Keynote Luncheon

Our keynote speaker, Henry Cisneros, Chairman of the American Triple I, will be interviewed by Jon Ballan, a Member with Harris Beach PLLC, during our luncheon hour.

Transcription:

Jonathan A. Ballan (00:07):

Hi everyone. Thanks for coming. I know you're all very busy. I'm Jon Ballan, bond partner and head of infrastructure and P three Finance at Harris Beach. It's a pleasure to be here. Once again, volume. Okay. I'm going to say just a few words before introducing our prominent luncheon keynote speaker, and it's very exciting for me to be introducing Henry Cisneros. First thanks to the bond buyer for organizing this annual event. I really think it's a good one and special thanks to my colleagues from Harris Beach for allowing me to undertake this role. As you know, it's the legal field call non-billable hours, but I tend to get a lot of those. But so 2023 was disturbing in the public finance community. I believe. I'm not just talking about volume or interest rates and volume picked up and interest rates stabilized after just a shocking rapid increase earlier in the year.

(01:14)

But there were a few particularly jarring events, namely the closing of UBS Public Finance Department and the closing of the illustrious city public finance department where actually I spent some time as an investment banker early in my career. They stand out and the impact on the liquidity, which I'm sure has been discussed today, but also the next time there's a crisis and issuers are looking around for talent and experience to help through the crisis, there won't be as many people around and that's not good for the industry government or the public. And on a personal note, so many outstanding professionals had careers disrupted by these jarring events. I wish them all well and hope to see them on deals soon. I won't give out my phone number at this point in time, but so as an area of finance that brings so much good to our country, in my view, and I'm sure yours, I hope that government officials working with the public finance professionals are able to obtain some relief for the tax exempt bond market, either with drastic changes to what I think are the harmful constraints of volume cap, which were introduced in an earlier era.

(02:35)

And actually at the beginning of my career, I remember it well. But they now conflict with the ability of state and local governments to provide basic services economically or any other legislative or regulatory steps, maybe new categories of tax exempt bonds that could help us address the major capital requirements for infrastructure, public projects and in our housing, in our modern economy. How it is today post covid, and I've said it before, but I hope the public finance professionals can collectively prevail on our clients and friends in local government with the organizations such as naville, SIFMA and the others to lead a bipartisan effort for these changes. I think there's common consensus on the need for better infrastructure and housing that should be tapped, especially after what's going to be obviously a very partisan election year. But the groundwork, the blocking and tackling needs to be pursued.

(03:41)

Now I know I'll help in any way I can, so please contact me if you want to help or collaborate on either Washington or Albany to help address our currently inadequate capital investment in infrastructure and housing. Now I'm honored to introduce our luncheon speaker, former cabinet member to President Clinton Henry Cisneros. It's been a pleasure meeting Henry. We had blocked out some time to get to know each other, and I think we exceeded that time by probably an hour, but it was a really enjoyable conversation and some follow up. So let me tell you a little bit about Henry and his distinguished career. Henry's chairman of American Triple I, which is an infrastructure investment firm based in New York, and he's vice chairman of the board and equity owner in Shank, William Cisneros and a principal of Siebert, William Shank, and we all know them. They're good friends, talented bankers, clients, and one of the lead sponsors today.

(04:51)

So Henry has a number of jobs, a number of cards. His community building career began at the local level as city councilman. And then he was the first Hispanic American mayor of a major US city that was San Antonio, Texas. He was mayor for four terms and he accomplished great things to rebuild the economic base of that great city. But in 1992, president Clinton appointed Mr. Cisneros to be secretary of the US Department of Housing and Urban Development. What a massive job with great impact on people, great impact on our industry and great impact on the country. And Secretary of Cisneros has been widely credited with initiating the revitalization of many of the country's public housing development and to achieving great success in the home ownership rate that needed improving back, particularly in those days. Then Mr. Cisneros went on to Univision and he remained there.

(06:00)

So he has private sector experience. He was on the board for years. He's a charitable gentleman, served as president of a number of civic organizations such as the National League of Cities. He was involved in the Federal Reserve Bank of Dallas and many others. He's been the author or editor of several books and one jumps out at me and I'm sure he has several that are his favorites. Henry wrote a book of another former HUD secretary, Jack Kemp on the bipartisan platform for National Housing Policy, opportunity and Progress, and that received awards and demonstrated bipartisan cooperation, a concept that I hope we hear a little about and that seems completely lost today in Washington DC for sure. And he authored several other noteworthy books dealing with infrastructure and dealing with his great state of Texas. Henry holds bachelor's master's degree from Texas A&M, a master's from Harvard. He's got the graduate work at MITA doctorate from the George Washington University, and he's been awarded many honorary degrees. There's a CI Narrow Center for Emerging Leaders at Texas A&M University in San Diego. Now that's some resume, so it's an honor to now I'm going to go sit with Henry. We're going to discuss just some topical issues of the day and then if there is time, I don't know if there will be or won't be. Maybe we'll take some questions.

(07:40)

So just bear with me a minute. Thank you. I hope the mic's working. So it's a great pleasure to be here with former Secretary Cisneros. He's truly an intellect, kindhearted and reasonable, and it's a joy for me to be here. So Henry, your job resume, your current jobs, I've been able to count, there's at least three, maybe four or five tucked in there. Would you like to explain to folks what you're doing now and how it clearly fits into what we're here

Henry Cisneros (08:22):

About? Sure. Be happy to John, first of all, lemme begin by thanking you for a very complete introduction. You covered everything I've done.

Jonathan A. Ballan (08:30):

Well, actually, Henry, I cut out two pages. Just couldn't deal with it.

Henry Cisneros (08:36):

Thank you and for your career in the bond in public finance. Also want to thank the bond buyer. These kinds of conferences have been very substantive this morning. I've had the privilege of participating with a bond buyer in California conferences and others, and it's a wonderful institution in our business. I get on my desk every morning a summary of the bond buyer and then I'm able to sort of go through and choose what articles I want to reproduce and dig down, and inevitably every evening I end up with four or five pieces from the bond buyer that I want to study in greater depth. So I congratulate the leadership of the bond buyer and the staff of the bond buyer on the work that they do. And then real quickly, just thank and congratulate all of you who are in this industry, which is so important to our country. I've heard it said many times, I believe it to be true. The United States has the most extensive and efficient system of getting public finance to municipalities, state governments, counties, local governments across the country, and therefore building the basic stock of the country, the capital assets of the country. There may be times when you're way down in the weeds on something and don't have the bigger picture, but this is part of why America is as strong as it is, is because the public finance business exists in the way that it does.

(10:10)

As John said, I was mayor of San Antonio in the eighties, secretary of HUD in the nineties, and since 2000 have been in the private sector, started by building a firm that has raised this capital for housing, middle income, workforce housing, not upscale, not subsidized, but that company did very well. I had the opportunity to buy into Siebert what is now Siebert, William Shank, and for those of you who don't know the firm, Muriel Siebert was the first woman to serve on the New York Stock Exchange and was approached by a fellow named Branford and by Suzanne Shank 25 years ago now about creating a public finance firm that would be woman and minority owned, and they teamed up and have built a hugely successful firm. I bought into that and asked to come board as a principal, and then together we decided that the opportunity to raise capital and deploy it in infrastructure was so great that we would create such an entity. It's called American Triple I, the Triple I stands for Infrastructure Innovation Investment. And I'm pleased to say that my partners at seabert are investors in American Triple I, including Bill Thompson who is the former controller of New York City and a principal at Seabert who is here today. Please join me in acknowledging the great work that he did as controller.

(11:48)

So that's my day jobs, that's what I do between the two entities and also am chairman of something called the Bipartisan Policy Center in Washington, which takes a little bit of time, but it's so important. The concept of bipartisanship these days is difficult and yet so many of the critical issues we face, the economy, housing challenges, some of the issues in education and fundamentally even our democracy, our elections safeguards, et cetera, is the work of the bipartisan policy center, and it is meticulously studiously bipartisan. It was created by four former majority leaders of the United States Senates, two Democrats, Senator Mitchell and Senator Daschle, and two Republicans, Senator Baker and Senator Dole. So those are the creators of the Bipartisan Policy Center, and I have the honor of serving as chair at this time. So that's the way I spend my days.

Jonathan A. Ballan (12:56):

Those are long days, and I know you still reside down in your hometown of San Antonio.

Henry Cisneros (13:04):

I have a residence here and an office in the Chrysler building, but I live most of my days when people ask, what does it mean? Where do you live? Well, where is your wife or where are your children? And they're in San Antonio.

Jonathan A. Ballan (13:21):

I got to be careful with how I ask some questions. I think. So you just touched on two things. I just threw out the list of questions. It's just so natural what we're going to talk about all that prep is we'll get to it, but we'll go in an order in which we go. Sure. You mentioned infrastructure and you mentioned by Paul,

Henry Cisneros (13:43):

John is auditioning for his own show. Charlie Rose Lost is out of his job. So John is practicing with me.

Jonathan A. Ballan (13:53):

Yeah. Alright, let's do it. Let's do a podcast after this bomb buyer take notes. So we'll go to infrastructure and bipartisanship and I want to discuss more in each, so you can go whichever order you want because I'm not going to tell a former cabinet member what order to do, but I think that in infrastructure there's certain issues. How can Washington encourage the development of better infrastructure when you compare this country with other countries? Clearly we're lagging. And then with bipartisanship, how are we going to come together as a country without more people with your vision and your desire for it?

Henry Cisneros (14:46):

We're living in what I call the golden moment of infrastructure because of what happened bi partisanly and that is we passed as a country, the infrastructure and the jobs and infrastructure investment act, which is several trillion dollars when combined with money that was in the pipeline and new monies, about 175 new initiatives in infrastructure that match up with our times. And then there was what they call the IRA, the Inflation Reduction Act, which is dedicated to clean energy. And then there is the CHIP Act, which put hundreds of millions of dollars into semiconductors. So right now out in the country there is a flood of infrastructure dollars from the federal government. It's always a little slow in getting started, and there've been some articles about how it's slow in deployment, but when I was secretary of HUD, it takes a good eight months to a year from the time legislation has passed to write the regulations, put 'em out for comment, and then convert that into programs that get onto the street.

(15:59)

And that's what's happening the last year or so. But the money is now hitting the street in a pretty substantial way. They've got something like 30% plus of the money now deployed and it covers the whole range of infrastructure needs when you put it all together. The truth of the matter is our country was woefully behind on infrastructure. We had congested roads and as you know, some places really deteriorated roads. There were places where roads that were designed in the 1950s were actually dangerous to drive on because even the design standards were different of guardrails and turn radiuses and so forth on major roads and highways. Our airports were woefully inadequate as compared to what you could find in third world countries. Even our water systems, we have water systems, including not long ago in New York that were a hundred years old and some were wooden pipes still in the ground, ports falling behind.

(17:05)

As water levels rise, ocean levels rise, and the docks were inadequate for that rise and too small for the larger ships that could now come through the Panama Canal and would come to the East coast ports. So almost any area of one, the most obvious is high speed rail. We have not one mile of legitimate high speed rail in the United States. Our top trains Acela run at 90 most of the way and have a short burst where they can get over a hundred. Yet we have 150 mile an hour trains and now 200 mile an hour trains, 6,000 miles of them in China, 1600 miles of them in Japan and in Europe, Britain, France, Spain, Germany, all kinds of different variations of high-speed rail. So there's no question we needed to pass these and they did pass bipartisan league. I think they're going to make a huge difference in several respects.

(18:14)

First of all, objectively speaking, that investment is going to take hold and you're going to see dramatic changes. Secondly, the technology applied to infrastructure dictates that this next generation of infrastructure is not going to be the same as the last. It's not going to be just do more of the same and do it bigger. It won't be the same roadways. There'll be roadways with electronics in them that help guide traffic. It won't be just more fossil fuel generation plants. It will be solar and wind. It won't be just more rail. But now we have about six major possibilities for high-speed rail. One of 'em is the Bright Line project that will link Los Angeles and Las Vegas. Another is augmentation of the Bright Line project that links Miami and Orlando, the Texas Central rail that would link Houston and Dallas improvements to the Ella line in the Northeast connections from Chicago across the Great Lakes across to Indiana and onto Michigan.

(19:27)

I mean, we have a real potential to build a modern infrastructure. So there's that. And then finally there's the fact that even though that federal money will only go so far, other places are not going to stand by, other cities are not going to stand by because they need to compete for jobs, firms, population, et cetera. So you will see them using public finance to create the public matches for the federal dollars or to start from scratch and make some of these improvements themselves. So I think this is just in the nick of time that we are improving our international competitiveness by investing in infrastructure to this extent.

Jonathan A. Ballan (20:15):

Let's unpack that just a little bit and then we will stay with infrastructure. Stay with high-speed rail for a sec. I recently took the Euro store and then I came back home and I had to take Amtrak, and you just shake your head, you go, oh my God. But the reality is, the way you said it is the public finance community needs to be part of the high-speed rail solution, and perhaps we need liberalization of things like the qualified management agreement rules and other limitations because the private sector is the one with the technology and the expertise to build and operate these. Even in Europe, they have the privatization of a lot of the high-speed rail. So that might be one area where maybe in a follow-up, we can talk about what needs to be changed under law to make it easier to finance those types of projects on an affordable tax exempt basis and on a bipartisan.

Henry Cisneros (21:20):

I think there's a Lot of things we are learning and that we need to do as a country. We are behind the rest of the world, not just in infrastructure, but in ways to fund it. But it's clear that there are several things that are needed to make this truly scalable. One of 'em is the P three rules in the 50 states differ from state to state. So when you have cross state projects or firms that want to work cross state, they want to do broadband, let's say in multiple states. They have to deal with different P three requirements, different expectations of the private sector, different state regulatory regimes in the various states. So some national overarching regime and framework of law would be important In addition, things that enable local p threes to actually come into existence. Our firm, American Triple I is a partner in JFK terminal six.

Jonathan A. Ballan (22:24):

I was going to go there.

Henry Cisneros (22:25):

Yeah, it is a 4 billion complete start over terminal six JFK, of which 1.3 billion is private capital. So 1.3 is private equity. The remainder is largely debt. The port authorities bonds, and many, many firms have been involved in that, including Seaver, but that's a $4 billion project that our firm is doing 30% of the private equity piece. But it's an example of how a public authority, in this case, the Port Authority of New York, New Jersey with real deliberation and intent. Rick Cotton is one of the smartest public servants in the country today can make it happen. They're doing that not just at terminal six, but terminal one, LaGuardia and Newark is next.

Jonathan A. Ballan (23:25):

Do you think that the domestic private equity market and participants fully understand airport finance? And did you have a particularly difficult time raising that capital or did it go as anticipated?

Henry Cisneros (23:42):

The majority of the money that we were able to solicit was of an international quality.

Jonathan A. Ballan (23:50):

Oh, okay.

Henry Cisneros (23:51):

But let me just say the P three business, well, the private equity side of infrastructure is growing very, very fast. I mean, just look at the pantheon of firms like Blackstone and BlackRock and Brookfield and GIP, general infrastructure partners, which BlackRock just bought, but that whole field, I could go on and on with the names. Some of them, a lot of 'em American, but there's Canadian firms where there's a long history of p threes in Canada, in Britain, in France, all of those are now active in the United States, but it's one of the largest. My sense is I see enough activity that I would call it one of the faster growing sectors of bringing capital to public projects. I think it's only going to get bigger. You notice that BlackRock just bought general infrastructure partners, which I always thought was just an incredible firm. When they raised money, they raised it in 10 billion chunks and they manage probably $200 billion or so if not more, and BlackRock just bought them. My sense is because Larry Fink understands that if you want to do infrastructure in this country, you need to have access to an entity and expertise like that. He cares a lot about particularly climate change issues, renewables, et cetera. And now he's got an instrument to do that.

(25:32)

And he said when he announced the reason for the purchase that he believes the infrastructure field is one of the fastest growing areas of investment in the future.

Jonathan A. Ballan (25:44):

Well, you mentioned something. It was very interesting about how the laws in the 50 states are different now, of course, contrasting the United States with Europe, we have states and we have federalism, but simply has to be true that a lot of the states should adopt similar laws, particularly states where projects may be inter-state

Henry Cisneros (26:04):

Projects. It's happening. Colorado has legislation pending. Louisiana has legislation. They're building what's called the Calcasieu Bridge, and they had to change state laws. In order to do that, you can just go literally through the litany of states and you find legislation underway to change laws to make P threes more possible. And by the way, in many, many, many cases, the P three, I mean the public projects are going to require public capital as part of the mix. Many of these will be hybrids. The P three movement is growing, but even when it's not a formal P three, the invitation to match private capital with public finance in some kind of match because the federal government requires a local match and it isn't existing in the community is real. So I would say all of your firms will have the opportunity and presently have the opportunity to act on infrastructure projects.

(27:10)

I spoke last year to the state treasurers, and it was very interesting to see the extent of interests among the state treasurers in infrastructure because they could do huge things for their states by bringing state capital to move major infrastructure, projects, roads, water systems, power, broadband. And look, this field is broadening and as it broadens, it's being redefined. Housing was generally not thought of as infrastructure, but now in many places it is, and it makes all the sense in the world because the workforce needs a place to live, and you can't watch a region or a city grow without having workforce housing available. Climate change is real.

(28:04)

People still, there's still skeptics about climate change, but we live through 5,100 degree days in Texas this year and more 105 degree days than we'd had in history. And that's not just Texas, that's much of the southwest. I served on a panel here a few years ago, chaired by two secretaries of treasury, Hank Paulson and Bob Rubin, and the focus of that was is climate change real? And what does business need to do about it? And the truth of the matter is many businesses are going to be impacted. You can't build homes in Arizona in 115 degree heat. So it changes the very nature of the business. You're not going to be able to do traditional forms of agriculture in the Midwest because the contour of temperatures moves northward and places where one particular crop was viable or two seasons of crops in a year are not possible in increasing heat, the heat line moves north.

(29:09)

With that comes extreme weather in the Mississippi Valley, for example, more tornadoes of greater intensity hurricanes that are stronger on the East Coast. So places like Miami Ocean level rise is real in Miami. It's real in Norfolk. Some of the more extreme storms like the ones that have come through New York are real. So all of that is impetus that makes infrastructure a real thing. It's not a figment of our imagination. It's not somebody's wish to build new docks or to build new docks along the Mississippi River or to deal with additional water conservation measures in the West where the droughts are a result or all of the other implications that come with climate change.

Jonathan A. Ballan (29:59):

Very interesting observations and it's kind of encouraging if you're in the public finance industry. Yeah, I would think so. You're going to have to come up with infrastructure and public ways to solve or mitigate these problems to move forward. I'm glad you mentioned that. JFK, I did want to go there. I was fortunate to work on LaGuardia Terminal B, which was the first one up and done, and it's absolutely beautiful. And you see, and people from all over the country and international businessmen comment on that, and it's just so great for the economy. We have other wonderful projects underway in the New York metropolitan area, including your terminal other terminals at JFK.

Henry Cisneros (30:43):

The Port Authority is doing fantastic work. I mean, when I say the golden age of infrastructure, it sounds like I'm exaggerating or hyping, but just look at what the Port Authority here is doing. LaGuardia Kennedy, Newark, they're not involved directly in the Gateway Project, but that's the project under the Hudson.

Jonathan A. Ballan (31:04):

Well, we have to mention that because there's at least one person in the audience who would kill me if I didn't.

Henry Cisneros (31:08):

That's one of the largest infrastructure projects in the country and its incredibly important for rail transit. It's key to the Amtrak system and for movement of people into New York City. Beyond that, they're doing bridges and roadways and New York is going to be transformed. Let me just say a quick word about the interplay between infrastructure and cities, if I may. America is now clearly a metropolitan nation. The Brookings Institution wrote a book along those lines describing the country's transformation from what was once an agrarian and rural nation to what is now clearly a country driven by its metropolitan centers. But wait, we have thousands of communities, but just in the 100 largest metros reside 66% of the American people in just 100 metros, and they produce 75% of the GDP of the country. Now, what does that say? That says, if you want to maintain our competitiveness economically globally, and we are a metropolitan country, then you have to upgrade the infrastructure of our metropolitan centers. In practical terms, it means Los Angeles prospers when the Port of Los Angeles deals with congestion for trucks, new cranes, the Alameda corridor to get cargo out of there. That's what it means.

Jonathan A. Ballan (32:44):

But when in the post pandemic world in which we're living now, a lot of people, a lot of discussion of the decline of the city, a occupancy percentages of offices is still way down, crime is up. People are concerned about living on top of each other in an era of possible other pandemics or disease. What do you think the prognosis is for cities and living actually in the cities, not just in the metropolitan area?

Henry Cisneros (33:17):

When I was secretary of HUD, the title was Housing and Urban Development. I spent a lot of time on the urban development component because of the basic facts that I'm describing here of how important the cities are to the country. We subsequently suffered, suffered a recession, which just sort of hurt the cities badly because of the loss of housing and because of the slowdown in the economy generally. And it looked like that trajectory was just not going to ever occur where the cities would be the leaders that way and then came the pandemic and people moved out of some cities, including New York, population dropped, and we saw also people not coming back to work in many of the major cities. But my own sense is those are not permanent dynamics. The cities are important to the country. We heard several panelists this morning talk about how people working from home is not going to be the permanent pattern. So the cities are going to continue to be important. Some of it may take slightly different form. Maybe it won't be as much office buildings and more residential for people working in smaller businesses, but the cities are still the place where what economists call the agglomeration economies exists. People have to be together to create, have to be together, to transact. And so I think the cities are going to continue to be very important for the country, and we see examples of it all over America.

Henry Cisneros (34:57):

In addition, there will be smaller cities coming to prominence, but just take a quick tour around the regions of the country. We don't have time here to do that, but I was in Atlanta recently and I was just blown away. First of all, Atlanta's airport is the busiest airport in the United States, more in placements and transactions there every day. And they're transitioning that airport into an airport that serves the entire Atlanta metro and its growth. And it is now the capital for sure of the southeastern United States, not just of Georgia, but of the southeastern United States. And you could say the same for Denver in that Rocky Mountain West. You could say the same for Charlotte as the banking center it has become. And then you've got places like where I live. I live in San Antonio, which is part of the Texas triangle, Dallas Fort Worth, booming Houston, booming Austin, fastest growing city in America linked to San Antonio in a triangle that is a new urban mega region.

(36:06)

So all the evidence to me suggests the pattern of cities is going to continue to be strong, and they require this modernized infrastructure that I'm describing. The next iteration is not going to be just more of the same. I've already said that, but I can give you example after example. In broadband, for example, we are behind right now in broadband speeds, Japan and the Scandinavian nations. We need broadband to compete from a business standpoint, and that needs to be put in place. So this interplay between the cities, the country, its economy, its competitiveness. On the one hand, it public finance, private equity deployed into infrastructure. It's just hugely important at a very basic level.

Jonathan A. Ballan (37:00):

Isn't it true that underlying all that is the fact that human beings enjoy being in the presence of other human beings and derive intellectual and other pleasure just by being in rooms such as this as opposed to doing this over zoom?

Henry Cisneros (37:14):

Well, I think that's absolutely true. This conference couldn't have been held two years ago because of everyone's fear of the pandemic. We're over that. And now how is it possible that after four panels today, we still are holding this group and people are learning from what they hear and will use it in their daily work. It's because that's the only way that that can happen. That's it. It's legit. It's not something we do just for our expense accounts or fun. We actually come here because it's part of our business learning process.

Jonathan A. Ballan (37:50):

So let me jump quickly. You talked about the economic development, urban development. What about the housing? There's clearly a housing crisis in this country now, particularly workforce and affordable housing. Any thoughts you have on that? And then I'll of course make the link to public finance when you're done.

Henry Cisneros (38:15):

The housing crisis that America is confronting is real, and it's principally a crisis of affordability. But behind that is supply and production inadequacies. We're not producing enough housing and certainly not at affordable prices. We have to make a much more dramatic effort. When you see polling these days in cities of what they regard as the critical problems that confront their cities, housing shows up on the list now more than ever in some place. In some places, housing or the absence of housing and what it creates in homelessness and unaffordability are right at the top of the list. In San Francisco, in Austin where housing prices rose, rental prices rose by 40% between 20 and 21, a 40% increase in rents because there just simply wasn't enough being built. And the same is true of entry level housing for younger families that want to begin their quest toward homeownership and net worth, which is what for most Americans, a sum total of their net worth is the equity that they have in their home. So it's more than four walls in shelter. It's the largest investment that they will make. So housing does need to get a higher priority. I was pleased in the recent congressional action on a tax bill that they included an increase in low-income housing tax credits, which is the most effective way to build affordable housing in the country today. We don't do it through building more public housing anymore or other programs. Housing tax credit gets us a really attractive supply of affordable housing, but it is an area where we need to give more priority.

Jonathan A. Ballan (40:18):

So on that last point, as a municipal bond attorney practitioner and also my experience from the Sunny May Board, which is the affordable housing agency in New York state, and even in my experience on the MTA board, because infrastructure and transit have a lot to do with housing location, what frustrates me is again, you hit this volume cap problem because the reality is to build workforce and affordable housing, you need some assistance, particularly now on the interest rates and the tax credits. And so the left hand and the right hand shouldn't be battling each other in government. If you need more housing, what can we do to make that easier? One thing you could do is get rid of the volume cap allocations, which were designed to keep the issuance down back in the eighties. But really now we should revisit it because we want the issuance for housing. And I would argue workforce housing too increase. So the left hand and the right hand of government just get in the way.

Henry Cisneros (41:22):

Well, you are correct. Fundamentally, we need more volume of capital devoted to housing and other public finance. But that is what is called in government a tax expenditure. It's an expenditure that comes on the tax side, but it counts just as much as programming that you would actually allocate for. And therefore the Congress, the administrations are very reluctant to increase further the deficit and the overall debt by adding more on the tax expenditure side. So it's a hard sell.

Jonathan A. Ballan (41:54):

And that's where the bipartisanship maybe.

Henry Cisneros (41:56):

Well bipartisanship and support from the industry and support from the communities and a recognition that public finance is just what I said at the outset, a critically important vehicle for all these things we need for our country. It's a fantastic machine of generating capital that public finance represents.

Jonathan A. Ballan (42:16):

So can I do a couple bigger national issues? I don't get the chance personally to discuss these with someone with your background and experience and intellect.

Henry Cisneros (42:27):

I don't think I can stop you.

Jonathan A. Ballan (42:28):

In the room. Yeah, I think we rented the room for the whole hour.

Henry Cisneros (42:34):

But let's leave time for some questions from the folks as well.

Jonathan A. Ballan (42:38):

Yes, absolutely. So the one serious and one not serious question, and we'll throw it open. The serious one is, as a former mayor, I'm taking notes, Henry as a former mayor of San Antonio, major Texas City, someone who resides there is family there and has been such a big civic-minded person there. Could you comment perhaps on the immigration crisis, particularly as it might be affecting not only the nation, but Texas and San Antonio?

Henry Cisneros (43:13):

Well, obviously a critical problem, and fundamentally, it's the difference between what people are living in their central American countries or in Venezuela or other places to the South. That's a majority of the flow, although there are some people who come from other parts of the world. Now in that immigrant movement, we find people from Haiti, we find people from Africa, Asia coming in the flow and on the other hand what they aspire to because either they are in physical danger where they are or they are economically untenable in their position. So that's the fundamental dynamic that's at work. Now, clearly we understand a nation has to have secure borders. The definition of a nation is to have borders on a map, right? And if you can't protect your borders, you almost beli the definition of nationhood. That's a fundamental element of it. So border security needs to be a part of what we do.

(44:29)

And then there's also kinds of tweaking to things like the Senate offered this week concerning asylum and reducing the number of people who qualify for asylum and that sort of thing. That's a long way for Democrats to have come. It's a shame that that legislation has hit a wall. Hopefully it can be revived because it's needed to manage the flow. But the missing piece for the long run, and it sounds a little bit like a pipe dream, but it is intervention by the United States with aid and economic assistance to stop the flow from coming in the first place. Places like Costa Rica, for example, which are suffer, which will suffer as climate change impacts the coffee crop, and people will have no ability to make a living if the coffee industry goes under. And you'll see flows that contribute to the flow. So work to find economic answers, trade answers. President Kennedy had the organization of American States. President Eisenhower had extensive programs. President Reagan had programs. It's been bipartisan in our approach to try to deal with the Americas. We take our eye off that ball. We have bigger national security problems, China, Russia, other issues. We take our eye off that neighborhood and we will end up with flows of people and then we have a problem at the border. So a long-term commitment and recognition of that interplay is essential.

Jonathan A. Ballan (46:05):

Thank you for those thoughtful remarks. Very interesting. So people have requested the opportunity to ask some questions. We have five, six minutes left. I think we will call out. So I guess government officials should come first, if you have any. There's a lady right here with her hand. Harris Beach. Clients come first. I'm sorry. No, just kidding. Go right ahead. Any order you want.

Emily Brock (46:33):

Of course. I represent government officials, so does that count Emily Brock with the Government Finance Officers Association. It's so nice to hear you again, Mr. Cisneros. Thank you for your insight. Most of the work that we do in Washington DC is around the federal funds for infrastructure. That is the IIJA and the IRA. And we too agree with you that the next phase of infrastructure should be built back better, just like this administration has said. However, in the rollout of these funds, they've layered on procurement parameters for domestic procurement, domestic content that is limiting choice, increasing cost, and in some cases is more of a stick than a carrot in order to see full success of these programs. In fact, what we're seeing is cities around the country just trying to do projects under the threshold to make it work more of a fizzle than it is a bang. So I guess maybe wanted your thoughts on that, which works better, the character, the stick, and really this is a global conversation, but if we can't find things to buy to create an infrastructure that's built back better, it's a bigger challenge I think, than we bargained for.

Henry Cisneros (47:54):

My answer is clearly the carrot is better than a stick in almost any case you want to incentivize. But it is the right thing to do to try to buy products, services, work with vendors who are local, and it's a good way to address the more fundamental problems that present the country. We know that there's a lot of attacks on the equity agenda and DEI, but a way to address the issues of inequity without actually calling them that is to give people a chance to get in on work that's of this scale. So small businesses and vendors that are local in the communities, that's a pretty important priority. I wouldn't want to ride over that priority. I think it's going to make a big difference. Similarly, jobs training people. I'm working right now with the building trades in California in preparing for a huge 10 billion rail initiative that would link UCLA along the 405 to the San Fernando Valley.

(49:06)

And the 405 is the busiest freeway in the country. This would be a rail alternative to it. Huge. Everybody in Los Angeles wants that. It's part of something called Measure M, which was a massive bond commitment and lots of public finance involved. So it's a very promising project. They're going to employ 10,000 people, got to go get 10,000 people. So they're reaching deep into the communities, including targeting women, for example, as construction workers to come in and join the construction workforce apprenticeship programs, pre-apprenticeship programs. Very complicated, but I think it's the way we use infrastructure, not only for its stated purposes of carrying cargo and moving goods and moving people and providing power and water, et cetera, but to build a middle class and keep our country strong. There's a lot of things in recent years that have cost us that have made more fragile. Our middle class offshoring and the practices of certain businesses, the very changed in the makeup of the economy that's got more people working in service jobs at low wages, here's an opportunity to build back the middle class again, that's not imaginative. It's not an imaginary proposition. We can actually make that happen using this moment.

Jonathan A. Ballan (50:32):

One more question. Is it Kennedy? Thank you. Did anybody It's hard to see with the lights.

Henry Cisneros (50:39):

You said you had another question.

Jonathan A. Ballan (50:41):

I was trying to give the distinguished audience a shot. Alright, thank you for that question. And if there are any others, John? No, mine was just going to John, is there someone, oh, I couldn't see. Yeah, please.

Mark Price (50:51):

Hi. Public official and a hair speech client.

Jonathan A. Ballan (50:58):

We are extending the lunch until this is,

Mark Price (51:02):

Hi, I'm Mark Price. I'm the director of Capital Markets for New York State Homes and Community of Renewal. Mr. Cisneros, thank you very much for being here today. Thank you for your comments. Really appreciate it. You mentioned about volume cap and the issue around more volume cap being about tax expenditures. What are your thoughts about the fact that not all private activity bonds are subject to volume cap? Airports are important, huge economic engine, but they are not subject to volume cap, but housing is. What are your thoughts about that?

Henry Cisneros (51:46):

Well, first of all, I think private activity bonds are a huge tool, very important. We probably have not used them to the extent that we can, but anytime you have an enterprise like an airport, private activity, bonds make a lot of sense. And by the way, one of the reasons that airports are undergoing so much investment and change is because of the pandemic. Let me make the connection. During the pandemic, people shopped less in brick and mortar stores and more online. Online and expectations grew that we would have the product the next day or the day after that. That requires air. That requires moving them by air. So virtually every airport in the country is expanding. Its air cargo facilities just look around America today. There are RFPs in Atlanta, in Newark, in Philadelphia, in Los Angeles for cargo, because cargo today is a different beast than it was in terms of how we handle it.

(52:50)

This is no longer a moving cargo on little trolleys and getting 'em to the airplanes. This is robots in logistically centered buildings, sometimes multi-story moving goods in a completely new way. And Los Angeles, for example, just selected a team to do their new cargo facilities and they're basing it on something that they saw in Hong Kong. Multi-story building with robot and robotics, et cetera, moving these products along on the logistics chain. So it's a very different world out there in terms of what we're going to need in airport expenditures and public activity bonds as a way to do it. I've not looked into the use of public activity bonds with respect to housing, but I look at what the barriers may be to why they're not used that way.

Jonathan A. Ballan (53:54):

Well, the question sort of implies, I guess an answer. Take affordable housing out of the volume cap and free it up where you do airports. And maybe that's be an interesting idea.

Henry Cisneros (54:05):

It might be part of the evolution in the thinking about housing as infrastructure, which is happening in a lot of places. People are thinking about housing in a different way, and maybe if it crosses that line, it can be subject to different forms of financing than we've used here for.

Jonathan A. Ballan (54:23):

I think we've used up the time. My last question was a little lighter. San Francisco or Kansas City. You're not running for national office.

Henry Cisneros (54:38):

I went to school at Texas A&M. The chairman of our board is a dear friend of mine. He's also in the bond business. He's a bond lawyer and his name used to be Bill Mahomes. He's a fantastic human being. He's changed his name because he is the uncle of Patrick Mahomes. So he's now Bill Mahomes and I'm riding with him. I'm riding the river with him. I want Kansas City to win.

Jonathan A. Ballan (55:07):

All right. That was it. Thank you.