Tunnel Deal "Gotcha"
Let me give you a recent example of what I mean that is easier to understand. At Council on Monday, the Mayor told us that Mr. Sutts is following Council’s directions and he has had no “face-to-face” meetings with people from Detroit on the Tunnel deal. When we see the legal bills, if the Deputy Mayor of Detroit is telling us what happened, we will note that the City’s lawyer has spoken to people from Detroit.
How can that be you might ask? Did the Mayor not tell us the truth? Of course he did. There is a very simple explanation… a telephone conversation as an example is not “face-to-face.” So what the Mayor has told us is the truth. He can say with a clear conscience:
- "I did not have face-to-face Tunnel relations with that Detroit Mayor."
Remarkably, as a reader told me and as I Blogged, the two Mayors met face-to-face Wednesday morning in Windsor in a so-called secret meeting that wasn’t so secret if you read the Star story.
In passing, I wonder if Councillors were aware of the meeting prior to it taking place on Wednesday. Without knowing, I would be surprised given what the Mayor said Monday night at Council.
My guess is that the Eddie must have known by the start of the Council meeting that he was going to have that face-to-face meeting. Why do I suspect that… here is what Kwame has to comply with according to a Detroit newspaper article that I read:
- “Conditions of Kilpatrick's bond, while charged with perjury, obstruction of justice and misuse of office include no travel out of state without authorization of the judge. Kilpatrick's city business travel is unrestricted, but still requires notice to the judge 48 hours in advance."
Accordingly, Kwame would have had to have given the judge notice by early Monday morning at the latest if he was going to meet with Eddie on Wednesday.
Another casepoint. Eddie’s continued use of the words “business case” in relation to the Tunnel deal bothered me. It was too deliberate a choice of language that obviously could mean anything to anyone. What the heck could it mean I thought? I assumed that no one would spend $75 million for half the tunnel unless one expected to make a profit on the transaction. I did not know how that could be done so I made the assumption that the deal would never take place.
It was really another “gotcha” because I did not understand what was being said. I had not been listening carefully enough. It is starting to fall into place for me.
Nowhere did Eddie say that the transaction had to make financial sense. Nowhere did he say that we had to make a profit. I realized finally, in fact, that the transaction could result in a Detroit default thereby costing the City money and he could still claim that it met the terms of his business case.
Eddie made the assumption, and it was a pretty good one, that through his choice of language he would mean one thing but we would take it a different way. He could not lose. He had the perfect answer whether the Tunnel made money or not. Mr. Sutts and his partners therefore did not have to worry about their guarantee either. They were home-free.
Let me give you another example. Eddie likes to divert our attention so that we will be distracted. Again, how many times have we read that one of the reasons for the deal is so that the Windsor can keep the Tunnel out of the hands of the Owner of the Ambassador Bridge? We were given the absurd story that if someone got control of the Tunne,l after spending millions of dollars to do so, then that person might want to block it.
- "If someone acquired the other half they could fill it up with cement and our investment would be lost."
Of course, the Bridge Co. owner would not do so since that does not make business sense, financially or otherwise. He could not possibly do so realistically. It would be political suicide for him if he took over the Tunnel operations and then closed it down. The Governments on both sides of the river would be all over him. The scandal would be much too high and the risks to his bridge business would be totally unacceptable. Either his Bridge would be taken over immediately, expropriated, or the new DRIC bridge would be built and he would have no hope of preventing it.
Eddie is smart enough to know that this is an impossibility so why would he suggest it? It diverts our attention away from the party that is his main concern… Alinda who actually runs both sides of the Tunnel right now. There is a dispute going on between the City and Alinda as was pointed out in the rollover documents on the transfer of title of the Tunnel from the City to the Tunnel Corporation. What the dispute is about and when it will be resolved I do not know. However the documentation does say that Alinda is holding back monies from the City.
Eddie is concerned about Alinda obviously and wants to ensure that Detroit does not do something that will expand the time during which they are operating the Tunnel. Detroit already did that once and that is why Alinda’s contract has another 12 years to run.
But Eddie has others to worry about as well. OMERS sent the Tunnel Commission a letter saying that they would be interested in helping out on financial arrangements with respect to the Tunnel but they were given the kiss off, politely of course.
I suspect that the Province was interested and still may be interested in the Tunnel. That is the only explanation I can think of about why Infrastructure Ontario might give any consideration whatsoever to doing a loan transaction. I remember when the Ontario Transportation Minister backed off completely on the Province having a role with respect to the Bridge. I’m sure that the Federal Government made it absolutely clear to them that the federal role is primary.
We know as well that the Feds are very interested in the Tunnel. Why else would a bunch of them have flown down to Detroit to speak to the Detroit Mayor when the Bridge Company made an offer to lease the Tunnel in the first place from Detroit to prevent it.
Don’t you find it absolutely amazing that all of these smart people are still interested in a Tunnel Asset
- that has lost a good chunk of its traffic since 1999
- that may lose a another chunk if the new DRIC bridges built,
- that is a unique security risk,
- that has stopped paying dividends to Windsor
- that is losing market share, and
- that is getting old and may require substantial repairs over the next 75 years.
The reality is, and Eddie knows it, that none of the parties including himself has any real interest in the Tunnel except as leverage against the Federal Government. The prize is not the Tunnel but the new bridge crossing whether it is the takeover of the Ambassador Bridge as I believe the real plan is or the new DRIC bridge.
In my view, Alinda and OMERS have an interest in being the P3 partner in the new bridge. OMERS may want to use this deal to become a big player in the world of P3 transactions as well
- “In the next stage of Borealis Infrastructure’s evolution, we will partner with other like-minded pension funds in the pursuit and acquisition of trophy infrastructure assets around the world.”
The Province is interested in the Tunnel again because the Feds have kept them out of involvement in the new bridge crossing. Ontario needs to protect their entry-way into the US market and has concerns about the building up of the Atlantic and Pacific gateways that are the sexy infrastructure projects that are attracting Federal Government money.
The Feds have no real interest in the Tunnel except that it has to be under their control in order to get a P3 partner in the new bridge. The Tunnel is a competitor to any other bridge crossing and could, if not in the hands of the Federal Government, keep tolls artificially low to pressure any P3 partner at the new crossing. It provides an unacceptable financial risk to the P3 partner whom US DRIC has already said needs to take over about 25% of the Tunnel business, amongst other traffic, to be successful.
Accordingly, Eddie has no concerns about the Ambassador Bridge other than as a bogeyman. He needs to chase away Alinda, OMERS and the Provincial Government so that he alone can leverage the Federal Government to get whatever it is that he wants as a financial deal out of a new border crossing.
In a sense, he really does not care how much he pays Detroit for the Tunnel. That is why he chose a number that would get Kwame out of his financial jam and is so high that no one else would put in that kind of money. He is gambling that the Federal Government would ensure that Windsor is paid out by the P3 partner so that Windsor makes a profit since the amount of $75 million is tiny in comparison with the billions to be spent on the new DRIC crossing.
I remembered what my Detroit friend had written to me quite some time ago and it might made much more sense now:
- “why are you attacking this deal? financially, it helps the city of Detroit and provides Windsor with certainty over toll structure.”
That is the key for Eddie… “certainty over toll structure.” One only has certainty if one has control and that is what Eddie’s ambition is in the Tunnel deal.
This could be a brilliant financial play for our Mayor if it works. If it doesn’t, it could help destroy the City financially at a time when we need every dollar.
The Star wrote with respect to the greening of the entrance ways to Windsor:
- “With a tight budget and a diminishing tax base, this city has to carefully watch every penny it spends.”
Yet the Star is meek and mild with respect to the Tunnel transaction as I Blogged the other day.
Eddie Francis was not elected Mayor to play financial games with taxpayer money. From watching his deal making skills in the past, he certainly does not have the credentials to be playing in the big leagues. We have seen enough disasters in this City with financial transactions that go sour and that cost taxpayers in the end.
It is time that Council take control of this City and revoke the Motion in which the Mayor is appointed Voice of Council. He made it clear on Monday night that all that Councillors have received is “information” but nothing with respect to the “business case.”
If Council truly believes that they will be given a business case and the financial information upon which it rests in a timely fashion so that they can make an informed decision, then they only need look at the Agenda Item with respect to the hybrid buses and when it was presented to them.
The Mayor has no interest in what they have to say. As he made abundantly clear and as I wrote the other day:
- “He has no respect for the Councillors. He has only respect for the process. How else to explain the failure to defer the vote on the hybrid buses so that Councillor Dilkens and others could actually read what was being proposed so they could make an informed decision. Here is what the Mayor said as quoted in the Star:
"It's not a question of reading a report, but a factor of requirements."
Eddie was not elected to play Bay St. financial wunderkind with taxpayer money. He was elected to speak with John Tory, not to snub him, about jobs in the area not Kwame Kilpatrick about infrastructure plays. He was elected to use tax money for City purposes not to run an international border crossing.
There is no doubt but that Eddie is in the wrong job. He has no interest now, if he ever did, in being the Mayor of a small town in Ontario. Why bother with lowering taxes, potholes, overflowing sewers, leaky watermains and filling buses when there are credit ratings to protect, entertainment complexes to build, land developments downtown at the urban village or at the airport or in the East End Arena area to promote, Intermodal transportation hubs to construct and Brownfields to redevelop.
Can you blame him... it is much more fun flipping Tunnels, P3ing water and electrical utilities, controlling international border deals and having grand visions. Those are multi-hundred million/billion Dollar transactions that would look very good on a resume to be sent to one of the big investment houses once Eddie's second term is completed.