Infrastructure bills have promised big and delivered little in the past. Will it be different this time around?
Investors certainly seem to think so. Martin Marietta and Vulcan Materials , which provide building blocks for infrastructure such as concrete, asphalt, sand and gravel, hit record highs this month, soaring 120% and 93% respectively over the past year, compared with the market’s 75% gain.
Both the companies and investors seem bullish about federal support for infrastructure, which is high on President Biden’s agenda. The details of the new administration’s $3 trillion infrastructure plan, which haven’t been finalized, are likely to shift over time—including the sticker price and the parameters of what counts as infrastructure. But there are factors outside the plan that already help brighten prospects.
On a federal level, timing matters. The federal surface transportation funding authorization that passed in 2015, the so-called FAST Act, is due to expire in September after a one-year extension passed last year. The industry sees an opportunity for a reauthorization and increase in that pool of funding, whether or not it gets folded into the larger infrastructure bill.
That reauthorization seems realistic. First, action must be taken before the bill expires again in September. Industry observers agree that it appears to be the least controversial of infrastructure proposals. Secondly, both houses of Congress have said they would like to increase the funding pool. The Senate Environment and Public Works Committee in 2019 thought new highway funding should increase by more than 27% compared with original FAST Act levels. The relevant House committee proposed that the total funding for all aspects of the FAST Act—including highways, transit and railroads—should increase by more than 40%. Notably, that funding pool provides a lifeline to the Highway Trust Fund, which would have been underfunded if it had solely depended on federal gasoline taxes, which haven’t been raised since 1993.