Tuesday, July 28, 2015

Should Toronto bid for the Olympic Games?

The Toronto 2015 Pan Am Games are over (barring the ParaPan Am Games), and the mass  hysteria in this city is beginning to settle down. The Games are being called a resounding success - did any city ever call its hosting of a major event an unmitigated disaster? - and the local people are still feeling all warm and fuzzy.
Cue, then, the predictable talk about Toronto possibly making a bid for the 2024 Olympic Games: serious, grown-up games in comparison to the Pan Ams, with serious, grown-up financial commitments to match. Currently, Rome, Paris, Hamburg, Budapest, and possibly Los Angeles, are in the hunt for the 2024 Games, and Toronto has until September 15th to decide whether to join them.
I must confess I breathed a secret sigh of relief when Toronto failed in its bid for the 2008 Games, and, if it comes to a vote, I would vote against another bid. This is not just "bah, humbug" from a cantankerous old geezer (well, there is a bit of that too): there are serious financial, administrative and security objections to hosting Olympic Games. Just making a bid would apparently cost $50-60 million; actually hosting the games would cost orders of magnitude more.
Although Brazil's bid for the 2016 Games was originally for $14 billion, the associated infrastructure spending is independently estimated to be in the region of $25 billion, and there will no doubt be more to come before the Opening Ceremony. Beijing's costs in 2008 are widely thought to have been in excess of $40-billion (we will probably never know the full total), even though the "sports-related" costs they made available for public consumption were only around $5.5 billion. The debacle of the Sochi Winter Games last year may have cost Russia over $50 billion, the costliest ever.
And bear in mind that huge cost overruns come as standard when hosting an Olympic Games. A University of Oxford study from 2012 revealed an average cost overrun of over 250% for Summer Olympics (slightly less for Winter Olympics). For example, the 2012 London Games was initially budgeted at £2.4 billion; after winning the bid, this suddenly swelled to £9.3 billion, and the final cost was probably substantially much more than that. Canada's own Olympic experience is just as checkered as everyone else's: although Vancouver's 2010 Winter Olympics was one of the closest to budget in recent decades, Montreal's 1976 Summer Games resulted in a ridiculous 796% overrun, the largest for any Games.
It is notoriously difficult to find convincing, comprehensive costs for these kinds of undertakings. But you can rest assured that the $8.7 - 17.1 billion cost mentioned in a 2014 feasibility study for a possible 2024 Toronto bid can quite reasonably be doubled or tripled. This is big money that Toronto (and Ontario, and Canada as a whole) can ill afford now, not to mention in the unknown economic situation in 5-10 years time.
Only 2 or 3 out of the 22 summer Olympics of the modern era have been able to make any money. Los Angeles in 1948 and Barcelona in 1992 (and possibly Atlanta in 1996) are often touted as role models in this respect, indeed as proof that profitable Olympics experiences are in fact possible.  But even these few commercial successes are far from rock solid. Barcelona, for example, was already undergoing something of a tourism renaissance, with or without the Olympics, and L.A. was only able to make money by persuading the IOC that they could use sub-par existing venues instead of building new ones, something which would not pass muster these days. There are, on the other hand, many more examples where the Olympics have drained local economies and government finances for many years.
And don't expect the Games to repay themselves in tourist and business revenue. Even the bidding countries don't really believe that old saw any more. It is almost impossible to place a figure on such spin-off income, but the benefits to local tourism in host cities is certainly overstated. For example, London apparently experienced a downturn in regular tourism during what appeared to be spectacularly successful Games in 2012, as many tourists stayed away to avoid the (non-existent) crowds and the expected public transit chaos. A similar thing happened in Sydney in 2000, as well as in several Winter Games (which are typically even less profitable than Summer Games). What tends to happen is that Olympic tourism simply displaces traditional tourism, resulting in little or no gain in local spending and trade.
A 2009 University of California, Berkeley report pointed out that even countries that made losing bids for the Olympics experienced an increase in trade, suggesting that the signal that a country was open for business was more important than the spending itself. A University of South Florida report on the impact of major sporting events in general unequivocally concluded that they cause "no real change in economic activity".
Even the much-touted stimulus in jobs that an Olympics bid brings to host cities are over-stated: most Games-related jobs are short-term, temporary and low-paying. Neither are the Olympics facilities particularly useful to the cities in the long run: most are very sport-specific, excessively large and not in the best locations for the local population, and are usually little used after the events are over. Thus, Olympic cities find themselves littered with expensive white elephants, taking up valuable real estate that could perhaps be better used for other purposes. Any infrastructure improvements which result from Olympic Games hosting are still paid for by the local taxpayers, and indeed may crowd out other badly-needed public investment in schools, healthcare, etc. Multi-billion dollar decisions on infrastructure should be based on local needs and not on the whims the IOC.
And of course, if everything does not go perfectly, there is always the risk of some very high-profile bad press for the host city and country. High profile events like the Olympic Games are also prime candidates for political protests and even terrorists attacks.
And God only knows how the Olympics will be perceived in 2024: as drug and graft scandals become more and more common in international sports, I can.easily see public support waning dramatically, thus increasing the economic risk commensurately.
Not looking quite so compelling?
Having said all that, I think probably the main reason for Olympic bids is not financial at all: people feel good to be hosting a major event of this kind. It makes them proud and happy, much like an expensive but successful wedding. But are we in a position to be throwing tens of billions of dollars at something so intangible? Think what else that kind of money could be doing, and how happy THAT might make us.

I'm pleased to report that, on September 15th, common sense prevailed and Toronto Mayor John Tory announced that Toronto would not be pursuing a bid for the 2024 Olympic Games, leaving Los Angeles, Paris, Rome, Budapest and Hamburg to contest that dubious honour.

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