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American Shipper

Washington Notebook: Michigan gets infrastructure handout from Canada

   Friday’s announcement that Michigan has approved a deal with Canada to construct and operate a new international bridge two miles from the existing Ambassador Bridge in Detroit and Windsor, Ontario, is good news for the border economy and both nations.
   Michigan Gov. Rick Snyder deserves credit for understanding the desire of businesses for a wider bridge that can relieve congestion on what is the busiest commercial truck crossing between two nations. But Michiganders should be embarrassed that the state won’t pay a dime and needs help from a foreign government for its portion of the project.
   Canada believes so strongly in the importance of predictable commerce between itself and the United States that it has agreed to front up to $550 million to pay for land acquisition and an interchange connecting the bridge to I-75 in Michigan. Canada will bear the initial costs for the $2.5 billion bridge project and make its money back through tolls. It will keep Michigan’s portion of the toll revenue until it is paid back. After that, Michigan and Canada will split the toll revenue.
   The only thing Canada isn’t paying for is the Customs facility on the U.S. side. The federal government will pick up the tab for that.
   Michigan is getting a free ride even though it will benefit just as much as Canada. In fact, the situation is so sweet that the U.S. Department of Transportation agreed to treat the money from Canada as a state highway investment that is eligible for matching funds to pay for projects elsewhere in the state. Under federal aid formulas, states typically get $4 for every $1 spent on the highway system. That means that Michigan will pull in another $2.2 billion for roads, bridges and other transportation projects, making up for deferred maintenance in recent years.
   The innovative financing scheme allows Canada to find a private company to design, build, finance, operate and maintain the facility for up to 50 years, while maintaining control of toll rates. It does that through availability payments to a concessionaire. Each year the bridge operator will receive a pre-determined amount of money from the government for keeping traffic flowing, and ensuring safe conditions and a state of good repair. That’s a better arrangement than letting the operator set and keep tolls, creating an incentive to gouge the public.
   While Michigan legislators worry about the cost, Canadians see long-term economic growth that will easily cover the initial investment.
   More than 8,000 trucks each day cross the Ambassador Bridge, which last year enabled $120 billion in two-way trade.
   A day before the official announcement, the Center for Automotive Research in Ann Arbor released a study that estimated the New International Trade Crossing, as Michigan supporters refer to it, would create more than 8,000 permanent jobs on top of 12,000 jobs for each of the four years of construction. There will be jobs to operate the new bridge and from additional private investment in Southeast Michigan. Michigan’s productivity would increase $760 million per year, the study said.
   Michigan businesses have been unable to convince the Republican-led legislature to give the go ahead for the project. Automakers like Ford Motor Co. are big proponents of a second crossing over the Detroit River.
   “This is very important to Ford because we have critical plants in Ontario, we have critical plants in Michigan. And the only way for us to ship power trains, and parts and finished vehicles back and forth is over the bridge, and as a result we send about 600 vehicles a day over. And any delay costs us time, and ultimately, money,” Bill Ford Jr., Ford’s executive chairman, said in a video clip posted on the Detroit Free Press Website. Ford estimates that multiple cross-border moves for semi-finished and finished vehicles adds $800 to the cost of a vehicle.
   Industries on both sides of the border are inextricably linked. They form manufacturing clusters that become more competitive through their proximity to each other. But the only way to take advantage of the close distance is to have a border that acts like a membrane, rather than a barrier, for trusted shippers.
   A second bridge between Detroit and Windsor has been in planning for well over a decade. Always there to gum things up has been Manuel “Matty” Maroun, the billionaire owner of the Detroit International Bridge Co. which runs the Ambassador Bridge and has enjoyed a transportation monopoly for decades.
   He has employed every political and legal maneuver possible to prevent any competition with his bridge, which can only be reached from the open highway on the Canadian side by winding through urban neighborhoods full of traffic lights. That’s a losing proposition for truckers and their customers who want faster deliveries.
   During the past couple of years, Maroun has mounted an aggressive advertising and lobbying campaign to convince state lawmakers that a new bridge is unnecessary and would drain taxpayer money for a project that can be handled by the private sector. The Maroun family, which also owns motor carrier Central Transport, has its own plans to build a twin span next to the Ambassador Bridge.
   Now he’s also scaring Republican lawmakers by suggesting he’d throw financial support behind Tea Party candidates seeking legislative seats.
   You would think that Republicans would be at the front of the line to help the business community. Maroun’s political contributions and hardball tactics have clearly had an effect. 
   But the same excessive focus on low taxes and deficit-reduction that has plagued Congress on the national scene also seems to be a factor in Michigan.
   Last week, the Michigan House passed a supplemental budget that would prohibit the state from using any money for the Detroit River International Crossing unless approved by the legislature.
   Republican lawmakers are more interested in pushing the worn-out ideology that low taxes is the silver bullet for economic prosperity. A week ago, Republican lawmakers rejected proposals to increase investment in roads or higher education in favor of an income tax cut that the Detroit Free Press says will save state workers less than $5 per month.  
   Michigan was hit hard by the financial crisis and recession of 2008. The budget is tight. But there is a difference between spending and investment. A new bridge is a major investment that will support manufacturing and job growth. 
   The U.S. Congress is also facing gridlock over a multi-year surface transportation reauthorization bill. House Republicans claim they support infrastructure investment, but are so devoted to demonstrating their fiscal purity that they prevent any moves without cutting programs elsewhere in the budget. 
   Insisting on fiscal austerity during a time of economic weakness is only going to help tip us back into a recession or muddling along without creating new jobs for millions of unemployed. Ask the Europeans how that policy is working.  
   At least Gov. Snyder, a Republican, understands what is at stake and found a loophole that allows him to bypass the legislature and proceed on the bridge project with Canada as a partner.
  While the United States stumbles around without any sort of national transportation strategy to set investment priorities, especially to help freight and trade movement, Canada and its provinces have identified key corridors where freight investments give them a competitive advantage. Canada is becoming increasingly attractive for U.S. companies as a conduit for shipping goods to and from foreign markets, shorting U.S. ports and logistics providers of potential revenue. 
   The Congress can’t even pass a two-year, band-aid transportation spending plan when long-term vision is needed. – Eric Kulisch

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