Dear Member of the
International Olympic Committee:
The unfavorable publicity for the 2016 Committee and its work continues today following 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.
David Greising is the business reporter for the Chicago Tribune.
RACE FOR THE 2016 GAMES
Chicago's 2016 Olympics bid: Deeper look shows potential financial pitfalls
David Greising - August 28, 2009
The Chicago 2016 Olympics committee is
determined for Chicago
to host the Games, come hell or high water.
But Chicagoans, who are being asked to guarantee the Games, need to worry about
what will happen if we get both hell and high water.
The Civic Federation gave a remarkably robust go-ahead to the Olympics bid on
Wednesday. The financial watchdog group's president, Laurence Msall, stepped
before microphones in City Hall and declared that the Chicago 2016 projection
of a $451 million financial surplus is "fair and reasonable."
Everyone expects Chicago 2016 to puff up the potential of their Summer Games.
By the same token, there are people with every bit as strong a motivation to
take a careful look at how much it would cost if things go terribly,
For such worrywarts, a close read of the Civic Federation report reinforces
their skepticism of all this Olympics hoopla.
Take a careful look at Msall's report, and one can only wonder: Did he read the
For starters, there is that problematic graph that shows a variety of potential
shortfalls that add up to $864 million in red ink. That's enough to wipe out
the Olympic committee's projected budget surplus and then some.
We're not talking doomsday scenarios, either. Between now and the Games, a mere
1 percent difference in the annual growth rate of sponsorship revenue adds up
to a $234 million shortfall. A 10 percent increase in construction costs would
lop $146 million from the budgeted surplus, not that construction projects in Chicago ever go over
Other assumptions and projects not delineated on the graph further compound the
sense of risk. Naming rights figure prominently in the Chicago 2016 budget:
$15.7 million for the velodrome and another $19 million for two facilities, the
rowing and shooting venues.
In other words, the bid committee expects revenue that approximates the most
lucrative naming deal in sports: slapping Citibank's name on the New York Mets'
new stadium at a cost of $20 million a year. Chicago's most lucrative deal to date, for
U.S. Cellular Field, nets all of $3.4 million a year.
Employee benefits are budgeted at 25 percent of salary, when the going rate in Chicago is 30 percent,
the report notes. The cost difference? Some $25.5 million.
The bid committee budgets $9 million in outside legal costs. That may sound
like a lot, but it's less than one-third the estimate of the bid committee's
own legal department, which pegged the cost at between $25 million and $40
Much is made of all the insurance to be taken out to cover any budget shortfalls.
The bid committee boasts plans to secure $1 billion in various policies, on top
of the $500 million city guarantee and $250 million in state backing.
"We talk about it as 'belt and suspenders' protection," said Rick
Ludwig, chief financial officer of the Chicago
bid. The sort of shortfalls spelled out by the Civic Federation would happen
only in a "perfect storm," he added.
Here's what the bid committee doesn't talk much about: The insurance would not
cover a great many of the shortfalls laid out in the Civic Federation
report. The insurance is meant to cover
major disasters: cancellation of the Olympics, for example, or a sponsor's
The worst likely will not happen. The Games likely are not headed for financial
disaster. If professionally managed, with careful oversight and a little luck,
chances are the Chicago Olympics can succeed.
But in guaranteeing the Games -- unequivocally, without limit, come hell or
high water -- that's a chance Chicago
taxpayers are being asked to take.