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No Games Chicago Update
35 Days To Decision
Daily News

 
August 27, 2009

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The People Speak

I oppose the Olympics coming to Chicago. We have a great city that needs a lot of work to make it livable for all citizens. The time and money devoted to hosting and promoting the Olympics is misspent. The true priorities should be quality of life, safety, education, environment and jobs.

Karen Harlander
Chicago

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Open letter
to the IOC
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"Why you don't want to give the Olympics to Chicago"


Dear Member of the International Olympic Committee: 

The unfavorable publicity for the 2016 Committee and its work continues today with the release of the Civic Federation's review of the 2016 bid financing. This review was ordered by the City Council and was directed by the Civic Federation, an independent good government group. The Civic Federation hired L.E.K. Consulting to do the actual research.

Olympic 'real estate risks'
Athletes' village could be financial drain, consultant says

Chicago Sun-Times
August 26, 2009 - FRAN SPIELMAN and LISA DONOVAN

Chicago's $4.8 billion operating budget for the 2016 Summer Olympic Games provides "adequate protection" for taxpayers, but the $1.1 billion Olympic Village exposes the city to "ongoing real estate risks" that must be insured and closely managed, the Civic Federation has concluded.

The Civic Federation and its handpicked consultant, L.E.K. Consulting of London, conducted a six-week review of Chicago's Olympic bid at the City Council's request after the furor caused by Mayor Daley's pledge to match the full government guarantee promised by rival cities -- and Chicago 2016 Chairman Pat Ryan's decision to keep aldermen in the dark about it.

Today, the study was hand-delivered to aldermen, who are expected to vote next month on whether to authorize Daley to sign the blank-check promise.

The report recommends that:
* the Olympic Organizing Committee that replaces Chicago 2016 be led by a "professional and experienced management team" that selects employees and contractors "based on non-political criteria."
* The City Council ride herd over the games by mandating "regular reports."
*That insurance coverage designed to limit the contribution from Chicago taxpayers to the $500 million the City Council has already pledged include "capital replacement insurance" for the Olympic Village to be built on the campus of Michael Reese hospital. "If developers proceed with the village as planned and are not required to buy the insurance, then taxpayers could be exposed to risk," the report states, noting that Chicago 2016 has a $68.3 million insurance budget.

"It is critically important that aldermen provide legislative oversight to ensure the Organizing Committee is sticking to the detailed plan laid out by the Bid Committee," said Civic Federation President Laurence Msall.

"Some of the greatest risk ... does not come from the plan itself, but from not following the plan."

The report reveals that the city expects to spend $122 million on direct city services during the games, including police, fire and emergency services, however, public safety expenses would be reimbursed by the federal government. City costs after federal help are estimated at $41 million. Those costs would be covered by revenues generated by the amusement tax assessed on ticket sales and some sales taxes tacked on to Olympic concessions and merchandise.
Civic Fed OKs 2016 cost forecast - except for Olympic Village

By John Pletz - Crain's Chicago Business - Aug. 26, 2009

The Civic Federation has come out with a report that generally concurs with Mayor Richard M. Daley's budget projections for the 2016 Olympics - with the exception of the development of the Olympic Village. In a highly anticipated report, the tax-policy group said that "the operating budget, including venue construction, proposed by (Chicago) 2016 is fair and reasonable." But it warns that the Olympic Village, which would house athletes if Chicago gets the games, exposes the city to "continuing real estate risks that must be managed." The report recommends that the city purchase additional insurance to protect against cost overruns on the $1-billion project.

See related story: "The next Olympic land mine"

Patrick Ryan, CEO of the bid committee called the report "very gratifying." "We've been working on it for over three-and-half years, and they came out with the conclusion confirming what we've been saying all along," Mr. Ryan said.
While the Civic Federation found the projected $3.8-billion operating budget "fair and reasonable," it warned that several of the mayor's estimates of how much revenue the games would generate are "optimistic compared with previous games."

Civic Federation President Laurence Msall said the Olympic Village project presents the greatest risk in the bid because it's the most expensive project and relies on private developers. Last month, the city paid $86 million for the Near South Side land under what used to be Michael Reese Hospital. The intention is to sell the land to a private developer that would build the Olympic Village if Chicago lands the 2016 Summer Games, or turn it into private housing if Chicago is outbid.

Vancouver and London, hosts of the 2010 and 2012 Olympics, respectively, have had to step in with public money for Olympic housing projects when private funding dried up during the global recession.

Chicago 2016 told the Civic Federation that it has identified a relatively new class of insurance, called capital-replacement coverage, that would cover a financial shortfall on the part of developers.

Mr. Msall says such coverage costs about $17 million per $250 million of coverage, and the bid committee is contemplating about $2 billion worth of coverage. That would cost Chicago 2016 $137 million.

The Civic Federation's report says that such insurance - along with other policies the city plans to buy to cover everything from event liability to default by corporate sponsors - should be sufficient to shield taxpayers from financial risk, but only if Chicago 2016 sticks to its current financial plan.

"Much of the protection planned by the 2016 committee requires the purchase of insurance," Mr. Msall said. "That insurance is not yet available until it's determined whether Chicago gets the bid or not. That is the role where the City Council has to step forward with oversight."

Such insurance will increase the amount of private donations the Olympic committee will have to raise to $269 million to $287 million. Previously, the bid committee expected it would have to raise $246 million to cover previously identified construction-fund shortfalls.

The group's report comes in advance of the City Council's vote on whether to authorize a host city contract. The contract means the city would have unlimited financial liability for hosting and planning the games, a move drawing sharp criticism at a time when Chicago faces a growing budget shortfall.

Some have slammed Mr. Daley for going back on his word that no public dollars would be used for the event.
The host-city guarantee is set to be presented to the City Council's Finance Committee on Sept. 8, followed by a full council vote Sept. 9.

Aldermen asked the Civic Federation to undertake the review, which was performed by London-based LEK Consulting and cost more than $100,000. Mr. Msall said the analysis was paid for largely with donations from private groups such as the MacArthur Foundation, the Joyce Foundation and the Chicago Community Trust.

The International Olympic Committee requires bid cities to sign the host city contract. Chicago is competing against Tokyo, Madrid and Rio de Janeiro. The IOC will announce the host city on Oct. 2.