Thoughts and Opinions On Today's Important Issues

Thursday, June 24, 2010

Should MDOT's Captain Kirk Resign

Frankly, does he have any other choice? It is the honourable thing to do.

Hey, didn't I just start off another BLOG this way the other day? Amazing what is happening on both sides of the border.

The MDOT Director's position has been completely undercut by Transport Canada's John Baird's attendance at the Senate hearings. The Minister made a complete fool out of Director Steudle on several key isssues that Senators were interested in. I was in shock listening to what Baird had to say and felt sorry for Director Steudle. His credibility on the border crossing topic in my opinion has been severely damaged.

Given what I write below I would think it that it would be impossible for him to appear in front of Legislators again and expect to have the kind of relationship he had before with them.


That section was very clear:

  • "(2) The department shall submit an investment grade traffic study to the legislature by May 1, 2010 from a reputable traffic company with appropriate experience intended to provide a detailed traffic projection for the ensuing 10 years, taking into account projected infrastructure modifications, expansions and improvements announced."

I have written enough times that in my opinion MDOT did not comply. All that MDOT did was submit a refresher of a 2008 Canadian report that has never been released publicly. That was no investment grade traffic study except to the Director who kept saying that it was.

At the hearing, Canada confirmed that it was only a second level report prepared by Wilbur Smith, not an investment grade traffic study. That kind of a study would only be issued immediately before a Request for Proposal would be sent out to possible investors.

The Director did not tell the Legislature this fact. The WSA report did not meet the requriements of sec. 384. There is no excuse for his non-compliance.


Did you ever hear the Director tell us that availability payments would have to be made? My goodness gracious, there was certainly enough money according to the Director to pay off all the costs including financing cost from toll revenues.

  • "MDOT officials argue that under legislation currently pending in the Senate, the state would sign a public-private partnership (P3) agreement with a third-party investor who would upfront the cost of construction on the pledge they could recoup their costs over time with the toll money.

    If an investor doesn’t believe he or she can make the numbers work to take the risk, they argue MDOT would not get any bidders, but the interest they’ve received to date would not indicate that is the case."

DUH... the vast majority of the RFPOI responders said they wanted availability payments because toll revenues would not cut it.

However, the overly optimistic Director expected that the couple of potential investors who said that toll revenues would be sufficient would force the other respondents to change their minds

Remember this:

  • "Two of the interest bidders on the project said tolls could finance DRIC, and Steudle believes that is enough to get other companies to... [Crains story did not complete the sentence online]"

Presumably the sentence would have said something along the lines of "change their position."

Well, availability payments are in and toll revenue payments are out. Notwithstanding the convoluted remarks that the Minister made, it was very clear that Canada believes that availability payments are essential. Remember, the Border Authority makes the profits and is responsible for any shortfalls.

Canada should know the financial results because the Minister claimed that the project was financially viable. He must have the figures but it does not appear that he ever shared them with Captain Kirk or the Senators. Or is that viability based on the overly optimistic WSA traffic numbers and unrealistic costs so that is why they are not being released?


I'm so pleased that Canada's $550 million is all accounted for but what about the billion dollars to pay for the US half the bridge that is also going to be P3ed. What is the arrangement for that and is Michigan at risk? I wonder why no one has talked about that including the Director, or should I say, especially the Director.

Canada's contribution only applies to one third of the cost of the project.

Has the Director done the calculations to ensure that there is enough money in total revenues to pay off the $550 million as well as this $1 billion? If not, why not and why has he not talked about it?


What are they? Financing, maintenance, HR, operational, reserves etc etc etc

Transport Canada must have the cost figures because the Minister said very clearly that the project is financially viable. Does Captain Kirk have those numbers? If so, why hasn't he released them? Why has he only released the revenue numbers? It appears to me that the only inference that can be drawn is that costs are higher than revenue as I showed in my spreadsheet. If they were not, don't you think that they would be shown to everyone by now?

What if Captain Kirk does not have the numbers? Did he ever ask for them? If he did and his request was refused, don't you think he should have told that to the Senators so that they would be fully informed? If he did not so advise them, is that proper on his part?

What if he never asked for them in the first place nor did his own calculations? If that is the case, then how can he possibly say that toll revenues would exceed costs? He has no basis for doing so. Would that be improper in saying that without information that supports his position? He would not be fully informing Senators so they could make an informed decision.


What Bridge Authority? Where did that come from all of a sudden? I don't remember the Captain talking about that in media reports in such detail. Is it a done deal already without discussion by the Legislators? Is that how the P3 Bill will work in future?

Obviously, that was a big deal for the Minister because presumably that is how Michigan is going to be shielded from liability and at least with respect to the $550million. Why the Minister even told us how that Authority would be structured.

Now I am very suspicious about that so called Authority. I did not hear the Director talk about it with the specificity that the Minister did. Or was he hiding that one as well to be brought out as required, or if required? Moreover, the Baird letter states that the future private party has to be involved in governance issues.

The reason I'm so suspicious about it also is that I did not see one word about such an Authority in the Minister's letter. Look for yourself.

Did the Director know that the Minister was going to talk about this at the heaing? Frankly, what the Minister said was so confusing I don't think that he understood either what he was saying as he was reading the speech himself.

Note that there was a suggestion that any revenue shortfalls might be paid by Canada but presumably the maximum amount that Canada would contribute would be $550M. What happens after that? Did the Director tell anyone what the consequence would be, especially if there was a default?

I am not sure though that Canda will pay for "shortfalls" in any event since the letter talks about payments for "components" only and a shortfall is NOT a component.


To be direct about it, that is how I feel. Canada, MDOT have no clue what they're talking about right now. They will say and do anything to get the P3 Bill passed even if it makes no sense whatsoever.

That is not how a Government Department that spends so much money annually and has major contracts should be operating.

  • A loan not a loan but must be repaid,

  • increased participation not a loan but must be repaid,

  • equity position not a loan but must be repaid,

  • similar financial arrangement to the Blue Water Bridge although that is not what the Blue Water Bridge Authority claims,

  • toll revenues turning into availability payments payable by an Authority whose only revenue comes from tolls,

  • no liability on Michigan other than for the other 2/3rds of the cost of the project that has NOT been discussed or seeing its assets going to default and losing them,

  • Instrumentality of Government of Michigan in which Canada seemingly says there should be no sovereignty concerns yet the section was added in the Bill after Canada made its $550 million offer.

When one considers the above and the waste of time and money over this project over the last eight years, the Legislators need to reassert their authority.

Someone unfortunately needs to take the fall for this Departmental mess. It is unconscionable what has happened. Director Steudle as Head of the Department must bear that responsibility. He should take the honourable action and go.