Re-Assessing Bridge Options in the Detroit-Windsor Corridor: Economics and Pragmatism Versus Politics
20 Pages Posted: 8 Oct 2018
Date Written: September 15, 2018
For the last decade, the Government of Canada has been determined to build a new bridge across the Detroit River – the busiest trade corridor on the Canada-United States border. This drive led Canada to agree in its 2012 “Crossing Agreement” with Michigan to basically finance the entire project and to take all of the financial risk related to its future operations. Yet, these blanket commitments may prove problematic as project costs estimates for its “Gordie Howe Bridge” project continue to grow. Official project estimates were re-set in April 2018 to C$4.8 million – 17% above the original C$4 billion budget.
The proposed construction of the Gordie Howe Bridge comes at a time of significantly declining traffic volumes across the Canada-U.S. border. Traffic on the Ambassador Bridge, the main full service crossing in the Detroit-Windsor corridor, was down 44% between 2000-2017. With traffic stagnating, toll revenues are unlikely to grow in the years ahead.
This paper lays out the issues around the Gordie Howe project and calculates the estimated required annual Canadian Government subsidy to the Bridge and related infrastructure. It compares three scenarios: status quo, a doubling of tolls, and a tripling of tolls. Under the most optimistic scenario, Canadian taxpayers, by the terms of the Crossing Agreement, will be required to subsidize the Gordie Howe Bridge a rate of US$100 million per year.
The paper then assesses an alternative approach: embracing the proposal by the owners of the Ambassador Bridge to build a new privately funded span adjacent to the existing crossing. The estimated cost of achieving basically an equivalent outcome in infrastructure functionality would be C$420 million - less than one-tenth of the cost of the Gordie Howe project.
Ultimately, the paper asks, how much is public ownership and control of a bridge worth? The paper concludes that the significant financial liabilities surrounding the Gordie Howe Bridge suggest that the project be shelved.
Keywords: Infrastructure, Canada, Detroit, Michigan, Ambassador Bridge, Trade, NAFTA
JEL Classification: H20, N12, N72, N82, N92, R48
Suggested Citation: Suggested Citation