DRIC's $200 Billion Shortfall And Other Fun With Figures

Some math examples for you to consider when looking at the border file.

FINAL DRIC BLIMP PAYMENT

Did I make a mathematical error somewhere? I could not believe the results either. Has anyone else has done the math, especially at MDOT, and if they have, why they kept it secret from Legislators?

The last payment after 50 years would NOT be a balloon payment. Rather it would be like the Hindenburg. A huge blimp that will blow up Michigan's finances.

I wanted to see what the amount owing on the DRIC bridge would be after 50 years in the simplest way possible if the "ramp-up" shortfalls were "capitalized." After all, MDOT and Transport Canada told us in their handout:

• "Q. Are there years when there may be insufficient revenues to cover all costs?
  
  A. For such projects, there is normally a “ramp up” period of traffic and revenues during the initial years of a project’s operations. Any shortfalls will be capitalized and repaid in subsequent years. Over the concession period, projections show that there will be more than sufficient funds to cover costs, that is, Michigan will not incur any future financial liability.

You will want to see their numbers after I have done my math!

I did not want to go through amortization tables since frankly, little principal would ever be paid off as I demonstrated previously. I also wanted to be conservative.

So taking out a friendly Excel spreadsheet, I started off with a principal amount of $1.5 B, assumed that revenue would be $80M per year on average, assumed only a very low 12% rate of return, calculated the shortfall and added it to the principal and then started over again. I did this for 50 years.

Check out the spreadsheet here: http://www.scribd.com/doc/32704384/DRIC-payment-math

What does it show:

• the amount owing after 50 years would be almost $200 billion dollars if toll revenue only was used! That is on only $1.5B
• in no year would toll revenues ever equal annual payments ie the ramp-up would last for the full 50 years
• in the final year, toll revenues would have to equal $20B. I wonder what the toll amount per car would be to cover that
• after only 10 years, the section 384 time-period, the amount outstanding has doubled.

If my math is correct, then no wonder the WSA financing costs projections were never released! No wonder P3 proponents want "availability payments."

With the Governor gone and the MDOT Director in a new job, who would take the hit when the finances became public.

IBG...YBG!

TRUCK TRAFFIC WILL TRIPLE

Whatever happened to DRIC traffic will double between now and 2035 that we heard before.

Tripling sounds so much better but here is why. To make it easy to figure out and to get away from big numbers, do the following calculations.

Bridge traffic 1999----100 trucks

Bridge Traffic 2010----50 trucks (50%) decline

Previous DRIC number doubled---200 trucks

New DRIC number tripled---150 trucks (3 times 2010 traffic volume)

At its best, the new DRIC triple numbers are about what the DRIC engineers said could be handled by the Ambassador Gateway Project itself without a new bridge anywhere!

DRIC SCREWS WINDSOR

Our truck volume today is 100 trucks per day to take a simple example. That volume we are told is not good for this City.

Truck volume doubles over the next 25-30 years to 200 trucks according to DRIC projections.

The assumption in the past was that the DRIC and Ambassador Bridges would each take 50% of the traffic.

Windsor's 2035 numbers would be 50% of 200 trucks or 100 trucks. Or the same number today.

HUH!!! What did Windsor gain out of all of this?

TRAFFIC FLOW CAPACITY OF THE AMBASSADOR BRIDGE

Assuming that US Customs meets its goal to speed up the handling of trucks to say 30 seconds per truck rather than 2 minutes, how many trucks could the Ambassador Bridge handle today?

There are 13 truck lanes into the US today. Each lane could theoretically handle 2 trucks per minute, 120 trucks per hour, 2,880 trucks per day, for a 30 day month--86,400 and 1,051,200 per year.

Multiply that by 13 lanes and the total volume that can be handled is 13,665,600 trucks. Even the inflated DRIC numbers cannot reach that volume!

TOLL PRICES

Try out this logical thinking.

If DRIC costs $2B and the Ambassador Bridge Enhancement Project costs $500M and if tolls are to be used to pay down the costs, whose tolls would be higher and by how much?

Hmmm, I would guess that the DRIC tolls would be 4 times higher. If you wanted to spend a day across the border, would you pay $19 each way to do so, the cost for the DRIC bridge, making the cost for a return trip $38? Or would you rather pay $4.75 each way?

NUMBER OF MDOT PROJECTS TO BE POSTPONED AND JOBS LOST

Let's see, MDOT had to postpone 243 road and bridge projects because they did not have $84M to pay for them to get federal matching grants.

If MDOT has to pay out $250M per year for availability payments for the DRIC project, how many more projects will have to be postponeed and for how long?

If postponing the 243 projects resulted in a loss of about 10,000 jobs for 4-5 years, how many additional jobs would be lost because of the DRIC "availability payments?"