The Civic Federation found that the operating budget, including venue construction, proposed by the Chicago 2016 is fair and reasonable and provides adequate protections against financial risks to Chicago's tax payers.
Now, if the committee and the Mayor thought that this report would quell the concerns of the citizens, it's likely he's in for a surprise. First, only in the last few weeks has the objectivity of the Civic Federation come into question. The Civic Federation gave its top honor, Lyman J. Gage Award for Outstanding Civic Contribution to the city, to Pat Ryan in 2007. Ryan heads the 2016 Olympic bid. Second, no less than 40 of the board's 82 members work for companies that are supporters of the 2016 bid . More than this, LEK Consulting, the group that the Civic Federation hired to do the analysis, is now bidding for a major contract with the city at O'Hare International Airport. The LEK disclosure was disclosed in the analysis but not before. Most of the other disclosures were actually investigated by citizens and journalists and not even revealed by the Federation itself. As such, it's unclear just how objective either the Civic Federation or LEK are in their analysis.
Within the summary, the report says something that is peculiar.
Given the limited time frame and complexity of hosting the games, the following report is not a financial audit but rather a high-level review (page 6)
It's unclear what a high level review is. It also adds to the dubious nature of the report. If the Civic Federation is unable to conduct a full audit, how can anyone trust any of their findings. The findings, as I mentioned, find that the budget projections are solid, but the findings don't question the projections or funding plans of the Olympic village. According to the Olympic Committee, the village will cost just over $1 billion. Yet, in Vancouver, their Olympic Village now stands at costing $1 billion. Yet, their village has roughly 1000 units whereas the plans for the Chicago village will be for 7000 units. Furthermore, the report doesn't question the assertion that the village will be financed entirely by private funding. This seems dubious. As I've been reporting, financing for commercial loans, like an Olympic Village, is nearly non existent. It's especially difficult for properties of $10 million and more. As such, the Olympic Village would fall into the sort of financing that is difficult to get now. The report states that "LEK (the firm that prepared the report) cannot "predict future events". As such, they must be using current circumstances. If that's the case, there's no way they can conclude that a private firm would finance the entire cost of the Village. This is potentially up to a $1 billion error.
Next, tickets for events may wind up costing out most of the citizens of Chicago. For instance, the Civic Federation estimates that tickets to the opening ceremonies will cost nearly $2000 with taxes per person. This is no small point. Even if the games wind up being a boon, if that happens because the only people that can afford to enjoy them will be the wealthy that won't be of much consolation.
The report also didn't question the veracity of the projections that the bid made for sponsorship revenues. The Olympic bid expects the revenues to be 1.8 billion dollars. In the Atlanta games, that number was about $1 billion. The Olympic committee targets $19 million for the naming rights of the rowing venue which is equal to what Citibank pays yearly for naming rights of the Mets baseball stadium. Neither of these are challenged or questioned even though the numbers appear dubious.
Most troubling, the Olympic Committee changed the structure of it insurance policy after the analysis came out. This is vital. The insurance policy may be the only thing that keeps tax payers from footing the bill of the cost overruns that are expected by many skeptics. A full transparent analysis and explanation of the policy has not yet been made public. Worse yet, the Olympic bid committee plans on having Aon provide the insurance. Aon is the company that Pat Ryan helped to found. So, the leader of the Olympic bid is having his own insurance company provide the vital piece of insurance.
(Please note I was hoping to speak with Alderman Flores regarding this report but he was pulled away on a personal matter and I hope to get his reaction next week)