Will Vancouver count cost of Olympics?

Winter Olympics Vancouver torch run meets protesters photo: KK+

Montreal took 30 years to pay off the 1976 Olympics. Delusions of grandeur and patronage greed drove the over-spending. Kickbacks and graft were legion but little effort was spent prosecuting guilty politicians and developers. The taxpayers were left holding the bills.

Residents of Canada will soon learn the same painful lesson. Politicians looking for headlines don’t stay around to pay the piper.

By Bill Wilson, Business reporter, BBC News

The spectre of 1976 hangs over the Canadian city of Vancouver ahead of the opening of this year’s Winter Olympics.

It took decades to pay off the cost of those Montreal summer Olympic Games from 34 years ago, and questions have been asked this time about the cost of the Vancouver event.

Preparation for the games in Vancouver and the nearby resort of Whistler, where skiing events are taking place, is estimated to have cost organisers close to 6bn Canadian dollars ($5.7bn; £3.6bn).

That is a very different sum from when Vancouver won the games in 2003, and the bid team said the costs for everything, from capital construction to fireworks, would be about C$2bn.

photo by KK+

Despite the large costs, it is hoped that there will be tangible economic benefits – if even just short term – for Vancouver and the wider province of British Columbia.

For the 17 days of the event the focus of the world will be on the city, while there will be an influx of sports visitors ready to spend on goods and services.

Several hundred thousands tourists will visit the country for the games, with almost all the area’s 25,000 hotel rooms expected to be filled.

Restaurants and cafes will see trade increase, and millions will be spent on tickets, consumer goods and souvenirs.

“The games are a once-in-a-generation opportunity to bring Canada’s tourism brand… to two billion viewers around the globe thanks to the extraordinary international media coverage,” says Susan Iris of the Canadian Tourism Commission.

“We’re making the most of this chance to show the world why they should visit Canada now.”

Athlete village

There is also a so-called post-Olympic “halo effect”, of things such as increased tourism immediately after the games, and increased investment in the host area.

James Brander of the Sauder School of Business, at the University of British Columbia, says it was the attraction of this halo effect that encouraged British Columbia to bid for the Olympics.

“We get on the world stage, people are going to see the city, they’re going to see it’s great,” he says.

However, there are some misgivings about whether this rather short-term stimulus will be sufficient recompense for the large amounts of money pumped into the games.

One area of contention is the plush C$1bn residential complex that will host the athletes during the Olympics.

Last year, Vancouver city authorities sought emergency powers to borrow up to C$458m to finish construction of the village, after private financing stalled due to worsening economic conditions.

Olympic Torch parade at Vancouver City Hall photo: KK+

Vancouver’s Mayor Gregor Robertson was quoted at time as saying: “It’s a bitter pill for taxpayers to swallow.”

‘Double whammy’

The city could recoup its investment if enough high priced apartments in the athletes’ village are sold after the games.

But many Vancouver taxpayers are beginning to wonder whether the games are worth it.

Some teachers have concerns about the amount of money being spent on the Olympics rather than the education system.

“I think Vancouver has been caught by surprise by the global economic downturn, and did not have a coherent contingency plan in place to deal with it,” says Simon Chadwick, Professor of Sport Business at Coventry University.

“Some costs increased – there is always the probability that can happen on projects like this, but on top of that there was the global economic downturn, causing a double whammy.

“There has been a budget deficit which the taxpayer has been obliged to fill.”

Transport links

As well as the athlete facilities, a new bobsled run, skating rink and curling centre have also been built.

In addition, the province has also built a new convention centre (cost C$885m), a rapid transit line connecting Vancouver to the airport (cost C$2bn), and a much-needed upgrade of the motorway to Whistler (cost C$800m).

But will any of this spending bring about a financial return?

An early economic impact statement projected that the games could bring in C$10bn, but a recent PricewaterhouseCoopers showed total economic impact would be more like C$1bn.

The trade and convention centre could be the first to provide some sort of return, given that 2011 is on target to be the best convention year ever in Vancouver.

And the Canada Line metro train line could encourage long-term development close to its 16 new stations, particularly in fast-growing Richmond.

Sponsor cash

It has also been estimated that the Sea-to-Sky motorway could increase the provincial GDP by a total of C$300m, spread over the years until 2025.

And it should also be noted that this huge infrastructure spending created a lot of work.

A report put forward by the province of British Columbia claimed more than 22,000 jobs were created between 2003 and 2008, although some question this figure.

Meanwhile, last August the International Olympic Committee (IOC) said it would give extra cash to the Vancouver organisers if there was a budget shortfall caused by the global downturn.

There is a potential gap in sponsor revenue as the IOC has only signed up nine worldwide corporate partners.

Eleven had been expected when Vancouver’s C$1.7bn operating budget was drawn up.

And there has been less cash from TV rights than originally thought.

Benefits v costs

photo: KK+

Vancouver organisers say they are still hoping to have a balanced budget, even if the Winter Olympics is not the money-making event they once thought it would be.

“Questions are being asked about the whether the benefits to be gained will outweigh the cost of the event,” says Professor Chadwick.

“What Vancouver has got is not a profitable event, rather what they have is a showcase.

“But has hosting a showcase event been overshadowed by the costs involved?”

Back in 1976 the Montreal Olympics not only landed the taxpayer with a bill that took 30 years to pay off, but the country’s athletes failed to win a single gold medal.

That is an unwanted double achievement that Vancouver and Canada will be striving to avoid this time around.

Story from Slate