Customs-plaza pact removes last hurdle for new Detroit-Windsor bridge
The busiest commercial border crossing in North America may finally be on its way to expansion. On February 18, the U.S. and Canadian governments and the state of Michigan announced an agreement to build and operate a new U.S. customs plaza, one of the last major hurdles to the construction of a new bridge between Detroit and Windsor, Ontario.
Over $165 billion in goods, a quarter of all merchandise trade between the U.S. and Canada, traveled through the Detroit-Windsor corridor in 2014, according to the U.S. Department of Homeland Security. The Ambassador Bridge, the only bridge between the two cities, could not continue to handle the projected growth in truck traffic.
Most larger employers in Michigan, including the Big Three automakers; the Michigan and U.S. chambers of commerce and many local chambers throughout the region; and Michigan Gov. Rick Snyder and four of his predecessors, have all pushed for a new bridge. Bilateral trade in goods between Canada and the 11 states in the Midwest exceeded $243 billion in 2013, with most goods being delivered by truck.
More than 4,200 trucks enter the U.S. at the Ambassador Bridge every day. Between 2010 and the end of 2014, truck traffic grew by 102,000 trucks, or 279 a day. These trucks carry everything from commodities to finished goods to parts that feed into cross-border supply chains. Before entering the U.S., these shipments must be cleared through a customs plaza, and the current facility does not have the capacity to expand.
In 2012, Snyder entered into an agreement with Canada to build a new bridge, called the New International Trade Crossing. The Canadian government assumed responsibility for constructing the bridge, with repayment coming from bridge tolls.
Both governments have moved ahead with some construction plans and appointed governing authorities. The one major unfunded piece was the U.S. customs plaza, an essential part of any international crossing. However, no funding for the plaza was included in President Obama’s 2016 budget, and efforts to get a congressional fix also went nowhere.
The agreement announced by Transport Canada and the U.S. Department of Homeland Security states that Canada will take responsibility for the $250 million customs facility. The U.S. has agreed to pay for staffing, operating and maintaining the customs plaza.
This adds to the $2.1 billion cost for construction of the bridge. Canada will use a public-private partnership, or P3, to fund the investment. Once the private sector partner is selected, it will pay for construction of the bridge, the customs plazas on both sides of the border and the roads that feed into the bridge.
According to Dr. Bill Anderson, director of the Cross-Border Institute at the University of Windsor, “P3 projects are becoming much more common in Canada.” Such contracts, he says, provide powerful incentives to the builders to keep the project within budget, because they can’t just pass along overruns; to finish it on time, because they don’t get revenue until the facility is operational; and to build it right, because they operate it after it’s built.
The Windsor-Detroit Bridge Authority, the Canadian federal entity that will supervise the construction, will oversee the bidding process for a private sector partner. The partner will be repaid through bridge tolls, over a period that could last some 30-50 years (not unusual for a P3 infrastructure project) before they would be shared between the two governments.
“Now that the final funding issue has been resolved,” Anderson says, “it will take a while to get the P3 contract in place, so it’s not like the bridge will start to go up next week, but the project is definitely moving forward.”
The bridge authority projects that the bridge will open in 2020.
|Stateline Midwest - March 2015||1.65 MB|