Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 5 - Evidence - November 21, 2006
OTTAWA, Tuesday, November 21, 2006
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-3, respecting international bridges and tunnels and making a consequential amendment to another act, met this day at 9:30 a.m. to give consideration to the bill.
Senator Lise Bacon (Chairman) in the chair.
[English]
The Chairman: I call the meeting to order. On our agenda today is Bill C-3, an act respecting international bridges and tunnels and making a consequential amendment to another act.
Our witness this morning is Mr. Thomas E. Garlock, President of the Bridge and Tunnel Operators Association.
Welcome to our committee, Mr. Garlock. We are pleased to have you with us. Please proceed.
Thomas E. Garlock, President, Bridge and Tunnel Operators Association: Members of the committee, good morning, and thank you for your courtesy in permitting me to address you on behalf of the Bridge and Tunnel Operators Association concerning the provisions of Bill C-3.
The Bridge and Tunnel Operators Association, comprised of the ten entities responsible for 11 of the international crossings between the province of Ontario and the states of Michigan and New York, works diligently to support the efficient movement of people and commerce over the Canada-United States border. The BTOA is acutely aware of the importance of an efficient border to Canada's competitive economic position in the world.
We have carefully followed the development of the legislation before you since it first appeared in a previous Parliament as Bill C-44, and prior to that as Bill C-26, if I am not mistaken.
While I am appearing on behalf of the members of the BTOA, as we are known, I advise you that individual operators may offer testimony or comments independently that would reflect their particular view or circumstance.
Over the past 18 months or so, Transport Canada officials, on at least three occasions, have generally advised us of the intended legislative provisions, together with their reasoning and the expected outcomes of the legislation. While we appreciated the information, there was an area within the legislation that we explained would be injurious to crossing operators in a way not intended by the legislation. This issue dealt with the intent to approve the setting of tolls, fees and charges. The majority of BTOA members are financially independent, funding all operations and capital improvements from their toll revenue, and it is that revenue that is contractually pledged to bond holders to raise capital for significant projects.
As I am certain you can appreciate, bond holders require that issuers have the ability, means and flexibility to manage their revenue sources in such a way that debt obligations are repaid according to contractually agreed terms. In the event that financial markets sense that an issuer may be constrained in managing its funding streams, there is a direct negative impact upon the issuer's rating that can have the effect of dramatically increasing future borrowing costs. Such costs would have to be met by increased revenue from toll payers.
It should be noted that it is not only bridge or tunnel infrastructure that requires financing but also facilities required by the Government of Canada. While the United States either provides or reimburses for the buildings, repairs, utilities and upkeep necessary to house its customs, agriculture and other agency functions, Canadian law requires operators to bear all these costs.
In the case of the Niagara Falls Bridge Commission, of which I am the general manager, this includes the $40 million expended to build a new complex at Rainbow Canada in the year 2000 but also the $2.5 million of annual cost of maintenance, debt service, utilities and other services required by the Canada Border Services Agency at our three crossings.
We brought those concerns to the attention of the House of Commons Standing Committee on Transport, Infrastructure and Communities and officials concerned with drafting Bill C-3. We also had previously arranged to have officials briefed directly by teleconference with bond councils last year. We are very pleased and appreciative that the House committee gave our concerns careful consideration and amended the legislation with clause 15.1 before it was sent to the full House. We are optimistic that the minister, in developing regulations in support of Bill C-3, will be sensitive to the interests of existing and future bond holders and avoid any action that will increase costs of financing for operations, construction or renewal of critical border infrastructure. We believe that the amendment perfected by the committee and present in the language that was approved by the House of Commons will preserve the government's ability to address the matters with which it is concerned while clarifying that owners and operators will be able to continue managing their financial affairs in the most efficient manner in accordance with their legal obligations.
Finally, it is important that I assure members of the committee and all your Senate colleagues that the members of the BTOA clearly understand their unique obligation to the people of Canada and the people of the United States to maintain an efficient border between these two great countries. We know that these bridges and the tunnel play a critical role in the economic and cultural life of the nation, impacting people and commerce far from the point where they may make landfall. In light of that, there can be little argument that they serve a federal purpose and that the legislation before you establishes a federal role.
The members of the Bridge and Tunnel Operators Association assure you that we will continue to work carefully with the government to ensure an open, efficient and safe border.
I would be pleased to respond to any questions senators may have or to receive comments regarding my testimony.
The Chairman: Thank you, Mr. Garlock. I have a few questions and then I will defer to my colleagues.
You mentioned that the amendment was prepared and adopted by the House of Commons committee with section 15.1. With this amendment, will the owners and operators be able to continue managing their financial affairs in the most efficient manner?
Mr. Garlock: We believe so. I should clarify that we are not asking this committee or the full Senate for any change in the legislation because we do believe that those concerns were addressed by the committee in the House in such a way that the minister still has the ability to step in regarding any tolls, fees or charges that he or she may believe could be injurious to an orderly border. However, it is a reactive process rather than a proactive approval process. Given the new language, we have confidence that our bond holders will see some assurance that our obligations to them will be met without any impediment.
The Chairman: With clause 15, the government will have the power to establish procedures to deal with complaints. Could you explain the current procedure for complaints related to tolls, fees or charges? Also, what are your views on the process that should be considered for complaints-related matters? What should the mechanism be and who should be considered to efficiently handle the complaints process?
Mr. Garlock: The majority of crossings are public benefit corporations in some way, shape or form, and we are governed by commissions or boards made up largely of local representation.
I have been joined by Ron Rienas, the General Manager of the Buffalo and Fort Erie Public Bridge Authority, which owns and operates the Peace Bridge between those two communities. In the case of the Peace Bridge Authority, the Canadian commissioners are appointed by the Government of Canada. The American commissioners are appointed by various officials of the State of New York.
In the case of the Niagara Falls Bridge Commission, just a little further north on the Niagara River, my Canadian commissioners are appointed by the Premier of the Province of Ontario and the American commissioners by the Governor of the State of New York. There are differences between all of these crossings going back to their historic evolution.
These commissions and boards are very visible in the communities where the crossings are located and certainly approachable by anyone who would have a complaint, comment, criticism or observation regarding tolls or any other matter concerning the bridges. Because they are appointed by respective government leaders, they are very sensitive to the interests of people, and not only those in the immediate community. As I said in my testimony, the crossings have impact far beyond the border. My commissioners are very attentive not only to the interests of Niagara but to all of Ontario and all of Canada, just as they are to all of New York and all of the United States.
I can tell you that, from talking to my colleagues, I am not aware of significant complaints. In the matter of tolls, for most of us, it has been some time since we have had a toll increase. It is generally a shared philosophy among the public benefit corporations that operate the bulk of the crossings that we only collect that amount of money required for our purposes. As a result, we are able to keep tolls very modest. At the Peace Bridge and at the Niagara Falls Bridge Commission, presently the Canadian toll is $3.50 for a passenger car round trip. We are very proud to tell you that we have the lowest tolls on the border, and our boards and management are devoted to keeping it that way. I hope I have answered your question.
The Chairman: Are people satisfied with the complaints process, or do they want something else?
Mr. Garlock: I have had no complaints about the complaint process. I would say that there certainly is a role for the government to react, should there be complaints. While I have had no complaints about the toll, I can share with the committee one example from just a few weeks ago. Because of some physical changes on Provincial Highway 405 approaching the Queenston-Lewiston Bridge, a motorist was lost and had a difficult situation. This complaint found its way to the desk of Minister Cannon, and the minister's office got in touch with me and I was available to respond to it. While it is an informal process at this point, it does work reasonably well.
While I would not propose to speak for the minister or the agency, I suspect that, in regulation, it will be a similar consultative process that will get to the heart of the complaint and, at the very least, give the person placing the complaint a clear response as to why things are the way they are, or to adjust the issue that they brought.
The Chairman: Bill C-3 is inspired, in sections 6 to 12 regarding construction and approval of a new bridge or tunnel, by the American presidential permit process. In Canada, for now, construction and alterations are managed on a case- by-case basis, if I am correct, without a uniform approach or approval mechanism. Are you familiar with the American procedure? What are the strengths of the American approach?
Mr. Garlock: I am familiar with the American approach. Right now, the process in Canada is based on the Navigable Waters Act. I think that for either country to look at all of the issues surrounding dramatic change to a crossing or, importantly, the creation of a new crossing, are most certainly under the purview of the federal government.
While the bridges between Ottawa and Hull are very important, and there is no question about that, those are matters for perhaps the provinces and the local community. However, in the instance of the international bridges and tunnels, because they have such an implication, particularly for the economic life of the nation, it is important for the federal government to have a role.
The American presidential permit process is going through some amendments itself at this time. It is becoming a bit more refined, particularly in the area of any alteration to the span.
I submit to you that last year, with the support of the Government of Canada and the province of Ontario, the Niagara Falls Bridge Commission reconfigured the entire deck of the Queenston-Lewiston Bridge, going from four lanes to five lanes and doing a seismic retrofit of the span to better strengthen it. That is something in which the minister should have direct involvement and be able to make known the government's wishes in something that would change the complexion of the crossing as dramatically as it did.
Because it was a border infrastructure fund project and because all of the public benefit corporations have a very close working relationship with Transport Canada, I think largely what will be found, not only in statute but in regulation, ultimately, through Bill C-3, was followed in a more informal way when it came to the creation of the fifth lane.
If there is to be a significant alteration, that carries a great federal interest, in my opinion.
Senator Tkachuk: Just so I am clear, after the amendment in the House, there are no objections by your organizations to the bill?
Mr. Garlock: That is correct. While I will tell you that there may be individual members who could still approach the committee on various and sundry issues, the BTOA as a whole has no objection to the legislation.
Senator Tkachuk: What is a public benefit corporation?
Mr. Garlock: They are a strange and mysterious animal. As I say, each of them is a little bit different. Let me speak about the two here today.
The Buffalo and Fort Erie Public Bridge Authority came about first. The Peace Bridge between Fort Erie, Ontario, and Buffalo, New York, was built in 1927 by a private operator. During the great economic crash of 1929, that operator went broke. At that time, the State of New York and the Government of Canada stepped in to acquire the asset and created the Buffalo and Fort Erie Public Bridge Authority to operate it in the best interests of Canada and the United States.
The Peace Bridge authority board is appointed, and consists of ten members, five from Canada, five from the United States, and they operate the crossing in the best interests of both countries. There is not a profit motive, and it is operated as efficiently as possibly to keep tolls as low as possible.
I am sitting here today because there was a great tragedy in January of 1938. The Honeymoon Bridge, or the falls view bridge, between Niagara Falls, Ontario, and Niagara Falls, New York, was forced off its foundation by an ice flow in the Niagara River. The bridge crashed into the river. There was no loss of life. It was well forecast that this was going to happen, so no one was on the bridge. When that occurred, both cities of Niagara Falls had had difficulty with the private operator who owned the bridge. There had been some friction. They said that if there was to be a new entity, they wanted it to be somewhat of a public nature so people in both communities would have input. Therefore, the Government of the United States adopted legislation creating the Niagara Falls Bridge Commission. There was supposed to be complementary legislation in Canada, but that did not occur, per se. We were given licence to build the crossing, but the legislation that guides the Niagara Falls Bridge Commission is U.S. federal legislation. Bill C-3 will provide that complement, in my opinion.
At any rate, we were created with four American commissioners appointed by the governor of the State of New York, and four appointed either by the Dominion of Canada or the Province of Ontario. Because the moving force behind the commission was then a minister of the provincial government, it really fell to the province.
Again, we operate in the public interest. In fact, while we own and operate these three bridges, if we are ever completely debt-free, the U.S. legislation stipulates that our assets will revert equally either to the Government of Canada or the province of Ontario and to the state of New York. There is very much a public presence there. The commissioners serve at the pleasure of the premier or the governor. The premier has made a decision to appoint them to three-year terms. They are business leaders and people with financial ability, some understanding of capital construction and a clear understanding of how governments in both countries operate. They add a great deal to the benefit of the bridge commission.
Senator Tkachuk: Who are the shareholders? Are they the Government of Canada or New York State and the Province of Ontario?
Mr. Garlock: They are the people of Canada and the people of the United States.
Senator Tkachuk: Is the government the shareholder?
Mr. Garlock: The entity of the Niagara Falls Bridge Commission owns the assets, but if they are ever debt free, they resort to both countries.
I should add that we are entirely self-funded. In fact, in the more than almost 68-year history of the Niagara Falls Bridge Commission, it was just last year for the first time that we took any public assistance from either the federal government, the provincial government or the state government in doing the fifth lane project. Other than that, we are responsible for all the operations and the capital improvements required. As I alluded to in my testimony, under section 6 of the Customs Act we are required to provide all facilities to Canada Customs. That is without cost to any government.
Senator Tkachuk: Is it a non-profit corporation?
Mr. Garlock: Yes.
Senator Tkachuk: That is what it is. Instead of shareholders, do you have members? How does that work? Who owns the company?
Mr. Garlock: The commission owns the asset. If at any point the commission becomes debt free, the asset must be divided equally between Canada and New York State.
Senator Tkachuk: Maybe I am not saying this right, and I will let Senator Eyton ask later on. I am not sure how that operates.
When you refer to the Bridge and Tunnel Operators Association being comprised of ten entities responsible for eleven of the international crossings, are all of the ten entities as you describe them, or are some of them privately held?
Mr. Garlock: Nine are public; one is private. The Ambassador Bridge between the city of Windsor and the city of Detroit is privately owned by an individual family.
Senator Tkachuk: Were they the ones most concerned about the fact that the authority would be approving any increases in fees, tolls and charges? It seems to me that the government is asking the government in all the other cases. When the bonds are issued, does the government not act as a guarantor, as in most Crown corporations?
Mr. Garlock: No, it does not. In fact, you are looking at two of the people most concerned with the language.
Because of our nature, we are able to issue tax-exempt bonds in the United States for our capital improvements. In fact, both of us have gone through a refinancing in the last few years where we saved toll payers millions of dollars in debt service.
When the Niagara Falls Bridge Commission went to the bond market in 2003 to finance, we were able to assure the purchasers of the bonds that we had control over our toll structure to the point where they could have confidence that we would be able to generate the revenue that we required to repay the bonds. As a result, we received an A rating from Standard & Poor's. That allows us to borrow money at ridiculously low rates. I believe our mixed rate is about 2.80 per cent on our outstanding bonds. It is cheap money.
We were concerned with the original language of the bill such that if the bond market were to perceive that the minister could step in and make changes to the toll structure, it could jeopardize their ability to repay our obligations. Now when it is clear that the minister will only step in in those instances where tolls, fees or charges are being disruptive to the border, it gives the bondholders an assurance that it is an authority held by the minister that would be used for a very specific purpose, and not arbitrarily.
Senator Mercer: I now wish we had heard the witness prior to hearing from the minister, because this witness's evidence has prompted a number of questions that I would have liked to have posed to the minister.
I am a little confused. I do not understand why we need this legislation. If it is not broken, do not fix it. Has something gone wrong that I have missed that has prompted government to bring forth this legislation to fix organizations that are working well, from what I see in the history of the Niagara Falls Bridge Commission and what I know of the operation of the bridges in the Windsor area? We have problems at the border, but they are not with the operation of the bridges or the tunnel. It is more a volume problem and perhaps infrastructure problems on the Canadian side, particularly the bridges in Windsor.
Mr. Garlock: I preface that by saying it is my opinion that the legislation is necessary, again, recalling that almost all of these crossings came about in somewhat of a patchwork way. It clearly gives the government the authority to address some serious issues.
The security at these crossings is an issue that has become far more serious in the past five years. It would be reasonable for members of the committee to think, "Well, there are federal agencies on each end of all these crossings. Are they not responsible for security?" The answer is no. When there is a bomb threat at one of my bridges, customs from both countries tell us, "When you get to the bottom of it and everything is clear, call us and we will come back." We have worked with law enforcement authorities on both sides of the border to address that kind of a situation.
In the instance of the Niagara Falls Bridge Commission, we have invested almost $3 million in hard dollars and about $1 million on a running rate overhead basis every year since for an extensive security system composed of video motion detection controlled access that surveys everything on our bridges, in our plazas and under our bridges.
Certainly, the Government of Canada has an interest in ensuring that every crossing meets a basic standard in terms of security, which is an important issue.
The other thing that must be considered is that some of these crossings are beginning to age. The Whirlpool Rapids Bridge between our two countries, the only NEXUS-only crossing between Canada and the United States, is 110 years old next year. It is inspected every year and it is in excellent condition. There is an aggressive inspection regimen. Every other year, we do a spectrographic examination of the rivets and some of the other components to ensure that they are in good condition. That is also an area where the minister would definitely have an interest, namely, ensuring that these spans are inspected and maintained in a safe way to ensure that the travelling public is safe and that international commerce is not disrupted.
Finally, in the case of the Peace Bridge, there has been a process of an environmental impact study that will lead to an expansion of capacity at the bridge. It is likely that another span will be built in addition to the existing span. It is important that the government has an oversight role in determining what is built, how it is built and what the effect will be at other crossings.
We have done a reasonably good job up to this point, but Bill C-3 will complement and improve those efforts further, in my personal opinion.
Senator Mercer: You have just talked about the Peace Bridge and the need for expansion and possibly a new crossing. We have also heard about a new crossing in Windsor. I am not clear about whether the new crossing at the Peace Bridge and the one in Windsor will be financed through the non-profit corporation. In the case of Windsor, will it be the private corporation? I understand that the private corporation in Windsor which owns the Ambassador Bridge has been preparing to build a new structure. Are we talking competitive bridges? I know the Peace Bridge is different, and so is the Ambassador Bridge. I have seen the minister's musings in the newspaper in the last couple of weeks in regard to the government possibly being involved, and I am not sure how government is involved if one of these is a private corporation.
Mr. Garlock: I can tell you that certainly the bulk, if not all, of the financing for the Peace Bridge expansion will be within the mechanism that I described, in terms of issuing bonds and then the crossing being responsible for the repayment of the bonds.
Senator, I think it is a little early to determine what might happen in Detroit-Windsor. I know there are a number of competing ideas about what should happen there, how it should happen, and who should be responsible for it. I think that will have to be worked out over the next period of time. No matter how it may be done, if it is done privately, publicly or in some kind of a private-public partnership, certainly the Government of Canada has a great interest in how that expansion occurs.
It is more than just a bridge. It means a lot in terms of jobs for Canadians and the economic life of the nation. When one thinks about the number of exports that cross the 49th parallel every day, clearly the Government of Canada has an interest in how that happens, and in the most efficient and safest way.
Senator Mercer: We talked about the necessity for the legislation. I understand the security factor which is added to the issue, particularly post-9/11, but I also find it rather amazing that we have major economic land links between ourselves and our largest trading partner such that if a bomb scare or threat were called in to the Peace Bridge or the Ambassador Bridge, or any of the bridges, the government officials involved would walk off the bridge and say to the bridge commission people: "Give us a call when it is all clear." I would think that the issue of security would be a little more of a concern to both the United States government and the Government of Canada.
Mr. Garlock: I understand what you are saying. Bill C-3 does indeed inject the government into the security issue to ensure that it is well done by whomever.
Senator Mercer: Well done, but not paid for by the government.
Mr. Garlock: That is a debate for another day, senator.
Senator Mercer: What I am getting at is that they, the government, are telling you that you must provide this level of security, but that they will also have a say as to how you set your fee structure.
Mr. Garlock: As far as the fee structure goes, only in the instance that a fee structure has been adopted that has been injurious to efficient flow.
What the minister is trying to get at in terms of fees, charges and tolls is that if I were to drop the truck toll on the Queenston Bridge to $1 a truck, it would mean that since the Peace Bridge charges $20 for the same truck, I would attract all the trucking from the Peace Bridge and undermine their ability to meet their obligations to pay their bills, and so that would be a predatory action on my part. That is the kind of instance where the minister would step in and say that this is injurious to an efficient border. Not only are you undermining the Peace Bridge authority but you are also clogging the border at one point where another point for commercial traffic is completely open.
Getting back to the issue of security, many people have the same reaction as you, senator, when they learn how the crossings are secured. However, it is not an altogether imperfect situation as it stands.
In the case of the Niagara Falls Bridge Commission or the Peace Bridge Authority, we are a completely integrated, bi-national commission or authority. This means I am the only general manager of the Niagara Falls Bridge Commission, but I work equally for the interests of Canada and the United States. We freely cross the border and we are able to react quickly to any manner of situation, rather than having the federal agencies of one country on one side of the river and the federal agencies of another opposite them trying to coordinate. Although they do coordinate, in an emergency situation, we are very nimble and we are able to step in to address the situation at hand. We have excellent relationships with the OPP and the RCMP in Canada, as well as with the state police and, to a lesser extent, the FBI in the United States.
Getting back to Bill C-3, it is important that the government, through the Minister of Transport, has a level of assurance that security matters will be appropriately handled at each crossing. Transport has been consultative with the operators in this regard and we expect that to continue during the regulation-making period.
Senator Mercer: You talked about the possibility of predatory pricing disrupting the marketplace. Would the marketplace not take care of that? In the example you used, where you drop your price to a dollar, the more trucks cause you more wear and tear on your bridge; plus, with your revenue dropping, it seems to me that you will only get away with that for a certain period of time. Air Canada is a good example of what predatory pricing does: you end up in financial trouble yourself.
Mr. Garlock: Ultimately, it is possible that the market could address the issue, but in the interim a great deal of damage could be done. In our instance, while we work for separate authorities, we work collegially to manage the traffic over the Niagara River. This happens in most instances along the border.
I will speak specifically to the Niagara River. There are only two commercial bridges of the four: Queenston and the bridge at Fort Erie. When we made plans to do the fifth lane on the Queenston Bridge, the Buffalo and Fort Erie Public Bridge Authority suspended a plan to do some joint replacement work for a year so that they could handle any additional traffic that would be diverted from Queenston while our construction was ongoing. Conversely, this June, we did not open one of our lanes to fast traffic. We wanted to ensure that the bridge could handle the most traffic as efficiently as possible while the Peace Bridge did the joint replacement work that they put off for a year.
In mid-October there was a serious snow and windstorm that swept through Southern Ontario and Western New York, and the Peace Bridge lost power going into the United States for a period of time and was unable to process commercial trucks, so they sent those trucks up to Queenston. At the same time, if we had issues at Queenston, we would send them down to the Peace Bridge. That is the kind of working relationship that you want all along the border. The minister has an interest to ensure that, particularly in the area of tolls, nothing is done to disrupt that situation.
You are right, senator; the marketplace might ultimately work it out, but in the meantime, the regional traffic movement will be seriously compromised. In this day of just-in-time delivery, it could cost a lot of people a lot of jobs. While these operators are having this knock-down, dragged-out war between them, the minister should be able to step in and say "No."
Senator Phalen: Most of the questions that I intended to ask have been answered. However, I will go back to Senator Bacon's question and your answer. From what I understand, you seem to be satisfied that you can balance the need for business confidentiality with the need to protect Canadians from terrorists. Is that correct? Did you say that in your answer?
Mr. Garlock: Yes. I am not particularly sensitive to business confidentiality in that we are a public entity. We share our situation with the Minister of Transport, if he so requests. In terms of security, while there are some things that I do not talk about in an open forum, they are few and far between. I want people to know there is a robust surveillance system on our bridges and that there are protocols for security sweeps, because they can have a chilling effect on someone who might be thinking of doing something untoward to the crossing. I am not sure I answered your question.
Senator Phalen: I am satisfied. An article in the Ottawa Citizen last Friday said that the Minister of Transport would be announcing the backing of the construction of a new link between Windsor and Detroit. What is your view on the public-private partnership concept?
Mr. Garlock: As I said earlier, we are very strange creations. To some extent, that is what we are, the Niagara Falls Bridge Commission or the Buffalo and Fort Erie Public Bridge Authority, in that we perform a public purpose but without relying upon the government for funding. We generate the revenue required to address the task at hand but we also recognize the legitimate government oversight of what we do. Therefore, we are somewhat of a model for that public-private funding. In fact, in Canada, the Niagara Falls Bridge Commission is licensed under the extra- corporations law of the Province of Ontario, which recognizes that while we are a private, not-for-profit corporation in Canada, we perform a public purpose. Much of that blending is already going on.
I cannot speak directly to what the minister has in mind. I am not up to speed on the most recent deliberations. However, it is not an unusual approach when you look at what else has been happening along the border.
Senator Phalen: Your organization is the Bridge and Tunnel Operators Association. Is the Canadian Transit Company a part of that?
Mr. Garlock: It is a member.
Senator Phalen: I have a letter from the Canadian Transit Company and they seem to be at odds with what you are saying. In the letter, they say that in respect to this issue, they were not consulted. There is a list of things here that they object to. They say that for 78 years they had an annual engineering inspection, and opened these documents to review from public and government services. Then they say that there is nothing in this section identified as maintenance or repair that will protect the confidentiality of information that they may be asked to provide. Do you believe that is correct?
Mr. Garlock: I can imagine that they would have more sensitivity toward sharing that information because they are a completely private corporation. I am public, and so I do not have that same sensitivity. What I do should be subject to your scrutiny, and to the scrutiny of the minister and the scrutiny of the Government of the United States, because I am public. The situation at the Ambassador Bridge is different. As I said in my testimony, on some components of the bill there may be members who have another view, and you have just cited a good example of that.
Senator Eyton: I want to follow up on Senator Phalen's comments about your association. Could you tell me more about its makeup? How long has it been in existence? You mentioned 10 out of a possible 11 members. You mentioned that the Ambassador Bridge was one of the nine. I would like to know something of the composition beyond what you have said.
Mr. Garlock: Certainly, senator. The association has probably been around for 10 years or more, in one form or another. In the format that I am familiar with, it has been in existence for the last six years. It is composed of the international bridge at Sault Ste. Marie; the Blue Water Bridge between Port Edward and Port Huron, Michigan; the Windsor-Detroit tunnel; the Ambassador Bridge between Windsor and Detroit; then moving east, the Peace Bridge in Fort Erie and Buffalo; the three bridges under the Niagara Falls Bridge Commission — Rainbow, Whirlpool Rapids, and Queenston-Lewiston. Going farther east is the Thousand Islands Bridge, the international bridge over the St. Lawrence River and, finally, the Ogdensburg Bridge between Plattsburgh, New York, and Quebec.
In the instance of the Blue Water Bridge, half of the bridge is operated by the Blue Water Bridge Authority, a Crown corporation. The other half of the bridge is operated by the Michigan Department of Transportation. If the number of our members does not quite jibe with the number of our crossings, that is why. There are two owners of that bridge and there is one owner of three bridges in the case of the Niagara Falls Bridge Commission.
Generally speaking, the association's reason for existence is to share best practices and operating information between all the operators. We do not lobby as such. Our opinion has been sought on Bill C-3 so we have offered it. I have restricted my remarks as President of the BTOA to that area where we had our greatest concern and that has been addressed.
Generally speaking, the members of the association meet several times a year to share information that would improve the efficiency and operation of all of the border crossings.
Senator Eyton: You mentioned 10 out of 11. Who is the exception? Who does not belong to the association?
Mr. Garlock: All those bridges are members. It is just that there are only 10 members for 11 bridges, because I have three.
Senator Eyton: It is because of Blue Water?
Mr. Garlock: Yes.
Senator Eyton: You are speaking today on behalf of your association. Do you have a specific instruction or mandate in coming here today?
Mr. Garlock: All of the members saw my testimony in advance of me coming to you. If a question is asked on which I think there would be disparity among the members, I would try to reference that for you and assure you that I am speaking only on behalf of myself as opposed to all the members.
Senator Eyton: As has already been noted, we have been approached by various of your members who have had some constructive suggestions or criticisms about the bill as it stands today. They relate to approvals covering ownership, new works, and fees and tolls. Are they not discussed within your association as association issues?
Mr. Garlock: They are, senator, but if we cannot find consensus then you would not find that present in my testimony. It has been known throughout the development of this bill that some members may approach Transport Canada, the House of Commons or the Senate, independent of the association.
Senator Eyton: Are you and the association content to have them make their representations and wish them well?
Mr. Garlock: Yes.
Senator Eyton: Tell me more about tolls. I am a free marketer, much as I now understand Senator Mercer to be. Are tolls consistent in the border crossings across Ontario? How are they set? Are they set individually or in relation to competitive bridges down the way a bit? Can you tell me more about the toll-setting process?
Mr. Garlock: It is done individually by each entity responsible for the crossing. In our case, it is set by the eight commissioners. It is one of their primary responsibilities. Sometimes toll increases are agreed to within the context of bond covenants. I can give you an example. We did our first significant bond issue in 1991. We issued $130 million in debt bonds. Part of the covenant called for a series of toll increases. We were supposed to have a toll increase in November 2001 and again in November 2003. However, with agreement of the bond trustees, we had a traffic study performed that would project what our future traffic would be and that would produce results in terms of what our cash flow would be. There was an examination of our reserves for capital purposes, for capital construction. The bond trustees agreed that the commission did not have to increase tolls at that time, if we chose not to do so. The commission chose not to do so. Over the last six years we have saved toll payers more than $12 million. This is driven by a philosophy on the part of the commission that we will only collect that amount of money that we need for repairs, maintenance and capital construction.
We have been doing a lot of capital construction at the Niagara Falls Bridge Commission, as has the Peace Bridge and a number of other crossings. They have done things, are doing things or they need to do things. Over the last 10 years we have finished something in the area of $160 million of improvements. That was based on issuing $130 million in debt and then using any overage from tolls for capital construction.
Senator Eyton: I was more focused on the tolls themselves. Are they relatively consistent on all the border crossings?
Mr. Garlock: No. For the Ambassador Bridge, with the highest volume between the two countries, I believe for an automobile to go round-trip on that bridge it is $8. For that same automobile to go round-trip on the Rainbow Bridge or the Peace Bridge, it is $3.50.
Senator Eyton: The three crossings that you are responsible for in Niagara Falls and that area, are they all the same?
Mr. Garlock: Yes, for cars they are the same. As for trucks, let me use the U.S. rate because we know it. For a five- axle truck, which is the average truck, at the Queenston-Lewiston Bridge they will pay $13 U.S. to go round-trip on that bridge. At the Peace Bridge, they will pay $19.80 cents to go round-trip. That is considerably lower than some of the other crossings.
As far as tolls are concerned, regionally there is some elasticity. As I said earlier, if I were to drop tolls through the floor, I could expect some volume to divert to my bridge. By and large, tolls are one of the last things that a carrier considers in terms of mapping their route. It is usually dictated by where they came from and where they are going. That determines which crossing they will use. All of the toll structures are up to the individual crossing entities and they have to make that decision based on criteria that makes sense for them.
Senator Eyton: I think Bill C-3 is long overdue. A couple of attempts have been made to get there in the past. I am strongly in favour of the bill and the consistency and regulation it will provide. There is a similar process in the U.S. Is there any need to make this bill consistent with the process within the U.S.? I find it strange to think that there are two different sets of rules and regulations for a bridge that is half owned by Canada and half owned by the United States.
Mr. Garlock: There are two countries here, senator, and they do not always see things the same way. I think we know that. It certainly does not cause me any concern. As Mr. Rienas just reminded me, in the case of safety inspections right now, if there is a provincial standard and a state standard, we follow the more demanding standard. We have had some preliminary discussions with the Department of Transport, and I am sure that will continue after the bill is approved by the House and the Senate, about not developing an entirely new federal standard but, rather, looking at the most demanding standard that is out there and, we hope, coming to a meeting of the minds that that is acceptable.
Because this is such critically important infrastructure, it is in all of our interests to ensure that we go through every step necessary to ensure that the crossings are safe and stable and will serve the interests of both countries for a long time. That is the basis of Bill C-3 and the basis of the presidential permit process in the United States. Personally, I do not see any conflict between the two. I am comfortable in dealing with the requirements of both Ottawa and Washington.
Senator Eyton: Even if they are different?
Mr. Garlock: Yes, senator.
Senator Zimmer: Thank you for your presentation, sir. I think your quantity and quality of answers are good.
My questions are in the area of financial impact. Senator Eyton touched on the first part of it. I want to join the free enterprise club with him and Senator Mercer.
My question concerns non-profit and not-for-profit organizations. As my colleague Senator Johnson from Manitoba knows, I am involved in many non-profit organizations. To me, gentlemen, you are smiling and sitting there too happy, I would say, because I would like to get an idea of the financial impact of revenues versus expenses on these bridges. Can you give us an idea of what volumes we are talking about — not only rates but also amounts of revenue versus expenses and surpluses which will be, I presume, ploughed back into the maintenance, repairs and infrastructure of bridges. Can you give us a general idea of what numbers we are talking about?
Mr. Garlock: Of course. At this point I will ask Mr. Rienas to step in to talk about the Peace Bridge as well. We can talk about our two organizations but I would be reluctant to talk about anyone else's finances, although I may have some general understanding of them.
While we are private-public benefit corporations, we bring an entrepreneurial, businesslike approach to how we operate these crossings. I can tell you that at the Niagara Falls Bridge Commission, there was a period from 1995 through until about 2005 where our expenses dropped every year. A new general manager had been brought on and the board had a new and entrepreneurial, businesslike approach. We stripped out a lot of unnecessary overhead. It was unusual. Deloitte & Touche has been our auditor since 1941 and they cannot cite many organizations where the expense line went down and the revenue line went up. We operate very much like private sector interests. As opposed to satisfying shareholders, we are trying to drop more to the bottom line to help finance our capital improvements.
To give you a profile on the Niagara Falls Bridge Commission, it costs us about $13 million to $14 million per year to operate the three bridges. On top of that, we have debt service of about another $7 million. We drop everything that is left — that usually runs about $12 million to $13 million — to our capital reserves. Right now, we are carrying $90 million in debt from those 1992 bonds that were refinanced in 2003, but we have about $120 million in reserves. You say, well, that is a little bit outrageous. However, we are looking at $130 million that we will have to put into the Queenston Plaza and the turnaround. While the Government of the United States ultimately pays for their facilities, we front the money and then they make us whole after the fact. Lewiston will run us $75 to $88 million. We also have a commission policy that we do not let our reserves drop below $60 million. The reason for that is twofold: First and foremost, it is to preserve our bond rating on Wall Street. That A rating is terribly valuable to us and saves a great deal of money for the toll payers in terms of interest charges. The other interest is that if we had a catastrophic occurrence on one of the bridges, we would be able to step in and have the financial wherewithal to address it very quickly.
Therefore, our revenue stream is comprised of three components: first and foremost, tolls; second, it is comprised of non-toll income. We have duty-free operators who lease space on the plazas from us, and we receive a percentage of their sales. That is a very important component.
We also receive payments in excess of $3 million per year from the government of the United States for use of their facilities on the U.S. side. That is a payment reflective of our capital and borrowing costs, particularly when we rebuilt the Rainbow Bridge in the mid 1990s. That payment pays for such things as repair, maintenance and things such as utilities.
Our third source of revenue is the interest income being thrown off by the reserves but being ploughed back in for capital construction.
Senator Tkachuk: Do you know what that total is per year?
Mr. Garlock: A total of $30 million for the three bridges.
Senator Tkachuk: Is it about $20 million in expenditures?
Mr. Garlock: Yes, between debt service and ongoing overhead.
Ron Rienas, General Manager, Buffalo and Fort Erie Public Bridge Authority, Bridge and Tunnel Operators Association: The Peace Bridge is very similar, in the sense that we operate much like the Niagara Falls Bridge Commission with private sector principles.
Over the last five years, our expense line has gone down in large part to reflect the decline in traffic crossing the border. I am sure you have all heard about the decline of U.S. visitors to Canada. That is directly reflected in our bottom line.
In summary, our total revenues are slightly in excess of $25 million. Our expenses are generally about $16 million or $17 million. That amount is ploughed back into capital infrastructure reserves.
We have a total bonding capacity. We talked about building another bridge. Those are all known as revenue bonds. We can bond to a total of about $230 million to build a new crossing between Buffalo and Fort Erie. Our existing debt load presently is about $43 million, which we refinanced in 2005 and we are presently paying an interest rate of 3 per cent as a result of municipal tax exempt bonds in the U.S.
The big advantage of being an international authority is that we can finance on the U.S. side without having to pay taxes on it.
Senator Zimmer: One thing we have found with non-profit organizations is that it is not a mortal sin to earn a profit. It is important to be good business people, even in non-profit organizations, because they will survive with a good posture and attitude.
The other area I wanted to touch on is with respect to something you mentioned to Senator Eyton. You talked about how often your bridges are inspected and by whom. More toward the area of engineering standards, it is one thing to say that your bridges are x-rayed and checked for fissures. Last week it was discovered, 94 years later, that one of the main reasons the Titanic went down was as a result of the coal fire that started before it departed, which weakened the metal. The other thing that occurred was that they finally had the ability to examine the rivets. Although they may have been in place, it was discovered that there were flaws in the rivets. When the vessel hit the iceberg, the panels literally popped off. It was not as a result of the gash from the ice, but because the rivets weakened and popped off.
How deep do you go into the investigations of your examination of the metals and rivets? There may be problems with them. How extensive is that examination?
Mr. Garlock: First, I am not an engineer. We complete a spectrographic inspection of the rivets and other components, particularly on the Whirlpool Bridge, every other year. It is inspected every year, but we look at different components from one year to the next. This is technology that I am not capable of fully explaining to you, but it is akin to an X-ray of the critical components of the structure, to ensure it still has the integrity required to keep the bridge safe and stable. This initiative is not required by any standard. We have been proactive in looking at it.
The other thing that is important to keep in mind is that all of these operators usually only have a couple of assets that they are responsible for. In the instance of the Niagara Falls Bridge Commission, we only have three bridges. The Province of Ontario and the Province of Quebec could literally have thousands of structures that they are concerned with maintaining. Because we only have three, we can do an extraordinary job of maintenance.
Just a few years ago, the Peace Bridge led the way in using a new organic based de-icing method to remove calcium chloride off the bridge. Obviously, salt is not beneficial for steel. Two years ago, we followed their lead and there is no longer any salt on the span.
When we took the deck off the Lewiston-Queenston Bridge in 2005, it was 43 years old at that time, and it was in very good condition. It exceeded our expectations. In fact, one of the reasons we were able to bring that project in under the forecasted costs was that we did not need to spend the money that we thought we might on the steel replacement. When we started looking at steel that no one had seen in 43 years, it was in incredibly good condition. That was because of the superior maintenance we were able to apply to these crossings.
Senator Zimmer: I have one last question. They have come out with a new invention just recently, and that is the good thing of moving ahead in modern times. I know you are not an engineer, but you may have heard of this. There is a system now whereby they can put an electrical trickle charge into a bridge which will completely stop corrosion from even starting. Have you heard of that concept?
Mr. Garlock: I am not familiar with that concept. As Mr. Rienas was referencing a couple of years ago that, instead of painting the Rainbow Bridge, we metallized it. This is not in response to your question, but it is an interesting story.
Rather than a conventional paint system, we blasted the bridge and removed all of the old lead paint. A specialized gun with a line of zinc and aluminum was used. Those two wires are heated to 1,400 degrees Fahrenheit and then blown onto the span. It is akin to galvanizing the bridge in place, and we expect that coating system to last and protect for a minimum of 40 years. We paid about a 20 to 30 per cent premium to complete that project, but we did so because it is in our interest to stay off the bridge and not impede traffic between Canada and the United States.
While I am not aware of the process you mention — I will be asking our engineers from McCormick Rankin about it — I assure you that I and the other operators, by and large, look at extraordinary measures to keep these spans in excellent condition.
Senator Zimmer: Thank you.
The Chairman: Are there any other questions?
Thank you very much, Mr. Garlock and Mr. Rienas, for your presence today. Your presentation was most interesting, and we received many answers to our questions. Please feel free to send us any additional information that you have available, and we will distribute same to our members.
The committee adjourned.