Who's Against the Olympics? Taxpayers Most Notably
On July 6, 2005, Londoners celebrated in Trafalgar Square as giant television screens carried the announcement by the International Olympic Committee that the city had won the right to host the 2012 Summer Olympics. Back in New York, Mayor Michael Bloomberg apologized to America because his city's bid to host those games, which Bloomberg had pursued ardently, fell short.
Bloomberg had argued that the games would provide the money and political impetus to transform New York through a giant building program that would include not only new sports facilities but also a host of related projects such as new housing and transit. New Yorkers, however, were skeptical and in polls gave thumbs down to the centerpiece of the city's Olympics bid, a $1.6 billion domed stadium on the West Side of Manhattan. Popular opposition in New York helped devalue the bid in Olympic circles.
Much has changed in the world since the summer of 2005, but the London Olympics have arrived in predictable fashion. Like other Olympic Games in the modern era, they've cost far more than the politicians and organizers predicted, and they are generating far less of an economic boost than supporters projected. There may never be a good time for the kind of fiscal folly that the Olympics visits on its host cities and countries, but right now is just about as bad as it can get.
The London organizers originally projected that staging the games would cost $8 billion, a pretty penny, indeed. But now it looks like the true bill will be between $17 billion and $19 billion. Meanwhile, the economic boost from the games appears minimal. Tourism's contribution to the U.K. economy is likely to grow less than one percent this year despite the games, according to the World Travel & Tourism Council.
Other European capitals are reporting a sharp and unusual boost in visitors, which they attribute to tourists who aren't interested in the Olympics avoiding London this summer. By some accounts, London hotels are discounting rooms by as much as 25 percent in recent weeks. One West End theater chain which operates six venues, Nimax, says ticket sales are off 30 percent this summer. The Association of Leading Visitor Attractions in London, which represents the city's museums, estimates attendance is down 30 percent to 35 percent. Either people are saving their money for the Olympics or simply avoiding London.
"Overall, we think that the Olympics are unlikely to provide a substantial boost to the UK economy and believe that the impact of infrastructure developments on UK GDP has probably already been felt," Moody's recently noted.
This has generally been the story in the modern era, which we can date back to the Montreal Olympics in 1976. The effort nearly bankrupted the city, which spent three decades paying off its debts from staging the games. More recently, Greece sunk some $16 billion into the Athens games, originally projected to cost a mere $1.6 billion. The expensive effort helped exacerbate the country's subsequent debt crisis. While the Greeks had hoped that spending on the games would help transform Athens, many of the venues constructed for 2004 now sit largely unused and deteriorating because the country can't afford to keep them up. That's stimulus that Greece could have done without.
Cities and countries continue to pursue the Olympics in the face of such disappointing experiences because politicians try to use the popularity of the games as a vehicle for pushing through projects they can't otherwise seem to get done. New York embedded into its Olympics bid plans for a stadium that city officials thought would bring the New York Jets back to Gotham, as well as plans to develop housing on the Queens waterfront. London officials pitched the massive building scheme for the Olympics as a way to revive depressed areas of East London.
This is part of a larger trend in which local officials tout new sports venues as central to economic revival. In America today our cities build stadiums for professional sports teams because elected officials tell us they will revive depressed waterfront areas, and we construct arenas for NBA or NHL teams because they will supposedly inject vital new business into our downtown areas. Studies of the actual impact these venues make on a local economy consistently show that they don't live up to supporters' projections. Money spent in these stadiums and arenas often isn't additional spending, but rather dollars siphoned from somewhere else. Think of those empty museums and theaters in London.
But these sorts of experiences don't stop elected officials. In New York may Mayor Bloomberg lost the Olympics' bid but then turned his attention to helping push through the massive Atlantic Yards redevelopment project in Brooklyn, whose centerpiece is the new Barclay's Center arena where the former New Jersey Nets will now play. To make the 22-acre project possible in the middle of the borough New York government used the threat of eminent domain to displace some 400 residents and two dozen businesses. Politicians also gave the developers hundreds of millions of dollars in tax incentives to construct the arena, all on the basis that the project would upgrade a neighborhood where people were already paying upwards of $500,000 for condos and co-ops. Of course, the marketplace has a way of intervening with the best laid plans of government, and so while the Barclays arena is scheduled to open this fall, the developers have pushed back construction of the project's residential towers thanks to the housing bust.
After Chicago lost its bid in 2009 to host the 2016 Olympics, President Obama criticized naysayers who urged the city not to try. "I mean, who's against the Olympics?" he said. Right now in London I'm betting there are quite a few taxpayers and business owners who can provide the President with an adequate answer to that question.