New Border Bridge Financing 101

If it was not enough to examine 15 corridors, even though it was obvious that many were unacceptable right at the beginning, someone in Government has figured out that another task force needs to be set up.

This group is now being asked to look at the "Governance" side of the border crossing. What that really means is how is the new bridge going to be financed. [Note I deliberately said "bridge" since the DRTP is virtually ended.] My understanding is that a group examining this issue has been around for quite some time . What have been the results of that group? Why do we need another study?

Let me save them some effort and taxpayers some money. (And to save a few trees too since the Border Reports are sooooooo voluminous). No one in the private sector will finance it at this time since it is a money drain that may never make a profit! And the public sector won’t either.

Who in their right mind is going to finance a new crossing when the Bridge Co. has announced a new proposal for 200 Customs booths at a site in Detroit? That project would result in 50 million plus vehicles being cleared at the Tunnel and Bridge. That’s twice the total volume of all traffic being cleared in SW Ontario today! Our Mayor panicked when he heard about the proposal since he feared it could negatively impact the Tunnel if business was taken away and could kill his proposed leasing/operating proposal with Detroit. Imagine what a new bridge would do---cause severe financial problems for existing locations everywhere. (That’s why Gridlock Sam had to talk about sharing revenues!)

Are the traffic volumes there anyway? Only a very few years ago, the Bi-National Partnership Engineers gave us very optimistic projections about what was to happen 30 years from now that supported the concept of a new crossing. Well they had to revise those projections downward.

If the traffic is not there and we build another crossing, can someone please explain to me how the exisitng crossings are going to make money? Take a declining volume of cars and trucks and have a new crossing trying to capture the business. Want to bet how long the Tunnel remains solvent or even the new crossing? Even the Ambassasdor bridge might see some lower revenues.

I am not trying to knock people who make projections but if these sophisticated people cannot see only a few years into the future accurately, then how can financiers have confidence that their revised figures are any better when deciding to invest hundreds of millions of dollars?

One other consideration. The Bridge Co.’s project could be in place by 2007 at a cost of $200 million while a new bridge will not be built until 2013 at the earliest at a cost of at least $600 million plus infrastructure improvements. Which project would be in a better position financially? What traffic would there be for a new crossing? How could the new crossing ever compete on price without massive subsidies?

If not private money, then there has been a demand for Public ownership… Get real…who has the money for a border crossing when there are federal elections to be won by bribing taxpayers with our own money and Ontario is becoming a have-not Province. As for the Americans, do you really think they are going to duplicate the massive amounts of funds that they have sunk into the Ambassador Gateway Project at another location? We are looking at around $1.5 billion for plazas, roads and infrastructure on each side of the river as well as $600 million plus for bridge construction.

A public authority? That sounds like Gridlock Sam’s Report and Bill C-44. Both are virtually dead anyway and if someone really was serious, the Bridge company would litigate forever since both actions are directed right at their business. Has anyone asked yet if Bill C-44 is even constitutional or if the Bridge Co. is interested in sharing the money it earned through its own efforts? I wonder also how the Canadian Government would expropriate an American company’s assets in the US.

If the Bridge Co. was to back off however, and allow themselves to be expropriated or bought out, then we are talking over several billion dollars based on what Mayor Daley did in Chicago on a 99-year lease. Maybe I am wrong, but I’d rather use those funds to improve the doctor situation in Windsor or to replace the sewers on Erie Street that are still flooding or to fix some roads.

Wouldn’t it be silly to pay out all of that expropriation money and then still have to spend more to build a new crossing? Absurd!

These are not just my ramblings by the way. The only proponent that has given some comment to finances is DRTP. I assume that DRTP had a Business Plan that they offered to investors but even with their ambitious numbers I do not believe that they were ever 100% funded. I thought that they were in the mid-80% range the last time I heard them comment.

I also recall hearing one of their spokesmen say at a meeting I attended that their payback was over 20 years but he did not say how many years more.

DRTP’s Business Plan probably included their traffic projection on their website that "approximately 7,600 trucks per day will use THE TRADEWAY when it opens in 2007."

Could DRTP really take away that much of the Ambassador Bridge’s business? In any event, those numbers must have been based on projections similar to those of the Bi-national Partnership which have now been revised downward. If the volumes are down, is a new crossing financially supportable?

DRTP needed $150 million of Government BIF funding but as their website now says: "a $600 million new rail tunnel and high-speed truck route are proposed." BIF funding is only available for existing crossings so DRTP could not get that financing and neither could a new crossing. Interestingly, if the Bridge Co’s project is viewed as an improvement to an existing crossing, as it is, then BIF funding is available to build the DRIC road ie the work on the Canadian side. Wouldn’t that be ironic!

As the DRTP GM said previously

• "As yet, there has been no financial commitment from any U.S. agency or government, though the DRTP is pursuing that, Sheahan said. "If we receive U.S. funding, it would mitigate our investment, but even if the only funding we get is the $150 million, we would go ahead with this project."
  
  Without it, we won’t be able to proceed on the proposed timelines. It may well make good business sense to go ahead with the new tunnel anyway, but not with the same sense of urgency."
  
  

If DRTP are to build an "enhanced" project they need hundreds of millions more from taxpayers and if it is to be a new 6 lane road and 6 lane bridge or tunnel…well you calculate the billions needed.

If one adds together construction costs, the Canada Customs Cost recovery charges for new border crossings, financing costs even at some low interest rate, operating costs and some kind of a profit, then there is not very much room to make a buck especially when one has to compete against the Bridge Co’s tolls. I’ll let you figure out the cost per truck for a new crossing and ask you to compare it with the existing charges to see if someone can realistically compete.

Today’s Trucking magazine made an interesting comment recently:

• "Even in the event that the new bridge would be contracted to another party, how would it compete with the Ambassador? Any new bridge would be heavily reliant on toll revenue just to keep above water for the next 30 years. If the Ambassador slashed rates (and Moroun could run for years at a loss), it would deter volume from spilling over to the new crossing and keep a large chunk of truck traffic right where it is. Then, with the new bridge desperate for revenue to pay off debt, can you guess who comes to the rescue?"