Richard D.

McLellan Notes On the Michigan Role In the Michigan-Canada Bridge

6/16/12 3:27 PM The following Notes have been prepared through a reading of the Crossing Agreement executed on June 15, 2012 by the Governor of Michigan and the Minister of Transport of Canada providing for the proposed new international bridge between Michigan and Canada. The Crossing Agreement, in my view, will be recognized as a vital step in the growth of the economy of both Michigan and Canada and in facilitating the global trade that is important to all of us in North America. Following the Notes are excerpts from various constitutional and statutory provisions that form the legal basis for Michigans participation in the Crossing Agreement. The Notes are my own and are subject to correction or revision as the process contemplated by Michigan and Canada becomes clearer. They were not prepared for any client or organization. Suggestions or corrections are requested. My contact information is at the end of the document. Richard D. McLellan

Key Points for Michigan in the Crossing Agreement

The Crossing Agreement includes the following synopsis: The Crossing Agreement provides a framework for a Crossing Authority established by Canada to design, construct, finance, operate and maintain a new International Crossing between Canada and Michigan, under the oversight of a jointly established International Authority with three members appointed by Canada and the Crossing Authority and three members appointed by the Michigan Parties, and with funding approved by Canada, but with no funding by the Michigan Parties. The Michigan Parties are not obligated to pay any of the costs of the new International Crossing. Unlike the legislation that was rejected by the Michigan Legislature, the Crossing Agreement represents the results of a bi-national negotiation between the United States and Canada. The State of Michigan has essentially agreed to have the Canadian-owned bridge link up with Michigans road system without any state costs for the bridge itself. Since the state is not paying for this major international infrastructure project, its role is limited.

Notes On the Michigan Role In the Michigan-Canada Bridge Page 2 of 9 No bridge tolls will be collected in or by Michigan. All tolls to pay for the bridge will be collected in Canada. The Agreement includes the following language: The Crossing Authority shall provide the means whereby users accessing the International Crossing from Michigan and returning to Michigan without leaving the International Crossing may do so without paying any Canadian Crossing Tolls. No Party may establish or collect tolls, fees or other charges for use of the Michigan Crossing or the Michigan Interchange. The Crossing Agreement represents an important exercise of state government powers delegated to the Legislature and the Governor in the 1963 Constitution. In a prescient action, Michigans voters contemplated the future importance of Michigans international neighbor and included in their constitution the authority enter into agreements for the performance, financing or execution of their respective functions, withCanada. The bridge will be located at the International Crossing Alignment based on the Detroit River International Crossing Environmental Assessment Study, Environmental Assessment Report approved by the Ontario Minister of Environment. The bridge project is a complex series of interlinked elements necessary for an international water crossing, access to road systems and relevant national security and customs functions. The Crossing Agreement seeks to allocate legal authority, financing responsibility, ownership and operation among the United States government agencies, the Government of Canada and the State of Michigan. Elements include:
o o o o o Canadian Crossing -- the bridge, plaza and approach in Canada Michigan Crossing -- the bridge and approach, including the plaza, in Michigan Michigan Crossing Lands -- all land, rights-of-way, property, rights, easements and interests for the Michigan Crossing owned by Michigan Canadian Crossing Lands Integral elements, but not part of the Crossing o Michigan Interchange -- the interchange between Interstate 75 and the Michigan Crossing or the US Federal Plaza o US Federal Plaza -- the plaza in Michigan for use by one or more US Federal Agencies o Windsor-Essex Parkway in Canada

The requirement that neither the State of Michigan nor its taxpayers will be liable for paying for the bridge is reflected in the Crossing Agreement: o The Crossing Agreement provides a framework for a new International Crossingwith funding approved by Canada, but with no funding by the Michigan Parties. The Michigan Parties are not obligated to pay any of the costs of the new International Crossing.

Notes On the Michigan Role In the Michigan-Canada Bridge Page 3 of 9 o Purpose: This Agreement is to provide a framework for the Crossing Authority established by Canada to, with the assistance as necessary, but not funding by, Michigan. The Buy American provisions of U.S. law are replaced with the following: (I)t shall be required that all iron and steel used in Federal Aid Highway Project Activities must be produced in only the US and Canada and (b) there shall be no discrimination in favour of the US over Canada or in favour of Canada over the US with respect to any products, materials, supplies, labour or services under any of the Federal Aid Eligibility Requirements. The bridge project remains subject to the Presidential Permit application to the US Department of State for a Presidential Permit for the construction, connection, operation and maintenance of the Michigan Crossing. The bridge will ultimately be built and operated by a private concessionaire under a Public-Private Agreement providing for the design, construction, financing, operation and maintenance of the International Crossing. Michigan will be limited to an advisory role in the selection of the concessionaire through the International Authority. Selection of the concessionaire is through a two-step RFQ and RFP process. The Crossing Agreement includes language assuring Michigans continuing compliance with the agreement. In the section on References to Law, the Crossing Agreement provides: Any reference to any Michigan Law, or to any section of or any definition in any Michigan Law, in respect of the power or authority, and all procedures and approvals required by Michigan Law related thereto, of any Michigan Party to enter into and carry out its obligations as a Party to this Agreement, shall be deemed to be reference to such Law or section or definition in effect as at the date the Michigan Party became a Party. Any other reference to any Law, or to any section of or any definition in any Law, shall be deemed to be reference to such Law or section or definition as amended, supplemented, substituted, replaced or re-enacted from time to time. Accordingly, Canada has required that, before it commits billions of dollars for the most important infrastructure project in their country, that its partner, Michigan, not be able to renege by changing its constitution. The Crossing Agreement is made on the representation by the State Michigan that its constitution and laws permit the agreement (and they do). A solemn contract between sovereigns, pursuant to powers delegated under the U.S. Constitution should not easily be overturned.

Notes On the Michigan Role In the Michigan-Canada Bridge Page 4 of 9 Michigans Role Under the International Authority The primary entity responsible for the entire bridge process is a Canadian government entity called the Crossing Authority which is responsible for: International Crossing Project Activities Design, construction, financing, operation and maintenance of the International Crossing Improvement, operation and maintenance of the International Crossing Michigan Interchange Project Activities Design and construction of the Michigan Interchange

The role of the State of Michigan is focused primarily on the three persons it appoints to membership on the six-member International Authority, the entity created, in part, under the Michigan Urban Cooperation Act. Under the Crossing Agreement, the International Authority (which is required to meet only once a year) is given limited powers, including the power to approve: Requests to acquire the Michigan Crossing Lands, the Michigan Interchange Lands and the US Federal Plaza Lands, Michigan Lands Leases, etc. Requests to lease, licence or otherwise grant a property interest in the Michigan Crossing Lands to the Crossing Authority or the US Federal Plaza Lands to the Crossing Authority or one or more of the US Federal Agencies. RFQ, RFP & Concession Agreement RFQ, RFP, Public-Private Agreements and the selection of the Fairness Monitor with a specific provision that approval by the International Authority of the RFQ or RFP shall constitute authority for implementation of the public private partnership procurement process in a manner that is materially consistent with the RFQ and RFP approved by the International Authority. This apparently is designed to avoid having the International Authority second guess Canadas implementation of the RFQ and RFP processes.

Federal Law
1. Article I, Section 10 of the U.S. Constitution: Section 10 - Powers prohibited of States No State shall enter into any Treaty. No State shall, without the Consent of Congressenter into any Agreement or Compact witha foreign Power. 1. Presidential permit process delegated to Department of State in 1968. 2. Federal statutory law; International Bridge Act, adopted in 1972 Title 33, Subchapter IV International Bridges, Section 535 -535a

Notes On the Michigan Role In the Michigan-Canada Bridge Page 5 of 9 Sec. 535. The Consent of Congress is hereby granted to the construction, maintenance and operation of any bridge and approaches thereto, which will connect the United States with any foreign country (hereinafter in this subchapter referred to as an international bridge) and to the collection of tolls for its use, so far as the United States has jurisdiction. Sec. 535a. The consent of Congress is hereby granted for a State or a subdivision or instrumentality thereof to enter into agreements (1) with the Government of Canada, a Canadian province, or a subdivision or instrumentality of either, in the case of a bridge connecting the United States to Canada for the construction, operation and maintenance of such bridge in accordance with the applicable provisions of this subchapter. The effectiveness of such agreement shall be conditioned on its approval by the Secretary of State. Sec. 535f. This subchapter shall apply to all international bridges constructed under the authority of this subchapter. Sec. 535i. The right to alter, amend, or repeal this subchapter is expressly reserved.

State of Michigan Constitution and Statutes

In 1963 the People approved a new constitution that authorized the State of Michigan to enter into agreements with Canada: Art. III, 5. Intergovernmental agreements; service by public officers and employees. Subject to provisions of general law, this state or any governmental authority may enter into agreements for the performance, financing or execution of their respective functions, withthe United States, the Dominion of Canada, or any political subdivision thereof In 1967, the Michigan Legislature implemented Article III, 5 by adopting a general law as follows: MCL124.504. Joint exercise of powers. A public agency of this state may exercise jointlywith a public agency of Canada, or with any public agency of the United States government any power, privilege, or

Notes On the Michigan Role In the Michigan-Canada Bridge Page 6 of 9 authority that the agencies share in common and that each might exercise separately. The 1967 Act has been amended at least four times by the Michigan Legislature without limiting the power to enter into agreements with Canadian government public agencies. Building, financing and operating roads and bridges are among the respective functions of both Canada and the State of Michigan. Michigans Constitution provides: Art. V, 28. State transportation commission; establishment; purpose; appointment, qualifications, and terms of members; director of state transportation department. There is hereby established a state transportation commission, which shall establish policy for the state transportation department transportation programs and facilities, and such other public works of the state, as provided by law. Art. IX, 9. Use of specific taxes on fuels for transportation purposes; authorization of indebtedness and issuance of obligations. All specific taxesimposedon fuels sold or used to propel motor vehicles upon highwaysshallbe used exclusively for transportation purposes as set forth in this section. Not less than 90 percentshallbe used exclusively for the transportation purposes of planning, administering, constructing, reconstructing, financing, and maintaining statebridges designed primarily for the use of motor vehicles using tires, and reasonable appurtenances to thosebridges. STATE TRUNK LINE HIGHWAY SYSTEM MCL 247.659a Definitions... (1) As used in this section (b) "Bridge" means a structure including supports erected over a depression or an obstruction, such as water, a highway, or a railway, for the purposes of carrying traffic or other moving loads, and having an opening measuring along the center of the roadway of more than 20 feet between undercopings of abutments or spring lines of arches, or extreme ends of openings for multiple boxes where the clear distance between openings is less than 1/2 of the smaller contiguous opening. As proposed by Gov. James Blanchard and with the support of then-Senate Majority Leader John Engler, in 1984 the Michigan Legislature created the Michigan Strategic Fund and defined its powers broadly:

Notes On the Michigan Role In the Michigan-Canada Bridge Page 7 of 9 MIC.HIGAN STRATEGIC FUND ACT, Act 270 of 1984 MCL 125.2001. Legislative finding and declaration. The legislature hereby finds and declares the following problems and objectives: (a) The economy of the state of Michigan is at present recovering from a recession and action is needed to encourage increased employment and business expansion in this state. (b) The economy of the state of Michigan is undergoing a long-term transition requiring new and innovative policies from state government and greater coordination of existing policies and programs related to jobs and economic development. MCL125.2002. Purposes of act. It is hereby declared to be the purposes of this act and of the Michigan strategic fund created by this act to help diversify the economy of this state to aid this state in achieving the goal of long-term economic growth and full employment, to preserve existing jobs, to create new jobs, to reduce the cost of business and production, to foster export activity., to alleviate and prevent unemployment through the retention, promotion, and development of export markets and export activitiesand to otherwise assist in the achievement of the solution to the problems and objectives set forth in section 1. MCL 125.2007. Powers and duties of fund. The fund shall have the powers and duties provided in this act, the powers delegated by other laws or executive orders, including, but not limited to, the power to: (b) Solicit and accept gifts, grants, loans, and other aids from any person (d) Constructor equip a project or any part of a project. (e) Borrow money and issue bonds and notes to finance part or all of the project costs of a project

Notes On the Michigan Role In the Michigan-Canada Bridge Page 8 of 9 (f) Acquire or contract to acquire from any personreal or personal propertyas is convenient for the accomplishment of the purposes of this act and of the fund. (i) Engage personnel as is necessary and engage the services of private consultants, managers, counsel, auditors, engineers, and scientists for rendering professional management and technical assistance and advice, payable out of any money of the fund legally available for this purpose. (j) Charge, impose, and collect fees and charges in connection with any transaction and provide for reasonable penalties for delinquent payment of fees or charges. (m) Mortgage or create security interests in a project or any part of a projectin favor of the holders of the bonds or notes issued by the fund. (n) Convey or release a project or any part of a project to a lessee, purchaser, or borrower under any agreement after provision has been made for the retirement in full of the bonds or notes issued for that project. (s) Do all other things necessary or convenient to achieve the objectives and purposes of the fund, this act, or other laws that relate to the purposes and responsibilities of the fund. MCL 125.2041. "Public work" defined. As used in this chapter, "public work" means the acquisition, construction, or improvement of public works; the acquisition of easements necessary for the public works; the acquisition of real and personal property and interests in real and personal property which are necessary for the public works; and the demolition of structures, site preparation, relocation costs, building rehabilitation and administrative costs, including, but not limited to, the cost of technical and economic feasibility studies or architectural, engineering, legal, and accounting fees, which are necessary for the public works.

Notes On the Michigan Role In the Michigan-Canada Bridge Page 9 of 9

Ambassador Bridge
1. In 1921 Congress granted the American Transit Company, its success and assigns, the authority to construct, maintain, and operate a bridge across the Detroit River. The law was passed pursuant to a 1908 federal law on bridges over navigable waters. The law required companion legislation to be passed by Canada. Congress retained the right to amend the law. 2. In 1921, Canada passed companion legislation authorizing the Canadian Transit Company to construct, maintain and operate abridge across the Detroit River. Companion U.S. legislation was required. 3. Canada and the Ambassador Bridge were engaged in litigation in both Canada and Michigan. The litigation ended in 1992 with a consent judgment that, inter alia, Improved the customs facilities, In the recitals to the settlement agreement, the parties agreed that Canada and DIBC have the mutual desire to make the DIBC facilities in Windsor a model facility border crossing between Canada and the United States. Was implemented by a court order that wholly discontinues this action

4. In 2003, Congress appropriated substantial funds for critically important direct access improvements between the Ambassador Bridge Gateway Project 5. In January 2010, after the DRIC process was initiated (which would provide competition to the Ambassador Bridge), Canada initiated litigation to seek a declaration that The Settlement Agreements impose no on-going obligation on [the Canadian Government]in respect of the DRIC process. The Ambassador Bridge enjoys no exemption by reason of the Settlement Agreements from the provisions of the International Bridges and Tunnels Act, S.C. 2007, c. 1 (IBTA) or any other federal legislation.

6. The litigation status is unknown.

Prepared by: Richard D. McLellan, e-mail: rdmclellan@comcast.net, telephone: (517) 374-9111.