Thoughts and Opinions On Today's Important Issues

Monday, June 21, 2010

Why P3s and DRIC Make No Sense

Ontario has to come up with money and Michigan has trouble finding it and may lose Fed financing help too by being cut off.

Two news stories that tell me that P3s and a DRIC bridge are sheer folly.

In the first story, the Ontario Government, a DRIC partner, has to save the P3 deal by financing it while the private partner makes the cash, $100M a year in revenues, $9B over the term of the agreement.

Why is the noney needed---capital markets do not have the cash and "Responses to the tender indicated that operation of the centres was not as financially viable as initially estimated,"

Now you know why DRIC P3 RFPOI responders wanted "availability payments." They are telling you us that there is NOT enough money in tolls. That is why the P3 Bill has section 7(B) 14 that allows taxpayers to be hit with costs. And Legislators have no control over it

In the second story, Michigan cannot keep up with its existing bridges, and risks losing federal funding. It is way behind on bridge inspections with many bridges in poor condition yet will be forced to make "availabilty payments" to finance an unneeded DRIC Bridge that will take more money out of the sytem.

Can you understand this? It is sheer madness:
  • "401 rest stops to cost taxpayers $200M

    TILBURY, Ont. -- Two Tilbury service centres are to open July 1 but those and the 18 others under construction now come with a $200-million price tag for taxpayers.

    The lengthy process of closing down and remaking stops along Highways 401 and 400, many of which date back to the 1960s, has closed some local stops since spring 2008. In April, Host Kilmer Service Centres signed on to modernize the gas stations, washrooms and restaurants and agreed to pick up $100 million of the $300-million cost.

    Originally, the government said public money would not be used. "The province (will) not have to invest taxpayer dollars into redeveloping and maintaining this vital government service," a question-and-answer section on the ministry's website said earlier this year.

    But that changed when a 50-year contract was signed with the private vendor.

    Negotiations with bidders "were undertaken at the height of the lending crisis," which made operating the centres less attractive, Bob Nichols, Ministry of Transportation spokesman, said in an email.

    "Responses to the tender indicated that operation of the centres was not as financially viable as initially estimated," Nichols said.

    Public money will now cover $200 million of the cost. The province hopes to recover its costs over the 50-year duration of the contract with Host Kilmer, he said...

    Transportation critic Gilles Bisson (NDP -- Timmins-James Bay) called the public-private partnership "stealthy" and "not very transparent."

    "We're not getting the deal we thought we got," he said.

    Bisson only found out about the public funding two-thirds of the project this week.

    "We're having to pay twice in this case," Bisson said.

    "We're giving the private sector money in order to invest in some reconstruction there and then they're allowed to make a profit through the sales that they make."

    Host Kilmer estimates making $100 million a year, or $9 billion over the 50-year contract, when the centres are up and running, the company said in an April news release.

    Nichols said the government will be repaid over time, but since sales fluctuate it's unknown how much the province will receive on a yearly basis.

    "The sad part of what's happened is that the government seems to have picked the worst of three options," Bisson said, adding that two better choices would have been a strictly public or private partnership."

  • State has Dec. 31 deadline to report on bridges
    Supports in water are biggest concern

    Michigan’s inability to ensure all of its bridges are inspected properly has landed the state under federal scrutiny.

    The Michigan Department of Transportation has been working with local officials to catch up on late inspections on bridge reports — tardiness that put the state out of full compliance with the federal regulations, the Free Press has learned.

    The Federal Highway Administration said that by law, MDOT must inspect all highway bridges that are 20 feet or longer at least once every two years, or make sure that local governments do the inspections as required.

    The administration put MDOT in conditional compliance last summer — around the time a state audit determined that about 10% of bridge inspections were overdue, some for 36 months or more.

    The feds ordered the state to complete hundreds of crucial bridge inspections by Dec. 31 or risk losing highway funding, a last-ditch punishment that MDOT says it will avoid...

    MDOT spokesman Bill Shreck said...“Under the present funding situation, those things will start happening in the future,” Shreck said...

    Ted Wahby, chairman of the State Transportation Commission, said the delayed inspections are troubling.

    "We're always concerned when we see stuff like that happening," said Wahby, Macomb County treasurer. "You don't want that kind of deterioration to go unnoticed. The inspections should catch that and get it corrected..."

    "But this points to the fact that you need to keep up with maintenance or you do run into trouble," Gilbert said...

    Nancy Singer, spokeswoman for the Federal Highway Administration, said states that don't comply with National Bridge Inspection Standards risk sanctions, including loss of federal road money...

    A state report in 2009 found more than 10% of routine inspections weren't completed as scheduled in a two-year period the Michigan Office of the Auditor General analyzed. More than 1,000 inspections were late; 102 were three years or more overdue, the report said. It covered October 2006 through September 2008...

    MDOT said dwindling road money makes it hard for state and local road agencies to keep up with maintenance.

    "It points to the challenges we have under our current funding," Shreck said. "The situation will continue as the money we have for transportation buys less and less."

    Keith Ledbetter, legislative affairs director for the Michigan Infrastructure and Transportation Association, called the state's troubles with bridge inspections symptomatic of "a highway and bridge system that's starving for additional dollars."

    "We cut corners to make ends meet, but it's not a very good long-term strategy," Ledbetter said."

Who needs Matty's toll credits anyway.