City Council Testimony - No Boston Olympics

City Council Testimony

Testimony Before the Boston City Council Special Committee on Boston2024

3/6/2015

Prepared Remarks

Mr. Council President, members of the City Council, thank you for inviting No Boston Olympics to testify at this morning’s hearing. We are an all-volunteer organization with supporters in each and every neighborhood of Boston and in every corner of the Commonwealth.  My name is Chris Dempsey, and I am one of three volunteer Co-Chairs. It is an honor to be here.

Rich Davey, who preceded us here today, is someone for whom I have enormous respect. We briefly served and worked together in the Patrick Administration where I was Assistant Secretary of Transportation before I left to attend business school.

No Boston Olympics shares many of the same beliefs as Boston2024 and its supporters such as Mayor Walsh, including – (1) that Boston is a world-class city and we have much to be proud of, (2) that Boston can host a great Olympic Games, and (3) that the 1992 Dream Team was perhaps the greatest showing of American exceptionalism since we put a man on the moon.

By the way, we’re also glad that the boosters are not bidding on the Winter Olympics – after all, as Mayor Walsh would say, this isn’t Loon Mountain.

Our members are not naysayers, we are not cynics, and we do not disagree with the inherent coolness and “once in a lifetime” nature of a Boston Games. But we do disagree with the wisdom of pursuing the Games as a sound and responsible public policy.  We come to that conclusion based on our research of the Games in other cities, our examination of the International Olympic Committee’s idiosyncratic bidding process, and our analysis of Boston2024’s bid. We agree with Mayor Walsh that much of the conversation so far has been more “heat than light” – and we hope to share important facts today.

We will focus our remarks on two key issues.  First, we believe that Boston2024 dramatically overstates the benefits to our region associated with hosting the Games. And second, we believe Boston2024 significantly understates the costs of hosting and the risks to both city and state taxpayers.

Let’s start with the overstatement of benefits. Boston’s boosters makes three arguments here: (1) Tourism Boost --  that the Games will have an immediate tourism benefit, (2) Profile -- that by showcasing Boston on three-weeks of international TV, we can expect more tourism and business investment, and (3) Infrastructure Deadline --  that the Games will compel us to invest in transit and other infrastructure that we need regardless.

On (1) Tourism Boost: There is none. The number of visitors passing through the Beijing airport actually dropped immediately before and during Beijing's 2008 Games as business people and tourists who would otherwise have visited the city decided to stay away. The same was true during the 2012 Games in London – where the National Gallery had 40% fewer visitors than the same week the year before – tourists that would have come for London’s culture stayed home or went elsewhere.  Greater Boston's hotels are already at over 90% capacity in the summer months -- filling them with Olympic visitors will just push out those who would have come as tourists or to conduct business.

On (2) Profile: The track record of the Olympics is that they leave local economies no better off after the Games than they were before the Games. Study after study by independent academics has shown that the Games do not create economic growth. There is no discernible “tourism bump” in the years post-Games. The UK’s tourism sector grew more slowly than Ireland’s in 2013, and tourism in Sydney grew more slowly than in other parts of Australia in the years following the 2000 Games there. And independent economists have found no causation between hosting the Games and increased direct foreign investment.

On (3) Infrastructure Deadline: It turns out that the stuff you absolutely have to build for an Olympics – a velodrome, a temporary 60,000 person stadium, an aquatics center – is stuff you don’t really need. And the stuff you really do need is stuff you don’t have to build. In Rich Davey’s own words, “Boston2024 is asking for no new transit projects”. It is difficult to see how the MBTA can be dramatically improved when Boston2024 does not support raising new revenue to fund the system.

If our statewide and regional governance system is so broken that we cannot find ways to get people to work, does it make more sense to paper over that system between now and 2024, or to fundamentally fix it. Boston should not have to depend on the Olympics as a catalyst to fix basic services. We’re better than that.

On to the second of our two concerns -- that Boston2024 dramatically understates the costs of the Games and the risks to taxpayers. Please turn to page 2 of the handout. Boston2024’s budget submitted to the USOC on 12/1/2014 was $14.3 billion dollars, or $9.1 without any infrastructure upgrades. That’s before overruns, and every single Olympics since 1960 has overrun its initial budget. There are particular reasons why Olympics tend to have cost overruns, and I would be happy to discuss them with you during Q&A.

The biggest financial risks at the City level fall in two of those four buckets that you see on page 2 – the OCOG and non-OCOG budgets.

The International Olympic Committee’s standard contract requires the host government, in our case the City of Boston, to accept financial risk for the hosting of the Games. Taxpayers are on the hook when costs go over the submitted budget. As it stands, the City of Boston – that is, city taxpayers – will be required to write a “blank check” to the IOC. A plan that uses a financial backstop from taxpayers is not a “private financing model”. Period.

Now, Boston2024 will say it intends to take out an insurance policy to protect the City, but the group included no insurance premium payments in its submitted budget. Chicago’s recent failed Olympic bid proposed $68 million in premiums but that only covered $1.1 billion of the $3.8 billion operating budget, according to Crain’s Business Journal. How will Boston2024 pay for insurance that adequately covers the risk to Boston taxpayers when they have no premium payments in their budget?

There is, fortunately, precedent for eliminating the financial guarantee. For the 1984 Games, Los Angeles refused to provide taxpayer backing. We would encourage the City Council to draw a clear line in the sand – that City of Boston taxpayers will get the same deal Los Angeles got, and not provide a financial guarantee for the Games.

If you turn to the next page, a breakdown of the OCOG budget, I will draw your attention to the $600m payment to the USOC. This is a franchise payment -- a “thank you” for the privilege of bidding on the Games. Those dollars go to USOC headquarters in Colorado Springs and are used for salaries and other USOC expenses – they are not spent here in Boston. Historically, that payment has been made before the Games are actually held. We hope you agree that it is outrageous that the United States Olympic Committee would receive a $600 million payout made possible by Boston’s hosting long before the boosters have followed through on the myriad promises they are making to neighborhoods in Boston and communities across Massachusetts. Boston2024's OCOG budget has razor-thin margins. If it has cost overruns or if revenues don't come in as planned, it will fall back on its taxpayer guarantee -- all while the USOC walks away with a big check. We believe that if the bid moves forward, the $600 million should be held in escrow and only sent to Colorado when elected leaders here in Massachusetts agree that Boston2024 has fulfilled 100% of its community promises.

These are but a few of our many more concerns with the bid’s precarious financing, but we want to be respectful of your time this morning.

We’ll conclude our testimony by saying that the City Council has an important role to play here in protecting City of Boston taxpayers from the raw deal that Boston2024, the USOC, and the IOC are offering. The boosters’ hope is that the glittery sales pitch of the Olympics will distract the City from doing its due diligence on the most significant contract it would sign this century.

This is why it is so encouraging to see this committee formed and to know that it wants to hear from both sides of this debate.  Mr. Council President, thank you again for the invitation to speak today. We hope that you and your colleagues on the Committee have found our remarks helpful as you begin to weigh the costs and benefits of Boston2024’s bid. We would be happy to answer any questions you may have.