Thoughts and Opinions On Today's Important Issues

Monday, June 14, 2010

Michigan Legislators: "Stop Asking Questions On DRIC Forecasts"

Ho, ho, ho. Ha, ha, ha. He. he, he,

I have to stop laughing so hard. My sides hurt. I cannot believe what the DRIC-ites are saying. They are pathetic. From the absurd to the ridiculous.
  • "Finally, with Michigan having no financial cost or risk because Canada accepts all of that, it’s time to stop asking questions on the DRIC forecasts and start putting people to work!"

Seriously, that is what they are saying to the Michigan Legislators. Stop doing your job, act in a negligent manner and allow a foreign country to take over the main border crossing into your State, no questions asked.

Are they mad? Can they be that insulting? Are they serious?

Or rather, have they conceded that the gentleman from Wilbur Smith Associates failed in his mission in front of the Senate at the recent Hearings. He could not convince Senators that they should "trust" him with his traffic numbers. After all, he was forced to concede with respect to his firm's track record that 50% of the time they overestimated the traffic and 50% of the time they underestimated the traffic. In other words, read their huge disclaimer against liability for forecasting on their Refresher and wonder why they are being paid for anything.

However, the real reason that the DRIC-ites are so concerned about DRIC traffic forecasts is clearly that they are suspect. If there was no concern about them, then the gentleman from WSA would have answered several of the questions asked of him by Senators. Instead he said that he could not do so without getting permission from Canada first because after all it was THEIR report.

Of course, this means that MDOT has not complied with section 384 because they have not presented to the Senate an investment-grade traffic survey but rather a Refresher of some report prepared for Canada by WSA which report has never been made public. No one knows therefore what that report says, what the underlying assumptions are or what the results are.

It is all so secretive. AND SO BAD! No wonder the DRIC-ites do not want questions asked about it!

Naturally, if more questions are asked, say about the revenue forecasts, why that would be even more embarrassing to everyone. I'm still waiting for someone to tell me that my $200 billion figure for the "blimp" payment at the end of the 50 years is wrong i.e. the amount that would be owed on the DRIC bridge during the "ramp up period" of 50 years because at no time will the annual revenue ever exceed the annual financing amount. Money is Lansing-ized errrr capitalized and added to the outstanding principal forever.

I really don't want to go through the DRIC materials but I will do so once because the latest missive from them is so ridiculous that I am surprised that someone would actually distribute it:

1) Canada is taking no financial risk. Even assuming that money is going to be offered by Canada, which it is not, the amount of money being offered is to be paid back.

2) all that Canada has offered so far is a two-page letter which sets out no Terms and Conditions so no one knows what will happen in the end

3) we already know now that this money will not be paid by Canada but by some P3 operator as this will be rolled into the financing and requires an agreement with MDOT

4) "The infrastructure investment community considers the Wilbur Smith study wildly optimistic. There’s not a lot of confidence in the traffic demand study,” said Brian Chase, an investment analyst on large infrastructure projects for the Washington D.C.-based International Finance Corp., part of the World Bank Group.

Chase was formerly a financial/legal analyst with Los Angeles-based Nossaman L.L.P. which specializes in toll road issues, and later was with Washington D.C.-based private equity firm Carlyle Group."

Nossaman in case anybody wonders is the law firm advising MDOT.

5) even though the DRIC-ites keep saying it "absolutely no financial risk or exposure for the State of Michigan" they cannot prove that considering the section of the P3 Bill that deals with risk allocation. That provision in itself would allow for "availability payments." In other words, Michigan taxpayers would be at risk

6) even assuming that there was no financial liability on the $550 million, that is only about one third of the costs that would have to be paid out on the US side for the P3 DRIC project. That amount is at least $1.5 billion. Who is responsible for the balance... Michigan taxpayers presumably since most of the proponents who answered the RFPOI wanted availability payments not toll payments as the basis of them being involved in the project in the first place.

Oooops, the DRIC-ites forgot all about that extra billion dollar risk.

7) Canada can be so "confident" about WSA because it will be a P3 operator who puts up the money for the $550 million, not Canada.

8) DRIC-ites say

"Investment grade forecasts... are typically more conservative and rigorous than forecasts developed to determine whether there is a need for a project in the first place. Investment grade forecasts typically include data that takes months and months to gather and analyze."

WSA admitted that they did not spend months and months doing so but rather just did a "refresher." So much for their so-called investment-grade traffic study.

If this study is so brilliant, then why can't Michigan legislators see it? Why has it been hidden from them as well as from Canadians since I filed a Freedom of Information request and was opposed by the Government?

9) it gets worse for the DRIC-ites:

"For P3 projects with private financing, investment grade forecasts are used by governments to build their financial business case. In doing so, Canada is absolutely confident in the project’s need that it is ready to move forward with funding."

Canada may be confident but since MDOT has chosen not to release the revenue forecasts, how can Michigan be confident? If the financials are so positive, then what does MDOT, and Canada, have to hide?

If the WSA revenue numbers are $60 million, then explain to me please how a P3 project on the American side costing $1.5 billion can be financed without a huge increase in tolls that would drive away traffic or Government guarantess supported by taxpayers.

10) "Owned by Michigan – Built by Michigan Workers" Lots of a bald assertions made by DRIC-ites except he who has the gold makes the rules. Where is anything that they have suggested been put in a legally binding agreement.

Remember, that there was a big issue with respect to Canadian steel to be used in the United States in the past. US protectionism was viewed as an impediment to our steel being allowed into the United States. Guess whose steel will be used on this project if Canada puts in the gold.

"Canadian steel producers and builders say they have “grave concerns” about a U.S. proposal that would call on major public works projects to favour U.S. steel over imported metal.

“There’s no question about it that some of our members and even non-members export work to the U.S. and it’s a substantial part of their business,”

As I showed in the Baird interview, the only jobs that he talked about were for workers in Windsor and Essex County. Not a word about jobs for Michigan workers.

How good is the word of Canada and Ontario and their commitment----that $300M mentioned was to have been used for building the road to the Ambasssador Bridge. Ask them how much they spent on that road! Not a penny.

The DRIC-ites asked:

  • "Question: Now, with Canada taking all the financial risk, why are there still questions on the DRIC traffic forecasts?

Now you have 10 good reasons why!