The Canadian government will be on the hook if a multibillion-dollar bridge project between Detroit and Windsor fails to attract sufficient traffic, briefing notes show – a guarantee that demonstrates how desperate Ottawa is to speed commerce through this vital trade link.
Documents prepared for Transport Minister Denis Lebel acknowledge Ottawa could end up footing the bill for more than just its share of building the bridge if toll revenue from the planned New International Trade Crossing falls short.
The Canadian government is so keen to get the link built it’s already offered to pay Michigan's $550-million portion of the new bridge, which would later be repaid from toll revenue.
Political approval for the crossing from the state of Michigan is the last big hurdle for the project, the most important border infrastructure project in the works for Canada. About 25 per cent of the annual merchandise trade between this country and the United States crosses between Windsor and Detroit.
Memos prepared for Mr. Lebel when he took over the Transport post in May show Ottawa could also be liable to pay the operators of the proposed new bridge “availability payments” if traffic volumes don’t generate expected returns from tolls.
The Harper government, which just last week signed a perimeter security deal to expedite cross-border trade, has said this second vehicle bridge across the Detroit River would be financed by private investors and that Ottawa would rely on a partnership with the private sector to build and operate it.
Ottawa has been pushing for the new link for seven years despite strong opposition by the owners of the existing Windsor-Detroit bridge. The company that operates the Ambassador Bridge warns that vehicle traffic – down 40 per cent since the Sept. 11, 2001 terrorist attacks – is insufficient to support another crossing.
Despite the reduced traffic volume, increasing layers of U.S. security at the border over the last decade have made crossings more unpredictable and prone to bottlenecked congestion.
A federal government website that promotes public-private partnerships describes them as an arrangement where a private investor “assumes a major share of the responsibility in term of risk.”
Briefing notes for Mr. Lebel, however, show that Ottawa is ready to assume a fundamental risk: that demand for the bridge is weak.
“The bridge will be tolled and the government of Canada would take the demand risk and provide regular, performance-based availability payments,” the briefing notes, obtained under access to information law, tell Mr. Lebel.
The goal of these payments would be to ensure a steady rate of return for the private investors, to assure them they can cover their costs and earn a profit for their stake in the new bridge.
The Canadian government, however, rejects the idea this is a subsidy, arguing any payments it might make would be temporary.
“There will be no subsidy,” Transport Department spokesman Mark Butler said. “We are confident that, over the project life, toll revenues will be more than sufficient to recover the full investment cost. However, it is normal that any major project will require a ramp-up period, in the initial years, before revenues will cover all costs.”
He said there’s no question in Ottawa’s mind that the recession-battered manufacturing sector will bounce back and generate increasing numbers of customers for a second vehicle bridge.
“The independent forecasts for this project indicate that truck traffic will triple and vehicle traffic will double over a thirty year period,” Mr. Butler said.
NDP international trade critic Brian Masse recommended Ottawa float public bonds to build the bridge instead of seeking a private investor, eliminating the pressure for the project to generate a profit for corporate shareholders.
The documents also provide the most detailed cost estimate to date of the project: $2.2-billion (U.S.) including $900-million for the bridge, $600-million for Canadian and U.S. customs “plazas” to screen crossings as well as up to $525-million for "utility relocation."
Separately, Wednesday, the Ambassador Bridge owners sharply criticized the Canadian government after The Globe and Mail reported that Ottawa was considering using an act of Parliament to shield the new bridge from legal challenges from the rival crossing.
“No private sector business should have to deal with a government that can only win by changing the rules,” said Matthew T. Moroun, vice-chairman of the Ambassador Bridge company.
The NDP’s Brian Masse said Ottawa should be passing this legislation as soon as possible in order to clear the way for the new bridge.
“The government should act immediately to address this potential delay and introduce the appropriate legislation immediately,” he said.