Staring Down the Transit-Abyss and Coming Up with-Innovative Solutions

Transcription:

Bryant Jenkins (00:05):

I know one thing that has taken up countless pages in both mainstream media as well as the Bond Buyer has been the transit fiscal cliff that's affected agencies around the country and certainly here in California. There's no exception today. We're blessed to be part of a very informative panel of folks who I'll introduce in just a few moments. I am Bryant Jenkins. I'm fortunately taking the place of Swan Kim from Seabert, who's unfortunately unable to be with us, but today I will carry on in her tradition of getting some useful information from our panel, our panel, and from left to right. Please introduce yourselves, John Palmer.

John Palmer (00:54):

I'm John Palmer. I'm a partner at Orrick Herrington and Sutcliffe, and I am here with my client Pam from Bart.

Pamela Harold (01:04):

Hi everyone, I'm Pamela Herold. I'm the assistant general manager of performance and budget at BART, a lifelong transit rider and have been at BART for a long time. So happy to answer any questions about public transit and Bart.

Peter Schellenberger (01:16):

And good afternoon. We're happy to have the coveted after lunch slot. I'm Peter Schellenberger from PFA. I'm a managing director and live here in the Bay Area, work primarily with transportation clients.

Bryant Jenkins (01:32):

Thank you all. I think we'll start off just by asking the obvious question, given Pam Herold's presence here, Pam, if you could address how BART your agency is planning to avert a fiscal cliff and how it will still advance programs and policy changes that are necessary to restore and increase ridership.

Pamela Harold (01:55):

Okay, thank you Bryant. I've spent a lot of time over the past few years answering questions of this nature. So first let me just be clear, we know that fares are no longer sufficient to support BART operations, but I need to set the context of what BART means to the Bay Area. BART is the transit backbone for the Bay Area nine county region. We provided before the pandemic, we carried a full 50% of all miles traveled on public transit in the Bay area where they were traveled on BART. In fact, it's actually quite compelling to consider the fact that BART carried 25% of all public transit miles in the state of California before the pandemic. So we mean a lot to the Bay area and we mean a lot to California. 90% of the transit trips that are taken in the Bay Area that transfer from one operator to another have a leg on BART.

(02:49)

So BART is here to stay and BART will make it through this prolonged downturn in fair revenue. So let me tell you what we're doing. To address our challenges, we're taking a two-prong approach. So first we are looking to extend our fiscal runway and we received 1.6 billion in federal financial assistance. That's taken us a long way. It'll take us a little bit further and we're doing everything we can to extend that money. We're also advocating at the local and at the state level for additional gap funding to help push out that fiscal clip. We're doing everything we can to reduce or hold the line on expenses and in an infrastructure intensive public transit organization, it's hard to cut back expenses, but we are doing a good job at holding the line on expenses and most recently for about the past four or five years, we've kept our expense growth rate down below the rate of inflation and down at the lower end of all transit operators.

(03:51)

The next thing that we're doing to extend our runways, setting ourselves up to potentially execute some moves that might take some of our expenses right now and move them into future years. So not taking these actions right now but setting ourselves up to move pretty quickly on that. The second part of our two-pronged approach is to advocate strenuously for new transit funding. Before the pandemic, two thirds of our operating expense was covered by passenger fairs. Obviously that's not the case anymore. We're trying to invert our funding model so that maybe two thirds of our operating expenses covered by a sustainable long-term funding source and that is exactly how most other North American transit operators are funded. So we're just kind of getting ourselves into line with most every other public transit agency. I've said a lot. I'll pause there and turn it to anybody else on the panel.

Peter Schellenberger (04:47):

Yeah, I'll add to it. It's interesting, I was reading APTAs June report where they surveyed their member agencies on this very question. I think they surveyed 122 different transit agencies and 50% expect to confront the fiscal cliff in the next five years and the majority see that occurring in 2024 and 2025. And it is interesting to hear Pam, your approach, your two-pronged approach. They surveyed the various agencies and asked what ways, what strategies are they using to address this? And I'm just going to read off the answers to that survey question. State funding folks are looking for state funding, they're looking for local funding. They're looking to go out and try to pass a dedicated measure like a sales tax measure. They are very, to your point, disinclined to reduce service or increase fares because at the same point at the national level nationally transit ridership is back about 70% pre pandemic. And so that's the effort to try to get people riding transit, get the fair revenues up along with that. So it's sort of counterintuitive to increase fares and cutback service while you're trying to increase ridership. So that is not high on the list. Also not high on the list is federal funding. So I don't know if you have a sense of federal funding really stepped in and save the day during the pandemic. That's nearly fully obligated across the country, across agencies. Do you feel we're done looking to the feds for a continued or increased subsidy?

Pamela Harold (06:27):

I will say we're not counting on any additional federal funding. We'll take it if it's offered.

Bryant Jenkins (06:32):

No, it's a fair point. Going back to Peter for a second, could you talk about some of the capital market solutions that some of these transit agencies, whether here in California or across the country have used to sort of extend that runway from the fiscal cliff?

Peter Schellenberger (06:48):

Sure, I've got notes to this point, so forgive me if I look down and squint here. The delivery of major transit projects across the country, there's a well-established set of tools and financing tools to deliver these projects. I'm just, and even though we're in a high interest rate environment, we're still in a very well-functioning market. I think that's an important takeaway. We're seeing rates go up, but we're still seeing strong demand for high credits and most of the credits coming and being offered and sold through transit agencies, very high credits. And so it's a well-functioning market for high credit issuers like the transit issuers. I'm going to speak a minute about a project that we worked on in San Diego. The Mid coast transit project, it's a $2 billion project or was it was an 11 mile project that extended from downtown their fixed rail from downtown San Diego to the UCSD University Campus North and they used the full array of tools which are still available to transit agencies.

(08:01)

Of the $2 billion project, about 49% was funded through full funding grant agreement. So they had a billion dollar FFGA, which they closed in 2016. At the time of closing that full funding grant agreement, we also closed TIFIA loan, which has to happen commensurate with one another. We closed the TIFIA loan for 537 million. So transit agencies have increasingly looked to TIFIA to get some flexibility in their portfolio away from the capital markets rather than draw on the TIFIA alone. Upon closing at the time, this will sound ridiculously low in current environment we had a rate of 2.75% on that TIFIA loan, but we could issue back when we had a normal ascending yield curve, we could issue short-term notes for one and a half percent. So rather than draw on the TIFIA loan upon closing, we issued short-term notes, TIFIA bans to carry us through construction and then following construction drew on the TIFIA loan and then with the full funding grant agreement, they began to draw on that and pay project costs on a PayGo basis.

(09:17)

But as most of the full funding grant agreements they have those grant receipts come in well after expected expenditures or actual expenditures. And so what we did was we issued a federal grant anticipation note, federal GANs secured only by the full funding grant agreement. So transit agencies throughout the country have often issued debt secured against their formula funds like the 53 07 funds, a recurring fund coming from the trust fund, which is fairly reliable here. The full funding grant agreement has a little hair to it, some contingency upon funding. So that was a fairly novel structure to borrow directly against the full funding grant agreement, we issued 335 million of grant anticipation notes. We got a single rating from s and PA minus, so that was an accomplishment, couldn't quite get there. With all the various rating agencies. There is risk for the FFGAs and any debt secured against those and the two risks are generally related to appropriations. It's the timing and the amount. If you look at the history of full funding grant agreements, they're usually almost always paid in full, but there are times in which the annual receipts are lower than expected or there could be a delay. So there was a structure built in to accommodate those risks, hence the A minus rating.

(10:50)

And so that was a novel structure that's available today to go out and borrow against a full funding grant agreement. The final maturity of those notes was 2027. As it turns out, just in the last two weeks, SANDAG has received the full amount of the FFGA, so we've defete those GANs. So I think that's a relevant point. It had been many years since anybody borrowed against an FFGA as of this, the last two weeks we have borrowed and repaid these GANs. So that's a structure that I think we could make more appealing to the rating agencies and walk out that success story. And then on top of the FFGA and the TIFIA, they use their sales tax debt both in the form of commercial paper to accelerate in the early years and then term that out to long-term debt through construction. So these two well-established tools, these tools exist for all of us today.

(11:47)

Granted in a higher rate environment, I do think the challenge in this strategy is first to try to use grant funds, state and federal grant funds to advance projects. Secondly, it's not a rate play to use commercial paper or a line of credit rates are as high as long-term rates if not higher currently. But it does keep flexibility and so using a line of credit or CP does carry us through this high rate period, we could fix it out. As rates go longer, you will still need to issue long-term debt to keep the projects going. I think the third prong of the strategy, rather than to borrow three years at a time, which agencies often have done, folks are looking ahead to just fund the next 12 months sort of fund your near term needs, get in, borrow, hopefully rates come back down and you'll get back in. So it's some initial thoughts.

Bryant Jenkins (12:40):

No, that's not bad, that's not bad. Just a quick follow up, I know that process, although you talked about all this various instruments, the FFGA, the GANs, the TIFIA took a bit of time. Are there other things that transit agencies have at least considered or executed on like tenders recently or is that something that they've not really stepped to the plate yet?

Peter Schellenberger (13:05):

That's a good question and you could add to this, Tenders have certainly been a popular strategy, certainly not unique to transit agencies, but for any issuers that have particularly taxable debt outstanding, the ratios have really allowed us to go out and purchase those bonds on the open market and fund those through the issuance of tax exempt debts. So tenders have been certainly commonplace this year.

Bryant Jenkins (13:38):

Anything else from the panel on that? Well,

Peter Schellenberger (13:41):

Any other short-term, long-term strategies for finance? I

Bryant Jenkins (13:44):

Don't want to leave John Palmer feeling alone. So John, the next question's for you, given some of your transit clients as they prepare to go to market, are there any legal issues that you're commonly coming up against given that they are looking at, whether it's from a disclosure perspective or dealing with the rating agencies or just trying to figure out how to get more investors?

John Palmer (14:10):

Well, I mean I think that it's a little bit hard to get focused to focus on the capital needs right now because everybody's so focused on their operating budgets and I think that we as an industry need to be careful in how we talk about what we can bring to the table because I think that solution is maybe a little bit of a misnomer. I think that we can help people buy time at a cost, but the real solutions are going to come from elsewhere, whether that's state or local or individual measures. And I think that it's important to think about how real those potential solutions are and I think that in a rising rate environment it's tempting to want to begin to use variable rate solutions again because they can be a little bit cheaper, especially if the yield curve straightens out. But I think that there are a bunch of risks involved in that, particularly given the fiscal cliff that so many transit agencies are looking at.

(15:30)

And if you have a fairly robust variable rate program and you're going off a fiscal cliff that can exacerbate an already bad situation pretty quickly both through swap rates and increased costs on your letter of credit, increased borrowing costs. And so I think that it's important to weigh one's projections about what's going to happen in the future in terms of real new sources of revenue against the cost of trying to buy more time through Capital Solutions. I've had my eye on ACA one, which is going to provide some, if it passes in 24, it'll lower the threshold for geo bonds to 55% and I would imagine that that will mean that we will move a bunch of capital costs that are currently funded by sales tax programs to geo programs because they'll be much easier to pass. And to the extent that the debts, what would've been debt service sort of falls through to the operating side of the house, that will provide some relief there. And I think that it might be helpful, Pam, for you to just talk a little bit about why it's so hard to address the expense side of the equation, right? Because I think that for those folks who don't pay that much attention to transit, they go, okay, well you're getting less money, spend less money and that's how you can balance your budget. And I think some education around why that doesn't really work as a solution would be helpful.

Pamela Harold (17:23):

Yeah, absolutely. I can definitely address that. But I also want to underscore something that you said at the beginning, which is transit operators are focusing on operating right now. Many are, but there's still a tremendous pressure to address capital needs primarily because projects that are underway are facing incredible cost pressures in the inflationary environment with the disruption of supply chains that we had or with the pandemic with the challenges in hiring the appropriate people to implement these capital projects. So it is on both sides of the house, we're really trying to keep things moving along, but as far as I am so glad that you asked that because everybody says you see in the media and in fact I think one of the questions at lunchtime said, what should trans operators do? Should they change their business model? And a lot of people say yes, and what many people mean by changing the business model is well certainly if you have 50% less ridership, you should cut your costs by like 50%.

(18:18)

That's what any normal person would do. And Bart and many other fixed guideway rail operators, we cannot do that. Whether a train is carrying a thousand people or whether it's carrying 10 people, we still have one train operator, we're still maintaining that train, we're still maintaining the right of way, we're still staffing the stations. All of those costs cannot easily be paired back. So only about 30% of our costs actually scale, maybe 35% scale up and down with service and with ridership the rest of the costs are fixed and that is because we're still maintaining our heavy infrastructure intensive physical plant. So it's a bit of a challenge and it's a bit frustrating I think to people that don't know public transit and don't know the infrastructure to see us not cutting back, but let me assure you, you don't want to see us cut back to the extent that it would allow us to balance our budget. We never would be able to do that and it would be what we call in the industry the dust spiral.

Bryant Jenkins (19:20):

Understood.

Peter Schellenberger (19:21):

I'm going to ask a question, sorry to follow up on that. Fixed guideway difficult to back off on costs. Is that a differentiating factor between fixed guideway rail if you will and bus?

Pamela Harold (19:35):

Absolutely. If you think about it, a bus runs on city Streets primarily who maintains the city streets. As much as I love AC Transit, I love Muni, they don't maintain the city streets. All of our right of way, all of our guideway is a hundred percent maintained by bar. Nobody else comes in, nobody else touches it. We have a third rail, we don't want anybody on our right of way. So all of that cost falls on us.

Bryant Jenkins (20:02):

One thing that sort of brings to mind is dealing with the rating agencies, and I'm not just saying that because Pascal's in the front row, but the rating agencies in general through the pandemic have I think sort of maintained relatively strong ratings for transit agencies. Although there have been some instances of entities like New York City MTA, which have more recently gotten upgrades based on additional state support and entities like BART, which have recently had downgrades in part due to some of the issues with Fairbox revenues. That being said, I don't know Peter, if you could just talk about are we now getting to a point of a tale of two different types of transit credits?

Peter Schellenberger (20:45):

Sure. It all ties back to the broader enterprise, the view of transit as an enterprise and really right back to the operating challenges for transit. Even though as you look at take a narrow focus on the debt or the bonds issued, much of its sales tax bonds or even some Geo bonds, but I think the rating agencies for a long time have always looked at the data issuance within the broader enterprise and so you've always had to address operating considerations. Recently they have called out large urban systems that have been dependent on Fairbox as those on the highest end of the credit risk and that kind of fits into our friends at Caltrain are here in the audience, so Caltrain used to have that 70% Fairbox recovery ratio. Right now it's right around 30 recovering and BART falls into that. You look at AC transit, they've always had a bus only system.

(21:53)

Their ridership has come back pretty good back to the national average around 70, 72% never. Were dependent on fair revenue and so that's I think distinction number one. Those that were dependent on fairbox and those who are slow to recover with ridership are sort of at the higher credit risk. But that said, the transit credits have hung in there pretty well. You look at for instance, the s and p report from just in September I think they took, there was 11,12 positive rating actions in their portfolio and only four negative. So frankly it's hanging in there and it's kind of hanging in there across the spectrum of financing vehicles. So for instance, sales tax revenue bonds, predominant source of issuance for transit systems across the country, still highly rated still in that double A plus sort of category doing pretty good. You look for instance back at AC Transit, they don't have a dedicated source.

(22:59)

They issued COPs and those COPs are AA rated stable from s and p, which you could be somewhat surprised about. No dedicated source transit system's having the same issues as others, still AA rated, but they do get the benefit from that sort of enterprise analysis, which is they get sales tax dollars from Alameda County Transportation Commission, they get sales tax from CCTA, they have a broad array of property tax measures that flow not directly to the bonds, it's not a directly pledge if you will, but it helped support the entire system. They were not heavily dependent on fairbox and so they're hanging in there at that AA level In San Joaquin Regional Rail Commission, we refunded some coops for commuter rail coming from San Joaquin into Silicon Valley. Those COPs managed to keep it at single a rating. They're hanging in there. Caltrain interestingly, you don't see too many fairbox revenue bonds out there currently, but they just had their fairbox revenue bonds affirmed at the a plus level not because of the strength of the fairbox if you will, right?

(24:08)

But because of the enterprise analysis, because measure RR the sales tax that was passed to support that system supports the enterprise and so it's probably the right way to look at. We may have grouse at the rating agencies a little bit when we didn't get the aaas off of sales tax and they would always come back and say, no, the sales tax is sort of embedded within the enterprise and you got to look at holistically. Now that's somewhat beneficial for those that do either directly get a dedicated source or like AC transit indirectly get a tax back source. It's keeping the enterprise up if you will, up and running and it's reflected in ratings that are still pretty healthy and at the end of the day it's going to come right back to how do you operate your system and have long-term feasibility.

John Palmer (25:01):

That makes sense. Any other answers from the panel? Well I'd be curious, Pam, if you want to talk about why you think some transit operators aren't seeing the same level of fair revenue recovery as sort of the national average?

Pamela Harold (25:24):

That's a good question. For BART, we are running at about maybe 40, 42% of our pre pandemic levels. A lot of our ridership was focused on the East Bay to San Francisco commute, so the Trans Bay corridor we provided pretty robust high frequency service through the corridor. A lot of folks are not working back in San Francisco nor or if they are working in San Francisco, they're not coming in five days a week. So I think that's the crux of our problem. Kind of the neat thing though is you peel back the onion of ridership that the pandemic has done for us is that we see that we have a high number of transit dependent riders, a high number of folks that are doing really long commutes on BART and the stations that are coming back the quickest are actually never even really dropped as deeply as the system are. Those that serve what we call priority populations, low income minority populations, this would be Fruitvale Coliseum and actually Antioch. Antioch to San Francisco is one of our strongest corridors and those are some people that are really traveling long distance distances to find affordable housing and get to their job. I think it further underscores how essential BART is to the Bay Area. We may not be our old self at 400,000 plus daily trips. Were our new self at like 190,000 daily trips, but we're still very relevant.

Peter Schellenberger (26:50):

I'll add an additional long-winded comment if I may. Just in terms of your prognosis, Pam, I've always said that congestion is the transit agency's best friend and it feels like we're getting back very congested up in the door. I take BART every three days a week to your point.

Pamela Harold (27:13):

Previously five I'm sure right from previously?

Peter Schellenberger (27:14):

Yeah. Well frankly I couldn't park at BART, so I take the Trans Bay bus but now BARTt's open, so I take BART, but bridge traffic, bay bridge traffic is about 90% Back to pre pandemic. I was looking at a statistic for San Francisco freeways and the average travel speed is back to pre pandemic. You used to cruise much quicker on the freeways in San Francisco 2021, 2022. Here we are back to fairly slow crawl and so is that eventually going to be reflected in increased ridership? You're hoping or your ridership forecasters are prognosticating?

Pamela Harold (27:52):

I never like to use the word hope and anything that we put out about BART, but yes, we are ready to take that Bay Bridge congestion when it reaches peak capacity. There is no way the Bay Bridge is going to get any bigger than five lanes. The toll plaza is already fairly congested in the morning. I don't want to say there's lots of capacity at BART. Our trains are actually pretty full but is capacity on BART. We're able to add more capacity if needed and we're ready.

Peter Schellenberger (28:20):

Great.

Bryant Jenkins (28:22):

All right. I've got one last question before I open it up for audience questions which is going back to the money, the governor's budget this past year included 5.1 billion in aid for transit agencies, 1.1 billion for operations and then 4 billion for the Turkey program that could be flexed from Capital Two operations. I guess starting with Pam, is this level of state support enough?

Pamela Harold (28:52):

Absolutely not. So we are very appreciative of the state funding. In fact, I think I saw a headline the day after the state that was announced that said BART to receive 5.1 billion. So that wasn't the case. The church that funding, we received about 350 million to help us. It was part of our local match for our full funding grant agreement for our core capacity program. So not an option to flex that into operating and the remainder of that 1.1 million for operations, the Bay area got 400 million, the most of the rest of it went to Southern California. Out of that 400 million I don't know yet. We should know the next few days how much might be available to BART and a few of the other operators. If I had to put an educated guess on it, I'd put about 180 million. Very grateful for that but certainly not going to close the gap. The state should and the state can do more. We are continuing to advocate at the state for additional what we call gap funding.

(29:52)

They should be able to come through. I certainly see some opportunities seeing that state highway or the highway funds. I really think the state needs to put their money where their mouth is on this because they have some pretty stringent climate goals and BART is key. As I mentioned earlier, we carried a full 25% of all miles travel on public transit in the state before the pandemic hit and BART, we are a 100% greenhouse gas free electric rail system. So we are key to the state meeting. Its climate change goals and as I mentioned earlier about the Antioch to San Francisco Quarter, BART having a safe, clean, reliable, well run BART system is really important too. Equity to housing and to access to jobs.

Bryant Jenkins (30:42):

Thanks Pam. Peter and John, I don't know if you guys have either seen some of the things that Pam talked about whether here in Northern California or and other trans agencies around the state just in terms of how much state support if it's useful or like Pam said for Bart it's not enough.

Peter Schellenberger (31:04):

I can echo it is not enough. I think just due to the struggle of the folks that we work with and again on the operating side and referencing back to the after 50% of operators are looking at a fiscal cliff in the next 24 months. So they're really not looking to the feds according to their own responses to plug that gap. So I think that does come down to sort of your local and state strategies.

John Palmer (31:33):

Yeah, I mean it's a piece of the solution but it's never going to be the whole thing.

Bryant Jenkins (31:39):

Gotcha. With that said, didn't know if there are other questions from folks in the audience I see in the back Gary Hall.

Audience Member 1 (Gary) (31:50):

Just curious as to whether Peter, either any of your clients or Pam at BART, what are your strategies for tapping the 108 billion of IHA money for public transportation, especially those competitive grants for your space?

Pamela Harold (32:05):

I can jump in first. Absolutely. We are turning on full speed to access whatever funds that we can. Primarily what we're trying to do is use federal funding in any form of grant funding to help us close any existing funding gaps on projects and we're also using, looking to use those funds to help match with local funds that we have to further advance projects that are underway in the pipeline. We were already starting to head in the way in this direction before the pandemic, but the pandemic has certainly accelerated this move for us in that we're not generally not starting new projects unless it's something necessary for stated good repair. I also want to note that we were super excited to learn a few weeks ago that we are the recipient of a regional infrastructure accelerator grant, so we'll be using those funds to help us kind of coalesce the pipeline of projects and also help us put together a package to potentially tap into federal credit assistance like TIFIA or maybe Rev if we can.

Peter Schellenberger (33:10):

You're the best to speak to that. I think everybody's looking at all available resources and really trying to mobilize to go after those.

Audience Member 2 (33:28):

Guess my voice doesn't carry as much as I thought I did. So for those that are playing Death Spiral bingo out there, can the panel go into a little more detail on what the perspective is on? Because this is what we hear all the time of the death spiral of transit and it's coming and it's big and it's nasty and it's awful and we're all shaking in our boots. How more are we addressing?

Bryant Jenkins (33:57):

Yeah, let's start with Pam just talking a little bit about that death spiral or the potential for one.

Pamela Harold (34:04):

Yeah, absolutely. We are headed in the other direction at least with where our mindset and our resources are. I also want to just take the opportunity to push back on the anecdote that was shared earlier in the other session about transit, scary, dangerous. I am not at all saying that transit is a complete walk in the park, but this is the environment that we live in. The city streets are like that. The San Francisco, Oakland, you look around the Bay Area, this is life these days and I ride BART 10 times a week sometimes more. I welcome you to come ride BART. It is safe. So to get to Connie's question about what are we doing to, I would flip it around and say what are we doing to avert the dust brow? We're putting a lot of resources into reliability, into cleaning, into policing.

(34:53)

We have an award-winning progressive policing bureau, which 10 years ago, no transit agency with the police department thought about bringing on social service workers, community service officers, crisis intervention specialists, but we're putting money there. We're putting over 10 million a year into that type of resource so that we can get people that need help off our system and not just dump them on the city streets, but put them into the services that they need so that we can break that cycle of getting back on to the system. We're cleaning, I mentioned that earlier. We're increasing the police presence. We've doubled the number of police officers that are on our trains and we also, we revamped our service plan just last month so that we're putting more night and weekend service out there. That's when we see a lot of ridership growth and we shorten our trains too. That's a good thing. That saves money. It reflects the ridership demand that we have right now and it puts more people all together so that you don't have these long empty trains late at night with the potential for some sketchy activity. So if you haven't ridden BART lately, please get on. It's a new system. I think you'll like it.

Bryant Jenkins (36:01):

Peter.

Peter Schellenberger (36:03):

Yep. Like I said, we're the right part every week. I'm not scared now. It's fabulously reliable. The reliability is excellent and if you come into any urban area, you come into San Francisco, I could get in the mornings, I can't get home. The only way to get home at a reasonable hour is part and it's in the app and everything. I'll second your pitch for getting back on transit and it's probably time to change the narrative a little bit nationally. Ridership is back to 70%. Two years ago it just felt very different. Nowadays it feels like we're getting back. I really do think congestion reaches a point where it's like I need to get out of my car. I can't spend an hour and a half getting there and door to door 45 minutes on BART. So I think congestion is going to be a good friend here for transit, 70% nationally, 72% over at AC Transit and you check with them.

(37:05)

The beginning of the year is more than 60 and so it's coming back. In terms of strategies, I do think folks are going to lean on their local dedicated funding sources for operation to get them back as we were sort of experiencing this fabulous return and climb and like it or not, they're going to rely on those that have it. They're going to rely on their dedicated funding sources for operations and that might mean a little bit of a delay on expansion and new projects and then the challenges, the state of good repair as you're saying.

Bryant Jenkins (37:38):

Definitely I would also add just from at least what I've seen for other places in the state when I've gone down to LA Metro's system, they've had several new rail line opening this year and there's a lot of excitement they've gotten at least on their rider ship, their backup certainly on the bus side and definitely on the rail side. There's a lot more excitement both to ride the system and to it takes people from point A to point B and given the traffic volumes are back, that's what really matters to people. Any other questions from the eyes? Pascal, I won't out you as a Pascal, Sandra from Fit Trades, but continue.

Audience Member 3 (38:29):

Just question when I hear the national number being 70% and then I also hear the number, that number of folks who've not gone back to work fully at 30%. It just kind of costs me to think about is this sort of the new normal of the frontal changes that exist now post pandemic, and if that is the case, what do you intend to do going forward? And the second question is, given that reality, what do you foresee is your trajectory for future capital product, capital project needs and what does that do to the timetable, to the project delivery? Just solve it.

Bryant Jenkins (39:19):

I can start off for a second. I mean, look, there was an op-Ed, I think in the New York Times this week from Nick Bloom who's a professor at Stanford and he's written a lot about return to work and his message was basically what you see right now in terms of how the fruit, two people going to work like two, three days a week. That's the new normal. I don't necessarily know if that's let's say accurate or I mean, again, when you say something in the nation, in the national realm, what does that mean for the Bay Area, for LA, for San Diego, but certainly to the extent that the 200,000 people that BART takes a day nowadays, is that the normal? That's the question. Both for current projects, future projects out of Pam, what are your thoughts? Yeah,

Pamela Harold (40:10):

First off, I just want to say 200,000. That's perfectly fine. We're not hanging our hat on getting back to 400,000 anytime soon. We want to be the best we can be for 200,000 daily riders. As far as capital projects go, can't underscore enough expansion's not in the cards we'll support VTA with their expansion project, but for the rest of us it's not in the cards. We're all about system reinvestment and making the system that we have right now better for the riders and closing our funding gaps accountable.

Bryant Jenkins (40:43):

Peter, John.

John Palmer (40:44):

I'm skeptical that this is the new normal as we sort of come out of the pandemic. I think that a lot of industries where people can work remotely are realizing that there's real benefit to having people in the office. And although the ship is turning slowly, I wouldn't be surprised to see people in the office more frequently in five years. But I think from a planning perspective, both capital and operating, I don't think it's wise at this point to rely on a return to fair box revenue as your sort of solution to avoid the fiscal cliff.

Bryant Jenkins (41:24):

Any other questions? Not even from the Orrick attorneys in the back row that are worried that John's basically calling you back to the office five days a week. Okay. With that being said, I wanted to thank everybody here on the panel. Thought was really helpful both from my own understanding of transit, fiscal cliff, and also hopefully for yours. And thank you all. Thanks.