Saturday, August 8, 2009

Burned by the Torch:Why Chicago is Better Off Without the 2016 Olympic Games

A number of months ago, well-known Chicago columnist Stephen Chapman published an article in Reason Magazine discussing the negative aspects of the 2016 Olympic Games, notably the cost to the public till.

This past Wednesday, the Olympic Bid Committee appeared at the Rogers Park Branch of the public library to deliver their spin on the games. About 150 residents of Rogers Park and neighboring areas showed up, and the mood of the crowd was overwhelmingly skeptical, with most people present expressing deep misgivings about the costs and benefits to the public of this short-lived Vanity project, and I was pretty much with the crowd in my doubts that the costs outlined by the bid committee were a correct representation of the costs pursuant to hosting this multi-week circus.

That we were not told the whole truth and nothing but the truth was pretty obvious. For one thing, if all cost overruns are insured, then why was it necessary for the City of Chicago to pledge to cover all losses that may be incurred by private developers? Do we already have enough failed private development whose losses are being born by the taxpayers?

The figures were vague and unspecific. For example, we are told that this event will create 31,000 jobs. If so, how many of these jobs will go to local residents, and how many will go to people who travel to Chicago specifically to work the Olympics? How many of these jobs will be permanent? What kind of jobs are they and what kind of wages will they pay? Likewise, how many local businessmen will score lucrative contracts vs. out-of-town concerns, and just how much opportunity is there for businesses that are not cronies of Daley?

The Atlanta experience is instructive. 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.

So much for Atlanta Mayor Shirley Franklin's cheery claim that "there were no negatives" from the Atlanta Games. She's forgotten a few things, clearly, and notable among them was the bombing that occurred there during the games. So much for the claims of the Committee that the games were profitable in Atlanta and Salt Lake City. The accounting involved clearly leaves out many of the costs, notably those that are not borne by the game promoters but by the taxpayers simply as a result of having to meet the security and infrastructure needs of a temporary event and having to pay for projects pursuant to it that would not be needed and could not be justified by the city's everyday needs.

The speakers on hand Wednesday of course forbore to mention the experiences of Bejing (2008), Vancouver (2010) and London (2012). Vancouver and London leaders frankly admit that they wish they had never bid the games, for the associated costs to these cities have mounted astronomically, and all three have been stuck with sunk costs in the tens of billions for both public buildings and money-losing private development pursuant to the games.

None other than Republican Mitt Romney, former Republican presidential hopeful and CEO of the 2002 Salt Lake City Games, told the Vancouver Trade Council that "the Olympics generate no economic gains for a host city. He told them that there is no economic reason to hold the games - only patriotic reasons. He said that spikes in tourism are balanced by residents leaving the region for the duration of the games and a depression in tourism following the games."

Yet, we were told at Wednesday's meeting that the Salt Lake City Games operated profitably. Well, perhaps they did... but who, exactly, profited? Not the taxpayers of Salt Lake City, for a fact.

Vancouver's Chris Shaw, professor in the Department of Ophthalmology at the University of British Columbia and is one of the organizers of and spokesperson for 2010 Watch and a member of the Olympics Resistance Network in Vancouver, and author of Five Ring Circus: Myths and Realities of the Olympic Games, states that the costs to Vancouver of hosting the games have gone completely through the roof. He says:

"The costs have gone through the stratosphere. It's $7 billion so far - that we know about. The security costs alone will be $1 billion. We have taken on massive debt that will probably take 30 years to pay off. Montreal, which hosted the 1976 Summer Games, retired its debt in 2006. The environment has suffered - with over 100,000 tress cut down, mostly old growth and the games are estimated to pump out an overall increase in carbon dioxide of 5% over current levels. There will be 15,000 soldiers on our streets next year with massive surveillance programs already under way. There will be cameras on every street corner with face recognition software and voice recognition software for the phone lines. We are facing a freaking nightmare for civil rights." [Chris has written extensively about the criminalization of poverty and homelessness that has become a new policy for Vancouver]"

Additionally, the Committee did not discuss the cost of private investments that the city has pledged to cover, and infrastructure improvements that are not the ones that the city needs the most, but are necessary only to accommodate the million or so game attendees who are expected to descend upon the city. The Committee also has a strange idea of what constitutes an economic "benefit", for they mentioned among the benefits at least one new hotel. Now, that is just what this city needs, another hotel that will be substantially vacant after the 8-week event ends and whose losses our taxes are pledged to cover. The cost of that hotel will almost surely be born by Chicago taxpayers, for the local hospitality market is already glutted with half-empty hotels as the economy deteriorates, and hotels built specifically for the 2016 event will only add to the glut and run a substantial risk of being permanent money-losers. Worse, there are numerous indications that the American economy will be worse by 2016, not better, in spite of the Happy Talk dispensed by television financial pundits and their blather about "green shoots" and rising home and auto sales due to tax-funded incentives. For looming ahead is the wave of commercial defaults for failing shopping malls, office parks, and hotels that is about to wash over us; there are $3.5 Trillion worth of commercial loans out there for properties that are shuttered or half vacant. This second wave of financial disaster will leave our economy prostrate for many years after, and we can safely assume falling tax revenues and greater demand for tax-funded bailouts.

Among infrastructure improvements planned to meet the transportation needs of the event is an express rail line between downtown and O'Hare, which is presumably what the $300 Million-plus Block 37 El Superstation is all about. Aside from the fact that work has completely stopped on this station and the hundreds of millions spent so far just so much money down the drain, there is completely no local need for an dedicated express train to either airport, as both are well-served by existing rail lines. Worse, funds are diverted from the cross-town rail lines and connector lines that are badly needed to make the city fully accessible without a car, for the city as a whole is woefully lacking in adequate public transit, and worse, there is talk of eliminating essential "owl" service on the Red and Blue rail lines. The mayor who is so obsessed with making Chicago a "world class" city doesn't realize that once you eliminate your all-night transit, your city starts to die, and quickly; eliminating this service would considerably reduce the liveability and safety of the city, and the game attendees could arrive in a town curiously drained of vitality with unsafe downtown streets and an air of neglect and malaise, as Chicago's 24/7 accessibility and vibrant night life die in tandem with each other.

The El Superstation and the airport express are two costs that were not mentioned by the committee, mainly because these projects are not their business, but fall directly to the city and to the taxpayers.

Unfortunately, the Olympics has seized the imagination of most of the citizens of this city, who, like most Americans, tend to believe whatever Happy Talk they're fed, and who are totally in the grips of a delusional Disneyland-entitlement mentality. Like most other Americans, Chicagoans tend to be very image and entertainment-obsessed at the expense of mundane economic realities, and like most of their countrymen and women elsewhere, are very poor at reckoning the end costs of feeding their delusions and vanity, as the credit rampage of the past 10 years has shown. And, like most struggling common folk in the failing empires of the past, they will, in the absence of the truly miraculous affluence and success this country once owned, settle for a glittering fascimile thereof, just like the about-to-be-unemployed yup who spends her last $1000 worth of credit on a designer handbag or a downpayment for a new BMW, in the hopes that expensive bling will miraculously restore the wealth and stability that made it possible to begin with.

Chicago did not grow wealthy and great by means of expensive vanity projects. These are the result of wealth, not the cause. We need to earnestly set to work making Chicago truly hospitable to all legitimate business, mostly the manufacturing that no country can know real prosperity without, and that made this city one of the country's foremost industrial powerhouses in the last century and that generated the wealth that we've been squandering ever since. The first step in the arduous process of rebuilding the Chicago and Greater Illinois economies for economic sustainability and genuine prosperity is to reign in out-of-control public spending, what task would seem to be urgent given the current financial difficulties that Chicago and the State of IL are experiencing.

Most of all, we need to quickly get it through our heads and those of our leaders that you do not cure bad debt and gaping public deficits by incurring more debt for unnecessary vanity projects that will bring very little long-term benefit, if any, in return for their stratospheric costs to the public in both tax funds and disruption.


consultant said...


Here in Atlanta, there are few signs the Olympics were ever here. The main stadium was cut in half and turned into the "new" Braves baseball field. The beach volleyball venue, about 15 miles south of Atlanta, is still available, I think. Centennial Park, where the bomb went off, is still there. And recently there has been a big fuss about the tennis center, in Stone Mountain (about 10 miles east of Atlanta). This is a full blown "world-class" 12 court tennis complex, with seating for thousands, that no one wants to take care of. The county that it sits in, Gwinnett, wants to tear it down. They would, but they are also broke.

The sad, despicable fact is that Billy Payne (the Chief Olympic Guy) and his crew didn't really care about the Olympics, the economic impact or its legacy. It was just a real estate deal. A way to recalibrate the politics of Atlanta so some developers could get their hands on some choice pieces of Atlanta real estate. That's all.

Of course before the games, there was all this happy talk from the Atlanta Olympic Committee about legacy, economic benefits and all the rest. But as soon as the games were over, that was all history. It was clear the Atlanta Olympic folks really didn't give a damn about any of that stuff.

Other than converting the main stadium into the baseball field, and turning Centennial Park over to the city, there were NO PLANS for the future use and maintenance of the many remaining facilities.

13 years later, there still aren't any plans.

Chicago-welcome to our world.

The North Coast said...

Thank you for your observations on the results of the games in your city.

I hope other people from other cities similarly burned will chime in, especially the rueful political and business leaders who lobbied hard to get the games in their cities and are now very sorry for it.