Buy My Book Here

Fox News Ticker

Please check out my new books, "Prosecutors Gone Wild: The Inside Story of the Trial of Chuck Panici, John Gliottoni, and Louise Marshall" and also, "The Definitive Dossier of PTSD in Whistleblowers"

Monday, August 10, 2009

The "Enron Accounting" of the Chicago Olympics

The folks at No Games Chicago refer to the manner in which the Chicago Olympics 2016 committee comes up with their numbers as "Enron accounting". Enron famously hid their costs by moving those costs off the books. As such, they "cooked" their books to the tune of hundreds of millions in inflated profits for years until their pseudo ponzi scheme was discovered and the company disintegrated.

The 2016 Chicago Olympic committee claims that no tax payer has or will be used to put on the games. Yet, the city has already spent $80 million to purchase the former Michael Reese Hospital. That structure will be torn down and turned into the Olympic Village. The cost of the Olympic Village will be $1 billion. In fact, according to a recent Chicago Tribune report, the price tag at $1.18 billion. That includes $100 million for streets and sanitation and the aforementioned $80 million to purchase the property. Even this figure is likely light. This figure doesn't include about $11 million to demolish the site, $1 million to provide security, and tens of millions to clear and clean the medical waste that will be caused.

Furthermore, construction of the Olympic Village will cost somewhere in the neighborhood of $1 billion. This isn't counted into the Olympic Committees figures either. That's because the city expects to find some private construction company to foot the bill. (then afterwards, the same construction company will turn the village into condos and presumably the project would pay for itself) In fact, in both Vancouver, which will have the winter Olympics in 2010, and in London, which will have the summer games in 2012, their citizens heard the exact same thing. Now, both cities are footing the bill for construction of the Olympic Village.

On top of this, the city is creating a Tax Incremental Fund to pay for all this. A TIF, as they're called, is when property taxes are capped for their intended purpose and then the rest of the bill goes into a general fund, or even a slush fund. If the Olympics will be paid for, why would the city need to create a TIF to pay for the Olympic Village? That's what the folks at the Tribune company asked.

Asked how this squares with continuous pledges not to use taxpayer money for the games, Chicago 2016 spokesman Patrick Sandusky said, the village infrastructure wouldn't siphon money from existing tax bases, but would pay for itself.

"There's no village there now, so there are no incremental taxes," he said.

In other words, they haven't started collecting the taxes yet to pay for this. The Committee says that if they don't get the games, they have up to five years to sell the property and expect to make a profit on the $80 million investment. Of course, in the meantime, that is a loss they aren't accounting for.

The "Enron" accounting doesn't end there. The Olympic Committee says that the games will pay for themselves. Yet, the expenses are all projected. It's been centuries since this city has had a project come in within budget. Millenium Park was originally scheduled to cost about $150 million and wound up costing about three times that. The Olympics will cost exponentially more than that and these projects are years in the future. Furthermore, streets and sanitation costs along with costs form security aren't factored into the expenses. In Vancouver, the estimate for security costs will be $1 billion.

It's about seven years before the games and the city is already $100 million. Chicago's security costs will be exponentially greater than that. So, in effect, there's no way to know just how much the games will cost. In effect, bringing the games to Chicago gives the mayor a blank check to spend on putting them on.

No comments: