Calling for action on infrastructure in 2021 (Part 1)

The following transcript was edited from one of two concurrent discussions at this year’s Pit & Quarry Roundtable & Conference. The conversation was edited for brevity and clarity. Editor’s note: Shortly after this June 3 discussion, the Biden administration and a bipartisan group of senators came to an agreement on the framework of a five-year, $953 billion infrastructure bill. The comments presented here were made just ahead of that development.

P&Q: President Biden introduced a $2.3 trillion bill (the American Jobs Plan) this spring that calls for an additional $621 billion for transportation infrastructure, including ‘roads, bridges, transit, ports and airports, as well as electrifying vehicles.’ The bill’s critics argue that the bill is too large and that transportation infrastructure, as a percentage, is but a small fraction of the whole bill, which also calls for the corporate tax rate to jump from 21 percent to 28 percent. A group of Senate Republicans countered the president’s proposal with a five-year $568 billion for roads, transit and broadband. Based on the two proposals, it’s clear Democrats and Republicans are very far apart. All this said, do you see there being a true “middle ground” that Democrats and Republicans can come to on infrastructure? Do you expect any compromise involving surface transportation infrastructure to also address other forms of ‘infrastructure,’ and are you willing to make significant concessions in order to get something viable passed on surface transportation infrastructure? Do you expect all sides to come together on an agreement this summer? What strategy should be employed to pay for a bill? Lastly, is the definition of ‘infrastructure’ changing? Infrastructure has traditionally been about roads, bridges and highways, but we’re hearing new talk these days of ‘infrastructure’ being so much more.

SHELDON SHEPHERD (TECWEIGH): When I think of infrastructure, I think of roads, buildings, bridges, power grids. But are they trying to piggyback, or is it just an evolution of social programs in there, too? Because that way, they can talk about infrastructure where social programs become less popular.

DAN JOHNSON (VDG): This industry has had what has been a blessing of having a dedicated product line. Infrastructure was roads and bridges and it brought in a stream of income in the form of motor fuel taxes. But the more they broaden the definition of infrastructure, the less relevant having a dedicated pot of money is. My concern for the future would be that this industry is thrown in with everybody else fighting and squabbling a portion of the general fund instead of having a dedicated fund.

As the definition of infrastructure changes and the means of funding infrastructure – especially with the growth in electric vehicles – whether they’re going to be able to extract money from them for this dedicated pot or whether this dedicated pot is just going to gradually go away, that’s one of the things I see as an issue and maybe a question mark for the future.

GEORGE REDDIN (FMI CAPITAL ADVISORS): Maybe a trip down memory lane will put some perspective on the risk. I’m talking about history. [The] first federal highway bill in the early 1990s [was] also the last time we had a federal gas tax increase. We go into TEA-21 and, ultimately, we’re able to get SAFETEA-LU, and SAFETEA-LU expires in fall ‘09.

But what else was happening in fall ‘09? We were trying to come out of a collapse of the economy in 2008. What happens? We have continuing resolution after continuing resolution. Now, ‘21 is a two-year glorified continuing resolution. We go from the fall of 2009 to December of 2015 before we get the FAST Act.

So, we have a more recent history with not increasing the dedicated funding, continuing resolutions – and we just went through another one. It’s always been deemed bipartisan. So while we’re excited, people were excited four years ago.

TOMASO VENEROSO (AMCAST): A number is a number. We can argue, of course, it’s a little scary. But the issue is how you get the money and then how you use the money. The issue is that a lot of people are nervous. Let’s say we agreed [about] the amount of money that is going to be [for] infrastructure. Then, the major concern for us is how can you recruit money? And people will say: ‘Well, I think that everybody agrees if we spend all the money wisely, specifically with infrastructure, who cares if we raise the taxes?’ That, to me, is the big if.

SEAN WEISIGER (CONN-WELD INDUSTRIES): I live in Virginia and I remember back to 2012-2013. We had a different administration locally in Virginia and passed sales tax increases for infrastructure traditionally. A lot of projects were going on. I remember sitting in meetings and Virginia was held up as an example: ‘Look what they did to raise money on their own.’

Well, then the administrations changed and I remember sitting at a state organization meeting and our new governor came in. He said: ‘Guys, great news: We figured out how to pay for the Affordable Care Act. The bad news is all those projects that are on the books are no longer on the books anymore.’

By changing that definition of infrastructure in recent history, we’ve seen how that can negatively affect our spending of those infrastructure dollars. That’s what concerns me the most about lumping all that in and making a new definition of infrastructure. Like Tomaso said, it depends on what the government does. How are they going to allocate those dollars?

SCOTT ALEXANDER (ARCOSA AGGREGATES): It’s a negotiation. The president starts high. The Republican Party’s low, and they’re going to split the baby in the middle. I think everybody would be happy with that because, quite honestly, everybody’s still shocked about the trillions of dollars being floated around here. And that means who can even keep score anymore.

P&Q: For the Trump administration, one of the big champion moments was the 21 percent tax rate. Are there concerns about that going up as part of infrastructure? Does that set off alarm bells?

SHEPHERD: It would make every business alter their plans. That’s what they do. It would alter everyone’s long-term plan because they would be doing their financial planning based on 28 percent instead of 21 percent.

P&Q: Is it a compromise you’re willing to make in the interest of getting the bill done on infrastructure?

SHEPHERD: If money goes to the proper location.

VENEROSO: Exactly. In other words, you have an increase of 21 to 28, but your volume of affairs, whether a producer or manufacturer, increases threefold. We can talk about it certainly. But, as Sean said, where does the money go? Overall, it’s accountability. That’s it. Despite the political vision – right, left, Democrat, Republican – it’s about the common denominator, which is a strong economy. You cannot ruin the status of the United States. It’s the No. 1 economy in the world, and if you continue like that, I don’t know how long we can be the king of the world in those economic measurements.

REDDIN: This tax issue doesn’t apply to S corps; they’ll be taxed at the individual rate. We’re talking about C corps. With 21 [percent], it’s artificially low. The other piece that’s missing is effective tax relief. We’re talking about the top tax rate, but we’re ignoring what has happened in the changes in the tax codes and the deductions. For example, this industry has experienced the benefit of the bonus depreciation driving your effective tax. This is a conversation that, if we’re being taxed at 37 percent of the personal income tax level, corporations are at 21. It’s interesting but complicated. It’s more political.

KEATON TURNER (TURNER MINING GROUP): Whether it’s 21 or 28, it doesn’t really change how we do business. I don’t think we change our strategy. Producers know. It costs a lot more to produce a ton of gravel in California than it [does] in Texas. But you’re still producing gravel in California. So, business carries on. It’s just another somewhat form of inflation.

BRAD NICHOLS (SYNTRON MATERIAL HANDLING): We talk about the definition of infrastructure. It’s the physical and organizational structures needed for the operation of society or enterprise. So the big thing is if it’s developing and expanding the growth of society [and] of the ability to do interstate commerce [and] do operation. Generally, that’s what’s been described as infrastructure.

If you think about it, what is being required for the expansion of society, enterprise and infrastructure has changed over the last 30 years. It’s not just bridges. It’s not just roads. When we talk about the power grid, we’ve got the expanded communications grid. We’ve had to expand fiber throughout the country. We’ve had to expand all sorts of communication, computer interaction.

Where does that affect labor? Now, you deal with labor versus how you deal with enterprise. When you start adding all that into one bucket, the biggest problem is how to budget and where the money goes. As long as we keep it to the basics of the definition of what is required to run society and enterprise, that is where we’re going to see the biggest expansion of infrastructure over the next few years.

Click here for Part 2 of the infrastructure discussion that took place at the 2021 Pit & Quarry Roundtable & Conference.

Featured photo: PamElla Lee Photography