Thoughts and Opinions On Today's Important Issues

Monday, March 01, 2010

Why Did Canada Do It

I have written about this subject before but Canada's role has always troubled me. It made no sense when this is an MDOT matter.

Just like Transport Canada under John Baird, just before Deputy Minister Louis Ranger resigned, when they decided no longer to play the game that they were NOT trying to force Matty Moroun out of business, I guess Canada's realists in Ottawa do not care now if their role as co-conspirator with MDOT comes out. How else to explain the so-called MDOT RFPOI for P3ing the new DRIC bridge with their name and fingerprints all over it.

Who gives a damn what Michigan politicans say---or the Canadian Senators--and taxpayers on both sides of the border want. Who cares that money is tight, Canada has a 50-year agenda to complete already. They have to beat Moroun now or it will never happen. He will get his bridge and it is game over. They fooled him once on the FIRA settlement when they really "retreated" not settled only to arise again a decade later to try again.

It is just like Canada is daring the Americans to do something to stop us. Heck we supply them with oil and energy as Harper said so what are they going to do about it? Invade us, or impose tougher protectionist measures? Our own Government has killed our manufacturers already. What more can the Americans do!

Let Obama worry about medicare, 2 wars and jobs; Canada can sneak in under the radar and take over the Central North American crossings using P3s as a front. Dubai Ports...who will guess.

As for Moroun, who cares if he sues. What's another lawsuit or six? Canada will buy him off in the end if they cannot crush him, or his son, with lots of cash if things gets too tough. In the meantime, demonize him and say whatever you want with impunity about the border and DRIC, even if it is an absolute lie.

When the real DRIC P3 costs come in at $3-4B for the DRIC road and a similar cost for the plazas on both sides and bridge, that will provide the justification needed for buying out Moroun and then building a cheap DRIC road, upgrading E C Row and building the second crossing exactly where Moroun wanted to build his Enhancement Project bridge. Just like the twinned bridge in Sarnia/Port Huron and what is proposed at the Peace Bridge in Buffalo/Fort Erie.

Let us take a look at a few sections of the RFPOI that are supposed to encourage all of these P3 investors so that the Michigan Legislature will allow DRIC to go forward:

1) "Individual firms or teams interested in responding to this request (“Respondents”) are invited, on a non-binding basis, to express their interest in the project.

MDOT and TC are looking forward to the feedback of the private sector in response to this RFPOI. The responses will be used in developing governmental policy, in structuring the procurement process and the project agreement, as well as briefing the legislative branch of the State of Michigan and the executive branch of the Government of Canada.

This is nothing more than a public relations exercise designed to fool Legislators that someone is interested in the project. Tell investors there is no guarantee and that they will have to compete with the Ambassador Bridge whose tolls will be 2 to 3 times lower and see if anyone bites.

2) It is anticipated that one or more public - private partnerships will be used for the delivery of the remaining four primary elements.

More than one makes no sense since the crossing would be divided into a Canadian and American section. That makes it impossible for Canada to control the crossing on both sides of the river. Otherwise, Canada is replacing one "Moroun" with "another Moroun."

3) The project is needed to address future mobility requirements across the U.S.-Canada border. More specifically it is needed to:
• provide new border-crossing capacity to meet increased long-term demand;
• improve system connectivity to enhance the seamless flow of people and goods;
• improve border operations and processing capability in accommodating the flow of people and goods; and,
• provide reasonable and secure crossing options in the event of incidents, maintenance,congestion, or other disruptions.

All can be done with the Enhancement Project Bridge just as easily and more cheaply considering that there is no capacity issue, the Ambassador Gateway project is almost done with easy connections to the Interstate system, an extra lane in each direction improves flow and the second bridge provides redundancy.

4) In addition to the need of the additional capacity, the Final Environmental Impact Statement for the Project mentions that the development of the DRIC does not appear to threaten the viability of other border crossing, including the Ambassador Bridge, the Detroit-Windsor Tunnel, and the Blue Water Bridge.

[Let's see, a new crossing fighting for volumes that are about the same now as they were in 1999 with no expectation of them increasing rapidly in the near future.

Let's see, the Tunnel pays no dividend now to Windsor as an example and somehow it won't be impacted negatively when traffic is taken from it by the DRIC bridge?

Funny, I recall the US DRIC Engineers saying that the new bridge would take traffic from the other crossings and that could make their financial future iffy:

  • "DRIC predicts an initial loss of traffic for the Blue Water Bridge in Sarnia, the Detroit-Windsor Tunnel and the Ambassador Bridge.

    Blue Water would see a seven per cent decline in cars and 16 to 18 per cent drop in truck traffic in peak travel periods when the new bridge opens. The tunnel would take a 20 to 26 per cent hit on cars. The Ambassador Bridge would see a 30 to 39 per cent drop in cars and 54 to 75 per cent drop in truck traffic, depending on the location of the new bridge."

This is very similar to what Mark Butler on behalf of Transport Canada said years before. As I Blogged:

  • "Transport Canada says it doesn't believe the other area border crossings will suffer long-term losses.

    "We don't see them closing up," said Mark Butler, a spokesman for Transport Canada and DRIC."

    [Of course they are not going to close up since that would devastate the economies of Ontario and Michigan! But they would operate at a loss if another crossing fought for traffic that was not growing as projected by DRIC but was stagnant or decreasing overall.

    What Mr. Butler did not say makes my pocketbook ache: Taxpayers are not only going to get stuck for paying for the billions of dollars of cost of the DRIC project, we are going to subsidize the losses of the other crossings and may have to pay damages in a lawsuit! The Sarnia Bridge cannot close down because that would kill the automobile industry that the Governments have been so eager to attract to Ontario. Eddie would go ballistic and so would the City of Detroit if the Tunnel went out of business. Like it or not, the Ambassador Bridge will sue "If government expropriates anybody's business."]

What is also very interesting is that support for this statement comes from this Report "DETROIT RIVER INTERNATIONAL CROSSING STUDY TRAVEL DEMAND FORECASTS" prepared in 2005. I must admit I could not find that support in the document unless you still believe in fairies or these long discredited traffic volume numbers:

  • "At the Detroit River crossings, passenger car traffic is forecast to increase from 12.0 million vehicles in 2004 to 18.7 million in 2035 (a 57% growth), while truck traffic is projected at 8.1 million vehicles in 2035 from a 2004 base of 3.5 million (a 128% growth). The overall result is a 73% increase in total road-based traffic over the study period."

Yes, our volumes are now at around the 1999 levels. so much for that traffic forecasting. But here is the real hoot:

  • "The results show that the Ambassador Bridge has adequate capacity to accommodate growth in cross-border traffic until approximately the year 2020. The lower capacity limit indicates that bridge traffic operations will become unstable by approximately 2011...

    Taking the access/egress road system as a whole, it is projected that capacity will be reached (i.e. level-of-service F), by approximately 2010, although localised intersection improvements at critical locations could potentially extend the timeframe before capacity reached by several years."

DUH....sorry guys. It is 2010 now and are you ever wrong. How can this document be given to poor unsuspecting P3 investors!

Here's the killer for traffic volumes from the report and why a new DRIC Bridge could mean financial difficulties for crossings without a government subsidy"

  • "7.1 Travel Demand

    The Base Forecast traffic volumes, summarised in Exhibit 7.1, project a 58% increase in passenger car traffic and a 128% increase in commercial vehicle traffic between 2004 and 2031. The projected passenger car growth reflects the fact that much of the historic growth in passenger car travel was fuelled by two major phenomena. First, the crossborder shopping phenomenon in the late-1980s/early-1990s saw tremendous growth in same-day recreation trips to the US. This was followed by the opening of Casino Windsor in the late 1990s, which also resulted in a large increase in cross-border traffic. In each case, these types of movements have declined significantly from the original peaks due to several reasons including 9/11, SARS, North American political and economic conditions (i.e. security, production, exchange rate), the continued integration of consumer markets and the opening of three casinos in Detroit. A return to these levels is not expected in the future. As such, after a near-term rebound from the recent excessively steep decline, future growth of passenger car traffic is expected to be more in line with the projected population and employment growth in the Windsor-Essex and SEMCOG areas.

    In the last thirty years, commercial freight movements across the Detroit and St. Clair Rivers, in particular trucking movements, have increased at a very substantial rate. Between 1972 and 2000, the Ambassador Bridge experienced a five-fold increase in truck trips. Commercial vehicle movements for the Detroit-Windsor Tunnel remained relatively stable; however, commercial vehicles represent a very small portion of the demand for this facility. Between 2000 and 2004, truck traffic has undergone a decline and rebound, such that current volumes are about the same as those in 2000. The commercial vehicle forecast assumes a continuation of sustained economic growth in the US and Canada, with trade between the two countries increasing at a higher rate than overall economic growth, consistent with the increasing trade ties that Canada has with the US and the rest of the world."

Oooops I guess they did not take into account in 2005 the chance of a disaster that hit the auto industry, the big users of the bridge.

5) In the interest of facilitating the construction and financing of this project, TC and MDOT are considering utilizing public-private partnership delivery approaches. An agreement (Concession Contract) between the joint partnership and the private sector partner (Concessionaire) will outline the roles, responsibilities, policies, procedures, reporting requirements, operating standards, etc., of the Concessionaire, as well as the obligations of the owners...

Approvals and permits pursuant to the mitigation program in the ROD and independently required by state and federal agencies remain to be acquired. Principal among these is the Presidential Permit required for a new international crossing by the U.S. Department of State. MDOT will seek this permit. The State Department has indicated that permit conditions include approval of the project by the Michigan Legislature."

Of course, no one mentioned that Michigan cannot enter into such a deal legally nor did they mention what the State Department has already written about the DRIC Bridge location.

6) Cost of all of this
How the heck can this be financed with tolls from users? The Cost Exhibit ensures that it cannot be. But no one told that to the P3 investors

That is why separately Transport Canada's Mark Butler said:

  • "We are continuing our discussions with Michigan on governance issues and financing issues,” said Mark Butler, a Windsor-based spokesman for Transport Canada...

    Butler said the Canadian government would prefer that the new cable-stayed or suspension bridge be undertaken on the basis of a public-private partnership. But he said this approach is not yet set in stone."

Now you know why it is not set in stone. But it gets even worse:

  • "Given the anticipated tolled nature of the border crossing, MDOT says there are several public-private partnership models ranging from real tolls to availability payments that could be applied to the DRIC under current market conditions."

What a joke...from real tolls to phony tolls ie payments support by either direct Government payments or guarantee or subsidies. All at extra taxpayer expense forever! They dare not say that in the RFPOI because then the Legislator who reads it would knwo that this is a financial disaster.

"Current market conditons" is a euphemism for saying there is no way that a "real toll" bridge could ever be considered because of

  • the multi-billion cost which would drive users away

  • economic melt-down,

  • lack of infrastructure money and
    competiton from the Ambassador Bridge whose tolls would be 1/4 of that of the DRIC bridge.

Oh well. This document is just another that will become key as litigation moves forward. The question I have is why Canada is making it so easy for Moroun. There is more behind this than meets the eye. I think I may have an explanation.

However, you will have to find it in my next border BLOG disclosing what I just learned by reading Canwest newspapers.