Economic Facts Behind The New International Trade Crossing (NITC) October 4, 2012

1. Economic Facts Behind The New International Trade Crossing(NITC)October 4, 2012

2. Conclusions on the NITC • Not Needed • Not Economically Feasible • Not Free • Not a Monopoly – Multiple Crossings In Corridor • NITC Feasibility Based On Speculative & Highly Optimistic Demand Forecast • Likely Cost Overruns • Need For Redundancy Not Proven • $2.1 Billion Investment – Not Properly Vetted • Questions That Need To Be Asked

3. Not Needed • “The proposed NITC bridge, if constructed, is not expected to ‘induce’ new traffic.” NITC Presidential Permit Application, Page 23 • Border crossing improvements implemented in 2004 “have eliminated most of the significant delays at the Detroit River Crossings” and “border crossing performance is now satisfactory“ IBI Group Traffic Forecast, Page 53 • Crossings down 22% since this statement was made in MDOT’s 2005 IBI Group study released to support the NITC • Current Crossings for the entire S.E. Michigan border region down 40% since 1999 peak • The NITC study team expects Detroit River crossing volume to exceed capacity in 2035. NITCPresidential Permit Application, Page 23 • Why build now and take on financial risk of forecast volume not materializing? • Debt rating of Blue Water Bridge downgraded November 2011 due to “continued reductions in traffic volumes and a deteriorating financial risk profile.” Standard & Poor’s press release • Conclusion: • No current need • Delays not an issue • All crossings running below capacity

4. Not Economically Feasible • Between cost overruns (10%) and forecasted traffic volume reductions (20%) the unrecovered Canadian Investment is $8 billion. Who pays? • Risky Investment: Canada must subsidize P3 investment to construct bridge with availability payments. Toll revenue not sufficient to finance without Canadian support. • Neither Michigan or Canadian bridge promoters have shared a financial forecast showing feasibility • Michigan sees no financial benefit from the NITC for 50 years, if ever • Any shortfall in forecast revenue, cost overruns, increase in interest rates – push out Michigan participation in toll revenue • Trucks constitute 80% of NITC total forecast revenue. Any shortfall in truck volume will have severe consequences on financial performance. • Effect of proposed $400 million rail tunnel under Detroit River for double stacked containers not factored into forecast truck volumes used to support NITC • Canada’s funding pledge capped at $550 million and subject to Government of Canada approval • The only way the NITC is no risk to Michigan is if it makes financial sense. The NITC project is very high risk and does not make financial sense.

5. The NITC Is Being Built In Anticipation Of A Highly Speculative DemandIgnores Past 10 Year Trend – Assumes Return Of Go-Go 90’s Growth Rate

6. Not Free • Lost Revenue at Blue Water Bridge and Detroit-Windsor Tunnel • Less tax revenue from Ambassador Bridge • Costs to maintain NITC infrastructure such as I-75, I-96, I-94, and other approach roads • Added downriver congestion from having a 2nd crossing in metro Detroit instead of routing long distance trucks via Blue Water Bridge • Lost Benefit of public investments in the existing border crossings • $400 million at Blue Water Bridge • $230 million for Ambassador Bridge Gateway project • $80 million planned for Detroit-Windsor Tunnel

7. Not a Monopoly • Definition: Commodity (international crossing) controlled by one party, command of supply • Ambassador Bridge competes for truck traffic with the Blue Water Bridge, the St. Clair River rail tunnel and the proposed Detroit River rail tunnel • Long distance trucks can take the Ambassador Bridge or Blue Water Bridge with no penalty in time or distance. NITC Presidential Permit Application, Page 19 • 54% of Ambassador Bridge truck traffic is long distance. 2010 Wilbur Smith NITC traffic study, Table 3-18 • In 2011, 1.4 million long distance truck crossings chose to route via the Ambassador Bridge versus the Blue Water Bridge. (54% of total Ambassador Bridge truck crossings) • Forecast growth comes mainly from long distance truck traffic • For trucks originating in Halifax or Montreal, the Peace Bridge in Buffalo is also a competitor • Passenger Cars can use either the Tunnel or the Bridge for local trips • In 1999 the Tunnel handled over 9 million crossings • In 2011, the Tunnel and Bridge combined handled just over 8 million crossings • Passenger car volume is running way below existing capacity

8. NITC Unfairly Tilts Competition • Michigan did not negotiate a level playing field for the Ambassador Bridge • No assurance of effective or adequate Canadian staffing of crossings • No guarantee of permits or approvals granted for maintenance or future expansion • No efficient access granted to Canada’s Highway 401 • Canada is spending $1.7 billion to connect Highway 401 to NITC. Could also improve connection to Ambassador Bridge.

9. NITC Feasibility Based on Speculative and Highly Optimistic Forecast • 2005 IBI Group forecast used in Michigan’s June 2012 Presidential Permit Application for the NITC • Forecast is outdated and actual results for 2005-2011 significantly below forecast • Future demand projection ignores past 10 year trend • 2010 Wilbur Smith Associates NITC Forecast • Contradicts other WSA forecasts for the Blue Water Bridge Plaza • Ignores trends of revenue drivers • WSA has a documented history of optimistic toll forecasts • 2006 U.S. Transportation Research Board Study showed 10 of 12 WSA projects were 21% - 78% below forecast volumes • 2012 Reston Citizens Association Study • “WSA has a demonstrated upward bias” • Of the 12 WSA studied projects, 4 either filed for bankruptcy or went through major restructuring

10. Likely Cost Overruns • $2.1 billion budget is in 2009 dollars, construction will start in 2013 at the earliest • A recent study on infrastructure project costs states: • Cost overruns average 61% on large public projects • Journal of American Planning Association • Almost 9 out of 10 large infrastructure projects have cost overruns • Zilwaukee Bridge – 57% cost overrun on a much smaller and less complicated project than NITC

11. Need for Redundancy not Proven • Multiple crossings exist • Blue Water Bridge twin spanned • Proposed Peace Bridge expansion in Buffalo was to be twin span • Homeland Security has not issued a statement regarding the risk of a twin spanned Ambassador Bridge versus the NITC

12. $2.1 Billion InvestmentNot Properly Vetted If the border crossing were a business, before making a $2.1 billion investment, a CEO would: • Evaluate existing capacity for bottlenecks, improve efficiency to maximize throughput • Peace Bridge cancelled second span and instead expanded plaza capacity for processing vehicles • “80 percent of what was going to be accomplished with a new bridge can be accomplished with these plaza improvements at 20 percent of the cost” Sam Hoyt, Chairman Peace Bridge, Sep 2012 • Coordinate project forecasts to cover the entire border capacity instead of evaluating each project in a silo • Blue Water Bridge Plaza expansion • Ambassador Bridge Gateway Project • Continental Rail Gateway & Intermodal Freight Terminal • NITC • Update traffic forecasts and spending projections on a regular basis so as to time $2.1 billion investment to meet demand • Would not in 2012 rely on a traffic forecast from 2010 or a budget in 2009 dollars to make this decision • Incur huge financial risk if new bridge constructed and demand not there to support $2.1 billion NITC cost that must be repaid with interest before Michigan sees any money

13. Questions That Need to be Asked • Why has no NITC financial forecast been produced for public review? • Why is a second crossing being added in metro Detroit, dumping even more truck traffic downriver on to I-75, instead of routing long distance truck traffic via the rural Blue Water Bridge and on to I-69? • Why has no comprehensive study of all S.E. Michigan border crossing capacity and forecast volume been produced? • Why does MDOT commission traffic forecasts that are prepared in a silo to support specific projects instead of comprehensive studies of the entire border? • Why is the proposed $400 million double stacked container rail tunnel for the Detroit river not reflected in the 2010 Wilbur Smith traffic forecast? Does building this tunnel delay the need for the NITC? • Where is the traffic growth coming from? What industries are driving it? • Why has there been no detailed analysis of less expensive alternatives using existing capacity and improving crossing efficiency? • Will Canada cover cost overruns beyond the promised $550 million? • Will Canada fund larger than expected availability (subsidy) payments if lower than projected traffic volumes result in a miscalculation of revenues?

14. Questions That Need to be Asked 7) Who will guarantee the P3 financing and return on equity? • If the bridge is a good deal, why is a government guarantee required to obtain financing? 8) If the NITC is built, will Michigan insist on firm commitments to keep the Ambassador Bridge competitive? - Adequate staffing of Canadian customs - Permits and approvals for addition of second span - Efficient access to Canadian Highway 401 • Will Canada guarantee it will maintain reasonable tolls on the NITC even if doing so delays or eliminates the ability to be repaid its $2.1 billion investment and associated interest cost? - How does Michigan replace its lost revenue for the next 20 years plus pay for the cost of maintaining expressway infrastructure related to the NITC?

15. Documents Referred To in Presentation • The Presidential Permit Application (“PPA”) dated June 18, 2012 submitted to the U.S. Department of State by the Governor of Michigan • The Crossing Agreement dated June 15, 2012 between Canada, the Crossing Authority (an entity to be established by Canada), the Governor of Michigan, the Michigan Department of Transportation (“MDOT”) and the Michigan Strategic Fund (“MSF”), ostensibly on behalf of the State of Michigan (MDOT, MSF and the Governor of Michigan shall be referred to hereinafter as the “NITC Proponents”) • The Wilbur Smith Associates (“WSA”) Preliminary Results of the Comprehensive Traffic and Toll Revenue Study for the Detroit River International Crossing (“DRIC”), dated May 2010, and used as the investment grade traffic study supporting the NITC construction; • The IBI Group Working Paper entitled “Detroit River International Crossing Study: Travel Demand Forecasts,” (September 2005), relied upon in Michigan’s Presidential Permit Application as justification for the NITC • Data regarding actual border crossings between 2006 and 2012 collected by the Public Border Operators Association (“PBOA”) and between 2004 and 2006 collected by the Bridge and Tunnel Operators Association (“BTOA”) • Other information available to us as of the date of our report.