Do-It-Yourself Border BLOG

It is just one of those days again. It is not easy writing these BLOGs. It does take time to research and then write something that hopefully makes sense to readers and makes complicated subjects understandable.

Every so often one needs a break and today is my day to take it easy. However, I know that you need to do something when you eat your breakfast or first come into the office in the morning or have your coffee break. Heaven forbid that you would do a crossword puzzle or play one of those WINDOWS’ games like solitaire or Free Cell. No, you need stimulation to get you going, something more to make those brain cells work.

I thought then that I would allow you to write your own BLOG today. What I will do is set out facts that I have found on the Internet and let you put them together in any order that you want and see if you can make sense out of them. I have categorized them under headings for ease but you can do with them what you will.

Try and figure out the connections between different companies and individuals, take a look at the financing and the history of the various border projects. Put it all together and you have a very interesting picture that you may not have considered before.

Effectively, that is what I do each day when I do my BLOGs. Sometimes it all comes together and then I have one of my EUREKA moments and sometimes it goes nowhere. When you look at all of the facts and they seem to make some sense, that leads you to a conclusion about what the different parties are doing. Then there is a terrific feeling of accomplishment.

At the least, this will be a good review of what is known to date with a few recent additional facts that makes all of this much more interesting when one is trying to figure out what is really going on with the border file.

Trust me, it is not as simple as should we build a new crossing and where should it go.

AMBASSADOR BRIDGE COMPANY

• By mid-2000 the Canadian Government knew that the Bridge Company was going to expand its Canadian plaza and by 2012 was going to build a second bridge adjacent to its existing bridge.


• the Bridge Company had announced that in 1998.


• Michigan and the US Government have sunk in several hundred million dollars into the Ambassador Gateway project which was designed to accommodate a second bridge


• MDOT has said that the Ambassador Gateway project with the Bridge Company is “Effectively the first Public-Private-Partnership (P3) in Michigan”


• Dan Stamper has said that they have all the approvals they need to start building a six-lane twin span beginning next year.


• The City of Windsor WALTS study set out a route from Highway 401 to the Ambassador Bridge that could be used for border traffic, which route the Bridge Company engineered and which would have cost in the region of $2-$300 million


• the Border Infrastructure Fund was a $300 million fund set up by the Governments of Ontario and Canada to be used for existing border crossings to improve the physical infrastructure at or around border crossings including local access roads and Canadian highways that provide direct access to a border.


• While monies have been provided to improve the access to the competitive border crossings of the Detroit/Windsor Tunnel owned by the City of Windsor and for the private Detroit/Windsor Truck Ferry, nothing of significance has been spent to build a road to the Ambassador Bridge except for building a left turn lane at Industrial Drive/Huron Church.
  
  DRTP/BOREALIS/OMERS

• The Michigan-Ontario Railroad Border Crossing Infrastructure" Report effectively destroyed in 1991 the concept of a DRTP-type project.


• The DRTP truck highway was to cost $600 million


• DRTP wanted $150 million subsidy or grant from the Senior Level Governments to make this deal viable


• Borealis was not going to pay for the entire transaction but claimed that they had a number of pension funds who had been lined up who were interested and investing in the project


• I remember a DRTP representative saying that there would not be a payback on its project for at least 20 years


• Mike Hurst used to be Mayor of Windsor but then joined DRTP


• Michael Nobrega used to be the President and Chief Executive Officer of Borealis Infrastructure. Management, a subsidiary of OMERS


• Michael Nobrega is now President and Chief Executive Officer of OMERS


• Even though the truck expressway appears to be dead and the double stack rail tunnel is invisible to the public, Nobrega has said that "we are confident that the project will ultimately succeed in some form...We are committed to investing another $300 million of equity"


• Nobrega’s goals included to create a “North American infrastructure fund, managed by Borealis Infrastructure, in which OMERS would be the lead and largest investor” and “Borealis Infrastructure and OMERS would also consider expanding their reach of co-investment partners to include other major capital pools around the world


• Nobrega just set up an office in London England so that it would be easier to partner with some of the world’s major pension and governmental funds


• However, these sovereign wealth funds are having problems of their own since their inflow of funds is being reduced as the price of oil goes down and their investment in Western banks decreases in value because of the economic meltdown


• Nobrega has suggested that they should diversify their investments and not concentrate in one market segment and has recommended that they take a look at investing in infrastructure projects


• Nobrega is pushing for investments in “alpha assets which can generate sustainable cash flows for the future generations”


• In his terms Alpha assets are “major real estate, infrastructure and related private market assets”


• OMERS has four primary investment businesses - public markets, private equity, infrastructure and real estate.


• Presumably, the DRIC project at a price tag of $3-$5B, and especially if it included the Blue Water Bridge, would be classified as a “major” infrastructure project.
  
  MICHAEL FORTIER


• He was a former Senator in Canada, former Cabinet Minister and a defeated candidate for a seat in the House of Commons


• Presumably, he is looking for a new job


• He seemed to be the point man for the Prime Minister on the direct file visiting a number of the players in this part of the world


• He is also a former lawyer at the firm of Ogilvy Renault and an investment banker
  
  JACQUES DEMERS


• He was a lawyer at the firm of Ogilvy Renault



• He heads a new OMERS a new strategic fund to be backed by billions of dollars of investment funds”


• The new fund will look for “once-in-a-lifetime opportunities”



• Demers acted for the consortium that was involved to develop, finance, design, build, operate, manage, maintain and rehabilitate the Fredericton-Moncton Highway


• That project turned into a “Shadow Tollls” project.



• “Shadow tolling is a tolling approach… where governments pay tolls rather than motorists… a government makes shadow toll payments to a private concessionaire for a highway facility's construction, operation, or both. The payments are based on traffic volumes and service levels. Motorists see no visible evidence of government payments to the facility's contractor or operator.
  
  DRIC PROJECT


• this project was intended to be a fair analysis to determine if a new border crossing was needed and if so, where it should go


• there is considerable question, at least in my mind, as to what its true purpose is


• it has recommended that a new road to the border be built along with a new plaza and bridge on both sides of the river at a cost that may exceed $5 billion by the time actual costs are calculated


• it is expected that part or all of this project will be funded by P3 investors even though at this time there is no legislation in Michigan that permits it


• based on my calculations and considering the reduction in the traffic volumes and the competition of the Ambassador Bridge, this project does not seem financially viable


• Most infrastructure projects require that a sustainable revenue stream be present or that the project financing be at least partly guaranteed by government.


• a system of ”Shadow Tolls” could be used to provide a guaranteed return to the P3 investors considering that the Government of Ontario has said that it would not toll the road to the bridge


• the US DRIC consultants claim that the new bridge would take away the vast majority of the Bridge Company’s traffic and a significant percentage of the traffic from the Detroit/Windsor Tunnel and the Blue Water Bridge


• the US DRIC consultants stated that the Ambassador Gateway project in itself could handle twice the volume of today’s traffic without the need for a new bridge


• only about 50 to 60% of the capacity of the Ambassador Bridge is being used today while the opening of new Customs booths has virtually eliminated truck back-ups on local streets in Windsor


• the Ambassador Bridge does not need a Presidential Permit to build their Enhancement Project but the new DRIC bridge will require one and it seems that the Department of State on behalf of the President will not issue such a permit
  
  BLUE WATER BRIDGE


• its main competitor is the Ambassador Bridge


• recently the Government of Canada announced that it is considering disposing of assets one of which could be “Two bridges over the St. Clair River between Ontario and Michigan”


• presumably, given the competition, a P3 for those bridges alone might not make sense to a P3 investor who generally favours a monopolistic position
  
  GORD HENDERSON


• He knows a provincial government insider who gives him all kinds of information about the border crossing matter


• he reminded us that “Herb Gray moved heaven and earth, as Liberal minister responsible for FIRA (Foreign Investment Review Agency) in the early 1980s, in a failed effort to prevent Moroun's trucking empire from acquiring the Canadian half of the bridge.


• He is “in awe of Moroun and his hired hands. These folks are the masters. They're always two or three cunning moves ahead of the other players in what amounts to a high-stakes border chess match."


• Recently he attacked the bureaucrats claiming “They can't figure out where to place a jail or find the means to let our main highways be driven in comfort instead of excruciating pain. And these are the folks preparing to undertake the biggest infrastructure project in the province's history? Lord help us.”


• His latest revelation of the Duncan/Francis ride to Toronto Airport, along with other governmental indiscretions, could result in the DRIC project being set aside on the basis of a reasonable apprehension of bias.


• He mentioned the Confederation Bridge in PEI at least 7 times in his columns.


• OMERS has an interest in that bridge
  
  OTHER MISCELLANEOUS MATTERS


• Sam Schwartz in his first report laid out a game plan about how truck traffic could be managed in South West Ontario/South East Michigan but that plan would probably require a single owner of all of the crossings


• The disclosure by the Ontario Realty Corporation that the Brighton Beach area may not be satisfactory for a new jail may mean that a bridge and plaza in that area is also not satisfactory


• The Mayor of Detroit may have to oppose the DRIC project until such time as this project as well as the DIFT project are examined together to determine if there are negative impacts on South West Detroit based on a resolution that he introduced previously in Detroit Council


• The Gowlings law firm has acted for Borealis, the City of Windsor, DCTC, Macquarie, the Ambassador Bridge Company and the Peace Bridge Authority.


• The Government of Canada threatened to sue the City of Detroit if it completed its Tunnel deal with the Bridge Company.


• At the same time that it was opposing having Canadian and US Customs together on the US side of the Ambassador Bridge, Canada was trying to implement shared border management on the Canadian side of the Peace Bridge


• The Canadian Government’s worst nightmare given NAFTA-gate has come true with the election of Barack Obama who may want to renegotiate NAFTA


• Could the dispute over the Ambassador Bridge become another software lumber-type dispute between Canada and the United States


• This file has already reached the highest levels between Canada and the United States when the Prime Minister at the SPP conference tried to convince President Bush to go along with Canada's plans for the border crossing in Windsor but failed miserably


• Even the leaked Radio Canada story which came from senior Government officials I am sure that Canada and the US would sign a deal in mid July with respect to the crossing did not achieve its purpose of trying to force the US government to go along with Canada's plans before the Canadian and US elections.


• Key players in the border file have just moved from the private sector into the Government groups that will be closely involved in the financing: Leonard Kozachuk from URS is the Vice President of Project Assessment. Saad Rafi from Deloitte's National Infrastructure Advisory and Project Finance Practice Leader moved back to Government and is now the Deputy Minister of the Ministry of Energy and Infrastructure. He was Deputy Minister of Transportation in 2004 so he would be quite familiar with the Windsor border file.

Wow, that is a lot of information to absorb and to try and figure out what it all means. However, it's all there. The BLOG practically wrote itself when you set out the facts in a logical order. The conclusions just jump out at you don't they?

Hmmmm not quite yet. It is still not all there. I agree. There are a few more bits of information that we need to fill in all of the blanks. But we are getting there. We are getting closer. I can just feel it.

Now perhaps you understand how hard it is to write a BLOG and to keep it short. If I was going to write something on this subject, I need to provide the backup. I would need to put all of this information in a context in order that you would be able to understand my conclusions. I just would not want to make statements without helping you understand why I am saying what I am saying.

Go on. Take a shot at making sense of all of this. As for me, my head hurts and I am going to take a nap.