- Projections with respect to ridership levels, including dealing with losses associated with rider fare avoidance in major cities
- Credit implications for the sector
- Transit-Oriented Development: focus on Build America Bureau for future TOD TIFIA Loans
Transcription:
Adam Gordon (00:08):
Good morning ish, everybody. It's great to be here. This is the transit infrastructure update. My name is Adam Gordon, lawyer number one on the panel. I'm a Partner at Nixon Peabody in the New York City office. My practice concentrates on transportation infrastructure, economic development. I represent issuers, underwriters, and other project participants and financings across the country. And really excited for this panel today. We've got a great agenda. We're going to be first hearing from Libby and Steve on some of the challenges and priorities of their transportation systems. And then we're going to turn to talk about collaboration opportunities and partnerships with an emphasis on transit oriented development. And then we're going to take a step back and talk about how all these sectors interrelate. So again, this panel got fantastic participants. They don't need introductions, but we're going to just go around the horn and let everybody introduce themselves.
Libby McCarthy (01:17):
So good morning. I'm Libby McCarthy, Chief Financial Officer of the Port Authority of New York and New Jersey.
Stephen Brich (01:23):
Morning, Stephen Brich, Commissioner of Highways for the Virginia Department of Transportation.
Lori Small (01:28):
I'm Lori Small an Executive Director at Morgan Stanley
Dr. Morteza Farajian (01:33):
Morteza Farajian, Executive Director at Build America Bureau. And prior to that I was with Steven in Virginia as director of P three Office and Acting Deputy Secretary of Transportation.
Joseph Sullivan (01:43):
Hi, Joe Sullivan, a partner with Hawkins De Field and Wood.
Adam Gordon (01:48):
So to set the stage today, we're going to hear first from Libby, the port's current priorities and some of the challenges that it's facing in this environment. So Libby, would you give a comment?
Libby McCarthy (02:01):
Yeah, sure. I mean, I think just to frame everything, the Port Authority is a diverse network of infrastructure assets. We have bridges and tunnels, airports, marine ports, our path commuter rail system, as well as our real estate assets. All of those are put together, which is a credit strength of ours in a consolidated credit. And we also are sort of unique in the sense that we don't get state support and we get very little federal support. So COVID-19 had a really big impact on the Port Authority, which is something we're still working our way through and adapting to. So we had about a $3 billion loss in the first 24 months of COVID because every one of our business sectors was impacted. Since then, they've all recovered at different rates, all are back with the exception of the past system to above COVID-19 levels. But the past system continues like every other mass transit system to be recovering more slowly, more directly impacted by the continued hybrid work environment.
(03:24):
So Path is sitting at about 67% right now of pre COVID levels. So we had to, because of those impacts, we had a 37 billion capital plan. We were working our way through, it was adopted 2017, it was a 2017 to 26 plan. And what we had to do immediately following the impacts of COVID was stand back and say, okay, what are we going to do? How are we going to prioritize given the impacts on our cash flows, et cetera. We prioritized on finishing some major projects that were in construction, the completion of LaGuardia Airport, the total rebuild of that airport, the Restore the George program. We call it a large massive state of good repair program for that bridge and several other. And then what we tried to do is bring everything else that was in planning or pre-planning into a controlled stop place so that we could bring down our spending. And now what we're doing is we're ramping that spending back up. And so we're back this year with a $3.6 billion capital spending plan and we're evaluating the timing, et cetera, of all the other projects that were in that plant. So it was a big impact. It's a lot of the focus, but really where we're focused now is on continuing that investment we've had in our infrastructure, bringing it back up and moving forward from there.
Adam Gordon (05:12):
And Libby, the port has so much going on right now. You mentioned the 30 billion capital program. We've got the JFK redevelopment, we've got the bus terminal, and Manhattan, we've got the Gateway program as well. So with so much going on, how do you balance all these projects and priorities with available funding?
Libby McCarthy (05:34):
First, from the operating side, we have standards that we look at of what we want to be achieving in terms of delivering our services under those standards. So the operating budget is always set with a thought toward making sure we're focused on customer service best in class safety and security, and then the availability and ongoing operation of our facilities. On the capital side we go through in developing that capital plan that we did this 37 billion plan, we go through a screen and we monitor that on a regular basis. And the screen is first, look at all the projects that are in construction, ask ourselves should we continue them, complete them next, are there mandatory projects, things required by law. And then we look at safety and security investments and then state of good repair and we have a whole scoring mechanism. We apply to that. And then from there we go down to the system enhancing projects. But to your point, we have just massive investment going on right now at the airports. We're leveraging the private sector investment there and we've got a lot of fun projects we're moving forward. So it's always a lot of fun.
Adam Gordon (07:01):
Great. And Steve, give you the same question. If you could talk a little bit about the priorities and challenges that your system has faced,
Stephen Brich (07:10):
Just a little bit of context similar to what Libby started with. So Virginia from a highway perspective is the third largest state, DOT in the country. We have 57,000 miles of roadways, 21,000 structures, six tunnels, two of which are mountain tunnels. The other four are water tunnels. And we have two new board tunnels that are being under construction today. And then to add to it, and we have three ferry systems. A little bit of what happened during COVID was that we did see a reduction in revenue sources that were coming in. And we had been waiting for the long awaited infrastructure package through the White House, both of the Trump administration and the Biden administration.
(07:57):
But in 2022 or in 21, I'm sorry, in August, we worked with a special session of the general assembly recognizing that the revenue streams that we were experiencing were not going to be sufficient to meet our capital needs predominantly on the construction end. We are a maintenance first organization. And what we did out of that was that we reconfigured the entire Commonwealth Transportation Fund to be able to make sure that we had a sustainable funding source well into the 2030s to couple that just a few months later, we had the IIJA come out and what we experienced, at least in Virginia was about a 20% uplift in revenues from the federal government. What that meant was we've all experienced what happened in 2022, 2023 with the inflation and commodity adjustments and whatnot. We've chewed away at quite a bit of our buying power strictly on the IIJA monies.
(08:56):
But the revenue streams that we put forth out of the revenue package that the General Assembly put forward has been a game changer for us. We've gone from about a 10.1 billion construction program over a six year window to a 19.6 billion in about a seven year window. So we've doubled the size of program, 4,700 projects that are in our pipeline today, and we're due to expect to next year adding to that, I'll say that even with those numbers that I'm sharing with you, our needs continue to outpace our ability to be able to deliver what Virginia desires. So we continue to take a look at our P three model and our P three pipeline of projects and how we can advance those. And right now we have two in the pipeline. One is to take about a 10 mile section of facility that's reversible today along Interstate 95 just south of DC and be able to create something called we're calling bi-directional.
(10:07):
This could be a game changer in the region because as my governor keeps telling me that every time he wants to go to DC, the lanes are pointing in the wrong direction, can't you do something about it? So with that being said, we're looking hard at it. It's the unfortunate thing. Last year about this time I was looking at about a 750 million price tag, and at this point we're looking at about a 1.7 billion price tag just to be able to create that reliable service. So another project 495 Southern Extension. For those that don't know, we have a 90 mile express lane network in Northern Virginia that we're building. This would be a continuation to be able to help get it to the eastern side of the state on 495 from Springfield interchange, either right up against the Woodrow Wilson Bridge, which is co-owned between Maryland and Virginia, or with some negotiations with Maryland, see if we can't take it into Maryland for a logical termini.
(11:11):
So both of those projects valued at well over a billion dollars. But as you can see that we're still looking at how do we build out our network and how do we leverage all the sources that are out there. I should note that because of the actions that we took to be able to make sure that our funding streams were adequate and sustainable into the 2030s, we looked at our cashflow models at that time and we did remove about 600, $700 million of Garvey bonds out of it. We're starting to see because of inflation, because where we are, we're going to start slowly interjecting those bonds back into the program. And we do have our first bond sale coming up October 1st, which that might be in a good place to be with potentially the interest rates coming down today. So I'll save the rest of the commentary later, Adam. But that gives, I think an overview of where we are. Sustainability I think is the hallmark for what we've tried to do within our infrastructure and make sure that we've got a very balanced program between the maintenance program and our construction program, not only for the next couple of years, but well into the 2030s.
Adam Gordon (12:25):
Thanks, Steve. So Lori is our resident banker on the panel. Love to get your reaction to some of the thoughts that Livy and Steve have put forward and if those are consistent with trends that you're seeing and any other insight you have.
Lori Small (12:40):
Yeah, I think what strikes me the most is just trying to balance needs that are continuing to grow with funds that are perhaps growing but not as fast. So it's really about the efficient use of resources towards problems that you need to solve. And so there's a lot of ways that you can look at that. I think one thing that is important, and I think what we'll talk about a little bit more here is how the interconnectivity of a lot of different things can help with that. So it could be interconnectivity between governmental agencies in a city in a region, but also partnering with the federal government and the programs that exist there and just kind of a joke, but I mean thinking about what transit is, right? It's about connecting everybody. And so how do you take what are considered traditional transit systems and connect them to other modes of transportation such as airports, which is an area that I focus in at Morgan Stanley, but what we've seen there is a lot of effort on the part of the Build America Brio, but really a lot of other areas to try and increase the investment that we can make into airports and how those connect to transit systems around the country.
(13:53):
So a lot of the legislation that we were just talking about in terms of COVID era infusions of money into airports also just changes with the IIJA in terms of being able to have a little bit more applicability to airport projects is something that we're seeing. And I think it's still relatively new, but there are airports around the country that are really trying to take advantage of that. So I think we'll see that really try and help with connectivity around the country. And so I think that really is the next step that we're starting to see going beyond just the traditional ways of financing projects. And I think it's true really for any transportation entity that everyone's going to look at their pie chart of funds differently. There might be somebody who has a capital program, they're going to do it 99% with bond proceeds, and there's another that's going to use no bond proceeds. And so we have to really be flexible as an industry and how we think about it and not necessarily saying that this is the right way to do it because they've done it. You can't just examples and case studies are great, but they really don't necessarily need to be a blueprint for other people. There's really, really differing needs everywhere.
Adam Gordon (15:07):
Excellent. I think when you mentioned the interconnectivity of transit, it's a great segue into the next part of our agenda. We're going to talk a little bit about transit oriented development and love to turn it over to Marza to sort of give us his perspective on sort of the Bureau's priorities and TODs where we are from a year ago.
Dr. Morteza Farajian (15:28):
Sure. Thanks Adam. So in general, I think most of you are familiar with Build America Bureau, but maybe just starting with what Bureau does, I think it would help, many are familiar with the two legacy loan programs. We have TIFIA and RRIF. They have been around for a long time, although we have changed them, especially in the last 3, 4, 5 years to be more streamlined. And also we have got additional authority from Congress to diversify asset classes. So one of the things that, especially since I joined Build America Bureau about five and a half years ago, I have focused on it, is to make sure that we are not just working with a few borrowers and on a few asset types, Hy-Vee projects for example, in the past they represented the majority of the portfolio that Bureau had in the pipeline. That Bureau had to close new loans and a few states like Virginia, Texas, California were borrowing from majority of the program that we had.
(16:32):
However, I can tell you today with over a hundred billion dollars in lending capacity, the pipeline is as diverse as it can get. Not only in terms of geography that there are new states that are for the first time borrowing from us, but also in terms of asset classes that for example, now we have three airport projects in our underwriting process that hopefully we can close the first airport loan before end of this year or TOD as you mentioned, Adam, that's a new asset class that it's about two years that we are very focused on that pipeline. And today TOD represents, I think it's about 30%, 40% of overall pipeline. And if you combine it with other transit projects, it's more than two third of total pipeline. We have pipeline itself has grown from about $4 billion five years ago to over $40 billion today. So it's 10 times bigger.
(17:31):
Part of it is because of new asset classes. The other part is because of the new borrowers. And the reason that all of this has happened is because I think we have focused on educating a lot of the project sponsors on the benefits of the loans that we provide or in general financing. Many of project sponsors that initially I started a tour of going to different states and talking especially to the states that had never borrowed from Bureau in the past. In the conversations, many of them when I was talking to them, they would just look at, for example, the interest rates saying that either I don't want to borrow at all, I'm a conservative estate, I don't want to borrow, or I mean the savings if you just look at the interest rate is not that much for me. And then they would ignore all the other flexibilities that these loans provide, such as deferred payments upfront such as the ability to refinance at any time, all those flexibilities that help a lot to structure the loan and have the flexibility to refinance it, for example, when the rates go down and then save either way, I think many of them are understanding that this is important.
(18:35):
The other thing was that many of them who knew there are benefits, they would just tell me that, look, I don't have capacity within my organization. I have accountants, not financial or business mindsets. So we try to build a capacity through either direct technical assistance, there are a lot of workshops, so they fly to different cities, sit down with 'em. I take my underwriters, my experts with me. We spend two days with them to just look at various options and how they can get some of these projects done. But also we have grants, there was an announcement yesterday, I dunno who has seen that announcement. It's called Innovative Finance and Asset Concession Technical Assistance grants about $50 million that we are giving to 45 different applicants. Literally there is no strings attached to it. It's the money that they can use to do asset scanning to look at the existing assets that they have and figure out which one of them are underutilized.
(19:34):
For example, a parking lot right next to a transit station that they can monetize it. And what we are trying to do is not only to build capacity for them, give them money to hire advisors, hiring in-house staff to do it, but we are also trying to build a national inventory of those assets. So for private developers, it's easier to understand what exists out there that has the potential for development, have the basic information so they can put their business case together and go and talk to them. So trying to make those connections between various players, that's one of the things that BR is doing. And I think a combination of all of those steps that we have taken now has resulted in this 40 billion pipeline that's moving forward. And in new loans that we're closing, for example, Oklahoma, DOT, right before this panel, we were having a conversation, a state that had never borrowed from us in the past, it's not really keen to borrowing, has closed five loans to build shoulder lane in the rural roads that is going to prevent a lot of fatalities.
(20:34):
So instead of doing it over 13 years, they borrowed that rates around one, one and a half percent to save on construction cost escalation bundle them, build them in three or four years and then of course have all the savings. So those are examples that I can talk about when it comes to transit oriented development. We are seeing of course a huge movement still as early in the process. We have closed only one deal so far in Mount Vernon, but a really interesting deal that shows how various things can be combined under one project. It's, it's a parking garage that has a community center that is designed to allow cars to park in this structure and not on the street to free up space on the street for outdoor seating for bike lanes, make it more walkable, the whole downtown area economic development, but also the community center that they're putting in their EV charging infrastructure as well as a STEM center and a commercial kitchen all under one roof. And again, we are financing that for City of Mount Vern as one example that how cities are taking advantage of some of the products that they're providing.
Adam Gordon (21:44):
Steve Virginia has had a great track record with p threes and collaborations and just on the theme of just partnerships and what Morteza was saying, it'd be great to sort of hear some examples from your perspective of those successful collaborations.
Stephen Brich (21:59):
So I think translating that back into our P three program and how that relates back to the transit program and Lori I think said it very well. We're looking at it from an integrated system that's focused on all users. And so as I said, we have about 90 miles of express lanes in the Northern Virginia district and we're working on about another 45 miles down in our Hampton Roads area right now. But what we've been able to achieve, I think in Northern Virginia focused on all users has been creating reliable, reliable service for all users of the express lanes, single occupant vehicle, high occupancy vehicles, and more importantly some of our transit users. And we've been able to structure a number of our P three deals that had financial viability to make transit payments and dedicate those transit payments through the waterfall. And I'll give you some statistics.
(22:58):
So the first project was our 395 express lane project that goes from Springfield right up into the DC area. And through that particular project, we were able to secure an annual transit payment of $15 million a year and we're going to grow that over a period of time or grow that for the life of the concession at two point half percent annually. That in itself was a game changer. We started that in 2019. We then went and evolved that to inside the Beltway 66 inside the beltway. So this is another facility that was an HOV only facility during peak periods, but we felt that there was an opportunity to take the excess capacity, generate an opportunity to be able to still let those high occupancy vehicles use those lanes free of charge, but then charged for the SOV and create reliable service. And if there's revenue to be taken off of that, we would be looking at one paying for transit service along the corridor.
(24:08):
Last year we had about $10 million that we've been able to afford to that. This is one facility that has seen an impact because of COVID and the lack of federal employees going into Downtown DC on a regular basis. But part of this unique part of this waterfall that we've been able to create is also to be able to pay for debt service for our rail projects that we have in and around the corridor, which includes our long bridge project that is the gateway into dc that is a choke point that's at 98% capacity today, and we're going to double the size of that facility, get passenger rail service off of the CSX tracks. But we're looking at using, leveraging that deal not only for the transit service of about $10 million, but also debt service and potentially coming to you Morteza for see if we can't leverage some of that revenue stream for Atia loan outside the beltway, which is the hallmark I think to mort's his architecture of structuring this deal.
(25:17):
This is about a 23 mile section of roadway outside of the beltway. He has structured that deal in such a way that over the life of the concession, we will have a payment of about 1.5 billion dedicated to transit in and around or on that facility, including the park and ride lots and system enhancements that are there inclusive of a lump sum or an outer year payment of about $350 million. Looking at investments in enhancements along the corridor, and I'm happy to say the last deal that we've been able to work on during the COVID years was the 495 next project that is taking a very, probably the most expensive part of our beltway two and a half mile express lane network valued at $650 million. We were able to work with the concessionaire in the deal to be able to have a transit payment of about 1.1 million annually to that.
(26:19):
Now that might not sound like much, but when you did not have transit service along that corridor, and we're going to go from Tyson's Corner to Montgomery County in Maryland, we did start that service just last week, I'm being told. So even though the express lanes are not finished, we will now have transit service along certain routes that did not exist. And I'm looking to do the same thing both on the two projects that are in the pipeline. So I think this is what this does. One is it provides a reliable service for all users. Transit buses now can use it. I spoke about the bi-directional project. The issue that we've had there is that there's reliability in one direction, but the bus service can't provide service in the opposite direction due to congestion that would unlock this opportunity. So there's a lot of benefits that we've been able to discern and you think from a highway guy would not be this interested in transit, but this has a big role in moving people in services that did not exist before.
Adam Gordon (27:22):
Those are great examples. And Libby, it'd be great to hear about sort of how the port is thinking creatively about some of its projects. Certainly we know there's been a lot going on with what we talked about already, but love to hear your perspective.
Libby McCarthy (27:35):
Yeah, I mean the port authorities kind of leveraged its investments and private sector investments over the years and I guess what I would say is we look at each transaction as a unique transaction. We say we use a horses for courses approach, so we look at everything we're doing and make the decision of what's the best way to deliver it. The Gulf Hills Bridge replacement we did as an availability P three leveraging as well, TIFIA alone and private activity bonds to help cover the cost of the incremental capacity that allowed us to do that transaction sooner than we otherwise would. Terminal B at LaGuardia concession P three, we looked at that one and looked at the risk of operating, continuing to operate that airport while building in place and made the decision that that was best done with the private sector in that concession model. Whereas at the exact same time or very closely to that, we looked at the terminal aid redevelopment and said that being close to greenfield was better done on our balance sheet.
(28:53):
So these are just examples of how we come at each one of these and look at them. And then like Steve was talking about, when we're going in through a P three structure, we'll make sure we have key performance indicators and different participatory rents, et cetera, to make sure that we have the right balance of focus on what we're delivering. I think when we look at the success we had in the three projects I just talked about, we have the Gulf Hills Bridge has just been performing great for us in terms of the full replacement. I mean, how could it not given what was there before, but still on top of it. And then terminal B award-winning airport terminal, pre versai award terminal, a award-winning air terminal. So we're delivering and we're delivering what the customer expects and we're making sure these contracts are doing that.
(30:01):
We're also looking at the connectivity of the airports and making sure that's part of what we're looking at. The other thing we have coming up right now and we're looking to, it's in Marta's pipeline, and so we're hoping for a closing by year end is the bus terminal. We're going full force into the bus terminal replacement phase one we're doing on our balance sheet, which is a staging and storage facility that will serve as a temporary facility. When we then move to the next phase, which is taking the existing bus terminal down, that's a key part of the commuter system into New York that is due for replacement. So I think we always are looking for what's the best thing, what are the tools, how do they help us? We're looking to that TIFIA alone for those structuring benefits that Morteza talked about that will allow us to deliver phase one and put the payments out once that's completed. And we've moved into the next phase of the bus terminal replacement. So that's kind of how we look at it. We'll always be looking at what we can do to connect our projects and get the right mix of capital sources.
Adam Gordon (31:26):
That's great. We've talked a lot about structuring these deals, whether it's TOD or P three, certainly on the legal side, we always want to make sure that there's the authorization to do so. And something I've done is draft legislation. And Joe, this might be a great time to weigh in on some of the planning considerations that you've seen and advice.
Joseph Sullivan (31:47):
Sure. Thanks Adam. So I think a lot of what you're hearing is a lot of pipeline for TOD projects, a lot of planning considerations, careful planning considerations, and that's what's really critical. Which hasn't mentioned the ODOT project. We worked on that, and I think it's a good example of looking at a project and seeing, okay, how can we bring the TIFIA financing program to its best advantage for something new that we're doing? And so that effort starts with legislative effort. There's a legislative effort to authorize the debt obligation to authorize the projects. And in doing so, there was consideration about, okay, but let's anticipate this program. Let's make it work so that they work together. But it fit itself into an existing debt program, an existing system that ODOT had used, O-O-C-I-A conduit debt shore had used in other applications with publicly offered debt. And so what we were able to do is craft that, modify it so that it would be for TIFIA, but then be able to execute quickly on subsequent projects.
(32:59):
That's an example of the planning side and thinking about these things at the outset. But I think as you get more into TOD projects and alternative project delivery, I mean there's a good P three panel earlier, but I think looking at all different types of project delivery is important. Part of that is the financing decisions are going to drive the procurement decisions. The procurement decisions are going to set the ultimate risk allocation. Having upfront a concerted effort to think about risk allocation and how the governmental entity wants it to play out, how it's going to fit in with the financing, those are all really critical considerations.
Adam Gordon (33:43):
So we've talked a lot about even a theme of this conference is outside the box thinking innovations, creative approaches, and I'd love to hear from Morteza some examples he's seen of innovative thinking and lessons learned from that.
Dr. Morteza Farajian (33:58):
Thanks, Adam. That's a good question because that's what I love about my job, that we are troublemakers. It's difficult to make any change in federal government and bureaucracy, even at the state level. It was at a state level, but I think that's why Bureau was created. Bureau was created to promote outside the box thinking Bureau was created to focus on innovative ways to get things done. And that's exactly what we are doing. Although sometimes we get our hands a slap, but that's why I have the job and I have to push the boundaries. And I can give you a couple of examples of what we are trying to do. Historically, a lot of project sponsors have been used to getting a pie pizza and trying to slice it and then trying to figure out based on their priorities, how they should slice it. What we are trying to do at the bureau is we are focused on how we can increase the size of the pie, not just to slice it in a different way.
(34:55):
And what do I mean by that? Financing is a good example. Steve just mentioned that a project that a couple of years ago was $750 million is looking at $1.7 billion. Now look at states like Tennessee for example, with the needs that they had and how a program has become so much more expensive, or even in the case of OD, that if they wanted to build that project over 13 years, what would've happened based on the resources they had? If they are able to think outside the box and not just think the old fashioned way of I'm just going to program my money the way that it comes in to spend it at different projects. If they can think about bundling, if they can think about leveraging it at a much lower rate through financing, and they have the resources to do that, not only to identify those solutions, but also to execute those solutions, then of course with the same resources, they can get more done.
(35:47):
And that's the outcome that we all want to achieve to be more efficient, get things done faster and cheaper. In the case of OD, I think the study shows that they're saving 30% in terms of cost, and then of course they're getting everything done years earlier than what otherwise it would've happened. Just imagine how many lives they're going to save and what's the value of those lives. But going back again to how we are trying to do that, I feel that there are a lot of silos within the same organizations. Not only they don't have capacity in certain areas, but even if they have capacity in certain cases, we have figured out that there are silos. I would travel to a city and we are having a conversation or a workshop about projects that they have, and a month later, somebody comes to me and says that, oh, I'm in the housing department of the cd.
(36:34):
They had no clue that they were in the city having workshop, for example, with D-O-T-D-O-T was not talking to the housing department. Sometimes there are all the silos within the CD or within the state that they're not talking to each other. What we are trying to do is we are trying to bring them together. We are trying to connect the dots. We want to be the convener, of course we have our own carrots and let's just stick to the carrot, not mention the stick part, but we have our carrots that we can provide to bring people to the table. And that's what we are trying to do through those workshops and through encouraging people to think outside of just one project or one way of delivering that project, thinking about various delivery models, but also thinking about how you can bundle various projects. The case of Mount Vernon's great example that it's not just a parking garage.
(37:25):
The city had multiple needs and they're trying to build it all under one roof. The case that Steve talked about that how Virginia was able to not only build another lane as express lane, but also I think that that might be the only project that I'm aware of that for the next 50 years transit is funded in that corridor and they may have some surplus. And it's not just I 66, the rest of that network. So these are all examples that shows that how you can connect various elements together. Going back to TOD, if you're building a station, why can't you design it in a way that you can build on top of that or around that maybe the real estate development fee that you can charge on that? And I'm saying fee. Let's say if the transit agency already owns the land and that would just have a lease for the land or some sort of revenue sharing, maybe it can, it can pay for the construction cost of the station as well.
(38:24):
Maybe the transit agency can get a station for free if they partner with a private developer to be able to develop around at the station and use the savings or the profit to pay for the station. And there are multiple examples like that that we are talking to through project sponsors. I can give you example of a workshop that I really enjoyed attending. It was in Jacksonville, Florida, by the way. Just got the grant from us yesterday. One of the grants that we announced, it goes to this project in Jacksonville, Florida, that they want to reopen an old abandoned Amtrak station. We had to bring CSX, we had to bring Amtrak to the meeting. We had to of course have various parts of the city, some non-for-profits from DOT. We had to bring FHWA, the state DOT. We had FTA and FRA. Just imagine how many different players we were able to bring to the room for two days to talk about how they can reopen that station and then the entire neighborhood around that station.
(39:18):
That is all abandoned warehouses. The plan is to redevelop it, have it a thriving community that is going to be based on that new station that Amtrak is going to open service there. That's just one example. We can talk about Rhode Island and some of the projects they have. Office to residential conversion is huge. New York City, I've had multiple trips to talk to various players. There's so much office space available out there. Many of these buildings are about to go to bankruptcy. I mean, as we all know, office space is not needed, especially if it's not class A, class two, three, I mean people are not that interested in it. It can be converted to residential and we can help. And the interesting thing is that some of these buildings, I thought that for example, the case of Rhode Island, when I went there and multiple developers and multiple site visits, I thought that they're competing with each other, so I should schedule meetings separate from each other.
(40:13):
When I went there, I saw a completely different scenario that they were all telling me that, look, we love to close deal with you all at the same time. You're not competing with each other because there's no point for me to renovate my building when there are three or four other office buildings vacant in this community. The community is not going to be as good. I want my competitor, not competitors partners in this case to also renovate theirs because that way the whole community is going to be alive at nights. We can have restaurants, we can have bars, like everything changes. And we see more and more of that type of partnership happening. And then the transaction level with TOD, what we see the interaction between rating agencies, banks, some of you have heard this idea that I've been talking about short-term financing provided by a bank or any other financial institution.
(41:00):
And we be the takeout facility and real estate deals for various reasons. But bringing everyone together, making sure that rating agencies understand it, banks understand it, different players and project sponsors understand it. It has taken a long time, but it's finally coming together. A lot of webinars, some of you might be surprised at why Build America Bureau has so many webinars because of that educational piece that we are trying to go through. And again, bring various players and make sure that they understand each other and they talk to each other because the project is not going to happen unless all of them get on the same page. So that's what I'm enjoying the most about what we are doing this day is about being that convener and trying to push the boundaries.
Adam Gordon (41:39):
That's great. Morteza. I mean it's really, again, hits on the theme of this interconnectivity of transportation transit and you've got all these unlikely partnerships coming together, amazing collaborations, people just coming together. And maybe going back to Lori, it'd be great to kind of hear how this will continue to play out in the industry, not just for transportation, but also for the municipal market.
Lori Small (42:07):
Yeah, I mean I think that all of this is, we're at an infrastructure conference and I think all of this hits on all the aspects of infrastructure. It's not just specific to transit-oriented development or transportation even. It really is, goes across all the different sectors. And so when I think of what does the interconnectivity mean, there's kind of three ways that I think about it. One is just granularly, what are the first things that need to happen at all different levels in order for us to see the connection across these different systems. So there's a process that's happening right now to kind of get more framework around the ratings for transit oriented development projects. So that Build America Bureau can have ratings on some of these projects that maybe didn't have them before. Also, the loan programs through the federal government just generally have been getting a lot more clarity around them, which has been really helpful.
(42:56):
So there's sort of these real just working steps that need to happen. But I think also it's about efficiently using resources, which is we've hit on in a lot of different ways. But do you use a different project delivery method? Because internally at your transit organization, your transportation organization, you don't have enough people that can manage the project the right way themselves. Maybe you look at different delivery methods for that. Maybe you're going to use the bureau in order to get loans because you don't want to have to issue billions and billions of dollars of just revenue bond debt out there. And then also just advisors, bankers, people like me that can come in and kind of say, Hey, let me do some analysis for you. Send it back to you. You don't have to rely on this, but let us just help you with some information for you to then figure out who you need to talk to.
(43:43):
And then I think what that does is it brings it up to the biggest level of really delivering the projects that will help with this interconnectivity have economies of scale, everything that Morteza was just talking about with the different buildings working across in the same area, making sure that you're not using resources that you don't need to use. It's really all about efficiency. I mean in everything, in every other business aspect in the world right now, we're seeing everyone's talking about ai. It's really all about efficiency. So how can we bring that into our world in the right way?
Adam Gordon (44:16):
Thanks, Lori. This has been a great conversation. We've got some really great perspectives and I had like to thank everybody for their preparation for doing this. Please give everybody a round of applause and we've got time probably for one question or two, so I'll open it up. I think everybody's ready for lunch. Well, thanks everybody. It's been great.