Business

2016 Olympic Bid Raises Economic Concerns

By Geoff Bough

Medill News Service

CHICAGO (Medill News Service) ― Montreal, Athens, Barcelona and Sydney have at least two things in common.

They all hosted the Olympic Games -- and they all wound up in debt because of it.

In fact, almost all of the cities that have hosted the Olympics, both winter and summer games, have fallen into the red. Only Los Angeles in 1984 definitively came out ahead.

If going into debt is almost a foregone conclusion, then why would Chicago -- or any city, for that matter -- want to have any part in hosting the Olympics?

It depends on whom you ask.

Mayor Richard M. Daley wants an Olympics in Chicago in 2016, and members of the U.S. Olympic Committee are in town next week on a scouting exhibition. They're also visiting Houston, Philadelphia, Los Angeles and San Francisco.

While international recognition has always been trumpeted by Olympics supporters, there's more than that involved. Like money.

Jeffrey Humphreys, director of economic forecasting at the Terry College of Business at the University of Georgia conducted a study in 1995 with Michael K. Plummer, an Atlanta financial consultant, that broke down the economic impact that Atlanta would experience as a result of the Olympic Games from 1991 to 1997.

"It doesn't make any sense to measure the economic impact of the Olympics over a three-week time period," Humphreys said. For one thing, construction on necessary facilities begins years in advance.

Humphreys and Plummer estimated that Atlanta would stand to rake in somewhere in the range of $5.1 billion over the extended time period.

According to Humphreys, Atlanta may have done even better than that.

Humphreys said that estimates he and Plummer made in the study about ticket sales were too conservative, and that although operating costs were slightly more than predicted, it stood to reason that Atlanta would have made more than originally estimated in their study.

Atlanta, Humphreys said, tried to keep costs down by following the Los Angeles model of not building major new infrastructure.

Soccer, tennis and swimming events all took place at nearby universities and public facilities. Even structures that were built for the Games were designed to have a use after the Olympics. The Olympic Stadium became Ted Turner Field, where the Atlanta Braves now play, and the Olympic Village became dorms for Georgia Tech and Georgia State students. It was this thoughtful planning, Humphreys said, that saved taxpayers from being stuck with paying for one-time-use venues.

Economic experts agree that cutting infrastructure costs is critical to the hope of financial success with the Olympic Games, but not all agree with Humphreys' methodology or his results.

Victor Matheson, a professor of sports economics at the College of the Holy Cross, said that data produced by Humphreys effectively cooked the books for Atlanta. Matheson claims that even though the structures built had post-Games uses, the construction cost should have been included in the total for the Atlanta Games.

Another issue is the revenue produced as a result of hosting the Olympics. Humphreys said he believed that although the cost of hosting the Games is rising, so too are revenues; Matheson does not see that as being the case.

"I would be very surprised if revenues were increasing at the same rate," Matheson said.

That opinion is shared by University of Chicago senior lecturer of social sciences Allen Sanderson, who believes that the cost of putting on an Olympics is spiraling out of control.

"The way you get the Olympics is by throwing money at the Olympic Committee," Sanderson said.

A typical host city budgets $1.5 billion for the Winter Olympics and $3 billion for the Summer Olympics, but the current trend seems to suggest that costs are increasing. London, which won the most recent competition and will host the 2012 Summer Games, has an estimated budget of more than $4 billion. New York, by comparison, which lost its bid for the Games, was eventually determined to be considering a budget above $7 billion.

Observers estimate that Beijing, which will be hosting the 2008 Summer Games, will be spending nearly $30 billion.

Of even greater concern is the looming cost of security in the post-9/11 era, which is something Atlanta did not need to address in its planning, despite the fact that the Games were bombed.

Sanderson said that Athens spent $1.5 billion on security for the 2004 Summer Games; he predicted that number only increases for future Games.

Despite the advance scrutiny, there was never a thorough post-Olympics economic assessment of the Atlanta Games by Humphreys and Plummer or Atlanta media, according to Dana White, professor of Urban and American Studies at Emory University.

Salt Lake City supposedly made a miniscule profit in 2002, but Matheson said that was because security costs were paid with federal money and was not factored into Olympics costs the city bore.

"There's a lot of creative bookkeeping with the Olympics," Matheson said.

The lack of information on the economic impact of an Olympics after its completion is nothing new. Every Olympic city presents thorough studies touting how much money the Games will make a year or two before they begin.

None, with the exception of Los Angeles, have completed any post-Olympics studies for one very clear reason, according to Matheson.

"There's no incentive to do a report that will make you look bad," he said.

The economic impact of the Olympics is particularly important with Chicago in the mix for 2016.

Chicago is expected to put together an Olympics exploratory group that will talk with past host cities.

Although Humphreys believes that Chicago has a decent infrastructure in place to host the Games, others are highly dubious of a Games in Chicago.

Sanderson said that Daley made a huge mistake in renovating Soldier Field, which took place, largely, with public money. If Chicago hosts a Games, it would need to build an Olympic Stadium -- Soldier Field is too small -- and it is unlikely, so soon after that project, that the public would want to foot the bill for another stadium.

This is almost exactly what happened in New York, where it was proposed that a $2 billion Olympic Stadium would be built in Manhattan, mostly with tax money from the state of New York. The proposal died in the New York state legislature, effectively eliminating New York's chances of hosting the Games.

Sanderson also said that there are only two cities in the United States that have the ability to effectively host the Games: Los Angeles and Boston. The reason: Athletic facilities available through universities in the area.

Dick Simpson, a professor of political science at the University of Illinois at Chicago and a former Chicago alderman, said ideas have been floating around that Memorial Field at the University of Illinois at Urbana-Champaign could be an Olympic stadium. Simpson said that the idea of getting 70,000 people a day out to Urbana, located about 135 miles south of Chicago, even if it were on a proposed high-speed rail line, would be impractical.

South Bend, Ind., home to the University of Notre Dame, and Milwaukee, home to Marquette University, University of Wisconsin-Milwaukee and several other smaller universities, are two other cities that have been mentioned by Daley as potential satellite site for events if Chicago were to win the Games.

If the practical considerations are problematic, some wonder why Daley is pursuing a Games for Chicago.

Simpson said that Daley is trying to create a legacy. Daley, he said, does not have much to lose by going after the Games, since he is unlikely to be mayor by then.

"If Daley works hard and looks like he cares, then win or lose he looks good," Simpson said.

If Chicago does win the Games and they go poorly, for whatever reason, Simpson says that will be the sitting mayor's problem, not Daley's.

"It's easier for Daley to be doing what he's doing now than if he were mayor in 2016," Simpson said.

Another ulterior motive for Daley seeking the Games, Simpson said, could be purely political. Both Simpson and Sanderson said that the Olympics would be a goldmine of contracts, something that Daley cronies could be in line to profit from.

Sanderson went even further, saying that he considers the potential Olympic bid as a way to get voters' minds off of the Hired Truck scandal.

In the end, however, exorbitant costs surrounding the proposition may simply force Chicago not to bid. It is believed that the IOC, which used to only accept one bid per country, may soon begin allowing bids from any city hoping to win the Games, meaning several U.S. cities could vie for the same year Chicago seeks to be host.

Chicago could be competing against as many as 20 cities worldwide for the rights to the Games.

Matheson sees this scenario as tremendous for the IOC, but a nightmare for
bidders: He said bidders are likely to promise more and more expensive facilities and venues to win the Games.

For Matheson, the answer is clear.

"The best thing for Chicago is to not be selected."

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