TRANSCRIPT:
Mike Scarchilli: (
Hi, this is Mike Scarchilli editor in chief of the bond buyer. Welcome to the future of infrastructure, our new podcast. It's a series of deep dives into us, infrastructure opportunities, investments, and impact for our first installment. I'm pleased to welcome investigative journalist, Peter Keating in this four part series build what better. Peter will break down the most important topics of the new landmark infrastructure deal subscribe today. So you don't miss any crucial insights.
Peter Keating: (
Now that the infrastructure investment in jobs act is law projects across America are expecting to share in its 550 billion in dollar bounty of new federal spending. We'll talk with three people involved with major public works initiatives about how they'd like to see that money put to use, and about how state and local officials around the country can leverage the new funds from maximum effect. I'm your host, Peter Keating, and welcome to bill. What better a bond buyer podcast that will explore the future of infrastructure in America. For starters, I talked with Erik Olson, senior strategic director at the natural resources, defense council, a leading environmental research and advocacy group efforts to fight lead contamination in drinking water. Tell me how lead contaminates American homes and what kind of damage it does.
Erik Olson: (
Well, lead comes from multiple different sources. Um, one of the big sources is from our tap water. Um, usually it gets into our tap water from these pipes that run from the main, out in the street to our houses. And there are about nine to 12 million of those so-called web service lines. They're like a garden hose made out of lead. Basically that brings water into our houses. Of course, there are other sources that we worry about, especially lead paint and older houses built before 1978. When we paint was banned.
Peter Keating: (
Why was lead regarded as such a suitable or ideal component for pipes in the first place?
Erik Olson: (
Well, actually you can go back to the ancient Romans and even the symbol for lead PB is where the word plumbing comes from. So lead is really easy to work. It's bendable with your hands it's malleable. Um, and it's ideal for pipes because it is so easy to work with with your hands and to bend around curves. That kind of thing we've known lead contamination, um, can harm the brain's development. It can cause problems with children after they're born with, um, learning disabilities, lower IQ problems with controlling their ability to impulse control. You mentioned
Peter Keating: (
That lead paint. We recognized as a problem nearly 50 years ago, the United States phased led out of its gasoline. Why is this still such a prevalent problem? Nine to 12 million pipes all around the country? It's
Erik Olson: (
A prevalent problem because literally for decades, led pipes were encouraged by municipal governments. In many cases, they were actually required up until they were banned federally in 1986. So believe it or not some cities like Chicago, Illinois required lead pipes to be used in Chicago's case all the way up until they were banneded by the federal government in 1986. So we're stuck with a lot of these old pipes. It is a scourge that we've been living with for decades. Do you feel
Peter Keating: (
Like government at any level or every level has a special obligation to remedy problems that government may have caused or mandated in the first place? Sounds like lead pipes are a classic example of that
Erik Olson: (
Lead pipes truly are a good example of where the government required or are strongly encouraged a situation that ends up really being a big problem. So we really do feel that it is the government's primary responsibility to help pull these lead pipes outta the ground. Since they had a lot to do with creating the problem, there's no responsibility, more important then providing safe drinking water to people.
Peter Keating: (
So, uh, who's checking for lead problems. Is that the primary way where a town or a state learns that there's a problem by finding out that it's already contaminated young people?
Erik Olson: (
Well, we really don't wanna be using a, our children as Guinea pigs to figure out whether lead contamination of drinking water is a problem. So the theory is that, uh, water is supposed to be tested by municipal authorities by the water utilities to see whether there's a lead problem. And then those authorities are supposed to start addressing the lead problem. What we found is that the fed rules, um, for we and drinking water are extremely weak. We saw this in Flint, Michigan. We saw it in, uh, numerous other locations, Newark, New Jersey Pittsburgh. I could go on and on. And until we fix both the funding for replacing those wed pipes and also the rules, um, for EPA, a governing wed in drinking water, we're not gonna resolve this problem.
Peter Keating: (
The new infrastructure law has many spending categories, but not so many earmarks. For example, president Biden has said many times that the law will help take care of the 10 most important bridges in the country without ever specifying which bridges they are. But with lead, uh, 15 billion is targeted at this problem. So why were advocates successful at getting that money that specifically,
Erik Olson: (
Well, the, the president, um, called for removal of a hundred percent of the lead service lines in the country. This was I think, a result of just years of relentless, um, publicity about the lead contamination problems after Flint, Michigan, and numerous other communities. And we, and a lot of our colleagues in the public health community in the environmental justice community were pushing very hard to get language, to actually require these, or at least fund these lead pipes to be pulled out. And by the way, there, the polling indicated that 90% of the us, um, voter supported pulling out all these lead pipes. So there's very widespread public support for it as well.
Peter Keating: (
Is it enough?
Erik Olson: (
Well, 15 billion is about a third of the cost. That's been estimated for removing all the lead service lines in the country. So, uh, the president and EPA had estimated the to it'll cost is about 45 billion to remove all the wed pipes. And one third of that 15 billion is in the, um, infrastructure bill, by the way, there's another 10 billion for wed service line replacement. That's in the build back better bill that passed the house right before Thanksgiving and is pending now in this Senate,
Peter Keating: (
What can states and cities do to, uh, leverage that financing or any financing into the full cost? They need to take care of this job. The
Erik Olson: (
Way that the federal financing works is that 15 billion can be used, um, to help leverage, um, other funds. So for example, a municipality like Newark raised 120 million through municipal bonds, the surrounding county, um, was able to float bonds. We're hoping what will happen is that these federal funds, hopefully with additional money from the bill back better, bill will actually end up, um, helping communities across the country to float their own bonds, um, or to match some of the funds that they raise from rate payers, um, to pay for full replacement of all the we service lines in the country. It's a huge opportunity that we feel strongly needs to be taken advantage of as soon as possible.
Peter Keating: (
Your research has shown that more than half of states in the country don't even know how many lead pipes are underground serving homes because they aren't searching for them. So I'm just wondering, in addition to maybe municipalities that are already eager to do this, if they had the money, what happens in, in places that don't necessarily have this high on their agenda?
Erik Olson: (
Well, this is why this really requires one, a one, two punch. There needs to be this federal money as well as state and local money. But the second thing that really is urgently needed is an overhaul of EPAs lead and drinking water rule. We think that a key hand in hand with the money is going to be for the federal government to install strong rules that actually require these wind pipes to be pulled outta the ground. We hope within 10 years, and we think that's a very realistic opportunity to make that happen. So stay tuned.
Peter Keating: (
Next. I discussed roads and bridges with Joung Lee. He's the director of policy and government relations at the American association of state highway and transportation officials. That group represents departments of transportation from states around the country. What is your sense of where states will first use this money?
Joung Lee: (
We're looking at about 500, uh, 60 billion or so of that amount going to, uh, surface transportation sectors as administered by the us department of transportation and having this five view, your funding bill for highway highway safety, uh, transit and passenger rail programs baked into the infrastructure bill. You know, when you look at it in that five year reauthorization bill lens, uh, one of the first programs that we'll be able to get out the door, um, are the core formula highway dollars, for example, that are provided to states, the ones that have existed before, say something like what we call the national highway performance program that focuses on interstate highway, uh, system and other larger highways that will continue, um, highway safety improvement program. That's also another carryover. So those types of programs will be able to start off right away, but there are also a number of brand new programs in the bill, uh, such as EV charging infrastructure program, such as vulnerable user safety programs, such as wildlife crossing, you know, program.
Joung Lee: (
The newer programs will by nature. Just take a little bit longer to set up and to administer with the added distinction that the dollars that are not going out by formula to states that really provides the discretion for states on how to program those dollars for specific projects. There are a whole new set of what we call the discretionary grant programs. Us department of transportation will directly select projects. And those tend to, um, take, uh, much longer time to, you know, uh, set up the framework, collect applications, evaluate them, provide grant towards and things like that. What would you
Peter Keating: (
Highlight if, if anything comes to mind as some of the excite work being done around the country that might get a new boost or more expansion or exposure now because of funding from the new bill,
Joung Lee: (
There is a, a great kind of increase in the base of research funding, um, across the board in the new infrastructure bill, including for highway infrastructure, but other modes as well, uh, whether that's transit or rail infrastructure, um, in particular, you know, I think there is definitely a lot more opportunity to look at the electric vehicle charging infrastructure rollout, right? In terms of, um, deployment along the, kind of the key corridors, uh, to really spur the movement away from the internal combustion engine, you know, for carbon reduction purposes, climate change, goal purposes, another signature piece of the infrastructure bill is massive investment and focus on bridges. And so, um, I think, you know, there's really good opportunity to shore up a lot of the, um, investments that just weren't able to happen before, because there weren't the dollars to go around. And that speaks to both making sure that as many, uh, bridges are brought back to state of good repair, but also being able make some really big investments on the most important bridges and structures around the country. Like the Brent expense bridge that we've heard about for so many years between Kentucky and Ohio that has not been able to get done because of the amount of, you know, capital you need front is so massive. What do states
Peter Keating: (
Need to make widespread use and roll out of, of more electric vehicles work efficiently? What do, what do they need to accelerate things to the point where everybody wants this to go?
Joung Lee: (
Yeah, I think, uh, you know, uh, uh, starting place there is figuring out what is the appropriate role for each, you know, state government, um, that that is not just the department of transportation at each state question. That's also with the, you know, the energy department or the natural resources and environment departments at each of those states as well. And to the extent that, you know, the states are involved in EB charging infrastructure, it can vary quite a bit in terms of whether it's direct ownership to providing, you know, seed capital or some sort of financial subsidy, but really leaving it to the private sector to install and operate and maintain. It really has to be, you know, flexible enough at the federal level to accommodate whichever preference or the arrangement works best, uh, for each state. The other P piece, I think is, you know, what is the capability out there right now in terms of both the supply and the labor slash, uh, workforce, the goal of 500,000, um, EV charging infrastructure stations that the Biden administration has laid out, that's an ambitious goal. And, you know, when we're also thinking at about and what the administration has talked about, for example, the Byer push, those things are gonna be at, you know, involve some trade offs in policy, right? Uh, if you want to do the EV charging infrastructure rollout as quickly as possible, you probably, you know, want to put as minimum restrictions on it, but something like by America would significantly restrict the kinds of resources that you have available, uh, to do. So. What
Peter Keating: (
Are state agencies doing to leverage funds, uh, or to, to use federal funds, to build the overall pot of money they can spend on big ideas or big projects?
Joung Lee: (
The federal dollars typically are focused on the capital, um, side of infrastructure investment. So operations and maintenance, for example, of all these assets all throughout the country of which very, very few are actually owned directly by the federal government. It really falls upon the state and local governments to maintain and operate in perpetuity. I think 30 plus states over the past decades that have been able to do their own major revenue increases for transportation infrastructure. So the states have been able to step up and provide more funding, uh, on their end. The non federal requirement for matching purposes will increase under the new infrastructure bill, because it does increase, uh, the funding levels for highway and transit programs. That is something that our members are obviously well aware of, but, you know, if the federal government is providing $4 for every dollar that you're putting up, I mean, no state is gonna leave that money on the table, and that's certainly, you know, gonna hold, uh, going forward. But I think this is something where it, it will be a perpetual, uh, challenge to be able to come up with, um, the adequate revenues and resources as our infrastructure, you know, capital stock as a whole increases over time.
Peter Keating: (
Well, that's fascinating because as the mix of projects changes to adapt to the needs of PE people, people have and to subjects like climate change, clearly the, the mix of funding and sources of revenue are, are likely to change or, or need to change well.
Joung Lee: (
Yes, absolutely. Absolutely.
Peter Keating: (
Finally, I talk trains and how to build out light rail systems with Peter Rogoff, CEO of sound transit, which serves the Seattle metropolitan area. Tell me a little bit about where sound transit runs now and how it's connected to many stops that people actually want, like the airport and sports stadiums and where you're heading in terms of new stations opening in the next few years and over the next couple of decades. Well,
Peter Rogoff: (
We are about the business here, uh, at sound transit of executing the largest transit expansion program in the country. We're actually in the transit only piece we're larger than Los Angeles's program. And that's that's for several reasons. One, it is popular, uh, and the voters have now gone to the ballot three separate times to raise their own taxes, to fund our capital program. They did. So I think, uh, in the most recent iteration in 2016, largely because traffic had more than doubled in this region in just six years. And it's the kind of traffic that people in this part of the country are not accustomed to. We are in this region constrained by mountains and water it part of the beauty of our area, but also means that we have limited, uh, transportation quarters. Uh, you're either on I 90 on I five or on I 4 0 5, uh, and you have very limited other options and people are looking for a way to get off those, uh, those highways and into a traffic free trip.
Peter Rogoff: (
Right before the 2016 election, we had opened up service to, uh, Husky stadium at the university of Washington, as well as the Capitol hill region here. It was just two stops, but our ridership on light rail jumped, you know, more than 60% just with those two stops, cuz it was two of the densest areas of the region. And also in terms of getting up to the university, it avoided a, a, a bypass around water. So, uh, we do serve a great many destinations that are desired. You mentioned the, the airport and the sports stadia that are right here, downtown over my right shoulder. But we, we also serve now the university and not just UDub, but other universities, including Seattle U uh, the entertainment district. And we are heading, uh, north, south, east and west over the next several years, just in the next three years will be more than, or, or I should say close to tripling the, the, uh, a print of our light rail network. We are, uh, extending all the way up to Linwood in Snohomish county to the north that will allow four more stations all the way down to federal way in the south. And, and very importantly, we'll be opening up 10 stations overnight to the east where we will, uh, land at a Microsoft campus as our Terminus stop, but also serve, uh, Redmond and Bellevue as well as Mercer island. There is a lot of activity with tech firms expanding their, their footprint out on what we call the east side here in Seattle.
Peter Keating: (
And as passengers and commute shift from highways to light rail, or at least join this network, they're joining a system that is powered by hydrotic and wind power, not by carbon emitting, fossil fuel burning substances. Is that right? Correct.
Peter Rogoff: (
We, um, are the first light rail system that is zero emissions in that we do derive our power just from hydro power and a wind farm that we bought into, uh, along with a number of other public entities here in, in the Puget sound region. This is also the kind of region where people will opt to take transit as a matter of environmental choice. And it, it just has to do a little bit with the political ethic in this region. It has also enabled us to be one of the principal sellers of municipal green bonds. And we
Peter Keating: (
Actually do quite well, uh, and get very, very, uh, good spreads because there is a market for green bonds. Uh, and there are, there is a, uh, of folks who want to, you know, responsibly invest in expansions of this kind. We'll continue our discussion after this short break. And we're back with Peter Rogoff, the CEO of sound transit in Washington state. Let's talk about another area where sound transit has been very successful. That is in leveraging federal financing. Tell us a little bit about how FTA or other direct grants from the federal government work and how you make sure you stay in the flow of, of, of those funds. Well,
Peter Rogoff: (
The FTA has a multi-billion dollar, uh, program known as capital investment grants, and we participate in it robustly. We obviously wanna maximize our federal participation in these projects, cuz frankly, you know, the voters have approved ballot measures to say, build these projects. Every dollar that we can obtain for in the federal government is one less dollar that the regional taxpayer has to pay to build. We have a certain assumption, uh, in terms of how much federal funding that we could assume for our entire program. We did it at, at relatively low federal shares. And that might have been viewed as the cost of doing business to get those grants during the Trump administration. You know, we were ready to move out and get shovels in the ground on those projects, we are hoping for much larger federal shares outta the Biden administration.
Peter Keating: (
The second thing I wanna ask you about is the transportation infrastructure, finance and innovation act or TFIA, which provides low cost loans and guarantees and credit agreements and sound transit is actually the biggest single client that TFIA has, right?
Peter Rogoff: (
We are the largest TFIA borrower. So I came out here in early 2016 in late 2016, right at the end of the Obama administration, we signed what's called a master credit agreement. I'm frankly, a little bit more surprised that more agencies haven't gone and utilized tool. We're still the only transportation entity of any kind port authority highway department, or transit agency that has a master credit agreement, but it enabled us to, uh, negotiate the parameters of about 2 billion. Um, in loans spread over four separate loans over a period of time. Most recently, we were very pleased with the Biden administration that they agreed to refinance that entire package and give us another loan. You know, these TFIA opportunities in the end save our, borrow our taxpayers, hundreds of millions of dollars in credit costs over the life of the program.
Peter Keating: (
I know in California, it can take 10, 15 years to get a yes or a no on a new project, many times longer than it would've it would take to execute the project in the first place.
Peter Rogoff: (
I do think that there's a great challenge with this new infrastructure bill and the administration that is for, to really succeed. I think in the ways that president Biden and secretary budgie wanted to, they need to take a hard look, uh, at the internal processes of the department on how we can get this money put to work rapidly. And then the question comes like, are they going to turn around the guidance and rules for those program in three months or three years? And I've seen times when agencies return 'em around in three months and I've seen times when they've taken three years or more, uh, you know, there's a, there's a certain, an urgency. I think there should be in order to put this money to work and show that the industry is drawing down on all of the robust dollar figures, put into the infrastructure bill to find ways to help us access it and put shovels in the ground out here in
Peter Keating: (
What does this appointment of Mitch Andrew mean?
Peter Rogoff: (
I think he is a smart and charismatic guy. I, I think, you know, mayor Landro could perhaps be a convener of the senior executives of all those agencies to talk about the imperative of protecting the environment while ensuring things move forward at pace to put this money to work. I do believe that mayor Landro can, can play an important role in finding tools to either control or compel governors to make the more transformative, more fundamentally important investments that the Biden administration is focused on. It will be a hugely lost opportunity if we under invest in the maintenance of the existing system and expand in, you know, an existing highway network that just buys us more greenhouse gas, emissions, more sprawl, and a broader footprint that we would have to pay to maintain later.
Peter Keating: (