BLOGEXCLUSIVE: Was There Ever Any Money To Do The Tunnel Deal

Did the City of Windsor ever have $75M to do the Tunnel deal with Detroit in the past? If not, has Infrastructure Ontario now put up that amount so that all that must happen is that the Mayor of Detroit calls our Mayor to start up the deal-making again? If not, why has almost $2M been spent in legal and other fees by taxpayers? If not, what is the purpose for all of this? More importantly, who knew what and when!

Keep on reading. You will see documents you have never seen before that will shock you and will lead to questions for which you, dear reader, ought to be demanding immediate answers from our City leaders. No excuses. Truthful answers only. Right away.

Councillors Halberstadt and Marra may be prepared to wait for a year or so for answers from our Mayor/Chair of the Tunnel Commission but we ought not to do so. It is time that they got some guts and started demanding answers to their questions on the Tunnel deal!

They and their colleagues cannot be so weak any more. Windsor cannot afford it. Halberstadt and Marra must ask their questions again publicly at Council on Monday and demand that Eddie provide the answers on the spot. They must not let him off the hook.

Heaven forbid, it looks like the Tunnel deal may be started up again. Oh my aching wallet, more money to be spent unless this thing can be stopped right away.

I note in the Detroit media that:

• “Other issues ahead for the [Detroit] council include:
  
  • The city's deficit, which could be as high as $300 million. Cockrel's staff said recently that a deficit elimination plan could be submitted to the City Council within the next two weeks. Layoffs and proposed sales of multiple city assets, such as the Detroit/Windsor Tunnel, are expected to be core components."



• “City Councilwoman Barbara-Rose Collins said fixing the mess will require measures she once opposed, such as selling Cobo Center to a regional authority and the city's half of the Detroit-Windsor Tunnel.”

In addition, here is some frightening news that scares the heck out of me when thinking about the transaction. Can you imagine now if the deal had been signed. Guess whose head would be on the block and who would be blamed:

• “Detroit, in financial crisis, can look to San Diego
  
  Extracting Detroit from a junk bond credit rating will require difficult, painful steps to finally balance the city's budget and untangle its financial records, government and financial officials said Wednesday…
  
  Standard & Poor's downgraded Detroit's rating Tuesday...
  
  The downgrade carries severe consequences for the city. Besides higher interest rates on the city's debt, depriving the budget of money to fund services to residents, it also could force the city to pay $400 million to investors with certain deals with the city.
  
  Those deals enabled the city to get a lower interest rate on certain debt -- with the catch that if the city fell into junk bond status, it would have to repay whatever savings it derived from the lower rate, an amount estimated at $400 million.
  
  Daniel Cherrin, spokesman for Mayor Ken Cockrel Jr., said the city is consulting with its financial advisers and attorneys about the downgrade and is putting together a plan to avoid having to pay the sum, which experts say could force the city into bankruptcy.”

Some very tough questions need to be asked on both sides of the river and the questions that need to be answered forthwith.

The assumption on the Detroit side seems to be that Windsor is still in a position to do a deal with them. After reading this BLOG, someone on the Detroit Council or their Mayor needs to ask Eddie Francis exactly how much money Windsor has been offered by Infrastructure Ontario to complete this transaction with Detroit. I would be very surprised if the amount is anywhere near what Detroit thinks it is.

From Windsor’s perspective, someone on Council needs to ask the Mayor why the City should enter into a transaction with Detroit. It is one of only five cities in the United States who “have junk bond credit ratings from Standard & Poor's” and whose deficit is at least $300 million, a 50% increase from the amount that the former Mayor was dealing with. Why do we want to do a loan transaction with a city that is verging on bankruptcy and whose rating has just been downgraded?

Infrastructure Ontario needs to be asked by politicians at Queen’s Park why they would even consider such a transaction when Ontario has its own infrastructure problems. Someone needs to ask the question whether money is still available knowing that is going to a City in the United States in financial crisis and that Windsor is facing severe economic problems that could also result in a default in the transaction.

Taxpayers need to demand that Windsor Councillors stop this madness right away and if not why not! We ought not be paying any more money in legal and other fees. Almost $2 million is enough already.

What did we get for that money and was it worth it? You may get pretty angry by the time you reach the end of this BLOG so make sure that you do not have any hot liquids near you that may spill over. I do not want it to be responsible for you getting burned.

If one goes by success, then this was another failure by the Mayor. It shows that he is incapable of executing a transaction. Unfortunately, there is nothing to show for the $1.7M since no deal was completed with Detroit.

However, there seems to be a silver lining to justify this spending although it is hard for me to understand the comment of Council Valentinis:

• "But unfortunately when you are trying to protect your interests it simply becomes necessary."

Eddie repeated the comment by saying:

• "The costs incurred are necessary in order to protect the asset."

On Face-to Face, Eddie said:

• "For us, the driving, the driver force, the driving force behind the discussions was that we cannot afford to have this entity, the American half fall into private hands because of the…consequences.

Can somebody please explain to me how spending all that money achieved the result of protecting the asset? The deal had nothing to do with Windsor's asset----it all had to do with Detroit's asset. Nothing has changed after spending $1.7M except taxpayer money has been wasted. Even after the deal was done, Detroit could still sell the asset. Windsor was NOT buying it.

Presumably, the asset is still available to a third party if someone wanted to get control of Detroit’s half of the Tunnel. In that respect, Valentinis and Francis still do not understand that they have failed to protect at all. In fact, I would not be surprised to see it being offered by Detroit as collateral for Detroit creditors with credit swap agreements given their extra $400M exposure because their credit rating dropped.

Oh I do remember the comment about someone cementing up the Tunnel. That took a very fertile imagination to think that someone would spend millions and then destroy the asset. At least now our Mayor has condemned P3 investors so we know that we will never get a P3 DRIC bridge in Windsor because the Mayor will use all of his resources to adamantly oppose it:

• "He reiterated his concern that investors such as Ambassador Bridge owner Matty Moroun or private infrastructure funds could make a bid to take control of the Detroit side of the tunnel."

Poor Eddie, he just cannot get the Bridge Company Owner out of his mind! He is so fixated on him.

I do have a bit of trouble understanding the mathematics of the legal fees. I know it is a minor detail but it is those minor details that interest me. The Star story claimed:

• "Legal fees have risen about $375,000 since March, when the city said it had been billed $1.3 million by lawyer Cliff Sutts, according to a report prepared by Mark Galvin, executive director for the tunnel commission."

However, in a previous Star story, the following was written:

• "Legal fees hit $1.2M in city's tunnel talks
  Windsor Star 04-05-2008
  
  The city has spent $1.2 million in legal fees to date as it attempts to negotiate a deal with Detroit over control of the U.S. side of the Windsor-Detroit tunnel."

So which is it? Is it $1.3 million in March or $1.2 million in April? Surely if they cannot do the mathematics on this, one has to question the mathematics of their business case, especially since they seemingly forgot that, if the DRIC bridge is built, the comment was made that about 25% of the Tunnel traffic would be lost.

Do you remember what Cliff Sutts said:

• "Residents and council in Windsor will soon be privy to more details of the multimillion-dollar transaction, Sutts said."

How many months ago was that? Apparently that "soon" may take much longer than I thought. As you will see below, I asked under a Freedom Of Information Application for certain documents to be disclosed by Infrastructure Ontario. Some "third party" opposed the release. Now I have to appeal and that will take months for a decision.

You see I had some questions:

• How much was the City going to receive from Infrastructure Ontario as a loan, $75M or less and if less, how much less


• If the amount was less than $75 million, why would Eddie want to go on with the transaction when that amount might not solve Detroit’s budget woes


• Did Eddie tell anyone about the amounts he was going to be loaned and if so whom


• When was the Infrastructure Ontario transaction put on hold and who was told that and when


• What does the new Mayor of Detroit know about the amount of the loan that Windsor was to receive?

The most simple transactions in Windsor seem to be complicated all out of proportion as they move along. I am not sure of the reason for it but given the experience of contract negotiations in Windsor on a major transactions, every time one happens it makes me nervous.

Why am I asking these questions?

The Blogmeister has found through the FOIA directed to Infrastructure Ontario some startling new documents that demand an answer from our Mayor. I was advised recently that Infrastructure Ontario has refused to provide certain other documentation and a key piece of information because a "third party" has refused to allow the information to be released to me.

Since the only parties who could be involved in the document request were the City of Windsor, Windsor's new Tunnel Corporation and Infrastructure Ontario, I am certain that you can make an assumption about who the third parties were who refused permission to release the information.

To me, it is shocking since the "old" Transaction is over and done with as the Detroit Mayor has stated yet the "third party" still wants to keep the materials hidden. I cannot think of a reason why it should continue to do so. The "third party" believes I am told that to give out this information would weaken its position.

However, as was said in the Star story:

• "Francis said he does not anticipate additional legal fees related to the tunnel talks in the near future.
  
  Valentinis hoped the legal fees were nearing the "tail end."

It is important first that you take a look at the key documents. I will comment on each.

This first document is interesting because it suggests early on that Infrastructure Ontario might have a problem with the transaction and so sought the support of the Ministry of Transportation, the DRIC Road people.

One can wonder whether there has been some wheeling and dealing with respect to the DRIC/Greenlink issue that may result in a payment perhaps from the Province so that the Tunnel deal can be done. If Eddie gives up on Greenlink after being made to appear as our Saviour as an example, would he get money from the Province for the Tunnel deal? Who knows? Mind you, $75 million is mere chicken feed in a $5 billion plus DRIC transaction.

Note that part of the document has been "redacted." Must be something really serious there. The key point to notice is that Infrastructure Ontario would not make a loan for the purposes of making a loan. In other words, neither the City nor the New Tunnel Corporation could borrow money and then immediately loan it to the City of Detroit for its half of the Tunnel.

That may explain why the Loan Application was made by the Tunnel Corporation to acquire the Canadian half of the Tunnel from the City and it was then going to pay off part of its promissory note to the City for $75M. Presumably then, the City was going to turn around and loan the money to Detroit.

One may question whether this transaction was possible at all since it was doing indirectly what could not be done directly. Moreover, there is a question in my mind whether the City of Windsor, if that is how the transaction was going to be structured, has the municipal power to loan money to a foreign city. I am not certain if the Regulations passed previously by the Province contemplated this type of a transaction. It may therefore be one that the City cannot entertain.

Now we are getting to the nitty-gritty. Note the important piece of information that was redacted again.

HOW MUCH WAS THE AMOUNT OF THE LOAN OR THE RANGE THAT WAS BEING OFFERED BY INFRASTRUCTURE ONTARIO?

Presumably, that amount was not $75 million or the letter would have been drafted to say that. It sets out how much money was being asked for. There would be no reason to set out a range of amounts if the full amount was to be loaned. If $75 million had been granted, then there would be no reason for "the third party" not to allow that amount to be disclosed. After all, there would be nothing to hide.

Shall we assume therefore that the amount was less and perhaps significantly less than what was asked for? If you will remember, I did a BLOG on this and speculated that the range might be around $15-20 million or so. Was I right or wrong? Unfortunately until the Privacy Commission appeal takes place, probably four to six months from now, we will not know assuming that I am successful. Otherwise we will never know until Cliff Sutts tells us.

The final document is interesting because it now appears that MTO is the party that may have an interest in the Tunnel deal. It also appears that the loan application to Infrastructure Ontario was put on hold pending further direction from the Tunnel Corporation.

In passing, what is very strange to me is that there is no documentation in writing between the City and Infrastructure Ontario putting this transaction officially on hold in July. This is the most bizarre way for government entities to act on a $75 million transaction. There may be a reason for this but frankly I don't understand it. Perhaps the Auditor General better see how Infrastructure Ontario carries on business.

From these documents, we can see that there seemed to be a question whether Infrastructure Ontario could do the transaction at all, and that might be why MTO was involved. The assumption that I am making is that the amount of the loan that Infrastructure Ontario was prepared to make was less than the $75 million asked for. My assumption again is that the amount would be significantly less or why else would the transaction be put on hold at this time.

The fundamental question that I have is why this transaction went forward and negotiations continued if the amount was less than the $75M. Why was time and money being wasted? Was the deal on or off?

If the deal was on hold in May, why was Windsor Council only "stepping back" in July? If it was "on hold," why were there negotiations and over what? When did negotiations actually cease. We do know that there were actions on the transaction until around the end of July at least.

I do not understand why negotiations would continue if the $75 million was not going to happen? Detroit needed that amount of money. Why were legal costs incurred from May to July?

As I said, it appears from the Infrastructure Ontario records that this deal was put on hold at the end of May. If that is the case, then why did it take so long for Windsor Council to know that? It appears that it was not until mid-July that Council made the decision to put the transaction on hold. And yet, there were still negotiations but in secret as my previous BLOGs set out.

Was Council ever told that Infrastructure Ontario was only prepared to extend a loan of less than $75 million and was Council told the exact amount? Note that Mr. Sutts said he had authority to continue speaking with Detroit officials. Were Windsor Councillors told for example that Detroit would take less? Otherwise, why would they want legal fees to keep on being incurred if the deal could not go forward?

Here is what I wonder now. Does the City of Detroit know that Infrastructure Ontario may have offered less? It would seem to me that if their deficit is about $300 million and that they think that they are going to get a significant amount of that from the City of Windsor transaction, then they are in for a big surprise.

Wouldn’t you expect that Eddie would tell the new Administration in Detroit what was going on? After all,

• "Francis also said he has a good relationship with U.S. attorney Saul Green, who on Wednesday was named Detroit deputy mayor.
  
  Francis said they previously worked at different offices of the same law firm."

We need answers and we need answers now. There is no reason to keep secret the amount of the Infrastructure Ontario loan any longer. If it is less than $75 million, Detroit will hear about it sooner rather than later once negotiations start again if they ever start.

Do the Councils of both cities know what the amount of the Infrastructure Ontario range is? If so, why is that information being kept from citizens on both sides of the river?

Who knew what and when? This is a $75 million transaction that makes no sense on the face of it especially given the huge amount of the legal bill. This secrecy is shameful and a disgrace. What took place between March or April and today that justifies an increase in legal fees of anywhere from $375,000-$500,000.

In a different context in this strange file, Cliff Sutts stated:

• "We feel it's necessary to put the record straight...
  
  We feel we need to reveal the facts...
  
  The facts are the facts -- and they can't change them."

I agree. I trust on Monday our Council will ensure that Windsorites get the facts!