Saturday, December 6, 2008

Nix the 2016 Olympics

Is the City of Chicago broke enough without committing $2 billion or more to another idiotic and disruptive exercise in empty symbolism and monument- building?

If New York City doesn't want the Olympics, should we consider whether we really want it?

And just exactly what will the city gain from hosting this 8-week extravaganza with the attendant security risk, and the disruption and displacement of thousands of residents from the area around Washington Park?

The cost alone ought to make boosters pause. Chicago is in poor case to front the projected $2 billion the event will cost, which would mean a pretty steep net loss to the city, for revenues from ticket sales are projected to be about $750 Million.

However, the estimated cost is most likely a very conservative estimate of the actual costs involved. The experience of other cities hosting the event is very instructive. Tessa Jowell, the minister in charge of the London 2012 Olympic Games, has admitted that it was "a mistake, in light of the current recession", to have bid for the games, and that costs are far exceeding original estimates. The cost has, according to Jowell, risen almost four-fold, to 9.35 Billion pounds, or approximately $20 Billion. Bejing fared much worse with its 2008 games, which not only cost more than $40 Billion, but occasioned a massive diversion of water from the provinces, causing widespread crop failures in water-short,poverty-stricken rural provinces.

The London games will not take place for another four years, yet the costs continue to mount, and during the worst ecomomic downturn in 75 years. Given our mayor's penchant for monument-building projects that virtually always overrun their costs estimates and siphon much-needed funds from lifeline services such as our underfunded and steeply undermanned police department, and decrepit public transit and essential water, sewer, and road infrastructure, we can pretty well figure that the expenditures on the Olympics will cause steeper shortfalls, with potentially disastrous results, in our necessary municipal services and structures. We need urgently to consider whether an open-ended financial commitment to this immense vanity project is in order given our current economic situation, especially since it so closely parallels the debacle of 1929 and ensuing Great Depression. Falling personal incomes, failing businesses, and mass layoffs will probably continue for quite some time, and we will be severely challenged to meet minimal public needs from falling tax revenues. All public expenditures will have to be carefully weighed, and whatever is not essential to maintain our muncipal services at a level that assures the safety and basic well-being of its citizens and businesses, will have to be tabled.

Well, counter the boosters, the games will boost tourism and enrich city businesses. My first response to that, is: at whose cost? Will the taxpayers at large be soaked once more to provide profits to a few business concerns? Are the taxpayers not being soaked enough through the city's 165 or so TIF districts in order to provide lavish profits to a few crony businesses?

However, it appears, from the experience of Atlanta, that the event can result in a net loss of tourism and revenues to tourist-related businesses. A 2003 study by Coates and Humphrey concluded that "building new sports facilities and attracting new professional sports teams did not raise income per capita or total employment in any US city." In his excellent article, Estimating the Costs and Benefits of the Olympic Games:What Can Bejing Expect From Its 2008 Games?, Jeffrey Owens describes the disappointing economic results of the 1996 Atlanta, Georgia games:

In reality, data and anecdotal evidence strongly suggest the Olympics had a significant crowding out effect on the rest of the tourism industry. Table 3 shows convention attendance in Atlanta, which had been increasing steadily over the previous ten years, fell ten percent from 1995 to 1996. hotel occupancy rates fell from 72.9% in 1995 to 68% in 1996 despite the Olympics. Macroeconomic indicators in Georgia and Fulton County show no discernible break in the pattern of per capita income growth or unemployment rates (State of Utah 2000). Due to the disruption caused by the Olympics, hotels and restaurants that would be expected to benefit from increased tourist traffic were actually hurt. "In other parts of town, many hotels and restaurants reported significantly lower than normal sales volume during the Games. Even shops and resorts in areas up to 150 miles away reported slower than normal business during the summer of 1996" (French and Disher 1997, p. 390).

Mr. Owen goes on to remark:

Along with crowding out on the demand side, local businesses and workers must also deal with temporary entry on the supply side. Although the Atlanta economic impact report makes no mention of entry by either workers or firms, the Atlanta experience serves as an example of how entry can bring into question if area residents actually benefit from growth in the tourism sector. The Centennial Olympic Park in downtown Atlanta served as the focal point for entry of corporations who sponsored the Games. To some extent the Olympics in Atlanta were self-contained. Entry of corporations and workers from outside the Atlanta area made the Olympics an economy unto themselves. Much of the income would go to firms and workers who are not permanent residents of the local economy.

Lastly, consider the terrorism risk. Chicago got lucky in the 911 attack. The 911 terrorists had a much bigger day planned than what they were able to accomplish, for the Sears Tower was on their list of targets, and only the immediate closure of all airports in the country saved this city. Security will have to be a major obsession at the games, given Atlanta's experience, and the known threat that exists at this time. The Games have been so politicized and are so laden with symbolic value that they are a very appetizing target for terrorists.

Whether considered in the light of its cost to the taxpayers, the security risk involved, the disruption of the lives of thousands of residents in the affected area and their inevitable displacement, or the negative return on investment that most cities hosting the games have experienced, the Olympic Games are a costly and unjustifiable vanity.


Because of the lenght of the URL links to articles quoted here, I didn't link them in the article but am posting the links below.

The title of this post links to a series of articles examining the Chicago 2016 Olympic bid, by Daniel Honigman. Dan's website is http://danielhonigman.com. He has posted an entire series of articles discussing the costs and benefits of the 2016 Chicago Games.

Jeffrey Owens, Estimating the Cost and Benefit of Hosting Olympic Games: What Can Bejing Expect From Its 2008 Games? is at http://findarticles.com/p/articles/mi_qa4127/is_200510/ai_n15705690/pg_1?tag=artBody;col1


Nudge said...

Great post .. and glad to see that people are aware of the Olympic events being something other than the usually-assumed free money showering onto the metro area hosting the games.

The North Coast said...

Hi,Nudge. Glad to see you here.

Yeah, people need to learn that there's no such a thing as free money. Everything has to be paid for.