- How has the implementation of the IIJA been progressing?
- How have issuers used the money and for what projects?
- To what extent has the inflation made the available funds irrelevant?
- IRA
- Latest on the implementation of the Act
- Greenhouse Gas Reduction Fund
Matthew Neuringer (
Come back to, so this is not the water challenge and its potential solutions. Sorry for anybody who is here for that, but this is the federal infrastructure legislative outlook, which is extremely exciting. So want to introduce the panel? Let them introduce themselves. Welcome. Thank you,
Justin Marlowe (
Thank you, thank you. Great to see everyone. My name's Justin Marlowe. I'm here from the University of Chicago, the Center for Municipal Finance. Good to see everyone because everyone in Chicago, of course, being a sales tax dependent city, we're thrilled that you're here. I encourage you to spend lots of money while you're here, buy some appliances and leave them here. That sort of thing wise, a pleasure to be able to host everyone here in our great city. So we're here to talk about the federal infrastructure outlook with lots of emphasis on where we're at with both the legislative side of things as well as in particular the implementation side of all of this. And we've had a great panel to be able to share a lot of insights to that effect. Their bios are certainly readily available to you, so we won't do long introductions here, but I have, just so everybody's clear with who we have, we have to my immediate left at least geographically I suppose, Emily Brock from GFOA, we're also fortunate to have John Stanley from Orrick and of course Chris Meister from the Illinois Finance Authority, and in particular their green bank, which is going to be a big point of emphasis for what we want to talk about here this morning.
(
We want to kind of do this in two parts. We're going to start with a bit of a retrospective on the IIJA and even to a degree going back to the ARPA funding, which as one of the themes that we've talked about as a panel and getting ready for today, is that ARPA is not done, it's not dead. In fact, it's quite alive in many places. And so that's something that needs to be revisited a little bit when we talk about the federal outlook. So we're going to talk about that and then we're going to shift gears and get more into the IRA and including, and in particular, a lot of the emphasis on tax credits and some of the other kinds of financing and partnership models that are emerging from the IRA and Chris in particular has some great things to say about that given the work that they've been up to.
(
So two parts and then we'll have some time at the end for questions for all of you. So the first question, just to kind of kick things off, one of the things that, the theme that I think has come up here throughout the course of the conference so far is that this massive infusion of federal money, somewhere around $3 trillion or more, depending on how you do your math, that has made its way into states and localities over the last several years has been transformational in some ways, and it's been maybe less transformational in other kinds of ways. That whole infusion of cash was based on some assumptions about how states and localities would respond to having access to those kinds of resources. And so the first thing we wanted to do as a panel was look back a little bit and think about those assumptions. What assumptions were made about the way that states and localities would respond to that infusion of dollars, which of those assumptions held true, which did not, and what can we take away from this grant experiment with both the IIJA and ARPA before that? So turn to Emily Brock to kick us off on that question.
Emily Brock (
Yeah, I mean, I think it's fair to say the grand experiment has finally come to a conclusion. I can't imagine another trillion dollars coming our way. I was saying though, for job security, it'd be great to have another old pandemic come around because that certainly changed and sort of reformed my job in Washington. So of course before then I was market-based. I was watching the market. I was certainly working with GFOA's 23,000 members to ensure access to the market is available. It happens healthily and we can underpin infrastructure across our country. And then the pandemic happened and all of a sudden there was, I know your map says 3 trillion. I always say 5 trillion because I don't net out the tax increases that came along with spending on it. But I would say ARPA in and of itself, that's the 1.5 trillion bill. And Justin, you mentioned that some people aren't over it.
(
I kind of liken it to grief. The federal government's moved on, the market's moved on, but we haven't, we still have it. We are still, it is still within us. And by that I mean I just came from the New England GFOA. It's a state association with five states that participate a lot of rural small towns. And I asked the room if they still have ARPA funds that are unspent and every single hand went up every single hand. If that means that the administration's assumption when they went ahead and executed ARPA was that there was a pandemic, we needed to spend it, we were going to spend it fast. I'm here to tell you we aren't spending it that fast. And it's still around now for those larger cities and larger counties that were particularly working with the health matters surrounding the pandemic, yeah, they did spend it fast, but there's also sequential audits that have to happen as a result of the spending of those funds.
(
So I did a quick call over to treasury last week. We were talking about the amount of single audits that would be required for the receipt of the American Rescue Plan Act, and they're looking at about 7,500 new single audits which have to occur every single year that there is federal spending happening. So there's a ton of stuff still happening. And if you don't do those single audits and if you don't spend the funds, the threat of non-compliance with the federal government is imminent. Now, I listened with interest, a concept about the inclusion of technology. Why is it that our market doesn't really embrace technology faster? I think we can probably step back to the fact that technology certainly has been tried and the deployment of these funds, there's technological elements for small towns and small counties to be in compliance and they're not. So there is technology relationships between the federal government and the local governments that has been tried that still needs some finessing.
(
As we move on to the next experiment, which is IIJA. Now if we have all of the hands in New England, GFOA going up and saying, I haven't spent all of my funds. Well, I don't think they're really looking at IIJA just yet, but we don't have any intention of leaving money on the table. We are halfway through the IIJA covered period. So whatever is out there is out there already and there's only 50% left to go. So there's a lot of attention being spent to it, but I'm not certain that it's getting to where the administration thought that IIJA would be best spent. And that is rural small infusions of building back better of infrastructure across our country. And I think the motivation right now for people like us is to find those small towns, find those rural counties and try to help the administration achieve its goal and ultimately not leave money on the table.
Justin Marlowe (
So it sounds like we need to take the seven stages of grief and add audit to them from what you're saying. We can make that work. Chris, John, anything to add to Oh to that, by all means,
Chris Meister (
I have views. So again, I'm Chris Meister. I'm with the Illinois Finance Authority that was designated as the State's Climate Bank in our state energy, large state energy legislation known as CJ back in September of 21. My ears perked up when Emily pointed out that many of these federal funding opportunities were in fact a federal full employment act for the external auditing industry, perhaps one of the least constructive elements to create jobs and build back better. However, I'll just leave that there again, it's great to be back with all of you. I think it's been three or four years since I've seen some of you in person. And I'm going to talk a little bit about the missed opportunities here because I was around during the Great recession and there were missed opportunities there. But the deep thinkers in Washington or the deep state or whatever black box comes up with cost analysis and whatnot, they did deploy a lot of conduit, private activity, bond authority.
(
We used ours in Illinois to keep Navistar's headquarters and a big plant here. It was not designed the way that I would've hoped that it would've designed, but we took the puzzle pieces that they dumped on us and we ended up keeping a company that had been in Illinois for 175 years or so and kept their headquarters there and kept them viable so that Volkswagen could buy them. And so my disappointment with the federal spending up until the IRA, and I remember this because I was tracking the House Ways and Means committee the evening that every municipal finance person's dream legislation was going through house ways and means, I think it was a November or a couple of years ago, none of it made it to the floor, none of it, only very obscure things like carbon sequestration, rural bond band, which truth be told, may not be ideal sectors for bond issuance. And I think we may even be still waiting for guidance from the Internal Revenue Service. Indeed. So the people in this room can't take advantage of this. So I was really disappointed that this opportunity was left on the table. I think the beautiful thing about tax exemption and our industry is that it mobilizes private capital with very, very little cost to the public side, zero cost generally at the state and local level and even at the federal level. Let's just say for a moment, your Joe Biden, you are Chuck Schumer. Oh boy.
(
And you are Kevin McCarthy, sadly for you. Well, you are from California.
John Stanley (
My cousin actually used to be one of Kevin McCarthy's field agents.
Chris Meister (
Oh man, wow. So, and I think we're going to have one of these demonstrations of the malfunction of American democracy. Let's say that the three of them are fighting over Emily's computer and everybody who gets federal dollars is hanging on every twist and turn on this drama except if you guys are involved in tax exemption because tax exemption is designed so that it's off at Allison Swisher's table over here so that it's that water bottle over there. So the three of them are fighting, and guess what? All of us in this room merrily develop an issue federally tax exempt be debt either for public borrowers or for conduit borrowers. It's a wonderful system. The world turns, however, the strategy that they picked was let's flood the zone with money and then afterwards let's flood the zone with auditors to torture everybody that got the money. And then just my experience with making loans to small downstate under-resourced municipalities, you end up talking to some part-time elected village clerk whose real job is tending bar at the VFW Hall and then try and explain all of this federal single audit mumbo jumbo to them can't be done. That's the lost opportunity.
Justin Marlowe (
John, anything to add to that?
John Stanley (
I mean, I'll point out. So I'm a tax lawyer and even in the situation of tax exempt bonds, I work with so many issuers that have trouble getting all of their bond proceeds spent and there's a real risk in that situation of IRS audits. And so this isn't tax exempt. Bonds is not inherently a solution to that getting all of the money spent problem, but I can totally see how just particularly the ARPA funds where there was a certain percentage you could only spend on certain types of costs, there was a lot of almost litigation over that or desire to change it and make it more flexible to get the money spent. I'm sympathetic to a lot of issuers that are having these trouble, the difficulty actually getting the money out the door.
Emily Brock (
And I think we need, to Chris's point, talk a little bit more about the politics of it. The ARPA was a reconciliation bill and so is IRA reconciliation means that only Democrats voted for those bills to pass. And because of it, it has become a target, a targeted discussion among house Republicans of how there might be oversight of those funds. Now blessingly like blessedly, as Paul mentioned on the last panel IIJA was actually a bipartisan bill, so it's kind of been masked or cloaked in this sort of protective gear at the point where it is most important for entities who might be eligible for these NOFO, the notices of funding opportunities that are out there, they need to just kind of peel away that shroud and make sure that they aren't eligible for that money that's sitting on the table.
Chris Meister (
Well, and I'll just make a point, let's go back in time because you'll be able to give chapter and verse. There was another highly partisan bill, the Trump tax cut bill that nearly destroyed our industry for no good reason because the beauty of tax exemption in this country is that it had been for many, many years, decades, the perfect bipartisan Venn diagram. Wealthy people like to avoid paying taxes and Democrats like to spend taxes and generally to build things. And so when you harness the desire of wealthy people not to pay taxes to the cart of the democratic desire to build things and put people to work, you get the perfect Venn diagram. The challenge is that the circles have sort of moved apart and I would argue that the tax that the Trump tax cut bill that arguably nearly destroyed, at least my part of the industry, the conduit industry and severely damaged it for no good reason with the elimination of advanced refunding is again, that was a highly partisan play and I think we need to be really clear about what that was and frankly what a bad policy decision that was and what an injustice it was.
Justin Marlowe (
We have one more question on this before we tee Chris up to switch over and get us talking a little bit more about the IRA. There's been quite a bit of discussion already so far about issuances down trend in the market away from refunding certainly and lots of just overall gloom and doom to what there's been a couple of examples, but I'm wondering if those of you can zoom out a little bit and talk a little bit about what extent all this federal money has contributed maybe to that lack of issuance or that sort of down year.
Emily Brock (
Yeah, I mean I think I recall a very similar panel at a previous Bond Buyer conference where we said, oh, IIJA is coming around the corner, it's bipartisan, it's 500 billion new dollars in addition to already funding roads bridges. So a lot of good and hopeful expectation about it. And we said a lot of folks were asking, well, does that mean that issuance is going to go down? Oh no, no, no, no, no, it's not going to go down. It's going to be additive. We're going to have train stations and city center receiving IIJA funds and then we're going to build up the sidewalks around it and we're going to make the road we're going to, everything's going to just explode in growth and that hasn't happened. So I think we need to call it what it is, which is that was sort of naive on our part. We didn't know or we couldn't expect for $5 trillion to come from the federal government as Chris suggested flooded sort of our space and what kind of impact that would have on issuance afterwards. I can tell you the debt committee of GFOA is still very active, very much active. There is issuance happening, but from a large full market perspective, what we thought was going to happen didn't happen.
Chris Meister (
And I can tell you that there's a very simple reason for that is that when you get money for free, why on earth would you pay somebody to borrow it?
Justin Marlowe (
Except for the audits.
Chris Meister (
Except for the audits, which in government in Illinois we get tortured with audits anyways. But I would also say before I joined the finance authority, I ran the grants unit at our State Department of Commerce. And among my jobs in state government, I will tell you I learned the lesson, which is directly applicable to Emily's example, which was ordinary people will walk a mile barefoot over broken glass for a free dollar and you explain to them that, don't worry, borrow the money and you'll save a hundred dollars and they promptly fall asleep. That's the challenge with our industry.
John Stanley (
I do have one sort of related anecdote. I had a small city, semi-rural 20,000 people or so. If they had a bill coming due for a new water pipe, their existing water pipe that provided water service was going to be torn out as part of some other project and they had to pay for a new one. They put it up for vote, general obligation bonds and some sector of the city got it in their head that there ought to be federal grant money out there to cover this. And so the election ended up failing pretty narrow, but apparently a lot of the reason it failed was people in the city were like, there ought to be federal funds available for this. We don't need to authorize geo bonds. In the end, there was no federal funding. They had to do another sort of financing, but there definitely is a sentiment that there's a lot of money out there, why should we borrow?
Justin Marlowe (
Interesting. Interesting. Very good. Okay, well let's switch gears then. Chris has slides for us to walk us through what they've been doing with the IRA.
Chris Meister (
Hopefully this works well because again, I know this audience. Wait, which is,
Justin Marlowe (
You're good.
Chris Meister (
It works. Okay, so again, it's been a while before I've been with all of you. It's great to see you. So I know this audience and I think what you're really interested is more volume of issuance, so I can't promise you that, but I can promise you some hope of more volume of issuance because of the variety of funding that is flowing through the Inflation Reduction Act. And again, my colleague, the Executive Director of the Ohio Air Authority, a bond issuer, Christina O'Keeffe, sadly could not be with us because one of her kids got covid. So that Covid is still with us. But what I am hoping, hey, Beth, what I am hoping is to give you some hope for more volume of issuance in the future because obviously as you just said, and again, the views are my own, but I think Congress missed a large opportunity to use our industry and the people in this room to really use finance to solve a lot of problems in this country and then to communicate this, and again, for whatever reason, they chose a full employment act for auditors.
(
So I have shuffled these slides. So the states of Ohio and Illinois are very different politically, but I'm going to list the states that are bond issuers that are around the table for these opportunities. And I think all of you in this room will like them, but it's Missouri, it is Vermont, it is Rhode Island, it is Ohio, it is Illinois. And I think there's a possibility that since Massachusetts seems to be solving or putting these functions in its housing bond issuance agency, that we could include Massachusetts. I think that this opportunity is really made for this industry and I'm about to tell you why. So that's Christina's agency, Ohio Air Quality, and that's the Illinois Finance Authority. Most of you know us as a 22 billion outstanding volume conduit issuer, and many of you in this room know us as the partners with this governor and the IEPA to issue hundreds of millions of dollars in green bonds under the AAA rated SRF.
(
This sort of gives a high level met mission of Ohio Air Quality, and this gives our mission, which is accelerating now under this energy legislation, accelerating the investment of private capital into clean energy projects that reflects the racial, ethnic, gender and income diversity of Illinois. And again, the Illinois Climate Equitable Jobs Act or CJ is very aligned with the purposes of the IRA and the other federal legislation. This is what IFA does as a conduit, issuer, hospitals, nonprofit, business and industry. Yesterday we had a meeting, we had about a billion dollar agenda with a couple of large healthcare issuers and a couple of large solid waste issuers. Pay close attention to this slide because this is not my slide, but this is the slide that was presented by a senior member of the US Department of Energy at the Green Bank Summit a year ago in September of 22, and they are very explicit at the US Department of Energy, and I've been in lots of conversations.
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This goes through all the federal funding opportunities that while federal single family home mortgage guarantees create the American Middle Class, lots and lots of people were left out of that equation, and that is distorted the geography, the politics in the communities of this country, and I think these are the redlining maps of Pittsburgh and Baltimore. The places frankly aren't very important because whether you're in Chicago, New York, Flint, Michigan, Gary, Indiana, the Quad Cities, Des Moines, Iowa, every place in this country has a version of this, and this demonstrates Ohio's focus on pursuing federal funds pursuant to federal objectives. Again, note the focus on low-income and disadvantaged communities, and Christina did a great job. You got Appalachian, Ohio and you got inner city, Cleveland, Cincinnati, Columbus, Youngstown, what have you, Dayton. This is what we did and we did it thanks to the people in this room and thanks to our industry because it demonstrates the power of municipal finance to solve real problems that matter to real people.
(
We were asked, Hey, you guys were designated the Climate Bank by state law back in September of 21. What did y'all do in 2022? Well, I'll tell you what we did. We mobilized quarter billion dollars of private capital for water quality and public health issues and for redevelopment, again, C-PACE, something that is a great opportunity that we've been building up at the IFA. It's a great opportunity for our industry because it is a non-public subsidy conduit structure brought to the markets by enhanced security. 65% of these investments funded by private capital were made in or benefited disadvantaged communities. That 233 million number is the drawdown of the December, 2020 IFA IL EPA SRF green bonds. This is a summary of the Greenhouse Gas Reduction Fund. This is a little bit more detailed, but we'll post this on the website and have the bond buyer posted too.
(
This is something to make it even comprehensible. There's $7 billion going to states and spread out a little beyond that. Apparently it was called under the federal law, the Zero Emission Technologies pot. It's now called Solar for All, which also happens to match the name of what one of our colleague agencies in Illinois is trying to do with rooftop solar. Other states also use it too. There's the 14 billion fund, the NCIF. I think that's the real opportunity for the people in this room because the fund is going to be capitalizing climate and green banks across this country, and I believe that with the help of the people in these rooms and these federal funds that you'll see securitization, you'll see homogenization of credits and structures and that will open the doors for the private capital markets. And then there's the $6 billion. This is going to go out in chunks of $10.8 million for community lenders.
(
This is a way, this is the way that Christina Ohio are thinking about it. This is the way that Illinois is thinking about it after having done many, many stakeholder engagement sessions of which tomorrow we're having another one. These are the Ohio's keys to success. This is the Illinois approach. We're focusing on zero emission transportation because we think that the beauty of the SRF, which improves human health outcomes while reducing the burden to my taxpayer, my tax lawyer colleague, his example of the water pipe, while reducing the local and state tax burden on ordinary people that this model and Ohio and Illinois and Missouri, we are aligned on this idea that the middle pot, the $14 billion, the NCIF, even though it's a one-time allocation over the next several years, we believe that if you model it correctly, like the state revolving fund, it opens the doors to the capital markets through municipal finance because we're bond issuing organizations. We understand that.
John Stanley (
Chris, do you mind if I paraphrase and make sure that I'm following because my read on it is very similar to what you just described of this is going to be a grant of money essentially creating an SRF, like a number of SRF like programs.
Chris Meister (
We hope.
John Stanley (
We hope. I mean, the details are kind of fuzzy in terms of the legislation.
Chris Meister (
Because individual organizations and states need to partner with national organizations that need to apply to the USEPA.
John Stanley (
Yeah, no. Looking through the materials, it's all entities that want to receive these grants to start. These programs are putting together program applications that it's a competitive grant. And so they're saying, Hey, here's what we plan to do with this. Give us some of this $20 billion. So it'll be really interesting to see how that plays out. And it could vary from program to program. They could take, going back to our comment earlier, sort of a federalism approach of letting different entities in different geographic regions set up very different structures for how this could work. And so it'll be really interesting to see how it plays out.
Chris Meister (
Yeah, and again, I mean, look, the people in this room know, I hear from many of you regularly on SRF is there are 25 states that don't access the capital markets, give or take. They're leaving money on the table. And I think it's because they have an inherent bias. They're scared of debt for the reasons that my colleague gave in his example of the small town in California. So even something as elegant and effective for human health outcomes and leveraging the private capital markets and reducing the burdens on local and state taxpayers like the SRF. We can't get this simple equation through the heads of policy makers in any number of states. But anyways, in Illinois, we're focusing on zero emission transportation. Governor Pritzker had a big win on Friday. Goshen, a foreign battery making plant is being located in Kankakee County.
(
And the Governor Pritzker would like Illinois to be the best state in the union to build own and operate electric vehicles. Batteries are a key part of that. Hopefully a C-PACE bond will be part of that. Hopefully a solid waste bond will be part of that in addition to the state's incentives. But the beauty of transportation of impacting human health outcomes is because like water and like is that you can really improve air quality very quickly by switching fleets over to zero emission technology. You could improve human health outcomes in low income and disadvantaged communities in two to five years if you do it right and use this money correctly and access the municipal capital markets in an effective way.
(
These are the Ohio goals, improve air quality, achieve economic prosperity, build wealth, and enhance public health and building a healthy Ohio. That's the theme of Ohio Air. This is sort of the coalition. This is the Illinois, what I call the alphabet soup. It's basically $200 million that of either formula money or competitive funding that IFA under the leadership of Governor Pritzker is applying for. And that's even without the Greenhouse Gas reduction fund. That's another way of showing it, except the real opportunity is to leverage the Department of Energy's loan programs office and entities like Ohio Air, IFA, even the Illinois Department of Commerce can become what's known as a State Energy Financial Institution that removes the innovation gating mandate to LPO financing. And again, shameless plug for Illinois Jigger Shaw grew up here in a small industrial town just in time for the major employer, a steel plant to close, thus leaving a mark on his childhood and his outlook on life. That's how to contact Christina. That's how to contact me. Thank you very much.
Justin Marlowe (
Thank you. Thank you, Chris. Excellent, excellent, excellent overview. Here's a broad question for John and Emily. Reactions high level or otherwise to put, Chris has had to say.
Emily Brock (
I think that the potential for the program is extremely high in the states that are mobilizing right now. Like Chris, I worry in other states where they're less mobilized, but perhaps maybe there's a way that we can have that network of learning through the bond bank states in particular and to be able to transmit that. I would also say there's other augmented programs or augmenting programs to issuance inside of the inflation reduction Act. And that is the direct pay benefit for issuers who are deciding to either produce or invest in clean renewable energies. And there's a lot of very healthy conversations happening right now, sharing of information. But I would say mostly we surveyed about 200 mayors the other day with the National League of Cities. I would say 199 of them are like, we're going to put solar panels on a middle school. And we're like, think bigger.
(
Go a little bigger than that. But at least they're trying. I mean, everybody's dipping their toe in the water. And I think that this is a very good opportunity. Of course, they call it elective pay, but at the end of the day, it is technically direct pay. It is a credit that will have to be a direct payment similar to of the ilk of the 80 38. So there is a lot of massaging that we're doing with treasury right now and with the IRS, again, talking about technology, we're beta testing a portal. When you ask about project latitude and longitude, you're going to have to simmer down a little bit. You're going to have to give us a little bit of flexibility to describe these projects and be eligible at the end of the day for the investments, these investments that are so critical to creating a clean renewable energy across the country.
John Stanley (
And I'll just say, I think the application process to receive the elective pay credits should be as streamlined as possible and should be as easy. I'm also sensitive to abuses and there needs to be some robustness to verification because we don't want the IRS going out and auditing all of these, but we also don't want the kinds of abuses that are talked about with the PPP loans and other things. The other element to the elective pay is the tax credit law is pretty robust and pretty technical. I've had to learn enough to sort of talk about it basically. But we have other lawyers that are specialists in this area, and so you talk about solar panels at a middle school, let's say they're putting them on the parking lot, the cost of the panels qualifies. The cost of the supports to hold the panels up qualifies the costs of lighting underneath the panels to light down on the cars parked in there that doesn't qualify. So there's a detailed analysis, and same thing if you're building a biodigester at your wastewater treatment plant, you can't necessarily include all of the costs of your project. It's a different way of thinking about things than we have historically thought about it in this industry of, oh, we're financing low-income housing and so we just finance all of these things. There's a level of nuance there and a level of subtlety that is going to be hard to,
(
I don't know, hard for issuers to get up to speed on and to apply in a way that is meaningful and make sure they're not dinged for claiming too much of a credit.
Chris Meister (
And also to that point in the place mat slide, what we hope to do in Illinois is to take the NCIF, our portion of the $14 billion fund and begin a revolving loan program from the IFA working with nonprofit and local government public issuers to do bridge loans so that they can do this. And by the way, borrow the money for the lights underneath the solar panels to shine on the cars so that they don't get broken into details. And again, I think Emily will probably be able to speak to this, but my lay person's observation is there's, with a lot of these streams of funding, there seems to be a lot more ambiguity against the traditional prohibitions against double dipping because nobody has told us no that we can't take GGRF funds, use it as bridge financing or a participation loan with an intermediary or private lender to a public entity. And somehow that will destroy the credit.
John Stanley (
No, I mean the law specifically allows that of if you tax exempt finance a credit eligible project, you only take a 15% haircut at the most in the amount of the credit. And at least from some of you who have run the numbers, I've been told that using tax exempt financing and taking that 15% haircut is still a better option, particularly as interest rates continue to rise than taxable financing and getting the whole credit.
Justin Marlowe (
Terrific. We have one more question for the panel before we go. I think I've got time for a couple of questions. All I can give us the hook if we don't. We're barreling toward yet another budget showdown, government shutdown, et cetera, et cetera. Are any of the dollars that we've talked about here today candidates for some sort of a clawback?
Emily Brock (
Yes.
Justin Marlowe (
Very good. Thank you.
Emily Brock (
So in any given Congress, any subsequent Congress can change an act. That's essentially what we've been trying to do with the 2017 Tax Act too, to claw back the rescission of advance or funding. So I think what's important to note is nothing's ever 100% secure. IIJA though passed with bipartisan support and probably has the largest underpinning of support, both from the administration and execution through the various streams of the administration. I would like to say though, more colloquially, one of the strangest things we experienced in the pandemic is who's essential and who's not essential in the federal government. Because when we were filing our 80 30 eights, we realized the people reading the 80 30 eights, the contents of the envelope were essential, but the people who opened the envelopes were non-essential. So therefore none of those got read. And there is a bit of a challenge I think with what is essential, how is it that we can keep our market going with support from the federal government? And these funding programs require hands-on approaches, especially as we're talking about green energy investments and questions that continue to come. If there's a lapse in execution or a lapse in support that we can get from the federal government, that's inherently a bad thing for any program.
Chris Meister (
I would just like to again underscore the beauty of tax exemption as a policy because as Joe Biden, Chuck Schumer and Kevin McCarthy fight over Emily's computer in a mud wrestling pit for the next two weeks. I'd rather have a financial structure that relies on that water bottle over there in front of Alison Swisher. Then whatever is the content in that computer because it's likely going to be harmed for exactly the reasons. Oh, as stupid of a reason as the people that read the 80 30 eights are essential, the people that open the envelopes. No, too bad for you. We've just got a lot of sealed envelopes. And my guess is the people that read have work rules that say that they can't open up the envelopes.
Justin Marlowe (
Terrific. I'm sure there are questions and we have time for a couple.
Chris Meister (
Wow, Emily, this is a quiet.
Emily Brock (
I like it.
Chris Meister (
You know what? They're not this quiet when they come to pitch their wares. Come on, speak up. Raise your hands. Please, Bremmer.
Audience Member 1 (
A practical question. Will the slides be available?
Chris Meister (
Yeah, we're going to give them to the bond buyer. We're going to put them on the IFA's website under our climate bank tab. And then we're also, I'm going to talk to my colleague Christina in Ohio, see if she's willing to post my shuffling of our two decks.
Audience Member 1 (
It'd be very useful in other states that we work in.
Chris Meister (
Yeah, we've got sort of a purple presentation. And again, we've been working closely in having conversations with Missouri too with their SRF issuer.
Audience Member 2 (
So Chris, what do you think your timeline is for submitting a grant application and receiving an affirmative response from us about whether you get money or not?
Chris Meister (
That's a great question. So after working on all of this for nearly a year, we have exactly $3 million from a sub allocation of the state's SSBCI. I have been told that in the alphabet soup that before the end of September that we will have chunks of the grid and the RLF money. I think our strategy under Governor Pritzker has been unique is that we've been trying to layer these additional alphabet soup pops money as steps up to the GGRF and then hopefully up to the US Department of Energy LPO. Now, the people in this room know that the LPO probably cost two to $6 million in white collar work. A great thing for the people in this room to be part of one of those applications. And that takes two, three years probably faster under Jigger Shaw and Secretary Grand Home.
(
But for the GGRF, we understand that the applications are due I think on October 12th, but I wouldn't bet on that because the solar for all applications were due in the third week in September and a week ago, they changed the rules, extended the date, and then said that states that had planned for many of the states that had planned to apply for $400 million could only apply for $250 million. So there might be changes, and these things have been changing. But broadly speaking, what I have been told repeatedly is we're going to get the applications received in mid-October. We're going to announce who's the lucky winners in March of 2024. There's going to be several months of negotiating over contracts. Again, solar for All is actually fairly simple because it's states generally negotiating with the federal government in that people are used to that relationship.
(
The relationship that people are not used to newly created nonprofits with national scopes negotiating on a brand new program with the federal government that might and oh, and states are below that national nonprofit applicant thing. But we've been told that the GGRF, the dollars should start to flow summer to September of 2024. Subject to what Emily says is this is all theoretically part of Emily's computer so people could fight over it in the meantime. And the other element is section 134 of the Inflation Reduction Act that really talks about the GGRF basically says that EPA should have started deploying this money in February of this year, and that all of it should have been out by the end of September of 2024. That's what federal statute says. I have no idea why USEPA when they had the SRF model, why they couldn't have trundled at least the 7 billion for a solar for all, made it into an SRF type program and got it out the door and said, states go to it. But for whatever reason they didn't. The application is due for all three pots of money in mid-October.
Audience Member 2 (
So it's really interesting that you and I would come to the same conclusion from different completely different perspectives that we've got the model that works that just needed to be funded and they choose to make up all this shit. You have no idea of what it is or how it's going to work, rather than using the models that had been tried and tested.
Chris Meister (
I could not agree with you more.
Audience Member 2 (
So what efforts are happening at the national level in Emily's space, in your space on the CFA kind of stuff to be a catalyst for pushing this information out about the model that can get replicated for different kinds of projects, clean energy kinds of projects rather than reinventing the wheel.
Chris Meister (
So I'm going to handle this one quick and then throw the ball over to Emily and my colleagues starting at the Green Bank Summit in September of 23. My colleague from Rhode Island and I and from Ohio, we said, Hey, all you want to be green bankers in the room, SRF, that's the model. When comments were requested, we said SRF. That's the model. When the Environmental Financial Advisory Board, which I served six years on, had a bunch of hearings on this stuff in November and December, all of us said, Hey, SRF, that's the model. Pay attention. EPA bureaucrats, you are the change that you've been looking for. Just look in the mirror. And they could have rolled that out in February. They chose not to. Why? Don't know, not in charge.
Emily Brock (
I mean, I suspect that the conversation got complicated when initially they said States local governments are eligible for these credits. It got complicated when we started adding on the instrumentalities. No offense to Instrumentalities, they are my members, but there are a lot of models that they follow that are different than SRF's. And so there's a lot of different suggestions on how to model these programs being thrown at them by a variety parts of our market that rely on different parts of the federal government. And so it's funny, I was in a meeting at the IRS and I was talking about modeling SRF in the EPA and a university chimed in that it's a lot like this other acronym and it was an acronym I had never heard of before in my life. And I was sitting there thinking, well shoot the i s or and EPA. Everyone's sort of wading through all of these different recommendations slowly and I think a little bit too slowly like Chris is suggesting. Right?
Audience Member 1 (
So what is the policy decision around creating or prioritizing the national nonprofits over state and local governments? I mean, I've seen a lot of, they're real nonprofits and they're nonprofits by name only, that suck an awful lot of resources out of the system and don't necessarily with no intention of necessarily doing any good with that.
Chris Meister (
Well, I can tell you what I've seen because the world of developing green and climate banks, we have now coalesced and we're in regular conversations. And I will tell you there's a continuum. My hope is that in five years, all of you will be talking to your local, regional, state, green bank about when the next issue is coming because I think that, I hope that this money will catalyze homogenization and standardization and open the door to access to the municipal tax exempt markets. That's what I hope. That seems to be the broad desire. But there are a lot of voices in this discussion about, hey, and there's a wide variety of models. As Emily said, I've mentioned the bond issuing agencies, New York, nice Serta created a green bank with a billion dollars worth of rate payer money Connecticut cobbled its Green bank together. Out of a grant making agency, there are various non-profits that are created by state or local law that are a little further removed.
(
So there are a wide variety of these models. It's the Experimentation lab of Federalism, and we're at this fascinating moment, just like there's a wide variety of conduit, issuers, shores. But the bottom line is, is that the person probably singularly most responsible for this is Reed Hunt who heads the Coalition for Green Capital, and he's been, he was chairman of the FCC when they rewrote the rules to allow us to communicate with each other on stuff like this. And he's been plowing these fields for about 15 years, seeding and starting green banks. He helped start the Connecticut Green Bank, and frankly, as I understand it, he sold Joe Manchin on this idea and for the reason to change, again, I don't have this on firsthand knowledge, but anecdotally, I understand that the reason that Solar for All took its current form in a sort of non SRF fashion is because of the influence of Senator Sanders of Vermont. That's my understanding.
Justin Marlowe (
I'm sure we could talk all afternoon about this, but we need to move on to the water panel. Thank you all for an excellent discussion. Please join me in thanking our panelists yesterday.