Daniel Patrick Moynihan, God rest his soul, encouraged us all to dream of a better bridge, and now those dreams of grandeur may be turning into a bit of a nightmare. The better bridge, if its ever built, may wind up not belonging to the public, because, as the saying goes, business does it better.
In the case of the Peace Bridge, the name of that business is the Detroit International Bridge Company, a private company that owns the Ambassador Bridge between Detroit and Windsor, Ont., and is getting aggressive in its bid to take over Buffalos gateway to Canada. Representing the company locally is former Moynihan staffer James B. Kane. Mere coincidence? We think not.
Alt reported four years ago (when the Peace Bridge conversation was at its loudest), that Warren Buffett, chairman of The Buffalo News, had held as much as quarter of that company at one point, raising ethical questions about why that newspaper was advocating delay of the Peace Bridge Authoritys plans at seemingly every opportunity.
The defeat of the Peace Bridge Authoritys environmental impact study that effectively forced the process to start all over again, may not be the victory that Signature Span proponents were envisioning, however. Failure to expand capacity at the Buffalo border crossing has not generated enthusiasm for a dream bridge. It has merely served to increase traffic at other border crossings, such as the Ambassador Bridge.
Now, in the current domestic security state of George W. Bush, the delays created by idealists and editors may result in the privatization of the Peace Bridge by backroom politics. Panic In Detroit?
One of the most influential Signature Span advocates, Bruce Jackson, formerly of Artvoice, acknowledged the seriousness of the Detroit companys efforts in early 2001. If theyre poised to pour a huge amount of money into a war with the Public Bridge Authority, Jackson wrote, its because they expect to be able to take a much huger amount of money out of here.
The events of September 11th and their political aftermath have greatly altered the equation at the Peace Bridge. It may be politically unrealistic to expect government support for a dramatic signature span, and, if enough political leverage is applied, it may also become politically unrealistic to expect federal support for the Peace Bridge.
In addition, the Detroit International Bridge Company is seeking to expand border operations here in anticipation of something entirely new to the company, competition. Two investor groups are seeking to tap into the Detroit-Windsor corridor, one with an express truck tunnel and the other with a bridge crossing just three miles down river from the Ambassador Bridge.
Building a truck bridge over the Niagara River and taking over the operations of the Peace Bridge Authority would recreate the virtual monopoly environment that the Company currently enjoys.
Buffett and The Toll Bridge
At the time that Warren Buffett was embroiled in the controversy surrounding his newly acquired Buffalo News and its successful attempt to bury the Courier Express, his partner Charles Munger and their budding business empire (which became Berkshire Hathaway) had acquired a quarter of the Detroit International Bridge Company with the intent to gain controlling interest in the bridge.
Former Wall Street Journal reporter Roger Lowensteins best seller Warren Buffett, The Making of an American Capitalist documented Buffetts monopolist vision at the time: Warren likens owning a monopoly or market-dominant newspaper to owning an unregulated toll bridge. You have the relative freedom to increase rates when and as much as you want.
The quote was from Sandy Gottesman, Buffetts friend at First Manhattan. Buffett tried to dance around it, but the toll-bridge metaphor was just too good. Everyone knew where it came from.
Lowenstein then goes on to cite Buffetts testimony on the stand in a lawsuit brought against The News by The Courier: Frederick Furth was the attorney representing the plaintiffs.
Furth: What you are saying is that owning a monopoly or market-dominant paper in a small community is like owning an unregulated toll bridge; is that right? Buffett: I wont quarrel with that characterization. It is a very, very good business.
Furth: Because you can raise rates as much as you want, isnt that true?
Buffett: I wouldnt put it quite that strongly, but you have the power to raise rates.
Furth: That is the kind of business you like to own; isnt that true?
Buffett: I dont own any, but I would like to own one.
Furth: Now, sir, you have used that word, unregulated toll bridge, with others, havent you? Isnt that one of your phrases?
Buffett: I have said that in an inflationary world that a toll bridge would be a great thing to own if it was unregulated.
Buffett: Because you have laid out the capital costs. You build the bridge in old dollars, and you dont have to keep replacing it.
Furth: And you used the term unregulated so that you can raise prices; is that right?
Buffett: That is true.
? That Was Then, This Is Now
Judging from his testimony, in The Buffalo News trial and his actions since then, Buffett finds monopolies even ones that hold communities hostage to be very, very good business.
Buffett has been in the spotlight recently, primarily, because of his role in the Arnold Schwarzenneger coup in California. While that may have surprised Democrats, many right-wingers instantly hatched a Kennedy conspiracy theory. As reported here, Buffetts involvement is more likely explained by his expanding business interests in California, notably in real estate and power generation.
Interestingly, Buffetts name was also mentioned recently in an article in The New Yorker by Ken Auletta in connection with the possible purchase of The Wall Street Journal the bible of American business.
In addition, Berkshire flagship, GEICO insurance, announced that it will open a 3,000 seat call center in Amherst. This marks the most significant investment made in Western New York by Buffett interests since the acquisition of its stake in M&T Bank. This comes one year after the Rigas scandal blew up in the face of The Buffalo News, which staunchly supported the Rigas family.
Is Buffett the living legend of humble Middle American success, or is there a darker side to his drive to become the second wealthiest human on the planet? With the creation of the same amount of jobs promised by the Rigases, many here are likely to believe only the kindly, Yogi Berra-like legend that Buffett has cultivated so brilliantly..
The Moroun Family Business: From Jimmy Hoffa to Berkshire Hathaway
A recent article by John Lippert for Bloomberg News shed light on the Moroun family, which currently controls the Detroit International Bridge Company. Lippert outlined the story of the family patriarch, a Lebanese immigrant named Tufick Moroun who built his familys empire by helping Jimmy Hoffa build up the Teamsters. His trucking company, Central Cartage, evolved into present day trucking giant, Centra, which, along with the Ambassador Bridge, is part of an impressive, diverse portfolio of holdings.
According to Lippert, Tuficks son and current patriarch, Manuel Moroun wound up outbidding Buffett & Co. for the bridge company. The article also quoted Charlie Munger who expressed admiration for Moroun and mentioned that he had seen him at a Berkshire Hathaway shareholder meeting. So it remains unclear exactly what sort of relationship, if any, that Moroun maintains with Berkshire and Buffett. The point is that The Buffalo News has never mentioned Buffetts previous holdings in Morouns company despite the publication of literally hundreds of articles on the subject of Peace Bridge expansion.
Matthew Moroun, grandson and heir to the family fortune, recently gave a speech calling for a total overhaul of U.S. Customs, citing, not surprisingly, September 11th and the war on terrorism as a justification. My organization operates the busiest border crossing in terms of trade in the United States, Moroun boasted, It was built in the 1920s as the longest suspension bridge ever at the time. At that time, and until the advent of terrorism in our country, a bridges success could be assured by successfully engineering and construction of the physical infrastructure alone. Now satisfying those requirements alone doesnt even get a passing grade.
Clearly, the country would be lost without a product of inherited wealth, such as Moroun, to manage international trade and direct U.S. Customs on how to do its job.
Moroun went on to state that Customs needs to do more than simply collect revenue. Interestingly, Morouns organization itself has done much to avoid providing revenue to the American government itself. The Detroit International Bridge Company which also owns Ammex, the duty free shop at the Ambassador, waged an intense battle for its right to sell tax-free gasoline at the duty-free shop.
The tax-free gas at Ammex story provides yet another example of free trade in action. Moroun and his father went to the International Trade Court for the okay on tax avoidance, and they sold the gas until the federal government finally shut them down. Naturally, this exercise in globalism did not sit well with other gas station owners. An article from the Minnesota Service Station Association website underlined the frustration with the Moroun family business model:
The National Association of Truck Stop Operators estimates that Ammexs tax-free sales have so far cost the U.S. road-building fund from $2.7 to $3.7 million dollars, and has forced at least one nearby truck stop out of business. An estimated 15 million vehicles cross the bridge each year, says NATSO CEO Dewey Clower.
"It is outrageous that this one business can deprive the highway trust fund of such significant revenues, said Clower. Since this (duty-free) loophole was created (Ammex) has been selling fuel at its location cheaper than our members can obtain it at the terminal rack. It doesnt take a genius to understand that our members cannot stay in business for long under such a scenario.
Peace Through Privatization
It also doesnt take a genius to realize that monopoly businesses are not about operating in the host communitys best interest; they are about raising rates arbitrarily as Mr. Buffett pointed out some twenty odd years ago. Whether or not the Detroit International Bridge Company is able to take control of our international border crossing or not, their presence has already been felt. As our government pushes privatization in the newly liberated Iraq, it should come as no surprise that an equally radical and ambitious plan should be presented to us here in Western New York. By John McMahon
If the Peace Bridge Authority had had its way, a twin span would have been constructed last year, in time for the bridge's seventy-fifth anniversary.