August 31, 2009
For Immediate Release
For more information:
Tom Tresser, 312-804-3230, email@example.com
Quellos, 773-531-2341, firstname.lastname@example.org
IOC NEWSLETTER - Aug. 31, 2009
No Games Chicago Has No
Confidence in Civic Federation
|(Chicago) No Games
Chicago today issued its own review of the Civic Federation's review of the
2016 Committee's finances. "What we've got here is the sheep paying the foxes
to audit the wolves" said No Games organizer Tom Tresser. "There are so many
conflicts of interest in the inception, staffing and execution of this report
as to make it virtually toothless." Nevertheless, despite the many flaws in the
reporting process, the document still reveals many new reasons for Chicagoans
to be concerned about the 2016 bid process and its authors.
Chicago has a number of major objections to this report:
THE KEY PLAYERS ARE
numbers refer to the L.E.K. report unless otherwise indicated. Additional information and back up for this assertion is available at our website.)
1. The sponsoring body, the Civic
Federation, is hardly impartial.
the 82 board members listed at the end of the Civic Federation's 2007 annual
report 40 - or almost 50% - work for companies that are supporters of the 2016
bid - either as donors or members of the 2016 Committee.
Chairman Patrick Ryan is displayed prominently in the Civic Federation's 2007
report because he was awarded their 2007 Lyman J. Gage Award for Outstanding
Civic Contribution to the city. He is also a major donor to the Civic
2. L.E.K. Consulting, the firm hired by
the Civic Federation, has ties to both the city administration and the Olympic
of the seven funders of this study were major donors to the 2016 Committee. The
Chicago Community Trust, the MacArthur Foundation and the Polk Brothers
Foundation have donated a total of $3 million to the 2016 Committee.
has done major consulting work for the City of Chicago and has a major proposal
pending - regarding retail opportunities at O'Hare Airport. The firm did work
on the privatization of the Monroe
Street garages (p.1). How can we expect them to be
critical of the Olympic bid when they know this is Mayor Daley's
obsession? In addition, L.E.K. has done
work on Olympic bids, according to Civic Federation President Lawrence Msall,
quoted in Crain's Chicago Business online.
UNCHALLENGED - TOUGH QUESTIONS UNASKED
called upon subject matter experts friendly or directly beholden to the bid
process. The list of experts "consulted to understand how the 2016 budget was
crafted" shows 15 individuals from14 companies. Ten of those individuals were
from eight companies that have donated to the 2016 Committee - that's two
thirds of the "experts" consulted. If your firm is a major contributor to the
2016 effort what sort of perspective are you going to bring to a review
1. The Civic Committee's Narrative
Summary says that "the following report is not a financial audit but rather a
high-level review." (p. 3) So they're NOT really running the numbers but
"testing the assumptions" used to develop the plan.
2. The report adheres to the fantasy
that the 2016 committee is independent of City Hall and that their plans will
be executed without the endemic corruption and overruns that have plagued every
city project for decades.
3. Assumptions regarding the Olympic
Village are extremely optimistic and are unwarranted given Olympic history and
the Chicago marketplace.
report accepts the committee's estimate that the Village, which will contain 7,300
athlete units, will cost about $1.2 billion to complete. The Vancouver 2010 Olympic Village, 1100
athlete units, is now estimated to cost almost $1 billion. How can Chicago
possibly construct 7 times the space at approximately the same cost for a
project that will take place seven years from now?
- The report does not question
the feasibly of finding private developers who will undertake this
project. However, a report in Crain's Real Estate Daily quotes a principal
at Kargil Development as saying lenders today will not finance more than
60-70% of a project, leaving taxpayers to pick up as much as $720 million
if the project comes in on budget.
This is in addition to $110 million in TIF funding for
infrastructure costs. The private
development of the Vancouver and London villages ran into severe economic
difficulties and left the citizens of both cities will the entire bill for
completing the buildings.
4. Local sponsorships and donations are
budgeted at substantially higher rates than previous Olympics (the report calls
them "aggressive") and depends on many companies to participate at historic
levels. However, no fundraising plans to
achieve those goals have been established.
- Once the Olympics are over, the
city may be responsible for selling those units in a condominium market
that has historically been volatile and risky. An aggressive estimate assumes the
market will be able to absorb all 2,000 of the units created from the
athletes' housing at a premium price over several years, although the
report notes that "the true costs and sales potential will not be evident
until trends in the construct and real estate markets become more
certain." (p. 64-65)
- The $1.8 billion in sponsorship
revenues, which account for one-third of total budgeted revenues, are $1
billion more than was achieved in Atlanta
in 1996 (p. 20).
5. The contingency of $451 million
included in the budget is likely to be insufficient if the aggressive
sponsorship and donation are not reached and construction costs are more than
10% over budget, as overruns have been in major Chicago projects such as
Millennium Park, Block 37, and the Monroe Street garage.
million in naming rights, considered "donations" by the 2016 committee,
are based on revenue costs and not on the market for naming rights. For example, the committee has set a
target of $19 million for naming rights for the shooting and the rowing
venues, equal to the amount Citibank pays annually (for a seven month
season and 81 home games) for the right to put its name on the Mets
stadium. Naming rights for the
Olympic Stadium are budgeted for $47 million in a time of corporate
cutbacks and cost cutting! (p. 26)
6. Although the 2016 committee has repeatedly
maintained that not one penny of taxpayer money is included in the Olympic bid,
the report makes clear the City of Chicago and its citizens will be supplying,
in addition to the $86 million in costs to buy the Michael Reese site (plus tens
of millions for security, demolition and remediation costs), $110 million in
TIF funding for the Olympic Village site (p. 66) and $35 million supplied by
the Park District to build a velodrome in Douglas Park and a slalom canoe and
kayak course on Northerly Island (p. 73), neither of which was requested by the
citizens of Chicago and neither of which would have been thought of except for
this Olympic scheme -- at a time when employee cutbacks have caused beaches to
open later and close earlier and parks to be cleaned less often, when park
programs have been cut and fees raised.
7. It was only
after the L.E.K. report was issued that Chicago 2016 revealed its latest
insurance policy to be put in place in the event of cost overruns -- leaving
the plan for taxpayer protection unchecked by an outside body and L.E.K's
review of Chicago 2016's proposed insurance policies virtually useless.
to the Chicago Sun-Times, "Chicago's
bid team said it negotiated to move a $500 million "catastrophe"
insurance policy to the front of the line of guarantees to be tapped. If that
policy is exhausted, an additional $500 million in "umbrella"
insurance will become available. After that, planners could tap Game revenues
to date or take out a line of credit based on $450 million projected revenues
from the Games."
if a "catastrophe" or something of the like were to occur and the insurance
fund is tapped, Chicago
taxpayers would again be responsible for picking up the tab.
despite promises to taxpayers that insurance policies will pick up the tab, Natalie
Moore of Chicago Public Radio reported
that, "The insurance doesn't cover failure to secure sponsorships and game
ticket sales," leaving taxpayers of Chicago
on the hook for any
portion of the optimistically budgeted $1.8 billion in sponsorship revenues not
reports, "If construction insurance is triggered and emptied, additional funds
will be drawn from the contingency, city and state guarantees and then
additional funds from the city" (p. 77).
No Games Chicago believes there are numerous fundamental
problems with the L.E.K. report. "How can we trust the independence of L.E.K.'s
report when it is was hand picked by individuals backing the bid and L.E.K. is
currently competing for a contract at O'Hare's International Terminal that is
worth $33 million a year in revenue? This whole process reeks of typical
Chicago politics," says Bob Quellos of No Games Chicago.
with all the talk of "construction-overrun insurance" coming from Chicago 2016
it turns out that the policy isn't even required if Chicago is awarded the
Games. L.E.K. states that, "cost overrun insurance will be optional as fixed
price contracts may be negotiated instead of procuring the insurance." (p. 77) Again,
taxpayers exposed to cost overruns.
Even so, L.E.K.'s report does provide enough information to
conclude that Chicago's 2016 Olympic bid is a raw deal for the people of the
city. From shaky promises about insurance policies to over inflated projections
on sponsorships and donations -- it is clear from L.E.K.'s report that Chicago
2016 is attempting to sell the people of the city a lemon.
No Games Chicago is an all-volunteer group of social justice activists, concerned citizens and grassroots organizations opposed to bringing the 2016 Olympics to Chicago. The group was launched on January 31, 2009 with a public forum at the University of Illinois Chicago.
# # #