Monday, February 13, 2006

Olympic overruns a warning we need more control

VICTORIA - I used to be a manager, and probably that shapes my response to the Vancouver Olympic financial problems.
If someone who worked for me came back soon after a project started, confessed they had got the numbers wrong and asked for a lot more money, I might come up with the cash. But I would be unhappy, and trust them less.
That's roughly where the Vancouver Olympic Organizing Committee is today.
VANOC, as it is called, has been warning vaguely about cost overruns for a couple of months. Now management says the cost of building the Olympic venues and housing was going to be way more than they had told the public. The $470-million budget was going to be overspent by $110 million.
The explanations get a little vague. The IOC demanded the Olympic bid be prepared based on 2002 costs, the organizing committee said. Now, four years later, things cost more, especially because construction costs in the province have been rising sharply.
But IOC requirements don't explain why VANOC didn't provide more accurate numbers to government when it asked for financial commitments. If it had, the committee wouldn't be looking for more money now.
And it doesn't explan why the public wasn't told about the real construction costs.
There's no need to panic. The venue overrun is 23 per cent, bad but still manageable. If the operating costs - about $1.5 billion - can be controlled, and revenues reach the target levels, then there will be no nasty shocks. (The idea that a two-week sports event can cost $1.5 billion to run is in itself alarming.)
But there is every reason to be watchful. The Games organizers have already broken trust. They said they would need $470 million from you to build the venues. Now they want much more.
VANOC says you're not to worry. "We are determined never to go back to the taxpayers," says CEO John Furlong.
Except they already promised no more money would be needed, when they asked for support for the Olympic bid. Once you have broken trust, you better expect to be watched much more closely.
Provincial taxpayers are on the hook for any Olympic overruns or losses.
We are the owners, the guarantors, but are kept mostly in the dark. VANOC's published financial statements provide no useful information to allow assessment of progress, costs or coming problems. Shareholders in a tiny business get better information. (That may improve next month, when provincial Auditor General Wayne Strelioff provides an independent update.)
It's our show. We put up a big chunk of the money - about $1.3 billion if you count the Sea-to-Sky Highway project. We've taken all the risk. But we're ignored. If any company treated shareholders like VANOC treats us, the directors would be dumped.
The province has three directors on the 20-person VANOC board, including close Campbell advisor Ken Dobell and Rusty Goepel and Richard Turner, both at the top of the business heap and finance experts. (Whistler gets two board seats.)
None of the province's directors are accountable to you. If Olympics minister Colin Hansen is too busy to sit on VANOC, why not a Liberal MLA to bring accountability?
It's not simply a question of looking out for your money. The economic justification for the Olympics is the spinoff benefits - the tourism, and investment that follow. But as former auditor general George Morfitt noted, that will only happen with planning and investment. A keen MLA on the VANOC board could help ensure all opportunities were seized, and that benefits came to to the entire Lower Mainland and the rest of the province.
This is the critical time for the Olympics. Decisions made now will be irrevocable.
And while VANOC neds to get on with the job, it shouldn't shy from greater openness and accountability. Especially when it comes to the people who wll pay the bills.
Footnote: Turin's Olympic committee went back to government last month for another $110 million, pushing the operating costs to $1.6 billion - more than VANOC has budgeted for Games still four years away. The late request is a reminder that governments are captives of the Olympic committee as the Games near. Saying no - and risking a global embarrassment - is not an option.


Anonymous said...

Put Auditor General on VANOC Board

If oversight is needed, why put some political hach MLA on the VANOC Board?

The Auditor General is independent (if properly funded) and would be most effective at monitoring the $$ if on the VANOC Board.

Anonymous said...

"What me worry" said the cartoon character. Alfred E. Newman, of MAD comix. Come to think of it, he might well be on the board right now.

When the socreds were setting up expo 86, they were over budget etc ect. The premier of the day brought in Jimmy Patterson who took over, worked for free, and fired the political hacks in place and made the place run and if I recall correctly. No defecit. amybe it's time to call back Mr. Patterson, a guy who really knows a bottom line. and I'm no Jimmy patterson fan but I can see a large defecit looming. Montreal is almost paying off their olympic debt this year.

Anonymous said...

Saying No is what we should have said at the start. No one who's watched this farce unfold in other jurisdictions had any illusions about exactly how this works -- who would reap the Gold and who would be screwed on an Olympian scale.

Having been in Montreal in 1976, so far everything is going exactly as expected. Don't believe for a moment that the cost overruns won't keep growing.

This was corporate welfare for Mr Campbell's development/ construction industry backers from the start. What do we get from it? Higher taxes, higher housing prices, can't even find a plumber to fix a leaky tap. And for what? So we can stay home and watch people ski at Whistler on TV because we can't afford event tickets and the traffic jams will make it a lost cause even if we could.

The incredible thing is how they manage to pull off the same con over and over!

Anonymous said...

Anon said."The incredible thing is how they manage to pull off the same con over and over! "
It's because we get all gung ho, as the movers and shakers tell us just how wonderful these things are for the young athletes. We collectivly are rather stupid that way.

I'm sure the "amateur" Canadian Hockey team of millionaires will make everone feel good for a few days. Think of the beer sales alone. Thnink of the TV commercials, and of course folks buying some stupid hat they would not normally get caught wearing.

Anonymous said...

(in fairness, I should have noted above that it was welfare for Premier Clark's union backers before Campbell took over the act on behalf of his boys)