The Canadian government and the state of Michigan signed a deal this June to build a new $2-billion bridge between Detroit and Windsor. Including highway upgrades and customs plazas, the estimated cost is $4-billion. The government of Canada will absorb the entire cost.
Backers of the New International Trade Crossing (NITC), as the project is called, believe that there is a need for increased capacity at the Windsor-Detroit border. As much as 25% of trade between Canada and the United States crosses the existing Ambassador Bridge between the two cities, and NITC backers project that traffic will double by 2034.
However, there is good reason to doubt the accuracy of these projections. In fact, border traffic fell steadily between 1999 and 2010, and is now at 60% of the 1999 level. One important reason for this is the decline of the auto industry. Further shocks to either the auto industry or the broader world economy would ensure that the traffic levels required for any new bridge to be economically viable will not be reached.
While there would undoubtedly be some benefits from the NITC, it would make more sense to allow the private sector to build and finance the bridge, while diverting the public capital expenditures elsewhere. In a world of finite resources, it makes little sense to build something that the private sector would otherwise provide. And, indeed, the private sector would provide increased bridge capacity — if it were allowed to.
American businessman Matty Maroun owns the only commercial crossing between Windsor and Detroit, and has been lobbying against the NITC. He argues that there will be insufficient traffic to pay for the new bridge through tolls. He points out that if traffic volumes fall short of projections, taxpayers will be on the hook for the difference. Maroun has proposed to build his own six-lane bridge next to the Ambassador Bridge.
While the bridge is being advertised as self-financing and risk free to Canadians, and outright free to Michiganders, it isn’t. A Michigan consulting firm recently released a report estimating the financial risks of the project. (The study was funded by Maroun’s company; but it is based on publicly available data). The report found that using assumptions contained in the most recent traffic study commissioned by the Michigan Department of Transportation, revenue from the NITC will fall short by $360-million. Assuming a 10% construction cost overrun — cost overruns occur in nine out of 10 bridge projects — that would increase to $3.1-billion. If traffic is 20% lower than projected, the shortfall would be $5.8-billion. If both happen, it would be $8.6-billion.
Moreover, Michigan stands to lose tax revenue as drivers shift from Moroun’s bridge (which is taxed by the state) to the NITC (where all the revenue will be collected by the Canadian government). The report found that this could amount to $473.5-million, in addition to $273-million in losses at the Blue Water Bridge (linking Port Huron, Mich. to Sarnia, Ont.) and Detroit-Windsor Tunnel. This is by no means “free” to either party.
The Ambassador Bridge poses some logistical challenges at the moment. It currently funnels traffic through Huron-Church Street in downtown Windsor. This creates traffic problems in the city. Moreover, the street contains the only 17 traffic lights on the route between Montreal and Miami. These logistical elements explain why the NITC would bypass Windsor via an extension of Highway 401. However, this extension is being built regardless of the NITC, and can be connected to the new Ambassador Bridge.
Ultimately, it is not clear that the new bridge is the best use of infrastructure dollars at the moment. The $4-billion could have been used to undertake several highway projects within Canada that would have a dramatic effect on commute times in the country. The projected cost of the new bridge would be roughly the combined cost of extending the 407 east of Toronto from Pickering to Oshawa, twinning Highway 63 to Fort McMurray and Highway 17 from Manitoba to Kenora, as well as the 401 extension to ease the local impact on Windsor of the international crossing.
In a world of finite resources, governments need to weigh the tradeoffs of spending decisions carefully. Given the myriad of infrastructure projects that could be funded with $4 billion, the NITC is not the best use of funds. Expanding capacity at the Windsor-Detroit crossing would be as valuable to Maroun and the State of Michigan as it would be to Canada. If another bridge is needed, the other parties ought to pay their share.