Thoughts and Opinions On Today's Important Issues

Monday, June 14, 2010

How Michigan Legislators Got Fooled

Don't feel bad Michiganders. You need to understand how Canada operates so that you can look a gift horse in the mouth. Let me explain the technique.

You do not read the lines in a Canadian Government letter. You have to read what is between them to understand what Canada is really saying.

You do not listen to what a Canadian Minister says to Michigan politicians and the media in Michigan but rather what he says to the home folks in Canada to minimize the payment of $550M to a struggling US State which might not be able to pay it back.

And of course, you do NOT read what the traditional media say. You look to find what they did NOT report, matters that go to the heart of how Michigan taxpayers are screwed.


An offer, a loan, increased financial participation, call it what you will....Michigan will get none of it as a freebie. Riskless and a no-brainer, do not make me laugh.

A 2-page letter and a breathless Governor is all the House got for passing a P3 Bill. I wonder how little the Senate will be promised to pass the Bill? Or is Moroun vilification, father and son, enough?

Not a penny of cash from Canada (unless it is merely short-term bridge financing) since there will be no agreement on the terms and conditions of whatever it is that Minister Baird offered. Or rather NO agreement until after the Michigan Senate approves the P3 Bill and then MDOT and the P3 operator can agree with what MDOT determines in its complete discretion with no legislative oversight.

That's the game isn't it. Circumvent the Senate. Get the P3 Bill passed and Canada is home-free. And all it cost was to send a letter to the Governor. Canada gets to control all of Michigan trade and becomes an Instrumentality of Government of Michigan for much less than the $24 to buy Manhattan. The deal of the 21st century.

MDOT discretion includes matters of shortfalls and risks on construction costs overruns and toll revenues:
  • "SEC 7B.(14) FOR ANY INTERNATIONAL BRIDGE CROSSING THAT DOES NOT EXIST AS OF THE EFFECTIVE DATE OF THE AMENDATORY ACT THAT ADDED THIS SECTION, A PUBLIC-PRIVATE AGREEMENT FOR ANY SUCH INTERNATIONAL BRIDGE CROSSING SHALL INCLUDE RISK ALLOCATION PROVISIONS SPECIFYING THE RISK ASSUMED BY THE CONCESSIONAIRE AND EACH INSTRUMENTALITY OF GOVERNMENT THAT IS PARTY TO THE PUBLIC-PRIVATE AGREEMENT RELATED TO THE PUBLIC TRANSPORTATION FACILITY, INCLUDING THE RISK RELATING TO CONSTRUCTION COST OVERRUNS AND, AS APPLICABLE, TOLL REVENUE SHORTFALLS.

    BEFORE APPROVING AND ENTERING A PUBLIC-PRIVATE AGREEMENT FOR ANY INTERNATIONAL BRIDGE THAT DOES NOT EXIST AS OF THE EFFECTIVE DATE OF THE AMENDATORY ACT THAT ADDED THIS SECTION, THE DEPARTMENT SHALL ENSURE THESE RISK ALLOCATION PROVISIONS PROVIDE FOR THE MOST ECONOMICALLY BENEFICIAL WAY FOR THIS STATE TO PERFORM THE PROJECT, WHILE MINIMIZING LIABILITY FOR CONSTRUCTION COST OVERRUNS AND TOLL REVENUE SHORTFALLS FOR WHICH THIS STATE COULD BE HELD LIABLE, AND THE DEPARTMENT SHALL SUBMIT A REPORT TO THE GOVERNOR EXPLAINING HOW THIS MANDATE WAS FULFILLED."

How were Michigan Legisltaors fooled. It was easy to do . You had to read Baird's letter carefully and then you had to listen to what he said in Canada, not in Michigan, when it was explained.

Here's the letter:


Did you hear anywhere in Michigan about the need for a deal with a future private partner? We heard about the expectation that the US Feds would kick in several hundred million dollars but nothing about a P3 partner contribution. Canada will never have to put up a cent even though you thought it was $550M.

Here's the interview:




video


Note what was said around the 1 minute mark: "credit facility," the money will be part of the financing arrangement and will be rolled into the financing arrangment, the need for a P3 Bill. Again, someone else is paying or there is no deal at all. Canada puts up nothing even though you thought it was $550M

Here's the Canadian Transportation Committee comment:

  • Hon. Joseph Volpe: Did you ask the Auditor General whether that $550 million would pass her examination?

    Hon. John Baird: Well, the Auditor General doesn't give pre-clearances. She's the Auditor after the fact. She will not give a pre-clearance on any issue before government.

    Hon. Joseph Volpe: So did you ask the Justice Department whether it was a legitimate offer for you to make?

    Hon. John Baird: We're comfortable with it. I should underline that it's up to $550 million. It's not a loan to the State of Michigan. It'll be part of the P3 Project."

The Minister completely reversed himself! It is all part of a P3 deal, not a payment from Canada. Even though you thought it was $550M.

There, there...don't feel so bad. You learned.