Tuesday, January 13, 2009

The Games nightmare

How did we get into this Olympic thing, anyway?
The Games are a year away, and British Columbians face rapidly rising costs and growing doubts about the event's economic value.
Provincial taxpayers are likely on the hook for more than $2 billion for the Games and directly related infrastructure costs. That's about $450 per person.
Municipal governments - B.C. taxpayers, again - will pay some $600 million.
The federal government will end up contributing another $800 million.
That's a cost of something like $3.5 billion. And that's not including the out-of-control spending on the Vancouver Convention Centre, now at $900 million, or the $2 billion to expand rapid transit to Vancouver's airport. Both those projects went ahead, during a time of high construction costs, at least in part to support Vancouver's Olympic bid.
So just the basic costs tied to the Games will cost the public about $220 million per day during the big show.
That's not how the Games were sold to British Columbians by government. The Liberals, despite looking increasingly foolish, have consistently tried to claim the province is only contributing $610 million.
That required excluding the Sea to Sky Highway improvement costs, which the province's auditor general said should be considered part of the Games expenses. Poor Finance Minister Colin Hansen was even forced to try and claim that the government's Olympic Secretariat was not a Games cost.
And the government also claimed for years - despite mounting evidence - that the initial $175-million projection of security costs was credible. It has now conceded the costs will be higher, but won't say how much higher. Stockwell Day, federal minister on the file, says perhaps $1 billion will cover the costs.
And the federal government is only on the hook for $87.5 million, although expect it to come up with at least some of the increase.
The big risk-taker in this deal was the provincial government, which accepted responsibility for all cost overruns or revenue shortfalls.
Even the costs of the incredible mess in Vancouver, where city council ended up taking on all the risk involved in completing the athletes' village, could end up being worn in part by the province.
That could include at least a share of the hundreds of millions of dollars at risk in Vancouver's bungled plan for athletes' housing. A private developer was supposed to build condos that would be used for the athletes' village and then sold.
But the lender has cut off funding because of cost overruns and market concerns. The city foolishly entered into agreements that leave it guaranteeing all the costs - currently estimated at $875 million - to complete the project in time for the Games.
The money is certainly not all at risk. The condos will have value. But much less than expected, and Vancouver taxpayers will pay for the losses, which could easily be $250 million. And ultimately, the city might come looking for provincial help, pointing to the government's guarantees.
As all this happens, the potential benefits of the Games are shrinking. The long-term selling point was marketing exposure, bringing tourism and investment. But as the global economy chills, so does the chance of luring tourists and investment. (And anyway, how many of you made plans to vacation in Turin after the 2006 Winter Games there?)
Back to the original question- how did this happen? For starters, the whole Games bobsled started down the icy run with a gentle nudge. A group of boosters were interested, then premier Glen Clark kicked in $150,000 to help them and we were off on the thrill ride. We just kept going faster down the slope and no one really stopped to figure out if this was a good idea.
The other big problem has been lack of honest, open information. If the government had accepted the auditor general's recommendations in 2006, the risks would have been managed.
As it is, B.C. taxpayers face a big bill for this ride.
Footnote: The money is mostly spent or committed and the show must go on. British Columbians can at least expect every effort to control costs and protect their interest now - and much more openness. And it's critical to ensure that every effort is made to capture the Games' benefits.

6 comments:

Dawn Steele said...

We would never have gone down this road in the first place if governments had been honest at the outset about the anticipated public costs vs public benefits. Hard to do that, with Mayors, Premiers and PMs all dreaming of their 5 minutes of international fame, standing on the podium, surrounded by champions, for all the world to finally see how important they really were.

(And to get to the heart of it, really, as Paul says, how many people suddenly added Calgary and Turin to their "bucket list" of places to visit before they die as the result of their hosting winter games? Did people really believe this?)

Business and union interests - resort owners, developers, construction companies and workers, etc. - all helped to sell the big con that an event they hoped would make them rich was actually going to lift the rest of us up in some mysterious way that has never been clear to me (especially after a 6-year boom that's left us with the highest child poverty rate in Canada). But if both the unions and the chamber of commerce wanted this, what politician in his/her right mind was going to challenge it?

The media deserve a big part of the blame: with CTV, CBC, etc competing for lucrative broadcasting rights and everyone else dreaming about all that extra ad revenue, which one was going to challenge all the Best Place on Earth schtick and whether this was actually likely to benefit the average British Columbians in the final reckoning?

Even our banks are now bombarding us (the clients!) with the nauseating boosterim. (Does anyone still honestly believe that any of this was really ever about "supporting our athletes"?)

Chris Shaw and others valiantly tried to inject a dose of reality but too few heard or wanted to hear - they were outgunned, outspent & shut out from the mainstream.

And thus the Olympic Village fiasco is symbolic of the simple formula that sums up the much bigger 2010 Con that all these Olympic partners helped to pull on us BC taxpayers:

"Heads they win, tails we lose."

Dawn Steele said...

...I should have read your previous post first, Paul!

And re my little hit on the media above, I should have been clearer that I meant that in a broad sense. You're one of the few journalists who consistently asks the tough and unpopular questions (which is why I'm such a fan) but sadly, for the average consumer who just scans the surface, it's totally lost amidst the louder boosterim all around.

At some point we are going to need a full review of how and why all the governance checks and balances failed on this one. I think it will say a lot about a much wider problem that we have to confront.

paul said...

You're still right about the media performance, including my own, Dawn.

Anonymous said...

The commentary on this project and this Olympics from all sources over the last few days has really disappointed me.

Its been 20 years since Expo, and I can't think of one example since then were we have really tried to think bigger in this province, to actually put Vancouver forward as an international city and our province as more than a backwater region in a backwater country. Who really heard of Torino, or Lillehammer, or of Nagano before they held Olympic games? And dare I say it it, but despite the Big Owe, would Montreal be the international city it is today if it had not hosted the Olympics?

Yes there are costs to the Games. Or put another way, those dollars equal value. Value in promotion, value in jobs, and value in those intangibles. I believe projects like the Olympic Village will be vindicated when all is said and done.

Paul, you are one of the thoughtful ones -- I'd think you'd see beyond the dollars and cents. questions on this file and ask yourself how future generations will see this milestone in BC history.

Dawn Steele said...

You're kidding, right,anon?

When visitors dream of a romantic getaway, a taste of La Belle Vie right here on our continent, the image front of mind is an ugly stadium in a suburban wasteland? Have you ever seen the thing?! How can you even compare that to eating crepes or hanging out in a jazz cellar in Old Montreal?

And all those Vancouver kids & their desperate parents living in poverty, First Nations living in 3rd world conditions, frustrated Surrey commuters, homeless people downtown, families of crashing drug addicts & people with mental health problems, immigrants trying to get a foothold - you honestly think they all spend their days sadly worrying about what the people in New York and LA truly think of Vancouver and what can we do differently to finally impress them?

Where do people get this enormous inferiority complex from? All the "greatest place on earth" boosterim has always sounded to me like an incredibly desperate, hick thing to go round saying - about as classy as drunk sports fans screaming and stamping on top of cars after a victory and about as pathetic as a 16-year old telling the girls at the school dance how handsome he is in the hope of getting noticed!)

You'd never catch Montrealers going around saying anything that gauche!

We sure arent' perfect, but we have absolutely no reason to be ashamed about our little corner of the world, and I think if people actually believed that, and started to focus more on our problems than our image, we'd get over this frantic, expensive (and frankly embarrassing) pursuit of external recognition and end up being an even greater place to live.

Declan said...

The best timing for an Olympics would be to do the building during a downturn and then have the games occur during a recovery/growth phase.

No coincidence that the '84 games in LA were one of the most financially successful ones.

OK timing would be for both the construction and event to take place during a growth phase, Calgary '88 for example.

Worst timing would be like Vancouver - building during a boom and then holding the event during a bust.

While generally I am mostly leftish in my views, people do seem to get irrationally opposed to the Olympics. Sure they cost a lot, but aside from the security costs, most of what is spent is left as assets to the community. The sea to sky highway wont revert to two lanes, the Canada line won't disappear, the improved recreational facilities will still be used after the games, etc.

And people seem willing to attribute as much as possible in costs to the Olympics, while ignoring the massive inflow of cash to residents (I've lost track of how many people I know who have rented out their accommodation for large sums, or traded their modest houses for villas or estates for two weeks. Plus all the benefits to local merchants, taxi drivers, hotels, etc.

In short, the idea that hosting the Olympics is a net negative for a city is a silly one, in my opinion, even if the timing ends up being as lousy as possible, as in Vancouver's case.