The Price of Glory

olympics

Well, the Sochi Olympics are in the history books and the Russians bested us in the medal count.  Actually they tied us for gold if you consider an American really won two of their medals.  Not that I begrudge Vic Wild his just desserts, after he was forced to join the Russians when the US cancelled the alpine snowboarding program in which he excelled.  It’s actually quite American in spirit to work around a bureaucracy to achieve one’s goals and aspirations, though it’s a shame he didn’t do it for us.  The Ruskies paid big money for that medal, and for the games themselves.

The figure most often bandied about is $51 billion.  For some perspective, that’s a few billion more than the state budgets this year for Delaware, South Dakota, Mississippi, Montana, New Mexico, Oklahoma, West Virginia, Wyoming, and Vermont – combined.  While the real number is likely lower than $51 billion, it is fair to say at least half that figure was borne by Russian taxpayers.

Last year, the United States Olympic Committee ruled out bidding for the Winter Olympics anytime soon, choosing to focus instead on bidding for the 2024 Summer games.  At least seven American cities are seriously considering a bid, and the decision will be made soon.  The Summer games are generally cheaper than the Winter ones, but the numbers are still staggering.  Add to that the fact that the costs never seem to go down, and always seem to go up – often more than double.  That’s because there is so much wishful thinking and accounting when the city bids are made.

The budget for the London’s Summer budget was about $4 billion, but came in at over $15 billion.  Beijing said they spent about $15 billion, but the real number there is somewhere in the mid $40 billion range.  Rio de Janeiro will host the 2016 Games.  Last month alone, they upped the budget by 27%.

What does this mean in terms of a bid for an American Olympics?  Well, first of all, whatever you hear about the budget for the games, don’t believe it.  Think about doubling it…or more.  “The games overrun with 100 percent consistency.  No other type of megaproject is this consistent regarding cost overrun. Other project types are typically on budget from time to time, but not the Olympics.”  That’s what two Oxford University professors demonstrated.  They concluded: “The data thus show that for a city and nation to decide to host the Olympic Games is to take on one of the most financially risky type of megaprojects that exists, something that many cities and nations have learned to their peril.”

The other problem often seen with the host cities is that the costs don’t end with the Games themselves, but continue on well into the future to upkeep and maintain the structures built to house the exhibitions.

Looking back at recent past hosts, the results are a mixed bag, but often not pretty.  It costs a great deal of money to maintain these large infrastructure projects, so there needs to be a viable ongoing revenue stream for them not to turn into an albatross for the area.  The Olympics are often sold to cities and by cities as a boon for tourism and development lasting well beyond the Games themselves, and constituting financial benefits that outweigh the costs.  But the numbers don’t really bear that out, and according to this scholarly analysis of recent Olympic Games’ economic impact on host cities/areas, “We couldn’t find any difference in terms of building permits, tourism, anything before or after.  If you masked the name of the cities, you would not be able to tell which of these two cities had the Olympics and which did not.”

It seems one of the keys to making a bid a somewhat reasonable proposition for host cities’ taxpayers is not building too much new infrastructure.  To build up a small place like Sochi to accommodate the Games makes little or no economic sense considering the likelihood that people will not continue to use the facilities in numbers sufficient to support the outlay.  On the other hand, if the games are held in a place that already has many venues, hotel rooms, and transportation options, the numbers become more reasonable.

Bidding cities should not go forward with wild plans for new venues and construction knowing these costs will weigh down the taxpayers for a generation or more.  Furthermore, knowing the troubles besetting host cities post-Games, the USOC should not select a city bid unless they are already well situated with the necessary infrastructure.  For example, Tulsa surely would be left with dire problems if they proceed with their plans to host the Summer Olympics in 2024.  Yes, that’s Tulsa, Oklahoma.

As University of Chicago sports economist Allen Sanderson economist said, “We do lots of things that don’t turn a profit.  We own dogs. We have boats. Those things lose lots of money, but we know it.”  There is perhaps no easy way of measuring civic pride, the lifelong benefits of motivating our youth into healthy and beneficial sports, and the potential regional upside to a well managed games.  These are all viable considerations.  Not saying American cities shouldn’t bid for the Olympics, but the cities and especially the taxpayers ultimately responsible for such huge outlays must go into this with eyes wide open.