Speaker 1: This is Coast to Coast. I'm Carol Masser and I'm
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Speaker 1: has been pretty solid here with lots of issues in
Speaker 1: all sorts. But what's going forward? We are broadcasting live
Speaker 1: in the Build America Mutual here in New York City.
Speaker 1: Well what could be joined as CEO of Build American
Speaker 1: Mutual Sean McCarthy as well as the Chairman of Build
Speaker 1: America Bob Cochran joining us right now and uh shan,
Speaker 1: let me start with you. Um, where do we see
Speaker 1: uh investors and muties and how is that changing from
Speaker 1: what we've seen maybe previous years. Well, you know, I
Speaker 1: think the investors are still and been the same for
Speaker 1: quite a while, and that is a retail investor, UM,
Speaker 1: and we see uh, the marriage between what municipal issuers
Speaker 1: are doing. Cities and towns are raising funds to build
Speaker 1: fundamental infrastructure, and those bonds are being bought by retail
Speaker 1: mom and pop people in states New York, New Jersey, California, UM,
Speaker 1: in order to support the construction of bridges, tunnels, roads
Speaker 1: and hospitals. I'm curious about the rate of activity that
Speaker 1: you're seeing, Bob, come on in on the conversation. I mean,
Speaker 1: I am curious. I drive around the roads here in
Speaker 1: the New York metro area. Man, there's a lot of
Speaker 1: infrastructure spending that could be done, and we're starting to
Speaker 1: see it on the on the airports. I am being nice, um,
Speaker 1: but are we seeing more investment in infrastructure, UM, because
Speaker 1: we're not seeing a ton coming out of the federal
Speaker 1: government right. Well, there's a tremendous amount of investment going
Speaker 1: on in infrastructure around the country. It's just not as
Speaker 1: much as we need, uh, the but it's growing. That's
Speaker 1: a year over year Association of Engineers have said we
Speaker 1: need what two trillion, We're two trillion behind or need
Speaker 1: to raise another two trillion, and infrastructure funding over the
Speaker 1: next ten years. We're doing about two hundred and fifty
Speaker 1: billion of that a year, and new money financing in
Speaker 1: the US municipal market, I think most people involved in
Speaker 1: the market would say it's got a lot more capacity
Speaker 1: than that. But the issue is really the ability to
Speaker 1: afford the infrastructure that we need and that how do
Speaker 1: we do that, because it seems to be, um, whether
Speaker 1: it's Republicans Democrats, most most people agree that we need
Speaker 1: to do the spending, and yet when it comes to
Speaker 1: actually putting some kind of formal plan in place, we
Speaker 1: never get the dollars that we really need. Well, you
Speaker 1: make you make a good point, Um, I'll say that
Speaker 1: over a long period of time, state and local governments
Speaker 1: have always, through sales tax and other local taxes, have
Speaker 1: been raising money to build infrastructure for a long time.
Speaker 1: And it's not just new money is the issue. It's
Speaker 1: really also making sure you continue to repair the infrastructure
Speaker 1: that you've got, whether it's bridges or tunnels or roads maintenance.
Speaker 1: It's maintenance as much as anything else. And so I'm
Speaker 1: from New Jersey, the state of Roads, so so you're
Speaker 1: helping to pay keep those roads. So but the real issue,
Speaker 1: if you think about it is what are you going
Speaker 1: to do to finance going forward? Now, the municipal market
Speaker 1: has been able to finance long term infrastructure, whether it's
Speaker 1: really really small transactions or enormous transactions like life in
Speaker 1: the in the Greater New York area. So it's a
Speaker 1: revenue stream that we need to look for, which is
Speaker 1: how do you either raise taxes or get support from
Speaker 1: somewhere else in order to finance these essential infrastructure projects.
Speaker 1: In December of nineteen eighty five, as a building we're
Speaker 1: in here, Better Park City was being completed, there was
Speaker 1: a billion dollars in musical bonds issue. It was the
Speaker 1: biggest month in the history of muni bonds that might
Speaker 1: be surpassed this month. That's correct. That's an amazing time
Speaker 1: for you guys. It was a previous tax bill, right
Speaker 1: and we'll talk to me about the impact of this
Speaker 1: tax bill. And so we see a lot of activity
Speaker 1: out of fear of what the tax will might have
Speaker 1: right where they want to get these deals out now
Speaker 1: because they might not be around to do that in
Speaker 1: in four or five weeks there. Right. Well, there are
Speaker 1: two major elements that are in doubt in the current
Speaker 1: tax bill. One is current refundings of existing financings excuse
Speaker 1: me m advance refundings of existing financings, and the second
Speaker 1: is private activity bonds. Perhaps so, the first advance refundings
Speaker 1: are an important source of efficiency and cost savings for municipalities.
Speaker 1: But if those deals don't get refunded between now and
Speaker 1: the end of the year, and that part of the
Speaker 1: bill remains, they'll get refunded at some future point. Uh
Speaker 1: the uh if we lose private activity bonds, although that's
Speaker 1: not a part of the activity of BAM, it's not
Speaker 1: what we ensure, but nonetheless it's a very important part
Speaker 1: of the market. It's the equivalent of what people call
Speaker 1: P three public private partnerships financed by tax exam bonds,
Speaker 1: and it would be a shame to lose that when
Speaker 1: we're trying to go positively in the direction of more
Speaker 1: infrastructure finance. To lose an efficient element of the market
Speaker 1: would be Unfortunately, why isn't why isn't infrastructure included more
Speaker 1: aggressively in this tax bill? Well, you know, it's it's
Speaker 1: a it's a twofold issue one or or which projects
Speaker 1: are federal issues, in which projects are state and local issues?
Speaker 1: And you're going to speak to a number of other
Speaker 1: people today that focus on the state and local part,
Speaker 1: which is where the vast majority of infrastructure, as you
Speaker 1: know it other than gets done. So if you think
Speaker 1: about it at them, what we do is we ensure
Speaker 1: municipal bonds to lower the cost of borrowing for these municipalities.
Speaker 1: But each local government decides which projects they want to do,
Speaker 1: they put them on the ballot. The voters usually approve
Speaker 1: the revenue stream, whether it's an increase in taxes or
Speaker 1: another revenue stream in order to pay that infrastructure project
Speaker 1: off of our long period of time, that's a long
Speaker 1: history of doing that and that works very well. The
Speaker 1: issue right now is that major infrastructure has to be
Speaker 1: done at the federal level. And you know when when
Speaker 1: the current administration got in, they identified a hundred big
Speaker 1: projects that needed to be done. And let's hope they
Speaker 1: get those projects a revenue stream so that they can
Speaker 1: come to market and get financed. But that's the big issue.
Speaker 1: It's not market access, it's a revenue stream in order
Speaker 1: to pay for them. You know. The unfortunate thing is
Speaker 1: that no one has figured out how to finance infrastructure
Speaker 1: for free. Yeah, well we are, we are going to
Speaker 1: have to pay for it, And the issue is whether
Speaker 1: you impose taxes today to pay for it now or
Speaker 1: whether you well you can you can essentially build infrastructure
Speaker 1: and pay for it off, pay for it over the
Speaker 1: twenty or thirty year useful life of that infrastructure where
Speaker 1: it actually contributes to positively to the economy and to growth,
Speaker 1: and pay for it with user ease or identified revenue. Strange,
Speaker 1: but it does have to be paid back. Finally, ask
Speaker 1: is there more of a piecemeal approach to the way
Speaker 1: because of the way that the borrowing is happening, that
Speaker 1: master planning isn't happening in a big way. Communities aren't
Speaker 1: being planned in a very large way, but small problems
Speaker 1: are being dealt with instead of big ones. Well, you know,
Speaker 1: everything starts at a small level. So if you think
Speaker 1: about certain projects that are done within a state, at
Speaker 1: the state level, they focus on some of the larger
Speaker 1: projects and then they work their way down all the
Speaker 1: way to schools. So what the issue is is making
Speaker 1: sure that the people in the community are focused on
Speaker 1: which projects they feel they need to finance, which ones
Speaker 1: do they need because essentially, so we don't have to
Speaker 1: go back to the days of Robert Moses and and
Speaker 1: bulldozing whole cities because of one person thought it was
Speaker 1: a good idea. I don't think so. I don't think so.
Speaker 1: I think that you know, what we do is serve
Speaker 1: building that really the sent projects that you live with
Speaker 1: day to day. When you get into the subway that
Speaker 1: was funded with municipal bonds, when you go to the
Speaker 1: US Tennis Center that was funded with municipal bonds, the
Speaker 1: hospitals should go to their funded with municipal bonds, and
Speaker 1: these are all essential municipal services that are fundamental to
Speaker 1: the way we live. And so at BAND what we
Speaker 1: do is two things. One, we're really focused on helping
Speaker 1: the small and medium sized issuers, cities and towns come
Speaker 1: to market and lower their cost of funding. And second,
Speaker 1: we provide financial transparency. So if you come to our
Speaker 1: website at build America dot com, we write a summary
Speaker 1: for every credit that we do, available for free. So
Speaker 1: if you are on a municipal bond investor and you say, boy,
Speaker 1: I want to look at a bond and figure out
Speaker 1: really what's going on in that city or town or
Speaker 1: that school district, we make that available for you. Interesting
Speaker 1: lots of transparency there to see you know exactly what
Speaker 1: you're investing into precisely. That's I love interesting instructure. I
Speaker 1: wish we had more time. We've got to but hopefully
Speaker 1: we can continue this conversation another time. Thank you very
Speaker 1: much for coming here. Thank you Sean McCarthy, chief executive
Speaker 1: officer at Bild America Mutual BAM, and also Bob cochrane,
Speaker 1: chairman of BAM, and we are here at BAM headquarters
Speaker 1: in New York City. We do want to talk about
Speaker 1: the city's Keep in mind that the municipal bond market
Speaker 1: preparing for a potential onslaught of bond deals. Corey talked
Speaker 1: about this earlier before the end of the year as
Speaker 1: a U S lawmakers consider pulling the tax break from
Speaker 1: tens of billions of dollars of debt issued each year.
Speaker 1: Let's get some thoughts on that and why the muni
Speaker 1: bottom market is crucial to US infrastructure investment. Kind of
Speaker 1: continue that conversation we just started. Clarence Anthony is CEO
Speaker 1: at the advocacy and lobby group National League of Cities,
Speaker 1: based in Washington, Right, Yes, that's correct, and the group
Speaker 1: represents thousands of cities, towns, and villages. But he joins
Speaker 1: us at BAM headquarters in New York City. Welcome blo
Speaker 1: A Radio. Thank you very much for having me year today.
Speaker 1: Tell us a little bit about who you guys represent
Speaker 1: and what you do. Yeah, we have a National League
Speaker 1: of City. We are the voice for cities all over America. UM, Cities,
Speaker 1: towns and villages, nineteen thousand of them, all kinds from
Speaker 1: New York City down to sop Choppi, Florida where I'm
Speaker 1: I didn't grow up there, but I'm from Florida and Ulida. Yeah,
Speaker 1: there's a city called Choppy Florida. UM. And and we
Speaker 1: make sure that the voice with the administration as well
Speaker 1: as with Congress, we make sure they hear the voice
Speaker 1: of city leaders. UM. And it's a big job. Right now.
Speaker 1: What's going in Washington? Yeah, let's talk Washington right now.
Speaker 1: And what does Washington want to hear from small communities
Speaker 1: and cities? Uh? You know, this administration has been unique
Speaker 1: in many forms, and I wonder what the reaction is
Speaker 1: to what small towns and and and big cities need.
Speaker 1: I think that what we have been focused on, it's
Speaker 1: trying to get the attention on the infrastructure plan for cities,
Speaker 1: um as Sean and Bob indicated. Um, you know where
Speaker 1: the rubber meets the road is in local governments where
Speaker 1: we control the road systems, the bridges, half a million bridges,
Speaker 1: you know, six airports. I mean, you can go on
Speaker 1: and on and on. And what we'd like to see
Speaker 1: is for Congress as well as the administration to focus
Speaker 1: on an infrastructure plan and allow us UM will give
Speaker 1: us a partner to deal with the cramble crumbling infrastructure
Speaker 1: in America. Clarence, I want to ask you something that
Speaker 1: I asked Um, Sean and Bob, and that is again,
Speaker 1: most people will say infrastructure spending, it's a good thing.
Speaker 1: It's a good thing for the country. It's probably a
Speaker 1: good thing for our economy. Uh. And yet when it
Speaker 1: comes down to it, we can't seem to get a
Speaker 1: massive project, certainly with some federal direction, federal support underway.
Speaker 1: You the group is in Washington. What are you hearing
Speaker 1: right now? Well, so we thought this was going to
Speaker 1: be an easy thing out of out of the gate
Speaker 1: when President Trump came in with his team, and yet
Speaker 1: here we are. There's no question we thought that we
Speaker 1: would have a partner in in trying to get infrastructure
Speaker 1: funded in America. UM. You know, UM, it's already been said.
Speaker 1: You know, we have a D plus in America infrastructure.
Speaker 1: I think that if if we really want to see
Speaker 1: our economy grow, we want to see communities grow and jobs,
Speaker 1: it's about the infrastructure, UH that creates those opportunities. We've
Speaker 1: not been able to at this point get that focus
Speaker 1: on infrastructure. Well, we're faxing fighting now with tax reform.
Speaker 1: Bill is trying to save the tax exemption on immuni bonds.
Speaker 1: We're trying to save the private activity bonds, or the
Speaker 1: new markets tax credits. You can go on and on
Speaker 1: those things that help local leaders invest and reinvest in
Speaker 1: their communities. We just want a tool box of things,
Speaker 1: money and funds to be able to UH deal with
Speaker 1: this deficit that we have in UM infrastructure. So we're
Speaker 1: we're a willing partner. We don't want to focused on
Speaker 1: all those other things that are happening in Washington. We're
Speaker 1: focused on what is important to cities. Well, are the
Speaker 1: needs of cities when it comes to lending right now
Speaker 1: substantially different than UH smaller municipalities you mentioned villages and
Speaker 1: sub choppy and the like. Are the needs of big
Speaker 1: cities very different or they're just bigger. They're just bigger.
Speaker 1: I meant to you, you need a tool box that
Speaker 1: would include muni bonds, private activity bonds, no matter the
Speaker 1: size of your city, because I'm because so one of
Speaker 1: the things I travel around the few cities I travel around,
Speaker 1: and they tend to be the same cities. But I
Speaker 1: spent a lot of time in San Francisco, has spent
Speaker 1: a lot of time in New York, has spent a
Speaker 1: lot of time in Los Angeles. Just got it back
Speaker 1: from Chicago last week, and I see a problem of
Speaker 1: homelessness that I haven't seen in my lifetime, including you know,
Speaker 1: in this city in the eighties. Uh. And it seems
Speaker 1: to be universal across all those cities, and I don't
Speaker 1: see it. You know, I was in Grand Rapids last week.
Speaker 1: I didn't see it. I've I've been an other smaller
Speaker 1: places I haven't seen it. And and it seems like
Speaker 1: that's a unique problem. Yeah, it is one of the
Speaker 1: issues that we're dealing with, and and it's very complex.
Speaker 1: I mean, maybe because you're veteran. Veterans homelessness is something
Speaker 1: that is a priority for the national Legal Cities and
Speaker 1: we've gotten mayors all over America competing to make sure
Speaker 1: that they get rid of veterans homelessness in their communities.
Speaker 1: But we also have the opioid problem that is causing
Speaker 1: many of the homeless issues that we're seeing, especially um,
Speaker 1: you know Corey in the rural communities of America, and
Speaker 1: and now that is becoming a major issue in the
Speaker 1: urban communities as well. So um, you also look at
Speaker 1: just the affordability for the millennials and the and the
Speaker 1: young folks that are coming out of college UH to
Speaker 1: be able to afford homes. So it's a very complex
Speaker 1: issue it but it exists in every city. You may
Speaker 1: not have seen it, but that issue because of the
Speaker 1: but there's opioids, whether it's UH inability to afford homes,
Speaker 1: affordability the captain originally course starts to play itself out
Speaker 1: with those people on the street in a major way.
Speaker 1: We'll talking with Clarence Anthony CEO of National League of
Speaker 1: Cities at headquarters in downtown New York. So you mentioned
Speaker 1: some of the provisions, if you will, in the tax
Speaker 1: overhaul legislation that's working its way through Congress. If indeed
Speaker 1: some of the benefits to the MUNI market are taken out.
Speaker 1: What do you think that would mean for cities and
Speaker 1: infrastructure spending. Well, first of all, it's the cost of borrowing.
Speaker 1: That's the first thing that would go up. And UM
Speaker 1: the cost of barring means that less investments and parks. Uh,
Speaker 1: they're going to have to look at their investment and
Speaker 1: police and fire protection because you're going to have to
Speaker 1: pay more money to build the infrastructure that we don't
Speaker 1: have a partner with at the federal level. So that's
Speaker 1: the first piece that we would have. UM. The other
Speaker 1: thing that UM it does, if it's strips UM the
Speaker 1: deduction or the pre empt from UNI bonds, what we're
Speaker 1: gonna have is um less investment in infrastructure periods, the
Speaker 1: community centers, UM, the airports. I mean, you go on
Speaker 1: and on. We use all of that in the water
Speaker 1: waste water systems in our cities. So UM just quickly
Speaker 1: just get twenty seconds. If if the economy grows faster, though,
Speaker 1: then might we see the spending is some of that
Speaker 1: kind of part of the equation what we see with
Speaker 1: the economy. Yeah, I don't. I don't think the economy
Speaker 1: will be able to make up for the difference that
Speaker 1: we will see for the cost in local governments to
Speaker 1: provide those services. So, um, it's a it's a difficult
Speaker 1: time now, but the National Legal Cities and Build American
Speaker 1: Mutual is partnering to make sure that we are getting
Speaker 1: the best solutions to leaders all over America. Let's hopefully
Speaker 1: listen Clarence Anthony, Thank you, Carol, thank you. Court So
Speaker 1: next case knows an awful lot about the sun. He's
Speaker 1: got a state perspective on muni bonds and infrastructure. Ben
Speaker 1: Watkins is Director of Bond Finance at the State of
Speaker 1: Florida Sunshine State. It is indeed here at BAM headquarters
Speaker 1: in Lower Manhattan. Been good to have you here with us.
Speaker 1: Thank you, good to be here. So what do you
Speaker 1: spend most of your day doing? Oh, thinking about the
Speaker 1: market and paying attention to themuni bonds and what does
Speaker 1: the market tell you right now and how it relates
Speaker 1: to Florida. Oh, so, interest rates are really great. They've
Speaker 1: been great for a decade. I've been I've been wrong
Speaker 1: for ten years waiting for rates to go Well, all happen, yeah, okay,
Speaker 1: And so we've been taking advantage of that by doing
Speaker 1: refundings to save save to lower our interest rate and
Speaker 1: save money for our citizens and tax How significant are
Speaker 1: those savings over the last ten years from my perspective, extraordinary.
Speaker 1: So we've executed about twelve billion dollars worth of refinancing.
Speaker 1: So we've refinanced over half of the debt that we
Speaker 1: have outstanding the last state. So that's extraordinary. And UM
Speaker 1: so savings level three billion dollars and so three billion
Speaker 1: is significant. Um And so we've been able to take
Speaker 1: advantage of historically low interest rates by refinancing all of
Speaker 1: our debt. Uh, are you done? We wouldn't be but
Speaker 1: for congresses proposal to out of the business. Do you
Speaker 1: want to squeeze stuff in before the end. You're going
Speaker 1: to try to accelerate things. That's inconsistent with our normal discipline,
Speaker 1: which is just take them as they come and take
Speaker 1: them in bite sized pieces. But given the extraordinary circumstances,
Speaker 1: we're gonna move a little up. So and I'm sorry
Speaker 1: you were saying about the what Congress is trying to do?
Speaker 1: What what's Congress is? What's the worst? Whats Congress is
Speaker 1: trying to do? Right now? So one of the proposals
Speaker 1: and tax reform that's both in the House and the
Speaker 1: Senate proposal is to eliminate our ability to do advance refundings.
Speaker 1: So what does that mean? That eliminates our ability to
Speaker 1: be able to refinance that a lower interest rates, and
Speaker 1: it impairs our ability to provide real economic savings to
Speaker 1: our citizens and taxpayers. That's what it does to us.
Speaker 1: So that three billion dollars, well, that's three billion dollars
Speaker 1: less we have available for investment in infrastructure. Why do
Speaker 1: you think Congress is doing this? I mean that much
Speaker 1: you come from that. They're misguided, that's my best answer.
Speaker 1: They don't understand and they don't necessarily want to understand.
Speaker 1: So you stop and think about it. So you know,
Speaker 1: it's all about the scoring thing, which is so think
Speaker 1: about this for a second. One point for trillion dollars,
Speaker 1: I mean, that has so many zeros I can't even
Speaker 1: count it. The impact of the amounts for funding. Yeah,
Speaker 1: well would you write that up on the board between
Speaker 1: between all of his fingers and toes, we can get there. Yeah, okay,
Speaker 1: So seventeen billion dollars is what this cost over ten
Speaker 1: years the federal government. That's what they say. That's how
Speaker 1: j c T and CBO scored it. So the new
Speaker 1: Joint Many Taxation score just came out, like literally just
Speaker 1: came out, and it says that the budget deficit that
Speaker 1: they've got the highest estimate for growth of any of
Speaker 1: the estimates out there, averaging point eight percent increase in GDP,
Speaker 1: and still they think the deficit is going to increase
Speaker 1: by more than a trillion dollars. Right, So here's my point, Charlie.
Speaker 1: So all that is is a game, that's a scoring
Speaker 1: game that's about the deficit. How big do we want
Speaker 1: the deficit to be? State and local governments. We're talking
Speaker 1: about true economic savings. We're talking about dollars that have
Speaker 1: to be charged our citizens and taxpayers to pay the
Speaker 1: debt service on our bonds to build infrastructure, and they're
Speaker 1: impairing our ability to do that. So this is real dollars.
Speaker 1: This is not just made up stuff inside the Beltway
Speaker 1: kind of gaming on scoring deficits. And that's how they're
Speaker 1: impacting us. Well, you know, Queer and I spend a
Speaker 1: lot of time talking with various guests about trying to
Speaker 1: understand why, you know, infrastructure spending hasn't really kind of
Speaker 1: gotten through, um Washington, especially when that was certainly a
Speaker 1: big push by President Trump. That is a big push
Speaker 1: of his And yet this provision maybe in this GOP
Speaker 1: tax overhaul bill, how do we reconcile that if he's
Speaker 1: for infrastructure, and yet you're saying that by this provision
Speaker 1: um in the tax bill, it's going to prevent maybe
Speaker 1: some infrastructure from happening, perhaps in Florida, cost you guys
Speaker 1: a lot more if you want to pursue this project, right,
Speaker 1: So think about it like this. First off, I think
Speaker 1: they're irreconcilable. I think they're diametrically opposed. I think you
Speaker 1: can say one thing and saying one thing and doing
Speaker 1: another thing to me is not being genuine and sincere
Speaker 1: about what you really what your priorities really find everybody,
Speaker 1: I would think. So, I think are you being heard
Speaker 1: in Washington? Absolutely with the with the proposal that we
Speaker 1: have today that's on the table today, that's gonna impair
Speaker 1: our ability to be able to lower our interest rate
Speaker 1: and save dollars. We have to balance our budget. This
Speaker 1: is not a game. It's dollars in equal dollars out.
Speaker 1: We're not inside the belt Way. We can't play foot
Speaker 1: seats under the table between the Federal Reserve and the
Speaker 1: Treasury and print money. And so if you if if
Speaker 1: if the cost to me is higher, that means there's
Speaker 1: necessarily going to be less of it. Um So, is
Speaker 1: there a fixed me? What are you doing to try
Speaker 1: to fix this problem? So I've written my congress lay
Speaker 1: all of this out right, um So, Senator Rubio and
Speaker 1: Senator Nelson and in an array of people at the
Speaker 1: congressional level, to explain this in a very simple way.
Speaker 1: Because people say, oh, wellmmunities are complicated. This is not complicated.
Speaker 1: I'd be happy to explain it to Chairman Brady and
Speaker 1: Chairman Hatch. I mean, you guys, I get him on
Speaker 1: the phone. I mean, so I sent this. I told him, Hey,
Speaker 1: we say, three billion dollars. This makes no sense at
Speaker 1: any level. It's inconsistent with your policy. It's going to
Speaker 1: result in less investment in infrastrates. And do we know
Speaker 1: that for a fact that it will? It will result
Speaker 1: in less investment in infrastructure by definition, Yes, it will.
Speaker 1: I mean that's the reality because you have less money.
Speaker 1: If you have less money, you're going to do less
Speaker 1: of it. What if the economy is coming along, doesn't
Speaker 1: help you, doesn't matter, doesn't matter why because certainly will
Speaker 1: help can afford it better. If so, you can do
Speaker 1: more pago right, But this eliminates our ability to finance infrastructure.
Speaker 1: I mean, that's really what we're talking about. And so
Speaker 1: when you think about it, at the local government level,
Speaker 1: we have dedicated revenue streams for specific things, for specific projects,
Speaker 1: water systems, sewer systems, electric utilities, schools, um roads. That's
Speaker 1: what we're talking about in terms of financing infrastructure. The
Speaker 1: debt associated with it has an interest rate associated with it.
Speaker 1: We have to pay for that before we turn the life.
Speaker 1: So what will happen if this provision is included in
Speaker 1: the final um tax overhaul provision? There will be a
Speaker 1: higher there'll be a higher cost basis that has to
Speaker 1: be passed onto the citizens and tax or projects don't
Speaker 1: get done or projects don't get done. Uh, this is dramatic.
Speaker 1: I'm surprised. I'm a little bit surprised given that your
Speaker 1: point about Republican governor to your position that, uh, you
Speaker 1: see a lot of problems with republic and tax bill. Well, so,
Speaker 1: uh completely agree. But I call it like I see it,
Speaker 1: Whether it's dear, it's our I'm magnostic about it. But
Speaker 1: so back to my point about you know, I I
Speaker 1: communicated this in a very simple, very straight forward, very
Speaker 1: understandable way to our congressional delegation and Senate offices. You
Speaker 1: know what I got back, crickets, not even the courtesy
Speaker 1: of a response. Right, So what do you do with that?
Speaker 1: So they're living in their own world and they don't
Speaker 1: really understand that the infrastructure in this country is financed
Speaker 1: by is paid for with step by state and local governments.
Speaker 1: It doesn't come out of Washington, d C. It's not
Speaker 1: money raining out of the sky. It's something we do
Speaker 1: and UM and the and the tool that we use
Speaker 1: to do this, of course is tax exempt bonds, tax
Speaker 1: advantage bonds, which makes it less costly to provide for
Speaker 1: the infrastructure for America. So the impairing our ability to
Speaker 1: be able to reduce our cost is inconsistent with his
Speaker 1: bad policy. Um usurps local control and it disrespects the
Speaker 1: partnership we have with the federal government on how infrastructure
Speaker 1: is built in this country. Then we've got a run.
Speaker 1: I like this conversation. I wish you could do finance
Speaker 1: for state of Florida. So a Rista says, when it
Speaker 1: comes to US, infrastructure funding is the problem, not capital.
Speaker 1: Christopher Hamill is head of Municipal Finance at RBC Capital Markets,
Speaker 1: joining us here at BAM headquarters in downtown New York City.
Speaker 1: Nice to have you here, a pleasure, So explain away. Well,
Speaker 1: you know a lot of the proposals that you hear
Speaker 1: about addressing infrastructure um developed more borrowing programs, and really
Speaker 1: the challenge for state and local government is not where
Speaker 1: to borrow, but how to pay it back. And so
Speaker 1: any meaningful solution going forward has to address the issue
Speaker 1: of where additional funding as opposed to financing, is going
Speaker 1: to come from. Does that mean we've exhausted the vast
Speaker 1: reservoirs of creativity for investment bankers. No, It just means
Speaker 1: that at the end of the day, any form of capital,
Speaker 1: be at municipal bonds which is my own expertise, or
Speaker 1: private equity or other forms of debt, have to be
Speaker 1: paid back. And so that the strain for state and
Speaker 1: local government to do more is to develop other sources
Speaker 1: of revenue by which they could uh finance their infrastructure.
Speaker 1: So great for the people who live in those areas,
Speaker 1: I feel like they're getting tough. But no, Chris, when
Speaker 1: you when you talk to folks around the country, what
Speaker 1: do they see as new areas of revenue sources to
Speaker 1: pay all this back? Well, I think the first obligation
Speaker 1: of government is to do more with existing resources. And
Speaker 1: so a lot of us smarter, be more efficient with
Speaker 1: they've got correct. And you see in the State of
Speaker 1: New York, Governor Cuomo advancing a concept called design Build,
Speaker 1: which is really not about financing, but how to build
Speaker 1: infrastructure at a lower cost. My firm commissioned to study
Speaker 1: on the Tapanzee Bridge, which is nearing completion and because
Speaker 1: because of Design build procurement, that was built for twenty
Speaker 1: less cost than a norm procurement method, and the New
Speaker 1: York State legislature has not yet given the City of
Speaker 1: New York the ability to use that procurement method. Wait,
Speaker 1: how does it work? Well, what it does is it is.
Speaker 1: What it does is combine the design aspects of building
Speaker 1: a project with the construction. And I don't know if
Speaker 1: you've ever remodeled your house, if you've hired an architect
Speaker 1: and then turned the plans over to the contractor, lots
Speaker 1: of times it doesn't work. And What it does is
Speaker 1: combine those two steps into a single um, a single
Speaker 1: party that performs both. So you design costs everything, and
Speaker 1: you say, the builder might say, actually, there's a there's
Speaker 1: a new kind of concrete you can use in this,
Speaker 1: or there's a new light bulb you could use there
Speaker 1: or whatever. Cisely, it integrates the two functions more efficiently,
Speaker 1: and it brings do you do that? Well? You know
Speaker 1: everything about seven or years ago in San Francisco and
Speaker 1: the building in the architect we spent a lot of
Speaker 1: time all of sitting together at early stages of the house,
Speaker 1: but also throughout the construction of the house. Right that is,
Speaker 1: that is what it takes, and that's what this procurement
Speaker 1: method permits. And so about forty states have it, but
Speaker 1: New York is one of the states that only applies
Speaker 1: that in a limited capacity. And I think Governor Cuomo
Speaker 1: has used it for five seven projects at the state level,
Speaker 1: but they don't have it yet at the city level,
Speaker 1: because I have to say, I come from New Jersey
Speaker 1: and grew up you know, and really works smoothly, but
Speaker 1: there's just but there's so much waste. You can see it,
Speaker 1: whether it's through bureaucracy so that the money isn't spent
Speaker 1: on the things, whether it's schools, whether it's bridges, whether
Speaker 1: it's roads. Sure, and and I genuinely believe beyond this,
Speaker 1: we're going to need more tax revenue. But I think
Speaker 1: you build the political tax out as I can be
Speaker 1: and getting ready for a lot more taxes because of
Speaker 1: tax overhaul. And and so if you convince voters taxpayers
Speaker 1: that you're using existing dollars efficiently, um, they might be
Speaker 1: more open minded about pony and appetitional funds to build
Speaker 1: more projects. I don't mind smart spending precisely. And I
Speaker 1: think that's a bipartisan belief. Yeah, well, I mean smart,
Speaker 1: I mean, of course it is. I mean it's easy.
Speaker 1: It's like the differesting major and minor surgery, minor surgeries
Speaker 1: on me on you major surgeries that they start cutting me.
Speaker 1: But uh, you know, and I think that's true of
Speaker 1: of programs and two. But uh, is there a sense
Speaker 1: though that you know that there's One of the arguments
Speaker 1: that Republicans have put forth with this tax bill is
Speaker 1: that if in fact that it would of state local
Speaker 1: tax deductions, for example, and other deductions, it will force
Speaker 1: municipalities and cities or governments, state governments in particular to
Speaker 1: lower tech, to spend less, do less, and cut taxes. Um.
Speaker 1: That seems like a pushing on a string. The kind
Speaker 1: couldn't agree with you more. I I think for stay
Speaker 1: in local government. Um, particularly the House bill is very
Speaker 1: much headed in the wrong direction. That it's it's going
Speaker 1: to put more strain overall on their budgets, and that
Speaker 1: is going to hinder what I think everyone believes that
Speaker 1: the country needs to be doing more on infrastructure, and
Speaker 1: the House build really is a non starter for any
Speaker 1: meaningful infrastructure policy discussion next year. You know, I'm assuming
Speaker 1: you spent some time in Washington. We just talk with
Speaker 1: Ben Watkins. Um, I'll just stay to Florida. He's a
Speaker 1: really smart guy. He's a lot of fun. I have
Speaker 1: to tell you. We've got a bunch of viewer responses too,
Speaker 1: are like, Amen, what do you have to say, especially
Speaker 1: about the frustration and getting caffeine after two Um, but
Speaker 1: frustration with people in Washington hearing what really needs to
Speaker 1: be done on the ground. What are you here from, folks? Well,
Speaker 1: we just got about very quickly what what the federal
Speaker 1: government needs to do is broaden the options available to
Speaker 1: state and local government with with remembering that you know,
Speaker 1: seventy of the infrastructure spend every year comes from state
Speaker 1: and local government. Infrastructure is really a state and local function.
Speaker 1: And what the federal government needs to do is create
Speaker 1: policies that allowed them to do more, not try to
Speaker 1: federalize those projects. And and Ben is one of those
Speaker 1: really smart guys who know how to run an infrastructure program. Yeah, fascinating.
Speaker 1: I was telling him. I was down when Port of
Speaker 1: Miami when they were building the tunnel and watching the
Speaker 1: crane's come in from China and out in the water,
Speaker 1: and it was pretty fascinated. That was a public private
Speaker 1: partnership and interesting to see it get done. We had
Speaker 1: to run. Thank you so much. Thank you. Chris Hammill,
Speaker 1: head of municipal Finance at RBC Capital Markets here at
Speaker 1: the headquarters in New York City. This is Bloomberg Radio.
Speaker 1: It's talk about municipill finance problems. Puerto Rico. It's got
Speaker 1: to come to the top of the list when you
Speaker 1: look across all the parts of the United States that
Speaker 1: are having issues. But perfect person talked about that and
Speaker 1: more about what we're learning about the issues as it
Speaker 1: relates to municipal finance and the infrastructure built up can
Speaker 1: hide charge on this right now. He was the director
Speaker 1: of the U. S. Treasury Department's Office of State and
Speaker 1: Local Finance, exactly the guy in the government who should
Speaker 1: know how to make these things work. Now he's with
Speaker 1: Ernston Young uh and and so glad to have you
Speaker 1: here with us. UM, let's talk about Puerto Rico. Puerto Rico.
Speaker 1: We've we've done a lot of stories about Puerto Rico debt.
Speaker 1: We've had Kate Long on the show talking about that.
Speaker 1: Who's who's so uh laugh, you know Kate, and she's
Speaker 1: she knows this stuff so well. Has been so helpful
Speaker 1: to us to understand it. But after Maria, uh, it
Speaker 1: seems like the problems of Puerto Ricos has had have
Speaker 1: They've been blamed for those port problems going into it.
Speaker 1: We're not able to get around them to solve these
Speaker 1: problems that are coming up after since the hurricane. Listen,
Speaker 1: we had a wonderful lunch today at the Municipal Forum
Speaker 1: where Ben Watkins described how are as a country we
Speaker 1: respond to disasters and it's a bottoms up approach. Um,
Speaker 1: it's local and state government's working together. They're on the
Speaker 1: front line and the federal government is their partner from
Speaker 1: a funding point of view, and it takes that capacity
Speaker 1: to respond when you have a government that's under the
Speaker 1: stress like Puerto Rico is. UM a storm of this magnitude,
Speaker 1: the worst in ninety years. UM. It really unveils um
Speaker 1: the lack of capabilities in this kind of area. Running
Speaker 1: a government every day is hard, but running it with
Speaker 1: the situation that they're in now is extremely difficult. And
Speaker 1: so I think we're in uncharted waters in terms of
Speaker 1: the role of state and local government in Puerto Rico
Speaker 1: versus federal government and and who has which responsibility and
Speaker 1: how to allocate that properly. So do we need to
Speaker 1: can kind of rethink the relationship and responsibilities between the
Speaker 1: federal government of the United States and Puerto Rico. Well,
Speaker 1: we did that and Congress did that UM in June
Speaker 1: of two thousand and sixteen, and it's called Promisa, which
Speaker 1: was an unprecedented piece of legislation. Other than Washington d C.
Speaker 1: The federal government has never come in and imposed a
Speaker 1: financial oversight board over our government. UM. And in return
Speaker 1: for having access to debt restructuring authorities. So that was
Speaker 1: pre hurricane. UM, now we have a situation where um,
Speaker 1: the federal government will have to respond with billions, if
Speaker 1: not tens of billions of dollars UM going in to
Speaker 1: rebuild Puerto Rico. It's now truly a humanitarian crisis. We
Speaker 1: saw some numbers today about death just people dying in
Speaker 1: the in the country, and that the compared to the
Speaker 1: statistical average in recent months. We've seen over a thousand
Speaker 1: people die in the last month in hurricane who might
Speaker 1: not have otherwise because the conditions there. Uh. I have
Speaker 1: not been to Puerto Rico since the hurricane, but many
Speaker 1: of my friends have, and UH, it's extremely extremely disturbing.
Speaker 1: But I guess what I would say is, I think
Speaker 1: what Washington is talking about now is how are we
Speaker 1: going to respond in terms of this aid and is
Speaker 1: there going to be a plan and who is going
Speaker 1: to have input and ultimately who is going to um
Speaker 1: have final say on what that plan will be. And
Speaker 1: I think, um, there is no question given the dollars
Speaker 1: that Washington has to spend in looking at a number
Speaker 1: like right now, well that's the that's the governor's number. Uh.
Speaker 1: There are still technical damage assessments underway. It will be
Speaker 1: some time before we know the exact number, but it's
Speaker 1: a big number. I mean Bernie Sanders said, it's what
Speaker 1: should be the future of Puerto Rico. Well, uh, once
Speaker 1: we get past God forbid, you know, God hoping we
Speaker 1: get through this much more soon, the crisis that's there.
Speaker 1: But what should be the future of Puerto Rico. Well,
Speaker 1: the future of Puerto Rico has to be a fiscally
Speaker 1: well managed territory with an economic future. How do you
Speaker 1: get there? And second thirdly, there has to be ultimately,
Speaker 1: in my view, a resolution on status promessa. Specifically because
Speaker 1: of the politics of the situation, we said, let's put
Speaker 1: status aside until we can fix the fiscal situation and
Speaker 1: get the economy growing. Um. But the real question is
Speaker 1: what is the economic rationale uh for Puerto Rico? And
Speaker 1: how many people on the island uh support that economic rationale?
Speaker 1: And I think there was the people Portico getting a
Speaker 1: vote in Congress. Well, no, that's the issue of status
Speaker 1: and and uh, I think you know, the country is
Speaker 1: responsible for allowing, um, the situation in Puerto Rico to
Speaker 1: be in this um no man's land for decades. Um. Yes, Ultimately,
Speaker 1: we have to make a decision about how we're going
Speaker 1: to treat our territories as US citizens in the country. Uh,
Speaker 1: and and and just finally here, um, it sounds like
Speaker 1: also this tension between the governor of Puerto Rico and
Speaker 1: and and the and watch you to as part of
Speaker 1: the problem deciding who's going to be responsible. Yes, I
Speaker 1: mean there are many players and and there's the administration,
Speaker 1: and there's probably not a uniform voice in the administration
Speaker 1: on the issue, whether it's FEMA or HUT or Treasury
Speaker 1: O m B. And there's Congress and so uh, there's
Speaker 1: going to be an opportunity in the coming weeks with
Speaker 1: a supplemental appropriations bill UM that will affect both Florida, Texas,
Speaker 1: Puerto Rico in California to address this issue. What is
Speaker 1: the amount of money that should be spent and how
Speaker 1: should it be spent and who should make those decisions.
Speaker 1: We have to run, but I hope we could talk
Speaker 1: in the future. Kenichi, He's strategic advisor and Earnson Young's
Speaker 1: Transaction Advisory Services team here at BAMA headquarters move around
Speaker 1: most gray promotion up the later moved on can you
Speaker 1: move like they do? I've never seen anyone move that
Speaker 1: fast hard people. Let's move to get a purpose is
Speaker 1: called movers and shakers. They cost a little more. That
Speaker 1: name cracked me up. Bloomberg Markets Movers and Shakers with
Speaker 1: Carol Masser and Corey Johnson on Bloomberg Radio. All right, everybody,
Speaker 1: time for your movers and shakers on this Thursday afternoon.
Speaker 1: Carol Masser along with Corey Johnson, we are live in
Speaker 1: downtown New York at BAMA Headquarters. We'll get more on
Speaker 1: the MENI market infrastructure spending in just a moment. First up, though,
Speaker 1: SNP five hundred, three hundred seventy seven names in the
Speaker 1: index higher today. We had quite a rally on Wall Street. Uh,
Speaker 1: we have hundred and twenty seven names lower, one unchanged.
Speaker 1: Let me talk about Kroger, the second biggest gainer in
Speaker 1: the SNP five hundred shares of Kroger up more than
Speaker 1: six percent, up a buck forty eight to t eighties
Speaker 1: six is share that stock though still down seventeen Well, Kroger,
Speaker 1: which was up as much as fourteen percent, almost fourteen percent,
Speaker 1: and it's highs today's yeah, I mean ended up up
Speaker 1: six percent, so it pulled off substantially, but U Kroger,
Speaker 1: even as we see competition heating up UH in the
Speaker 1: grocery industry. UM this company which has been battered for
Speaker 1: months by pessimism after Amazon UM bought Whole Foods, and
Speaker 1: it's been pushing right fiercely into this industry. It jumped
Speaker 1: the most in almost twenty five years after the company
Speaker 1: posted corey same store sales that beat estimates. Kroger also
Speaker 1: sees sales growth continuing in the fourth quarter, so some
Speaker 1: upbeat news and that stock just shooting up. Roger shares
Speaker 1: are up the first of October, so about the time
Speaker 1: that you could walk into a store. UH, the Whole
Speaker 1: Foods owned by Amazon, Kroger shares started rallying and they've
Speaker 1: been rallying ever since. I was just trying to look
Speaker 1: at the gross margins for Kroger because it was such
Speaker 1: an interesting part of this story. H gross margins were
Speaker 1: covering to positive numbers one percent after the first positive
Speaker 1: numbers in in in three quarters. Michael's stores Michael's stock
Speaker 1: up there all the time. Well, I do a lot
Speaker 1: of scrap booking, as everyone knows. I spent a lot
Speaker 1: of time with the scrap books and putting into books.
Speaker 1: That's what scrapbooking is, right, Just take junk and his
Speaker 1: stick in books. Well, it's helping. It's helping Michael's third
Speaker 1: quarter earnings, a very strong same storece sales have one
Speaker 1: percent of squanderial improvement, a transluctor to continue into the holidays,
Speaker 1: or such as the guidance after the call higher priced
Speaker 1: seasonal items. Of course, good for them. Uh, and you
Speaker 1: know it's really good for Michael's. Is your daughter into
Speaker 1: this slime? Has this slime thing is driving sales at
Speaker 1: Michael Yes, you can buy stock and slime. And look
Speaker 1: at Michael's stores. Michael Stores stock rallying on this tremendous
Speaker 1: sales of slime in the quarter and all the slime
Speaker 1: stuff stock up eleven point six percent, closing because of slime.
Speaker 1: How come I didn't get on that. This It's another one, right, Stair,
Speaker 1: I me in the face. You missed bitcoin too. I
Speaker 1: did a bitcoin interview for your San Francisco's missed what?
Speaker 1: I got a text message from a friend of mine
Speaker 1: who said he opened up a coin based account and
Speaker 1: forgot to put the five thousand dollars into it that
Speaker 1: he meant two years ago. He knew he didn't, but
Speaker 1: it's like I was gonna put five thousand. It's what
Speaker 1: he usually do with a new investment. Would have been
Speaker 1: worth five thou dollars today. Oops. Yeah, note to self,
Speaker 1: don't do that again. I'm sure he did. CBS fourth
Speaker 1: biggest gainer in the SMP five hundred shares of CVS
Speaker 1: Health at four point four percent, more than three bucks
Speaker 1: at seventy six sixty a share in today's session, still
Speaker 1: down about three percent this year. His health nearing an
Speaker 1: agreement to buy Health Insured ETNA for more than sixty
Speaker 1: five billion dollars, according to a person familiar with the negotiations,
Speaker 1: Did I miss that that deal actually got done up?
Speaker 1: I'm just looking to see if I missed a headline
Speaker 1: so said to me. Near to buy Health Insurre ETNA
Speaker 1: for more than sixty According to a person familiar with
Speaker 1: the negotiations, it's a deal that could reshape the pharmacy
Speaker 1: and health insurance industries, and an announcement could come as
Speaker 1: soon as this coming Monday. But we'll have to see.
Speaker 1: CBS likely to agree to pay at least two a
Speaker 1: year for ATNA, with more than paid with for are
Speaker 1: paid for with cash I should say talks could though
Speaker 1: still fall apart. All right, let's get to the volatility index.
Speaker 1: It was exciting for the volatility index. Are typing the
Speaker 1: VIX into my Bloomberg terminal. I go to the VIX index,
Speaker 1: get out up six point four percent, so a rise
Speaker 1: of six point even at the final closes at six
Speaker 1: point six percent, but close to eleven forty one. And
Speaker 1: by contextually, we are the VIXED trading a below ten
Speaker 1: for uh, you know, four of the last six days,
Speaker 1: but today up to eleven forty one, six point four
Speaker 1: percent right now after six point seven percent yesterday. So
Speaker 1: we've had four games in the VIX and the VIX
Speaker 1: across on tunday moving average as well. This is Bloomberg. Alright,
Speaker 1: Dave here, my name is Dave. Just what do you
Speaker 1: think you're doing today? We're going for Dave. We're talking
Speaker 1: to Dave. Dave Wilson are stocked with his stock of
Speaker 1: the day that would be at home group. It's what
Speaker 1: you get when you put together furniture and home furnishing. No,
Speaker 1: definitely not pro absolutely not. We're talking about a company
Speaker 1: describes itself as a home de course settler. I just
Speaker 1: love that this company exists. Given what at Home was
Speaker 1: the dot com bubble, Well there go. I mean the
Speaker 1: company that we now know as at Home operates more
Speaker 1: than a five stores, each one offering more than fifty
Speaker 1: thousand items for sale. At Home has been around since
Speaker 1: nineteen seventy nine and went public in August of last year.
Speaker 1: The ticker, as you might expect, his Home. The initial
Speaker 1: public offering was made of fifteen dollars a sheriff. Two
Speaker 1: months of struggling to stay above that price, the stock
Speaker 1: began rising this past April. Today, at Home climbed to
Speaker 1: a record after fiscal third quarter results were well received.
Speaker 1: Report came out late yesterday. Revenue beat the average analyst
Speaker 1: estimate in Bloomberg survey by the widest margin since the
Speaker 1: I p O. Sales growth that stores open more than
Speaker 1: a year accelerated for a third straight quarter. Earning surpassed
Speaker 1: estimates as well. Now that trifecta sent at Home surging
Speaker 1: seventeen percent. That was the second biggest game ever for
Speaker 1: the stock. The largest followed the release of first quarter
Speaker 1: results in June. Put it all together, and today's advance
Speaker 1: brought these stocks games since the I p O to
Speaker 1: eight four all right, Dave Wilson. Thank you so much,
Speaker 1: Bloomberg SACS commas Dave Wilson with his stock of the day.
Speaker 1: Thanks for listening to Coast to Coast. You can subscribe
Speaker 1: to this podcast on iTunes, SoundCloud, or Bloomberg dot com.
Speaker 1: You can also listen to our radio show weekdays two
Speaker 1: o'clock Eastern only on Bloomberg Radio and follow us on Twitter.
Speaker 1: She's at Carol Masser, I'm at Corey TV. No't