Congratulations Boston! Your rejection of the “honor” of representing the US as its candidate for the 2024 Summer Olympics is an inspiring example of government performing its obligation to taxpayers and their hard earned money. Those of us who think that government has a responsibility to wisely use taxpayer money sometimes forget that Massachusetts enacted Proposition 2 1/2 not long after California’s fabled Proposition 13.
In an era of routinely wasteful government spending, Boston’s decision stands out as unusual. It rivals the courage of New Jersey Governor Chris Christie who cancelled a new Hudson River rail tunnel, mid-project, because of the consultants and builders seemed sure to take advantage of the blank check that New Jersey taxpayers were required to pledge. This, of course has been the record of major infrastructure projects all over the world and most recently one of the most grotesque examples was Boston’s own “Central Artery.” But unlike “the Big Dig”. This time Boston didn’t have speaker Tip O’Neill to bring home the bacon. Then, the federal government capped its share and Boston had to pay it all. Unsurprisingly, the bill was much higher and had to be paid by Massachusetts, along with the interest on extra debt that had to be issued.
Oxford University Professor Bent Flyvbjerg, who has become famous for his quality analysis of large infrastructure projects, especially urban rail projects, produced a report with Allison Stewart on the history of Olympics cost overruns between 1960 and 2012. The two worked under the auspices of the Said Business school of England’s at Oxford. They concluded:
The data thus show that for a city and nation to decide to host the Olympic Games is to take on one of the most financially risky type of megaproject that exists, something that many cities and nations have learned to their peril.
They found that every Olympic Games, summer or winter, for which complete data is available experienced cost overruns. The most recent, in London, experienced a cost overrun of 100 percent. Flyvbjerg and Steward used a very simple model that has been applied to the previous infrastructure work. They just looked at the final bill that included all the expenses.This was compared to the amount the sponsors and their funders, the taxpayers, were it was going to cost when the application was approved by the local political process.
The principal problem was the Olympic Committee requirement that sponsors must ensure the financing of all major capital investment required and are “on the hook” for any cost overruns.
Montréal’s legendary Mayor Jean Drupeau sold his city on an Olympics bid saying that “the Montréal Olympics and no more have a deficit that a man can have a baby.” Well, men are not yet having babies, but Montréal gave birth to a world-class cost overrun in its 1976 summer Olympics. According to Flyvbjerg and Stewart, the 1976 Montréal Olympics had a cost overrun of nearly 800 percent, nearly double the 1992 420 percent cost overrun of Barcelona. Montréal may have set a record for much more than the Olympics with its cost overrun.
Things have been virtually as bad in Greece. The researchers reported that “Olympic cost overruns and debt have exacerbated” the Greek economic crisis.
There has been one exception to this sorry record. Los Angeles, host of the 1984 summer Olympic Games, actually turned a profit, sending more than $300 million to the international Olympic Committee and using the local profits for the LA84 Foundation, which funds youth sports and related activities, even 30 years after the event.
I coordinated the information program for employees at the Southern California headquarters of Crocker Bank (subsequently sold to Wells Fargo), assisting employees in getting to work during what was expected to be the high traffic from the 1984 Olympics. It turns out that the advice of local officials to encourage and vacations and working at home paid off handsomely. People who commuted during the Olympic Games had unusually light traffic.
In addition, I was a member of the Los Angeles County Transportation Commission (LACTC), having been appointed by Mayor Bradley and confirmed by the Los Angeles City Council. Both the Mayor and the Council were committed to putting on the show without burdening the taxpayers – no public money. And Olympic Committee was established under the direction of Peter Ueberroth, who became a legend for his skillful management of the games.
But there was some public money lost on the Olympics. The Southern California Rapid Transit district (SCRTD), the large regional transit operator announced its intention to provide bus service to Olympic venues from all over the Los Angeles area. SCRTD claimed that it would be able to do the job without public subsidy. I believed otherwise and predicted that the service would fall far short of its ridership projections and lose about $5 million. LACTC had the authority to ban the expenditure, which I tried to do. Unfortunately I was unable to obtain the necessary votes to make that happen. In the end, the ridership fell far short of projection (the kind of thing Professor Flybvjerg usually reports on urban rail projects).
Meanwhile, the Olympics were a one-off to Los Angeles. Most infrastructure projects of this nature are financially ruinous. Maybe Massachusetts learned a lesson from the Central Artery. Boston proved itself to be a world-class city in having the courage to say “no.”
Cross-posted at New Geography.