By Jeff T. Wattrick | MLive.com
Part two of my conversation with Roy Norton, Canada’s top diplomat stationed in the Midwest. We discussed politics and power at play in the debate over a new bridge for the United States’ and Canada’s busiest border crossing.
Jeff Wattrick: When you talk about lane capacity, you say there are 14 lanes in Niagara…
Roy Norton: Not all of those carry trucks, but not all of these carry trucks either.
JW: Sure, but there isn’t a traffic jam on the bridges or in the tunnel so much as at the plazas.
JW: When you were at Detroit City Council you said you couldn’t expand the Ambassador Bridge plaza without destroying the Sandwich community in Windsor. Can you talk about the significance of Sandwich?
RN: What I specifically said at Detroit, I was talking about one of the options because some folks in Michigan have said: “Here’s a solution! You’re going to spend your money to extend the 401 to foot of the new bridge, thereby obviating the need for trucks to go through 17 traffic lights. Why not just swing that around after you’ve brought it to where it is you’re proposing to bring it. There’s a railway line that sort of parallels the river. Bring that [freeway] over the railway line to the foot of the Ambassador Bridge. That way we don’t have to deal with the University of Windsor and the graveyards and that sort of thing.”
Well, number one, it’s a single-track railway line so extend your arms, that’s how wide it is. Yes, it has right-of-way on either side, but it’s not nearly as wide as what a six-lane freeway plus right-of-way on either side would be. So, by definition, you’re going to have to expropriate a lot of land.
On the riverside of the railway is the historic community of Sandwich. Sandwich is the longest settled community in Canada west of Montreal. It was settled in 1748. It is not a well-off community at all, but there’s a cohesiveness in the community.
It was the terminus of the Underground Railroad. It’s where slaves prior to the Civil War and the Emancipation [Proclamation] fled the American South. There are churches, a Canadian national historic site—a Baptist church built by slaves who fled the south.
The community would be totally isolated and much of would have to be physically destroyed including historic landmarks if this option of swinging the highway over—and in any event, it’s a railway track that’s operational. The company that operates it has expressed no interest in selling it to the government for the purposes of a highway being built over it.
This is pie-in-the-sky notion, just like the deal with the stoplight issue. A solution in quotation marks, and this one doesn’t work either I’m afraid. That’s what I was addressing when I spoke to Detroit City Council.
JW: The last hitch in the NITC approval process in Lansing. You were at the hearings, as you said. How do you feel that process is going?
MM: Obviously, we were very pleased when the Governor on the 19th of January in his State of the State speech endorsed the bridge. We didn’t know he was going to do that. We weren’t alone in not knowing he was going to do that, but he is someone who is very methodical about assessing the plusses and minuses of an issue. He brings kind of an accountant’s outlook to things. He satisfied himself that this is the right thing to do for Michigan.
He also has, or had, lots of other items on his agenda. He has proceeded to implement with the collaboration of the legislature quite a numbers of reforms, and the bridge was always secondary. That is, it was always going to be dealt with after all these other items.
Well, they’ve dealt with the other items and now they’ve turned to the bridge. Some time, in a sense, was lost, and the owners of the Ambassador Bridge filled that vacuum quite well by launching a multi-million dollar advocacy campaign, part of it television advertisements and part of it these flyers that are being disturbed to all of the constituents in all of the electoral districts. In some cases, I understand, more than one edition of the flyer has arrived at doorsteps …
JW: Is that in the United States or Canada?
RN: No, that one is only in Michigan to the best of knowledge. It has the picture of the legislator, and it says something like: “You’re state Senator hasn’t declared his position on the New International Trade Crossing.” It then proceeds to trash the NITC, making such totally unsubstantiated assertions like it’s a $2 billion bridge when, if you’re talking about the bridge, it’s a $1 billion dollar bridge. Saying that it’s going to cost Michigan taxpayers $100 million a year when in fact it’s going to cost zero…
JW: Sorry to interrupt. I did this with Moroun, and I’m going to do this with you. You say the bridge is a billion dollars but when you add the toll plazas on both sides, which you have to concede are essential to the project…
JW: It comes to $2 billion…
RN: No, it does not come to $2 billion. As I say earlier, it may be $900 million. The concessionaire, and in 2010 the governments of Michigan and Canada invited expressions of interest from companies. They describe the project—because there is no point in heading down this track predicated on the assumption that this would be a public-private partnership with the private partner bringing a billion dollars to the table if we get authorization and find their isn’t any company interested in doing it.
We went through the exercise. It’s not definitive, as in nobody that expressed an interest in obliged to participate and companies that didn’t express an interest are prohibited for participating, but 20 firms indicated they would be interested in participating in the project, and the project is expected to cost—the span plus the two toll plazas that you reference—is expected to cost $900 million or maybe a billion dollars.
The Customs’ plazas are on top of that, and they are paid for by the Canadian government on the Canadian side and the U.S. government on the U.S. side. Both governments are completely in on those.
On the Canadian side there’s the $1.4 billion—not the $2.2 billion that Mr. Moroun asserts in the television ads that are now running in Ontario—highway to connect the 401 to the foot of the new bridge. That’s being paid for by Ontario and Canada equally. It has nothing to do with revenues from the bridge.
And on the U.S. side there is expected to be $500 or $550 million to connect the foot of the bridge to I-75. That’s the sum that Canada has agreed to front, and that will be retired through toll revenues as well, so there’s no cost to Michigan associated with that. No cost to Michigan associated with the U.S. federal government [Customs’] plaza. No cost to Michigan associated with the span or the toll plazas because the private sector developer is paying for those costs. No cost to Michigan associated with the highway on the Canadian side, and Michigan will after 45 years or so will receive $50 million a year in revenue.
And the Governor has negotiated this arrangement with the U.S. Federal Highway Administration whereby Canada’s $550 million can count as Michigan’s contribution and be eligible for matching on a four-to-one basis for road and bridge work anywhere in the state of Michigan, meaning $2.2 billion is extracted from the U.S. federal government at no cost to Michigan.
That’s expected to create many thousands of jobs and enhance the investment climate. The bridge construction itself is expected to create 13,000-15,000 full-time jobs directly related to the construction and another 20,000 or so spin-off jobs. Those are overwhelmingly in southeast Michigan. The state and federal government derive revenues, obviously, in terms of income taxes as well as corporate taxes from all of this.
So, it really is a project that just keeps magnifying its benefits at no cost—not $100 million, not $50 million, not $10 million—at no cost to the state of Michigan. Notwithstanding these advertisements in a completely unfounded way are trying to scare Michigan voters into believing it’s going to cost them $100 million a year.
JW: Let me ask about the offer to front the Michigan portion of this project. Earlier you said Canada is not in the business of making bad investments. What happens if the bridge does not generate the toll revenue that’s anticipated? It is a venture; there is risk. If in 45 years that $500 million is not paid off, what happens?
RN: We suck it up. The government of Canada assumes all liability associated with that money.
The bridge builder/developer assumes liability with regards to the project they’re contributing, so if it costs $1.2 billion that will be their responsibility to suck up. But, in terms of the $550 million, if the bridge were never to become profitable, Canada eats the $550 million and the government of Canada is fully mindful of that risk. It’s quite an affordable risk; it’s quite a manageable risk.
The official opposition party—we had elections on the second of May—the government that made this offer was re-elected with a majority in our parliamentary system. The new official opposition party completely endorses the proposition. The third party, that used to be the official opposition, completely endorses the proposition. 301 of the 306 members of the Canadian House of Commons are completely in support of this, and there’s not going to be an election in Canada until October 2015. We’ve embraced your system of fixed election dates.
The folks in Michigan can rest assured that the offer remains on the table, and we’re committed to it, and we assume—I stress this—total liability in the event that the project never becomes profitable. And because we’re not in the habit of making dumb financial decisions, we’re pretty convinced that the project will be every bit as profitable as we have indicated. After 45 years or so, each of Michigan and Canada will be receiving—and this is after money for maintenance and for upgrades and to pay the operator a profit—each of us will receive between $40-$60 million a year from year 45 on. We’re that confident of this.
We’ve done a lot of public-private partnerships in Canada. We’ve got a lot of experience with them. This is a good time for building these sorts of things. The Ontario freeway—the $1.4 billion freeway—we had thought would cost $1.6 billion. It came in $200 million under budget. Other public-private partnerships that we’ve engaged in over recent years have come in under budget, ahead of time, or both. There’s no basis for promoting cynicism, as some folks have done along the line of: “Oh, well you know these things always far more than what they’re projected to cost.”
No, we’ve scoped this out well. We think we know how much this is going to cost, and we’re prepared to assume the risk in the event it takes longer to become profitable, or for that matter, in the event it never becomes profitable.
JW: A lot has been made about the coalition—I think it’s a pretty impressive coalition in favor of the NITC on the American side. You don’t get that diverse of a group in a room on an issue very often, but from the Canadian side, how often does the Conservative Party, the Liberal Party and the New Democratic Party are speak with one voice on something like this?
RN: Oh, all parties can speak in favor of the importance and desirability of a particular infrastructure project, but it is unprecedented that all three parties would agree that the government of Canada should encumber the Canadian taxpayers with a $550 million liability to support a developed country’s contribution to a share of a bridge. This is unique. It speaks to the importance to which we attach to the project.
We think Michigan will benefit from this every bit as much as we will. Indeed the Senate in the state of Ohio last year unanimously passed a resolution endorsing this bridge. They don’t expect to get any of the short-term employment associated with building the thing, but they do $32 billion a year of trade with Canada and, insofar as the western half of the state is concerned, almost all of that crosses the Ambassador Bridge.
I was down in Indiana a couple weeks ago. They’re very apprehensive. Indiana does $17 billion in trade with Canada, because of their geography, most of it crosses the Ambassador Bridge. They worry about the attractiveness of Indiana as an investment destination.
Less than half of the trade that goes across the Ambassador Bridge today is represented by Michigan-Canada trade. The majority of the trade that goes across the bridge is represented by other states, as far away as Texas and California. Most of Texas’ trade with Canada, which is as big as New York’s trade with Canada, crosses the Ambassador Bridge. It is important to all jurisdictions, which is why it is important to the U.S. government, because it is a matter of binational economic importance as well as of binational strategic and security importance.
JW: With the $500 million dollar offer, does Canada expect any strings to be attached in terms of who gets the work or who gets the contracts?
RN: No. There are very clear restrictions in U.S. law on who can work in the United States and what the terms and conditions are. Nobody without a permit to work in the United States will be able to do so. Canadians will work on the Canadian side of the bridge, and Americans will work on the American side of the bridge.
People have asserted that we’re interested in reversing the course of the War of 1812, I guess, and we’re trying to invade the United States and somehow capture sovereign territory. This is preposterous.
This is a commercial and strategic priority between two jurisdictions, or four jurisdictions as the case may be. We’ve got 27 bridges between Canada and the United States; 25 of them are organized precisely according to this model, as in Canada and the receiving state agree to create an authority which then supervises the building and maintenance of the bridge.
There is nothing novel about this model. It pertains in the case of 25 of the 27 bridges. The two exceptions are the Ambassador Bridge, which carries the most traffic, and a bridge in northwest Ontario-northern Minnesota across the Francis River that’s owned by logging company. They have a sawmill on each side of the river and they drive back and forth. For the most part, they’re the only people who use it. It’s the bridge with the least amount of traffic is privately owned, and the bridge with the most traffic is privately owned.
There’s no problem with private ownership. We’re not trying to force the Ambassador Bridge out of business. Indeed, this will be a public-private partnership. It will be private capital that will come to the table to build and operate the bridge, and it’s the private sector in both countries—you’ve talked about the coalition, you’ve got the automotive companies, the big manufacturing companies in west Michigan, you’ve got the Chambers of Commerce is almost every municipality in the state of Michigan, you have major unions, you have the farm bureau and just about every agriculture organization.
Thirty per cent of everything grown in Michigan is sold in Canada and 50% of everything that Michigan sells to the world is sold to Canada. It’s important to folks here to have that capacity, which is why that coalition has come together under the Governor and the Lt. Governor and the Senate President, and there’s a comparable coalition on the Canadian side. The Canadian business community is fully in support, as are unions, because they recognize the contribution this will make to economic activity both in the short-run and in the medium and longer terms.
JW: How would you describe the relationship between the Detroit International Bridge Company and government agencies in Canada that deal with border on a day-to-day basis?
RN: If you mean the enforcement agencies, the Canadian Border Services Agency…
JW: And the regulatory agencies…
RN: Well, for all intents and purposes it’s an unregulated bridge. It’s an extraordinary situation.
Among the preposterous accusations made was that this bridge—the NITC—would be built by the Chinese and would become a conduit for Chinese products to come into the United States. Well, Chinese products don’t need a conduit into the U.S.
But this bridge would be regulated. The Ambassador Bridge could—hypothetically, I’m not suggesting they’re going to do this—sell itself to the Chinese and the Chinese would then own a bridge that is entirely unregulated and they could use it for whatever it is they wanted. So if people are fearful of that scenario, they have more reason to fear in the case of the Ambassador Bridge than they do in the case of a government-regulated bridge.
We regulate telecommunications. We regulate electricity and other monopolies. This is a piece of critical binational security infrastructure. Why would it not be regulated in the same way? If ever there was a case for a government role, it’s got to be in the context of something like this.
But, the relations between the Ambassador Bridge and the law enforcement agencies I think are fine. The relations with Transport Canada, which is the lead on the NITC, get rockier every time the Ambassador Bridge brings a new lawsuit against us, and they are quite litigious by nature, and not just us. They sue the government of Michigan, they sue the city of Detroit, they are into lawsuits big time.
They are suing us for $5 billion dollars, arguing under NAFTA chapter 11 we are acting to devalue or diminish, as if that was our deliberate objective, the value of their bridge. I mean who knows what their bridge would be valued at, maybe a tenth of that sum. Nonetheless, they’ve brought this lawsuit against us because maybe they think it will silence us or make us uncomfortable in engaging in public advocacy. I don’t know what their motivation is, not for me to question it.
They are a business. They own the most important traffic crossing between Canada and the United States so we deal with them. We’ve sat down with them, had meetings with them, Transport Canada has over the years. We haven’t done so since they brought this $5 billion suit and I’m constrained from doing so. Every once in a while they challenge me, or other propose that we have a face-to-face debate.
There’s a principle here that probably should be addressed. They are a special interest like any other business that’s interested in maintaining a situation where there’s no competition. We are a G7 government. People should stop looking at this through the prism of some kind of equality—he said, they said.
We don’t regard ourselves as being a special interest. We’re the government of the United States’ closest ally, best friend, best customer. We are one another’s best customers. We are not engaged in a situation where we’re trying to advantage ourselves at the risk of disadvantaging the many.
JW: The DIBC has said they’re not interested in competing for the concessionaire for NITC, but they are also a business and businesses tend to be flexible on things like that. If at the end of the day they do express interest in having a role in NITC, is that something that—other things being equal—Canada could be comfortable with?
RN: Absolutely. We think they should bid. We think it’s unfortunate that they’ve indicated they aren’t interested. This is an open process. They’re not a firm that knows something about building a bridge, necessarily, but they certainly know something about operating a bridge. Maybe they can be part of a consortium with people who know something about bridge building but not about operating. It would be a match made in heaven.
For their own reasons they’ve chosen to say they’re not interested. That may reflect the fact that they’re only interested in being the sole owner of the transportation capacity across the Detroit River, and they’re not interested in any kind of participation in a project that they see as competitive.
The Blue Water Bridge doesn’t think the NITC is competitive. They think it is complimentary of their existing capacity.
If the Ambassador Bridge were to become interested, and kind of lift itself up out of its mire, and recognize the contribution this project could make to the region and stop fighting it, they would be every bit as much of a legitimate contender as any consortium that would forward. They would have strong credentials by virtue of the fact that they know a lot about managing a bridge right here in this region. I hope they’ll change their minds.
JW: Conversely, as this moves forward, if it reaches a boiling point where the ability to do border issues becomes a bottleneck because of DIBC’s ownership of the Ambassador Bridge, would there be interest in a binational attempt to purchase the Ambassador Bridge?
RN: We don’t anticipate that worst-case scenario. It’s in the interest of the Ambassador Bridge to continue to operate their bridge profitably. For them to act in any way that would impede traffic, create bottlenecks beyond those that already exist would be counterproductive. They haven’t threatened that…
JW: But in terms of, you point out the Ohio Senate with a Republican majority supporting what was then called the DRIC, the fact that the Michigan legislature is still dealing with this in July 2011, that has a lot to do with the Morouns’ political influence. If that alone is enough, not just on the bridge question, but anything related to border traffic…
RN: I’m not going to go into all the details, and I’m not familiar with all the details, but there had been discussions before with folks at the Ambassador Bridge as recently as a couple years ago, maybe three, to see if they would be potentially interested in selling—I don’t know who initiated the discussions.
They periodically ask for opportunities to sit down, it’s my understanding there was more than one such session, they never put a price on their bridge. There was lots of discussion of sweeteners that might have been sought, perhaps ownership of another bridge in exchange for their existing one plus a certain amount of money, but there was never precision about the money.
The government of Canada, the state of New York, the government of Michigan are not interested to the best of my knowledge in some sort of trade off where the Ambassador Bridge is pacified by being given monopoly control over transit at some other crossing in exchange for selling the Ambassador Bridge. If they wanted to sell the bridge, it was incumbent upon them to put a price on it.
Regardless of who owns the Ambassador Bridge, there’s need of redundancy. There’s need of additional capacity. It’s important that capacity not be where it is now. That is to say, dumping two or three times as many vehicles onto the streets of Windsor or into the existing Customs’ plazas does not achieve the objective.
The issue is no longer about assessed need. Everybody, including the Ambassador Bridge, is in accord on that one. The issue is where it will be, and we think it should be where the NITC is proposing to land, and we think it should be soon. We think it is a matter of national importance to all governments and all people in the area.
JW: That ties nicely to my final question, if and when the NITC legislation passes in Lansing, what’s the timeline to actually build the bridge.
RN: There’s every reason to believe the presidential permit would come swiftly after authorization. The U.S. administration has not been willing to anticipate the state, but will follow along very quickly. There is land assembly. There is the process of tendering the bridge. We had thought if it had passed in the spring of 2011 that construction could have begun in 2012. Given that it won’t pass before the fall of 2011, construction probably doesn’t begin until early 2013 and it will probably take four to five years to complete. So, an opening in 2017 with all those jobs existing during a period of construction is probably what we should be anticipating.