The View from Washington – Policy and Regulatory

Transcription:

Lynne Funk (00:08):

Welcome to our panel on the Washington DC update. While I don't think these two need much of an introduction, I will introduce them anyway. Welcoming Emily Brock, who is director of the Federal Liaison Center at the GFOA and Leslie Norwood who was Managing Director and Associate General Counsel of SIFMA. So we have a lot to talk about, but I figured maybe we could start off with Emily with just delve into sort of the legislative efforts that have come out of Washington, the IRA, the IIJA. What are some key highlights? What do these new laws provide for issuers?



Emily Brock (00:47):

Yeah. Well, I mean I think there's still a lot that is lingering from previous congresses. And of course from the pandemic, there's the American Rescue Plea Act, which was about $2 trillion to governments across the country. And it also had derivative effects on sub-recipients from the prime recipients. So while cities and counties and states got the benefit of being able to recover with those stimulus funds, often those funds were shared with other parts of the municipal sector. And so the important thing about ARPA is that it's almost expired. So the end of this year, December 31st, 2024, all the funds have to be unquote obligated. And what that means is they have to be encumbered, they have to be claimed, they have to be sort. An encumbrance is a sort of a techie accounting term where you have a contract signed. The rules are still kind being nailed down here at the end of this last year of ARPA funds outstanding. But at the same time, there are two new programs that have come up. IIIJA or the Infrastructure Investment and Jobs Act was another 550 billion in competitive grant funds. That is still outstanding. So there are actually a lot of non-traditional uses of IIJA funds in the grants that are designed to be the whole of the IIIJA.



(02:27):

Are we good?



Lynne Funk (02:27):

So this happened yesterday. Oh, right. For those who were here.



Leslie Norwood (02:31):

Oh, okay. So it is the fire alarm. It is real.



Emily Brock (02:38):

It's fire.



Lynne Funk (02:40):

It happened yesterday too. Okay, let's just let it go so we can see.



Emily Brock (02:46):

Alright, we'll keep going. We're going to keep going.



Leslie Norwood (02:49):

We'll keep going. If we smell smoke, we're stopping. Right?



Lynne Funk (02:51):

If we smell smoke, yes, we'll stop. Okay.



Emily Brock (02:55):

So IIJA is about halfway through. We have two and a half more years for folks to realize that those federal funds are still available and to apply for them. So they're competitive. It's important to note. So keeping an eye on those is another sort of part-time job of finance officers across the country. But the last one you mentioned is actually not a grant program, the Inflation Reduction Act. We mentioned that this morning and Megan Kilgore mentioned that understanding what the Inflation Reduction Act is a full-time job. She's trying to figure out from Columbus, Ohio if they have any eligible investments that are in clean and renewable energy. And then suddenly what you have on the backend is the federal government asking you to claim those elective payments or claim those credits which end up being a benefit for the community. So look, there's a lot of federal funds still just kind of out there. People are thinking about them, people are trying to sort of pick them apart, understand how they might be able to benefit from those appropriations as we have them.



Leslie Norwood (04:12):

But Emily, these are all grant programs. Yes. When we're talking about bonds and finance this conference, do you feel like all of these programs over the past couple of years have maybe taken the place of what otherwise would've been financing programs? And do you feel as if these programs when they start rolling off that there will be a greater need for bonds and debt because of the reliance on these grant programs over the past few years?



Emily Brock (04:45):

Yeah, I mean you remember Leslie 2017 probably clearly, right? So we're going to talk a little bit about the 2017 Tax Cuts and Jobs Act. But I remember in 2017, I don't know if you remember this email I sent out to the public finance network. I said, the death nil is tolling on advance refunding. And I had a colleague wrote me back and they were like, isn't that a little dramatic, Emily? And I was like, well, yeah, but this is the biggest moment of municipal bond history. Well, it's not, at the end of the day, 2017 happened, advance refunding was one of the victims or fallout victims of the 2017 Tax Act. But to your point, while we relied so much more on the market in 2017, we've had a period of time during Covid where it's been a lot of funding. And so while some of us said that borrowing would go up in order to compliment the investments of the federal government in our communities, indeed of course we saw that did not happen. We saw a significant decrease in issuance. So where are we now? I don't know. So I can't imagine we're entering 2025 with a congress who wants to give us more money.



Leslie Norwood (06:08):

I mean, I think we also have the overlay of the increase in rates being a factor and when costs increase for projects in that manner for financing tools, the funding tools that the federal government are just handing out seem much more attractive. I mean, you're not going to turn down that money anyway, but trying to parlay that into a greater financing package at that time seems like maybe you would wait until a more favorable rate environment. Yeah, I think it's a big challenge and hopefully as we see into the future rates, hopefully coming down, we'll see more borrowing. But there's a need regardless of where rates sit at any particular time. Sorry Lynne, I think I cut you off earlier.



Lynne Funk (06:55):

No, no, you're good. So I would like to ask you, Emily, about one specific thing. Actually, lemme ask you this. How much of the ARPA funds are still outstanding? Are there're still really, I mean, state local governments haven't tapped them all?



Emily Brock (07:08):

I was at Virginia GFOA on Monday and I asked a room of about this is the straw poll, a room of about 400 issuers. How many still had ARPA funds outstanding? I would say three quarters of the issuers in the room raised their hand.



Lynne Funk (07:28):

Wow. Okay. So one of the things in the IRA specific proposal, or not proposal it's in the law, is the direct pay tax credits, which we actually had, I hope you read it. We had a commentary from treasury. So these direct pay tax credits, they're called investment tax credits, ITCs and the Treasury wrote that they're trying to assure issuers that they're not like Build America bonds, they're not going to be subject to sequestration. I'm curious kind of what your thoughts are on this new tool.



Leslie Norwood (08:03):

Look, it's a one-time credit. So I think it makes it an easier sell. The risk of the reimbursements on Build America bonds over the 30 year period certainly increase the risk, the issuer, that something would happen in the intervening years that would reduce the reimbursement like sequestration for example. And even though they've built into the law a sequestration proofing with Congress, anything said gamble. So I think it's an interesting tool. I not sure how it's going to go in terms of the effectiveness and the implementation of it. But you have any views, Emily?



Emily Brock (08:49):

Yeah, I mean I think, so the investment tax credit is an element of this administration's efforts through the inflation reduction Act to encourage issuers to invest in clean and renewable energy. And if in this room we all remember Build America Bonds and Build America bonds, we're an encouragement of the federal government to utilize bonds that were taxable so that we would have different buying bases so that it could just sort of open up our space and we would have a lot more buyers. So I mean, if we dig down to the bottom of each one of these policy tools, the congressional intent was noble, but Build America bonds have not been noble. They have been a pain for issuers across the country. Each time the subsidy is sequestered. And as many issuers across the country have said, fool me once, shame on you, fool me twice, shame on me.



(10:02):

And herein, love and behold, we have another subsidy program. So that's exactly what issuers are saying right now. They're saying, okay, isn't this green and renewable energy structured just like what Babs were? And what we hear treasury saying is, no, no, no, no, no, it's not the same. And what we see though is a two year congressional appropriation cycle, just like we saw with Build America Bonds. The difference here is that we don't get these subsidies for the inflation reduction Act until these clean and renewable energy projects are placed in service. And as Leslie said, it's a one time thing. So the structure is a little bit different, but you have got to give issuers a little bit of grace. Here they are coming off of this Build America bond sort of melee that's happened through sequestration and now court cases and all of these other things where they have 10 years to make a choice to invest, and they're probably going to take their time.



Leslie Norwood (11:16):

Yeah, well, I mean with all due respect, no one expects a Spanish inquisition. And although it's debatable as to whether there was trust in the federal government when Babs rolled out, we were in a market position where there was dislocation in the muni market and people were not able to borrow out of the muni market at reasonable rates. And Babs served a very good function at that time, as you point out, opening our market to taxable investors who otherwise would not have been interested in our market. And so they did serve a purpose. We got a wrench thrown in the product due to sequestration, which was very unfortunate for everyone involved because I think we would continue to have that vibrancy in the market and more resiliency with more investors against dislocations happening in the future. But we had sequestration. We are where we are, and I think the market depends on issuers being comfortable with the product. And if the issuer doesn't want to use the product, then it's not going to fly.



Lynne Funk (12:28):

Leslie, what do you think? One of the things I think harken back to Babs actually was it did open up the muni market to taxable investors and to foreign investors. I mean, firms were selling them all abroad in a way. Do you think that they did serve another purpose? And that was when advancement fundings were taken away and issues start doing taxable refundings, that those same investors were more familiar with taxable bonds and maybe that helped broaden the investor base a bit?



Leslie Norwood (12:57):

I think that's an interesting point, Lynne. And certainly we've heard from foreign exchanges and entities who have for whatever reason, and whether it's an ESG purpose, legislatively in, I believe it's the Netherlands, to invest in ESG projects and debt or other reasons for wanting to invest in the United States. Yeah, no, I agree that that was a marketing opportunity to introduce the US public finance market to non-traditional investors in our market. And that may have been a factor in that. Yes. Okay.



Lynne Funk (13:42):

Well, let's move on to some regulation. I think maybe a quick segue here might be actually another, you mentioned the tax cut and jobs advancement, fundings being taken out, private activity bonds were possibly going to be taken up. They weren't the FDTA, another piece of legislation that affects the muni market. IT and kind of was, I'll let you tell this story, Emily, but I think a lot of folks thought it was sort of just putting it at the last minute and the industry was surprised. I'll take both your takes on the FTTA, but maybe Emily, you start, what does it mean for issuers? Sure.



Emily Brock (14:20):

I think this crowd is pretty well versed on the FDTA, but just to break down just a little bit, the Financial Data Transparency Act, it requires all sorts of agencies in the federal government to collect information as a repository to collect information in a specific type of data format. And once again, the municipal market fell victim to a much broader effort. But in the municipal market, the argument is issuers communicate information to our investors through Emma on machine readable PDF format. That's the way that we do it right now. What the FDTA will require instead is for us to submit information in machine readable open source data format. So the way that the bill structures is it requires the first two years of rulemaking to be joint rulemaking between the treasury and the SEC, and they're going to figure out two things. Number one, how do we categorically assign ourselves numbers?



(15:34):

We all know the naming conventions in Emma are pretty bad. And so the question is how do we assign a social security number to each one of our issuers? And then second, we start to talk about that structure. What are the reliable resources for open source and machine readable? And what might that look like Now in the second two years for implementation, that's where Civil War breaks out again, where we talk about what's a revenue, what's a capital asset, what is it that we are required to submit into Emma in this machine, readable open source data of format. Now, I think if there is still a lot of rulemaking to go, but in sort of a rumsfeldian or way, we know what we know and the known knowns are basically in the law, but the known unknowns are pretty pervasive. We don't know what an LEI is.



(16:35):

We don't know what the technology will be. We don't even know. In some cases, they are already aggregating systems in states, Florida for one aggregates disclosures of smaller issuers through the Florida CFO, Texas, Mac, Michigan, cdac out of California. These are all already aggregating systems. So they don't agree on a universal format between them and the states are sovereign, right? But I think the two known unknowns that are the most pervasive part is number one, who's going to pay for it? Number two, who's going to go to jail if we don't comply? How are they going to enforce this? So I think to go back to the who's going to pay for it, I think maybe the person to my left might have some opinions on that. But you're looking at me, there's a question about it didn't come with a congressional appropriation. I remember after it passed, I asked the SEC, so are you guys going to pay for it? And they laughed and I said, that was a serious question. And then the follow-up question. Question is, do issuers have to pay for that? And if so, guess what that is? That's an unfunded mandate.



Leslie Norwood (17:56):

Megan left. She did.



Emily Brock (17:57):

So then the question is, are you guys building FDTA jail somewhere? Is this like the new Martha Stewart where you guys are just going to have to go and sit in your F-D-T-H-A, those who don't comply? And more importantly, do the broker dealers become the enforcers through 15 C two 12? All these questions are still out there. And those are the known knowns that even though we ask the office of Municipal Securities, I don't know every waking day, can you give us more details? They can't because they're in the middle of active rulemaking, they literally cannot answer our questions.



Leslie Norwood (18:38):

So what I would've pointed to Megan to say is, progress happens. Computer systems and electronification of data has changed dramatically over the past 10 years, and the pace of change keeps getting faster and faster. So it does make sense that the regulators are trying to make sure that the data in this field is keeping up with that. Now, I hear you on the expense component, but at a certain point, the old ways of doing things are no longer functional in the current electronified environment. And so this would handle all issuers and their filings with regards to debt. But there are current programs with the federal government that issuers need to be using these formats to get grants for grant programs. Correct.



Emily Brock (19:46):

In development, yeah. Yeah.



Leslie Norwood (19:48):

So it's not just in this area that these changes are happening. And so we look forward to working with the issuers, the regulators, to make sure that the progress is not unduly burdensome, but we do have concerns that it'll just be laid at the feet of the broker dealer community or that the, there'll be some sort of responsibility associated with changing financials in some way so that they're compliant with the rule and we can move forward with the financing. When the issuers historically don't want people to touch their documents, it puts the broker dealer, the underwriter community in an awkward position as opposed to when we had the last major change, when we went basically from paper filings to machine readable Adobe Acrobat scanning those documents in putting them in PDF format and OCRing them wasn't really changing them in any way, but putting things in XBRL format really does. And so we want to be part of the solution here, but we also want to make sure that we don't get ourselves in a position where it's a no win.



Lynne Funk (21:17):

Do you think one of the things that this implementation period for the FDTA decent runway, could there perhaps be more technologies that do come out to aid in this effort that think about how fast technology is moving right now? So I don't know, is that maybe massage some concerns?



Leslie Norwood (21:39):

Go ahead.



Emily Brock (21:41):

I mean, I think that, again, it is the law. It is officially the law. So any voluntary progress that's made by the market, this is the really frustrating part of our job in Washington. We see advancements happening while the massive stone is growing. Moss trying to figure out how to design it. The way I talked about it the other day is the market may create the newest, coolest toy in the world in three years, and the SEC will be like, I got it. Here is a block. Enjoy. So they will create an old dated something or other. The fear is, of course, they will create an old dated something or other that we have to comply with. While there are toys out there that are a lot cooler.



Leslie Norwood (22:35):

Yeah, that's a risk of the rulemaking process, particularly a rulemaking process that's a minimum of four years long while it feels actually not like a super long runway for the massive amount of changes that are going to have to take place. And you're talking about assigning a little LEI to issuers, not the actual capital LEI that already exists, as well as the language at which the machines are going to talk to each other, whether that's XBRL or some other format. And then you get to the really hard part as you point out, which is the taxonomy, which is the fields. And for Munis of course, everything's got to be a little bit more difficult, which you point out we've got 40 to arguably 60 plus thousand issuers in the municipal security space, but they don't all look the same. We have governmental deals, we've got conduit deals with nonprofit obligors, we've got private activity bonds with for-profit obligors. We've got all sorts of different structures for hospitals or higher ed. Some fields are appropriate for some and not others, and that is a huge lift. So while that is all going on, change is happening. And so, I'm not sure the SEC is nimble enough to accommodate for that, but hopefully through advocacy with the SEC, the MSRB and industry participants will come to a solution that will be workable.



Emily Brock (24:18):

And I think it's important though, yes, they will come to a solution, but from a CFO's perspective, and I know there are several in this room, FDTA is not their world. They've got so many other things going on. The UIs, the eis, the EISs, they are monitoring for risks. They are assessing for that kind of stuff. And so while the SEC might not be nimble, there are other requirements that are coming down the pike that they're having to navigate.



Lynne Funk (24:54):

Okay. Let's talk about the MSRB. Leslie. There are several proposals out there. It'll be affecting the dealer community, one minute reporting, invest X. What are your thoughts here? What's going on at the MSRB that this crowd should be keeping tabs on?



Leslie Norwood (25:15):

I think there's a lot going on at the MSRB. A lot of what is moving forward at the MSRB is also a key interest in a top priority at the SEC up to the commissioners and the chair. First and foremost, one minute trade reporting, which right now the SEC has instituted proceedings on Onement trade reporting, pushing out the deadline for decision into late July. They could get another 60 day extension on that if the SEC wanted, which would push it out to September. But there must be a decision on it by September. Whether the proposals from MSRB and FINRA are approved or disapproved, that will fundamentally change the market. Right now in the muni market, a significant portion of trades are in within one minute and making sure that there is an exemption that can handle the trades that aren't making it in within one minute, which are very important. Most of those trades that are not making it in within one minute are large institutional trades that are affected by voice trading. And if there's no exemption, those trades will essentially go into a liquidity queue and be handled one by one slowing down the pace of market.



(26:49):

We hope that if the SEC does approve it, that it approves it with the manual trade exemption. Likewise, the SEC's got reg best X, which we believe will also be moving in the near term. It overlays the MSRB and FINRA best execution rules, which we feel were already as vibrant as possible to mimic the equity concept of best execution. It doesn't really work in fixed income at all, but we spent best part of a decade developing best execution rules, guidance, FAQs, and now the SEC has come in to do an overlay or replacement depending on how the MSRB and FINRA look at that rule when it comes into effect, if it comes into effect. And it seems a little nonsensical at this point to do a supplementary rule.



Lynne Funk (27:57):

Okay. What do you think about, we've heard now the SEC seems to kind of actually be pushing back on MSRB. The most recent was when they killed the rate card changes, which are the fees, the fee structures that dealers pay, which then that led to the MSRB holding meetings with stakeholders such as yourselves. What's happening there? Can you read some tea leaves?



Leslie Norwood (28:22):

You want to start with that one? Sure. Yeah. Alright, here we go.



Emily Brock (28:25):

So the MSRB did stating the obvious, the SEC said MSRB, you've proposed this new rate card, which increases rates for the regulated entities. That's the municipal advisors and the broker dealers, not the issuers. However, when the SEC said, no, you can't make those increases, you've got to go back to the old rate card. That of course caught the issuer's attention because we said, well, that's interesting. Even though issuers are not subject to these fees in theory, then what that means is now there is an opportunity with the MSRB to not only have a conversation about the revenue side of their budget, but also the expenditure side of their budget. And that's where issuers really are concerned and where we ought to be concerned, because the MSRB's responsibility is to protect issuers and investors. And from our myopic standpoint, we look at the MSRB and we say, Hey, MSRB, you need to have the best and easiest repository for the information that we are giving you through Emma to tell our financial story to our investors.



(29:56):

And when we did talk with the MSRB about the expenditure side of their budget, we noticed there is significant increases in technology. And this kind of goes to the theme of the earlier part of our conversation. They have done transformational changes to where their data is housed from a static system to the cloud, which has taken a substantial amount of investment. But also there's a lot of other things that the MSRB has invested in to, I don't know, could be described by some as bells and whistles. Things that aren't necessarily the things that help issuers input information. It's other information. And so the question is, does that satisfy the MSRB's mission, which is to protect issuers and investors, or is it something that is maybe superfluous that then might be for those who are paying the bill or footing the bill, they might have a different interpretation of whether it is bells and whistles are superfluous or not.



Leslie Norwood (31:07):

Look, nobody likes paying their bills, right? So I don't think it's a surprise that the dealer community wrote comment letters pushing back on the rate card and fee changes when you look at the development of the rate card model a couple of years ago, because this was the first round that the rates were going to float in accordance with the new rate card model. It was done with the purpose to address historical reserves at the MSRB, which were becoming an issue for the regulated entities. The MSRB had a substantial amount of monetary reserves on hand. That was mostly dealer money. We were seeking a more rational level for those reserves. And they had gone through a process when they had a longstanding fee level to first rebate some of those new fees back to the broker dealer community. And that was problematic operationally in a number of ways, particularly in syndicate transactions.



(32:22):

And then they went and tried fee holidays, which dropped the fees to essentially zero for periods of time, again, problematic in other ways, really a smoother type of fee structure or change was thought to be beneficial for all in the market. And dealers are not permitted by MSRB rule to pass the fees along to issuers. But look, I think the development of the free rate card was good in terms of what it sought to do when it came around for the first reset. It was not anticipated that they'd hit the caps in multiple different fields. The operation of the reset I think was surprising to many. And I think the disapproval or the institution of proceedings on the rate card was also a surprise to many. And understandably, the m mssrp is going back and essentially looking at all of its fees.



(33:33):

I think one fee that is always being discussed by different regulators is market data fees. We do have a concern about that. That's a longstanding series of rules and litigation on market data fees, many pieces of data, the regulated entities are required to send to the regulator and we essentially have to pay to get it back. But when there is a significant markup on that, that is yet another tax just in a different format. So while that may be seen as a way to collect fees from other parties, it will also increase the cost for regulated entities. And it is, right now, our belief is the information that comes out of the MSRB is either free via Emma or at a cost level pricing, which has seemed to be very helpful up to now when you look at Finra, FINRA's got level fees for many, many years. And so it is interesting to compare and contrast the level of pushback on the different budgets and fee structures.



Lynne Funk (35:00):

Want to add anything Emily?



Emily Brock (35:01):

No, I mean it is pretty sticky right now. I think that what has occurred to us, and I think the whole market really is this was not something that had happened to the MSRB in decades ever in ever, ever. And so this is a pretty monumental declaration of the current chairman and the responsibility of the SROs.



Leslie Norwood (35:32):

There's been a significant uptick in the institution of proceedings in the muni space by the SEC?



Lynne Funk (35:39):

Yes, they're actually testifying before Congress right now to the health financial services about regulatory overreach. So we'll have to watch the recording of that. Okay. So anything else? We want to talk about regs? Are we good? Alright. I want to move on to the election. The tax exemption threats 2025. I'm not asking to make predictions about the election, but I'm curious what we both think about what the industry should be prepared for in terms of potential tax policy changes, particularly with some of the 2017 provisions that are expiring in 2025. Let's start there.



Leslie Norwood (36:21):

Okay. So in 2025, all the TCJA tax cuts and other tax items are all open for discussion ways and means just established 10 different internal committee tax teams that will be focused on the various parts of tax issues as we head into 25. Of course advocacy efforts will be focused on meeting with all of those offices starting now into 25. I really don't see raising taxes as a good thing regardless of who wins the election in November. That's not going to be seen as a positive for whoever wins. But we'll continue to work and educate on issues that are important to our broker dealer members, including our municipal securities members on the tax exemption, the need for finance to fund infrastructure in this country as well as tools such as advanced refunding, small issuer exception, and so forth. I think one big challenge is the amount of advocates that we've had in Congress that will be retiring or no longer running for reelection. And we've had a stable of former state and local officials in Congress that we could go to that we're familiar with municipal bonds and how infrastructure was funded at the state and local level. And I feel like we're losing some key advocates. And Emily, I don't know if you have any thoughts about that.



Emily Brock (38:03):

Yeah, I mean what's pretty astonishing is how many members of Congress are picking up their ball and going home. I think that there's a very, we used to think about it as retirement, but really now people are in mid-career in Congress in deciding they've had enough of this. And so it's hard for us to continue that sort of bipartisan push. But I want to go back to really quickly to what Leslie had said about the Tax Cuts and Jobs act. And remember that law passed in 2017 and one of the biggest, it was a 1.5 trillion package, but one of the biggest funders of that was the cap on the state and local tax deduction or salts. And so I know there's some New Yorkers in here. You guys are well aware. Certainly if you're in an urban area, certainly if you're in Washington DC you're well aware of the salt cap.



(39:00):

And the question is, does Congress and the complexion of Congress next year want to take that back up because in order to continue the tax breaks, so if you look at it, that 1.5 trillion bill was a lot of tax breaks at the expense of some pay fors. One pay for was salt, another pay for was advanced refunding in 2025. It's a little bit more complex. Salt is still on the table. Advance refunding is absolutely still on the table. And Leslie, I think you're right, there's probably not a lot of political consideration of raising taxes no matter what party is in power. But one thing that they do have is the potential for clawbacks of stimulus era grants and funding. And that's causing a little bit of consternation on our part because every time there is a discussion about, well, where will we find a pay for?



(40:01):

They'll say, well, what has been obligated and what hasn't been obligated? That's a natural knee-jerk reaction I think of the members of Congress to say, well, I give it to you so therefore I can take it the way. And that is a reality in some cases if the funds are obligated by the United States Treasury or the granting authority inside of the beltway. So there's a lot more things at stake now for the municipal space that are going to come to the fore in the middle of this rehashing of the 2020 2017 Tax Act. I don't know what clever name they're going to give it for 2025. But so far the presidential candidates have sort of postured interesting cliffs, like there are salary cliffs that don't want to be crossed or cliffs on tariffs that must be imposed. And so they're coming out and they're saying 10% here and 140,000 there.



(40:59):

And as we're thinking about all these different numbers that are being tossed about it is so much more complex than that. And it will be a process of educating the market. So the last thing I want to say is we are educated. We know the good things that the municipal bond does. We know, know the good things that are happening in our community. Congress tends to only get the sound bites of the bad stuff. And when they only hear bad things, those bad things beget bad policy. And so we think it's up to us right now. Certainly Leslie and I are taking charge right now on the Hill with the rest of the public finance network to do three things. Number one, we're going to get a broad market information out there so that everybody understands the complexity and the volumes and the way that we've used the market over the past 10 years.



(42:01):

Number two, and probably more important than number one. Number two, we are planning on storyboarding. So we're going to have at least two projects from every congressional district that we can go. We can advertise, we actually have built by bonds.com and built by bonds.org. So we're going to make sure that the story is told of good projects that are out there no matter who asks. And then the third thing, which I think is really important that certainly the bond buyers covered and I think in a very effective way is that the Office of tax policy in the United States Treasury, we used to have an officer there who was John Cross was his name. He was certainly our counsel when it came to tax exempt things and discussions. He was counsel of the United States Treasury. If Congress ever had a question about the tax exemption, he's gone and they never filled his spot. So if we're about to have another round of 2017 tax act and we don't have anyone inside of the United States Treasury, who knows what a bond is. I'm saying that colloquially, if we don't have somebody in the United States Treasury who cannot be the resource of information in the municipal market, then there's going to be a real problem on our hands. So we're certainly going to be advocating for that position to be filled. And we'll have someone hopefully before the 2025.



Leslie Norwood (43:29):

Yeah, I mean, certainly we'll be working with the office of State and local Finance on the policy side, but on the rule writing side, John was unique in terms of yet a career's worth of experience as 1 0 3 tax counsel on deals and saw many, many different types of structures and actually how they worked in the marketplace. So he is shortly missed.



Lynne Funk (43:53):

It was interesting, the first panel yesterday really was we're talking about how the muni market needs to tell its story better. And I think that's something that we saw last week at an FMA. So I think it's something that we at the bond buyer definitely try to get that news out there. But not everybody in Congress has a subscription to the bond buyer. So you all have your work cut out for you too. We have a couple minutes. You anybody have any questions? Oh, there is a microphone. Beth right there. Sorry, I forgot to remind you.



Audience Member (44:30):

Hi. So, just wondering what your thoughts are around emerging firms and how this new regulatory environment might be hurting women and minority owned businesses that are really trying to grow at this point, especially with the new trade rules and the like and what the potential impact might be.



Leslie Norwood (44:49):

Yeah, I think it's interesting that MSRB did release a request for comment on the impacts of its rules on small firms. We did respond to that the electronification of the market in different systems firms need to subscribe to vendor systems. Now data feeds, it's very expensive to enter the market and to keep track with all of the changes that are going on, not just with the rule set, but just access to the markets. And so certainly something that we're monitoring with our members, but as the marketplace has changed and larger players have exited the business, it has been also an opportunity for some smaller or super regional players to step up into that space that some of the wirehouses, or at least one of the wirehouses that's not in business anymore used to inhabit. So there's certainly other changes afoot that impact staff. The CO era relief on supervision, remote supervision is expiring May 31st.



(46:10):

And certainly we have been working with FINRA on that for an extended amount of time. FINRA's been working with the SEC and the state regulators. NASA MSRB is going to mirror what FINRA does. They have not been able or willing to take a look at the rule set and do a wholesale change in terms of the way people work now, which is very different than the way people worked pre covid. If you layer that on top of enforcement with off channel communications for people who need flexibility, and I think it's going to be an increasing challenge for people in the marketplace who need flexibility.



Emily Brock (47:07):

And I think for what it's worth, issuers are also participate in those requests for comments. And we're torn in some cases between having a regulation regime that helps protect the issuers of course, but also procurement pressures that require investments in utilization of small and minority women owned firms. And so we are, I would say, less torn, certainly more leaning toward more choice than necessarily more regulation. So that's just generally how we've taken that approach.



Leslie Norwood (47:49):

In the one minute trade reporting, there is an exemption for low volume dealers. However, the threshold is so low that it is really cutting out such a small part of the market that could be argued by the MSRB. They think it's a large number of dealers, but those dealers do so little trading volume that it doesn't hit the smaller dealers that are quite active in the market still.



Lynne Funk (48:16):

Okay. Well ladies, thank you so much. It was a great conversation. We appreciate your time and your insights, and thank you very much.



Leslie Norwood (48:23):

Thank you for the opportunity.