Thoughts and Opinions On Today's Important Issues

Friday, April 30, 2010

More Litigation

The fun continues:

DIBC to file $550 million NAFTA claim against Canada

WARREN, Mich. – The Detroit International Bridge Company is preparing to file a claim under the North American Free Trade Agreement (NAFTA) against the Canadian government because of its offer to provide $550 million to the state of Michigan for a proposed new border crossing.

Canada’s offer is to pay Michigan’s costs connected with the Detroit River International Crossing (DRIC). The DRIC is a project proposed by the Michigan, Ontario, U.S. and Canadian governments for the construction of another international border crossing a little over a mile from the existing Ambassador Bridge.

“The only way the DRIC project will have enough traffic to justify its construction is by diverting traffic from and bankrupting the three existing international crossings in the area: The Ambassador Bridge, Blue Water Bridge and Detroit-Windsor Tunnel,” said Patrick Moran, corporate counsel for the Detroit International Bridge Co. (DIBC).

Moran said DIBC would file a second NAFTA claim against the Canadian government, adding that “it is clear that the Canadian government is using its legislative power inappropriately to discriminate against an Arab-American businessman who has owned and operated the Ambassador Bridge for more than 30 years.”

The Ambassador Bridge has become the No. 1 border crossing in North America under the ownership of Manuel J. (Matty) Moroun and is highly regarded for its efficient operation, Moran said. The Ambassador Bridge alone carries more 27 percent of the trade between the two countries.

“The Canadian government is using its power inappropriately to coerce the Michigan Legislature into adopting legislation necessary to ensure the implementation of the DRIC project to the detriment of necessary infrastructure projects in Canada and the U.S. ,” Moran said. “Not only is it clear that the DRIC project is not needed at this time, the Canadian government is trying to use its authority to steal a viable for-profit business from an American businessman.”

By offering to increase its financial participation in the DRIC project and give Michigan $550 million, Canada is intentionally undermining a U.S. citizen’s right to own and operate a business in Canada, Moran said.

The new NAFTA claim against Canada is the second one DIBC filed against Canada in connection with actions related to the DRIC project. DIBC filed a Claim of Arbitration under Chapter 11 of NAFTA on March 23. In that case, DIBC seeks a determination that Canada has breached its obligations under NAFTA, an award of damages of at least $3.5 billion and other appropriate relief.

The arbitration arises from the decisions by Canada, the Province of Ontario and the City of Windsor to locate the parkway serving the DRIC so it steers traffic away from the Ambassador Bridge.

Baird Interview: Help For The Bridge Company DRIC Lawsuit

It is a fascinating interview that tells us everything about what Canada really wants and why if you listen closely.

Helping out poor Michigan----BS!

If you have been a faithful reader of this BLOG, it is no surprise. It is all about control of US land ports by Canada, a project that has been ongoing for a decade---actually much longer, about 50 years. Moreover, it has been corrupted by money, big money, to help out P3 operators to rip off the public of billions over the next 50-100 years.

It is a disgrace at the highest levels of politics too.

I guess that Matty Moroun did not take Cliff Sutts free legal advice that his lawsuits are futile:
  • "Veteran Windsor lawyer Cliff Sutts says legal action by Ambassador Bridge owner Matty Moroun against the Canadian and U.S. federal governments is a "desperate" last-ditch effort to win the fight over control of cross-border tolls.

    "It seems they have really stretched this and have made some misstatements of facts in law and that's puzzling," said Sutts of the federal lawsuit filed in U.S. District Court in Washington against both governments claiming interference with his bid to build a twin span.

    "It strikes me as a desperate attempt to keep the cause alive. There are a lot of misstatements that might be attributable to putting together a pretty complex statement in a short period."

Mind you, Cliff ought to know what futile means. He acts as the lawyer for Windsor's Tunnel, the competitor of the Ambassador Bridge which takes away their traffic constantly. He was also the lawyer for Mayor Edgar (aka Eddie) Francis who tried to take over the US half of the Tunnel as what was clearly now the precursor for the Ambassador Bridge takeover. He failed on that.

Now, I do not mean that Matty will get this kind of help that I saw on an employment site recently which tells me he really is serious

Instead, he will get this kind of help from Canada's own Tranport Minister John Baird who gives it all away in his interview. Just listen to this. A judge certainly will

If Wall Street shares tumble today, blame Baird. Listen to the cynicism in the tone of the reporters when they ask if the US does not have the money for this project! I guess that not only Greece is in financial trouble but the US as well thanks to what Canada has done!

Michigan's Third World Status; Accepts Canada's Foreign Aid

She was so proud of herself too. As if it was a huge accomplishment. Phone calls back and forth to Canada to salvage Michigan.

Governor Granholm's legacy has been fixed for all time. She has confirmed that she has turned Michigan into a have-not State during her two terms as Governor as Canada's bribe errrr offer demonstrates so clearly. There is no money in the State so it has to go begging. Imagine the signal to investors and P3 operators.

Negotiate whatever deal you want. Michigan cannot afford to say no. Just threaten to walk away and Michigan folds. That is what Transport Canada's Minister Baird is telling the world. As did MDOT's Steudle during his presentation when he showed he would cave in to the demands of the Wall Street boys on a P3 deal.

And then maybe the Governor hopes for a Supreme Court appointment next as her reward. Perhaps she can do to the Court what she did to Michigan.

As I do my income taxes tonight to meet the April 30 deadline, I am so pleased to learn that some of it is going to help out Michiganders. I did not know that our economy was so sound under Prime Minister Harper that we can afford to do so. I do hope that people in the State will show me the proper courtesy after my good deed of the day when I visit there.

It was all pure Hollywood in Lansing.

Just as MDOT’s Captain Kirk was starting his presentation on the P3 legislation and the DRIC Bridge, in came, breathless, Canadian born Michigan Governor Granholm. Catching her breath from running into the House Committee room with the great news, she read out the letter from Canada about its $550M bribe errrr offer to Michigan to try to beat the Ambassador Bridge Company. Or rather, to force the Owner of the Bridge to sell cheaply to Canada or else. After all, Prime Minister Harper did issue his secret mandate letter to buy the Bridge. He cannot let some mere transport truck owner beat him after all.

It was great theatrics but it merely confirmed Canada’s opinion of Michigan that it is a Third World State without any money. In fact, the US is not much better off because the actual amount of money that Canada will pay is $550 million which covers both the State and the US Federal contributions for transportation connections for the DRIC project.

Has anybody figured out that this is about twice the cost of the Ambassador Gateway project? That project itself could handle most of the border traffic in the forseeableable future even without a second bridge as confirmed by the US DRIC consultant.

I was pretty accurate a couple days ago when I did that chart about how the P3 legislation would lead to a takeover of the border crossing by Canada. I must admit that I did not believe that Canada would be a direct investor but rather would be a guarantor. I did not believe that Canada wanted to directly confront the US Congress as would happen since this is now a Dubai ports issue.

In any event, it does not matter. The half a billion dollar loan to the Americans will not be able to be paid off by toll revenues because they are too small given the low traffic. It means that almost from day one there will be a default and Canada will be able to take over the new crossing, if in fact one is ever built.

Michiganders, don’t flatter yourselves. That is the only reason Canada has any interest in your State.

I really wanted to do a BLOG on the Michigan House Hearings on the P3 legislation but obviously events have overcome everything. However there were a couple of interesting comments made during the Hearings.

Everybody talked Jobs, Jobs, Jobs. Fortunately one of the Republican House members did mention that those jobs would be created by the Ambassador Bridge project as well although the pro-DRICites did not mention it.

And Representative Young does need to be concerned about Community Benefits because MDOT has no power to offer any as they admitted. $1.9M for homes…..what’s that, housing for a mere fraction of the almost 300 families who will be displaced by DRIC. Pathetic. No one cared about Delray before and MDOT does not care about Delray now other than to shut up residents.

It was fascinating to hear about all the private parties in support of the DRIC project but I did not hear one of them say that they would be particularly interested in helping to pay for it. Specifically, I saw that the Canadian truckers’ head honcho David Bradley was there as part of a group from Canada but for some reason he forgot to tell the members of the House how he whined and cried because his members could not afford to pay the recent doubling of the Blue Water Bridge tolls. I guess he just takes it as a given that the State taxpayers will subsidize DRIC tolls as it did for years in Sarnia/Port Huron. Heaven forbid that users should pay the cost

I again heard this nonsense about Buffalo, and I am disappointed that MDOT did not stand up and admit that this was a myth that they had destroyed a long time ago

Poor old Mayor Francis of Windsor. His dream was shattered. The DRIC bridge apparently is going to help out Aerotropolis in Detroit. Accordingly, the need for an expansion of Windsor Airport is not required now. Look at all the money that can be saved including not upgrading our E C Row Expressway. Maybe he should not have been so fast in supporting DRIC to Windsor’s detriment now it seems

The Wilbur Smith phony traffic numbers based on phony numbers from a Canadian traffic numbers report were used again to justify DRIC. The WSA report was NOT an investment grade traffic survey so MDOT is in breach of what it was to deliver to the House in my opinion.

Just so you know we will probably get one gigantic P3 deal to cover roads, plazas, and bridge in Canada and the US. That is what some P3 companies thought made sense and so advised MDOT. And so does Canada too I bet. I can guess who the winner of that competition will be already. It's hardly a surprise so I hope that the other companies don't spend to much cash to prepare a quote.

But they need not worry too much. The P3 legisaltion provides:
And where is the WSA financial report already?

It is interesting that again no one told us how the traffic would increase, including MDOT But we are required to take it on faith.

Oh sorry, I forgot. Somehow ship port traffic from Halifax and the Montréal areas will boost our traffic. I don’t know about you but I would have thought that it is cheaper to send containers via rail or even by lake freighter than by truck to send them into the United States from our East Coast port.

Oh did someone from the Detroit Chamber get a job trying to sell Halifax harbour in the US? That is what I heard but do not know yet if it is true. If true, that person should know that Halifax is so pleasant in the summer.

I am so glad that the auto company executives told us why they needed the bridge but not that they were going to help pay for it either. Just like they refuse to acknowledge that they are responsible for the backups because of Just in time delivery. They also forgot to mention the concept of building mother plants with all of the supplier plants around it so that there is little need to cross the border at all. A mere oversight.

The most interesting part was the discussion by Captain Kirk again that there was no need for legislative oversight whatsoever. That is mind-boggling considering the dramatic changes in the P3 market that he himself identified. Even he acknowledged that only a few years ago a P3 operator would have paid the State money upfront as in Indiana but now it looks like the State will have to raise bonds itself to help out a P3 operator who probably cannot raise money on its own. That’s right in the legislation.

The MDOT highway bureaucrats want to have the absolute power to do whatever they want to do. You see, the private operators might get soooooo upset. They might not want to go into Michigan but would go elsewhere if there are silly things like Legislative oversight to control their rip-off of taxpayers. Heck a P3 20% rate or return is hardly something for legislators to be concerned about when the State can borrow the money at 5%!

And I liked how the possibility of availability payments was snuck in too ie taxpayer subsidy for a project that cannot pay its own way in any event.

No one really focused on how projects will be paid back and how these excessive charges will be borne by users as tolls or by taxpayers if taxes have to pay for this. Oh heck, our children and grandchildren can pay because all of the bureaucrats and legislators who sold them out would be long gone by then.

Nope, we just got a breathless Jennifer and Hollywood! And have you noticed how expensive it is to buy popcorn these days when you go to the movies.

BreakingBlogNews: Canada's DRIC Bribe To Michigan

Here is the infamous letter to Michigan which will allow Canada to take over the DRIC project and the key land border crossing in North America from the Americans.

Heck Mayor Francis should have held out for more than $34M for a $5M piece of property in Windsor for the bridge Plaza from the Feds. And only $78M from the Province for the DRIC road. How much did he leave on the table by settling now? Canada has oodles of money to throw around.


“Michigan Gov. Granholm, who is both a Canadian and an American citizen, has offered to sell the Michigan border to Canada. Meanwhile, the governor has consistently caused red tape from the state of Michigan to prohibit an American company – Detroit International Bridge Co. – from building a second span to replace its 80-year-old Ambassador Bridge. Instead, she wants to tear down hundreds of homes, businesses and churches in Southwest Detroit to obtain money from Canada.

“It is incredible that Gov. Granholm spends thousands of dollars in taxpayer money to travel around the world to find jobs for Michigan, while at the same time attempting to destroy a Michigan company that has paid state taxes since the early 1920s.

“The Michigan governor now has caused Canada to offer to buy Michigan’s future for $550 million. The question is whether the Michigan Legislature is more committed to Michigan’s future than the governor. Michigan is not and should not be for sale.

“This offer from Canada and acceptance by Gov. Granholm will assure that construction jobs for the public bridge will be Canadian jobs, when and if jobs are ever created.”

Thursday, April 29, 2010

Except For Edgar, Who Cares Who Announces Now

Whoa! Someone must be reading to the bottom of my BLOGs, even my long ones.

Why just the other day in my BLOG “DRIC and Political Cynicism” I wrote:
  • “So much for my dream of being PM one day. But who knows, Fate works in mysterious ways. Municipal politics can be so much more rewarding when you are solving real people's real problems. Perhaps being Mayor of some small town might not be so bad after all."

Then mere days later, this Henderson column:

  • “There's plotting, pleading and polling aplenty”

In that column he makes out that the only serious Mayoral candidates could be Marra, Wisdom and Millson and then dimisses them all with this crack:

  • “Who in their right mind, no matter how much union pressure is exerted upon them, would run against him under those circumstances and become, in effect, the CUPE revenge candidate?

Gee, a reader called me the Voice of CUPE during the strike and a Councillor said I should run for CUPE President.

And then, following in his Master's print, mini-Gord in his column still is trying to make CUPE the big campaign issue

  • “The Big Fight being council's plan to contract out city hall's meter readers, garbage collection, recycling, and day care. It's all about CUPE jobs -- the same fight roiling the city for the past year.

    It's far, far from over. The entire region's political class is pretty much completely embroiled in this struggle right now. Some of them are growing quite anxious in their search for a candidate to take on Mayor Eddie Francis to "Keep our services public."

    The struggle will continue to dominate the municipal political scene until the last vote is cast in the election this fall.”

They are writing this crap for one reason only. They are doing it clearly because of MY BLOGs setting out the facts that they refuse to disclose about the strike. That Edgar (aka Eddie) and the hardliners LOST and cost citizens a huge fortune, forever!

If that ever got out to the Windsor public on a wide scale, Edgar could never run for dogcatcher, never mind Mayor again. He would have to pull a Mayor Miller of Toronto and announce that he was not running for “family reasons.”

All this silliness from Edgar:

  • “They're pretty much unknowns. But Francis said he has the utmost respect for the three aspiring individuals, Anthony Brothers, Sam Sinjari and Rob Vinson, who've plunged into the mayoral race.

    "I give them a lot of credit. They've made a decision," said the mayor. Implicit in that, of course, is that he doesn't have much respect for those who expect him to make life easier for them by declaring his intentions.”

All of the flurry of Star stories and columns about who will run for Mayor and will Edgar run for Mayor or won’t he and when will he announce, April, May or now mid-June or until his 6 files are finished, whatever those files are. As if any of it matters.

  • "There are six active files, very important to this city, that are now coming to the final stages and should be wrapped up in the next two months. What's driving me are those six files. I want to see them wrapped up before I make an announcement," said Francis.”

Wow, is Edgar ever that important!

But you know what it is don’t you, dear reader. Edgar, the E-Machine and the Star are terrified. There is one thing that chills all of their collective souls. They want to know, they have to know, what only one person in this City is going to do. In all modesty, that person is the BLOGMeister!

Wait, it cannot be. Perhaps they think I am going to run for Mayor! That has to be it. They want to know if I am going to do it and they are trying to force me to make an announcement prematurely. They are trying to shame me into it. What gall.

Or at the least, they want to know whom I am going to back and on whose campaign I am going to work. The way I helped get Eddie elected to my chagrin now. They know I would go for the jugular with a legacy of 7 years of failure as Edgar's legacy.

Yes, I know it is hard to believe that a mere lonely Blogger can cause that much concern in this City. But I do because I, and my Obliging Blogosphere colleagues, write a BLOG 5 days a week and sometimes on Sunday too pointing out what is wrong with the Francis Administration and how the City has suffered because of it! And how this City could do so much better with a real leader in charge.

It is because they know I am strategic, planning every move far in advance with military precision, grabbing opportunities when they make a mistake, no matter how small. And that frightens them. They are waiting for the hammer to fall and need time to be able to regroup when it does.

That is why STOPDRTP was so successful. We capitalized on the Hurst error re his Made in Windsor solution (Do you really think it was by co-incidence that our Group just happened to be set up at Devonshire Mall when the Hurst mistake hit the press, a few days before a key Council vote). He never recovered from it as we captured the spirit of the vast majority of Windsorites.

Why else the smears, the “obliging Blogosphere” crack, the nasty and childish name-calling without mentioning mine because all it would do would be to increase my readership. How else do you explain the Star deleting any reference to my Blogsite on the Star Forums even though such mention is not a violation of their Terms last time that I looked. It has even spread to the radio with the foolish pre-emptive strike by CKLW against Bloggers just before Edgar’s DRIC sellout announcement.

It’s laughable. Edgar is trying to set the agenda. He wants everybody to play his game according to his rules. As if I care what he wants or what his timetable is. I remember his nervousness when Hurst did not announce what he was going to do in his first campaign:

  • “Don't wait for me. If you want my job, just get up and go for it. That's the advice Windsor Mayor Eddie Francis is throwing out to potential high-profile challengers who've been hiding in the weeds while anxiously awaiting word on whether he will seek a third term.”

Announce today and let the sycophants and lapdogs do the dirty work for him to try to destroy and discredit any opponent. Because he does not have the nerve to do it himself because it would provoke a counterattack, something he cannot handle.

Who wants Edgar's advice anyway.

I did like this quote that I read about the founder of Time Magazine:

  • “Luce, the creator of Time, Life, Fortune and later of Sports Illustrated, was a media tycoon at a time when, as A. J. Liebling put it, freedom of the press belonged to the man who owned one (rather than, as now, to anyone with an Internet service provider), a time when a lone publisher could aspire to influence the course of world events. Luce used his mighty megaphone to promote leaders he admired, to paint a generally uplifting portrait of middle-class America and to advance the cause of American intervention in the world, up to and including an unrelenting passion for the misadventure in Vietnam. What he called journalism of information with a purpose was sometimes hard to distinguish from propaganda.”

That sounds so familiar to me regarding what the Editor of the Messenger said but in slightly different words:

  • “We did things that newspapers can do to bring about change, positive change. I think we got a lot of results this year and this now validates the results we got."

Make them sweat because they are desperate. They want to know what I am thinking. They want to know what I am doing. They want to know whom I am supporting for which positions and what the kind of campaign will be. They need time, lots of time, to plot a defence to Edgar’s lack of success in everything. That is why they must have someone announce right away. And you know that the best defence will be very offensive:

  • “In 2003, the last time Windsor had a serious mayoral race, then-councillors Bill Marra and Francis had entered the fray months before incumbent Mike Hurst announced at an emotional late September gathering in Dieppe Gardens that he wouldn't seek a fifth consecutive term.

    Nobody sat on the sidelines that year biting their nails and sniffing the wind while waiting to see what Hurst would do and what their odds were. They got in and started trading blows in one of Windsor's great political showdowns.

    In 2010, it's a different story. With a mere six months left until election day, there's plotting, pleading and polling aplenty, but little evidence that anyone of substance is prepared to throw caution to the wind and leap into a race that could mean going chin-to-chin with the current mayor.”

Who needs to go nose-to-nose with the Mayor just to boost the Star’s circulation? What is the necessity of announcing now, just as people are planting their gardens and before the summer holidays. At this time of year, no one has any interest in a municipal election campaign including a lot of the incumbents who have not announced yet if or where they are going to run.

If the Mayor is so brave, why hasn’t he told us what he is going to do! He does not dare. If he says that he will quit, he loses his power. If he says he will run, then he is a target.

This is a small town, 200,000 souls. It is not hard to get well-known quickly for good work. STOPDRTP of which I was General Counsel became a powerhouse in the City in a 2 month time-period resulting in Hurst leaving the mayoral job and getting the Star to drop DRTP support. As the Star said, no politician would ever get elected at the time supporting DRTP.

STOPDRTP defined issues not the Star or anyone else. Remember the debate over E C Row and the Montreal to Tijuana trucks. That was our coined expression and our issue to prevent the building of an upgraded E C Row for international trucks necessitiating the building of DRTP.

The Star---heck being slammed by them is a badge of courage in this City, a positive not something to be afraid about. Notwithstanding strong Star support, whatever happened to DRTP. They could not beat the people! Anti-Edgarites and anti-hardliners have nothing to fear from a newspaper that has lost its way in local politics.

So for me, pardon me why I chuckle at Gord's attempt to flush me out to see what I am going to do. I think I will offer him this advice as he gave to some of us in a Star column in 2004 after we met with him over a coffee as we began to feel that that Eddie might sell us out on the border file years ago:

  • "Stay tuned

    Supporters of Windsor Mayor Eddie Francis say people who are growing impatient for action should kick back and enjoy the final three weeks of summer because the municipal universe is unfolding right on schedule...

    Stick around. The fun begins after Labour Day."

Oh and by the way, if you think I am being arrogant in this BLOG or bragging about my self-importance, I am not. I am realistic enough to know that I am not all that important in the scheme of things. However, it is just that Edgar and his allies believe that Edgar must micro-manage and control the world around him, including me. And you, dear reader.

As for me, I am just not going to let him do it. I will act when it is the appropriate time to do so. When Edgar makes another one of his huge blunders. I am sure that I will be given many opportunities over the next few months.

Wednesday, April 28, 2010

Are Riskless Michigan P3s Risky

Has anyone seen yet the Wilbur Smith financing report on a P3 DRIC bridge that MDOT has had in its possession? MDOT released months ago the questionable traffic numbers report based on a phony premise, a report which in my opinion does not meet Legislative requirements. The failure to release information before the P3 House hearings has to tell you that P3s are financially risky without even reading a page of the report!

MDOT has learned from Canada how to withhold information from Legislators except in Canada it may result in a Constitutional crisis and in Michigan I think it should lead to a Motion for the Legislature to censure the Governor and MDOT. After all, the projected P3s would cost multi-billions and Legislators are being asked to vote without facts and with MDOT giving them some information in a Presentation in the last second. Is that how Government should operate:
  • "Speaker smashes government secrecy
    DEMOCRACY IN ACTION: Reaction to historic ruling
    Rules MPs have right to view all Afghan-related documents

    Parliament's right to know has trumped the government's right to keep national security secrets in a historic ruling by the Speaker of the House of Commons.

    However, Peter Milliken has given both sides two weeks to reach a compromise, setting the stage for critical backstage negotiations aimed at avoiding an ugly parliamentary showdown, a potential court battle or even an election.

    Milliken sided Tuesday with opposition parties in concluding MPs have unlimited power to demand the release of all uncensored documents related to the alleged torture of Afghan detainees. He said that power is absolute and goes to "the very foundations upon which our parliamentary system is built."

    And he said it applies even to sensitive information the government fears could jeopardize national security, the lives of Canadian troops in Afghanistan and Canada's international relations."
Check out this article to see what I mean about Presentations: "We Have Met the Enemy and He Is PowerPoint"

Are P3s risky? Taxpayers could be called upon to pay outrageous amounts in taxes to support projects, road users could have to pay sky-high tolls to meet P3 profit goals especially when traffic declines and investors could lose their shirts. But to P3 bankers from Wall street and Australia there is no risk. In fact they make ultra-millions in extra fees when the projects collapse:

  • "Macquarie finds new ways to gouge MIG

    Just when you think Macquarie’s broken model of gouging infrastructure investors is winding down, the Millionaires Factory pulls another doozy from the wreckage of Macquarie Infrastructure Group as it proposes splitting it in two.

    Macquarie, a company that owes its existence to protection by the Australian taxpayer, has no shame. Having delivered stunning underperformance running MIG while paying itself a fortune through all the usual Macquarie fee channels, it now has the cheek to propose resetting the performance bonus clock at the bottom of the cycle.

    If MIG stumbled on under its current structure, given the billions in underperformance racked up, I can’t imagine Macquarie seeing a performance fee in my lifetime and perhaps not my children’s.

    But reset the clock on ‘‘Active MIG’’ (a euphemism for ‘‘Debt-laden MIG’’, as opposed to ‘‘Mature MIG’’, aka ‘‘Solvent MIG’’, in the proposed split-up of the current MIG) at the bottom of the cycle and there’s a rather nice chance that the 20 per cent grab of outperformance could very well be on again.

    And that is on top of an increased base fee, never mind nine figures in various fees, charges, postage and petties for splitting MIG and allowing the extremely low-maintenance Mature MIG to be finally free of the gougers...

    Macquarie’s going to cop a fee of 1 per cent of the post-restructure market capitalisation of Mature MIG, plus another fee of $50 million “for its role in doing all things necessary to implement the restructure including provision of transition services”. I’d bet there will be plenty of other fees as well"

Come on now, there are no risks to Michigan as their P3 legislation is structured. Why the P3 companies bear all the risk of finding the money and cost over-runs. If there is default, why the general obligation of the State is not called into pay, just the revenues from the project are at risk:

  • Sec. 7e. (1) The department may issue and sell bonds or notes for the purpose of providing funds to carry out the provisions of this act with respect to the development, acquisition, construction, financing, maintenance, or operation of a transportation facility provided for by a public-private agreement or the refunding of any bonds or notes, together with any costs associated with the transaction.

    (2) Any bond or note issued under subsection (1) does not constitute a pledge of the faith and credit or indebtedness of this state or any political subdivision of this state within the meaning or application of any constitutional provision or limitation. A bond or note issued under subsection (1) is payable solely as to both principal and interest from revenues generated from use of the transportation facility authorized by the public-private agreement, the proceeds of bonds or notes sold to finance the refunding of the outstanding bonds or notes, if any, or investment earnings on the proceeds of the bonds or notes.

Sure. And I have a bridge for you to buy in Brooklyn and some swamp land in FLA.

As the Ontario Auditor General told us in his hospital report, to protect against every conceivable contingency that may happen in the future:

  • "WOHC and the Ministry engaged approximately 60 legal, technical, financial, and other consultants at a total cost of approximately $34 million. About $28 million of these costs related to the work associated with the new P3 approach"

Yes, nothing can go wrong over the next 50 years or so, can go wrong, can go wrong...

  • "Province 'stuck' with ironclad Hwy. 407 deal, minister says

    Transportation Minister Jim Bradley has confirmed..."The court confirmed the contract was ironclad. They ruled on the side of 407."

    Now, Ontario consumers are left to pay the price, he said.

    "Unfortunately the lawyers for Highway 407 negotiated an extremely good deal, from their point of view, with the Conservative government of the day, and we are stuck with it," he said.

    The 407 can raise rates "almost whenever they want to; they have the right to have licences suspended when there is nonpayment," Bradley said. "I disagreed with it then and I disagree with it now."

Here are a few risks that Michigan Legislators should think about with their proposed new riskless P3 Bill:

  • The big risk is what happens if the P3 project goes broke. Michigan has to take it over when they had no intention of doing so and could be in a big jam if it has NOT been completed. eg Port Mann bridge.

  • Usually P3 operators want a monopoly and prevent the State from building competitive facilities. This is to protect their profit position. What if I-75 was expanded through Oakland County in a P3 deal but because of growth, MDOT wanted further expansion. They could NOT do so unless MDOT paid a penalty or was forced to buy out the operator at a premium.

  • What if tolls were increased to levels that the public could not tolerate---MDOT might have to buy out the project at a premium.

  • Re Section 7E, the reason the State may have to raise State bonds to get money is that the private operator cannot raise the money theses days with the economic meltdown eg Macquarie's Port Mann bridge in British Columbia. Private investment was the reason for P3s in the first place...who needs them when the State can borrow at a lower cost and use the same contractors to build the road----that is exactly what happened in BC where the Government was forced to take over the project and actually saved a billion dollars!

  • If the P3 contractor went broke and MDOT raised money under Sec 7E, then it would be a horrific mess---MDOT would have to pay back the money but may NOT be able to do so if revenues were less than the financing costs. It might not be able to afford to pay back the financing so that a third party takes control of a State asset.

  • I also heard that there is a proposed amendment that money not allocated to the P3 operator can be used for State transportation purposes! This is also a way to get around Legislative control even if there is NO P3 for the new project! Use the extra money for it and the charge is applied to the P3 project. Favoritism abounds now.

  • I heard as well that there is a new amendment to make the separate P3s into a private entities. We have that experience in Windsor where our airport and the Tunnel were "privatized" into City-owned private companies. Our Mayor kicked out reporters and the public from meetings that were previously open to the public but now were not since it was a "corporate" matter. That means there is NO legislative control at all just like with the Peace Bridge Authority in Buffalo. Check out as well the stories about public authorities and corruption

  • Contract default by government could result in substantial cash payment to concessionaire and stress to government rating

    A default by the government on the terms of the concession, on the other hand, could result in a substantial termination payment equal to the fair market value of the concession at the time of the termination. In the case of the Chicago and Indiana concessions, events of default by the government include a failure to abide by the terms of the concession, payments due from an encumbrance on the toll road created or incurred by the government, or an inability of the government to pay its debt or a filing for bankruptcy protection—a remote risk in Moody’s opinion. Termination payments could necessitate a use of reserves, a bond sale or both; and these actions could have a negative impact on a government’s credit rating.

Oh I am sorry, Didn't anyone mention these slight hiccups before to Legislators? Now you know why.

DRIC P3---Forward To The Past

I know how boring these BLOGs are on P3s for you to read. Heck, I have to sit down and write them so take pity on me.

I hope I can convince a few Legislators in Michigan to kill their proposed P3 legislation since in my opinion it will ruin the financial position of Michigan in the future when they have to pay back the money. After all, beware Wall Street bankers bearing P3 gifts.

My opposition has little to do with the DRIC bridge either other than outrageous P3 fees and payments. I am against P3s as a financing tool as a taxpayer. It rips us off. PERIOD.

Remember what the Ontario Auditor General wrote about the hospital P3 and how much extra it cost taxpayers here:
  • "The province’s 5.45% cost of borrowing at the time the agreement was executed was cheaper than the weighted average cost of capital charged by the private-sector consortium. Had the province financed the design and construction costs at its lower rate, the savings would be approximately $200 million over the term of the project’s P3 arrangement."

  • "We found that the cost estimates for the government to do the project were overstated by a net amount of $634 million"

And the hospital itself was going to cost originally under $400M. You just have to read his Report to see how the bureaucrats played with numbers to justify a P3. As a taxpayer, it makes me sick.

It invites the obvious question: why. And suggests the obvious answer: [Fill in Blank yourself]

If a Michigan Legislator has the nerve, then do this. May I respectfully suggest that at the next Michigan P3 hearing on Thursday, right after MDOT makes their pitch, that Legislator should ask point-blank and demand an answer to this simple question:

  • what would it cost to finance the DRIC project the traditional way ie using bonds compared with what the cost would be if it was done as a P3.

The consultants or MDOT should be able to give an approximation but I bet they will say that they cannot for obvious reasons. No point getting Legislators all upset. The difference would be multi-billions! See my BLOG where I guesstimate it to be $8.5 billion over 40 years.

This BLOG's title is a play on the movie title as I am sure you can figure out.

But I want to take you forward to a few years from now if the DRIC bridge had been built, by going back to 1999 when the DRIC matter started. I want to wave my magic wand and assume that a DRIC P3 bridge had been built. I want then to come back to the present to try and guess what would have happened.

Back in 1999, the Ontario Government had commissioned a report, Southwestern Ontario Frontier International Gateway Study, to be undertaken by a distinguished firm, McCormick Rankin, about future traffic projections for a bridge in our region.

Here is the graph they produced.

Nice projected increase in traffic that would have excited investors to a P3. Except, we know now that it is all wrong. It bears no relationship to what actually happened. It over-estimated traffic numbers as DRIC has been doing constantly. Wilbur Smith, their own consultant, demonstrated it conclusively in their recent traffic report.

45,000 vehicles per day at the Ambassador Bridge by 2021 was predicted. In 2009, it looks like around 36,000 vehicles on the graph. 2009 actual: 17,800, about half. In fact, volumes approached that number in 1999 and have sunk like a stone since. Here are the latest graphs I have respecting our region. I believe subsequent years are even worse.

Oh, and in case you forgot, DRIC projected in 2035 that the number would be 38,218 while about a year later, Wilbur Smith projected a number about 10% less at 34,000. That's a far cry from 45,000 in 2021!

By the way, this is not so far-fetched. Take a look what happened at the Blue Water Bridge which was twinned. Since that time, I do not believe that volumes have grown back to where they were in the past.

Accordingly, with a decade of traffic declines, how would the P3 investor survive in our region ie cover their debts, pay for operations and maintenance? The answer is simple. They would not.

Bankruptcy is the likely outcome just as happened in California where Wilbur Smith traffic projections were off by 60% for the South Bay Expressway [WSA also is doing the traffic guessing for both Canada and MDOT on the DRIC project]:

  • Toll road operator files for Chapter 11
    South Bay Expressway use below forecasts

    What was heralded in late 2007 as the next big thing in regional commuting — a 10-mile, privately operated toll road in South County — may wind up testing the wisdom of public-private partnerships.

    In its court filing this week for Chapter 11 bankruptcy protection, the company that runs the South Bay Expressway cited the ripple effects of a rotten economy. It said the collapse in home prices and the spike in unemployment have hurt its fortunes since the road opened nearly three years ago.

    “What’s driving this is that we’ve been severely impacted by the recession,” said Greg Hulsizer, chief executive for South Bay Expressway Ltd. “We find ourselves in a position where in the not-too-distant future, we’re going to run out of financial reserves.”

    On average, nearly 22,600 cars travel the road each day, far below initial projections of 60,000. Riders typically marvel at the seemingly empty stretches of pavement, even during peak traffic hours.

    While revenue is steady because of rising tolls, the company is falling about $16 million short each year in what it owes its direct lenders, according to court filings....

    In a phone interview, however, Hulsizer said turning over operations to another private business or the company’s lenders may be an option, depending on the outcome of bankruptcy proceedings that could last a year or more.

    Many South County commuters said they weren’t surprised by the bankruptcy bid and blamed the operator, saying its decision early last year to boost tolls drove away customers...

    Ken Monk of Bonita said his extended family was drawn to the roadway at first. “They all used it, all of them,” he said.

    But once the higher tolls kicked in, they stopped completely. Monk and others said many rush-hour commuters now cut through residential neighborhoods to avoid paying the higher tolls...

    Turning over toll operations to Caltrans may hold little appeal to the agency, given its budget constraints. But a government agency takeover wouldn’t be unprecedented.

    In 2003, the Orange County Transportation Authority paid $208 million to buy out the developer of the state Route 91 express lanes because the agreement negotiated by the builder prevented California from widening the overall freeway.

    Hulsizer said South Bay Expressway, a subsidiary of the Macquarie Infrastructure Group of Australia, owes its lenders $510 million, including $170 million to the U.S. government. He said the money is in the form of direct loans, not bonds, and does not involve an underwriter..."

Here is something even gloomier:

  • "While the companies had predicted that traffic volumes would reach 60,000 vehicles per day during 2009, actual traffic was only 23,000 vehicles per day. The result was that "actual revenues compared to original projections were 70% and 53% respectively for 2008 and 2009, with revenue growth from 2008 to 2009 of only 4%, compared to 36% in the original projections."

Naturally, the Chapter 11 filing is no one's fault. Everyone was right. It's the fault of the economy. Blame it on the downturn. Wouldn't that be the same result here. The economy forcing the DRIC bridge into bankruptcy based on an overly-optimistic travel projection.

I will be helpful to my MDOT friends. I will set out the comments that a DRIC President can use when the DRIC Bridge will fold. Just make a few Detroit/Windsor modifications and the script can be used here:

  • 61. The planning and financing of the Expressway project were based upon certain projections of population and employment growth and traffic volume in the South Bay region that depended upon the strength of the residential real estate market and the availability of financing for both home builders and home buyers. As a consequence of the now well-documented economic downturn, including the collapse of the sub-prime housing market and the nationwide credit crisis, the projected growth underlying the development and funding of the Expressway failed to materialize. In addition, recent traffic flow has been further weakened by a decline in cross-border commercial traffic and a rise in unemployment in the South Bay area. As a result, commercial traffic and commuters—the Debtors’ target customer base—increasingly choose to travel via free routes that are now seldom congested.

    62. At the time the Expressway project was approved, the South Bay area was, and had been for many years, identified by state and local authorities as a high-growth area in need of additional transportation routes to ease congestion. Indeed, plans for a southbound extension of SR-125 had been included in state and local transportation plans since 1959. During the construction phases of the Expressway, population and development in the South Bay area grew, as families flocked to affordable new housing developments. The Expressway was intended not only to reduce traffic congestion on interstates I-5 and I-805, Otay Mesa Road, and local streets in Chula Vista and Bonita, but also was expected to propel development of the localities along the route.

    63. Unfortunately, the nationwide housing market collapse hit the South Bay area
    particularly hard, resulting in population and employment growth far below projections. In the year preceding the opening of the Expressway, foreclosures were reportedly up 247% in San Diego County, with Chula Vista zip codes consistently ranked among the highest foreclosure rates in the county. As a result of the credit crunch that followed, new residential development projects plummeted. The graphs below illustrate the decline in San Diego residential real estate values over the last five years and the decline in residential developments between 2001 and 2009.

    64. Further, cross-border traffic from both ports of entry is significantly down from its peak in 2005. The following chart shows that there has been a 30% decrease in incoming traffic since 2005 at the San Ysidro port of entry and the Otay Mesa port of entry (less than one mile from the Expressway). This has relieved previously-congested alternate routes. As a result, traffic entering the Toll Road at the southern end, particularly truck traffic, has declined significantly below
    initial projections.

    65. The adverse market conditions and resulting decline in traffic flow have taken a toll on the Debtors’ financial position. Projections underlying the Senior Loan and the Franchise Agreement estimated that traffic flow on the Expressway in 2009 would be approximately 60,000 vehicles per day. Actual traffic flow on the Expressway in 2009 averaged approximately 23,000 vehicles per day.

    66. In 2009, the Debtors’ revenue totaled $21 million compared to $21.7 million for 2008. Original projections estimated revenue of $42 million for 2009 and $31 million for 2008. Actual revenues compared to original projections were 70% and 53% respectively for 2008 and 2009, with revenue growth from 2008 to 2009 of only 4%, compared to 36% in the original projections. Moreover, the Debtors’ adjusted EBITDA for 2009 on a cash flow basis was only $3.4 million compared to $3.1 million in 2008. As a result, the Debtors are unable to maintain sufficient liquidity to meet their debt service obligations and are having to use reserves for such obligations.

    67. Typically, in the private toll road industry, a new toll road operator will experience significantly increased traffic flow and revenues in its first two years of operation, but the severity of the economic recession prevented the Debtors from growing as originally projected."

It does not take a crystal ball in the present to predict our P3 future by looking at the past.

Tuesday, April 27, 2010

Dwight Disowns Bill

It was the best news that Councillor Bill Marra has had for a long time

But first, my declaration of pecuniary interest.

I have met Al Maghnieh and he did me a huge personal favour in the past for which I owe him one. This BLOG is it. I will be nice to him and let him enjoy his day in the sun with the big article about him in the Star. After this, it is all fair in love and war and political BLOGGING.

I do congratulate him for making attracting physicians and general practitioners to this area an election issue because City Councils have talked about it but really have accomplished little in the way of successfully bringing more medical personnel to this underserviced region.

I assume that the Star must love him with all of that coverage because according to Chris Schnurr, mini-Gord said at a meeting for candidates:

  • “Mr. Vander Doelen proceeded to inform potential candidates that incumbents would garner the most media attention because, “they have a name” and “that’s just how it is” in the media world.”

Obviously Al commands attention from our Windsor source of news not because he has ever done anything to make him notable municipally that I can remember (and there is not much in my archives about him either) but because he is not just any old candidate. He

  • “has spent the past seven years working in Finance Minister Dwight Duncan’s local constituency office.’’

Moreover, he is supported by Liberal heavy-hitters

  • “including [Dwight] Duncan, Steve Salmons and former MP Rick Limoges.”

I guess Sandra does not support him or perhaps she is a hitter but not heavy even after eating so many killer quiches.

He was also Windsor-Sarnia Campaign Manager for the Michael Ignatieff Liberal Leadership Campaign and "campaign aide" in Marra's last Council run.

The fact that he is running and that one of his big campaign issues involves the Zalev site intrigues me. He wants to:

  • “pursue the removal of Zalev Brothers scrap yard from “a prime piece of city real estate which could be used for commercial or retail development…”

    the scrap yard at the intersection of Dougall Avenue and E.C. Row is “an eyesore and the first step is to get them out of there. From there, we can decide what to do with the site and how we can tap into different envelopes of government funding to clean up the site…”

    “I’m not privy to details but I know the mayor’s office has had discussions with the scrap yard owners and I’d like to see the city continue with those discussions,” said Maghnieh.”

You can now count on the fact that at the bacon and cheese killer quiche meetings hosted by Sandra not only was DRIC discussed but Zalev as well. We have heard smatterings about that location over the last year or so but hardly any action taken on it. However, do remember that the day after the last election, Gord in his column said that the Zalev plant would be one of Edgar’s priorities.

Nothing like bringing it up just before the election and having lots of Council meetings about it to get headlines to get all the people around the plant all excited again. Obviously, Edgar’s discussions made its way to the office of the Minister of Finance who coincidentally will be running for office next year and perhaps also for the Leadership of the Liberal Party when the Premier leaves office. The Province would have to put in big $$$ to make it happen and to convince the Feds to do so as well.

I wonder if Max Zalev will leave Enwin (and the Audit Committee as Edgar (aka Eddie) wanted) and will take on this civic job for the boys' re-election campaigns!

However, the happiest man in town with Al's announcement has to be Councillor Bill Marra. As most people know, Bill is a good Liberal and well acquainted with Dwight. In fact, based on what I know, he was so well acquainted with Dwight that Bill lost his chance of becoming mayor at the last election. And I think he would have won handily.

With Al running in Ward 10, it is a clear indication to me that whatever the relationship between Bill and Dwight was in the past is now over. My guess is that Dwight has anointed Al to be the next Mayor of Windsor assuming that Edgar runs for a third term and then decides to leave. Even if there was another Mayor if Edgar chose not to run, Al would be a very attractive candidate at that time, in his early 30s, and having four years of Council under his belt. Having a Liberal machine behind him would not hurt either especially if Dwight was Premier.

Fortunately for Bill it now means that he has the Dwight monkey off his back. In effect, Dwight has walked away from him. If Bill decides to run for Mayor, he can run his own campaign now in his own way and with his own people and not have to worry that whatever he does may impact Dwight’s political career.

I find it fascinating that Edgar is now not going to announce what he’s going to do as far as running until mid-June. Wasn’t he supposed to announce something in April or May according to Gord? The E-machine is still trying to find out who may run against Edgar and is trying just about every trick in the book to convince someone that he/she should announce now.

It does not matter what Edgar says or does now, even if he announces that he is/is not running for Mayor. Edgar learned from the walk that Mike Hurst and his wife took along the riverfront before he announced that he was not going to run for mayor. Edgar has to one up that theatrical performance and expect him to do so.

Monday, April 26, 2010

How Canada Will Control US Land Border Crossings With Michigan's Help

What is wrong with the Michigan bureaucrats? For that matter, what is wrong with those at Infrastructure Ontario and at the PCO and PMO? Are they all mad? Why are they screwing taxpayers:
  • "Jane Welsh, a senior investment consultant at Watson Wyatt, said infrastructure funds were typically aiming to make inflation-linked returns of about 12% a year after management fees of 1% to 1.5% and performance fees of 20%.

    The riskiest opportunities, such as those involving the building of a tunnel for a tollroad, may aim to generate returns of more than 20% a year."

Oh don't worry we are told, we will control those Wall Street bankers with our P3 legislation and tough contractual terms. Let us look at merely one small point: toll increases. An obvious way to control them is to put a limitation on them, something the Ontario bureaucrats forgot to do with Highway 407. How about this as a control: increases in the consumer price index.

Sounds perfectly logical to me until you do the math. As I Blogged before:

  • "I read an article about that Chicago project. Here are some of the astounding statements made by the authors that ought to make one very leery about any P3 project:

    -In the case of the Chicago Skyway sale there was no apparent sensitivity to ratepayer impact, with an allowance for initial rate increases averaging 12.50% per year for a total of 150% in a twelve-year period and ongoing increases of 2% to 7% or more over the life of the franchise that will drive the beginning $2.00 toll up to over $60.00 per passage if rates increase at 3.00% per annum and vastly higher at greater per annum increases.

    -Thus if GDP growth were to continue at the high historical rates of 4-7% ultimately tolls to cross this 7 mile span could be over $1,000 per trip. (ie with 7% GDP growth, the toll would be $1,800.36)

    -To give these toll increases some perspective, if the appropriate index were used to control toll rates from the time of opening of the Holland Tunnel, connecting New York and New Jersey, beginning in 1927 when the toll was $1.00 (50 cents each way) until today the river crossing toll would now be $185.13… rather than the $6.00 that is being currently charged.”

    - All of these private profit dollars would otherwise flow back to the public transportation funding system and allow for investment in infrastructure over this extended period, including roads that are impacted by the growth in traffic volume connecting to the sold roadway.

    If you want a practical Canadian example of this, take a look at the profits for Highway 407 in the Toronto area. Tolls have just about doubled, off-peak rates are virtually the same as peak, from a loss of about $70M to a profit of $41M in only 7 years with operating costs stable, no payment of taxes and another 89 years left on their agreement."

Let me take you through the P3 process so that you will understand how the game is played. I will use the legislation set out in the Michigan House Bill so that you understand exactly how it works

  •  The MDOT Director will determine that a P3 should be required for the DRIC Bridge

  •  The Michigan Transportation Commission will approve the project

  •  MDOT will negotiate the agreement with the P3 Company on whatever terms and conditions that it chooses

  •  The P3 Company will hire the contractors and engineers for the project

  •  MDOT will issue bonds for the project and its only obligation is to repayt those bonds from the revenues generated by the DRIC bridge

  •  Chances are that the purchaser of the bonds will be a pension fund because supposedly it wants a longer-term investment to match its requirement to pay out pensions to its members over the long term and it wants a stable rate of return. Let us assume that OMERS is that pension fund, or rather it will be one of a number of pension funds involved to put up the money

  •  Naturally there will be some concern about Michigan’s financial position and to ensure that this project goes forward, Canada will guarantee the indebtedness of Michigan. We are such nice people after all and gifts to Michigan are permitted under the Michigan legislation

  •  At each stage of the process Wall Street Bankers will be generating huge fees because after all we are talking about a $2 billion project. These fees are paid up front

  •  We are told, and this is the way that the Ontario DRIC Road is going to be financed, that no payments will be required to be paid by Michigan until such time as the project is completed.

  •  Accordingly, the P3 Company will need to do some interim financing until the project is completed in which the Wall Street Bankers will also get a fee

  •  When the project is completed, then Michigan will loan the money that it borrowed from OMERS to the P3 Company who will then pay off the contractors

  •  Almost immediately, there will be a default because traffic numbers were not as projected but much lower

  •  Here is where the fun begins… the Wall Street Bankers will be called in to help renegotiate everything at a huge fee

  •  Chances are that the P3 Company will go bankrupt because it is not earning enough money to pay off its loan to Michigan. No one will care because it was a front anyway.

  •  Michigan will now be required to take over the DRIC bridge because it has an obligation to salvage the project

  •  Unfortunately, because of the lack of traffic, Michigan will not be able to pay down the loan from OMERS and a Wall Street Banker will do some projections and will advise that because of the lack of traffic Michigan can never pay off the complete debt in this loan transaction ever.

  •  Michigan will not be too concerned because its obligation is to pay down the loan based on revenues only. The shortfall will go to the account of OMERS

  •  However, OMERS will raise a fuss because its poor pensioners would be taking a huge loss

  •  Naturally, it will call on Canada to make good on its guarantee, which of course Canada will do

  •  The guarantee between Canada and Michigan will state that if Canada is required to pay based on its guarantee then it takes over Michigan’s role in the transaction

  •  As the P3 legislation states, in any P3 arrangement, Michigan is the owner

  •  Accordingly, Canada now owns the US side of the DRIC bridge as well as its own.

Remember I suggested to you before that the Tunnel deal could work in a similar fashion if Windsor paid to take over the US half and I expect a similar situation to take place at the Blue Water Bridge as well. It is on the MDOT list for possible P3ing and is on Canada's list for assets that can be "disposed of" perhaps by a P3 as well.

Before you know it, Canada is in control of all of the crossings in SW-Ontario and SE-Michigan excpet for that damned Ambassador Bridge whose owner is screwing all of this up by not selling out.

And as for the Dubai ports risk, hey, it is merely exercising rights under a guarantee. No one will be the wiser.

Nice plan isn't it.

Michigan P3 Bureaucrats Overthrow State Government (Part II)

It's like buying a toll road or a DRIC bridge on a credit card when Michiganders have no money in the bank. No cash today and pay it back over time at outrageous interest costs.

I was so upset I was going to organize a tea party so I could meet with friends to calm my nerves about how the Legislative function was being usurped by the Bureaucracy in Michigan over P3s.

It is a bureaucratic heaven. Deal with private parties and Wall St. bankers, make them rich with upfront fees and who cares what the consequences to taxpayers are since the Legislators have no say in the matter. Just a Governor appointed Commission can approve or reject. All power to MDOT thanks to proposed P3 legislation. It is scary.

Imagine commuters in L. Brooks land waking up one morning and being told this about a P3 project that the MDOT Director and the Michigan Transportation Commission decided they wanted to build without any legislative oversight or approval. From the MRG website:
  • "Will Public Private Partnership projects apply to our existing roads?

    In some cases the answer is “yes”. For instance, one potential P3 project is adding a fourth lane to eighteen miles of I-75 in Oakland County. Though the added capacity is desperately needed, there is no money in our transportation budget for such a large project. However, with private investment a “fast” toll lane could be built adjacent to the existing lanes. Drivers who wanted to pay the tolls could guarantee faster travel and other drivers would have an expressway with less traffic."

And if that road could not pay its way, or the tolls were too high and few used it, would taxes have to be raised to subsidize it? What would have to be cut for billions of dollars of such programs from the State budget if some go sour---education, police, more local roads and bridge projects?

That was my reaction when I read the news story out of Lansing about the P3 hearings.

It was an episode that should have been created for the British political sitcom, Yes Minister! It was that absurd.

In fact, it was the most ridiculous thing I had heard in a long time, perhaps other than this comment which I read in another Lansing report:
  • "You all need to recognize that we don't have dollars for major infrastructure investments in this state," Gonzales told the House Transportation Committee. Referencing a recent article in Governing, Gonzales stressed that "we're broke fiscally and our systems are broken.

    "We have dysfunctional systems -- point being we'll be fortunate if we can, in a bipartisan way, later this year come up with a solution for the $84 million in funding" required in order meet the match for some $470 million in federal road funds."

So call in P3 operators to further impoverish the State, Representative, as they get their huge fees and obscene profits. Set aside $100M for DRIC so you don't have $84M for about 10,000 jobs for the 243 postponed MDOT projects. And don't take advantage of the billions of toll credits which the State would earn from the Ambassador Bridge Enhancement Project. This is unreal!

Who is there to protect the interests of taxpayers if this legislation goes through? In effect, the Legislature loses control over hundreds of millions of dollars of transportation spending. It is in the hands of the MDOT Director overseen by the Michigan State Transportation Commission comprised of six members appointed by the Governor with the advice and consent of the State Senate.

The Commission's role is "approval or disapproval of public private partnerships entered into by the department."

So now we have the Governor's appointed Commission watching over the spending by the Governor's bureaucrats. Nice work if you can get it.

In effect, the Governor has just wiped out the Legislature and MDOT can spend to its heart's content with no one being able to say a thing to them. Make it a P3 and who needs legislative oversight.

MDOT has complete discretion to do whatever it wants in the Agreement terms subject to including terms designed to protect the public interest and assure accountability of an operator. I would be really assured by that!

And how long can a P3 last---"for a period determined necessary for the economic viability of the arrangement." Now that's a loooooong time.

However, here is the pièce de résistance , the icing on the cake, the complete and total sell-out of taxpayers if obscene P3 profits were not enough:
  • "Tolls and charges imposed for use of a Transportation facility may be used for the repayment of bonds sold for those purposes. As provided by the terms of a public-private agreement, a portion of the revenue may be allotted to the operator."

Wow, this is truly unbelievable. No criteria set out about how the Wall Street bankers can be rewarded and on what basis.

Here is a news story I saw about the P3 hearings and a few fisking comments of mine:

Shaky Start For D.R.I.C. Bill

There is unanimous support for the Department of Transportation having the authority to create partnerships for private financing of infrastructure projects as long as the Detroit River International Crossing is not one of those projects. [OMG, unanimous support! Are they mad? Can't they read? A Department whose experts cannot predict traffic projections should never be given this kind of power to spend. It has to be unconstitutional somehow if all else fails!]

The House Transportation Committee began discussions Thursday of legislation (HB 4961 ) that would allow the department to contract with private companies to build new or expanded roads, with the department either making payments or allowing the company to collect tolls.

But the possibility that the DRIC project could be one of those partnerships drew concerns from both sides of the aisle, particularly with the department, as the bill is structured, having the ability to create the partnerships without legislative oversight. [Thank goodness someone is on the ball on this matter]

The process, which was also recommended by the Transportation Funding Task Force and has support from most road interests, would allow the state to finance and build projects either ahead of schedule or that it might never have the money to build, various supporters said at Thursday's hearing. [The road interests----they are so foolish. They don't care where the money comes from for their business of building roads as long as it comes, but they need to think as taxpayers also. When they see how they will be over-charged for projects, and taxes or tolls go sky-high, then their tune may change. However, by then it is too late and the bureaucrats who entered into the dumb deals will have been long gone]

In addition to the DRIC, some of the projects listed as candidates for the program were I-75 in Oakland County, I-94 in Detroit and commuter rail lines from Howell through Ann Arbor to Detroit. [Oakland County gets a road. Oh, isn't that where the big DRIC booster L. Brooks is from.]

Republicans thanked the department for providing a list, but Rep. Paul Opsommer (R-DeWitt) said the proposal has to include more legislative oversight. "I just don't see this process moving forward without some legislative oversight," he said. The bill as it stands is essentially a "blank check" to MDOT, he said. [Darn Republican spoil-sport]

But MDOT legislative liaison Ron DeCook said other states have had to repeal their legislative oversight to get projects moving. [Proof that MDOT does not give a damn about the Legislature and wants to avoid them as much as possible. Get those projects moving regardless of whether it hurts taxpayers]

And he said the private financiers of the projects, including the DRIC, would not fund a project that was not viable. "We are trusting the private sector to evaluate these projects and make that determination," he said. [What a ridiculous comment. The bankers get their fees upfront and could NOT care less if the project fails. The State would have to come in and salvage the project. Look at the mess that Macquarie had with their toll roads. Were they the Australians that MDOT saw who educated them on P3s. If so, heaven help us if this is the result. This is a complete dereliction of duty on the part of MDOT for which termination is too good a punishment for any bureaucrat who acts this way.]

Rep. Marty Knollenberg (R-Troy) said the DRIC was too risky of a project to be included, considering its size as a binational public-private partnership and that the state has little experience in these contracts.

And he said allowing the DRIC to remain as a potential project would kill the bill. "If that wasn't a consideration, you would probably have P3 on the floor," he said. [I agree with his comments re DRIC but this legislation is too dangerous and needs serious amendment.]

Dan Stamper with the Detroit International Bridge Company, which owns the Ambassador Bridge, said the proposal was simply an effort to take business from his company. "MDOT now wants to use the P3 process to sell the international corridor to another private company," he said, adding contracts between the state and the owner of the Ambassador Bridge prohibit the state from introducing such competition.

Mr. Opsommer said the proposed additional bridge would not have sufficient traffic to cover its expenses. "We all know they're going to come back and say "We're going to go bankrupt if you don't provide more money,"" he said. [Wait until he reads my BLOG re P3 math]

But Liam Kelly with KPMG, a consultant for the department on the P3 process, said the contract would not allow for such funding requests. "One of the great strengths of the P3 process is it does transfer this risk to the private sector," he said. [Of course the P3 investor builds in a big contingency amount too that is in effect financed as well. That makes the project cost higher than the traditional way to finance projects like these. And he did not say that if the project goes broke, the State will have to come in and salvage it or buy out the P3 partner]

And, under the bill, the facilities remain under the ownership and control of the state, Mr. Kelly said. [Except that the P3 partner can do what it negotiated for the entire length of the contract and the State has no say if they negotiate badly as Ontario did with Highway 407 and tolls!]

Rep. Coleman Young II (D-Detroit) raised concerns that taking decisions on building the DRIC out of the hands of the Legislature would also take some bargaining power from his community. He said the DRIC should not move forward without a community benefit agreement that ensures much of the work on the project goes to community residents. [The Representative need not be concerned. For DRIC for instance, Community Benefits are minimal anyway:
  • "He said he was disappointed with the lack of progress on the Community Benefits Program (CBP) requests. He felt that many of the benefits were items for which he already paid taxes. He said he had hoped the future in Delray would be made better by the DRIC, but now felt Delray would go down with or without the DRIC. Of the 62 items submitted by the Community Benefits Coalition, almost all had come back “no.” He does not consider that MDOT working together with the community. He prefers to be disappointed without a bridge than with a bridge.]

The committee is expected to revisit the bill next week. [I truly hope it is sent back to be rewritten]

Doesn't anyone get it? P3s are a financing tool. The money has to be paid back:

  • "MDOT provided the committee a list of a dozen potential P3 projects that represented potentially $6.4 billion and tens of thousands of construction jobs. The largest of the projects outlined was the DRIC project at an estimated $1.85 billion for the U.S. side.

    "These are very large projects," said MDOT's Ron DeCOOK. "These are projects that would not be done under our normal funding scheme right now. If we had the opportunity to use P3s in addition to our regular program we could add these projects to the list."

If Michigan does not have money to undertake projects how will it have the money to pay it back and at a rate higher than traditional Government financing?

Is this taxation without representation? Pass the teabag please. It's a pity.