Michigan misses self-imposed deadline for PPP legislation

The state’s senate didn’t vote on a measure to authorise the Michigan Department of Transportation to pursue PPPs by a 1 June deadline. However the bill is still alive and, if it is enacted into law, the $3.5bn Detroit River International Crossing could become the state’s first PPP and clinch a crucial $550m funding commitment from the Canadian government.

The Michigan legislature has missed a self-imposed deadline of 1 June to adopt legislation authorising a public-private partnership to build an international border crossing over the Detroit River.

“It’s their intent to vote by 1 June,” Mohammed Alghurabi, senior project manager for the $3.5 billion Detroit River International Crossing, said in an interview last week. “By all means it looks like its heading in that direction,” he added.

On 26 May, the Michigan House of Representatives passed Bill 4961 that would give the Michigan the power to pursue PPPs for transportation projects, including the Detroit River International Crossing, which would become Michigan Department of Transportation’s first PPP.

But after the bill was reported to the Michigan State Senate, state senators failed to vote on the measure before the 1 June deadline. The deadline was adopted by the legislature last year in an effort to keep the PPP bill moving.

Missing the deadline will not reset progress on the bill, which is now under consideration in the senate’s transportation committee and could be voted on soon.

However, an important financial commitment hangs in the balance: in late April, Canada agreed to provide up to $550 million toward Michigan’s construction cost for international crossing so long as Michigan enacts legislation that will allow the crossing to be built as a PPP.

The pledge bridges an important gap in the financing of the project, which primarily relies on tolls that will be collected once the bridge opens to traffic in 2017.

“Out of the whole PPP, we knew there was . . . right around $550 million that will not be covered by tolls,” Alghurabi explained. That money would have to come out of US federal highway and Michigan transportation funds on an 80-20 split, respectively.

That would leave Michigan on the hook for about $100 million, a small amount considering the project’s total $3.5 billion price tag but one which Michigan can ill afford during such dire economic times.

“We knew that would be a tough sell for the legislators. So that’s why Canada stepped in, to address that need,” Alghurabi said. Eventually, tolls from the bridge will be used to pay back the Canadians.

Alghurabi said the arrangement was not without precedent. A similar deal was struck in the delivery of the Blue Water Bridge, a $4 million international crossing the US and Canada built in 1938.

“The US paid the total bill and the Canadians had to repay [their portion],” Alghurabi said.

The Detroit River International Crossing is a bigger and more complex undertaking. Bill Shreck, director of communications for the Michigan Department of Transportation, put the total cost of the project at $3.5 billion.

That total includes four four separate construction projects on Canadian and US sides of the river that will have to be completed: an interchange connecting the bridge to the I-75 highway in Michigan, a US toll plaza with related inspection and customs facilities, the bridge itself, and a Canadian plaza with related inspection and customs facilities.

In late January, the Michigan Department of Transportation and its equivalent in Canada, Transport Canada, issued a request for proposal of interest, an effort aimed at gauging the private sector’s level of interest in developing the projects. Twenty teams representing 38 companies responded to the request, according to Shreck.

Alghurabi said the responses showed a diversity of opinions as to how to deliver the four separate parts of the project.

“Some [respondents] said they would like to see all four of them, you know, be all linked to one PPP. And then some said, you know, you don’t have to do it all together. You can have just the bridge as a PPP and have the other ones be separate projects,” he said.

The bill authorising PPPs in Michigan could be reported out of the senate transportation committee as early as this week.  If the bill is ultimately signed into law, Alghurabi estimates that a request for qualifications for the Detroit River International Crossing could be issued by the end of the year.

A request for proposals would follow in 2011 and financial close could occur “sometime in 2012”, he said. Then, following a five-year construction period, the bridge would open to traffic in 2017.