Mary Peters’ 30-year career in
public service culminated in her
appointment as Secretary of the
Department of Transportation in
the recent Bush administration.
Now, in a turn to the private sector,
she has joined Texas construction
firm Zachry American Infrastructure
as a senior adviser.
ai5000: Why have you decided to join an
infrastructure investment group now, when
so many other firms are having troubles?
Peters: The main
reason is that I see the
need being so great.
There is a perception
that the stimulus
package really satisfies
the investment needs
and we don’t need to
do anything else. That
is far from true, however: Only 5% of the stimulus
package is for transport infrastructure. There is a
tremendous need within our nation to renew our
infrastructure, and the public money will just not
be there in the future. So, I see an opportunity.
One issue is that many see infrastructure as
a public right and national asset that should
stay in the public sphere. How do you see
that perception developing?
We need to help change that perception. Starting
in the 1950s, we were able to develop our
infrastructure ahead of the curve, but we began
to lose power in that area in the 1980s and
1990s. So, we need to educate the public that
we are not meeting our nation’s infrastructure
needs and we need to think differently about
how to invest in infrastructure.
There are two bills currently before the
Senate that, in effect, outlaw states’ abili-
ties to toll roads and lease them out to
It is very much a step in the wrong direction. I
want to know where the two senators are coming
from with this legislation—there are rumors that
it is from the trucking industry. These bills would
really shut the door on private investment in
infrastructure; so what are they offering instead?
The failure of the Chicago Midway airport
and Pennsylvania Turnpike deals suggest
that the private sector model isn’t working
I think that these were casualties of the
economic downturn and a political catastrophe,
respectively. I see Midway coming back.
We talk of these failures, but there have been
Are the opportunities for firms such as
successes, too. I-595 in Florida was very good,
and perhaps a way forward, but we do need
to look for ways to put these procurements
together better. It is discouraging for private
investors, especially after all the investment that
went into Pennsylvania and Midway, to see it not
happening. We need to make the process more
efficient and the outcome more certain.
Zachry Hastings Alliance (the Zachry
alliance with Hastings Fund Management
of the Westpac banking group) in the
smaller negotiated deals rather than the
overarching top-heavy auction processes?
Absolutely. There will be far fewer of these big
Why are institutional investors interested in
multibillion-dollar projects and more smaller,
less costly projects that can be dealt with at
a local government level. This is where we will
see the wins. We won’t see them coming out of
Infrastructure is a very attractive asset class to
long-term investors: There are barriers to entry,
there is an essential service, and there is an
opportunity to have an exclusive provider. Those
types of investments are very attractive to the
Those attributes also tend toward monopoly
providers, which necessitate a strong and
independent regulatory system to ensure
that customers are not gouged—but that’s
difficult to do.
It is difficult. We have very autonomous states
and local and regional regulatory authorities.
Would it be helpful if the federal government had
some overarching policies out there that would
protect the public interest and provide some level
of certainty to the investors? It would. Do I have
any confidence that that is going to come out of
Washington? I’m a believer that this has to be
done within the states.
Public pension funds have a lot at
stake here. What’s their role in helping
circumvent political roadblocks?
Pension funds can say to federal government
officials that they are basically shutting down an
avenue that we would like to invest in. Governors
as well need to rise up and say, “Don’t do that;
you are shutting off an avenue we need.”
There is a real opportunity with the pension
funds to have a win-win-win. Labor or public
employee groups want their funds invested well.
We all have an interest in seeing infrastructure
built so we can build our overall economies. If
pensions funds can invest in areas that provide
a long-term reliable rate of return and benefit
the communities, isn’t that a great win for
If you look at some of the other senior political figures who have gone into infrastructure investment groups—Norman Mineta
at Credit Suisse, Dick Gephart at Goldman,
or Jeb Bush at Lehman—almost no one
has made any discernible difference to the
ability of those funds to win deals. How will
you be different?
My reputation is very important to me. I am not
going to sign up to something where I am just
a name on a letterhead. I want to know about
the deals and make sure that something I am
lending my name to is something that’s good for
the public. I am not just going to parade around
knocking on governors’ doors.
Any thoughts on the proposed National
There is a lot of talk about it right now but I’m
not sure it will work, mainly because it’s not
clear how it will be capitalized. I have a concern
that, if Washington plays too heavy a hand in
this, they crush the opportunity for viable private
investment in infrastructure. We need to let 1,000
flowers bloom and see what works best. n