Johnson on the road ahead for infrastructure

By |  April 23, 2018

During the Pit & Quarry Roundtable & Conference, Mike Johnson, president and CEO of the National Stone, Sand & Gravel Association (NSSGA), offered thoughts on the year ahead for the aggregate industry, as well as insights and potential developments on the infrastructure spending front.

P&Q: Reflecting on 2017 and looking ahead to the year in front of us, what’s your overall feeling on the state of the aggregate industry?

Photo by PamElla Lee

Mike Johnson, president and CEO of the National Stone, Sand & Gravel Association, addresses Roundtable attendees. Photo by PamElla Lee

Johnson: What I generally hear from our producers is that it [was] a pretty good year. Some people talk about record numbers. That’s good news. The unfortunate part is it is still too spotty. We are not where we need to be in terms of volume all across the country. To do that, we’ve got to get [to] our biggest customer. Believe it or not, the biggest customer for this industry is the federal government. We’ve got to get them back into investing in infrastructure.

P&Q: When it comes to tax reform, we heard early positive reactions from the business community. What are your thoughts on the impact this is going to have on construction material producers?

Johnson: The feedback has been largely very positive. Who doesn’t like a tax cut? We all keep more of the hard-earned money in our pocket – that’s the good thing. For this industry, though, I will tell you that some producers say, ‘Wow, I would much rather see an infrastructure investment than a tax cut. I would much rather pay a high rate on 2006 or 2007 kind of numbers than a low rate on the numbers we have today.’ What we have is a situation where the tax cut did a lot of good things. I think it will move the economy some, but it has also created some challenges.

P&Q: Considering the tax reform bill will add $1.4 trillion to the nation’s deficit over the next 10 years, the prospect of passing an infrastructure-spending bill seems somewhat diminished. Still, infrastructure is being teed up as a big opportunity. What are your expectations as talk of infrastructure heats up on the Hill?

Johnson: [Tax reform] makes it more challenging, without a doubt. If you think about the last few times we had low infrastructure investment, the revenue they needed to do it was buried in the new tax bill.

In 1993 when they increased the gas tax the last time, it was buried in the tax bill. It’s harder to do that kind of work when you’re doing it as a standalone. It’s not impossible, but it is certainly harder.

We’re very excited [to join] with the U.S. Chamber of Commerce recently to say infrastructure is important to our success and we’re willing to put some money into that. We are very excited because this brings business into the user community and into the work on infrastructure in a different way.

P&Q: You mention the federal gas tax, and we haven’t seen that increase since 1993. We’ve had the conversation about raising the gas tax for a number of years now, but we haven’t seen traction. Is there reason to believe that now is any different?

Johnson: Yeah, there is. It starts with [the State of the Union address], which was the longest State of the Union address in the history of the country. In the State of the Union address, the president did what he has done constantly: talk about the need for infrastructure investment.

It is great to have a builder who understands the importance of growth. He talked about the new investment, something that we haven’t heard previously. He said $1.5 trillion – that’s significant, that’s real. That’s presidential leadership: consistently talking about this issue. I can’t remember when there has been significant discussion on infrastructure in the State of the Union. To get there, though, the devil is in the details. It is going to take consistent presidential leadership.

P&Q: Historically, we don’t see a lot of major legislation taken up during midterm election years. That being said, infrastructure is on the plate and immigration has been talked about. Do the midterms slow the potential for legislative progress?

Johnson: It shortens the window for sure. We are already well into legislative year and there are not many days left if you believe that.

They (Congress) will probably adjourn for the 2018 elections no later than about Columbus Day. So, we’ve got a very narrow window to get some important things done. It is going to be a challenge and a fight [for a deal on infrastructure].

Istock.com/mrod

NSSGA’s Mike Johnson suggests the industry needs to intensify its effort to get in front of Congress on infrastructure and hold legislators accountable on the issue. On the topic, Johnson says: “If they don’t do this, we are going to show up and we are going to vote to replace them with somebody who will do this.” Photo: iStock.com/mrod

The way it happens is for the business community – the Chamber [of Commerce], the truckers, NSSGA and everybody else in this industry – to stay united and keep the focus on this. We must take every opportunity we have to talk to our members of Congress about the fact that if they don’t do this we are going to punish them. If they don’t do this, we are going to show up and we are going to vote to replace them with somebody who will do this.

Our industry has never been as aggressive as we can be and should be, in my opinion, on this issue. We have always been a little bit quiet. We’ve got to be bold and proud. We have to join together with the business community and we need to drive this home with every opportunity. It is going to town hall meetings; it’s letter writing; it’s sending emails; it’s showing up in Washington for [NSSGA’s] Legislative & Policy Forum where we go face to face with members of Congress. We had 300 [NSSGA] members in Washington last year, but we need to double that this year.

P&Q: Let’s break down the Trump infrastructure plan as it is. The $1 trillion figure was bandied about on the campaign trail and throughout his first year in office. When you break down the now-$1.5 trillion figure, it’s really just a fraction of federal investment, right?

Johnson: When you keep talking about billions and trillions, you are getting into some real numbers. It’s some real money.

The [American] Society of Civil Engineers says we are $4.6 trillion short of the investment to get our infrastructure up to where it should be right now. Of that $4.6 trillion, $2.5 trillion is already ready.

There is money there from the Highway Trust Fund, the FAST Act – all these things come together to create $2.5 trillion of funding. That means we are $2.1 trillion short of where the civil engineers say we need to be.

Trump’s proposal at $1.5 trillion is a big step in the right direction. I have been in the White House six or seven times where I have been in active conversations with some of the folks in the administration. Their idea on how to give that $2.5 trillion is a little different than mine and a little different than the history of our country. They [Trump administration] don’t want to fund $1.5 trillion – they want to incentivize or generate $1.5 trillion.

Now, those types of words scare me a little bit because that means it leaves a lot of ‘ifs,’ ‘ands’ and ‘buts’ on the table. What they are proposing right now would be a complete upheaval of the traditional infrastructure-funding model.

What the administration is talking about right now is doing no more than $200 billion of the $1.5 trillion in direct federal spending. You can do the math. That means the states will have to figure out the $1.3 trillion to get to the number. The administration believes if they incentivize the states with that $200 billion it will be enough to get them there. A lot of states have already raised the fuel tax so they can fund infrastructure.

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The Trump plan on infrastructure is to incentivize states enough that they will come up with $1.3 trillion in investments. Photo: iStock.com/peeterv

So, what would you have to do? Raise more taxes? The administration says ‘No, we would prefer the states engage in asset recycling.’

P&Q: We haven’t touched on the Highway Trust Fund. What is the future for that?

Johnson: Right now, it’s not talked about. The administration, so far, doesn’t have anything to shore up the trust fund. It’s worth pointing out that had the government just indexed the gas tax for inflation in 1993, we wouldn’t be having this conversation right now. There would be a surplus in the Highway Trust Fund. That is why the Chamber did 25 cents and the truckers did 20 cents. All those proposals go directly to secure the Highway Trust Fund.

P&Q: If you are a betting man, Mike, would you be willing to say that at this time next year when the Pit & Quarry Roundtable & Conference reconvenes, we will have a major infrastructure bill in place? Or will we be having similar conversations about getting something done?

Johnson: Yes, I am willing to bet that we will have an infrastructure bill in place. What does it look like? That I don’t know. I am willing to say the NSSGA will continue to keep our members more engaged in this grassroots messaging because that is the way we are going to get there.

P&Q: We’ve covered the legislative front a little bit here, but let’s move to the regulatory front. Pit & Quarry took part in the inaugural NSSGA Legislative & Policy Forum in September. You brought in some key speakers, including Scott Pruitt from EPA (Environmental Protection Agency) and Ryan Zinke from the Department of the Interior. They talked about the role of regulation and how there should be a practical approach to regulating business. How would you characterize the regulatory environment aggregate producers currently find themselves in?

Johnson: There is no question this administration has been a lot more business friendly than the last eight years – maybe even than the last 16 years.

The Trump administration gets the business community and understands the working relationship. On the regulatory front is where we made the fastest progress with the Trump administration. With MSHA (the Mine Safety & Health Administration), we have a leader in David Zatezalo who came from a mining company. That is a huge step forward.

We went from a guy who was a United Mine worker (Joe Main) to a guy who owned a mining company. He understands what we do in a different way. We are encouraged at what we are seeing from MSHA.

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