LA 2024 releases revised budget for Olympics, revenue to equal $5.3 billion in costs
In an era when the Olympics have become synonymous with cost overruns and massive deficits, the private committee seeking to bring the Summer Games back to Southern California has released what it calls a “no-surprises” balanced budget.
LA 2024’s latest proposal, issued on Friday, estimates that it would cost $5.3 billion to stage the mega-sporting event.
For the record:
6:36 AM, May. 22, 2019An earlier version of this article said LA 2024’s original budget from the summer of 2015 included an initial estimate of $4.1 billion. The estimate was $4.6 billion.
Though that number exceeds their initial projection, bid leaders still believe they can cover all expenses with revenue earned from sources such as broadcast rights, corporate sponsorships and ticket sales.
“We have been extremely conservative in our approach,” said Gene Sykes, the committee’s chief executive.
The new budget includes an expanded $491.9-million contingency — money set aside to pay for unforeseen problems.
Olympic experts warn that problems often arise and that taxpayers can be forced to pay the bill.
“Costs creep up pretty quickly,” said Victor Matheson, an economics professor at College of the Holy Cross in Massachusetts. “Historically, the final numbers have been well in excess of the original bid.”
This fall, Tokyo organizers have struggled with preparations for the 2020 Summer Games, which, according to a government panel, could cost $30 billion, or four times the initial estimate.
The spiraling expenses represent yet another headache for the International Olympic Committee, which dealt with a record-setting $50-billion price tag for the 2014 Sochi Games and last-minute cuts at the cash-strapped 2016 Rio de Janeiro Games.
“If L.A. is chosen to host the 2024 Games, the IOC does not have to worry about changing or evolving budgets, shifting competition venues or uncertainty about delivering the Games,” said Casey Wasserman, the LA 2024 chairman.
Committee leaders made a strategic shift Friday when they deleted any mention of a projected surplus.
Their original $4.6-billion budget, prepared in the summer of 2015, predicted revenues would exceed expenses by $161 million. That would fall in line with the millions left from the 1984 Los Angeles Games, which set a new standard for hosting the Olympics and left an endowment that, decades later, still funds youth programs throughout the city.
LA 2024 hasn’t ruled out turning a profit. But Wasserman said: “Surpluses don’t happen until after the Games are over. We’re focused on a balanced budget with lots of protections.”
The IOC will gather in September to vote on a host city for 2024, with L.A. competing against Paris and Budapest.
The Paris 2024 bid has proposed to spend about $3.4 billion on operating costs and $3.2 on competition and non-competition infrastructure. Budapest has estimated about $3.41 billion in operating costs.
From the start, LA 2024 has focused on limiting construction — the largest financial concern for any Olympics — by making use of existing venues such as the Coliseum, Staples Center and StubHub Center.
LA 2024 has estimated it will spend about $1.2 billion on all of its venues. That money would go toward renting and retrofitting existing facilities and building temporary sites. The Coliseum, for instance, would be fitted with a raised track for the duration of the competition.
“Keeping construction costs down is the only hope you have for doing this without putting a big burden on taxpayers,” Matheson said.
It also helps that preexisting government projects have begun to upgrade the public transportation system and Los Angeles International Airport. Voters recently approved an additional $120 billion for transit funding unrelated to the Games.
“Instead of mortgaging our futures on unknowable construction costs, our Games will capitalize responsibly on investments that are already transforming our city for the future,” Mayor Eric Garcetti said.
LA 2024 leaders worked with city officials and private consultants to develop the new budget.
In addition to venue infrastructure and the contingency fund, the committee proposed spending $922 million on operations, $565 million on technology and $695 million on its workforce.
The opening and closing ceremonies would cost an estimated $176.8 million.
The IOC would cover about 16% of the overall price tag by sharing $1.3 billion of its broadcast and sponsorship revenue with the host city. Domestic sponsorships are expected to generate $1.93 billion and ticket sales $1.47 billion.
An independent analysis of the budget was performed by the KPMG accounting firm and filed with the city Friday afternoon.
The evaluation — requested by the city and paid for by LA 2024 — found the new budget to be “substantially reasonable” and noted the “level of rigor … for this stage of the bid process.”
LA 2024 received similar high marks from the state’s Legislative Analyst’s Office last month, which noted the bid’s “low-cost, low-risk approach.”
Although Los Angeles conducted financially successful Olympics in 1984 and 1932, experts warned that much has changed since then and costs can skyrocket in the seven years between bidding and the opening ceremony.
Economic situations can worsen. Local, state and federal legislators can use the Games as an excuse to launch expensive infrastructure projects.
“It’s always sensible to be vigilant,” said Andrew Zimbalist, an economist at Smith College in Massachusetts. “But at the end of the day, do I see any substantial unanticipated costs for L.A.? No, I don’t.”
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