Other Views from Those in the Know
Patrick La Pine
President and CEO
Municipalities Deserve Better Returns on Their Deposits
A critical piece of legislation being considered this session is a proposal that would finally allow municipalities and public offices to have depository choice when it comes to their funds and financial-service needs. Every Floridian has the ability to choose whom they want to “bank” with, so why should municipalities not have that same opportunity?
Credit unions across Florida receive deposit requests from local government entities, but Florida law forces them to turn these requests down. That’s because the law, as it stands, only allows commercial, for-profit banks to receive these funds. By allowing not-for-profit credit unions to accept public deposits, municipalities potentially could receive better rates of return on their tax dollars and would have the opportunity to keep their holdings within their own communities.
Passing this legislation would benefit many in Florida. Credit unions are required to meet the same public depository requirements as for-profit banks, and they are held to the same accountability standards and offer the same protections to their members. Yet current law considers banks acceptable public depositories but not credit unions.
The new legislation would allow credit unions to bring competition to public deposits, which would help drive better returns and optimal economic benefits to Florida taxpayers. In addition, it would provide a unique opportunity for towns and public offices to take advantage of community-based financial institutions, whose member-owners are they very people these government entities seek to serve.
Opponents of the bill may claim that credit unions should not be allowed to serve local governments because they do not pay taxes. But that would be not only a grave misrepresentation of the facts but an archaic and possibly self-serving argument. To claim that only for profit banks should be able to conduct business with municipalities and public offices is a clear attempt to maintain the monopoly banks have had on accepting public funds. And the policy would limit other, deserving, accessible and qualified institutions to compete in this market.
Credit unions pay tangible personal property taxes, real property taxes and (as employers) all employment taxes, as would any other bank. Their not-for-profit structure and mission to serve their communities only exempt credit unions from paying federal and state income taxes (the latter, of course, is not an issue in Florida, which has no state income tax). So, essentially, credit unions pay the same taxes as sub-S corporations, and currently, there are 40 Sub-S banks in Florida, 23 of which are qualified public depositories.
Beyond that, credit unions are 100 percent locally-owned and return all of their profits back to their member and, in turn, into their local communities. Banks, on the other hand, are management and board driven, shareholder owned, for-profit institutions that transfer their earnings back to their shareholders, who may be located outside of the immediate community or even the state.
Opponents may claim credit unions were not originally chartered to serve as public depositories. But given the fact that they are locally-owned and continuously invest and reinvest their funds back into the community, shouldn’t they be allowed to safeguard local taxpayer dollars? One could just as easily argue that banks weren’t originally chartered to sell mortgage or car loans, either. However, the market has evolved, and the law has followed suit and allowed these banks to evolve as well.
Credit unions are not asking for any preferential treatment when it comes to the public funds market. They are simply seeking the opportunity to provide depository choice for public offices, with which they may have strong, community ties and for which they potentially provide a better return on deposit and bigger savings during an already tough economic environment.
Patrick La Pine is president & CEO of the League of Southeastern Credit Unions & Affiliates.
© Florida Voices
Published Sunday, March 10, 2013