Webcast transcript:
Willy Walker: Welcome everyone to another Walker Webcast. Last time I had Governor Polis on the webcast was in the midst of the pandemic and it was wonderful to hear from a governor about how his state was dealing with the pandemic. And at that time, we had an abbreviated conversation because the governor was managing a thousand things. Today, we are going to have a little bit longer time to be able to dive into some issues. I'm waiting to see the governor join me at some moment now. So, while I am waiting for the governor, I will try to do a little bit of adlibbing on the overall capital markets because there is a lot going on in the markets right now. And so, before we turn to politics with the governor, when he comes on, I will for a moment just talk about what we're seeing in the overall capital markets from Walker & Dunlop’s perspective.
Obviously, markets have sold off dramatically. Rates have risen significantly over the past several months. And we continuously get asked at Walker & Dunlop, what's happening during this period of sort of unprecedented interest rate rises, cap rates on commercial real estate staying, if you will, begrudgingly low and where's transaction volume at this time given everything that's happening in the markets? As I said in an investor conference yesterday, what we are seeing is no slowdown in overall deal volume, and I think that's due to two things.
The first is that there is still a tremendous amount of capital in the system that is trying to find assets to acquire. And until that wall of capital, as Peter Linneman (who has joined me many times on the Walker webcast), is either no longer there or subsides in having an interest to invest it hard assets in a rising inflationary market – we will likely continue to see cap rates stay quite low as interest rates continue to rise and as Linneman has said many times, cap rates are much more dependent upon capital flows than they are on where interest rates are. That dichotomy, if you will, of the amount of capital going to commercial real estate and where interest rates are today makes it so that many people who are acquiring commercial real estate are doing so with negative leverage in the sense that the cap rate that they are buying the asset at is below what their cost of financing is.
That's doing two things: One, it's saying that investors have great confidence in rent growth on the properties that they're buying, that while they may be buying it at a cap rate that's below their cost of debt today, they see the revenue growth and the rent growth that they're going to get off that property, allow them to grow that cap rate over time and make it so that they actually have positive leverage on the asset. I think the other piece to it is that what we're seeing is many people going with lower and lower leverage loans. And so, in this period of time right now, what you're seeing is a lot of 50-60% LTV loans going on to the acquisition of commercial properties and that lower leverage is making it so that people are using up a lot more equity capital than they typically would in the commercial real estate environment, where in a typical normal cycle we'd be putting 60 to 70% debt on a property and 30 to 40% equity. It's now more like 40 or 50% equity.
The one other area that I get asked about a lot is when new construction starts, what is happening, particularly in the multifamily industry, but it's kind of across the board as it relates to shovels in the ground. And I think it's fair to say that the market continues forward, that where there are great projects with great sponsorship, there is capital both from a debt financing and also from an equity financing standpoint to put into the projects. But that a lot of big developers are, I wouldn't say in a wait and see mode, but they're pulling back a little bit. I was with a very significant multifamily developer a couple of weeks ago. They typically have somewhere between $40 and $50 million a year that they invest in pre-development dollars on building multifamily properties all across the country. And they're pairing that back to $20 to $30 million this year, basically just trying not to be overextended as it relates to the amount of money that they're spending on taking down land, the permitting process, and all that goes into a project before they bring in their equity capital partner.
And so, while multi continues forward, industrial continues forward, I would say that one of the asset classes that has been under quite a bit of pressure of late has been office and the back to office movement that we're seeing take place across the country.
There's the governor, wonderful! Governor, let me finish up my quick thoughts on the capital markets and then I'm going to jump to you and we're going to jump into our conversation. And first of all, it's great to see you, and I'm extremely thankful that you're taking the time to join me today.
Let me just finish this one quick thing, which is just that the back to office movement that's happening across the country has made it so that new office buildings at A-class office buildings are both occupied and have quite a bit of demand in the marketplace for people trying to either move into new office buildings or build new office buildings. And if anyone looks at Boston properties, for instance, their stock price is held up very well because Boston Properties owns A-class office buildings and not B and C class office buildings. The weakness we are seeing is in the B and C office. One of the big issues there is in downtown metros where you might have a C class office building, getting that refilled with tenants is going to be challenging. And one of the big questions is, can you repurpose some of that real estate to either become a multifamily property, to become some type of a distribution facility, we financed a vertical greenhouse recently where they literally are planting crops in a vertical environment. And so, we will see how adaptive reuse of both office as well as other asset classes come over the coming months and years.
And with that said, Governor Polis, it is fantastic to see you and thank you for joining me. Let me do a quick intro to you and then we'll dive into my questions for you.
Governor Jared Polis is the 43rd governor of the state of Colorado. He served in the US Congress before being elected governor and prior to that had an extremely successful business career, launching three high tech companies and doing very, very well in the private sector before he shifted his focus to the public sector. Governor Polis grew up in Southern California, went to Princeton University. I have been honored to become a friend of the governors since my family moved to Colorado several years ago.
Governor Polis, we are celebrating Pride Month in the United States this month. And you are married to Marlon Reis and one of the only two LGBTQ governors in the country, along with Kate Brown of Oregon. What's it means to you to represent the LGBTQ community in one of the highest political offices in the country?
Governor Jared Polis: We give Kate a hard time because she's married to a man, but that's okay. You know, the B represents too. Happy Pride, everybody. You know, we have enormous Denver Pride the weekend after next. It's going to be enormous. Hundreds of thousands of people. We have different Pride events across our state. One of the things we really cherish about Colorado is Colorado for all. I mean, we celebrate everybody no matter who you are, who you love, where you're from. We have people that are descendants of Native Americans who've been here for thousands of years, we have people who arrived in Colorado last week from Mexico or China or New York and they're really all part of making Colorado an even more amazing place. But, you know, people will ultimately remember the work we do on the issues that matter to them, whether they're gay or straight or black or white. You know, our universal kindergarten and preschool, which we now have in Colorado, are huge benefits for parents, for kids. You know, when you're driving down the road and we're able to reduce the traffic with our infrastructure package, you know, no matter who you are, you benefit from that. So, it's really about what unites us, what brings us together. And Pride Month in particular, it's about being proud of whoever you are. We all deserve to be proud and confident of who we are. And for too long, there's been too many folks who have been marginalized who haven't felt that, but they're very much part of Colorado.
Willy Walker: So, Governor, your mother wrote a book called Depression and Back, as well as she produced the PBS documentary The Misunderstood Epidemic: Depression. How does this personal connection to depression impact your policymaking as it relates to mental health?
Governor Jared Polis: Certainly, my mom has helped inform me of the importance of it. I, of course, watched her documentary and got to hear many of the stories that were even on the cutting board that didn't make it into the final hour. But yeah, when I came in, we sort of inherited a really overly complicated and inefficient behavioral health system. And what we set out for my first days in office is let's fix this. Let's make this person-centered. So, access to behavioral health care when you need it, where you need it, rather than having to navigate government bureaucracies at a time when you least want to do that. Nobody wants to do that, even in good times. But if you're facing mental health issues, you even less want to have to navigate bureaucracies, be on hold and talk to six people. So, we set about doing that. We're now consolidating a behavioral health approach from all the different agencies that had it into one agency and really focused on getting that as a single front door or gate to people in need so they can get connected to the help they need when they need it. Because we don't want any Coloradan to struggle alone. Help is available and I won't quit until these services are accessible, affordable for everybody. That's really our goal. And absolutely my mom's movie about depression helped inform those goals.
Willy Walker: So, you created a behavioral health administration, governor. It seems to make perfect sense to those of us from afar and outside of government. But my assumption is that creating a whole new administration under behavioral health was a pretty heavy lift. How difficult is it, if you will, to kind of recast or reshape the bureaucracy that exists in the state of Colorado to create something like that and pull it all together?
Governor Jared Polis: So, it's hard, but it also is a lot easier to do things at the state level than nationally. And Willy, as you know, I was a member of Congress for ten years and it is very hard to change. Here at the state level, we move a lot faster. So, we started with involving many stakeholders that we knew were reform oriented, but we wanted to speak with a voice that had input from dozens of people. We then came out with a blueprint and then we set about implementing that blueprint with the state legislature. And we got it done. There were certain special interests against it, especially behavioral health. There are folks that are funded that don't have accountability built in. And part of what we're doing is we want to build accountability. It's not just money you get from the government. You've got to show us that you're actually helping people and document that, so that is all built in. And obviously there were some that would have preferred not to have that accountability and transparency. But overall getting things done at the state level is very possible. You need a deliberate plan, a thoughtful approach. And it took us a couple of years to get the full structure and change in place. But we did it. And that behavioral health administration goes live July 1st. So that's when the results of the work of the last two years, it goes live.
Willy Walker: So, Governor, guns and gun policy has obviously been in the headlines recently, given the tragedy in Texas. And gun violence is obviously something that ties back to Colorado, very unfortunately, with many of us can remember Columbine, which sort of set off these past two decades of very, very unfortunate, and tragic incidents at schools across the country. Mental health is a component part of the issue on guns and gun policy in the country. How have you and I known you've done it exceedingly successfully. How do you, if you will, manage the two pressures that you're under for increased gun control in the state of Colorado and at the same time, the Second Amendment rights for people to bear arms, given the sort of the populace of Colorado and the complexity of this issue and how closely and dearly it is, touch the hearts of many Coloradans.
Governor Jared Polis: We have a very good law, kind of a nexus of mental health and guns. It's called the Red Flag Law. And I'll describe what it does, but it's actually now one that is going to be embraced, we hope, with this bipartisan group of senators, ten Democrats, ten Republicans. This is really important because there is a very high bar, as there should be, for involuntary detention of somebody in a mental health crisis. The legal bar is an immediate danger to themselves or others. Immediate danger. Right. So literally, you're about to stab yourself or someone else. You can be in detention for 24-72 hours, but then, well, guess what? You are released. And many people who are released or who don't quite meet that bar can still be dangerous. It might not be seen as an immediate danger. And so how when a parent sees their 19-year-old kid, they see them going through something. They're worried, they're suicidal, that they're going to lash out. What is the legal mechanism where they can temporarily lose access to their guns while they work on their mental health? And so that's what the Red Flag Law does. It generally allows a parent, but it could be a brother, sister, or spouse to be able to temporarily remove access to guns to somebody, somebody who's having a mental health crisis. It's been used a few hundred times in Colorado since we implemented it. And there's no question that some of those would have resulted in tragedies that weren't able to happen because of removing that opportunity for that person in a mental health crisis to damage or kill themselves or others. So, this is part of what's being embraced nationally. The part that's still missing in Colorado is we need to get the word out on this. People in different communities don't always know about this. So how do we make sure that anybody facing this situation with a loved one is equipped with the information about how easy it is to use Red Flag Law and potentially save their own life or the life of their loved one.
Willy Walker: And having been in Washington, in Congress, and now being governor of a state – How much should this be a state issue and how much should this be a national issue as it relates to obviously, the Second Amendment is clearly a national issue, but as it relates to setting up responsible laws at the local level, do governors and do state legislatures have the ability to tighten some of this down, like Colorado has done, that can move this further without waiting for Washington to do it?
Governor Jared Polis: We do. It would benefit from national attention are things we have in Colorado, like universal background checks. But the problem is, if you're a convicted felon in Colorado, you can drive an hour and a half to an open-air gun show in Wyoming and you can purchase a weapon without a background check. So that is a big loophole. I do support universal background checks nationally. I think that would cut down on illegal guns. Again, some people, because they're a convicted felon, they might have lost the right to bear arms. They might be on probation. Those are all valid parts to the due process of law, but you need an enforcement mechanism around that. We have that in Colorado. But as long as you're only an hour and a half away from an open-air gun show with no background check, it is still useful. We should still do it. But that is a glaring loophole.
Willy Walker: So, Governor, as I mentioned at the top, you are one of very few people who's been able to be wildly successful in two distinct industries. You were in the business world. You did extremely well there and have now come into the political world and have been extremely successful there, having been elected to Congress and now governor of Colorado. As you think about those two careers, what's the best and the worst of the private sector and what's the best and the worst in the public sector?
Governor Jared Polis: Well, I love the private sector. I was an early stage guy, entrepreneur. So, founding early stage, raise capital, grow it usually and then less operational as they get to a few dozen people, maybe in a board role. And you know to me, the biggest company I grew ProFlowers.com, had 250 people when we sold it. And to me, that was an enormous company. Right. The days where people say it's under 500, it's still called a small business, so it's all relative. I've never been kind of in that corporate world, but I've been in the entrepreneurial world. So, you know, and I really love the private sector and it's exciting every day and there's always something new.
I think what the public sector gives is that additional fulfillment of knowing, okay, I'm now working really on behalf of others, trying to bring the experience that I have in life to create a better outcome for everybody, whether it's improving education for kids, whether it's fixing our roads, whether it's in saving people money on health care. I want to make sure that I'm doing everything I can to make that a reality. So, I really enjoy both. And a lot of the skills have been transferable. But I do like the public mission of being able to work on a broad array of public policy to make life better in Colorado.
Willy Walker: Do you think that that mix of backgrounds is –I don't want to say a necessary component to success but given that Colorado is a purple state and you're managing I mean, if you travel, as you and I know very, very well, many people listening to this may not know that well. If you go from Colorado Springs, which is a very red city to Boulder, which is a very blue city, and you've got Denver in the middle, that kind of, those three cities from Boulder down to Denver, down to Colorado Springs, gives people a real sense of the melting pot that is the politics of the state of Colorado. Do you think that having a business background allows you, if you will, to identify more with what people typically would say are people on the right? And then also just your general orientation as it relates to being a Democrat that allows you to be so successful in a purple state like Colorado?
Governor Jared Polis: First of all, I think it makes a difference in Colorado now. I'm completing in my first term, four years, but we've now had 12 years of having an entrepreneur as governor. John Hickenlooper, my predecessor, also an entrepreneur. And if I win reelection this November, that'll be 16 years of having an entrepreneur at the helm. I don't think any state's had that before, and I think it does make a difference in the culture of our state. I'm excited about innovation and entrepreneurship. One of the things we did this year, Willy, is we're making it basically free to start a business. So rather than have to pay filing fees, if you started a new S-corp or C-Corp, we're waiving that. And that's not a lot, $75-$100 bucks. But if your whole starting budget for business is $500 and there are people that save up a year to get the $500 they need to start a business, that's a lot. Right now, it's like 15-20% of their budget that we're saving them by saying it's free to start a business is actually $1 to start a business for legal reasons, but still $1 instead of $100, it's essentially free and that's very exciting to people. So, we want to encourage innovation and entrepreneurship. It's not about left or right. It's about what's the best way to move Colorado forward. We're a very future oriented state. We live here because we love it. We want to protect and preserve our quality of life and really address some of the issues we face, like rising costs. And that's why our agenda is focused on saving people money, expanding parks and access to outdoor areas to make Colorado even better.
Willy Walker: Like all governors, Governor, you have a broad constituent base across the state and at the same time, the main economic drivers of the state are in the front range cities of Boulder to Denver, to Colorado Springs. And yet, at the same time, the ranching community and the farming community comprise a big part of the overall state from a landmass standpoint, but then also economic production. How do you manage that? Just like you manage blue and red issues, if you will, being a purple state. How do you manage staying in touch with the ranchers and the farmers in a state that is as large and dependent on that part of the economy, as well as all the technological innovation and investment in new businesses that happens on the front range?
Governor Jared Polis: Yeah, our biggest export as a state is beef. And so, we are at our heart a farming and ranching state. And we really talk about it in terms of rural urban unity. It's about both sides being stronger and better needing one another. Our suburbs, our cities, our rural areas. There is no Colorado without Yuma County and Sedgwick County. And, you know when I speak to the cattlemen and rural communities, they love that line. But then I follow up by saying there is no Colorado without Denver and Boulder because there really isn't. And Colorado Springs, our whole state is part of that value equation, whether it's in the agricultural tech side where CSU is doing amazing work out of Fort Collins. It's powering the future of the ag industry, not just in Colorado, but across the world, whether it's new practices, soil health and agricultural takes and other areas that are the intersection between renewable energy and farmland, new more water efficient crops to increase yields and decrease costs for farmers. So really a lot of exciting things are happening in agriculture and it's a big part of our state success story. It's also one of our major climate dependent industries, the other being the skiing and outdoor recreation industry, which is one of the reasons that Colorado is such a leader on climate, because we're directly impacted by the changing climate with two of our key industries.
Willy Walker: So, when you talk about climate, water obviously becomes a huge issue. And I believe that every county in the state last year hit drought level at some point during the year. What are you doing? What's the state doing? What's the federal government doing to try and address this issue as it relates to water and natural resources?
Governor Jared Polis: First of all, investing in water stewardship projects, and we also have to make sure talking about rural urban unity, one of the key tenets of that is that our administration, we oppose these buy and dry efforts where farmland is dried up to feed the fast-growing suburbs that pits one Coloradan against another. We think the answer is all of us together. There's never an answer in drying up farmland. We need to make sure we're able to continue to be a top production state. At the same time, we need to make sure we implement better conservation practices in our fast-growing cities and suburbs. For instance, we signed a bill that now supports turf replacement with native grasses or artificial turf where there's large grass areas in parks, etc. We have to think about how we can better support homeowners in doing zero scaping around their homes. We've got to find a more efficient way to do this so that we can avoid pitting some Coloradans against others.
Willy Walker: So, the Colorado River flows through Colorado, but supplies a tremendous amount of water to the states of Utah, Nevada, New Mexico, Arizona, and California. For those who don't know how did the water rights to Colorado get determined? And how much does the governor of Colorado and does the state of Colorado determine the usage of that water flow?
Governor Jared Polis: Yeah, there is an interstate compact between the states that draw from the Colorado River. We are, of course, one of the headwater states, meaning we are upstream, if you will. So, we get our draw. But they are also guaranteed certain rights down river. So, it's the short answer. Your question is the governor has very little say over it unless there's a renegotiation of the compact, there's not one currently now we've ongoing compact base and meetings, but there's a large body of law around that and a very detailed compact about the disposition of those water rights. Now, of course, what we're worried about is with the hotter and drier climate, those obligations will not be able to be met over time. And there's a lot of thinking in all the basin states about how we can adapt to this new, drier environment.
Willy Walker: So, talking about drier environments, forest fires unfortunately, the summer of 2021 Colorado, for all practical purposes, you may correct me on this, Governor, but there was not, to my knowledge, a major forest fire in the state of Colorado in the summer of 2021, which is unlike 2020, where we had some very significant fires. Outside of government, those of us who both live in Colorado and spent a lot of time in the Mountain West. This issue of drier and more forest fire activity and smoke in the air seems to be something all of us need to get sort of accustomed to, given what the trends seem to be. What are you doing and what do states like Colorado need to do to be better prepared to deal with these natural disasters that seem to be happening on a more frequent basis, particularly in states like California and some of the other Western states?
Governor Jared Polis: So, we are upping our game on rapid response. We've acquired a new Firehawk helicopter. We've added new tankers to our leases. We also are supporting additional mitigation, meaning taking down trees and fuel to defend sort of create perimeters around sub-developments and also at the home level, really upping our game on that. It makes an enormous difference when you do this kind of mitigation. We also, in addition to the three largest wildfires in the entire history of Colorado in the summer of 2020, also experienced the most destructive fire in the history of our state. Just six months ago, marshal fires in Boulder County, over a thousand homes destroyed. And that was in December, right. Who would have thought such a destructive fire in the middle of winter? We had a very dry winter, no snow on the ground. And that's what happened.
Willy Walker: I know that your team did Herculean efforts to make it so that that fire was contained and didn't turn into even a larger crisis in Boulder County. And I would just take my hat off to you and your team for their quick response to that. And while it was tragic and a loss of a huge number of homes in Boulder County, had it not been for some very amazing work by you all and the electric utility, my understanding is that it could have been a lot worse than it ended up being.
Governor Jared Polis: There's some great heroism from the first line responders. For the first night, the frustrating part was we had winds at 105-degree gusts. So really our fire response ground to a standstill. We cannot operate our aircraft. We cannot operate on the ground, very limited with high winds. Then we got, dropping the winds, a little bit of precipitation. But absolutely, the evacuations went amazingly smoothly. Even evacuated a hospital in a very good period of time. I think what you might be alluding to is we're able to save the power station there. That would have caused immense power outages across the high country out to Eagle and Summit County had we not been able to get the Xcel Energy folks in there to address that.
Willy Walker: Yeah. So going from, if you will, rural issues to more urban issues, you have a policy called Revitalizing Main Street. We've already supported more than 100 communities across the state of Colorado in revitalizing Main Streets in the aftermath of the pandemic, where all main streets were shut down. What are you seeing, Governor, as it relates to the revitalization of Main Streets and more particularly, the downtown of Denver, which for quite some time now has yet to pull back in the traffic flows and the foot traffic that was there pre-pandemic?
Governor Jared Polis: Yeah. I'm really excited about these investments. First of all, we also can talk about what might come out of the pandemic era that's good. I'm hoping some of the on-street dining, the additional opportunities to expand outside will continue. They continue at municipal discretion, the state absolutely now permanent; it allows in our piece that allows the delivery of wine and alcohol to a noncontiguous plot. We allow all that, but we encourage all the cities to continue a piece of that vibrant outdoor lifestyle, especially when the weather is good. But what that Main Street investments do is really millions of dollars around connectivity. It's around bike paths that connect downtowns to residential neighborhoods. It's about transit corridors, it's about bridges, it's about pedestrian crossings. It's really about making a better experience in small towns and large towns across the entire state, through the built environment. And a lot of towns had great ideas and we worked with them and were able to fund some of those ideas to really make transformational change, connecting communities that were historically cut off, creating pedestrian access, and really revitalizing not just the commercial centers, but also really the cultural centers of civic life across our state.
Willy Walker: To make those city centers work and run, you're also dedicated to moving Colorado's electric grid to 100% renewable by 2040. This whole issue, Governor, between fossil fuels and renewable energy, is one that is at the national level today, particularly given that fuel prices are over $5 a gallon. As you make that transformation, first of all, how are you doing on the path to making the grid 100% renewable by 2040? And second of all, what are the big barriers to realizing that goal?
Governor Jared Polis: So, we now have Willy, really locked in with all of our utilities. We're going to be at 80% plus in just seven and a half more years by 2030. And that leaves that final decade, 2030 to 2040 to get to 100%. But whether it's Xcel or Holy Cross or any of the major utilities in our state, UPI and the tri state will be at that full 80% probably in 2029, Willy. So, you know, it's probably about six or seven years. And it's just a matter of we have the retirement of the high-cost coal. Coal is the highest cost form of power. People should know that from the start. The reason we pay more on power is because of costly coal plants. So, the sooner we can phase those out and close them, the sooner that we will have a consumer dividend from low cost solar and wind energy and then figuring out how to make sure we can have that base load through storage and other ways we do that geothermal, electric, hydro in some places, not as much in Colorado, is going to be a key part of keeping rates low and reliable and cleaning our air.
Willy Walker: As you know Governor, Bill Gates has done a bunch of work on safe or clean nuclear energy. And there's been a big call for more investment in nuclear energy. What's your take as it relates to the possibility that Colorado could actually turn to nuclear power and use that as a form of maybe even that extra 20% that you were talking about? Or is that just a bridge too far, given that people still have in the back of their mind the Three Mile Island accident?
Governor Jared Polis: You know, it's always one of those things, Willy, that seems like it's 5 to 10 years out in terms of commercial viability. And it was 20 years ago in the year 2000 when we were like 2008, 2010, 2020 now nearing 2030, I mean, maybe eventually they'll be right. We still don't have flying cars and we've been waiting for those since the 1950s. They've always been ten, 20 years out. But I mean, it has to make the commercial case on viability. A lot of the technologies being developed are modular, smaller scale, more distributed. There's a lot of promising things on the drawing board. Some might even be at that kind of investigative level. But there's been nothing deployed at scale that is anywhere close to the economics of solar or wind. And so, we're all hopeful that maybe in five or ten years we will be there. We'll see.
Willy Walker: Last time you joined me on this Webcast, it was right in the midst of the pandemic. And you were extremely generous to take some time to give our listeners an idea of how a governor was dealing with the many, many just sort of crisis issues that you were dealing with at that time. I guess my first question to you, Governor, would be, are we beyond the pandemic?
Governor Jared Polis: Well, I think we're in an endemic stage of illness that still, for instance, today there's over 200 Coloradans hospitalized with COVID 19, about 250. To put that in perspective, that's still 2 to 3 times higher number of people hospitalized than we would have during a bad flu season from the flu. But this is going to be the normal, I mean there's more immunity out there because people have had it. People have been vaccinated. We built that up. So even at the larger infection numbers, a much smaller percentage of people are hospitalized. But yes, some people are still hospitalized. Tragically, some people still will die from this, even though we have more therapeutics now. We had zero therapeutics two years ago. We now have therapeutics and treatments in addition to the preventative aspects of the vaccination.
Willy Walker: You've been credited with sort of threading that needle very effectively between to go to extremes, the lockdown policies of some blue states, and the more liberal - there's nothing going on policies of some red states. As you think back on it, Governor, what was the guiding principle that allowed you to kind of take those two very significant political kinds of inputs from both sides of the aisle, one side saying you got to lock everything down and throw away the key. The other side says we just have to keep living our lives and be able to find that happy medium that you so effectively found throughout the pandemic.
Governor Jared Polis: It was really about empowering people to make the best decisions for themselves. Wearing a mask can reduce your risk if you want to wear it, wear it, there are some communities that require it, getting vaccinated, it's the right thing to do to protect yourself. Just getting that data as a trusted messenger out to really give people the information they need to weigh those tradeoffs in their own mind and make informed decisions about what they want to do. Government is not, nor should we be in the business of telling people whether to skydive or whether to go out on motorcycles. And we're not in the business of saying, yes, there's a pandemic. But, you know, do you want to go to a bar or nightclub? That's up to you. This is the risk profile. Have you been vaccinated? This is what you should understand. But absolutely, we're not about to say you shouldn't be able to do it. So, it's about empowering people with the information, with their own personal health risks, the tradeoffs in their lives to make the best decisions for themselves.
Willy Walker: So, you created an Office of Saving People Money on Health Care, headed by Lieutenant Governor Primavera to try and identify and implement policies that will reduce health care costs in the state. Sounds great. Huge issue, particularly in an inflationary environment where health care costs have been rising at a much, much higher rate than the cost of pretty much anything else in our economy. What have been the successes and what have been the challenges?
Governor Jared Polis: Yeah. We're focused on saving people money and all major cost drivers. So, two of the biggest for most families are housing and health care. Those are going to be your biggest. But that's why we've provided major property tax cuts, additional tax incentives. Every Coloradoan is going to be getting a $500 tax rebate back later this summer. But on health care, a lot of our focus has been around people who don't get it through their job, through employment-based policies, people who buy it on their own, usually in exchange. And so, we created a reinsurance program that reduces rates by over 20% for people who buy it on their own. Where we need to make progress in addition to the hospital and provider side was the pharma side. And so, we are now working on the authorization to negotiate for better prescription drug rates, to import prescription drugs from Canada and Mexico. The FDA needs to approve that. But we have our application in and so we're doing everything we can as a state.
Willy Walker: Sorry to jump in, Governor. You can do that on a state basis to get that approval from the FDA and they'd give it just to Colorado?
Governor Jared Polis: There's, I think, two or three states pursuing it – Florida, Colorado, maybe Connecticut. We're hoping we get that authorization to do. People can do this on their own, not insurance paid. You can legally import for your own use from another country. But what we're trying to do is get it connected with the payer side so that we can, on a larger scale, pass those savings along in the form of reduced premiums to people. So, it's an exciting area. It's an inefficiency in the market because these pharma companies shouldn't be charging Americans more in the first place and they're charging other wealthy, industrialized nations. But it would allow a backdoor mechanism to address that, which is one reason pharma doesn't want to allow that. But yeah, the importation will absolutely start saving people money right away if we can move forward with that on a larger scale.
Willy Walker: Applying to the FDA for that approval Governor, makes me think about the federal banking regulations as it relates to banking, the cannabis industry, and the fact that you still can't use the backbone of the federal banking system to actually purchase or sell cannabis. Is there any chance that given the number of states today, including the state of Colorado that have legalized cannabis, that there's going to be a change to federal policy?
Governor Jared Polis: Yeah, there's a real movement to do that, led by one of our congress people from Colorado, Ed Perlmutter, called the Safe Banking Act, which would basically create that safe harbor for banks not to have to worry about doing business with businesses that are following our state laws. It probably has enough support to pass. That's the first. I mean, it passed the House, by the way, overwhelmingly bipartisan vote, 300 and some votes. I mean, really strong. It probably has 60 plus votes in the Senate. So, when something's got to let us do it, put it into something. And so that would be huge is certainly a priority of ours. I've talked to Senator Bennet; Senator Hickenlooper are very supportive of it. But we just need to get it done because when you don't have access, the normal financial services sector from the cannabis side, it just increases costs. It prevents us from reaching the goals of driving the illegal drug market out of business. And it just is a very inefficient way to do things and dangerous, frankly, because a lot of people know there's a lot of cash moving around in that sector.
Willy Walker: You know the impact of the cannabis industry on the state of Colorado better than anybody. As you look back on Colorado and all of the either benefits and also fears that people had when cannabis was legalized in the state, as you look it back at what has happened subsequently as it relates to both revenues attained as well as crime, health care, etc., is it a glowing scorecard that says that it's worked across the board? Is there anywhere that the fears have actually demonstrated themselves to have been worthy of fears and concerns?
Governor Jared Polis: I think it's worked well overall. A lot of the studies show that underage use has been steady or even lower in some studies among 14- to 16-year-olds, so that's a good thing. It's obviously generated tax revenue that's gone to build community youth centers and build schools. Especially now I worry about the fentanyl toxicity and poisoning, so if you have an underground market in marijuana, you're a lot more dangerous. I'm sure in states where it's illegal, they're going to be losing more people to fentanyl laced marijuana. We don't have that through our regulated markets. So, we've kept the product safer. We've reduced or at least held steady underage use. And it absolutely helps revitalize economically many communities across our state as well. So, I think it's been a good thing. Many states are following suit. Most recently, our neighboring state, New Mexico, just came online. And I think Illinois is coming online. So, it really is moving across the country.
Willy Walker: You mentioned that health care and housing are the two largest expenditures for Colorado residents. In a recent Forbes ranking of the 100 Best Cities in America, two of the top five are in the great state of Colorado, Colorado Springs, and Boulder. Everyone seemingly wants to come to your state, and at the same time, that is only driven the cost of housing up to a level where many can't afford it anymore. What are you in the state doing as it relates to housing affordability?
Governor Jared Polis: Yeah, Colorado Springs is just doing great and really great downtown revitalization and great, great quality of life. Boulder, that's where I live, as you know, great, great town. Yeah. So, we're victims of our own success here, right? So, a lot of people are worried, hey, where's my 18-year-old kid going to be able to ever afford to have a down payment on a home? And so, we are focused on how we can reduce costs in housing. And so, some of that we're very excited about embracing and leaning into some of the new prefab and modular technology homes that are made and then largely offsite and transported. We can reduce the cost to 20% to 30%. Land planning -- this is the role of local governments. But what incentives can we use to actually allow more housing to be built? Supply and demand and reduce costs. Increase supply. You don't want to reduce demand. We like the people who want to live here. That's a good thing. But let's increase supply. So, a lot of that is happening and we're really trying to push for where it makes sense. Development density in transit corridors where people can live closer to where they work, shorter commute times, less pollution, less cars on the road, better quality of life.
Willy Walker: So, Governor, I want to be mindful of your time. I've got a couple final things as it relates to you personally and then your reelection campaign. You've always been the smartest person in the room. You graduated from high school at 16 and went to Princeton. You were top of your class at Princeton, very successful at launching three businesses and selling those businesses. And our mutual friend John Delaney, when I first talked to him about you in Congress, he said, without a doubt, you are the smartest person he knows in all of Congress.
When you think about that, where does your intellect come to bear: is it in the sense that you remember people's names when you walk into a room? Is it that you can recall data points that allow you to kind of put an issue into context? Or is it that the team is sitting around trying to find a solution to something and you're there with some sort of innovative idea that sort of says, why are we looking at this way or that way?
Governor Jared Polis: Well, I'd say the same about our friend John Delaney, by the way. He's very brilliant as well, just a first-rate guy. And he would have made a very fine president. You might even remember he ran for president?
Willy Walker: I do. It's funny, just as a quick aside, Governor, I was at a Bennet event in D.C. about three weeks ago, and I was co-hosting it with Delaney, and I was asked to make some remarks at the beginning, and I made some very quick remarks, and then all of a sudden John stepped out and sounded exactly like a presidential candidate. And then Bennett came up, who also ran for president.. And afterwards I said, when you're going in front of two guys who have both run for president of the United States, make sure your comments are very, very quick because no one will remember them when you have two guys like that speaking behind you. But anyway, go ahead.
But where do you really feel like that gives you a leg up if you will?
Governor Jared Polis: I would say, first of all, as a kind of an entrepreneur and a disruptor, it's avoiding groupthink. And if anything, when everything has been done one way for a long time, my first thought is what probably ought to be done a different way rather than just keep doing it the same way. So how do you kind of introduce that needed disruption into the public sector side, reinvent and improve the efficiency of legacy systems? That was very much my background as an entrepreneur, trying to surround yourself with creative people as well, people that share your values, you have to delegate. We have in the state of Colorado, for instance, 31,000 employees, I have a 19-member cabinet. So, they do much of the work - Department of Natural Resources, Department of Health, and so they manage those departments. I meet regularly with them every week together as a cabinet and then oftentimes independently with members. So really pushing that change agenda, that reform agenda, just because people have been doing things this way for 50 years probably means we ought to change the way we do things. And so that's kind of the mindset that I bring to the public service.
Willy Walker: So, you're running for re-election, what's the biggest difference between running the first time and running the second time as it relates to either infrastructure, branding? Give us a sense when you first put your hat in the ring the first time and put all that together and now this time running for re-election.
Governor Jared Polis: Well, the first time around, people knew me well in my congressional district because I’ve been a representative for about ten years in Fort Collins, Boulder, Loveland, Broomfield. But I was not well known in Grand Junction, Colorado Springs or even Denver. So, I was really spending a lot of time. I launched my campaign in Pueblo, all over the state, in communities. We had over a hundred gatherings, house parties and meeting people one on one and sharing their concerns. This time around, I think people are a bit more familiar with me and my work, and we're really centering our focus on saving people money because that's the call of the moment, right?
From a jobs perspective, there's a strong economy. There are actually more employed Coloradans now than we had before the pandemic. But what does that mean if you got a 4% raise at work, but your costs have gone up 8% because your rent's gone up and your groceries cost 20% more. So how do we reduce cost? And that's why we comprehensive package over 100 things that we are getting done right now to save people money ranging from, removing the sales tax from items like diapers and feminine hygiene products to a rebate that everybody's getting to cutting property taxes to tax credits to universal preschool, kindergarten free for every parent, preschool starting next year, saving over $4,500. So really, this agenda is centered around, we all love Coloradans, that’s why we're here, how do we make sure that everybody can enjoy the Colorado we love in this challenging time of high inflation nationally?
Willy Walker: I know the focus right now, Governor, is on your re-election as governor of the great state of Colorado. But should President Biden not put his hat in the ring for re-election in 2024? Might we see you looking at the national office?
Governor Jared Polis: No. I am very excited about pursuing the best job in the world, Governor of the state of Colorado. And I will be deeply honored to be able to do that for four years. And that's what I'm going to do, health permitting.
Willy Walker: So final two questions. One, you have two children. As you think about the future, what are the two most important issues that need to be resolved to make their future look like our future?
Governor Jared Polis: You know, our kids are ten and seven and it’s summer vacation right now and doing different camps. And when we think about what it means to live in Colorado and love our quality of life here, it's about protecting our outdoor areas, our access, our parks. We added two new state parks. It's about world class outdoor recreation opportunities we have, the quality of life we have, and just the opportunities to live your dream in Colorado, the opportunities with some of the world class, higher education institutions, great job opportunities. It's a great place to grow up and we're looking forward to continuing to raise our kids here as well. And I know that that's why so many families choose Colorado.
Willy Walker: So final question. The eyes of the hockey world are about to descend upon Denver, Colorado, with the Stanley Cup finals. Are you going to go, and you want to make a prediction about whether the Avalanche beat the Lightning?
Governor Jared Polis: So, I don't know how subtle it is, Willy, but I'm wearing the Avs color here. This is my one maroon shirt that I have, and it's not a color I wear very often. But yeah, I'm excited. First of all, we're a huge sports town: Denver and Colorado, we got Nuggets, Broncos, Rapids, Avs, Rockies, you name it. And it is so exciting to see for the first time since 2001, the Avs in the Stanley Cup. I think it's gonna be great. I'm going to be down in MacGregor Square this afternoon and really excited to join so many Coloradans in festivities. Tampa Bay, look out, we're coming for you.
Willy Walker: I think it's going to be great. I'm actually at UMass right now, Governor, about to give a talk to the coaching staff here. And this is where Cale Makar went to college and took UMass to the national finals as an NCAA hockey player before joining the Avs and becoming the star.
Governor Jared Polis: I think his brother's there now.
Willy Walker: Yes, that's exactly right. Taylor Makar is here at UMass.
Governor, as always, great to see you. I look forward to seeing you in person sometime soon and greatly appreciate you spending time with me this afternoon.
Governor Jared Polis: Thanks, Willy. Take care.
Willy Walker: Great to see you.
