Michigan’s Transportation Solution: Make Canada Pay

Michigan and Canada officials recently announced a landmark deal to build a new $950 million bridge linking Detroit to the Canadian city of Windsor.

Michigan officials have repeatedly praised the arrangement because of one unusual facet: State officials say it won’t cost Michigan taxpayers a dime, and the contract explicitly states that Michigan is not required to fund the bridge, its own highway interchanges, or federal facilities associated with the new crossing.

It may sound too good to be true, but state officials insist it isn’t.

Under the deal Michigan inked with Canada, all aspects of the project known as the New International Trade Crossing (NITC) -- from design to construction to maintenance and operations -- would be funded without leaving Michigan on the hook, even if there is a shortage of funds, says Kirk Steudle, Michigan's Department of Transportation director, in an interview with Governing.

The deal is the result of a conflict between Gov. Rick Snyder and the Michigan Legislature, which has been unwilling to provide funding for the project in the past. Essentially, Canada is betting that the bridge will be such a good investment that it’s willing to front the money for all of it.

There will be no tolls on the Michigan side of the bridge. Instead, Canada will set and collect tolls on its side of the bridge and use the revenue to reimburse the itself for the money it fronted for the project. Eventually, it could turn a profit.

As an added bonus for Michigan, the U.S. federal government is allowing the $550 million of Canadian money that will fund work in Michigan to count toward the state’s portion of transportation spending used to calculate the level of federal aid it gets for transportation projects.

Depending on one’s point of view, the arrangement could be viewed as an innovative way for Michigan to pursue a big project with little to no risk. Or it could be viewed as a picture perfect illustration of the state of American infrastructure: U.S. lawmakers are so unwilling to invest that they've had to rely on another country to build their roads.

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“Canada believes in Michigan's future more than most Michiganders do,” the Detroit Free Press wrote in a recent editorial. “Why else would the Canadian government agree to front all of the money, and incur all of the risk, to build a bridge that seems likely to boost Michigan's economic prospects as much as Ontario's?”

(It should be noted that Gov. Rick Snyder did recently get some positive attention from the transportation community for signing legislation that redirects about $100 million in sales tax revenue toward transportation purposes.)

Snyder has called for the construction of the international bridge to address problems facing the existing, privately owned Ambassador Bridge that commercial trucks use to travel between the cities. He and others argue that the Ambassador Bridge is too narrow, too congested, and suffers from a key logistical problem: It connects to Windsor’s commercial streets rather than directly to a highway, causing serious backups. Detroit-Windsor is the busiest commercial truck crossing on the northern border, according to federal data, and it's the second busiest truck crossing in the country.

Michigan officials have pitched the NITC bridge as crucial to the state's economic future, highlighting the 257,000 jobs across the state supported by trade relations with Canada.

But billionaire Manuel “Matty” Moroun, who owns the Ambassador Bridge, is aggressively fighting the efforts to build the NITC. His company is supporting a push for a ballot referendum that would require a statewide vote on any new international bridges or tunnels.

Still, despite the fanfare and controversy surrounding the arrangement, many steps remain before a new bridge is actually erected.

First, an authority tasked with soliciting bids for the design, construction, maintenance and operation of the bridge has to be formed. Then, those positions need to be filled. After that, the authority will have to determine how, exactly, a deal would be structured with a private partner. "In either case, Michigan can spend zero dollars," Steudle says. He estimates it would take about a year for the authority to select a concessionaire after it solicits bids.

The authority would also need to determine whether the private partner would just build the bridge, or whether it would build the toll plazas and customs facilities too. And because of all those questions, it's unclear when work could actually begin on the project. Michigan officials say even if the private partners involved in the project go out of business, the state won’t be on the hook.

Also on the checklist: Environmental reviews for the project as well as the design, engineering and construction. The state also doesn't have a presidential permit issued by the U.S. State Department for the project. That's a necessity of any new international border crossing, though it's expected to come through soon given the administration’s support for the effort.

On the Michigan side of the border, the government will have to start acquiring anywhere from 80 acres to 150 acres of land for the project, Steudle says. That could be a litigious and controversial process, since state officials will likely have to use eminent domain to acquire some of that property. The money to buy that property won’t come out of Michigan’s coffers, though, and instead would be paid for by the $550 million Canada is putting up for what would ordinarily be Michigan's costs. Michigan doesn't have to pay that money back.

Meanwhile, the project could face legal challenges. Robert Sedler, a law professor and consultant to the Ambassador Bridge ownership, penned a recent column in the Detroit Free Press questioning the legality of the deal and saying only the state Legislature has the power to commit resources to such a large project.