation, increases could exceed 10 percent and would occur automatically, regardless of whether additional revenue is necessary to capitalize or operate the bank or the potential financial harm to residents. 

3. Align Tax Revenues with Capitalization Needs, Example Provision

Once the Bank has achieved its required capitalization through any combination of taxpayer funding, retained earnings, grants, private investment, or other lawful sources, the parcel tax shall automatically be reduced to the amount necessary to maintain required regulatory capital. No tax shall be collected beyond the amount reasonably necessary to capitalize and operate the Bank.

If proponents believe the Public Bank will become financially self-sustaining through retained earnings and other capital sources, taxpayers should benefit from that success. A mechanism tying future tax collections to the bank's actual capitalization needs would prevent unnecessary revenue collection while preserving the institution's long-term financial stability.

A Better Path Forward

Had the proposal continued through the traditional legislative process rather than proceeding directly to the ballot, provisions such as these could have been debated publicly, refined through stakeholder input, and incorporated into the final ordinance. 

This is the central policy question before Berkeley voters: 

If a regional public bank is a worthwhile investment, why should a minority of Berkeley residents pay for it?

This report does not suggest that a regional public bank is inherently unsound. Rather, it documents how the financing mechanism presented to Berkeley voters differs from the regional cost-sharing approach that guided the project's development for nearly a decade. If the bank is intended to serve the East Bay, then equity and progressive policy suggest that its capitalization should be shared by the jurisdictions it is intended to serve.