You've heard of shopping local.
On Tuesday, the Santa Rosa City Council promised to take taxpayer dollars and bank locally.
The council approved a local banking policy that will result in up to $1.25 million in city funds being deposited with five Sonoma County financial institutions.
Under the policy, two banks and three credit unions will each receive up to $250,000 in an effort to keep that money circulating in the local economy.
“I'm really excited to see us living some values here,” Vice Mayor Erin Carlstrom said.
After reviewing nine banks that are based in Sonoma County and have at least one branch in Santa Rosa, the city selected five that met other criteria designed to ensure the public's money would be safe and liquid and earn a fair return.
The institutions chosen were Redwood Credit Union, First Community Bank, Summit State Bank, Community First Credit Union, and Sonoma County Grange Credit Union.
Two of the largest banks in the county, Luther Burbank Savings and Exchange Bank, were not selected for different reasons.
Luther Burbank Savings doesn't accept the investment of public funds, likely because the paperwork involved in managing public dollars is significant, explained city financial adviser Arvin Look.
Exchange Bank didn't qualify because its certificates of deposit are generating a return of only 0.19 percent. That's lower than the 0.25 percent the city receives from the $50 million it keeps in the state's Local Agency Investment Fund, which pools money from various local agencies, Look said.
Most of the city's other funds are held in nonlocal banks, including Bank of New York Mellon, US Bank and Wells Fargo Bank, Look said.
There are several regulatory limitations to a municipality investing much in local financial institutions, he said.
“By their nature, local banks are just not equipped to accept large investment of public funds,” Look said. “We'd like to do more, but there are definitely some constraints on doing so.”
One speaker noted that the interest at stake in investing $1.25 million for a year at less than 1 percent interest won't even cover the cost of staff time to administer the program.
But Look said the real value is in the multiplier effect of the money in the local economy, which the institutions theoretically will make available for business and consumer loans.
Other financial institutions that meet the city's criteria can be added at any time by the city's chief financial officer.
You can reach Staff Writer Kevin McCallum at 521-5207 or firstname.lastname@example.org. On Twitter @citybeater.