- How is the tremendous sales tax growth throughout the pandemic relating to bonding?
- Changing landscape of airlines
- Electric vehicle wave: how do we support the infrastructure for charging stations?
Devin Brennan (
Good afternoon everyone. Welcome to the panel. I wanted to just start by saying what folks have been saying.the last two days is that it's really nice to see everyone in person again I'm happy to be able to be a part of this and glad that the bond buyer put this together and was able to bring folks together here to talk, also nice to see new faces for those who I haven't met. I'm a partner in Orrick Herrington & Sutcliffe, San Francisco office and head of our transportation financing group there. As folks know the pandemic had pretty significant wide ranging effects on transportation issuers over the last two years. As we'll kind of hear not all of those effects were necessarily negative particularly with respect to certain types of revenues but it it was mixed and transportation issuers have had to adapt and change the way that they've thought about planning for financing and operating their projects and enterprises. So we've got a good panel here to talk about that and about some emerging topics in transportation finance that the Bond Buyer put together. And I'd like to introduce the members here to my left is Pascal St. Gerard, he's Managing or Senior Director and Head of the Western Region at Fitch. Pasco, can you tell us a little bit about your background in transportation.
Pascal St. Gerard (
Thank you, Okay. Pascal St. Gerard, the Regional Manager for Fitch Ratings in San Francisco. Par Fitch, I was at Charles Schwab where I worked on local government issues and transportation credits. And before that I was on the prop desk at Wells Fargo. So I've had a pretty extensive career in muni finance covering these issues. And I look forward to this discussion
Devin Brennan (
And to Pascal's left is Kevin Scott. He's the Chief Financial Officer at the Alameda Corridor Transportation Authority. Kevin can you tell us a little bit about your background in
Kevin Scott (
Transportation? Sure. I became CFO about two years ago. And prior to that I had been an independent consultant in doing public policy for several years. And prior to that I was with Frasco associates as an FA and and Prague as an FA. And prior to that I was with Goldman Sachs for long while.
Devin Brennan (
And to Kevin's left is Darren Hodge he's a director at PFM financial advisors.Darren can you tell us a bit about yourself.
Darren Hodge (
Hi good afternoon. My name is Darren Hodge as Devin mentioned director at PFM, focused only on infrastructure. So that's everything from transportation to water to local government.prior to PFM I worked at the investment banks and then I saw the light and came over to PFM and been working here since 2015
Devin Brennan (
End to Darrens left is Paul bloom, who's a Vice President, Co-head of the Transportation Group at Goldman Sachs.
Paul Bloom (
Hi everyone, Paul Bloom. I started in banking in 1994 and the cubicle next to Mr. naka hara. So somehow I have a lot more gray hair than he does. I don't know how that works but I've been in banking for 28 years prior to that. I was at the port of Seattle. And prior to that I was with the city of New York.
Devin Brennan (
So one of the topics for the panel was you know the sales tax revenues which in California are a major source of transportation funding for county transportation authorities cities and other public agencies that pursue transportation finance. Darren can you tell us a little bit about how you know sales tax revenues as maybe opposed to certain other types of revenues like fairbox performed over the last couple years and what kind of impact that had on bond financing for transportation projects?
Darren Hodge (
Yeah no absolutely. It's a very important question. And it's very interesting when you look back over the pandemic and see the relationship to sales tax revenues time and you kind of I don't know if we want to relive those moments but you can kind of see how things changed. And when we look at sales tax revenues as davin mentioned sales tax revenue are a very important part of transportation infrastructure. Whether you look at self-help counties or transit agencies that need a stable source of funding so most localities and gonna make general statements here because it really differed. There's a study that UCLA did which we can talk more about afterwards. If folks are interested that really analyzed the impacts of the pandemic on sales tax by county. And what they found was very interesting is that a lot of the higher wealth counties had much more of an impact on their sales tax revenues for longer than some of the more rural lower income counties. But in general what we saw was that sales tax revenues started declining about January of 2020. And for the most part that decline year over year lasted until about June of 2020 starting in about July of 20. We started to see sales tax revenues pick up and this entire panel attribute that till we all went out and bought toilet paper. So directly attributable to that kidding of course not really about the toilet paper. We all remember that but what we see then over a year over year basis is that 2020 for the most part had a reduction in overall sales tax revenues versus 19 that trend reversed itself starting in 21. And I think a large part of that was a lot of us remember the recession of 2008 nine and 10. And so once the pandemic occurred the uncertainty of how long this would last what would be the impacts? We all cut down on our spending after several months people started understanding okay this could last a little while. And so got back to normal and started purchasing more online started purchasing different types of good rather than services which led to an increase in our overall sales tax revenues. Now as that relates to bonding the interesting part about the bonding is that when you look at the overall trend of debt issuance it also tells a very similar story. So starting in March April and may of 2020 debt issuance was very very low because everyone was working from home. People were trying to figure out how do we address and react to this pandemic but then starting in June and July what we saw was that because rates had decreased so dramatically it started making more and more financial sense to start borrowing for projects. People were coming back to the office going to work. We had policies and procedures in place to protect each other. And so we saw a lot more issues starting in June and July of 2020 that trend dropped in November December and it correlates directly to when we saw a spike in COVID. And so a lot of that occurred because as our projects were starting to ramp up we were having to do 50% shifts. We were having crews come out. We were also starting to have problems with supply chain issues so that all led to a decrease in debt financing. Then when we talk about bonding there's a couple different factors over the last two years that have really interacted with the amount of debt that we've issued. The first is as sales tax revenues increased we simply had more mathematical capacity you know a lot of transit agencies and itself help they fund on a gross basis. So when we talk about our bonding capacity you're just looking at what our overall revenues are to our debt. So as we had increasing revenues low interest rates we were able to borrow more now mitigating that is as sales tax revenues were increasing as interest rates were low we started seeing inflationary costs on construction. Whereas our sales tax revenues might have increased between eight and 9% year over year. We were seeing in many cases bids for construction projects coming in 25 to 50% higher. So you can see a discrepancy there. A lot of that led to a problem from a debt financing and bonding capacity standpoint because we had projects that we wanted to finance but we simply didn't have the same capacity net that we did previously. The last thing was obviously supply chain issues. And that really goes hand in hand with inflation. We had projects that we perhaps wanted to debt finance fund and accelerate but simply didn't have the materials the labor et cetera available to accomplish that. The other reason that sales tax is important is really specific when you talk about transit agencies. So sales tax provides a very stable source of revenue for transit agencies. And that's important for a number of reasons specifically during the pandemic transit agencies saw fair box revenues decline incredibly materially. You could even argue there's an important component of transit funded that they receive under TDA. That depends on their fair box recovery ratio. A lot of transit agencies were able to use sales tax revenues to supplement the fair box revenues they're receiving to meet those minimum thresholds to achieve that funding under TDA. So incredibly important. The other reason that sales tax revenues were important for transit is that the very beginning of the pandemic it was simply not marketable to go out with transit credits. If they were exposed to operating risk we had several clients who had fair box revenues outstanding try selling a fair box revenue credit in April of 2020. There simply wasn't a market at any sort of a price you'd want to take. So what we would do is we would sit there and figure out how can we use the sales tax this more stable source of revenues to wrap it around the fair box revenue to make it marketable to fund some of these projects refinance some of this debt to make it more feasible for them to continue operations for the next several years.
Devin Brennan (
Thanks, As you noted you know not all revenue sources fared as well as sales taxes through the course of the pandemic fair fairbox revenues in particular you know were were subject to well known declines work from home orders occurred. And they changed you know fundamentally at the time commute patterns and downtown foot traffic patterns transit agencies you know are adapting to that and wanted to find out Pascal from you what you've been seeing in terms of how they've been adapting to that and what impacts you know if any you think going forward those changes are gonna have as we work through the you know emerging hybrid work kind of paradigm.
Pascal St. Gerard (
I think the adaptation, how do I describe this? They've all adapted. I mean I think that the first order of business was sort of to right size the service level whether it was sort of limiting lines or rewriting lines or increasing the time between trains. We saw all of that so I think agencies had to sort of look at their regional markets looking at their their downtown central business districts and trying to figure out what the new demand level was. I mean I think they've all been surprised by how sticky the work from home or hybrid environment has been not withstanding sort of the upticks in in new variants with regard to COVID. But I think there's a new attitude with regard to work and commuting and they've had to adjust. So the agencies who do well going forward will make adjustments in terms of service level they'll make adjustments in terms of their long term capital plans. They'll also make adjustments with regard to extensions of the different lines that they had contemplated in their capital plans. So I can't tell you for certain when ridership levels will come back. My personal view is that you know I compare it to the play waiting for goodo and I hope the agencies don't view the return of the commuter in the same way cuz they will be waiting and waiting waiting without necessarily making any additional adjustments based on the demand levels for their respective markets. They have the data and that's the other point which I think the pandemic is has forced or is forcing is for agencies to look at the data that they receive from the ridership that they currently have whether it's day trips station information or consumer surveys which also get a sort of perceptions of the service as it's been reopened in a lot of different markets. So I do think all of those things will help them navigate the next two three I'd say five years and on a longer term basis they really need to look at their capital plans. I know of a couple of agencies that have actually extended delivery dates for some some new lines or actually completely froze out certain planned extensions. So I think all of the things have to be on the table especially for the ones that rely more heavily on fair box revenues.
Devin Brennan (
And certainly some some have had unanticipated extensions of projects and deliveries whether that be contracting issues or based on you know inflationary pressures and delay in the in the scope and the budget. So well I thought that we had put the great toilet paper shortages of 2020 behind us until Darren brought it back up. So, as Darren noted you know there were significant disruptions in the supply chains that occurred immediately following COVID and those echoes have continued and stayed with us for the last couple of years. Kevin as people have experienced in their own lives you know these have not been fully addressed. Could you provide us with a little background on the Alameda corridor transportation authorities role in the supply chain and how COVID and the pandemic and resulting supply chain disruptions impacted your revenues and operations?
Kevin Scott (
Sure. At the is a rail corridor that connects the two largest busiest seaports with the port of Los Angeles and the port of long beach to transcontinental lines in downtown Los Angeles. No we're not in the bay area.the primary source of money for APTA is essentially tolls or fees on on trains as they use the corridor to move their goods from the ports to downtown. And one interesting factor about our debt which we that was a large amount of debt taken out to finance the corridor is that 40% of the debt service that you do on the on our bonds is backed by the ports of Los Angeles and long beach. If we're unable to pay ACT's mission is to facilitate the safe and efficient movement of goods with facilities health and health and safety benefits and air quality traffic and aesthetics record corridor communities in. So in the Southern California region in partnership with the ports and railroads Act as a joint power authority formed by the city of Los Angeles and long beach in 1989 to provide an effective corridor connecting the two largest ports to the continental lines today Act is governed by a seven member governing board with members from the ports of Los Angeles and long beach the cities of long beach and Los Angeles and the Los Angeles county metropolitan transportation authority .The corridor consolidated three former branch lines into a 20 mile corridor that connects the it to the ports the rail is the day is high speed high capacity in fully grade separated. And the operations began in 2002 the ports of Los Angeles and long beach. They are the nation's busiest ports measured button 20 foot equivalent units the largest us sport complex in the principle destination for imports from Asia. At this really the was itself before there were green bonds and green projects was a green was a green project. It's the intervi inner environmental benefits of the Alameda quarter are realized by faster transportation speeds the elimination of 200 at grade car crossing that reduces emissions and delays and improves response times for emergency vehicles and enhancing rail capacity. Reducing the need for trucks. The Alameda corridor allows trains to move more efficiently from the ports. It provides a consolidated route that were replace three historic route that were Securous slow and ran grade through many more communities than the current corridor. The trains using the Alameda corridor provide an eco-friendly alternative to trucks on the road which means fewer emissions and contaminants. Going to our revenues again it they're governed by a use and operating agreement with the railroads BNSF and union Pacific. They acted charges fees for all the ports intact cargo entering or leaving Southern California by rail. And this is pledged to the payment of the bonds. There is no direct tie between debt service and the revenues that we raise, this gives us the situation that we found this year this year or we found ourselves in 2020 with a steep demand decline in revenue in revenues followed by as with the ports highly correlated to the ports with a steep increase. But in the later times in the mid to late 2021 our revenues started to decline even though even though the ports were steady or growing. And we found this was because the carriers the carriers had decided to use modes of transportation used trucks to deal with the congestion in the Chicago area that had that had slowed shipments. This produced this produced what we call shortfalls the difference between our revenues and in our debt service. And we to handle this shortfall we which was occurring for the next five years that had previously had not been for forecast. We issued bonds to restructure our loan by taking it out the debt out much further from two from 2037 to 2060. That's how we dealt with it.
Devin Brennan (
Great. Yeah. And familiar with a number of issuers that tried to figure out that two year period you know between now and 2022, 2024, 2025 somewhere in there and adjust to that and then kind of move back based upon the sort of V-shaped change in revenues. Paul the another area that that COVID and the pandemic really had an impact on and maybe one of the first areas as we now kind of recall back to the very beginning of the pandemic that that had an impact on was airports and the decline in passenger traffic there. Since that time what have airports done differently for purposes of financing following COVID what you know have you seen now that the recovery's underway with respect to airports and airlines more generally as a result of trying to address and respond to the pandemic and recovery?
Paul Bloom (
Yeah well actually COVID other than the first several months was actually a very vibrant time in airport finance kind of counter intuitively you know initially just like every other enterprise government or commercial airports were just trying to stabilize their workforce and their operations and sort of figure out what's going on get their at work at home systems going. And you know once all that was done that the next immediate focus was cash flow because revenues more or less stopped activity more or less stopped. So CFOs treasury folks debt people were were just trying to make sure they had enough money to pay the bills for the next few months and then the next focus was what do we do with our capital plans?and so there was kind of a variety of of reactions across the airport sector. Some airports chose to slow down their capital plans stopped them even projects that were ongoing. Some of that was a strategic reaction to the uncertainty. Some of it was jurisdictionally. They didn't have the ability to continue to have their work sites open. There was obviously a lot of refunding activity in and a lot of it was around restructuring for near term savings versus you know the standard refunding for savings. But there was also a lot of airports that chose to kind of push forward either because they had big ongoing projects that would've been extremely costly to stop or because they were trying really hard to take the long view and realize it's a lot easier to build junk at an airport when it's empty. And so alot of airports in LA is a great example. You know one of the local airports really leaned into their capital projects and accelerated and got a lot done from a building standpoint while we were all at home. And all of us who are frequent travelers I think are happy to not have had to live through some of that building but what were the key factors that allowed airports to continue to borrow money when we were not flying around very much? So first and foremost the government relief money the COVID relief money that came into the airports and into the airlines really stabilized the system and allowed people to not be so worried about the near term bill paying piece of things but to be able to look down the road and see how to operate through and operate coming out of and grow through and grow after COVID. So the the stimulus money was hugely important. I think the rating agencies were also very constructive, each of them took a different approach to assessing the impacts on the system of this obviously huge increase in near term risk but they all gave airports time to kind of work through the challenges and there weren't a lot of of sort of reactionary catastrophic downgrades that would've rattled investors. And so I think the agencies did a nice job of trying to be analytic trying to be helpful but in doing so were very supportive from an investor standpoint. And then you know the combination of essential travel that needed to happen even in the very early days of COVID and then just Americans unwillingness to stay put you know we started to see recreation travel come back really pretty early. And it was it wasn't all to traditional recreation locations. There was a lot of you know increased travel to the Intermountain west increased travel to Florida increased travel to Texas places that had outdoor recreation opportunities that had less restrictive Covid rules about what you could do and how you could do it.and so we saw people start to get back on planes pretty quickly and that that really helped a lot. So just in terms of the numbers 2019 was a record year for airport finance. It was around 21 billion in volume in 2020 and 2021 there was 15 billion which is roughly the average amount of annual issuance from from 2010 to 2019. So other again other than that first few months the market kind of came back to life but we saw different financings in 2020 than we had in 19 or or then we're seeing now. So in 2020 50% of the volume was refundings. It's usually around 30% there was a lot more taxable bonds done because people chose to do taxable refundings that they might have waited for the opportunity to do it down the road as a tax exempt but they wanted to carve out near term savings. So we saw more taxable financings and we saw a lot less new money in in 2021. We sort of reverted to the average amount of new money versus refundings. As capital plans started to come back to life. There was less taxable bonds and there was less restructuring once the the revenue started to kick back in and the government money had had come in people were less interested in doing dis savings or zero savings refundings just to increase near term liquidity. What we're seeing in 2022 obviously rates have have gone up a fair amount. So we're seeing fewer refundings. We're seeing a lot of new money though and we've already hit around 15 billion this year. Whereas the last two years that was the full year volume. So the market is very vibrant away from airports on the airline side. You know similarly there was a few months early in COVID where that market had dried up. And then what we saw was just a massive amount of airline financings. Again to focus on liquidity get cash on the balance sheet have enough money to live through the whatever it was gonna be months or years of negative cash flows. So we saw a lot of activity in the airline space and those financings were very large very innovative and had great support across a wide range of investor types. We've also seen along with all of us ordering more stuff to our houses air cargo has has kind of reemerged as a big theme that a lot of airports are focusing on as volumes has come up have come up and we've seen a lot more private aviation general aviation FBO financings as some people make the choice to not fly commercial anymore. and during COVID there was a decent amount of that going on. So kind of overall early on you know like everyone we were airports were just trying to figure out how to have a safe and operational place to work and make sure that liquidity was dealt with during COVID the federal government and the investors and rating agencies showed a lot of support to the airport sector and airports were able to borrow very efficiently in large you know size and at great rates and spreads to fund their ongoing operations and strategic investments and overall it's you know again kind of counterintuitively been a very active time for those of us in the airport sector.
Devin Brennan (
Thanks Paul.
Pascal St. Gerard (
One additional comment. I would add that with regard to transit agencies the rating agencies sort of looked at it the same way as far as sort of looking through the pandemic and not sort of going in and making rating adjustments but we did express our views on some transit agencies that we thought that would experience sort of a prolonged period of pressure. And we did make that clear to the market and to those agencies that as they run through the federal assistance that they've received that you know they would have to make adjustments. So I just wanna make sure that that's not lost that we're just sort of giving everyone a pass because I think just given the nature of what we're confronted with with regard to ridership we really need to sort of stay on top of agencies and they need to stay on top of themselves to see or to understand I should say what the new permanent demand for the service is going forward and how they need to make adjustments to their capital plans and also their operating budgets but just wanted to clarify.
Darren Hodge (
But I do think that's an important element when you talk about transit is open communication going forward pre pandemic obviously when you're talking with investors talking with the radi agencies very real discussions about what are the different sources of revenue that you have availability if you're a transit agency for operating capital but also the flexibility that you have on the operating side you know as we look forward and Pascal's thinking what does the future of transit look like for the next three to five years? We're probably okay. Under the IAG funding there's significant amount of operating capital money available to transit agencies but thereafter that's when we need to start thinking visionary what do our systems look like? What do we want them to be? What do our communities want them to be? And what's the mix of revenues that we have available. I think the agencies that made it through the pandemic the best at a very diverse source of revenues not just what's available from the state and the feds but also locally sales tax nationally. We had transit agencies with property taxes all of these funds combined together to provide some source of mitigation against economic downturn and unexpected events like this. So going forward I think it's very important with investors and agencies to be open about that. Talk about the flexibility. We have talk about the initiatives that we have and even more important talk about our long term financial plans. How are we preparing for what the future holds for us even if we're not exactly certain what that might look like?
Devin Brennan (
I think just echoing that from the legal perspective that this is somewhere some someplace where you know the team that you have really sort of matters because when you have this diverse set of revenues you have to ask yourself what can fund this project what can fund this operating expense and how do I allocate those? But in addition when you're talking about bond financing you have to ask what funds can secure these bonds. Do I create a diverse double barrel triple barrel credit? How do I efficiently do that and sort of what are my real options. and so I don't know if you know based upon the federal COVID relief support that was really important for airlines for transit agencies. There was you know a lot of flexibility that was found there but as we go forward and things that have traditionally supported some of these you know diverse credits and diverse enter revenue diverse revenues for enterprises like the gas tech acts and other things may roll off how do we how do they address that and what do they what do they look for? you know in terms of new revenues.
Darren Hodge (
Yeah. Pascal scale us.
Pascal St. Gerard (
I think the sales tax will continue to be a major source of revenue for transit and other forms of transportation infrastructure. I think the gas tax probably will be the more challenging of the two mainstays as far as a source of revenue. I mean if you just look at what happened in California what two weeks ago with the governor's I guess executive order regard to the termination of a new combustion engine car sales by 2035 it's not gonna happen overnight but I imagine that over from that point forward you know we will see less gas being sold and consumed. So that will undoubtedly impact the ability of localities and transit agencies to count on the gas tax as a source of revenue to leverage and finance capital projects. So, I think along the way you know we're going to have to think about transportation funding differently and I struggle to come up with alternatives other than going back before the voters and seeking additional authority for new measures.or maybe you you you assess levies on activities that have yet to take a foothold but I do think the sales tax will be the mainstay at least compared to the gas tax which I think we can describe as waning if you really believe that we're moving in a direction where we take ourselves away from the use of fossil fuels. Yeah. So I don't have a substitute for the gas tax
Darren Hodge (
So I think a large component too I'll try to think a little visionary Devin. You're giving me a hard time for looking looking back. My best years are behind me. I'm fine with that. So but I'll try to look a little forward. So we talk about new revenues but I think another part could be how do we finance some of our capital plan? And you look at some of the tools that are now available to us. You look at transit oriented development always a big topic for transportation cities counties don't shake your head Rodney it's comman but IGA provides an additional set of tools for TOD. So in the past prior to IGA you could use TFIA for transit oriented development projects but in a very limited fashion it was more for the horizontal infrastructure the public infrastructure under IGA there's a set of a checklist that you have to meet but that's now expanded so that you can use TFIA for more of the private type use. So your retail your residential commercial et cetera to help fund and make these Tod projects more feasible. So I think when we think about what is ridership going to look like I think a big part of what we're trying to do is figure out how can we make ridership and transit more efficient? How can we make it more easily accessible to a lot of our communities? And I think TOD is a big part of that.I think the other important part about transportation we talk about IGA a we talk about revenues. We talk about 2035 the EV mandate is partnership. So what I am fascinated with is in 2035 we have a requirement in California. All new vehicles will be electric at that point all new vehicle sales so electric vehicles. And when you think back we also have renewable mandates. What's been the challenge with renewables. Well it's storage well by 2035. And after all of a sudden we have millions of rolling batteries on our roads. And so how do we figure out as transit transportation agencies working with our power utilities working with our local cities and governments how can we use this mandate in these tools available to us to solve some of the problems we have not just in transportation but in grid management. You know you look at some of the visionaries in transportation electric vehicle and they say these rolling batteries. When do they charge? They charge at night when there's not a lot of load on the grid? When is that needed? When do we need grid management? Well during the day well that's when those electric vehicles are mostly parked. So how do we develop systems that integrate all these things together? And I think that's where we all have to work together. And 2035 will come very very quickly. And so when we think about what are the types of topics and infrastructure we need to think about to me that's one of the key elements that we need to start on now because yeah it comes quick.
Devin Brennan (
I think some of the themes that we're hearing here today is you know the various types of revenues that are available some are more certain some are less certain the reduction in transit ridership and use of transit broadly speaking and the ESG goals that we've kind of been touching around. How do you combine those three revenues you know transit usage and ESG to achieve the goals that you're aiming for. How do you you know if you just propose attacks to support transit but you don't have people demanding to use transit is that politically sustainable? How do you how do you encourage people through this process to use transit with the tools that you have available?
Pascal St. Gerard (
Yeah. I think you have to present them with a value proposition in terms of what the purpose of ESG is what the goal is with regard to reduce the missions why we are moving in the direction of EVs and the numbers will bear this out. I mean if you were just to look at the avoided cost and additional healthcare with regard to folks who suffer from asthma with regard to folks who suffer other pulmonary diseases I mean I've looked at several different studies where if you look at the next 10 years you know we're talking a couple hundred billion in avoided costs avoided trips to the hospital. So I think it's about rationalizing with the public what the point is with these efforts. And I also think that the mistake that we tend to make with regard to just the greening of things where people look to the big infrastructure projects that are easy to point to and people can you can hold the vent over but you know if transit agencies also focused or put as much emphasis on greening their facilities greening their operations in addition to sort of greening the fleet or being able to rationalize their source of electricity being being green that could help explain or gain support and also just increase efficiencies across the board. So it's not just focusing on one the infrastructure which will be very expensive but also take a long time. There are things that you could do incrementally that kind of get you there and also bring people along and then there's also a valuable discussion be had with just other partners as you noted before whether it's other agencies or other governments to really get at sort of a multi-layered efficiency approach where you're not reinventing a wheel every day within your own shop. Meanwhile your sister agency is not really a part of the discussion. I think when I first moved to California 21 years ago to the bay area I was just blown away by the fact that you know just taking public transit required you know three different cards you had a different rate schedules. I had to keep track of what this bus costs what Bart costs and now you just have your of card that you can use interchangeably do at different so little innovations like that definitely help move the ball forward. I think you can accomplish the same thing with regard to ESG and other aspects of increasing efficiency increasing restoring ridership. I'm a little skeptical still about the rate at which it comes back and also understanding that some of it will not come back just because of the nature of the new operating environment they we're now in sort of post lockdown.
Devin Brennan (
And are there ways of leaking that to revenue generation? I think of you know the high occupancy toll lanes and demand based response and things that that really modify behavior as well as generate revenues for our infrastructure. Are there other approaches that are available for for transit?and I open this to the group.
Darren Hodge (
I would say going back to partnership and thinking strategically is very important you know too often I think we put these different transportation modes in their silos and it doesn't have to be that way.we take an example such as express lanes or managed lanes think about how you can define the corridor and how you can use some of those revenues to help fund some of the transit projects that the express lanes or managed lanes might help with meeting certain mandates. I think that's very important. Yeah it's it's a challenging problem. Devin's going off script here and it's not fair to the rest of us. They're important points but it just yeah it requires quite a bit of discussion and forward thinking.
Devin Brennan (
The problem with congestion price again managed lanes is that you'll you will get people who utilize the preferred and pay for the privilege of using the lane but you also then push a certain number of folks to find alternative routes and that in itself can create more problems for the communities that live in the alternative route that that they've opted to utilize that's currently free. So it's not a panacea. So I view congestion pricing as sort of a tool. I think it definitely has to be used in conjunction with with other things. I'm skeptical of congestion pricing in sort of central business districts to some extent whereby you eliminated vehicles completely from a downtown corridor. I think it creates distortions that that are harder to manage else worth regard to just local businesses or just traffic flow within downtown area.
(
Much like Kevin mentioned with the transition to trucking that that the unintended consequences kind of flow through the whole system. And you you don't know what the real consequences is at the end well.
Darren Hodge (
Kind of to push back on that no offense here.
Pascal St. Gerard (
This started before this session here.
Darren Hodge (
Probably continuing to dream time. So I think congestion management can be an incredible tool but I think there are challenges with that. I think one of the things again going back to these themes of partnership and long term thinking holistic thinking figuring out how can you make sure that this congestion management tool with express lines toll roads manage lines whatever it is cohesive because what you don't want to have is a partial system at express lanes which all of a sudden is not going to work. And so I think when you talk about the impacts of it I think we have to be very forward looking to figure out how are the policies how are the infrastructure that we're setting? How do they all work together? Because ultimately to your point what you don't want to do is develop a system which pushes too much strain on one of the other modes. So it all has to work together. But I think that's one of the important things that we're thinking about as an industry right now is how do you look and manage this tool? Because congestion management is an active tool to modify user's behavior or as a sales tax that doesn't modify anyone's behavior in terms of what mode they take that's just a funding tool. And so I think it's worth taking that into account and using it strategically to achieve the goals that you have as a regional or agency for your transportation needs.
Devin Brennan (
And I think there's a political question there too at the end you know as as you it sounds like you're advocating for regional planning and regional you know resources and an intelligent sort of smart deployed set of both funding and behavior kind of issues and just as a number of counties right now are dealing with you know cross county line transportation projects that are to based or others. And how do you kind of incorporate and integrate those given the existing financing structures and Tiffy loans and other types of things that you have sort of you know applicable there are a lot of complexities and details to work through that. Oh absolutely. Yeah. Paul I know we're running outta time. I wanted to really touch on airport ESG topics too because they're they're somewhat distinct and find out from you you know what you've seen on the airport side in terms of ESG focus and their approach to both ES issues and financing.
Paul Bloom (
Okay. Well just like with many governmental units and I think a little bit to Kevin's point earlier a big part of the focus has been around sort of packaging for various audiences what airports have been doing for years. Whether you're talking about on the environmental front noise mitigation storm water runoff energy efficiency investments that kind of stuff on the social side airports are extremely focused on creating economic opportunity for DBEs through their capital plans and their concession programs and their other vendor programs. And that's not something that's new but has been going on for a long way. So you know what we're starting to see is more and more of our airport clients have an executive officer position. That's either around ESG or around economic opportunity or some combination or in some cases there's an executive officer for each which I think is forward progress in terms of getting the right kind of focus on these topics. We're starting to see a lot of our airports do annual ESG reports where they talk about their investments and their programs in and around these issues. And those are are good for local constituencies and have begun to be read and looked at and commented on by the rating agencies and investors. We've seen lots of energy efficiency investments and terminal developments that are achieving high enough standards to qualify for green financing on the disclosure front just sort of the nuts and bolts of the financing. You know one thing we've noticed is that there's a little bit of ESG here and here and here and here in 10 sections. And so we've started to try and get our you know the councils on airport deals and on our airport clients to create an ESG section which isn't all new stuff but in a lot of cases it's just putting it all in one place to make it easier for investors to absorb the information. And we're seeing a lot of dialogue around ESG with rating agencies and with investors even though they don't necessarily you know translate into revenues and coverage and that kind of thing. And we're starting to see airport green bonds. It's another sort of counterintuitive thing in in the airport space where we're flying people around. There's a lot of carbon out of that but there are well designed terminals. There's these automatic people mover projects at airports airports are doing a lot around energy. And at the demands of their customers the rental car companies want to put electric fleets in their rental car facilities that requires charging infrastructure and capacity. The airlines want to turn the ground handling equipment into electric vehicles and that requires more load at the airport and different transmission patterns storage charging infrastructure. So, there is a lot of activity both in the physical and then in the kind of reporting and strategic planning and management in the airport space in and around all all the different parts of ESG.
Devin Brennan (
Thanks, I wanted to open it up for questions to the audience before we go since we we have run out of time do folks have questions for our panel? All right. Well I just wanted to say thank you to everyone for joining us and thanks to our panel members for giving us such a detailed insight into what's happened with transportation finance after Covid.