Thoughts and Opinions On Today's Important Issues

Friday, June 25, 2010

Can Baird Fool All Michigan Legislators All The Time: More DRIC Math

Seriously, would you buy a used car from John Baird? Or a bridge in Windsor/Detroit?

I had to do the above spreadsheet to try and figure out what Transport Minister Baird was telling us. It sounded too good to be true .

You may check it out here as well.

I did an edit of the DRIC-ite video so that you could see and hear what the Minister said. If you can figure it out, then explain it to me.

We used to have a political party in Western Canada that advocated a theory nicknamed "Funny Money." The Conservative Party had its roots in Western Canada as well. Listening to Baird's financial explanation, I can only call this "Hilarious Money economics."

Here is what Baird said. I fisked it too:

  • Canada will provide up to $550M [only for "components" as Baird's letter sets out, nothing else]
  • to a Bridge Authority [not mentioned in the Baird letter so someone dreamed this up at the last minute]
  • Bridge Authority will be responsible for paying any shortfalls between toll revenues and availability payments [so this is an "availability payments" regime after all. HUH...if the only revenue of the Authority is toll revenues, how can it pay any shortfalls. It will be in default after the first payment . Then what?]
  • funding is not a loan BUT is repaid solely from future toll revenues [Sure looks like a loan with the repayment requirement. As the spreadsheet shows, there will always be a deficiency]
  • Canada will be repaid by the Bridge Authority from future toll revenues [I still cannot figure out how this works with a $12B deficiency after 50 years]
  • Since it is not a loan there is no obligation on Michigan or Michigan taxpayers to repay the Government of Canada [But it s a loan and there is a shortfall. How is that handled?]

This is a make it up as you go along piece of financial nonsense. It is not believable. How can the DRIC-ites say what they do? Do they not respect the facts at all?

Anybody who can do basic math understands that this loan, which is not a loan, can never be paid back.

Do you think any rational investor would be interested in making a payment in these circumstances? Do you think that any rational investor would make a loan to a Bridge Authority whose only revenue to pay back the money is toll revenues which will never be sufficient? Do you think that any rational investor would have any interest whatsoever in doing this deal without an absolute guarantee of payment from the Governments involved including Michigan?

This could be the Baird stratagem in the end---Michigan does not pay money to Canada directly but rather pays the money as a guarantor of the Bridge Authority! Smart eh!

This is nothing more than trying to pull the wool over Michigan Senators' eyes in order to get the P3 Bill passed. It is nothing more than to get the "Canada provisions" into law especially the section that makes Canada an "Instrumentality of Government of Michigan" that can deal with every significant transportation facility in the State.

Once the Bill is passed, Canada and the private party can negotiate anything they want with no legislative oversight whatsoever. There is nothing at all that prevents Minister Baird changing the deal completely at that time. MDOT has built in conveniently section 7B (14) that CAN put the State at risk for "availability payments."

Baird's letter and what he said at the hearings are NOT legally binding whatsoever.

This is absurd. This is insulting. This is nothing more than an attempt by Canada to put Moroun out of business.

Does the Minister believe that everybody is stupid?

As the Better Business Bureau has said: if it sounds too good to be true, chances are it is.


Now about that other billion dollars of P3 money for the bridge, who pays for that? And how?