After the Olympics comes Debt
2 more articles on Vancouver's Olympic Village and growing debt, including Vancouver's potential loss in credit rating...
After the Olympics comes debt
By Kelly Sinoski, Vancouver Sun, January 13, 2009
The Olympic Games will always turn the world’s eyes to a host city but they won’t necessarily bring gold to the city coffers, according to an Olympic scholar.
Except for the Los Angeles Olympics in 1984, cities — including Montreal and Athens — generally don’t make a profit hosting the Games, said Kevin Walmsley, co-director of the University of Western Ontario’s International Centre for Olympic Studies.
Most are left holding the bag, which for Vancouver could be an $875-million-plus debt for the Olympic Athletes Village. In Montreal’s case it was a $1.5-billion debt and a white elephant Olympic Stadium dubbed the Big Owe, which was built in 1976 for the Summer Olympics and just recently paid off.
It’s difficult to compare the two because the contracts, economic climates and even the value of the Canadian dollar are so different, Walmsley said. But both follow a common theme.
“The Olympic Games are not a profit generator and never have been,” he said. “What is always consistent is, there are always cost overruns.”
Take Athens, which hoped to shed its drab image and become a true tourist haven, but was left with a $17-billion US debt. Or Italy, where the national government helped bail out the 2006 Turin Winter Games by covering $159.11 million US of a $195.82 million shortfall.
Olympics watchers say Beijing’s bill will top $50 billion US.
Walmsley noted Athens proved the Olympics aren’t a way to regenerate a city. There also aren’t any guaranteed economic spinoffs. To reap any benefits, he said, cities have to work hard afterward to sell the brand.
He points to Calgary, which is reinventing itself as a post-Olympic city to keep the Games legacy. But that also costs money.
“The whole point is to have the world’s eyes on your city. You have to get the job done,” Walmsley said. “Some of these things are hard to avoid.”
He noted that cities bidding for the Olympics are able to show zero deficits because they don’t have to show infrastructure costs. Vancouver, for instance, didn’t have to show the costs on the convention centre, the Canada Line and the Sea-to-Sky Highway.
Los Angeles, which reaped a $225-million profit, was successful because it already had the infrastructure in place and had corporations pay for upgrades.
Walmsley said Vancouver’s challenge will be to sell the units in the Athletes Village for “as much as possible” if it’s to recover some of the overruns. “The point is the price guarantee doesn’t equate with the current market value,” he said.
Vancouver credit rating in jeopardy
Olympic Village problems could affect other loans
By Christina Montgomery and John Bermingham, The Province, January 14, 2009
The City of Vancouver faces a drop in its favourable credit rating if it's forced to borrow heavily to shore up the Olympic Village project, according to international ratings agency Standard and Poor's.
A lower credit rating means the city would face higher interest charges (possibly a quarter of one per cent) on all new borrowing, not simply on Olympic-related loans.
The agency said yesterday that it has placed Vancouver's current AA+ rating on "credit watch negative" as the city contemplates it may need to step in to finance the Olympic Village's remaining construction.
Steven Ogilvie, director of public-finance ratings for Standard and Poor's Toronto office, said the concern is that, if the city cannot seal a financing deal with Fortress Investment Group, the Wall Street lender backing the project, it might have to borrow a big piece of the $850 million for which it is responsible.
The city's loan could be as much as $458 million, Mayor Gregor Robertson confirmed this week.
When Fortress in September stopped advancing loan payments to Millennium, the project's developer, the city began covering costs.
The city is still negotiating with Fortress to get money flowing again, and is in talks with the province and Games officials, but it isn't clear if any money will be freed up, the agency said. A final decision on a credit-rating change is not expected until full disclosure of the city's financial position and risk.
Meanwhile, NDP Leader Carole James wants Premier Gordon Campbell to level with taxpayers about the final bill for the 2010 Olympics.
"It's time the B.C. government came clean about the true costs of the Olympics," James told The Province yesterday. "We are certainly talking billions."
James figures the cost of the Games could be between $3 billion and $5 billion, not the $600 million that the B.C. government insists is the final Olympic tab.
James also wants B.C. Auditor-General John Doyle to do a full costing of the Games. And she's asked Doyle to investigate the finances of the Olympic Village project.
Doyle has asked the government to tell the public about the full cost of the "Olympic footprint," the third successive auditor-general to do so.
"This government has tried to keep the information away from the public," said James.
"It's clear the taxpayers are on the hook for Olympic debt they didn't tell us about."
The B.C. government was holding an all-day cabinet meeting in Vancouver yesterday, and Campbell was unavailable for comment.