Michigan Legislative Provisions

I thought that you might be interested in reading the actual wording of the budget provisions with respect to DRIC that was passed in Michigan.

In addition, I thought it might be even more interesting for you to read the brilliant, well reasoned argument of the Senator who supports the DRIC bridge in Michigan in the Senate Journal [sarcasm intended] and also the comments made by Senator Cropsey that will go far to prove "legislative intent" if this matter proceeds further.

I still find it difficult to understand why anyone would support DRIC based on the comments made by Senator Cropsey. There has to be something that I am missing since I just do not get it.

Please note the strong limitations imposed upon MDOT with respect to the DRIC matter that are now in "black-and-white" and in particular the comments made by Senator Cropsey. In addition, the Senator does need to tell us more about this blockbuster of a statement:

• "MDOT is honoring the existing commitments, including numerous agreements and the 1999 application for the Gateway Project. The department should be keenly aware that the Federal Highway Administration, Congress, the Ambassador Bridge, and taxpayers have all relied on the partnership commitments, and this Legislature demands that MDOT fulfills its commitments under the Gateway Project. Indeed, MDOT has the moral obligation to fulfill its commitments under the Gateway agreements, including the completion of the second span of the Ambassador Bridge. Anything less than fulfilling existing commitments will seriously undermine any credibility of the department."

Sit back and gasp as you see that the cost of the DRIC study in Michigan was 1000% more than originally projected, from $3.3 million to $33 million. I wonder what the percentage increase in Canada was.

• Sec. 384. (1) The state transportation department is allowed to finish the Detroit River international crossing (DRIC) study provided that activity associated with finishing the DRIC study shall not bind the state in any way to construction. Certain preliminary activities which are necessary to prepare a proposal for a decision by the legislature are allowed as long as they do not bind the state. Those activities include all of the following:
  
  (a) Applications for permits and approvals.
  
  (b) Preliminary design engineering work.
  
  (c) Preliminary utility planning and relocation.
  
  (d) Preliminary financial and funding arrangements.
  
  (2) The department will report on a quarterly basis to both the house and senate appropriations committees on any expenditures relative to the process identified in subsection (1).
  
  (3) In addition, advanced property acquisitions that are hardship or opportunity purchases are allowed as long as they do not bind the state. The department will notify, in writing, both the house and senate appropriations committees within 30 days of any advanced property acquisition purchases. The department cannot enter into any binding commitment to construct the crossing until authorizing legislation is enacted into law.

Do you think that MDOT finally understands that the Legislature makes the decisions after they are told four times that they cannot do anything binding without legislative approval? We shall see.

Senator Basham’s statement is as follows:

The previous speaker said that he was ready to take questions. I was here to make a comment, but I wasn’t prepared to have a debate on this issue. I believe the previous speaker did support the conference report. I do believe that a projection is exactly a projection. I know a good college in this state, the University of Michigan, that always makes a projection about the economy. The economy is supposed to be turning around. Just around the corner, we are supposed to have a bottom in this recession that we have been going through in the state of Michigan. Next year when we hear a projection, it’s always going to be around the corner next year.

I think that MDOT does a wonderful job for this state. I think you get a good bang for your buck. I think that certainly a projection is a projection, and I am glad that we can move forward with the Transportation budget and the DRIC process.

Senator Cropsey’s first statement is as follows:

I do have a fairly lengthy statement because this is a tremendously important budget, and it is one that will have implications well into next year and probably the years beyond...

One of the key sections that everybody is aware of is Section 384, which is the Detroit River International Crossing language. This states very clearly that MDOT cannot enter into an agreement to construct the crossing without specific authorizing legislation. Only certain preliminary activities are allowed in the process of preparing a proposal for the Legislature. Keep in mind that this is preparation of a proposal to the Legislature. That is, applications for permits, preliminary design work, preliminary utility planning and relocation, and preliminary financial and funding arrangements. But this is only to make a presentation of a proposal to the Legislature, and they cannot go beyond that.

I cannot overemphasize that I believe the DRIC bridge will reduce state road projects over the entire state for the next generation. The MDOT testimony is that the connecting roads cost at least $167 million. Citibank has said that the connecting roads could cost $1 billion. Citibank has also said that if a DRIC bridge is built, after five years of operation, we would probably need a subsidy of $965 million that has to come from the taxpayers or from somewhere.

For perspective, the state gets only 30 percent of all road funding, so for $167 million in connecting roads, we need to raise $556 million in new road funding. The $193 million annual subsidy means that you need $643 million in new road funding. The summary for the first eight years of DRIC, you will need a 10-cent to 12-cent per gallon gas tax increase just for the DRIC. These figures assume that the DRIC bridge will make up to 75 percent of all river crossing truck traffic, and if that was considered, it could be far worse.

There are a few other problems that we have with DRIC that I believe the department has to overcome. The department’s traffic projections in the last two decades, the MDOT has a poor history of projecting international traffic. For the Blue Water Bridge, their projections were too high by 60 percent after just 15 years. Worse, their projections for the proposed DRIC bridge are too high by over 20 percent after just four years. The MDOT testified in front of the ad hoc committee that private investors require an investment grade traffic projection study before building. MDOT miscalculations in international crossing traffic projections is stunning.

Another issue, the MDOT has a poor history of cost projections. The Blue Water Bridge was projected to cost $67 million. The new span cost $107 million, and the new plaza needed to correct the original plan will cost an additional $433 million—at least. The Blue Water Bridge will end up being 800 percent more expensive than projected. The MDOT projected the DRIC study to cost $3.3 million. Four years later, the cost had escalated to $33.3 million another 1,000 percent increase. The Michigan Department of Transportation claims the DRIC bridge will be self-supporting, but the only private sector cost analysis we’ve seen estimates the DRIC bridge will need taxpayer subsidies of just under $1 billion in the first five years. This methodology ought to give all of us pause.

The DRIC bridge would also devastate a Detroit community. There are several things that I believe needs to be done, and the department would agree on at least four of these before a DRIC bridge is built. First of all, you have to get a congressional or presidential permit. Congress has to act on it. Three things this Legislature must do: We have to have a P-3 law—a public-private partnership law—to govern a DRIC bridge; you need a toll provision law; and you need a governance law. Three items that this Legislature would have to pass. Other items that should be done is that Detroit should have a say; the Detroit City Council should give its approval. We also need an updated traffic projection, an investment grade traffic projection, on what we can do, and we should do it and not just allow Canada to do it, but this ought to be done with our interests in mind. We ought to have the study that says how a new DRIC bridge impacts the other three border crossings. Will they go bankrupt? Also the Ambassador Bridge and the Canadian government, in view of their legal settlements, the projections need to be redone in view of a new Ambassador Bridge going up.

I am especially concerned the committee concurred that the intent of this language does not in any way grant a license to MDOT, but rather it is a limitation. In the ad hoc committee, MDOT agreed that they have little expertise in alternative financing and public-private partnerships, and they agreed that they have no legislative authorization to proceed. I reminded MDOT that this state has had its clock cleaned on negotiating tribal compacts, and the Legislature is in no way interested in compounding our economic situation by allowing MDOT to negotiate with foreign interests. That is why we agreed that MDOT could only explore preliminary funding arrangements but has no authority whatsoever to enter into binding contracts with such financial institutions until they have explicit authorization from this Legislature. With that, I believe we are willing to take questions.

Senator Cropsey’s second statement is as follows:

I am rising to support this budget, but I did want to make very clear that Section 384, the committee was especially concerned that the intent of the language did not grant MDOT a license but a limitation. That is why we have said MDOT could only explore preliminary funding arrangements, but they have no authority whatsoever to enter into binding contracts with such financial institutions until they have explicit authorization from this Legislature.

This means that we expect Director Steudle or any DRIC consultants will not enter into any binding agreements, as the boilerplate states, on any public-private partnership in any way until there is explicit authorization by the full Legislature. In the meantime, MDOT and the DRIC consultants perform academic research to do preliminary financial and funding arrangements, but MDOT certain knows that this Legislature is watching and will reach with appropriate oversight to ensure this is merely preliminary.

Finally, MDOT is honoring the existing commitments, including numerous agreements and the 1999 application for the Gateway Project. The department should be keenly aware that the Federal Highway Administration, Congress, the Ambassador Bridge, and taxpayers have all relied on the partnership commitments, and this Legislature demands that MDOT fulfills its commitments under the Gateway Project. Indeed, MDOT has the moral obligation to fulfill its commitments under the Gateway agreements, including the completion of the second span of the Ambassador Bridge. Anything less than fulfilling existing commitments will seriously undermine any credibility of the department. The Legislature expects that we will study the DRIC for the future, but absolutely we expect to fulfill all existing obligations on the Gateway Project that is currently underway.

In talking with Director Steudle this morning, he very clearly stated to me that MDOT would not in any way impair the Ambassador Bridge project and stated to me that MDOT is on record that the Ambassador Bridge should be twinned. With that, I urge adoption of the report.