Understanding the impact of the infrastructure bill on the muni and Texas markets

The infrastructure law brings $550 billion to the municipal finance market. Our panelists will discuss how the market can integrate the infrastructure dollars to bolster the broader municipal industry. A portion of the discussion will focus on the bill’s impact on the Texas market specifically.

Transcription:

Announcer: (00:07)

Good morning, everybody. We're going to start off this morning from, 8.30 to 9.20 with the understanding the impact of the infrastructure bill on the Muni and Texas markets. And I'll turn it over to Ms. Asha.

Asha Mathew: (00:24)

Good morning, everyone. I want to thank the Bond Buyer for giving us this early bird panel time slot. So, I really appreciate all of you for getting that coffee and being here on time. As many of you may not know me. My name is Asha Matthew. I'm a director at Short Guarantee, Eastern Regions, Public Finance team. I'm also the lead insurance, analyst for, the State of Texas. I'm happy to be moderating this panel, where we will discuss the impact of the infrastructure bill on the Municipal and Texas market. As you know, on November 15th, 2021, President Joe Biden had signed into law, HR 36-84, which is the infrastructure investment and the jobs act, this bipartisan infrastructure bill includes 1.2 trillion of federal spending over the next five years of this amount, $550 billion will be new spending while they will fund the reauthorization of the highway trust fund.

Asha Mathew: (01:25)

Our discussion will focus on the 550 billion of new spending as it spreads over a number of transportation and water sub sectors. Our panelists here will discuss the impact of the bill on the municipal market, on a national level as well, specifically on the Texas market and we'll also highlight how the market can integrate the infrastructure, dollars to bolster the broader municipal industry. So, I'll keep my introductions brief on the panelists. So, we can hear from them. Their bios are pretty impressive. So, I do encourage all of you to take a look at the bios when you have a chance. First, we have here, Nick Samuels, who is the Executive, I'm sorry, who is the Senior Vice President for the states and high profile ratings team at Moody's investor services where he covers credit for the state of Texas New York city and the district of Columbia.

Asha Mathew: (02:20)

We also have Jeff Walker who is an Executive Administrator at the Texas Water Development board. Jeff has served in various areas of the Texas Water Development board for over 30 years. We have Frank Doyle, who's a Vice President and Senior Client Executive within the municipal finance north America team at SNBC. We also have Jennifer Wright who is the Project, Finance and Debt Director at the Texas department of Transportation, where she manages multi-billion, dollar transportation financing programs of the Texas Transportation commission. And finally, we also have Robert Mellinger, he's a, Director at City Groups' global markets. He is a member of the firm's water infrastructure finance group, within the public finance department and leads the City Group's state revolving fund efforts nationally. So, without further ado, we'll just get into the panel questions. The first one will, start with Nick. If you could provide a high level view of the credit positive aspects of the infrastructure bill.

Nick Samuels: (03:27)

Sure. Thank you and high to everyone. It's very good to see actual people instead of little screens, little Hollywood squares with a green thing around it. My last work trip two years ago was to this conference. I've been a little out of practice on business travel. Since then, I came in Tuesday, got to my room, opened my suitcase to put my things away, put my shoes, whatever, no suit, there's a Joseph a bank at the corner of third in Congress.

Nick Samuels: (04:01)

See side, they did, he said you're 42 long. Right? I said, he said, no problem. They did the pants for me, generate a little sales tax, crisis over. Thank you. So, what else is new? Right? Well, a trillion-dollar infrastructure bill, and the infrastructure bill really does two things. And of course, it's broadly credit positive, and, you know, first it renewed a whole host of existing federal transportation programs. Most importantly, the existing, highway reauthorization. Now, if you've worked on highway finance and you were thinking back to 2015, when the highway author was expiring 2014, really, it took 33, short-term extensions, probably at least causing me and Jennifer and others who work on highway finance. A lot of head scratching about what's the federal government doing took 33, short-term extensions to get the bill passed here.

Nick Samuels: (04:58)

They did one year extension, but then we've got a five year authorization for highway spending. So, from a credit perspective, just that stability, is a good thing, but it also, is providing 550 billion of new federal money for state and local governments for infrastructure over, the next five years. And why is that important? Well, because generally speaking, the condition of state and local government infrastructure has been weakening over the decades. Reinvestment in capital is not keeping pace with depreciation. And so capital assets are aging, their conditions are aging. And you really see at, especially for example, in bridge condition, there are something like 610, 600 20,000 bridges in the US. 44,00 of them are deemed in poor condition. I'm sure none of those are in Texas, but, maybe a few, and this is, everything from, big bridges that, the name of to, little Viad and things like that that are the responsibilities of state and local governments.

Nick Samuels: (06:10)

And, while on the one hand, the ability to, defer capital projects can be a good budgeting tool for a government, in a downturn, if it needs to find some money, the longer you wait to keep, up with your capital maintenance, the more expensive it becomes, and the harder it gets and you end up with, notable things like the recent bridge collapse in Pittsburgh, or a few years ago, bridge collapse in Mineapolis, or a few years ago in Mississippi, for example, the governor closed a hundred bridges around the state and said they're in two terrible condition to allow people to drive on. So, that's a kind of a long-winded answer to the fact that, reauthorizing in a predictable way, the existing program for state and local governance for infrastructure finance is a part positive and coming up with new money, to confront infrastructure condition as a positive also because spending on that new infrastructure is going to generate jobs, have other benefits. We heard the control yesterday talking about, for example, broadband expansion, that has benefits beyond just running the cable, know out to different places, what that will mean for people that can take advantage of that.

Asha Mathew: (07:24)

If anyone wants to add, please feel free to, otherwise we'll go to the next where, if you have any roadblocks, that you see that are doubt, that might be a challenge, to this capital investment, I would open up the floor to anyone who wants to answer that.

Nick Samuels: (07:41)

Well, I mean, I'll maybe dive in first inflation is very high and while new money, for infrastructure is good in the existing environment, it's going to go less far. Right. Not only is core inflation, I think right now, something like 7.9% - 8%, something like that. The producer price index for construction materials is at a record high labor cost. Also, average wages, for construction workers are at an all time high. So, roadblocks or speed bumps are, sort of however we want to describe that. It's harder right now if you're trying to finance infrastructure now, because I think both because of the supply chain issues that the pandemic, has raised, there's some geopolitical issues right now that are interfering, with supply chain, high oil prices. It all really comes together to make, I think, financing anything right now, a bit more difficult.

Jeff Walker: (08:44)

I think for me, it's more of a perception issue. I mean, we talk to people out there and they're like, money's falling from the sky. We're going to solve all the problems. Our problem is, our money's going to run through the SF programs, our normal SF programs, and they think, oh, we got tons of money. We're getting about 600 million. This year. Problem is 220 millions of that is lead. We don't have a lead problem in Texas. We don't have a $220 million every year lead problem in Texas. So, that takes a chunk big chunk away from that right there. And also, going back in history, the SRS were a revolving fund program. And so, we take a cap grant, we leverage it out. We build it out. When era came in 2009, it became partial grant program. And now this new money is even more so, so even though we're getting make $300 million, we have to give about half of that away.

Jeff Walker: (09:35)

Then there's set aside and there's administration. So, by the time you get down to it, we get about 36 to 38% that we're revolving. And so that doesn't go very far to meet that next need. So, when you're for example, in our drinking water, we're getting $228 million in basic grant and cap in new grant, IIJ, but we need to revolve 38% of that. So, it's great for those 96 million people to give free money, but that's not very, like you said, that's one project these days. I mean, we're seeing 20 and 30% increases in projects that we're doing. It's not going to go very far. Unfortunately, I wish it was, but that's, the hard part for me is telling people it's not going to solve all the problems like you think it is. It's not going to go as far as it'll be great for those small group of people that get free money. But for the bigger part, we've got two lists for drink and clean 2 billion, each of needs identified about 150 to 200 projects each. So, the need is huge, and this is not going to solve it, unfortunately.

Robert Mellinger: (10:38)

Yeah. I'll just add to Jeff's point and just talk about it nationally. How much money is being allocated to the water infrastructure space. But, Nick had mentioned, 550 billions of spending, over the next five years out of the bipartisan infrastructure law, 55 billion is going to be allocated to the water space. So, certainly, it's very important to, addressing the critical infrastructure needs that are out there. But, most of that 55 billion is being allocated to the states. So, the states are actually going to be taking the money from the federal government or EPA in this case, and managing that money through the state revolving funds, 44 billion is going to be channeled through the revolving funds. It's going to have to move, it's a lot of money and it's going to have to move, relatively fast through the revolving funds.

Robert Mellinger: (11:27)

And there are conditions to that money. As Jeff had mentioned, 15 billion is going to be allocated to lead service line, replacement. 23 billion is going to be, a supplemental, federal money to the base SRF programs. And then there's 10 billion. That's going to be allocated to emerging contaminants. And those are the four ever chemicals such as the non-stick chemicals that are on your cookware or, firefighting foam, and all of those needs are not uniform. As Jeff had mentioned, lead service line needs, those are really predominant in the Midwest area. My home state, Illinois, I'm based, unfortunately, we're number one in lead service line. That's not a good number one to have, but all of that money is being allocated, individually to the states and the not all the needs are there. So, there may have to be, states giving back that money, which may delay the money going out to other states that are really in need of that.

Jennifer Wright: (12:22)

Well, I can add, so to drill down a little bit further on the transportation, coz that's a trillion dollars, sounds like a lot of money, but what that means for taxes is 5 billion, over the next five years. And to put that into context, it's an additional 1 billion over prior authorizations, but to put that into context, we have a 15 billion budget. So, we're getting an extra billion dollars. We're not going to turn down anything, but it's not as, as big as it might sound when you talk about trillions.

Frank Doyle: (12:53)

Yeah. And I would also like to add to that for a off good morning, everyone. It's good to see you. It's so full. The, from our perspective at SNBC, we get to see a wide variety of issuers. And I think when preparing for this talk, I was talking to some of them and I think the overall, thought process on their behalf was that this is supplemental. It's not a replace me. This is useful, but it's not, a wholesale solving the problem kind of funding that, we would all love to see.

Jeff Walker: (13:27)

That once in a lifetime event that

Frank Doyle: (13:30)

To keep pushing that's right. Yes, I mean, just to give a scale of the problem, the American society of civil engineer, put out a plan last year, not a plan, but a status object would probably be the best way to say it. And the nation's funding need for infrastructure structure just to get it up to a decent level would require about 6 billion over the next, 10 years. And of that only 3.5 billion when they published it in 21 was for this, infrastructure plan wasn't enacted, only 3.5 billion was actually funded. They believe will be funded. It's probably a better way to put it. So, when you put in that context and you could see that a 500 billion new issue, new money, 5, 5 50, I mean, it's helpful, but it's, it's, again, not even 10% of the total that's needed. And, and when you talk to issuers like these two to my left and my right, they also, they all said the same thing by the time you drill down and you drill down and it's really not going to have as much an impact as, that people were, we need. Yes.

Nick Samuels: (14:37)

Imagine the engineers saying there needs to be more infrastructure.

Jeff Walker: (14:40)

Yeah. Self serving.

Frank Doyle: (14:42)

Well, I was trained as an engineer that case we need more.

Asha Mathew: (14:47)

Well, that being said, what opportunities related to this bipartisan infrastructure bill are you most excited about? And, we can start with maybe Robert.

Robert Mellinger: (14:57)

Well, I think, Nick said earlier, you can see the investment in bridges and RO roads and, what the conditions are with water infrastructure, which is, again, my area focus, those are assets. And so it's tough to see what the investment is until actually a system fails, or there's a problem with the water quality. This goes, despite it only funding a portion of that cost, it goes, it will help address that. There are significant water challenges. I think the EPA is estimated, seven and hundred 50 billion of need over the next 20 years. 55 billion outta the 750 billion, which is probably conservative, as is a small person as we've been talking about, but it does help, go a long way in helping to address some of that. The, as Jeff had mentioned, a lot of this money is going out as, and, loan forgiveness, versus the traditional below market interest loans, at least for water borrowers, and a lot of communities, especially the smaller ones, even, being able to afford a debt repayment, on a below market interest rate loan is going to be a challenge for them. So, having this grant money or loan loan forgiveness will help them fund some of these projects. It could be more challenging for them.

Frank Doyle: (16:18)

I actually think, what I'm most excited about is the Amtrak funding. So, since I use the train a lot, I think, I think personally, I think Amtrak has been come the biggest winner out of this, infrastructure bill for any single entity. What I think has probably more also interesting is how the priorities of the administration is illustrative of who, what sectors got, what funding, and to be candid, probably the sector that did the best, I think, is the port sector. And when you think about the supply chain management issues, etc., I think that is actually quite interesting to see. And yet it's also, the one that, was funded, when the, our American society of civil engineers, they're actually one of the ones that have the best rating of B rating for the nation, which, they're one of only most of, most of the ratings for the individual sub sectors by the way, were D so, but don't fear not we overall, it was C minus for the year, last year, which was an improvement over the prior year, but that's what I think is going to be the most important one is the, ports.

Asha Mathew: (17:31)

Okay. And you were talking about also the airports, right? Airports and ports, if there's

Frank Doyle: (17:36)

The airports are, in a, thank you. Yes, airports are, need more funding. I think the direction of the airports, they only got 25% of their needs met for the next 10 years through this funding bill. And you know, again, it's supplemental, it's helpful. It's certainly not something they're going to turn away, but I think the message subtly to the airports by the administration was private public partnerships, that the bill has a, encourages those kind of triple P projects, large infrastructure, which, mostly airports that my, bank deals with follow in that category. Not that all airports will do it. Some airports will just stick to the traditional funding methods, but it's, and in Texas itself, it's interesting because you have, some airports like Houston, which seems to embrace trip will be, and you have other airports, which, do not, but Texas itself in terms of funding, they got, 200 and, almost 300 million for this coming fiscal year from the FAA. And, I think, Alice Fort worth, Houston and Austin are something like 70 of that funding. Wow. So, yeah. Okay. But I don't think it's going to be again to get to Jeff's point a lot of this is going through the traditional federal grant program. but, so, but it's going to be certainly useful, but I know for Austin, that's not going to be replacing what they're playing to the issue.

Jeff Walker: (19:07)

Yeah. For those of you who flew in all on Monday or saw the news we're way behind on infrastructure in Austin, the airport's just grown like crazy. One thing that's exciting to me, kind of most exciting and problematic is that all this free money we're giving away, it's going to disadvantaged communities. There are 7,000 water systems in Texas, 7,000. Most of them, as majority are under a hundred, a thousand connections. So, they can't take it a lot of dead end. A lot of 'em are either flat or not growing. So, they need infrastructure. So, hopefully this can help them get where they need. But also the reason it's problematic too, is that they're disadvantaged because they're poor. They, and they usually don't have the withal to take out loans. And so we don't have enough money to everybody, a hundred percent grants.

Jeff Walker: (19:56)

So they're going to take some debt out and getting them to the point where they can take that debt out and have the financial and managerial and technical assistance capability to do that is tough. It takes a lot of boots on the ground. Handholding EPA says, they're going to do that, but I'm skeptical of that. How long to take we'll have five years, this, that money out and, EPAs Strikeforce will probably be three years getting set up. And so, and it takes a year to get those communities going. So, hopefully we can get some money out to them cuz there's, there's a big need out there.

Jennifer Wright: (20:27)

So circling back to transportation. I think one of the things that we're excited about is in addition to the additional funding, there's also four new formula programs, much of the highway, funds get, portioned out through formulas and there's actually four new programs. One is bridges, which there already are bridge programs, but there's a new bridge program. There's will be implementing programs for electric vehicle charging infrastructure, which is interesting, carbon reduction. And then there's a program for pre-disaster mitigation resiliency. It's also being called the protect program. So, having four new programs to administer will be exciting. And then we also have, 15 discretionary grant program that we can submit projects for. So, we hope to, submit as many projects as we can to apply for those discretionary grants.

Asha Mathew: (21:15)

Jennifer, I know you were talking about transportation earlier. How much funding did you say the, Texas transportation will receive? And then how soon do you think the funding will be received?

Jennifer Wright: (21:25)

So, again, we get, under prior authorizations, we received about 4 billion per year. We're going to get an extra billion dollars. So, 5 billion over the next five years. The act was approved in November and which, gave us, apportionment and that's kinda like budget just a few weeks ago. The budget was actually approved, which gives us obligation authority and obligation authority is the ability to spend the money. So, they said, here's, here's, what's coming now, you can spend it. So, we just received that a few weeks ago, as far as how soon there's a, so in Texas we use a unified transportation plan, which is the UTP, it's a 10 year plan, and it's a comprehensive, and programming, process that links the statewide long range plan, which is a 25 year plan to the metropolitan plans.

Jennifer Wright: (22:17)

And they, and then those are boiled down and into a detailed programming, activities, that are, established with inside the step, the statewide transportation plan, sorry for all the, Ackermans the acronyms that early in the morning, we live in acronyms, but that's a four year plan. And then that gets funneled down into the two year letting schedule, which, the letting schedule is how transportation projects go to construction. So, when we received notice of the new funding in November, we started planning activities for those projects. And we, in addition to the UTP process, we also, prepare a funnel of projects that can be adjusted. So, if we receive new sources of funding, we're able to open that funnel up and quickly implement new projects for Texas.

Asha Mathew: (23:06)

And if we can stay on you for just a moment, the influx of funds, how do you believe it'll solve the trans transportation needs? Or, you know, if,

Jennifer Wright: (23:14)

Well, I don't think we'll ever solve it, but, I think it moves us a long ways. I mean, obviously every dollar counts in Texas with a growing economy and aBurge state with growing infrastructure needs will take every dollar we can get. But I think what's more important is that this is a great compliment to some of the state sources that we've seen in, in recent BI, a few years ago, about 2015, the state legislature authorized, two new funding sources. one is called proposition one it's oil and gas, severance taxes that are being dedicated to transportation. And then proposition seven funds, which is, a portion of sales, general sales tax, and then, vehicle sales tax and rentals. Those two sources alone contribute two and about two and a half billion dollars to our budget each year. So, those were great improvements and great increases to our, our state funding. And then just last year in the 2021 session, the state approved bonding authority for the Texas mobility fund. So, all of those combined together are, are, are getting us further in Texas on in transportation.

Nick Samuels: (24:21)

And if I could just follow up on that, I mean, it's really interesting, right? That Texas look for other revenue sources to dedicate to transportation. You know, one issue that states generally have had, right, is that federal money, federal gas tax hasn't been increased since the early nineties, right? And so there has been this long term uncertainty, about how much federal money would be coming to states for transportation, the outflows of the federal highway trust fund, dramatically exceed the revenues coming in. So, the federal government's been transferring general fund money in, what many states, not Texas who found other sources had been doing over the last several years, not really being able to wait for the federal government had been raising their own gas taxes, right? It was really politically, difficult. Some of them did it by creating inflation linked formulas so that they could enact the law once.

Nick Samuels: (25:12)

And then they didn't, you know, then they could have say, oh no, it's inflation, that's raising your tax is not us. But one interesting thing that's happened in now. And it also may be a function of the fact that there are 36 gubernatorial elections this year is, states either suspending for some short period of time, their gas taxes or suspending that inflation linked component and, 50 states, 50 different ways to tax gas, some straight X sizes, some X sizes and sales taxes, some taxes just on wholesale. And then, there is legislation working through Congress that would suspend the federal gas tax through the rest of 2022, allegedly making the highway trust fund whole with additional, general fund transfers. all of this are reaction to high inflation and generally high costs, but, gas tax are generally how states finance transportation at a time when there's a lot of need.

Nick Samuels: (26:13)

And, of course reducing taxes, is easier than, raising them again at the end. So, we talked about infrastructure condition. The candle gets burnt a little bit at, at both ends when you begin to back off the revenues that are dedicated it to them. But I think, Texas estate that as the controller pointed out yesterday, generates a lot of sales tax where, the formula related to the severance tax that puts money into the rainy day fund and the state highway fund, it's basically indexed off of what oil taxes were in the late eighties is a really good one for generating a lot of money. And that's been, I think, really important for the highway trust fund here.

Jennifer Wright: (26:54)

Yeah.

Nick Samuels: (26:54)

They're not going to raise the gas tax.

Jennifer Wright: (26:56)

No. And the proposition one funds are, again, we take anything we can get, but they're somewhat volatile when gas price is go low, then they, that's a real small source, but fortunately we're moving into a period where that the proposition one deposits look to be pretty substantial. 2 billion I think is part of it. So, those are it that does a lot for transportation in Texas

Jeff Walker: (27:18)

Of that billion dollars. You're getting extra, not IJA. I know there's a lot of push for alternate transportation is how much of that is worth can go to roads, how much can go for, rail and how much they have to go to bike, bike path and things like that.

Jennifer Wright: (27:34)

Yeah. So, I like to focus on roads cuz that's what I know the best, but we do actually. The department of transportation actually is the, pass agency for, other modes such as transit aviation in ferry. You'd be surprised that we do actually operate the fairies in Texas. It's a much smaller portion. Obviously they wanted to, put the vast majority to, transportation, but part of that's also safety and other initiatives like I mentioned earlier, the electron, vehicle charging stations. but the vast majority is formulaic. It goes through the standard programs.

Asha Mathew: (28:14)

Jeff, maybe you can also provide, your standpoint on how the influx of funds will help the water and wastewater needs.

Jeff Walker: (28:21)

Like I said, it'll help some small communities with the more grant funds, but overall, like I said, we got 2 billion worth of needs and this is a, I hate to use the pun drop in the bucket, but it really is. SRF are a small part of our portfolio. we also do water supply for the future. that's our biggest, that's our biggest program by far, we've done 8 billion in water supply projects in the last six years where we've done probably 3 billion in SF. So, it's a much bigger need that Texas there's 1100 new Texans every day and nobody's bringing water with them. And so we have to meet that need going forward too. So, this will help just not going to be a panacea. Unfortunately it helps some, the small communities and problem with us is like everybody workforce is problematic, right? And so when you have disadvantaged communities, they small projects, I'd rather do two giant projects. I can do two with two staff versus 50 small projects that take a hundred staff because they need a lot of handhold. And so it's going to, it's going to be a strain on us really to get some of these smaller projects through the door and successful.

Asha Mathew: (29:35)

Robert, maybe we can start with you, for the next question. What are your thoughts on making this implement implementation of success?

Robert Mellinger: (29:43)

I think, Jeff mentioned small communities. I think that's going to be, that's going to be a challenge, with this and just make, trying to make this process as, as easy as flexible as possible while still staying within the federal requirements of the money. At least on the water side, again, the way that the way the state revolving funds operate it's that individual projects come in, they have to apply. And for these smaller communities just being, committing to, filling out an application, the technical expertise of managing the project, helping these smaller communities, that's going to be a challenge, but trying to make that as easy as possible, I think would help go a long way. It's just, again, a tremendous amount of money, that has to be allocated to individual projects. And it's going to be a challenge. You look at the American recovery and reinvestment act. That was one, you know, that was stimulus. That was an infrastructure that was, 6 billion in one year. This is infrastructure 55 billion over five years. And being able to move that money quickly with, with basically the federal government or EPA, putting a lot of pressure on the states to get that money out quickly is going to be a challenge. So, making it as easy and flexible as possible would help this, go a lot more, smoothly.

Jennifer Wright: (30:58)

And that one of the things that we're seeing is that with the new programs, I mentioned to the isn't, there's forthcoming guidance that's needed to implement those programs. So, while we prepare for administering programs, we still need more guidance. And so we're eagerly anticipating that guidance.

Asha Mathew: (31:15)

do you think bond issuance will go up because of this bill or will bond issuance be displaced, for future, issuances until they, you know, go through the federal monies and I can leave that open to the panelists.

Frank Doyle: (31:30)

I'll start, pardon me? I'll start that one off. I actually think that in it's going to be an issuer by issuer, kind of decision. I think, as I alluded to with the airports in Texas, I think some issuers will, it won't impact their debt issuance. I think others will, use it to, this federal money to maybe do something different for them or something like triple P. And, but I do think that, and some of our issuers have told us this, that they will use, that they will use this funding in place of debt. So, I think it's overall, I probably would expect to see, not as much debt issuance, but I think it's probably going to be more on the margins, maybe a 5% decrease than it, or 10% at the most than it would be without the program.

Asha Mathew: (32:29)

Frank for, you, how much flexibility will the municipal entities have to spend for projects under this bill?

Frank Doyle: (32:37)

Sure. I don't think, I think most of the money is going to be programmed through grants, etc. Yeah, I think there is some, especially as, Jeff was speaking about, more, flexibility for certain, priorities that the administration has, which, on the face of our good priorities, but I think for the bigger spending, projects, I think it's all going to be through grants or through SFS variety of different federal program issuances. This is more putting money into that, those kind of funnels

Speaker 8: (33:11)

More funnels.

Asha Mathew: (33:13)

And is there a prospect for another infrastructure bill or a sustained increase in federal financing for infrastructure?

Frank Doyle: (33:21)

Well, I think, before the geopolitical risks that Nick was talking about, I think there may have been in a few years time, but, especially, as a big point of view, most of the federal budget is, pays for the, Medicare and Medicaid, social security, the entitlements, then there's the interest on the debt, which is going to go up because the interest rates are going up. And then on top of that, now you the last major category since defense department and because of the geopolitical risks, that's going to be increasing too. And then when you look at the possible discussion over the possible outcome, that's going to be happening in the election this November. I think this is probably going to be it for a while. In that sense, it's probably one in a generation, which is a real shame because, infrastructure, as we all know, infrastructure projects, when done well, have a good return to the economy.

Frank Doyle: (34:19)

But it's also a shame because, as Nick was saying earlier, we as a country are right now spending, we historically have spent around 3% of our GDP on infrastructure. And the reason we're in this problem with the C minus rating overall is because it's only now down to around two before this program, 2.3% of the GDP. So, you have a sort of like 140 billion or 200 billion gap, depending on how you want to do it on an annual basis. And, I look at the colleagues from the state of Texas here on the panel, historically most of the funding for the federal, excuse me for infrastructure has come from the states. In fact, the single biggest, in the early years of this country's history, the single biggest, construction project, the E canal was, funded by the state of New York at that time for the astronomical sum of 7 million. And I think that once this program expires probably beforehand, I hope that the states realize that they'll have to increase their funding, because otherwise, this is just going to be alip, yes. And, not a panacea. And it's really, and when you look at the lack of, the negative impact that a lack of funding has on our country, it's just, yeah, it's a shame in a sense.

Nick Samuels: (35:46)

And, just to Frank's point state and local governments do three quarters of annual capital spending themselves, and there are lots of competing priorities, right? For, for states, they have, lots of programs to do. And it wouldn't be a Moody's analyst. If I didn't say, that's also competing in some states with, very high unfunded pension liabilities, there's, there's a lot of, a lot of demand for those dollars. And, absent, I think right, the federal money we've said is good, but it is, not a solution to, the infrastructure, condition problem that exists without more, but, where's that going to come from? Cause they're also not going to raise the federal gas tax or, or come up with other sustainable sources and in the long run, like I don't say over the next 30 years of, some buddies, municipal bonds, excise taxes on gasoline, aren't, really a winning proposition anyway, because, if GM and Ford and the other big manufacturers are going to move to alternative fuels, the, consumption will decline and those revenues will decline.

Asha Mathew: (37:02)

No, we definitely wanted to leave some time for, questions from the audience. but if the panelists have any closing thoughts or if they had any, additional comments, I leave the, some time for that as well.

Frank Doyle: (37:15)

One thing I would like to add in terms of thinking about the question earlier about, what I'm my excited about. I was remiss, I should have said broadband, I think by bringing broadband to a lot of underserved communities that will help, our country tremendously. And, it's we're a big country. I mean, my wife is French and you go to France, which is like the size of Texas. And, and when you have, and I usually work at foreign banks since I left move back in the mid-nineties and there, the Europeans are just amazed. The Japanese are just amazed of the sheer size of our country and the lack of, density. I mean, you take a look at Ukraine, which is again, roughly around the size of Texas, but it has 44 million people, as we all know now. And, it just, the density is something else. And that's, and I think the broadband outreach to a lot of these small communities, a lot of these underserved communities will help bring them into the 21st century

Nick Samuels: (38:12)

Thoughts. Well, I was just going to add to that, right. And it's not just because then you can get Netflix in, you know, some far away place, but like, you can't forget about sort of what we experienced in the pandemic, because those necessarily aren't necessarily locations where there's work from home jobs, but maybe that allows people to move farther away, the ability to do as, remote learning in all of the different ways, not just the kind of school that some of us experience with our kids during the pandemic, but, you know, if you want to get some sort of continuing degree or something and you live out and, you know, you're not going to be able to drive to, a nearby college or something necessarily to do that. Those are things that will help grow your economy, right. As people get more education, more ability to do that, the controller talked about telemedicine. I mean, they're so many different things that are embedded in that broadband expansion that, we kind of forget is infrastructure too.

Asha Mathew: (39:05)

We'll open it up for audience questions. If anyone has any questions, regarding the bill or any of the sub sectors.

Speaker 9: (39:16)

Just to follow up, Nick, on your comment about the gas pack and electric vehicle from the trends, any of that comment on maybe alternative revenue sources that might be discussed to address that issue?

Nick Samuels: (39:31)

Yeah. I mean, some states have done pilots on vehicle mile travel kind of schemes. And those are interesting, but you also basically have to, come up with ways either that you're going to track where vehicles are moving and not everyone necessarily likes that. Do you have some sort of transponder on your vehicle or do you just make estimates based on, your registration or something like that? I think that's been a real challenge is how do we, how do we do this when we don't have that thing where we know you're going to the pump, the thing is ticking as you're putting it in. And that's, that's what we're taxing. you know, maybe it is a more Texas like model where it's not necessarily based on fuels use, you know we don't really understand yet. I think, you know, what's the scheme of vehicle charging stations. There are gas stations are like everywhere. Yeah, you know, where, how are these going to go? How are you going to plug into it? Is there a way to have, you know, sort of a meter on your usage like that? I don't think anybody really knows, but, you know, but some states have been thinking about it for a long time, but I also think the flip side of that is they've not figured out the answers from that yet either.

Jeff Walker: (40:49)

So, odometer, we get your new license every year, they have an odometer check, but the problem is you don't know where that was if it's in state or outta state.

Nick Samuels: (40:57)

Right, and you know, the flow with the gas taxes, you pay it immediately. So, there's always money coming into these funds versus

Jennifer Wright: (41:05)

Once a year. That's annual, right. That's a big dilemma for us is what we like to call it road, user charges. Well, all those electric vehicles, aren't paying road user charges because they're not buying gas. And so that, you know, the gas taxes are main source of funding. And hasn't been raised since the nineties. So, it's purchasing power is decreasing, and there's also with more fuel-efficient cars and electric vehicles. You've got this divergence of our revenues versus our road users. And so that's a big topic. We don't have the answer for it yet, but it's certainly a topic of concern.

Asha Mathew: (41:42)

Do you have any other questions? I think this looks like we might be ending a few minutes early then, but you know, I want to thank all the panelists, for joining us and for volunteering their time. And thank you all.