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Jane Garvey and Joseph Aiello | On the Hot Seat

Building a better system for funding new infrastructure

Jane Garvey, chairwoman, and Joseph Aiello, chief executive, Meridiam North America Fund

Jane Garvey, chairwoman, and Joseph Aiello, chief executive, Meridiam North America Fund

(Pat Greenhouse/Globe Staff)
By Katie Johnston Chase
December 12, 2010

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Jane Garvey and Joseph Aiello oversee the Meridiam North America Fund, which partners with government agencies to build and maintain public projects such as bridges, highways, and hospitals, including a three-quarter-mile underwater tunnel in the Port of Miami. The fund is part of the France-based Meridiam Infrastructure Managers, which has disbursed more than $1 billion since its inception in 2006, including five projects in the United States. Garvey, who lives in Northampton, was the director of Logan International Airport in the early 1990s and was the head of the Federal Aviation Administration at the time of the Sept. 11, 2001, terrorist attacks. Aiello, an East Boston native who lives in Winthrop, oversaw the development of South Station and the Silver Line for the MBTA. Garvey and Aiello recently spoke with Globe reporter Katie Johnston Chase.

How are most tunnels and hig hways funded?

Garvey: If you look at the history of transportation in the United States . . . it’s for the most part funded by either federal or state funds. If you’re going to fix the Longfellow Bridge or build a bridge in New Hampshire, you’d construct the bridge and then you would get reimbursed by the federal government. And generally it’s just a construction project. It ends when the construction is completed.

Why has Meridiam financed and overseen these projects instead?

Garvey: If you talk about the tunnel in Miami, for example, . . . it’s a billion-dollar project. It’s complicated to build, it’s very expensive to build, and it would be difficult for a state to do that within its existing capital funds. So what they did then was say, let’s consider this as a public-private partnership, where we will join with the private sector. The private sector will be responsible for designing, for constructing, for operating, and maintaining the project . . . And it allows the public sector to advance the project quickly.

Aiello: Six years into operations of a public courthouse, sometimes you’ll see the roof is leaking or the air conditioning isn’t working appropriately. And the question is: How do you fix it? And the maintenance staff says, ‘Well, gee, the contractor didn’t put it in right.’ And the contractor then says my warranty period is over, or blames the architect. . . . [With Meridiam] since we’ve had to finance the project, we’ve taken total responsibility for the long-term performance of the building, typically 35 years. And if the air conditioning isn’t working, if the escalators and elevators aren’t working, etc., we simply don’t get paid, and therefore can’t earn our return on the investment. So the government actually improves its bargaining power over the private sector by using this model.

But the government is paying more money for these projects by hiring you to oversee them.

Aiello: If you go to the UK Treasury Department, they have done studies about projects that were done traditionally and projects that were done this way. They have found that over the life cycle of the buildings that they’ve built this way vs. the conventional way, they have saved 15 to 25 percent. So it’s actually cheaper over the long term because you are providing the standard of care for the facility throughout the life of the facility.

Would this kind of partnership have worked for the Big Dig? Aiello: It might have. The industry didn’t exist at the time.

Jane, you were the head of the FAA during 9/11. What was the pressure like that day and the days that followed?

Garvey: On that day after the second plane, we knew that we had something quite serious and began to bring down the planes, first in the Northeast and then had a national ground stoppage, which meant you couldn’t take off, and then finally decided let’s bring them all down. I still remember watching that screen in my office that had 4,233 planes up at the time, it was such a beautiful flying day, and then watching all those dots disappear until finally you just saw Air Force One and the fighter jets.

Did you take heat for the fact that the terrorists used the aviation system to attack us?

Garvey: I think people were pretty focused on the intelligence side of it. I think anyone who was involved in that day always questions and wonders what else could we have done? What did we miss?

Jane, you also used to be the director of Logan. Garvey: I was. Some girls have all the fun.