Olympic costs escalate

Back when Vancouver made its Olympic bid, the boosterism was phenomenal. The games were going to create 244,000 new jobs, $10.7 billion of economic activity, and so on. The BC government, who is on the hook for any cost over-runs, never did do a proper cost-benefit analysis of the games. In fact, they willfully confused costs and benefits by counting public capital expenditures as benefits not costs, in doing so proving only that government can create jobs by spending money. This has turned out to be a modus operandi of the BC government: big boosterism for its pet projects, be they P3s, private surgery clinics or the Olympics, without a business plan or any more detailed study.

in any event, Vancouver held a plebiscite on this and two-thirds said yes. Personally, I like the Olympics and am a democrat, so I’m willing to go along for the ride, and its implied cost of putting the games on. But my concern at the time was that people were given menus without the prices on them and were thus told to make their decision based solely on promises of how good the food was going to be. Now comes the matter of the bill.

I should also point out, because the media have completely failed to, that the only cost-benefit analysis of the 2010 games was done by the CCPA. In a February 2003 report by Marvin Shaffer, Alan Greer and Celine Mauboules, the analysis used the 2010 Bid Book and some crafty calculations to estimate the net financial cost to British Columbians at $1.2 billion, and $2 billion if the new transit line to Richmond and the airport was included. The report stands the test of time quite nicely, I would say. And the authors at the time cautioned that “costs could be substantially higher, and are subject to numerous risks. The Province of British Columbia, as the sole guarantor of the Games, is assuming all the financial burden of what is, clearly, a risky business venture.”

In response to the CCPA report, which only provided numbers and did not take a position on whether the province should or should not go ahead, Premier Gordon Campbell dismissed it: “I really don’t pay much attention to that think tank. It’s driven by ideology, not facts.” (quoted in the Vancouver Province, Feb. 16, 2003)

With that background in mind, here is what leads off today’s Vancouver Sun story:

The true cost of the 2010 Olympic Games is at least $2.5 billion, which could still soar higher and may even result in the delay or elimination of promised sporting facilities, perhaps damaging athletes’ chances to win gold medals.

Those are the hard-hitting conclusions of reports released Thursday that outline a series of Olympic planning, marketing and construction snags — not to mention a $150-million US currency blunder — that have increased the risks to taxpayers.

The opening salvo of the critiques came from B.C.’s Auditor-General Arn van Iersel, who effectively shot down the provincial government’s long-standing claim that the cost of the Olympics wouldn’t exceed $600 million. Van Iersel says $1.9 billion in Olympic-related projects — from the Sea to Sky Highway to sections of the new Canada rapid rail line that will service the Olympic Village — should be included in the Games’ real price tag of $2.5 billion.

Meanwhile, a team of consultants hired by the federal government warns the Vancouver Olympic Organizing Committee may not be able to build Olympic venues on its $580-million construction budget — even after receiving a $110-million boost to the original $470 million three weeks ago.

…

Olympic organizers managed to get the IOC to agree to downsize the Games’ arenas to NHLsized rinks instead of the larger European surfaces that are the Olympic standard, as the report suggested. But a curling arena is still up for grabs — if it can’t be built on the original $28-million budget it should simply be scuttled. The speed skating in oval in Richmond is also facing a scheduling crunch.

OK, here’s my idea: the BC government LOVES contracting out and privatizing. Having just recently been in Calgary, I noted that they have a perfectly good speed-skating oval just sitting there unused most of the year, plus ski-jump facilities and more from the 1988 Olympics. Perhaps we should just contract out these events to Calgary. Photoshop in the BC Coastal Mountains, and voila!

Seriously, though, the story continues:

The auditor-general presented a broader critique of the provincial government’s management and accounting of the Games, suggesting the province has not been properly adding up the true price or being clear about the organizational risks ahead.

Three and half years before the Olympic flame will be lit, the auditor-general now pegs the Games’ total budget at $4.3 million. About $1.8 billion of that will be recouped from Olympic revenues.

Ottawa will contribute $607 million and local government $389 million, leaving B.C. taxpayers on the hook for about $1.5 billion, the report estimates.

But like the federal report, the auditor-general also warns of the possibility of more budget problems looming. Some construction schedules for Olympic venues are sliding, adding a threat of even more cost overruns. In addition, $175 million in security costs may be underestimated and even the anticipated $13 million in medical costs anticipated for looking after athletes could rise.

The auditor-general, who is responsible for ensuring government bookkeeping is clear, warns the provincial government’s $76-million contingency fund for cost overruns may prove inadequate for the costs ahead.