[van-announce] Press Release from Cdn Center for Policy Alternatives: Olympics Cannot be Justified on Economic Grounds

[Bella]

Olympics cannot be justified on economic grounds
 Canadian Center for Policy Alternatives
 Friday, February 14, 2003
 News Release

 (Vancouver) Hosting the 2010 Winter Olympics cannot be justified on
economic grounds alone. That is one of the key findings of Olympic Costs
and Benefits: A Cost-Benefit Analysis of the Proposed Vancouver 2010 
Winter
Olympic and Paralympic Games, released today by the Canadian Centre for
Policy Alternatives.

 The study shows that the Olympics will not pay for themselves. "The Games
are not attractive from a financial point of view," says Dr. Marvin
Shaffer, co-author of the study and one of the architects of the 
province's
Multiple Account Guidelines (used for undertaking cost-benefit analyses of
major capital projects). "If Vancouver hosts the 2010 Winter Olympics,
there will be a substantial net cost to British Columbians in the order of
$1.2 billion, even taking into account increased tax revenues and the
benefit of not having to upgrade the Sea-to-Sky highway at a later date."
And as the sole guarantor of the Games, the Province of British Columbia 
is
assuming all the financial burden of what is clearly a risky business
venture."

 Alan Greer, co-author of the study, says the economic benefits of hosting
the Games are limited. "Job creation estimates have been wildly
exaggerated. Realistic employment estimates range from 1,500 to 5,600 jobs
created over the seven years the Games are estimated to have an impact.
Based on a net cost of $1.2 billion to host the Games, that's a public
subsidy of $220,000 to $820,000 per job."

 The Olympics also carry significant environmental and social risks. 
"There
are some innovative ideas in the Bid Book for mitigating social and
environmental costs, but many of them haven't been budgeted and, if
>implemented, will likely mean increases to the overall cost of the 
Games."
says Celine Mauboules, co-author of the study.

 "That's not to say the Olympics don't have benefits," says Mauboules. 
"The
positive impacts for British Columbians include the pride and enjoyment
from hosting the Games, the opportunity to attend events, and the use of
new sports, housing and transportation facilities, to name a few."

 Seth Klein, the CCPA's BC Director, says the question for policy makers
and the public is: Do the benefits outweigh the substantial price tag that
comes with hosting the Games? "To date, the public has received inadequate
information about the costs and benefits of hosting the Winter Olympics.
We've basically done government's job for them. Both federal and 
provincial
guidelines recommend the use of multiple account evaluations for such an
initiative. Yet neither level of government, nor the Bid Corporation, has
undertaken such an evaluation."

 "The Olympics have too often been pitched as having miraculous economic
powers," says Klein "They do not. Like all public policy choices, they 
come
with benefits and costs, and will require trade-offs."


Olympic Costs and Benefits: A Cost-Benefit Analysis of the Proposed
Vancouver 2010 Winter Olympic and Paralympic Games

 SUMMARY

 To date, the public has seen two economic impact analyses and the Auditor
General's review of the Bid Corporation's estimates. None of these provide
an assessment of net benefits and costs. Economic impact analyses consider
all spending as having a positive impact; they do not differentiate 
between
money spent to build a new hospital, a sports facility or money spent to
dig a hole in the ground. These analyses do not consider costs, they
overstate the benefits, and they fail to consider what might have been
accomplished had the same resources been directed towards other activities

A cost-benefit evaluation, in contrast, looks at the broader questions of
what society gains and loses as a result of undertaking a major capital
project. The provincial and federal governments' own guidelines recommend
the use of such a broader cost-benefit analysis, yet to date none has been
forthcoming.

 The purpose of this paper is to present a "multiple account evaluation" 
of
the costs and benefits of the 2010 Winter Games and related initiatives. 
It
is based on publicly available information and is only an overview. Time
and data constraints preclude a more detailed analysis. However, it does
serve, much more than the impact studies upon which the government and Bid
Corporation have been relying, to indicate the trade-offs and benefits and
costs that holding the Games would entail.

 Multiple account evaluations are not intended to answer whether a project
should or should not be undertaken. That is for policymakers and the 
public
to decide. However, this evaluation can and should inform the policy 
choice.


Overall assessment

 This evaluation has three key implications:

 1. The Games are not attractive from a financial point of view. There
would be a substantial net cost to the public treasury, which would have 
to
be offset by less government spending in other areas or increased taxes or
increased debt.

 2. The Games cannot be justified on the basis of the estimated economic
impacts. The jobs would not be generated in regions of the province where
unemployment is high (compared to the rest of the province) and additional
employment opportunities most beneficial. The impacts would be of limited
duration, and the effective subsidy per job would be very high.

 3. The main potential justification for the Games is the benefit that
British Columbians would derive as hosts and spectators of the Games and
users of the facilities they provide. Whether the value of those benefits
outweighs the cost and risks—whether these Games' benefits are higher
priority than the government services or investment that would be
displaced, or disposable income that would have to be taxed to pay the net
cost of the Games—is the central public policy issue policymakers and the
public must decide upon.

 Consistent with provincial government guidelines, this evaluation 
examines
the costs and benefits in five key areas, known as "evaluation accounts" :
government financial, resident/consumer, environmental, economic
development, and social.


Government Financial Account
 (Net return or cost to taxpayers)

 The 2010 Games will not "pay for themselves." This analysis indicates 
that
the net financial cost of the Games to British Columbians is $1.23 
billion.
This figure builds on the Auditor General's estimates by incorporating a
provision for unbudgeted costs, the opportunity cost of federal funding,
incremental taxes, and the benefit of undertaking Sea-to-Sky upgrades that
would otherwise be done at a later date.

The costs may be substantially higher, and are subject to numerous risks.
The Province of British Columbia, as the sole guarantor of the Games, is
assuming all the financial burden of what is, clearly, a risky business
venture.

If one includes the cost of advancing the construction of a
Richmond/Airport-Vancouver rapid transit line, the net costs would be in
the order of $2 billion.


Resident/Consumer Account
 (Net benefit to British Columbians as consumers of what the Games 
provide)

 The positive impacts for British Columbians as residents or consumers
include the pride and enjoyment from hosting the Games; the opportunity to
attend Games events; and the use of new sports, housing and transportation
facilities

Negative impacts include disruption/congestion during construction and the
Games themselves, and displacement of existing activities from some
facilities

While there would be user benefits from advancing improvements on the
Sea-to-Sky highway, they are lower per dollar spent than improvements on
widely recognized higher-priority projects in the Lower Mainland and
elsewhere

On balance, in terms of the resident/consumer account, one could expect
that there would be a net benefit to BC residents - particularly for those
who would attend events and use the facilities. The economic question is
what value do British Columbians place on these benefits - how much are
they willing to pay in higher taxes, increased public debt, or displaced
government spending on other investments. This question is fundamental to
the economic evaluation of the Games, but has yet to be clearly put to the
public.


Environmental Account
 (Impacts on the environment)

 The Bid Corporation and its member partners have made extensive
environmental commitments. If those commitments are kept, environmental
impacts may be minimized. However, little detail is provided about what
specific measures would be taken, what they would cost, and whether those
costs have been fully budgeted for

The negative environmental impacts of the development and expansion of
facilities and increased accessibility to new sites such as the Callaghan
Valley will be difficult to effectively mitigate.

 The urgency of meeting the 2010 deadline may reduce the opportunity to
delay, alter or abandon any Olympic project because of environmental
concerns.


Economic Development Account
 (Income and employment effects)

 Claims by some proponents that the Games will generate over $10 billion 
in
provincial GDP and more than 200,000 jobs grossly exaggerate the likely
impacts. These estimates include the benefits of an expanded Vancouver
Trade and Convention Centre, even though the convention centre is not part
of the Bid, hasn't been included in the estimate of Games-related costs,
and will go ahead with or without the Games. In addition, the employment
estimates incorrectly assume that Games-related projects would only hire
British Columbians who would otherwise be un- or underemployed

The extent to which the Games will result in increased economic activity
(referred to as "incremental effects") is inherently uncertain, depending
not simply on the success of the Games and complementary marketing 
efforts,
but also on what would or could have occurred without them

The incremental employment generated by the Games is estimated to range
between the equivalent of 1,500 and 5,600 full-time, continuing jobs over
the seven years the Games are estimated to have an impact. The lower 
figure
of 1,500 is the estimate of a forthcoming CCPA study by UBC economist 
David
Green. The 5,600 estimate is based on the InterVISTAS "medium visits"
scenario

Based on a net cost of $1.2 billion dollars for hosting the Games, the
effective public subsidy would be $220,000 per job, and possibly as high 
as
$820,000 per job

The Games would concentrate economic benefits in the Lower Mainland and
Whistler, where economic help is less needed than elsewhere in the 
province.


Social Account
 (Community and social impacts)

 The Games pose social risks, such as the displacement of low-income
tenants and rising housing costs

The Bid Corporation and its member partners have committed to minimizing
negative social and community impacts associated with the Games, while
maximizing opportunities for British Columbians, and in particular,
low-income individuals

While some funding has been committed to and accounted for in the budget,
additional funding would be needed to ensure that the commitments are 
fully
realized. It is unclear whether needed additional funding will be made
available

Some proponents argue that the Games are needed in order to leverage
provincial and federal support for much-needed social infrastructure, such
as social housing and public transit. This view is questionable. Positive
social ventures have merit and are worth pursuing with or without the
Games. Both social housing (after a concerted national campaign) and 
public
transit (in the wake of Kyoto ratification) seem now to be firmly on the
public agenda, with or without the 2010 Winter Games


Conclusion

 The purpose of this cost-benefit evaluation is not to tell policymakers 
or
the public whether the 2010 Games should be undertaken. The Games will
carry substantial net financial and other costs and risks, but will also
bring benefits. Whether the benefits outweigh the costs is a matter of
individual opinion. What is clear, however, is that to date, trade-offs
implied by the cost and benefits of the Games have not been fully
acknowledged or explicitly addressed.

 Complete 33 page Report: <http://www.policyalternatives.ca/>

 To arrange an interview, call Shannon Daub at 604-801-5509.
shannon at bcpolicyalternatives.org


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