Chip Barnett: (00:03)
Hello, and welcome to another Bond Buyer podcast. I’m Chip Barnett coming to you live from the Bond Buyer National Outlook conference. I’m here today with Emily Brock from GFOA. And we’re gonna be talking about a lot of different things.

Emily Brock: (00:20)
It’s such a pleasure to be here. Thank you so much for having me.

Chip Barnett: (00:23)
Well, let’s get started right away. Let’s talk a little bit about infrastructure. Can you tell me what’s been going on in Washington and what you think is gonna be happening?

Emily Brock: (00:37)
Well, as, you know, Washington, hasn’t slowed down for quite some time since starting in 2020, and now here we are in 2022. Obviously in 2020, we had a series of stimulus plans that were in effect addressing the pandemic as it was upon state and local governments. And you know, many of the state and local governments were actually shouldering a lot of the costs of the pandemic. So we saw that coronavirus really fund come. We also saw an omnibus spending plan, which included emergency rental assistance come. And then in, of course in 2021, early 2021, we saw the Biden administration and a very quick address of the, to, to sort of polish off and round out the ends of stimulus funding and how that might be able to U to be in order to in effect, create recovery rescue and recovery. And, but also in tandem with that, as the Biden administration was addressing things through the American rescue plan act, they too had several campaign promises that they had made they were effectively working on in this new administration.

Emily Brock: (01:41)
And that includes infrastructure. Now, when the Biden administration, of course, was talking about infrastructure, they were talking about physical infrastructure, but they were also talking about human capital. They were talking about people as well as buildings and so that kind of created this, this formative stage from the administration’s perspective on where we could go with infrastructure called the American family plan and the American jobs plan, right? AFP AJ kind of was created sort of melded together, started a very effective bipartisan conversation between the by administration and Republican and democratic senators and together. They created the IIJA in effect. IIJA has created about $560 billion of new federal infrastructure spending that is specifically oriented to both, to both, um, federal funds that would be, um, formulaic in nature. So things expected, but also there’s a portion of it. That’s gonna be competitive. Now we don’t know exactly what those competitive grants are look like, but we certainly know that there will be many organizations around the country that will be eligible for those competitive grants.

Chip Barnett: (02:51)
Well, it sounds like they got started off on the right foot and they were moving ahead. What happened?

Emily Brock: (03:00)
So, you know, I think really what happened is it was a cost of dollars and cents. And obviously, you know, when you do have bipartisan senators coming together, you have a big group of senators coming together. It’s easy to sort of pick apart and talk about what the policy will be, but it’s so much easier to talk about what the cost will be. What’s your top line? What, what, what can you stomach, what is it that a senator’s office would be able to, to, to withstand and, and, um, and, and, and essentially pay for, to create this infrastructure plan for our country. And that became a major concern in the middle of the conversation. So are we talking a $2 trillion plan or a $500 billion plan? There were a lot of perspectives all over the map when they went into the closed room and, you know, Biden talked with a group of bipartisan senators and they said, what is your top line?

Emily Brock: (03:56)
Ultimately, the top line came to $1.2 trillion no more. So while you do have formula funds that are plus up, and those competitive grants, it couldn’t get any larger than $1.2 trillion. So what do you do when you have a top line number? Do you keep the very large policy actions and trim along the edge of the smaller costing things? Or do you keep all of the smaller things in and trim out the big stuff ultimately together? They decided on the very large chunks of money being inclusive in the, IIJA and unfortunately some of the smaller policy initiatives were cut.

Chip Barnett: (04:39)
What do you think the next step is?

Emily Brock: (04:41)
Well, so right now, in order to fund the I IJA, the Senate has to pass the spending bill that has been attached to the continuing resolution that funds the federal government. And theoretically, we are in an environment where it’s a lot easier is sort of punt it than it is to vote on a spending package that will last year. So, so far we have lived through two punts. We went from the end of last year to February 18th, and now there’s another punt, February 18th to March 11th is when we’ve been promised action on the continuing resolution. You know, I think the big question is, are people going to, are the senators going to want to create that spending plan? Are they gonna argue about the small stuff, or are they gonna create a plus up of the of the transportation spending of all of the infrastructure spending that of course leads them into is a next general election cycle? I would think they would like to have something to show. And so I think the real motivation is there to actually create the spending plan and vote on a continuing resolution that lasts longer than just a punt.

Chip Barnett: (05:56)
Do you think this is gonna happen quickly or slowly or….

Emily Brock: (06:01)
Yeah, well, I mean, primaries are coming up, so I think March 11th is gonna come and we’re going to see either action or inaction.

Chip Barnett: (06:14)
Besides infrastructure. We, what else have or your plate this year, or what do you think is gonna be important for you?

Emily Brock: (06:22)
Well, obviously we are looking at, the sole basis of what brings us together in Washington, D.C., which is the protection of the tax exemption of municipal bonds. You know, of course Congress has been looking at this massive spending package, there are other proposals that have come sort of around the edges of that. So for example, of course probably have seen or read that you know there are proposals regarding professional sports stadium in the tax exemption, there are also proposals regarding clean drinking water and the tax exemption, all of those things we’re staying on top of just to make sure we understand, those initiatives and, and where they might go and what they might be attached to. But I think, again, going back to sort of the original comment about it comes down to dollars and cents. If there’s a proposal that costs something, we just have to make sure that we understand where it can go and the outcome that it might have, of course, nothing to us is more important than of course, the tax-exemption, reinstatement of tax exempt advance or funding, again, a small price tag for our major effect across country, especially in 2022 in a rising interest rate environment.

Chip Barnett: (07:44)
And we’ll be right back after this important message. And we’re back. And I’m talking with Emily Brock of the GFOA.

Chip Barnett: (07:55)
If you were talking to Congressman about the tax-exempt advanced refunding, what would you say? Why would you tell them that’s important?

Emily Brock: (08:03)
So I think we come at it in a very fundamental way and our, again, just kind of thinking about the structure of the conversation. We first have to outline the basic difference between funding and financing. Yes. So we’re coming off of a period of time in the last two years where we do have a lot of funding measures that were passed for the, to help to assess state and local governments who were shouldering the cost of the pandemic. Um, those funding measures will last three years, tops, five years tops, even the, IIJA that has to be spent within a five year wind of passage. So it’s a very short period of time, but when you talk about financing, the market is there for our long term horizon. The market is there for 10, 20, 30, 40 years, which actually matches the, uh, the asset glass that you’re trying to mix to, to match the financing to. And so when we do talk with a Senate office or a house office, it’s a basic conversation, the difference between short term funding and long term financing, and, and the support really is needed on the tail end. At this point, we need for, uh, federal regulators or federal, um, uh, policy makers to make sure that they underpin a healthy and thriving, municipal bond market.

Chip Barnett: (09:28)
And I think in this sense too it would help out tax payers because it would save money for them in the longer on.

Emily Brock: (09:35)
That’s a great point. You wanna come to Washington with me?

Chip Barnett: (09:39)
Ha. I think I’ll just stay here in New York and in Miami. What else do you think is gonna be happening this year that we should keep in mind?

Emily Brock: (09:47)
Yeah, well, I mean, I think of course we’re watching the primaries. Um, that certainly is something that I think is of great interest, sort of anyone watching policy, because when you get into sort of the primary arena, then of course, they’re thinking, well, now it’s time to position myself for November. Now it’s time to position myself for January. There’s a record number of governors coming up for re-election as well. So we’ll be watching that and sort of the makeup of the states. In terms of a conclusive bill passage for this year, I think we need to look at probably September as being sort of the very last opportunity for policy action to happen. And so if there are bills out there that seek to preserve or extend or put tools back in the toolkit for issuance of municipal bonds, that’s sort of the hot deadline.

Emily Brock: (10:41)
And so we’ll be working with our champions, in both the Senate and the house to advance legislation that we have. For example, Terri Sewell out of Alabama, she is actually a former bond council out of Alabama, now Congressman in Alabama and she is our major sponsor of what’s called the Lift Act. The Lift Act —I like to call it the Trifecta — it incorporates full restoration of tax exempt advance refunding, the increase of the bank qualified debt limit from $10 to $30 million per borrower. And it also incorporates the Build America Bonds or the direct subsidy bonds again. So the Trifecta, there you go. If we were able to get the Lift Act across the door, then we would be good to go. However, we don’t have a companion bill in the Senate. We have two different companion bills in the Senate where Senator Wicker out of Mississippi and Senator Stabenow out of Michigan are sponsoring a bill that would allow for the full restoration of the tax exempt advance refunding and Senator Wicker and Senator Bennett out of Colorado are sponsoring a bill that would reestablish a direct pay subsidy bond. So we’ve got two different bills that we’re monitoring in the Senate right now that again, if there is an opportunity to attach them to, they are ready and waiting. So we’re very excited about the prospect of attaching these two types of text titles to whatever will move.

Chip Barnett: (12:18)
Well, we’re gonna keep our fingers crossed. Switching gears a little bit, can you tell me anything that’s going on in the regulatory area that you might be concerned about or are keeping an eye on?

Emily Brock: (12:30)
Yeah, I mean, so, yes, of course. I think in terms of, of the regulatory arena, when we talk about sort of the, the introduction of the Biden administration in 2021, um, you know, the one thing that we had to focus on of course is understanding his appointment of key regulators, including Gary Gensler. Chairman Gensler and the SEC. Now of course he has a huge job. I can’t even imagine how he sleeps at night, but, one thing that he made very clear, of course, even before he took office, was that his interest is in climate. There was a really quick RFC that Commissioner Lee put out and said, ‘Hey markets, can you tell us what you think about climate and what’s happening in the sort of climate arena?’ GFOA commented and a lot of other industry trade groups in the municipal bond market commented.

Emily Brock: (13:35)
And it became very clear that that kind of set the path for Mr. Gensler to come in and really think about climate. Now his focus of course has been in the corporate space, it really hasn’t been in the municipal bond space, but our goal as the main issuer organization representing who is in the municipal bond space is that our approach is an offense is the best defense. So if you know the SEC is curious about climate, we’d like to be able to have some best practices that both speak to practice in the market, but also maybe to the regulators that we understand what ESG risk based disclosures are, we understand how we might be able to articulate those risk based disclosures to investors. And then separately, if we are thinking about issuing a designated or a label bond, which could be a green or a social bond, we not only understand what that means, but also the associated disclosures that years might like to see should they be investing in those bonds as well.

Emily Brock: (14:39)

So, so, so yes, sort of responsive to the theme that’s happening in at the SEC, but I think it’s also, I’d be remiss not to mention that, um, the municipal securities rule making board is, is right now, has a request for information out. In fact, the comments are due on March 8th, which will be about a couple of days from now. And the request for information is pretty broad. They ask for information from issuers, they ask for information from investors, municipal advisor underwriters, and they’ve separated a lot of different questions about what, um, are members of the deal community. How are members thinking about ESG? You know, I’ll be of course, interested in monitoring responses to that as I’m sure the municipal securities we’re making board members are as well. Um, but I think it, it, it contributes to a broader general narrative of both a sort of a practical and a political approach to addressing climate in the markets.

Chip Barnett: (15:42)
Well, I want to thank you for taking the time and talking to me today. I was wondering if you had any last thoughts for our listeners.

Emily Brock: (15:49)
I’m just so pleased again, to have the opportunity to chat about this. I think what’s of course really important is that as we approach all of our policy issues in Washington, D.C., that it takes a village and that issuers together with all of our industry partners coming together to have a voice that is representative of millions of people and a $4 trillion market is very substantial. So if anybody feels energized about lobbying for any particular cause in the muni market, I would be very happy to work with them.

Chip Barnett: (16:29)
Emily Brock. Thank you very much for being here today at the Bond Buyer’s National Outlook conference.

Emily Brock: (16:35)
Thank you.

Chip Barnett: (16:37)
Thanks to the listeners of this latest Bond Buyer podcast, and thank you to Kellie Malone, who did the audio production for this live episode. And don’t forget to rate us, review us and subscribe at for the Bond Buyer I’m Chip Barnett. And thank you for listening.

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