car7858's Blog

Sunday, June 29, 2008

Editorial Detroit would get poor return on tunnel lease The Detroit News

Detroit Mayor Kwame Kilpatrick's proposal to lease the Detroit-Windsor tunnel may solve this year's budget deficit, but long term the deal shortchanges Detroit's taxpayers.

The city ought to get a better bargain than the one the current proposal strikes.

Tomorrow, the Detroit City Council is slated to vote on the creation of an authority to manage Detroit's tunnel ownership, one of the first steps toward making such a deal happen.

If City Council approves the creation of an authority to manage Detroit's side of the tunnel -- an authority that would be run largely by Detroit mayoral and Windsor appointees -- the authority is expected to approve a $75 million lump sum payment from Windsor, money that would be spent immediately to resolve this year's budget shortfall.

And then for the next 75 years, Detroit would get nothing while Windsor would keep $375 million in anticipated revenue, in today's dollars, according to figures provided to The Detroit News.

Leasing the tunnel to Windsor may make sense, and there may be considerable operational savings gained from having one authority manage both the American and Canadian sides of the tunnel.

But Detroit should push for a better deal, and for one that provides annual revenue for the city.

Currently, Detroit gets about $600,000 annually through its leasing agreement with Detroit-Windsor Tunnel LLC, which is run by American Roads, a private company contracted by the city to manage Detroit's side of the tunnel.

American Roads nets an average of about $5 million annually on the tunnel after annual maintenance costs of about $250,000.

If Detroit waits 12 years until its management deal with American Roads ends, it could take over management itself and claim all of that $5 million a year revenue for itself. Even a deal that split the $5 million a year with Windsor would be better than what's on the table.

Detroit has had better offers. Earlier this year, American Roads offered to extend its leasing agreement, proposing to give Detroit $70 million and 20 percent of net revenue over 70 years.

The mayor is asking the council today to set up a tunnel authority that would be the first step in leasing the facility to Windsor. It should look carefully at whether Detroit is getting as much as it can from the tunnel.

Council members have complained the mayor has not given them enough details to make an informed decision. They should make sure they understand the consequences of the authority's creation before they act.

A city asset as valuable as the tunnel should not be frittered away to avoid tough spending decisions. The tunnel has the potential of being a revenue producer for the citizens of Detroit for many decades to come.

But if the financial potential of the tunnel is squandered today, Detroiters will have nothing to bank on tomorrow.

The city of Detroit wants to lease the Windsor-Detroit Tunnel to the city of Windsor for a lump sum payment. (David Coates / The Detroit News)