Friday, July 3, 2009

The Olympics Financial Time Bomb

Crain's Chicago Business, in this week's issue has very helpfully clarified the point that anti-Olympics activists have been trying to get across to the entertainment-obsessed moron supporters of the idiotic Olympics 2016, which is, in short, that we are being lied to about the cost of the games to the public, that they will be vastly more costly than advertised, and that the public will bear most or all the costs, inasmuch as Chicago must pledge to cover any costs that the private sector won't.

First, the costs that the supporters admit to keep mounting. First, the games were to cost only $700 million at the most. Then, the costs were to be capped at $2 billion or so, never mind that they ended up costing Bejing over $40 Billion, and London regrets its decision to bid for the 2012 games because the costs have run over $20 billion to the city so far. Now, according to Crain's, "With as many as 3,000 units, the proposed South Side housing complex is the single costliest item in the $4.8 Billion Olympic budget. Chicago expects private developers to pick up the construction tab, betting that they'll profit by converting the buildings to apartments and condominiums afterwards."

HUH? I mean, but the last damn thing that Chicago developers want or need is 3,000 more condos and apartments to sell or rent to a sinking midde-to-upper middle-income population in the most glutted real estate market in history , in the worst economic downturn since the Great Depression. Does anyone seriously believe that developers will want more inventory than they already have? Does anyone really believe that the Village will not be built at the expense of the taxpayers, and at the expense to the 10,000 or so poor people whose lives will be disrupted as they are forced out of the Washington Park area to make room for the games? Chicago is glutted with unsold condos, many of which are upper-bracket units in new highrises in south Streeterville, the Near North Side, and other prime neighborhoods. The city is awash in condo foreclosures. The South Loop is an absolute disaster area comparable to Miami. But, according to the supporters of the bid, developers here will just leap at the chance to develop more condos and apartments, and that buyers will be lined up to buy or rent

Did anybody tell Daley about all this, and that we're in the middle of the unwinding of the biggest credit swindle that was ever foisted on humanity in the history of the world? We are only one leg down, and there are more foreclosures, developer foreclosures in front of us than behind us, if the record number of Notices of Default (the first stage of foreclosure) is any indication. And these will be much bigger defaults, for the commercial credit is just beginning to unravel, and the shuttered shopping malls and half-completed apartment and condo developments are stacking up allover Chicago and its suburbs.

Will all these bankrupt or struggling developers who are already up to their ears in all this crap be willing or able to finance the construction of Olympic Village? And, anyway, developers don't expect to have to support stuff like this. They expect to be supported by stuff like this. They expect to be guaranteed against business risk by TIF districts and tax abatements and other crony inducements. Anybody who thinks that private developers, if any remain who are solvent, are going to volunteer to pick up a tab that the city has already pledged to meet, is too naive to be let out alone at night.

Philip Owen, former mayor of Vancouver, is quoted. "You'd better get your checkbook, " he says, "you're going to need a lot of cash. There are always a lot of surprises." Vancouver is another city that regrets having bid the games.

Daley has decided to provide a blanket guarantee to cover operating losses incurred by private developers and businesses for the 2016 games, a decision few of our aldermen disputed and one that most of the real stakeholders- the taxpayers of Chicago- had no voice in. So much for all the assurances that this event won't cost the taxpayers a dime. Given that funding for new commercial development has collapsed and that the work0ut of the trillions of dollars of bad debt sitting on the books of failing banks will probably take another five years at least, and that most of it will never be recovered, it seems unlikely that any developer is going to be able to get financed for a risk like this, and that the public will surely be picking up the cost.

At this time, 70% of the residents of Chicago support the bid, according to polls. That's no surprise. American people are very childish and love big spectacles and love feeling like they live in the most important city on the planet, and, like most children, do not count the costs, or connect the dots between massive financial commitments reaching far into the future, on top of an already strained city budget; and our escalating taxes and fees, our hostile business climate and the continuing exit of businesses from the city to places where they are obstructed less and taxed less, and the continuing deterioration of lifeline services such as police protection, public transit, and infrastructure maintenance.

And this is not the only massive project Daley is trying to shove down our throats. The north lakefront infill with an extension of the outer drive and the construction of a marina in Edgewater or Rogers Park, is still alive. This is something Daley has wanted for a long time, and he's not about to be deflected from it by the vehement opposition of residents in affected neighborhoods of Edgewater, Rogers Park, and Evanston, nor do considerations such as the decreasing number of boat owners and the effect of a marina on lake pollution, weigh with him and his supporters; nor does the minimum cost of $400 million.

Daley and our aldermen are pledging away the money we will need to maintain and rebuild our decrepit infastructure, fund our undermanned and outgunned police force, and otherwise maintain the services we need in order for the city to function and its denizens live decently and safely on a day to day basis- all for unnecessary "vanity" projects and grand circuses that few of our citizens will be able to even attend, let alone capture any economic benefit from. The economic benefits will accrue to the developers and crony businessmen who will be guaranteed against all normal business risk.

There is not much time left to topple this inane and hideously costly project. We who oppose this project need to get busy, and apply pressure not only to our local pols, but to the people who run the games, such as Prince Albert of Monoco, who is one of the members of the International Olympic Committee. These people need to know that Chicago has neither the money nor the infrastructure to support this event.

And so do our leaders and our citizens.

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