SPORTS AND THE ECONOMY - In Tuesday’s CityWatch column I explained why the National Football League and developers exaggerate the economic benefits of professional football teams and new stadiums by a factor of at least 10.
In a nutshell, the NFL wants state-of-the-art stadiums everywhere. Billionaire owners salivate over the profit potential of teams and stadiums. Enough is never enough.
Stadium developers will almost always tangle Super Bowl bait in the faces of politicians and the public, and they aren’t shy about tossing out the temptation of a future Olympic Games either.
Although hosting the Olympic Games may intuitively seem to be a boost for any city’s economy, independent analyses show that this is rarely the case.
History has recorded that the 1984 Los Angeles games produced a small profit. That may be true.
Following the historic financial disaster that was the 1976 Montreal games, Los Angeles was the only bidder for the 1984 games.
Montreal went deep in debt due mainly to all the facilities it had to build. It wasn’t until the end of 2006 that everything got paid off.
City officials projected the cost of the event at $124 million. It then ballooned to $2.8 billion. In 2009 dollars that amounts to $10 billion, which is an important number given the three decades that it took to get all the bills paid.
On the other hand, Los Angeles only had to build a few structures. And being the only interested city, it stood up to a stunned International Olympic Committee and said that no public money would be used. That launched the era of the heavy commercialization of the Olympic Games.
A study by two university economics professors found no economic benefits left behind in LA. The temporary jobs disappeared when the flame was extinguished.
And this is an Olympics success story!
Horror stories abound.
Barcelona went $4-6 billion in debt.
Athens and Greece started with cost projections of $1.6 billion, but ended up spending $16 billion. Beijing estimated the same cost, but spent $40 billion.
London will host the 2012 Summer Games. Its $4 billion cost estimate is now heading north of $19 billion. London’s mayor told the London Telegraph that if she had known then what she knows now, London never would have submitted a bid.
Perhaps the most serious flaw in the build-to-suit reports that are prepared by event proponents is that they count many huge costs as benefits. If a government agrees to build structures or repair the streets, the Olympic organizers know that it doesn’t affect the cash flow of their committee, so it isn’t counted as an expense.
In preparing for the Winter Games, Vancouver spent $6 billion on infrastructure improvements, but only one-tenth of that was specific for the games.
What government overlooks in its zeal to spend public money to prepare for the games is what else it could have used the money for, such as building hospitals, schools, or providing incentives to help businesses grow and create jobs.
Some cities justify the costs of the games as a means to “put their city on the map.” Certainly, Los Angeles isn’t one of them.
The danger with this thinking is that the games could produce a negative image of the city. Atlanta took a beating in 1996 because of horrendous traffic problems, and the bombing in Centennial Park. Maybe it was a coincidence, but Atlanta’s convention business, which had been increasing, fell 10% during the year leading up to the games.
The reason that it’s so difficult to get indisputable cost figures is that each local organizing committee submits reports at the end that reflect only its direct costs. Absent are the costs for infrastructure improvements, loss of other visitor revenue, etc. that are absorbed by the taxpayers.
Andrew Zimbalist, professor of economics at Smith College, is supported by other independent experts in concluding that there is scant evidence that huge sporting events like the Olympic Games have a positive economic impact.
Dr. Jeffrey Owen, an economics professor at Indiana State University, joined the chorus and wrote that “there has not been a single study of an Olympics or other large-scale sporting event that has found empirical evidence of significant economic impacts.”
Next Tuesday: Consider yourself lucky if your city lost its bid for the World Cup.
(Greg Nelson participated in the birth and development of the LA Neighborhood Council system and served as the General Manager of the Department of Neighborhood Empowerment. He also served as Chief of Staff for former City Councilman Joel Wachs. Nelson now provides news and issues analysis to CityWatch. He can be reached at: [email protected] .) –cw
Tags: sports, economy, sports economy, Olympics, Olympic Games, Montreal, Barcelona, Los Angeles, stadiums, public money
CityWatch
Vol 9 Issue 92
Pub: Nov 18, 2011
