- A shifting competitive landscape for the sell side as the industry sees growth opportunities following the Citi/UBS exit
- The explosive growth of SMAs, ETFs and what it means for selling to the buy side
- Expectations for bond volume growth and new financing vehicles for issuers
- What are the expectations for tax policy in 2025 as the Tax Cuts & Jobs Act provisions are set to expire
Transcription:
Chas Cardall (00:10):
So we are going to get started with our first big panel of the day, State of the Union, Trends in Public Finance, Market Developments and so forth. So I'm Chas, I'm moderating this. If all of you don't mind introduce yourselves briefly to the crowd, make sure your microphone's working and then we'll get started.
Ronda Chu (00:38):
Hello. Good afternoon. Can you hear me? I think it's fine there.
Rob Dailey (00:45):
It's that worked.
Ronda Chu (00:48):
I'm Ronda Chu, Managing Director of Finance at the airport, San Francisco International Airport. The airport itself about 18 years, 25 plus years and just aviation in general. Before the airport I was a consultant but really enjoying my time. SFO, there's so much going on and it's an exciting place. I'm excited to talk about the bouncy walkway, which is going away. So looking forward to our discussion.
Rob Dailey (01:19):
Hi, I am Rob Dailey. I'm the Head of Public Finance at PNC, which includes both the bond side of public finance as well as the corporate banking side of public finance.
Andy Nakahata (01:30):
I'm Andy Nakahata. I've been introduced once and I won't waste your time in going through it again.
Gary Hall (01:35):
Well, I'll take his time and give you my whole resume. No, I'm joking. I'm Gary Hall, I'm President and Head of Public Finance for Siebert Williams Shank.
Chas Cardall (01:44):
Excellent. Alright, so let's go ahead and jump in. So we've got a few questions and I'm hoping that my esteem panelists will take over and provide some great insights. Maybe just starting very much from the beginning and we can go down or people can talk in whatever order they want, but how would each of you describe the general state of the market this year? Kind of current state of the market, maybe what we've seen, what we're experiencing right now? Anyone want to go first? Gary is going to go first.
Gary Hall (02:21):
Sure. So I would say we started off in an interest rate environment that was higher than we had in years past. And then we saw the feds started tightening during the course of the year. And so when I predicted volume at the start of the year, I thought it was going to be largely comprised of new money because outside of tenders and some creative bad restructurings, the refinancing market was scarce. But now we're seeing that now that interest rates are starting to low decline, that the current refunding market is coming back to us and we predict going forward, we'll talk about next year. That's going to be extremely voluminous in 2025, but the process to finding the right levels, it's more volatile than it's ever been. I used to have more hair, I have less now because we underwrite more bonds and we encourage tremendous amount of risk in doing so. There's true risk in underwriting. We did a deal earlier this week for a new MTA where it was a 435 million, a four 70 million deal and we underwrote $80 million in bonds and didn't give away to the syndicate. And so we just completed a 1.5 billion deal today and fortunately we didn't have to take much in, but I would just say the art in underwriting is definitely pronounced in. Working with our issuers and their financial advisors to get to those levels requires a tremendous amount of collaboration.
Chas Cardall (03:52):
Anyone else?
Andy Nakahata (03:53):
Yeah, Andy, we'll just keep going down the line here. Yeah, do it. Do it. I would say when I think of the market, I think of it as macro. The market really is driven by indicators and it's driven by events and be it everyone now waiting more than ever. We put all the economic indicators on the calendar and check them because you want to look at them and you want to know what information's coming out to drive your pricing dates and to drive how you're thinking about the market macro and the perspective of we're all waiting to see what happens with the presidential election because that's going to have, we have two very different candidates who will have very different policy views, especially probably related to infrastructure finance and local governments. And so that's going to drive very different views of what the market could look like next year. And I think macro in the state policy perspective, we're looking at a ballot that has from a state level, 20 billion worth of bonds in LA County. There's another nine or 10 billion in San Francisco, we have several hundred million on the ballot. We are waiting to see kind of how people look at where we are in society and how they vote. And that's going to be a big driver of the market that we're going to see in the next 12 months.
Rob Dailey (05:17):
I agree with the comments we've had so far. I think the whole year, to me I was expecting there to be less volume than there's been. I was expecting it to be a relatively kind of an up five or 10% kind of number over the course of the year and we were pretty flat through mid-year in terms of bond issuance, but it's taken off since it's really striking and I did see a projection for next year of over 500 billion. And I think that seems to me to be a trend that's going to continue. We've got supply chain disruptions, project inflation digesting the risk of global events have all been taken into account. People are living with that. We've gotten our heads around higher rates and I think there's also when you combine that with the pent up or lack of issuance over the past few years, subsiding of some of the federal dollars, we've got a need for financing that we haven't had for a couple of years either.
(06:22):
So I think there's a lot of demand among issuers to go, we're seeing bond and flows almost every week from investors. And so it's a very attractive market right now. I wouldn't say we have the same level of resurgence of activity in the bank market. It's still very healthy, plenty of players. But we did see over the few years proceeding this that there was a lot of very competitive activity that didn't look like it was going to last and ultimately it didn't. So I think a very healthy market there, but not the same level of higher activity.
Ronda Chu (07:03):
And as an issuer, the market dynamics, I leave you to the experts, but from my practitioner perspective, taking your slogan Nathan, riding the wave from issuer's perspective, but we're going to ride the wave, meaning we've got a lot of investments so we need to finance right? And we can't really sort of time the market or wait for certain things to happen in the market. We have a longer term perspective. We know we have certain infrastructures we need to improve upon. And so it's really about finding the right spot in that wave to get to what we need to get in terms of getting the lowest possible interest cost for our infrastructure needs. So unfortunately we don't have the luxury of waiting towards something happening in the market and trying to go to the market. So it's really about doing what you can given what you're given.
Chas Cardall (07:53):
Got it. Got it. So maybe taking this, and we talked a little bit about it, but taking this and kind of now looking a little more forward, and actually Ronda, let me start with you and start with you just in terms of, because I think it'll be a good example maybe for others as we go through, talk a little bit about what you're expecting in the next year, two years to be happening at SFO.
Ronda Chu (08:18):
Sure. So let me take a step back. A year ago I talked about remain nimble and flexible in the capital markets and that's again because we have a large capital program at the time we're finishing up terminal one, which now houses American, Alaska and Delta just recently moved over. So if you flew through SFO, you sort of see that the terminal in June, we actually finished the entire terminal. So I want to also play a video for you guys just to wrap up what I've talked about a year ago until now, which project is done. So if you don't mind are my AP friends down there? Nifty
Video Presentation Ryan Louie (09:12):
Vision for Harvey Milk Terminal one in the beginning was actually just a new boarding area and it actually quickly expanded into a full terminal renovation.
Video Presentation Farrah Young (09:25):
It was the first terminal that was designed from REACH principles. So reach is revenue enhancement, customer hospitality,
Video Presentation Ivar C Satero (09:39):
An experience that people would walk through and say, wow, this terminal really resonates with the values of San Francisco.
Video Presentation Ryan Louie (09:50):
My name's Ryan Louie and I'm with the planning design and construction department.
Video Presentation Farrah Young (09:54):
My name is Farrah Young, I'm a Project Manager for Terminal one.
Video Presentation Ivar C Satero (09:57):
I'm Ivar C Satero, SFO Airport Director.
Video Presentation Farrah Young (10:04):
The final phase of Terminal one allows the passenger to experience the full journey of which we plan for.
Video Presentation Ryan Louie (10:13):
It's not your traditional straight building with hold rooms on the side. There's a lot to explore and enjoy through the building itself.
Video Presentation Farrah Young (10:25):
On pre-security, we've got an expanded lobby for check-in.
Video Presentation Ryan Louie (10:32):
We're actually introducing new technology into the check-in process with self bag drop.
Video Presentation Farrah Young (10:40):
We're very proud to have our first sensory room, which will be opening later in the year.
Video Presentation Ryan Louie (10:44):
Passengers will be able to tag the bags themselves, drop their bag onto self bag drop units, and off the bags go.
Video Presentation Farrah Young (10:50):
We have a yoga room of which we've become famous for.
Video Presentation Ivar C Satero (10:54):
This will be the first time we've had full connectivity post security across all of our terminals.
Video Presentation Farrah Young (10:59):
It's the first terminal named after an L-G-B-T-Q leader.
Video Presentation Ivar C Satero (11:06):
Harvey Milk would be incredibly proud of how we've really worked hard to bring his work to life in our terminals. And Harvey Milk Terminal one was a challenging project. It was challenged from a complexity of design and construction
Video Presentation Farrah Young (11:26):
From the beginning. The idea was to bring as much opportunity out into the community, so it was contracted in two separate pieces. So it's a very large group of people trying to accomplish a singular goal.
Video Presentation Ivar C Satero (11:41):
And then of course COVID created its own set of challenges.
Video Presentation Ryan Louie (11:49):
COVID actually suspended us for 11 months and we worked through that with an incremental release of the scope.
Video Presentation Ivar C Satero (11:56):
The team stayed focused and delivered on really extraordinary results with this new terminal.
Ronda Chu (12:36):
So we are on the second year of a five year strategic plan. We have a new logo, I dunno if you've seen that one new logo. Our director is retiring, so we're going to have a new director and next few, we'll probably know it in next few weeks and months. Mayor year election. So everything is happening at one time at SFO and the city, but it's a really exciting place with a wrapup of Harvey Milk Terminal one. We're embarking on another 11 billion infrastructure needs. So over the next several years we will be in the market often and it's an exciting place at the airport. I know the colleague at SFO is here with me, Hal and his team as well as I think I see also Sacramento, Chris right there. So it's exciting place in California. We have a lot going on, a lot to build from all the successes and unfortunately, well maybe it's a good thing, right?
(13:38):
Because the next big project involves terminal three, which is where United operates out of. But the walkway, which I also enjoy, the bouncy walkway is going away. So if you want to experience that, get your time in there. It did actually garner a lot of social media interest in that one, but it does take a lot more resources to maintain that walkway. It's a large piece of equipment, the rub itself, so it's not like the new walkway. So you can take out pieces when you need repair. So again, if you enjoy the walkway as I did, what I'm enjoying, get you fill.
Chas Cardall (14:23):
Excellent, excellent. Rob, do you mind if we head down your direction now?
Rob Dailey (14:27):
Yeah, so just thinking about next year, I think the conditions that launched increased issuance, increased activity this year will continue. And you talked earlier about trends eras and it seems to me that we've begun what is going to be a multi-year cycle of increased infrastructure financing, infrastructure spending. We're seeing also I think an opening up of technique and approach so that I think the definition of public-private partnerships for instance, has just continually expanded to the point now where we have nearly endless permutation of what structures work depending on the individual circumstances we're seeing that in the housing space in particular, but I think it's also taking place broadly in infrastructure. So I continue all these things to continue to keep going. Will rates ever go down again? Probably so that will I think spur some changes in the shape of the yield curve, probably broaden out the degree or the scope of financial products that people are using. I expect more variable rate bonds for instance, to come back when we get an upwardly sloping curve. But all in I think these positive conditions will support us at least through the next year. My guess is more than that. Longer than that.
Andy Nakahata (16:08):
I would agree with everything that Rob said. In addition to that, I think the results of the election will be interesting to see how the bond measures do, just to get a sense of where the popula stands on supportive infrastructure investments. Most interesting I think will be the results of prop five, which call for lowering the thresholds from the two thirds super majority to a 55% majority on housing and infrastructure projects. As we've seen with school financings and school bond measures, we've seen obviously much greater success lowering to the 55% threshold. So that has the opportunity to allow for a lot more voter backed and approved bonds to pass. So it'll be interesting to see how that drives our sense of supply, especially in the California market.
Gary Hall (17:02):
I answer the question, but I was just want to piggyback on the whole issue of public support for infrastructure. We spent a lot of time in Texas and you would think just given the conservative nature of the politics in Texas that there would be some sort of headwinds when it comes to approving bond issuance. But in the last couple of years they've had record number of bond initiatives pass even with some really onerous thresholds for passing, whether it be two thirds or sometimes even 20% of the registered voters in a locality and they're still passing. So there's a tremendous amount of support for infrastructure as we think about going forward, I believe. And yes, I took the BART over and there was a lot of sense and I have a contact high what happens in Oakland, but there is a lot, this is the nirvana for public finance for the next 24 to 36 months.
(17:55):
Most prognosticators are predicting over 500 billion of issuance, but driven by three things that one of which I think is sort of agnostic to the election, but this whole notion of aspirational infrastructure, whether it be leveraging federal dollars to create more regionalization or resiliency for it because we need to raise sea walls or have new sources of clean water. These sort of aspirational mega projects are going to start to take hold in our marketplace and we're starting to see seeds of that. We also have our core infrastructure that we need to repair and restore and everyone knows that we have an aging infrastructure landscape in the country and that's one of the drivers for why we had infrastructure, a major bipartisan infrastructure bill passed. And then lastly, if we get some cooperation from the Fed and it looks like that we, we can have this return of a flood of refinancing. So that three-legged stool is going to create a tremendous amount of volume and keep us employed and active very heavily. So we're making investment decisions based on that going forward.
Chas Cardall (19:01):
Yeah, that makes sense. That makes sense. So I am not sure this is all that different, so maybe people won't have a lot to add, but purely from your own personal sort of 2025 business plan perspective, what are you planning on this next year? I mean it sounds like we're expecting, hopefully I say that think we all kind of like the, well maybe some of us aren't as excited about debt as others still as, but maybe starting down with you Gary, what are you thinking about how you're going to get out or your group is going to be trying to take advantage of some of this?
Gary Hall (19:51):
Well, first of all, we don't subscribe to boiling the ocean, so we have to be somewhat strategic in what we go after and we use data to inform our view. I just saw a survey recently of policymakers around the country and where they thought infrastructure investment will take place and I was shocked when it turned out that water and sewer was the leading sector or category that they thought actually infrastructure dollars would be going to. So no, I'm not going out and hire a bunch of water sewer bankers, but what we are doing are making this sort of considered effort to see those places in the country that have that glut of infrastructure need and where we think there are a tremendous amount of callable bonds in play for the next 36 months. And so thinking about where those markets going to be most active and making sure we have bankers on the ground that can actually service that need. I will tell you in my years in banking, I have never lost friends over losing a deal, but you poach a junior banker and no one talks to you. So we are starving for junior bankers and I know I'm going to make some enemies over the next couple of years. We spend a lot of time finding the talent to bring 'em into our firm.
Chas Cardall (21:06):
Interesting. Andy, you have any other thoughts to add to that?
Andy Nakahata (21:08):
Gary, I'm going to be pissed at you if I lose appeal to you.
(21:14):
Yes, I think that it'll be interesting to see where the climate change bonds go and how that is going to be a leader in terms of as we think about the environment, there's obviously a national debate going on around climate change and how to address it. And I think that the state's taking a very bold step in terms of 10 billion in climate change bonds and we need real investment there. And I think it's going to be interesting to see if that becomes one, if that passes, and two, if that becomes a leader nationally in terms of thoughts and efforts around climate change and how to deal with what's really becoming a national crisis.
Chas Cardall (21:59):
Interesting. Anything to add, Rob? Or you want to?
Rob Dailey (22:02):
A couple of thoughts. One is in terms of where our focus is, we're investing, we're extending our reach to the west coast and so we're looking to grow. We'll be very selective about that as we have, but for us individually, we feel great about growing in this market. A couple other points I would make. One is in the banking side of our business, we see a lot of emphasis on focusing on process, streamlining things, automating to the extent possible, driving to a higher level of quality, protecting against cyber risk and some of the other operational challenges that keep people up at night. Toward that end in terms of the process of issuing bonds, something that's I think trends that have begun that will continue the market's more receptive to larger issuer issues and to a great degree, I think there are incentives to go kind of bigger and you don't get quite the same execution if you're going to go smaller, which I see as a further step in the integration of the municipal bond market with other bond markets, corporate and other taxable markets.
(23:24):
The same thing I think applies in the same way to issuers telling their story. We've had a huge focus for a long time on disclosure, transparency. There's a great disparity in how some issuers do it versus others, and I think that we're going to continue to push toward a more current state-of-the-art standard on that. And so the importance of being able to tell your story I think will play to a greater degree. And then maybe one last thing is out there, we haven't seen the credit cycle hit yet and that had been predicted for most of the past 18, 24 months. So at some point that will turn.
Gary Hall (24:10):
Good news on the credit cycle. I'm sorry to interrupt. There's a huge uptick in insurance. I read something recently that we are up close to 30% year over year in insurance par insured par. Not only that we're starting at least we focus a lot, not just on, I'm just telling you insured and bam, it's not just based on your pricing quotes, but it literally is how Europe wraps resonate with the most pertinent investors that we're targeting for a particular deal. If you have investors that your reps resonate with more favorability, that will lend us to advise our issuer clients to go towards one rep versus the other because we think those competitive forces can swing leverage your way. So insurance is going to be a huge factor, especially as we hit this credit cycle.
Chas Cardall (25:01):
Go ahead
Ronda Chu (25:02):
Yes. I do like debt.
Chas Cardall (25:05):
There we go
Ronda Chu (25:05):
With nine billions worth of.
Chas Cardall (25:06):
Sorry about that. I didn't mean to suggest otherwise.
Ronda Chu (25:10):
But our business partners at the airport do not like that amount of debt because overall our budgets 40% bouts is debt, right? It's your mortgage payment. Well,
Chas Cardall (25:22):
And you're talking about some really big numbers too, right?
Ronda Chu (25:25):
And so for the airport to remain competitive, we have to really be in tune with how we spend operating and how we invest. And so the airlines themselves, we service them, but they do have a loud voice. Every year we review with them what we would charge for their operations here, but we know our value at SFL, we know our value to them. And so we're able to have that dialogue with them to the extent we're able to not define in certain projects would love that. With any federal fundings out there, our grant programs, all those outside sources of funding is what sort would be better received or able to actually get the grants themselves in. I think the challenge for the airport and other municipality is the way that I'm going to be jumping ahead.
Chas Cardall (26:23):
Oh, do it, do it. I was just going to say that, yeah.
Ronda Chu (26:26):
The intent of all these, the funding from the federal government through the bill, through the inflation reduction Act to IRA, once we, at least for airports it may be different for other local municipalities and agencies, but once it's administered through the FAA through their certain lens, the benefit of the initial thought on those grant funding to the low community gets kind of stripped out. And so the amount of resources available to airports like us is a bit limited and it's a challenge to chase after those. And so the one reliable source of funding is debt, is debt financing for what we need. I hope there's other ways of looking at how it could be administered in the future. The bill will be expiring in about two years time, 2026. And so in hindsight, we have to ask how can we best administer programs such that different agencies, different sectors can benefit from it? And we have sort of learned from our past and it's not really happening now and it's a lot more debt. I mean folks in the room may be happy about it, but the airlines are not happy about it.
Chas Cardall (27:40):
Yeah, right, right. Well the interaction with some of the federal programs and how that has sort of affected things is definitely a new kind of level of complexity. Maybe let's shift this a little bit. Any comments? Well, I'll preface it this way. I tend to work, I mean I don't see the whole market. I see the little bit of the market that I work with. I tend to work on a lot more sort of higher yield type transactions. And so from that perspective, I feel like I'm seeing more what I think of as being kind of specialty buyers or private placement buyers, or maybe it's bank financing, whatever that is. But is that part of the market evolving, continuing to change? Are we seeing more players on the buy side or do you think we're going to continue to see more players on the buy side? Any comments around that aspect of what we do? Maybe I'll start with you, Rob.
Rob Dailey (28:44):
Yeah, I think will we see more? I think we will. We've seen a lot. We've seen a lot of growth among credit oriented buyers, investors who are able to structure, understand more sophisticated approaches to credit who might ultimately refinance into a sort of certificate structure where they're taking exposure but trying to get some leverage. So I think that will continue. We're seeing obviously a huge surge in private credit throughout the financial markets, financial industry, and that is touching public finance as well. And I think through that type of vehicle, a couple other things that are going on. One is SMAs continue to be tremendously important in increasingly the buyer class that's driving a lot of activity tactically about how you get a deal done. And I would just want to call out ETS are growing tremendously and I think that will continue. So to me, these are things that reinforce this integration with some of the other markets that we're seeing. So we're seeing more situations now where for instance, if a private placement is appropriate, as it might be in some of the more sophisticated, more complex or hairy credits, we're seeing the approach that we take falls much more in line with the way a corporate credit would get done or a bond in the high yield space in the corporate space would get done different than the way we would've used to have done a private placement in Munis. So to me, this is all evolution and I think these things continue and will continue.
Chas Cardall (30:30):
Interesting. Andy?
Andy Nakahata (30:32):
Gary was about to jump in.
Gary Hall (30:32):
No, no, no.
Chas Cardall (30:33):
Go no go. Yeah, either whichever you want to do. No,
(30:35):
No, I was just joking.
Andy Nakahata (30:36):
because Gary always jumps in.
Chas Cardall (30:37):
Agreeing with that. Rob. I think the other thing that's going to depend as we see if as projected interest rates continue to come down, I think we will see people start to reach down the credit spectrum again to add in yield to their portfolios. And I think the work that we've and the evolution we've seen on the credit side, I think will start to really come together there and we'll see. I think greater participation, I don't think we'll necessarily see it as much on the private side as much as I think in the public market side. I think we've seen more investors continuing to reach down and really put in the work and the effort and to buy where they think are good opportunities, but where they can get paid for it too.
Gary Hall (31:20):
And I was going to give you a secret, but I won't. So one of the things that we were really concerned about with tax reform is the exodus of demand from our insurance company in banks, especially at the belly curve because we've really used them in the past to sort of fill that demand place. We've been able to fill that with hedge funds and ARBs who've been very, very active and in candor, given us more accurate reads during the deal process than we've given from the real money bond funds. And so the activity of the hedge funds in the ARBs was something that still is going to be a place in our market. And I would say if we do have some retrenchment on the tax reform, we get the banks and the insurance companies back that can actually add a significant amount of demand in our marketplace place.
Chas Cardall (32:10):
Thank you. Okay so I think we're kind of running near the end of our time, but let me do this. This is the betting the people at your table part of the presentation. Are any of you willing to venture a guess as to what the next kind of structure is? The next big things? We saw a lot of tender offers. We saw a decent amount of Build America Bond refundings with using the extraordinary call for a long time. When rates were low, we saw taxable, advanced refundings. What's next? What's the next, what should we expect? What's the unexpected? Anybody willing to take a guess?
Gary Hall (33:02):
I'll take a guess. Election dependent and it's not a new product, it's an old one. Tax exempt advanced refunding coming back.
Chas Cardall (33:13):
Ooh, there you go. There's some, okay. Okay.
Andy Nakahata (33:18):
So I'm going to go less Chaz into structures and products, but what I do think is going to be a big focus will be the issue of property insurance in California. And I think the lack of availability of it.
Chas Cardall (33:32):
I think probably not just in California even, right?
Andy Nakahata (33:34):
Yeah. Not just in California, but we're seeing it so acutely in California. I think that has the potential to be such a major market disruptor of the base of all of our markets in California. That solutions around that and some of which have been discussed as bond related will be key.
Chas Cardall (33:54):
Yeah, there's a lot to deal with there for sure. Interesting. Rob, we're going to ask everybody where their money is going. So think wisely.
Rob Dailey (34:07):
Well, I don't have much nothing new. I think we're going to see normalization of the yield curve. I think we're going to see more floating rate debt. To me, some of the stuff we talked about in terms of investor activity, that's all going to drive interest in more credit focus. And then this last piece is just this broadening definition of P three and kind of all the ways in which it works into our work.
Chas Cardall (34:34):
If we see more variable rate debt, do you think we'll see derivative products? Any swaps coming back or you think people are, that ship sailed and it ain't coming back into port?
Rob Dailey (34:45):
I think in the governmental governmental space, it's mostly sailed among housing issuers we see.
Chas Cardall (34:50):
Yeah, maybe a few,
Rob Dailey (34:52):
But in the straight kind of plain vanilla government space. I don't think so.
Ronda Chu (34:57):
I would wage you if one of you guys would be right next year.
Chas Cardall (35:00):
There we go. There we go. Awesome. Awesome. So there you go. You heard from the experts, they're awesome. Alright, actually can do we have time to take? Are there questions and do we have time to take them? Well we got time. Okay. Do we have questions? Anyone? Don't be shy. Yeah, go ahead.
Andy Nakahata (35:33):
Keep in mind that we can't see you at all.
Chas Cardall (35:38):
Yeah, there we go.
Audience Member 1 (35:39):
Right? Yeah, and I'd like to ask about energy as a service. I don't know much about it. I just heard a webinar about it hosted by ORIC actually, and I also heard about it from Moody's recent. Maybe it's something you could talk about. And in private sector I know there is a huge demand for energy because of the data center and so,
Chas Cardall (36:13):
Energy as a service.
Gary Hall (36:14):
Oh, I see. I see.
(36:15):
So thank you so much for that question. So we are starting to talk to issuers, especially cities who are very, very concerned with being a catalyst for technology advancements in their area and making sure AI is prominent and going into public private partnerships, building data centers, even in Oakland, we're talking to some folks about it. So there is at least a focus on that. I have not seen to date a project that's specifically backed by state local government for that type of project exclusively. But there are active discussions about what we can do to make sure that the energy sources are sufficient to fuel the need for data and AI sort of infrastructure going forward.
Chas Cardall (37:04):
Yeah, I mean, I will say, not that I'm one of these experts here, but focusing on energy just as a notion, whether it's efficiency on the one side or generation and dealing with increasing demand, which happens a lot with the whole data center and AI kind of push that's coming. It's here and it takes a long time to develop projects and deal with that. And certainly I'm seeing a lot of people asking questions about that. I mean, one of the things that we didn't do, actually, maybe this is a good point with that. Have any of you been fielding questions on the IRA and tax credits? I mean, it's not really muni finance, but certainly there are, I mean you guys probably have tax credits that you're going to be claiming, right?
Ronda Chu (38:00):
We are exploring that as the city, well, one of multiple agencies in the city. So we're actually coordinated with the city of San Francisco to file for credits because I mean the terminal one that you just saw, it's Lead platinum, the first in the world platinum terminal. So there are a lot of elements of those IRA criteria is in there and we just need to look more in depth how to allocate them. So it is something we look at. Hopefully if we're able to get some traction, get some credits that then we can share with the design team for future projects to bring the cost down. Again, from my perspective, it's really bringing the cost down where we can find these credits. We will look for them. So you are looking really heavily into the IRA?
Chas Cardall (38:51):
Yeah. Yeah. I mean, the other thing, I don't know how many people dialed into it, but the bomb buyer did a webinar on the whole kind of energy as a service concept, which is essentially a P three structure. Most of them these days seem to be aimed at achieving savings in your utility costs that will then offset maybe more than offset the debt service on making the improvements to gain the efficiency. So I view that as being sort of a solution around the edges for some of these issues, but at least part of a solution. Any other questions? Feel free, but you need to go to a microphone. Sorry.
Audience Member 2 (39:56):
So I had a question because we have a client who is looking at the tax credits. I thought that you had to have the application in by December 31st. Isn't that correct?
Chas Cardall (40:10):
For just like renewal?
Audience Member 2 (40:11):
Well, one of the ones I was thinking of was one of the energy efficiency tax credits.
Ronda Chu (40:16):
Yes.
Audience Member 2 (40:17):
Isn't that correct?
Ronda Chu (40:18):
Yes. That's for fiscal year for facilities that open and operations in 2023 I believe.
Audience Member 2 (40:26):
Okay. I actually have a client with a new project that they're looking at, but they didn't think they could meet the deadline because you had to have basically substantially final design and bids in place in order to apply for the credit. And that may not be correct information. I'm just curious if anyone knew.
Chas Cardall (40:42):
Yeah, I'll say I'm not an expert in how that fits together. There are, I don't know, 10, 12 different sort of parts to the tax credit programs. And so it really depends, I think a lot on the particular type of facility that you would have and where sort of deadlines and requirements fall. So it's more, I would view this part of it as, okay, a lot of things came into play with the inflation reduction act. Some of them were more time limited than others. A lot of them do burn off over time or the value of the incentives decrease over time as we go through. Who knows what's going to happen with legislation and the election. I think there's some questions around that. Who knows what's going to happen with sequestration. I think there's kind of questions about that, but I do feel like there are many programs and I think some of the larger issuers are really looking at trying to take advantage of them. I'm not sure I can help you a lot more on the specifics of your question though. Yeah,
Ronda Chu (41:49):
I think it depends on what section of the IRS code we're looking at. Section 1 7 9 D is, I want to believe the building efficiency. And then there's the other piece of the IRA is focusing on EV chargers, your battery storage. Right? Those are different types of investments if you like, I can give you my number. We can connect.
Audience Member 2 (42:10):
Okay. Yeah, I would appreciate that. Thank you very much for your time.
Chas Cardall (42:14):
Yeah. Any other questions? Eyesight's not great if you're waving your hand but scream or something. No. Okay. Maybe we're done. Thank you.