L.A. cuts deal to keep imaginary 2028 Olympic surplus, this is what victory looks like

As expected, it was announced yesterday that the 2024 Olympics will be held in Paris, and the 2028 games in Los Angeles. With those two cities the only bidders for 2024, the International Olympic Committee had decided to just declare two winners at once, and once L.A. officials offered to go second, the deal was done.

So given the disaster that other recent Olympic games have been for host cities, should Los Angelenos be celebrating or cowering in fear? I’d previously argued that L.A. needed to drive a hard bargain with the IOC — as it did prior to hosting the 1984 Olympics, when it was similarly the only real bidder — and indeed the city did get some concessions in its deal:

  • The IOC will share media and sponsorship revenues with L.A., which it estimates could be worth as much as $2 billion, though there are no guarantees.
  • $180 million of this cash will be forwarded immediately as an advance, helping the city pay for some of its up-front costs.
  • The city will set aside $487.6 million in contingency funds for cost overruns, and if the games come in under budget, they’ll get to keep all of it — the IOC is waiving its usual demand for a 20% cut of any surplus.

If that seems like weak tea to you as far as concessions go — Los Angeles will get to keep its own money if it doesn’t spend it! — well, that’s what counts as a good deal compared to the unmitigated disaster that many other cities’ contracts with the IOC have been.

I’m going to try to dive into the numbers a bit more in coming days, and L.A. does have a lot of existing venues that it can repurpose for the games, which should help keep costs down. But given that cities the Olympics almost always go way over budget and cities almost always lose money on them, getting a vague promise of lots of media riches and getting to keep any surplus if there is one isn’t exactly something I’d be running out into the streets to celebrate.

FC Cincy mulling Kentucky tax kickbacks to pay its entire stadium cost, and other week’s news

All the news that wasn’t fit to print this week:

  • FC Cincinnati now wants the Port Authority of Greater Cincinnati to own its stadium since Hamilton County doesn’t want to. (Does “own” mean “pay for”? Reply hazy, ask again later.) Or maybe Newport, Kentucky, since, according to team president and former city council members Jeff Berding, that would allow the team to recoup its entire $100 million through tax increment financing kickbacks of property taxes paid on the property. How would it generate a whole $100 million in TIFs? Reply hazy, ask again later.
  • Would-be Seattle arena builder Chris Hansen hired University of Washington public finance professor Justin Marlowe in May to compare the economic impact of his Sodo arena proposal to that of the KeyArena renovation plan, and he has issued his report, which says that the Sodo plan would create three times as much tax revenue for Seattle ($103 million over 35 years vs. $34 million for Key). On the other hand, the Key plan would include some kind of sharing of arena revenues, though that wouldn’t kick in until the Key developers got their share, and, yeah, basically it’s a muddle. On the whole, it seems to give the edge to Hansen’s plan, if only because that arena would pay property taxes, but I’d need to sit and break down the math to say exactly by how much, and I’ve been waiting for time to do that all week, so clearly it’s not happening. Reader exercise!
  • Oakland A’s executive VP Billy Beane promised that once the team gets a new stadium, it will stop trading all its decent players once they start to get expensive: “There’s only one way to open a stadium successfully, and that’s with a good, young team. … Really what’s been missing the last 20 years is keeping these players. We need to change that narrative by creating a good team and ultimately committing to keep them around so that when people buy a ticket, they know that the team is going to be around for a few years.” Which could make sense if a new stadium draws enough fans that having a winning team boosts revenues enough to pay for player salaries, though we’ve heard this song and dance before elsewhere.
  • The Nashville Sounds‘ new stadium was supposed to cost taxpayers $37 million, but it ended up costing $91 million.
  • What does $74 million in public subsidies buy Minnesota Timberwolves fans and staff? New seats, new restrooms, new locker rooms, an ice floor that doesn’t leak, two new loading docks, and a big glass wall, because everybody’s gotta have one of those.
  • The athletes’ village from the 2016 Rio Olympics is now a wasteland of unsold condos, because everything the Olympics touches turns to trash.
  • A homeless camp has arisen on the site of the planned Las Vegas Raiders stadium. Make your own metaphors.

Stadium architects dream of holographic players, and other Friday news

Hey, know what we haven’t done in a while? A Friday news roundup. Let’s do one of those now!

Happy weekend, everybody!

Pretty much every Olympic sports venue in Rio is falling apart now

And finally today, in The Olympics Are Bad For People And Other Living Things news, Deadspin has a rundown of all the Olympic venues in Rio de Janeiro that are falling apart just months after the games were concluded, which is basically “all of them”: The Maracanã soccer stadium that was upgraded for the 2014 World Cup is plagued by patchy grass and power outages to save operating costs (and vandals stealing seats during the power outages), a complex of nine Olympic venues that was supposed to be auctioned off after the games drew zero qualified bidders, an Olympic site that was turned into a public park was closed when its private manager shut down, and its $19 million Olympic golf course is falling into disrepair. All this for a cost of only $10-12 billion in public money!

Some of this, no doubt, has to do with Brazil’s political turmoil and resulting economic crisis, which is what leads a government to do things like skimp on paying the light bill at its most iconic soccer stadium. But when the best you can say about hosting the Olympics is “Hey, we might have been left with lots of nice but unneeded sports venues for our $10 billion if only our entire nation hadn’t collapsed,” that’s not really the best selling point for hosting the Olympics.

Olympics go 90% over budget on average, prospective hosts say, “La la la, we can’t hear you”

Since the start of the Rio Olympics, media coverage of the controversies surrounding the games has mostly been limited to things like the algae-polluted diving pool, turning attention away from the widespread protests in recent months against the Games themselves and their costs. (This is a bit of a tradition: The 2014 Winter Olympics in Sochi were widely considered an unfathomable scandal, until the events began and suddenly everyone forgot about the caviar highway and the anti-gay laws.) So it’s nice to see Fivethirtyeight turn its attention to what a massive money suck the Olympics have become, not just for Rio but for any city that hosts them:

By the time Vanderlei de Lima lit the Olympic torch at last week’s opening ceremonies, the country had already spent some $4.6 billion on venues, administration, transportation and the like, putting the games roughly 50 percent over budget. By the time the games close on Aug. 21, the tally for the games will likely be higher still.

But it could be much worse. The 2014 Winter Games in Sochi blew their budget by 289 percent. The 1980 Winter Games in Lake Placid overtopped projections by 324 percent. And the 1976 Games in Montreal ran a staggering 720 percent over projections; the city spent three decades paying down the bill. While outliers such as these distort the average cost overruns somewhat (176 percent for Summer Games, 142 percent for Winter Games), the median cost overrun for all games for which we have data is 90 percent, making Rio’s cost overrun somewhat lower than the historical norm, at least so far.

Those numbers are all from a new study by Bent Flyvbjerg of the University of Oxford, and are right in line with past estimates of the Olympics’ inherently massive cost overruns. The reasons why are simple: Construction projects of all kinds often go over budget, and when you add in the fixed deadlines for Olympic venues — you can’t just delay the swimming events if the stadium isn’t ready — it’s a recipe for inflated costs.

That said, what we should care about here isn’t really how badly Olympic organizers underestimate the costs of hosting the games, but whether cities lose money in the end on hosting them. And though Fivethirtyeight buries the lede a bit here, it eventually notes that the numbers on that count are if anything even more dismal:

Host cities almost invariably fail to cover Olympics costs with associated revenues (for instance, in 2012 London took in $3.5 billion in revenues and shelled out something like $18 billion to host the games), leaving them with piles of debt and various useless venues. Research has repeatedly shown that in most cases the Olympics are a money loser for cities, particularly those in developing nations where the cost-benefit proposition tends to skew even worse.

The Rio Games will likely be cheaper than other recent Summer Olympics, but still cost Brazil several billion dollars, in exchange for a hoped-for boost in tourism that other cities have found never arrives. You’d hope that all this would make cities think twice before looking to host the 2024 Summer Games, the next ones up for bid, but you would be wrong. At least we’ll always have Oslo.

Losing key to stadium is least embarrassing thing about Rio Olympics

Okay, so yes, ha ha, the organizers of the Rio Olympics forgot to bring one of the keys to the Maracanã Stadium for the opening event, a women’s soccer match between Sweden and South Africa, and had to call in the fire department to bring bolt cutters to open the gates. Look, hilarity!

All things considered, though, this one screwup really should be overshadowed by the ways in which the Rio Games are a far more massive screwup — not just because of incompetence, but because putting on an Olympics is a massively expensive undertaking that has doused city after city in red ink. (Chicago, which was runner-up to Rio for getting the 2016 Olympics, is currently congratulating itself on having dodged a bullet.) Brazil is expected to end up spending between $12 billion and $20 billion on hosting the games, a figure that they’ll never ever make back on Olympic revenues, especially given both Zika fears and the proven effect that the Olympics make everyone not there for the Games clear out of town for three weeks. And it’s hard to envision Rio even doing too well in terms of publicity (if anyone really needed to be told about Rio — it’s already the subject of two movies about adorable talking parrots, after all) when the enduring image of the Games could be athletes swimming through raw sewage.

Of course, once the opening ceremonies kick off tonight, all will likely be forgotten, at least in the official coverage of the Olympics. But as much as it’s fun to laugh about Rio, just as we previously laughed about Sochi’s caviar highway, remember that those firefighters who had to cut open the Maracanã had just been through layoffs to help pay for, among other things, Olympic debts. Now that’s comedy! Or maybe that other thing.

Rio velodrome might not be ready in time for Olympics, feel free to panic if bike racing is your thing

Speaking of sports venues that may not be ready on time, that Rio Olympics velodrome, man:

Tecnosolo, the construction company in charge of the velodrome, declared bankruptcy on Monday, causing the city of Rio de Janeiro to cancel its contract and hand it over to a different construction firm. The city government has said that construction is 88 percent complete, which is probably an optimistic estimate, given the flood of bad press they’ve been under for the entirety of 2016.

The Olympics start in ten weeks, so this is pretty much officially a crisis. That is, assuming the Olympics don’t get moved somewhere else or delayed thanks to Zika virus or Brazil’s political crisis, which lots of people think would be a good idea but isn’t going to happen — the Olympics must go on, even if athletes are afraid to show up or have to race their bikes in the street.

Tokyo’s new Olympic designs are $700m cheaper, look less like potty seats

Tokyo has officially scrapped its $2 billion dollar 2020 Olympic stadium that looks like a potty seat, and replaced it with a pair of somewhat cheaper ($1.2-1.3 billion) designs that look significantly less like potty seats:

n-stadium-z-20151215-870x592As Gizmodo notes, both redesigning a stadium in response to public pressure and releasing possible designs to the public for vetting before a winner is chosen are potentially promising actions, especially in the world of overpriced Olympic stadiums. Though Gizmodo also writes that the original design had “cauterized locals” to march against it, so maybe the locals started fighting fire with fire.

LA Olympics plan facing backlash over same overrun guarantee that sank Boston’s bid

Los Angeles Mayor Eric Garcetti said last week that he’ll sign the International Olympic Committee’s pledge to cover any cost overruns if the 2024 Olympics are held in his city, saying any bid would be “dead on arrival” without it. The L.A. Times editorial board, for one, is displeased:

[U.S. Olympic officials] 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.

Now, there are indeed some reasons to hope than an L.A. games could avoid some of the worst of the red ink that has befallen other Olympics: The city does have a lot of existing venues, for starters. Still, the number of Olympics that haven’t lost money is so vanishingly small — the only one in recent memory is the 1984 Olympics in L.A., which notably got an exemption from the overrun guarantee — that it’s worth being cautious. And with fewer and fewer cities willing to take on the risks of being a host city, this might well have been a good time to call the IOC’s bluff on this.

That’s apparently not going to happen, at least not this time around in L.A. (Unless the L.A. city council does an end run around the mayor and gets a public vote banning any public spending on cost overruns, as it did before he 1984 games.) Still, it’s interesting to see pushback growing to the IOC guarantee requirement — first in Chicago over its bid for the 2016 games, then with Boston, and now in L.A. It’s likely to be a while before the world runs out of mayors more eager to be the politician who landed the Olympics than the politician who stood up to them, but as I said in my own L.A. Times op-ed last month, the Olympics are supposed to be about chasing big dreams, right?

Japan issues guidelines for cheaper Olympic stadium, doesn’t include actually making it cheaper

The Japanese government has issued guidelines for designing a new Olympic stadium that isn’t as insanely expensive as the one they scrapped last month:

Japan on Friday approved guidelines for its new Olympic stadium, vowing to build an “athlete’s first” stadium as cheaply as possible and complete it by March 2020, a year later than planned, but without including any cost estimates or limits.

Great start, guys!

Prime Minister Shinzo Abe also announced that “We should make a structure that will emotionally move people all over the world,” which the original design certainly managed to do. Hilarity is an emotion, right?