The Tunnel Deal Has New Wrinkles

Can this Tunnel deal get any more confused than it is now.

Another new wrinkle, although we had heard about it before from one of the Detroit City Councillors, makes the deal subject to another contingency.

• "Before the deal would be completed, Congress would have to sign off on it as well as the U.S. State Department given that the tunnel goes into another country."

Hmmmm I can just see the Americans ceding control of the Tunnel to Canadians. Will they wonder if Eddie and/or the Province are really fronting for the Feds. Tie that in with a possible P3 controlled by the Government of Canada over the DRIC bridge, since Michigan doesn't have the money to build it nor the legislation that permits P3's, and Canada is in total control of one of the key border crossings in North America, Windsor/Detroit.

With possible shared border management in Fort Erie still around, the time will come when Buffalo will not permit expansion of the Peace Bridge Plaza and the same in Port Huron. Then Canada will control all of the key border crossings in central North America. And one wonders why the NAFTA agreement is so fundamental for Canada!

In Canada, as I have said before, the change in ownership is subject to the provisions of the International Bridges and Tunnels Act. Who knows when the Regualations under the Act will be completed or what they will contain.

There seems to be as well a disagreement between the two Mayors as to whether the Tunnel is a public utility or not. In Windsor, the Mayor considers it one as I have written before. In Detroit however:

• "A public vote isn't required on the sale of the Detroit-Windsor Tunnel because it isn't considered a utility, according to Detroit Mayor Kwame Kilpatrick."

I wonder when Detroit Council will be able to take a vote on the Tunnel deal since their Municipal Building will be closed for at least a week because of a fire. Their latest new scandal involving the FBI and certain Councillors just makes this deal even messier since so much money is involved. Now the Detroit Mayor gets his chance to do a bit of talking about people who live in glass houses!

It comes down to this in the fight betwen the Mayor and Council in Detroit:

• "Even if council agrees to create the authority, the text messaging scandal swirling around the mayor causes "trust" issues for Cockrel in signing off on a deal, she said.
  
  "This is a situation where I have asked for this mayor's resignation, I have voted to begin forfeiture proceedings, I have voted to send this matter to the governor," she said.

But here's what makes the least amount of sense to me. The Detroit News in an Editorial slammed the deal with Windsor. The Editorial pointed out that Detroit had received a better offer from Alinda:

• "Detroit has had better offers. Earlier this year, American Roads offered to extend its leasing agreement, proposing to give Detroit $70 million and 20 percent of net revenue over 70 years."

Why then would Detroit ever consider a $75 million LOAN from Windsor, money that has to be paid back when Alinda's offer did not require repayment and gave them a share of net revenue over the next 70 years. Windsor offered them nothing more.

It is so obvious that the Windsor deal makes no sense in comparison with the other one so that one has to ask the question why would Detroit even consider it. Perhaps there is a term in the agreement that does not allow Detroit to look at another offer until such time as the Windsor deal is ended but then why would Kwame fight so hard supposedly to try to convince Council to enter into the transaction with Windsor? Is he just trying to demonstrate good faith so that Windsor cannot sue him?

The big question all the way along is how could the Province of Ontario even consider spending $75 million or more on this transaction which in effect helps out a foreign jurisdiction rather than a municipality in the Province of Ontario. I did not know that we had money to burn in this Province.

One further little point. The Detroit News Editorial states:

• "American Roads nets an average of about $5 million annually on the tunnel after annual maintenance costs of about $250,000."

Doesn't that suggest that there is a nice profit to be made by taking over the Detroit side? It does except for the following points:

• if Windsor ran the Tunnel, wouldn't the toll on the US side have to be decreased by a dollar per vehicle so that the two tolls are comparable. That would reduce substantially the income on the US side
• Windsor predicts that its net income for 2008 is about $3.4 million, substantially less than what the US side is earning
• capital maintenance on the Canadian side in 2008 is estimated to be $1.3 million, more than $1 million more than the US side
• Tunnel volumes are consistently going downward as is its market share
• the border crossing itself has lost substantial volumes with no sign that tourism and business is increasing in the near term
• do not forget that if the DRIC bridge is built, the estimate is that the Tunnel would lose 25% of its business to that crossing.

I almost forgot. The Windsor Tunnel Corporation has to pay $5 million a year in interest to the City of Windsor on its promissory note. With of all of this wheeling and dealing, revenue has to be found to pay the interest costs on the $75 million loan borrowed to finance the Detroit deal as well! That takes up so much of Detroit's $5M net revenue that one wonders why Windsor would want to take the risk to enter into this transaction in the first place.

Let's not even consider that the Tunnel is almost 100 years old and could need extensive repairs in the future. One needs only to take a look at the Tunnel Ventilation Building cost to know how that could get out of control. And if the Tunnel Plaza Improvement Project has been deferred for years with the costs increasing and the City unable to contribute even its $10 million share at this time, this entire transaction becomes even more puzzling.

If this is such a good transaction, then why all the secrecy? Why are Detroit Councillors asking questions but Windsor Councillors are so silent? Why would the City of Detroit deal with Windsor if the Alinda deal is clearly so much better? Why do Windsor Councillors/Tunnel Commissioners allow themselves to be treated with contempt when their questions have been outstanding and not answered for about a year. Who is there to protect the Taxpayers of Windsor?

The question I have is what is this transaction really all about! This plum deal is turning into a prune!