L.A. Makes $4.5 Billion Bet on Olympics After Boston Backs OutJames Nash
Los Angeles’s dreams of hosting the Olympic Games for a third time could get a boost from the City Council this week, even as officials try to assure taxpayers that they won’t be forced to bail out a botched effort.
The council is expected to vote Wednesday on giving Mayor Eric Garcetti power to negotiate with the U.S. Olympic Committee to bring the 2024 games to Los Angeles and require the city to pay for cost overruns.
Los Angeles emerged as the U.S. contender for the games after Boston withdrew from consideration in July. Opponents there warned that taxpayers were on the hook if the nearly month-long sporting event lost money.
“They have a lot going for them, but there are risks involved,” said sports economist Andrew Zimbalist, who wrote a book about the costs of the Olympics and the World Cup. “Every city we’ve looked at since 1960 that’s hosted the Olympics has had a cost overrun. There’s not any evidence that this helps the city economically.”
Garcetti and other leaders are racing to put together a $4.5 billion budget for the summer games by a Sept. 15 deadline, while reassuring taxpayers that the city, which warned of bankruptcy three years ago, won’t repeat Boston’s experience.
Los Angeles’ pitch is that the city already has most of the venues -- including AEG Worldwide’s Staples Center and the Los Angeles Memorial Coliseum, which hosted the games in 1932 and 1984. Those facilities should keep costs down, city officials say.
Still, Zimbalist estimates the city, with an annual budget of about $8 billion, should expect cost overruns of as much as $2 billion.
That finding hasn’t diminished Garcetti’s Olympic dreams. The mayor was 13 when the games last came to L.A., an endeavor fondly recalled by many Angelenos.
“Our prospects are excellent,” Garcetti said in an interview Aug. 20. “We have an Olympics that will not only cover its costs, but also make money. It just really lines up with L.A.”
Garcetti said 90 percent of the Olympic venues already exist in L.A. and the city’s operating budget for the games includes a $400 million contingency fund. The city also would buy an insurance policy, he said. Still, Los Angeles would have to agree to the International Olympic Committee’s contract requiring the host city to assume financial liability for any losses.
Rome, Paris, Budapest and Hamburg, Germany, also plan to bid for the 2024 Games.
In Boston, the specter of a money-losing Olympics sparked opposition, said Chris Dempsey, one of the three co-chairs of No Boston Olympics campaign. He said the International Olympic Committee plays cities off each other, with terms more favorable to the committee.
Consultants hired by Massachusetts said Aug. 18 that Boston had underestimated its costs. The Brattle Group concluded that the $4.6 billion operating budget and $4 billion capital spending plan may have been as much as $3 billion short of the mark.
“This is a process that is driven by what makes the most sense for television, what makes the most sense for the sponsors,” Dempsey said by telephone. “It’s hard for us to see a city breaking that dynamic.”
Boston also was well-positioned to host the games with existing sports venues, said Victor Matheson, a sports economist at the College of the Holy Cross in Worcester, Massachusetts. The fact that Brattle still projected an extra $3 billion in expenditures on facilities shows the tendency of would-be host cities to assume the best-case scenario, he said.
Most Olympic cities realize a surplus from the games, the International Olympic Committee press office said in an e-mailed response to questions. Money invested in airports, roads, public transit and sports stadiums often reaps benefits for years after the closing ceremonies, the committee said, citing redevelopment of East London and the waterfront in Barcelona.
Unlike Boston, where resistance to public subsidies to the Olympics brewed for months, no organized opposition has emerged in Los Angeles. On Aug. 21, City Council President Herb Wesson introduced a resolution to give Garcetti the power to negotiate a binding agreement with the U.S. Olympic Committee. The resolution also would require the city to release a detailed breakdown of its Olympics budget.
The 1984 games were a boon to the city, said Jack Humphreville, a member of an advisory neighborhood council who moved to Los Angeles that year. Still, he said he’s skeptical that L.A. would do as well in 2024, noting that 1984 was a unique circumstance in which no other city vied for the games.
“Everybody did a fantastic job in 1984,” Humphreville said. “The problem I have now is, the city doesn’t have the money, the management skill or the organizational structure to handle this. We can’t even fill potholes.”