Numbers Dropping Like A Stone

As I Blogged before, I would really like to help out my friends in Detroit with their financial problems but I don't want to do so, to be selfish about it, if it causes me financial distress. And there is no doubt in my mind that it will.

I do not want this City to be in the same dire straights that Detroit finds itself. Our taxes, levies and other charges are high enough already in comparison with other municipalities in Ontario. We do not need more problems from entrepreneurial business deals that go sour.

I wonder if Eddie has the guts to walk away from the Tunnel transaction even if Detroit Council likes the deal because they will never get this kind of money, $75 million, from anyone if I am correct. After all, didn't Eddie and his lawyer Mr. Sutts assure us that they would not do the deal if it would cause a financial problem for Windsor. If that is the case, then it is time that Mr. Sutts pulled the plug on this risky venture:

• "I've said all along from square one I will not recommend a deal to the city of Windsor that did not make business sense," he said. "My intention has not changed.
  
  "In all of these negotiations everything I've done is with that in mind."

I must admit that, if I was a Detroit Councillor, I might want to take the deal with Windsor given what is going on in Detroit these days. However, as described in the Detroit newspapers, it just seems that the deal is a loan transaction. What is the advantage to Detroit? A loan has to be repaid. Unless there is more to it than this, and I would bet that there is, I would think that the City could probably get a loan at a cheaper rate than the Province of Ontario would provide, that is assuming that someone would actually loan Detroit any money in the first place.

I still cannot believe that the Province may be serious about loaning money to Windsor that it can loan to Detroit. I still think that several Ministers would be crucified politically if they did so but then again, what do I know.

Yes I am conflicted. I want to help Detroit but I don't want to see Windsor hurt.

What is prompting my concern... the traffic volume numbers year to date for the Tunnel, the Ambassador Bridge and the Blue Water Bridge compared with last year.

They are horrible. How anyone can think that the numbers will increase the way that the DRIC and the Canadian Government think that they will is beyond comprehension. People are staying away from this area in droves. The question is whether they will ever come back and if so, when!

The Sarnia crossing is doing the best of the three with virtually the same traffic numbers as last year. The Tunnel is doing better than before with only a relatively small drop in both cars and trucks (The drop in trucks is smaller than the reduction in cars yet is significant because the revenue per truck is quite good for them). It is however the Ambassador Bridge who is suffering from their Gateway project with very substantial losses in car traffic and slightly less of a decrease in truck traffic but large nevertheless. What is also disturbing at all the crossings is the big decrease in bus traffic.

It is only natural for the Ambassador Bridge to lose traffic because of the chaos due to the big construction project for the Ambassador Gateway that resulted in the closure of I-75 for 18 months. I absolutely agree with that. If that was the only concern, then I would not be writing this BLOG.

The scary fact for this part of the country is that the drop in traffic at the Ambassador Bridge is NOT being captured by the Blue Water Bridge as far as trucks go and is certainly not being captured at the Tunnel for cars and trucks. In other words, the vehicles reduction represents vehicles that are not coming over at all. The drop in the number of buses for example is huge when you consider that a bus can hold 40 people. So much for the marketing prowess and business acumen of the Tunnel.

It is very difficult for me to tell but my expectation is that a lot of the car traffic being lost is tourist traffic, especially daytrippers, because I would expect that the commuter numbers would not change much. For whatever reason, tourists are just not coming over here. Whether it is the increase in the dollar, fear of being caught in a traffic jam or something else, we have lost hundreds of thousands of visitors when one combines car and bus traffic numbers. Just watch the Casino to see if that is reflected in a decrease in revenue and profits.

With respect to truck traffic, much of it I am sure has to be Big Three automobile industry related and the closure of the GM plant is not going to make things better. There are a number of reasons why trucks are not going across the border and again there is no reason to expect it to get any better in the foreseeable future. If the gossip is right, one might even see Ford pulling out of this area as well. If that happens, will Chrysler be close behind?

Obviously, this is another reason to question whether this area can afford to have a new crossing built that will cannibalize traffic from existing crossings. Who will subsidize the existing border points if the DRIC bridge is successful or are they to be driven into complete bankruptcy to protect the financial interest of a P3 investor? If you are a Bureaucrat in Toronto or Ottawa and have your own agenda, this issue probably would not have been factored into your business model.

That brings me again to the Tunnel deal. If I was a Detroit Councillor, I would probably run and not walk to conclude a transaction with Windsor. If I am correct, $75 million in the hand is better than some unknown amount in the bush with an asset that is declining day by day by day.

From the Windsor side of the river, I will not understand how our Councillors can even think of approving such a transaction because I believe it to be virtually impossible to create a business case for one. How can we possibly pay back the loan to Ontario? What if the Detroit Tunnel Authority defaults because of lack of traffic volume? How do Windsor Taxpayers pay then?

All I know is what the numbers boys will do with their spreadsheets to try to justify the borrowing of the money to pay for this deal but I have also read the Danish Professor's book on Megaprojects and know how numbers can be manipulated.

Can you imagine if you were an investor and had accepted the traffic projections that the experts had given you around the 1999/2000 time period for what the future would hold. You have seen the charts I have presented before about the real numbers compared with the projected numbers at the border crossings. You would be in severe financial distress I would suggest at this time.

If the Tunnel cannot capture cross-border business with all the advertising that they have been doing and with the Ambassador Gateway project disrupting traffic, then they never will.

I imagine that the Owner of the Ambassador Bridge cannot be very happy with his reduction in traffic either. The question for our Mayor/Chair/CEO of the Tunnel Commission/Corporation is what will he do to get his numbers back up.