Last week, the Trump administration released a 53-page infrastructure plan, outlining its proposal for rebuilding America’s infrastructure. The proposed plan, which is one of the largest to be released by the White House, has some similarities to Australia’s infrastructure plan, which has been proven successful. This action sparked some responses and thoughts from experts in the waste and recycling industry, as many of the suggested changes and updates could affect the industry.
“I think it’s very positive that we went from talking about a $1 trillion infrastructure package to a $1.5 trillion infrastructure package, which would of course be broken out with the $200 billion in seed money incentivized with the state’s localities to engage in construction of infrastructure,” says Jim Riley, vice president of federal affairs and deputy counsel for the National Waste & Recycling Association (NWRA). “I like to point to the Transportation Infrastructure Finance and Innovation Act (TIFIA) grants that were enacted in the past decade or so to demonstrate the possible return of investment for this proposed infrastructure plan, which could be upwards of $2 trillion. I think the Trump administration might be underselling the capabilities of this plan, and that goes along with its approach of under promising and overperforming.”
Waste360 recently spoke to a handful of experts in the waste and recycling industry to discuss some of the proposed changes that could have an impact on the industry, and their comments and predictions are outlined below.
Better Access to Education and Workforce Development Programs
The workforce development section of the proposed infrastructure plan highlights provisions dedicated to the American workforce and to policies that will help Americans secure stable, well-paying jobs. Currently, there are about seven million individuals looking for work and approximately six million unfilled jobs, which include driver and mechanic positions that are in high demand in the waste and recycling industry. As the battle of the driver and mechanic shortage continues, industry leaders are stepping forward to try and recruit qualified applicants to fill these positions.
“I recently spoke with the CEO of one of the larger waste companies, and he mentioned that the driver shortage is a significant issue for the company and others in the industry,” says David Biderman, CEO and executive director for the Solid Waste Association of North America (SWANA). “We will continue to educate members of the Congress about the shortage we face in our industry regarding drivers and mechanics, and we believe that vocational training and access to education and workforce development programs will allow us to overcome the driver shortage that we are seeing in certain parts of the country.”
The U.S. has the most productive hiring workforce in the world, according to Stifel Managing Director Michael E. Hoffman, but the problem is that the nation may not have enough people who are trained and qualified to fill some of the positions available.
“Improving workforce development programs and offering more training opportunities would be a good deal for everyone because it puts wage pressure on the industry and fills open positions,” says Hoffman. “Right now, the industry has a 3 percent to 5 percent wage pressure for the driver world, and the mechanic side is even worse because it’s a harder thing to retain. It takes about three years to train a decent mechanic and costs between $60,000 and $80,000 for the training. There are people out there who would walk to work just to be employed, but they don’t have the right skills so we need to work on providing more training opportunities and repositioning their skills.”
At the upcoming Waste360/Stifel Investor Summit at WasteExpo in April, Hoffman will speak with industry CEOs about labor and the ongoing labor issue. Hoffman says the waste and recycling industry turns over between 18 percent and 25 percent on the driver side and between 30 percent and 35 percent on the mechanic side. To reduce that number, companies need to rethink their shifts to give employees more of a work-life balance. Right now, many drivers work 4 a.m. to 4 p.m. and mechanics work 4 p.m. to 4 a.m. If the companies made the change to noon to midnight, for example, more people may be interested in working and maintaining those positions.
“During Waste Management’s earnings call last week, Jim Fish, president and CEO of Waste Management, made a comment and then had to go back and reframe it a little better because costs start at $12,000 to replace one driver,” comments Hoffman. “That total is based off lost opportunity, recruitment, training, etc., and the cost to replace a mechanic is even more. While the company seems to be working through the driver shortage, the mechanic shortage worries them, and they are starting to rethink the allocations of spares in the fleet.”
In addition to the driver and mechanic shortage, the industry is adapting to China’s waste import ban and contamination standard, which is putting pressure on the U.S. to find new homes for recyclables.
“Given the events that have occurred overseas over the past six months, it’s imperative for the industry and others to educate elected officials about the impact of the global changes on U.S. recycling programs,” says Biderman. “There may be an opportunity through the infrastructure bill to provide support for those programs, and that support could include significant domestic job growth as recycling programs create jobs here in the U.S. If the material is recycled in the U.S., it’s more likely to be used as feedstock for manufacturing here in the U.S. There is a ripple effect to creating recycling jobs, and I am hopeful that we will have an opportunity to persuade members of the Congress and others to support this effort.”
Repairing and Expanding Transportation Infrastructure
The provisions for transportation infrastructure could benefit the waste industry along with many other industries, as roads, bridges, waterways, ports and airports could see improvements and upgrades. These changes could help the industry move product around more easily and quickly and move a lot of dirt, which generates a flurry of opportunities for the industry at large.
For example, in fall 2017, Advanced Disposal won a bid for removing all of the dirt from Chicago O'Hare International Airport’s runway expansion. This was a huge win for the company because it added almost a point to its volume growth in the third quarter of 2017, and it was about an 80 basis point drive on its price, states Hoffman. It also allowed the company to stock up on nearly three years of daily cover for its local landfills. Opportunities like this one provide companies within multiple industries with many benefits, all while bettering transportation infrastructure.
Another proposed action that could benefit the industry is the Water Infrastructure Finance and Innovation Act (WIFIA) that has been used for water infrastructure projects in the past. It's been limited to only drinking water, clean water, etc, but the Trump administration is looking at expanding this act to include inland waterways and ports And given the amount of waste and recycling material that is transported to a landfill, incinerator or cogeneration plant by barge or loaded onto big container ships for export to Asia or other countries, it’s very important for the industry to be able to have good water transportation infrastructure, states Riley.
Industry experts are also pushing for rubberized asphalt to be used for new roads and road repairs because it is safer, quieter and it grips tires better. According to Billy Johnson, director of political and public affairs at the Institute for Scrap Recycling Industries, Inc. (ISRI), it also makes the roads last longer and drives up the demand for discarded tires.
Streamlining the Permitting Process
The Trump administration is looking to streamline the permitting process by creating a new, expedited structure for environmental reviews, delegating more decision-making to states and enhancing coordination between state and federal reviews and authorizing pilot programs through which agencies may experiment with innovative approaches to environmental reviews while enhancing environmental protections.
“Looking at the way the Trump administration is changing things with this infrastructure plan, I think there is real potential for there to be one designated lead agency to make the determination instead of multiple agencies,” says Riley. “There was a good start with this under the Fixing America's Surface Transportation (FAST) Act, and that really did a lot of streamlining provisions in regards to federal permitting. It proved the permitting process and provided a transparent, time-limited review of projects above a certain threshold. When you look at that model, it’s something a lot of agencies and groups can use to modernize the federal permitting process.”
Currently, the permitting process involves review and approval from various agencies, which is a timely process that can take years.
“The Trump administration has said a number of times that it took a year to build the Empire State building and that today it would take 10 years to get the permits for it,” says Johnson. “This is because there are so many agencies involved, and they can punt proposals to each other. This process makes it hard for those in the industry and other industries to plan and invest for infrastructure projects.”
If the Trump administration can improve the permitting process and get things permitted within a year or two, we will see more things getting built, comments Johnson. More construction means more use of concrete, rebar made from recycled steel and iron, steel mesh made from recycled steel, guardrails made from aluminum and steel, etc., which is good for the recycling industry.
Improving the Federal Real Property Disposal Process
President Trump has called for the federal government to sell off some of the property that’s no longer needed, and that opens up some opportunities for the waste and recycling industry to take advantage of, says Riley. “Whether it’s purchasing land or a facility that they might be able to convert for us, there’s a multitude of ways it could be beneficial for us. It’s something a lot of people haven’t focused on yet, but I think there will be a lot of activity in that area,” he says.
Missing Component: Recycling
While the proposed infrastructure plan features many components, it’s missing a large one that many in the industry were hoping for: recycling. According to Keefe Harrison, CEO of The Recycling Partnership, access to good, consistent, high-quality feedstock to make into new products is at the top of the list for manufacturers’ needs. And including funding for improved recycling in the infrastructure plan is a way to ensure long-term reliable supply created in the U.S. and to help communities provide universal recycling access to their households through the procurement of recycling carts, trucks and other equipment also made in the U.S. According to Harrison, making the switch to automated collection helps improve worker safety, reduce workers’ compensation claims, protect the longevity of recycling as a local service and make collection easier for both workers and residents.
“We are working to educate members of Congress on the reality that infrastructure for the modern economy is more than bridges and roads; it’s about how we provide the necessities for society,” says Harrison. “Currently, 20,000 local governments make independent decisions on how to recycle and that leaves us with a very scattered infrastructure. I think the federal government could go a long way by helping local governments secure access for every American at home. Right now, only about 50 percent of Americans can recycle at home, but the federal government has an opportunity with this infrastructure plan to level out that playing field.”
The Recycling Partnership, which was formed four years ago because there was no system solution for improving recycling, is working hard to make sure that recycling is not working in a vacuum. It focuses on the three main areas—healthy water, climate action and healthy communities—that it views are the future of infrastructure.
“We need to make sure recycling isn’t in a silo by connecting recycling to manufacturing, helping communities and taking climate action,” says Harrison. “We also need to make sure the demand for materials is there, and I think the recycling industry as a whole has the opportunity to connect the dots so that we are at the table of conversations that are happening around the U.S. This will allow us to build the America of the future, not just the America of today.”
Timeline for Infrastructure Bill Creation, Review and Implementation
To move the proposed infrastructure plan forward, the funding first needs to be approved and secured, which is the biggest challenge right now. The White House is asking for a total of $1.5 trillion in infrastructure investment between direct federal funding and incentivized non-federal funding, and to come up with some of the funds in a timely manner, President Trump has proposed a 25-cent gas tax hike.
“The president is known for throwing the ball 100 yards while knowing very well that all he really needs to do is get to 40 yards,” says Johnson. “This causes everyone to freak out, but in the next play everyone will move around the field and they will get 40 yards out of it, which is all he needed to begin with. In reality, we don’t know how big this plan will actually be because it started out at $1 trillion and turned into $1.5 trillion overnight.”
Throughout the election process and this presidential term, the Democrats have opposed and resisted a number of President Trump’s proposals and actions. And they may do the same in this situation because they may not want to give the Republicans another victory before midterm elections, comments Johnson.
There are a lot of steps to take to create and approve a bill, and right now the Congress is taking the Trump administration’s plan proposal into consideration, and the House and Senate are both starting to think about what they want, according to Johnson. There will be a number of committees involved in this process, and there are a lot of people who are riding on this bill. Bill Shuster, chairman of the House Transportation Committee, for example, has announced his retirement, and according to Johnson, he may not be willing to leave Congress until a bill is passed.
“We will probably be looking at early summer for a bill to be introduced in the House. I know the Senate is working on things already, and they are talking with the House on this. There’s a lot of work that has to be put in place because anything reaches the floor in either chamber, but by looking at the speed in which tax reform came together, this is something that could possibly progress forward at a quick pace. This is an issue where there’s a lot more agreement than there was with tax reform, and there is enough bipartisan agreement on infrastructure where something can get done quickly,” says Riley.
If the plan moves forward and a bill is created and passed this year, it won’t have an impact on 2018; it would become part of an appropriation and obligation for 2019 and beyond. But the current conventional wisdom is that it will take into next year to develop a consensus infrastructure proposal that both the Republicans and Democrats can agree upon.
“There are a few other hot buttons on the agenda right now like immigration and the appropriations bills—spending bills for last year, next year and the year after that—so they have a lot of work to do,” says Johnson. “The Congress was not designed to be efficient and rapid fire; it was designed to make things really hard to get done to ensure that things are really good and have public support.”