- How are issuers doing business in the hybrid world?
- Navigating the red state, blue state environment: anti-gun laws, energy/fossil fuel boycotting: what does all this mean for the muni industry?
- What do issuers want to see happen when it comes to ESG?
Karen Ribble (
All right. I'm delighted to be moderating the issuer panel at year's Bond Buyer. My name is Karen Ribble. I'm a Senior Director with Fitch Ratings based in San Francisco. I will let each of the panelists introduce themselves and then we'll move to our Q&A format. we have a variety of topics to cover and we will welcome questions at the end.
Jyothi Pantulu (
Okay. Thank you Karen. I'm Jyothi Pantulu. I'm an Assistant Director at overseeing the debt function and the city of San Diego at sort of been in this area for 20 plus years in the issuer space and our function. We we oversee both public utilities debt so water sewer debt as well as our general fund back debt. So that's and of there are a few other like special districts and such but that's pretty much what we do at city of San Diego. Thank you.
Marla Bleavins (
Hi, good morning everyone. My name is Marla Bleavins. I'm the Deputy Executive Director and Chief Financial Officer at the Port of Los Angeles. I've been there since January of 2015. And in addition to overseeing all of the finance functions I'm over all of the administrative functions as well including human resources in procurement.
Derek Hansel (
Good morning Derek Hansel, Chief Financial Officer for the Metropolitan Transportation Commission and Bay Area Toll Authority. Next week it'll be six months. It only feels like 30 spent first 20 years of my career doing investment banking and financial advisory work and have now been working directly with public agencies for last 13 years. So very challenging. we always want folks to to come over to the bright side so join us.
Nikolai J. Sklaroff (
Good morning Nikolai Sklaroff, Capital Finance Director of the San Francisco Public Utilities Commission. I started in this business many years ago with a small financial advisory firm where we recruited a a young rock star. who's now leading the MTCs finance team and spent most of my career as an investment banker.
Karen Ribble (
Great. So I thought we'd start with the basics. what was your experience with COVID and remote work and returning to office and hybrid work plans and all those things we've been working on the last couple years Jyoti start with you.
Jyothi Pantulu (
Thank you Karen. So in March 2020 the city of San Diego we were working actually on three simultaneous transactions two lease revenue journal fund backed transactions as well as a water revenue bond was scheduled to be priced on a competitive sale basis. Of course COVID happened. And we had to quickly pivot you know by city standards in a month we were able to re-situate ourselves and get a banking team on board and were able to actually quite quickly you know with maybe about a month's delay from our original schedule we're able to complete all the three transactions. so that so basically bottom line you know it was business as usual. you know maybe it took us a day to resate in our homes and we were all working a hundred percent remote since then the city has really given a lot of flexibility more at a department level to decide you know whether you do hybrid or remote or in person depending on the needs of each department. So most of the support functions like finance and my debt function about six months back we sort of started transitioning to hybrid work schedule. So a couple of things about hybrid that's really worked for us is and I was discussing this with some of the panel members that it worked because we are a small group but to really have a little more structure to the hybrid. It's not anyone comes in anytime but really the entire team is there Mondays and Tuesdays it also coincides with when our legislative body meets. So it seems like the most productive way to be in the office and you know to be able to interact with the rest of the team and other three days continue to be remote. So that seems to have given us a good balance. And definitely one of the positives of being partially in the office is onboarding new employees. you know even the youngsters have come and told that you know it's nothing like walking into someone's office to get some questions answered. So yes you know definitely it's not perfect but this hybrid schedule has been working for us.
Nikolai J. Sklaroff (
So this is my fourth month on the job. so I have to say right upfront that everything I say is my own opinion not necessarily opinions of my employer. I have to say that I'm a little freaked out. was one of the people who showed up with one of these in the office were all wearing mask common spaces. we have had a difficult summer with many of our floors in various stages of breakout status. We have our employees coming in two days a week but sorry this week three days a week. And fortunately we have a very enlightened leadership that understand that it's also a recruitment issue in the city that we're competing with a lot of tech employers and like and so there's a commitment to to maintaining a hybrid environment and based on understandings with labor we know it it won't increase any time soon. So I am very impressed with my team and how productive they are whether they're in the office or working remotely. Obviously we wanna have time together in the office. So we coordinate that I think one of the things that COVID has done for us though is provided us with great tools. And I have to say know all of our banker friends here in the room think that if they could just meet us over coffee we'd fall in love hire you. But frankly anyone who a appreciates how we're we're working may find that the most productive meetings are the ones where we can have multiple screens up. We can see all of you including the credit analysts who's hiding behind the underwriter at the end of the table. We can have not only that up on the screen we can have your deck up on the screen but most importantly I could be taking notes if you're trying to present us complex ideas. So I would say that in many ways our most productive meetings for really substantive ideas are those that are coming over zoom. And so that's been a great tool but it also has meant as a practical matter that if I'm not escorting you from security up to another floor where there's a conference room and then taking you back to security at the end I can fit in a whole bunch more meetings with underwriters. And I know not all of my colleagues in issuer world love underwriter meetings but as someone who used to be an underwriter I do appreciate the substantive good meetings that we've have with some people. But these COVID tools have really helped facilitate those.
Derek Hansel (
Yeah would kind of echo what both with ly and Jody said in the sense that the pivot to remote worked really well and it went way faster and to a degree more seamlessly than I think any of us could have expected in say January of 2020. I think the pivot back from full remote is going to be much much harder. And I think there are real really things we missed. A lot of what was talked about yesterday was the culture that's missed in a full remote environment. I miss serendipity I miss just running across people who I don't even typically work with and sharing ideas and learning oh boy I ought to have known that. And that's something that never happens in zoom land. So that's something that hope we can see more of as we move back. The other thing is I think full remote technology zoom technology works very well in a full remote environment. I can tell you at our agency we are not ready for a true hybrid environment where some folks are in the office. Some folks are out of the office and on zoom or teams or whatever to date. I think that experience frankly is relatively lousy particularly for those folks who are are remote at that point. so I think that's just something we're gonna have to work through.
karen Rebel (
Marla.
Marla Bleavins (
Sure, For us in the city of Los Angeles telecommuting had not been a part of city work culture at all. I think you needed a proclamation from a judge and maybe the queen of England in order to be able to do it in the past. But I was pleasantly surprised at how well we pivoted to it. I mean we literally sent people home over the course of one or two days and thank God for VPN and zoom and PDF and scanning those are really been super aids of all this entire process in this whole evolution. I think that going forward you know we've got a wide array of job classifications at the Harvard department ranging from plumbers to real estate professionals. And there were some employees who were able to work from home quite seamlessly. You know financial statements got out budgets got done board reports were written and there were some people who had no choice but to work on site. And so I think going forward I you know we are gonna bring people back on a hybrid basis in mid-October. We made that announcement late last week. we're starting out gradually cuz we know it's gonna be an adjustment for people coming back who've been working from home for the last two and a half years. We're starting out with one day a week and then going up to two days a week you know like in San Diego city departments have been given the leeway to stagger work schedules full remote versus hybrid as they see fit. But I think for us we're going to slowly evolve back into it but there are equity considerations for employees that aren't able to do their jobs from home. You know some of them have been vocal about well it's not fair that I have to work on site all the time. And so and so gets to work from the comfort of their homes. I think there was a little bit of suspicion about well are people who are working from home really working from home but I mean people have deliverables to produce. And I know that my boss was concerned about sending people home but I said look if people were working hard and the the building they're gonna be working hard at home. If they weren't working hard in the building they're not gonna be working hard at home. It it's about the person and the work ethic. It's not about the location and that's really proven to bear out. so yeah it's the future of work it's it's still evolving and we'll just have to see where it goes but so far so good. Yeah.
Karen Ribble (
Great. Thank you. Does anybody wanna comment on any other anyone else's? No. Okay, so aside from remote work and hybrid work what are the biggest challenges you and your agency are facing right now? And we'll start with Marla.
Marla Bleavins (
Well he might have seen in the news that we've had some challenges at the port of Los Angeles the last couple of years you know with the pandemic people weren't spending money on going out and on vacations they were spending money on goods buying things on Amazon clicking away and all of that had an impact on the supply chain. And we saw that I mean quite frankly some of the things that we're seeing with the supply chain aren't new they were just exas as exacerbated excuse me by the increase in demand for goods. I mean we've had issues with a shortage of chassis truck drivers and so forth and so on. It just became more pronounced during during the last two years. you all saw the ships at anchor the last during the last year the peak was during the fall. We had as many as a hundred ships at anchor. it was like a parking lot on the water. It was just crazy to see things have gotten better. We get daily reports on the number of ships that are out there. And we the number of ships that are at birth actually are are quite normal compared to what what they have in the last couple of years there are still concerns out there. The port of Los Angeles is a is a landlord port. So we basically develop the infrastructure and lease it to tenants and they're in charge of the operations. But however we do try to convene stakeholders in order to get things more fluid to get things more moving. We try to provide incentives where we can we have truck turn time incentives. we also provide sticks where we can as well. One of the problems that was contributing to supply chain inefficiencies was the fact that boxes were being left on on the terminals. So last October we along with the port of long beach instituted a penalty basically for boxes that were on the terminals for more than nine days. And the goal was not to make money from it. We wanted to change behavior and we think it did have an impact because that we haven't had to actually charge the fee because we've seen progress and the amount of dwell times for boxes on the terminals. So those that's a big challenge that we're facing and also just going forward. the port of Los Angeles has had for quite some years and also going forward a very ambitious environmental mandate. So the mayors of both ports have signed an agreement to have the ports be zero emissions by the year 2035. So that means the trucks as well as the cargo handling equipment at the ports would have to be zero emissions by that year. And we have instituted a fee a per box fee in order to help subsidize that but there still remain challenges with respect to the availability and the cost effectiveness of the technology to make that happen.
Karen Ribble (
Thank you. Derek.
Derek Hansel (
Yeah I'll talk about it actually from a couple perspectives as I said I'm gonna be six months in next week prior to that with CFO at Caltrain. And what think a lot of folks don't know is the absolute panic that some of us had when the pandemic hit Caltrain was dependent on fairbox for 70% of our operating revenue. And we lost 93% of rider within two weeks. that gives a CFO nightmares. You know I mean it's just bad and with no real projection for how you get out of it other than prayer and hoping somebody comes to your rescue cuz you know it's not gonna be writers. So that's a was super challenging and without help from the federal government frankly huge existential crisis for us at the bay area to authority traffic got crushed we are still not back. So that's a real issue you know San Francisco and the bay area as a whole was one of the first to really Institute real shelter in place orders. And as I said we're still not back you know Oakland bay bridge still not back to full capacity the Southern crossings the San Mateo bridge the Dunbarton bridge worse frankly because of the importance of the tech industry down in the south bay. And so that's just a real issue and you know what happens with return to office we know we're not going back as an area to the same kind of in-office profile that we had pre pandemic. So what does that do to bridge traffic? And what does that mean for how we've got to to manage through those things? you know we were just hearing about the macroeconomic issues. What kind of hit does recession pose for us. And then you know it's not as if we don't still have to maintain the bridges you know we spend 200 plus million dollars a year keeping the bridges in good shape and that's our the core mission we've got is to keep those things operating well keep 'em in good shape. it's not cheap.
Karen Ribble (
Great thank you. Jyoti.
Jyothi Pantulu (
Thanks Karen. Yeah it city of San Diego is facing the same macroeconomic issues as everyone else inflation supply chain issues hiring problems and all of that. So but in that environment really one of the biggest challenges for us is meeting all our capital improvement project needs both from a funding financing solution as well as an execution of the projects timely execution and within cost. So that's really the big area of challenge on our end on the public utilities side we have one big mega project our pure water project which is recycling water to make it portable water. But in addition to that one and a half billion dollar project there's the routine replacement of pipelines upkeep of pump stations to really layer the ongoing C I P with these mega projects to meet the mandates is really a challenge balancing with rate affordability and such. So that's on the public utility side and even on our general fund back debt it's it's a similar scenario. We have our ongoing maintenance of storm drains and facilities and street replacement. It's a never ending list. but on top of that we have some of the similar goals in terms of climate action plan. So we have to now upgrade our fleet to electric vehicles the accompanying infrastructure. So it's really that challenge of existing ongoing C I P with new mandates and not necessarily new revenue sources. And finally this is a little bit unique to San Diego the state law I think it was SB 1383 with the organics processing and collection. Our charter restricts us from charging a fee for refused collection. So again to meet these additional requirements with the existing revenue is really a challenge for us. So thank you.
Nikolai J. Sklaroff (
So as the sole utility representative on the panel I'd be remiss not to mention the drought and I know there's a another session later about water. So I won't go into that long but enough to say that particularly for utility like us that not only delivers water to 2.7 million people but we're also generating hydropower and obviously operating sewer facilities. The drought is a major issue. And I think of relevance to this audience one of the things that we're doing even an agency like ours that has a very robust water supply great supply up in the Sarah mountains at cheche. we are looking at alternative water sources and alternative water supply. And I think some of the people in this room who are already looking ahead are appreciating that delivering that water is gonna require different ways of of delivering and financing a water in the future. So we're looking at more joint types of facilities. some of them we will be the lead on some we may be part of a larger group. Some may involve other parties who don't have the market access we have as well. So that's gonna be going to our commission next summer. Some of you who have had insights on this have already provided innovative ideas. I think that's one thing but for me the real crux is how much we have on our plate. From a debt perspective. We have a 10 year capital plan. We are have new money needs. And every year of that in some years including this we are projected to issue new money and all of our enterprises we are managing a very robust complex short term program for all three of our utilities. We also have tendered notes that we need to remarket. And lastly we're monitoring very carefully. What's going on in Washington DC looking forward to hearing from Emily Brock our GFOA Federal liaison tomorrow. but one of the things we are particularly focused on is Babs. it's a big hit for us if anything disrupts Babs it's about a 25 and a half million dollar hit across our water waste water revenue bonds as well as COP's that we issued in the form of Babs for our new headquarters in San Francisco. So a lot on our plate for this year.
Karen Ribble (
Great. Thank you. All right. We're shifting gears a little. We heard a lot about ESG yesterday. So let's talk a bit about what your agencies are doing in that area. Are you issuing green bonds? Why or why not? do you have policies to mitigate greenhouse gas emissions or to mitigate climate risk? And we'll start with Jyoti.
Jyothi Pantulu (
Oh thank you Karen. Yeah the as I just alluded to in the previous response the city has a climate action plan. We originally adopted a climate action plan in 2015 and it was cap 2.0 that we adopted earlier this year legislative body. So the mayor is a huge Propent of it. I think for those of you who were here yesterday morning I know Jay our CEO spoke about it a little bit. So again similar to some of the other agencies zero emissions goal by 2035 so fairly you know challenging challenging goals. So from a finance perspective of course you know our finding all the solutions for that as our charge in other ESG related or governance and related items. Of course again Jay spoke a little bit about this yesterday but all the homelessness solutions to the homelessness problems. So that's one aspect where we are also focusing on as well as the cybersecurity area. So currently you know our my goal and from the finance and disclosure perspective is really to focus and strengthen the disclosures in our documents. So far the city has not issued green label bonds. that's something we continue to evaluate generally our bonds both on the utility side as well as general fund side are tend to finance a variety of projects sort of a basket of CIP so definitely sort of determining green nature of it as well as the ongoing reporting is really one of the considerations as to why we haven't yet done green bonds. but definitely continue to evaluate that space. Great.
Karen Ribble (
Great Thank you, Nicklias.
Nikolai J. Sklaroff (
So if I might I've I've we've had a lot of conversation about ESG already and I've bit in my tongue till now and like to share some thoughts as a member of the GFOA debt committee ESG has been a real focus hope you'll all take a look at the new publications that came out from the GFOA a on this. And I think we need to reframe how we discuss ESG. We tend to to mention as we've done here and in other panels ESG and green bonds in the same sentence. And I think it's also part of what's caused some of conflict around the country. I think they are very separate conversations. was attracted to the se S F P C because of the innovation and great work they've done in green bonds. Addressing climate change is fundamental to our mission. look where do where do you build wastewater treatment plans? They're near water. Our water all happens to be at sea level. So it's fundamental to what we do and is has been a big part of our deck program but whether you decide to proactively address climate change and you know some people we're a big blue state but we have a very diverse population. You may choose not to address climate change but whether you do or don't you still have to disclose ESG factors in your disclosure. And I think we're hearing that message loud and clear from the office of municipal securities. We are discussing that a lot at G O a debt committee. So separating these conversations now again we've been very innovative. I take no credit for that. I I've joined after all this great work has been done but first to use climate bonds initiative certification on bonds first to list on the London stock exchange Audi from LSE is gonna be speaking later in the conference. And we are still the only issuer who's done that but one of the things that we've identified is that certain international buyers look at that as a prerequisite of for purchasing bonds. And where is the demand for green bonds? It really started internationally in the taxable markets. And so we're very focused on that but we're also not focused on innovation for innovation's sake. I think right now we are really focused on institutionalizing best practices really focusing on now making sure that we're eeking out all of the advantage to issuing green bonds that we can. So we're very excited about this arena.
Karen Ribble (
Great Marla
Marla Bleavins (
So the port of Los Angeles has issued green bonds twice. we were the first port in the nation to do so. I won't pretend that I did it for the pricing differential cause I wasn't anticipating one at all and we're highly rated credit but for us because we have such a strong environmental mandate and sustainability focus I just saw it as an extension of that. We also chose to use a third party certification just to further bolster it. And also quite frankly to keep us honest when we came forward with a list of or you know we're set here is 120 million in green bond projects. And they were like eh it's more like 30. So it's like okay we we'll take what we can get you know but so yeah and it's been but for us it's been fine for us and I think we'll continue to do that in the future just see how the space continues to grow in terms of ESG. Like I said before we've got the clean air action plan. That's a joint effort with the port of long beach to reduce emissions in the area. Unfortunately you know running the nation's busiest port comes with a lot of negative externalities that impacts the surrounding community in a not so great way. And we've made a lot of progress in reducing emissions and we still have a ways to go. So from my point of view we are ESG. We've been doing this for years. We haven't necessarily wrapped ourselves in an ESG blanket. We're not wearing t-shirts that say ESG but you know we do have environmental disclosure in our offering documents now whether that needs to be ratcheted up. I you know the last time we issued was in 2019 we probably won't be issuing for another couple of years. It'll be interesting to see if that disclosure grows or if the character of it changes to what extent if it becomes more sophisticated or dynamic as opposed to reporting on things is it making projections? Is it incorporating scenarios? I don't know. I guess I'll wait for you all and you all being market participants to to tell me that but for us right now we feel like there's a lot of information about our environmental record and our practices that's out there it's in different places you know you can go to a website and see our emissions data and practically real time you know we've got environmental and sustainability reports and you know we have public meetings every two weeks. So there's a lot of information that's out there. Is it neatly pulled together and the dots connected perhaps not I don't know if that's gonna be a requirement but like I said this ESG in a lot of ways isn't new but the terminology around it is. And so just trying to get my arms around that has been kind of challenging.
Karen Ribble (
Great. alright, Nicklais I alluded to this next question a bit ago. how are you navigating the red state blue state environment? Anti-gun laws energy fossil fuel boycotting. And what does this all mean for the muni industry and Nicklias do you wanna start on that one?
Nikolai J. Sklaroff (
So every instinct tells me not to answer this question and I've I agreed to this panel before I read that this question was gonna be addressed to us but like a moth to a flame. Here we go, hopefully I make it to month five after this response. so when I saw this question I was initially excited. I thought wow how cool is this gonna be get to speak to a safe California audience as representing one of the largest issuers of green bonds in the nation and get to poke fun at state treasurers who have been banning some of the largest buyers of municipal bulk bonds from buying their bonds and can't bring themselves to acknowledge what we here in California have acknowledged which is that burning fossil fuels is producing climate change. I thought that probably wasn't a prudent thing to do so won't do that then I thought well how fun would it be to get up here and talk about if they're gonna do that? Maybe what we should do is change our underwriting requirements and as prerequisites you have to be registered for the with the MSRP as a a municipal dealer and you have to have been banned in at least Texas and West Virginia. But I thought that probably wasn't safe either. So then I thought well maybe the safe thing to do would be to just shut up about this and if they wanna ban the biggest buyers in the country BlackRock if you're in the audience give us a call JP Morgan we have lots of green bonds to deliver but like I say like a moth to the flame. I rejected that answer too. And let me say once again that the opinions expressed here are not necessarily those of my employer and probably are not. Listen I've been in this business of a very long time but the most important lessons I learned were back in college economics 1 0 1 supply and demand. How many of you actually listened into the Brookings Institute municipal finance conference? Not many. So there was a professor for my Alma mater an assistant professor who studied this issue and determined that in eight months of issuance Texas costs their citizens 300 to $500 million in extra interest by banning some of the largest investors in our market and again maybe that's great news for all of us here in California but I'm also very mindful that I happen to work in a state in a city which is no stranger to bans as a employee of the city and county of San Francisco. I can't travel on city business or do business in 28 states. And so as we think about this tit for tat I think the important lesson and the message I'd like to deliver is yeah agree with all those policies but is this where we need to go as an industry? I think we need to educate our elected officials and leadership that the capital markets are not kind to those who don't know the rules by which they play. And most often bands in the capital markets end up injuring the person weaponizing them.
Karen Ribble (
Thank you Derek did you have any comments?
Derek Hansel (
Well I certainly won't be that dynamic you know for Nicklais alluded to the Babs issue earlier and for us so for us it's far less a red state blue state issue and just continued the very fine line at Congress which frankly leads to a lot of dysfunction. Sometimes that's good cuz they don't do things they shouldn't. And a lot of times it's pretty bad. The Babs issue which continues to to kick around a big one. I'll take 27 million a year. Ours is 75. Wow. Over the next four years. Again something that would cause me to lose a lot of sleep other than people keep telling me Derek it's gonna be okay it's gonna get resolved. We promise I'm really not looking at Emily. The other thing our role is the metropolitan planning organization for the for the bay area and working with 27 separate transit agencies all of whom are heavily dependent on federal money and lots of other folks who are dependent on federal money just the continued uncertainty you know having to deal with that having to to understand what levers can be pulled when what might be given what might be taken away. Those just are those are huge challenges and stuff to a certain degree for which you really can't plan effectively. So as I said it's it's far less a a blue state red state and just uncertainty you know caused caused at the federal level.
Karen Ribble (
Thank you.
Marla Bleavins (
I'll just add I wasn't planning on responding to this but you know I think it just shows that the public policy process is broken in a lot of places due to hyper politicization. And it's unfortunate. I mean look at the way that the country responded so differently to the COVID crisis it's a public health crisis and we're we're trying to save lives. And the way that you responded to it was highly correlated with how you identified politically. What is that? I don't think that it bodes well for the future of this country when politics just takes over good policy making.
Karen Ribble (
Right. Thank you, alright going to something a little easier less politically charged. what are your agencies near to medium term debt plans? And is there anything the market could provide to help facilitate your plans since you have an audience here of people who might be able to provide things and are there any changes due to the rising interest rate environment or is that just sort of par for the course?
Jyothi Pantulu (
Thanks Karen. Yes. Alluded to we have a pretty heavy capital program coming up in the next three to five years both on our utility side as well as our general fund back debt. I think in each case we are looking at about 500 to 700 million in financing needs in the next three to five years in terms of how we are handling. I think this was came up in a panel yesterday. Our goal has always been sort of just in time financing. so the rising in interest rate environment doesn't necessarily change how we are financing or it's more trying to focus on getting money for the projects. really the concern more is about increasing cost of capital or cost of actually the project cost itself going up. So that's really more of the concern. We do have a variety of dead instruments. We've used we have two commercial paper programs one for our water utility as well as one for general fund. Of course short term rates have have increased tremendously in the past few months but with a fairly large CB program for water it still makes sense to borrow just what we need with the CB program and do take out bonds, in addition to that we've always sort of looked out for other low cost loans. The WIFIAloan we've had two or three big WIFIA loans one for our Waterside as well as one on the storm water side we were really successful and sort of getting a storm water WIFIA with the least structure which was somewhat unique with WIFIA you so that we were successful doing that. And of course datas Aref loans. there you know there low cost it comes with a lot of strings attached but it's still very cheap money. So we we sort of try to with all our competing needs bond financing you know we that's always there but also trying to get every dollar from everywhere we can for some of our environmental department projects we are looking at iBank loans. So so basically just trying to tap money from different sources and trying to get the lowest cost of financing.
Karen Ribble (
Great Thanks Nicklias.
Nikolai J. Sklaroff (
So I alluded to this a little earlier. we our department of the city county of San Francisco but we have operations across seven counties have a very robust capital program. Our city charter requires us to prepare a 10 year capital finance plan every February. And right now we are in the process of refining our specific plans for this current year. As I mentioned all three enterprises are scheduled to issue new money bonds as a practical matter in this environment we are taking a careful look at at the spends for each of those programs. And we're not financing projects based on individual projects. We are financing programs of projects throughout that territory and so in many ways we're like a a big battleship we can't pick and choose when we need financing of obviously we we try to do it in a smart way but we have new money needs as I say in every every 10 years. But what we do is manage very carefully between our short term program and our long term program. And especially we are very active in obtaining lower cost financing through WIFIA and SRF. We're in the process right now of negotiating our third WIFIA borrowing for our program. And so it's really about orchestrating all of these together for a massive capital program.
Karen Ribble (
Great. Marla you mentioned your debt plan earlier. Do you want to add anything?
Marla Bleavins (
So we borrow when when needed and we don't have any plans in the foreseeable future to do a new money issuance. We'll do refundings that's appropriate. The whole COVID pandemic has been surprisingly a bit of a financial Bo for us when it first started we were projecting decreases in volume and so we did some belt tightening but as you've all seen it had quite the opposite effect. We get paid by the box we incentivize cargo or volumes in our leases. So it's been quite a boom for us. So liquidity position strong. So we don't we're just a boring issuer so.
Karen Ribble (
Thank you. Derek.
Derek Hansel (
Yeah we we just did a deal last fall so we have no immediate near term needs for new money though. That can always as I mentioned earlier we've got large rehab needs. So depending on what happens to traffic or what we choose to do with the tolls that could certainly change. We do have like others a pretty large and diverse floating rate program. We've got about 2.7 billion floating rate debt in one form or another. So we've got regular roles of that. And you know you asked what what can the market yeah. Help with? that's always something that we're looking for innovative ideas on. The other thing that we're seeing a lot from the market and I think that's really particularly over last few months now is there are some pretty interesting market anomalies that are coming up I've adopted Jerome Powell's word and I'm calling some of these transitory because I so hate the use of it in the other context. but certainly bringing some of those ideas that we may be able to integrate with our other financing plans certainly makes sense for us to consider they're too small quite honestly to consider on their own generally but if we can tack 'em on if they're still available at the time that we're doing some of this other work it may make sense.
Karen Ribble (
Great, well we're getting close to running out of time so I wanted to make sure to have an opportunity to open up questions to the audience. And if you have a question please raise your hand. Someone will find you the he's coming.
Audience Member 1 (
Thank you. You mentioned that I think you guys discussed the cost of financing and how that would impact your capital plans. What about the cost of construction? How has that impacted projected price for projects and whether or not that would actually impact your C I P going forward?
Marla Bleavins (
Yeah, your question is very timely. We do have a pretty good size capital program and we have just seen construction costs go through the roof. And honestly we've been seeing that for a while. And here in Southern California other major agencies have huge capital programs going on and we're competing for resources LAX 14 billion capital program LA Metro and then there's us and as well as other agencies as well. So we've had to really budget more for escalation. Whereas before we might have done a modest three 4% we're looking at double digit estimates in terms of increases in construction costs.
Derek Hansel (
Yeah. And I would just add for you know particularly in you may find some of these things too on the bridge maintenance side a lot of what we buy is pretty specialized bridge paint. There are like two or three people nationwide who make it and it is subject to cost increases associated with fuel and other supply chain and issues. So yeah we're we're facing very similar kinds of challenges particularly on the rehab side.
Karen Ribble (
Anyone else? Any other questions? All right I just have one more question. I thought I'd give you all an opportunity to let market participants know or what do you want market participants to know about working with your agency? You know how is it best to contribute to your projects to your needs? Jyoti we'll just go down the line this time.
Jyothi Pantulu (
No, I don't think anything too different from status quo. I think it's working for us. We are always looking for a variety of financing sources and you know zoom has definitely facilitated people knocking on our doors so definitely appreciate all the ideas that come our way. ah.
Karen Ribble (
Yeah. Anything to add?
Marla Bleavins (
Again zoom please. No in person meetings. No I'm just kidding coming out come by. We'd love to see you. while we don't issue as frequently as other issuers we still have a lot of things going on. and we're open to different you know financing structures and things to deal with challenges going forward. Things are evolving and then we've just we're just gotta roll with it.
Derek Hansel (
Yeah would say I mean we do appreciate new ideas and again taking advantage of these opportunities. I would also say that probably not dissimilar from many of the large agencies I've worked with over the past several years now. We try to be nimble, nimble is relative we are a very large ship and we don't move that. We don't change direction that quickly. and particularly given you know the nature of our governing boards which are dealing with a whole raft of issues where on a list of 10 some capital markets activities might land 30. So you know a as treasury professionals debt professionals we've gotta kind of figure out where we can slot in to to everything else that they're considering to make it the most effective. So that's just you know one thing think is maybe valuable for folks here to understand
Karen Ribble (
Nicklias.
Nikolai J. Sklaroff (
So as I look at on the audience see a lot of familiar faces competitors former colleagues investment bankers municipal advisors and a a couple of piece of advice. First of all having spent most of my career on the other side of the table I wish now that I had done this before becoming investment banker I think I would've approached my work very differently. And I would recommend for all of you to to spend a year or two on this side of the table it will give you a very different perspective on on what you're presenting. We had very massive refundings and this all before I joined massive refundings that had been authorized by our commission and that were underway a relatively small one got done for our wastewater enterprise but a lot of refundings were left on the table as so to speak prior to the run up of interest rates. And so as you can imagine we're we're seeing a lot of refunding ideas and props to all of you for all the very creative ideas tenders borrowing our savings and doing long forward refundings and we appreciate those. I can tell you that if you are if you've sent us a refunding to show us that a certain refunding doesn't work you probably don't need to send it to us again the following month of interest rates have gone up and I would really highlight that for a program that has as much new money as we have. I think we've all become dare. I say it as a former banker a little a little lazy in the fact that it is so easy to show refunding ideas but what really moves the needle is understanding our new money needs. And what that means is really understanding not just what interest rates are and how that's gonna affect our at our debt service but understanding the strategy of putting together all of these different pieces our commercial paper our low cost financing from WIFIA. Do we those WIFIA rates are are incredible but do we preserve those so that we could renegotiate the rate one more time? You know all of those sorts of things are sorts of things we're looking at. And then finally one of the important things that we're looking at are debt metrics and really trying to get a handle on when is too much debt too much debt. We have a supportive rate payer base. we've got a massive program but we're really focused on and we'll be reaching out to market participants to better understand what are those thresholds. So for us part of what's different about my position than my predecessor is that it's we're really trying to focus a lot on the strategy of some of these new tools that are in place and some of these new types of financing that may be coming because of the need for alternate water supply.
Karen Ribble (
Thank you very much. I think we are out of time so join me in thanking the panelist. Thank you.