Vancouver Olympics costs ballooning to taxpayers’ dismay

Organizers for the 2010 Olympic Games have been forced to slash expenses and adjust to lower projected revenues according to a new budget released Friday.
The Vancouver Olympic Organizing Committee (VANOC) new budget is at $1.76 billion, up from the $1.65 billion originally budgeted in 2007. The increase comes despite eliminating medal ceremonies for alpine and Nordic events in Whistler, reducing budgets for marketing, communications and technology and selling more tickets than anticipated.
VANOC’s budget does not include security costs because those costs fall to the RCMP and the military.
Though the Conservatives did not announce any numbers regarding the Olympics in the federal budget, security costs for the Games are now expected to be slightly less than $1 billion. This is five times the amount budgeted when Vancouver was first selected to host the games in 2003.
The federal and B.C. provincial governments agreed to split the $175 million originally budgeted for security – a number the International Olympic Committee (IOC) said was too low. After months of negotiations it remains unclear how the governments will divide the increased cost.
B.C. finance minister Colin Hansen is hoping to have the final numbers confirmed by Feb. 17, in time for the province’s own budget.
Concerns surrounding the Games’ rising costs has been growing since financial backing for the athlete’s village fell through.
“The Olympic Village is a billion-dollar project and [Vancouver] taxpayers are on the hook for all of it,” BC premier Gregor Robertson announced at a press conference in early January. “We can’t turn back the clock on the actions of the last mayor and council, we are financially and legally committed to completing this project.”
The original plan for the project, which was a three-way deal between the city of Vancouver, New York-based hedge fund Fortress Investment Group and Millenium Development Corp., was drafted in 2007.
The city made a financial guarantee of $190 million and a completion guarantee, which left Vancouver taxpayers responsible for advancing funds to developers when Fortress ceased payments in September 2008.
“The completion guarantee was likely added into the bid book to make Vancouver a more attractive candidate,” said Kevin Mulligan, an economics professor at the University of British Columbia, saying that other Olympic venues likely have similar clauses in their development deals. “The mess that it has become is more about other points in the contract.”
Mulligan believes the true problem with the development project is the city’s apparent failure to make provisions for the looming recession and downturn in the housing market.
“The economics of the project were projected on a continuation of the growth in housing prices,” said Ralph Winter, another professor of economics at UBC. Mulligan believes Vancouver’s idealism has resulted in “un-credible revenue projections.”
Sam Sullivan and Philip Owen, both former mayors of Vancouver, have both said Robertson and city council are taking an alarmist approach to the costs and are wrongly asserting the building project as a loss for the city.
“At the end, we’re going to have 800-odd condominium units on 17 acres of land on a beautiful waterfront area of Vancouver. That’s gotta be worth something,” Owen told CBC.
“It’ll come to be seen as a marvelous legacy – the greenest housing development anywhere,” Sullivan, who was the mayor of Vancouver when the village deal was struck, told The Vancouver Sun. “In the end it will make hundreds of millions of dollars for the city’s Property Endowment Fund.”
VANOC has stressed the operating budget for the games and the cost of building venues are completely separate.
The cost of building venues is divided equally between the federal government and the BC provincial government, whereas most of the operating costs are financed by private sector revenue. International and domestic sponsorship, licensing and merchandising, the Olympic Committee, ticket sales and fundraising cover the majority of operating costs.