Engineering Influence from ACEC

The Ins and Outs of Choosing Insurance with the ACEC Life Health Trust

 
John Krebsbach with ACEC Life Health Trust joined the podcast to recap the August 26th webinar, Health Insurance 101 and discussed the many options offered by the Trust to help engineering firms take care of their employees.
Transcript
Host:
Welcome to another edition of Engineering Influence a podcast from the American council of engineering companies brought to you by the ACEC Life Health Trust. And today we are featuring the life health trust. I want to introduce John Krebsbach. He is the director of sales for the Trust. And recently the Trust just finished off our R3 sponsored webinars series. It was the final in a series of webinars that have been sponsored kind of as a service to members in response to COVID-19. And the webinar took place on August 26, then it's available online. We'll link to that in the show notes, but really the webinar focused on insurance plans and something which is I'm sure, a mystery to many people who are very busy running their firms, very busy, making sure that their employees are happy and may not have the direct exposure to what insurance plans are meet up above or why it's important, or how do you choose one. So having John on the show is great today, because he can kind of expand on what was discussed in the webinar a little bit, but also give some good information about insurance plans. So John, thank you and welcome to the show.
John Krebsbach:
Hey Jeff, thanks so much. Appreciate you and ACEC National having me today. You know, I, I'm always really excited to have opportunities like this, Jeff, to provide the value of the ACEC Life Health Trust to all ACEC member firms and prospect firms. But thanks for having me today. My name is John Krebsbach. I'm the national director of sales for the ACEC Life Health Trust, a little background I've been with the trust for just over two years and prior actually spent over 10 years at United Healthcare. And most of my time at United Healthcare, believe it or not was working with the trust. So I've I've been around the program for quite some time.
Host:
Yeah. And the Trust has been around for quite some time as well. I know a lot of our members are familiar with it, but for those who aren't, I mean really it's a 55 year anniversary this year for the Trust. And can you go a little bit more into kind of what the trust is focused on, what the mission is and why it's so important and tailored for the engineering consulting industry?
John Krebsbach:
Yeah, absolutely. And thanks for, thanks for calling that out. Like you said on May 1st, actually May 1st of this year, the ACEC Life Health Trust celebrated 55 years of supporting ACEC member firms. And we're, we're extremely privileged to continue that role. It's, it's clearly stated in our mission, which, which we feel is very simple. You know, we're the ACEC Life Health Trust is here to provide healthcare benefits, solutions, and services to support the business objectives of ACEC member firms and the health and wellbeing of their firms, employees and family members. You know, I think you could argue the ACEC Life Health Trust, Jeff, is one of the biggest benefits of being an ACEC member.
John Krebsbach:
You know, I also, we believe our vision along with our mission, our mission is very compelling, you know, with, so well, I'm sure we'll get into it here. With all of our programs, medical, ancillary value added services, we, we really feel we can establish the consulting engineering industry as one of the healthiest industries across the U.S.
Host:
And you the trust, I mean recently right as the pandemic was kind of hitting its peak did something for its members, which was very beneficial. And that was that $10 million loyalty credit. What was that?
John Krebsbach:
Yeah, that's something that myself and rest of the associates at the Life Health Trust are very proud of, you know, this, this is an example in my opinion, Jeff, that just screams our mission in really being there for our member firms. So, you know, back earlier this year, when, when everything was going on the board of trustees Pat Fayen, president of the ACEC Life Health Trust approved, like you said, over $10 million in a loyalty credit that was given back to all of our member firms as a one-time invoice credit on August 1st. So we're, we're very excited to have the opportunity to give back to our member firms in that loyalty credit. And again, a piece that really lives by our mission of being here and giving back to our member firms.
Host:
Well, that's great, John, and I know that the trust has done a great job trying to keep members informed about different aspects of insurance and the services that the trust provides. And you've done a number of webinars for ACEC in the past. And of course the one that just happened recently on the 26th of August was how to buy insurance 101. Go a little bit into what was covered in that webinar, you know, for our members that that is available online on acec.org and the education area of the site, you can go back and see that on on demand, but what was, what was the main focus there and the big takeaways?
John Krebsbach:
Yeah, you're right. It was really how to buy insurance one-on-one piece. You know, insurance costs are among the top three expenses that a business takes on each year. And you know, what, what may have seemed simple in the past, Jeff with limited options has now become at times confusing as far as what plans and programs are available out there for each state, for these businesses. So the webinar from last week, which you referenced, allowed us the opportunity to break down the steps, to really understand how to purchase the right specific insurance plan for your firm.
Host:
And one of the things that I know was covered was, was what makes up an insurance plan. And I I'm guilty of this. I, you know, don't pay as much attention to this as, as I probably should. And I don't really spend time thinking about how plans and premiums are calculated and really what goes into them. Can you go a little bit into how those plans are and the premiums are constructed?
John Krebsbach:
Yes, absolutely. You know, you're looking at roughly four categories when it comes to insurance premiums, you know, those, those four different buckets that we're looking at are you know, we look at the expected medical and pharmacy claims for a specific firm. There are obviously administrative expenses which include taxes and fees. You have a profit risk margin, which is really looking at the amount of risk which I can kind of get into here a little later of how much the employer wants to pay. And then at the end of the day, it's really trying to figure out the premium, what is the per member per month pricing? You know, I think it's, there's a huge benefit. Jeff looking at the ACEC Life Health Trust in that we have multiple plans and programs available to ACEC member firms. You know, we're not just locked within one specific plan design.
John Krebsbach:
So we really have the ability to quote fully insured through United Healthcare. We have our, which was talked about last week on last week's webinar, the select level funding program, which utilizes Meritain the TPA and Aetna as the network on the ACEC select level funding plan. This plan is available in 33 of the 50 States. And then we have our, our advantage plan, which is available to firms that are typically over 100 employees in size and are currently self-funded or looking to move self-funded. So, you know, now all these programs aren't necessarily available in all states. But like I said, Jeff, there, there are many states where you could technically request a proposal for all three of these programs, which again, I think is just a huge benefit of the life health trust,
Host:
That scalability, right? It's that ability to be able to go and say, you know, how big is your firm? What are your needs? You know what exactly absolutely. You know, what's the level of covers that you want to have and how you want to structure that you guys can really focus in and design a plan that meets the needs of the firm.
John Krebsbach:
Absolutely.
Speaker 2:
So as it goes with, with insurance, I mean, I know you mentioned like, you know, the fully insured or the fully, the fully insured versus self-funded what are the big differences between those two?
John Krebsbach:
Right. So, you know, I look at what let's look at all three fully insured, level funded, self-funded. And again, I really encourage the listeners to refer back to last week's webinar because that really gets into the, into the weeds on each three of these funding types. But you know, for today's opportunity, Jeff, you know, I like to look at it from on a scale, you know, low risk to high risk, you know, fully insured is really non non-refundable premium, right? The, the insurance company assumes all the risks there. So there's low risk and low reward. Then you move into, as you get further on you know, the scale to higher risk, you know, you look at level funding, it's kind of right in the middle where the employer assumes some of the risks. And then self-funded is obviously the opposite of fully insured from a it's more of a high risk, high reward set up.
Host:
Now John, I know during the webinar the focus was put on the trust select plan and you went into some detail about what that plan offers for our listeners. Can you go into a little bit about about what was discussed about that?
John Krebsbach:
The select level funding plan, you know, you're looking at a handful of key, key advantages you know, really attentive to service. We have a dedicated customer service and account management team that's available to answer any the firm and broker questions to meet their specific needs. Like I mentioned earlier, it's the select level of funding plan utilizes Meritain as the TPA and, and it's on the Aetna network. So it's a very broad national network. The Aetna choice POS 2 is, is the specific network, Jeff that that's on. So thousands of hospitals as well, as more than 75,000 pharmacies nationwide when it comes to that broad national network. And then when you're, when you're looking at, you know, specific plan design options, we have over 80 plans in that product portfolio that are your traditional PPL plans. And then we have over 30 of our, of the plans within that product portfolio that are our more high deductible health plan options for health savings, qualified health savings account type plans.
John Krebsbach:
And, you know, lastly, again, just as far as availability goes the ACEC select level funding plan is available in 33 of the 50 States. And for listeners feel free to go to ACECLifeHealthTrust.com where you can find really those key advantages that I just listed off and an availability map of where that is available. And again, like I mentioned on last week's webinar, when it comes to the 33 of 50 States, that just means that your, your site - your headquarter location needs to be in one of those 33 States. But if you find that your firm has offices standard across the country, that may land in one of the non 33 of 50 States, you can, the, the entire firm can still take advantage of that ACEC select level funding plan.
Host:
Hmm, that's important to note, I also noted that, that on the webinar it was discussed that there is, you know, risk protection for firms with the select plan that the firm kind of decides on what they want to set their premiums to be. And that means that they don't have that risk of paying at the end of the year. Right. So if the claims come in or the firm actually gets that money back, they're not on the hook for that.
John Krebsbach:
Absolutely. That's and that's a fantastic point and one to call out because we don't typically see that, Jeff, in the open market with other arrangements. So yes, our ACEC Select Level Funding Plan essentially has two options. We can look at an aggregate only where all of the group claims roll up to one aggregate account. The second option, which is just an enhancement here recently is the individual stop loss where we can put in based on state ruling, state regulations, anywhere between 10,000 and 50,000 individual stop loss. And really how I look at it is you're just, you're buying that extra protection for your group. So you know, anything that is left over in that surplus in that claims fund at the end of the contract period, whether it's with either option yes, that that firm gets that entire amount back. The ACEC Life Health Trust does not keep that money. So really an amazing opportunity for firms to keep their costs down and in and enjoy that savings. And like I said, you typically don't see that amongst other arrangements across the country where you'll see a, a share of that cost 50/50, 70/30. So again, the firms get that entire amount back.
Host:
So, that's good to know number one, number two is, you know, with the variety of options that plan and the others present for members. I mean, it's kind of a, it's a lot of options to choose from. If I'm a firm CEO or, you know, if I'm in operations at a firm and I'm trying to out, okay, how do I navigate this? Can you go on a little bit into how the trust works with firms to kind of identify what they would need to select a plan that adequately not only covers the employees that they have, but also creates an environment where they can attract talent and, and retain the talent that they have?
Speaker 2:
Yeah, absolutely. I mean, we're, we're very open to all groups reaching out to us. You know, a lot of our business, we work through broker channels. So, you know, for listeners please feel free to reach out to us directly for any questions that you have around the plans and programs that we have. You can work through your broker and we're more than happy to connect with your broker again, on the programs and plans to really sit down, look at, look at maybe what, what you, as, as a firm are currently on where you want to go into the future. You know, we can, again, to my point earlier, it's, it's a huge value of the ACEC Life Health Trust to be able to look at different funding options and not just be locked into one. And again, if you're in any one of those unique States, we, we may have the opportunity to look at multiple options for you and you know, find out which one's the best fit and put our best foot forward.
Host:
And with 55 years of history behind you, I imagine that you have that institutional knowledge of what works best and what states and how similar firms similar sizes kind of navigate this. So I imagine you have a lot of historical information to be able to assist clients with making the right decisions.
John Krebsbach:
Absolutely, absolutely. We can absolutely look at you know, again, based on a firm size what firms of that size are typically electing within the trust. Yes, we can look back at that and really help paint a clear picture for these, for these firms.
Host:
I know, we went into the kinds of different plans that are out there and available with the levels of risk levels of coverage. But I know that the trust also offers a number of value added services with all the plan that they offer. What are some of those additional services that, that clients can take advantage of to plus up their plans?
John Krebsbach:
Yeah, Jeff, you know, this, this goes back to our vision, you know, in my opinion of really establishing that consulting engineering industry is the healthiest industry across the U.S. So, you know, with that, our member health and wellness is such a high priority, which is why we invest in and also offer, like you had said our value added services. So again, it's, this is not a, a stop to look at the health insurance plans, but you know, real quick, we have partnerships with United Healthcare and guardian when it comes to the ancillary benefits. So we're talking dental, vision, life, disability and then our value added services. These are again, very important. Our designed wellness program is our specific wellness program designed by engineers for engineers. There are three different levels of design wellness all of our ACEC Select Level Funding firms that move over will be automatically put into our basic program.
John Krebsbach:
And really Jeff, what it is, is based on the group's participation engagement, they can work, work their way up the ladder, if you will and receive different incentives for both employees and spouses. And then, you know, one of the other value added services, which I would argue has been a very hot topic of conversation is our design virtual care program. You know, a statistic that I think the audience will not be surprised with is telemedicine has the utilization has doubled since the pandemic started. So again, a very important very valuable added service that we provide with everyone that, you know, is maybe a little weary going into the doctor with everything that's going on. This is a service that includes 24 seven, three 65 tele-visits and then just recently we've added some enhancements. We have a behavioral health service back care dermatology and expert medical services that are embedded into the design virtual care program. And then we also have a design advocate service, kind of a patient advocacy tool, and then benefit solver, which is an enrollment and eligibility software solution. So for the HR audience out there, that's a program that could really take a huge burden off their plates.
Host:
That sounds like something, you know, especially, I just recently had my first ever video conference doctor's appointment where it was just strange, almost like a zoom call with the doctor, but, you know, every week, you know, so dispersed and working remotely, you know, having access, if you're a smaller firm and you have a program that allows you to have your employees engage in telemedicine that's a big benefit because that's the kind of thing that, you know, the big, you know, bigger firms definitely have. And the same with the enrollment eligibility software, that, that that's something that will speed the process for HR managers at, at smaller midsize firms. So those are, those are all value adds that I can see actually that, you know, adding value to an engineering firm.
John Krebsbach:
Absolutely. I mean, the, the, the trust, you know, one of our values is innovation and we are constantly looking at new upcoming value added services that are, that are going to bring value to our ACEC member firms. Again, back to emission, we are, we are here to serve the ACEC member from population, their employees and families. So we will, we will continue to look at new, up and coming latest and greatest services that we can bring into our portfolio to continue to add that value a lot like the design virtual care program and the others.
Host:
Absolutely. That webinar is up online for everybody to look at it goes into much more detail that was took place on the 26th. And it's again, it's the title of that is How to Buy Insurance 101. Really encourage all of our members and listeners to take a look at that webinar and get a little bit more of a deep understanding of the offerings that the trust provides member firms, especially when it comes to selecting coverage and selecting a plan. John, you know, for, for our conversation here, you know, kind of just going over these broadly, is there anything that we missed that you want to make sure that our members know?
John Krebsbach:
No, I don't think so. Jeff, you know, I think just the one thing I would ask is, you know, first off for the audience, you know, just that the ACEC Life Health Trust really values and appreciates the opportunity to serve those that are participating in the life health trust. You know, we have roughly 1,500 firms, Jeff that are taking advantage of the ACEC Life Health Trust. There's just shy of 4,000 firms across the country that are dues paying members. So we really appreciate that business. And for those that are not participating in the life health trust, it does not hurt to take at least a look. There are a lot of programs out here that, you know, we, we rolled through here today. And we'd, we'd love to earn the business and take a look at that benefit package.
Host:
Well, John, again, you know, our members are pretty aware of, you can be found on the web at www.aceclifehealthtrust.com. And for you in the sales department, where can people reach out and contact you?
John Krebsbach:
Yeah, my contact information email john@aceclifehealthtrust.com, or you can simply email sales, sales@aceclifehealthtrust.com. Everything that we discussed today, Jeff is on our website, www.aceclifehealthtrust.com, including contact info.
Host:
Well, that's great, John, thank you so much for coming on the show. This is really good information, especially these days with the focus being so much on health wellness, and just living in this remote work environment here you know, having a strong insurance plan is part and parcel with that. So really appreciate you being able to go a little bit more into what the trust provides its members. And thank you very much for coming on the show.
Host:
Thanks, Jeff. And thanks for everybody listening in. Hope you all stay safe and well, and we'll talk to you on the road.
Host:
And again, this has been Engineering Influence, a podcast from the American Council of Engineering Companies brought to you by the Life Health Trust. We'll see you next time.
 

Mick Morrissey of Morrissey Goodale Looks at the M&A Market from the Seller's Side

 
Mick Morrissey, managing partner of Morrissey Goodale, visits the Engineering Influence podcast to analyze the current state of the M&A market and offer insights and advice to engineering firm owners who may be contemplating selling their firms.
 
Sponsor Message:
The ACAC Life Health Trust is offering free insurance comparison quotes for all ACEC Engineering Influence listeners. During these uncertain times, every dollar counts. And we want all our listeners to take advantage of this special offer. Typically our firm medical plans offer your employees lower insurance costs, better coverage, and complementary health and wellness benefits above our competitors. Visit our website at acclifehealthtrust.com or call our sales team at (844) 247-0020.
Host:
Welcome to the ACEC Engineering Influence podcast brought to you by the ACEC Life Health Trust. The mergers and acquisitions market has been very strong in the engineering industry in recent years with Baby Boom generation owners, looking to sell their firms and buyers looking for strategic purchases. Not surprisingly the COVID-19 pandemic had an impact on the M&A market due both to the initial, rapid deceleration of the economy and now the uncertainty that pervades the market as it recovers. To find out where the M&A market stands right now and where it may be going, especially for owners who are looking to sell., we have invited Mick Morrissey, managing partner of Morrissey Goodale onto the podcast. Morrissey Goodale is a specialized management consulting firm that exclusively serves the AA and government contract consulting industries and is one of the go-to advisors for buyers and sellers.
Host:
Welcome, Mick. Thanks for joining us,
Morrissey:
Thanks for having me on great to be here. All of us at Morrissey Goodale are big fans of the podcast.
Host:
So the M&A market for engineering firms took a dip in the spring when the pandemic hit, but it has gradually worked its way back up right now. Year-over-year deals in the U.S. are off about 10%. What do you expect to see in the market over the coming months?
Morrissey:
Let me put some context on that. It's a great question. 2019 was a record year for deals in our industry, 317 deals, almost one per workday, a pretty torrid pace of activity and, really speaking to how fast our industry was consolidating. January and February of 2020 were ahead of that pace, then COVID hit and the M&A market froze in the spring, March through May deals were down about 50% year over year. We were back to 2017 levels. Things started heating up a little bit in June and July, but still way behind last year. And then boom, in August of this year, M&A just started right up again. And indeed, we're going to have one of the strongest August on record for deals in the United States. Based upon everything that we're seeing in terms of interest from buyers, based upon the fact that the consulting engineering industry and the engineering industry writ large has been remarkably resilient through this pandemic, and then given that we anticipate some sort of stimulus package benefiting the industry after the election, we would anticipate that we're going to see lots more M&A activity and an uptick in M&A activity as we head into the back end of the year here in Q3 and Q4. I wouldn't be surprised if we end up the year very similar to where we were in 2019, which was a record year for deals, or maybe 5% or so beneath that level.
Host:
You mentioned, that the engineering industry has not suffered as badly as many other industries did. A guy who owns a firm and is looking to sell, is now a good time to sell?
Morrissey:
It depends. It depends on what markets your firm is in. Buyers are looking for quality. They're looking for growth in the acquisitions that they make. They were before the pandemic and that's certainly where they're focused now. So if a firm is serving, for example, the federal market, or if a firm has particular expertise, let's say in warehouse and distribution centers, both of those markets are doing well in 2020 and are anticipated to do well into 2021. This could indeed be a very, very good time in terms of valuation and deal structure for a seller that serves those markets. On the other hand, if you're a firm that is seeing a decline in backlog or weakening in earnings, and oftentimes today, those are firms that are serving, for example, the retail market or the commercial markets, this may not be the best time to go to market. It may not be the best time to seek a buyer.
Host:
What about size? Is this a good time if you own a smaller engineering firm or a larger engineering firm? Does That have any impact on the decision?
Morrissey:
Well, it's a really interesting question, because the trend we're seeing in acquisitions for consulting engineers is that the median-size deal has continued to fall over the last several years. Now the median-size deal is something like 15 to 17 employees with somewhere between $2 and $3 million in revenues. And that's a direct result of it being so hard to find talent in this industry and that challenge hasn't gone away with respect to COVID. While there may be 9% to 10% unemployment nationally, that unemployment level is not being felt in our industry. By and large, quality people in our industry aren't getting hired at the same rate that they were before, although maybe it's a little different in terms of onboarding and hiring now with most of it being done remotely, or a lot have been done remotely, but still, talent is very hard to find and that's what's driving acquisitions of smaller firms in our industry.
Morrissey:
And that's why the median deal size continues to fall because small acquisitions are a way to get talent on board fast, instead of going through a three-month to six-month to one-year cycle of picking up the equivalent number of employees. So I'm not sure that that size is a determinant with respect to whether it's a good time or a bad time to sell. I do think though that size and we saw this pre-pandemic and we're seeing it still that size correlates with valuation. So the larger a firm is, the greater the probability that it will achieve a higher valuation when it sells than a smaller firm.
Morrissey:
If you look back a decade or so ago, right after the last recession, about one-quarter of all deals in the United States were being done by publicly traded firms, the Jacobs and AECOMs. The brand names. Since the Great Recession, the percentage of deals being done by the publicly traded firms has dwindled to about 5% of all of the deals. Over the same time period, private equity-backed firms and private equity recapitalizations of firms engineering firms in the ENR 500 have grown significantly to the point where now about a quarter of all the deals. Now, what does that mean with respect to size? Those private equity groups typically are looking to make acquisitions of firms that are generating at least $1 million in EBITDA and more commonly $3 to 5 million in EBITDA. And that speaks to firms that are generating about $10 million to $50 million in revenues, which would speak to the larger firms in the membership of ACEC.
Morrissey:
So, um, I think the market is fairly agnostic believe it or not with respect to size. I think there's a market for each size segment with different types of buyers. Again, I come back to the determinant, particularly in 2020: What is the outlook for the markets that the selling firm is serving? Are the selling firms are serving markets that are being impacted by the shift in what's happening in the larger economy? If the firms are serving commercial real estate, or they're serving bricks and mortar retail, or they're serving, for example, the cruise industry or the hospitality industry, those firms, by and large, are seeing some significant or moderate impact to their backlog into their earnings. And they're just not attractive to buyers right now because buyers are looking for quality. But for firms that are serving the federal market, which is still going strong, for firms that are subject-matter experts in particular facility types where there's great demand, such as warehouse and distribution centers being driven by the Targets and the Amazons of the world, those firms are seeing demand. And particularly for firms that have figured out how to incorporate technology and big data management, or have developed proprietary software applications to wrap into their traditional engineering business model, those firms are seeing demand.
Host:
So if I were the owner of a firm and I was not in warehouses or data centers, what would be my strategy to make myself appealing
Morrissey:
That depends on what sort of runway you've got. From our perspective at Morrissey Goodale, the industry has entered the first phase of a new reality, and most firms have got about a year we believe to figure out that new reality because we believe there's going to be a lot of pain in 2021 as state and local governments face some real holes in their budgets. That'll put real downward pressure on the market for engineering services and put downward pressure on pricing and fees. So, firms need to reposition themselves from our perspective over the balance of 2020 and beyond. If you have a backlog to do that, then the way for firms to make themselves more attractive over the next year or so is to get into the markets that are more attractive.
Morrissey:
They either do that by making key hires or making acquisitions to do so, or they need to figure out how to deploy technology. And that's either generating it internally, leasing it, or buying it off the shelf, and then customizing it to adjust their business model, to really improve their technology game. Neither of those strategies are immediate strategies that can happen in a three to six-month period, so firms need to start making those investments now. For firms that only have 30 to 90-days worth of backlog, to make themselves more attractive for a buyer, they need to really cut out all extraneous costs, need to get themselves profitable, need to connect with their clients, and need to get as much backlog as they can in place.
Morrissey:
Those are the things that they need to do to position themselves for a sale, but even in that situation, and even if they do find a buyer, firms that are serving clients or markets that are being challenged are going to find it hard to find a buyer. Again, I come back to buyers being focused on quality. They're focused on the long term. And so they're planning to allocate their M&A resources to, to quality firms.
Host:
What about selling to insiders? Is that market slow right now? Has it stopped or is it continuing?
Morrissey:
It's continuing, although we believe it's going to run into headwinds into 2020 and 2021. If you look at 9 to 10% unemployment in the nation, there's a greater chance that, somebody's spouse or partner has either been furloughed, um, or has lost their job. So, if you're a potential owner in an engineering firm and your partner has lost their job, your kid is graduating from college and can't get a job because of a 9% unemployment rate and is stuck at home with you, then it's harder to have that kitchen table conversation and say, "Hey, I need to invest a hundred thousand dollars in my company to support the ownership, transition plan," because the money just may not be there.
Morrissey:
This is what we saw in the last recession. Ownership transition plans broke down in the industry, and we saw a spike of M&A activity 12 to 24 months after the recession as firms realized that they just weren't having the capital inflows from their employees and potential owners to support the plans while they were digging out from, uh, the wreckage of the recession. So we expect to see internal ownership transition plans be challenged again over the next 24 to 36 months as we come out of whatever we're in the middle of. And in particular, when we come out of the challenges after 2021, because again, we think that 2021 is going to be a real challenge for the industry.
Host:
So in this situation with, with the uncertainty, with the potential for a bad year coming up, how do you value a company? Are they the standard valuation techniques or is there some sort of percentage allocation for uncertainty?
Morrissey:
Yeah, that's a great question. And actually there should be some sort of percentage allocation for uncertainty, Valuation is one of those professions that has a hard time in pivoting to a new reality and it is pretty much stuck on the axiom that valuations of a firm are based upon forward-looking cash flows for the entity. In a time of great uncertainty, however, forward-looking cash flows become hard to forecast. Most firms in our industry have a hard time forecasting a year anyway and beyond a year becomes challenging. So when you look at valuations done in the industry, and you look at the projections that are used for those valuations, they make you scratch your head sometimes. And also when you consider that in the middle of the year, the publicly traded firms in our industry withdrew their guidance, meaning that they weren't going to provide estimates as to what was going to happen going forward.
Morrissey:
You can see how it makes it much harder for smaller privately held firms, which are the majority of the ACEC membership to do so. The way that valuation adjusts is, the valuation folks assign a higher discount rate, which just means they put more risk into the model, and that tends to drive down valuations. So that's sort of a theoretical perspective, but that's not necessarily what we have seen in the marketplace. My contention to our team was if deals are falling 50% in the spring, then let's figure out if valuations have also fallen 50%. And what we found was it wasn't the case. In the data set of deals that were done in the spring and the data set of deals that were done in the summer, the valuations are not that dissimilar from the valuations that we saw pre-pandemic, in January and February or in 2019.
Morrissey:
So what really happened was, instead of buyers beating up on sellers and looking for lower valuations as the pandemic played out, in the first stages, buyers just kind of withdrew. And so those valuations in theory went to zero, but in reality, they kind of stayed put, because many of those deals came back online in the summer. Also, when you're buying an engineering firm, the last thing you want to do is start with an evaluation and then if things change, try to beat up on the seller and say, "Things have changed, We're only going to buy it for 50% of what we said." That's just a lousy way to start a relationship and it really doesn't help integration.
Morrissey:
So what happened was the deals where buyers felt that there was quality, they stuck with those valuations through the deal-making process. Where there was uncertainty, about half of the deals in the U.S. stopped. They just stopped. Now the deals are coming back. What we've seen in the late summer, what we're seeing in August is those valuations are pretty much picking up where they left off prior to the pandemic. So, I urge everybody listening to the podcast to take these metrics with a grain of salt and don't apply them specifically to your individual firm, but what we saw at the high end and what we're still seeing at the high end, in the upper quartile, is multiples of EBITDA in and around the seven range, seven times trailing 12 months; EBITDA multiples in the medium range of about five or north of five; and multiples in the lower quartile of a little under four and a half. So we haven't seen the valuations change that much from a real-life perspective in the marketplace.
Host:
What do you think might happen to valuations if the market does struggle next year? Do you expect to see a gradual tailing off or do you think this trend will continue?
Morrissey:
So I think what we'll see is a bifurcation of the market, actually a continued bifurcation of the market. Quality firms--firms that have got really strong backlog, firms that have got something special about them, firms that serve attractive clientele, firms that are located in a great part of the world in terms of the outlook for engineering services, firms that have proprietary offerings that they have developed and where there is demand--those firms will continue to see strong demand and strong multiples and high multiples. Generic firms--firms that are vanilla firms that don't have anything special about them, firms that are followers rather than not leaders, firms that have to sell--they're either going to find lower multiples await them with not very attractive terms or they are going to find that there's no buyer for them. That's where I think we're headed and that's where that's the market that we're in now.
Morrissey:
In 2019, there were 317 deals. Not all of those firms were getting the higher multiple. Smaller firms tend to get the lower multiples. Smaller firms tend to have fewer options and may need to sell rather than choose to sell. And when you need to sell, when you have to sell that's when the deals that are in front of you generally are less attractive. And that gets to the interesting nature of selling your consulting engineering firm. The best time to sell is when the economy is doing well, when your market you're doing well, when your firm is doing well from a financial perspective, and to do it before you're 60, because then typically a buyer is going to lock you up for three years. And so at 63, which is still relatively young given all of the advances in healthcare and science, you've got two great decades ahead of you to decide if you want to work or consult or go and sail the Caribbean. Most owners don't figure that out. And most owners end up looking to sell when the economy is not good when their markets are not good, when their firm's financial performance is weak, and when they're 65 plus, and they have lost all of the leverage that they could have had in any negotiations,
Host:
That's a great lesson, right there, I'd say for people to listen to it because that seems to me to cut right to the heart of it. But just one more question and then we'll let you go. What kind of financial arrangements are you seeing as far as how the deals are structured?
Morrissey:
We're seeing the same basic packages as pre-pandemic. So cash, notes paid over one, two, or three years, stock, and earn-outs. Pre-pandemic we were seeing more cash, more notes, more stock, less earn-outs. Post pandemic, what we've seen is buyers moving more consideration to the earn-out component and moving it away from the guaranteed components of either cash or note payments over one, two, or three years. And that I think is just an acknowledgment that, the market is less certain for both buyers and sellers, and buyers are looking to hedge their bets with the amount of money that they guarantee in a deal.
Host:
Which, given the pandemic, sort of makes sense.
Morrissey:
Yeah, I think it does, but I also think, and this is what we saw again in the last recession, there's a whole bunch of received wisdom and conventional wisdom in our industry, and that has played out in the fact that M&A has declined over last year, which is not unusual. In general, when there's a recession or a pullback in the economy, M&A does decline, and indeed, M&A was down 19% in May and June year-over-year, but now it's back to just down 10% or so. But I think, when you dig into the details, once again more and more deals are being done by these private groups. So while employee-owned firms and ESOP firms have pulled back from the marketplace, the private equity firms are still buying because that's what they do. And if you consider a mantra of buy low and sell high, while the marketplace in general recognizes the pandemic and acts appropriately, and most of the ACEC membership acts conservatively, a number of these private equity groups, who are very, very skilled buyers, are seeing this as a buying opportunity and a way to position themselves ahead of the market recovery. And I think that's something for the membership and the listeners to be aware of.
Host:
It's a good place to end. I appreciate your taking the time to talk to us about the market. Thanks so much,
Morrissey:
Thanks for having me on, I really enjoyed it. Great to be with you.
 

ACEC Research Institute Special: An Interview with WSP's John Porcari on America's New Playbook for Infrastructure

Engineering Influence and the ACEC Research Institute welcomed WSP's John Porcari onto the show to discuss his work with the ACEC Research Institute on the New Partnership on Infrastructure and  Accelerator for America's new report:  "A Playbook for a new Infrastructure Partnership."
 
Host:
Welcome to another edition of Engineering Influence, a podcast by the American Council of Engineering Companies. It is my pleasure to welcome John Porcari to the program. John is a senior advisor at WSP and has an impressive history, both as the Deputy Secretary of Transportation in the Obama administration, where he was second command to then Secretary Anthony Foxx. And before that, John served two terms as Maryland Secretary of Transportation. His experience in program management, planning, design, and construction delivery is widely sought after by elected officials and policy leaders across the political spectrum. And it's fair to say that his insights and advice are of great value to presidential candidates, which comes up to a sharp focus this year with the general election. Mr. Porcari is now with ACEC member from WSP, where he oversees the firm's advisory services.
Host:
And not long after the ACEC Research Institute was established, WSP suggested that one of the first projects the group could undertake was the new "Partnership for Infrastructure," which is a program that's also supported by ACEC member from HNTB. Now, the Partnership's focus was to interview mayors across the country to better understand local and urban infrastructure challenges and develop a playbook of actionable recommendations. And when the project started in early March, there was a lot of buzz about the potential for an infrastructure bill, but no one could have imagined the disruptive impact of COVID-19. And on top of that, how urban protests would make us all think more about the state of America's cities. Los Angeles-based Accelerator for America interviewed the mayors for the playbook over the course of the Spring and assembled the recommendations and led the socialization of the recommendations and various online forums. The ACEC Research Institute participated in the process as an advisor and a financial supporter, but it doesn't necessarily endorse all the recommendations, but the playbook provides a great value for, firm executives and leaders in the engineering and the A/E/C space. It provides a lot of access to gain key insights into the tough local challenges facing our cities. The mayors are looking for problem solving partners to address complex societal needs. In some cases they want consulting help before they even have projects identified. Also the complexity of project finances, much more challenging today, and simply identifying funding for a list of projects. We all know what COVID-19 and the crunch on state and municipal budgets has really done to the industry. Now, this playbook is called the community serving infrastructure, a playbook for a new infrastructure partnership, and it can be found@acceleratorforamerica.org. The link to that document as well as supporting documents will be added up to the show notes on this episode.
Host:
That was kind of a long introduction kind of setting it up here, John, but I want to give you the opportunity. Number one, thank you for coming on. And number two, you know, for us in the beltway, you are well known as an expert in public administration, infrastructure transportation for those outside of the beltway who are politically active and are engaged in the A/E/C industry. Can you tell us a little bit more about your major interests and, and in, in, in the field and, you know, the turning points in your career that kind of got you to this point?
John Porcari:
Sure. Jeff, and thanks for having me here today. I, I've been very lucky in my professional career, in both the public sector and the private sector and in the public sector, as you pointed out, sort of at the local level, the state level is the Secretary of Transportation at the federal levels, Deputy Secretary of Transportation. And now in the private sector working to help clients get these projects across the finish line which is harder and harder. And we can talk about this a little bit, some of the things that are holding it back, but what's motivated me through my whole career is infrastructure is economic development. I started my public sector career as an economic development person working on major projects. And the more time I spent on economic development, the more there was a transportation and infrastructure linkage to it.
John Porcari:
So it's kind of a natural crossover into transportation. And that's especially true at the local level. We have this great system in the U S at the federal state and local level where each level of government has various responsibilities under our Federalist system, but we sometimes forget that the real actions at the local level. So the project decisions are at the local level, the priorities are established at the local level, and then you have to work your way through what can be sometimes some very difficult federal processes and regulations, for example, to get those local priorities built. So one of the reasons that we were very interested in working with Accelerator for America and the Research Institute to actually join us in that endeavor was we wanted to take a local lens to it and hear directly from mayors of big as the city of Los Angeles. And as small as cities like South bend and Waterloo, Iowa what on the infrastructure side they would like to change and this playbook we've put together some very specific recommendations through that local lens. That'll really help all kinds of infrastructure projects.
Host:
Absolutely. That's something which, you know, echoes throughout the country. I mean, my personal experience was in Congress with former Chairman Shuster, both in the personal office and then a committee and in the personal office, in his area of Pennsylvania, it was always economic development. It was always, you cannot have growth and opportunity without infrastructure, which naturally just tied directly into roads intotransportation networks, because the two are intertwined. And, and those decisions at the local level at the County municipal level really are the things that shape what that economic development is going to look like. So having a playbook, having some kind of a document, which looks and focuses in on the needs and the requirements of mayors and of people who are really active in local government is, is critical because it's not all at the top. It's not all federal. How, how did the accelerator for America? How did, how were they chosen to do this project? Why were they kind of the, the ideal group to, to undertake this?
John Porcari:
It's a great question. We began this discussion, this journey, essentially trying to take a local view to infrastructure by talking to some of the think tanks in the Washington area, some of the larger established organizations and it was such a different kind of view for them that they had trouble getting their heads around it. And so again, together with the ACEC Research Institute we had been working with Accelerator for America on specific projects. And as opposed to a think tank, the Accelerator is known as a do tank. These are mayors like all mayors and County commissioners and County councils that are out there working these issues every day. And, you know, if it works and, you know, if it doesn't at the local level, there's no hiding it. So a believer or not no one has done this before taking this local lens to infrastructure and tried to change federal regulations and requirements and programs to fit local needs rather than the other way around, rather than the experience of mayors and County commissioners across America is you have to kind of force fit what you're trying to do at the local level into whatever federal silo is out there.
John Porcari:
So we took the opposite approach Accelerator turned out to be the perfect partner for it. And the interviews, which were part of the process with mayors across the country, Republicans, Democrats, independents - party had nothing to do with it. Infrastructure had everything to do with it. And it truly is one of the bipartisan issues out there. We heard some common themes that turned into these recommendations in the playbook. Some are very specific, and frankly, some of them are relatively easy to do and would make the infrastructure work at the local level. So much easier, so much more freedom to adapt to local conditions.
Host:
Absolutely. It's really a paradigm shift because so much of the time we're focused on federal policy and programs. And those are developed, you know, with, with some thought and input from state DOT, administrators and such, but really it's, it's never given that focus from the local area because, you know, their needs should really bubble up and shape that policy, because if you're able to solve a lot of the problems with the local level, and a lot of the things that the consulting industry engineering consulting, engineering industry can come in and help in that process as well, understanding how to apply solutions to the challenges that are facing at the local level. It can speed project delivery can improve policy. At the national level, it seems like a natural model that hasn't been followed a lot by Congress. It's an interesting thing.
John Porcari:
That's exactly right. And, and the members of ACEC, I think could be very helpful in this and the the at the local level mayors and their counterparts don't have the luxury of thinking in the silos that the federal government operates in. And as you point out, the reality is that innovation doesn't trickle down from the federal level, it bubbles up from the local level and some of the more successful infrastructure work and infrastructure policies, and even projects have been local decisions that aggregate into a national system. And if, if you think about goods movement, if you think about moving people safely and efficiently they're really thousands of local decisions that together make the national policy not the other way around. We tried to reflect that in the playbook and make sure that the mayors were heard loud and clear on what their priorities were in our, in of course it varies all over the country based on local conditions, but to a person, they, they understood the fact that it's economic development it's quality of life, of their communities, it's building the economic future.
John Porcari:
So in one example, the highway right away is not just right away to them. It's, it's how their water and wastewater systems are conveyed as storm stormwater management. It's where broadband is bringing an economic future to these communities. And so they don't think of it as the state highway departments right away. They think of it is their economic future.
Host:
Yeah. And those, those city planners, those, those you know, local planners have to look forward on, on where's the growth and opportunity going to be, where can we actually create the economic development and how can we use all of those pieces of the infrastructure puzzle together to more effectively create jobs, or attract businesses? One of the big issues that we had in central Pennsylvania was trying to get headquarters with operations and, and trying to do it in such a place where you not only had right away or, or thoroughfare, but then you also have the actual wastewater, water, infrastructure, broadband, all those different aspects. And it's, it's, it's the, at the local level, you see more of the picture than you do if you're just sitting, like you said, in those silos, and you're just looking at one or two different things now, when this started, and we didn't have any idea of what was around the bend. I mean the focus of this project must have been impacted by the pandemic. And then, you know, the social issues layered on top of that kind of two part question, the first is how did it change scope, but then, you know, how did it, how did it also expand to, put a focus on to urban areas of, and their infrastructure needs and how they may have been underserved in the past and looking at what they might need to rebuild after the pandemic?
John Porcari:
It's a great question, Jeff. And we got some great direct input from these mayors. And so is one example. We talked to dozens of mayors across the Heartland of America small and medium sized cities where they're grappling with all kinds of issues, but, but again, trying to build an economic futureit makes sure they could do it. And as we started this project, the pandemic hit so it did change the infrastructure priority to some extent, for example one of the medium sized Midwestern cities that we were working closely with found that to do online instruction for their public school district almost 40% of their students didn't have access to broadband. You can imagine what that did to the priority of broadband relative to some of the other infrastructure priorities that they have at the same timethings like some of the transit service and planning for a future transit capacity changed as well, knowing that that economic lifeline of transit, connecting people to opportunities is, is every bit as important in some of these smaller jurisdictions as it is in large areas.
John Porcari:
And it was a go-no-go item for employment in many ways. So the, the it also at the same time with some of the storm events and natural disasters that we've had in the country while we were developing this, the whole idea of resilience, which really means something in practical terms terms at the local level resiliency is being able to operate your infrastructure, making sure your roads aren't flooded out and your water and wastewater systems work. And you actually have electrical power that can survive these events is something that is, is a very practical value at the local level and something that these mayors are very focused on. So as opposed to an esoteric discussion at the national level about resiliency and climate change the practical, nuts and bolts part of it is it changes infrastructure priorities at the local level. They see the facts on the ground and they have to respond to them. In real time.
Host:
I noticed in the last Congress near the end, the T&I Committee specifically was looking at a lot of different areas related to resiliency, and the word came up a lot more. But I don't think there was a complete appreciation for what it meant. Do you think that these stories and these recommendations from mayors can help fully flesh out federal law makers understanding of the importance of resiliency and what it means? It's not a political term, it's an actual, this is something that has to be considered.
John Porcari:
Yes, Jeff that's exactly right. It is not at all a political term. It's not some esoteric discussion at the local level. It's it's the practical impact of flooding where, you know, the prudent thing to do on the redesigned side is to upsize the the culverts. It's, it's where, you know, that having buried utilities makes them much more resilient for outages and storm events. The practical impact is something that we saw very clearly and heard very clearly from the mayors where they want to make sure that they're squeezing every bit of value out of harder and tax dollars for this infrastructure by making a durable. And future-proofing it to the extent that you can. So one of the great things about applying this local lens to infrastructure is it takes the kind of sterile Washington philosophical and political discussion out of this and puts the practical impact in there where these are people across the political spectrum, working side by side, acknowledging that building more resilient infrastructure is the smart thing to do from an economics point of view. And from obviously from a service delivery point of view for your city.
Host:
Absolutely. I know that there are four broad, which kind of form the focus of the document, and that's maximizing investment for a job and small business growth, empowering localities with effective tools and processes, funding, and financing for community serving infrastructure and making transformative investments for more resilient future, going back to the resiliency part, taking kind of that last one, since we're talking about that, like you said, the impact of, of, of looking at the local level and, and saying, like you said, you know, these power lines, you know, or what have you should be placed underground, or the covert should be made larger. I mean, that definitely will have an impact on those budgetary decisions. And, and especially with the way that the States are going right now having that cash crunch related to the pandemic how do you think the document's going to come into play with that?
John Porcari:
It's a great question. So there are some very specific recommendations related to resiliency, for example, that, that helped carry the argument for these cities to, to do things differently, but it also calls for a reset at the federal level. It's the, it's the local government saying, for example, that you need to form a federal infrastructure planning council. We have all of these federal agencies that don't even talk to each other, let alone work together on a regular basis at the local level, you don't have the luxury of, of building things in silos, organizational silos, this federal infrastructure planning council would be a forcing mechanism to get the different federal agencies like the Corps of Engineers responsible for all of our inland waterways, great lakes inland maritime transportation working with other federal agencies where they very seldom interact in practical terms where they do it's at the local level where you have local representatives and a local project that forces them to work together.
John Porcari:
So the idea is at the state and federal level to, to really highlight what some of those disconnects are, and in, in a very practical way, show how we can do a better job. And again, it recognizes the reality that's that's in our constitution and in the way we operate under federalism, but is not recognized in our institutional structures, which is those decisions and choices are made at the local level. And they should be but you don't have a federal partner that's necessarily recognizing that. And the federal share of funding in many cases in percentage terms is declining every year. So you have this ironic position of more local funding going into these projects, less federal funding, but federal regulation that makes it difficult to do business.
Host:
So how would that, how would that planning council be structured? Would that be executive level, or would that be kind of a congressional action? How do, how, how how's the playbook kind of see this happening?
John Porcari:
Well, it can be done a couple of ways, what the playbook focuses on are practical solutions. So for that planning council, the deputies level that the deputy secretaries and deputy directors in the federal departments by definition are the chief operating officers. And on, on important issues, they function is a deputy's council where they actually get together and work through issues. And what, what the playbook is saying is that for infrastructure planning at the deputy secretary at the deputy director level, we really should have that kind of coordination across the executive branch. Now, as you well know, from, from, from your background, these individuals report to all different committees of jurisdiction, but that shouldn't be the local government's problem. Right?
Speaker 3:
The whole idea is, is that you have the, the executive branch agencies working with each other to make it easier for the project choices and to build those projects at the local level.
Host:
So formalize the informal working groups into an actual council that meets and discusses infrastructure and creates a liaison for the States and for local governments to bring the ideas up, to be discussed at that operational level. That's right. And give them a specific agenda on where those barriers to cooperation are, where some of the loan programs are too restrictive and can't be used. The what you tend to do at the local level is try to get as much different kinds of infrastructure into every project that you do at the federal level. It's more of kind of a rifle shot approach where you have very narrow programs. So part of the agenda for that planning council for example, would be to broaden those programs to think more holistically to, again, frankly get better value out of these public investments by making the infrastructure more holistic and more comprehensive. It sounds fairly common sense. So, so how would, how would that, for example, you know, how would these policies accelerate, you know, improvements really that the brick and mortar infrastructure and the people really care about the, you know, you have the drinking and the wastewater, of course you know, Flint was, you know, still is the poster child for that, but then, like you mentioned earlier, we have, we have broadband, we have the issue with the gas tax and we have declining revenues, but have increasing, you know, via electric vehicle market, but we don't have a national electric vehicle charging infrastructure, you know, that's something which has to be addressed. And, and the other, those transformative areas that seem to be happening at the state and local level, of course, the States that are really ahead of the curve and trying to be centers of innovation and are starting to think of transportation, not in transportation sense, but as in mobility and, and, and as a holistic way of looking at things how would these policies help accelerate that the federal level?
John Porcari:
Yeah, it would do. It would happen a couple of ways. One I mentioned, which is most infrastructure projects of any size are not funded anymore. They're financed. And that's, that's a very important difference where it may be a 50 or 70 year lifespan piece of infrastructure that has a 35 year loan against it. Broadening the eligibility of those loans would be one thing, expanding the capacity of the federal loan programs, whether it's for highway or transit, water or wastewater. If you just look at the lead pipe and lead contamination issue, the, the existing federal programs capacity for loans is only a fraction of what you would actually need. And it's not just Flint, Michigan it's cities and towns across the country and rural areas. It's also other federal policies. So electric vehicle tax credits can be expanded, accelerated depreciation, all the kind of tax policies that actually trigger private sector investment in infrastructure or public private partnerships is, is something that can be encouraged through these recommendations. And the idea was to be w was, was to try to address the infrastructure needs and be agnostic on whether it's publicly addressed or privately addressed, or a partnership between the two but across the spectrum to try to identify some of these very specific recommendations that that can actually make these things happen.
Host:
Yeah, and that's a very important point because earlier in the couple of months ago, we did a, a round table discussion on the future of funding and transportation. And we had some, some policy think tank guys. We had Jeff Davis and Eno, and we had some thought leaders from Harvard. We had kind of a mixture and everyone agreed that, you know, reliance on farebox revenues especially now. I mean, you can't do it, you can't do it. There has to be a, there's not one solution. There has to be a number of different solutions to broaden the type of financing that you can actually go for for these projects that, you know, just relying on trust, run revenue, for example, is, is something which is, which is difficult in a time of declining revenues. Is there a recommendation on the trust fund within the document?
John Porcari:
It doesn't make a specific recommendation on the trust fund. The participants in this study, like everyone else acknowledged that's that it has to be changed. The system has to be changed. There's no, there's no trust in the trust fund anymore, right? If the Congress has to keep putting general funds and other monies into the trust fund, it's actually not a trust fund where and especially with the recession related to the pandemic, we're seeing trust, run revenues declining very rapidly. But the idea would be to at the local level and the federal level to open the aperture for more innovation on the funding and financing side. And there are jurisdictions that have limitations on how they can raise local funds. These local bond issuances and referenda and local other kinds of local self-help initiatives are limited in many places yet.
John Porcari:
They're actually the primary funding source of the local funds for many of these infrastructure projects. So opening it up across the board and making a better case that infrastructure is actually an investment. Yes, it's an expenditure, but infrastructure given its lifespan and given the economic activity that generates is actually a good investment. Whether it's airports and air service highway transit, the utilities that provide services you simply can't have economic growth and the quality of life we all want without that infrastructure investment.
Host:
And, and I know there, there are a couple of ideas about state local road transfers and federal funding for betterments. Can you go a little bit more into that? You know, what problems are we solving by transferring road ownership from, from state to local governments and, and what is the focus on betterments about?
John Porcari:
Sure, let me take each of those in turn so that the road transfer part of it is a recognition that the primary purpose of any given road may change over time. So in every state, there are state routes, the numbered state routes that were probably very important from a regional point of view maybe back to the horse and buggy days. But that state route is now main street for a town or city. And in that municipality it's serving a very different local function as opposed to the regional function that was originally built for. And so who would be the best steward of that? Who would use that right away most effectively for all the things we talked about, water and wastewater, broadband, burying electric utilities transit service, maybe dedicated transit lanes inductive charging in the next few years.
John Porcari:
The idea is that some of the functions of those roads, which were much more of a state function in the past local function now, it's not true in every case. The idea is to look at those individually and see where it makes sense it might have been for that state route example, 75% interest state regional traffic before. And it may be 25% now. So who would be the best steward of that? The betterment issue is a really interesting one, the when there's a hurricane or tornado or storm event that does significant damage for example, to our highway infrastructure. There's, there are emergency relief funds from the federal government to rebuild that in this highway example and until not too long ago about eight years ago, you could only rebuild that highway the same way it was built before you could not put in bigger storm drainage culverts.
John Porcari:
You couldn't raise the elevation. The idea of betterment is now accepted and it's federally funding eligible where you could rebuild that highway. And now you can do it with transit. You can pull it out of the flood, plain, you, you can armor it in ways where you're not rebuilding the same facility time after time with federal money, emergency relief money, every time it's common sense, but it's something that literally was not allowed until fairly recently. And so one aspect of resilience is to make sure those betterments rebuilding smarter every time is built into the core of what we do.
Host:
Yeah, that's a really good point and it makes complete sense. And I know, but it's the kind of thing that, that from an, you know, from an industry perspective, when, when a firm like WSP or a firm, you know, another ACEC member firm is brought onto a project, you know, they're of course working as a trusted advisor to their client to be able to say, okay, well, this road is built this way, but what we know of, you know, past events and you know, our expertise that we bring into it is that you should be improving it in a number of ways. And here is our expert consultation on how to, how to do that. And, if that idea is, is adopted by a broader swath of the States, that it means that you're going to have an improvement overall in the length and the value of infrastructure, like you said, stretching that dollar, that taxpayer dollar further, and just rebuilding a road exactly how it was. And it's just going to be washed away or destroyed in an earthquake, or what have you again,
John Porcari:
Right. That's right.
Host:
Now we talked about fund financing. We talked about the betterment issue. I know that the plan has a few deregulatory ideas on, on project delivery and cutting red tape. They include accelerated procurements reviews, the permitting, P3 processing. I, you know, we've heard a lot of these ideas from state officials. Did it really surprise you that a lot of these priorities were also coming from mayors who were interviewed?
John Porcari:
Not really the, the more time you spend with mayors, the more you see that they really are hands on problem solvers. So the one of the specific recommendations shortening the procurement cycle is basically the the city's asking the federal government to do what they've already done. We had a mayor for example, that during the pandemic cut their procurement times by 50% and just did it they're meeting all their legal criteria. It's there's no part of the procurement process that's been compromised, but they literally shave 50% of the time off. And the idea is if you can do that at a local level, it can be done at the federal level too. And it, if you do it at the local level and you don't have a federal partner that also cuts their response time and their review time, it doesn't help because you have to get ultimately get there. Okay. Anyway, so these are commonsense forms that don't really don't compromise the quality or the integrity of the process or the project. But what, what the recommendation is really saying is we can do it at the local level. We'd like our federal partners to do the same
Host:
Now to kind of wrap it up. I know the last areas, it really kind of goes into the job creation and employment issue, which is, which is especially important now with the effects of of the pandemic on, on employment. But the playbook discusses a number of of different areas. Here are the importance of training centers of local and targeted construction hires and support for small and medium sized businesses and, and the importance of, of expanding federal research into a lot of these emerging transportation and, you know, planning and such, where do you see this going? You know, what area in this kind of gets your attention the most?
John Porcari:
Well from a local perspective, this was a really pressing issue as well. So part of it is trying to squeeze again, as much value as you can out of tax dollars, by making sure the money stays in the local economy, to the extent possible. You know, at the end of the day, these infrastructure jobs or jobs you can't export, they are American jobs. And as an industry, there's a lot we can do to maximize that. But it also it also talks about taking projects as an opportunity to move people up the skill scale. So if you are learning a skilled trade from a laborer to say high voltage, electrician or welder is part of that project. You have brought someone into the middle class and doing that. And there's a whole ecosystem that could be helpful to that.
John Porcari:
The community colleges that are operated at the local level, we'll put together a training course for anything there's demand for. And there's a little bit of a chicken and egg aspect of this, where you need to make it, if it's clear, the demand is there for skills training, as part of infrastructure construction, the training will be there through private programs to community colleges, through unions and others, lots of providers but what we have not done and, and you can't do at the local level by yourself is systematically put, put that together into a system that lifts people up that skills ladder and provides better opportunities.
Host:
And that that's, you know, cross jurisdictional, because that's not just, you know, infrastructure or transportation policy, but it's educational policy at the, at the national level. It's how, how do you, how do you make the two kind of fit together, which shows, you know, the size of the task, but also the value of these recommendations to inform especially federal policy makers. Since it's an election year, I can't not ask the question. How has this playbook been received by the candidates have you or anyone else from, from, you know, who were leading this charge brought this to either the presidential campaigns or, or any of the the leadership and at the federal level to say that if, as you're, as you're developing policies, keep this in mind.
John Porcari:
It's a great question. At the beginning of this discussion, I mentioned that this is very much a bipartisan effort by bipartisan mayors. And so the playbook recommendations have been made available across the board people on both sides of the aisle have been briefed on it. I will just tell you from my personal perspective and personal experience and full disclosure, I'm a strong supporter of vice president Biden. The uptake of these ideas and, and concepts behind it has been very positive. There's a recognition that, that again, the innovation's at the local level, the decision making's at the local level, let's make sure we're letting our local elected officials make they know what the right choices are for their jurisdictions. Let's back them up and support them with federal policies that actually help them as opposed to getting in their way.
Host:
That's a really good point. And I think a good, a good area to, to leave it on. John, do you have anything else to add about the playbook? It, we've covered a lot of ground here. We know a lot of the recommendations, but is there anything, any, any final parting thought that our listeners should know going out of it?
John Porcari:
Well, I, again, this is, this is from a local perspective and it's very practical as mayors are. So there, there's nothing in here that can't be implemented ACEC members around the country should really think about how this can help locally. To a person ,the members are working at the local level, helping with those local choices, literally use the playbook for what it's intended to be, which is a way to help you with infrastructure, construction and, and in a more general sense, help make the connection between infrastructure and economic growth and prosperity. And the fact is, you know, if we're honest with ourselves, you can look at infrastructure coast to coast here, if you're honest with yourself, and you look at that infrastructure more than likely it was built and paid for by your parents, or maybe your grandparents, and in some cases, your great grandparents. So, it is just irresponsible of us not to invest in the future. It's the best thing we can do for the country going forward in terms of thinking about the future.
Host:
Yeah, really good parting thoughts there, because I think that one of the things that our members are very busy running their firms are very busy of course, with the work that they have ahead of themselves and running an office from the time of pandemic. But we can't lose sight of the fact that, that from an industry perspective, we're the thought leaders who can help drive these decision making processes at all levels of government that as an ACEC member, as a professional engineer and a business leader, there's a platform and there's expertise that our elected officials can't get anywhere else. And if they're able to use this documentthe playbook as a way to inform their thinking and develop their own thinking it'll help raise the profile of the industry as a whole, which is of course, one of the focuses of the institutes, you know, one of the key missions is to support the growth and the thought leadership of the industry.
Host:
But, you know, from a business sense, it'll, it'll make you more competitive when you're going for business, because you can put that economic argument behind it. You can put that, you know, like non, non partisan political argument to, to tie it all together and justify a project. I guess I do want to put a plug in because the, the ACC research Institute coming up in the, in, in, in next few weeks is going to be delving into aspects of the playbook. We're going to be doing some round tables on the playbook in conjunction with Accelerator for America. And we had our first series of round tables on the future of engineering. They were very successful and we look forward to another successful series coming up in, in only a few weeks but more information on that's going to be coming up shortly.
Host:
So stay tuned. We are going to post up the the, the program on the show notes, we will have a link to the, to the Accelerator for America website. And then of course, that will have the link to the playbook. John, I really appreciate your time today. Thank you so much. And I know our listeners really benefited from hearing your views and your expertise.
John Porcari:
It's my pleasure. And I do want to thank the ACEC Research Institute, and also everyone who's involved in putting this playbook together, because it took a lot of hands to actually get a nationwide perspective here.
Host:
Well hopefully we can have you back on the show a little bit later after we have those round tables and kind of maybe after once we get a better idea of what happens in November, and we get a better idea of, you know, what infrastructure policy might look like and either administration it might be good to revisit these issues. So until then, again, John Porcari, He leads advisory services at WSP, but he is also just a very, very knowledgeable individual when it comes to federal and state and local transportation policy. And thank you so much for being on the show.
John Porcari:
My pleasure, Jeff. Thanks.
Host:
And this has been Engineering Influence a podcast from the American council of engineering companies. We'll see you next time.
 
 
 

Preview of ACEC‘s New Project Management Course

 
Howard Birnberg, the instructor for ACEC's Project Management 101 course stopped by to talk about the 9-week course and why it is so important for engineers at every experience level.  Learn more on the course website here: https://programs.acec.org/pm101/ 

Congressional Update with the Chamber’s Ed Mortimer

 
 
 
 
 
 
 
 
 
The U.S. Chamber's Vice President of Transportation and Infrastructure, Ed Mortimer joined the program to discuss the current state of play in Congress and the Chamber's advocacy efforts on behalf of the engineering industry.
 
Transcript:
 
Host:
Welcome to another edition of Engineering Influence, a podcast from the American Council of Engineering companies. Today, I am pleased to welcome Ed Mortimer to the show. Ed serves as the Vice President of transportation and infrastructure at the US Chamber of Commerce, where he oversees the development and implementation of the Chamber's, transportation and infrastructure policy, and represents the Chamber on Capitol Hill, as well as before the administration and industry organizations. In addition, Ed also leads the Americans for Transportation Mobility coalition, which is a collaborative effort by business, labor, transportation stakeholders, and concerned citizens to advocate for improved and increased federal investment in the nation's aging and overburdened transportation system. We at ACEC are members of that coalition which helps us amplify our voice to Capitol Hill. And Ed comes to the Chamber from AECOM where he served as director of government relations. So in other words, Ed knows our industry and he understands Congress and it is great to have him on the show. So welcome to Engineering Influence.
 
Ed Mortimer:
Great, Jeff, good to be with you.
 
Host:
So we were kind of talking about this beforehand, before we went live, but, you know, things are happening at least a little bit on the Hill. If you can give us a kind of an update on the legislative prospects for a surface bill, now that the House has passed their version. And of course that was dead arrival in the Senate and the Senate has been acting on their own version of not only a surface bill, but a WRDA bill. Where are things standing right now? Do you think we'll get something passed?
 
Ed Mortimer:
Well, Jeff, we're definitely in a critical moment to get something passed through the Senate. We have 63 days until the expiration of the FAST Act. And it's been over a year since the Senate Environment and Public Works Committee marked up their surface transportation reauthorization, the American Transportation Infrastructure Act, which was a 27% increase in highway funding. Unfortunately we haven't seen any action since then to bring the full bill to the floor. We need the banking committee who does a transit title, commerce committee, which does a safety title. And then the most critically the finance committee, which pays for the Senate bill. Since we haven't raised the gas tax in 27 years, they need to come up with $110 billion in new revenue to pay for that 27% increase in funding to date. They have not been able to do that.
 
Ed Mortimer:
We have been advocating for action on this. As you mentioned, the House of Representatives passed a bill, which unfortunately wasn't something we were very excited about in the sense that, the bill was introduced in the transportation committee and marked up in a partisan way. Not one Republican vote in committee, it was a 494 or 5 billion five-year reauthorization. And then all of a sudden, right before the bill came before it became a $1.5 trillion bill with a lot of things that I think your members. And again, the Chamber and the business community think are important, such as school construction, affordable housing. But in our view, we have an authorization bill that expires September 30th. We have divided government, so we have a Republican Senate, a Democrat House and a Republican White House. So the end of the day we need bipartisan solutions because until a bill signed into law, it doesn't do us any good.
 
Ed Mortimer:
And so our view was the House bill did not move that process forward of getting that bipartisan solution. So, but it passed, at least they got it through. Now we need the Senate to move out and then get into a House-Senate conference committee. So we urging the Senate knowing that they have a lot of things going on, or obviously working on the next COVID relief bill, they have appropriations that expire in September. But again, this is a, this is a priority that Congress is supposed to do their job. They're supposed to get these bills done in time and we need the Senate to act now, so we can get this bill into conference and get it to president's desk before September 30th.
 
Host:
Yeah, this is not something which is creeping up unexpectedly on either chamber. I mean, last Congress, the conversation was about the fiscal cliff that happened with the FAST Act and dealing with that, uh, knowing that there was going to have to be a reauthorization coming up because the law was expiring. The Senate was the first out of the gate, early on moving a surface bill. And it just seemed that the House's answer increasingly, it seems with the, you know, the polarization in Congress that you had a surface bill, but then it was run out of the Speaker's office and all these other policy provisions were tacked on and it became more of a political football and you're right. There were some things in the bill, that I think overall industry is interested in, you know, issues related to resiliency issues related to school construction, rural broadband, especially now in the post COVID working remotely kind of environment, but we need a surface bill
 
Host:
We've been looking at this over time. And infrastructure has always historically kind of been a broad bipartisan issue, but it does seem like those parts and elements have disrupted the dynamic, the T&I part - we mentioned that the process there was, was as partisan as we've ever seen it. And, you know, is this going to be the new norm? I mean, do you think that in your experience in working with Congress and this administration, just how things have developed do you think we can get back to that level of compromise and bipartisanship, or do you think we're going to be in a pitch partisan battle moving forward?
 
Ed Mortimer:
Well, I mean, I think it's gonna be a combination of both. And I will say, you know, a couple of weeks after this extremely partisan, uh, transportation bill came up, the committee unanimously approved a water resources development act, bill, and, you know, uh, on July 27th, the full h]House is going to take it up under suspension of the rules, which means two thirds vote to approve it. It should probably get 300 to 400 votes. So as painful as the surface markup and that situation was, they have come back and were able to get this WRDA bill done on a bipartisan basis. So, we are optimistic that we can get back to cause again, at the end of the day with divided government, you need bipartisan solutions. And we've always whether we had divided government or not. We've always been able to work on a bipartisan basis.
 
Ed Mortimer:
Now it may not be the same as it was 20 years ago. But we are optimistic that, you know, there's an old saying there is no Republican road or a Democrat bridge. And so at the end of the day, we have to hold our lawmakers accountable because they should work together to do the people's business. And in our view, infrastructure is a core responsibility of the federal government. You go back to the constitution, it actually requires the federal government to do two things. Now they may have wandered a bit from that, but the only two things that the constitutional part of the federal government to do is national defense and interstate commerce. And so investing in infrastructure is really critical to the backbone of our economy. And we have to hold our lawmakers accountable. We can't just let them say, well, I passed a bill through the House or we did a mark-upw. We have to tell them until it's gets signed into law engineers, don't benefit the American public. Doesn't see the fruits of the engineering industries labor until these bills get signed into law. And so we cannot accept half passage and press releases saying we just passed this 50% increase of funding because it doesn't mean anything until it's signed by the president, wherever that is. And then we can get the states the predictability of federal investment over the next several year period.
 
Host:
Yeah, absolutely. I mean, that's, I still remember, you know, and I don't know if it's there still, because I haven't gone into the committee room, uh, since the, uh, the Congress, the new Congress, but, you know, the last Congress could be turned around after entering a room on the left hand side is Adam Smith talking about the responsibility of the sovereign to maintain commerce and infrastructure. And on the right, is the constitution, uh, specifically outlining the federal responsibility for maintaining post roads. And of course, you know, the national infrastructure, so it is a federal responsibility and you're absolutely right. We can't take half measures. We have to get a bill done because it will, it's necessary for the certainty that the states need, especially now with, with, you know, shrinking budgets, for those states to be able to do long-term planning and, you know, the programs need to be there to, to allow our economy to recover. You did mention WRDA, and I think that's an important point that the reference, because this is always the sleeper bill, it's the one that generally gets the bipartisan support. It passes with overwhelming majorities in both chambers, but it doesn't get the press that it really deserves. From your position at the Chamber, how important is that WRDA bill, you know, it's critical for water infrastructure, you know, inland waterways, port stamps, harbors, but what's the economic impact of getting a bill like that done?
 
Ed Mortimer:
Well, what WRDA does is, and Jeff, why it's really important for the engineering industry is it's 2015. Congress has done this bill every two years. And so every two years they authorize new water projects. So without that action, uh, the Corps cannot start new projects. Why is it important? Because before 2015, it was seven years until the previous authorization was done. So this is the third time in a row that Congress is on track to meeting that responsibility. What does that mean? That means that communities can make plans and investments knowing the federal government going to do this bill every two years. Um, water infrastructure is critical to so many communities throughout the country, particularly in the agricultural, the manufacturing industry. And we all know that our infrastructure systems are old at the best and our locks and dams are some of the oldest. We've been band-aiding them for 25 to 30 years. And so these water investments are really critical, so many communities, we're also looking at, you know, you talked earlier about resiliency, we're looking at natural disasters are happening. And so doing this water bill every two years allows engineers to provide the innovation and technology that they can bring to the table and we're repairing and modernizing these water systems. We can make sure the resilient to handle the new natural disasters that perhaps our forefathers 50 years ago, hadn't planned on us dealing with.
 
Host:
Yeah. So you did mention earlier the, um, pandemic response bill, do you think that infrastructure investment like support for state DoT or local transit agency airports or other sectors might be included as a portion of that bill?
 
Ed Mortimer:
Well, it has to, okay. Our transportation systems have suffered substantially since the pandemic started. We shut down most of this country. Um, some parts of this country now we're going through a mini second shutdown. Um, the revenue sources for state DoTs is dried up significantly. AASHTO has said that they need an additional $37 billion to continue projects through the next year. Um, transit agencies have submitted proposal for $32 billion. Um, the heroes act, which passed the house includes 15 billion for state DoTs and 15 billion for transit agencies. Um, the Senate bill that McConnell has started the process of putting out there only includes $10 billion for airports. But I can tell you that we need, we will fight very hard and vigorously to ensure that any final product includes funding for those state DoTs, for those transit agencies in the airports, because they have suffered not because of anything they did, but because of a pandemic, that's a federal response has to take place to ensure that we're able to continue the business.
 
Ed Mortimer:
So many engineers have been able to continue work. They're essential workers. We be able to actually in several States move projects faster because of a lack of traffic on some of the infrastructure. So we actually have an opportunity here to take advantage of this unfortunate situation, to maybe expedite some infrastructure projects in a more timely manner. So it's a combination, all of us to ensure that the Senate, uh, the ball's in their court, the house passed a bill Baldwin Senate court. They need to come together. They need to ensure that this type of funding is available. Cause whether we get in long-term reauthorization of the fast app or an extension of this program without state match we're going to see a reduction in projects at the, at the, at the, on all levels of government. So it's critical that we urge the Senate to include this as this process moves forward.
 
Host:
Yeah, absolutely. And that's something that's been a core focus of our digital advocacy effort. Of course, we were hoping to have a spring convention and legislative fly in as normal, but COVID disrupted that. So we switched over to a virtual advocacy campaign, which was successful in the House. And of course our target is right now is the Senate. And our grassroots advocates have been very, very vocal and sending messages to their members of the Senate and also organizing meetings, virtual meetings over zoom and other formats. What has the Chamber have been doing in terms of grassroots activities to support those objectives?
 
Ed Mortimer:
So we've been very active, you know, educating our members about what's going on. Um, we've actually started a social media campaign where we have a calendar every day. It's, you know, I mentioned 63 days, to the expiration, we remind lawmakers every day, they haven't acted and that the clock is ticking. We actually have on our website, let's rebuild america dot com. We have a ticker that shows the hours, the minutes, the days that are taking now, um, for action. Um, and so like your members, we've learned to kind of change our advocacy. It's no longer um, just our folks walking the halls of Congress, but it's doing zoom. Uh, it's being involved in social media campaigns. You know, we're still talking to members of Congress and their staffs in a different way. Um, but to be honest with you, it's, it's still effective.
 
Ed Mortimer:
They still hear it. And I know engineers have a lot on their plate right now, but we need you to step up and have your voice heard these members of Congress need to hear how many jobs your company has, uh, what projects you're working on and what are the opportunities that may go away if they don't act. Um, it does make a difference and telling our story is really going to be critical in next three weeks where there's so much noise in Washington, right. We watched the news and we know the ongoing pandemic. Um, but making sure that our voice is heard, that the lawmakers truly understand the ramifications of not acting to invest in infrastructure. Uh, it's really to make the difference whether we get the right amount of funding in this next bill or not.
 
Host:
Yeah, absolutely. I mean, you turn on the television it's wall to wall COVID-19 coverage. You look at the major newspapers and they talk about, you know, the issues going on around the country. Um, and it doesn't seem like this is getting a lot of play, but honestly, the people who matter are paying attention and the best way to cut through the noise, cut through the media cycle is to get to them directly, um, either a message by email or a request for a zoom meeting. The ones that we've had have been very successful and the members have been very receptive meeting because we're able to amplify our voice. You can never get, let's say 50 people into a Senate office or 50 people into a House office. Now with zoom, you can have as many people as you want on that meeting with that member of Congress.
 
Host:
And you can essentially have a full fly in and one meeting virtually. So it's of critical importance. Um, also the ATM coalition, which is something that we've been involved with. Um, you know, you see a lot of the social media activity going on our page. Uh, we always retweet the messages and we, and we try to drive people over to the website, um, which is for the coalition it's, it's faster, better, safer, safer. So our faster, better, safer. Yes, I know exactly. I always get caught up on that. Tell us a little bit more about that coalition in some of the, some of the things that it's focused in on.
 
Ed Mortimer
Yeah. So we started this coalition, um, and it's been around for a while. And, and what we decided was, you can't just have the engineers, the construction industry, go up to the Hill and continue to ask for funding. We need to broaden the coalition. And so the goal of the coalition was let's bring organized labor in, let's bring other parts of the business, community retailers, Farm Bureau. And so we're trying to widen the coalition of stakeholders that understand the importance of infrastructure. And so ACEC and their membership in it allows us to do those activities. And then Jeff as you mentioned, we're able to kind of amplify all of our messages in this world of Twitter and so much noise, uh, being able to have colleagues to amplify the message are really important. Um, and so the coalition does that. We partner with folks, we tell the story of members all over this country.
 
Ed Mortimer:
And so ATM really is focused on from it from a grassroots campaign and on the outside in, so we hear stories around the country. We try to tell those stories to the members of Congress, um, you know, ACEC's got a great Capitol Hill office, and you guys work the inside the beltway, we partner with you guys on many of those efforts, but again, it's working inside the beltway and combining that with an outside the beltway campaign, to make sure that we're bringing the vast array of resources that we have, and we pull them together and pulling them together. We're able to be more effective than if we just do all of our, do our own campaign. So, you know, I really love what you guys do. Um, your membership has been extremely active. Um, I know it, cause I hear from members of Congress all the time hearing about what ACEC members were just in your chapters are very active at the state level.
 
Ed Mortimer:
And you've been, the chapters have been very effective at the state level raising revenue. We need to take some of the lessons learned at those state campaigns and bring it to Washington because so much of Washington tells us why they can't do something. Engineers know how we can do something. And we just have to remind these folks. And then we got to hold them accountable, whether they're Republican or Democrat, um, too many times, they tell us what we want to hear and they don't do anything after the meeting. So when you meet the zoom meeting, follow up with them and say, okay, you promised me X, Y, and Z, where are you at on those promises? Where's the bill? Has it been approved? Is the bill going to the White House? because it doesn't help you and remembers if we don't get these things done. So again, I think bringing all these resources to the table that none of the organizations that care about this can do it on their own, but together we really are bringing that large stakeholder community that can make a difference.
 
Host:
Yeah. If you were able to bring the engineering sector of the economy together with the construction sector of the economy and then the labor that actually gets it all done and have a unified voice it's practically unbeatable because you you're covering all fronts. Um, and I, and I think that's a good point. I mean, from, from the perspective of our state chapters, you know, they're working very hard on their own issues at the state legislative level, but if there's a success that, and this was kind of a call for stories, if there's a success that you've had at your state level to let us know, so we can filter it up because success at the state level translates to success in the federal level, because the members of Congress from that state delegation pay attention to what happens in the state house. And if you're able to go back and say, Hey, in Pennsylvania or Illinois, we were able to do this. So Mr. Senator or Congressman, it's not impossible, and this is how we did it. Um, it all feeds together and we all kind of self-support. So, uh, anyone out there listening who as a story or as a kind of a case study, make sure to let us know so we can get it to Ed. We can get it to people at the ATM coalition and kind of get that communicated to Congress.
 
Ed Mortimer:
Yeah. Jeff, if I could make one more point on that, the other thing is we see a lot of state officials come to Congress. So, you know, when they hear these stories, a lot of these folks that have, are now coming to Congress, we're seeing more and more of them say, Hey, I, I worked with the engineers on getting a gas tax raise or a sales tax raised. And that's going to be very helpful as we continue to grow base of support in this Congress to make the real investments that are required. So that's why in another way that, you know, these folks that end up at the state level, they find their way to DC. So cultivating those relationships and keeping them going is going to be really critical.
 
Host:
Absolutely. Well, before I let you go, I've got to ask a NEPA question because, you know, this has been n one of the administration's main focuses policy-wise from a regulatory standpoint, so I know that the Chamber supported the administration's NEPA reform, um, and of course the streamlining of project delivery, which is crucial. Why do you think it's important to the business community in general? And do you think that the changes in the NEPA regulations will make it through legislative and judicial challenges?
 
Ed Mortimer:
So good question. So, you know, look, the Chamber believes we need to modernize our infrastructure. That also means we need to modernize the way that we deliver projects to the engineers on the frontline of the challenges in the permitting process. Almost 20% of the cost of many major federal projects is due to the planning approval process. And NEPA has been used by our opponents to delay and stop projects. And that's not what NEPA was meant to do. NEPA was meant to encourage public participation and to make sure environmental regulations are being met, um, engineers that work on products today, I guarantee you any project at any ACEC members working on is going to make the infrastructure more environmentally sensitive than what it replaced, just because innovation and technology that engineers bring to the table. And you're replacing an infrastructure that was built 50 years ago or longer.
 
Ed Mortimer:
So the reality is, is that we need to show the business community because the business community is willing to pay more for infrastructure. As you know, we've been out there saying we need to adjust the fuel tax, but if we do adjust the fuel tax, we also need to show the business community that we're going to use limited dollars more effectively. And so we did support the administration's executive order on tightening up, uh, the NEPA requirements. Um, again, it doesn't change the NEPA law and there's some misconception out there. Uh, it does not change the law. It just changes the way federal agencies implement NEPA, and it provides some reasonable timelines for it. And while the Mark dental community and others have raised a lot of objections to it, um, actually in the Senate EPW bill that I mentioned that moved through the committee on a 21 to zero vote, um, that was sponsored by Senator Carper of Delaware.
 
Ed Mortimer:
It includes language that would put a two year time limit on lawsuits, on NEPA projects, um, Democrats and Republicans in the last two surface transportation bills have supported, you know, ways to kind of expedite permit approvals. So again, we believe this needs to be done without changing environmental law without cutting corners, but putting reasonable timelines. And if the answer is no, we'd rather see limited dollars go to projects that get to yes. And so again, if we're going to make the major investments necessary to modernize, we have to figure out a way to modernize these rules. So, you know, the administration just made an announcement that they finalize these rules. Um, they're going into litigation, um, as all of these things always do. Um, you know, do you believe that it's solidly, it should last that now obviously if there's an election this fall, um, there could be a change in an executive order, and that's why we wanted to get the Senate bill codified into law because a law is a lot harder to change than an Executive Order. And so that's one of the other reasons that we want to push to get that Senate bill done. Um, because getting that enacted into law this year would make sure that it's going to last where the Executive Order, if there does happen to be a new administration, it's pretty easy for them to just eliminate that Executive Order.
 
Host:
Yeah, that's, that's a really good summary because I think that a lot of people are following it, but they're not following it too closely, but it is all about keeping the pipeline open for projects. It's about easing burdensome regulations. It's not about undermining environmental quality or protections, but about getting projects from paper to completion faster. That benefits the local level all the way up to of course, the federal bottom line. So, that's very important. Ed, is there, is there anything that we didn't cover that you want to make sure that our listeners know? I mean, this is a great opportunity to hear from the Chamber.
 
Ed Mortimer:
Sure. Well, one thing I wanted to let you know, the engineers know that there's a couple of things that Chamber's really going to be advocating for in the next COVID relief bill. Um, one is liability protection, making sure that businesses that are following CDC and other health guidance, um, don't have frivolous lawsuits, as long as they're showing they're doing the right thing. Uh, making sure that we extend the PPP program, uh, and work to make sure that our businesses are able to survive through this very challenging time that did not come from anything they did. We also want to make sure, as we talked about state and local governments get resources to make up for some of the lost revenue that they had. Um, and we it's really critical that we get these done before they leave for the August recess. Um, you know, in our view, they shouldn't go on recess until this is done.
Ed Mortimer:
Some of these programs, actually the PPP program, the unemployment insurance, additional funding expires this Friday. And so we have to hold these lawmakers feet to the fire. Um, it's been a challenging start in Senate where at this point there's probably not 50 votes for the initial proposal that was put out there. It's going to be a lot of horse trading, um, but we have to keep our eye on the ball and remind our lawmakers, stop the partisanship. Uh, you have to do the right thing on behalf of the American people. Businesses need some certainty that these things are going to be locked into place. And so, you know, this is something that is really critical to all businesses. But I know in the engineering business, a lot of engineering companies took advantage of PPP, and we want to ensure that you're able to keep your employees through this very difficult time. We want to make sure there's government support there - very timely and targeted. So these aren't just longterm extensions, but timely and targeted to help businesses get through this pandemic. So urging you all to talk to your lawmakers about that and ensuring that they get this done before they leave for the August recess.
 
Host:
Absolutely. And those are issues that we will be joining you with, and helping you to advocate for, uh, throughout, um, the current session of Congress. And hopefully they do get this done before leaving for recess. And if they don't, they, they shouldn't go. Um, this is, this is critically important for the economy and for the industry. So, um, there's a lot to do. Um, if you're listening out there, you have a voice, make it, um, follow a Ed on Twitter at Chamber Moves - @ChamberMoves, and that's his Twitter feed, the ATM Coalition, faster, better, safer, that's www dot faster, better, safer.org, check them out and stay with us. And, uh, we'll keep you informed ed. I really appreciate you coming on the show. Uh, love to have you on when we get closer to the lecture and kind of maybe, uh, uh, look at, you know, the two potential outcomes and kind of where we might be going from an infrastructure standpoint. I'm a little too early to tell. We need to get Congress moving first before we can talk about that. Absolutely. Well, glad to glad to do that and good to be with you. All, everybody stays safe and let's keep busy. Yep.
 
Host:
Great. Stay safe and enjoy, uh, I guess the, the, the hot sweltering DC weather.
 
Ed Mortimer:
Right.
 
Host:
But thank you again, ed. And you've been listening to engineering influence from ACEC.
 

ACEC Update for Friday July 24, 2020

The ACEC Update for July 24, 2020:
Here are the registration links to the webinars announced on the show:
NextGen: Positioning Future Leaders Tuesday, July 28, 2020, at 1:30 pm ET
With more than 78 million baby boomers stepping away from the workforce in the next decade, it is imperative that firms prioritize their future. This includes not only identifying, but also developing the next generation of leaders. Success requires succession, but it isn’t always easy. The skills needed in the past may no longer be relevant for the future success of the firm. Join SN’s Director of Workforce Advisory as she leads participants through the best next steps to ensure their leadership of tomorrow is ready, willing, and able.
TAKEAWAYS: • How to align leadership skills with the trends that will happen in the future • Effective techniques for identifying the next generation of leaders. • Best practices for engaging legacy leaders in the development plan for future leaders. • Critical steps you can take today to start the journey of transitioning leaders.
Diversity & Inclusion: HR Panel Discussion on Program Examples and Lessons Learned Wednesday, July 29, 2020, at 1:30 pm ETComplimentary Registration
Back to the Table - The 2nd Half M&A Outlook for Engineering Firms Thursday, July 30, 2020, at 1:30 pm ET 1.0 PDH
Despite the damaging impacts of the coronavirus to our economy and industry, engineering M&A activity finally appears ready to get off the sidelines. Buyers and sellers are reengaging in talks from earlier this year while others are ready to chart new paths in their organization’s growth or exit strategy plans.
But how are the nuances of successful deal-making different from the start of the year?
Join Steve Gido as he reflects on the current M&A environment, highlights trends in first-half activity, assesses the new challenges buyers and sellers are facing, and offers anecdotes to guide expectations for the rest of 2020.
TAKEAWAYS: • Explore if the coronavirus will accelerate industry consolidation • Understand the motivations driving buyers and sellers today • Examine the implications on valuations and transaction structures • Discuss how due diligence and integration processes may evolve
For more information on the 2020 ACEC Coalitions Summer Education Series on August 6th and 7th, click here
The new ACEC legislative Action Alert urging Senate action on infrastructure can be found here
 
 

The Future of Funding and Mobility as a Service with David Zipper

 
 
ACEC welcomes David Zipper onto the show to discuss the future of infrastructure funding in a post COVID economy and the future of Mobility as a Service (MOS).
 
 
David Zipper is a Visiting Fellow at the Harvard Kennedy School's Taubman Center for State and Local Government, where he examines the interplay between urban policy and new mobility technologies. David’s perspective on urban development is rooted in his experience working within city hall as well as being a venture capitalist, policy researcher, and startup advocate. He has consulted with numerous startups and public officials about regulatory strategy.
 
David’s articles about urban innovation have been published in The Atlantic, WIRED, Slate, and Car and Driver. His 2018 article in Fast Company was the first to apply the the “walled garden” framework to urban mobility. David has spoken at events including the Consumer Electronics Show, SXSW, and the FIA Conference. He focuses on topics including Mobility-as-a-Service, the uses of transportation data, the future of micromobility, and linkages between public transit, city regulations, and private shared vehicles.From 2013 to 2017 David was the Managing Director for Smart Cities and Mobility at 1776, a global entrepreneurial hub with over 1,300 member startups. At 1776 David connected hundreds of entrepreneurs to urban leaders eager to deploy their solutions, and he closed millions of dollars in partnerships with cities and corporations worldwide. He continues to be a Partner in the 1776 Seed Fund.David previously served as the Director of Business Development and Strategy under two mayors in Washington DC, where his responsibilities included attracting businesses to the city, promoting entrepreneurship, and overseeing economic development strategy. David led support to Washington’s first startup incubators and guided the city's response to the emergence of ride hail services. Before moving to Washington David served as Executive Director of NYC Business Solutions in New York City under Mayor Bloomberg.
 
David holds an MBA with Highest Honors from Harvard Business School, an M.Phil in Land Economy (Urban Planning) from Cambridge University, and a BA with High Honors from Swarthmore College. He has been selected as a Truman Scholar, a Gates Scholar, and a Baker Scholar.
 
Transcript:
 
Host:
Welcome to another edition of Engineering Influence, a podcast by the American Council of Engineering Companies. I am pleased today to welcome David zipper onto the program. David is a visiting fellow at the Harvard Kennedy School's Taubman Center for State and Local Government where he examines the interplay between urban policy and new mobility technologies. David's perspective on urban development is rooted in his experience working within city hall, as well as being a venture capitalist, a policy researcher, and a startup advocate. He has consulted with numerous startups and public officials about regulatory strategy. David is a published article appearing in Wired, The Atlantic, Slate, and Car and Driver. He's spoken to groups such as the consumer electronics show South by Southwest, and focuses on topics such as mobility as a service and micro mobility and the linkages between public transit city regulations and private shared vehicles. David was also one of the panelists on the ACEC Research Institute's most recent round table discussion on the future of engineering focused on the future of funding in a post COVID-19 environment. And David welcome onto the show. Really great to have you.
 
David Zipper :
Thank you very much. It's a pleasure to be with you.
 
Host:
So that was an interesting panel. I listened to it a couple of times and I would imagine, I guess it's safe to say there was a universal agreement that the recovery is going to be gradual at best. After COVID-19 with your perspective from working in city hall and having that local political experience, how do you see this playing out where really the rubber meets the road? You know, you're talking about metropolitan transit agencies, you're talking about, you know, people get trying to get to and from work. How do you think COVID-19 is going to impact cities?
 
David Zipper :
That's a big question. And there's lots of different ways to answer it. And frankly, the answers are going to be different based on the, the nature of a transit agency versus a county government or a city government. But I can certainly maybe I can offer some, some overall thoughts up front and we can go into whatever detail that you like. But but yeah, in the short term you've seen transit agencies and local governments and state governments really just scrambling to keep the lights on as it were. Adjusting transit routes. Sometimes bringing up capital projects to do, to go faster because there's fewer people on the roads and there's fewer people flying at airports. So you can do airport expansions all faster. There's fewer trains running. So you might be able to more easily do capital projects.
 
David Zipper:
But that's really like a, a sort of a short term band-aid because the money's running out fast. We're already just, just today, actually, as we're recording this, there's been news about a $20 billion plus budget gap over the next couple of years in New York City's MTA, that's going to have to get closed. And the biggest transit agencies are feeling the pain first because they are really using their farebox revenue. The fairs that we all pay when we take transit they've used what they, that they collected yesterday to pay today's operating expenses. And in the big cities, that's a big chunk of their revenue, transit revenue. Transit ridership has fallen through the floor because people are uncomfortable on transit, even though it's the data suggests it's relatively safe, as long as people wear masks, but you've already seen, for example, in San Francisco, Muni, the transit service, there is consolidated routes really in a huge way, Caltrain in the Bay area, its future is up in the air there's discussion of whether to do a new tax to save it.
 
David Zipper :
And the transit agencies are going to feel the pain a little bit later because most of their revenue comes from state and federal governments that, you know, their budget is already allocated for this year, before the coronavirus hit. But there'll be a rolling impact there. And then for, for, for states and cities to, to you know, state the obvious they can't print money, they have to meet their, their - they have to make their budgets align so they can have a deficit. So what that means is that you're seeing some projects postponed, you're seeing layoffs and the Cares Act at the federal level. It gave a bit of a lifeline a few months ago when the coronavirus first hit there's discussion. Like again, as we're recording this there's discussions on Capitol Hill about a new federal investment program, it's unclear if that's going to have money for states, cities, deities, and for transit agencies, if it doesn't, I expect we're going to see pretty intense contractions and layoffs and pull back on capital projects and all of those levels.
 
Host:
It's been in my experience, you know, formerly on Capitol Hill and, and, and, and just watching this from time to time with all the surface bills that kind of come on, you always have that partisan divide when it comes down to the usual argument is that, you know, Republicans want to have the move towards devolution, but it was always that argument that, okay, we're going to Republicans would fight against Democrats who wanted to have bike trails or greenways or things of that nature, rails to trails, things like that. And then the Republicans were always going to fight against transit because they just wanted to make sure that that highway trust fund was kind of boxed in for roads.
 
Host:
Given the fact that we're in this new environment now, we're, it seems the federal government is more willing to provide aid, to deal with, to soften the blow for COVID-19. Do you think that any of those old entrenched arguments might shift, just because of the willingness to put money on the table to actually create assistance programs, do you think this might be an opportunity to break the paradigm and potentially have that money going to, you know, state and local transit agencies more freely?
 
David Zipper :
I wish I could say yes. I can't because there's a, I think unfortunately the you know, we used to say decades ago that transportation is a nonpartisan issue is simply not true anymore. The, the there's a professor at UC Santa Barbara named Clayton Nall. He wrote a book called the Road to Inequality. And in which he writes about how in the last 50 years transportation funding and particular transit funding has become remarkably partisan.
 
David Zipper :
Even to the point that if you live in a Democratic area, like say the Bay area or the New York area, even if you never take transit, you're more likely to vote in favor of referendums, referenda in favor of transit than, than any those who who'd be elsewhere, that doesn't apply in other parts of the country. So transit has become a democratic issue, which to me is unfortunate because frankly, the more people who are riding transit, the less congested roads are including those roads that are being used by some exerbs and suburbanites who are more likely to be Republican. So I would love to, to hear to, for your hypothesis to be held, to be the whole true. But from everything I've seen, like, for example, with the Cares Act you know, Schumer and the Senate and its allies had to hold out longer to be able to get a few billion dollars more for transit, it seems like it was done despite Republican opposition, as opposed to a sort of like heralding, a new breakthrough, which I wish it would on a nonpartisan bias.
 
Host:
That's something that was kind of brought up a little bit on the panel, but it wasn't really delve deep really more, more than just a couple of questions and just comments on it. But the push pull between of course, the large metropolitan areas in, on the coasts and your larger cities in the interior, but then you have those swaths of, let's say, you know, like I said, exurban or rural areas, how do you think the funding's going to be effected for projects in those smaller cities or, or areas between the two coasts?
 
David Zipper :
Well, a lot of it, right, it's going to depend on, on one, what happened to the budgets of state DOTs, and that's what, that's what those small cities and rural areas are really relying on. And this is a point that was made by Jeff Davis on the, on the panel.
 
David Zipper :
You know, even if there is stimulus money from the federal government is provided with a very generous match for highway projects for small towns. And for rural areas would say, I don't know, four to one federal match or whatever it is. There's still a one in five, 1 dollar of every five has to be put up by the local and state governments that at a time when income taxes are collapsing and tax revenue from hotels and restaurants, it's just drying up. It's not clear the extent to which States and local governments can even meet very modest matches. So if I were an official at a, in a small city or small town or a rural county, that's what I would really be worried about is to say, look, if I get a generous program with a low match, can I even meet that? I may just be grants. Yeah.
 
Host:
And that, that kind of goes into the segway to the idea of the integrated mobility or the mobility as a, and where the private sector might be able to in some way, step in. I mean, it's the few - Consumer Technology Association and CES. I've been out to a couple of their shows and seen kind of the idea of, you know, mobility as a service. The idea that you know, you might be able to have - deleverage maybe transit. And so in some way where you can actually then have vehicles, which are not so much owned, but private shared vehicles or some kind of autonomous systems, some, some cities are starting to try to get pilot programs on the road already for autonomous buses and things of that nature, which are private public partnerships. That's all nascent a little, you know, it's not fully developed. Where do you think the opportunity is for some of these technology companies that are, that are focused on mobility, and that's a big change. I mean, just the change between transportation to the concept of mobility is not so much what you own or what you have, but how do you get from point a to point B?
 
Host:
Do you think It's an opportunity for the private sector kind of enter and, and treat this as a, as a business opportunity?
 
David Zipper :
Maybe, maybe I wrote an article in Slate two months ago that noted how truly unusual this moment is, and that you know, ordinarily, there's a lot of research that shows it takes a lot to get you or me or anybody to change how they travel. We're creatures of habit when it comes to commuting, right? We have a given route we take to get to go to work or to the grocery store, to the gym or to the school. And if we're biking or if we're taking a bus, or if we're driving, we're probably going to stick to that. It takes a lot to get us to change. Just inviting you to change or me to change is probably not going to do much.
 
David Zipper :
It's really hard. What does get people to change and individual change is if you have a shock, like a like you have a new child born, and your habits have you have to move around, or let's change, maybe you change where you live, you move where you get a new job. That's an individual shock though, or a household shock. What we're undergoing now because of COVID is a society wide shock where everybody is rethinking how they travel, because they may not be going to work anymore at all. And they, if they took public transit, they may not be comfortable doing that. Now they may not be comfortable at being in ride hail the way they used to. There's lots of trips, millions of trips up for grabs in terms of how, what the new mode might be. And frankly, this is sort of a rationale for the cities to quickly put up bike lanes and, and new infrastructure that it can, can encourage people to not default to driving, which can feel like the safest route.
 
David Zipper :
It's just not sustainable at scale for cities. So the question becomes to get to your point of like, what's the role of the private sector in this? I would say that there is potentially a role for private sector actors, whether it's operators like scooter companies to step in and be able to provide, for example, a lower priced options for the short term, or maybe monthly rentals, which companies like Spin and I believe Lime have moved toward providing now as sort of a product that fits the market right now to encourage people who are not going to be, who might otherwise default to driving, to take another mode. That's more environmentally friendly, it takes up less space. And then you get into mobility as a service, which for those who aren't familiar, I would assume that everyone knows about MOS. Maybe I should define it really quick, because I don't know if all of our listeners are engaged in that. I Know some of the larger players in the engineering space are, but...
 
David Zipper :
Yeah, it's still a new field. It's a lot of people are excited about it and transportation planning and policy and technology, but it's still in its early days. The idea behind mobility as a service is to say that if we can sort of take all of these various options to get around a city for those who don't drive and knit all those options together. So you've got transit in there and scooters and ride hail and car share and bike share, and whatever else, put them all on one platform that MOS platform, it lets people choose how to get from point a to point B on all of those collective options and purchase their ticket, or a ticket that's a combination of modes on that platform. You can actually take away some of the friction, the annoyance factor of having to jump between apps and figure out which is the best service to get you from point A to point B.
 
David Zipper :
This is a need, MOS advocates claim, that really didn't exist 20 years ago when we had a very sort of fixed number for decades, really of a number of ways to get around town. You walk, bike, taxi, drive transit, but now we've got these other new modes and MOS can make a little bit simpler to navigate. So, and there's a bunch of companies that provide this now, like City Mapper and transit and so forth. And so on Google Maps, you could argue as a MOS provider in some ways. So the, the role of MOS in this particular moment that we're in is potentially a powerful one because lots of people are again, figuring out how to travel because they're breaking their old habits about how to get from point A to point B and MOS platforms can inform those decisions.
 
David Zipper :
And perhaps if the government gets involved, especially could nudge some of those decisions to be, to be resulting in a trip that's other than driving and potentially other than transit, cause people are just uneasy with it right now, for reasons that are in a lot of ways. Understandable. So is this a moment for MOS? Maybe? I would argue that these platforms are really reliant on the underlying quality and comfort of the services that they knit together. So you need to be able to provide comfortable biking and scooter lanes in a city to make people consider those options. You need to be able to provide reliable transit, to get people, to consider that which is, you know, sometimes a problem in American cities. But I do think this is a moment where MOS could be an interesting area of exploration
 
Host:
Or at least an area a time where federal policymakers can start looking at this and integrating it into, you know, long-term, you know, policy that, cause I know that, you know, Uber for example, was, was very active on the Hill talking about their fully integrated model where it's, you know, it was the combination when, you know, Uber taxi was kind of first coming out and they were talking about, we'll take an Uber to they're there, I guess, hanger or whatever they're going to consider, you know, get on an Uber taxi that will fly you to the next facility where you can go and take an Uber for your final destination. And you know, that kind of a kind of integrated, you know, closed loop system.
 
David Zipper :
Yeah, I mean, that's a little that's going to suit Uber's needs. I'm not sure cities are going to be that excited about everybody jumping into helicopters.
 
Host:
Exactly.
 
David Zipper :
I think that the high speed rail argument of saying, okay, you can take a high speed rail route to, let's say Washington DC to New York, but after you get off the train, then what?
 
David Zipper :
Correct.
 
Host:
It's how do you, how do you connect a route and how do you connect that high speed rail line termination to all the different options you can get to get to your final destination without having to get a car or, or, or reliant on one form of transportation over another.
 
David Zipper :
Yeah, I think the idea is if you're choosing between driving, flying or taking the train wouldn't it be nice if you could basically with one tap, be able to purchase your train ticket and know that there will be a, just for example, a Lyft car waiting for you because that, that car was summoned knowing that your train is running seven minutes late and it's pulling up just two minutes after the train gets into the station and you're, you've got a seamless sort of transfer from the train to ride hail onto your destination. That's the idea behind MOS, that's an inner city vision of MOS. Usually to be honest, MOS advocates are thinking more about travel within the city. So maybe the argument there would be, you know, I want to go to the place in Fairfax County, I'm in DC and to get to Fairfax County, Virginia, I need to do a combination of transit to ride hail or transit to scooter.
 
David Zipper :
And I can in one fell swoop purchase, determine my route, purchase the ticket and know that I'll have a seamless transfer when I get, when I pop out of the Metro station in Fairfax.
 
Host:
And then again, you know, a lot of this has been on the tech side because of developing the technology to allow that seamless integration of different mobility solutions. But on the engineering side, the people who are designing the infrastructure to actually enable this to happen. And that's really, you know, our core constituency from an engineer's perspective. What do you think the top, what do you think maybe a few of the, the main things that they should be looking at, or they should be paying attention to? If, they see opportunity to, you know, design the infrastructure to support systems like this.
 
David Zipper :
Yeah, I'll mention a couple of things. You know, one is the, again, the topic I wrote about a month ago I feel like there's a lot of people live in cities who suddenly have a new appreciation for their sidewalks, you know, as we're all stuck at home, trying to get exercise, to avoid going stir crazy. You realize that a lot of our urban neighborhoods have terrible sidewalks and some don't have any at all, especially in the South and the West. And I I think we've got, there's a good chance and I frankly, am hopeful that there is going to be a window of opportunity to consider sidewalk products - and sidewalk infrastructure is real infrastructure. It's less expensive than building a tunnel, but for those of your the engineers that are members of the organization that are trying to think of how can I really tap into what public leaders are thinking about now, if you can incorporate high quality wide, well lit, accessible sidewalks into your proposals for renovating a given district or into a new project.
 
David Zipper :
I think that this is a time when that's going to be thought of a little bit more directly and more constructively. I think that that also these new bike lanes and, and that are being developed, I don't see them going away. I frankly think that's also opened the door to considerations of some new technologies that will also have infrastructure needs. And I'll give one example that I'm really interested in, which is, which is parcel delivery. There's an argument that the coronavirus is a great catalyst or an accelerator of trends that are already underway. I think everybody knows that people are buying more stuff online than we used to. Now it's even more stuff than we did a few months ago. And there's been moments of sort of bullishness for sidewalk drones. I personally think that's going to take a while.
 
David Zipper :
Partly because our sidewalks think like we were talking about earlier, but the other option is is something I am actually kind of bullish on, which is e-cargo bikes, or electric cargo bikes, which for those of the audience who've been to Europe, they're widespread in Germany and other European countries. And they could be, they can utilize the existing infrastructure in cities. And most of it, at least the city of Boston is, but not an RFI today. July 21st, I think is today's date to basically invite suggestions from the private sector about what sort of infrastructure upgrades might be necessary in terms of depots to collect parcels and various neighborhoods as distribution nodes, things like that. And I, this is an area where I'm bullish in cities for the next five years. I think cities are gonna recognize that they can reduce congestion, improve neighborhood quality of life and, and utilization of existing infrastructure.
 
David Zipper :
If they shift some of these UPS, DHL, USPS trucks that they take up space and double park and can be pollutants instead utilize E cargo bikes, Europeans can do it. And I think we can too. And a lot of our cities.
 
Host:
Those are really two good points. He and I, and I, it's always kind of sad when I see a drone and Fairfax or one of the, you know, robot parcel delivery or package delivery drones get caught up on a stump or something on the, on the sidewalk and Fairfax city. It's kind of sad.
 
David Zipper :
But it happened. There was a viral video and Friendship Heights, one of the wealthiest neighborhoods in Washington over the weekend where you see the sidewalk drone got stuck because the sidewalk got too narrow. And I myself tweeted about him saying, because the guy who saw I was like, Oh, this I helped a little guy.
 
David Zipper:
It's kind of cute. I'm like this, isn't cute. If it's a person in a wheelchair, like we've really blown it with our urban sidewalks. And this should be a moment when we should be really investing in them. That's a very good point.
 
Host:
Well, David, I do appreciate you coming on the show. There's a lot to talk about here. I'd love to have you back on the show so we can talk about really these mobility issues when it comes to, you know, the interconnection of technology and mobility, how it all kind of ties together. You know, it's something that we'd like to explore a little bit more. Because I think our members are always looking for what, you know, what is the next thing what's going to be the next area that we might be able to invest in. And I think that, that these issues are going to be top of mind.
 
Host:
And yeah, and I do appreciate your time. And you mentioned that article. I mean, what else do you have coming out? Where should people be looking for the the article that you're writing now?
 
David Zipper :
Yeah, I'm actually, I've got a couple articles coming out in the next week or two. I write a lot about new forms of urban mobility and new technologies, and also about sort of the interplay between local policy, especially around transportation and automobiles and transit. So, so those who are in, if you're interested, you can always reach me on Twitter. I post all my articles there people can send me DMs. If they've got a question it's easy, it's a zipper, just my name at David Zipper. And then for my articles I actually have a website where I put them together. Cause I do write across a number of platforms and that's just as easy again www.davidzipper.com and you can find all the articles there. And I even have a little newsletter. I put out once a month with the stuff I've been writing and thinking about in these topics, because especially in the current environment, so much is changing so quickly. So I appreciate the opportunity to come join you and talk about some of these changes.
 
Host:
It was great to have you on and again, follow David and David's zipper and look out for his upcoming pieces. And we'd love to have you back on. So David have a great rest of the week stay as cool as possible when this heat wave and stay healthy.
 
David Zipper:
I'll go for a socially distance bike ride.
 
Host:
There you go. There you go.
 
David Zipper :
Thanks a lot. It's great to be here.
 
Host:
And you've been listening to Engineering Influence brought to you by ACEC.
 

Funding in the New Normal - An ACEC Research Institute Roundtable on the Future of Engineering

 
 
On July 16, 2020 the ACEC Research Institute held the last roundtable in its "Future of Engineering" series.  The event brought together some of the most respected thought leaders in the infrastructure space to discuss the financial effects of the COVID-19 pandemic on the future of funding for infrastructure projects
Panelists included:• Rosemarie Andolino, Former Chairman of MAG USA and CEO of International Development, Manchester Airport Group• Anirban Basu, Chairman and CEO, Sage Policy Group• Jeff Davis, Senior Fellow, Eno Center for Transportation• David Zipper, Visiting Fellow, Harvard Kennedy School’s Taubman Center for State and Local Government• Moderator: Joseph Bates, ACEC Research Institute
Transcript:
Daphne Bryant:
On behalf of the ACEC Research Institute's, Board of Directors, welcome to our third round table in the series, the future of engineering. A big thank you to our donors who have made this session possible. We have a great group of thought leaders here today. As you can see on your screen, they're going to share their insights and expertise with us on the future of funding in our new normal. Now without further ado, it's my pleasure to introduce two of my colleagues from the ACEC Research Institute, Joe Bates, who will serve as our moderator for today's session, and Kevin McMahon who will be monitoring the chat box and fielding your questions during the session, Joe, it's all yours.
Joe Bates:
Great. Thank you, Daphne, and thank you all for joining us today. First, I'd like to introduce you to our panelists that we have with us first there's Rosemarie Andolino, Former Chairman of MAG USA and CEO of International Development, Manchester Airport Group in the UK, where she oversaw the development of MAG's North American and global airport services business. She currently serves as an independent board member and advisor to various for-profit and not for profit organizations. And previously she served as the Commissioner of the Chicago Department of Aviation, where she oversaw the management and operations of one of the world's busiest airport systems that comprise of O'Hare and Midway International Airports. Rosemarie, welcome today. I'd also like to welcome Anirban Basu. Anirban is Chairman and CEO of Sage Policy Group an economic and policy consulting firm. Headquartered in Baltimore, Maryland with an office in Indonesia, the firm provides strategic analytical services to energy suppliers, law firms, medical systems, government agencies, and real estate developers among others.
Joe Bates:
In 2014, Maryland governor Larry Hogan appointed Anirban Chair of the Maryland Economic Development Commission. He also serves as the Chairman of the Baltimore County Economic Advisory Committee. Welcome Anirban. Next I'd like to introduce Jeff Davis. Jeff is a senior fellow with the Eno Center for Transportation and is also the editor of the Eno Transportation. Weekly. Jeff has worked on Capitol Hill working on various legislative budget process oversight and parliamentary procedure issues. He also worked extensively on the FAA, Amtrak and surface transportation reauthorization laws in the late 1990s. His current work focuses on analysis of the federal budget, federal transportation budget, and his longterm trends in transportation, funding, and policy. Finally, I'd like to welcome David Zipper. David is a visiting fellow at the Harvard Kennedy School's Taubman Center for State and Local Government, where he examines the interplay between urban policy and new mobility technologies.
Joe Bates:
David's perspectives are rooted in his experience working within city hall, as well as being a venture capitalist policy researcher and startup advocate. He has consulted with numerous startups and public officials about regulatory strategy. So thank you all for joining us today and welcome.
Joe Bates:
I'd like to go ahead and get started and jump right in to get a, sort of a feel of what's going on with the economy. As everybody knows, the US economy, as well as the engineering profession was hit quite hard by the pandemic and the last business impact survey that ACEC conducted showed that over 80% of firms said, they felt that the economy was in worse shape today than it was on March 1st before the pandemic really took hold. So clearly there's a lot of pain going on out there. There's a lot of stimulus efforts that have happened, but Anirban, I'd like to turn to you and ask you to give us an overview of what's happening with the economy right now and where you think it's going in the next five years or so.
Anirban Basu:
Yeah, well look, the recession is dated to have begun in February. According to the national Bureau of economic research is Business Cycle Dating Committee. I think by late April, it was over in late April. That was the nadir for mobility of Americans based on cell phone and other data. You know, Governor Kemp in Georgia started opening up the economy on April 20th. And there was a lot of cash that had been built up in the economy and the household sector because of those $1,200 checks for $600 in federal subsidies for unemployment insurance benefits. So the household savings rate went from 8% pre-crisis to 33% by April. The economy opens up in May guess what? We get job growth, 2.7 million jobs added in may. We followed up in June 4.8 million. That's not consistent with recession. And so it felt pretty good. Didn't it?
Anirban Basu:
Retail sales surging 17.7% in may then again, bouncing back in June felt really good. And then what happens Florida? It's always Florida. For some reason, Florida, Arizona, Texas, Georgia Governor of Oklahoma is now COVID-19 positive. So the surgeon reinfection has put the entire economic recovery in doubt. And we can see that some of these reopenings have been postponed. Some of them have been reversed. We've got the initial jobless claims today at 8:30 AM Eastern Standard Time. And they were somewhat disappointing the market's down today. So I was looking forward to a third and fourth quarter. That was very robust in terms of the economic expansion. It might still happen because people don't seem to care that there is this viral spread. They're just going about their lives. I'm in Ocean City, Maryland today. No one out there on the beach is wearing a mask. I can tell you, and they're not social distancing. They're just going about life. As, as if it's normal, you would know that there was a pandemic. So for right now, the economic outlook is very uncertain. I just think that the economic expansion will continue through the end of the year, but it won't be nearly as dramatic as I had hoped up until about a month ago.
Joe Bates:
How long do you think Anirban that the overhang will stay with us? You know, there's bound to be a vaccine in the early part of next year think pretty much everybody is banking on that right now. So let's say we get a vaccine, you know, things return back to normal in terms of how society functions sometime next year, what's the longer term outlook are we gonna, is this like 2009? Are we going to be sort of suffering for a while? Or do you think it's going to be a lot shorter than that?
Anirban Basu:
Oh no. I think it would be longer than that. And I'll tell you why, you know, after 2009, you know, the economy sort of came back to life, you know, I mean, we pumped a lot of money into the economy. We recapitalize the banks, the federal reserve increases balance sheet from $800 billion. Pre-Crisis the four and a half trillion dollars during and after the crisis. So, you know, the money disappeared as the housing market collapsed. You know, that's what caused, you know, 2008, 2009, we put money back into the system, bam LinkedIn's economic expansion, American history, and very little inflation, booming stock market. It was fabulous. And we entered with that momentum in January and February of 2020. And in February we added more than a quarter million jobs this time. What do we have? We have shattered government finances, state, and local. We have a commercial real estate sector that is in deep recession and will take years to recover, right?
Anirban Basu:
Empty storefront, shuttered restaurants, vacated office suites. And so that weakness lingers, we've got lots of debt on various balance sheets, household balance sheets, corporate balance sheets. And of course, governmental balance sheets and especially the federal government, right, which in June ran nearly a $900 billion deficit for one month, you know, $64 billion dollars. So you put all that together. I think it is possible to talk about a double the procession. And in fact, it is conceivable that we'll have that double dip this year. If, you know, if you agree with my proposition that we were in recession, we came out of recession. We could go in back into recession this year. And then at some point in the future, once this new, next round of stimulus works its way through the economy, you can get another recession thereafter. So there's, you know, a w and then another V on top of that, it's a really risky moment in economic history and the policymakers have to get this right. And those are political outcomes they have to get right. And political outcomes are rarely, right. So, I mean, that's where we are right now, very uncertain place.
Joe Bates:
Great. Okay. Anirban, thank you for that perspective. I'd next like to focus on a question for Jeff as as some of you probably know who, who have looked at the ACEC business impact study that we conducted 90%, nine zero, 90% of firms reported obtaining a PPP loan to bridge the summer and spring trough that many expected. The question here is, will clients start new projects once we get through the summer, or are we gonna continue to struggle through next year? Jeff, what do you think?
Jeff Davis:
In terms of the regular the regular federal infrastructure programs, the federal side of the spending hasn't been affected yet by any of this coronavirus? The, the, the question is always really the degree to which the level of the government that can print its own money. The federal government is going to step in temporarily and assist the levels of government that can't print their own money, state and local. And so you saw a little bit like $150 billion of aid to state and local governance was in the last traunch coronavirus relief the S the house back zone wishlist bill about a month ago, three and a half trillion dollars in one bill that was going to have like $500 billion from state governments. None of that set aside directly for state DOTs, but that's the fundamental question you gotta answer is if you're going to provide a, to state and local governments, does the federal government single out transportation as being privileged and give it a special carve out of money and leave everything else up to state local politicians to determine the priorities, or do they make transportation aid subject to state and local decisions in place that you know, weighing it against the needs for education, budgets of corrections budgets of all the other things that state governments do.
Jeff Davis:
There is zero consensus right now in Congress of whether state DOTs in particular should receive a special targeted round of assistance. That's not subject to state and local governments determining where to best allocate the resource. The Senate Majority Leader McConnell is going to introduce his own coronavirus bill next week. They've got a July 31st deadline for leaving town, at least the house for five weeks, and also unemployment insurance rent. So extended unemployment's going to be in that bill at some rate. We're not sure if the special $600 bonus will be in there or any kind of bonus at what level McConnell wants to put at least $75 billion in dangling a carrot financial aid and school systems that open on time in late August, September. And the only other thing I know about that bill is that he's determined to keep the price tag below $1 trillion.
Speaker 4:
So you're going to have you have a House bill, a three and a half trillion, the Senate trying to max out at 1 trillion, and they're going to have between middle of next week and July 31st to figure out what that goes. So, because it doesn't do any good, the federal government putting out money at 80% federal share for highways, if the state or local DOT can't afford its own 20%, or is uncertain, whether they're going to have the dedicated revenues over the next X number of months to cover their 20%. So that's the basic issue is the uncertainty of government tax receipts at the state and local level is going to start tampering all this.
Joe Bates:
So, so if I can press you on this just a little bit, Jeff, and I'd also like to get David's thoughts on this. You're saying the federal money is there. So are projects going to be effected. And if so, in what way?
Jeff Davis:
Cash going out the door for federal infrastructure programs has not really been affected at all yet by coronavirus, but for the big highway and transit programs, those are reimbursable dollars. The government signs a contract upfront only after the state government pays the contractor do they come to the US Department of Transportation and get reimbursed. So the dollars leaving the door and the treasury is a lagging indicator. Unfortunately, it's the most up to date indicator we have as far as monthly basis. We'll find out next week, hopefully on the obligation to the grant agreements actually signed between the federal government and state local government for infrastructure we'll hopefully have enough later quarterly total on that. And they're about to move to monthly reporting on that. So we can finally get something other than anecdotal evidence, you know, from States, state DOT here, or city transit agency there on how much they're curtailing their future spending plans in light of the coronavirus revenue uncertainty, but at the federal level, we don't quite have the data yet on just the degree to which the federal governments, local and state government infrastructure partners are rolling back activity, looking to the future yet.
David Zipper:
Yeah. And can I follow on, on that? Is that.
Joe Bates:
Yeah, go ahead, David.
David Zipper:
Yeah. And, and just cause I do a lot of work in particular with urban transportation, like the transit agency is I can sort of speak from that perspective and everything that Jeff is saying is, is I think true and the lack of certainty, the lack of clarity at the federal level sort of filters down to transit agencies, being very concerned or cities being very concerned about future cash support, which leads them to make decisions now about future planning. And I can give a few examples of that. You can see that that very simply some of the groups that are hit the hardest by this right now, it would be the transit agencies that live off of their farebox revenue. They're using the farebox revenue from last week to pay their bills from this week.
David Zipper:
So just this week, there's been a big controversy in the Bay area where CalTrans may or may not get the funding. It would need through a special sales tax to be able to continue. And there's it's kind of incredible for his affluent areas, the Bay Area, serious conversation about CalTrans ceasing service. And if that happens that actually, and I want to make this clear since given the audience here, it's not like you can just turn off a transit agency and then turn it back on. You're losing mechanics, you're losing specialized knowledge about the technology and the vehicles that it's very difficult to emulate. And you look over New York with the MTA saying that they're going to have money to get through August. And they're the, the, the director was saying yesterday that she's being forced to go through the whole org chart, to lay people off and then sort of compounding these problems.
David Zipper :
You've got, especially in New York, for those who may be there, you've got the Trump administration are sitting on decongestion pricing, which would have otherwise provided a $15 billion cash infusion into MTA at a time that really needs it. So, there's plenty more examples I could cite, but I would simply say, you know, this is a time when in the urban transportation side, which I would imagine is of interest to many in the audience. You're seeing a lot of leaders being forced to assume the worst, because there's just no clarity from the federal government about whether there'd be a secondary infusion like there was with the cares act, which is forcing them to hunker down and, and make some really difficult decisions.
Jeff Davis:
And at the state level, most States operate under constitutions or laws prohibiting them from running a deficit. So the deficits are cash in cash out. So they've got to arrange their, their future spending commitments based on anticipate the latest anticipated future tax revenues. And that's why they have to particularly curtail slow spending capital programs early and upfront to try to make sure that they don't run a deficit six or eight, six or 12 months down the line when the bills are coming due and being paid.
Joe Bates:
Rosemarie, I want to get you in the conversation here is what else how do you see since we're talking about the public sector here in public funding, how is the public funding going to affect the airlines? The airports, obviously the airlines got a little bit of assistance in the last month or so maybe not as much as they wanted, but what's your take on the public funding and how that's gonna affect the airline sector?
Rosemarie Andolino:
Well, I think you've seen two things, right? Not only did the airlines get some money, but airports did as well. Right now I think everybody is in a cost constraining mode, right? No spending, looking at ways to actually conserve money and continue the projects that have been funded or continue moving along. The things that have you know, make sense, but, longterm projects, new terminal developments, where if they haven't already again, been funded are going to be placed in a whole holding pattern right now, due to the fact that we need to see where the world's going. We need to see what type of demand there will be. I think this aligns, however, with large capital projects needing time to plan things out in order to before construction. But what will the future look like? That's going to be the challenge that we face.
Rosemarie Andolino:
And I think that's where we need to focus. Our time and energy right now is looking at what are going to be the needed things that our ports are going to need to put in place. If you think about 9/11 and what occurred after 9/11 TSA, we have all these check-in facilities. Now, you know, you have the meter greeter halls that now have all these security measures in place in places like Chicago's airports, older facilities, most U S airports weren't built to handle that type of impact in our terminal facilities. However, now what you see is going to be another layer of potential demands or needs of policy changes, which we won't even know for a while yet what's going to happen. So I think at the moment, airport directors, airlines are still trying to understand what is going to need to happen for, you know, the issue we're dealing with today, the pandemic we're dealing with today, but what then does the future bring, what do we have to plan for for the next phase of the next? What is?
Rosemarie Andolino:
The one thing I will say about our industry is, you know, the aviation sector has always been an indicator in the economy, right? It kind of leads because of the fact that you have to book your travel in advance. You start seeing where the spending is going. You start seeing what the airlines are putting in place, whether the demand is for the next three months, what's going to be happening in the fall. So this is going to be a time now where we're going to see the booking. So what's going to be booked by carriers and what the demand's going to be. You know, as cities are kind of hunkering down again, putting in more restrictions of travel, what's that next phase going to be, and what are those impacts going to be? And that's just phase one. We're not even into our fall phase two yet of what could happen.
Rosemarie Andolino:
But on the positive note is the aviation industry has always recovered stronger than where it was before. So ideally, you know, we could see these trends, you know, and recovery happened quickly. However, we're still out three to five years in that recovery. And what we'll come back first will be that domestic travel, right? The leisure travel, domestic travel, what's still on hold right now, which is kind of the bread and butter of the industry is business travel. And that is a key importance to the success of the entire, not only aviation industry, but hospitality industry as well. We talked about, you know, the entire economy at the opening of restaurants, et cetera, that all feeds from travel aviation and business.
Joe Bates:
So I want to ask a couple of followups here, Rosemarie, you talked about the short term and then the long term. So let's break that down in terms of funding, how are the airports and the airlines going to do the things they need to do in the short term? Where are they going to get the money from for that?
Rosemarie Andolino:
Well, again, I think there's been, there's been some money that has been passed around recently. I think everybody's looking at what's going to be the next phase. Is there going to be another CARES Act two? Or is it going to be the HR 2 and there will be, will there be provisions in that for and again, we'll the neck, there'll be another round of care act funding, right? So those two things are going to be extremely important. I think right now, in terms of where they get the money is again, what they've already issued. So airports are reliant on garbs right? General airport revenue, back bonds that have already perhaps been issued for key projects or AIP money that has come from the federal government and airports have, are they, they are longterm, they plan three, five years out. So projects I've already been planned designed, perhaps they're going through the bidding stage now for construction, you know, depending on what part of the world you're in. So that's work is going to continue. What the question will be is major, you know, terminal redevelopments, right? Major projects. When you have additional capacity right now in the, in, in the market, the question really is, are you going to retrofit your facilities, use that money to retrofit your facilities, to perhaps close down some concourses to consolidate the operations. You know, it's impacted everybody from the cleaning people that are, you know, the cleaning crews and cleaning these large facilities to the operations of concessions. You talked about the airlines, you know, the airports, there's so many jobs and activities that are part of aviation. So many behind the scenes that you don't realize that are, again, especially with key facilities like that are huge. Cargo has continued, you know, the demand for cargo high value cargo.
Rosemarie Andolino:
So a lot of retrofitting for those aircraft have been carrying cargo. Passenger carriers have been carrying cargo now more, even in, not only in the belly of the plane, but they've converted, you know, the passenger seating to carry cargo as well. So, you know, that has been growing and has been stable. But in terms of getting revenue, collecting money from what the normal revenue creations would be like, you know, the Passenger Facility Charge the concessionaires, all of that has basically come to a halt. It's just trickling it. And so that's where the focus will be on O&M, right? In terms of the maintenance of your facilities, I think to take advantage. Well, when I was at O'Hare, we were in a decline. It was the recession when we were building the $8 billion expansion program. And Kevin will remember this many airports were actually closing down their programs because of what was ahead.
Rosemarie Andolino:
We were actually moving forward because of the down in traffic, gave us the ability to actually build those runways, the infrastructure that normally has to be, you know, that's normally impacted with high volumes of operations, give you a little bit more flexibility in that construction of those major impacting projects. So for airports like Utah, who have said, we're going to continue to go forward, you know, they're continuing to build their facilities to get it done, save money on delivering it faster, right. And build, you know, it's, it's in that stage of what it needs to be complete. But for most airports, it's really going to be functional improvements that they're going to be needing to make with the money they have. And you, you know, reprioritizing, perhaps fundings of projects already out to actually move that money to do functional improvements for current environment.
Joe Bates:
Okay. So it sounds like, you know, things there for the moment in our airport space, the projects are continuing, but the question is a bit more longterm than this....
Rosemarie Andolino:
Major projects, yeah. Major change projects, I think are just pulling, are going slower. It hasn't completely, unless it's like a hotel development or certain things of that nature, and depending on where the stages and they are on their development. But if they're in the preconstruction, I think they're starting to go a little slower before they put the shovel in the ground in order to manage the future. Right. Because this is a three to five year recovery. It takes usually three to five years to build some major projects.
Joe Bates:
Sure. Anirban what are your thoughts about the airline industry and in particular, as you look at the sort of the macro economic movements here?
Anirban Basu:
Oh, I think there'll be a rapid bounce back. You know, you said it earlier, we're going to get a vaccine at some point, right? Come on Pfizer, come on, Maderna, come on, Berry, jeez. You know, Regeneron, Gilliad, somebody, you know, start up your computer, get some test tubes out and do this because that's, what's going to solve this problem. That's the only thing that can do it. It's not going to be a cause of our good behavior and our mask wearing. We don't seem capable of that. And so you can see the pent up demand out there. You can see that people want to travel right when Disney opens up. But I think the best example of this was when the Las Vegas casinos opened up and the long lines to try to get into those places. People want to live like that. They want to go to professional sports games.
Anirban Basu:
They want to do all of those things and allow that requires travel. And so once we get a vaccine and you know, obviously people are talking about how long they'll take to get people actually vaccinated. It's not just discovering the vaccine, but actually operationalizing it. But once that happens, I think you'll see tremendous traffic increases at some point in 2021 itself. I really believe that business travel is going to come back. I love these Zoom meetings. I really like this. This is fun, but there's nothing like that coffee break after a long speech, getting ready for the next speech and shaking the hands with sponsors and others. And so I think that comes back pretty, pretty, pretty quickly. I think, I think it comes back more quickly than most economists would
Rosemarie Andolino:
On antibiotic. I think right now, if I could add, you touched on the fact of the what's happening, right? This is the leisure market, right? These airlines are offering right now, very discounted prices, just kind of fairs for travel. A lot of packages out there. You've got your choice, right? Because, but the reality is you can't social distance on a plane, right? You can wear your mask. But there are some challenges associated with that and where the risk is not being taken as in the business community, right. Business companies don't want to take that risk. And again, that's a key driver for the changes in the airline economy is that business traveler.
David Zipper:
I think we all agree. We need a vaccine. I might just connect actually the airport question with issues of a broader ones about transportation projects. I may a glimmer of hope for the airlines. Other not for transit is that for the foreseeable future, people are not comfortable taking transit. Ridership is down around 50% and ride hail trips are way down too. So what that suggests to a lot of people, myself included, is that one source of revenue for airports, meaning parking facilities, make it a bit of a boost, which is something that has not been the way it's going for a while. You disagree with that?
Rosemarie Andolino:
Yeah. Parking facilities have been consolidated again. There's really, there's no demand for parking right now. There's excess, you know, there's plenty of supply in terms of parking close proximity to your terminal if you're departing at the moment. So parking at airports is challenging. I mean, look at the rental car industry as well. You've seen Hertz in bankruptcy. You're going to see consolidation there. Yeah.
David Zipper:
Yeah there's no question of that, I guess for the next year though, I think I would expect, I find to make a bet. I would put more money on people on parking revenue for airports to come back faster than transit ridership.
Jeff Davis:
And over the next month or the next year or so, the data we have indicates that the best infrastructure performing there's going to be are hot lanes because what's going to be slow is to come back to, we get a vaccine is carpooling particularly with this DC, the DC area, and a couple other places had a thing called slug line where complete strangers would line up in certain places in the suburbs could be picked up by other complete strangers and share their air and their car for 15 minutes. So to go downtown, to be able to use the, the, the express lanes, that's going to be the last thing that comes back in all transportation and so hot lanes where you can pay extra money to use the carpool lane.
Jeff Davis:
If you think to getting there is important, or if, if, if the lanes are being congestion managed at all times, like the new I-66 is here what we've seen Transurban reported the lanes they run in China, and there are a bunch of them now actually have more ridership as a month ago than they did before Coronavirus. So at least in the time being, not, not longterm and until we get a vaccine, single occupancy ridership, and the toll lanes that that make revenue directly from people who are willing to pay our may even do better in the interim than were doing before.
Joe Bates:
So now Jeff, that's assuming that we have traffic like we had previously, right? If, if people aren't going into the office, then maybe we're not going to have the same level of congestion. I don't know. What, what do you think about that?
Jeff Davis:
That's true. Okay. We're going to, I anticipate sort of slow quasi reopenings and I forget, how, how, why did this spread out? Some of the places that went to a, to a terminal congestion can kind of congestion pricing anyway, like Interstate 66, Northern Virginia is now told all morning that those, the congestion based set by computer where that you know, the toll varies minute by minute to try to keep traffic at 45 miles an hour, wherever I think it is. So things like that once I unfortunately if we're, if we're like, if a vaccine takes two years there, there, there has to be significantly more reopening than we have in urban cores to get through the two years. You can't have two years of shut down. So to the extent that there's going to be some kind of reopening vaccine or not single occupancy cars or cars occupied by immediate family members only are going to be where it's at in that short term. And then it's a question of once we do get a vaccine of digging out of those habits and trying to get back to the changes in, in using different modes that we were trying to get to before the coronavirus.
Joe Bates:
Okay. So I want to go back and talk just a little bit more about the public sector. And before we turn to the private sector, in terms of projects and Anirban, I want to direct this one to you, how are the States and localities going to make up for the revenue shortfalls they're seeing, you know, the, the tax revenues are way down, people aren't spending as much. How are they, how are they gonna survive and continue to fund their portion of these public projects?
Anirban Basu:
I mean, there's only one way isn't that, right? They have to have a system called the federal government. I mean, that's, it mean it had been pointed out by Jeff. I believe state local governments have to balance a budget every year, but the federal government doesn't and the federal government right now is looking at a 10 year Treasury yield of 0.615%. There's actually a really good time for the federal government to borrow. I know the national debt is 26 and a half trillion dollars. I get that at some point, we have to start paying some of that back. I understand that, but we're in the midst of a pandemic crisis and state local governments have already laid off 1.5 million workers in recent months. If that continues, then that will really stifle the economic recovery we all want for this country. And so that's, that's it.
Anirban Basu:
I mean, how else are you going to make a billions of billions of dollars of lost revenue? If you try to increase taxes, if you're in New York or Connecticut or New Jersey, guess what happens? People move to Florida, you know, so there's a limit to what you can do in terms of revenue enhancement. Now you can, you know, told more roads and so on and so forth. There's some of that, there's no, there's less elasticity there. So customers have to use those roads to get to wherever they're going. And so maybe that makes sense, but otherwise it's really the federal government. And that I think you're going to see this month is some kind of stimulus package with monies for state and local governments. That's going to help a lot on the capital side and on the operating side.
Joe Bates:
Okay. David, anything else to add on that subject?
David Zipper:
Yeah, I mean, in the absence of federal funding, I, the only other options I see are, would be new tax revenue at the local level. And Audubon's right, that there's a cap to what you can do there. And as we saw in San Francisco earlier this week, even there, in a particularly affluent city, they didn't want to do a very small sales tax raise to fund Caltrain. So what you end up with are, I'm just not just talking about transit. You know, recently he was looking to push out the purchase of a bunch of electric buses for a couple of years, and there was a $15 billion program up in Boston to convert commuter rail, to be a regional rail with 15 minute headways and being all electric. That's now a little bit on ice so that they won't say that explicitly.
David Zipper:
I mean, this stuff is just going to get postponed unless there's an infusion of federal dollars. Cause I tend to agree with Anirban that there, there might be bits and pieces of additional revenue. You could get it at the state and local level through tax raises, but it's not, it's not anything close to enough.
Joe Bates:
Okay. I want to take a second to remind the audience that we do have the Q and A chat for, for questions and also the chat box. At the moment we don't have any questions or, Oh, Kevin. Okay, go ahead, Kevin.
Kevin McMahon:
We just got one. The question is the panel is painted a very good picture of demands in aviation and transit, particularly being in down short term major infrastructure clients, or feeling the uncertainty of commitment from the federal government on funding. What would you advise most of our listeners who are running engineering firms in terms of, of their employee base, should they be looking to you know, really be frugal in terms of hiring plans over the next year? Or do you see any type of demands that would encourage folks to go out and hire additional people.
Joe Bates:
Who wants to take that one?
Anirban Basu:
No, I was going to say, you know, like I've been saying it to, you know, whether you're an engineering firm, CEO or whatever company that happens to be, what are we in right now? We're in cash preservation mode, that's it? You know, we're trying to hold on to liquidity. I mean, that's it, we're trying to make payroll now. You know, the other part of this is there will be an economic recovery. There was after 2008, 2009, there will be this time around. And so who do you want to be with you as that recovery begins? You want the best and the brightest engineers and your stars, your stars, your star engineers, whoever you really need to be part of the team. And so the, you know, you go down, you know, person, you know, person by person on your team and ask the question, do I need this person? And it's an unfortunate situation. We don't want to throw people out of work. That's not what this is about, but at the end of the day, if your enterprise doesn't survive, you're no good to anybody including yourself. And so I think that's the mode we're in right now. There's just too much uncertainty to be in any other mode,
Jeff Davis:
The goal of the federal aid right now is, and should be trying to hold things level to try to keep the amount of total amount of federal state, and local money going for infrastructure type projects to be the same as it was going to be had coronavirus not happen. And then you've got a separate question of the great, the great infrastructure backlog, but I think that's going to have to go on the, on the back burner shortly in terms of just trying to maintain temporary directed aid, whether it's to revenue replacement to state governments or whatever, trying to tread water until coronavirus is over it. And then next year try to do some kind of broader infrastructure boost above the current spending levels that we're, that state local governments are now struggling to maintain. So it was a bad, it turned that it was a bad time to bring up infrastructure bills this year because of the focus is much more on preserving the funding that we've already got going at the state local level versus trying to build significant new dollar amounts of new capacity above that, which I think is going to have to wait till next year.
Joe Bates:
Rosemary were you wanting to add something to that?
Rosemarie Andolino:
I was going to add onto what Anirban said was the fact that, you know, do you have the right people is really the question, because I think again, as airports look to look to the future, airlines are looking to what is going to be necessary to make their customers feel safe and to continue to facilitate travel. What are the things that that, that are going to be needed at airports? And I think we need to look to engineers and others to help us understand what types of technologies, right, whether it's cleaning and sanitation, if it's technology for contactless opportunities to service customers better, and it contactless sweat, what are the types of things that need to be brought into place again, to create functional enhancements of the facility today for better service that customers can rely on and feel, you know, again, give them the comfort and safety for their travel journey.
Rosemarie Andolino:
So I think, and for the future. So I think that is a key important component. I think also part of what's been discussed in Congress as well. And Jeff, you could probably add more to this, but the Congress is looking at, if we are going to make investments, we want those investments then to put our infrastructure in a better place, right. To make it better than it was. Many airports are older facilities and are retrofitted. How do you take those facilities that you have today and whatever investments you make make it so that they're better for the future sustainable green, you know, less energy in terms of technology. Those, I think are some of the things that can be worked on now. And again, you know, do you have to UV light, you know, baggage as it's going through baggage systems, you know, what is going to be the future? And I think getting the bright, you know, engineering groups that are out there, the people, the right talent to help think these things through and come up with solutions and ideas are going to be extremely important again, how do you minimize costs and investment, but come up with great solution,
Joe Bates:
Kevin, it looks like we've got some more questions in there.
Kevin McMahon:
Thank you, Joe. There's, there's a couple of questions. One I'll ask the panel right now is, conventionally, infrastructure has been seen as a, as a great type of stimulus funding mechanism to get people back to work. It seems like nowadays more of the stimulus is funding. Those aren't just giving laid off employees cash versus creating jobs. Ins't this the perfect environment to create an infrastructure bill that would think big and get people back to work. Why is that not as robust in the discussion as some of our panelists, some of our listeners think it should be?
Joe Bates:
Jeff, do you want to start us off on that one?
Jeff Davis:
Yeah. well, first of all, your aid needs to be targeted and what your problem is. And immediately, you know, as of June 30th, the number of people employed in heavy and civil engineering construction seasonally adjusted was down 8% from February.
Speaker 4:
...Seasonally adjusted is pivotally important in outdoor activities like construction, but that 8% is 85,000 jobs. I'm not sure that that should be the prime focus of federal recovery when you've got 5 million people out of work just in the hospitality and restaurant sectors alone, but not to mention, you know, the million or so state, federal, state, local government employees you know, 400,000 people in transportation. You know, the infrastructure everyday of automation of complication means that infrastructure spending as a way of just providing jobs as stimulus is a little less effective than it was back in the good old days. So even though, you know, we definitely, as a country need to be spending more money on infrastructure, focusing on infrastructure as a job creator is probably not the right answer when all of the jobs, the majority of job losses are not from people who were probably going to want to retrain to go work in construction.
Rosemarie Andolino:
You know what though, Jeff, I think on top of that though, is the benefit of with low traffic, right? With low utilization of our infrastructure today because people are staying at home still to get minimized impacts, right? Greenhouse gas impacts, minimize congestion impacts all of the things that also come when you actually do more with a, you know, kind of a respite here where there aren't as many constraints on your current infrastructure, can you, it's easier to close down lanes and to, you know, to build more. The challenges we have, let's say the Myrtle Beach corridor. I know the Congressmen there had been struggling many, many years because it's a definite destination for the drive market. And, but the roads there are built for the local traffic not to handle the ingress and egress of the swells of people that come and drive into the marketplace.
Rosemarie Andolino:
So it causes major conduct congestion for those living there and for the, you know, the community at large, to make those investments today, while traffic is low, it will be a win win for again, when that traffic, when that curve starts, you know, that that color starts rocketing up again, to be able to accommodate them efficiently and to grow the market. Because with the delays that the experiencing last year, you know, they're going to start to lose, they would have lost start losing traffic. So if we could fix a tent to the problem today, so that it will, we're prepared for that future growth again would be ideal. And if it creates jobs and feeds families that's right.
David Zipper:
Yeah. Yeah. There's a variety of transit agencies are doing exact same thing of trying to do the capital investments on an expedited timeline now to take advantage of the fact that few people are riding, same thing goes, a few people are using a bridge, easier time to do repairs. It's less disruptive and that will provide some efficiency gains. The problem though, is that you know, capital budgets are different from operating budgets, certainly for transit agencies and for everybody else. And and it's the farebox revenue that's gone down 50% plus in many places it's coming back very slowly and there simply isn't enough money to keep the operating operator, to have the lights on effectively. That's where I worry. Although I think all the points Jeff made about recognizing that transportation is part of a much larger economy, which is where other parts have been hit even harder is a worthwhile thing to keep in mind so that we can maintain perspective.
Joe Bates:
Kevin, do you want to ask any other questions before we move on to the private sector?
Kevin McMahon:
Yeah. I'll just ask one question, Joe. And it relates to really, there's a few questions I'll try to collapse into one. Is there any chance that Congress will do anything before the election and you know, like suspend NEPA from, for the next six months or anything like that, or are we sort of in a really holding the Fenn vote until this whole election plays out?
Jeff Davis:
I don't think legally they can suspend NEPA the, with anything they did calling them the emergency would be, would be instantly drawn out in court. But the Trump Administration just yesterday released the final regulation on reforming all of the NEPA on amending all the NEPA regulations comprehensively. The first time since they were issued in 1978 and putting hard two year time limits on a lot of these process. So, like I said, the regulation was released yesterday. It should be officially printed in the Federal Register in the next couple of days and take effect 60 days after that, I'm sure the environmentalist are gonna Sue, but that was the combination of, of the entire Trump Administration NEPA regulatory agenda for last four years as it came about yesterday. So I'm not sure how much they're going to be able to do in in addition to that, between now and the end of the year.
Joe Bates:
All right, let's go ahead and move on to the topic of the private funding private projects, you know, this is sort of a whole other animal here what's going to happen with you know, apartment building, home, building a high rise construction. Are we going to see a credit crunch? And, you know, I saw a piece of information this morning. It said home builder sentiment is back to pre coronavirus levels, which really surprised me. So, David, what do you think is going to happen here in the private sector?
David Zipper:
I, well, people still need places to live. I'm not sure how much they're going to need places to, to work in the same way as we did before. So you know, I think I would look for resurgence coming from the residential side faster than I would expect to see it on the, the office development side, particularly in the dense cities like we're where I'm based in Washington, DC, where I've already heard murmurings about possible conversions from corporate into into residential. I think that's going to take some time to play out, but I would have every expectation that residential would come back before commercial. And then there is the next question of where is it going to be in a central city? Is it going to be in the suburban, is it going to be, is this the big moment for some of the like second tier cities like Denver and Boise and salt Lake city to suddenly suck some of the talent away from the big, expensive coastal megalopolises? I tend to be a little skeptical of that for a variety of reasons. But I will note just to say that there is something happening that the rents in San Francisco year over year are down over 12%, which is higher than any other market.
David Zipper :
So that does suggest at least that by the way, San Francisco has the highest rent in the whole country. So it does suggest there is some movement now, at least temporarily of people who can move and go live with family, or just relocate for a while that they are I think, and this is, I think it's a bit of a shaky time for, for a market like the Bay area. But you know, I always, my attitude is always, it's, it's easy to overestimate the duration and extent of a change when you're in the middle of it. So I wouldn't quite if I had the chance, I wouldn't sell off all my my buildings in Manhattan just yet, let's put it that way.
New Speaker:
And Anirban, what are we looking at in terms of a credit crunch? Are we, do we have anything to worry about there is the Fed providing sufficient liquidity in the markets and are the private projects going to have problems getting funded?
Anirban Basu:
Oh, I think the credit crunch has already begun. Third reserve can create as much money supplies at once. It can't force banks to lend, and there's nothing bankers like less than defaults and delinquencies, they hate it and ends careers and it destroys the quarterly financials. So yeah, it's already begun. And, you know, with respect to, you know, some of the comments David was making very good comments. I think this is the decade of the suburbs. The previous decade was the decade of the cities. Millennials turn into their twenties and large numbers, often renting very expensive apartments, driving density, but, and, and this was going to be the decade of the suburbs, even without COVID-19, but COVID-19 makes it even more so, so owner occupied part of the residential market is flying high - homes are flying off the shelves. Condos are selling freely in all markets, even in Connecticut.
Anirban Basu:
But I'd say that multifamily market will be much more challenging going forward. You're going to see a real surge in vacancy rates in multifamily America going forward. And of course, that's going to further perpetuate that credit crunch and then commercial real estate forget about it. It's already in crisis and will be in crisis for many years to come. Because again, of all those empty office suites, abandoned storefronts, shuttered restaurants on and so forth. So the suburbs will fare better than the cities, but commercial real estate generally will be in quite bad shape.
Joe Bates:
Rosemarie. Do you have any thoughts on this topic?
Rosemarie Andolino:
Well, again, living in an urban environment in Chicago, I would agree that you're starting to see, you know somebody joked about people moving to Florida, right? There's the, there's been a huge influx of people relocating. And I think you're seeing that from a lot of major cities. I mean, people whether it was the, you know, the COVID that hit New York and Chicago and other locations and people then relocating to what they thought were communities that were less exposed or had things under control, which has now basically inverted, right? So now those communities are challenged, but you've got distance, you've got, you know, more against, you're not as crunched in together, right? As in an urban environment, you have some more freedom. So to actually, you know, be outside and have space away from people. So I think there there's definitely that exodus happening and you know, with the change of offices and you know, some of the leading technology companies, right, that are out there are saying, don't come back. You know, we don't need you to come back to the office for a, you know, let's revisit it in a year or two years. So if that's where most of the key employment was, and if they can all work from home, you know, will they be buying them a nicer, more expensive home and spending their money there. If they're not moving around the country as much, either in travel.
David Zipper:
If I could, it was an interesting thing that just happened. I think it was today, if not today, yesterday, Airbnb, which I think is a really interesting company in the midst of all this, just announced that they're going to go, they're back to doing an IPO. And what's interesting is they got hammered hard. They had to raise a down round of capital because when the coronavirus hit people did the whole, like one night or two night business just disappeared. But now they've created this whole new market and the CEO, Brian, Brian Chesky talks about this of month to two month rentals, where people are going into a cabin here, there would have you. And it's true that some of the largest employers in the country, some of the tech companies in particular said, we're not going to require people to be back throughout 2020. It opens the door. And then Airbnb has really fast recovery with this creation of a new longterm rental market, which by the way, is driven not by urban locations. Does lead to me to the question. I think anyone who goes beyond asking the question is saying, they know more than they really do of whether some of these, some people are going to decide, you know, what, for the foreseeable future, I really don't need to live in a central city with my family anymore. How that plays out. I don't know, but it's interesting to watch
Rosemarie Andolino:
Well, and if I can add to that, I think what the additional factors is going to be in the next few weeks, it's really going to show its head is if people, if school districts are not going to require kids to actually go to school, then parents can relocate anywhere and spend the next three months, six months, as you said, in different cities or different communities. You know, cause they can learn from anywhere they can work from anywhere and the children can learn from anywhere. So that's, I think is going to be a key factor coming up that hasn't actually shown itself yet.
Speaker 5:
Kevin, do we have any questions on the private sector side of things?
Kevin McMahon:
Yeah, there's there's one, one one quick comment that one of our Connecticut participants, Anirban, really liked your comment about wow, when people are moving to Connecticut, it's shocking. So you got some air airtime on that, but Joe, the question is about some private, some public ports in inland waterways. Is that really just dependent on the economy and freight movement? Or what does the panel think about that space?
Joe Bates:
Who'd like to take that one.
Rosemarie Andolino:
I think the cruise ship cruise industry in terms of passenger cruises is challenged right now. So I think in terms of ports, for the purpose of the hospitality industry, the travel industry, that's a longer term recovery than even aviation. You know, so you're looking more from, you know, four to seven years. It's just, how are they going to deal with those issues?
Jeff Davis:
The the, the big trillion dollar infrastructure bill, the House passed last on July 2nd, didn't really deal with ports and inland waterways and harbors that much because the bill that passed the house was a Democratic only messaging exercise. And they were very close to a bipartisan two year reauthorization bill for those programs that passed committee in the House yesterday, it's past committee in the Senate the month ago. And it's one of the few things that actually make an inaccurate law on its own before the end of the year. And in addition to authorizing a few new, large projects. They're also trying desperately. They found that they finally found a budget gimmick in the House. That'll work to unlock that nine and a half billion dollars. That's been collected over 30 years in the Harbor Maintenance Trust Fund and not spent. So that may get an act of the law this year, finally separate from any other infrastructure package which would really open the flood Gates on a lot of much needed harbor dredging capacity improvements, et cetera.
Joe Bates:
We only have a few minutes left here. So I'd like to ask each of you to peer into your crystal ball. This is my final question, which I like asking on these, these round tables. And the question is, I'm going to start with you on a bond. One is a two part question one, and you've, you've gotten into this a little already, but how long will this recovery take for us to reach levels that were pre COVID and not only how long will it take, but what's, what are the, what's the critical thing that has to happen for the recovery to proceed?
Anirban Basu:
Oh, it'll take years to fully recover from this. I mean, I think the initial period of recovery has been sharp will be sharp going forward, even with some of these reopenings being postponed and some of them even being re reversed, but but it's going to take years. I mean, if I asked you the question, you know, back to you, how long did it take us to get to a 50 year low in unemployment? It took us 50 years. I mean, the economy was really shockingly good coming into this pre-crisis period. And we entered, as I say, 2020 with so much momentum. It's going to take a long time to put that back together again. And we in America, what's it going to take to really get back bipartisanship, right? The radical center re-emerging so we can work together so that something like a tip O'Neill and Ron Reagan on a Friday afternoon, going to a Georgetown pub to talk policy that could happen again in this country. And that's, what's going to take, cause we have unskilled immigration policy. We have unsettled infrastructure policy. We have global trade fragmenting and uncertain trade policy. And by the way, that relates to the port's outlook, as well as it turns out you put all that together. That's what we're going to need bipartisanship.
Joe Bates:
Okay. Rosemarie, what about you? How long will this recovery take? And what's the critical piece to proceeding?
Rosemarie Andolino:
I believe right now, I think it seemed when this whole hit, I should say we were at like the 19 North, the 1954 levels of, you know, in terms of aviation and travel. You know, after 9/11 we saw a 30% decline in travel, but it was one region right? Here, this is global. And in April we saw an 80% decline. And what really was moving was those that had to move, you know, whether it was medical professionals, meaning to move locations. You're seeing that come back with some leisure travel, but I think again, the business community is going to be key because that is the higher spend that the airlines and others need. And that is really the bigger indicator. I think you're looking at, I mean, 2022 really before you'll see kind of the comeback here, because I think we're at least a year out from a vaccine, because again, we talked about that that's going to be key for people to feel comfortable and safe. The one thing we have in the United States is short haul traffic and domestic traffic, right?
Rosemarie Andolino:
So you can travel essentially within the 50 States with less restrictions. So I think people, whether they travel by car, but by air they'll feel comfortable getting on the flight for an hour with their masks and, you know, better cleanliness the activities that have occurred on aircraft now. So you're going to continue to see that consolidation, I think will happen fairs for probably then, you know, start going up in that regard. But international traffic, we're still looking at probably 2024 before that really comes back. So, you know, it's gonna, it's gonna be a while. Ideally, you know, the industry itself there are things that need to be done right, to make travel better for everyone, whether it be the passenger, the airlines, or the airports, whether it's funding. We talked about NEPA and, you know, constructability of programs, et cetera, and implementation.
Rosemarie Andolino:
So I would hope that during this time Congress can take them and the leadership can come together from the different organizations to actually solve those solutions so that when traffic does come back, when we are earnestly building, you know, new programs, bigger projects, you know, building the terminals of the future for our airports that have not had those investments in many, many years, that we're able to do those with great technology with simplified processes and proper funding so that they can continue to be the economic engines that they have been for communities across the country.
Joe Bates:
Great. David, you next and we'll close it out with Jeff.
David Zipper:
Sure. I find this question. It would be a lot easier for me to answer if we were talking about Canada or about Holland, because there, you're talking about basically like the, the V I think, which is like, you basically have the virus come, you, you provide some, put some cash in people's pockets to make the economy be, be put it in a coma basically. And then you come back out and if we're talking about those countries, you can see that already at this point was made earlier that auto traffic is back up and it's already higher than the peak rush hour to auto traffic is higher than it was before t he virus in places like Longxeuver in China and, and Shengen. But we, we frankly blew our chance to do that in this country.
David Zipper:
And you know, and I actually worry about how bad I think things could actually get much worse in the next few months, as people start losing their homes, being foreclosed on as unemployment benefits run out. I don't think we realized that we are on the precipice of things, getting a lot worse with a lot of people in the middle class or lower middle class being unable to just survive and who knows what that's going to do. It, that that actually leads to political questions that go far beyond you know, the demand for certain types of engineering services. But I will say that it's going to take a long time before we're going to be, we need a vaccine. And even with the vaccine, I think it's going to take a long time in the United States to see a rebound in, in, in critical parts of the economy, especially for engineers, such as office construction. We're a long way away from that. I think we're a long way away from it with regards to to urban transportation. And to be honest, like, like the most important things to do now in my view is to be honest, to call your elected representatives and tell them we absolutely need more stimulus money in people's pockets. Now that's my personal view.
Joe Bates:
Great. Thanks, David. And Jeff, what about you? And then after your comments, Jeff, we're going to go to Daphne to close us out here.
Jeff Davis:
In terms of additional federal dollars for new infrastructure you know, new projects, new structures, new routes. I don't expect any action on that this year because Democrats, particularly in the House and Republicans are a light they're light years apart on the relative priorities, they believe should be given to highways versus transit and mass transit and Amtrak, the whole rural, urban divide. And every day, that gets closer to the election with the polls, where they are Democrats saying, why would I bother negotiating issues that fundamental with Republican Senate and Republican president when there's a 50, 50-ish or plus chance that starting in January, they could hope that Democrats get the trifecta and write a bill. They really want, instead of locking a compromise priorities in for five or six years next year is what it's all gonna be about. You know, the extensive infrastructure to be one of many priorities. In addition to coronavirus, it's all going to get wrapped up in the fact that starting August 1st of next year, the debt sexual debt limit will reset. And they'll start taking emergency measures.
Jeff Davis:
We've already added four point 6 trillion, I think since the last reset August 1st, just a year ago. So this will be by far the largest debt limit increase in the history of the country. And so September, October, next year, treasury, won't be able to move money around and traditionally many of your major turning points in federal fiscal policy in the last 30 years, Graham Rudman the 1999, three budget deals, budget control act HARP, Fannie Freddie bailout, last year budget deals. They all revolve around debt debt, ceiling crisis of trying to find ways to get the votes, to raise the debt limit and all the fiscal policy for that year wound up getting wrapped up in it. So I expect that to be the centerpiece of next year, around September, October, 2021, that will set the stage for fiscal policy for the next five to 10 years.
Joe Bates:
Got it. Yeah. Well, let's, let's all keep our fingers crossed that we have a vaccine by then. So at least we can take that out of the equation. Thank you all to the panelists for joining us and Daphne, why don't you go ahead and close this out.
Daphne Bryant:
Great. Thank you. Thank you all for joining us today. Thank you to our panelists and our donors for making this session possible. We have a short evaluation that we'll send you this afternoon. So please share your experience with us. Thank you all. Have a great afternoon and please stay safe. Thank you.