Annual Report 2010 Blue Water Bridge Canada

Annual Report 2010 Blue Water Bridge Canada
Annual Report 2010
Blue Water Bridge Canada
Table of Contents
Letter from the President and Chief Executive Officer…………………………………………
3
Letter from the Chairman of the Board………..………………………………………………… 4
Board of Directors………………………...……………………………………………………… 5
Background, Legislative Authority and Compliance…….……………………………………… 6
Major Trade Routes……………………………………………………………………………… 7
Highlights for Fiscal 2010………………………………………………………………………
8
Fiscal 2009/2010 Strategic Objectives……………………………………………………………17
Cash & Investment Availability for Fully-Funding Master Plan…………………………………19
Human Resources…………………………………………………………………………………20
Five Year Review…………………………………………………………………………………22
Corporate Plan Evaluation……………………………………………………………………… 23
Corporate Plan Discussion……………………………………………………………………… 24
Management's Discussion and Analysis of Financial Condition and Results of Operations
25
Financial Statements and Notes to Financial Statements…………………………………………30
2
Letter from the President and Chief Executive Officer
The Canadian economic rollercoaster ride we experienced last year is slowing down,
although the lessons learned will stay with us well into the future.
Never before have such overriding business controls been required at Blue Water
Bridge Canada, as those required in response to last year’s dramatic decline in toll
traffic and revenue. But, with guidance from our Board of Directors and a commitment
by all employees to make the necessary accommodations, we have emerged
operationally fit and financially solid, still focused on our customers’ needs.
In facing the recession, we learned that efficiencies come in all shapes and sizes, as we acquired an allelectric maintenance truck. The subcompact vehicle is highly versatile for plaza duties and runs at a
fraction of the cost of the 4x4 pick-up it replaced. As well, we discovered new opportunities for
improvements in cooperation with our U.S. counterpart, the Michigan Department of Transportation. We
completed our first shared engineering bridge inspection under a single, three-year contract and will
harmonize our winter maintenance programs. Travelers perceive the bridge crossing as one entity and do
not perceive nor care that it is being operated by two government agencies from two separate countries.
Improving service to our customers and optimizing our efficiency are recurring themes of our joint
efforts.
A 10-percent increase in commercial traffic and a three-percent improvement in auto volumes over 2009
are positive signs of recovery, and more in keeping with the spirit of our property development activities.
Last year’s Canadian government infrastructure funding enabled us to implement our largest-ever capital
development program. The centrepiece of the $80-million program, our CBA building, is on budget and
due to be occupied in the spring of 2011. In addition, our Projects team continues to do an outstanding job
advancing eight other projects, including: the widening to four lanes of our approach from Hwy 402; a
new energy distribution network for Span 2 and the plaza; and new electronic billboards, now in
operation, which offer travellers information and BWBC a source of ad revenue.
Following a June meeting involving BWBC, Canada Border Services Agency President Stephen Rigby
delivered solidly on his promise to improve the efficiency of officer vehicle inspections. But, while we
experienced fewer delays inbound to Canada, the number of back-ups doubled year over year for summer
traffic to the U.S. Increased inspection times by U.S. Customs and Border Protection officers held
commercial vehicles and many vacationing families on the Hwy 402 approach to the bridge for up to
three hours. With delays occurring on a near daily basis throughout August, BWBC had portable comfort
stations placed along the highway, offering travellers some relief during the unpredictable holdups.
BWBC and other Ontario crossings are working with federal agencies on both sides of the border in
adopting an approach to introducing security controls, which also encompasses the efficiency of delivery.
Through such cooperative steps, we can all contribute to achieving our common goal: providing for the
safe, secure and productive movement of people and products between our two neighbouring nations.
Chuck Chrapko
President and Chief Executive Officer
3
Letter from the Chairman of the Board
The remnants of the global recession continue to worry business and citizens across
North America, prompting the Board of Directors to take a double-edged approach to
our business during the past year.
From one perspective, we have conducted our oversight responsibilities with a measure
of caution, since traffic volumes and the associated toll revenues are still recovering
from the full force of the recession. The Board has appreciated the decisiveness and
responsiveness of CEO Chuck Chrapko and his staff during these unpredictable times,
as we continued to serve our customers and retain our solid financial footing.
Despite our economic challenges, our organization has been preparing for further growth and continued
success in the future. I am extremely pleased with the progress that we have made in the areas of strategic
planning and governance. Consistent with the Board’s strategic direction, our CEO and his team have
developed comprehensive, multi-year action plans for our major programs. Subsequently, the Board
considered and approved the priorities and direction staff recommended for our Marketing/Customer
Service, Community Relations and Government Relations programs. The guides represent a major
milestone in our collective efforts to determine and advance progressively along a common course of
action. Combined with the Board’s audit function, the regular and standardized dashboard-style
performance reports defined in each plan will enable current and future Boards to focus more efficiently
and effectively on our governance role. In addition to the action plans, the Board approved the framework
and timetable for the development of a comprehensive Environmental Sustainability Program. Our new
CBA complex, which is being built for certification under the Canada Green Building Council’s
Leadership in Energy and Environmental Development (LEED) green building rating system, is an early
example of how our Sustainable Development Program will influence everything we do.
Unfortunately, solutions to minimize delays for honest and law-abiding travelers continued to elude
border control agencies for another, consecutive year. While recent discussions suggest a more positive
attitude by U.S. Customs and Border Protection towards the introduction of measures that could help
maintain national security and cut wait times for legitimate travelers, our customers grow increasingly
impatient at the lack of real progress on this important matter.
On a very positive note, the Board’s endorsement of a staff initiative to continue working cooperatively
with the Michigan Department of Transportation, owner of the U.S. side of the bridge, is already leading
to joint projects that will advance customer service and operational efficiencies.
Improvements to further strengthen the Blue Water Bridge’s outlook for the future can be expected
throughout the upcoming year. Whether involving the completion of infrastructure developments assisted
by federal government funding, or the introduction of new service offerings created by our employees, all
of our improvements will remain centred on the needs of our customers and the well-being of our host
communities. As in the past, we will continue to honour these important obligations only through the
dedication of our Board and staff, and with the generous support of our many local, national and
international partners.
Ken James, Chair
Board of Directors
4
Board of Directors
Ken James
Chairman of the Board
Former federal MP, 1984 to 1993
Former Councilor and Reeve of Township of Sarnia, 10 years
Rina Mukherjee
Director
Member, Sarnia Environmental Advisory Committee
Former Chair, Lambton Rural Childcare
Ann Gray
Director
Freelance Lambton County law clerk
Member, Ontario Association of Professional Searchers of Records
Board Member, Fraternal Fellowship Association
Chair, Board of Managers, St. Giles Presbyterian Church
Cathy Newman
Regional Accountant
Nova Chemicals
Corporate Governance
BWBC is guided by a Board of four members appointed by the Governor in Council. The Board does
not receive remuneration but is entitled to be reimbursed for travel, living and other necessary expenses
incurred by them in the performance of the duties of BWBC under the Bridge Authority Act. The
Minister of Transport, Infrastructure and Communities will recommend the nominee(s) to the
Governor-in-Council for final approval and appointment, traditionally for a term of up to 3 years. As a
parent Crown corporation, BWBC is accountable to Parliament through the Minister of Transport,
Infrastructure and Communities. The Board members are knowledgeable individuals from the local
community who are sensitive to BWBC’s business needs. They understand the Financial
Administration Act (FAA) requirements for Corporate Plans and Annual Reports and they work
earnestly with management to ensure that BWBC’s financial obligations are met within the guidelines
of our mandate.
The Board takes an active role in the stewardship of the overall future direction in addition to
addressing internal and external issues currently affecting Blue Water Bridge Canada. A chartered
accounting firm, acting as the internal auditor, reports directly to the Audit Committee. Governance
issues and practices continue to evolve and the Board strives to improve its due diligence and
governance processes throughout the year. Board members regularly attend annual governance and
stewardship sessions to keep up-to-date on the various issues.
5
Background, Legislative Authority and Compliance
Blue Water Bridge Canada (BWBC) was created by a 1964 Act of Parliament (Blue Water Bridge
Authority Act) to own (under federal control), operate and maintain the Canadian half of the
highway toll bridge over the St. Clair River between Point Edward, Ontario and Port Huron
Michigan.
In accordance with the provisions of a 1928 Special Act of Parliament authorizing construction
and operation of the Blue Water Bridge, ownership of the Canadian portion reverted, at no cost or
expense, to the Federal Government from the State of Michigan in 1962. The Michigan
Department of Transportation (MDOT) owns, operates and maintains the U.S. half of the bridge.
BWBC qualifies as a “parent Crown corporation” under the Financial Administration Act and
regulations. As such, BWBC is required to submit an annual corporate plan outlining its business
activities and investments, set BWBC’s objectives for the relevant period and the strategy to
achieve such objectives. The Financial Administration Act (Canada) also requires that BWBC
prepare and file annual operating and capital budgets, each of which require the approval of the
Treasury Board on the recommendation of the Minister of Transport, Infrastructure and
Communities. BWBC is obliged to prepare annual reports including audited financial statements
for submission to Parliament via the Minister of Transport, Infrastructure and Communities.
The Blue Water Bridge Authority Act, and the Customs Act, section 6, require BWBC to provide,
equip and maintain free of charge adequate buildings or other facilities for the proper
interviewing, examination and detention of persons and goods by customs officers.
BWBC has taken active measures to ensure compliance with the Official Languages Act and
continues to implement its obligations with the Treasury Board of Canada Secretariat to ensure
compliance with the Federal Identity Program. As part of that compliance, The President of the
Treasury Board and the Minister of Transport, Infrastructure and Communities agreed on an
applied title for the organization – from Blue Water Bridge Authority to Blue Water Bridge
Canada – effective September 2007. We have received confirmation from the Canada Public
Service Agency that we have been successfully meeting our official languages obligations.
BWBC has operational relationships with: Ontario provincial authorities and particularly with the
Ministry of Transportation; the Ontario Provincial Police, and; local municipalities, in particular
Point Edward, Ontario upon which the bridge’s Canadian assets are sited.
Pursuant to the Blue Water Bridge Authority Act, BWBC is limited to charging tolls which
provide for current revenues in an amount sufficient to pay BWBC’s reasonable current costs; to
establish prudent reserve funds; to provide or replenish sinking funds in respect of outstanding
bonds, and; to pay other expenses properly incurred by BWBC in its performance of duties under
the Act. The Canada Transportation Act regulates the means of setting and publishing toll rates.
6
Major Trade Routes
The Bridge is a major commercial traffic access point to the south-central United States. The
Bridge connects Highway 402 in Ontario to I-94 and I-69 in Michigan, which provides southerly
access to the following metropolitan areas: Detroit, Michigan; Indianapolis, Indiana; Madison,
Wisconsin; Minneapolis, Minnesota, and; St. Louis, Missouri, covering the Gulf Coast Corridor
and extending down through Florida.
7
Highlights for Fiscal 2010
With reference to the Corporate Plan for 2010, Blue Water Bridge Canada’s (BWBC)
primary focus for fiscal 2010 has been its “showcase” capital project - the $68 million
Customs, Brokers, Administration Complex (CBA) building project – and the
commencement of the Federal Infrastructure Program projects ($20 million) for
completion by March 31st, 2011.
By December 2010, the centerpiece and cornerstone of our capital master plan, the CBA
Complex building, will be substantially completed. This building will fulfill and house
the most up-to-date Statement of Requirements (SOR) of the Canadian Border Services
Agency (CBSA). It will also house the commercial brokers and the administration of
BWBC in a building that will be an accredited Leadership in Energy and Environmental
Design (LEED) structure; visually impressive with its size and “blue water” theme to the
local community and to the travelers crossing the bridge spans.
Once completed and, with the move-in date set for April 2011, this will allow BWBC to
plan for the demolition of the old building and begin the process of widening the plaza,
adding fourteen additional primary inspection booths. It will also begin the process of
redeveloping the plaza into a preferred place of travel-through destination for both trucks
and car travelers with its increased capacity and improved customer service facilities.
Federal Infrastructure Program
At the inception of this program, BWBC agreed to undertake eight capital projects
totaling $27 million as part of the federal infrastructure program. During the Spring 2010
it was apparent that BWBC would reasonably complete only $20 million of infrastructure
projects by March 31st, 2011. As of August 31st, 2010, almost $4.9 million of eligible
expenditures has been incurred by BWBC on infrastructure projects; claims have been
submitted and federal funds received in the amount of approximately $1.2 million.
Infrastructure work totaling $2.4 million has been accrued up to August 31st for which a
$1.2 million account receivable has been set up in advance of a claim to be processed
during the Fall 2010.
With the economic downturn and its effect on our toll revenue, coupled with the
requirement to finance up-front the federal infrastructure projects, BWBC is projecting
that additional long-term debt financing will be required. However, the Bridge welcomes
this opportunity to expedite projects that have been part of our long-term Master Capital
Plan at approximately 50% of the cost. We will be well-positioned to take full advantage
of the excess capacity required to efficiently and safely expedite the anticipated increase
in volume that will be experienced once the economy recovers and when the American
expansion of their side of the bridge is completed.
A brief description and cost status of each infrastructure project (excluding HST) is listed
below:
8
Plaza Widening to Highway 402 Widening
{Budget $3.1M covering years 2009-2010; Claims submitted $1.2M}
To broaden the BWBC plaza to accommodate the widening of Highway 402
which is being constructed by the Ontario Ministry of Transportation (MTO).
With the provincial portion of the highway leading to the BWBC plaza being
widened, for ease of future traffic flow, efficiency and safety, BWBC needs to
match the widening through to the toll booths.
Dynamic Message Signs Overhead Gantry 402 Approach to Plaza
{Budget $2.8M covering years 2009-2010; Claims submitted $0.9M}
Dynamic Message signs on overhead gantries, pylon, cantilever supports and
canopy roofs will be installed in various locations on the plaza to provide real
time information to commercial and passenger traffic. These signs will be
programmed to provide information in real time conditions to assist with traffic
control management and lane allocations. These signs will also be programmed
for various scenarios to include emergency and incident information to the public,
delay times by allowing motorists to take alternate travel routes, change departure
times, or otherwise modify their travel plans to avoid incidents.
Bridge Span 2 Infrastructure & Systems Upgrade
{Budget $5.4M covering years 2009-2010; Claims submitted $0.2M}
To relocate and enhance the electrical and communication equipment that has
experienced several system failures to the existing infrastructure and to install a
new electrical distribution system for the plaza. The electrical component includes
a plan to relocate the existing bridge electrical system from the existing
Administration Building to under Span 2. The plan also included an emergency
back up generator and new feeders to the adjacent buildings.
Customs Bi-Level and Traffic PIL Booths
{Budget $1.7M covering year 2010; Claims submitted $0.0M}
With the redesign of the plaza, new booths are required to be purchased to satisfy
Canada Border Services Agency (CBSA) Statement of Requirements
specifications. These booths are required for a future phase of the Master Plan but
can be ordered and installed in the interim period. The new primary inspection
booths will be designed to provide improved efficiency in order to facilitate trade
and tourism. Seven new primary inspection booths will be designed, constructed
and delivered to the plaza for future installation. Four by-level booths will be
installed in the CBA-Complex phase 1 project.
Plaza Electrical / Communication Infrastructure
{Budget $3.0M covering year 2010; Claims submitted $0.04M}
Includes the expansion of the existing CBSA traffic parking lot, parking lot
lighting, high water storm water outlet to the east storm water pond, and duct
infrastructure connecting the south side of the plaza to the north side (under 402
highway approach to toll booths).
9
Eastbound Ramp Realignment
{Budget $4.0M covering year 2010; Claims submitted $0.1M}
Existing operations must be relocated and facilities demolished in order to
complete the realignment of the truck ramp, allowing Canada-bound trucks to
access Highway 402 eastbound.
Effect of the Economic Climate on BWBC
Historically, since becoming a parent Crown corporation traffic volume peaked in fiscal
2004 and has been in decline every year since, except for fiscal 2010. As noted in
previous annual reports, some of the decline was related to increased security inspections,
resulting in traffic congestion lasting from 30 minutes to 3 hours. In 2009 it was related
to the decrease in manufacturing and we were experiencing monthly decreases ranging
from 9% to 32% throughout the year for trucks. After 5 straight years of truck traffic
declines – with fiscal 2009 being the most significant decline at 18.2%, it was
encouraging to have experienced a 10.1% increase in truck volume in 2010. Car traffic
has had a more moderate increase in 2010 of 3.2%.
Traffic Volume Trends 2004 to 2010
2,500,000
2,000,000
1,907,019
1,860,097
1,710,939
1,612,064
Volume
1,857,347
1,500,000
1,738,243
912,718
1,000,000
784,319
883,421
953,127
1,562,799
617,102
754,660
500,000
679,450
2004
2005
2006
2007
2008
2009
2010
While the effects of the downturn in the economy experienced over the past few years is
out of the control of BWBC, management has been very active in promoting the bridge,
encouraging enrolment in NEXUS and contacting customers, specifically the trucking
companies to encourage their willingness to route their trucks through to our border.
Management has documented and the Board has approved our formal customer service,
marketing and government relations strategic plans which are aimed at working with all
of our stakeholders to make this border efficient, safe and enjoyable for all travelers
thereby encouraging their willingness to cross the border without any hesitation.
Due to BWBC’s efforts, we continue to have success with the NEXUS enrolment and
have experienced a 31% increase over the past year. More Canadians are signing up than
10
Americans and BWBC sees an opportunity to further expand overall enrolment next year
by actively promoting NEXUS in Port Huron, Michigan, our neighbouring community
state-side.
NEXUS Cardholders at Port Huron Enrollment Centre
40,000
35,000
NEXUS Info
Booths Started
# of Americans
# of Canadians
Total
30,000
25,000
Radio
Advertising
20,000
15,000
10,000
5,000
Go Border
Campaign
Oct-10
Dec-10
Jun-10
Aug-10
Apr-10
Feb-10
Oct-09
Dec-09
Jun-09
Aug-09
Apr-09
Feb-09
Oct-08
Dec-08
Jun-08
Aug-08
Apr-08
Feb-08
Oct-07
Dec-07
Jun-07
Aug-07
Apr-07
Feb-07
Oct-06
Dec-06
Aug-06
0
BWBC communicates frequently with the U.S. Customs Border Protection and the
Canadian Border Security Agency to encourage both parties to adequately man the
primary inspection lanes in relation to the daily spikes in demand to prevent long lineups
which discourage the general public and trucking companies from attempting to cross our
border.
As demonstrated below, the truck volume for 2010 was consistently and significantly
well below the previous 11-year monthly average. On an annual basis, 2010 volumes
were 154,560 trucks lower than the previous 11-year annual average. At an average toll
rate of $17.89 per truck this translates into $2.8 million foregone annually, now and
possibly into the future.
11
Peak Year(2004)
Avg(1999-2009)
Volume Variance - Trucks
Prior Year(2009)
90,000
Current Year (2010)
85,000
Volume per Month
80,000
75,000
70,000
65,000
60,000
55,000
50,000
45,000
40,000
Coupled with a similar, but less dramatic trend in car traffic, at an average $2.88 per car,
the decrease of approximately 281,670 translates into an average $0.8 million foregone
annually.
Historical Volume Variance - Cars
290,000
Peak Year(1991)
11-Year Avg (1999-2009)
Volume per Month
Prior Year (2009)
240,000
Current Year (2010)
190,000
140,000
90,000
Both charts indicate that, it is still not likely traffic will increase sufficiently over the next
few years to reach their respective peak levels nor the 11-year historical average. While
there were some significant truck increases from November 2009 through June 2010
ranging from 10% to 23% monthly over the prior year, it is of some concern that there
were only 3-4% increases in the last two months of fiscal 2010. The economy appears to
not be recovering as quickly as expected.
12
Controlling Costs
While the outlook is hopeful, management will continue to be fiscally prudent with its
overhead costs. In 2009, management reviewed all expenses and a “controllable
overhead” target was established for comparative purposes which removed such items as
interest expense, depreciation, municipal taxes, severances and non-cash accruals from
total expenses identified in the financial statements. During fiscal 2009, controllable
overhead costs were reduced by 15.7%. The historical departmental trends and success of
this cost-cutting program are as per below:
Tolls
Administration
Maintenance
Currency Exchange
Projects
Janitorial
Accounting/Office
Brokers, Customs & TIC
Board of Directors
Controllable Overhead
2002
1,558
2,445
1,391
646
295
536
251
62
7,184
2003
1,632
1,824
1,733
711
296
712
413
72
7,393
2004
1,842
2,302
2,104
787
350
319
804
240
59
8,807
2005
1,934
2,653
1,838
783
363
344
870
228
74
9,087
2006
2,040
2,901
1,852
804
390
396
944
258
68
9,653
2007
2,102
2,354
1,961
808
482
426
925
257
43
9,358
2008
2,175
2,164
1,759
720
521
558
705
267
106
8,975
2009
1,911
1,657
1,418
583
543
472
634
236
44
7,498
2010
1,645
1,591
1,685
537
619
544
652
189
72
7,534
Overall, total controllable overhead in 2010 was just slightly more than 2009 levels with
some of the departments reducing their costs to pre-Crown Corporation era (2002) levels.
With a significant surge in construction, maintenance and janitorial activity and an
increase in traffic, controllable costs have nonetheless held steady to 2009 expenditures.
Controllable Overhead
Board of Directors
Accounting/HR/Office
Administration
Aug-10
Year-end
$
72,510
$ 651,755
$ 1,590,605
$ 2,314,870
Aug-09
Year-end
$
43,601
$ 633,848
$ 1,656,652
$ 2,334,101
CY vs. PY
% vs. PY
Increase (Decrease)
$28,909
66.30%
$17,907
2.83%
($66,047)
(3.99%)
($19,231)
(0.82%)
Janitorial
Maintenance
Project Management
$ 543,461 $ 472,183
$ 1,685,213 $ 1,418,111
$ 618,889 $ 542,835
$ 2,847,563 $ 2,433,129
$71,278
$267,102
$76,054
$414,434
Currency Exchange
Tolls
$ 536,870 $ 582,971
$ 1,645,459 $ 1,911,156
$ 2,182,329 $ 2,494,127
($46,101)
($265,697)
($311,798)
(7.91%)
(13.90%)
(12.50%)
TIC/Brokers/Customs
$
($47,179)
(19.98%)
Total Controllable Overhead
$ 7,533,749 $ 7,497,523
188,987 $
236,166
$36,226
15.10%
18.84%
14.01%
17.03%
0.48%
Increased productivity, technological improvements and cost efficiencies will continue to
be a focus of management in the years ahead.
13
Issues with the Canada Border Services Agency (CBSA)
and U.S. Customs Border Protection (CBP)
During the summer of 2007, the general public and commercial traffic endured excessive traffic
congestion along the border and long delays to be processed through the U.S. Customs Border
Protection (CBP). There was considerable criticism coming from Canadian border users, both
from the traveling public and commercial users, criticizing CBP for their lack of staffing and
scheduling. BWBC’s government affairs efforts lead to a creation of a task force to address these
issues with CBP. As a result we are pleased to report a tremendous improvement since that
summer.
However the summer of 2010 saw an increase in delays once again for US bound traffic due to an
increase in documentation verification. Recent meetings between CBP and BWBC and MDOT
have been held regarding interim capacity improvements which will greatly reduce border wait
times. These discussions continue into early Fiscal 2011 with the hope of improvements in place
by summer 2011. We continue to work closely with CBP through our Government Relations
program to ensure border wait times are minimized.
Similarly in fiscal 2009, excessive traffic delays (congestion) of more than one hour were even
worse. On the Canadian side, CBSA fully staffed all ten primary inspection lanes (PILs) only
once in spite of the fact that there were fourteen days in July and August where delays were
measured at one hour or more. Again, through our Government Relations efforts BWBC was
asked to be a part of a task force with CBSA to address these excessive wait times, particularly
with the pending elimination of the summer student program and budget constraints within the
CBSA.
BLUE WATER BRIDGE- CANADA BOUND DELAYS OF 1 HOUR OR MORE vs. VOLUMES
2008,2009,2010
300
08VOLUMES
09 VOLUMES
10 VOLUMES
250
200
(000's)
150
# Days Where Delays Exceeded 1 Hour or More Canada
Bound
10
9
8
7
6
5
4
3
2
1
0
100
50
2008
2009
2010
Jan. Feb. Mar Apr May Jun
Jul
Aug Sep Oct Nov Dec
Jan.
Feb.
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
We were extremely pleased with the efforts of CBSA in summer 2010. They made some
adjustments to scheduling and increased the use of overtime which effectively reduced delays
during the peak summer travel periods. BWBC continues to be a member of the task force and
14
meets regularly with CBSA in a cooperative effort in finding new solutions to ensure border wait
times are kept to a minimum.
BWBC is also in discussions with CBSA to expand/adjust the Canadian NEXUS hours of
operations which were originally set in 2002. With increasing enrollment and feedback received
from customers we are suggesting NEXUS hours be adjusted so that they open earlier in the
morning on weekends and close later in the day at 9pm which better reflects customer usage.
CBP adjusted their NEXUS hours of operation in December 2009 at the request of BWBC.
Blue Water Bridge- US Bound One Hour Delays vs Volumes
300,000
Total WBTraffic
2007
250,000
2008
2009
2010
200,000
150,000
U.S. BOUND DELAYS OF 1 HOUR OR MORE 2007-2010
25
20
# of Days
100,000
2007
15
2008
10
2009
2010
5
50,000
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
The need for increased capacity in inspection lanes on the Port Huron Plaza is clearly indicated in
the chart below. The heaviest traffic across Canada per PIL booth is experienced at the Port
Huron / Sarnia border. The U.S. bridge plaza project which includes 20 PIL booths with room for
another 10 will help to alleviate this capacity issue but it will not be completed until at least 2017.
Thus, the discussions with CBP regarding interim capacity improvements as mentioned earlier
are crucial.
PORT
BLUE WATER BRIDGE
PEACE BRIDGE
2009 US Bound Volumes
Cars
Trucks
1,571,472
620,482
2,371,828
580,370
QUEENSTON LEWISTON
PAC HIGHWAY
AMBASSADOR BRIDGE
DETROIT WINDSOR TUNNEL
PEACE ARCH
RAINBOW BRIDGE
WHIRLPOOL BRIDGE
THOUSAND ISLANDS
CHAMPLAIN
SAULT STE MARIE
SEAWAY INTL
1,350,196
2,123,212
1,221,485
1,492,435
1,461,426
169,409
667,703
1,040,154
310,000
1,174,614
12,267
176,268
294,970
Total U.S. Bound Total Number of Annual Vehicles
CBP Pils
Per Pil
2,191,954
13
168,612
2,952,198
18
164,011
1,590,409
10
159,041
1,660,196
15
110,680
3,297,826
32
103,057
1,233,752
13
94,904
1,492,435
16
93,277
1,461,426
17
85,966
169,409
2
84,705
843,971
11
76,725
1,335,124
19
70,270
5
9
-
BWBC is constructing at its expense, a $68 million state-of-the-art building to CBSA’s up-to-date
and stringent Statement of Requirements (SOR). As part of the Master Capital Plan and the
15
Federal Infrastructure Program, we are constructing seven (7) additional primary inspection
booths for CBSA costing $1.6 million. BWBC is concerned that the additional new booths will
not be fully staffed when traffic conditions warrant extra staffing.
BWBC maintains a good relationship with the local CBSA and CBP management teams and we
fully realize the constraints through which both agencies must operate. BWBC wishes to
diplomatically advocate on behalf of CBSA. Based on our own experience with toll operations
we have made several constructive suggestions which we believe should improve the safety,
customer service and efficiency for all stakeholders here at the Blue Water Bridge plaza without
interfering with the security mandate of CBSA. We believe it would be helpful to:
1. Allow front-line CBSA supervisors to authorize the use of overtime when required. All
primary inspection lanes should be open during peak volume periods.
2. Examine the scheduling of shifts and assignments so that sufficient resources are
available for peak volume periods.
3. Introduce proximity card technology, as was installed by the U.S. CBP, which assists in
expediting vehicle processing.
4. Contribute to the marketing of “Trusted Traveler” programs, such as NEXUS, which
require extensive marketing efforts, proper staffing at processing and enrolment centres.
5. Increase the NEXUS lane operating hours to a minimum twelve (12) hours per day to
start to approach the effort put forth by the U.S. CBP. U.S. Nexus is open 15 hours a day
during the week. BWBC would prefer CBSA to staff the Nexus lane 12 hours a day from
9am to 9pm, seven days a week.
Section 6 of the Customs Act
BWBC’s obligation under subsection 6(1) of the Customs Act, is to provide “adequate buildings,
accommodation or other facilities for the proper detention and examination of imported goods
and the proper search of persons by customs officers.” However, over the years we have been
providing additional services for which we have not received compensation such as maintenance,
snow removal, utilities, janitorial and other miscellaneous day-to-day services.
The Public Border Operators Association (PBOA) received a legal opinion March 2010 which
has stated that we “are not obligated to provide services to the Crown, each (border
operation)…being limited to providing space/premises adapted to suit (CBSA’s) intended
purpose…and does not extend to or include any obligation to provide services. That is, we are of
the opinion that there is no obligation…to provide air conditioning, heating or lighting
services…but rather it is limited to providing base building systems capable of allowing CBSA to
achieve, at CBSA’s cost, the standards as prescribed by the Canada Labour Code.”
BWBC is very concerned with the Human Resources and Skills Development Canada (HRSDC)
ruling to the Peace Bridge on January 12, 2010, that bridge crossings are “liable for damages
arising” out of a CBSA employee’s injuries caused by CBSA premises. This adds to the risk of
providing facilities for free to CBSA.
In coordination with the PBOA, BWBC may pursue relief of our annual general administrative,
maintenance and janitorial expenditures in the years ahead. CBSA has been made aware of this
issue and has responded to the PBOA’s retained law firm in the hope of achieving a common
understanding and agreement for the future.
16
Fiscal 2009/2010 Strategic Objectives
2009/2010 Goals
2009-2010
OBJECTIVES
PERFORMANCE
TARGETS
MEASUREMENTS
Status
Incorporate improvements into
the employee management
program by the end of Q1,
2009-2010, that will strengthen
and augment the measures
currently being implemented
and address specific areas of
interest to the Board
Hay Compensation Structure
Review with Board by Fall 2009
Review at September or
October 2009 Board meeting
Completed
Management review of HR
policies by September 2009
Documented review
Completed
Development of Values
statement by May 2009
Document
Completed
Development of 5-year personnel
resources plan
Document & discussion at a
Board meeting
Completed
Development of an employee
relations plan
Document & discussion at a
Board meeting
Completed
Implementation of new
software
Project Accounting Module
Completion August, 2009
Deferred to Q4
2012/2013 due to
time constraintsother projects.
Impact study on the feasibility
of new technologies on
operations
Impact study identifying
software modules & hardware
equipment to improve
operational efficiency and safety
Formal impact study document
Completed;
implementation of
Sharepoint
completed with
enhancements on an
ongoing basis.
17
2009-2010 OBJECTIVES
PERFORMANCE TARGETS MEASUREMENTS
Status
Formalize purchasing and
contracting policies and
procedures
Purchasing Policy
Develop an asset acquisition
plan
Approved document
Plan document by December
2009
Develop a policy on electronic
devices and information
management
Develop a marketing and
customer service program plan
Approved policy
Policy document by December
2009
Both documents
Deferred to
2011/2012 due to
time constraintsother projects.
Satisfied with
Capital Master Plan
which is reviewed
annually.
Deferred to
2011/2012.
Increase prepaid toll accounts
Survey trucking companies
Completed March
2010
Develop a government
relations program plan
Identify key stakeholders, collect
and analyze field information to
determine attitudes, interests,
concerns & involvement
regarding BWBC
Documented report
Completed March
2010
Develop a community relations
program plan
Develop an Integrated
Environmental Sustainability
Program
Contracting/Tendering Policy
Multi-year action plan
Implementation strategy
Budgeted action plan
Measurable targets
Environmental Policy
Current situation analysis
Policy document by September
2008
Policy document by September
2008
25% challenge
Wait time metrics
NEXUS expanded hours
To be established
Completed March
2010
To be established
Further clarification
from the Board
required
18
Cash & Investment Availability for Fully-Funding Master Plan
Our 2002 bond issue raised funds to pay for the completion of the 2nd bridge span; the
rehabilitation of the original span; the set up for the debt service reserve fund and the operating
and maintenance reserve fund, and; provided BWBC with $40.6 million of additional funds for
implementing some of the capital projects identified in the master plan.
Timing of Capital Expenditures, Investment Maturities and
Cash/Financing Levels
(in $ millions)
$65
$55
Bond (2002)
Proceeds
$45
$35
$25
2007
$58.1
2008
$57.3
2009
$49.7
$15
$5
$(5)
2010
$25.2
2011
$0.5
Forecast
2012
$6.1
Forecast
2013
$8.5
Forecast
2014
$0.4
Forecast
2015
$(16.4)
$(15)
$(25)
Although our current working capital position looks exceptionally healthy, our cash and
investment balances will diminish due to the recent economic recession and due to the required
financing for the federal infrastructure program. In order to mitigate the anticipated additional
long-term debt requirements, we find it necessary to deplete the investments previously reserved
for our major maintenance fund. Over the next 5 years (2011-2015), in tandem with continued,
expected positive cash generated from operations, the existing cash and investment balances will
partially finance the planned capital projects, with the balance covered by a long-term capital loan.
As a federal parent Crown corporation, we generate profits specifically for the purpose of
maintaining the bridge spans, plaza and facilities and to fully fund other capital projects. As such,
over the long-term, all cash generated and invested will be fully spent to fulfill our federal
mandate.
While management continues to decrease its “controllable” costs, the Board can direct
management to further decrease expenses; delay construction on other projects, and/or; increase
revenue through toll rate adjustments. We have the option of transferring or borrowing funds
from our non-restricted major maintenance fund and replenishing at a later date. While we have
planned for the possibility of a negative cash position with an aggressive construction schedule
and conservative traffic flow projections, historically, construction schedules have been stretched
out and traffic volumes have usually come in higher than expected (2010 being a prime
example), resulting in better than expected cash flows.
19
Human Resources
On November 7, 2007 Blue Water Bridge Canada and the Public Service Alliance of Canada
(PSAC) signed their first 3-year contract with PSAC as the new bargaining agent. BWBC
continues to have a good working relationship with the employees and the representing union.
Strategies are in place to maintain this harmonious relationship which includes the continuation
of regular Union/Management meetings as well as Union input into the development and revision
of policies and procedures. Negotiations for the new contract will be undertaken during the Fall
of 2010.
For the first time in its 45 year history, BWBC instituted a formal downsizing program during
2009. A Voluntary Separation Package (VSP) was offered to all Toll employees. Four full-time
and two part-time employees accepted the offer.
Since January 2007, as employees resigned or retired, their positions were not replaced. In fiscal
2010, the office receptionist position was eliminated; in fiscal 2009, with the retirement of the HR
manager, the CFO and HR manager positions were combined; in fiscal 2007 and 2008 the
accounting supervisor position and the maintenance manager positions were eliminated.
For the year ended August 31
Human Resources
Salaries and wages
Toll collectors
Administrative and office
Maintenance
Project Management
Currency Exchange Department
Janitorial
2010
$
Benefits
Health Insurance
$
Employee pension
Vacation pay
Employee health taxes
Sick Pay
Employment insurance
Workplace Safety and Insurance Board
Uniforms and cleaning
Other
$
Increase
(Decrease)
2009
% Incr
(Decr)
1,162,157
752,598
599,679
475,875
337,097
336,008
3,663,414
$
1,569,096
1,054,877
536,250
402,002
410,572
273,485
4,246,282
$
(406,939) (25.93%)
(302,279) (28.66%)
63,429
11.83%
73,873
18.38%
(73,475) (17.90%)
62,523
22.86%
(582,868) (13.73% )
704,427
335,075
135,309
79,297
72,217
52,087
45,489
32,802
14,446
1,471,149
5,134,563
$
1,006,286
388,565
144,450
80,133
42,171
66,092
36,031
40,736
14,358
1,818,822
6,065,104
$
(301,859) (30.00%)
(53,490) (13.77%)
(9,141)
(6.33%)
(836)
(1.04%)
30,046
71.25%
(14,005) (21.19%)
9,458
26.25%
(7,934) (19.48%)
88
0.61%
(347,673) (19.12% )
(930,541) (15.34% )
$
$
During fiscal 2010 a part-time corporate secretary position was added to administration.
20
Actual
2009
2010
2011
2012
Plan
2013
3
5
5
6
9
6
17
51
3
5
4
6
9
6
19
52
3
5
4
6
9
6
19
52
3
5
4
6
9
6
19
52
3
5
4
6
9
6
19
52
3
5
4
6
9
6
19
52
7
7
4
18
1
6
6
6
19
1
6
7
4
18
1
6
7
4
18
1
6
7
4
18
1
6
7
4
18
1
6
7
4
18
69
70
70
70
70
70
70
Full-Time
Administration
Accounting/HR/Office
Currency Exchange
Janitorial
Maintenance
Project Management
Tolls
Total Full-Time
3
4
4
5
9
6
20
51
Part-Time
Administration
Currency Exchange
Janitorial
Tolls
Total Part-Time
Total Employees
2014
2015
The recent Treasury Board directive to keep salary cost increases to no more than 1.50% will be
part of the collective bargaining position as negotiations with the union are underway during the
Fall 2010. All staff will be subject to the same limits.
We take particular pride in our employees who continually go beyond the scope of their jobs to
provide an efficient and customer-friendly plaza, well appreciated by the many people who have
crossed the bridge spans and by the many people who work on the plaza. As well, BWBC
continues to provide mandatory, voluntary and personal training including higher education to
our employees.
21
FIVE YEAR REVIEW
Statement of Operations, Comprehensive Income and Equity
2009
for the year ended August 31st
( In Thousands )
Revenue
Tolls and Services
Interest and Sundry Revenues
Facility Rentals
Currency Exchange Department
Gain on disposal of property, plant and equipment
Total Revenue
2007
2010
(Restated)
2008
(Restated)
2006
$
$
$
$
$
16,910
919
2,462
1,025
21,316
15,465
2,106
2,586
1,101
67
21,325
17,100
2,710
2,618
1,202
23,630
17,872
2,634
2,937
941
24,384
18,297
2,489
3,277
1,099
25,162
5,959
5,135
4,438
1,699
1,462
149
18,842
6,138
6,065
4,204
1,576
1,242
149
19,374
6,306
5,515
3,983
2,142
1,458
19,404
6,464
5,763
3,633
2,109
1,620
1,018
20,607
6,612
5,658
3,767
3,019
1,586
29
20,671
2,474
1,951
4,226
3,777
4,491
13,961
7,920
1,515
319
23,715
8,890
32,671
1,109
381
43,051
16,116
17,778
1,678
369
35,941
20,629
22,844
1,224
300
44,997
13,882
13,245
1,738
382
29,247
-
-
-
576
606
3,341
8,118
23,389
14,593
31,320
161,801
368
5,160
129,876
486
8,177
120,522
8,682
119,858
8,362
117,386
8,019
194,385
189,708
188,534
188,386
186,578
6,374
4,394
1,524
3,089
15,381
4,641
1,356
1,303
2,900
10,200
2,278
1,483
2,723
6,484
2,890
439
1,694
2,556
7,579
2,519
1,048
1,476
2,400
7,443
4,140
4,029
3,419
2,987
2,537
Long-term debt
88,113
107,634
91,202
105,431
94,102
104,005
96,825
107,391
99,381
109,361
Equity
86,751
194,385
84,277
189,708
84,529
188,534
80,995
188,386
77,217
186,578
Expenses
Interest on long-term debt
Human Resources
Amortization
General and administrative
Maintenance & other expenses
Amortization of intangible assets
Loss on disposal of property, plant and equipment
Excess of revenues over expenses and comprehensive income
Balance Sheet
Assets
Current
Cash
Short-term investments
Accounts receivable
Prepaid expenses
Deferred Charges
Long-term investments
Property, plant and equipment
Intangible assets
Restricted assets
Liabilities and Equity
Current
Accounts payable and accrued liabilities
Holdbacks payable
Deferred Revenue
Current portion of long-term debt
Employee future benefits liability
22
Corporate Plan Evaluation
For the Year Ending August 31
( In Thousands )
Statement of Operations, Comprehensive
Income and Equity
Revenue
Tolls and Service Revenue
Other
Expenses
Excess of revenues over expenses
and comprehensive income
2010 Actual
vs.
2010 Actual
2010 Plan
$
$
16,910
4,406
21,316
14,194
4,695
18,889
2,716
(289)
2,427
18,842
17,684
(1,158)
2,474
1,205
1,269
2010 Plan
$
Balance Sheet
Assets
Current
Long-term investments
Property, Plant, Equipment
Intangible Assets
Restricted Assets
Total Assets
23,715
3,341
161,801
368
5,160
194,385
9,471
183,430
6,845
199,746
14,244
3,341
(21,629)
368
(1,685)
(5,361)
Liabilities and Equity
Current
Long Term
Equity
Total Liabilities and Equity
15,381
92,253
86,751
194,385
7,016
104,685
88,045
199,746
(8,365)
12,432
1,294
5,361
Statement of Cash Flows
Operating Activities
Net Income
Non-Cash Items
Changes in Working Capital Items
Investing Activities
Net acquisition of Capital Assets
Purchase of Intangible Assets
Decrease in Investments
Financing Activities
Cash and Cash Equivalents
Increase ( Decrease ) in Cash
Balance at Beginning of Year
Balance at End of Year
Incr.
(Decr.)
2,474
4,699
5,395
12,568
1,205
4,273
30,125
35,603
1,269
426
(24,730)
(23,035)
(36,363)
(32)
31,798
(2,900)
(7,497)
(50,668)
1,555
(2,900)
(52,013)
14,305
(32)
30,243
44,516
5,071
8,890
13,961
(16,410)
4,060
21,481
4,830
26,311
(12,350)
23
CORPORATE PLAN DISCUSSION
(in thousands of dollars)
Comparison of 2010 Actual with 2010 Corporate Plan
Tolls and Service Revenue
Truck volume was higher than budgeted by 121 thousand and car volume was higher than
expected by approximately 215 thousand vehicles ($2,816 increase); toll rate adjustment ($883
increase); Escort fees for wide loads ($80 increase); CAD/US travelers and axle mix ($268
decrease); the CAD was stronger than estimated ($799 decrease).
Other Revenue
Currency exchange revenue was down by $295.
Expenses
Major Expenses:
General and Administrative
Expenses were $159 or 10.3% higher than corporate plan due to a revised agreement with the
duty free store concerning the relief of municipal taxes ($94 increase); consultants ($53 increase);
software and support ($36 increase); internal audit fees ($23 increase); legal fees ($19 increase)
and bank charges ($16 increase). Partially offset with a decrease in spending for IFRS ($72
decrease) and insurance ($40 decrease).
Human Resources
2010 costs were $215 or 4.3% higher than corporate plan. Salaries and wages were up by $183
with additional requirements in maintenance ($122 increase) and projects department ($127
increase) related to the increased construction activity; cancellation of the out-sourced janitorial
contract ($33 increase); partially offset with further savings from the Toll department ($54
decrease) and Administration ($52 decrease). Overall benefits exceeded corporate plan by $32
with offsetting differences of $23 between group insurance and sick pay, higher than expected
CPP premiums ($12 increase) and smaller across-the-board increases in most other benefits ($20
increase).
Maintenance and Other
Property related expenses were higher by $113 or 8.3% due to higher than expected bridge
inspection costs ($153 increase), paving requirements ($99 increase) partially offset with less
maintenance than expected related to the CBA building site ($165 decrease).
Amortization
Amortization expenses were higher than budgeted by $775 or 20.4% due to the acceleration of
depreciation for buildings being demolished sooner than expected ($248 increase) and the
adjustment for the 2nd bridge span ($199). The remaining difference is related to an underestimation of the asset aggregate within the corporate plan.
Balance Sheet & Cash Flow Items:
Net cash generated from operating activities of $12,568 and net investments redemption of
$31,798 were applied against the net acquisition of capital assets and intangible assets of $36,395
and the pay down on the bond principle of $2,900 to create an overall increase of cash for the
year of $5,071. When added to the beginning cash balance of $8,890 this resulted in a total
yearend cash position of $13,961.
24
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands of dollars)
Except where otherwise indicated, all financial information reflected herein is expressed in
Canadian dollars and determined on the basis of Canadian generally accepted accounting
principles.
Introduction
The following analysis and prior year comparison reviews the operations for the financial years
ended August 31, 2010 and 2009.
FINANCIAL RESULTS
2010
$
Revenues
Operating Expenses
Excess of Revenues over Expenses
Excess of Revenues over Expenses/Revenues
2009
(Restated)
$
21,316
18,842
21,325
19,374
2,474
1,951
12%
9%
Operating Results
The operating income of $2,474 for the fiscal year ended August 31, 2010 increased by
approximately $523 or 26.8% from the 2009 fiscal year operating income of $1,951.
Period over Period Comparisons
Years ended August 31, 2010 and 2009
Revenues
Revenues are derived from four sources: tolls and services, rents, currency exchange operations
and interest and sundry income.
Tolls and Services Revenues
Tolls and services revenues increased by $1,445 or 9.3% for the year compared with 2009
revenues. Car volumes increased by 53,774 vehicles or 3.4% for the year and truck/bus volume
increased by 62,348 or 10.1%.
Tolls and services revenues from commercial vehicles represented approximately 72.5% of all
tolls and services revenues in fiscal 2010, with revenue from passenger vehicles making up
the balance. In the 2009 fiscal year commercial vehicles represented 71.7% of all tolls and
services revenues.
25
ASSESSMENT OF RESULTS, Continued
(in thousands of dollars)
Revenues
Revenues from tolls and services increased to $16,910 in fiscal 2010 from $15,465 in the
preceding year.
A portion of the increase came from increased truck toll revenue, going from $11,048 in 2009 to
$12,227 in 2010. This represents an increase of 10.0 per cent and comes from an increased
volume of trucks by 10.1 per cent ($1,116 fav); a toll rate adjustment ($513 fav); the negative
effect of an overall strengthening of the Canadian dollar against U.S. toll receipts ($445 unfav)
and a change in mix of Canadian-to-American trucks and truck sizes (axles) ($77 unfav).
Additional revenue was created with a significant increase in the escort and wide-load truck fees
($49 fav).
Truck Revenue - Fiscal Year
$14,000
$13,000
$12,000
2010
$12,227
2009
$11,058
$11,000
Corp Plan
$10,194
$10,000
Revenue from passenger car tolls increased from $4,381 in 2009 to $4,658 in 2010. While the
volume of cars increased by 3.4 per cent ($151 fav) and there was a toll rate adjustment ($342
fav), this was partially offset by the effect of the strengthening Canadian dollar on tolls ($161
unfav) and the change in CAD / U.S. mix of vehicles ($55 unfav).
Car Revenue - Fiscal Year
$5,100
$4,900
$4,700
$4,500
$4,300
$4,100
$3,900
$3,700
$3,500
2010
$4,658
2009
$4,381
Corp
Plan
$3,977
26
ASSESSMENT OF RESULTS, Continued
(in thousands of dollars)
Rental Revenues
Rental property revenues accounted for approximately 11.6 per cent of all revenues in 2010
(12.1% in 2009). Rental revenue decreased from $2,586 in fiscal 2009 to $2,461 in 2010
primarily due the full year effect of an across-the-board decrease in commercial lease rates ($82
unfav) and a decrease in Duty Free Store variable rent revenue ($46 unfav).
Currency Exchange Operations
BWBC operates a currency exchange, with its primary customers being travelers coming from
and going to the United States. Revenue from currency exchange operations approximated 4.8 per
cent of total income in 2010 (5.2% in 2009).
Interest Revenue
The balance of revenue is derived from investment of surplus cash and monies set aside in
restricted funds and other investments.
Curr. Exch.
4.8%
Interest
4.2%
Car
21.9%
Rental
11.6%
Truck/Bus
57.5%
Percentage of Total 2010 Revenue
Gain on Disposal of Assets
Gain on disposal of assets related to the reduction of the maintenance department fleet of trucks
in 2009. There were no gains or losses in 2010 ($67 unfav).
Factors Affecting Operating Income
The profitability of BWBC is affected by a number of factors, including seasonality, the strength
of both the U.S. and Canadian economies, toll rate increases, the fluctuating foreign exchange
rates and tourism in Ontario.
Profitability is largely dependent upon strong economies in both the U.S. and Canada. When the
U.S. economy is expanding, exports of Canadian products tend to rise. With the Blue Water
Bridge being one of the major commercial international crossings in North America, its revenues
and thus its profitability improves with the increase in activity.
27
ASSESSMENT OF RESULTS, Continued
(in thousands of dollars)
When the activity at the Blue Water Bridge increases, there tend to be increases in the activities at
both the duty-free shop and currency exchange. Increased activity at the duty-free shop results in
additional rental income to BWBC, as the amount of rent is affected by the amount of sales.
Similarly, increased activity at the currency exchange results in additional revenues, and with
expenses relatively fixed, an increase in net income.
However, we have come to learn that the public’s experience and perceptions with traffic
congestion will have a significant negative effect, not only on toll revenues but also on currency
exchange and duty free store revenues. With traffic congestion, people and commercial trucks
will either not bother to attempt to cross the bridge spans or not bother to pull out of the traffic
lines to exchange their money or buy products at the Duty Free Store.
Expenses
Operating expenditures are incurred in five main areas: general and administrative expense,
human resources, maintenance and other, interest on long-term debt and amortization.
General and administrative expenses include insurance, consulting and other professional fees,
public relations, office, municipal taxes and miscellaneous expenses. Amortization includes
amortization on: property, plant and equipment, intangible assets and deferred bond financing
charges.
Human resources include salaries and wages paid to toll collectors, accounting, administrative,
currency exchange, maintenance, janitorial and project management staff. Employee benefits
include statutory benefits and employee pension and life insurance. It also includes severance
packages providing both salaries and benefits to former employees.
Maintenance and Other expenses include maintenance supplies, services, snow removal and
landscaping.
For the year ended August 31, 2010, interest expense was derived solely from the bond debt of
$94,102 existing as at September 1st, 2009. For the year ended August 31, 2009, interest was
derived from bond debt of $96,825 existing as at September 1st, 2008.
Amortization
24.4%
Interest
31.6%
G&A
9.0%
Salaries & Benefits
27.2%
Mtce
& Other
7.8%
Percentage of Total 2010 Expenses
28
ASSESSMENT OF RESULTS, Continued
(in thousands of dollars)
Total expenses decreased from $19,374 in fiscal 2009 to $18,842 in 2010.
General and administrative expenses increased by $122 primarily due to an increase in municipal
taxes ($63k unfav), software service and support ($56k unfav), increased travel ($23k unfav),
bank charges increased due to additional credit, debit card, and ATM usage ($20k unfav);
partially offset with lower accounting consultant charges ($24 fav) and lower public relations and
advertising costs ($22k fav).
Human Resources decreased by $931 primarily due to the effect of the 2009 severance packages,
including benefits ($663k fav) and other downsizing. The reduction in employees decreased
costs in 2010 for the following departments: Tolls ($296k fav), Currency Exchange ($73k fav),
Admin/HR/ ($59k fav), Janitorial ($62k unfav), and Maintenance ($63k unfav).
Maintenance and other expenses increased by $220 in fiscal 2010 due to plaza paving ($120k
unfav), bridge inspections ($80k unfav). Waste disposal increased due to reversal of 2008
environmental spill receivable ($90k unfav). Partially offset by cancellation of janitorial contract
($67 fav).
Interest on long-term debt decreased from $6,138 in fiscal 2009 to $5,959 in 2010 as a result of
the lower bond principal outstanding as at August 31st, 2010 of $91.2 million compared to $94.1
million at the end of fiscal year 2009.
Total amortization expense for property, plant, equipment and intangible assests increased by
$235.
Cash Flow
There was a net increase in cash of $5,071 for the year 2010 as compared to a net decrease for
2009 of $7,226. This is primarily the result of liquidating investments when they matured to
finance the CBA building complex and federal infrastructure projects.
Capital Program
Capital additions in the 2010 fiscal year amounted to $38,790, of which the major contributor was
the Canadian Plaza Improvement – CBA building project ($33,606); the 402 Highway Widening
($2,092), Span 2 Infrastructure ($1,198), Dynamic Message Signs ($1,011) and other
infrastructure projects ($553).
29
Blue Water Bridge Canada
Financial Statements
For the year ended August 31, 2010
30
Blue Water Bridge Cauada Financial Statements for the year ended August 31, 2010 Management's Responsibility for the Financial Statements
MANAGEMENT'S REPORT
The financial statements and all other information contained herein are the responsibility of
management and have been reviewed and approved by the Directors of Blue Water Bridge
Canada. These financial statements, which include amounts based on management's best
estimates as determined through experience and judgment, have been properly prepared and are
in accordance with Canadian generally accepted accounting principles.
Management of Blue Water Bridge Canada maintains books of account, records, financial and
management control, and information systems, which are designed for the provision of reliable
and accurate fmancial information on a timely basis. These controls provide reasonable assurance
that assets are safeguarded, that resources are managed economically and efficiently in the
attainment of corporate objectives, that operations are carried out effeCtively and that transactions
are in accordance with Part X of the Financial Administration Act and regulations, the Blue Water
Bridge Authority Act and the by-laws of Blue Water Bridge Canada.
The Auditor General of Canada conducts an independent audit of the annual financial statements
and reports on the audit to the Minister of Transport, Infrastructure and Communities.
The Board of Directors' Audit Committee, which consists of four members, none of whom is an
officer of Blue Water Bridge Canada, reviews and advises the Board on the financial statements
and the Auditor General's report thereto. The Audit Committee meets with management on a
regular basis and occasionally with the Office of the Auditor General of Canada to discuss the
financial reporting process as well as auditing, accounting and reporting issues.
. Chuck Chrapko
President and CEO
David Joy, BA, CGA
Chief Financial Officer
Sarnia, Ontario
Canada
October 1, 2010
31
32
Blue Water Bridge Canada Financial Statements Balance Sbeet
As at August 31
2010
2009
(Restated
Note 2)
Assets
Current
Cash (Note 5)
$
13,960,797
$
8,890,041
Short-tenn investments (Note 6a)
7,920,167
32,671,348
Accounts receivable
1,514,750
1,108,211
Prepaid expenses
Long-term investments (Note 6b)
Property, plant and equipment (Note 7)
Intangible Assets (Note 7)
318,940
381,200
23,714,654
43,050,800
3,340,906
8,117,999
161,801 ,357
129,876,281
368,292
485,504
3,470,933
5,161,365
1,689,381
3,016,115
5,160,314
8,177,480
Restricted assets (Note 1O)
Debt service reserve fund
Operating and maintenance contingency fund
$
194,385,523
$
189,708,064
$
6,373,813
$
4,640,883
Liabilities
Current
Accounts payable and accrued liabilities
Holdbacks payable
4,394,015
Deferred revenue (Note 12)
1,524,167
1,303,013
3,088,832
15,380,827
2,899,965
10,199,738
4,140,415
4,029,427
88,113,405
91,202,237
107,634,647
105,431,402
Current portion oflong-tenn debt (Note 14)
Employee future benefits liability (Note 13)
Long-term debt (Note 14)
Equity
Retained Earnings
$
86,750,876
194,385,523
1,355,877
$
84,276,662
189,708,064
Contingencies (Note 17) and Commitments (Note 18) The accompanying notes form an integral part of the financial statements, AP~proved
by th: Board of Directors: --~~r-~r---~-------
C-
Director On behalf of Management:
--:zs....,;~-::H.~~--
Chief Financial Officer
Director
33
Blue Water Bridge Canada
Financial Statements
Statement of Operations, Comprehensive Income and Equity
2009
(Restated Note 2)
2010
For the year ended August 31
Revenues
Tolls and services
Facility rentals (Note 15)
Currency exchange department (Note 16)
Interest and Sundry
Gain on disposal of property, plant and equipment
$
16,910,416
2,461,474
1,024,573
919,472
21,315,935
$
15,465,230
2,586,117
1,101,260
2,105,321
67,188
21,325,116
Expenses
Interest on long-term debt
Human resources (Note 22)
Amortization of property, plant and equipment
General and administrative (Note 22)
Maintenance and other expenses (Note 22)
Amortization of intangible assets
2,474,214
$
1,950,758
$
84,276,662
2,474,214
$
84,529,366
(2,203,462)
1,950,758
$
86,750,876
$
84,276,662
Excess of revenues over expenses and comprehensive income $
Retained Earnings, beginning of year
Correction of prior period errors (Note 2)
Excess of revenues over expenses and comprehensive income
Retained Earnings, end of year
6,138,396
6,065,104
4,203,712
1,576,419
1,241,511
149,216
19,374,358
5,959,440
5,134,563
4,438,298
1,698,410
1,461,821
149,189
18,841,721
The accompanying notes form an integral part of the financial statements.
34
Blue Water Bridge Canada
Financial Statements
Statement of Cash Flows
For the year ended August 31
Cash Flows from operating activities
Excess of revenues over expenses and comprehensive income
Adjustments for items not affecting cash
Amortization of property, plant and equipment
Amortization of intangible assets
Employee future benefits liability
Gain on disposal of property, plant and equipment
Foreign exchange loss
2009
(Restated Note 2)
2010
$
Changes in non-cash working capital items
Interest on short and long-term investments
Accounts receivable
Prepaid expenses
Accounts payable and accrued liabilities
Holdbacks payable
Deferred revenue
Net cash provided by operating activities
Cash Flows from investing activities
Proceeds on disposal of property, plant and equipment
Purchase of property, plant and equipment
Purchase of intangible assets
Investments
Matured investments
Investments purchased
Restricted assets
Matured investments
Investments purchased
Net cash used in investing activities
Cash Flows from financing activities
Funding received from federal government - infrastructure
Increase in long-term debt - bond principal - current portion
Decrease in long-term debt - bond principal
Net cash used in financing activities
Foreign exchange loss on cash held in foreign currency
2,474,214
$
1,950,758
4,438,298
149,189
110,987
8,092
7,180,780
4,203,712
149,216
610,191
(67,188)
21,853
6,868,542
746,989
(406,539)
62,260
1,732,930
3,038,138
221,154
5,394,932
12,575,712
538,330
569,709
(12,251)
2,362,896
1,355,877
(179,548)
4,635,013
11,503,555
(38,789,823)
(31,978)
104,340
(16,426,458)
(7,325)
50,772,002
(21,990,717)
41,850,304
(42,010,768)
4,137,679
(1,120,513)
(7,023,350)
3,003,239
(2,498,671)
(15,985,339)
2,426,451
188,867
(3,088,832)
(473,514)
177,318
(2,899,965)
(2,722,647)
(8,092)
(21,853)
Increase (decrease) in cash during the year
5,070,756
(7,226,284)
Cash, beginning of year
8,890,041
16,116,325
Cash, end of year
$
13,960,797
$
8,890,041
$
5,986,212
$
6,163,531
Supplemental disclosure of cash flow information:
Interest paid
The accompanying notes form an integral part of the financial statements.
35
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
1.
Authority and Objective
Blue Water Bridge Canada (BWBC), legally known as the Blue Water Bridge Authority, as
established by the Blue Water Bridge Authority Act (Canada) on May 21, 1964; as per Section 22,
BWBC is not an agent of Her Majesty in right of Canada. On April 26, 2002 BWBC became a
Crown corporation, and as such, is listed under Schedule III, Part I of the Financial Administration
Act and is not subject to income tax under the provisions of the Income Tax Act. In October 2007
the Minister of Transport, Infrastructure and Communities confirmed that the new operating title of
Blue Water Bridge Canada was approved and registered by the Federal Identity Program.
The Blue Water Bridge complex includes the Canadian portion of two international toll bridges
connecting Point Edward, Ontario, Canada with Port Huron, Michigan, USA. The westbound
bridge was completed in October, 1938 and the eastbound bridge in July, 1997. Under the direction
and guidance of the Minister of Transport, Infrastructure and Communities, the mandate of Blue
Water Bridge Canada is to operate, maintain and repair the Canadian halves of the two bridges,
approaches and structures.
The Blue Water Bridge Authority Act and section 6 of the Customs Act, require Blue Water Bridge
Canada to provide, equip and maintain, free of charge, adequate buildings, accommodations or other
facilities for the proper detention and examination of imported goods or for the proper search of
persons by customs and immigration officers.
2.
Correction of Error
During the preparation of the financial statements for the year ended August 31, 2010, BWBC
determined that an incorrect amortization rate had been used to calculate the amortization expense
for the Bridge-second span. BWBC had been using an amortization rate of 1% of the cost since the
Bridge-second span started being depreciated in the financial statements for the year ended August
31, 1997. The amortization should have been taken straight line over the Bridge-second span’s
estimated useful life of 75 years. The result was that BWBC was found to be applying an
amortization rate which was 0.3333% lower than required for each year that the bridge has been
available for use. As a result, BWBC has amended its financial statements for the year ended
August 31, 2009 as follows:
Previously
Reported
Balance Sheet as at August 31, 2009
Property, plant and equipment
Retained Earnings
$ 132,278,904
$ 86,679,285
Adjustments
Amended
$ (2,402,623) $ 129,876,281
$ (2,402,623) $ 84,276,662
Statement of Operations, Comprehensive Income and Equity for the year ended August 31, 2009
Amortization of property, plant and equipment
$ 4,004,551 $ 199,161 $ 4,203,712
Excess of revenues over expenses and comprehensive income $ 2,149,919 $ (199,161) $ 1,950,758
Note that the property, plant and equipment net book value and amortization expense as at August
31, 2009 were recorded as $132,764,408 and $4,153,767, respectively. In order to conform to the
current year’s presentation which show the intangible assets as a separate line item, the property,
plant and equipment net book value and amortization expense as at August 31, 2009 are
36
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
2.
Correction of Error continued…
$132,278,904 and $4,004,551, respectively. The effect of the increased amortization expense on the
Statement of Operations, Comprehensive Income and Equity for the year ended August 31, 2009
amounts to $199,161. The cumulative effect on the increased amortization expense for prior years
of $2,203,462 has been charged to Retained Earnings.
3.
Accounting Changes
a) Adoption of new accounting standards
Effective September 1, 2009 BWBC adopted the following new sections of the Canadian Institute of
Chartered Accountants Handbook:
Section 3862, Financial Instruments – Disclosures
This section requires expanded disclosure requirements regarding fair value measurements
including the relative reliability of the inputs used in those measurements and the liquidity risk of
financial instruments. The standard also requires disclosure of a three-level hierarchy for fair value
measurements based upon the transparency of inputs to the valuation of an asset or liability as of the
measurement date. The applicable disclosures required under this standard are included in Note
4(h). The accounting policy on financial instruments, as presented in Note 4(h), was updated to
include additional information on the three-level hierarchy.
Section 3064 Goodwill and Intangible Assets
Adoption of this standard replaces Section 3062, Goodwill and Other Assets. This standard defines
the recognition and measurement criteria for intangible assets and, in particular, for intangible assets
that are internally generated. The standard provides guidance for the recognition of intangible assets
including computer software that is not an integral part of the related hardware.
b) Future accounting changes
International financial reporting standards (“IFRS”)
In February 2008, the Canadian Accounting Standards Board (“AcSB”) confirmed that publicly
accountable enterprises will prepare their financial statements in accordance with IFRS for fiscal
years beginning on or after January 1, 2011. Since BWBC is considered a Government Business
Enterprise for the reason that it has the ability to sustain its current operations and generate
additional revenue as it deems necessary, then it will move to IFRS. With this in mind, BWBC is
set for an IFRS changeover date at September 1, 2011 with the first IFRS statements being issued at
August 31, 2012. At this time, a conversion plan has been finalized to reasonably determine the
impact of this anticipated accounting change on BWBC’s financial results and position. BWBC
intends to restate beginning balances of September 1, 2010 accordingly.
37
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
4.
Summary of Significant Accounting Policies
The financial statements have been prepared in accordance with Canadian generally accepted accounting
principles. Significant accounting policies are set out below:
a) Foreign Currency Translation
Foreign currency transactions and account balances are translated to Canadian dollars as follows:
At the transaction date, each asset, liability, revenue or expense is translated through the use of the
exchange rate in effect at that date. At the year-end date, monetary assets and liabilities are
translated into Canadian dollars by using the exchange rate in effect at that date and the resulting
foreign exchange gains and losses are included in the Statement of Operations, Comprehensive
Income and Equity in the current period.
b) Investments
Investments are held-to-maturity. The carrying amount for both short-term and long-term
investments is amortized cost calculated using the effective interest rate method.
c) Deferred Revenues
Deferred revenues are comprised of tolls paid in advance by passenger vehicle users and commercial
trucking companies.
d) Employee Future Benefits
BWBC provides post-retirement benefits including health care, dental care, employee assistance,
and life insurance to eligible employees and their dependents upon meeting certain requirements.
The obligation and the cost of these benefits are determined on an actuarial basis using the projected
unit credit method prorated on service and management’s best estimate assumptions. The discount
rate used to determine the accrued benefit obligation is based on market rates for long-term high
quality bonds. BWBC uses an August 31 measurement date.
The net cost consists of the actuarially determined benefits for the current year’s service, imputed
interest on projected obligations and the amortization of actuarial gains or losses over the expected
average remaining service life. Actuarial gains or losses are amortized over the employees’ average
remaining service life (16 years; 2009 - 14 years) only if the net actuarial gain or loss at the
beginning of the year is in excess of 10% of the accrued benefit obligation at that date. These
benefits are not pre-funded, resulting in a deficit equal to the accrued liability benefit obligation.
BWBC also provides defined contribution pension benefits to its employees. BWBC’s contributions
reflect the full benefit cost of the employer and they are charged to operations during the year in
which the services are rendered.
38
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
4.
Summary of Significant Accounting Policies continued…
e) Property, Plant and Equipment - Amortization
The net value of property, plant and equipment as presented on the Balance Sheet is cost less
accumulated amortization. Replacements and major improvements which extend the useful lives of
existing assets are capitalized.
Amortization rates based on the estimated useful life of an asset are as follows:
Bridge – first span
Bridge – second span
Truck Ramp
Buildings
Buildings & Booths identified for demolition
Buildings – leased Duty Free
Buildings – residential (including land)
Equipment
Equipment – computer
Property improvements
Vehicles and construction equipment
Straight line for 50 years
Straight line for 75 years
Straight line for 50 years
5%
Diminishing balance basis
Remaining life, straight
line, 1 to 10 years
5%
Diminishing balance basis
No amortization
10%
Diminishing balance basis
Straight line for 5 years
10-20% Diminishing balance basis
30%
Diminishing balance basis
Ten buildings and all booths are identified for demolition in accordance with the master capital
plan. Amortization has been accelerated to amortize the remaining net book value, respective of the
planned date of demolition. Buildings-Residential and the land on which they are situated are
purchased for their land values. No amortization on buildings-residential is recorded. The total
acquisition cost will be transferred to the land account when these buildings are demolished.
Construction in process is not amortized. When projects are significantly completed and put in use,
the costs are transferred to the appropriate asset account and amortization is initiated.
f) Intangible Assets
BWBC’s intangible assets are comprised mainly of acquired software. The software is recorded at
cost at the acquisition date, and it is subsequently carried at cost less accumulated amortization and
accumulated impairment losses. Amortization is recognized on a straight-line basis over the
estimated useful lives (five years). The estimated useful life and amortization method are reviewed
at the end of each fiscal year, with the effect of any changes in estimate being accounted for on a
prospective basis. Intangible assets are assessed for impairment during the annual review of
intangible assets’ useful lives.
g) Revenue
Toll and services revenues are recognized and recorded at the time the tolls are collected when the
vehicles pass through the toll lanes. Payments received in U.S. dollars are translated into Canadian
dollars based on daily exchange rates.
39
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
4.
Summary of Significant Accounting Policies continued…
Facility rentals revenues are recognized and recorded in the periods in which they are earned.
These revenues include lease payments received from tenants such as commercial custom brokers,
private coffee shops, and a duty free store.
Currency exchange department revenues are recorded and recognized at the time the currency
exchange transaction is completed. Payments received in U.S. dollars are translated into Canadian
dollars based on daily exchange rates.
Interest is recognized and recorded in the period in which it is earned. The primary component of
revenue in this category is bond interest.
h) Financial Instruments
Financial instruments are measured at fair value on initial recognition. The measurement of
financial instruments in subsequent periods depends on their classification. The classification of
BWBC’s financial instruments is presented in the following table:
Categories
Financial Instruments
________________________________________________________________
Financial assets held for trading
Cash
________________________________________________________________
Financial assets held to maturity
Short-term investments
Long-term investments
Restricted assets
________________________________________________________________
Loans and receivables
Accounts receivable
________________________________________________________________
Other Financial liabilities
Accounts payable
Holdbacks payable
Long-term debt
Financial assets held for trading are recognized at fair value on the balance sheet. Gains and losses
arising from the change in fair value are recognized in the revenues and the expenses for the period
in which they arise.
Financial assets held to maturity are measured at amortized cost. Interest is recognized using the
effective interest rate method and recognized under Interest and Sundry in the Statement of
Operations, Comprehensive Income and Equity.
Assets classified as loans and receivables are recorded at amortized cost using the effective interest
rate method, which usually corresponds to the amount initially recorded less any allowance for
doubtful accounts. Other financial liabilities are measured at amortized cost using the effective
interest method.
40
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
4.
Summary of Significant Accounting Policies continued…
All financial instruments measured at fair value will be categorized into one of three hierarchy
levels as described for disclosure below. Each level is based on the transparency of the inputs used
to measure the fair values of assets and liabilities:
Level 1 – inputs are unadjusted quoted prices of identical instruments in active markets.
Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly or indirectly.
Level 3 – one or more significant inputs used in a valuation technique are unobservable in
determining fair values of the instruments.
The BWBC financial instruments are for the most part categorized at Level 1 as the fair value is
measured at prices identical to instruments in active markets except for some accounts receivables
and payables which are valued at their stated invoiced or contractual dollar amounts.
i) Federal, Provincial and Municipal Government Assistance
Federal, provincial and municipal government assistance is recorded as a reduction of the cost of the
asset acquired when there is a reasonable assurance that the requirements for the approved funding
are met.
j) Measurement Uncertainty
The preparation of financial statements in accordance with Canadian generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements, and the reported amounts of revenues
and expenses during the year.
Employee-related liabilities and the useful life expectancy for property, plant and equipment are the
most significant items where estimates are used. Actual results could differ significantly from
management’s best estimates as additional information becomes available in the future.
5.
Cash
BWBC’s bank accounts are currently held at two Canadian chartered banks but will be transitioned to
one bank early in fiscal 2011. Cash (including on hand) includes US $2,041,724 (2009 - US
$886,190) which has been translated to its Canadian equivalent of $2,172,191 as at August 31, 2010
(2009 - $971,884).
41
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
6.
Investments
BWBC invests in the money market. The investments are mainly composed of secure and low-risk
government and corporate bonds, guaranteed investment certificates, treasury bills, and banker’s
acceptances. These investments are held-to-maturity in four separate investment accounts.
a) Short-term Investments
The portfolio is composed of Government and corporate bonds maturing in the 2011 financial year.
As at August 31
General Investments (Carrying amount)
Cash
Financial Institutions
$
Major Maintenance Fund (Carrying amount)
Cash
Government
Financial Institutions
$
Fair Value
General Investments
M ajor M aintenance Fund
2009
2010
$
$
Average Rate of Return - %
Average Term to Maturity - days
62
5,764,733
5,764,795
11
2,155,361
2,155,372
7,920,167
5,770,056
2,197,389
7,967,445
$
$
$
$
29,578,889
29,578,889
2,003,671
1,088,788
3,092,459
32,671,348
29,697,174
3,155,492
32,852,666
2.84
2.96
109.5
116.8
2010
2009
b) Long-term Investments
The portfolio is composed of Government and corporate bonds.
As at August 31
General Investments (Carrying amount)
Financial Institutions
$
Major Maintenance Fund (Carrying amount)
Government
Financial Institutions
$
Fair Value
General Investments
M ajor M aintenance Fund
$
$
-
3,340,906
3,340,906
3,340,906
3,574,673
3,574,673
$
2,761,144
$
3,198,662
2,158,193
5,356,855
8,117,999
$
$
2,854,089
5,635,295
8,489,384
Average Rate of Return - %
4.42
4.32
Average Term to Maturity - Years
3.08
2.92
42
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
6.
Investments continued…
The fair value of the investments was determined using quoted market prices.
The Major Maintenance Fund was established voluntarily by BWBC in order to provide funds for
the major restoration cost of recoating and painting of the bridges and to provide funds for any major
restorative bridge repair work. However, this portfolio has been and will continue to be wound down
as the investments mature in order to finance the more immediate projects and priorities within the
master capital plan.
7.
Property, Plant, Equipment and Intangible Assets
2010
Accumulated
Amortization
Cost
Property, Plant, and Equipment
Land
Bridges & Truck Ramp
Buildings
Buildings-booths
Buildings-leased Duty Free
Buildings-residential (including land)
Equipment
Construction in process
Property improvements
Vehicles and construction equipment
Intangible Assets
Computer Software
$
7,963,429
98,778,548
18,434,220
3,123,218
5,281,899
621,729
6,101,456
55,490,964
8,813,665
1,766,069
206,375,197
936,130
$ 207,311,327
$
17,272,521
10,883,178
2,626,054
1,877,997
4,214,932
6,226,034
1,473,124
44,573,840
567,838
$ 45,141,678
2009
Net
Book Value
Net
Book Value
$
7,963,429
81,506,027
7,551,042
497,164
3,403,902
621,729
1,886,524
55,490,964
2,587,631
292,945
161,801,357
368,292
$ 162,169,649
$
$
7,963,429
82,867,779
8,936,327
611,284
3,595,227
621,729
2,265,219
20,021,713
2,576,574
417,000
129,876,281
485,504
130,361,785
Cost and accumulated amortization of property, plant and equipment as at August 31, 2009 amounted
to $170,011,823 and $40,135,542 respectively and, for intangible assets it was $904,153 and
$418,649 respectively.
8.
Rehabilitation of the Bridge
The Blue Water Bridge is comprised of two spans. The original bridge (first span) was constructed in
1938 and underwent a major rehabilitation in 1999. The useful life of the rehabilitation is estimated
to be 50 years, at which time the bridge could be demolished or rehabilitated for a second time. The
second span was constructed in 1997 and has a useful life of 75 years, at which time it is estimated
that a major rehabilitation could extend its useful life for 50 years. Rehabilitations of a bridge span
can extend the life of the bridge indefinitely, making any eventual full demolition improbable. Such
major rehabilitation projects will be considered first and undertaken to avoid future demolition of any
bridge span.
The replacement cost for both Canadian halves of the bridge spans is estimated by an independent
engineering firm to total $154 million.
43
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
9. Government Funding
The federal government, a related party, announced funding for BWBC through the Economic
Action Plan initiative. BWBC receives funding for infrastructure projects from the federal
government which will reimburse BWBC 50% of the costs for the infrastructure projects up to $10
million (for total spending of $20 million). As at August 31st, 2010, $4,853,900 of eligible
expenditures has been incurred by BWBC on infrastructure projects; claims have been submitted
and federal funds received in the amount of $1,207,716 (for $2,415,432 expended). Infrastructure
work in the amount of $2,438,468 has been accrued up to August 31st, 2010 and an amount of
$1,219,234 is included in accounts receivable at fiscal year end for claims to be submitted for work
completed up to August 31, 2010.
10. Restricted Assets
In accordance with the Master Trust Indenture, BWBC has established a Debt Service Reserve Fund
and an Operating and Maintenance Fund
Debt Service Reserve Fund
On the issuance of the bonds, BWBC established the Debt Service Reserve Fund in the amount of
$4.5 million. The bond covenant requires that the Debt Service Reserve Fund be established at the
level according to the following:
Gross Debt Service Coverage Ratio
> 3.00
> 2.00 and < 3.00
< 2.00
Debt Service Reserve Fund amount
No amount
25% of the Debt Service Amount
50% of the Debt Service Amount
Gross Debt Service Coverage Ratio means, on any date, the sum of free cash flow for a twelve
month period and the revenue account balance (cash plus all investments plus credit facilities)
divided by the sum of the net interest amount and the total principal reduction amount for the twelve
month period.
Debt Service Amount means, on any date, the sum of the projected net interest amount and the
projected total principal reduction amount for the twelve month period commencing on the first day
of the month.
As at August 31, 2010, the Gross Debt Service Coverage Ratio is 8.68 (2009- 11.51).
In anticipation of lower coverage ratios in the future as a result of the drawdown in investments to
finance capital projects, a balance will be maintained at a level equivalent to that required as if the
Gross Debt Service Coverage Ratio was greater than 2.00 but less than 3.00. This would require a
minimum reserve fund of $2,221,545. As at August 31, 2010, the Debt Service Amount is
$3,470,933 (2009 - $5,161,365). Thus, a balance of almost $3.5 million will be voluntarily
maintained.
44
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
10. Restricted Assets continued…
2009
2010
Carrying amount
Investments
Government
5,161,365
$
3,470,933
$
3,470,933
$
5,161,365
$
3,510,839
3,510,839
$
5,226,966
5,226,966
Fair Value
Investments
Average Rate of Return - %
2.53
3.49
Average Term to Maturity - Years
1.39
1.63
Operating and Maintenance Contingency Fund
On the issuance of the bonds, BWBC established an Operating and Maintenance Contingency
Reserve Fund in the amount of $2.0 million. Thereafter the reserve must be at least equal to twentyfive percent (25%) of the Operating and Maintenance expenses incurred by BWBC. Operating and
Maintenance expenses do not include amortization or the interest on any borrowings. As at August
31, 2010, the required minimum balance is established at $1,875,482 ($2,027,189 in 2009). The
shortfall has been covered in September 2010 with an additional $500,000 investment.
2009
2010
Carrying amount
Investments
Government
$
Financial Institutions
Fair Value
Investments
300,397
$
1,532,245
1,483,870
1,388,984
$
1,689,381
$
3,016,115
$
$
1,712,588
1,712,588
$
$
3,085,343
3,085,343
Average Rate of Return - %
2.97
4.06
Average Term to Maturity - Years
3.10
1.78
The fair value of the investments was determined using quoted market prices.
45
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
11. Credit Facilities
BWBC maintains two separate credit facilities with a Canadian chartered bank in the total amount of
$30 million (2009 - $15 million). There is no outstanding balance as at August 31, 2010. The
maximum amount that BWBC can borrow is $125 million with Ministerial approval.
12. Deferred Revenue
Deferred revenue of $1,524,167 ($1,303,013 - 2009) represents the balance, at year end, for tolls paid
in advance by passenger vehicles of $551,156 ($415,450 - 2009); and commercial trucking
companies of $973,011 ($887,563 - 2009).
13. Employee Future Benefits
a) Pension benefit
BWBC has contracted an outside life insurance firm to operate and administer an employee pension
plan. Employees of BWBC may voluntarily join the pension plan, subject to eligibility requirements.
The pension plan, which is a defined-contribution pension plan, is funded on a money-purchase basis
with members contributing 6.5% of their annual earnings. In accordance with the plan, BWBC is
required to contribute an amount equal to the member’s required contribution. During the year,
BWBC’s pension contributions amounted to $196,691 (2009 - $238,180).
b) Severance Packages
BWBC initiated a cost reduction program in fiscal 2009. Nine employees accepted severance
packages in 2009 totaling $662,541 including benefits. One employee received a severance package
in 2010 totaling $61,155. As at August 31, 2010, $121,742 (2009 - $263,975) of the severance cost is
included in accounts payable and $22,650 (2009 - $223,664) recognized in the employee future
benefits liability.
c)
Other benefits
Other than the pension plan, BWBC provides post-retirement benefits to its eligible employees
through health, dental, life insurance and an employee assistance program. Benefit costs related to
current service are charged to the Statement of Operations, Comprehensive Income and Equity as
services are rendered.
The following table sets forth the status of the post-retirement non-pension related benefit plan:
46
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
13. Employee Future Benefits continued…
For the year ended August 31
2009
2010
Change in accrued benefit obligation
Accrued benefit obligation, beginning of year
Current service cost
Interest cost
Amendments (elimination of health care deductible)
Special termination benefits
Actuarial loss (gain)
Net cost for the year
Benefits paid
Accrued benefit obligation, end of year
$
$
3,808,250
137,632
263,773
14,000
577,740
993,145
(90,278)
4,711,117
$
$
3,974,949
173,908
246,822
24,801
(541,925)
(96,394)
(70,305)
3,808,250
The following table reconciles the unamortized net actuarial loss at the end of the year:
For the year ended August 31
2009
2010
Unamortized net actuarial loss
Unamortized net actuarial loss, beginning of year
Actuarial loss (gain) arising during the year
Amortization of actuarial loss for the year
Unamortized net actuarial loss, end of year
$
$
2,487
577,740
580,227
$
$
555,713
(541,925)
(11,301)
2,487
The following table reconciles the accrued benefit obligation of the benefit plan to the accrued
benefit liability recorded in the financial statements:
For the year ended August 31
Accrued benefit obligation
Severances Payable
Unamortized past service costs
Unamortized net actuarial loss
Accrued benefit liability
2009
2010
$
$
4,711,117
22,650
(13,125)
(580,227)
4,140,415
$
$
3,808,250
223,664
(2,487)
4,029,427
The last actuarial valuation was performed as at August 31, 2010. BWBC intends to have its next
valuation performed as at August 31, 2011. The accrued benefit liability is reported on the Balance
Sheet as: Employee future benefits liability.
47
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
13. Employee Future Benefits continued…
The following table shows the elements of defined benefits cost recognized during the year:
For the year ended August 31
2009
2010
Elements of defined benefit costs recognized in the year
Current service costs
Interest cost
$
Elements of employee future benefit costs before adjustments to
recognize the long-term nature of employee future benefit costs
137,632
263,773
$
173,908
246,822
401,405
420,730
875
11,301
24,801
-
Adjustments to recognize the long-term nature
of employee future benefit costs
Difference between actuarial loss recognized and
actuarial loss on accrued benefit obligation
Special termination benefit
Past service cost recognized
Defined benefit costs recognized
$
402,280
$
456,832
Assumptions
2010
2009
Discount Rate, accrued benefit obligation
Discount Rate, benefit cost
5.50%
6.75%
6.75%
6.00%
Estimated per capita claims costs escalation rates:
General inflation
Dental and vision care
Employee assistance program
2.70%
3.70%
2.70%
2.70%
3.70%
2.70%
For the year ended August 31
Weighted average assumptions as at August 31:
The assumed health care cost trend rate for the next 8 years is 8%, 6% thereafter (2009 – 8% for the
next 9 years, 6% thereafter).
48
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
13. Employee Future Benefits continued…
Sensitivity analysis
A one-percentage-point change in assumed health care cost trend rates would have the following
effects:
One Percent
Increase
Total of service and interest cost
Accrued benefit obligation
$
Decrease
$
102,165
915,323
(78,187)
(722,699)
14. Long-term Debt
On July 9, 2002 BWBC issued at a face value of $110 million, 6.41% Revenue Bonds, payable
semi-annually, Series 2002-1, due July 9, 2027.
Principal and interest payments for the next five years and thereafter are shown as follows:
Year
Principal
Interest
Total
Current
2011
$
3,088,832
5,797,346
8,886,178
2012
3,289,999
5,596,179
8,886,178
2013
3,504,267
5,381,910
8,886,177
2014
3,732,490
5,153,687
8,886,177
2015
3,975,577
4,910,600
8,886,177
Thereafter
73,611,072
33,023,058
106,634,130
88,113,405
54,065,434
142,178,839
Long-term
$
91,202,237
$
59,862,780
$
151,065,017
BWBC maintains a covenant with the Trustee and Bondholders that so long as there is any amount
payable under the Master Trust Indenture, or any Bonds outstanding or any obligations under the
indenture that:
a) The principal and interest will be duly paid on the due dates.
b) Insurance will be maintained in such types and amounts in accordance with sound business
practices and standards in the industry.
c) BWBC shall maintain its corporate existence pursuant to the Blue Water Bridge Authority Act
and maintain its existence as a parent Crown corporation under the Financial Administration Act
subject to its right to reorganize, merge or amalgamate in accordance with the Master Trust
Indenture.
49
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
14. Long-term Debt continued…
d) Except for borrowings arising as a result of movements in the termination values of swap
agreements and any purchase money obligations not exceeding $2 million in the aggregate at any
time, BWBC shall not create, incur, assume or otherwise become liable for any additional
indebtedness unless it is pursuant to a supplemental Indenture. As at August 31, 2010 BWBC has
no active swap agreement.
e) The aggregate of all borrowings, subordinated debt and purchase money obligations does not
exceed any limitations on the amount of borrowings outstanding imposed upon BWBC pursuant
to the Blue Water Bridge Authority Act.
f) Toll Rate Covenant – BWBC will take all lawful measures to fix and establish toll rates and other
charges so that:
The Gross Debt Service Coverage Ratio is equal to or greater than 1.25 with respect to each
Fiscal Year and that the projected Debt Service Ratio is equal to or greater than 1.00 with respect
to each Fiscal Year.
As at August 31, 2010, the Gross Debt Service Coverage Ratio (as defined in note 10) is 8.68
(2009– 11.51) and the Debt Service Ratio is 1.74 (2009 – 1.95). If the ratios do not meet the
preceding guidelines BWBC shall take all steps permitted under the Blue Water Bridge Authority
Act to increase toll rates as may be necessary to achieve such ratios in the next succeeding Fiscal
Year.
As a result of the provisions of Section 13 of the Blue Water Bridge Authority Act, the Government of
Canada is not liable for any borrowings by BWBC.
A discounted cash flow method, using a discount rate equal to the prevailing market rate of interest
for bonds having similar terms and conditions, was used to determine the fair value of the bonds. The
fair value as at August 31, 2010 is $105,593,990 (2009 - $107,875,013).
15. Facility Rentals
BWBC has entered into a long-term operating lease with The Blue Water Bridge Duty Free Shop Inc.
BWBC provides the building and the Duty Free Shop Inc. operates the commercial facility. The lease
has been renewed in 2009 for 7 years with the term of the lease ending on December 31, 2015. After
that, the Duty Free has the option of adopting two subsequent, consecutive renewal periods of 7 years
each at the discretion of the Duty Free Shop Inc. BWBC receives a fixed rent per month and
contingent revenues based on a percentage of sales.
16. Currency Exchange Department
BWBC operates a currency exchange department. The department’s primary activity is to convert
Canadian and American dollars for travelers. The Currency Exchange department generated net
income of $316,028 in 2010 (2009 - $226,457).
50
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
17. Contingencies
In the normal course of its operations, BWBC becomes involved in various legal actions. Some of
these potential liabilities may become actual liabilities when one or more future events occur or fail
to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable
estimate of the loss can be made, an estimated liability is accrued and an expense recorded in
BWBC’s financial statements. There are no outstanding legal actions against BWBC at year end
(2009 - none).
18. Commitments
BWBC has awarded construction contracts for the Customs/Brokers/Agricultural (CBA) Complex
totaling $64,798,794 (outstanding commitment $17,734,995) and for federal infrastructure projects
totaling $13,032,747 (outstanding commitment $8,178,847). Maintenance and other awarded
contracts total $1,498,018 (outstanding commitment $989,713). The outstanding commitment
amounts will be paid in full within the next year.
19. Capital Management
BWBC defines its capital structure as its retained earnings. BWBC is governed by the Financial
Administration Act and is not subject to any external capital restriction.
BWBC is not authorized to modify its financial structure without pre-approval by the Government.
BWBC must obtain authorization from the Government to negotiate any borrowings. As at August
31, 2010 federal approval has been provided for: (a) its existing bond issue payable; (b) borrowings
of up to $15 million for short-term working capital requirements, and; (c) borrowings of an additional
$15 million for the purpose of funding capital expenditures that were accelerated due to funding
received as part of the Gateways and Border Crossings Fund under Budget 2009: Canada’s
Economic Action Plan.
BWBC manages its equity by prudently monitoring its revenues and expenses, its assets, liabilities,
investments and financial transactions to ensure BWBC achieves its goals and objectives, whilst
remaining a going concern. BWBC’s objectives, polices and processes for managing capital are
unchanged since August 31, 2009.
20. Financial Instruments
a)
Financial Risk Management
All the following risks have no significant impact on BWBC’s financial statements.
i.
Credit risk:
Credit risk is the risk of financial loss to BWBC associated with the counterparty’s failure
to fulfill its financial obligations and arises principally from BWBC’s accounts receivable
and its investments in money market funds. BWBC is subject to credit risk on the value of
its accounts receivable $1,514,750 and on its investments $11,261,073. BWBC has
determined that the risk is not significant.
a) Accounts receivable
BWBC is exposed to credit risk from customers in the normal course of business. The
accounts receivable are net of applicable allowance for doubtful accounts, which is
51
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
20. Financial Instruments continued…
established based on specific risk associated with individual client and other relevant
information. Of the accounts receivable, $1,219,235 relates to funds expected to be
received from the federal government under the infrastructure program; $254,263 relates
to receivables from BWBC tenants and other receivables $41,252.
b) Investments
BWBC manages its exposure to credit risk arising from investments by following its
investment policy which limits BWBC’s investments to cash equivalents thereby
significantly lowering credit risk. The cash equivalents consist of units in money market
funds whose objective is to earn interest income while preserving capital and maintaining
liquidity. The sums are invested in treasury bills or other debt obligations of, or
guaranteed by the Canadian federal or provincial governments, Canadian chartered banks,
Canadian loan or trust companies or Canadian corporations.
ii.
Liquidity/Solvency risk
Liquidity/Solvency risk is the risk that funds will not be available to BWBC to honour its
cash obligations as they arise. BWBC manages liquidity risk through the management of
its cash and investments. BWBC has determined that the risk is not significant because of
the high quality of its investments and its formal financial forecasting mechanisms.
The BWBC liabilities as at August 31, 2010 are:
Carrying Amount
of Liability
Less than
3 to 6
6 months
Greater than
at August 31, 2010
3 months
Months
to 1 year
1 year
Accounts Payable
741,610
741,610
Accrued Charges
4,364,501
4,364,501
Accrued Bond Interest Payable
841,960
841,960
Accrued Salaries and Benefits
425,742
425,742
4,394,015
4,394,015
Construction Holdbacks
Bond Debt
91,202,237
101,970,065
10,767,828
-
3,088,832
88,113,405
3,088,832
88,113,405
BWBC is responsible for the retirement of $110 million, 6.41% Revenue Bonds, due July
9th, 2027. Bond covenants are in place to ensure adequate liquidity over the duration of the
bond issue. During this period of time, in the event temporary operating cash deficiencies
occur, resulting from the timing of capital expenditure payments, a $15 million credit
facility is in place. BWBC’s borrowing may not exceed $125 million. As per the Minister
of Finance’s approval of the borrowing plan, this line of credit is not to be used to cover
cash shortages resulting from operating losses.
Due to the requirement to finance the federal infrastructure program coupled with the
current decline in traffic volumes, BWBC was granted permission by the Minister of
Finance to put into place another credit facility for $15 million on a fixed rate, long-term
basis with periodic payments of interest and principal not to exceed a maturity of 25 years.
52
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
20. Financial Instruments continued…
It is possible that future financial results and required federal infrastructure priorities may
impinge or strain BWBC’s ability to satisfy existing bond covenants and require the
utilization of the existing line of credit or the utilization of additional long-term debt.
However, BWBC manages this risk by maintaining detailed cash forecasts, as well as
long-term operating and strategic plans. The management of liquidity requires a constant
monitoring of expected cash inflows and outflows which is achieved through a forecast of
BWBC’s liquidity position, to ensure adequacy and efficient use of cash resources. In the
event that future cash deficiencies are identified, BWBC has the authority through the
Blue Water Bridge Authority Act (Canada) to fix and charge tolls based on a pre-set
formula; negotiate with our chartered bank, and; coordinate financial remediation
solutions with Transport Canada.
In September, 2010, Standard and Poor’s downgraded its bond rating for BWBC to “A/Negative”.
iii.
Market risk
Market risk is the risk that changes in market price, such as foreign exchange rates and
interest rates, will affect BWBC’s income or the value of its holdings of financial
instruments. The fair value of future cash flows of a financial instrument will fluctuate
because of changes in market prices, whether those changes are caused by factors specific
to the individual financial instrument of its issuer, or factors affecting all similar financial
instruments traded in the market.
a) Interest rate risk
A variation in interest rates would not significantly affect investment income and would
not have a significant affect on the financial statements as all investments are held to
maturity. At this time, our bond debt interest rate is fixed and not likely to be converted.
Our $30 million in credit facilities remains unused. Thus, a variation in interest rates of
1% will have no effect on the financial statements at this time.
b) Foreign exchange risk
A variation in exchange rates from year-to-year would significantly affect toll revenue
income. The 12.5 per cent average strengthening of the Canadian dollar over the duration
of fiscal year 2010 produced a decrease in toll revenue income of $607,449 (2009 $515,492 increase in income). For BWBC’s USD cash holdings (Note 5) a one per cent
change in exchange rate would produce $20,417 gain or loss.
b)
Fair value
The carrying amounts of BWBC’s cash, accounts receivable, restricted assets and accounts
payable and accrued liabilities approximate their fair values due to their short term maturity.
21. Comparative Figures
Certain of the comparative figures have been reclassified to conform to the current year’s
presentation.
53
Blue Water Bridge Canada
Financial Statements – For the year ended August 31, 2010
Notes to the Financial Statements
22. Expenses
For the year ended August 31
Human Resources
Salaries and wages
Toll collectors
Administrative and office
Maintenance
Project management
Currency exchange department
Janitorial
Benefits
Health Insurance
Employee pension
Vacation pay
Employee health taxes
Sick pay
Employment insurance
Workplace Safety and Insurance Board
Uniforms and cleaning
Other
$
1,162,157
752,598
599,679
475,875
337,097
336,008
3,663,414
$
1,569,096
1,054,877
536,250
402,002
410,572
273,485
4,246,282
$
704,427
335,075
135,309
79,297
72,217
52,087
45,489
32,802
14,446
1,471,149
5,134,563
$
1,006,286
388,565
144,450
80,133
42,171
66,092
36,031
40,736
14,358
1,818,822
6,065,104
347,360
338,474
171,761
128,411
99,441
98,552
89,109
89,185
77,310
60,165
48,823
44,371
31,608
29,177
28,017
16,646
1,698,410
$
407,641
243,938
180,910
119,612
118,614
83,682
74,856
61,541
61,409
49,548
37,920
22,150
1,461,821
$
$
General and Administrative
Insurance
Municipal taxes
Accounting, audit and legal
Computer services and supplies
Stationary
Public relations
Consultants
Travel and entertainment
Bank charges
Telephone
Meetings
Bond fees
Conferences, seminars and training
Office and miscellaneous
Shipping and handling
Memberships
$
$
Maintenance and Other Expenses
Utilities
Bridge maintenance and inspections
Landscaping
Paving
Waste disposal
Buildings and booths
Other
Janitorial
Equipment
Fuel and vehicle costs
Shop supplies
Snow removal
2009
2010
$
$
$
$
$
350,369
275,693
195,628
72,347
97,507
113,853
89,842
66,594
57,618
58,033
37,094
41,754
28,763
42,615
26,521
22,188
1,576,419
399,957
152,727
198,738
28,897
100,185
8,104
128,881
39,278
58,956
78,082
47,706
1,241,511
54
1 Bridge Street, Point Edward, Ontario N7V 4J5 www.bwbc.gc.ca
1 Bridge Street, Point Edward, Ontario N7V 4J5 www.bwbc.gc.ca
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