Thoughts and Opinions On Today's Important Issues

Friday, May 09, 2008

Is President George Bush Livid

The US President has to be furious at Canada today.

Let me ask the direct question:

Are Canadian politicians and bureaucrats complete idiots?

Do they really think that trying to pressure or end run George Bush will work? Do they not understand that in his world NO really means NO! The recent leak about the so-called bridge deal between Canada and the US to Radio-Canada is sheer stupidity that could jeopardize the relationship between Canada and the United States in ways that our politicians and diplomats have not yet figured out. Who needs another softwood lumber dispute over the Windsor/Detroit border.

It is bad enough that Ambassador Michael Wilson is in effect persona non grata especially if the Democrats win in November but why antagonize the Republicans too.

Stephen Harper tried at the SPP meeting and failed with respect to convincing the President to support a new DRIC bridge in competition with the privately owned Ambassador Bridge. That hardly was a surprise given the rejection of the central crossing proposed by DRIC by the US Department of State years before. The State Department acts on behalf of the President of the United States with respect to Presidential Permits for border crossings. [BLOG: May 12, 2006 "President Bush's Choice: The Twinned Ambassador Bridge"]

At the Three Amigos SPP Meeting, there was hardly a mention of the Windsor Crossing other than in relation to another border crossing in Tijuana. It is very clear from his remarks that Harper brought up the subject with the President but that nothing was accomplished since the joint communiqué barely mentioned the subject. [BLOG April 23, 2008 "Canada Loses Big Time" and "BREAKING BLOGnews: Three Amigos Lump Windsor and Tijuana Together"].

The North American Competitiveness Council Report at the SPP dealt with nuts and bolts issues as did the Brookings Institute report if it is read closely.

Want more evidence that Canada has been singularly unsuccessful on the DRIC bridge issue. Here is part of what Minister Prentice said at the Council of the Americas at the 38th Conference on the Americas respecting the border a few days ago:
  • "Canada is investing an unprecedented $33 billion in long-term, stable and predictable funding to meet infrastructure needs. For Canada, nowhere is more important than the Ambassador Bridge that joins Windsor, Ontario, to Detroit, Michigan. On a typical day, that bridge carries more than 8000 semi-trailers. About 40 percent of Canada's commerce with the United States crosses that bridge, and it carries more trade annually than the entire trading relationship between the United States and Japan.

    But it is not an easy crossing.

    Shortly after I became Industry Minister, I wanted to experience first-hand the frustrations that our cross-border trade can encounter. A senior executive from a successful automotive supplier was good enough to have me loaded into one of the firm's transport trucks. I travelled across the Ambassador Bridge as if I were an auto part and I witnessed the delays myself. This experience galvanized my conviction that we need to maintain momentum in the design, approval and construction of an alternative bridge crossing to increase our trade throughput.

    The governments of Canada and the United States have roles to play; so do the state government of Michigan and the provincial government of Ontario. We continue working with our binational partners and are determined to build this new bridge between Windsor and Detroit. In fact, we just announced $1.6 billion to link Highway 401 with that new bridge."

It is pretty clear that he was making a direct pitch and plea with respect to the new border crossing. His comments were a little better this time than his last reported comments that appeared to spread misinformation about the crossing. Here is what George Bush said about Canada specifically in his speech at the same session and especially about the border.

  • "I'm also pleased to be here with ministers, representatives, ambassadors from the governments of Canada, Colombia, Mexico and Peru -- honored you all are here."

Do you get it? Not a word about Detroit/Windsor. He has no interest in the border subject any longer! He spent more time talking about medical clinics in Guatemala run by US soldiers than he did about trade with Canada. While the news media tried to give Prentice some credit for what he was doing

  • "Prentice's warnings about the "thickening of the border" were much more pointed than those Prime Minister Stephen Harper expressed last month at a summit with President George W. Bush in New Orleans"
he achieved nothing as well. His comments fell on deaf ears.

Given all of this background one has to wonder who came up with the brilliant idea of giving Radio-Canada an exclusive story about the bridge that can be spread throughout the news media in Canada and perhaps be picked up in United States as well. Here is the story as reported in the Globe:
  • "Canada, U.S. agree on new Detroit-Windsor bridge: report
    The Canadian Press

    May 7, 2008 at 11:32 PM EDT

    WINDSOR, ONT. — Canada and the United States will reportedly build a new bridge between Windsor and Detroit.

    Citing unnamed sources, Radio-Canada reports the bridge will be built at a cost of $5 billion alongside the existing Ambassador Bridge.

    The French-language network of the CBC says the site for the Canadian side of the bridge has already been picked and an official announcement will be made by mid-July.

    Prime Minister Stephen Harper is reportedly pushing to sign a final deal before U.S. President George W. Bush leaves office early next year.

    The bridge will be built with the biggest public-private partnership in the history of Canada, Radio-Canada says, and will create up to 25,000 jobs in the economically fragile area of Ontario.

    A 15-kilometre freeway will also be built to feed the new link.

    The aging, narrow Ambassador Bridge is the route for a quarter of the traffic between the United States and Canada. Some 10,000 trucks pass over it on a typical weekday.

    Radio-Canada calls it the biggest joint construction project in the history of the U.S. and Canada."

It is pretty obvious that the expectation was that the Canadian Government would gain something at the SPP conference with all of the Ministers running to Washington over the past year lobbying the US Government. Wait until they start getting snubbed now by the Bush people.

However, the Canadian government should have remembered the incident over a dispute over a four-foot-high fence near the U.S.-Canada border in Whatcom County. President Bush fired Dennis Schornack as U.S. Commissioner to the International Boundary Commission and member of the International Joint Commission. The comment was made:
  • "Sooner rather than later, the Administration will be seen to prefer private property rights over national security and ready to undo an international treaty with Canada to serve that preference."
This is not some story that a Radio-Canada reporter dreamed up on his own in my opinion. From the video news story, it is clear that this story was prearranged considering that the reporter and cameraman (It is CBC after all with their union, not the private network) came to Windsor and had an interview with the Mayor. It may even have been in Eddie's office as well or in a City Hall meeting room. He also interviewed Transport Minister Cannon and there was a mention at the end of a new Federal Minister involved, Michael Fortier, Minister of Public Works and Government Services and the unelected Senator appointed by Harper. How many Ministers and Ambassadors have been involved so far in this file!

Can you believe it, the story was so poorly done that now the cost of the bridge alone seems to be $5 billion with 25,000 jobs created. Moreover, Harper seems to be getting slammed because the story makes it appear as if a twinned Ambassador Bridge going to be built because it states that the new bridge will be built:
  • "alongside the existing Ambassador Bridge."

What a crummy PR effort this was by whomever in the Government! They cannot even get the DRIC bridge located properly. Which P3 investor would want to touch this project now at a $5 billion cost? Absurd.

Naturally this story with respect to the bridge and the comments by the Ontario Ministers with respect to the road pretty much undercut the entire DRIC Environmental Assessment process and makes it appear very obvious that the whole DRIC process has been a joke right from the beginning. It was all poltical designed to justify what the bureaucrats wanted to do in the first place.

To me the big shocker is that a Conservative Government in Canada with their political leanings would go along with something as ridiculous as this. They too got sucked in by the bureaucrats.

However, the big story is the headline

  • "Canada, U.S. agree on new Detroit-Windsor bridge"
Do you really think that President Bush is going to appreciate the pressure when he already said forget about it? Do you think he will be pleased at a story that was obviously put together by the Government of Canada to embarrass him?

Do you really think that President Bush is going to appreciate making it appear as if this is something that he is doing that jeopardizes the Environmental Assessment process and undercuts what the State Department said several years ago so that Harper can get a win before Bush leaves office.
  • "Prime Minister Stephen Harper is reportedly pushing to sign a final deal before U.S. President George W. Bush leaves office early next year."

They are NOT bestest buddies after all!

Do you really think that the Democrats after the Wilson faux pas with respect to NAFTA are going to like what Canada is proposing to do with Bush if in fact a Democrat is elected President? Do you think they will appreciate a move decided to endrun them as well?

What is wrong with these people in Ottawa? Are they so desperate to take over the Ambassador Bridge that they are prepared to jeopardize the future of Canada and its trading with the United States? It's time that some people be moved into new positions or be retired. They have been around too long and have lost their sense of direction.

Just wait until Monday when I tell you who I think is behind the leak! He should be drummed out of Cabinet if true for the mess he has made in our relationship with the US.

The Bureaucratic Mind

I guess when you are a bureaucrat whether in Windsor, Ottawa, Toronto, Lansing or Washington you play by your own rules. Those rules, it appears, do not apply to mere mortals. You see, they do not necessarily have to follow the rules of profit and loss and return on investment that would apply in a business transaction that you and I would be involved in, dear reader. When what you are doing is in the public interest, or so you can tell everyone, and you can use taxpayer money rather than your own, it makes life so much easier.

Can you imagine pricing a DRIC Road or a Greenlink Road based on estimates and putting that forward as a price that should be considered if it was your money at risk? Does anyone really know what a new bridge will cost or how much traffic will actually use it? Of course not. That is why the Danish professor was able to write his book on Megaprojects. Here is a short description summarizing part of one of his speeches
  • "Truth and lies about megaprojects

    In his speech, Bent Flyvbjerg will first argue that a major problem in megaproject policy and planning is the high level of misinformation about costs and benefits that decision makers face in decid­ing whether to build or not, and the high risks such misinformation generates. A consequence of misinformation is massive cost overruns, benefit shortfalls, and waste.

How does one explain this story in the Windsor Star, excerpts of which follow:

  • "'Our intention is to build this bridge'
    Transport Canada says DRIC's plans to proceed despite Ambassador Bridge

    Sean O'Dell of Transport Canada said during Thursday's DRIC announcement for its Windsor-Essex Parkway that DRIC is marching forward with its plans to build a new bridge. A location will be somewhere off Ojibway Parkway.

    "The DRIC process was done on assumption the Ambassador Bridge would continue to offer four lanes of service and we were looking to add six to that," he said.

    "If we go ahead with ours and they subsequently replace their existing bridge, we go from four to 12 lanes. I don't think that is an excessive amount for long-term growth that we will probably see for the next 40, 50 to 60-year period.

    "Our intention is to build this bridge."

Pretty tough talking language isn't it. I bet that it has the Bridge Company people shaking in their boots. Mind you, Mr. O'Dell didn't say that they're actually going to build a bridge but rather that it is their "intention." But let's not quibble.

What bothers me about his remarks is that it seems that the bureaucrats are prepared to move forward on their agenda regardless. As I shall show you, it does not matter if there is traffic that can support a new bridge or not. They're going to build it and thereby cannibalize the traffic from the other crossings putting them into severe financial difficulty. Once that happens the Governments will have to spend even more money to subsidize those crossings or they will go broke and traffic will not be able to use them. I wonder if the bureaucrats have calculated that amount... probably not because that is not in their business model.

You see, just like our legal technocrat Mayor, bureaucrats prepare plans and business models and because they are so smart, smarter than mere citizens, what they say must be true. Therefore it doesn't matter what reality is, it can be ignored.

O'Dell confirmed something that Dan Stamper had been saying before when he said that they went forward on the expectation that the Bridge Company would only offer four lanes of traffic. In other words, the DRIC process really was an insurance policy to ensure that something would happen at this crossing if the Bridge Company chose not to move forward for whatever reason.

Mind you, when a company spends a half a billion dollars over a 10 year period including spending money on the Ambassador Gateway project, a normal person would assume that they are going to move forward with their Enhancement Project.

With all of the cranes working at the end of the bridge on the US side and with I-75 closed down for 18 months do you think someone gets the picture yet?

Here is what I wrote previously on this subject:

  • "There is a difference between private enterprise money and Government money. Private enterprise money comes out of the owner’s pocket. Government money comes out of your pocket and mine. A Bureaucrat really has no “ownership” interest in the funds. The Danish professor’s book on Mega-projects gives proof to this as well as the statement above by Minister Caplan.

    What was not understood by the Bureaucrats was that the Bridge Co. was NOT going to build a bridge until it made economic sense for them to do so. They do not have the luxury of unlimited taxpayer money. Their decision was that the time is now, not 5 or 10 years ago. Again, I do not believe that anyone believed that they were actually going to do it.

    I have heard Dan Stamper say that DRIC was just an insurance policy that would have a possible bridge location determined if the Bridge Co. did not move forward. It should have ended when the Bridge Co. moved on their EA hearings. However, I believe that there was still NO expectation that the Bridge Co. would ever build a bridge. Now that they are really taking action, the Governments are not sure what to do."

When DRIC's own consultant said that the Ambassador Gateway project could process about twice the volume that is at the bridge now and when he also said "Nonetheless, it is believed (by Joe Corradino the US DRIC consultant) that the market won’t support three bridges" one might think that a bureaucrat might pause and consider whether another bridge should be built so that taxpayer money is not wasted.

Not our friend from Ottawa. He wants that bridge built no matter what. As you will remember, the volume of truck traffic was to double by 2030. 2030 is important because that is the maximum time frame of the DRIC study. Well DRIC has been forced to revise that volume down several times. That is the experience at the Blue Water Bridge as well where traffic projections bore no relationship to reality.

US DRIC has effectively admitted that there is not enough traffic at all of the border crossings because in order to make the new bridge financially viable they'll have to take most of the traffic from the Ambassador Bridge, a quarter of the traffic from the Detroit/Windsor Tunnel and a good chunk of the traffic from Sarnia. What is hilarious about all of this is that when the DRIC process started the object of the exercise was to move traffic away from Windsor.

Mr. O'Dell effectively proves the point when he looks at the traffic over the next 40 to 60 years. Now I don't know how good a fortune teller he is but I don't take a great deal of comfort from what he said. Remember that his experts could not predict traffic volumes over a very short term and had to revise their estimates.

If this 40 to 60 year time period is the basis upon which Transport Canada wishes to build their bridge, then Mr. O'Dell made it very easy to set aside the Environmental Assessment. If their mandate was a 30 year time period why is he looking 60 years into the future as justification for spending billions of dollars of taxpayer money. He just made it easy for a number of people to sue the Governments.

The problem I have with Mr. O'Dell and the other brilliant bureaucrats involved in this file is all of the qualifying language that they use. He doesn't "think" that the amount is excessive and that we will "probably" see long-term travel growth over the next 60 years. But what if we don't. What if he is wrong. Everything they've been doing up until now, whether it is based on traffic projections or what the Ambassador Bridge will and will not do, has been wrong.

All that happens then I guess is that the taxpayers are stuck with a huge bill (even if a P3 operator is involved). Huge amounts will be paid out for a bridge that is not necessary, huge amounts will be paid out to subsidize the other crossings.

But how about if you, dear reader, and I have some fun as taxpayers who fund all of the levels of Government. Let us demand accountability from the bureaucrats in the same manner that you and I are accountable at our jobs. Sean O'Dell is Executive Director, Windsor Gateway Project Team. If he is wrong given his position, then let us demand that he suffers the consequences! Let's bring him back to our real world.

Thursday, May 08, 2008

The Bridge As A Federal Instrumentality

This Court decision in the United States will not make our Mayor very happy since he has already conceded federal jurisdiction over the Ambassador Bridge to the Canadian Federal Government during the Senate hearings in Ottawa when Bill C-3 was being discussed.

I wanted to provide some additional information as well to Councillor Jones about legal terms. He already knows what a "Black Letter Law" means. Now I want to teach him a US term: "federal instrumentality."

There was a case in the City of Detroit as outlined below that is very similar to what Windsor is trying to do to the Bridge Company by passing zoning bylaws to prevent them from carrying out their duties as an international border crossing and not allowing them to do repairs as required, even to closing roads on a temporary and intermittent basis in order to do so.

The laws in Canada and the United States seem to me to be very similar with respect to the powers of the Bridge Company to carry out their responsibilities under their incorporating statutes.

While the legal language in the two countries may be different, the end result would be the same in my opinion if the City decided to challenge the Bridge Company.

May I ask the Councillor to provide a copy of this BLOG to the Mayor for his legal education as well. I would be quite pleased to provide the full opinion if needed.

FILED MAY 7, 2008






This case presents us with an invitation to second-guess the trial court’s factual findings that construction projects on the Ambassador Bridge Plaza would alleviate traffic congestion and facilitate interstate and foreign commerce. Because the trial court, after conducting a four-week bench trial and delivering a 20-page opinion, did not rely on clearly erroneous facts, we decline that invitation.

Accordingly, we reverse the judgment of the Court of Appeals because the Detroit International Bridge Company (DIBC) is a federal instrumentality for the limited purpose of facilitating traffic over the Ambassador Bridge and, as such, is immune from the zoning regulation of the city of Detroit that would preclude construction projects furthering this limited federal purpose.

The city of Detroit seeks to enforce its zoning ordinance on the DIBC to stop the DIBC’s construction projects located in and around the Ambassador Bridge’s footprint. Part of the Ambassador Bridge sits on land owned by the DIBC that is within the city’s geographical boundaries. The DIBC is a for-profit, private company that has a unique relationship with the federal government. In 1921, Congress gave the DIBC the authority to construct, maintain, and operate the Ambassador Bridge and its approaches. This authorizing statute requires that the bridge’s private operator (the DIBC) also comply with the Bridge Act of 1906. The Bridge Act of 1906 applies to all bridges over navigable waters, and it requires all bridge operators to obtain the approval of the United States Secretary of Transportation regarding the “plans and specifications and the location of such bridge and accessory works” before commencing construction of a new bridge or construction on an old bridge or its accessories...

the DIBC requested the city’s approval to begin construction. The city denied the request, citing its zoning ordinance, and refused to issue variances, citing concerns regarding increased truck exhaust and noise. Nonetheless, the DIBC went forward with its projects. As a result, the city’s building inspectors visited the DIBC’s construction sites and issued several citations for violations related to the construction.

In February 2001, the city filed an injunctive action against the DIBC to stop the construction. After a four-week bench trial, the trial court orally ruled that the DIBC was immune from the zoning ordinance because of its status as a federal instrumentality. The trial court planned to prepare a written decision, but, given the events of 9/11 and border security concerns, the court suggested that the parties enter extended negotiations, to which they agreed. After the negotiations failed, the court delivered a written decision in July 2004. The court again ruled that the DIBC was immune from the ordinance as a federal instrumentality. In addition, the trial court held that the city’s zoning ordinance was preempted by the federal government’s demonstrated intent to control the entire bridge complex.

The city appealed. The Court of Appeals reversed on both grounds...

After accepting the facts established by the trial court, we affirm the judgment of the trial court, reverse the judgment of the Court of Appeals, and hold that the DIBC is a federal instrumentality for the limited purpose of facilitating traffic flow across the Ambassador Bridge and is, therefore, immune from any state law or local regulation that directly inhibits that purpose. Further, we affirm the trial court’s holding that this particular application of the city’s zoning ordinance inhibits the DIBC’s federal purpose.

Shorties Break

I cannot believe that so many of you are reading my long BLOG on the Tunnel deal this morning. You are gluttons for punishment aren't you.

You need a break so here are some shorter BLOG items for you.


Yes, the Windsor Star will help us believe in our City. It will help us feel good about ourselves even though a lot of our neighbors may be out of a job or be having difficulty paying the mortgage on their homes.

Why, it will help spread the good news about Windsor to counter the negative images shown on Radio-Canada TV as an example. You know the ones showing storefronts saying Closed or Out of Business.

We learned from the Star that the WEDC will be sending out a "specially printed magazine... across Canada.

How nice for the Star to be so helpful and to make a couple bucks as well boosting their community. Philanthropy and profit-making coming together. After all, we were told by Remo Mancini Chairman of the Board of Directors and Bob Renaud Chairman, Communications Committee Windsor-Essex Development Commission:

  • "We are asking our fellow citizens in Windsor and Essex County to be proud of this community and as expressed in the Windsor Star campaign, Believe WindsorEssex.

    We thank The Windsor Star and publisher Jim Venney for their support in expanding our campaign locally and nationally. Our plans are to morph W.E. Can and Believe WindsorEssex into an ongoing promotion.

Perhaps the Star can print the WEDC brochures at a discount too.

I thought you might want to see one of the Star pro-Believe ads that they published recently. Will you join the movement too? Just call Ray in advertising!


When he is Remo Mancini, the Chair of the Economic Development Commission, who "has taken on extra duties at the body, which has a budget of $1.5 million annually, funded by the city and the county." He is doing these things "while the search is on for a replacement" for Matt Fischer who was fired by the Commission. I wonder if he gets paid per diem or whether he now gets the equivalent of Mr. Fischer's salary.

My recollection is that the information was that the Chair would not be the interim CEO. Rumours originially suggested that:

  • "Remo Mancini, board chairman for the commission, will be named as interim CEO until a new permanent replacement can be found, some of the sources said. "

However, however his name was conspicuously absent in the contact list for the Commission when Fischer's termination announcement was made. Instead it was said

  • "The capable staff of the WEDC will continue to pursue with the full support of the Board, their business retention, attraction, innovation and small business support plans. Contacts which would normally be made to the CEO should now be made to Michael Burton, VP, Corporate Services and Communication, until a new CEO begins to lead the organization."

A list of names was then given and Mr. Mancini's was not on it. Can you imagine the confusion for poor out-of-towners who now will not have the faintest idea to whom they should call to get a copy of the new brochure of the Commission, assuming one has been printed.


June is a wonderful time in London, England. Of course there are world-class events that take place in June such as the Trooping of the Colours for the Queen's Birthday, the Wimbledon Tennis Championships and all of the different shows at the various galleries and museums including Tutankhamun and the Golden Age of the Pharaohs.

With all of the turmoil that is taking place at the WEDC, and given the fact that the Commission has been flogging the London Financial Times award for how long has it been with nothing achieved because of it, it is hardly surprising that a trade show has being organized for London, England. They do need a break from all of the stress and why shouldn't taxpayers pay for since they are working so hard for us.

I wonder how many trips to Europe members of the Commission have taken since it has been reconstituted and the results obtained.

Perhaps Council Dilkens who wants to have open and transparent government in Windsor including all of the Boards could ask the Chair for a copy of the Minutes to see if this information is revealed or perhaps he could ask the Chair to give a breakdown on trips taken. With that information, Councillor Dilkens could report to the public.

I truly cannot believe that the Star report is correct:

  • "The embattled Windsor-Essex Development Commission received a show of unanimous support from city councillors and support from some county councillors Tuesday night."

Seriously, look at what they are doing for almost $2 million a year:

  • "Among initiatives the commission is taking on are a planned trade show in London, England, in June, identifying research and development opportunities locally, working with the University of Windsor, and teaming up with the Woodslee Credit Union and The Windsor Star in extolling the virtues of the region as a place to invest. A specially printed magazine will be sent out across Canada."

And our Mayor wants to give them $100 million for a development fund. OMG!!!


The Big Train Trip to Toronto with all of the Windsor movers and shakers on board to meet up with Toronto VIPs is about to take place.

The big question is not whether the Mayor will be on board both going to Toronto and returning after the soirée but what will be his excuse for not being able to be on the train and flying back and forth, from YQG of course.

I would have expected mind you that the Mayor would be on board since he would have a captive audience to harangue for four to five hours each way about Greenlink and to ask them to fill in a postcard but he faces the risk that they might toss him off at the first station stop in Chatham if he annoyed them too much.

I have heard that a number of the senior Business People in town have been calling City Hall demanding a solution to the border road. Why that almost sounds like something that Councillor Marra has been advocating. If that is the case, Eddie will never do it.

It would not surprise me that if Eddie went along on the trip, we will see a Gord Henderson column a few days later saying that Eddie, Sandra and Dwight resolved all of their differences re the border road on the train. Why it would just be like Eddie and President Strasser starting to talk about moving St. Clair downtown at a Rotary lobsterfest and doing the deal in a Timmie's or Eddie's attendance at a wedding in London resulting in the purchase of the East End arena lands.

That's how urban legends are created and mayoral careers are saved. No wonder Gord Henderson asked for CAW involvement in this file. They can teach Eddie how to claim victory after a massive defeat.


While Pontiac has unique problems -- like the $1.5 million it spends annually to keep the roof inflated on the deserted Silverdome -- it's not alone in its financial troubles. Thirteen other cities in metro Detroit also appear on a state watch list for financial difficulty, according to fiscal scorecards compiled by the state's Treasury Department for the first time based on 2006 financial data submitted to the state last year.

Two of those 13 cities -- Highland Park and River Rouge -- already are considered financial emergencies. Declining populations, falling property values and rising costs for things like energy and health care are creating money problems for cities across Michigan, experts say.

"I firmly believe that this is just the beginning of a wave of cities falling into a variety of levels of fiscal distress," said Paul Tait, executive director of the Southeastern Michigan Council of Governments, or SEMCOG.


...will Gord Henderson go to try and find another tunnel so that he can support Greenlink or whatever Eddie's latest stall solution is.

He didn't mention an interesting fact about the proposed tunnel that may explain why it is being considered

  • "Finance Minister Michael Cullen confirmed today that a steering group had been set up to look at the feasibility of private sector involvement in building a 5km tunnel largely under Prime Minister Helen Clark's Mt Albert electorate."

The cost of that tunnel is estimated to be NZ$2 billion for a 5 km tunnel. Triple that cost or more for Windsor's length. And do not forget the tolls to pay for it which would make our crossing uncompetitive thereby killing economic development here.

Oh ought to know better. This is not true:

  • "Now we have a federal government holding out a blank cheque for a state-of-the-art national gateway right here at the country's most vital border crossing."

Here is what I wrote the other day about Transport Minister Cannon:

  • "The Honourable Lawrence Cannon, Minister of Transport, Infrastructure and Communities, today welcomed the proposal from the Detroit River International Crossing (DRIC) study team on the technically preferred alternative for the access road from Highway 401 to the proposed new international border crossing...

    "Our Government committed $400 million to this project in Budget 2007 to deliver economic benefits, increased employment, and a cleaner environment for the region," said Minister Cannon."

    Whatever happened to a commitment for an additional $4-500 million needed to pay half of the cost of the DRIC $1.6-1.8B road."

Why that $400M is barely enough to pay for a "cheap solution!"

Digging Deeper On The Tunnel Deal

It is so simple but this BLOG will not be that way I am afraid. It should make your eyes glaze over about half-way through. And if you do read it though to the end, then what can I say but thanks for your perseverance!

If only our political leaders trusted their constituents, I would not have to write another overly long BLOG about the Tunnel deal with Detroit and you would not have to spend so much time to read it. Instead, there is secrecy and it appears that not even the Councillors on both sides of the river know what is going on yet.

The Detroit Free Press is disgusted with what is happening and ties the Text Messaging scandal into this:
  • "What a tragedy of mismanagement that the administration took a full year to get a deal agreed upon with Windsor before presenting it to council to fulfill the budget promise. And what a shame that a rushed decision now must be made, in the face of very real threats to the city's financial health.

    And as with everything mayoral these days, the situation has to make you wonder about the effect of scandal on the incompetence. Has the mayor been distracted since January from getting the deal done? Certainly, he faces taller obstacles with City Council now, given the massive breach of trust he committed against its members...

    At minimum, the administration needs to get council members' many questions about the deal answered promptly, so they at least know the parameters of what's on the table."

Interestingly, I don't remember the Windsor Star writing a similar Editorial on this deal. Don't our Councillors deserve to know what is going on too.

I hope I am wrong but I fear, along with the East End arena, that the Tunnel will become this Mayor and Council's Canderel and MFP. The secrecy surrounding it gives me a great deal of concern. After reading the Spitfires' deal, I am disgusted at how poorly this City negotiates especially when Councillors claim they never read the Agreement but relied on a Report from Administration.

Why no one has come out yet publicly and told us what the deal is boggles the mind. Is it to be rammed down the throat of Councillors on both sides of the river at the last possible moment? It is for a lot of money after all. Shall we assume it is risky especially for Windsorites? Why do we have to guess especially when we are given mixed signals?

This BLOG is a bit complicated and overly detailed I am afraid because these transactions are complicated. Unfortunately as well, the transaction is secret so one can only speculate considering the transactions terms are being thrown around so loosely. So you may have to read it carefully to understand it fully. I hope that I do a proper job with the explanation to make it as clear as I can for you.

There is no doubt in my mind that the Tunnel deal will be another of our Megaprojects run wild. We will see outrageous claims for all the money that it will bring in. The numbers boys will use spreadsheets to figure out costs and revenues building in inflation, contingencies and any other matter that you can dream up to show us how huge the profits will be over the 75 year life of the deal.

We will see projections of revenues that will be mind boggling. We will see traffic numbers that will bring us back to the late 1990s since Eddie's economic development plans will bring back tourism and industry with a vengeance. We will see costs of maintenance that will make it appear as if this Tunnel has just been built rather than being a hundred years old. Who knows, even Sam Schwartz might be brought back to talk about this since he is a Tunnel guru too. We will seen valuations of June, 2007 rather than February, 2008 with no recognition whatsoever of the competition of a new DRIC bridge.

As far as I'm concerned, I will wonder why, if the Tunnel is such a magnificent operation:
  • it has consistently lost market share for almost the last decade,
  • it lost a huge portion of its volume and will probably lose more
  • the Tunnel Ventilation Building project was so over-budget
  • the huge dividends of the past have been reduced to zero dollars, and
  • why the City cannot afford to do the Tunnel Improvement Project even though the Senior Levels are picking up two thirds of the costs.

But I'll probably be a voice in the wilderness, a naysayer and whiner, with the headlines from the sycophants and cheerleaders proclaiming the brilliance of our politicians. I will be left wondering why an inexperienced lawyer, entrepreneur and border operator is smarter than the owner of the Ambassador Bridge.

I wish I could tell you what the Tunnel deal is but I cannot. All that I can do is speculate based on comments in the media, which comments themselves are contradictory.

It would appear to me that an outright sale of the Tunnel is out. I don't see either side of the river consenting to a sale of this asset except to a related company or authority. As I mentioned before, Mr. Sutts, the City's lawyer, stated:

  • "According to Sutts, the move allows the city and the new corporation to arrange financing independently of each other. However, any sale of tunnel assets would require the approval of the City of Windsor -- the corporation's sole shareholder."

Notice, that he only talked about sale requiring approval. So that's not going to happen. He did give us a hint however when he talked about independent financing so I would expect that whatever is going to be done will be done by the new Tunnel Corporation to try to keep the City's exposure at risk. I don't see how that can happen to be honest but what do I know.

If is not a sale, then perhaps Windsor will lease the Detroit half for the amount of $75 million and operate the entire tunnel and make all of the revenues and profits or alternatively money will be borrowed based on some kind of security I would assume.

Now the Detroit Mayor keeps on talking about leasing but I think if that was going to be the case, that has changed dramatically now. He said the following in the Budget speech that Detroit Council refused to hear a few days ago:

  • "The largest of these is the proposal submitted to you a week ago Friday to transfer our portion of the Windsor Tunnel to a holding company for the next 75 years. In return, we will receive a lump sum payment of $75 million. After using a portion of the proceeds to fund an annuity for an insurance package on the tunnel as well as financing and legal fees, we should net at least $65 million. The Windsor City Council already has taken action to transfer their portion of the tunnel to the holding company."

Only a few days before he talked about:

  • " a proposal to lease the city’s half of the Detroit-Windsor Tunnel to prop up the city’s budget."

Then just recently the Free Press reported that we are back to some kind of arrangement whereby Windsor operates both sides or maybe it is a Joint Operating Agreement. It is so confusing:

  • "Now, the mayor proposes to sell the city's half of the tunnel to an authority appointed by the mayor and council.

    With the city's fiscal year ending June 30, time is running short to complete the deal or find another way to balance the budget. Adams talked of layoffs to find the $65 million.

    Under the new version of the deal, both Windsor and Detroit would permanently turn over their halves of the tunnel to separate authorities that would be composed of appointees of the two city governments.

    On the Detroit side, Kilpatrick and the council would appoint members to the newly created Detroit Tunnel Authority. Windsor already has transferred ownership of its half of the tunnel to the newly created Windsor-Detroit Tunnel Corp.

    The $75 million would originate from the Ontario government and be routed to the Detroit authority, which would give $65 million to the City of Detroit and use the rest for insurance and transaction costs.

    In 2020, when the existing lease on Detroit's half of the tunnel expires, both the Detroit authority and the Windsor corporation would operate the tunnel, said Kilpatrick press secretary Denise Tolliver. But the report from the council's research division suggests the agreement would enable the Windsor corporation to operate both sides of the tunnel.

We know that the City of Windsor incorporated their Canadian Holding company but we have not heard that they have incorporated the American Holding company that was going to operate the US side. Did Kwame mean that Detroit's interest would be transferred into the Canadian Holding company? I would find that hard to believe because our Mayor said:

  • "The city's efforts are to ensure that the border continues to remain in public hands, and that the two (sides) continue to operate as one entity," Francis said. "It's not the city taking control from Detroit. It's not Detroit giving up control."

If the Detroit Mayor is talking about transferring Detroit's interest in the Tunnel into a Holding company as well, then it seems to me that the parties have agreed to transfer their interest in the Tunnel into separate Holding companies, each one owning their half of the Tunnel. The argument would be used on the other side as it was here that it is being done for liability reasons... you know those big bad terrorists.

Again it seems to me that the idea of leasing seems dead based on the Detroit's Mayor's remark and what Eddie said about the two sides operating as one entity. Yet Detroit Council's research division suggested otherwise.

Let's assume a structure like a Joint Operating Agreement where the two cities work together in one entity. That has been discussed in the past if I recall correctly. In such an entity, each side would be represented, probably equally. President Cockrel in Detroit said recently

  • "I'm willing to see what they come up with. I've always liked the idea of a joint management agreement, but the idea has to make sense for both cities."

So let's take the next step and say that something is going to be set up perhaps along the lines of the Public Authority concept at some of the other border crossings. In other words the parties will each own still their half of the Tunnel but through a holding company and these holding companies will set up a third authority to operate the Tunnel.

Kwame still insists that Windsor is going to provide $75 million to Detroit and that this money is going to be coming from the Province of Ontario.

Let's back up a bit. The City of Windsor has rolled over their Tunnel asset into its Holding company for $101 million and has taken back a promissory note at 5% interest. Let's agree that Detroit has done something similar. Why wouldn't the rollover amounts be the same? That's because Alinda still has the right to operate the Detroit half of the Tunnel for another dozen years or so naturally Windsor's side would be worth more.

However, do not assume that the Tunnel is worth at least $176 million. Obviously, Detroit wanted $75 million or else it would not do the deal. Presumably therefore someone had to calculate the Windsor side at more than $75 million or this deal would not make sense for anyone. I know there was a valuation report based on revenues that said that the Windsor side was worth $111 million. But you know what I think about traffic projections and valuations based on them given the DRIC traffic projection fiasco.

The real proof in what the Tunnel is worth as far as I am concerned is that the Bridge Company was prepared to give to the City of Detroit significantly less money for a much longer-term and that the Canadian Federal Government walked away from this transaction as well either because the valuation was too high, the Tunnel condition was bad or both. However, maybe a lender is prepared to loan money based on the valuation.

Again my concern is that if the Bridge Company and the Feds are correct, we are getting into a deal based on a valuation that bears no relationship to reality that could mean that this deal is a disaster from the start.

So if we have eliminated both a sale and lease, we are left with a loan. It seems that Windsor is the party that has to find the money to pay the City of Detroit.

Let's just stop right here for a moment. Both Detroit and Windsor I am sure know about the experience in Chicago and in Indiana when assets were leased out for a long term and the governments involved received huge amounts of money. Why wouldn't they do such a transaction jointly with respect to the Tunnel? Why would they do a loan?

What problems do we not know about have they run into such that the transaction seems to have changed so drastically according to the Detroit Mayor. And as we know, Detroit Council does not believe that the transaction can be completed before June 30 since they have only seen the skimpiest of documentation.

I don't have an answer for this and that is what is starting to worry me. Why wouldn't they do one of these P3 deals that look so attractive in bringing so much money and I would think pose little risk to the two Cities in the event of failure. The risk would be transferred to the private party wouldn't it. I wonder if DCTC and its Bank owner did well with the Detroit Tunnel. I would tend to think not given the fall of market share but I do not know. If they did not, then shouldn't that give us pause before we rush headlong into doing a deal.

Remember in the Star it was said:

  • "the new corporation to arrange financing" and
  • "How Windsor can fund a deal to take full control of the tunnel remains unknown.

    "Our legal team is looking at different financial options that are available," Francis said."

My guess has to be that private sources of P3 financing have dried up or alternatively no one is prepared to put in this kind of money into the Tunnel in a P3 lease deal. After all, it is a declining asset with shrinking revenues. The Province of Ontario as far as I know is not in the P3 leasing business either if they are the financing source.

So the conclusion that I'm coming to is that this is going to be some kind of a loan transaction. My recollection is that the Detroit Council at one time said that if the Mayor's deal fell through they could always go and get some borrowings to plug their Budget hole. Perhaps this is what is being proposed now.

While I find it completely inconceivable, and it will cause a major blow up at Queen's Park, it may well be that the Windsor or Windsor's Holding company will be able to borrow from the Province's Infrastructure Fund an amount in the sum of $176 million or more. After all, Windsor has to get a lot of money too or else why enter into the transaction. It has to be paid off by its subsidiary for the asset.

Windsor is eager to do a deal with Detroit rather than on its own because presumably it is easier to borrow against an entire Tunnel rather than only a half and probably there is an ability to borrow more. Again, my concern me is that our Mayor is overestimating the value of the Detroit half in putting us in jeopardy in the event that Detroit defaults.

I thought that Detroit was at its borrowing limit so that is probably why a Holding company is set up to do borrowing but the money is transferred to the City as part of their rollover transaction.

I suspect that the financing structure will be similar to what was done at the University of Windsor so that the loan is interest only for the life of the loan (probably 40 years because that is what I believe Infrastructure Ontario's loan period is) with a final lump sum payment to pay off the entire principal amount.

Let's assume that money can be borrowed by the Holding company. It would do so and then give $75 million to Detroit as a loan to be paid back over 40 years and pay off the promissory note to the City for $100 million thereby putting cash into the City. Why Detroit would do a loan transaction I am not sure.

Presumably that deal for $176 million would have to be secured. I would assume that it would be secured by the property, the Tunnel, the revenue stream and perhaps guarantees by the Cities involved. This stuff is starting to scare me because in the event of default, the Tunnel could be lost or the City could be stuck on its guarantee.

The hope has to be that revenues will be allowed to increase over time (how that can happen with the Bridge Company's tolls being lower today and with a possible new competitor in the future I do not understand) and that no costly maintenance will be done with respect to a 100-year-old tunnel. The proposed new regulations for the International Bridges and Tunnels Act may put a damper on that expectation!

How would this fit in with a comment that I wrote before:

  • "Going back in history, Mr. Sutts has effectively told us that the City will not be at risk in this transaction. That is a pretty nice guarantee that Mr. Sutts and his firm are providing to us.

    "the deal will not be completed until he is fully assured local taxpayers will not be hurt.

    “We will be extraordinarily cautious so costs of the acquisition will be self-supporting of the project itself. That there will be no need to go to the well of the city to support this transaction."

Whew, absolutely no risk to taxpayers or City assets ever. The Mayor and Mr. Sutts repeated in the last few days this assurance by saying:

  • "But Sutts and Francis said Tuesday they are being careful not to complete any tunnel deal that could prove costly in the years to come."

Nice to have Eddie personally on the hook as well.

It could be that another alternative for the borrowing is that it would be done by the joint operating party as it is with the other border authorities. But that joint company would have to own the assets and I do not believe that is going to happen. Again, I would think that the City of Windsor and perhaps Detroit also would have to guarantee the loan unless a lender was foolish enough to take it on a nonrecourse basis on the security of the Tunnel assets only or on the revenue stream.

Confused. Me too. It is pure speculation and I don't feel so bad about it since this deal was supposed to have been completed in June 2007.

If it works out, terrific.

We will get a massive amount of cash in up front on the borrowing, just like when you get a mortgage on the equity in your house. We can use that money for whatever purposes we want. The Tunnel is in good shape and will not require any significant kind of maintenance or repairs over the next 75 years we will be told. We will have more than enough money from revenues to pay off the interest. The increasing tolls will make us feel even more comfortable as the money keeps pouring in. When traffic volumes increase, as they will again, the Tunnel will again become a cash cow for us. The principal amount of the loan will be paid back after 40 years because of the structure put in place and then for the next 35 years it will be gravy for both the cities of Windsor and Detroit.

It will be presented that way because this is how Megaprojects have to be presented. And as you will remember from the BLOGs I did an Megaprojects, quite often, deliberately or inadvertently, everything about what we are told never turns out and there are horrific consequences. But the people involved don't really care anymore. They won't be around. They will have been proclaimed a hero and a genius long before all this falls apart. It will only be the taxpayers left holding the bag.

Still, if we can deal with the Hurst financial disasters, I guess we can cope with Eddie's. And I still don't expect to ever be able to see what this deal is all about without a Municipal Freedom of Information application that will take years to process because of confidentiality and all of the appeals or perhaps when I read the Bankruptcy Court files.

I hope that this transaction does work out because it could help relieve some of our financial distress in the City at a time when we need it. I just can't get rid of this nagging feeling that this will turn into a disaster since the deals I've seen so far with the City seem to have done so. The City is just not capable from past experience of being able to do this kind of sophisticated financial transactions and here we go again.

On this transaction, you can call me a naysayer unless I get a lot better proof of why this deal should work. And all of the secrecy and games playing to keep information away from citizens hardly makes me feel confident.

Wednesday, May 07, 2008

The Mayor Who Cried Wolf

Do you, dear reader, fully understand yet how much of a liability Mayor Eddie Francis is to the City of Windsor. Two of the most powerful Ministers in the Provincial Government are setting up a meeting in Toronto for some of the most successful Windsor business people to meet with their colleagues there to convince them to invest in Windsor and our Mayor threatens to sue the Government.

What kind of message does that deliver about this City and our local politicians? What kind of message does this send to people about investing here? Who needs this kind of aggravation from a City that apparently is prepared to fight a lawsuit to prevent billions of dollars of infrastructure investment that this City desperately needs for the jobs to be created?

It's all a joke anyway. Eddie has no intention of suing so he should stop posturing before he completely destroys this City. He would be the star witness in the lawsuit and he could not take that kind of pressure. Can you imagine if the City lost and he was forced to take the blame as the Senior Levels pulled out and 12,000 jobs disappeared!

If he won't back off, then it's time that Councillors stood up to him as they did with ex-Mayor Hurst for the good of the Community.

You know the Aesop Fable...the little shepherd boy who cried out wolf so many times that the villagers no longer believed him. When a wolf really came, no one came at all to help and the wolf ate his flock.

Isn't our Mayor the little shepherd boy. I think I have lost track of how many times he or one of the Councillors threatened litigation against the Senior Levels. Why even the nonviolent Councillor Mahatma said
  • "David Brister said the city could be forced to sue the government and tie up the border plan in the courts if route concerns are not addressed. "

In each case, nothing happened. Fortunately for us and the jobs we would have lost.

In the Greenlink campaign, we can see language that obviously David Estrin helped prepare. Language such as

  • "input from the affected community is a legislated requirement of the Environmental Assessment Act."
  • "the public must be given an opportunity to contribute their opinion and influence the outcome."

After all, as we know, at least according to the Mayor

  • "When Windsor speaks on the issue, the decision makers MUST listen."

Eddie ought to know that the DRIC people have been listening... what were all of those multi-dozens of sessions all about. Of course, what went in one ear went out the other. Their position will be simply that they took into account what Schwartz said and what Greenlink was all about in arriving at their decision.

When I was in private practice, I never threatened litigation unless my client was prepared to do so. I had no intention of jeopardizing my credibility as a lawyer by making phony threats.

Isn't that what our Mayor is doing... talking, talking, talking but not acting. It is almost predictable what he's going to say. Right after the DRIC announcement, we saw comments such as:

  • "Council's Toronto lawyer, David Estrin, who decades ago played a role in developing Ontario's environmental assessment regulations, called into question the process by DRIC to reach its final feeder road recommendation.

    He cited the lack of any supporting data Thursday -- although DRIC claims that will be released in weeks to come.

    "It's inappropriate to announce conclusions without providing the data or analysis on which those conclusions are based," Estrin said.

    "They have skewed the process. It's completely unprecedented and in a bad way. It's not the way you do an environmental assessment. It's supposed to be a transparent, rational, participatory process."

  • "Councillors have given orders to its legal team to present a report on options to challenge the DRIC plan, which they feel does not do enough to improve quality of life for local residents.

    "A lot of councillors feel passionate about the issue. They feel betrayed," said Mayor Eddie Francis on Friday. "A lot of them believe in a better solution and all are looking at ways how to achieve that."

  • "Windsor’s city councillors threatened legal action Thursday night"

    "What council has expressed is they clearly are pissed,” Francis said. “It’s not GreenLink and council wants to explore all their options — legal, technical, community — all of that."

It almost makes one think that Eddie IS serious this time. Of course, most of you have not seen this comment in this story in Today's Trucking magazine:

  • "The mayor told weeks ago that he would consider legal action if he wasn't convinced DRIC followed its own EA mandate to properly consider the solution that best protects the health of citizens and the environment.

    Though, local media reports in Windsor stating city council is threatening legal action are premature, Francis told us. Until all the details are published in the EA, there's little the city can do. "We would be having a different conversation today if the EA was completed."

    And that would be…? "It would be about what our next step is and (if) we unwind the process. It's an option—one we want to avoid—but an option.

    The EA will be completed by December 2008, DRIC officials said at the press conference. It will then be submitted to the Ontario Environment Ministry -- which could take up to eight months to review it -- and clear a number of other regulatory hurdles."

So you see all of this lawsuit talk by our Mayor is all for local public consumption. He's not going to do anything. He will huff and he will puff but he won't blow the house down. He frankly does not have the guts to do so. The Star Editorial warned today:

  • "Litigation would waste time and resources and delay a project promising to yield thousands of jobs. That doesn't mean litigation should be avoided at all costs, but it means litigation comes with a steep cost best avoided."

The Mayor and any Councillor who started a lawsuit would be run out of town.

Of course, dealing with lack of guts, we saw this easy with way out being put forward as a trial balloon by Councillor Lewenza:

  • "Among them is Ken Lewenza Jr., who suggested a referendum might be a good idea, so local residents can decide if GreenLink is a preferred plan over the DRIC recommendation. GreenLink offers about twice as much tunnelling of the corridor.

    "It's come to a point where council has to make a decision on what's in front of us," said Lewenza on Friday.

    "Absolutely, I think we have to go to constituents. Have a decision made by the community to give us specific direction."

In the end you see, none of them have the nerve. They are all running scared. They have to try and work us up so that we take the blame for litigation and not them.

The results are already in. In a recent CKLW poll, about 60% of the respondents said that

  • "Windsor-Essex Parkway [was] an acceptable alternative to GreenLink"

DRIC will take even more comfort in these numbers from the City's Pres Release:

  • "If you have not received a GreenLink postcard by mail, or if additional members of your household would like to show their support by filling one out, please come to one of our Customer Care Centres or to City Hall to obtain your cards. Then fill them out and return them (free of charge, postage paid) to the City of Windsor. We have already received over 14,000 replies!"

Since the postcard only gives the option to support Greenlink, the assumption that DRIC will make and will state is that the balance of the respondents, 66,000 households if 80,000 postcards were sent out, are opposed to Greenlink!

In the end, the only conclusion that I can draw is that our Mayor is a sheep in wolf's clothing. All bluff, no stuff. It is time that someone else on Council become the responsible Voice of Council.

And that is no Aesop's Fable.

BLOGexclusive: Windsor's Email Messaging Scandal Escalates

The Blogmeister has learned that the battle between the fired Volunteer, John Middleton, and City Hall is escalating.

The Municipal Gremlin will be taking action tomorrow at noon at City Hall at the Clerk's office to support his position that he was improperly terminated as the Chair and member of the Windsor Citizen Crime Prevention Committee.

Considering that Middleton is in the sign business and knows how to advertise, I would suggest that the media bring with them video cameras and digital cameras to take some interesting pictures for their news stories and websites.

You, dear reader, might want to attend too since it is at lunchtime just for the fun of it!

Wasting Taxpayer Money On A New DRIC Bridge

Here again is that chart that I have shown before with DRIC projected volumes and actual volumes at the Ambassador Bridge. Please remember this chart as you read through this BLOG with the opinion article attached.

It appears as if some people on the other side of the river are taking a long hard look at whether a DRIC bridge is necessary. And they are not just Bloggers either.

David Littman was a senior vice president and chief economist at Comerica Bank. He is also past president of the Detroit Chapter of the National Association of Business Economists and is a member of the Economic Club of Detroit. Obviously then, he has familiarity with regional issues and matters dealing with money.

Here is an article that he wrote in the Detroit News recently. It is something that I have written about as well in my BLOGs.

As you will recall, Joe Corradino who is retained by MDOT as their consultant on the DRIC project said back in 1997 that the Ambassador Gateway project without a new bridge could handle itself 5.4 million trucks per year. Since the volume today is just over 3 million trucks per year and the capacity of the Ambassador Bridge is between 50 to 60%, one has to ask as Mr. Littman does, what is going on!
  • "Opinion

    Michigan's bridge to nowhere
    Proposed additional Detroit River crossing unwise

    David L. Littmann

    Lansing tells us how threadbare our budget is. The Legislature threatens to release dangerous prisoners if Michigan taxpayers fail to cough up more dollars. Year after year, we are treated to the same political rhetoric from elected officials, paid lobbyists, and consultants that support a bloated public-sector budget.

    Can taxpayers ever test the veracity of these threats and assertions? Can we discover whether Lansing's claims to "frugality" and its so-called "investment in Michigan's future" are genuine? You bet we can. How?

    Follow the money, not the rhetoric. If Lansing has its way, sorely burdened taxpayers will be forced to fund a new bridge to Canada that is both redundant and a whopper of a losing proposition financially.

    But this is exactly what Governor Granholm and the Michigan Department of Transportation (MDOT) propose. To justify such absurd pork-barrel spending, state planners have persisted in projecting traffic volumes that bear no correspondence with reality, past, present, or future. Here is the objective reality.

    The current Ambassador Bridge opened in 1929. Its track record is 78 years of safe, economical, flexible, and accountable operations. Privately owned and operated, the Ambassador Bridge does not absorb taxpayer subsidy. It runs profitably and was first to make the all-important security adaptations that kept commerce flowing after the Sept. 11 terror attacks on the U.S.

    These points are critical because the Detroit-Windsor corridor accounts for 25 percent of more than $500 billion annual trade between the two nations and is the busiest commercial land border crossing in the U.S. Without question, the Ambassador Bridge became the most successful border crossing in North America since being acquired by the Maroun family in 1979.

    Unprofitable bridge
    Contrast this with the lack of profitability and ridiculously inaccurate traffic-volume forecasts at the state-controlled Blue Water Bridge. Not only are taxpayers still on the hook subsidizing the Blue Water operation, but the traffic volume that MDOT predicted would occur on the newly built span at Port Huron still has not materialized sixteen years later. Rather than face economic and fiscal reality, MDOT continues trumpeting its irrational exuberance. In 1991, MDOT projected that Blue Water traffic would grow from 6.2 million to 9.5 million crossings by 2007. Instead, actual crossings have dropped below 5.5 million.

    And this is despite the opening of a second span of the Blue Water Bridge in 1996, which would have enabled more traffic. Clearly, the opening of Sarnia's Casino in 2000, continued success of NAFTA (North American Free Trade Agreement with Mexico and Canada) and the four greatest auto sales years in U.S. history (2003-2006) failed to generate more traffic. Moreover, were it not for Canadian garbage trucks, the counts would be down more dramatically. But today, traffic still hovers at 1991 levels -- despite having spent untold millions to "twin" the government crossings.

    If you think this statistical skirmish with traffic reality has altered MDOT's predictions for traffic at Detroit's crossings, think again. Compared with 1999 (eight years ago), total Ambassador Bridge traffic is down 39 percent and Detroit Tunnel traffic remains down 49 percent! Today, the Ambassador Bridge operates at about 50 percent capacity.

    Sadly, MDOT has already spent $11 million on ground samplings and continues squandering the total $34 million appropriated for a study to justify building a state government bridge to compete with the Ambassador Bridge less than 3 miles away.

    So why has the privately-owned Ambassador Bridge firm spent nearly half a billion dollars over the past few years, acquiring land, building highway ramps and infrastructure, and complying with state environmental regulations? The existing bridge, explains the Maroun family, is almost 80 years old. Should major repairs be required and should traffic increase, a second span will be needed. The costs of ongoing maintenance justify investment in a new, modern span. Their private enterprise has done the groundwork and is willing to cover the costs plus any losses incurred. Why then, does the MDOT feel obliged to duplicate or supplant these entrepreneurial efforts?

    Proposal termed 'lunacy'
    Intervention by Lansing has been called "lunacy," by state Sen. Alan Cropsey, R-DeWitt. The senator is correct in this assessment. First, state spending on a duplicate bridge is money that the state no longer has for more worthwhile projects. Second, the state's record in such intrusions into the marketplace is abysmal --taxpayers end up subsidizing ventures that a private firm can handle profitably and with market accountability for services rendered. Third, MDOT assumes that, if built, its bridge would not need to compete with a new span built by the Ambassador Bridge firm. Such static analysis is what compounds their errors, in overestimating traffic volume projections and underestimating taxpayer subsidies.

    Arrogance with taxpayer resources could bankrupt the three current crossings, since new traffic won't magically appear. The government would cannibalize existing crossings and then hold another press conference. Building a second bridge to Canada using a government bureaucracy with impeccable track records for losses, chronic budget deficits, and deplorable traffic forecasting is like asking Lansing to drown our Peninsula in red ink."

Tuesday, May 06, 2008

Detroit/Windsor Tunnel To File For Bankruptcy

Oh don't get so excited. This will be the headline in the media years from now after all of the border machinations play their way through the system.

When a new DRIC bridge takes away a quarter of your traffic at a time when one is not making any money, then how can one stay in business. The easy answer is: one cannot. And that just suits the P3 partner for the DRIC bridge just fine because a DRIC P3 partner wants a monopoly in order to make a good rate of return on its investment. So the Tunnel has to go broke.

Before my friends in Detroit get all upset, and Windsorites too because we will be stuck with this white elephant, I'm going to assist Detroiters not only with fixing their budget problems, but making a few dollars more. (Don't worry citizens of Windsor, we're not really going to own this financial disaster).

I'm going to trust the Deputy Mayor in Detroit who seems to be in charge of this file now and probably the President of Council in Detroit too to be fair and to give me a commission based on my recommendations. I would think that a fee of 10% of the amount over $75 million ought to be reasonable. My target number is $175 million which is just slightly more than the City Of Windsor consultants said that the Windsor half was worth. Of course it's not but who cares when none of this has to do with money anyway but a hidden Government Agenda.

Thanks to a story in the Detroit Free Press, we are learning what the deal really is. In effect, the City of Windsor will run the Tunnel for 75 years and presumably get all of the tolls in exchange for a $75M payment which I want to increase to $175Million. Hey, that makes my commission $10 million:
  • Mayor pushes tunnel sale
    Money from Detroit's half would shore up budget and avoid service cuts, aide says

    "New details also were revealed that show Kilpatrick's tunnel proposal has changed considerably since he proposed a year ago leasing the tunnel to Windsor for 75 years as a way of keeping Detroit's budget balanced without raising taxes or cutting services. Now, the mayor proposes to sell the city's half of the tunnel to an authority appointed by the mayor and council...

    Under the new version of the deal, both Windsor and Detroit would permanently turn over their halves of the tunnel to separate authorities that would be composed of appointees of the two city governments.

    On the Detroit side, Kilpatrick and the council would appoint members to the newly created Detroit Tunnel Authority. Windsor already has transferred ownership of its half of the tunnel to the newly created Windsor-Detroit Tunnel Corp.

    The $75 million would originate from the Ontario government and be routed to the Detroit authority, which would give $65 million to the City of Detroit and use the rest for insurance and transaction costs.

    In 2020, when the existing lease on Detroit's half of the tunnel expires, both the Detroit authority and the Windsor corporation would operate the tunnel, said Kilpatrick press secretary Denise Tolliver. But the report from the council's research division suggests the agreement would enable the Windsor corporation to operate both sides of the tunnel.

    Windsor officials have said they like the deal because it would ensure the tunnel stays in public hands. Windsor has long fumed over the handling of the privately owned Ambassador Bridge and feared a bid by the bridge's owner for the tunnel."

Now this transaction is at least understandable. Windsor in effect will pay $75 million to get control of the Tunnel for an agreed number of years and will make its money presumably on the difference between what it will pay and the tolls that it can bring in. Of course, the number crunchers will show on the Canadian side how much money the City will make so that our Councillors will go along with the deal. I would expect that the City of Detroit gets the $75 million free and clear so that should solve the short-term budget issues for them as well.

And everybody lives happily ever after.

Of course, this isn't the deal because it doesn't make any logical sense. Just look at what I've written. Why does Detroit have to sell its interest in the Tunnel and set up a new organization, the Detroit Tunnel Authority? Interestingly, liability concerns were not the issue on the Detroit side as they were in Windsor. I think it's safe to assume therefore that there is something more going on that we are not being told.

The other absurdity is that the Province would finance this transaction. At a time when the Province desperately needs money, Ontario is going to finance the budget shortfall of the City of Detroit. Please explain that one to me.

One of the complicating matters that will have to be resolved will be the operation of the Detroit side by Alinda until 2020. Expect that to end soon after the Tunnel deal is completed with a big payout to Alinda to buy them off. That probably explains what they are not involved in trying to keep control of the Tunnel and to make an offer for it. Not a bad profit for them to make on such a short term of Tunnel management. Eddie's numbers clearly make their contract worth more too. Who knows, Windsor might keep them on as its manager too,

The key line in the news story is the following:

  • "But the report from the council's research division suggests the agreement would enable the Windsor corporation to operate both sides of the tunnel."

How wonderful that the City is now an entrepreneurial border operator that competes with the Ambassador Bridge instead of a City Government that fixes roads, sewers, and watermains. The City has been unsuccessful to date in its competition since it has lost significant market share to the Bridge. Why will operating all of the Tunnel make things any better? After all, in a few short years under the Chairmanship of our Mayor, the dividend has dropped from $6.6 million to $0. How wonderful as well that the City is making it so easy for the Bridge Company to sue us because of anticompetitive practices and for punitive damages also. I wonder how much that will add to my tax bill in the future.

There are several forces at play that the Deputy Mayor and President of Council should understand that will increase their payout if they follow my advice:

  1. Transport Canada's has a Corridors and Gateways policy which is their claim to fame which they believe is essential to maintain Canada's economy i.e. that is the way to protect Canada's ability to maintain its trade with United States

  2. Transport Canada needs to control all of the border crossings in Southwest Ontario/Southeast Michigan including the Tunnel as I have described previously

  3. Canada will "own" all of the crossings and will use the financial resources of private parties to do so through public/private partnerships. That may explain why the OMERS people attended the Rotary luncheon when Dwight Duncan, the Minister of Finance, spoke.

  4. Notwithstanding the theatrics, the three Canadian Governments are all working together against a common foe, the Americans, but are merely fighting amongst themselves to see who gets what

  5. The City of Windsor and the Province are the front for the Federal Government on this deal so that the US Federal Government will not go ballistic when Canada controls the Tunnel

  6. A P3 partner needs to be assured of high tolls to make a profit so that is why the Tunnel has to be in Canadian hands amongst other reasons.

  7. Bankruptcy will allow the P3 partner to incorporate the Tunnel into its border arrangement with the new bridge since who else would have an interest in it.

I hope therefore that Messrs. Adams and Cockrel are starting to understand why they can ask for any figure for their interest in that Tunnel and they will get it, within reason of course. $175 million is probably at the upper limit but it will all be buried into the cost of the DRIC project as "soft costs" so there is no reason to worry.

Oh, about the headline of bankruptcy. When the Tunnel goes bankrupt, since it has already been sold by the City of Detroit, it does not impact that City just the Authority. When the Tunnel goes bankrupt, since it has been rolled over to the City of Windsor, it does not impact the Windsor, just the Tunnel Corporation. Of course, the deal will be non-recourse as well to the Cities but the security for the transaction will be the asset, the Tunnel, itself.

Expect by the way that the loan amount from the Province will not be the amount that Detroit wants as we are all assuming but it will be that amount plus the least $100 million so that the Tunnel Corporation can pay off its promissory note to the City. Why else would Windsor get involved in this unless it was able to get something out of the deal.

What does this all mean... since the Province is the lender to the City of Windsor or the Tunnel Corporation, it will take over the asset. Of course, the Province doesn't want the asset so the Federal Government will graciously come in and salvage it, or rather, the P3 operator will do so in order that the American Federal Government will not get upset.

Do you see how nicely it all comes together. The P3 operator will ensure now that the tolls are such that it makes money no matter where a vehicle crosses in the area because it will be in control of all of the tolls. Of course, the tolls will be skyhigh and no one will complain because all of the crossings are Government-owned. The Canadian Government will be happy because it will maintain entry for Canadian goods to the US through the biggest corridor into the United States from Ontario and Québec. Detroit will get their $175M if they listen to me (less my commission) and Windsor will get $100M.

I know you think I'm merely speculating again but, as a matter of interest, the Government Press Release for the new DRIC Road "The Government of Canada welcomes the design proposal for the Windsor-Essex Parkway" had as part of the backgrounder this discussion which is totally out of place:


    The Memorandum of Understanding (MOU) between Canada, Ontario and Quebecestablishes the framework for federal-provincial collaboration to develop the Ontario-Quebec Continental Gateway and Trade Corridor in partnership with the private and public sectors. The main objective of this MOU is to establishthis commercial gateway and trade corridor as a strategic, integrated andglobally competitive transportation system that better supports the movementof international trade."

It really is not so difficult to understand once you can put all the pieces together in a logical fashion. There is however one fly in the ointment: that darned Ambassador Bridge Company. Their presence will scare away any P3 investor.

As I told you before, their elimination is what the DRIC process is all about. Take it as a given that the new bridge will be built beside the existing bridge just like the experience in Sarnia. The Enhancement Project Bridge will be the new crossing. The only question will be who the owner is.

Oh, Deputy Mayor and Council President, I will let you know the address to which you should send my commission payment.

Windsor's Email Messaging Scandal

Detroit has their scandal with respect to text messaging. Of course, Windsor has to follow their lead and now we may have one too!

I am sure that you remember the BLOG that I wrote involving the removal of a volunteer, John Middleton, as Chair of the Windsor Citizen Crime Prevention Committee. He accused the City of taking away the Windsor Citizen Crime Prevention Committee's money and co-ordinator thereby jeopardizing their existence and perhaps leading to the closing down of a number of programs for citizens.

I guess that Mr. Middleton was not invited to the Volunteers' dinner the other day. Is "removal" without being allowed to put forward one's side of the story the way people who offer to do things for the City on various committees at no cost are to be treated? Just ask the Windsor Library Board members how they feel.

The interesting part about all of this is that the Windsor Star reported that Middleton has:
  • "250 e-mails he has sent to and received from city employees regarding committee work. "I have nothing to hide," Middleton said."

Has any reporter from the Traditional Media looked at any of these e-mails? Do they know what is in them? What is really going on? Do they lose the "W" strapped to their chest if they do any kind of significant investigative journalism?

Did anyone at Council see any of these e-mails as well before they made their decision to remove him or talk to Middleton or did they rely on an Administrative report? Did anyone perhaps think that there was a conflict of interest involving Administration if Mr. Middleton's story is correct? I would have thought that a Councillor might want to ask a question since Middleton alleged:

  • " city administrators have been even contravening city council instructions."

Is there more? Some really juicy stuff I mean! Is there, and dare I use the word, SEX involved? There are allegations of that in Detroit. Of course, the Blogmeister has investigated and knows the answer to that question. I'll let the traditional media reporters do their own work to find out.

Neither we, the public, nor it appears Mr. Middleton really know what is going on.

  • "Council had some pretty compelling information," said Marra. He said that during his meeting with Skorobohacz, Middleton was not told the names of his accusers, but that there was "a general disclosure of the contraventions." And, Marra added, "the contraventions were very serious."

    Halberstadt said council determined Middleton treated city employees disrespectfully."

What does this mean? How does Marra know what Middleton was told? Did his information come from the Head of Administration, the CAO? On what basis, Counselor Halberstadt, did someone come to the decision that there was a disrespect involved?

Accusers, compelling information and serious contraventions. It sounds like a lot more information needs to be revealed since we are also told that:

  • "Middleton said some longstanding committee members are so fed up with city administration's "interference" they stopped coming to meetings, making quorum difficult.

    Marra validated Middleton's concerns, saying city hall is conducting a financial and operational review to address the issues." dead men prevent crime too now? Remarkably there can be an audit for this and the Library but it takes forever to do one on the 400 Building and no one does an operational audit on WUC.

The City itself seems to be schizophrenic on the matter. How can they remove him from one committee but not from another if his behaviour so poor:

  • "Middleton is also the vice-chairman of the city's property standards committee. Marra said there has been no discussion about having Middleton removed from that post."
Such action on behalf of the City is absolutely reprehensible and the Councillors are not doing anyone a favor by their comments either. It appears that only Administration's side of the story was presented to Council and in camera. Why did no one ask Mr. Middleton for his side of the story before a decision was reached. Where is the fairness in that?

Mr. Middleton's reputation has been besmirched. It appears that he strongly advocated for the position of his Committee and City Hall did not like it. Is that the real reason for his removal? I wish I knew.

However, we will probably never learn what it is unless Mr. Middleton decides to sue the City. There hardly seems to be a point in doing that since he is just a volunteer and he would have to run up legal costs out of his own pocket in order to do so.

It appears without more that the crime that is to be prevented is to dare question and demand answers from Administration.

PS. City Hall just created a Monster and it is their own fault. John has run for office before and with his sign business knows how to communicate to the public. Here is his new website and a pictue above of the start of his ad blitz for it:

Monday, May 05, 2008

Kids And Seniors Subsidize Millionaire Spits' Owners In Arena Deal

Wouldn't that have been a great headline in the Windsor Star when they reported on the Arena deal between the City and the Spitfires.

Don't be mad at me or think that I am being mean. I didn't say this. That's effectively what the City's Jan Wilson, Executive Director of Recreation, said as you will read below.

Or the Headline could have read:
  • "Arena Deal: Spitfires, PCR and Farhi Win Big!
    City Taxpayers Losers"
PCR did alright since they were able to dust off plans for an arena that they were going to build for a Port Huron project that went broke. Mr. Farhi was able to sell part of his land for the arena that he purchased only a short time before at a nice price. Luckily, it was just before the Lear Plant was going to close down. Moreover, he also received a prime piece of real estate in downtown Windsor which he does not have to close for several years yet. I wonder if he will redevelop the rest of the Lear site now.

As for the Spits....after taking into account the rent free status given to their office space and Retail Store (4,600 square feet of space in a prime location) and calculating the value of the 2 suites in the arena and 50 car parking they are given as part of the deal, they effectively pay nothing for rent while reaping huge payments. Can you imagine how much money they will make as you read on if they do well in attendance and how much the City can lose if they do not!

I wonder how tough the City was in negotiations. I recall that in one of the Administration Reports, it is said that, if the Project Ice Track proposal is selected, then Administration would try to bring Project Ice Track and the Spitfires together to negotiate a deal. Yet at the same time the Report also states that the City and the Spitfires have been talking about the East end arena and "through preliminary discussions with the Windsor Spitfires, a framework for a new agreement with the city has been reached." In other words, the City undercut Project Ice Track it seems!

I also wonder if there are any "side letters" or other agreements relating to the Spits that may technically NOT be part of the Arena deal but which Taxpayers should know about. As an example, were there any upfront monies paid to the Spits or their owners to tie them into the Facility or for Leasehold Improvements? It would be nice if the traditional media found out the answer. A good negotiator could ask for millions easily since the City set a precedent at Canderel.

There's a news tip of the week for an investigative journalist to follow-up on to see what the facts are!

Why is it that whenever something is controversial, especially if one might be able to point the finger of blame, the Mayor "was said to be unavailable for interviews Friday." I guess I know why. I would be embarrassed to answer some questions about the Agreement.

Let me deal with one issue right off the top... Confidentiality. Remember that was the excuse given for not revealing the terms of the Agreement and forcing Chris Schnurr and the Windsor Star to go to the Privacy Commission. I'd like to know where the Mayor/lawyer thinks that there is a confidentiality obligation on the City to prevent the release. Here is the only clause that dealt with confidentiality that I could find:
  • "Section 19.5 The Team and the City shall use their best efforts to ensure that those for whom the Team and the City are in law responsible and their professional advisors, keep confidential the provisions of this Agreement. "

Where in this clause is there any obligation on the parties to keep this transaction confidential? There is none. There is nothing that prevented the City from releasing this Agreement a long time ago. Why didn't the City do so? The reasons will be obvious as you read this BLOG.

I like reading the end of the Windsor Star stories. That's where the real juicy stuff comes out. Monica Wolfson's piece is no different:

  • "In interviews with four arena operators in Ontario, it was widely agreed that few arenas break even or make money. Most are subsidized by the municipality.

    "Some lose half a million one year or make a profit of half a million," Hamilton said. "Did you have a hard winter or summer when utilities went through the roof? Being profitable is a problem worldwide."

    Wilson, who didn't know what the WFCU operating costs would be, said the WFCU Centre will make an annual profit of $300,000 to $400,000.

    "If this was a stand-alone spectator arena, I'd say the same thing," Wilson said. "But we have more revenue streams. We have the rental fees from the (three) community rinks, the senior centre and community centre activities."

Ms. Wilson is telling us that but for the kids and seniors the complex would be losing money. If we never built a palace for the Spitfires, then the City would probably be making a profit. Instead, and contrary to what Eddie first said when he ran for Mayor when he wanted a public/private partnership with the City's liability limited, the risk is now on City taxpayers.

More than that, how can Ms Wilson claim there will be a "profit" when she does not know the WFCU operating costs. Canderel and MFP here we go again!

This whole arena deal is so curious. The City had to wait until the very last second before releasing the documents. Even when they did so on their website, the website did not work. I wrote a nasty e-mail to the City since this was not the first time that documents could not be downloaded from their website:

  • "From: Ed Arditti
    Sent: May 2, 2008 4:04 PM
    To: Vlachodimos, Steve
    Cc: Critchley, Valerie
    Subject: Why doesn't your damn website work
    Importance: High

    What is the excuse this time!!!!

    I cannot download the WFCU agreement."

More importantly, before the documents were released:

  • "Windsor's FOI co-ordinator Chuck Scarpelli said Tuesday that it was "the city's prerogative" to wait until then and that staff is preparing a report to council and a "media package" to coincide with the document's release...

    City council approved the agreement with the Spits in the fall of 2006, but councillors themselves were not shown copies of the deal. Council endorsed it based on an administration report that was then taken away following in-camera discussions.

    "I couldn't tell you what's in there," said Ward 5 Coun. Percy Hatfield, one of several councillors who will be seeing details of the multimillion-dollar deal for the first time this week.

    "I look forward to seeing it," said Ward 1 Coun. Drew Dilkens. "We had a discussion (on the arena deal) many moons ago ... but I don't recall that discussion."

Can you believe it... a transaction of this size and the Councillors never saw the agreement. Do you understand why I am troubled by the Tunnel deal with Detroit. If the Administration Report is like the media package, then someone has some explaining to do!

The media package is very interesting claiming an Operating Annual Gains/Savings of $735,200 and a Capital Gains/Savings of $900,000. Of course, that is playing with numbers as I shall demonstrate.

This transaction strikes me as being very similar to the funky bus terminal deal with Greyhound. Effectively for merely paying operating costs, Greyhound obtained a 50% interest in the terminal. It is just as if you paid rent in an apartment and the landlord gave you an interest in his building. I've never heard of that before.

There is a variation in the arena deal... for paying rental, the Spitfires receive a huge package of goodies from the City that more than makes up for the rental that is paid out in the first place.

And just like the deal with the Credit Union, the big number for the naming rights is set out but you have to read through the fine print of the Agreement to see how that amount is significantly reduced. In the same way, one sees a big amount for Spitfire rental but the takeaways are not publicized.

Let's go through the Agreement so that you will see what I mean. What is important to note is that many of the fees and revenues are paid to the Spits on the basis of the Entire Facility and not just the Spits' arena. That means that the City does not get those revenues but that they are given to the Team:

  1. The Term of the deal is 20 years and the Spitfires have the right to renew. The Agreement provides that "Any renewal shall be on substantially the same terms and conditions as set out in this Agreement, save and except that the Rent and other amounts herein shall be based upon the then current market rates for similar premises in the OHL." The only problem is that this clause is not workable. In the Star story it was said "Every arena deal is different, said Mike Hamilton, manager of the Mississauga Hershey Centre, home to the St. Michael's Majors."

  2. The Spitfires don't just get to play hockey at the arena, they get additional facilities including office space up 2600 square feet and a Retail Store of 2000 square feet at no additional fee. This is an offset to the team putting in improvements to the Dressing Room (NOTE: The City claimed "In addition approximately $100,000 in upgrades to the dressing room area is being funded by the Spitfires.") That is a very nice rental rate over a period of 20 years when one compares what it would cost to rent all of that space commercially. Not only that, the City will make available these facilities on a "finished" basis comparable to that located in the Labatt Centre in London.

  3. As part of the deal, the Spits get to use the arena for its Training camp and if it is not available, then the City has to pay the costs at another site. It also gets to use the facilities for all of the Team's practices

  4. A big deal is made about the Jumbotron being paid for by the Spits. It is valued at $800,000 although my recollection is that the Spits were going to buy it on eBay, believe it or not! I wonder what price they actually paid for it rather than its "Valuation." I don't feel so bad for them however since they get all the advertising revenues for it as the owner and can remove it at the end of the Term.

  5. The Spitfires get exclusivity on the arena for professional hockey. If therefore the Spitfires have a lousy team for years, and attendance drops, the City is stuck.

  6. The Spitfires get "50 permanent parking spaces located on the Property in the closest possible proximity to a private entrance to the Facility for use by the Team" not only that, 20 of those spots will have a security fence around them with controlled access at no charge to the Team.

  7. The Spitfires receive two complementary Suites or private boxes, not just for hockey games but for any event and does not have to buy tickets for them. The value of those suites range "in price from $27,000 to more than $41,000 annually." In addition, "Playoff tickets are extra. Suite holders are also required to buy between four and 14 tickets to other arena events which draw in excess of 1,500 spectators. " Those extra tickets could cost a Box holder additional tens of thousands of dollars annually. Assuming that the Spits get the most expensive boxes, then the price of the boxes alone almost equal the cost of the rental! Remember that the Credit Union also got a box as part of their agreement that would offset the amount that it paid for the naming rights.

  8. The Team is the exclusive agent to rent the Suites and makes a 50% commission annually on the fees paid. What real estate agent makes that much?

  9. The Team has the right to be the exclusive operator of a Pro shop for the entire Facility at some reasonable amount of rent, whatever that means.

  10. For doing nothing, the The Spitfires get 8% of all of the gross revenue of food and beverage sales in the entire Facility for the entire year, and not just the area where they play hockey during their season, for the Restaurant, Catering and Concessions with a few exceptions. Strangely, the City also gets a percentage of the gross revenues "that is to be determined." Who gets the balance... Global Spectrum?

  11. The City generously pays all Taxes "including those areas within the Facility to which the Team has exclusive or non-exclusive possession or rights"

  12. The City also pays for all utilities including those of the Spitfires as well as security for their area as well

  13. The big deal is that the Spitfires are to pay $150,000 per year in rental compared with what the City claims it receives today, $40,000 based on a rental per hour of usage. Of course, the rental should be higher since the seating capacity is over 60% greater and in a brand-new spanking building. After all, we have a $65 million facility to pay for. The Spitfire arena has a cost doesn't it? Is the $150,000 a fair price to pay off that cost? To be direct about it when you calculate in the value of the takeaways, the Spitfires pay little or no rental at all!

  14. There is a rental escalator but there is no requirement on the City to actually charge the increase. The increase is based on the Consumer Price Index and there is a maximum 12% increase over a five-year period. Not a bad way for the Spits to minimize their increase. I wonder if other commercial facilities have such a generous rental terms.

  15. The Spits are also the exclusive provider of ticketing services at the Facility, not the just their section of it, and get a fee of $500 per event for all other events that take place at the Facility. That fee is subject to increase but there is no maximum unlike the rental.

  16. The ticket surcharge is set to bring in more money for the City. I think it is based on the 4700 tickets being sold per game but I'm not sure. However, there is no obligation on the City to put one on. Somehow it is said that the surcharge is a "Gain to the City." Here's the fun part though. The surcharge is to be used first to pay for the costs of fixing up the private boxes. Clearly the City had no money in its budget to pay for the cost of the suites. Any monies left over don't go to the City but rather go into an Arena reserve account to fund improvements and maintenance of the facilities! Isn't this the way to hide the increase in the cost of the Arena by not including it in Capital. There goes Councillor Mahatma Brister's career!

  17. Ticket revenue... it all goes to the Spits. Can you imagine how much money the Team will receive if they sell out the arena for their entire year. And the City receives nothing extra for building their palace.

  18. The Spits are also immune from increases in Hydro, water levies and sewage charges since the City is responsible to pay all utilities and realty taxes.

  19. While there is a sharing of costs for Game Day Staffing, the cost to the City increased dramatically

  20. The Spits are given exclusivity in the entire Facility to sell hockey merchandise, the right to all revenues from the sale of game promotions, advertising and sponsorship for the entire Facility less a fee to the City of $25,000. Of course, the City gets the revenue from the Naming Rights except that the Spits get a commission of 6% of all such revenue if the Team was involved in obtaining such rights. I wonder if they got 6% of the Credit Union fees. Not a bad deal for doing very little.

  21. The Spits get all the revenue for the Pouring rights i.e. the fee paid to provide alcoholic beverages including advertising and promotion fees.

  22. The Team has the right to all media revenues

  23. A big deal was made about funding by the Spits of their Dressing Room. What was not said was that but for fixtures, everything else can be removed

The Spitfires did very well on this transaction as I am sure that you will agree. Effectively, they pay very little to rent to play hockey in the newest arena in the League. I must admit that I don't see a benefit for taxpayers but I do see us taking all of the financial risks on the Arena.

What was the need to build an arena for a private hockey club? Why didn't we just replace the public facilities with others? Interestingly it would appear that the rest of the Facility will subsidize the Sports Arena rather than the other way around.

I don't know about you, but this Arena lease just opens up more questions for me about everything to do with the whole Arena transaction from start to finish especially because of the so-called confidentiality that does not exist. I wonder if someone on Council will have the guts to demand a full and proper audit of the entire process from start to finish. Don't hold your breath.

Oh well, since we are in the airport business, the Tunnel business, the redevelopment business, one may as well add in entertainment and Sports Arena businesses too. Do you think I am kidding? There is one final term that I almost forgot to mention:

  • "the Team hereby grants to the City a right of first refusal to purchase the Windsor Spitfires Hockey Club to be exercised upon notice in writing from the City that another party wishes to purchase the Windsor Spitfires Hockey Club."

When the millionaire Spits owners decide to sell out, you can bet on the fact that the City will buy the Franchise because we have to protect our investment in the Arena. I can just picture that headline in my mind now too.