Thoughts and Opinions On Today's Important Issues

Friday, June 18, 2010

What Happens To The Ambassador Bridge Enhancement Project Now

What is wrong with MDOT? Do they not understand the simplest of concepts? It should be perfectly obvious that their misguided support for the DRIC bridge means the destruction of the Michigan economy.

That seems rather overstated don't you think. But it's not. It is true. Michigan has said that it absolutely, positively, for certain needs the Ambassador Bridge for the well-being of its economy. After all, MDOT claims it wants 10 lanes across the Detroit River.

If that is the case, then why isn't MDOT pushing for the completion of the Ambassador Bridge Enhancement Project as strongly as Canada is pushing for the construction of the DRIC bridge? The way MDOT is suggesting it, the two bridges are complementary not competitive.

My recollection of the Senate hearings was that when MDOT was asked what efforts they were making on behalf of the Bridge Company to help them get their Bridge built, the answer was effectively NOTHING.

I can see that you still do not understand what I am saying. It is probably because you are so wrapped up in the joyous news that the DRIC Bridge has enough revenue that it can pay its own way that you have not focused on the other big story that no one has really talked about except in passing.

I liked the Detroit Free Press as a newspaper for some time but unfortunately, it is becoming as bad as the Windsor Star in reporting news about the border file. Here is a comment that I saw in their news story:
  • "Among the highlights of the report:

    • Revenue from DRIC tolls would be $70.4 million in 2016 and rise to $238.2 million annually by 2040 — more than enough to maintain and operate the bridge and repay bonds used to build it."

To be direct about it, I have no idea where they get that information from. It certainly was not in the materials that I read from the WSA report. How could it be? There was no financing cost data supplied that I could find. Presumably, if there had been, it would have been provided in the revised chapters 6 and 7 of the WSA report.

If there was no such cost data, then merely because there are some nice numbers from toll revenues does not mean much if we do not know what the costs are. As you will recall, I did my version of a spreadsheet and at no time during 50 years was there ever enough money to pay off the bonds or even the principal because of the huge shortfalls.

If I am right about the lack of financing costs material, then this has to be a horrible misquote:

  • "Mr. Steudle said the study clearly shows that – contrary to what Ambassador officials said Tuesday at the Senate Transportation Committee – the DRIC would raise more than enough revenue to handle operations, maintenance and debt service."

That comment could not possibly have come from Director Steudle because he clearly said:

  • "This is every single thing we have,” Mr. Steudle said at a Wednesday news conference. “We really were at a point where there wasn’t going to be any action until that information was out.”

There it is. He said there is nothing more. The Senators need not ask for any more financing costs because there aren't any (unless he has seen something from Canada in another report that he is not free to release to the Legislators because of confidentiality). They are now free to dump DRIC because no assurance can be given that the State and its taxpayers will not be on the hook for making payments and being liable for unknown costs.

Anyway, back to the Ambassador Bridge. The WSA Report Summary states:

  • "The DRIC by 2025 is expected to capture 27.6 percent of the total passenger vehicle traffic across AMB/DWT/BWB (resulting in a 23.3 percent market share at the Ambassador Bridge compared to 36.0 percent under the no-build scenario) and 44.2 percent of the overall commercial vehicle traffic (resulting in a 33.4 percent market share at the Ambassador Bridge compared to a no-build market share of 65.0 percent).

    • The DRIC will by 2025 capture 34.5 percent of the overall combined traffic along the four frontier border crossings within the Detroit/Windsor/Port Huron/Sarnia region (resulting in a 27.5 percent market share at the Ambassador Bridge compared to the no-build share of 48 percent). "

That is a huge loss of business with an extremely large loss in revenues as well.

Check out this table with respect to revenues:

Income cut in half. Now that is quite a big drop of money once DRIC opens up. Here is what the Director said and it may well be accurate if the traffic numbers follow their projections

  • "Further, while the Ambassador would see a large percentage drop in its projected revenues, going from $107.6 million in 2020 without the DRIC to $57.3 million with the DRIC, that would be ample to handle operations and maintenance on the Ambassador, Mr. Steudle said."

There is a big problem that the Director forgot about. Where is the money coming from that revenue that the Ambassador Bridge Company will need to finance their $400 million for their new bridge? The Director talked about operations and maintenance but did not quantify how much money would be around that could be used to finance the construction of a new crossing by the Bridge Company. At an 8% interest rate over 30 years, we're looking at payments of about $36 million per year.

They may not have enough revenue for 25 years to be able to afford the new bridge. Can you imagine the maintenance costs on that bridge because by that time it would be almost 100 years old.

There is no doubt that the games will still be played preventing the Bridge Company moving forward until DRIC is ready to go too.

If the Ambassador Bridge Company does not have the money to pay for financing, then how can they build their second bridge? The answer is they cannot until the money is there.

What is the result... a DRIC bridge that is questionable financially and an 80 plus year old Bridge that cannot be replaced because of lack of money.

Something would have to be done and the only thing I could think of would be on-going subsidization of the DRIC bridge by Michigan tax-payers and now the Ambassador Bridge as well, a novel thought, or else the Michigan economy could be devastated since there would not be 10 lanes across the river.

Do you see what I mean? Do you understand what the consequences could be? What a complete and utter mess.