Canada: Let’s be clear — our Detroit bridge money is not a loan to Michigan

Crain’s Detroit Business

By Bill Shea

The Canadian government has made it explicitly clear that its offer of up to $550 million to cover Michigan’s cost of a new Detroit River bridge is not a loan.

Instead, Canada would pay any of the state’s capital costs for the Detroit River International Crossing that are not covered by the private sector or the U.S. government, up to the $550 million limit.

Those costs then would be recovered by Canada assuming Michigan’s share of bridge toll revenue for as long as it took to pay off the capital costs.

The original Canadian offer, made in April, didn’t specify how the money would be deployed for DRIC — giving rise to U.S. media reports that said it was a loan or indicating there was no explanation of the offer’s terms.

“Let me be very clear — the additional $550 million is not a loan,” Chuck Strahl, Canada’s minister of transport, infrastructure and communities, wrote in a statement provided to Crain’s this week.

The money would go to a joint authority that would be set up to operate the bridge, and Canada would have an increased equity stake in the authority while the money is paid back.

In June testimony before the Michigan Senate, Strahl’s predecessor, John Baird, explained to the Transportation Committee how the funding mechanism and repayment would work:

“This funding will be provided directly to the bridge authority to be established jointly by Canada and the state of Michigan. As such, Canada will be repaid by the bridge authority from future toll revenues. “

Baird also told senators that the money wasn’t a loan — but confusion over the terms of the money continued.

That confusion re-emerged when new Gov. Rick Snyder endorsed DRIC in his State of the State speech Jan. 19 and announced that he and Director Kirk Steudle of the Michigan Department of Transportation had secured a deal with the Federal Highway Administration that allows the $550 million to qualify as Michigan’s required matching funds for highway projects in the state.

The final amount that Canada covers for Michigan is unknown, so it’s unclear how the MDOT agreement with the federal agency will work. Typically, the state is required to match 20 percent of a highway project’s cost, and the federal government covers the remainder.

Michigan has had difficulty raising the required matching funds for the annual lump-sum budget for highway projects.

With Washington considering the $550 million infrastructure investment as qualifying matching funds, Michigan could be eligible for up to $2 billion in highway money.

But it’s unknown how much Canada would have to invest in DRIC on Michigan’s behalf, so it’s unclear how the deal with MDOT and Washington would work.

Messages seeking an explanation from Snyder’s office have not been answered.

The overall price of DRIC is $5.3 billion, and that includes Canadian highway work linked to DRIC but not officially part of the partnership’s work. The work on the bridge, plazas, interchanges and approaches is estimated at $2.1 billion. It’s broken down by MDOT as:

• U.S. bridge and approach: $501.6 million.

• Canadian bridge and approach: $447.4 million.

• U.S. toll plaza: $150.6 million.

• U.S. General Services Administration plaza: $270 million.

• Canadian plaza: $387.6 million.

• I-75 interchange: $420 million.

Michigan and Canada plan to make DRIC a partnership in which a private company bids to win a concession to build and operate the bridge, retaining toll revenue to cover capital and operating costs. The authority would oversee the concession agreement.

Lansing must approve public-private partnership legislation that would allow MDOT to participate in DRIC. Such a bill was allowed to die last year because of opposition from Republication legislators.