In conversation with issuers

Our panel of issuers will share their insights into the current state of the public finance sector and the road ahead. Topics of discussion will include the economic growth, issuance status, state and local government credit conditions, growing focus on ESG factors and more.

Transcript :

Announcer (00:09):

Good morning everybody. Thank you again for joining us today. It is such a pleasure to have you all. It is my absolute pleasure to introduce the next panel, a panel who helped me considerably with the development of this conference. So I must thank you again, especially Dwight and Elizabeth RA and Karl. Let me introduce the, yeah, in conversation with issuers. It is nothing to introduce. This is the most panel we were all waiting for, so please take it away, Karl. Really?

Karl Biggers (00:39):

Wow. Okay. Thank you.

Karl Biggers (00:45):

Do I turn it? We are having fun already. Thank you everyone for being here. Good morning. This panel is about just a conversation with issuers or as we have termed it, conversation among friends. By my math, there is probably a hundred years of experience sitting at this table in the public finance arena, both on the issuer side as well as on the banking side. So with that, we are going to get started because we want to effectively utilize our time and also I have got some people up here who do like to talk. So, and I am not calling any names, but with that we are going to let Dwight Burns kind of lead us in talking more about the macroeconomic impact of the last few years upon municipalities and other issuers. And then from there, we are going to go ahead and let Carmen kind of take up from the school districts and her perspective.

(01:53)Also piggybacking a little bit on some of the things that were talked about yesterday with regard to what is happening in the legislature and how that is going to be directly impactful to the Fort Worth ISD as well as other school districts. And from there we will come to Charise and let her to talk about how the city of Houston has been impacted and how it has recovered post pandemic. And then finally wrap up with Horatio Porter and let him talk more about development around the toll ways. And Dwight might want to jump in there as well and talk about transit related development as well and how development is spurred around and economic things or spurred around various toll ways and transit age rail. So with that, Dwight!

Dwight Burns (02:50):

Thank you. And I do not know who it is, Alexa, to talk up here, but there is certainly not, I do not know who that was. Good morning You all. Dwight Burns, treasurer of Dallas area Rapid Transit. Karl asked me to just talk a little bit about some observations about macro economic trends and if You all have, were here for yesterday's comments from Mark Zandi and this morning's comments from the controller. You got a good flavor of comments about the US economy from Mark and the state economy from the controller. And I am just going to dovetail on that a little bit. Dr. Zandy mentioned that his perspective, his forecast is probably leaning towards some contraction, right? In the US economy, very yield curves, all the normal trends that we use to see. And when the Fed takes aggressive actions, they have been with others, in conjunction with other global economic trends that he is seeing a pretty good chance of nationwide contraction of some sort.

(04:12)And so that being said, speaking for the state of Texas, the comments this morning from the controller, I do not know if You all noticed, but we are pretty bullish, right on the state of Texas, which any Texan is going to do anyway, as I like to tell anybody, I am a sixth generation texting myself. So no matter where I am, especially when I am in front of the rating agencies, we are going to talk up Texas. But there is data behind that is that couple of months ago, a lot of You all may have heard comments from the lead economists from the Dallas Federal Reserve and she forecasted that the state of Texas this year would probably experience some slowing of our overall economy, but that we would in her view, experience a soft landing whether we like that term or not. But she does not see in the state of Texas the same negative growth trend that we would might end up seeing for the US economy in general.

(05:24)Now, let me brag a little bit more specifically about my region of the state, the Dallas Fort Worth area. So for those of you issuers here in the room who are in local government sales tax collectors, yesterday was an important day. That is our monthly sales tax collection day for cities and transit agencies and any other entities that collect sales tax. And so I was actually sitting in this room doing a little multitasking and checked on my sales tax collection and we saw another growth, a strong growth rates ran. But here is the kicker, our growth rate this past month in sales tax was actually stronger than the statewide sells tax for the month. And I won't want to step on the controllers on his toes too much, but Dallas Fort worth is even stronger than the state right now when it comes to our economy. And I think to some extent it speaks in addition to the strength of my dear state in general economically. It speaks to the strength of a diversified economy in that we is our DFW and several other areas in the state also experienced some strong growth too. That also speaks to the diversification of our economy. Yes, oil and gas is important. Yes, mineral is important, but having a strong tech sector, having having a strong sector and I will just say, and finance and other areas like that are important to our economy. Strong hill in the healthcare sector. So we are seeing weakness of course in some sectors like retail.

(07:27)If you dig down numbers you can see. But overall You all, the Texas economy is strong and when you dig down deeper into the state, you will find some strengths in our economy. Listen up, rating agencies that make our economies the envy of the rest of the country in many ways. Is that good? Karl!

Karl Biggers (07:47):

You are done. Okay, emphatically now everyone knows Dwight, you told off on yourself. Thanks Dwight, that was good. We will go now to Carmen, the CFO of Fort Worth, ISD. And as I have mentioned, she is going to kind of piggyback on some of the things that were said yesterday. Also draw in how what Dwight has just said is impactful to them as well and talk a little bit and bankers listen up. She is going to talk about some of the Fort Worth ISDs capital plans. So pay attention.

Carmen Arrieta-Candelaria (08:31):

Thank you. Thank you Karl. So I am going to talk a little bit about my school district, Fort Worth, ISD. We are the six largest school district in the state of Texas. We have got about 73,000 students. We are also close to about a billion dollar general operating and debt service fund budget. But one of the things that we have done over the last, I think five years is in 2017 we passed a 750, excuse me, 750 million bond program for high schools. And then recently in November of 21, we passed a historic 1.2 billion bond program for middle school. So you can probably guess what we are hoping to do next, but I think one of the things that struck me about the last bond issuance is that our authorization had passed by 57 votes. So it was a really tight vote. And so what we have tried to really do is try to position ourselves so that being fiscally responsible as well as ensuring that our bond program rolls out really well.

(09:47)So we could try to encourage the constituents to continue to support the bond program. But I want to talk a little bit about what I have been involved in a number of deals and what I have seen over my experience. I have about 10 years in municipal government experience and then I have 17 years now of experience in school districts. So over the course of this timeframe, I have been involved in not only issuing general obligations, but tax maintenance notes cos pension obligation bonds, Q scabs, lease revenue bonds. I have done a commercial paper program. I have done variable fixed debt over the years. And what I have seen really is I think that the tools, I think Noe talked about it yesterday, is just the tools in our toolbox are getting smaller. They are tossing tools out that we have used over the past. And I have seen this over the last 30 years and I think Dwight spoke about the economic conditions while they are improving in certain categories in the state.

(11:02)I think with regards to school districts and our reliance on property values, particularly to fund our debt, our INS side of the house is that we are really focused on those legislative issues that will restrict our ability to continue to grow our property values like appraisal caps because we have to again create or develop capacity in order to be able to issue that debt. So the Fort Worth ISD, we have sold 450 million of that 1.2 billion authorization and we are trying to match our projects with the matching our cash flow with the projects that as we roll them out. But the district also imposed a 29 cent cap basically on the debt that we could issue. This is an internal restriction, so trying to work on a proforma to try to issue all of that debt within that constraint. So those are those internal things, but I think as a result of the legislation both at the state and federal level that I have seen is that it makes our jobs tougher either through restricting, limiting, eliminating our ability to issue the debt. And It is more complex than ever. And I do not know about the other CFOs in the room, but issuing debt is just probably a small percentage of my job.

(12:33)And I see that we need more people to assist us because It is more complex. We need a good financial advisor, we need good bond council, we need a strong team of underwriters to help us just bring the deal to bear. And I think that for the smaller issuance, I really worry about that, the smaller issuers that do not go to the market that often and just need a little bit more help because of just the complexities that are required. The other thing that I have seen is that the growth and the amount of the size of the authorizations. So we talk about 1.2 billion, well look what Austin ID just did and look what some of the cities are asking. We are in the bees now. We used to be in the arms, now we are in the bees. And It is not unheard of where you are passing larger and larger bond authorization. Oh, You are proposing, right? Because not all of them are passing and that is responsive to the cost of construction. Cost of constructions are skyrocketing. We are seeing large increases in cost of buildings as much as 25%.

(13:44)We are seeing square foot cost per square foot of being, it used to be 15,200. Now I have seen like 400. And I was like, you got to be out of your mind if who can afford to build, I mean we are certainly not paying that in a residential area in a rent residential home, but You are seeing those kinds of numbers and It is almost unheard of. And in some cases It is going to be very hard to build what you told your constituents you were going to build because of the cost of construction. So I think that is really an economic indicator that certainly my colleagues also talk a little bit about that. But what I worry is about the legislation that restricts her ability to do our jobs and to create opportunities for school districts and other governmental entities to deliver what the constituents are asking. And I will use Fort Worth ISD as an example, again, what is out there right now, proposed house bill two, which applies an appraisal cap to all real property.

(14:50)Again for us as we roll out our plan to be able to, while we have built a conservative growth in our proformer, but what does that mean? Are we going to be able to meet it given what is happening in the economy? In a little bit of the slowing that Dwight talked about, Senate bill three increases the homesick exemption from 40,000 to 70. We increased it from to 25 to 40 last year. So we took an impact. There is a hold armless in the bill, which helps soften some of that blow, but that is only for debt that is going to be authorized before September 1st, 2022. So that is a concern as well. I think that setting the limit at 50 cents, I think that is a reasonable, but at the same time and trying to work within that cap, I do believe that we need to set limits and that we work around.

(15:48)But I think some of the other things that again, make it more difficult. For example, Senate Bill 946, it requires all school district elections to move to November. So that is another planning tool that we have to be worried about. And then also at one point in time there was a priority to pass debt requiring two thirds of the vote of the constituents. Well, as I indicated earlier, 57 votes is what are passed with. So passing it at two thirds, I do not know where that is at right now, but that would also be of concern. And again, limiting our ability to issue the debt. I think a couple more things that I have seen as our proposition and how we bring forward propositions from school districts where we have to separate them through by technology, fine arts, athletics, well, we are trying to produce a well-rounded child. And I believe that those things, those amenities for fine arts and for athletics do add to the well-rounded experience of our children.

(16:59)And many of those are not passing. We had four on the ballot, one passed and luckily that was the one for the brick and mortar for instruction, but none of the fine arts or the athletics passed. And I can tell you kids come to school why sometimes because of athletics and that is what draws to school sometimes. And so we want to make sure that we are addressing the needs of all children and being able to provide those types of experiences for kids. But I think that the proposition splitting up the propositions has affected the passage of those types of funds of bonds. And so what happens while the m and o side has to pick it up or we are providing some standard facilities to our students, I think the definitive ballot question where, I do not know if that is on the table, but specifically identifying projects really ties the hands of the trustees, the people that are elected to try to pivot to other projects.

(18:15)Projects vary from time to time. And so to allow trustees that flexibility to be able to make the right decision for the students, I think is really important. And that would be something that would be concerned. I think the competitive restrictions, senate bill 19, Senate bill 13, I think we went through that in August. So we were really worried about bringing some underwriter to the table that may have been on the list. I think also that is restrictive restricts competition within our space. And the advanced refunding at the federal level has also limited our ability to take advantage of opportunities that we may have that would what lower the cost of borrowing, which is all our objectives. We do not go into this saying we are going to try to increase the tax rate to the highest rate we want to try and manage and be responsible and prudent.

(19:16)But these are some of the tools that I have seen over the course of time is really just continued to restrict our ability to be able to do our jobs and make it very complex. And so I would ask that we educate those that govern and help them understand what is the impact in some of the decisions that they are making that impacts those of us that are actually issuing issuing bonds because and the type of bonds that We are issuing, we need, that should be part of our charge, is to make sure that they understand what the restrictions that they are placing on us as issuers might have gone one of too long. Sorry.

Karl Biggers (19:59):

You were fine. Thank you Carmen. That was really good and very insightful as to an issuer and this very specific impact that some of the things that are happening in Austin are going to have on you as a CFO and on the larger Fort worth ISD and other ISDs across the state, Cherise is next. She is going to talk a little bit about the post pandemic and how the city of Houston has recovered and how it has utilized sales tax in particular with regard to their ability to meet their revenue budgets.

Charisse Mosely (20:43):

Okay. So one of the things I think I wanted to piggyback off of what Carmen, as far as some of the challenges that we face with the legislature and issuances of bonds is also we have the same issue with Senate Bill 19 the list. And it does limit cities, municipalities on who you can use. And I think I agree with you that they really do need to consider how that affects cities and municipalities on who they choose. It kind of limits us on transactions and how we want to pick a team and makes sure you have to plan a whole lot more than you thought you would have to in the past. So that is one thing that I agree with you on Carmen and some of the other legislative things that I think they talked about yesterday, the cos. And I think that does not really affect us as much because when the city issues cos they are normally smaller in amount, I think we could probably figure out a way to do it.

(21:51)One of the things that the controller, my boss, Chris Brown talked about earlier, I feel like I will just reiterate what he mentioned in the panel before. Our sales tax revenues are up a lot and I think It is initially we did not think they would be increasing as quickly as they have, but It is wonderful for us. So anyone wants to come and move to Texas. I know the comptroller mentioned the growth that we will be having over the next, what, 20 years or so. If anyone wants to come live in Houston or the surrounding areas, we would love to have you Dallas help increase our revenues.

Carmen Arrieta-Candelaria (22:31):

Fort Worth.

Charisse Mosely (22:35):

But we have had tremendous growth in our sales tax. But most of you who do deal with the city of Houston know we do have the rev cap that we do have to deal with as well as far as property taxes. So we will just have to deal with that. But the revenue source does as far as sales tax does help that situation for us. Let's see, what else did you want me to talk about? I know we had some more legislative things that as far as elections and stuff like that, normally the city only does their elections in November anyway, so I do not think that legislature would affect us. But I think one of the things that the panel mentioned yesterday on the legislature is that if everyone has to do their elections in November, then everyone be doing their bond transactions at the same time. So that is something that we would probably need to think about going forward. Anything else you wanted to ask me?

Karl Biggers (23:31):

I think you have covered it and one thing maybe you will elaborate a little bit on is more because of this, the limitation on say own property apartment on property tax, how that impacts your ability to issue debt as well. And how are you having to blend sources of revenue to support debt?

Charisse Mosely (23:59):

Well for us we, when we do our calculation and debt is first, so I do not, as far as any revenues that we get as far as the rev cap, I mean we kind of fill it, but we do have the sales tax to help with that. So we would love to have not have a rev cap and then we could just have extra reserves. But I do not think it affects us as much. We would definitely not want to have it. But I think that going forward it would be nice if we could get rid of it, but that is just me. I am leaving, so won't be retiring, when I say I am leaving. But I just put that in that is not everyone's thought, just my thought.

(24:52)As far as wanting to get rid of the rev cap. But that would take a lot more challenge and planning than I would be able to give in that aspect. But I think again, we have learned to work through it. We do not especially like it. We have had to lower our property tax rates over the, since we had the cap based on the calculation. But we have managed and it has not really affected us as far as issuing our debt as we needed. Again, we would not do any issuances last year, but it was mostly just timing right kind of thing. I do not think it was in relation to us having any issues. It was just a timing thing last year, but we will be ramping it up this year. So give us a call.

Karl Biggers (25:38):

Every banker in here wanted to hear that last name. Horatio talk about dance, talk about development around the toll ways. And in every city in Texas, toll ways have become rather prolific and they have cut across every landscape just about in a lot of undeveloped areas and the development that has come as a result of that. And Dwight, you might want to pitch in the tail end of that as well with regard to transit related development.

Horatio Porter (26:23):

Sure. Thanks Karl. Again, I am Horatio porter of the CFO of NTT. A again, happy to be here on the panel. The NTT story is really a remarkable story. Wendy, 627 years ago, the state legislature had the foresight to create the organization. The state did not have money then and sands the 30 billion they have today. They did not have money to address all the transportation needs that occurring in this great state. So again, they have the foresight to create ntta, to borrow money, to build roads in north Texas. And many of you in this room have helped us borrow the 9 billion that we have outstanding to build the roads. Okay, 9 billion with our outstanding principle balances. Now for the roads we have in north Texas, nine big is a lot of money as you can imagine. And we take that seriously. But in doing so, we have built a network of roads in North Texas that have been phenomenal.

(27:18)The roads are well maintained, they are safe, they are reliable, providing a tremendous amount of economic activity for the region. Dwight spoke about it earlier, there is great growth going on in the Nortex area in large part because of the roads that have been built. If the state of Texas had to do that using gas tax, it will cost every driver in the great state 6 cents more in gas tax to do just what we have done in North Texas. And I know this is a great state and everybody's collegial, but I do not know that you'd send your gas tax money to North Texas to fund roads, but that is what would require, it requires 6 cents of additional gas tax for every driver to fund what NTT has done in north Texas. So we built a lot of roads and we, again, they are well maintained and these roads have been built much faster than they otherwise would've been if we are relying on just gas tax.

(28:14)So we created an en engine in the North Texas area where people have more capacity and less congestion. You have access to what is the second or third largest airport in the country. You have access to the Ranger stadium, you have access to where the Dallas Cowboys play. I know You are a big fan Dwight. Lots of access, right? You have access to new cities. The city of Cleveland is growing, the city of Mansfield is growing, Salina is growing, prospering, growing because of the roads that have been built, that very reliable infrastructure has been a catalyst to growth in the area. Jobs, relocation and you hear my colleagues recruiting you to come to Texas, Houston, she says Houston.

(29:05)And my only ask is if you do come, bring some concrete with you and still to relieve some of the congestion. Yeah, there is a lot of activity going on in the Nortex area. And again, the development that has occurred along our roads has been phenomenal. And as development takes place, we have increased in property values. Who benefits from property value growth? I think my colleagues do, right? We have new development, economic centers across the region have more sales tax. It is been said a number of times here, the growth in sales tax. It is because of activity occurring along the corridor. Property values are rising in the area. And then despite the caps that are in place, there is still tremendous growth that is taking place. And we sat here three years ago thinking what could go wrong? Great activity across the road, some call it congestion, I call it activity.

(29:55)A lot of activity going on across the ntta roads. And we were sitting around talking and thought it is great, a lot of congestion, which is our friend at times, but a lot of good things going on. And I said, then It is going to take something pretty significant to change our trajectory. Well, lo and behold, March comes along. I think that changed all of our trajectory, a significant shift in all of our activity across the region. Before the pandemic, we were doing 2.8 million transactions a day across our system, 2.8 million transactions a day. A lot of activity. March 13th, April, yeah, March 13th it was down to 2.2 million transactions a day. One week later 1.2 million transactions a day when the shelter in place order was given, people were staying home and they were practicing social distancing on our road.

(30:46)No activity, no activity at all. In April, it was as low as 60% down 60%. And when you owe $9 billion, that is not going anywhere. You got to find a way to pivot. And we, like many of you, pivoted, we made some changes, we cut spending, we delayed capital projects, we accessed some liquidity to keep certain projects going. And we did a small refinancing. It allowed us to weather the pandemic. And as I said here today, again, three years later our transaction, now I am back up to 2.93 million a day because of the activity that is occurring along our roads. The interesting thing we have seen though, Karl, is that the activity occurs differently than it did pre pandemic. Prior to the pandemic we had, the typical morning rush drivers are rushing in to get to the office by seven or eight o'clock or so. And then during the midday there'd be a trough, if you will, a little less activity.

(31:41)And then the evening time, of course people going home so you have to peak again. Or during the pandemic we saw that the peak was not as significant because people weren't rushing into the office. And even since then, people are not rushing into the office by seven or eight o'clock. But the phenomenon that we did see was that midday traffic, it went through the roof trips you otherwise could not take during the daytime because You are in the office you can take now. So that midday trough that we used to experience prior to the pandemic had gone away. And the PM peak is still pretty intense. Cause at some point you got to go home, right? Sharice? Yes, at some point. So the traffic patterns have changed significantly since the pandemic, but the growth still occurs. There is still a significant amount of growth that is occurring along our corridor. We continue to extend our roads into new service areas that you mentioned, Karl.

(32:29)And as we extended new cities, pop created man, take the city of Adamson, for example. The city of addon did not really exist prior to 1980, so not real, not a lot of activity there. We extend our major corridor to Dallas North Tollway, the city Addison Boones. And as you further extended into Frisco, Frisco explodes the 5 billion mile that they refer to out there. A lot of development that has occurred. Again, a number of corporate relocations have taken place, which again gives rise to property values and again, of course sales tax that municipality benefit from. So while the 9 billion that we have borrowed over the years is on my balance sheet, I think many organizations in the area benefit from the infrastructure that is been put there. That reliable infrastructure continues to be a catalyst for the region. And the last thing I will say, Karl, before I turn it back over to you, is one of the reasons I think we survived the pandemic is not because, not just because of the growth along our corridors, but over the past several years we have strategically refinanced a lot of that 9 billion.

(33:30)And again, many of you in this room helped us do so. We have refinanced significant amount of money saving over a billion dollars in interest. So when the pandemic hit our debt profile was not the way it was. My Robb did not teach a, so we had a little bit more flexibility and a little bit more nimble to get weather the pandemic. Had we not done those refinances again with many of your help counsel and underwriters and others, it'd have been tough for us because you lose 60% of your revenues almost overnight and your debt service does not change. That is a pretty big hurdle again. So we have had a lot of great things going on in north Texas. I encourage you, as my colleagues do, to move to Texas and then she in Houston again, Carmen and say Fort Worth. And I will just ask you to bring concrete when you come. Thank you. That is good.

Dwight Burns (34:15):

Go ahead bud. You all, Horatio, those of you in the room who know Horacio, not how smart he is of competent, how hardworking. But one thing some of You all may not know is he's rather modest when he talks about the achievements that NTTA has incurred. And so when we talk about when he just kind of casually talks about the refinancings and folks that a lot of You all in this room have helped out and stuff, it was way more complicated than that. It was not just refinances, it was whole restructurings of securities of debt. And now I am going to go into bond analyst nerd mode here. Years ago, and this is before you even took charge over there at NTTA when I was at Moody's. And we used to sit, I used to sit in rating committee about the NTTA and the structures back then.

(35:04)Some of You all in the room know what the complex structures were and the special securities that had to take be put in place to deal with certain contingencies. It was a complicated set of restructurings and refinancings that had to take place to make the bush toll road happen. And then over the years to see the restructurings that happened, that methodically replaced some of those special securities with a more sy your did. Right? that is now. And with the upgrades that came, the creating upgrades that came with that was a big part of that. And so yeah, not just bankers, but fas and bond lawyers in this room had a big part to do with that multi-billion dollars. So I had to brag about that. Now, let us talk about more than roads for a second here. And You all know this is Texas and we love our roads, but the future of this state has to, in terms of mobility, has to go beyond, has to include good road infrastructure.

(36:08)It is include, it is going to have to include more road infrastructure bankers. do not get scared. I am not going to say we do not need more bonds for Rose. We are going to have to more infrastructure for Rose, but It is going to have to include a broader idea of mobility every day in the 700 square mile area that DART serves the two and a half million service area, these 13 cities that belong to us, we move over a hundred thousand passengers per day. It is a lot of people. And now It is only about 70, 65%, 70% of what we moved per day before covid. But It is still a lot and it is going to remain an important, a vital part of the infrastructure, the skeletal system of especially every large urban area in our state. And I am not just speaking for dart, I am also speaking for Metro speaking from here in this area, capital Metro.

(37:04)And my friend, I have friends in a room here who are part of a multi-billion dollar effort to increase mobility here with rail infrastructure with more mass transit. And so It is going to have to be a part of our future. Now, you guys are an important part of that in terms of our bonding. The federal government's an important part of that in terms of the grants that we receive both on a formula basis and a competitive basis tax reform. But the most important thing that I always remember every day, and I have been using Dallas Transit since the first grade and even before DART was created, all the thing I always remember is that we are serving those people who need to get where they need to go with more than just a car or a truck. And that is an important and really almost a necessary ingredient to go along with the vital infrastructure that Arturo rows are bringing with our other road infrastructure, arterials, whatever.

(38:15)It is all about mobility, all to help with our economic development, transit-oriented development. But Gen Z, my kids generation, they, they are much more in line with not buying a car. Not now. I wish my kids would not drive so much though these days because that toll tag I put on their car is giving you way too much revenue. Anyway, it is not too much. It is not too much. But you all, mobility in general is going to be a really important part of the future of the state with these millions of people that we are going to have to absorb over the next few years.

Karl Biggers (38:52):

Thank you Horatio and Dwight, that was excellent. We are pretty much on time, so we have some opportunity to take some questions. So with that, we will open the floor up for questions. I think there are some live microphones on the floor for people who would like to ask questions. There is someone put your hand up so she can see you.

Audience 1 (39:26):

Thank you. So Carmen and I have a question for you. So I just like earlier this year, wall Street Journal put out an article saying the public schools lost a significant number of students and they did unfortunately list Fort Worth as one of the top hundred public school districts that saw the enrollment decline by 10%. That was surprising because given the enormous growth that we have seen in Texas, that was very surprising. I am not worried about the credit concerns necessarily, but just wanted to hear from your perspective as to was it surprising to you? And obviously the declining enrollment is certainly not good. So how do you plan on improving and going forward? If you can just share your insights please.

Carmen Arrieta-Candelaria (40:22):

Sure. And so that was one of the comments that I had did not necessarily touch on, but yes, declining enrollment is a huge concern for Fort Worth is D as many of the legacy urban school districts that are out there are experiencing the same thing. So I think Horatio spoke about the covid in March of 2020, and I think that was the biggest loss. I do not know where the kids went. We have experienced, I think like a 5,000 student enrollment loss. There was a huge loss between 2021 and what we are projecting like 6,080, such a huge loss. And so it has to do with charters, the opening of charters and students going to those schools. It has to do with just less kids in the pipeline, basically birth rates. And it has to do with homeschooling. We see a lot of parents choosing to homeschool their children.

(41:31)So it is a big concern for Fort Worth. And what we are doing is we are trying to align our expenses with the revenue that we are actually receiving. And we are doing a, I am, I am sure you have read that some of the stories that we are doing, we are trying to align our staffing with our actual needs and what we actually want, what type of service we want to provide to our students. So we are doing a large realignment of our structure. And so that is one aspect. And on the other side, we are looking at expenses to make sure we really need everything that we have. And It is tough, It is a really tough environment because I wrote down while Rossi was talking about our aging infrastructure. So our maintenance costs are higher. And so we need to look at what do we need to do with our aging infrastructure and then how many schools we have, we have 140 schools.

(42:37)If you divide that by the 73,000 that we have, It is about 514, 15 students per school. And the average, well some of these schools are really small and that is because we have lost students to neighbor nearby charters. So we are using our schools. Our schools are at less capacity, but we still have to provide maintenance, we still have to provide utilities and all those costs associated with that. So It is a really tough challenge and I think I spoke to that during trying to look for additional assistance on the in n s side. But all my colleagues here said that there is tons of money in Texas. Well, I want to know where it is. I want it to be in public schools. So we talk about how much money we have, well let's slow it down to where it needs to go most. And that is really to our students. We talked about human, there was a panel earlier, human capital needs. We are in the same boat, our teachers are leaving. And so what do we have to do? We have to provide a competitive salary for them to stay in education. And so that is another pressing concern that we have. And we have to balance that. And again, the aging infrastructure is a huge issue for us. So I dunno if I totally answered that question, but I tried. It is a real challenge for us.

Dwight Burns (44:08):

Next question. Wait for the mic. Kim.

Audience 2 (44:23):

Horatio mentioned the impact of the pandemic on commuting patterns. And we have always thought of mass transit as sort of a commuter. And so can speak about DART or maybe just transit nationally. Any thoughts or things you guys were doing to think about changing the nature of the service that you provide as a mass transit provider?

Dwight Burns (44:43):

Sure. Well, Kim, we are not going to have to change ourselves. The change is happening to us in terms of the patterns. And of course those of You all, especially from other cities with even larger systems, will know that these patterns are changing. And matter of fact, I belong to a group of finance, transit professionals, and we just met last week in Phoenix in Valley Transit was our host. And we talked about the fact that, okay, It is time to stop talking about comparisons to before Covid, because We are now in the new normal. You are, You are alluding to Kim, the commuter is not going to be, I am now, I am speaking from my agency in my area. The commuter growth is not going to come back to where it was. Central business districts, while they will remain an important part of our local economy, just like it will remain an important part of New York.

(45:50)So Chicago's, everywhere else's central business districts are going to start to have a new role of having more gen Zers living down there, more fewer hub and spoke kinds of services that are needed to bring folks in for Mefor. I live in northern suburbs of Dallas and downtown. And so there will continue to be folks like me who do come in a few, several days a week to do that. But yes, our emphasis is going, is changing, and we just need to meet those new changes and continue to support, especially our reliant riders who need to get to work, who are not commuting, who are not commuting in that are using our services because it makes the best economic sense for them to use services. And again, that is a good huge portion of that, over a hundred thousand passengers that we move every day in our system.

(46:50)So yes, that is an incredible proposition, incredible challenge and an emphasis for my board at Darden. That is exactly what and that, and that is exactly how we are reshaping our capital needs going forward. Focus more on, all right, the rolling stock that we have, transit top rolling stock. All right. The buses and the trains that we have and replacing note and maybe a little less talk about some assertive, aggressive DART is actually moving to a phase. It is our CEO likes to remind us of this. We are moving to a stage where we are moved past the stage. Basically being in a construction company, that is what building the longest light rail system in North America basically required US basic to the largest construction company. We are moving past that now. We are now moving into our adolescent stage of what we are. And so now we need to start focusing off what we have, operations, maintenance, state of good repair and focus our dollars and then on. And then of course in the short, medium term, making sure that there are no concerns about safety and security, cleanliness, that kind of thing. So right, Kim. Right. We have time for maybe one more question.

(48:13)Lunch.

Audience 3 (48:16):

Hi. I would love to hear you all address what financial tools have been most helpful in terms of resiliency efforts, whatever that means for your individual regions, whether that is hurricanes, winter storms, cyber attacks, what financial tools have been most helpful in response?

Charisse Mosely (48:35):

What was the question?

Dwight Burns (48:36):

Financial about resiliency. Oh, and she said hurricane, so we know who she's talking to.

Charisse Mosely (48:44):

Well, I think as far as resiliency, the comptroller just mentioned how much money he had for emergency. So hopefully we will get some of that if we have an emergency if needed. But we do have a resiliency officer at the city of Houston that does a lot of work with the county as far as flood mitigation and things like that. So in the event of an occurrence that I think we will, working on more resiliency needs and trying to be more proactive in making sure that the city is ready for torrential reigns or any other in incidences that may happen. So that is where we are so far as, as I can say.

Carmen Arrieta-Candelaria (49:34):

I think from our standpoint, we have gotten quite a few grants and allocations, specific allocations to assist us as a bridge to get us from the COVID loss to where we at today. But I think with the Esser funding on the other side, on the Esser funding running out, we are also looking at are we going to be able to sustain those programs after the funding runs out, which is a different, whole different challenge. So I think while that has been a godsend, if you will, to assist us in creating that bridge, We are going to be in a couple years, we will probably look to see what are the programs that we need to review and be able to sustain and then continue with other dollars. So from a financial tool standpoint, I think that is been really helpful to receive some of the money that we have received as part of both from the state and the federal level.

Karl Biggers (50:38):

And with that, we are out of time, but before we go, I want to thank the panel. Thank you. You all have been great, but I want to single out one person for just a second. That is Charisse. This is her last Bond Buyer. She is retiring. She is retiring, and over 30 years she has been a public servant and many of us have met with her over the years. Some of us she is tolerated. And I would probably count myself in that number. But thank you Charisse, for always being open to hearing from us and always being supportive of us.

Charisse Mosely (51:22):

And never wanting to hear a market of that.