The concept of public-private partnerships (PPPs), until recently, has been fairly simple—public and private entities working together with a common goal or mutual benefit. The term is most often used to describe partnerships between government and the private sector where the partners would share both the risks and rewards associated with their relationship. Yet, as multi-country public-private projects gain momentum with the increase in trade, transportation, and infrastructure for cross-border logistics, they now have to navigate their own share of very different legal and regulatory environments.
In my work as a cross-border attorney, I see a few contentious areas in this burgeoning field. One is the eminent domain of land that had been previously granted interest to facilitate a new multi-country project or development, without the consent of its owner or occupants. Most governmental agencies are subjected to public scrutiny due to their compulsory acquisition. The government may partner with a privately-owned real estate company and still reserve the right to seize private property for its own use, for example, to demolish buildings and build a new bridge that improves infrastructure for cross-border trade and transportation. This is a controversial topic, and many view this an abuse of power.
Often, large-scale infrastructure projects have a significant impact, both good and bad, on the public. New highways or bridges built to facilitate cross-border trade may shorten travel time, generate income from tolls for both countries, and improve traffic within cities for commuters and trucking industries. At the same time, members of the community and local businesses may be displaced, disrupted, and lose money when accepting a financial offer for their property. Not only does this harm taxpayers, but it engenders views of collusion between the government and their private partner.
An example is the Gordie Howe International Bridge project that will span Canada and the United States. The transport departments of Canada, the United States, Ontario, and Michigan began discussions and ultimately formed the partnership that would move the project forward. This partnership was created in 2001 as a joint initiative between Transport Canada, the U.S. Federal Highway Administration, the Ontario Ministry of Transportation, and the Michigan Department of Transportation. Studying and justifying improvements to the Windsor-Detroit trade corridor was the goal.
An assessment of the potential economic impacts was performed in 2004, finding that—by 2020—increased congestion and delay would cost the United States more than $2.2 billion and Canada more than $300 million CAD ($200 million) in lost production and output. Over the following decade, congestion impacts would only increase exponentially.
In 2012, a landmark agreement was signed by the government of Canada and the state of Michigan to set out the framework for their respective roles and responsibilities in the most ambitious cross-border infrastructure project between the two countries. The Canadian government ultimately funded the PPP project, with tolls to recuperate some costs.
Currently, this trade passage is the busiest commercial land border crossing on the Canadian-U.S. border, handling almost 30% of all cross-border truck trade. The economic impact of the crossing was a driving forces behind the project.
The project itself was acquired using a PPP model. The crossing consists of various types of procurement vehicles, with PPPs providing only the bridge components. Compared to traditional procurement, a PPP reduced the overall costs for taxpayers, improving value for money. A value-for-money analysis of the PPP model predicts a saving of approximately $562.8 million CAD (or 10.7%) when compared to traditional acquisition methods.
While the new bridge—anticipated to open to traffic in late 2024—promises to help boost trade and job opportunities for citizens of Windsor and Southwest Detroit, the Delray community of Detroit had been displaced by industry. The Michigan Department of Transportation acquired properties through eminent domain in Delray to assemble land needed for the bridge project. Community members and local business owners sued over condemnation of land and the use of tax dollars for the new bridge, and ultimately lost the battle. Because Canada was funding the project and reimbursing the Michigan Department of Transportation, it was found that no Michigan funds were expended.
Alternative options were initially considered. Based on the transportation demands within the corridor, a Focused Analysis Area (FAA) was established in that region. All options had to include border processing and roadway improvements, with new or improved border crossings, to satisfy the long-term transportation needs in the FAA. As part of a multi-modal strategy, all options had to take into account travel demand management measures, such as rail, transit, and ferry service improvements. A roadway crossing was ultimately determined to be the best solution to the project's objectives.
For the Gordie Howe project, an extensive economic analysis was completed and exhaustive environmental studies were completed to satisfy the environmental agencies of both countries.
If any risks arise, they should ultimately be handled with discretion and with a win-win-win approach for all involved. While challenging, this is imminently possible.
Disclaimer: The content of this blog does not necessarily reflect the views of the World Bank Group, its Board of Executive Directors, staff or the governments it represents. The World Bank Group does not guarantee the accuracy of the data, findings, or analysis in this post.