Saturday, August 24, 2019Canada's Leading Online Business Magazine

Windsor-Detroit Bridge Will Provide a Much-needed Economic Catalyst

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The increasing presence of public-private partnerships in Canada continues to flow on an upward trend and is likely to remain that way, if not by design, then out of sheer necessity. In dealing with projects within the massively expensive infrastructure sector, the government may provide a capital subsidy in the form of a grant, in an effort to make it more attractive to potential private investors.

As one of the more prominent P3 projects on the horizon and just recently given the green light is the Windsor-Detroit Bridge. The official name is The Detroit River International Crossing (DRIC). With traffic crossing the border anticipated to grow from 18,500 vehicles a day in 2016 to 26,500 by 2025, the Detroit River International Crossing will provide an efficient means of transporting goods and saving thousands of lost hours waiting in border lines to get through customs.

The crossing will connect Windsor, Ont. and Detroit, Mich. by linking the still to be completed Windsor-Essex Parkway with Interstate 75 and Interstate 94 in Michigan. The $1.4 billion Parkway is under construction and will be a direct link with Highway 401, travelling southwest of the city of Windsor.

A Long Time Coming

Formal talks for the DRIC project began almost 10 years ago. The Canadian Business Journal spoke with Dr. Bill Anderson, research chairman of cross-border transportation at the University of Windsor. An expert on the topic, Anderson has watched – and been part of – the progression of this bi-national project from the very beginning. He’s also the author of a comprehensive report called The Border and the Ontario Economy.

“There had been talk of a bridge in this location forever,” Anderson tells us. “That was sort of a formal process that involved the four governments, the two federal governments, the Ontario government and the state of Michigan.”

A planning and feasibility study was conducted and a plan for what would be the bridge and the access roads with the Canadian environmental assessment completed in 2008. Right now, the Windsor-Detroit international crossings – the Ambassador Bridge and the Windsor Tunnel – are the busiest in North America in terms of traffic volume.

“That’s definitely the case in terms of the movement of goods from a trade perspective,” Anderson confirms. “Of the traffic that goes between the United States and Canada by highway, which is the majority of the trade, about 25 per cent of it goes across that route between Windsor and Detroit at the Ambassador Bridge. By value it’s something like between 15 and 20 per cent of the total trade between Canada and the United States.”

The share is actually a bit lower than it once was because so much of the Canadian exports to the U.S. are petroleum-based products, which now goes across in pipelines. As recently as seven or eight years ago, that wouldn’t have been the case.

The Detroit River International Crossing will facilitate the movement of people and goods by ensuring there is sufficient border crossing capacity to handle projected future growth in cross-border trade and traffic in the Windsor-Detroit trade corridor. It will also provide a much-needed crossing alternative at the busiest Canada-U.S. commercial border crossing and is expected to create 10,000 to 15,000 construction jobs in Ontario and Michigan.

The project includes the bridge, Canadian and U.S. inspection plazas, and an interchange with Interstate-75.  Construction is expected take four to five years.

The project will be funded by the Government of Canada, with the American plaza being the responsibility of the U.S. government.

The private sector is also expected to contribute to the project through a public-private partnership.  Ontario and Canada are jointly funding the Windsor-Essex Parkway, which will connect Highway 401 to the new bridge.  The total construction costs are valued at between $3.5 and $4 billion. 

The new inspection plazas at the bridge are being developed in consultation with the Canada Border Services Agency and the U.S. Department of Homeland Security, Customs and Border Protection. They will provide areas for primary and onsite secondary inspection of people and goods as well as permanent inspection equipment. The bridge will also provide for dedicated NEXUS and FAST lanes, which will substantially improve border processing capabilities.

Canada and the U.S. enjoy an economic partnership unique in the contemporary world. The two countries share the greatest bilateral trading relationship on the planet. In 2010, our bilateral trade was close to $645 billion, with more than $1.7 billion worth of goods and services crossing the Canada-U.S. border every single day.

“The Windsor-Detroit corridor is Canada’s most important trade artery and the busiest commercial land border crossing in North America,” says Mark Butler, Senior Communications Advisor, Windsor Gateway Project with Transport Canada.

The number of construction jobs and reciprocal work is sorely needed in a region where the unemployment rate of about 10 per cent is the highest in Canada.

The long-term effects of developing such a necessary transportation mechanism is sure to enhance economic productivity on both sides of the border.

“When the project is done, it will further reinforce our ability to be competitive at the global stage with new, modern infrastructure,” notes Windsor Mayor Eddie Francis.

Former Michigan governor James Blanchard alleged the Canadian government attempted to purchase the aging privately-owned Ambassador Bridge from Matty Maroun four years ago. It’s believed the potential sale fell apart when Maroun wanted more than $3 billion. The billionaire has since been contemplating twinning his own bridge in an effort to support more vehicle traffic and initiated a lawsuit trying to halt the new project. Voters in Michigan rejected the suit.    

Maroun, 85, spent more than $30 million promoting a proposed constitutional amendment on the November ballot that, had it passed, would have required approval of both the voters of Detroit and the voters of Michigan in state-wide elections to build the bridge. However, more than 60 per cent of Michigan voters soundly rejected Maroun’s proposed amendment, paving the way for the bridge to proceed.

Ultimately, the bridge will be built without the support of the Michigan legislature as no Michigan state funds will be used. With Canada footing the American portion of the bill as well, we’ll apparently recoup the additional $550 million investment from bridge tolls. Either the tolls will have to be exorbitantly high or we can plan on seeing those booths there for generations to come in order to pay off such a hefty bill.

Automotive Impact

“The reason this bridge (the Ambassador Bridge) carries so much traffic is really because of the automotive industry,” Anderson states. “If you look at trade between Canada and the U.S., and if you take oil and gas out of the picture, the biggest share is manufacturing.”

Quite often when people think about trade between the two countries it’s natural to assume products such as potash and softwood lumber would be at the top of the list, which are indeed crucial to our exporting sector, but for many years until oil and gas became the No. 1 export to America, the primary export was always automotive industry products. That goes back to the fact there’s been managed trade agreement between the two nations dating back to 1965.

“You had goods going across the border tariff free as long as they were automotive goods way back to 1965, so long before the Canada-U.S. Free Trade agreement,” Anderson reveals. “The automotive industry became very integrated across the border.”

As example, in Windsor the two biggest private employers are a Chrysler van plant, which assembles minivans that are sold worldwide and the other is a plant that makes V8 engines for Ford.

“Many components for the van plant come from the United States, meaning several hundred trucks a day have to come across the Ambassador Bridge,” Anderson says. “For the engine plant, most of the engines are going into F-150 pickup trucks which are produced on the other side of the border. The reason you have so much trade is because you have supply chains in the automotive industry that run across the border.”

Due to increasing congestion at the Ambassador Bridge, a resolution was needed and building an additional artery became the obvious answer, and thus the need for the DRIC Bridge. Goods need to arrive on time or it can result in the shutting down of production lines, regardless of what the industry happens to be.

We live in an era when demands are made for lean and mean manufacturing and logistics so companies don’t want to be sitting on large inventories.

“From an economic perspective it’s not just having the capacity to move goods across the border, but you have to be able to move it over fairly quickly and predictably in terms of times.”

There has been some degree of speculation as to whether or not this DRIC Bridge project would have moved ahead if Ambassador Bridge owner Matty Maroun had sold his international crossing. Prime Minister Stephen Harper has gone on record as saying he was shocked that a private citizen would be in ownership of something like this. In the U.S., it’s considered far more normal. But would the DRIC Bridge still have been necessary, had Maroun sold? 

“In the public perception a big problem with the border is that there’s a private operator who’s got a monopoly,” Anderson replies.  “The closest substitute (to the Ambassador Bridge) is the Bluewater Bridge way up in Sarnia. There’s a tunnel (crossing between Windsor and Detroit) but it can’t take full-sized trucks.”
Anderson believes the new bridge is necessary for some obvious reasons.

“The (Ambassador) bridge is 80 years old so it does need to be replaced at some point,” he says. “The Maroun family want to build another bridge adjacent to the existing one.”

For many years Maroun has made the argument that governments don’t need to build a new bridge – he’d do it. But once again the underlying concern is giving so much power and monopoly to a private operator for essential international trade between Canada and the U.S.

“It’s not the type of thing you want to entrust to this one type of private operator,” Anderson notes.

Selecting the Location

Going back through the original DRIC Bridge plans, Anderson says there were originally five different general options for the location of a new crossing and one was to make it adjacent to the existing bridge. But that’s not the most desirable of locations for several reasons, as Anderson mentions.

“Whenever you talk about this bridge project you have to realize that the problem hasn’t just been the bridge, it’s been that the 401 – the main Highway that goes up to Toronto and beyond – ends at the outskirts of Windsor.”

In other words, you have large trucks moving through municipal roads in order to reach the Ambassador Bridge. The highway access link is less than desirable to say the least.

“As long as I’ve been involved in transportation in Canada I’ve been hearing this joke that says ‘you can drive from Montreal to Miami and you only have to stop at 17 traffic lights – and all 17 of them are in Windsor, Ont.,” Anderson chuckles.

The project is not just about getting a new bridge. It’s about getting a proper linked connection from major highway artery to major highway artery, as opposed to literally going through the backyards of neighbourhoods. The goal is to have a seamless link between Highway 401 in southern Ontario and Interstate 75 in Michigan, with the DRIC literally bridging the gap. The question is how to do it? What’s needed is a limited access highway – a virtually impossible task if looking to reach the Ambassador Bridge because it is a densely populated section of Windsor.

The DRIC Bridge plan will see the new structure built about 2 km west along the Detroit River through a corridor that is much less densely populated. In order to link the new bridge to Highway 401, a current project is now under way spanning 11 km. Formerly known as the Windsor-Essex Parkway; it’s since been named the Herb Gray Parkway in honour of the former Deputy Prime Minister who hails from Windsor. Construction began in late 2011 and should be open for traffic by early 2015. It’s expected to come in with a price-tag of about $1.4 billion, making it the most expensive highway project ever done in Ontario’s history. Largely due to environmental reasons, it will be a six-lane below-grade freeway with a direct extension linking to Highway 401. It’s also a four-lane at-grade service road network which is an extension of Highway 3 and there are 300 acres of green space which will include 20 kilometres of recreational trails, ecological restoration sites and thousands of new native tree and vegetation.

“In this post 9/11 world, you worry about terrorist attacks on bridges,” Anderson says. “From an economic perspective, you could do a lot more damage by taking out something like the Ambassador Bridge or a few other key bridges throughout North America than by destroying a building. You kill more people by destroying a building but if you didn’t have any way to get goods across the Detroit River you’d literally throw thousands of people out of work. So if you’re going to have two bridges it makes sense not to have them right one on top of the other.”

These types of infrastructure projects often tend to run far over budget and so with this being a P3 it shifts a lot of the construction risk and financial responsibility onto the builders. It’s putting the incentives into a good state. The builder has the incentive to get the project completed on time and on budget.

Canadian-Michigan Agreement

An agreement signed last year between Michigan and the Canadian federal government lays out the structure of the commission, which still involves receiving a presidential permit. After that is procured, there will be requests for proposals and companies will bid on the job.

When it comes to raw dollars, the state of Michigan is contributing zero. The U.S. federal government is covering the inspection plaza in Detroit, and that’s about it. The rest of the financial burden is being placed on Ontario and the Government of Canada.

“If you look at the structure of the commissions that will build it, it’s very much a Canadian project in the sense there is an international commission that has to approve things, so there will be people from Michigan that have some sort of power of approval but Canada is going to be running the show,” Anderson remarks.

The institutional structure is quite fascinating. There is considerable political opposition to the DRIC Bridge project in the State of Michigan, largely based on sympathy for Maroun and his company. In the U.S., thoughts on private ownership of an international bridge run far different than what we’re typically accustomed to here in Canada. Hefty political contributions of course have a big say in just how vocal politicians tend to be when getting behind an idea. It’s all 100 per cent legal, but still has the very real possibility of skewering one’s true motives and beliefs. 

Michigan Governor Rick Snyder has been a proponent of the new DRIC Bridge, despite widespread opposition from the state. With no actual money to spend on the project, he managed to move things forward through what’s called an inter-local agreement. Keep in mind the project was not approved by the Michigan legislature.

“In the Michigan constitution there’s a term called ‘inter-local agreement’,” Anderson reveals. “It basically says the government – essentially the governor – in Michigan can enter into an agreement with another state or with Canada. They can do a joint activity without approval from the legislature. He can’t spend money without approval from the legislature but he can enter into this agreement on his own accord and that’s basically what made it possible for the governor to approach the Canadian side.”

“The support from the business community on both sides of the border is very high, and why shouldn’t it be?” Anderson states. “This is a piece of capital they need to do their business and especially with respect to the movement of freight in trucks.”

Another aspect that will improve economic efficiency is an agreement reached between Canada and the U.S. is the Trusted Trader and Trusted Traveller programs that have been established.

“The Trusted Traveller program is like having a Nexus Card,” Anderson says. For trucks there is the Trusted Trader program. While it’s great to have the trust so to speak, if there’s not the infrastructure in place to allow for quicker movement i.e. dedicated truck lanes to accommodate such cases, then it’s all rather pointless.

“Having more lanes across the border makes it possible to become more efficient. With the Ambassador Bridge there’s really just one truck lane and one car lane so if a truck is qualified to go through the fast lane, they still have to get into the same queue with all the other trucks, so there’s no time saved. 

Bottom line is that the DRIC Bridge is much needed for redundancy reasons related to security and for the ability and to accommodate greater volumes of business truck traffic carrying freight. Without keeping up with the needs of the 21st century, major sectors of our economy will be irreparably harmed.

“We better have a good bridge, which means not one that’s 80 years old and we need redundancy in the system so we’re not completely dependent on one,” Anderson notes.

He also feels the agriculture and livestock sectors would be ones to reap many positive benefits of another bridge due to huge American demand. 

The City of Windsor has been strongly promoting development of logistics centres and possibly things like truck depots that could be used as drop-points for truckers who could leave their loads and head back over the border for another run. The thinking is that these depots would create jobs in the depressed Windsor-Essex area, which has an unemployment rate of almost 10 per cent – which is the highest in any region of Ontario.

The DRIC, with three lanes running in each direction, should be open some time in 2017.

By Angus Gillespie

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