Thoughts and Opinions On Today's Important Issues

Friday, May 07, 2010

The Granholm Legacy: Slip Sliding Away

The lyrics of the song seem so appropriate:

  • "Believe we're gliding down the highway, when in fact we're slip sliding away...

    Slip sliding away, slip sliding away
    You know the nearer your destination, the more you slip sliding away."

Wrapping the DRIC in as part of the P3 Bill, making one of the biggest construction projects in Michigan's history the test case for a very complex contractual relationship for 50 or more years. What was she thinking! Was DRIC the camel that broke the straw's back? Is this one of the reasons that Legislators are nervous about signing a blank P3 check to MDOT?

That Australian trip that the MDOT people took to be educated on P3s must have been very enlightening. I guess that they did not understand that Commonwealth countries including Canada do not have the same separation of powers doctrine that the US has. Trying to usurp the Legislature's powers was something that allowed everyone to oppose the P3 Bill, regardless of their feelings re DRIC.

What a huge tactic error by MDOT. What over-reaching. Now the Governor has to pay the price. What can she do now to salvage her reputation?

I still cannot believe it. Who dreamed up the idea of trying to get the P3 Bill passed with UP TO $550M of supposedly riskless money. What an insult to the integrity of House members to have a breathless Governor put this down in front of them at the last second when obviously it was around for some time. Heck, it seems that L. Brooks knew about it since he said he had a letter that he was going to shop around to members of his Party.

During her phone call with Prime Minister Stephen Harper, I bet that Governor Granholm could just taste victory for her new crossing, her legacy, the one big act that would make everyone forget her failures.. Hmmmm, the "Jennifer Mulhern Granholm Crossing" perhaps.

After all, it was Michigan's idea to work so closely with Canada on the big push so she would get the credit errr "Transport Canada did a heck of a job in figuring out how to craft this. They really threaded a needle" so now she might get the blame.

She must be desperate now. Her dream of the DRIC bridge and her legacy perhaps going up in smoke unless she can charm her supporters to stay firm or twist their arms to get onside. Can you imagine the political pressure being applied to Legislators.

Except:

  • $550M for the DRIC project....errrr UP TO $550M actually and perhaps only $1-200M in the end IF the Feds come onside.
  • Canada's participation in financing DRIC was merely going to increase errrr Minister Baird called it a loan.
  • Toll revenues would pay for it errrr except P3 partners wanted availability payments because tolls would not cut it.
  • It was a riskless deal errrr for Canada and P3 partners but not for Michigan.
  • It was merely reciprocating what happened with the Blue Water Bridge errrrr Canada's version of history was different.
  • A good grab in the P3 Bill to give the Executive absolute authority over P3s without legislative oversight errrr That might be unconstitutional
  • Making a nice pitch to the House and Senate errrr Presenting a "refresher" as an investment grade traffic survey and refusing to produce the WSA financial report.

Do P3s have a place? I would be surprised if they did but let us assume that in some case it might be the way to go. Who though would ever support one now when everything bad about P3s has been identified as a result of trying to wrap a P3 Bill and DRIC together. The concept has been thoroughly discredited, something that I am thrilled about as a taxpayer.

Canada was driving the bus. Canada's DRIC time-table caused the P3 Bill to be questioned. Canada had to have the P3 legislation passed for whatever their scheme was and they had to have the P3 bill passed NOW. Whatever is going on has been planned for "a generation or two" with the last decade being the time when the hardest work was being done by Transport Canada.

Seriously, if you are a Michigan Legislator, are you going to ride on the coat-tails of a lame-duck Governor who promised thousands and thousands of jobs (but not until 2021, according MDOT/Semcog or perhaps even later) in a pep-rally but now cannot deliver because of the errors made.

I can just hear a Legislator being called into the Governor's office to be charmed. After listening to the Governor, I would expect that person , as he/she heads for the door, to shout back.

"It did not have to be this way Governor. You said it yourself:

  • "Granholm said this morning she would be happy to support the second Ambassador span, but pointed out the Canadian government is opposed to Moroun's plan, which critics say would be too disruptive for the City of Windsor.

    "I've long said that if he could get the permits, we'd be all in."

You could have helped him Governor get those permits and we'd be laughing now and enjoying our summer. You know how to talk "Canadian" since for 8 or 9 months your staff were working with Canada. How much did ex-Governor Jim cost us? For what?

Just think, all of those toll credits from the Ambassador Bridge Enhancement Project we could be using, all those postponed 243 bridge and road projects started with 10,000 people working again along with the thousands of bridge building jobs because of Moroun's bridge. We had it all and you blew it.

We had no risk if Moroun picked up the tab.

You had an agreement you could have relied on but you did not use it. You could have taken on a leadership role with Canada, been the peace-maker but instead you chose a side, the wrong one as it may turn out. How many lawsuits so far and how many more to come?

MDOT....I am furious at them for their botched strategy. As for the new crossing, please, I do not want to hear MDOT saying they want both of them again.

I have had enough of double-crossings!"

Did Michigan Front The Blue Water Bridge for Canada

That is what is being claimed now in Michigan from those who have no trouble with the State accepting UP TO $550M of loan money from Canada. That money is supposed to make DRIC riskless and help convince House members to pass P3 legislation and then allow the DRIC Bridge to be built without any legislative oversight.

But is it historically accurate? The answer may depend on which side of the border you live on, whom you want to believe and how the 2 bridges were built and financed and who the owners were and when.

Let me take you through some data I found which should shed some light on the matter:

From MDOT Director Steudle
  • "While the Canadian offer is unique, it isn't without precedence, said Kirk Steudle, director of the Michigan Department of Transportation.

    "Seventy years ago, the Blue Water Bridge between Port Huron and Sarnia was paid for in the same manner," he said.

    "Only then it was the U.S. that paid for the Canadian half, which was then paid off with the tolls they collected. This time, Canada would pay our portion of the project upfront."

From Governor Granholm:

  • "Come on. And we are all grateful to Canada for offering to do what we did on the Blue Water Bridge when it was constructed. We paid for the full thing then and the Canadian government is returning the favor."

From ex-Governor and DRIC consultant Blanchard:

  • "The idea for Canada’s offer to loan Michigan up to $550 million to cover the state’s cost of a new Detroit River bridge originated with the Michigan Department of Transportation, former Michigan Gov. James Blanchard said.

    “The idea came from MDOT,” he said in a telephone call to Crain’s this morning.

    There’s precedent for the deal, he said: Michigan floated Canada some portion of the funding for the construction of its share of the first Blue Water Bridge span between Port Huron and Point Edward that opened in 1938. The money was repaid with tolls."

Hmmm maybe, but Canada's payment is not to build a bridge; it's to make it easy for Legislators to pass P3 legislation, to "make it happen" in Minister Baird's terms so Canada can control the Ambassador Bridge after trying for a generation or two.

I wonder what the real story is since Steudle and the Governor said Michigan paid it all and the ex-Governor said it was only for some portion.

None of them talked about a loan being made as in this case today with presumably some default clause that would give Canada complete control if the revenues were not sufficient.

The BWB transaction was for the bridge; Canada's payment is for transportation connections and not the bridge itself.

Oh and did you notice, then until recently there was no talk of Michigan putting in any money. Then it was $100M and now it is $550M

I did a bit of research and there was not too much around. I am sure though that MDOT can give us all of the relevant info to put this question to rest since I trust what they say. Sure I do.

Here is what I did find:

  • "Early in 1928, bills for a bridge franchise were introduced in the United States Congress and the Dominion Parliament...

    The depression years came, and delayed the project. However, it was never quite dropped. In 1930, the franchise was renewed, but construction still hung fire. Another renewal was granted in 1934. Two years later the franchise was transferred to the Michigan Bridge Commission, this at long last proceeded with the financing and construction of the bridge..."

Doesn't that look to you that Michigan was in control of the project and therefore had the responsibility to finance it? That is not the DRIC project structure.

  • "1930's: Financing and building the original span

    In 1935, the Michigan Legislature passed a law (Act 147, Public Acts of 1935 ) creating a State Bridge Commission to finance the design and erection of the main bridge structure of the Blue Water Bridge. The commission was approved by the United States Congress in August of 1935 (Public Law 411 of 1935). The law permitted the commission to sell bonds that would be repaid by the revenue from the tolls collected within 30 years. This legislation assumed that Michigan and Ontario would each build their own approaches to the bridge, and customs, immigration and toll facilities...

    In 1970, the United States Congress passed a law permitting Michigan to again collect tolls on the Blue Water Bridge. To comply with the law, the Department had to repay the Federal Government $348,000.00 for the grant it received in 1938, which funded the approach road."

A US project again with no mention of Canada or Michigan helping Canada out. Again, not like DRIC at all. Canada it appears had NO role in the bridge construction. Note the US not Canada funded the border approach road.

  • "The original Blue Water Bridge was opened on October 10,1938 and was operated by the Michigan State Bridge Commission."

Again, not how DRIC is to operate.

I read this and did not understand the background

  • "Cdn half of the bridge became the property of the federal gov’t following retirement of the original construction debt...

    Blue Water Bridge: The bridge was built under the authority of 1930 Michigan legislation and opened to traffic in 1938. According to Michigan sources, there was an agreement between Canada and the United States that the bridge would become toll free once the debt was retired. This happened in 1962. At this point, the Canadian operator, Blue Water Bridge Authority, began collecting tolls in both directions. Prior to this, it is understood, each operator only collected tolls in one direction. Under 1970 US federal law, the Michigan Department of Transportation was authorized to re-institute tolls on its side of the bridge. Canadian sources have a slightly different slant on this story: “In 1964, following retirement of the construction debt, the Canadian half reverted, at no cost or expense, from the State of Michigan to the federal government in accordance with the provisions of a 1928 special Act of Parliament authorizing construction and operation of the bridge.” This source makes no mention of an agreement to cease collecting tolls or anything about the Canadian side of the bridge collecting tolls in both directions in 1962."

Totally different than DRIC and it is not unexpected that the US would pay for everything since it owned everything. The Bridge only reverted to Canada about 30 years after it was built it seems.

Then this:

  • "Congressional representatives acquired extensions for the construction permits and also passed a bill granting a state bridge commission the power to build and run a bridge as well as buy out the competition - the Port Huron-Sarnia Ferry Company. The state of Michigan had created a bridge commission in 1935 that could issue bonds to finance the design and erection of the bridge. Revenue from bridge tolls would repay the bonds..."

Again a Michigan project.

Here is what the Blue Water Bridge authority says which changes everything with a completely different version:

  • "1938 Construction of the original span was completed and was dedicated as “a new bond of friendship and commerce between two…nations of this continent”. Funding for the Canadian portion of the bridge was provided by the Federal and provincial governments. The project was completed at a cost of USD $3.9 million."

If the BWBA is right, then does it not seem that what the Americans are saying today is wrong? In any event, it looks like it was a US project and Canada only got its interest in 1964. It is hardly the same thing as what is going on with DRIC.

Just in case you have nothing better to do, you might want to read this Michigan statute in relation to the Blue Water Bridge and try and find any reference to Michigan funding Canada. If you cannot, then putting up money for Canada might have been illegal in my opinion.

  • STATE BRIDGE COMMISSION; PUBLIC WORKS

    Act 147 of 1935

    AN ACT authorizing the acquisition, improvement, construction, operation and maintenance of certain public works by the state; providing for the creation of the state bridge commission; authorizing the issuance of revenue bonds of the state payable solely from earnings to pay the cost of such works; making such bonds exempt from taxation and making them eligible for certain investments; providing for the collection of fees, rents, tolls and other charges for the payment of such bonds and for the cost of maintenance, operation and repair of the works; declaring that no debt of the state shall be incurred in the exercise of any of the powers granted by this act; and providing for condemnation.


    The People of the State of Michigan enact:


    254.151 State bridge commission; issuance of revenue bonds for public works.

    Sec. 1.

    Issuance of revenue bonds for public works. The state bridge commission hereinafter created is hereby authorized and empowered to acquire by purchase and to construct, or partly acquire and partly construct, and to improve, enlarge, reconstruct, own, equip, operate and maintain the public works hereinafter specified, and to issue revenue bonds, payable solely from earnings, to pay the cost of such works.


    History: 1935, Act 147, Imd. Eff. June 4, 1935 ;-- CL 1948, 254.151
    Compiler's Notes: The catchlines following the act sections numbers were incorporated as part of the act as enacted. By Act 302 of 1931 the state gave its consent to the construction of a bridge across the Saint Clair river at or near Port Huron by the Great Lakes bridge commission, created by act of congress.The state bridge commission, referred to in this act, was transferred to the department of state highways and transportation and abolished by MCL 16.456.



    Sec. 2.

    Definitions. As used in this act, the following words and terms shall have the following meanings:

    (a) The word “commission” shall mean the state bridge commission hereinafter created, or, if said state bridge commission shall be abolished, any board or officer succeeding to the principal functions thereof or upon whom the powers given by this act to said commission shall be given by law.

    (b) The word “works” shall include all property, rights, easements and franchises relating thereto and deemed or convenient for their operation, and shall embrace an international bridge over, and ferries across the Saint Clair River at or near Port Huron.

    (c) The word “improvements” shall mean such repairs, replacements, additions and betterments of and to works acquired by purchase as are deemed necessary to place them in a safe and efficient condition for the use of the public, if such repairs, replacements, additions and betterments are ordered prior to the sale of any bonds for the acquisition of such works.

    (d) The term “cost of works” as applied to works to be acquired by purchase, shall include the purchase price, cost of improvements, financing charges, interest during any period of disuse before completion of improvements, cost of engineering and legal expenses, plans, specifications and surveys, estimates of cost and of revenues, other expenses necessary or incident to determining the feasibility or practicability of the enterprise, administrative expense and such other expenses as may be necessary or incident to the financing herein authorized, and the acquisition of the works and the placing of the same in operation.

    (e) The term “cost of works” as applied to works to be constructed, shall embrace the cost of construction, the cost of all land, property, rights, easements and franchises acquired which are deemed necessary for such construction, the cost of all machinery and equipment, financing charges, interest prior to and during construction and for 6 months after completion of construction, cost of engineering and legal expenses, plans, specifications, surveys, estimates of cost and of revenues, other expenses necessary or incident to determining the feasibility or practicability of the enterprise, administrative expense and such other expenses as may be necessary or incident to the financing herein authorized and the construction of the works and the placing of the same in operation.

    (f) The word “owner” shall include all individuals, incorporated companies, societies or associations having any title or interest in any properties, rights, easements or franchises to be acquired.



    254.153 State bridge commission; membership, oath, bond.

    Sec. 3.

    State bridge commission. There is hereby created a commission to be known as the “state bridge commission,” and by that name the commission may sue and be sued; plead and be impleaded; contract and be contracted with; and have a common seal. The said commission shall consist of 3 members, who shall be appointed by the governor, with the advice and consent of the senate. The governor shall appoint the members of such commission as soon as may be after this act becomes effective. The said commissioners shall immediately enter upon their duties and shall hold office until the expiration of 2, 4 and 6 years, respectively, from the first day of April, 1935, the term of each to be designated by the governor, but their successors shall be appointed for the term of 6 years, excepting that any person appointed to fill a vacancy shall serve only for the unexpired term; and any commissioner shall be eligible for reappointment. Each commissioner before entering upon his duties shall take, subscribe and file his oath of office as required by law. Before the issuance of any bonds under the provisions of this act, each commissioner shall execute a bond, to be approved by the governor, in the penalty of 10,000 dollars, conditioned according to law, which bond shall be filed and recorded as are other bonds required of state officials. The commission shall elect 1 of its members as chairman and shall also elect a secretary who may not be a member of the commission. The state treasurer shall act as treasurer of the commission.



    254.154 State bridge commission; acquisition of necessary property.

    Sec. 4.

    Acquisition of necessary property. The commission shall have power to acquire by purchase upon such terms and conditions and in such manner as it may deem proper, and to acquire by condemnation in accordance with and subject to the provisions of any and all existing laws applicable to the condemnation of property for public use, any land, rights, easements, franchises and other property deemed necessary or proper for the construction, operation and maintenance of such works. Title to all property acquired or condemned shall be taken in the name of the state. The state shall be under no obligation to accept and pay for any property condemned under this act except from the funds provided by this act, and in any proceedings to condemn such orders may be made by the court having jurisdiction of the suit, action or proceeding as may be just to the state and to the owners of the property to be condemned. No property shall be acquired under this act upon which any lien or other encumbrance exists, unless at the time such property is acquired a sufficient sum of money be deposited in trust to pay and redeem such lien or encumbrance in full.


    254.155 State bridge commission; purchase of public works.

    Sec. 5.

    Purchase of works. The commission is hereby authorized to acquire by purchase whenever it shall deem such purchase expedient, but solely by means of or with the proceeds of revenue bonds hereinafter authorized, any public works hereinabove specified, or any such works wholly or partly constructed, and any franchises, easements, permits and contracts for the construction of any such works, upon such terms and at such prices as may be considered by it to be reasonable and can be agreed upon between it and the owner thereof, title thereto to be taken in the name of the state.


    254.156 Improvement of public works.

    Sec. 6.

    Improvement of works purchased. At or before the time any such works shall be acquired by purchase, it shall be the duty of the commission to determine what repairs, replacements, additions or betterments will be necessary to place the works in safe and efficient condition for use, and to cause an estimate of the cost of such improvement to be made, and submitted to the commission by an engineer or engineers appointed by it; such improvements shall be ordered by the commission before the sale of any revenue bonds hereinafter authorized for the acquisition of such works, and shall be paid for out of the proceeds of such bonds.


    254.157 Construction of public works; agreements with other states and Canada.

    Sec. 7.

    Construction of works. The commission is hereby authorized to construct, whenever it shall deem such construction expedient, any public works hereinabove specified, the cost of such construction to be paid wholly by means of or with the proceeds of revenue bonds hereinafter authorized. The commission is hereby authorized to make agreements with any company, corporation or commission, incorporated or created under the laws of an adjoining state or of Canada, respecting the construction, maintenance and use of any public works which said commission is authorized by this act to acquire or construct, together with all appurtenances of such works, and is authorized to purchase within this state and within any adjoining state or within the Dominion of Canada, solely from funds provided under the authority of this act, any such works already constructed or partly constructed, and such lands, structures, rights of way, franchises, surveys, plans, works, plant, machinery, and easements and other interests in lands, including lands under water and riparian rights of any person, railroad or other corporation or municipality or political subdivision, deemed necessary for the construction of any such works or for the operation thereof, upon such terms and at such prices as may be considered by it to be reasonable and can be agreed upon between it and the owner thereof, title thereto to be taken in the name of the state.


    254.158 Revenue bonds for public works; sale, notice; signature; report to administrative board.

    Sec. 8.

    Revenue bonds. The commission is hereby authorized to provide by resolution for the issuance of revenue bonds of the state (A) for the purpose of paying the cost as hereinabove defined of any 1 or more public works which said commission is authorized by this act to acquire or construct, which resolution shall recite an estimate of such cost, or (B) to refund any revenue bonds, heretofore or hereafter issued under the provisions of this act, not earlier than 1 year prior to either the date of maturity of such revenue bonds or the date upon which they may be redeemed prior to maturity, or at any time, upon the surrender for payment of at least an equal par amount of revenue bonds authorized by said resolution to be refunded: Provided, That any issue of such refunding bonds shall not exceed the total par amount of outstanding revenue bonds, less any available funds and sinking fund balances. Such refunding bonds shall be sold to the highest bidder upon sealed bids, the same to be publicly opened by the commission. No bid shall be accepted by the commission except upon the express approval of the state treasurer. Highest bidder is hereby defined as the person, firm or corporation submitting a proposal which shall effect the greatest saving of interest upon the bonds refunded. Notice of such sale shall be published at least 7 days prior to the day of opening bids in the Michigan Investor, the Bond Buyer and such other financial journals as the commission may deem advisable. No sale of such refunding bonds shall be made at a figure of less than that required to redeem and pay the bonds refunded and effect a net saving of at least /2 of 1% upon the bonds refunded. The principal and interest of such bonds shall be payable solely from the special fund herein provided for such payment. Such revenue bonds shall bear interest at not more than 6 per centum per annum, payable semi-annually, and shall mature at such time or times not more than 40 years from their date or dates as may be fixed by such resolution. All such revenue bonds may be made redeemable before maturity at the option of the commission at such price or prices and under such terms and conditions as may be fixed by the commission prior to the issuance of the bonds. The principal and interest of such revenue bonds may be made payable in any lawful medium. The commission shall determine the form of the bonds and the interest coupons to be attached thereto and shall fix the denomination or denominations of the bonds and the place or places of payment of principal and interest thereof, which may be at any bank or trust company within or without the state. Revenue bonds issued by the commission shall be signed by the governor and by the chairman of the commission, under the great seal of the state, attested by the secretary of state, and the coupons attached thereto shall bear the facsimile signature of said chairman of the commission. Any refunding bonds issued shall be signed solely by the chairman and the secretary of the commission, under the seal of the commission. All bonds issued under this act shall contain a statement on their face that the state shall not be obligated to pay the same or the interest thereon except from the revenues of the works. In case any of the officers whose signatures appear on the bonds and coupons shall cease to be such officers before the delivery of such bonds, such signatures shall nevertheless be valid and sufficient for all purposes the same as if they had remained in office until such delivery. All such revenue bonds shall have and are hereby declared to have all the qualities and incidents of negotiable instruments under the negotiable instruments law of the state. Such bonds shall be exempt from all taxation, state, county and municipal, and unless otherwise provided by law, shall be lawful investments in the same manner and to the same extent as other bonds of the state. Provision may be made for the registration of any of the bonds in the name of the owner as to principal alone or as to both principal and interest. The commission may sell such bonds in such manner and for such price as it may determine to be for the best interests of the state, taking into consideration the financial responsibility of the purchaser and the terms and conditions of the purchase, and especially the availability of the proceeds of the bonds when required for payment of the cost of the works, but no such sale shall be made at a price so low as to require the payment of more than 6 per cent interest on the money received therefor, computed with relation to the absolute maturity of the bonds in accordance with standard tables of bond values. The proceeds of such bonds shall be used solely for the payment of the cost of the works, or, in the case of refunding bonds, for the payment of the revenue bonds refunded, and shall be checked out in such manner and under such restrictions, if any, as the commission may provide. If the proceeds of the revenue bonds, by error of calculation or otherwise, shall be less than the cost of the works, additional bonds may in like manner be issued to provide the amount of such deficit and, unless otherwise provided in the trust indenture hereinafter mentioned, shall be deemed to be of the same issue and shall be entitled to payment from the same fund, without preference or priority of the bonds first issued for the same works. If the proceeds of bonds issued for any such works shall exceed the cost thereof, the surplus shall be paid into the fund hereinafter provided for the payment of principal and interest of such bonds. Prior to the preparation of definitive bonds, the commission may under like restrictions issue temporary bonds with or without coupons, exchangeable for definitive bonds upon the issuance of the latter. Such revenue bonds may be issued without any other proceedings or the happening of any other conditions or things than those proceedings, conditions and things which are specified and required by this act or by the constitution of the state. In the discretion of the commission revenue bonds of a single issue may be issued for the purpose of paying the cost of any 1 or more public works, whether of the same class or 2 or more classes.

    A report shall be made by the commission to the state administrative board on or before the fifteenth day of January, fifteenth day of April, fifteenth day of July, fifteenth day of October of each year, which report shall state the receipts and disbursements during the preceding quarter, and shall contain such further information as the state administrative board shall require.


    254.159 Lien on bond proceeds.

    Sec. 9.

    Lien upon bond proceeds. All moneys received from any revenue bonds issued pursuant to this act shall be applied solely to the payment of the cost of the works or to the appurtenant sinking fund, and there shall be and hereby is created and granted a lien upon such moneys until so applied, in favor of the holders of the bonds or the trustee hereinafter provided for in respect of such bonds.


    254.160 Trust indenture; collateral security, surety bonds; expenses.

    Sec. 10.

    Trust indenture. In the discretion of the commission, any series or issue of such revenue bonds may be secured by a trust indenture by and between the commission and a corporate trustee, which may be any trust company or bank having the powers of a trust company within or outside of the state, but no such trust indenture shall convey or mortgage the works or any part thereof. Either the resolution providing for the issuance of revenue bonds or such trust indenture may contain such provisions for protecting and enforcing the rights and remedies of the bondholders as may be reasonable and proper, not in violation of law, including covenants setting forth the duties of the state and the commission in relation to the acquisition, construction, improvement, maintenance, operation, repair and insurance of the works, the custody, safeguarding and application of all moneys, and may provide that the works shall be acquired, constructed, or partly acquired and partly constructed, and paid for under the supervision and approval of consulting engineers employed or designated by the commission and satisfactory to the original purchasers of the bonds issued therefor, who may be given the right to require that security given by contractors and by any depositary of the proceeds of the bonds or revenues of the works or other moneys pertaining thereto, be satisfactory to such purchasers, their successors, assigns or nominees. Such resolution or indenture may set forth the rights and remedies of the bondholders and trustee, restricting the individual right of action of bondholders as is customary in trust indentures securing bonds and debentures of corporations. Except as in this act otherwise provided, the commission may provide by resolution or by such trust indenture for the payment of the proceeds of the sale of the bonds and the revenues of the works to such officer, board or depositary as it may determine for the custody thereof, and for the method of disbursement thereof, with such safeguards and restrictions as it may determine. Any bank or trust company designated as a depositary, notwithstanding any provision of law to the contrary, is hereby authorized, with the approval of the commissioner of the state banking department, to pledge as collateral security for moneys deposited by the trustee in such depositary, direct obligations of, or obligations the principal and interest of which are unconditionally guaranteed by, the United States government, or other marketable securities eligible as security for the deposit of trust funds under regulations of the federal reserve board and having a market value (exclusive of accrued interest) at least equal to the amount of such deposit, or in lieu of such collateral security as to all or any part of such deposit, there shall have been lodged with the trustee, or with the secretary of the commission in the case of moneys deposited or remaining on deposit with the trustee, and remain in full force and effect as security for the moneys deposited, the indemnifying bond or bonds of a surety company or companies qualified as surety for United States government deposits and qualified to transact business in the state of Michigan in a sum at least equal to the amount of moneys deposited with such bank or trust company or such part thereof, such bond or bonds to be approved in writing by the commission: Provided, however, That it shall not be necessary for the trustee to give collateral security or file a surety bond as security for the deposit of that amount of the proceeds of the bonds which shall be paid out of the construction fund simultaneously with the delivery of the bonds: And provided further, however, That the cost of any surety bond furnished by the trustee may be paid for out of funds from time to time in the hands of the trustee. All expenses incurred in carrying out such trust indenture may be treated as a part of the cost of maintenance, operation and repairs of the works affected by such indenture.


    254.161 Revenues; contracts with state highway department and Ontario; elimination of tolls.

    Sec. 11.

    Tolls, fees, rents, rates or other charges shall be fixed, charged and collected for the use of such works and shall be so fixed and adjusted, in respect to the aggregate of such tolls, fees, rents, rates or other charges from the works for which a single issue of revenue bonds is issued, as to provide a fund sufficient to pay (a) operating, repair and maintenance expenses, until such time as the bridge shall become a free bridge as hereinafter provided, and (b) such issue of bonds and the interest thereon, subject, however, to any applicable law or regulation of the United States of America now in force or hereafter to be enacted or made. Such tolls, fees, rents, rates or other charges shall not be subject to supervision or regulation by any state bureau, board, commission or agency. At or before the issuance of any revenue bonds, the commission shall by resolution create a sinking fund for the payment of the bonds and the interest thereon, and the payment of the charges of banks or trust companies for making payment of such bonds or interest, and shall set aside and pledge a sufficient amount of the net revenues of the works, hereby defined to be the revenues of the works remaining after the payment of the reasonable expense of operation, maintenance and repairs, such amount to be paid into such sinking fund at intervals to be determined by the commission prior to the issuance of the bonds, for (a) the interest upon such bonds as such interest shall fall due and (b) the necessary fiscal agency charges for paying bonds and interest and (c) the payment of the bonds as they fall due, or, if all bonds mature at 1 time, the proper maintenance of a sinking fund sufficient for the payment thereof at such time, and (d) a margin for the payment of premiums upon bonds retired by call or purchase as herein provided. Such required payments shall constitute a first charge upon all the net revenues of the works. Prior to the issuance of revenue bonds, the commission may provide by resolution or by such trust indenture for using the sinking fund or any part thereof in the purchase of any of the outstanding bonds payable therefrom at the market price thereof, but not exceeding the price, if any, at which the same shall at the next interest date be payable or redeemable, and all bonds redeemed or purchased shall forthwith be cancelled and shall not again be issued. The moneys in the sinking fund, less a reserve for payment of not exceeding 1 year's interest on the bonds, if not used within a reasonable time for the purchase of bonds for cancellation as above provided, shall be applied to the redemption of bonds by lot at the redemption price then applicable.

    The commission is authorized and empowered to enter into any contract or contracts with the state highway department of the state of Michigan and the department of highways of the province of Ontario, for the maintenance of said bridge and its approaches.

    When the bonds authorized and issued under the provisions of this act have been paid and retired, tolls or charges for its use by the public may be charged only to cover the payment of the reasonable expenses of operation, maintenance and repairs.


    254.162 Powers of commission.

    Sec. 12.

    Powers. The commission shall have power to make and enter into all contracts or agreements necessary or incidental to the execution of its powers under this act, and may employ engineering, architectural and construction experts and inspectors and attorneys, and such other employes as may be deemed necessary, and may fix their compensation. All such compensation and all expenses incurred in carrying out the provisions of this act shall be paid solely from funds provided under the authority of this act, and no liability or obligation shall be incurred hereunder beyond the extent to which money shall have been provided under the authority of this act. The commission may accept from any federal agency grants for or in aid of the construction of any public works under this act, and may exercise any powers which may be conferred upon it by acts of the congress of the United States or which are necessary or convenient for the execution of its powers under this act. All public or private property damaged or destroyed in carrying out the powers granted under this act shall be restored or repaired and placed in their original condition, as nearly as practicable, or adequate compensation made therefor, out of funds provided by this act.

    254.163 Action by trustee and bondholders.


    Sec. 13.

    Action by trustee and bondholders. Any holder of any of such revenue bonds or any of the coupons attached thereto, and the trustee, if any, except to the extent the rights herein given may be restricted by resolution passed before the issuance of the revenue bonds or by the trust indenture may, either at law or in equity, by suit, action, mandamus or other proceeding protect and enforce any and all rights granted hereunder or under such resolution or trust indenture and may enforce and compel performance of all duties required by this act or by such resolution or trust indenture to be performed by the commission, including the fixing, charging and collecting of tolls, fees, rents, rates and other charges for the use of such works.


    254.164 Acceptance of contributions; use.

    Sec. 14.

    Contributions. The commission shall have authority to receive and accept contributions of either money or property or other things of value to be held, used and applied for the purposes in this act provided. The state highway department, subject to the approval of the state administrative board, is hereby authorized to cooperate with the commission in the construction of any bridge under the provisions of this act and in securing federal aid therefor.


    254.165 Competing ferries.

    Sec. 15.

    Competing ferries. If the commission shall provide for the issuance hereunder of a single issue of revenue bonds for the purpose of paying the cost of constructing a bridge or tunnel and of acquiring a ferry or ferries within 5 miles of the location which shall be selected for such bridge or tunnel, the commission shall not be required to maintain or operate any such ferry but in the discretion of the commission any such ferry, with the appurtenances and property thereto connected and belonging, may be sold or otherwise disposed of or may be abandoned and dismantled whenever in the judgment of the commission it may seem expedient so to do. The proceeds of any sale or disposition of any ferry or ferries shall be paid into the sinking fund hereinabove provided for the bonds.


    254.166 Alternative methods of act.

    Sec. 16.

    Act provides alternative method. This act shall be deemed to provide an additional and alternative method for the doing of the things authorized hereby and shall be regarded as supplemental and additional to powers conferred by other laws, and shall not be regarded as in derogation of any powers now existing.


    254.167 Construction of act.

    Sec. 17.

    Act liberally construed. This act, being necessary for the welfare of the state and its inhabitants, shall be liberally construed to effect the purposes hereof.

Thursday, May 06, 2010

Release The Wilbur Smith Financial Numbers

No matter how the DRIC project is to be financed, I would assume that there should be some assurance that the traffic is sufficient to pay the over $5B cost of the project. Especially as a number of the P3 companies pointed out, there is Ambassador Bridge competition and their tolls may be as much as 75% lower.

Would it not be nice therefore to see the revenue numbers from the experts hired and paid for by the State (and they worked for Canada too).

To my amazement, I am told that MDOT Director Steudle refused to release the information to the Senators at the hearings the other day.


Can you believe it? I will tell you that if I was a member of the Legislature, I would have thrown him out of the Hearing room and told him never to return unless he had a copy of that report in his hand and apologized for his disgraceful and insulting conduct.

His excuse---he did not want to give out competitive information. DUH, like P3 operators are going to accept what a Government expert says at face value.

Not a bad excuse though except that you are asking Legislators to accept on blind faith the word of a man whose Experts cannot predict traffic numbers even a year or so apart, the basis on which the DRIC bridge is to be built.

No Legislator in my opinion should vote on the P3 Bill until the information is provided, unless it is to kill the Bill. There are ways of releasing information so that it can be kept in confidence.

Of course it is obvious that the numbers do not work or they would be trumpeted on the front page of every newspaper around just like the so-called WSA traffic projections. We know that, because of what I Blogged about, the P3 operators who responded almost demand an "availability payment" scheme to pay for the DRIC crossing ie taxpayers pay. They obviously think that toll revenues alone are too risky.

Think about it:

  • The DRIC investment grade traffic survey is not one but a refresher of a Canadian report that I do not believe has been released.

  • The DRIC traffic numbers keep changing, going lower.

  • I am told that redundancy is now back as the reason for DRIC. I guess Jobs, Jobs, Jobs was a dud.

  • Lies about Sandwich and downtown Windsor traffic have been exposed.

  • The suggestion about the Canada loan not being a loan is a gross distortion of reality.

  • The Blue Water Bridge...find a section in the Statute that set it up that Michigan was loaning money to Canada. I could not find it. It's not in MDOT's history of the Bridge on their website either.

  • Questionable payments to get laws passed, endrunning the Legislature perhaps unconstitutionally, vilification of opponents...it's all in the game I guess.

  • And now no revenue numbers on a $5B project.

What a joke!

Remember that Canada has wanted to take over the Ambassador Bridge for a generation or two, even before Matty Moroun was the owner, as Minister Baird has said. Transport Canada has been especially working hard in the last decade to accomplish Canada's objective.

Frankly, I would like to know, if I was a Michigan Legislator, why MDOT is being so helpful to Canada at the possible expense of Michigan taxpayers.

When Is A DRIC Loan From Canada Not A Loan To Michigan

Quack, Quack, Quack. If you read to the end of this BLOG, you will understand the significance of these three words.

Don't you wish that the misinformation propaganda would stop. I have the damn interview where Canada's Transport Minister Baird spelled out the loan deal!

Why are MDOT and DRIC supporters so ashamed to accept a loan from Canada? We all know that Michigan has become a have-not State under the Granholm leadership.

Is the Governor afraid that her legacy will be that of a beggar asking her country of birth for money? Heck, her hubby was not breathless when he got a nice fee from the City of Windsor, one of the border crossing proponents, when he helped out Windsor's Mayor and Council. We own the Canadian half of the Tunnel which competes against the Ambassador Bridge for business.

I hear that some people are running around with a new group of FAQs to explain what is going on in Michigan with the loan deal. Here is a Q&A dealing with loans that I saw:
Not a loan? I'll bet that you are as shocked as I am on reading that. I am sure that the Editors of the Windsor are suprised because they just wrote a big Editorial about "Ottawa's border loan."

It looks like Jim Blanchard thought it was a loan according to Crains and he was deeply involved

  • "Blanchard: Canada loan offer for new Detroit River bridge was MDOT’s idea

    The idea for Canada’s offer to loan Michigan up to $550 million to cover the state’s cost of a new Detroit River bridge originated with the Michigan Department of Transportation, former Michigan Gov. James Blanchard said."

The Globe and Mail said:

  • "Ottawa wants to lend $550-million (U.S.) to Michigan as the Canadian government seeks support for building a new bridge along the continent’s busiest commercial corridor, offering to help bail out a state ravaged by the auto sector’s slump...

    Mr. Baird said the Canadian government expects to eventually recoup its loan of up to $550-million to Michigan by collecting a portion of the state’s toll revenue from helping operate the new bridge."

Rather than quote from the media, let's hear what the Minister said right from the horse's mouth.



There...repaid to Canada, credit facility, lending, putting the money up. It's a LOAN! I am not saying it, the Minister did.

Why is everyone so concerned about loans in Michigan and not calling this a loan? Here is the answer and remember, the bonds under the P3 bill were not to be "backed by the full faith and credit of the State:

  • "General obligation bonds are issued pursuant to Sections 15 and 16 of Article IX of the State Constitution. Section 15 authorizes the State to borrow money for specific purposes only after a positive two-thirds vote of the members serving in the House of Representatives and the Senate and a positive vote of the electors in a general election."

That would never happen for this deal! The process itself would kill the deal if the public had a say.

However, other types of borrowng are allowed:

  • "Nongeneral obligation bonds are issued pursuant to Sections 9 and 13 of Article IX of the State Constitution. These sections enable public bodies to issue bonds subject to constitutional restrictions and State law. These bonds are backed by dedicated revenue sources and are not guaranteed by the full faith and credit of the State."

Here's the rub for Michigan. It looks like many of the P3 investors want "availability payments" not toll revenues as their source of income because there are fears that the tolls ie the "dedicated revenue source" will not cover the finance costs. The State Treasury is NOT a dedicated revenue source the way tolls are.

Obviously, they are right and that is why the WSA financials numbers have not been released! I bet they show that the DRIC bridge cannot be paid off unless tolls skyrocket and Matty Moroun was put out of business.

So there may not be any Constitutional way that Michigan can borrow the money never mind that Michigan's borrowing ceiling may be near its top. That is why Baird's Canadian loan cannot be called a loan.

So DRIC supporters make it up as they go along just as long as the P3 legislation is passed so DRIC can be brought forward.

Remember, if it walks like a loan, quacks like a loan, looks like a loan, it must be a loan.

Windsor Downtown Myth Buster

I keep seeing this misinformation constantly being repeated as if it is now the truth. Here is an example of what a Michigan newspaper has stated recently:
  • "Michigan wants its own public bridge, which would be built about 2 miles south of the Ambassador Bridge. The Canadian government doesn't want Moroun's new bridge because it worries the span would bring too much traffic into downtown Windsor."

Frankly, has anyone been to downtown Windsor lately. We can use the tourist business since the Tunnel volumes, run by the City Governments of Windsor and Detroit, are crashing!

The route from the Ambassador Bridge to Highway 401 is Highway 3/Huron Church road which has been the route for 75 years. That road was built for the Ambassador Bridge. It was built around our community until our leaders allowed the area to be built up.

  • "Highway 3B was originally named Highway 3A, when its parent road (Highway 3) was re-routed to meet the newly-finished Ambassador Bridge."

Here is a map of Windsor to destroy this misinformation finally I hope. L Brooks could use it too so he can get his directions right for once.


I still think that people are mixing up the Bridge with the Tunnel that dumps traffic into the downtown of Windsor.


To get to Highway 401 from the Bridge, no truck driver would ever enter downtown Windsor!

BREAKINGBLOGNews: Bridge Company Successful in Michigan Supreme Court

State Supreme Court grants bridge company’s motions in Gateway construction case

WARREN, Mich. – The Michigan Supreme Court issued an order today granting a motion by the Detroit International Bridge Co. for immediate consideration of its application to appeal a Feb. 1, 2010, circuit court order in a case involving the construction plans for the Ambassador Bridge Gateway Project.

The Supreme Court also granted the bridge company’s motion for a stay of enforcement of the order issued by Wayne County Circuit Court and put a hold on further proceedings in the lower court.

The Supreme Court’s order provides, “the motions for immediate consideration and for stay of enforcement of the February 1, 2010, order of the Wayne Circuit Court and for stay of further proceedings in that court are GRANTED.” The court’s order also provides that the “application for leave to appeal the March 17, 2010, order of the Court of Appeals remains pending.” The Michigan Court of Appeals had declined to grant the bridge company’s request to appeal the Circuit Court ruling while the case was still open.

“The Detroit International Bridge Co. is pleased that the Michigan Supreme Court is taking the time to carefully review the application for leave to appeal that the bridge company filed with the court,” according to a bridge company statement. “The bridge company remains confident in the strength of its legal position. “

Due to ongoing legal proceedings and its pending application for appeal, the Detroit International Bridge Co. will not make further comments at this time about the proceedings and the issues pending before the Michigan Supreme Court.

Wednesday, May 05, 2010

Is MDOT's P3 Power Grab Dead Now

Do excuse me. Of course I am Blogging too much about P3s and the border. It's a boring subject....until taxpayers and their children and grandchildren realize that they have to pay to P3 investors megaprofits for the next 99 years.

Why no one does the simple math and cannot figure out that a loan at 5% is cheaper than a P3 at a rate of return at between 13-20% is beyond me to be honest.

Why no one can understand that a grab for taxing power by the Michigan Executive, because that is what paying back a P3 really is, and ignoring the Legislature is bad politics is beyond me.

Why people are applauding a move by Canada to get votes to pass P3 legislation in Michigan, and to have a Minister of the Canadian Government admit it too to "make it happen," is beyond my comprehension.

Why no one is asking the obvious question about why anyone would support a P3 with all of these negatives and with a rip-off of taxpayers is shocking.

So maybe we have to involve Constitutional law and the separation of powers doctrine to kill P3s as MDOT wants to do it. Check this out.

Here is the conclusion from a letter from the Michigan Attorney General's Office in Lansing


I do not see then how the proposed P3 Bill can allow the Executive to fund a P3 road or DRIC Bridge. It MUST go through the Legislature with Legislative oversight

Here is the Press Release from the State Representative Paul Opsommer who asked the question:


Nice try MDOT but no cigar.

Where's The Budget For Canada's $550M DRIC Funding

I saw this interesting comment about Canada's Economic Action Plan, the so-called basis of Canada helping out Michigan, a State in foreign country. If we consider our border crossing, what an indictment respecting our Federal Government's desire to force the Ambassador Bridge Company owner to sell out cheaply rather than let him build his Enhancement Project Bridge at his risk and his expense:

  • "Indeed, close to $18-billion of the $40.5-billion deficit didn't have to be there at all. The number represents the government's "stimulus" package, which, as a study by the Fraser Institute revealed last month, actually did squat to stimulate the economy. The study found that "government spending and infrastructure investment contributed only 0.2 percentage points to the change in GDP growth between the second and third quarter of 2009 and nothing between the third and fourth quarter. Private-sector investment and increased exports were the driving forces behind the change in GDP growth." Even the vaunted Home Renovation Tax Credit was found to have had no impact on the country's economic fortunes.

    Of course, Mr. Flaherty went out of his way to repudiate the Fraser Institute's results, but they were based on the government's own numbers: Statistics Canada data, to be precise. The conclusions bear out what many economists have been saying all along: so-called stimulus plans don't generate economic recovery. They simply divert money from the private sector to government projects, and since infrastructure projects in particular take time to get "shovel-ready," most of the spending tends to occur when the recovery is already underway."

It's probably not a big deal but where in the Budget has Canada set aside money for the DRIC bridge, especially the UP TO $550M part. I know that there was a 2-page letter that even Minister had to laugh over that allowed House Democrats to vote for a P3 Bill. But I am still trying to find the place where that cash was set aside back in March 4, 2010 when the 2010 Budget was presented to Parliament.

I cannot be sure that what I am saying is 100% correct. Budget documents spelling out Canads's Economic Action Plan are several hundred pages long. I have done the best I can but I cannot find any reference to the UP TO $550M financing that Transport Minister John Baird talked about. Perhaps he could point out the section where it is mentioned

What we know is that the money should be there somewhere. After all, it was discussed long before the 2010 Budget came out and even more than just financing DRIC but buying the Ambassador Bridge:

  • Baird was given the mandate by the PM 16 months ago to "make it happen," whatever "it" is

  • 8-9 months ago "The idea to loan Michigan money for the bridge project “came out of many discussions over the past 8 or 9 months,” he said.

    Talks became more detailed five or six weeks ago, he said, and Granholm become involved about 10 days ago. The deal was announced by her during her surprise appearance at a House Transportation Committee hearing Thursday morning.

  • Around Xmas time, 2009, Harper issued a secret mandate letter to buy the Ambassador Bridge

  • Detroit News told us on Feb 1o, 2010:

    "A frustrated Canadian government decided last summer to end its wrestling match with Manuel "Matty" Moroun by offering to buy the Ambassador Bridge from the billionaire, a former Michigan governor said Tuesday.

    But talks ultimately broke down when Moroun's asking price of $3 billion, plus incentives, proved to be too high, the former governor, James Blanchard, said. According to Blanchard, no new initiatives on the possible sale have been pushed forward since July.

    "If the Canadians could buy it, I'm sure they would. But I don't think Moroun's price and proposal was taken seriously," he added."

    "One insider said the government has approached Moroun in the past and been told the asking price is $3 billion — roughly twice the government's evaluation."

  • Now, Canada has offered Michigan UP TO $550M to pass P3 legislation errrr:

    "Canada has offered to contribute up to $550 million US to help the cash-strapped state of Michigan pay for a new bridge crossing the Detroit River between Windsor, Ont., and Detroit...

    "This is good news," said Baird.

    "But we're still waiting for the full Michigan house and full Michigan senate to vote, which is scheduled to occur in the coming weeks."

    Michigan will only receive Canadian funding when the Michigan state legislature fully adopts the DRIC project, a decision which is expected to happen by June 1.

    Baird said discussions between Canada's ambassador to the U.S. Gary Doer and Michigan's governor indicated the only way the legislation would pass through the house was for Canada to help out financially.

    "If you wanted to make this thing happen, this was the only way we could do it," Baird said."

In passing, here is something I do not quite understand. It seems contradictory. If Harper really wants to build the DRIC Bridge then why would he want to buy the Ambassador Bridge. It's too much money just to get rid of a competitor. Or could it be he really only wants the Ambassador Bridge and that is where the second bridge is really going to go.

In any event, apparently, the Minister tells us that this UP TO $550 project will be financed under Canada's Economic Action Plan. I tried to find a reference to it in Budget 2009 when the Economic Action Plan was first announced. But there was not even a mention of this area in that document except in the context of a Quebec-Windsor rail corridor and upgrading our VIA Rail station

For the border, I saw this:

  • "Providing up to $14.5 million for two bridges at two of the busiest U.S–Canada border crossings: the Blue Water Bridge in Sarnia and the Peace Bridge in Fort Erie."

  • "Providing funding to modernize and expand border service facilities at Prescott, Ontario; and at Huntingdon, Kingsgate, and the Pacific Highway in British Columbia."

Maybe it was here except the idea had not been dreamed up in 2009 and it was only 2 year funding:

  • "Immediate Action to Build Infrastructure. Accelerating and expanding recent historic investments in infrastructure with almost $12 billion in new infrastructure funding over two years for the construction and repair of roads, bridges, small craft harbours, broadband internet access, electronic health records, laboratories and border crossings across the country. This will support economic growth and employment this year and next, while also bolstering Canada’s long-run productive capacity."

So I looked in Budget 2010 and here is what I saw:

  • "Windsor-Detroit

    The Windsor-Detroit border is the busiest commercial crossing in North America, through which over one-quarter of our merchandise trade with the U.S. passes. In 2007, the Government of Canada set out a strategy to advance the construction of a new crossing in the Windsor-Detroit corridor. Canada has worked in concert with the State of Michigan and its U.S. partners, with the U.S. federal administration, with the Province of Ontario and with the City of Windsor to move this project forward. Since 2007, the project has reached key milestones, culminating earlier this year in the issuance of a Request for Proposal of Interest for the development of the Detroit River International Crossing Project under a public-private partnership arrangement.

    Budget 2010 provides $10 million over three years to Transport Canada to support the legal, financial and technical work required to advance this project."

Oooo, $10M is a far cry from UP TO $550M

  • "Budget 2010 invests $87 million over two years to ensure the Canada Border Services Agency can continue to deliver efficient and secure border services. Funds will be used to invest in state-of-the-art equipment, such as vehicle and cargo scanning equipment, as well as upgraded information systems that underpin effective border operations."

Nope, no DRIC money there; that's for Customs

  • "Public private partnerships (P3s)

    PPP Canada Inc. successfully completed its first call for project applications to the P3 Fund in October 2009. Twenty applications were received from provincial and territorial governments as well as Indian and Northern Affairs Canada. Six applications were for municipal projects. Projects ranged in size from $45 million to $500 million in capital costs and represented eight different infrastructure sectors.

    PPP Canada Inc. will commit over $100 million in 2010 to projects that demonstrate leadership in P3 procurement. The first project announcement will take place in the coming weeks. Further announcements based on Round 1 applications are expected later this spring. PPP Canada Inc. will launch its second call for project applications in mid-2010."

Not there either since no federal projects were involved other than from Indian Affairs and "over $100M" is nowhere close to $550M.

  • "Funding to Upgrade and Modernize Federal Infrastructure---

    Federal infrastructure projects, including faster and more reliable passenger rail services, safer bridges and highways, refurbished harbours for small crafts and more efficient border crossings, are now underway, creating jobs across the country."

Close but the Ambassador Bridge is NOT a federal infrastructure but private and the projects that were listed did NOT include DRIC.

Looking at the numbers:

  • only $45M was committed to border facilities and over 2 years.

  • $16B for Building Infrastructure to Create Jobs and none allocated for this border

  • $99M for Federal bridges

Then in the 5th Report on the Plan, I saw this:

  • "Building Infrastructure to Create Jobs

    Canada's Economic Action Plan provides approximately $16 billion over two years to modernize a broad range of infrastructure including our roads, bridges, public transit, parks and water treatment facilities, and to support home ownership, help stimulate the housing sector and improve housing across Canada...

    Investments in federal infrastructure projects $750M

Too many federal projects to have $550M just for DRIC and limited to Canada anyway.

  • "Funding to Upgrade and Modernize Federal Infrastructure

    Federal infrastructure projects, including faster and more reliable passenger rail services, safer bridges and highways, refurbished harbours for small crafts and more efficient border crossings, are now underway, creating jobs across the country."

That's more along the lines of repairs than providing a credit facility and DRIC is NOT mentioned in the projects.

Nothing under "Creating the Economy of Tomorrow" or "Improving Access to Financing"

So Mr. Minister, where's the money allocated? I know you had to "bring this game to a close" Was the offer just part of a game, a game designed to fool everyone to get P3 legislation passed in Michigan?

Just watch Baird's face for the answer.


Tuesday, May 04, 2010

Correction Notice: MDOT IS Smart Enough To Endrun The Michigan Legislature

If I am wrong, I am wrong. I am man enough to admit my errors and to do the right thing about it.

Just to be fair, no one complained. I found out new facts and must clarify the record.

I have been unfair to MDOT in this P3 legislation matter. I have said:
  • It was to be a quiet and bloodless coup d'état started in a Michigan House Committee. Clearly, Michigan bureaucrats as seen from their performance in other DRIC hearings were not smart enough to plot this out by themselves. They needed expert help to circumvent legislation and the Legislature.


  • The concern is, if Canada, a foreign country remember, tries to get control of key land border crossings into and out of the United States either through buying them directly or P3ing them through a "friendly" investor. The issue to avoid is clear:

    "Various United States political figures argued that the takeover [of the US ports by a state-owned company in the UAE] would compromise U.S. port security."

    But of course, no one can outthink a bureaucrat in developing plans to outsmart the public and more importantly, Legislators both State and Congressional.

    Canada is always there to help out the less fortunate.


  • In this time of need, Canada needs to step up to help out our good neighbour. I know that Canada does not want to increase the amount spent on foreign aid but the Prime Minister of Canada, Stephen Harper, needs to do some creative thinking to assist Michigan.

    I have heard a rumour of an idea like this being bandied around the braintrust in the DRIC camp. It is to make Canada the nice guys while really undermining the Americans.

  • Those With No Brains Support DRIC

    I am not being mean. I did not say this. The Governor did. Here is how the Detroit News put it:

    "Granholm: New Detroit River bridge a 'no-brainer'"

Look, be fair. How was I to know that it was not Canada teaching MDOT since we are so much more experienced in P3s? The Windsor Star reported this:

  • "Former Michigan governor James Blanchard -- also a former U.S. Ambassador to Canada -- was said to be instrumental in helping barter the deal. He recently took on the role as a paid consultant for DRIC's Michigan team.

    "This is a big day for the economic future of both countries," Blanchard told The Star. "We are thrilled."

    Blanchard was among high-level political leaders and bureaucrats on both sides of the border who met secretly for months, culminating with Thursday's letter from Baird, he said.

    "It had to be kept quiet or you can't have serious negotiations," he said.

    "Transport Canada did a heck of a job in figuring out how to craft this. They really threaded a needle with this."

Sew, what was I to think!

After all, I reported this story about:

  • "Parliament 'out of the loop' on gov't borrowing

    Parliament unwittingly gave away its right to oversee billions of dollars in government borrowing, say a handful of senators who are fighting to undo a change they say was slipped by them."

It seemed a natural to me when I saw these quotes by two distinguished Canadian Senators:

  • "The government now has the unconstrained authority to borrow whatever, whenever, at whatever rate, from whomever and for whatever purpose,"

  • "That's the way it was done for 140 years. "Now, we're cut out of the action," said Murray. "Parliament is out of the loop, and that is not where (it) should be."

That is close to what the P3 Michigan Bill does.

However, the facts do seem clearer now. Accordingly, I offer my sincerest apologies to MDOT. I will now state for all to read:

MDOT IS SMART ENOUGH

  • to endrun the Michigan Legislators on their own

  • to introduce P3 legislation that takes away legislative oversight

  • to bring forth legislation that on its own can put the State into dire financial straits

  • to keep saying that toll revenues can pay for a $5B DRIC project while many of the P3 parties are advocating for "availability payments"

  • to not provide the WSA financial reports and to have a "refresher" of a Canadian report that has not been produced publicly as its investment grade traffic study.

What brought all of this about you might wonder. This story in Crains:

  • "Blanchard: Canada loan offer for new Detroit River bridge was MDOT’s idea

    The idea for Canada’s offer to loan Michigan up to $550 million to cover the state’s cost of a new Detroit River bridge originated with the Michigan Department of Transportation, former Michigan Gov. James Blanchard said.

    “The idea came from MDOT,” he said in a telephone call to Crain’s this morning...

    MDOT confirmed that it authored the loan idea for the Detroit River International Crossing bridge project.

    “We pursued this because of tough economic times in Michigan... The Legislature raising the issue was helpful in making this agreement,” wrote William Shreck, MDOT’s communications director, in an e-mail today."

Whew, Canada cannot be blamed for this one thank goodness. When this falls apart in the future, Michiganders can blame.................no one. All of the bureaucrats and politicians trying to put forward this huge boondoggle will all be gone. Either retired or term-limited.

Now that's really smart!

Waiter, The Bill For Michigan's $550M Free Lunch

Here it is in a nutshell. You do not have to read to the end. It's simple:



  • P3 investors want no risk whatsoever in a new DRIC bridge when money is tight, there is low traffic and Ambassador Bridge competition. They want taxpayers to bear the financial risk in the DRIC Bridge project or they will go elsewhere.

Some free lunch!


Of course Michigan is being held hostage by Canada. It manifested itself ever since the Governor unilaterally removed the downriver areas as potential crossings to help get her re-elected. Canada got control then. Do it our way or else



  • "Granholm said this morning she would be happy to support the second Ambassador span, but pointed out the Canadian government is opposed to Moroun's plan... "I've long said that if he could get the permits, we'd be all in."

It's like in the movies with this strange line being used. Yup, get 'em when they are down and squeeze:



  • "I hope we've made them an offer they can't refuse," said local [Canadian Member of Parliament] Jeff Watson."

The whole purpose is to get Matty Moroun out of there, not to build a DRIC bridge. Want proof, listen to this:






Canada knows as you will also by the end of this BLOG that few have any interest in investing in a DRIC Bridge if their money is at risk.

Here it is, the huge Michigan risk in this so-called riskless P3 financial deal, buried in 521 pages of "Part 6: Proposals submitted in response to RFPOI issued on January 27, 2010" along with similar comments by other proponents.

That is what was distributed in the very last minute by MDOT so no one in the Michigan House could examine it closely before the House Committee vote. It was said by a division of one of Canada's major banks that knows this border crossing well, Scotia Capital:



  • "As briefly provided above, all payment mechanisms provide benefits to both the project and the public. In all cases, the private partner is motivated to maintain the facility in order to receive the maximum payment,whether it is in the form of user tolls, availability payments, or a mix of both. There are however, other considerations regarding payment method that will need to be reviewed by the procuring Authorities. For instance, certain payment mechanisms will be interpreted in different ways by various parties to the transaction. From the prospective of a lender, credit risk is decreased if remuneration to the private partner comes in the form of an availability payment. There are many reasons for this; however, the most significant is the lack of demand risk. Lower than projected traffic has plagued many user toll-based PPPs around the U.S., and as a result, senior lenders are more restrictive in providing credit to demand based facilities. This issue is particularly relevant for the proposed project considering the current economic climate. The Windsor/Detroit region has been heavily affected by the current recession, and given that a large amount of the trade volume (approximately 60-63%) between the U.S. and Canada is related to transportation products, the possibility for less than robust traffic patterns over the coming years is a significant concern. Additional risk associated with a demand based payment mechanism relates to the sharing of potential users with competing facilities such as the Ambassador Bridge. This competition may further strain demand assumptions especially if traffic patterns continue to falter for economic and other reasons.... However, if a demand based payment mechanism is utilized instead of an availability payment, an item which may require clarification relates to competition with the Ambassador Bridge. Bidding consortia along with senior lenders will need to be comfortable with the prospect of the twinning of the existing span as well as anticipated sharing of traffic volumes between the two facilities. It is also assumed that all legal matters with the Ambassador Bridge’s current owner will be resolved before the beginning of the formal procurement process."

I just wish, dear reader, that you had listened to me before and I would not be in this pickle again. I said this much more bluntly but not as nicely and professionally as the Scotiabank people who after all want the project. I am telling you now, upfront, that taxpayers including those in Canada, Ontario and especially Michigan will have to pay and pay and pay if they adopt P3s, especially for the $5B DRIC project! With no legislative oversight in Michigan, Michiganders are looking at billions of dollars that will be taken out of Michigan's economy by foreign companies, dollars that should never be paid out if traditional government road financing was employed. Just look at the list of possible foreign P3 proponents.


Not too many good old American companies in that list. Nothing like selling out your roads to foreigners, eh.


The Governor effectively admitted that her legacy is that she has rundown Michigan's economy and now needs a life-line from Canada. No wonder she favours DRIC so she can build a monument to herself for the future no matter what:




  • "Granholm said Thursday that Canada's offer means Michigan -- facing a $1.7 billion deficit next budget year -- would not have to put a penny towards construction, which could create up to 10,000 jobs. "They know that Michigan is financially strapped," Granholm said this morning on WJR-AM 760, referring to Canada. "They know that our roads need repair. So this frees up our money to be able to use on our roads and it allows the bridge to be built.

If Michiganders think you are financially strapped now, you ain't seen nothing yet after the foreign P3 investors get through with you! Why, why, why. Why is it always me? Why do I have to be the one who always bursts the bubble? After all, didn't some Detroit reporters win the Pulitzer prize for investigative reporting on a big scandal in the City? Don't the TV stations still send out reporters to investigate stories of interest although some key staff have been let go recently? Bill Shea of Crains at least took some of the heat off of me with his piece today "Private sector wary of tolls to finance new bridge." The Canadian media---give me a break, they have little interest in Windsor stories. And the Windsor Star---they are neutered given who their parent company is. So the Obliging Blogosphere once again has to take charge and do what the traditional media should be doing but aren't [Sigh]. Bill's piece is on his BLOG by the way. It's not like a lot of digging has to be done. Transport Canada Minister Baird gave it all away in his interview. But more importantly, MDOT's Captain Kirk did so as well and in writing too. What, you did not see it? You do not understand. Well you know what the DRIC supporters have been saying don't you about tolls, P3s, risks and so on:




  • "This is obviously a significant offer from the Canadian government," Granholm said. "It removes the risk from the state of Michigan for all of this."



  • "Infrastructure and Transportation Minister John Baird said the money would be repaid fully by tolls collected."


  • Detroit Free Press---"The Canadian government's offer to cover up to $550 million of Michigan's cost to build a proposed new U.S.-Canadian bridge downriver from the Ambassador Bridge should remove any doubts in the Legislature about the publicly owned crossing. The Canadian offer would practically eliminate any cost for the state to build a new entry plaza for the proposed bridge, and to connect it with I-75. Bridge construction would be paid with public bonds that would be repaid over time with toll revenues, which also would repay the Canadian government for the $550 million."

Is this another falsehood to be repeated time and time again because no one dares question it because no one understands it. That is why Captain Kirk and Minister Baird can pull the wool over everyone's eyes. They can spout off P3 theory but in practice, the reality can be quite different. Oh I have tried to educate readers. I really have. I told you that




  • the DRIC financing costs are too high with a desired rate of return of 13-20%


  • that P3 investors want a monopoly and hate competition because then they cannot get their huge rates of return. They want no risk.

  • traffic had dropped and may pick up but slowly


  • P3 money is so tight that companies like Macquarie lost the Port Mann P3 project because they could not raise the required cash


  • TOLLS WILL NOT COVER THE COSTS OF FINANCING, CONSTRUCTION, MAINTENANCE, CONTINGENCIES AND PROFITS.

In other words, a DRIC P3 project would go broke and no one would invest in it without some kind of Government guarantee or subsidy. OR AVAILABILITY PAYMENT.


I told you as well, that Tranport Canada already signalled some time ago that there was huge trouble in their P3 dreamworld and that something else other than the traditional model might have to be followed. Do not forget that Canada has never set aside a single cent in their Budget for the DRIC bridge unless it has been hidden (the $400M was for the DRIC Road only). A P3 was supposed to pay for it. Now desperation has set in and plans are changing. As I Blogged:




  • "How the heck can this be financed with tolls from users? The Cost Exhibit ensures that it cannot be. But no one told that to the P3 investors That is why separately Transport Canada's Mark Butler said: "We are continuing our discussions with Michigan on governance issues and financing issues,” said Mark Butler, a Windsor-based spokesman for Transport Canada... Butler said the Canadian government would prefer that the new cable-stayed or suspension bridge be undertaken on the basis of a public-private partnership. But he said this approach is not yet set in stone." Now you know why it is not set in stone. But it gets even worse: "Given the anticipated tolled nature of the border crossing, MDOT says there are several public-private partnership models ranging from real tolls to availability payments that could be applied to the DRIC under current market conditions." What a joke...from real tolls to phony tolls ie payments support by either direct Government payments or guarantee or subsidies. All at extra taxpayer expense forever! They dare not say that in the RFPOI because then the Legislator who reads it would know that this is a financial disaster. "Current market conditons" is a euphemism for saying there is no way that a "real toll" bridge could ever be considered because of ---the multi-billion cost which would drive users away ---economic melt-down, ---lack of infrastructure money and ---competiton from the Ambassador Bridge whose tolls would be 1/4 of that of the DRIC bridge."

However, you did not take my word for it. I am a mere lonely Blogger. I am no P3 expert. Of course there are experts around, 20 or so at least. Those are the groups who sent in an expression of interest for being involved in the DRIC project on some basis.


No. I am dead wrong. When you see what they say, you will know exactly why they want to be involved. But first, here is how Captain Kirk put it so nicely that no one knows what he is saying but his butt is covered for the future when this all fall apart.

And remember what Baird said about rolling up the UP TO $550M into the financing.

When you look at Slide 1 what has to be done---it is all P3s including Canada's UP TO $550M which will be rolled in as Captain Kirk also said, when talking only about Michigan's $100M, and the funds for Canadian projects since that is a P3 too. Then in Slide 2, the Captain tells us that it would be better if all of the components were tied up together in one single project.


Hahaha..we all know who is going to be the successful party already for that project even though they seemingly did NOT put in an expression of interest. But they did you know. You, dear reader, just do not know it yet. You will find out soon enough.


Here its comes now. Hang on to your hats:


MICHIGAN'S FREE LUNCH IS OVER.

THERE NEVER WAS ONE. YOU HAVE BEEN HAD!


It is the phrase "availability payment model" that will destroy Michigan financially.


Here is how another proponent, Acciona, describes the "availability payment model:




  • "Availability payments: Is the best option to achieve best value for money, and all or at least the vast majority of the payment should be availability-based. Certainty on the revenue stream will be essential to finance the project. This type of P3 structure transfers the risks of designing, building, financing and operating/maintaining a project to the private partner. Risk of volume and vehicle traffic remains in hands of public sector that is better positioned to assume the risk related to the revenues generated from the users."

The private partner builds it and get paid for it in periodic payments by the Government s who bears all of the revenue risk if traffic projections don't work out. So much for the tradional P3 model that no longer exists after the finacial meltdown and after many toll roads have gone bust. Just ask Macquarie with their good and bad roads companies that were split off. A no-brainer all right Governor, for the private partner! It's really a loan deal but because it is called a P3, then the private party can rip-off the taxpayer with the no legislative oversight thanks to MDOT supposedly because it bears some of the construction risk. 13-20% rate of return too. Of course, that approach also works in a traditionally financed project where, by contract, risk and reward can be passed on to the contractor with penalties and bonus payments. But shhhh, we are not supposed to know about that. It's not just Scotia Capital who prefers a virtually riskless, for them, availability payments model. Here are what other proponents have said. I won't repeat all of them: Another Canadian bank, Bank of Montreal:




  • "The Availability Payment alternative would appear to best suit the characteristics of the DRIC project. This is largely due to the following main factors: 􀂃 the project is “Greenfield” 􀂃 uncertainty regarding traffic levels, especially given the availability of alternate crossings nearby 􀂃 reduced risk appetite of lenders in the aftermath of the credit crises


  • "There are a number of alternative business models that could be used to successfully deliver the Project. The most common models that we have seen include Availability Payment Models; Real Toll Concession Models; and Hybrid Models. The challenge in selecting the most optimal model will be getting a better understanding of the Project’s economics. Can traffic forecasts and tolls support the project without any governmental subsidies? Part of the difficulty in answering that question is the uncertainty surrounding the Ambassador Bridge – will that remain as a competitor or will it be acquired by a governmental entity and the operations (revenues) and maintenance be included in this Project. Based on discussions that we have had with possible developer partners, we recommend a business model that: a) relies on a significant share of the financing to be provided by the private sector; and b) uses a payment mechanism based on Availability Payments to compensate the private consessionaire for its services."

Here's another one:


Here is one that effectively kills any hope of having tolls pay for the project and it means no financing at all if that is the basis:


Do you get it now? The UP TO $550M big number "riskless" payment idea is merely a 2-page letter that even Minister Baird is embarrassed about in presenting. It is just a way to get Michigan to sign up for the P3 deal that Canada needs so it can control the border.


P3 deals require government guarantees no matter what they are called or they will not move forward. P3 operators cannot raise money unless there is a riskless, for them, guaranteed deal since many toll roads have consistently been oversold based on phony traffic projections.


Michigan taxpayers are being sold down the river by term-limited Governor who has been afraid to tell the Canada that she will not allow hundreds of families and businesses to be moved just so that the Canadian Government can try to take over the Ambassador Bridge by pressuring Moroun to sell.


It really is a no-brainer Governor. Build a bridge no matter what it costs your citizens for the next 50 years so you can sleep at night pretending to yourself that you have accomplished something while your State has fallen apart under your watch!


Waiter, the check please!