Case study on D.C.'s first P3 deal: Department of transportation's smart street lighting project

Bolstered by the IIJA, the aim behind the District's first P3 deal is twofold: to convert D.C.'s network of more than 75,000 streetlights into energy-efficient LED bulbs and to upgrade its Wi-Fi infrastructure. To explain the intricacies of the deal, how it all came together and what to expect going forward, we will be joined by the parties directly involved in the project.

Transcription:

Darrin Glymph (00:07):

Good morning. My name is Darrin Glymph and I am a partner at OR's DC office here based in Washington DC and serve as bond council for various transactions in the District of Columbia and actually served as bond council on this transaction. So today I'm very honored to have the opportunity to present a case study on DC's first P3 deal which is the DC Street Lighting financing. I'd like to introduce my kind of colleagues on that financing, starting with William Liggins.

William A. Liggins (00:43):

How you doing? All right. William Liggins, director of t he DC Revenue Bond program. Happy to be here. Happy that you're in my home city. Look forward to explaining the different nuances of our transaction.

Darrin Glymph (00:56):

Next, Jeremy.

Jeremy Ebie (00:58):

Good afternoon everybody. Jeremy Ebie, Phoenix Infrastructure Group founder, CEO. We were the local investor and co-investor with our colleagues at Plenary America. So happy to be here. We're based in Washington and have offices in New York and obviously in the P3 innovative finance space. But obviously that rolls right into what we're talking about. Thank you.

Darrin Glymph (01:18):

Sia?

Sia Kusha (01:19):

Good morning everyone. Sia Kusha, Group Heads in Senior Vice President with Plenary Americas. We are the lead equity investor, active developer and active operator of 57 assets across North America. Pretty much asset agnostic in this particular case. We're the lead equity investor in the DC streetlight program. Great to be back in this gorgeous city and good to see everybody here.

Darrin Glymph (01:46):

Thank you, and Julie?

Julie Burger (01:48):

Yep. Last but not least, Julie Berger. I'm a managing director at Wells Fargo Securities. We were fortunate enough to be the senior manager on this transaction and as everybody said, it's good to be in DC and actually get to look at the lights that they're going to be replacing.

Darrin Glymph (02:04):

Although she was last, you see, she was the most important person on this transaction. So today we're basically, I'm going to have a conversation to talk about the financing. We're going to have Jeremy kind of lead us through various questions and it will be in a conversation format, and then after we're done we'll turn it over if you have any questions. So thank you very much.

Jeremy Ebie (02:23):

Thank you Darrin. Good afternoon obviously here we're here to talk about the DC Street Lights project. Very innovative project here. Obviously 75,000 lights placed from the traditional gas lamps to LED lights. It's a common trend amongst American in American cities, major American cities right now. That project in and of itself provided significant value to the community both to dc both from a fiscal standpoint as well as from a overall ESG and just community standpoint. Lemme just touch a few of the ESG points, which we're going to get back to in a few ways. If you change 75,000 lights from traditional gas lamp to LED, you're now reducing gas emissions by 50%, 38,000 tons. You're also including within this project wireless access. So one interesting part of this project is it provides 239 wireless access points throughout the city especially with the high focus in our more underserved communities in this city. That'll be ward seven and eight as well as parts of five. That was an additional point of this project was really interesting as well and then additionally to the project itself requirements for local and minority and disadvantaged business, hiring obviously is a role and I'll include myself part of that. Having a minority investor that's a local investor in the project. It closed in May, already this year. What year are we in?

(03:52)

It closed in May, 2022. Obviously Wells ran the books for that. What is really interesting about the product as well is 160 million in private activity bonds for this procurement obviously was run through our conduit agency DC revenue bond program. The debt is on the shoulders of PIDC, which is the company, the special purpose vehicle that is actually going to be delivering the light system throughout the city. We are on the hook for the debt and we're on the hook to perform. We receive an availability payment from the district based on performance. We receive bonuses if we succeed, we get dinged, if we don't, it's a 15 year term more than a ding, we just don't get paid. That hurts, right? So it's a significant performance based contract end the day, 15 years and what else can I add to it about the details?

(04:46)

If there's one thing that I did want to note, we ran this conversation a little bit it's almost a preview for our local kind of public finance community. John, how are you with a P F P association for public finance professionals in the DMV and the one person that's not here, I'm going to take her role sort and I'm going to also ask questions the same time I'm on double duty is Catherine Ru who ran for DDOT, she ran the program basically she ran this project specifically. So I'll kind of just make up from her perspective a few notes that drove the procurement essentially. Obviously look, the first question they got asked is why would you do this procurement through a P3, what is a P3 and why would you do it in this fashion? They chose this fashion for a few reasons that are pretty clear.

(05:32)

One is the ESG dynamics that they could contract directly to a company like PIDC. So that's one big driver. Additional driver is obviously the performance and the ability to deliver actually the asset itself on time on budget, which we are to do. They could contract that out as well. Then another point that I did want to highlight is that payments, they could actually measure out their budget and DC as all know, those of us that are not based here, are not based here. Significant requirements on the kind of debt handle that we have through an availability payment, they could measure out their payments for this procurement. Whereas before you would essentially run budget by budget. If you had emergency situations you'd have to run emergency funding, you had a very kinda scattered form of paying for the asset itself. Then the most important piece is for all of us is operations and maintenance over the long term over that 13 year period, which is post construction, you could essentially have those payments as well that maintenance paid peer by period.

(06:36)

Actually I'll have see kinda explain that later on and why this procurement is really so innovative is one that we think would be will replicated in certain asset classes. Obviously street lights is a particularly interesting one because it affects everyone. There's no one that doesn't deal with it traditionally now in this city, if you have a streetlight that's out, you have to call 311 and you wait and see if they come back and take care of that light. They may take care of it depending on where you are who or they may not in some cases in this project. I do want to also include another point. We have to be remote monitoring control system. We can identify 75,000 lights, see what the status is of it, what degree it's at and whether it's on or not. If there's any issues and we're required by contract as we see ones out we have to replace.

(07:24)

So as you see from a project standpoint and then we're going to go into the finance standpoint then as well a highly a very interesting project that produced a lot of value. So those are kind of the reasons why the district considered a P3 and went through the process. See I'm going to kinda reach out to you here. When you looked at this procurement and just to note it ran through traditional RFQRP process started in 2015-16, quite a while ago but did come to conclusion. There were the few reasons why the previous contractor for the project did protest. The procurement eventually was replaced by us obviously. So that provided some delays in the procurement. There was actually two points of protest but in the end, obviously a very successful project that's already received recognition in our industry. So I'll go to you see it. In looking at the procurement when it came out as it became developed, if you can give a perspective on from the private sector side is investor, developer, what were you looking at as the procurement as the opportunity? What were you seeing as the overall value here and the role that the value add for P3.

Sia Kusha (08:29):

Thanks Jeremy. Again thanks for including me in this conversation. The project was pretty unique cuz the department, quite frankly the district had issues with their current provider and the issues with the current provider were really a symptom more than anything else of how the project was procured and how the services were being delivered. Jeremy talked about a 311 process which basically put the burden of providing information back to the district as to whether or not a light was out in the alley in a street, at a stop sign, at a bus stop or so on. A lot of times when the three 11 would call be be placed, if it was placed it would go in the system and the folks at the district would get to it when they would get to it simply because they had significant other responsibilities and other priorities that they had to attend to.

(09:30)

Therefore, if a particular light in a back alley in ward seven never got reported, nobody knew that the light was out. So along with our benchmark competitors who looked at this opportunity, looked at it from a couple of different vantage points. First we looked at it as an opportunity to provide a pathfind type project and a pathfinding approach to asset delivery as opposed to simply replacing light bulbs as you see in a energy services type contract. That was number one, it's an asset delivery approach. The second one was a risk adjusted performance contract that would allow us as developers to not only bring the significant cost savings over the life of the contract, but also allowed us to provide a very cost efficient financing mechanism that included equity as well as significant debt. We talked about the PS allocation and we talked about the green bonds allocation and we'll spend some more time talking about those in a few minutes, but it also allowed us to deploy equity long term as private equity investors and developers.

(10:45)

Our reason for existence, we exist to deploy equity long term and because we're not a fund, we simply exist to put dollars in first take dollars out last and it allows us to meet our mandate. The other thing that the opportunity provide us was the ability to share and manage risk appropriately. Catherine and the folks at DDOT were absolutely amazing in being able to identify exactly the risks that they want transferred. They recognized the risk that would be best born by the owner simply because of their ability to manage those risks much better in their side of the table. It allowed us to provide significant value add to the services the district was getting at the time and those value ads, Jeremy talked about it, we are incorporating not only a self-reporting system because of the smart technology nodes that every street pole we have the opportunity to provide small cell, small cell wifi coverage across the district.

(11:57)

So we effectively use this program and the district will use the program to cap the digital divide and be able to provide full internet accessibility to underserved communities within the district. It also provides us opportunity as we begin to think about EV charging and EV deployment across the district to actually have at every single light pole in the city be able to have at the parking or curbside parking, we have the ability to have drop down electric charging that would be meter based and would be app based and would allow anybody to park their EVs anywhere and be able to use the district's backbone infrastructure to charge those vehicles. All of those will provide the opportunity for the district to create and generate additional revenues, provide for significant social objectives that were not being met previously. Then given the fact that we existed and the PDIC, the project company that was generated really exists here in the district over the next 15 years, it allows us, Jeremy's and all of our other consortium partners to truly become a fabric of the community.

(13:14)

One of the key elements of this particular project was the objective of creating generational wealth within a community that has never had the opportunity to do so. As a part of our commitment to the project and as a part of the requirements that a district was seeking we are providing workforce development. We are hiring a series of local businesses both in terms of construction but also in terms of long term operations and management. So in combination of all of these, it really provided us an opportunity to come in provide a significantly better asset delivery mechanism to the district and then hopefully use this as an opportunity to as a StepStone if you will, to other major municipalities around the country where the similar conditions exist to be able to benefit from a program like this.

Jeremy Ebie (14:11):

That's a great point. Before you say that, and I kind of want to touch a few points, the value you hear, the value that's created through this project, just tremendous obviously incredible project, did have a lot of fits and starts and shaping and refining and as any procurement would. I wanted to go to Darrin about one point because you were in many ways as counsel to the district and this is one point I think maybe folks in the audience could benefit from as they think about bringing forward potential opportunities with their clients. What were some of those, I guess those gating issues that you ran into as you brought we're trying to bring forward procurement that had already been brought to market at least through the RFQ stage. What were some of the back and forth that went on there?

Darrin Glymph (15:01):

No thank you Jeremy. So I'm glad you got started this way because I think we've spent maybe 15 minutes talking about the contract and the private side of it and probably what, four or five years of you guys working with DDOT, working with the district and then all of a sudden it came to my client, William Liggins, the revenue bond program and plenaries, we like to do a private activity bond financing and it was for streetlights and it was pursuant to this section of the code that I had never heard about. I honestly had not. It's 142M and it's something called qualified what highway and surface transfer freight facilities. I've worked with William now for about 25 years and we've done traditional revenue bonds, C3 financings, charter schools and things like that. But we had never done anything like a P3 deal.

(15:56)

So this is the first three deal for the District of Columbia, but it also was the first P3 deal for the revenue bond program. So that was one of the key things Jeremy first to start off with, what is this and how do we do this? So then you kind of go to 16142M and it talks about surface transportation projects, but you don't see anything about street lights. So you're like how does that fit into this? But then once you get into the code and you realize that yes this is innovative but it's something that fits within it. When you look at that program, which was started in 2005 and there was 15 billion that a private activity bond allocation that was given by DOT, there were 37 projects that were kind of allocated money and they were basically toros bridges, tunnels highways, but there were no streetlights.

(16:56)

So again, we were kind of like, okay, yes we can do this but it's going to be different. So mean that was one of the key things. I'm going to also add that when you look at this deal, yes it was a revenue bond deal, obviously a private activity bond, but also the revenues the bonds were repaid through these availability payments. Well the availability payments came from the District of Columbia. So then it became this kind of hybrid financing where it was a revenue bond deal done through the revenue bond program, but it also had to have disclosure on the District of Columbia because they were making these availability payments. So that was one of the key challenges, Jeremy, of just kind of melding these two really different bond offering programs because in the District of Columbia you have the revenue bond program that does C3 financing and then you have the office of the chief financial officer that does the go financing and that deals with all the district disclosure of its debt. So this deal was one of the first not only being a P3 deal, but one that really brought these two different bond programs together into one document

Jeremy Ebie (18:14):

I'll speak to that before I introduce you William. So there's a stage once we were right before we were preferred bid where we knew we had to go through a conduit, we were not going to be able to go through the District of Columbia. We knew that. So we reached out to, first of all, we didn't know what conduit we could go through. So bit wild, wild West Act. Actually it's funny, I dunno if John is still here. John, I actually, do you remember I reached out to you about this question? If we could, who would we go to talk to this? And first person he brought up was William Liggins DC revenue bond program. Obviously we ended up utilizing them as a conduit. Thank you John by the way, and maybe you can talk about how you saw this project, how you look at other kinds of innovative financing and really how folks here can engage you or entities like yours.

William A. Liggins (19:09):

So when the project comes away the first thing I said was yes, and then I drop it into and he starts to figure it out. Our internal attorneys pat Allen, they start to figure it out and say yes, this is something that we definitely can do. So our normal process, borrower, underwriter, draft a resolution both owned by council, we close it, not that simple at all. So first off, when you wanted to try to move one of these transactions, make sure you have all the players that you need up front. We didn't know what players we needed. I had to, in order for me to talk to Jeremy, he had to get authorization from the contracted and procurement. So the district has its own contracting and procurement. Now my particular agency deputy Mayor's Office of Planning and Economic Development has its own contracting authority that would've been different but we had to move as the contract stated.

(20:11)

So we had to get permission to actually speak to me and I could talk with him about our process. You also needed to find out who has signature authority. I could sign for everything that I needed for revenue bonds, but because as Darrin said, we had to get some things incorporated with the contract and procurement as well as OCFO, someone else who's not used to seeing 160 million and say, Hey, you need to sign right here. You could imagine the looks on their faces. So just making sure you have signature authority in place, understanding who needs to be involved and all of the timing. Our revenue bonds normally take, if I was to receive an application beginning of January, we can have a resolution drafted, we can have a hearing in front of council in February. It's voted on the first Tuesday in March and we're looking to close it.

(21:00)

We wanted to move that fast, but with everything we had, it was a task. It was tough to get everything in. Catherine who is not here made sure we stayed on time and on tasks to get everything done. But every now and then a particular document will pop up, okay, well who's, who's going to sign this document? Who has the authority to sign this document? And so those are some of the things that you want to take into account as you move forward with one of these transactions. I'm going to say as I did on last Wednesday, we want to do more. We want to do more, we want to do more. So please take my information out. I would rather have a conversation with you and we exhaust all options before and not have a a conversation about it. So please, I would rather speak with you and maybe we figure out, okay, we just can't do that transaction. But in most cases it's going figure it out.

Darrin Glymph (21:56):

Glad you said that you want to do more cause there's definitely more that can be done. There was another 15 billion that was provided. I did this program and the infrastructure act and I'm like, it doesn't all have to go to bridges and tunnels and tow roads. There's like urban infrastructure that needs to be done throughout this country. I think this deal shows that when you look at this program that there's some innovative options and people can be creative in the things that they can do to help finance the infrastructure needs throughout the country.

Jeremy Ebie (22:28):

There's no doubt that and then you include IJ-IRA that the world that CNI look at, which are specific assets, the ability to finance those directly has just become much more enhanced and obviously the avenues to get there through your DC revenue bond programs is getting built right now. So I think that's really good. One point I wanted to get to was also the one couple factors to cover the social political dynamic of these products. So you're talking about a single asset, so you're not talking about a geo bond where folks just kind of look through, they don't not necessarily know every detail. This is a clear asset people have opinions on. If you're talking about a water system, a toll road airport, people have opinions on it. In the case of DC Street Lights, it had to be voted upon by counsel.

(23:16)

It had needed a super majority vote on by counsel. Again we're saying her name a lot, you'll probably hear of her someday. Catherine Ru really orchestrated that on our behalf we could not engage counsel directly as PIDC. We cannot engage, even though we preferred we could not engage totally. It was upon the agency to really explain the project, explain the benefits from again, a subjective as well as a highly objective dynamic, which would be obviously the value for money analysis compared to the deal. So all of that took a lot of work and a lot of real laying out on behalf of our partners in the public sector. But it did get through and so we get to pricing day and I'll kind of give it to Julie to talk about a few things related to the project and just wonder if you could just touch base on the marketing process, the road shows, how it was seen through by investors, all the things that everyone here is used to hearing.

Julie Burger (24:13):

Yeah, thanks Jeremy. I'll say I think the bid for this went in December of 2021 and by the time we priced in April, I think rates had increased 150 basis points. So the PS allocation as we talked about was incredibly helpful. If anybody looked at the deal, you'll see there was also a small taxable piece. So as the run up and rates occurred, obviously we needed a bit more financing. I'll also mention this was an availability payment deal, but one thing the district did to bring down the cost is there are also milestone payments during construction. So some of that's being used for construction, some of it we sold is what we called the milestone maturity and so that accelerated some of that now into some bonding. As Jeremy said, it was an interesting marketing process at a time in the market that was incredibly volatile.

(25:04)

We also happened to be pricing right around the same time as a large deal in Maryland for a transit project called Purple Line and so certainly we had some strengths perhaps compared to that project and some of the noise on that. I'll say a new credit in the district did incredibly well. Investors were really drawn to that. We also had a three rating from Moody's, which most P3s tend to be in that triple B range and so having that A3 rating was sort of a badge of honor and something that I think distinguished the project and brought in some investors that you might not ordinarily see was also a little bit of a shorter deal. Final maturity was roughly 15 years. So a shorter maintenance period from investors perspective probably means less time for things to go wrong. So I think it stood out in a lot of respects.

(25:53)

The other major marketing advantage we had is these were designated as green bonds and there were really three components of the green designation. One is the obvious one, which is right now I think the light bulbs are incredibly inefficient and so these new LED bulbs I think are going to reduce baseline usage, something like 50% in the district. So clearly energy savings. We also talked a little bit about safety, but there's a safety aspect, one to being sure that lights are on and working two to getting calls of when something's going wrong and so some of the wifi improvements improve that and so that was another major one and then the wifi part of this, we are extending wifi to areas that maybe didn't historically have it and so there's also a social aspect to it. I think we would argue this would've probably qualified as a social or a green bond.

(26:42)

We went with green but I think there's quite a few number of benefits as we think about what the green designation was. The deal in spite of a really volatile market did incredibly well. We tried to accelerate a little bit, so we didn't go through the full marketing of two weeks of going to each city and doing a luncheon but we did have 37 investors look at the roadshow. I think we did close to 10 or a dozen and ultimately the transaction did very well over subscribed for and as we've talked about a lot, the tax exempt tabs really brought down the cost as compared to what would've been a taxable financing. I think when we looked at it was close to a hundred basis points of savings versus what would've been accomplished if we had to sell only taxable bonds. So that was a major component of the success of the financing and again, kudos to this team for getting us that allocation.

Jeremy Ebie (27:39):

We're running low on time, but I wanted to before, obviously the goal of this is just we would love within the industry just to explain this kind of a project. It's obviously one that's a bit of a innovative so there are a lot of lessons be learned. Maybe I'll go to Sia first from the private sector side and just maybe some of what you're hearing here, and obviously some of it's a little bit in the background. So with Darrin, a lot of what he deals with, what are kind of the dynamics within the industry that you think could help drive forward more of these kind of projects from the private sector side, build interest, build efforts trust, what are some of those dynamics you think?

Sia Kusha (28:17):

Well, as it is with almost any other P3, that you look at the long term engagement from an active developer and active operator through a risk adjusted performance based contract and changing the minds and the hearts of public sector owners from construction sequence contracting to an asset delivery process over longer term will continue to show value for money. The concept of value for money under the bill, the infrastructure package and so on and so forth. Now everybody has to do one. There are a variety of different ways you can do value for monies and what Catherine and her team did at the district in this particular case was absolutely amazing. Now up here we don't have the procurement advisor for the district. KPMG was very actively engaged in that process all the way through and I think the more we talk about the benefits of the district has achieved and will continue to achieve through this type of a program will should in our opinion, provide opportunity for others to take advantage of it.

(29:26)

Certainly, there are different things that can happen. In this particular case we've talked about P'S allocation, we've talked about the taxable portion versus the rest of the package itself. A lot of times when we sit down with CFOs and with public sector owners or with muni advisors, the first question that comes to mind is, what's the difference in wac? What's, how many extra basis points am I having to pay you guys as private equity investors and developers? But by the time we get down to really thinking through the benefits that they are getting long term with as compared to the extra cost of private financing, both in a taxable debt as well as the equity tends to wash itself out, especially if you change the minds and hearts and begin to think about the laugh of an asset as opposed to simply day one, construction cost.

(30:24)

The other thing that resonates, well perhaps not with the CFO's office, but the people who are actually handed over the asset after we cut the ribbon when the construction is done, is long-term operations and maintenance. One of the things we continually heard from the city from the district, from DDOT and from public sector as we continue to work on the project development phase of this particular program was the fact that, there is this deep desire within the public sector to provide the services once the asset becomes comes, gets online but the budget is in there or even if the budget is there, it's the first thing that gets cut or gets reallocated to some other priority and some other mechanism. Having this type of a contractual structure in place almost guarantees that those dollars are continue to be spent for the purposes that they were intended to and therefore the life of the asset could be guaranteed and the performance of the asset could be guaranteed.

(31:32)

Last but not least, given the shortness of time, one of the things that we believe we can do as a sector is to be flexible. Not every project needs to be a P3. Not every project pencils out as a P3, but in this particular environment given what the inflation reduction act allows for, given what the infrastructure bill allows for looking at asset delivery in a new mechanism, looking at the opportunity to use innovative financing, private financing, long-term life cycle approach to asset delivery and asset maintenance, I think will allow municipalities, will allow public sector owners to kind of step up in a ranking and rating of their projects, especially through the direct appropriation process and will allow opportunities for projects that have been long thought about but have never been able to come to market and again, it's just not us. I mean a lot of our benchmark competitors are out there having this conversation. I think the Moretza, Dr. Farajian is going to be up after this particular panel and as a part of the keynote and what Build America Center, build America Bureaus DOT's doing to encourage this type of an approach, regardless of taxable versus tax exempt approach to this type of asset delivery and financing of these types of programs is going to continue to provide opportunity projects like this.

Jeremy Ebie (33:06):

William, Darrin, any add-ons there from your side?

William A. Liggins (33:11):

Just to add on the flexibility and the creativity we're so used to certain language being in certain documents. One of the great things about this group is that everyone was able to say, Hey, maybe we just need to change the language a little bit here and it will fit, let's change the language in this document. Let's add an additional document to make this deal fit and work. Just be mindful of that as you move forward with any of these P3 transactions.

Darrin Glymph (33:39):

I think for me is that we've heard a lot of buzzword PABs, private activity bonds, we've heard revenue bond. But the funny thing about this was that when you drill down to the availability payment and recognize that a portion of that is paid by the District of Columbia that they considered to be debt, that was something for me that was that kind of learning curve and then when I had my beloved underwriter say, okay, in order to sell this and I know it's a revenue behind Aaron, but we need disclosure from the District of Columbia, that's when it really hit me that this was truly a hybrid deal. It was not the traditional private activity bond that I've worked on. It was not the traditional revenue bond deal that I've worked on. But it really was a deal that brought both kind of programs together of both debt programs together because because of the availability payment and the source of that payment was debt of the district and in order to sell this, we had to disclose the district's financials and because they were basically the source of the revenues paying those bonds. Julie, do you want to add something to that?

Julie Burger (34:47):

No, the one other point I was going to add to what Jeremy talked about in addition to street lights, it's also a smart city P3. So we talked a little bit about technology upgrades, but as I talked to other municipal entities, that's actually the part a lot are interested in as we think about the future and getting cities ready to be smart and we had a lot of investors ask, well what does smart cities mean? And we sort of liken it to a smart home that you tell Alexa to turn on your lights and all your lights go on and so I do think there's a lot of cities that are not quite ready for the technological advance that we're about to see and so this too is a nice example of that. So it really covered not just lighting but also the smart city's improvements as well.

Jeremy Ebie (35:27):

That's a great point, Julia. This is almost like, I think see book this as well. This is almost like a stage setting with this project, which there's significant that are potential potentially available for this project. There's somebody yelling the back. I don't know what's going on in the back there.

Darrin Glymph (35:42):

So Jeremy, I do have a question for you. What did you learn?

Jeremy Ebie (35:46):

What did I learn? Well, as a local investor developer that was moving into our first major investment deal. One thing I learned is that there's the two dynamics one for sure is that getting projects through at this local level, requires local participation. Yes, if there's local participation there will be more deals because you're just people like ribbon cutting and they want to be able to say, I brought this to your community and not only did I bring it to your community, you brought this to your community.

(36:20)

So there was that big dynamic. We're in the investor side, have a great relationship with plenary. They saw that as well. That is kind of what I knew as soon as we engaged with them that we had an advantage over the other teams that didn't have a local, I mean they're not many in this business but that we're not in this space and when we went to council and I had to speak and represent PIDC. I'm talking to Mary Chase, she's retiring Ward three where I live and I'm telling her who I am and what I'm doing in my role and I'm representing our group, I think that made this project go forward. So I think in the end it's all a very organic dynamic within this industry. There's a lot to be had, but it's gotta be done through a way that benefits all communities.

(37:09)

That's the great thing about infrastructure and I think that's one thing that IJ identifies that they'd like to develop projects within communities on behalf of communities, by communities and if you're going to see more of these deals happen, which I think you will, and I think that's the way forward. Innovation is the way forward. You're not only going to have to, but you're going to see more local engagement, more local involvement. It's critical and I talk about this stuff all the time, it is a critical driver for the space. So I guess that would be the one major story I got out of it that there is for what we do and we look for this dynamic within the projects we engage in, there is definitely room at this new era for participation for all kinds of firms. So we have two minutes left so I don't have anyone, I'm sure there are a few questions out there. Technical, not technical, whatever they may be. If you want to shoot them here real quickly, there's someone with a microphone in the back.

William A. Liggins (38:11):

Just a quick plug. I want to do revenue bond deals with housing. So 501 C3 housing, please call me.

Jeremy Ebie (38:18):

I don't know if you want to talk about anything else we can, but I'll say this is a great group. Obviously reach out to us as you may, I'd say the general story is there's a reason why there's an infrastructure conference here today. It is the trend in talking to a lot of folks on the buy side a lot of folks are on the debt side. I talk mostly to folks on the equity side. The demand for infrastructure assets is very high in this volatile market, especially a P3 with a AAA credit, AAA counterparty like the District Columbia in a 3 rating on the debt. It's highly attractive for equity investors and so there's room, there's a lot of capital that's sitting out there from the investment side, pension side, you had to include that. The amount of funding that's been provided through IJA, we talk about IRA and we, there's a lot of capacity here that's been created. I don't know, maybe I'll give it to you Sia, just to add on that point, if you have any additional.

Sia Kusha (39:20):

Really we always talk about, when it really boils down to when you think about a P3 deployment a lot of times it becomes a matter a question of cost to financing. It becomes a question of, I have the credit rating, I have the bond capacity. Why do I need your money? I think in this particular case, I will leave you with two things. First, think about it as an asset delivery. Think about it and it really applies to a whole bunch of other asset sectors. Prince George's County did one with the school bundles. Anything that you can bundle and benefit from the scale of a program would be applicable. So that's one element. The second element is in the overall financial stack, taxable, non-taxable equity debt. However, want to look at it. When you go to market on your own and you sell the bonds, regardless of whether or not the asset performs, you're obligated to pay the bonds back no matter what.

(40:19)

When you think about it this way, through this type of innovative financing, Jeremy and I are the ones that have to pay the bonds back and pay the lenders back and it's not recourse to the district. So if the lights are out, we don't get paid. That's a heck of an incentive to make sure that your private partner is there for the laugh of the concession to make sure every single light is operating the way it's intended to. So next time you're walking around anywhere in the district, you look up, you see a light not working, it's coming out.

Jeremy Ebie (40:52):

Think of these two guys.

Darrin Glymph (40:53):

No, and just real quick Jeremy coz see it made me think of something is that if the district had done this as a traditional GO financing, the full amount of the bonds would've hit their debt cap. But here because that's great point, the availability payment, half of it's being paid from federal funds, only 50% of that availability payment is hitting the debt cap. So if you think about it, this is a savings to the district and to the debt cap because only half of the true financing or the half of the cost to pay for the streetlights is hitting debt cap. The other half is federal funding.

Jeremy Ebie (41:25):

Great point. Yeah, great point. That adds incentive to do more of these kind projects.

Julie Burger (41:30):

Last point, I'll mention the equity gearing on this 10 to 20%. So we're not talking a ton of equity. So cost of capital though it's a little bit higher, not dramatically higher than what the district would've bonded against and as CS said, there's a huge benefit just to asset maintenance over the life of the lights.

Jeremy Ebie (41:48):

Great points. So there you have it. I just want to give my colleagues on the panel here a round of applause. They, they're best of what they do. Thank you Jeremy.