Dear Member of the
International Olympic Committee:
The veracity of Chicago's 2016 leadership comes under renewed criticism today in Crain's Chicago Business, our premier business news weekly.
Daley's Olympian stretch
By: John Pletz -
August 24, 2009
Richard M. Daley's prediction that the 2016 Olympics would give
Chicago's economy a $22.5-billion boost vastly overstates the likely
benefits of hosting the games, experts say.
"That's crazy," says Victor Matheson, a professor of economics at
College of the Holy Cross in Massachusetts who has studied the economic
impact of the Olympics. "Anyone using this $22.5-billion number as
justification to vote for the Olympics is being led down the garden
The figure far exceeds estimated benefits in forecasts prepared by
other cities that have sought the games. Atlanta, for example, figured
the games it hosted in 1996 would produce an economic jolt of just $7
billion in 2009 dollars.
Similarly, the Chicago Olympics bid committee's prediction that the
2016 games would create 315,000 jobs over 11 years is more than four
times the jobs estimate for Atlanta.
Chicago's bid committee is touting the $22.5-billion figure as it tries
to rally support for the 2016 games and persuade the City Council to
approve a blanket guarantee of Olympics expenses. Mr. Daley's estimate
of likely costs - $4.8 billion, including construction - already has
been called into question. If projected benefits appear unrealistic,
the council would have another reason to reject the guarantee when it
votes next month.
Economic benefits of the 2016 games are more likely to range between
$11 billion and $17 billion, based on the analysis of economists who
question two key assumptions underlying the Chicago 2016 committee's
estimate. The committee's economic study predicts a tourism boom
following the games, something other host cities didn't see. And it
applies an unusually high "multiplier" effect to Olympics-related
The forecast predicts the 2016 Olympics will generate $8.4 billion in
direct spending, more than twice the $3.1 billion forecast in Atlanta.
Some $7 billion of the Chicago 2016 figure represents tourism spending
during and after the games.
The committee predicts attendance in 2016 would exceed Atlanta's by
48%, owing to the increase in the number of events and larger venues.
Economist Sanjay Varshney of California State University, Sacramento,
who co-authored the committee's forecast, says that's one reason for
the high tourism spending figure.
Another is Chicago 2016's prediction that the city will see a
$1.9-billion rise in tourism revenue in the five years after the games.
Committee Chairman Patrick Ryan frequently points to Australia's
increase in tourism after the 2000 games in Sydney, saying the number
of international visitors passing through the city's airport has risen
25% since then.
But an expected $2.2-billion boost in tourism spending during the five
years after the games "never materialized" for Sydney, says economist
John Madden of Monash University in Melbourne, Australia.
Dennis Tootelian, of Sacramento State, the other co-author of Chicago
2016's report, stands by his prediction: "When you take a look at the
press the last Olympics received, that opens markets internationally.
Over time, tourism should grow as the exposure grows."
Without the post-Olympics tourism boost, direct spending predicted for
the Chicago games would slip to $6.5 billion. The follow-on impact of
that direct spending is another area where economists say Chicago 2016
goes too far.
The committee predicts a "multiplier" effect of 2.67, or $1.67 in
additional spending for every dollar in direct Olympics spending.
That's far higher than the 2.2 multiplier used in Atlanta's forecast
for the 1996 games and the 1.68 figure that Washington, D.C., used in
connection with its bid for the 2012 games.
"Typically, anything over 2 is pretty questionable," says Scott
Watkins, a consultant at Anderson Economic Group LLC, a Lansing,
Mich.-based firm that studies the impact of sporting events and expects
to release next month an economic impact forecast for a Chicago
Mr. Varshney and other economists note that multiplier effects are
often higher in larger metropolitan areas like Chicago with economies
big and diverse enough to absorb more follow-on spending locally. Mr.
Tootelian says the multiplier is dictated by data fed into ImPlan, a
frequently used economic-forecasting software program. "We don't set
Even economist who use ImPlan question the 2.67 multiplier. "I'm not
sure how you get an induced impact that large," says Richard Clinch, a
researcher at the University of Baltimore who co-authored the
Mr. Tootelian dismisses questions about the proper multiplier, saying,
"Even if it is 2, we're talking almost $17 billion in economic impact."
Predicting the economic effect of a future event is inherently
speculative, but $17 billion is 24% less than Chicago 2016 says the
games would inject into the local economy. And if the 1.68 multiplier
used by D.C. is applied to the $6.5 billion economists consider a more
realistic direct spending estimate, the benefits of the games would be
$10.9 billion, less than half the committee's projection.
Similarly, the committee's forecast of 315,000 jobs over the 11-year
period starting in 2011 is eye-popping compared to Atlanta and
Washington, which estimated 77,000 and 70,000, respectively.
Mr. Matheson of Holy Cross says a study he conducted with Lake Forest
College economics professor Robert Baade found that the Atlanta games
actually created about 42,000 jobs at most.
"The Olympics in Chicago would be cool," Mr. Matheson says. "But don't expect them to make you rich."