After Kwame, What Happens To The Tunnel Deal
The Mayor of Detroit has so many legal actions going on against him now that you need a program to tell which ones are which and which are taking place when.
Let’s assume for the sake of argument that there is a resolution of all of these actions whether by agreement or by a court decision or by the Governor of Michigan and in the end Kwame is no longer Mayor. What then happens with the Tunnel deal between Windsor and Detroit?
In passing, one should ask whether the authorities on both sides of the border are looking into this transaction the way the FBI is looking into several matters in Detroit. I am not suggesting that there is anything criminal going on but it is after all a huge transaction between the two Cities with lots of flip-flopping and secrecy being involved.
There is no doubt that our Mayor wants a Tunnel deal. Why, I still don’t have the faintest idea. He was prepared to be “accurate but narrow” when he answered Councillor Mara about the “face-to-face” meeting with Kwame. That the Mayor was prepared to say such things in order to keep the meeting secret confirms to me how much he wants to do this deal. I had thought before that Council had voted not to take any more significant action but that didn't seem to bother our Mayor.
It must have really bothered him to ask Infrastructure Ontario to put the loan transaction “on hold” and seemingly to put the discussions with the Detroit “on hold” as well.
If Kwame is no longer Mayor of Detroit, then that job falls to Ken Cockrel Jr., the President of the Detroit Council. Apparently, he is already looking at what he would do:
- "City Council President Ken Cockrel Jr., who would become interim mayor if Kilpatrick steps down or is removed by Gov. Jennifer Granholm, told the Free Press he has been studying the city's organizational chart and the names of appointees to determine who keeps a job. He said he would not fire every Kilpatrick appointee.
If Cockrel is Mayor, that will be good for Eddie because I believe that he’s been cultivating Cockrel for a long time. He was always Eddie’s fall back given what I believe to be a strained relationship between Kwame and Eddie after Eddie seemed to support Kwame's opposition candidate for Mayor.
Remember that the President attended one of Eddie’s State of the City speeches and it is clear that Councillor Jones is being the loyal member of Council by keeping up a dialogue with the Detroit President. I do not believe that the Councillor would be involved without Eddie's permission given that our Mayor is Windsor's "Voice of Council."
Cockrel has said in the past that he thought that a management agreement with Windsor was worth looking into. He was one of the two members of Detroit Council who were in the minority when Council opposed the transfer of the Tunnel into an Authority on the other side.
Therefore, if Cockrel becomes Mayor and wants to move forward on the Tunnel deal he can say that he has been consistent throughout. And being the nice guy on Council, a number of the Councillors may well go along with him since he was one of them just a short time ago.
I have long believed that the DRIC bridge and the Tunnel deal are tied together. After all, a private investor in a P3 deal generally wants a monopoly in order to induce him to invest. While the Tunnel is being run into the ground under the leadership of our Mayor, nevertheless it does draw a significant number of vehicles. If Eddie chose as his "business case" to lower the price of the tolls dramatically to gain traffic, it could affect the profitability of the DRIC bridge because presumably they would have to match the lower tolls at the Tunnel.
The Feds must have an interest. Why else would former Deputy Prime Minister Anne McLellan have taken such an active role when the Bridge Company wanted to do a Tunnel deal with Detroit:
- "[she] sent a letter to Mayor Eddie Francis to emphasize there are no plans to move Canada Customs officers to Detroit -- as called for in the bridge proposal.
There are also "serious concerns" about redundancy by creating one customs bridge-tunnel superplaza at North America's busiest border crossing, she said.
McLellan, who oversees the Canada Border Services Agency (CBSA) as Minister of Public Safety and Emergency Preparedness, expected that Detroit's council would have contacted Ottawa first to learn there are no plans to move customs officers across the border, said McLellan's spokesman."
Why else would Transport Canada be so interested:
- "It would be inappropriate to comment on actions involving Detroit's council and the mayor," Mark Butler, spokesman for Transport Canada, said Wednesday. "But we are watching very closely to what happens in regards to the ownership of the tunnel...
We certainly know there is a faction over there that wants the deal involving the Tunnel to go ahead. But anything that could impede the flow of two-way traffic is not in the best interest of anyone on either side (of the border)."
There is no doubt in my mind but that Senator Michael Fortier is a key player in this exercise. He is after all one of the key people that Prime Minister Harper is relying upon. He is the P3 man in the Cabinet given his professional background. We do know that he has already spoken to the Mayor and to the Bridge Company. It would not at all surprise me if he has been visiting with people from Michigan to provide them with assistance since they do not have any P3 legislation in place yet. Who better but the Senator and his colleagues to help them draft legislation and then to help them on the financing given all their contacts.
If you think that I am kidding about Canada's "educational" role read the following:
- "When the Canadian Council was conceived in 1993, there was an appreciation that PPP expertise developed in Canada would be valuable to other jurisdictions at some point. Certainly Canada benefited from the transfer of skills from the UK and Australia and continues to do so as more and more individuals take up positions in companies working in the PPP businesses in this country. Now it is Canada’s turn to showcase its PPP experience. At the request of the Government of Canada, Infrastructure Ontario’s David Livingston and representatives of CCPPP participated in two days of meetings with State of California legislators and staff, local business organizations, Stanford University students and municipal representatives highlighting the concepts of AFP and PPP, and the progress being made in Canada."
I have all kinds of questions that have that I would like to have answered. Here are some of them.
The first and obvious one is how can Windsor finance the Tunnel deal and who is going to do it?
Why would anyone ever believe that the US half of the Tunnel is worth $75 million, especially when a smart border operator like the Bridge Company offered so much less. Don't you find it interesting that the $75M (less $10 million for fees and insurance) remarkably solves Detroit's budget problems? Windsor apparently has some kind of valuation on the Tunnel but no one has yet seen it even though it has been asked for.
What would happen after Kwame left if a new bid from Windsor came in but much lower than the $75 million because of all of the difficulties that Windsor is having because of the mess in Detroit? Would Detroit Council still go along with it and blame the whole fiasco on Kwame as their scapegoat? Is there a giant game going on designed to lock up Detroit with an "exclusivity" clause so that the City could not deal with anyone else and then put the squeeze on that City in the end on the financing?
I would still like to know how much money the Province of Ontario is prepared to invest in the Tunnel deal. In fact, even more interesting would be how much Eddie has asked for. We have all assumed that it is $75 million. Perhaps my Freedom of Information Application will reveal that information.
Presumably, the Federal Government was involved in this matter at one time but decided that they were not going to invest $75 million. Let's assume they offered $50million. Could it be that the Province has only been asked for $25 million, the deficiency amount? Wouldn't that be interesting!
Why hasn't the Federal Government made a decision on the transferring of the Tunnel from the City of Windsor to its subsidiary Company. Notwithstanding that there are no Regulations in place yet, it should be a no-brainer. Is the Federal Government deliberately stalling things for its own purposes until the situation with Kwame is resolved?
In this light also, what is the position of Homeland Security? Would they be happy if our Federal Government controlled both sides of the Tunnel for the next 75 years and also had a major role in the new DRIC bridge? I believe during the Cropsey hearings a suggestion was made that perhaps the US Federal Government would finance the entire DRIC project if Michigan pulled out. Has the Canadian Government also offered that kind of financing so that neither US government needs to be concerned?
If that happened, do you truly believe that the US Government would be pleased if Canada controlled two of the most important border crossings between the two countries? Why wouldn't the US feel the same way that Canada did with respect to the Bridge Company? Is this all part of building plazas on the Canadian Side of the river so that Canada can control access of our goods and foreign goods into the United States.
What I can't figure out is that if the Tunnel deal makes so much sense for the City of Windsor, then why isn't the Tunnel Plaza Improvement Project being carried out? Why is it in limbo for a number of years because of budget reasons especially when the Senior Levels were going to put into this project the amount of $20 million? And then the question that needs asking is why the Senior Levels have not pulled their funding if this project is not going forward for years.
Don't you find it strange that our Mayor has never said anything negative about the new DRIC bridge taking over 25% of the Tunnel's traffic? What happens to the Tunnel's financial position if that happened?
Don't you find it strange that our Mayor has never said anything negative about a proposed water taxi that the Windsor Port Authority is looking into with respect to the canal project and that in fact the Port Authority has contributed $25,000 to the Cooke feasibility study. I'm sure that it is just a coincidence that the Port Authority is involved considering that they are one of the lead agencies on the Bridge Company's Enhancement Project file.
Here is something that I found very interesting as well that I've written about before. It is even more interesting given the lawsuit by the Bridge Company against the City's lawyer David Estrin:
- "Feds threaten to sue Detroit
Windsor Star 11-30-2005
"Feds threaten to sue Detroit
Windsor Star 11-30-2005
The Canadian government has threatened Detroit with legal action if it approves the Ambassador bridge's bid to take over the U.S. side of the Windsor-Detroit tunnel...
The federal government's concerns were raised in a letter sent by the law firm Honigman, Miller, Schwartz and Cohn -- the Canadian government's legal counsel in the U.S. -- to the City of Detroit...
"The (federal government) letter reaffirms support not only from our perspective, but also from a national perspective," Francis said."
Remember that law firm name for a few minutes.
How many of you spotted in the ad in the Detroit papers that I Blogged the other day the two names, "Detroit & Canada Tunnel Corp." and "Detroit Windsor Tunnel LLC."
I started doing some research on those companies and guess what I saw---Honigman, Miller, Schwartz and Cohn were involved with the Certificate of Merger between Macquarie North American Infrastructure Inc and Detroit Windsor Tunnel LLC on May 12, 2006 and one between the Detroit & Canada Tunnel Corporation and Detroit Windsor Tunnel LLC on May 12, 2006.
For the heck of it, I checked out the Detroit & Canada Tunnel Corporation. Honigman, Miller, Schwartz and Cohn were involved with the Restated Articles of Incorporation of the Company back in 1991.
I had no idea what all of this meant to be honest or how much work the law firm did. I wondered though if the law firm had done legal work for DCTC for all of this time. Had there been a hiatus between 1991 and 2006? Those were interesting questions to ask. I sent an email to both Gordon Jarvis and Neal Belitsky of DCTC (or is it now Alinda) asking the questions but did not get back an answer.
The reason for the questions was that if the Honigman firm was acting for DCTC at the time when a threatening letter was to be sent by the Government, how could it act for the Government of Canada too? If it was not acting for DCTC during the period, then presumably there is no issue. But if it was, why would the Government use a law firm whose other client was a competitor of the Bridge Co.? Doesn't that just invite criticism? Doesn't it appear as if the Government was favouring one proponent over another? Why would it put itself in that position?
If you think I am reading too much into Canada and Macquarie perhaps working together because of a law firm, then put this into your pipe and smoke it.
David McFadden is a partner at Gowlings where the City's lawyer David Estrin works. He is National Group Leader Infrastructure where Estrin practises. McFadden was Chair of the Board of the Detroit and Canada Tunnel Corporation and is Deputy Chair of the Board of Macquarie Canadian Infrastructure Management Limited. He is also a Board memeber of the Canadian Council for Public-Private Partnerships . And if you want to have some real fun bringing a number of border crossings together, Gowlings through Estrin represented the "public" Buffalo and Fort Erie Authority for the purpose of obtaining all environmental approvals required for the twinning of the Peace Bridge.
My head is spinning again. As I wrote months ago:
- "Are Windsor, the Feds and Macquarie working together...
Oh no.....Were Windsor, the Feds and Macquarie working together along with Borealis?
Were Macquarie and Borealis going to be the P3 partner for the new border crossing?"
Is the only logical explanation for all of this that the new DRIC bridge and the Tunnel are going to be put together in one big package and be put out to bid? Given the Rail Lands study that will cost $300 million as well as another $400 million for a proposed doublestack DRTP rail tunnel (which OMERS’ Michael Nobrega wants to help finance and which has been promoted aggressively by Mike Hurst), will that project be part of all of this too as well as will the DRIC Road to the border? It would not be all that far-fetched to me to see Macquarie/Borealis and perhaps the Canada Pension Plan take a piece of this and be the lead syndicator in a transaction involving private investors from around the world.
The only problem in this grand scheme is the private ownership of the Ambassador Bridge. Do you understand now why some are trying to get them to sell out cheaply.
posted by JoeBlog at 12:01 a.m.
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