Thoughts and Opinions On Today's Important Issues

Wednesday, January 30, 2008

Did The Arena Kill The Tunnel Deal

I want the rumour ended right now. Yes I know that our Mayor is a Blackberry user and that he is very adept at multi-tasking by sending and receiving Text messages even when he is in a meeting. Remember when he was annoyed at Councillors with all of their messaging during Council meetings too.

To put your mind at ease, I would doubt that there are thousands of text messages exchanged between the Mayors of Detroit and Windsor. Over the Tunnel deal I mean for heaven's sake! Rest easy Windsor.

However, just the other day I Blogged about the Tunnel Plaza Improvements and also about the deal with Detroit over the US half of the Tunnel.

I had a feeling that both of these projects were dead and not just because of the problems that Kwame has. They were just taking forever to do. I could be wrong but since nothing seems to have gone on with both transactions for such a long period of time, except I would assume paying legal fees and consultants' fees, one has to wonder what is really happening and why the Mayor refuses to tell us.

I wonder if any of the Councillors who are also on the Windsor Tunnel Commission have any idea either. If so, maybe one of them could tell us.

I remember the Treasurer saying at one of the Council meetings when the arena was being discussed that, in effect, that project will suck up most of the City's free cash for the next few years until it is paid off. Perhaps that is why the University was not going to get any money until after 2010 from the City. If so, can it be said that the arena killed the University deal? Who at the University would make a commitment to spend $110 million downtown without absolute assurances that the City was going to pay its share of the funds. The University got burned from the City once before.

2010 is a popular year for money flows. Remember Dwight Duncan's Gong Show performance promise of $500M for the border. It was supposed to come after 2010 too.

I started going through the City's budget documents the other day and to my shock, here's what I found:
  • "Subsequent to the Capital Budget Committee of Council meetings and upon further due diligence, Administration made 3 further revisions to the 5-Year Capital Plan as follows:

    2. The phasing of the Tunnel Plaza Master Plan & Environmental Assessment project."

I don't recall anything in the materials with respect to the EA for the Tunnel dealing with phasing. The City's five-year plan is supposed to accomplish the following:

  • "The proposed plan fully funds the following major projects by no later than 2010:

    o Huron Lodge

    o WFCU Arena & Community Centre

    o Corporate Radios and Related Infrastructure

In passing, in going through the documentation even more, I saw the following which confirms to me how poorly the Tunnel has been managed:

  • "Tunnel Dividend - Due to Reduced Cross-Border Traffic 1,000,000."

Was it just a short time ago when the City said at the Joint Councils Meeting in Detroit that the dividend was $6 million a year. Losing $5 million a year is a disaster for the City budget.

But there was more that suggested to me that the Improvements may never get done. Take a look at this page:

There are no expenses for Improvements in 2008, 2009, 2010, 2011, and 2012 as well. Nothing is now budgeted until 2013 or later. If the project is going to cost $30 million today, or rather, back in 2004 when it was agreed to, what will it cost in 2013? Are the Senior Levels going to pay the increased amount after about a 10-year hiatus? The experience in Windsor after 4-5 year delay is a 30% increase in construction costs. What would the increase be in 2013?

We already know that there are issues with respect to the cost of the project. What happens now with respect to the Burger King deal as an example? Will the City buy the property or back out? If the City backs out, does that kill the Top Hat deal? The question I have is who will pay for the Burger King land. If I were a representative of one of the Senior Level Governments, I would tell the City of Windsor that it is all their responsibility because they are the ones who are now saying that the project will be put off in the future at some time. That is not what they signed up to in the 3-party Phase 1 Agreement.

I do not think that the City can afford to pay the expropriation amount on its own these days!

How about the people who have property around the Tunnel? The Duty-Free Shop owners, as an example were said by the Star to own many of the properties around the Tunnel. What happens to them now? Are they in limbo for who knows how long? Would they have an action against the City for effectively putting them out of business because of the delay? Who would become their tenant and put in any kind of improvements in the buildings around the Tunnel not knowing when they might be expropriated? Or not!

Do you believe that the Senior Levels would pay damages if there was a lawsuit by a land owner around the Tunnel or would they stick it to the City?

Does this mean that the US$75M Tunnel deal with Detroit is over too? I must admit that I assumed that the Improvement project was designed to enhance the operations of the Tunnel to make it more attractive for someone to lease the whole Tunnel after Eddie got the US half. I mean it had to be more attractive if the Senior Levels put in $20 million that Eddie could utilize to increase the Lease price. However is that deal dead now too because the Improvements are not going to be made?

This is so confusing. We see Eddie running off to Germany on behalf of YQG and jobs and being thrilled about Mexicana airlines coming to Windsor but we don't see him incorporating a company with respect to the Tunnel, an asset of the City.

I'm rather shocked that the improvements have been put off for so many years. It has to mean that the City does not have the $10 million to finance its part of the three party deal. What other projects will not be done and will they not be done because of the East End arena needing all of our City's money?

If I am right in what I'm saying, then there was no possibility of the University moving downtown based on financing by the City. Any University Board member would have had to have his head examined to go for that kind of a deal. I wonder how St. Clair Board members will feel now since it appears that the City may not have any money to finance a move for them to go into the Western Super Anchor site.

Obviously, we are about to hear a whole bunch of THINK BIG statements about taking over the Zalev site. How are we going to pay for that too?

It seems very clear to me that this City is in poor financial shape because of the Arena transaction. Obviously now, in order to maintain the City's Standard & Poor's rating, this Mayor will be under intense pressure to start selling off or leasing for the long term assets such as Enwin and WUC. Of course, with the financial markets in a turmoil, Eddie's timing is off and the price that we would expect to get will be much lower than if he had acted promptly. That assumes that it makes sense for the City to sell or lease out the Assets in the first place. The gun is to our head, a very bad position to be in when one wants to negotiate a major transaction.

Just remember what Chris Schnurr pointed out: WUC is looking at relining pipes that should last for about 50 years rather than replacing them. The cost of doing so is significantly less. Can you imagine if the assets had been sold or leased to some private equity firm... they would have done the relining and made a ton of money on the transaction at taxpayer and user expense.

I just hope that we do not have a major calamity between now and 2010. The cupboard seems bare.