The Credit Union Association of New York (CUANY) and local government officials are pushing state lawmakers to pass legislation that would allow municipalities the option of depositing tax dollars in their local credit union or community banks. CivSource spoke with the CEO of CUANY, Willam J. Mellin on the impact of municipal deposit choice for the state.
“Right now, commercial banks are in control of municipal deposit authority.” A problem which, according to Mellin, can keep municipalities from saving money through the lower fee structures and higher yields of their local credit unions. Municipalities he says, may also have more financial options such as loans which are scarce at the corporate banks.
Currently, the surrounding states of New Jersey and Connecticut allow municipal deposit choice, leaving New York with a corporate bank monopoly. The local law, enacted in 1909 was created before credit unions existed and as Mellin points out, give corporate banks an unfair advantage. CUANY has been working with local legislators on passing support measures and getting municipal deposit choice included in the upcoming state budget. New York State Assemblymen Carl E. Heastie, D-Bronx, and Sen. Kevin S. Parker, D-Brooklyn, are sponsoring the municipal deposit choice bill (S.1782-a/A.4370-a) and a reform initiative was included in the 2010-2011 Executive Budget.
CUANY currently has support from several municipalities and mayors including Albany Mayor Gerald Jennings and New York City Mayor Michael Bloomberg. The New York City Council also recently passed Resolution 17, which encourages the state legislature to enact legislation amending all applicable state law to allow local government entities statewide, such as cities, towns, counties, public schools, fire districts and public libraries, the option of depositing public funds in local credit unions or community savings institutions.
However, supporters of reform are facing opposition from the New York Bankers Association which estimates a loss of state revenue if the bill is passed to be anywhere from $15 million to $30 million over the next couple of years. Supporters are quick to counter that competition allows the market to decide.
Mellin points out that placing deposits with credit unions has a direct relationship to community development and local economic activity. Local credit unions pay payroll and local property taxes, and their member-owners also pay taxes on their dividends to the municipalities that they operate in, creating a natural relationship between the credit union and municipal governments.
In the year ending September 2009, credit union loans grew by nearly 3%; while during that same period of time, banks reduced their loans by nearly $575 billion, a decline of -7.2%, according to FDIC and NCUA.