Credit Union Association of New York Calls for "Municipal Deposit Choice" At NYC Council's Committee Hearing

ALBANY, NY (02/23/2010)(readMedia)-- The Credit Union Association of New York (CUANY) testified yesterday before the New York City Council's Committee on Community Development calling on the Council to join Mayor Bloomberg and Gov. Paterson in support of municipal depository choice, which would allow local government entities 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.

While a majority of states including Connecticut and New Jersey allow municipal deposit choice, and the Federal Credit Union Act explicitly authorizes federal credit unions to accept local government deposits, commercial banks in New York State currently own a monopoly on such deposits.

"Credit unions have the potential to help state and local officials in a way that doesn't cost state or local taxpayers a dime, but instead will save them money and increase the range of financial options available to elected officials in New York City and throughout the state as they deal with the great recession and the growing budget crisis," said Linda Levy, Chief Executive Officer of the Lower East Side Peoples' Federal Credit Union (LESPFCU), while testifying on behalf of the Credit Union Association of New York and 4.3 million credit union members throughout New York State.

"Municipal deposit choice allows these public funds to stay local, allows for more reinvestment in our communities, helps local governments increase revenue, and create savings for the taxpayers," continued Levy. "In short, municipal deposit choice puts more public dollars back into Main Street."

Levy also thanked Councilman Albert Vann for sponsoring City Council Resolution 17, which calls upon the New York State Legislature to adopt and the Governor to sign legislation allowing credit unions, savings banks, and savings and loan associations to accept and secure these municipal deposits.

Vann's resolution builds on the support recently demonstrated by Gov. David Paterson and Mayor Michael Bloomberg. Paterson included the expansion of municipal depository choice in his proposed 2010-11 budget, and Bloomberg proposed an investment of up to $25,000,000 in New York City credit unions as a means of fostering investment in low-income areas.

"It is time for New York State to allow the city to invest its money in these community development financial institutions. While major commercial banks have decreased their amount of lending, these local community development financial institutions have provided lending opportunities in neighborhoods throughout New York City," said Councilman Vann who represents the City's 36th District in Brooklyn. "Many of these institutions have given a lifeline to New York City's small businesses that are struggling to find capital, while also offering opportunities to individuals traditionally without bank accounts or banking and financial services."

Levy noted that the Lower East Side Peoples' Federal Credit Union serves the Lower East Side and Central Harlem, employees and volunteers of several non-profit organizations and local businesses, and low income residents throughout the five boroughs.

Furthermore, according to Home Mortgage Disclosure Act data, credit unions make a larger percentage of loans to low and moderate income borrowers than banks and thrifts. According to the National Credit Union Administration, 96% of the members of Federal credit unions have household incomes of less than $100,000 per year.

"Allowing these institutions to accept municipal deposits will only strengthen the communities they serve by offering competition and an alternative to commercial banks, whom often have no significant relationship to the communities they serve," continued Councilman Vann. "I urge the State Legislature to adopt, and the Governor to sign, this much-needed change into law so that the economic vitality of communities throughout New York City can be improved and strengthened by community-based financial institutions."

William J. Mellin, president/CEO of the Credit Union Association of New York said that "in recent months, a variety of publications and organizations have been urging consumers to ditch their 'big banks' in favor of credit unions or community banks. This broad support confirms that the credit unions' member-owner operating model works and I'm confident that local government entities, like more and more consumers, will soon be jumping on the credit union bandwagon as long as they are given the freedom to do so. "

Levy added: "The Governor's proposal simply gives those localities that wish to deposit funds in credit unions or savings banks the authority to do so. While the big banking special interests are lobbying hard to deny local governments that option on the grounds that credit unions are non-profits and don't pay corporate taxes, the fact is the banking industry constantly misrepresents the true tax status of credit unions. The simple truth is that credit

unions do pay taxes, including payroll taxes and local property taxes to the very local entities looking for help through municipal deposit freedom."

Credit unions do pay property taxes and employer taxes, and their member-owners pay taxes on dividends. Credit unions' tax exemption lies in their not-for-profit structure, including cooperative ownership and volunteer leadership –not because of the types of services they provide. Credit unions are 100% locally-owned, and as not-for-profit financial cooperatives, they return all profits back to their members. Access to municipal deposits would allow credit unions to further reinvest in their local communities, via loans to members and local small businesses.

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.

The Credit Union Association of New York has served as the trade association for the state's credit unions for 92 years. New York credit unions have assets of more than $48 billion and 4.3 million members. To learn more about the Association, visit www.cuany.org.

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