Monday, January 20, 2003

Time to start worrying about Olympic cost risks
By Paul Willcocks
VICTORIA - It's time to start getting nervous about what the Olympics could cost us.
Not panicky. The Bid Committee and the province get pretty good marks for the planning so far.
But nervous, because without a great deal of debate provincial taxpayers have now been committed to spend $1.3 billion on the Games.
And the province's auditor general says the Games' financial plan relies on extremely tight management and good luck. And a business plan based on good luck and fond hopes can be deadly.
In case you haven't been paying attention, here's the basics. The IOC will award the 2010 Games in July, choosing between Vancouver, Salzburg and Pyeongchang, South Korea.
If they come here, we're on the hook for the costs. The Games committee figures it can build the venues for about $620 million. Running the actual events - staff, computers, security and all - will be $1.5 billion. Improving the Sea to Sky Highway and a contingency fund add another $817 million.
So all in, the Games will cost $2.9 billion. (That doesn't include the convention centre expansion, or a transit line to the airport.)
You don't have to pay all that. The Games will get money from ticket sales, sponsorships and TV rights. They hope for $1.3 billion. Ottawa is in for $330 million.
But that still leaves $1.3 billion to come from you and me. And we've accepted all the risk if costs go up - as they usually do - or revenues go down
No need to panic. Auditor General Wayne Strelioff examined the bid, and concluded the committee and the province have put together a reasonable plan.
But not reasonable enough. The auditor general spotted some ski hill-size holes in the plans.
The committee hopes to raise $454 million through sponsorships - nine times as much as the Calgary committee attracted in '88, less than half what the Salt Lake committee lined up. Strelioff concludes that reaching the goal will require "favourable circumstances and effective marketing." Any plan that requires favourable circumstances to work is alarming. Life is short of favourable circumstances, especially when you're counting on them. (The committee's plan even includes $28 million in revenue that's to come from some source they haven't even figured out yet.)
The auditor general is also worried that costs have been under-estimated, and that the contingency budget - money set aside to cover problems - is too small. He notes that in most Games, costs skid upward, often for good reasons.
Auditors and accountants are skittish souls, given to picking at details and worrying. That's one of the things that makes them so useful when the rest of us get swept up in the excitement of our next great idea.
Is it going to be worth it? The mid-range forecast is that our $1.3 billion will produce about $376 million in provincial and municipal taxes, over six years. It will create an average 11,000 jobs a year, a significant employment boost.
But only if the province works to get the full benefit of the Games, notes Strelioff. He quotes one of the consultants who did the economic impact studies. "These benefits will not materialize automatically," they said. "They must be earned by a focused, adequately funded and skillfully executed marketing program."
And that could be a problem. It's unclear where the money will come from, especially because the province plans to take about $90 million in hotel room taxes now earmarked for tourism marketing and use the money to help pay for the convention centre.
The stakes are high, and the decision on whether Vancouver gets the Games only six months away. And the auditor general has pointed out some early warnings that taxpayers could be at risk.
It's time we all started paying more attention to the risks, and benefits, of this bid.
Paul Willcocks can be reached at

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