Thoughts and Opinions On Today's Important Issues

Thursday, March 25, 2010

Why MDOT Needs P3 Legislation For The DRIC Bridge

Some Michigan Legislators are going to get very angry after reading this BLOG. Perhaps some people in Washington, DC too. Probably in Ottawa as well but for different reasons. I know I was angry when I was writing it since I felt I had been duped and misled.

I hate to admit it but I must in all honesty.

Public-Private Partnerships. A P3 for the DRIC bridge. What insanity. Except without such legislation the DRIC Bridge is dead in the water.

I get upset when I miss the obvious but it was my own fault. It has been staring me in the face for so long that I just ignored it. I was distracted. And that was part of the tactics. Distract us so they could try to slip something in without us knowing about it. It's an old trick and I fell for it.

But I bet that I am NOT the only one.

Oh I had my moments but my sin was not thinking it through. I just took everything I was fed at face value; I took it for granted and did not look below the surface to try and discover what was really going on.

Think about it. With the economic meltdown so money is impossible to raise, Moroun's competition (assuming the Governments still allow competition) and traffic at 1999 levels with little hope of growing quickly, who in their right mind would gamble billions of pensioners' or shareholders' or investors' money in a P3 DRIC bridge in Windsor/Detroit. The answer is: NO ONE!

Yet MDOT is pressing their Legislature for P3 legislation. Why?
  • "MDOT seeks Windsor-Detroit bridge partners

    Michigan's department of transportation has issued an official request for companies interested in being part of public-private partnership to construct new international bridge, plazas and feeder roads under a $5-billion government plan touted by the Detroit International Crossing (DRIC) team...

    The stage is being set to form a public-private partnership that will move the DRIC project forward, said Michigan's Transportation Director Kirk T. Steudle.

    "At this point, we are considering a model that would incorporate some participation by the private sector in financing, design, construction, engineering and maintenance," Steudle said.

    "Although we have not yet finalized what that model will eventually look like, we know there are a number of teams out there eagerly anticipating the start of work on this historic project that will create jobs and keep international trade flowing across the border as efficiently as possible."

It cannot merely be because they visited Australia and were convinced by the time-zone changes that P3s made good sense. There had to be more to it than that.

Heck, they could have visited Windsor to learn about P3s. Canadian Government officials could have travelled there to meet with the MDOT people since we are so experienced in them. And look at the Michigan taxpayer money that could have been saved too. I guess they were afraid to cross the Ambassador Bridge since then they would have learned how to operate a border crossing properly and used that experience in Port Huron.

That was the sign though, the tip-off and I completely missed it. What MDOT was doing made no sense. It was ridiculous. A P3 bridge would cost a fortune compared with the traditional way of financing a major project like this since a P3 operator wants a return of 13-20% on these types of projects.

The BC P3 Port Mann bridge project which the Australians, Macquarie, could not finance in the end was a classic case. The poor economy meant that the P3 money could not be raised and the Provincial Government had to take over the project. However, using the same contractors as the P3 company, the Province would save about a billion dollars in costs and would finish the project quicker.

So who needs P3s?

I wish I could say that I figured it all out. But I did not. However, the answer was handed to me on a silver platter. Guess who spilled the beans: MDOT itself!

I know, I know, you cannot believe it either but here it is except it is in relation to the Detroit Intermodal Freight Terminal project and not DRIC and not dealing with P3s specifically so perhaps MDOT was a bit more forthcoming. And careless:

No wonder MDOT's Bill Shreck could say this after the Bridge Company bought land upon which the DRIC Bridge would be built:

  • "A land purchase by Ambassador Bridge owner Manuel “Matty” Moroun has created a new complication for the Detroit River International Crossing project — but the Michigan Department of Transportation insists the plan for a publicly owned span won’t be derailed.

    Bill Shreck, a spokesman for MDOT, said the state can simply expropriate the land it needs if necessary.

    “We’ve gone through it a thousand times in a thousand places. It’s normal operating procedure,” he said."

MDOT must believe that they can get around the Michigan Proposition 4 constitutional amendments by expropriating the property in MDOT's name so they are the owner and "leasing" it via a P3 to a private bridge operator.

MDOT would not be expropriating Moroun's land to give it to another private party. Since MDOT is always the owner, even though it could be operated by a private party for up to 99 years, they feel they are not caught by the law. A P3 upfront payment effectively gives MDOT the purchase money too so it works out so well for them.

Of course, they cannot circumvent the law that easily but why spoil their fun.

Do you see what I mean? I am sooooo embarrassed I missed that. It was so plain. P3 legislation is absolutely required NOT for financing reasons but for eminent domain purposes by MDOT.

However, to redeem myself in your eyes, dear reader, I thought of another reason why MDOT is pushing for P3s: to get around the Dubai ports issue for Canada.

If Canada bought the bridge as PM Harper seems to want to do, then all hell would break loose with President Obama and Congress with a foreign Government, even friendly Canada, owning a key border crossing. But if MDOT owns it, even if it leases it to Canada under a P3 for 99 years with the automatic right to renew for another 99 years, who can get mad? An American State Government is the "owner" isn't it?

Now that is clever. Very clever. In fact, it is too clever for MDOT. They are not that good.

Here is another revelation although I am speculating now. I would bet that it was Canada who came up with the idea of getting around the legislation and the Dubai Ports issue since CANADA has so much experience in P3 deals. Moreover, it is Canada who is at risk if it was seen as controlling the crossing.

So hide the scheme by using Michigan. That is the only reason Canada has any interest in a State that cannot even afford to fix its roads and bridges.

Canada would have considered such an issue before, say in the proposed Tunnel deal with Detroit that Edgar (aka Eddie) was trying to achieve. That deal was a lease deal too with Detroit maintaining Tunnel ownership but with Windsor taking over management for 75 years. If it had been finalized, it would have been the precedent for what would happen with the bridge!

So please forgive me. I promise to try and do better. I will try to ensure that there is no "next time."