Calgary, Canada work out Olympic compromise but math doesn’t really work and council is still mad and luge fans are madder ARGH

Sorry to be late with the posting today, but I had a morning appointment and time got away from me and anyway Calgary and Alberta and the Canadian government have apparently settled their $430 million difference over paying for a 2026 Winter Olympics bid, meaning the plan will now go to a public vote on November 13 as previously scheduled.

How on earth did this happen, after just the night before everything seemed to be headed for the bid to be pulled amid a budget stalemate? Partly by some sleight of hand: The total projected bid cost is now just $2.875 billion, down from $3 billion, but given that the typical Olympics goes 156% over budget, both those numbers should be treated as fictitious anyway. As for who’ll pay for what share of that:

  • From the City of Calgary, $370 million in cash, plus another $20 million to cover a premium on a $200-million insurance policy against cost over-runs, for a total of $390 million.

  • From the City of Calgary and Government of Alberta, $150 million in pre-authorized improvements to Victoria Park and access to the Calgary Stampede grounds.

  • From the Government of Alberta, $700 million in cash.

  • From the Government of Canada, $1.423 billion, which matches the amounts committed to the core event costs by the province, city and Town of Canmore; also, $30 million in “leveraging initiatives” which the letter said are identified in the hosting plan.

So basically Calgary and Alberta put in an extra $170 million, the feds put in $47 million less, and the total public contribution ($2.69 billion) is nearly $200 million short of the actual total public cost. Numbers are fun!

The numbers work out better if the $200 million insurance plan is counted as a city expenditure toward the $2.875 billion cost. But if it’s part of the cost, it’s not for overruns — you’re really saying that the projected cost is now $2.675 billion, plus have an insurance policy for the next $200 million. Seriously, did somebody major in doubletalk here?

Furthermore, an insurance policy against $200 million in cost overruns doesn’t do much good if the overruns are more than $200 million — which, as noted above, they’re almost certain to be — so who covers any additional costs?

Interestingly, as of last night one important decisionmaker hadn’t officially signed onto the deal:

It was signed by Alberta Premier Rachel Notley, federal Minister of Sport Kirsty Duncan and included a space for Calgary Mayor Naheed Nenshi’s signature.

Nenshi was “not available for comment” today according to several news outlets, and hasn’t tweeted in a while, so your guess is as good as mine what’s actually been agreed to and by whom. The city council is set to vote on a proposal to deep-six the Olympic bid entirely today, but presumably this announced agreement is set to forestall that, but councilmember still sounded unhappy about the new deal but they were being yelled at by angry luge fans NO SERIOUSLY ANGRY LUGE FANS and I need to go have a lie down right now. Let’s all tune in again tomorrow morning — morning, I promise this time — and see where the chips have fallen.

[UPDATE/CORRECTION: The $150 million Victoria Park money was actually already allocated, it’s just being newly counted as Olympic spending to qualify for matching funds. That’s good in that the city will just be on the hook for the $20 million in insurance premiums; it’s bad in that the only money actually committed to Olympic costs now comes to $2.325 billion, which is a lot less than the $3 billion originally projected. Basically, the feds seem to be dealing with the funding gap by saying, “Let’s shift $675 million from the ‘spending’ category to the ‘overrun’ category, and hope that we get lucky and it costs less than we expected!” This is not likely to go well.]

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After Canada demands more Olympic money from Calgary, Mayor Nenshi threatens to pull 2026 bid

It’s Canada day here at Field of Schemes — no, not Canada Day, that was months ago, and we even missed Canadian Thanksgiving, but anyway — as in addition to the news from Halifax, Calgary Mayor Naheed Nenshi has threatened to withdraw his city’s bid for the 2026 Winter Olympics if the federal government doesn’t promise to cover more of the bill:

The letter was triggered by Friday’s Postmedia revelation that the federal cabinet had decided to fund up to $1.75 billion in 2026 dollars, but only if the province and city match the total.

“It is clear there has been a tremendous misunderstanding of the nature of the required funding amongst the three government partners and now we are in a position where we cannot show citizens how the required public contribution could be met,” Nenshi wrote.

Calgary and Alberta officials apparently thought they had an agreement in place where the city would put in $370 million, the province $700 million, and the federal government $1.75 billion plus any overruns. But it turns out the $1.75 billion is in 2026 dollars, which comes to more like $1.5 billion, and it’s contingent on the city and province matching that $1.5 billion, which is $430 million more than the two local governments had offered.

Negotiations are reportedly ongoing, but there isn’t much time left, as Nenshi said he needed a resolution by today or he’ll cancel a scheduled November 13 public vote on the plan. Polls have shown that the proposal is likely to pass, but Nenshi has previously reserved his right to pull out of the bid before or even after the public vote, so there could be much haggling yet to come. Which is good, because at $3 billion in public costs and a projected $200 million in new tax revenue, this sounds like a pretty awful deal, unless Calgary residents really think it’s worth $2.8 billion to have their lives turned upside down for three weeks in 2026 so people can come watch winter sports (doubtful, though Canadians do love their curling) or to put Calgary on the map as a tourist destination (um, maybe after global warming kicks in a few more degrees?).

We should find out more by end of day, or at least by Wednesday, when the Calgary council is set to meet to discuss the Olympic plan.

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Friday roundup: Nobody wants the Olympics, nobody wants the Marlins home run sculpture, nobody wants the Chargers (but L.A. is stuck with them through 2040)

So what else happened this week? Glad you asked:

  • Stockholm’s new city government said it won’t provide any public funding for a possible 2026 Winter Olympics. That would leave only Milan and Calgary as bidders, and the former hasn’t committed to public spending either, while the latter is set to hold a public referendum next month on hosting in the midst of complaints that no one knows how much it would cost. It’s still a longshot, but there’s a real chance here we could see our long-awaited “What if they held an Olympic bidding war and nobody showed up?” moment, or at least that the IOC will have to consider bids that don’t include its usual requirement that local government promise to backstop any losses.
  • “Several dozen” Long Island residents marched in protest last week against the New York Islanders‘ proposed arena near Belmont Park, saying it would create too much traffic and construction noise. Those aren’t the best reasons to be concerned about it in my book — I’d be more upset about the crazy discount on land New York state is giving the team, if I were a New York taxpayer, which I am — but maybe the protestors are worried about that too but it didn’t fit easily on a sign.
  • The owners of the Miami Marlins (i.e., Derek Jeter and the money men behind him) are going to have to pay $2.5 million to Miami-Dade County for moving Red Grooms’ home run sculpture outside their stadium, since relocating it means that Grooms will disavow the work and make it worthless. They should’ve just traded it to Milwaukee for some lousy prospects.
  • Oklahoma City is looking for capital projects to spend the next iteration of its sales-tax hike on, and Mayor David Holt says if a maybe-MLS-caliber soccer stadium isn’t included, “the Energy won’t be here forever.” The Energy, if that name draws a blank for you, is the city’s beloved USL franchise that’s been there since … 2014? It’s only a matter of time before teams start threatening to move before they even exist, isn’t it?
  • Bwahahahaha, the Los Angeles Chargers are reportedly locked into their lease at a new Inglewood stadium through 2040, so there’s no way they’re moving back to San Diego or elsewhere no matter how terrible their ticket sales are. Dean Spanos is so screwed! Uh, until he sells the team for a multibillion-dollar profit, but he’ll be crying the whole way to the bank, I promise you!
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Friday roundup: Vegas MLB rumors, North American soccer superleague rumors, and everything just costs untold billions of dollars now, get used to it

I published two long articles yesterday — one on sports stadium and arena deals that haven’t sucked too badly, one on a particular non-sports subsidy deal that looks to be sucking pretty hard — so I wasn’t able to post anything here, despite a couple of news items that might have warranted their own FoS posts. But as the saying goes, Thursday omissions bring a shower of Friday news briefs (please don’t tell me that’s not a saying, because it is now), so let’s dig in:

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Friday update: Bad D.C. arena math, bad Bucks arena math, bad Columbus ticket tax math

It must be September, because my TV is filled with Jim Cantore and Anderson Cooper standing ankle-deep in water. But anyway:

  • Washington, D.C., is about to open its new Mystics home arena and Wizards practice facility, and Mayor Muriel Bowser says it’s a model of how the city would build a new NFL stadium as well. “We know [sports] can help our bottom line by attracting people to our city, but it also has a big impact when we’re winning on our collective psyche,” says Bowser of an arena that got $50 million in public subsidies for two teams that were already playing in D.C. anyway. Maybe she should go back to using her terrible soccer stadium deal as a model instead.
  • People in Calgary are starting to ask whether, if the city is looking to spend $3 billion on hosting the 2026 Olympics, maybe it should build a new Flames arena as part of the deal? Camels, man.
  • Buffalo Bills co-owner Kim Pegula says she’s going to wait until after the gubernatorial elections this November to start negotiating a new stadium with whoever ends up in charge of the state. It won’t be the lox-and-raisin-bagel lady.
  • Speaking of the Pegulas and New York’s current governor, they’re planning an $18 million upgrade of Rochester’s arena that hosts the Rochester Americans minor-league hockey team (which the Pegulas also own), with costs to be split among the owners and city and state taxpayers. Split how? Sorry, no room in the Associated Press article, ask again later!
  • The AP did find time to fact-check Wisconsin Gov. Scott Walker’s claim that the new Milwaukee Bucks arena would return three dollars in new taxes for each one spent, and found that “Walker omits some of the state money spent on the 20-year arena deal and relies on income tax estimates that experts call unreliable.” I could’ve told them that — in fact, I did, three years ago.
  • “‘Ticket tax’ proposal could lead to higher prices on movies, theater, sports in Columbus” reads a headline on ‘s website, something that the station’s reporter asserts in the accompanying video without saying where he got it from. He’s at least partly wrong: Ticket prices are already set as high as the market will bear, so unless the ticket tax changes the market — in other words, unless people in Columbus are forced to spend more on movies and theater and such because the other options (staying at home and watching TV, going out to eat) aren’t good enough, mostly this will just mean prices will stay roughly the same but a bigger share will go to theater/team owner’s tax bills. (I could try to find an economist to estimate exactly how big a share, but isn’t that really WSYX’s job?)
  • Former Oakland A’s exec Andy Dolich says the team owners may be looking at buying both the Howard Terminal site and the Oakland Coliseum site, and using the revenues from one to pay the costs of prepping the other for baseball, which, if the Coliseum site is such a cash cow and Howard Terminal such a money pit, wouldn’t they be better off just buying the Coliseum site and developing that? Or is the idea that Oakland would somehow give up the Coliseum site at a discounted price in order to get a new A’s stadium done? I have a lot of math questions here.
  • With nobody wanting to spend $250 million on a major renovation of Hartford’s arena, the agency that manages the XL Center is now looking for a $100 million state-funded upgrade instead. Still waiting to hear whether this would actually generate $100 million worth of new revenues for the arena; if not, the state would be better off just giving the arena a pile of cash to subsidize its bottom line, no?
  • Cobb County is only letting the Atlanta Braves owners out of part of the $1.5 million they owed on water and sewer costs for their new stadium. Yay?
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Brazil literally funded sports subsidies while its museums burned

I’ve blamed stadium subsidies for a lot of ills over the years, but never the destruction of an entire nation’s historical heritage. And yet here we are:

In the midst of an economic downturn, officials had drastically slashed the museum’s funding, reducing the budget to just 10 percent of what it was in 2013. A private association resorted to crowdfunding maintenance projects, including the restoration of a termite-infested dinosaur display. Meanwhile, fire-retardant systems and nearby hydrants lay neglected.

And yet, over the same period, the Brazilian government spent billions in preparation for the 2014 World Cup and the 2016 Rio Olympics. The delays, pollution, and corruption that plagued the country’s preparation for the events were widely publicized. Six of the 12 stadiums constructed for the World Cup later faced investigation for financial irregularities and bribery.

No, there’s no direct connection between the billions of dollars Brazil spent on the 2014 World Cup and 2016 Rio Olympics and the fire that destroyed the country’s National Museum, leaving only photographs as a reminder of what was lost. (And this wasn’t the first Brazilian museum to burn down in recent years.) People can (and I’m sure will) argue that if Brazil hadn’t wasted its money on sports, it would have wasted it on something else other than sprinkler systems.

But much like with that bumper sticker about bombers and bake sales, it’s tough to ignore massive spending on something stupid and wasteful when basic needs are going unmet. As the writers of the above-linked article in The Bridge conclude, every spending decision is a tradeoff, and “just because some public spending is uninteresting doesn’t mean it’s not critical.”

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Calgary to let voters decide on bidding $3B in public cash for 2026 Olympics

The Calgary city council has voted overwhelmingly to put the question of whether to bid on the 2026 Winter Olympics up for a public vote in November, as the price tag has become clearer: a $5.2 billion total budget, of which $3 billion would be paid by city, provincial, and federal taxpayers.

That sounds, um, really really bad, especially if Calgary wouldn’t get any revenue from the Games. (Olympic revenues would go towards paying off the other $2.2 billion.) But Mayor Naheed Nenshi, who has been notably skeptical about giving lots of money to the Flames owners for a new arena — something that’s not part of the Olympic plan — says there could be benefits for the city:

Nenshi said hosting the Olympics could be a “huge leveraging exercise” for Calgary that could attract billions in investment to help pay for projects that the city would otherwise have to pay for on its own.

“If we can get that money from other places and also get all the benefits of an Olympic Games, that starts to sound really interesting to me,” he said.

That sounds like “Hey, if Ottawa is going to spend a whole bunch of money on stuff in Calgary, works for me!”, which, sure, okay. But Calgary would still be on the hook for at least a billion dollars or so, which isn’t chump change. Bid chief Mary Moran said that her organization was projecting that Alberta would see about $200 million in new tax revenue as a result of the Olympics, which sounds like a terrible return on the public’s investment, but which she called “a responsible bid.”

Nenshi did imply that holding a plebiscite, or even passing one, wouldn’t necessarily mean Calgary would bid on the 2026 Games:

“I am not as much pro-Olympics as I am pro-a-great-deal for Calgary,” Nenshi said Tuesday night.

“So, if there is a point where that great deal just isn’t surfacing before or even after the plebiscite — if the plebiscite passes — then certainly council would still say ‘you know, this isn’t right for the citizens of Calgary and we are going to pull out of the process’.”

It’s also entirely possible that Calgary voters will tell the IOC to take a long walk off a short pier, as those in other cities have done. Ultimately, it’s less important whether Calgary officials okay a public vote — democracy is good! — than how they attempt to sell the deal to voters; if it’s all “Who can put a price tag on the thrill of Olympic curling?”, that’s less helpful in letting people determine whether this would really be a great deal.

 

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With Olympics over, it’s almost time to tear down Pyeongchang’s $10m-an-hour stadium

With the 2018 Winter Olympics now over and the world’s curling addiction having to wait for years for its next fix, it’s a good time to look back on some of the legacies of Pyeongchang Games. Most famously, once the Paralympics are over on March 18, the main Olympic stadium will be torn down after hosting just four events, at a total cost of $10 million per hour of use, as Michigan sports economics researcher Judith Grant Long told WBUR radio.

This, though, is actually a good thing, argues Quartz’s Josh Horwitz, because it enabled Pyeongchang to keep its construction costs low (a mere $75 million for the stadium structure itself, compared to $600 million for the Sochi main Olympic stadium that currently serves as a mostly empty soccer venue. And at least South Korea won’t be on the hook for maintaining the place once the Olympics are over.

All of which is true, but even $75 million for a building that only opened its gates four times is a pretty flagrant waste of money — unless the revenues from the Games were enough to pay for it, which they’re not. The bigger problem here is the requirement to keep building new venues in new cities every two years, which Horwitz acknowledges could be solved by just sticking the Olympics in one place and leaving them there, before dismissing that idea as unpalatable to the IOC:

“If you look at events like the Tour de France that are put on over and over by the same organizers, they get very good at doing it,” [Oxford University professor Bent Flyvbjerg] says. With the Olympics,”you’re always giving it to beginners that have never tried it, or if they’ve done it before, it’s so many decades ago that the experience they gained is not relevant.”

The International Olympic Committee is unlikely to welcome this solution. Keeping the Olympics in a single host would potentially give local organizers more control over the games than the IOC itself. It could also leave the games vulnerable to the political or economic problems a country faces at a given time.

To be honest, neither of those seem like huge obstacles — plenty of Olympics have ended up plagued by political and economic problems anyway, and more control by local organizers is only a bad thing for the Olympics if you take it to mean “can’t get billions of dollars in subsidies every other year to help fund fancier and fancier venues.” But certainly the IOC doesn’t want to consider a permanent host (or even a rotating set of permanent hosts), and is instead encouraging “sustainability” ideas like popup stadiums, which are at least somewhat less costly and embarrassing when they sit around rusting later.

The only way any of this will change is if cities stop bidding on the Olympics, and as Vox notes, things are starting to head in that direction. There are still plenty of candidates to host the 2026 Winter Games, though, so unless a whole lot of them drop out before the winner is picked in fall of 2019, it’s unlikely the IOC is going to see this as an existential crisis. It definitely helps that there’s more reporting going on of how hosting the Olympics is an incredible money suck for cities — this certainly wasn’t the case when I first wrote about it 18 years ago — but as long as there are still a few suckers out there, the IOC is extremely unlikely to significantly reform its act.

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Friday roundup: Pistons disguise empty seats as other-colored empty seats, Olympics tourism is bad and likely to get worse, Suns have no clue about arena plans, and more!

Off we go! In my case, literally: I’ll be traveling all next week, so if you don’t hear much from me around here, hold tight and I’ll catch up with all the news on my return. In the meantime, keep yourself warm at night with this week’s worth of fresh items:

  • Pyeongchang’s surge in tourism for the Olympics is unlikely to be sustained in future years, according to a study that shows tourism levels quickly drop back to normal, when they even have an Olympic uptick in the first place. (Overseas visitors to London were actually down in the summer of 2012.) Given that you can still walk up and buy tickets to most of this year’s Olympic events, I wouldn’t count on it being an exception to the rule. Hope the locals enjoy all those new hotels!
  • Phoenix Rising F.C. is designing a new MLS-ready stadium on the site of its current temporary stadium on the Salt River Pima reservation, and claims it will pay the whole $250 million cost. That would sure be nice, but then that’s what we were told in Sacramento, too.
  • The Koch brothers’ Americans for Prosperity is sponsoring bills in state legislatures that establishing bans on spending public money on pro sports stadiums, which would kick in as soon as 25 states agreed to join the compact. Better they spend on that than on trying to buy Congress, certainly, but as sports economist John Vrooman noted to the Arizona Republic, this wouldn’t stop the other 25 states from continuing to spend to try to lure teams, at which point the whole system would break down. Vrooman said really any legislation needs to happen on the federal level, and “unfortunately for local taxpayers held hostage, that ain’t gonna happen anytime soon.” You gotta believe, John!
  • The projected cost to restore Miami Marine Stadium — remember Miami Marine Stadium? — has risen from $45 million to $59.6 million, and Miami has only $50.4 million set aside to pay for it, and yeah, that’s not good.
  • If you were wanting a long, fawning profile of the Golden State Warriors COO in charge of building their new arena, the Associated Press is here to serve. I’m more interested in the accompanying photo of a giant model of the arena, which makes the upper deck seats look kinda crappy thanks to an intervening clot of suites and club seats, but other images that show the end seats make it look not so bad, so I’ll withhold judgment until somebody (maybe even me!) sees the new place with their own eyes.
  • Hey, Phoenix Suns president Jason Rowley, how are your arena plans going? “‘What’s the best solution?’ It hasn’t been figured out yet.” Are you thinking of going in on an arena with the Arizona Coyotes? “There really hasn’t been a whole lot of conversation between us and the Coyotes.” Any hints at all about what your plans might be? “There are so many pieces to an arena conversation that it’s very difficult to identify one thing that would either be a go-forward situation or one thing that would impact where you’re ultimately going to end up.” The Suns have an opt-out in their current arena lease in 2022, so expect more heated rhetoric once we get closer to that date.
  • The Detroit Pistons are putting black seat covers over the red seats at their new arena during their home games, to make it less obvious how many empty seats there are. The covers are removed for Red Wings games, because the Red Wings’ team color is red, so I guess for them it’s not embarrassing, it’s promotion of their brand? The Pistons are also letting fans move down from the upper deck to the lower at no cost to make the empty seats look less bad on television. Hope Detroit is enjoying all that economic development!
  • At least Detroit got lots of local construction jobs from the arena, and that’s one thing no one can take away! Unless you believe the claims of a local construction worker’s lawsuit against one arena contractor, which says he was only hired to meet the project’s 51% local hiring quota and then immediately fired, while at the same time suburban workers were brought in under fake addresses. And even then, city data shows that only 27% of total workers on the arena project lived in Detroit.
  • MLB commissioner Rob Manfred says he approves of the Tampa Bay Rays‘ preferred Ybor City site for a new stadium — it’s literally his job to say this, so no surprise there — and has told Tampa business leaders that they need to be “engaged in this effort” because “it’s good for community over the long haul.” He then added, “It’s crucial that we get a facility here that allows the Rays to get more toward the middle of the industry in terms of their revenues,” which pretty much sounds like, Hey, local corporate titans, one of your brethren isn’t making as much profit as he’d like, please give him a bunch of your money so his bank balance looks better, okay? More power to him if that sales pitch works, I guess, but I’m in no way confident it will take a significant bite out of that $400 million-plus funding hole, and remain concerned it’s mostly misdirection so that whenever the Rays eventually go to taxpayers hat in hand, they can say, Look, the business community is already chipping in, you gotta do your part too, capisce?
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South Korea’s Olympics may be the money pit to end all Olympic money pits

The Winter Olympics are underway, which for me means sitting through lots of ice dancing and people falling down mountains on various contraptions, while hoping to catch some curling. And, of course, wondering how much all this is costing. CNBC’s Squawk Box has the answer, via our old frenemy Andrew Zimbalist, and it ain’t pretty:

Speaking to CNBC on “Squawkbox,” he said: “At the end of the day, they’ve spent $13 billion and they’ll get back about $2.5 billion. The only way you can justify that kind of a terrible balance is if, in the long run, it’s going to promote tourism, promote trade and promote foreign investments.”

“There’s no evidence from other Olympics that that happens,” he added.

He’s not wrong: Multi-billion-dollar losses are de rigueur in the Olympic world, and by all accounts the only Olympic host to see a significant rise in tourism after the Games was Barcelona, which may now be having some second thoughts about that strategy. Still, a negative-80% return on investment is pretty impressive no matter how you slice it, so how exactly is South Korea managing this?

A $109 million Olympic stadium that will be torn down after only four uses is a decent start. Selling only 60% of the available tickets (according to Zimbalist) also helps, though Olympic officials claim that number is now down to 16%. I don’t have numbers for much of that $13 billion expense is cost overruns, but it’s typically a whole hell of a lot. A $3.7 billion bullet train to connect Seoul to Pyeongchang? Now we’re talking!

With the most impressive Olympic construction being its massive sea of red ink, cities like Oslo and Boston have to be breathing sighs of relief that they bailed out of their Olympic bids, while potential 2026 bidders — I’m looking at you, Sion, Erzurum, Innsbruck, Calgary, Stockholm, Sapporo, Denver, and Almaty — may want to start having second thoughts. I’m not honestly sure whether the best solution here would be to rotate the Olympics permanently among a few cities with permanent venues (but what city would really want to have to keep a velodrome sitting around that’s only going to be used for three weeks every 16 years?) or scaling back the Olympics to where they only involve sports that can be played in multipurpose venues (curling and ice dancing, you’re all good!) or what, but something’s gotta give eventually if we don’t want our planet’s most renowned sporting event to be all about setting fire to a giant pile of money every two years. Though come to think of it, that wouldn’t require a specialized venue or even a bullet train, so bring on the Money Bonfire as an Olympic event!

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