Crain's Detroit Business - 25th Anniversary Issue, May 3, 2010 - (Page 20)

Page 20 CRAIN’S DETROIT BUSINESS May 3, 2010 Canada’s bridge offer could calm fears Some analysts skeptical of projections ducted for the Michigan Department Legislation to allow the Michigan of Transportation by Columbia, S.C.- Department of Transportation to enCRAIN’S DETROIT BUSINESS based engineering and planning ter into a DRIC-related P3 is under Canada’s commitment to pay up firm Wilbur Smith Associates, which debate in the Legislature. If it fails, to $550 million of Michigan’s cost has an office in Lansing. Canada has said it would consider of a proposed publicly owned DeA message seeking comment financing the project entirely ittroit River bridge could alleviate was left at the firm’s headquarters. self. worry that insuffiPeter Samuel, edCanada is confident the P3 cient border traffic itor of Maryland- arrangement will mean that no would force a doubased industry debt costs fall on either nation’s bling of vehicle toll newsletter and Web taxpayers. rates. site Tollroad News “Over the duration of this conThe loan offer for the past 15 cession, toll revenues are expected may also allay fears years, questioned to cover the private capital and fiJohn Taylor, that the state’s taxthe DRIC traffic nancing costs as well as operations Wayne State University payers would be study projections. and maintenance costs,” wrote stuck subsidizing a portion of the “The realism of the assumptions James Kusie, director of issues $5.3 billion Detroit River Internation- used is not at all clear. For exam- management al Crossing project’s debt, although ple, the study projects an annual and parliamentary affairs of Canathe financial terms of the agree- growth rate in overall border da’s transport minister, in an ement, including interest payments crossing truck traffic 2009-2015 mail to Crain’s. to Canada, haven’t been finalized. over 10 percent a year for a 79 perThe toll industry is skeptical. “This is a game-changer. It cent increase overall “I find it hard to might result in much more reason- in only six years. believe (DRIC) can able tolls, if the Canadians are go- This recovery would be built without ing to subsidize it,” John Taylor, a be fantastic, but is it These are the companies huge taxpayer risks Wayne State University associate realistic?” he wrote that responded to a Jan. 27 and the tolls conprofessor of supply chain manage- in a recent analysis. Michigan Department of tributing very litTransportation request for ment and director of supply chain Other analysts are proposals of interest for the tle,” Tollroad News’ programs who has closely followed skeptical of the traf- Detroit River International Samuel said. “The the bridge situation. fic forecast, as well. Ambassador Bridge Crossing bridge project. Preliminary analysis of the “Forecasting from These companies are has a case: It’s uncosts and traffic estimates by toll this point in the eco- interested as general fair competition. If a industry analysts show that, with- nomic cycle is very contractors to finance, build DRIC bridge can’t be out subsidies, commercial trucks difficult,” said and/or operate the justified with toll could pay up to $40, or twice the Robert Bain, owner crossing, or a variation of revenue, they current Ambassador Bridge toll of London-based RB- that; or they’re interested in should put it on providing design, financial rate, and cars more than double consult, which pro- or legal advice: hold.” what is paid now, or about $13, to vides advice and Commercial trafBouygues Travaux cross the new bridge. analysis on infra- Publics S.A., Paris fic will study the Trucks now pay about $20 and structure investtolling rates and Daelim Industrial Co. cars $4 at the privately owned Am- ments such as toll Ltd., Seoul, South Korea routes to decide if a bassador Bridge. roads and bridges. route is economicalGlobal Via The rough DRIC toll rate estiBased on the num- Infraestructuras S.A., ly viable. mates are based on an estimate of: bers he’s seen, Bain Madrid, Spain “The truckers Up to a $1.5 billion bridge (not is skeptical that the will go wherever it’s Acciona, S.A., Madrid, including roads, plazas and inter- private sector would Spain the most efficient changes). invest in the project for them,” said WalBank of Nova Scotia 30-year construction financ- without government ter Heinritzi, execuSNC-Lavalin Inc., ing at 5 percent interest. subsidies. tive director of the Montreal $100 million in annual inter“I don’t know Lansing-based MichiGowling Lafleur est and principal payments. where this growth is Henderson L.L.P., Ottawa gan Trucking Associa$20 million in annual opera- going to come from,” tion. The 500-memKiewit Cos., Vancouver; tional costs. said Bain, who pre- Flatiron Construction Corp., ber group hasn’t Some increase in car and viously was a direc- Longmont, Colo. taken an official potruck traffic. tor of infrastructure sition on the bridge Macquarie Group Ltd., The DRIC traffic study released ratings at Standard & Sydney debate. earlier this year predicts that 3.1 Poor’s. “This makes The 4,500-member Walsh Construction Co., million cars and 2.7 million com- no sense at all. The Chicago; PCL Civil Canadian Trucking Almercial vehicles will annually use numbers don’t fly. Constructors Inc., liance in Toronto, the DRIC bridge by its tentative You would have to Edmonton however, favors January 2016 opening, for an aver- pay people to cross DRIC and has hired ACS Group, Toronto age of 9,800 vehicles daily. (the DRIC bridge).” Lansing-based PubCintra Infraestructuras By 2035, the study predicts that Despite the lack of S.A.U., Madrid, Spain lic Affairs Associates number will rise to 4.4 million cars toll revenue predicto lobby the LegislaBMO Capital Markets, and 3.9 million commercial vehi- tions, 20 responses Chicago office ture on its behalf. cles for a daily vehicle average of representing 37 comThe loan offer Citigroup Global 22,700. panies were re- Markets Inc., New York City could also sway The predictions are a blend of ceived in response DRIC skeptics in Scott Associates new traffic and vehicles siphoned to MDOT’s January Architects Inc., Toronto Michigan. from the other crossings. request for stateIn an April 29 letHochtieff PPP Solutions The report doesn’t provide a toll ments of interest North America Inc., New ter to Gov. Jennifer revenue projection for the DRIC bids from the pri- York City, Toronto Granholm, Canadibridge. It limited discussion of the vate sector. Minister of Meridiam Infrastructure, an DRIC tolls to this: “The toll schedCanada and AECOM Technical Services Transport John ule on the DRIC is assumed to be Michigan want the Inc., New York City Baird outlined that always the same as the Ambas- bridge to be built unnation’s offer of a Walter Toebe sador Bridge. This is consistent der a public-private Construction Co., Wixom loan to cover up to with the historical trends that partnership $550 million of Fluor Enterprises Inc., have shown close parity in toll arrangement in Austin, Texas Michigan’s cost for rates between the two existing De- which a company Source: MDOT the span that is not troit River crossings, given the would finance, build otherwise covered crossing market toll sensitivities and have a concession to operate by the federal government or the and competitive nature of their the bridge, with costs being paid private sector. close proximity.” back over time from tolls. The govCanada said it would recoup the The traffic study, mandated last ernments would jointly own the money by collecting Michigan’s year by the Legislature, was con- bridge. portion of bridge tolls. The state BRIDGE FACTS Details about the Detroit River bridge projects: The Detroit River International The estimated cost of a new Crossing is a joint effort by the interchange and non-inspection part Michigan Department of of the plaza is a maximum Transportation, Transport Canada, $550 million, which under typical Ontario’s Transportation Ministry U.S. Department of Transportation and the U.S. Federal Highway arrangement would be 80 percent Administration. It would link Detroit’s covered by the agency and 20 Delray neighborhood and Windsor percent, or some $100 million, a between the Brighton Beach power required state match. plant and a salt plant. It would Michigan’s estimated cost is connect I-75 and Highway 401. $100 million. It’s expected to take 48 to 52 The federal government’s months to finish, and the entire General Services Administration project has a $5.3 billion price tag, would pay $300 million for the with the bridge itself at up to bridge plaza. $1 billion. The remainder would be More than $33 million has been highway, ramp and plaza work, spent by MDOT since 2002 on DRIC including the Windsor-Essex studies and other related Parkway that is separate from DRIC processes. and is purely a Canadian effort. reportedly was going to be responsible for about $100 million of the project. There is no official U.S. government commitment to fund DRIC, and the $550 million would not only cover Michigan’s estimated share but much of the federal portion, as well. MDOT has said it has had conversations with federal agencies about DRIC. The Federal Highway Administration, one of the DRIC partners, declined to comment. The Canadian offer was made because of the “economic importance of this new crossing to the economic security and future prosperity of the United States and Canada” according to Baird’s letter. The Detroit-Windsor border, which includes the bridge, a tunnel and ferries, is the busiest in North America and carries a quarter of all U.S. trade with Canada, estimated at about $130 billion. The Legislature, which contains a bloc of Republican lawmakers opposed to the effort because they believe it is unneeded, is scheduled to vote by June 1 on MDOT’s continued financial participation in DRIC. The bridge is billed by proponents, including the Detroit Regional Chamber, as a way to create 10,000 construction jobs and preserve or create 25,000 permanent jobs, and to bolster trade capacity while providing cross-border redundancy in case the Ambassador Bridge goes out of service. However, criticism remains that DRIC is unneeded because of the traffic numbers, and that it’s unfair government competition to the Detroit International Bridge Co.’s 81-year-old Ambassador Bridge, which remains in litigation over its attempt to build its own $1 billion new span. That bridge has been since 1979 owned by Grosse Pointe trucking industrialist Manuel Moroun. “The current four lanes (of the Ambassador Bridge) can handle about 20 million vehicles. Our high actual traffic was 12 million in 1999,” said DIBC spokesman Phil Frame. About 6.5 million vehicles crossed the Ambassador Bridge last year, according to statistics from the Public Border Operators Association, which represents the 11 border Ontario-Michigan-New York crossings. The number broke down into 4.2 million cars and 2.3 million trucks, which DIBC said are 1987 traffic levels. DIBC has said the government bridge could siphon as much as 70 percent of its traffic. The DRIC traffic study estimates the project will take 31.1 percent of the Ambassador Bridge’s lucrative commercial truck traffic by 2035 and 12 percent of its automobile traffic. The bridge company won’t discuss its finances, but it’s widely believed to generate about $60 million in annual revenue from the Ambassador Bridge. Overall, the DRIC study estimates it will capture nearly 34 percent of all local border traffic — including new vehicle crossings and what it takes from the current crossings as far north as Port Huron — by 2035. The Detroit-Windsor Tunnel, jointly owned by the two cities, expected “little to no” traffic loss to the DRIC bridge. The tunnel, which is used only by cars and small trucks and is undergoing plaza expansions and renovations, saw more than 4 million vehicles in 2009. The tunnel’s top executive dismissed concerns about border crossing capacity. “Capacity is a fictitious metric as customs mitigates all variables. Capacity is only valid in an open road environment,” said Neal Belitsky, executive vice president and general manager, in an e-mail to Crain’s. Local border capacity isn’t the issue for the logistics industry, said Wayne State’s Taylor. Instead, it’s wait times driven by customs and security inspections. “Future traffic levels are going to be dependent on how onerous the border crossing process is in terms of customs inspections, wait times and those kinds of factors,” he said. “In order for trade and investment and cross-border integration to grow, we need a predictable, reasonable inspection process in both directions. That process has become less predictable since 9/11. Processing times have gone up. The likelihood has gone up that your truck your will be searched.” Bill Shea: (313) 446-1626, bshea@crain.com BY BILL SHEA “ This is a gamechanger. ” POTENTIAL CONTRACTORS 

Table of Contents for the Digital Edition of Crain's Detroit Business - 25th Anniversary Issue, May 3, 2010

Crain's Detroit Business 25th Anniversary
Looking Forward
25 Companies to Watch
25 Mainstays
25 People Then and Now
25 Scandals and Dubious Deeds.
25 Philanthropic Gifts
25 Newsmakers of the Year
25 Big Stories
25 Innovations
25 Gone But Not Forgotten
Health Care
Defense
Suppliers
The Internet and Communication
Energy
Finance
Signs of the Times

Crain's Detroit Business - 25th Anniversary Issue, May 3, 2010

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