Will Michigan’s AG break the Morouns’ deal-of-...

Will Michigan’s AG break the Morouns’ deal-of-the-century grip on the Detroit riverfront?

In deep debt to its master concessionaire, the Detroit Wayne County Port Authority has been hamstrung in its ability to work in the public interest to redevelop the Detroit River shoreline. A state senator argues that it’s time to end the deal.

Photo courtesy NOAA

In 2005, former Mayor Kwame Kilpatrick’s administration negotiated a deal with businessman Manuel “Matty” Moroun that stunned local officials, who feared it could take land off local tax rolls while ceding the control of a public agency to a private company for the next 100 years.

As part of the deal, Moroun lent the quasi-public Detroit Wayne County Port Authority roughly $2.1 million to pay off the debt of the city’s main cargo terminal, the Detroit Marine Terminals. In exchange, the Moroun-owned Ambassador Port Company became the “master concessionaire” for operations at the Detroit terminal. This position gives it the ability to operate free from city and county property tax obligations and without being directly responsible for environmental compliance. 

Under the agreement, the Port Authority has remained deeply in debt. And it’s become clear that the Morouns’ hold on the riverfront impacts not just shipping and transportation, but also future economic development in the region and the environmental remediation of waterfront property. 

State Sen. Stephanie Chang believes the deal is proving to be so bad for the public that she requested Attorney General Dana Nessel issue a ruling on the “validity and legality” of the Master Concession agreement. Her request comes five years after the Port Authority itself made a similar request to then-Attorney General Bill Schuette.

“This Master Concession agreement is so…egregiously one-sided towards the Ambassador Port Company that it really does not have the public’s best interest at heart,” Chang told Planet Detroit. 

Chang argues that the Port Authority’s financial difficulties stem in part from the Morouns’ loan, which has an adjustable interest rate that can’t dip below 6%. Under these terms, the Port Authority has paid down only 5% of the loan principal since 2005 — it now owes nearly the same amount as the starting balance, even after making more than $1.7 million in payments.  These terms have “rendered the [Port Authority] unable to function autonomously,” Chang wrote in her letter to Nessel. 

Chang’s request for a legal opinion draws new attention to a deal that was criticized when it was made by city council members, state legislators, and others as overly generous to the Morouns.  “I was surprised that the Legislature would be willing to take away the authority of Detroit and Wayne County and give non-elected people so much power,” former Trenton Mayor Pat Hartig said in 2006.

If the AG plans to invalidate the concession agreement, time may be of the essence. A state agency has questioned whether the Port Authority can even continue to operate on account of the financial pressures it’s facing. 

And if it does survive, it may do so primarily to advance the Morouns’ interests since it has mostly been unable to issue bonds and facilitate economic development the way port authorities in other cities have. 

Meanwhile, another Moroun affiliate, Crown Enterprises, took over the former McLouth Steel site in Trenton in 2018. Some downriver residents fear that Crown will turn this property into an intermodal hub for trucks, ships, and trains — ultimately folding it into an Ambassador Port Company-controlled Wayne County Port Authority. They’re worried about being saddled with a potentially highly-polluting operation while being deprived of the tax benefits.

Anatomy of the deal of the century

“Concession agreements are very normal all through the world,” Gregg Ward, president of the Detroit-Windsor Truck Ferry, told Planet Detroit. “But usually, it’s something that you pay for.” 

As a result of its loan to the Port Authority, the Moroun-owned Ambassador Port Company ends up paying almost nothing for the privilege of holding the Master Concession agreement. Nor has Detroit gotten much out of the deal, although it’s entitled to receive 40% of the Port Authority’s profits. A 2015 Free Press article reported that the Port Authority received just one payment from the Ambassador Port Company for $13,635 in 2005, putting the city’s share at $5,461.

Moreover, a 2017 Senate Fiscal Agency report said that the unfavorable loan terms prevent the Port Authority from functioning as a self-sustaining, autonomous entity. Under the agreement, the Ambassador Port Company is supposed to give 2.5 percent of its net profits to the Port Authority. In 2015-2016, 100% of that revenue — $205,720 — was funneled back to the Ambassador Port Company for loan payments.  Gross revenue for the company was likely around $8 million that year. 

“If not for the master concession agreement,” the report reads, “it is possible the Port Authority could be self-sustaining with that kind of revenue, even if it had to share most of it with a contractor to manage daily operations.”

According to a 2019 Port Authority financial statement, it still owed nearly $2 million on the loan, 95% of the original principal after 14 years.

Chang said the Port Authority’s financial difficulties have it in a tight spot that limits its power–and its potential to serve the public interest.  And in many ways, the Ambassador Port Company already runs the show at the Port Authority. The company has a right of first refusal for any property sales that the Port Authority makes, including the Detroit terminal.  

And if the Port Authority were to acquire new properties, these would effectively fall under the control of the Ambassador Port Company. The agreement states that any freight handling or storage facility in Wayne County under the Port Authority’s supervision is subject to the Master Concession Agreement’s terms, giving the Ambassador Port Company the right to run any facility tax-free.

“That there’s a private entity that can basically have say over [how these properties are run] is pretty alarming,” Chang said. “It doesn’t even have to be on the water, as long it has to do with transportation and logistics.”

If Nessel declines to invalidate the concession agreement, Wayne County residents may be stuck with it for some time. Under the terms of the deal, the Ambassador Port Company has the option for three 25-year extensions beyond the original concession term, which ends in 2030. This could keep several generations of Morouns in charge of what happens on the water until 2105.

Beyond the Detroit terminal’s initial financing, it’s unclear what the Ambassador Port Company is doing in its role as “master concessionaire.” Nicholson Terminal and Dock Company functions as the stevedore at the Detroit terminal, meaning they do the actual loading and unloading of materials like steel and iron ore.

“It’s very unusual to have a middleman that has no equipment — no experience in maritime — in between the deal,” Ward said. “It just shows you why it’s an improper agreement because the person who got the deal doesn’t contribute anything.”

Of course, this isn’t the first time such objections have been raised. In 2015, the Port Authority asked former Attorney General Bill Schuette to review the concession agreement, which he declined to do without offering a reason. The Detroit Free Press reported in 2018 that Bill Schuette’s gubernatorial campaign received $250,000 from a Moroun-funded Super PAC. (At the time of the agreement itself, it was noted that Kwame Kilpatrick received at least $20,000 from Moroun family members and executives for his 2005 re-election bid, and his mother, former U.S. Rep. Carolyn Cheeks Kilpatrick, was given at least by $21,000 by Moroun, his family members and other associates.)

Neither the Port Authority nor representatives for the Moroun companies responded to Planet Detroit’s requests for comment. But in a 2005 Detroit Metro Times piece on the deal, Dan Stamper, president of the Moroun-owned Detroit International Bridge Company, argued that the Morouns had been generous. “Typically, people get a contract from the city of Detroit and get paid,” he said. “But we put our own money out.”

Implications for downriver

Outside of Detroit, the master concession agreement has the potential to shape the development of the 138-acre former McLouth Steel site in Trenton and Riverview. The Moroun-owned Crown Enterprises purchased the land — which occupies nearly a mile of waterfront on the Detroit River — for $4 million in 2018. They promised to tear down 45 abandoned buildings, clean up contaminated soils and invest $20 million within six years.

The McLouth site sale was controversial because of Crown’s desire to see the property rezoned from mixed-use to waterfront industrial, a change that could allow it to become a trans-shipment hub, which could then be incorporated into the Port Authority as a logistics operation. Proposed legislation has sought to facilitate such an arrangement by expanding the Port Authority’s power to enter into public-private partnerships across Wayne County. 

The McLouth property is also a Superfund site, a designation that means taxpayers — not the Morouns– may be paying for the cleanup. However, if the site is rezoned as waterfront industrial, it will face more lax cleanup standards than it would as mixed-use.  Either way, a private entity would benefit from public dollars.

“If the site gets remediated, Crown is then going to benefit from a piece of property that they didn’t have to spend all the money on,” the former Trenton Mayor Pat Hartig told Planet Detroit. 

“Residents of Trenton could be deprived of tax revenue based on the terms of an egregiously one-sided, 16-year-old agreement to which they were not a party,” Chang wrote in her letter to the attorney general. Adding another shipping terminal would also give the various Moroun companies incredible control over the industry.

“You’re going to give a monopoly,” Ward said, comparing the Morouns’ control over shipping in Wayne County to their ownership of the Ambassador Bridge. Although the Morouns’ profits from their bridge may decrease with the Gordie Howe Bridge opening in a few years, the increase in shipping created by a new terminal at the McClouth site could make their virtual monopoly on the water even more valuable. A recent paper from the University of Windsor’s Cross Border Institute points out that the new bridge will “more effectively connect the Detroit-Windsor region not only to North American road and rail networks but also to global shipping lanes.”

In addition to undermining anti-competitive practices, Hartig believes that invalidating the master concession agreement could give local activists an opening to pursue a mixed-use development in Trenton.

“I think that would at least give more of a bargaining wedge for the public to move forward on,” she said. Among other things, it could give Crown an incentive to seek income and partnerships from other entities, rather than keeping the McLouth site as its own tax-free domain.

Freeing the Port Authority from the concession agreement could also help create economic opportunities in Wayne County more generally, Detroit councilwoman Raquel Castañeda-Lopez told Planet Detroit. 

Port authorities in other cities can often leverage their position to issue bonds for large economic development projects, spurring development on waterfronts and beyond. Although the Port Authority has helped obtain grants for some projects, it has only used its financing power once to help underwrite a $41 million parking garage at the Renaissance Center in 2005.

In contrast, the Port of Cleveland has issued billions of dollars in bonds to develop properties. In 1993 it issued a $40 million bond for the Rock and Roll Hall of Fame, and this year a $50 million one for a new Sherwin Williams headquarters in downtown Cleveland.  Yet, the Wayne County Port Authority’s cash flow problems and limited autonomy mean that it lacks similar power.

“There are huge restrictions on the Port Authority actually being able to operate independently. Anything really has to be approved by the master concessionaire — meaning the Ambassador Port Company,” Castañeda-Lopez said. She believes that a genuinely independent Port Authority would issue bonds and augment the work being done by groups like the Detroit Riverfront Conservancy to develop land for public use around the riverfront.

Wayne County residents have other reasons to question whether the Morouns should have this much control over the Port Authority. In the last few months, Planet Detroit has reported on a proposal to move hazardous materials over the Ambassador Bridge and a Moroun-owned concrete company storing materials on a questionable stretch of shoreline without having submitted a necessary report on the seawall. And these are just the latest in a litany of environmental complaints against the Morouns that have included asbestos violations at the McLouth site and resistance to selling pollution-reducing, summer formula gasoline at the Ambassador Bridge’s duty-free gas station. 

If nothing else, this latest objection to the concession agreement marks a significant challenge for a family that Chang said has “almost unilateral control over a lot of what happens on our riverfront.”

Brian Allnutt is a writer living in Detroit. He covers open space, environmental justice, food and gardening.