Olympic trade-offs

February 1, 2003

Proponents of the 2010 Winter Olympics claim that the Games will provide major economic benefits to British Columbians-so much so that the economic returns would easily justify the costs of staging the Games.

However, neither the Vancouver 2010 Olympic Bid Corporation, nor any of its member partners (Vancouver, Whistler, the provincial and federal governments), have undertaken a systematic economic evaluation of the costs and benefits of the investments and other commitments required to host the Games. Instead, they have cited economic impact studies that grossly exaggerate the benefits and do not properly measure costs.

Economic impact analyses consider all spending as a benefit. They don't differentiate between money spent to build a new hospital, a new sports facility, or to dig a hole in the ground. In other words, they don't address the value of what is produced, nor do they consider what is displaced or foregone to provide the goods and services that are purchased (what economists refer to as opportunity costs). That is why government guidelines recommend the use of cost-benefit analyses.

An examination of both the costs and benefits of hosting the Games shows that they will not pay for themselves. There is no doubt that there will be a net financial cost that British Columbians will have to pay for, either in higher taxes, increased debt, or further cuts in other government infrastructure or services.

Building on the Auditor General's review of the Bid Book, we believe a realistic price tag for hosting the Games is in the order of $1.2 billion, even taking into account increased tax revenues and the benefit of getting Sea-to-Sky upgrades out of the way sooner than later. If a Richmond/Airport-Vancouver rapid transit line becomes part of the Olympic package, then the overall cost rises to $2 billion.

However, these figures are subject to numerous risks and may be substantially higher-many of the cost and revenue forecasts are preliminary; some of the commitments haven't been included in the Games' or related government budgets; and considerable amounts of government support and contributions haven't been explicitly identified or accounted for.

The potential economic development benefits from the Games-cited as $10 billion in economic activity and nearly 250,000 jobs-have also been greatly exaggerated. These estimates include the impact of a new Vancouver Trade and Convention Centre, which is not part of the bid, has not been included in Games-related costs, and will proceed regardless of whether or not we host the games.

In addition, the economic impact studies on which those estimates are based incorrectly assume that Games-related spending will not cause any prices to increase and that all of the workers hired would otherwise have been unemployed.

The employment numbers ignore the difference between a 'person year' of employment and a job (a job lasting seven years is counted seven times). Even if we accept the medium employment estimate in the latest impact study, it would be equivalent to some 5,600 on-going, full-time jobs over the seven years that the Games are estimated to have an impact. With a $1.2 billion price tag, that's an effective public subsidy of some $220,000 per job. Other studies suggest the employment impact could be closer to 1,500 jobs, and therefore the subsidy would be much greater.

Finally, the Games will concentrate their economic benefits in the Lower Mainland and Whistler, where unemployment is relatively low compared to other areas of the province.

To be fair, the Bid Corporation has made extensive commitments to minimize negative social and environmental impacts, while also maximizing opportunities for British Columbians, especially low-income individuals. However, the full cost of these commitments has not been budgeted for. Further, 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.

If there is a justification for hosting the Olympics, it is the benefits British Columbians will enjoy from hosting and attending the Games, and using the facilities that remain afterwards. These benefits are not insignificant, and it is impossible to put a dollar value on them. The question is whether they are worth the trade-offs-how much are we willing to pay in higher taxes, or give up in other infrastructure or services, to get them?

It is this question that, to date, policy makers and Bid proponents have failed to acknowledge.