The Toronto Star, Editorial and Opinion Page, June 29, 1998, page A18
The 2008 Bid: we risk $1 billion debt to get Olympics
By Charles Smedmor
Think of the 2008 Olympics as a franchise for the world’s most complex summer TV series, a show with a cast of 15,000 athletes, an enormous crew of stagehands and, hopefully, a "studio audience" full of tourists.
Toronto, if it becomes the host city (read "franchisee") would provide sites for 43 Olympic sports plus other facilities to satisfy the International Olympic Committee (IOC). It won’t be cheap to put on this extravaganza; do we know what it will cost?
Personally, I enjoy the Olympics, but my worry, as a chartered accountant experienced in due diligence, is that City Council will sign a contract with the Canadian Olympic Association before it understands the nature and extent of the commitment and potential financial exposure for Toronto’s taxpayers. Having reviewed the Bid Book prepared by Toronto Olympic Bid Corporation (Bidco), I have concerns about the Olympic facilities, budget, and the cost to Torontonians.
What facilities would be needed?
Because the Olympics are so large (15,000 athletes) and so compressed (294 gold medals in 17 days), most event venues are used for one sport.
Bidco estimates we need facilities with a seating capacity of 465,000 to 489,000 people; at best we have 165,000 seats "in stock" and we would need an additional 300,000 to 324,000 seats of capacity, including:
What will this cost? Bidco says $162 million for the permanent facilities and $353 million for virtually everything else, the same price as the SkyDome, but the SkyDome was $510 million in 1989.
What will we have after the Games are over?
Basically, we get the TV series backdrops, not necessarily what Toronto needs.
Where is the demand for: an 85,000 seat open-air stadium (the CNE Stadium is derelict); a 32,000-seat aquatics centre (will tax-payers ever swim there?); a 20,000-seat gymnastics centre (is there a national gymnastics league ready to rent it?); and a 4,000 seat-velodrome (Montreal’s is now a botanical garden).
Can we afford upkeep on this legacy?
What does the Olympic budget say?
The Bid Book devotes just two pages to a discussion of Olympic costs; it forecasts outlays of $2.2 billion to $2.3 billion and a surplus of $25 million to $242 million.
However, my analysis shows a potential deficit of $1 billion (all amounts are in 1998 Canadian dollars). Why?
Clearly, Bidco’s calculation is not appropriate for such a complex, long-term financial commitment.
What will it cost Toronto?
Toronto, as the host city, would be responsible for any deficit; we do not have any commitments from Ottawa, Queen’s Park or the "corporate sector" for funding. While a federal subsidy is likely, it would be for a fixed amount, not a blank cheque. Montreal’s taxpayers are still paying, 22 years later, for their unsubsidized portion of the 1976 Olympics.
Also, an Olympic subsidy would probably mean less for other deserving Toronto projects and since there is just one taxpayer, Torontonians would end up with more than one tax bill for the three week Olympic party.
What is the bottom line?
If we have a $1 billion deficit, the cost to each of Toronto’s 700,000 households would be $1,430. To eliminate this debt in 10 years, each household would be paying an additional $207 per year in real estate taxes, or in rent bills through their landlord.
Is this the right time for the Olympics? Toronto is currently under siege with funding problems and cutbacks for GO Transit, education and affordable housing while we are borrowing $150 million just to fund the megacity transition costs.
We won’t even get first call on tickets for this event; Olympic sponsors and their guests rank ahead of taxpayers.
As the economic capital of a G-7 nation we are already "world class" and we should also consider the other probable side effects of the Olympics: construction inflation; corruption; congestion; disruption to normal business and tourism (hotels are 79 per cent full in July); social upheaval; and potential violence.
Before council moves further on this proposed Olympic contract, it needs an independent review of the Bidco proposal.
Toronto’s taxpayers expect prudence, not a leap into the financial unknown.
Charles Smedmor is a chartered accountant specialized in investigative accounting.