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Friday, February 25, 2005

The $20 Billion Olympics

make sure to sign the blank check

In Olympic Bid, City Must Be Ready to Cover Overruns, Too

Published: February 25, 2005

The uncertain fate of the proposed West Side stadium is not the only hurdle facing the city as it bids for the 2012 Olympics. Experts on the Games say New York has yet to satisfy the International Olympic Committee's firm demand that host cities guarantee to pay for all cost overruns and deficits, no matter how high they go.

When the committee announces the host city on July 6, it will require it to sign a contract that day agreeing to underwrite the entire cost of the Games, cover any differences between revenues and expenditures, and indemnify the committee, sponsors and broadcasters against any financial claims that arise.

It is a sizable issue, given that in Athens last year, the Games cost at least $10 billion, twice the original estimate, and the Sydney Olympics in 2000 also cost double the projection.

The other cities in the competition - London, Paris, Madrid and Moscow - have offered open-ended agreements to cover any cost overruns or deficits, in most cases underwritten by their national governments. "The chancellor of the exchequer has guaranteed that the U.K. Government will act as the ultimate financial guarantor should there be a shortfall between Olympic costs and revenues," reads the London bid, which is typical of the others.

New York's organizing committee, on the other hand, has taken a different route. Lacking such a guarantee from the federal, state or city government, it has offered to cover all excess costs up to $492 million, which organizers say should be sufficient, given that no American host city has had any overruns approaching that amount. It is far from clear, however, that that limit will be sufficient for the international committee.

"Somebody's got to step up," said Richard W. Pound, a Canadian member of the committee's unit that deals with legal issues.

"In the U.S., there's never any doubt it can be done, but they've got to produce a guarantee from someone."

Kevin B. Wamsley, director of the International Center for Olympic Studies at the University of Western Ontario in Canada, said the issue was generally considered nonnegotiable.

"They have to sign off on that issue, or the bid will not be accepted," Mr. Wamsley said.

Mayor Michael R. Bloomberg and Gov. George E. Pataki went out of their way on Wednesday to reassure the international committee's evaluation commission that there were sufficient contingency funds in the current budget to cover any overruns.

Jay Kriegel, executive director of NYC2012, the local organizing committee, said yesterday that New York has provided "without question the strongest guarantee that's ever been provided for an American bid."

The guarantee, he said, includes $250 million from the state and a $200 million contingency fund in the host committee's $3 billion budget for the Games. The 2001 state legislation authorizing that appropriation specifically states that "in no event" should the combined liability of the city and the state exceed $250 million. In addition, the federal government has agreed to pay for all security costs.

It is for the international committee "to decide whether the guarantee meets their needs," Mr. Kriegel said.

At a news conference yesterday, the chairwoman of the international committee's evaluation commission, Nawal el-Moutawakel, gave a noncommittal answer to the question of whether the city had met the committee's requirements, though she made it clear she appreciated the city's attempts to deal with the issue.

She added that the assurances the city provided would make it easier for the committee to prepare its report.

This was buried in the Times and it shouldn't be. Not a dime should come from government for this, especially city government. It's bad enough to build the damn stadium somewhere, now we have to cover their costs as well? Where is all this extra money supposed to come from? When we face an overrun of billions, you think Washington is going to pick that up in an election year? This should be a major issue instead of all the cheerleading.

posted by Steve @ 2:26:00 AM

2:26:00 AM

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