I recently had the pleasure of attending my first in person conference since the last one I organized in February of 2020 in Texas. I have a reinvigorated understanding of why conferences in person should be appreciated. The networking was fantastic. People were really excited to see each other. The speakers provided a strong depth of understanding about current market and credit conditions. All the individual side conversations provided insight into what is really on the minds of industry participants. Smith’s Research & Gradings was taking a small gamble holding an in-person event, but they won big. The conference was well organized, and the topics were those that everyone has been focusing on since March 2020. One of the more minor amusements was the discussion of ESG on every panel with no intentions of denigrating the topic. The industry is maintaining discipline while lamenting the lack of supply and the effects of low rates. It was beneficial to experience all the thought leadership directly with no filter.
The candid appraisal of industry developments became a bit more challenging when it came to parsing what is transpiring on the Hill. Of course, we all desire a completed infrastructure bill. It just appears to be increasingly clear that we should add to the list of failures of our representatives an inability to compromise. One would think that is the primary reason why anyone would be in D.C. in July.
I do agree that how to pay for the program is critical. The nation cannot wing it and just have the national debt support the program with no clearly identified revenue streams. There now appears to be less resistance to applying unspent Recovery funds to the program. Many are skeptical whether increased I.R.S. audits will produce the forecasted revenues. Broad based revenue increases appear to be anathema. What remains available on the revenue side that would be able to produce the significant revenues that are required? There are no easy answers. Even extending the session does not appear to be sufficient incentive to lead to late in the process progress.
It is sad to see the attacks on mass transit that are being waged once again. The systems have been essentially bailed out with federal aid in the short term but more needs to be done to keep these systems viable when the federal aid is curtailed. The debate over the allocation of funds to mass transit has a long history. Even a President I admired, Ronald Reagan, was not especially inclined to increase aid for mass transit and may have preferred to cut the existing level of aid at the time. Yes, it is true that Covid-19 put folks back in their cars and many joined them who did not use the automobile as their primary mode of transportation beforehand.
If we care about climate change and air quality, supporting mass transit is even more essential. There is also the discussion about the pricing of mass transit. It is true that the farebox only accounts for 35% or so of the cost of a trip with subsidies accounting for the difference. But there needs to be a sensitivity to the potential implications of the elasticity of demand. If the fare pushes too high, people will retreat to their cars. Is such an outcome desirable currently?
We should be able to approve a bill with a split that mirrors the existing levels of support for mass transit and seek more support subsequently even if this approach is not ideal. The regional splits on transit will never be resolved other than the fact that more resources are being dedicated to highways over time. Do we really want the consensus that has been worked on to fall apart when we are closer to completion than at any time in recent history?
Participants in the municipal market buy into the fee for service concept broadly. Congress should be able to do the same.
John Hallacy
John Hallacy Consulting LLC
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