13 March 2011

Bridge Over Trading Water

Being a news junkie who is not reliant on National Peoples’ Radio (sic) for information, it is crucial to develop selective listening to tune out commercials and Charlie Sheen’s shenanigans. But the other evening, I heard an advocacy ad which made me prick up my ears.  There was a campaign style ad run during Greta Van Susteren’s FNC show opposing the proposed Detroit River International Crossing (DRIC). The version of the ad which I saw urged viewers to call Gov. Rick Snyder (R-MI) to oppose the project.

Strange to see a regional advocacy ad on a national cable channel.  Since I was watching on satellite television, it was not an ad just intended to coruscate Between-the-Beltways.  It piqued my interest to learn about the public policy polemic and appreciate how and why politics needs to be played in this day and age.

The trading relationship between American and Canadian is the closest and most extensive in the world.  In 2009, US-Canadian trade was about $593 Billion. In Michigan alone, that bi-lateral trading relationship is valued at over $43 Billion, with at least $6 Billion within the penumbra of the Blue Oval.  Bilateral trade may have increased since NAFTA in 1989.  But there was 1965 Auto Pact fostered close Canadian-American bilateral trade.

A combination of geography and economics makes the Detroit area a lynchpin for this trade relationship.  Michigan and southern Ontario are industrially oriented, based in the automotive industry.  The Ambassador Bridge, a four lane Art Deco and Streamline Moderne styled suspension bridge, was privately erecting in 1929.  Its perfect placement on the Detroit River manages to capture 25% of the bi-lateral trade and 40% of the bi-lateral trucking That’s big money.

In 1979, Matty Moroun parlayed his interest in a small trucking line to buy out Warren Buffett’s 25% share in the troubled Detroit International Bridge Company.  In total, Moroun spent $30 million to fully acquire the Ambassador Bridge. Ironically, the $30 million price was 30% less than the inflation-adjusted cost of building it 50 years earlier, The Ambassador Bridge is the only major border crossing that is privately owned and is estimated to be worth half a billion dollars.

The Ambassador Bridge generates an estimated $60 Million a year which translates to hefty profits. But Moroun owns seven trucking companies that have established close relationships with automotive manufacturers. Moroun also owns logistics firm; several customs brokerages; and a monopoly on duty-free retail, including a gasoline station at the Detroit end of the bridge and a currency-exchange service. All told, total revenue exceeds $1 billion a year.

The Ambassador Bridge has some chaffing security issues. After the terrorist attacks of September 11th 2001, Moroun wanted to ensure that GM, Ford and Chrysler (all Moroun’s clients) were not stranded.  So Moroun ordered that the trucks be pulled aside and escorted across the bridge if that was necessary. To alleviate backups at customs in the aftermath of 9/11, customs personnel doubled yet they had to work with the six existing inspection booths.  The US Federal Government had to haggle with Moroun as he owned the surrounding land.  On his own, Moroun  built three more customs stations, but was sued by the city of Detroit as he failed to receive zoning and building permits.  Moroun insisted that he did not need any stinking permits as he was a “federal instrumentality”.  After 3 ½ years of litigation, Moroun prevailed.  But Morous forced the GSA to pay for this $2 Million “gift” for better security.  How convenient.

Moroun opts to operate with impunity over transporting federal contraband.  Federal law prohibits transporting corrosives, explosives, radioactive waste, and other toxic material across the border, but Moroun insists this does not apply on the Ambassador Bridge.  Moroun issues “Letters of Authorization” to certain truckers to haul banned contents across the bridge.  Might those letters be directed to Moroun owned trucking companies?  Nevertheless, state troopers can not ticket truckers on the bridge–they must do so upon leaving.

Structurally, the bridge is 81 years old and it only has four lanes.  There are issues that the ascent to the bridge is too tough for trucks.  To answer some of these concerns and maintain his monopoly, Moroun proposed erecting a six lane twin span of the Ambassador Bridge and keep the older span for excess capacity.  In furtherance of this effort, Moroun worked with Detroit and Michigan state officials to garner a $230 million Gateway Project that improved roadways on the Detroit side of the Ambassador Bridge.  Cynics see the construction augments Moroun other land assets and intuit that the infrastructure are the footings for the proposed twin bridge.  Yet the Canadian government is intransigent about allowing the twin span.

In Windsor, traffic leading to the Ambassador Bridge snakes through residential neighborhoods. A new alternative New International Trade Crossing located about two miles south of the Ambassador Bridge would more directly connect Canada Highway 401 (going to Toronto) with a crossing  near Detroit’s Fort Wayne (away from downtown Detroit and also near I-96 and I-75).  Of course, bad blood stemming from the Canadian government losing their 1970s lawsuit for 50% share in the Ambassador bridge and settling only for bridge and Canadian customs plaza improvements should not be discounted.

The Detroit River International Crossing (DRIC) has the Canadian Federal, Ontario Provincial and US Government on board for the US $2.1 Billion project.  The only holdout has been the Michigan State government.  To sweeten the long delayed deal, the Canadian government offered to front $550 Million, which represented Michigan’s contribution to the DRIC as an interest free loan to be repaid by collected tolls. With the deep deficits state budgets have, Moroun was banking on the hope that the newly elected Republican governor would favor keeping the border crossing in private hands and not risking state expenditures. But Gov. Snyder came out in favor of the DRIC, as Michigan could leverage the Canadian money to get 160% matching funding from the US DOT.  Gov. Snyder also indicated that he agreed with the Canadian suggestion of dubbing the new crossing as the Gordie Howe bridge, honoring the connection between the Canadian born hockey great and Hockeytown where he made his mark in the NHL.

In response to the tides turning towards another Detroit River international crossing, Moroun has launched a $400,000 ad campaign to disparage the DRIC and hired Dick Morris to do public relations, hence the media appearances and FNC advocacy ad. Hiring Morris, who is the High Priest of Triangulation and going national gives the impression that Moroun is taking desperate measures for desperate times. Contributions to Michigan State Legislators is not enough to turn the tide, so it is an attempt to gin up some grass-tops pressure from Tea Party types who generally look askance at governmental projects and boondoggle "bridges to no-where"

 It’s quite understandable why Moroun, the 321st richest American, would fight so hard. Not only would a nearby alternative deprive the Ambassador Bridge of its monopoly, Moroun would lose out on the profits from the adjacent properties that he owns. But major manufacturers would no longer feel obliged to transport their freight with Moroun owned truck lines, unless they still needed the sui-generis “Letters of Authorization” to carry excluded freight to customs. In fact, all of the major auto manufacturers are backing the DRIC.

Many in the midst of Mo-town know that Matty Moroun has vested interests in the Ambassador Bridge.  They know that Moroun is fighting an alternative crossing. But they have no idea about the byzantine business dealings that enrich Moroun and only a slight inkling of his belligerence towards dealing with the various governmental entities.  They just wonder why additional crossings, either through a new bridge or an expansion of the Ambassador Bridge, is taking so long.

Ordinary, one would assume that conservatives would want to privatize as many government functions as possible.  We echo President Kennedy’s quip that Washington is a city that has Southern efficiency and Northern charm.  We liken the effectiveness of governmental bureaucrats to the performance of Patty and Selma Bouvier in the Simpson’s Springfield DMV.

A strict construction view of the Constitution mandates that the government do certain discrete functions, amongst them are protecting the border and providing for common defense (policing power).  The cacotopia science fiction film “Robocop” (1987) illustrates the tensions and competing corporate interests when essential governmental functions are ceded to private interests.

Matty Moroun has illustrated these aberrant interests with his management of the Ambassador Bridge.  Allowing his trucking clients to cut to the front of customs after 9/11 shows that he looks out for his own interests in lieu of national security.  The special “Letters of Authorization” flout federal law and Moroun shows no signs of co-operating with state enforcement.  The Bridge Company has erected fencing along riverfront property that mimics the Department of Homeland Security handiwork but lacks its authority.

Moroun may campaign that the twin span is half built and will cost taxpayers nothing, but his track record with customs stations shows that he will eventually still stick it to taxpayers.  Maroun gave an unconditional offer to privately build the twin span of the Ambassador Bridge for $600 million.  But when governmental officials did not drop the alternative to the Ambassador Bridge, Moroun reneged on his contribution to the $240 Million Gateway project that exclusively benefits Moroun’s own asset.   So much so that the Bridge Company President was jailed for contempt for not rebuilding the approaches to the Ambassador Bridge. I guess that Smithers was not available to take the rap.

 Moroun does not seem like he is a friend to the public. In the 30 years that Moroun has owned the Ambassador Bridge, tolls for passenger cars have quadrupled and trucking tolls have doubled, whereas in the prior 50 years tolls were only raised once for passenger cars and never for trucks.  Moroun’s trucking ownership interests and doubling the trucking tolls implicitly represents a kickback.  And critic claim that the proposed twinning of the Ambassador Bridge would wipe out Mexican Town, the desirable tourist district that the Gateway Project was hoping to augment.

While crossing on the Ambassador Bridge have improved since its nadir on 9/11, it is estimated that delays into Canada  cost $800 million a month.  It is unwise to have one crossing take 40% of all bilateral truck shipments. Thus, it seems like the DRIC is a good deal, but it needs a better name. The Canadian acronym for the project NITC is not any better. The Gordie Howe Bridge is an apt moniker.

On an ancillary note, to discourage governments ceding essential functions to private interests, Detroit should not allow a Robocop statue to be erected on city property.  Assuredly, it does not capture the Spirit of Detroit like the Rocky statue does for the City of Brotherly Love. It would be a pity if the grim premise of the Robocop was honored by the city, even for the sake of publicity and tourism. As Fr. Gabriel Richard proclaimed in the Detroit city motto: “Speramus meliora; resurget cineribus”   ("We hope for better things; it will arise from the ashes”).

H/T: Forbes
H/T: (Detroit) Metro Times
H/T: Detroit News


Anonymous said...

So that explains the ad. I thought it was rather effective. Philly has moved the Rocky statue, sadly.

El Barroco said...

I am not sure if you mean that ad against the new crossing was effective.

Pro arguendo that the anti-DRIC ad was effective, does the message motivate you to flood the lawmaker's switchboard to protest the project?