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REFERENCE TITLE: establishment of state-owned bank |
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State of Arizona House of Representatives Fifty-sixth Legislature Second Regular Session 2024
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HB 2710 |
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Introduced by Representative Sun
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An Act
amending title 6, Arizona Revised Statutes, by adding chapter 18; amending title 41, chapter 27, article 2, Arizona Revised Statutes, by adding section 41-3034.01; relating to banks.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Title 6, Arizona Revised Statutes, is amended by adding chapter 18, to read:
CHAPTER 18
BANK OF ARIZONA
ARTICLE 1. GENERAL PROVISIONS
6-1801. Establishment of bank of Arizona
A. This state shall engage in the business of banking and shall maintain a system of banking owned, controlled and operated by this state under the name of the bank of Arizona.
B. The bank of Arizona must comply with chapter 2 of this title.
6-1802. Bank of Arizona commission duties; examination
A. The bank of Arizona commission shall operate, manage and control the bank of Arizona, locate and maintain its places of business, of which the principal place must be in this state, and make and enforce orders, rules and bylaws for the transaction of its business. The business and financial transactions of the bank, in addition to other matters specified in this chapter, may include anything that any bank or bank holding company may lawfully do, except that the bank of Arizona may not give or lend the state's credit except as allowed by article IX, section 7, Constitution of Arizona. This section does not limit or qualify either the powers of the bank of Arizona commission or the functions of the bank of Arizona. The powers of the bank of Arizona commission and the functions of the bank of Arizona must be implemented through actions taken and policies adopted by the bank of Arizona commission.
B. The first year the bank of Arizona is created, and annually thereafter, the bank of Arizona commission shall examine the bank of Arizona to ensure compliance with the laws of this state.
C. The bank of Arizona commission shall evaluate whether the bank of Arizona is in compliance with its business plan. The bank of Arizona commission's examination shall be made available to the public on a publicly accessible website six months after the examination is completed.
6-1803. Advisory board of directors; terms; requirements; appointment of chief executive officer; business plan; public meetings; public records
A. The advisory board of directors to the bank of Arizona is established consisting of nine members. The state treasurer or the state treasurer's designee shall be one member, and the remaining eight members shall be appointed by the state treasurer and have the following experience:
1. Two members who have experience in the operation of community development financial institutions that serve underserved communities.
2. One member who has experience with state-chartered depository institutions doing business primarily in this state.
3. One member who has experience with credit unions or cooperative banks.
4. One member who has experience with small business enterprises located in this state.
5. One member who has experience with public finance and economic development.
6. One member who has experience in local government and administration.
7. One member who has experience in environmentally conscious financing.
B. The advisory board must reflect the geographical, racial and gender diversity of this state. The advisory board must represent the geographic areas, including urban, rural and suburban areas of this state.
C. The governor shall review the eight appointed members to ensure that the advisory board has experience with the subject areas provided in subsection a of this section and that the advisory board collectively has broad knowledge of the economic needs of this state.
D. Each board member shall be a resident of this state for at least ninety days before the appointment, and except for the state treasurer and the state treasurer's designee, an advisory board member may not:
1. Be a candidate for federal, state or local elected office.
2. Hold an appointed office in a federal, state or local government or have served in an appointed office within four years preceding the appointment.
3. Serve as an official in a political party or have served as an official within the four years preceding the appointment.
E. Except the state treasurer or the state treasurer's designee, an advisory board member shall serve a term of four years and may be reappointed for only one additional term. An advisory board member may continue to serve until a replacement is appointed. The advisory board members shall take an oath to execute their duties faithfully and impartially. Except the state treasurer or the state treasurer's designee, the advisory board shall be compensated at such a rate as the department of administration deems necessary and appropriate to effectuate the duties of the advisory board.
F. The advisory board shall elect a chairperson by a majority vote. An election of the advisory board chairperson shall take place if:
1. The chairperson's term on the advisory board ends without reappointment.
2. Two or more advisory board members call for an election.
G. A majority vote is required for actions taken by the advisory board and seven advisory board members constitute a quorum.
H. The advisory board shall convene a public meeting quarterly or at the request of the chairperson or four advisory board members. The advisory board may adopt policies and procedures to assist in the administration of advisory board business. The advisory board shall annually elect a secretary to keep the minutes of the proceedings of the advisory board and serve as the custodian of records.
I. The advisory board is subject to:
1. Open meeting laws, title 38, chapter 3, article 3.1.
2. Conflict of interest laws, title 38, chapter 3, article 8.
3. Public records laws, title 39, chapter 1.
J. The advisory board shall appoint a chief executive officer of the bank of Arizona by a two-thirds' vote of the full advisory board, and the chief executive officer may not be a member of the advisory board. If a majority of the advisory board members declare a vote of no confidence in the current chief executive officer, the chief executive officer shall be terminated, and the board shall initiate the process of hiring a new chief executive officer immediately. In the case of an absence or vacancy of the chief executive officer or in the case of disability as determined by the advisory board, the advisory board may designate an interim chief executive officer by majority vote to serve as the chief executive officer until the vacancy is filled or until the absence or disability ends. Notwithstanding any other law, all matters of employment regarding the chief executive officer or interim chief executive officer shall be confidential, and the chief executive officer or interim chief executive officer may not attend executive sessions.
K. The chief executive officer or interim chief executive officer shall:
1. Serve at the pleasure of the advisory board.
2. Receive compensation that is commensurate with the position.
3. Be employed full time.
4. Have education, skills and knowledge in management and banking.
5. Be responsible for administering and enforcing the administration the bank of Arizona.
6. Be responsible for all aspects of the bank's management, including its physical facilities, investments, loan portfolio, accounting, risk management and regulatory compliance and draft and execute a business plan. The business plan shall describe the bank of Arizona's strategy for achieving and maintaining sound and responsible operation while enhancing the economic well-being of this state and its citizenry. The business plan shall be updated at least once every four years or more frequently as necessary. The chief executive officer shall send a copy of the initial business plan to the entire advisory board simultaneously at least thirty days before the next advisory board meeting. The business plan is a public record and the chief executive officer shall make the business plan accessible on its publicly accessible website.
L. Within thirty days after the advisory board meeting, the chairperson of the advisory board shall combine the comments expressed from other advisory board members and public comments into a concise list of modifications and distribute the list to the advisory board members. The advisory board shall promptly convey these recommendations, together with any comments of its own, to the chief executive officer. The chief executive officer shall prepare a new draft of the business plan and incorporate reasonable recommendations from the list into the business plan within thirty days after receiving the list.
6-1804. Duties of the bank of Arizona advisory board of directors
The advisory board of directors to the bank of Arizona shall:
1. Establish the bank of Arizona commission to manage and operate the bank of Arizona.
2. Meet regularly with the management of the bank of Arizona to review the bank's operations to determine whether recommendations should be made by the board to the bank of Arizona commission relating to improved management performance, better customer service and overall improvement in internal methods, procedures and operating policies of the bank.
3. Make recommendations to the bank of Arizona commission relating to establishing additional objectives for operating the bank of Arizona.
4. Make recommendations to the bank of Arizona commission concerning appointing officers of the bank of Arizona.
5. Meet regularly with the bank of Arizona commission to present any recommendations concerning the bank of Arizona.
6-1805. Chief executive officer and employees; compensation
The bank of Arizona commission shall employ officers, employees and agents as the bank of Arizona commission deems necessary and in the interests of this state and shall prescribe the duties, designate the titles and fix the compensation of all appointed persons.
6-1806. Removal and discharge of appointees
The bank of Arizona commission may remove and discharge any person appointed pursuant to this chapter except a person appointed pursuant to section 6-1803.
6-1807. Bank of Arizona; powers and duties
The bank of arizona shall:
1. Assist businesses and municipalities in recovering from the economic repercussions of the Covid-19 pandemic.
2. Expand affordable and sustainable financing in this state.
3. Enable this state to share in the benefits extended by the federal reserve to lending institutions.
4. Ensure that a significant portion of public revenues function as deposits to finance economic activity within this state, as opposed to financing out-of-state activity.
5. strengthen state-chartered banks, including through PARTICIPATORY loan programs.
6. Support state-based public and quasi-public agencies and nonprofit organizations, including Community Development Financial Institutions, Community Development Corporations and Economic Development Corporations.
7. Respond to the unmet affordable FINANCING needs of municipalities in this state.
8. Support small and medium-sized enterprises in this state, especially in underserved communities or in lines of business where traditional sources of financing are not AVAILABLE.
9. Assist workers and communities in creating jobs by supporting cooperative business models, including worker-owned cooperative enterprises.
10. Increase available affordable housing options for all residents in this state.
11. Promote sustainable AGRICULTURAL production, address food insecurity, and provide financing for rural business concerns tailored to the resource challenges rural businesses face.
12. Address the historic and CURRENT economic inequities experienced by this state's COMMUNITIES of color, their NEIGHBORHOODS and their enterprises through affordable financing.
13. Offer affordable FINANCing to nonprofit and community-based organizations that work to address the results of racial injustice.
14. Address the historic and current disadvantages experienced by this state's women-owned enterprises with affordable financing, as well as community-based organizations that work for women's economic and social equity.
15. Support the urgent expansion and development of public and private measures to mitigate the grave dangers that climate change poses to the public and to promote substantial reductions in greenhouse gas emissions.
16. Provide financing, either directly, through participation loans, or indirectly, through intermediaries such as community development financial institutions, that is long-term and flexible in its TERMS and use, including debt and under certain conditions, equity and all with the purpose of filling a capital gap and supporting the Bank of Arizona's INITIATIVES.
17. Be supervised for safety and soundness by the department.
18. exercise its powers to support eligible RECIPIENTS by providing those RECIPIENTS with affordable financing.
19. petition to become a member of the federal reserve system, but the bank of arizona is not authorized to become a member of the federal deposit insurance corporation.
20. pursue its goals through affiliates, to be established under the same rules and regulations that apply to other state-chartered depository institutions to the extent convenient for its operations.
6-1808. Bank of Arizona; eligible recipients
A. The Bank of Arizona shall use its powers to extend affordable financing to the following eligible recipients:
1. Public or quasi-public entities, including municipalities that are located within this state, enterprises managed in whole or in part by municipalities and public or quasi-public entities that are located in and primarily serving this state.
2. Nonprofit organizations that are exempt from federal taxation under 26 United States Code section 501(c)(3) and whose primary goal is to benefit this state or its residents through community development.
3. Land trusts.
4. Entities operating as, or transitioning to be, cooperatives that include housing, worker and consumer cooperatives, employee stock ownership plans and worker-owned cooperative enterprises.
5. Entities created by financial institutions that pool monies to lend for affordable housing development.
6. Developers of housing or preservation projects only when the entities that financed the project invite the bank of Arizona to participate with gap financing.
7. State-chartered depository institutions that are used to support other eligible recipients.
8. In-state community development corporations, community development financial institutions or investment vehicles set by such financial institutions to facilitate investment.
9. small business enterprises that conduct business in this state and are unable to procure affordable financing from other banks.
10. Small and medium-sized farms and related industries.
11. Investment vehicles that are created for the primary purpose of supporting other eligible recipients listed in this subsection.
B. affordable financing includes the following:
1. credit and loans, including long-term loans and unsecured loans. The Bank of Arizona may employ underwriting methods that are flexible in their criteria, terms and uses and shall provide loans at affordable rates.
2. letters of credit, guarantees, subordinate loans and other forms of derisking for the purpose of crowding in additional financing by nonBank sources.
3. technical assistance.
C. For the eligible recipients provided in subsection A of this section, affordable financing may include:
1. Equity financing, including preferred stock, common stock, equity equivalent capital and other hybrid instruments.
2. Grants, donations and contributions, including grants given over a period of years to provide predictability for eligible recipients.
6-1809. Bank of Arizona; priorities
Without deviating from the bank of Arizona's business plan, the bank of Arizona shall give priority to the following:
1. Eligible recipients subject to the historic and current economic inequities experienced by communities in underserved neighborhoods, including enterprises established by residents and eligible recipients working to remedy those inequities.
2. Eligible recipients subject to the historic and current economic inequities experienced by women throughout this state.
3. Rural businesses and farming concerns.
4. Businesses with compensation structures that provide a livable wage, establish an equitable ratio between the least-paid and highest-paid members of the business or otherwise demonstrate a commitment to equitable pay.
5. Entities that address the impacts of climate change and the reduction of greenhouse gas emissions.
6. Municipalities that need monies to update and build safe and sustainable infrastructure.
7. public and quasi-public agencies, nonprofit organizations, banks and community development organizations and financial institutions. The bank of Arizona shall partner rather than compete with these entities to expand affordable financing in this state.
8. Lending programs that originate and service a loan.
9. rural areas in order to promote equitable distribution of Bank resources.
10. Municipalities that lack resources. The bank of ARizona shall provide technical support to make the application process simple and affordable.
6-1810. Bank of Arizona; conflict of interest; purpose
A. The bank of Arizona may not:
1. Transact with or extend financing to a member of the bank of Arizona commission, the chief executive officer or an employee of the bank of Arizona, including an immediate family member of that person or an entity in which that person has an interest. This prohibition shall remain in effect for four years after the conclusion of the term of the bank of Arizona commission member, chief executive officer or employee.
2. Transact with or extend financing to a member of the advisory board or immediate family member. This section does not prohibit the bank of Arizona from transacting with or extending financing to an entity in which an advisory board member is associated.
B. This chapter shall be interpreted and construed liberally in aid of its declared purpose.
6-1811. State monies deposited in bank of Arizona; income of the bank
A. All state monies must be deposited in the bank of Arizona by the persons having control of the monies or must be deposited in accordance with constitutional and statutory provisions.
B. All income earned by the bank for its own account on state monies that are deposited in or invested with the bank to the credit of this state must be credited to and become a part of the revenues and income of the bank.
C. All remaining surplus after operating costs and expenses shall be deposited in the state general fund.
6-1812. Guaranty of deposits; exemption from all taxation
All deposits in the bank of Arizona are guaranteed by this state. The deposits are exempt from all state, county and municipal taxes.
6-1813. Clearinghouse
For banks that make the bank of Arizona a reserve depository, the bank of Arizona may perform the functions and render the services of a clearinghouse, including all facilities for providing domestic and foreign exchange, and may rediscount paper on terms that the bank of Arizona commission prescribes.
6-1814. Powers
The bank of Arizona may make, purchase, guarantee or hold loans to all persons in this state as prescribed by the bank of Arizona advisory board of directors and the bank of Arizona.
6-1815. Limits on loans
Notwithstanding any other law, the bank of Arizona may not make any loan or otherwise give its credit to a member of the bank of Arizona commission or the advisory board of directors to the bank of Arizona. Before taking office, a member of the bank of Arizona commission must file a statement with the bank of Arizona indicating any personal interest that the member has in any loan or loan application in existence or pending at any time during the member's term on the commission.
Sec. 2. Title 41, chapter 27, article 2, Arizona Revised Statutes, is amended by adding section 41-3034.01, to read:
41-3034.01. Bank of Arizona commission and the advisory board of directors to the bank of Arizona; termination July 1, 2034
A. The bank of Arizona commission and the advisory board of directors to the bank of Arizona terminate on July 1, 2034.
B. Title 6, chapter 18 is repealed on January 1, 2035.
Sec. 3. Purpose
Pursuant to section 41-2955, subsection E, Arizona Revised Statutes, the legislature establishes the bank of Arizona commission and the advisory board of directors to the bank of Arizona to operate, manage and control the state-owned bank in Arizona.
Sec. 4. Initial terms of members of the bank of Arizona advisory board of directors
A. Notwithstanding section 6-1803, Arizona Revised Statutes, as added by this act, the initial terms of members of the advisory board of directors to the bank of Arizona appointed pursuant to section 6-1803, subsection A, paragraphs 1 through 7, Arizona Revised Statutes, as added by this act, are:
1. Two terms ending July 1, 2026.
2. Three terms ending July 1, 2028.
3. Three terms ending July 1, 2030.
B. All subsequent appointments shall be made as prescribed by statute.