Editorial: Can L.A. afford the Olympics?
After months of plunging public support, Boston Mayor Marty Walsh in July abruptly pulled the plug on his city’s bid to host the 2024 Summer Olympics. The deal breaker? He didn’t want to sign the host city contract, putting his 650,000 constituents on the hook if the Games ran a deficit.
Considering that every Olympics since 1960 has had cost overruns — big ones — and that Boston needed to build a lot of things to successfully pull off a Summer Games, it was a prudent decision. But it left U.S. Olympic officials in a very bad place with just a month and a half before the deadline to submit an American city to the international competition to host the Games. They were on a plane to Los Angeles practically the next day to ask Mayor Eric Garcetti to help bail them out.
It’s good to have the upper hand, and that’s what Garcetti and his team have in the current discussions. U.S. Olympic officials may not be over a barrel, exactly, but that barrel is certainly in the negotiating room. They know that Los Angeles could host another Summer Games in its sleep. They know this city would be a strong contender based on the 1984 Games, widely considered the most successful in modern history. They know the region already has most of the necessary venues and infrastructure in place. They know they could make a lot of money off an “L.A. ’24" Games.
They know they need L.A. more than L.A. needs the Olympics.
But does Garcetti know this? We’re not sure. Last week, Garcetti said he’s pushing hard to be the American bidder for the Games, and that’s good. But he wouldn’t even consider playing hardball when it comes to the requirement that the city guarantee to pay any cost overruns. That’s not so good.
The mayor and his Olympic advisors say Angelenos shouldn’t worry, as Bostonians did, about paying for cost overruns because there won’t be any. Period. The city just can’t lose, he said.
Where have we heard that before? Oh yes, Montreal’s mayor said something similar just before his city incurred $1.5 billion in debt for staging the 1976 Summer Games. It took three decades’ worth of tobacco tax revenue to pay off the bill. That wasn’t an aberration. According to a University of Oxford study, the average cost overrun for the Games held since 1960 was 179%, making it “one of the most financially risky type of megaproject that exists, something that many cities and nations have learned to their peril.” Gulp.
That may not concern Garcetti, who will be termed out of the mayor’s office by 2024. But it certainly ought to concern Angelenos, who could end up paying a bill for a sporting event many of them can’t even afford to attend.
We don’t doubt that the mayor has put together as solid a budget as part of the bid as is possible at the moment. The projected $4-billion-plus cost would be covered by an estimated (but not guaranteed) $2 billion from the International Olympic Committee, as well as ticket sales, sponsorships and other revenue. That’s not counting the indirect proceeds from tourism in the region. And $200 million would go to L.A. city coffers just to cover any costs for public services (police, parking enforcement, etc.). That’s all good — assuming nothing unforeseen happens. Because the $400-million contingency fund planned for the L.A. Games won’t go very far if, for example, a global recession in 2023 depresses sponsorships or ticket sales, or a catastrophe damages one of our stadiums.
Although no one can predict what will happen nine years from now with any certainty, it is perfectly reasonable to make an educated assessment of the risks and benefits. What’s unreasonable is for Olympic officials, who reap big profits from the Games, to require the citizens of one municipality to assume the liability for costs of an event they don’t control and over which they have no say. That’s a recipe for economic disaster; no wonder there’s a history of Olympic cost overruns.
The odd construct of a single American city and its taxpayers guaranteeing the financial success of “America’s Games” is a relic worth reconsidering.
Besides, is it even necessary? In 1978, then-Mayor Tom Bradley reluctantly told the International Olympic Committee that he was withdrawing the city’s bid to host the 1984 Games because of the provision that made the city liable to pay for cost overruns. Bradley didn’t like losing the Games, but he had no choice. A contingent of financial skeptics on the City Council, led by Bob Ronka of the San Fernando Valley, got a proposition on the 1978 ballot asking voters to prohibit unreimbursed public money from being spent on those Games. Charter Amendment N was backed by more than 70% of voters. The IOC sucked it up and the result was a wildly successful, and lucrative, Summer Games.
We don’t need another charter amendment, but we do need Garcetti and his team to be skeptical of the promises of Olympic officials. He must negotiate a contract that adequately insulates the city treasury. The City Council also must stand firm. Before anything is signed that commits the city financially, there should be full and open hearings by the council to set the details of the proposed costs and risks, and the forecasted revenues to offset them. The City Council also needs to carefully examine the role of surrounding cities, the county and the state, as some of the events will be held — and much of the economic impact will be felt — outside the city of Los Angeles.
We want Los Angeles to host another Olympics as much as anyone. The influx of tourism could be great for the economy, and it would certainly boost the city’s global standing to produce another stellar Games. But we also don’t want a Games that wipes away the golden memory of 1984, when the city earned a perfect 10.
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