Intersections: A monthly go-to for reliable facts and analysis about California's debt, investments and economy

California�s Time Deposit Program Provides �Competitive Advantage�

A few years ago Paul Cultrera, the general manager of the Sacramento Natural Foods Co-op, began looking to finance construction of a $10 million, all-organic grocery store.

Out of the blue, he got a call from a local community lender, Five Star Bank.

�They came to us and said they were really interested in the project,� said Cultrera.

The call turned out to be the beginning of a beautiful, business friendship. �It was a perfect fit,� Cultrera recalled.

The secret to making the deal work came from the California State Treasurer�s Office. The agency directs about $5 billion in state bank deposits to modestly sized community banks, like Five Star, that, then, is lent to Main Street businesses. The result is healthier commerce and new jobs.

The Treasurer�s Time Deposit Program is a way to �take dollars that are generated within the state and then turn around and put them to use within the state,� said Five Star Chief Executive James Beckwith.

Put simply, the Time Deposit Program ensures that approximately 66 participating banks, credit unions and savings and loans across the state and the communities they serve have access to a reliable sources of funding to grow local economies.

�We move the money into local banks,� explains State Treasurer John Chiang. �Banks take the money and partner with local businesses, creating access to credit, where often times there was not sufficient access to credit. Business owners get to fulfill their dreams.�

Understanding those dreams was a big part of why Sacramento�s B Street Theater partnered with Five Star to finance the building of a 365-seat theater and cultural center.

�They just stepped up and saw the need, the importance of the project,� said Buck Busfield, the producing artistic director at B Street Theater. �Going to a community bank is the best way to go for a cultural facility.�

The ability to make such community-based loans depends on a source of stable funding, such as a $75 billion Treasurer�s Office account that invests short-term state and local government deposits, said Bank of San Francisco�s chief executive, Ed Obuchowski.

Financing backed by the Treasurer�s Time Deposit Program allowed the bank to loan money to a local eatery called Sushirrito. The Japanese-Mexican fusion restaurant opened in San Francisco's Financial District and since expanded to several locations in the San Francisco area. Sushirrito is also planning to open a location in New York City.

The program, said Obuchowski, is almost �too good to be true� and gives the Bank of San Francisco �a great competitive advantage� to support a broad array of business and nonprofit clients in Bay Area and beyond.

Working with community banks, said Chiang, is one of about a dozen economic programs the Treasurer�s Office provides to assist small businesses, develop affordable housing, encourage advanced manufacturing, clean the environment and finance schools, hospitals and private universities.

�Our goal,� he said, �is to help improve the quality of life for all Californians and to create greater opportunities.�