What The Federal Budget Really Meant For The Windsor Border
- “The Windsor-Detroit Corridor is our most important artery of trade, accounting for 28 per cent of Canada-U.S. merchandise trade. Many regions in Canada depend on the efficient movement of goods and people through this corridor. This includes not only Ontario, but also Quebec (in 2004, an estimated $5.7 billion of Quebec’s merchandise exports to the U.S. transited through this corridor). Both long-term planning studies and stakeholders have confirmed the need for a new crossing. Canada’s New Government recognizes that ensuring sufficient border capacity between Windsor and Detroit is an issue of national importance.”
- “I will be telling my colleagues in Ottawa that the border problems we've had in the past have been solved and I'm delighted to hear it," Jim Peterson [Liberal International Trade Minister] told reporters immediately after the closed-door discussion with about 40 representatives of agriculture, manufacturing, Ford, Chrysler, the Ambassador Bridge, the tool and mould industry and greenhouse growers.
He said he learned that the delays at the border have been dealt with. "This," Peterson said, "is music to my ears."
- “The Windsor-Detroit Corridor is Canada’s most important entry to the U.S. market. Congestion at the Windsor-Detroit border crossing can have a significant negative impact on Canada’s economy, particularly the auto sector. It has been demonstrated that a new crossing is required to meet long-term needs. The challenges of building such new infrastructure are significant.”
The view, according to Infrastructure Minister Caplan in Ontario, is that
- “Research done by the U.K. Treasury revealed that 88 per cent of projects pursued using alternative financing methods came in on time and on budget or early. And when there were cost overruns, they weren’t borne by the public sector.
Compare that with traditional means of procuring infrastructure, which delivered 70 per cent of projects late and over budget, according to the U.K. government.”
Moreover, it uses pension fund money from outfits like OMERS, Teachers, Canada Pension Plan and so on. These organizations have close connections to the Government already so it makes for a nice relationship. In addition, these pension funds were investing out of Canada and that did not look good:
- “Greater use of P3s will also provide opportunities for Canadian pension funds and other investors to participate in infrastructure projects here in Canada rather than being forced to look abroad, as is often the case now.”
Well you might say, doesn’t that put the pensioner at risk…of course not. If it is like OMERS, and they had a $600 million write-down a few years ago, they just tell the municipalities and their employees that their contributions are increased to cover the shortfall!
So back to the Ambassador Bridge. I was shocked that the Ambassador Bridge was “removed” by DRIC from their study. The Americans said it was the best choice for their side (After all the Ambassador Gateway project was designed to accommodate the Twinned Bridge) and in the initial reports, it ranked as highly as the central crossing. It lost out ultimately not because of what the Bridge Co. proposed but because of what Canadian DRIC said would be required on the Canadian side ie the large plaza in Sandwich and trucks down Huron Church. The Americans just went along with that decision conveniently.
I have done enough on the financial side of building a new bridge to know that it makes no sense whatsoever. No private investor in a P3 would ever be involved in it without a huge Government guarantee since it would go broke early on if there was fair competition.
If one looked at Sarnia/Port Huron and the Blue Water Bridge, they went through a similar study as DRIC and looked at locating their new bridge in various locations. In the end, they decided that a new bridge beside the existing made the most sense, especially operationally when each Customs booth costs a huge amount per year to staff and run.
So how does one explain what is going on. Again, it is the Bridge Co. that is front and centre. The answer is easy. No one believed that the Bridge Co. was actually going to build another bridge! All of their comments in the past were discounted. Each announcement of what they proposed to do was not believed. The statements were viewed as nothing more than the so-called Monopolist protecting its position.
Accordingly, it was felt by the powers-that-be that the Bridge could be bought and all that the Bridge Co. was doing was trying to get the price higher. The Governments wanted the site but they could not show it or the price would go even higher. What could be done: accordingly, in ex-Minister Rock’s words, create the possibility of a new crossing. That is what DRIC was for!
There is a difference between private enterprise money and Government money. Private enterprise money comes out of the owner’s pocket. Government money comes out of your pocket and mine. A Bureaucrat really has no “ownership” interest in the funds. The Danish professor’s book on Mega-projects gives proof to this as well as the statement above by Minister Caplan.
What was not understood by the Bureaucrats was that the Bridge Co. was NOT going to build a bridge until it made economic sense for them to do so. They do not have the luxury of unlimited taxpayer money. Their decision was that the time is now, not 5 or 10 years ago. Again, I do not believe that anyone believed that they were actually going to do it.
I have heard Dan Stamper say that DRIC was just an insurance policy that would have a possible bridge location determined if the Bridge Co. did not move forward. It should have ended when the Bridge Co. moved on their EA hearings. However, I believe that there was still NO expectation that the Bridge Co. would ever build a bridge. Now that they are really taking action, the Governments are not sure what to do.
As an aside, look at what DRIC is proposing. Sure they are wasting millions on this dumb boring of holes looking for salt mines. But if you examine the road they are proposing it can just as easily go to a new crossing by turning left near the river as it can by turning right and going to a twinned Ambassador Bridge.
Mich-can was never a serious proponent. They were dismissed as being merely bridge-builders. DRTP never had a chance based on the previous MDOT study that was hidden until I found it, although its corridor might have been used at one time to link to the Ambassador Bridge. In my opinion, the choice has always been a Twinned Ambassador bridge.
There was an issue though---how do they get rid of Matty Moroun as owner.
I won’t speak for the Americans but there clearly is an agenda on our side to have a “public” bridge. The Ambassador Bridge is an anomaly since most other crossings are viewed as “public.” Some in Ottawa even now cannot forgive that Moroun beat them on FIRA after a dozen years of litigation. They wanted to get rid of him then and failed. So they want to get rid of him now. As for Ontario, it’s just greed. They wanted ownership of and the revenue from the crossing
If the view was that he really would sell out, the question was NOT that he would sell but how do you get him to accept a low amount of money.
The RFP for the marshalling yard gave it away to me. It was nothing more than a means to pressure Moroun to sell out. The intention was to say that this yard would direct traffic away from his bridge to a new one and would control tolls. Therefore, sell out. That along with Bill C-3 which was designed to give the Government legislative control over the Bridge along with a number of other irritants along the way were designed to harass Moroun to force him to sell.
The Bridge is worth money. If the Government could demonstrate that they could decrease its value then why wouldn’t Moroun sell out as a reasonable and practical business person, especially when he said in the Star that he would do so if the business deal was right.
It all made sense to bureaucrats who never worked in the private sector and built a business model based on theory not reality. Well reality bites as they say. They totally misjudged Moroun.
He wants to keep the Bridge and in his family’s ownership. He believes that he has done his best to make it the model border operation in North America and has acted in the best interest of the Detroit-Windsor region. And he has. It makes money for him too, probably a fair bit.
Frankly, why would he sell out now?
The way infrastructure dollars are chasing projects, the bridge is more valuable every day. I reckon that its worth is substantial if one uses the calculator suggested by a recent Merrill Lynch analysis and I think that calculation understates the Bridge’s value. A cheque that would have to be issued would contain many zeroes before he would consider selling and even then I am not certain he would.
So where are we now? The bureaucrats know that they misjudged but they still want Moroun out. Would they talk to him to see if a business deal can be done? Not bloody likely. Then they admit defeat don’t they and the price goes up higher in their minds.
To provide an analogy, we are in the midst of a poker game. The bureaucrats got suckered in by their own brilliance. By trying to out-manoeuvre Moroun, they out-thought themselves. They bet too much. The pot is too big for them to walk away. They have too much invested. They think that they can still bluff him out. They are the Government aren’t they!
The Budget is just the latest attempt at intimidation as were the comments by the Transportation Minister when she was in town. It’s all planned to get him to consider that his ownership is limited and that he had better walk away and take what is offered and feel lucky. Pretend to be moving forward on a P3 bridge. Keep the cards hidden. Up the ante. The bureaucrats cannot fold now. Too many careers are on the line
Are they absurd? He fought the Canadian Government over FIRA and won. He fought the American Government over the 4 booths that ended the truck back-up problem and won. Why would he surrender now? He is holding the Royal Flush in his hand.
In a sense, I wish that I was younger and a practising lawyer again. I could dream up all kinds of legal arguments to make on a file like this. It is a “retirement file” for a litigator, one that will allow him/her to have a retirement in a style to which I would have liked to have been made accustomed.
Here is a quote from what Senator Dawson said during the Senate hearings on Bill C-3 that is very apt:
- “Above and beyond the interests of the Ambassador Bridge, this government and governments will be going forward with PPPs in the future. We are hoping that more public-private partnerships will exist to share the responsibilities between the public and the private enterprise, whether it is Highway 50 or Highway 30 in Quebec or other bridges to be built. If we are not going to have respect for private projects that exist and that have been going well for 60 or 70 years, how can we expect private investors to risk, whether it is the "competing" project or the "existing" projects?”
There is a partnership in existence and there has been one for 80 years at Windsor/Detroit. Recognize that it is not the P3 model that is so trendy today and which may not make sense for the Government anyway [See Chris Schnurr's BLOG about P3s and the Ambassador Bridge http://chrisschnurr.wordpress.com/ and the study referred to there paid for by the Feds too!]. At least this partnership works since the Ambassador Bridge is the #1 crossing and the best operation.