Chicago learns next Friday, October 2, whether it will host the 2016 Summer Olympics. But if they do win the games, the taxpayers in Cook County won’t learn until much later just how big the bill might be.
There is a 12% profit factored into the $3.8M budget, but that pales in comparison to the potential cost overruns, as described in this eyes-wide-open article “Peeling back the coverage” at chicagobusiness.com.
For instance, while there is $1.1B of insurance promised, there is no insurance coverage (or not enough) for:
- “… the risk that private lenders won’t shell out $1 billion to finance construction of the Olympic Village”
- “… shortfalls in corporate sponsorship sales, which they predict will rake in $1.8 billion, two-thirds more than London expects to collect for the 2012 games”
- “… overruns on the construction of Olympics venues tops out at 10% over budgeted costs”
- “… $246 million in contributions from private donors, a source already tapped for $72 million to finance the city’s bid”
And that’s just the insurance piece of the pie.
Predictably, construction costs are key, with the main costs being the Olympic Village and the sports venues. The plan is to convince private developers to “transform the former Michael Reese Hospital into athletic quarters to be sold later as condominiums or rental housing”. I’m not quite sure if this means converting the actual buildings themselves–which seems sort of crazy to me–or if it means first tearing down the whole thing and building new.
As for sports venues, the 2004 Athens games went double what they budgeted. The 2010 Vancouver games are running 23% higher than projected. Chicago 2016 is only allocating a 10% overrun, plus another 10% in insurance on top of that.
Then we have concerns about revenue projections.
Just read the whole thing.
The money quote by Allan Sanderson, a sports economist at the University of Chicago: “Athens was three times over budget; London is four times over budget. I don’t see that happening here. But are they going to come in at $4.8 billion? No, I just don’t see it.”