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Chicago's Bid For Glory; City Believed To Be Front-runner For 2016 Olympics, But Money Issues Remain
Chicago Tribune, February 14, 2009
By Philip Hersh, Tribune reporter
Chicago's 2016 Olympic plan is banking on nearly $1 billion more in revenue than any of its rivals and counting on International Olympic Committee voters to buy the idea that it can cover $1 billion in construction costs without any public funding or guarantees.
Both those facts have been issues for Chicago's bid since it first submitted plans to the IOC a year ago, and nothing about them changed substantively in the much more detailed iteration of the plans contained in the nearly 600-page, 8-pound candidacy file released Friday.
Nearly all the rest of the plan also remains as previously announced.
The Olympic Village will be at a Near South Side lakefront site on former Michael Reese Hospital property. The largely temporary Olympic Stadium and Aquatics Center will be in Washington Park. The major concentration of sports venues will be in the heart of the city, on the lakefront from 31st Street to Lincoln Park, with 11 sports in McCormick Place.
"Our Games offer an economic, sport, education, cultural and environmental legacy intended to be transformative for people and places," said Chicago 2016 bid committee President Lori Healey, who worked in Mayor Richard Daley's administration, during a news conference to introduce the candidacy files at the Chicago History Museum.
Nearly all the questions at the news conference were about financial matters, including concerns Chicago taxpayers would be paying a substantial part of what the bid committee insists will be privately financed Games.
"No U.S. [Olympic] Games has ever lost money, and we believe our financial plan is responsible and conservative," Chicago 2016 Chairman Patrick Ryan said.
Even though an IOC working group noted Chicago's previous revenue projections were "optimistic" and the lack of a full guarantee does not comply with language in the Olympic Charter, conventional wisdom still favors Chicago in the Oct. 2 vote for the 2016 host city.
Chicago, Tokyo and Madrid made their filings public Friday, putting the documents on the Internet. Rio de Janeiro decided to wait until Monday.
Chicago's numbers for running the Games as well as financing them are by far the largest, although two elements account for much of the difference.
Chicago's projections put $350 million of the $397 million cost for the largely temporary Olympic stadium into the operations budget of $3.3 billion. Its plan also includes a $450 million contingency fund. Madrid projects revenue and operations costs at $2.6 billion; Tokyo, $2.86 billion
The $3.8 billion Chicago revenue projection actually represents a drop from the $3 billion projection of a year ago, which did not include $1 billion from each host city's share of IOC TV and global sponsorship money.
"It's a really big number, but I think they might be able to get it if the economy turns," said Lesa Ukman, chairman of IEG, a Chicago-based research and valuation firm for sports marketing.
Ukman and other sports marketing experts generally agreed with Ryan's contention that the revenue projections are not outlandish.
"We believe although they are much larger than the competition, they deserve to be because of the uniqueness of U.S. market," Ryan said. "I'm not going to tell you it's not going to be a lot of hard work [to raise the money]."
Chicago projects $774 million in local (non-global) sponsorship, compared with Tokyo's $625 million and Madrid's $326 million. There's a huge difference in a category called "official suppliers," who provide materials and money: $474 million for Chicago, $51 million for Tokyo and $331 million for Madrid.
"Even in bad economic times, the American economy is more robust than any other economy in the world," IOC member Richard Pound of Canada said. "And people in the United States are used to using major events as part of their business strategy."
The operations' revenue also include $245 million in private donations, both as outright gifts and eventual naming rights for the venues, which cannot wear such labels during the Olympics. (The United Center, for instance, is "Chicago Arena" in the candidacy files.)
"There is an embedded idea in the U.S. of corporate citizenship in terms of social responsibility and of CEOs networking in a way where one tells another to step up," Ukman said. "You don't have that in other countries."
The $500 million in guarantees the Chicago City Council approved and a projected $500 million in private insurance would apply only to operations shortfalls.
The question of who covers any shortfalls in private financing of the Olympic Village ($977 million) and other permanent venue construction ($54 million) remains unanswered. That is where the lack of a full governmental guarantee, which the other three cities have, can work against Chicago.
Chicago bid officials undoubtedly will have to provide more detailed assurances on the guarantees and private financing to the IOC evaluation commission that visits April 2-7.
Among new information in Chicago's bid book were venue changes for soccer and modern pentathlon.
The soccer tournament has been switched from a regional to a national footprint.
The preliminary rounds would be played in Pasadena, Calif.; Minneapolis; Philadelphia; St. Louis; Washington, D.C.; and the New Jersey Meadowlands.
Northwestern University is the new venue for modern pentathlon (shooting, riding, running, swimming, fencing), previously planned for three different sites.
A $1,645 ticket
Chicago: $520-$1,645 for the Opening Ceremony and $28-$486 for "prime events"
Tokyo: $231-$1,389 for the Opening Ceremony and $9-$324 for prime events
Madrid: $490-$840 for the ceremony and $36-$249 for prime events
Rio de Janeiro: No prices yet released, but they are expected to be lower
phersh@tribune.com