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Tuesday, August 4, 2009

$500 Million or Blank Check?

In the winter of 2007, when Chicago's bid for the 2016 Olympics was just beginning, the Mayor of Chicago, Richard M. Daley, went to the city council. He came to the council looking for money. At the time, he wanted the city council to allocate $500 million toward the bid. At the time, it broke, according to some, an initial promise not to use any city tax funds toward funding the games. It was also a response to IOC pressure to "put some skin" in the game. Finally, Daley characterized this $500 million as the last and final request for any money from the city for the games.

Mayor Daley said today he knew “at the beginning” that city tax dollars would have to guarantee Chicago’s Olympic operating budget, but he didn’t fess up about it because, “We’re not putting any actual money up.”

The mayor’s cover was blown last week when Bob Ctvrtlik, chairman of the U.S. Olympic Committee’s evaluation commission, demanded during a site visit here that Daley “put some skin in the game.”

On the eve of a City Council vote that’s make-or-break for Chicago’s bid to host the 2016 Summer Games, Daley denied that the $500 million city guarantee breaks his promise to bankroll his Olympic dream with “not a dime” of local tax dollars.

“No we’re not [breaking the promise] because we’re not putting any actual money up. This is in case… everything breaks down completely…This would be like an earthquake. If an earthquake takes place and I doubt if it’s gonna take place,” the mayor said.

With little debate or coverage the city council approved Daley's request and Daley was given the $500 million necessary for the IOC to take Chicago's bid seriously.

Over the next two plus years Chicago's bid gained steam. In June of this year, Chicago faced a very important face to face with the IOC in Copehagen. Following this meeting, Mayor Daley pronounced, from Copenhagen, that Chicago would intend to sign the IOC's Host City Contract. The contract is a long and detailed document but among its many clauses is the commitment by the host city to take on full responsibility for any costs that the games may incur. It's true that the IOC does kick in some money from tickets, television revenue, and merchandising but that is negotiated ahead of time. As such, any host city is ultimately responsibile for putting on the games no matter what. As such, any cost overruns, unexpected expenses, and the price of corruption all are the responsibility of the city.

Then, in the last couple weeks, Alderman Manny Flores introduced a bill in the city council that would limit the city's exposure to the $500 million already allocated. Now, this bill shouldn't even be necessary. After all, the mayor has assured everyone that the $500 million is only insurance and he won't need anymore. Yet, this bill is being characterized as a deal killer for Chicago's bid for the Olympics in 2016.

I have introduced legislation to cap the city's financial commitment for the Games at the $500 million that was authorized by the City Council in 2007. It has been said that if my legislation passes, we will not be able to sign the host city financial guarantee contract required by the International Olympic Committee -- effectively killing our chances at being named the host city.

I don't want to that to happen, but the 2016 committee and City Hall have a responsibility to protect Chicago taxpayers. The five points I outlined would be a significant step forward in providing the protections we need to support a city guarantee.

Now, here are the facts. The Host City Contract is a standard requirement of all potential cities. The IOC would never put itself in the position to have to cover costs of overruns in expenses by cities in putting on the games. The IOC has plenty of potential cities to choose from in any given Olympic year. If a city is unwilling to sign this contract, there are plenty out there that would. Mayor Daley likely knew all of this when he presented the city council with his financial offer in 2007 and if he didn't, he certainly should have. That the current commitment to limit the exposure to $500 million would kill the bid means he wasn't being honest in 2007.

Second, there's no way to know just how much the games will cost. The games are still seven years away. We don't know how much steel, concrete, security, clean up, etc. will cost seven years from now. That doesn't even take into account what all of us expect which is the massive corruption of no bid contracts and backroom deals that Daley's office will likely engage in as they move forward in putting on the games. Just as no one should trust projections on health care reform ten years out, no one should trust projections on costs for putting on the Olympics seven years out. Finally, other host cities have an easier time dealing with this contract. Most countries will back up individual cities if costs do overrun. The U.S. has no such allowance. The federal government couldn't guarantee the costs for the city. As such, Chicago is the only city that will ben entirely on the hook for any unforeseen expenses.

That's why this bill would in effect kill the Olympic bid of Chicago. That's because there's no way that Daley and his ilk could possibly guarantee that the city's commitment would be no more than $500 million, and since they couldn't guarantee that, there's no way they could then sign the contract.

Of course, all of this should have been hashed out in the spring of 2007 when this first came up for debate. Instead, the city council essentially rubber stamped $500 million in 2007 without asking a lot of questions. The eventual commitment for this Host City Contract was never mentioned in 2007. Media didn't report on it and it was mostly sprung on the city in June.

If Daley does sign this Host City Contract, that would essentially give him a blank check on the cost of the games. That would commit the city to pay for whatever it happens to cost. Furthermore, within this contract, the IOC has powers to augment plans for facilities and venues. That means that not only could the cost of the games be determined by commodity prices, security concerns, mayoral corruption, but also the will of the IOC. Once this contract is signed, if Chicago is chosen, then it's too late. The city will have made the commitment and there's little that anyone will be able to do to hold down Daley's blank check.

The Flores bill is currently sitting in the Finance Committe run by Alderman Ed Burke. Burke is a powerful Alderman and an ally of Daley's. That means that the likelihood of this bill ever seeing the light of day range somewhere in the neighborhood of a snowball's chance in hell.

I'd also like to believe that Alderman Flores is acting courageously on behalf of the voters in introducing this bill. Still, there is a cynical way to look at all of this. Flores could also be acting in a cynical manner. With Burke as the chairman of the committee, the chances are slim that this bill will ever become law. A cynical politician could introduce it knowing it won't become law. They can they reference back to it when things go bad in budgeting the games. Yet, that same cynical politician could also go through the motions in putting this bill forward giving it just enough exposure to get themselves noticed but not enough to actually make it law.

What is Flores doing? That remains to be seen. Over the next several weeks and months, Flores will either make it his political mission to bring this bill to a vote, or he will fade into the background and media attention will disappear. If he does the first, then Flores is courageously trying protect the taxpayers from giving the mayor and the IOC a blank check in putting on the games. If he does the latter, then Flores merely acting like most opportunistic politicians.

1 comment:

Tom Tresser said...

Go to to the page "Important Documents" and you can get your own copy of the Host City Contract. The city and the 2016 Committee knew very well from the start what is required. They just lied to us.