City's 'skin' for Games? $500 million - But top official says only 'incompetents' could lose money

City's 'skin' for Games? $500 million - But top official says only 'incompetents' could lose money
By Gary Washburn and Philip Hersh
Copyright © 2007, Chicago Tribune
Published March 9, 2007, 11:22 PM CST

Chicago would be responsible for as much as $500 million if the 2016 Olympic Games operated in the red and other guarantees fell short, officials said Friday.

But Chicago 2016 Chairman Patrick Ryan insisted that no other host city has ever lost money in the Summer Games, and "we would have to be the first really incompetents to do that" if the reserves had to be tapped.

By a conservative estimate, the Games would generate a surplus of $525 million, Ryan said.

The risk of a money-losing Olympics would be "layered" under the plan proposed to meet the requirements of the United States Olympic Committee. The city could be required at two different points to come up with $250 million payments.

Exactly how City Hall would raise the money was somewhat hazy. Dana Levenson, the city's chief financial officer, said it would come from "cash on hand" and the proceeds of bond issues, but he did not elaborate on what funds would be used to pay off the borrowing.

Mayor Richard Daley for months had said that taxpayers would not be on the hook if Chicago wins the Games, but local officials amended that this week during a visit by a USOC evaluation team. An Olympic executive said that the city would have to have "skin in the game," a reference to cash backing in a worst-case scenario.

The city had been working to get "private market guarantees" as backing in case the Games operate in the red and only recently became aware of the requirement for public funds in reserve, Ryan said.

"You have to comply with what rules they establish, what they say it takes to win," he said. "Now we know it takes city skin in the game to win."

Defending Daley, a personal friend, Ryan said, "We think the mayor's statement stands that there won't be taxpayer money spent" because of the positive revenue projections.

Though Ryan said previous Summer Games enjoyed large surpluses, the figures he cited come from an author whose conclusions about the success of past Olympic Games can be questioned.

In his book, "The Economics of Staging the Olympics," Holger Preuss insists one can eliminate what he calls "investments" from the expense side on final balance sheets. That allows him to ascribe a $635 million surplus for the 1996 Atlanta Olympics, while the official Atlanta report calls its balance sheet a wash, with revenues and expenses of $1.72 billion.

Preuss goes so far as to contend that Montreal did not lose money on the 1976 Summer Games, something that most experts would dispute.

USOC Vice President Bob Ctvrtlik applauded the city's guarantee plan, saying it "substantially satisfies our requirements with respect to financial guarantees."

"This is a responsible, balanced approach reflecting commitments from both the private and public sectors, which we believe is critical for an internationally competitive bid," Ctvrtlik said in a statement.

Chicago and Los Angeles are vying for the right to be the U.S. candidate for 2016 in a contest that will be settled when the USOC selects a winner on April 14. The International Olympic Committee will make a final selection from a list of global competitors in 2009.

In what Ryan described as "a significant enhancement to our venue plan," the $78 million Olympics aquatics center would be built in Douglas Park on the impoverished West Side instead of the campus of the University of Illinois at Chicago as originally planned.

In the new location, it would be "more accessible to the community and much more available to the youth of that community," Ryan said.

The cost of the facility would be covered by $50 million from sale of air rights at the site of the planned Olympic Village near McCormick Place; $15 million from the Chicago Park District; and the remainder from the sale of naming rights.

Ctvrtlik said the USOC is "comfortable" with the change in location.

If a Chicago Olympics suffered an operating loss, the first pot of money to be tapped, an estimated $200 million, would come from two sources under the financing plan, officials said. They are skybox revenues at the major venues, including a new stadium planned for Washington Park, and money from the private developer of the Olympic Village.

Contributions from private donors in the years approaching the Games would add to the $200 million figure, Ryan said.

The city would be responsible for the next $250 million in potential losses. Third in line would be $250 million from private sources and other government entities. The city then would follow with another $250 million in reserve.

Quick action by the City Council is required to meet a March 31 USOC deadline. The council is expected to vote on the plan Wednesday.

Aldermen who emerged from private City Hall briefings on Friday generally liked what they heard, expressing confidence that the city's risk would be minimal and that the Games are worth pursuing despite the financial exposure.

"From what I saw, the structure looks sound," said Ald. Isaac Carothers (29th). "I think we should do all we can to bring this historic event to the city. [For] what it is going to do for the income of Chicago, it is well worth it."

Ald. Edward Burke (14th), chairman of the council's Finance Committee, was enthusiastic after his briefing, citing the impact on the city of the 1893 World's Columbian Exposition and the 1933-34 Century of Progress International Exposition.

"Believe it or not, in a six-month period 28 million people came to Chicago," Burke said of the Columbian Exposition. "It was the transforming event in Chicago's history.

"Likewise, in 1933 in the middle of the Depression, Chicago put on an exposition that was so successful it was held over for another year, and it was profitable," Burke said. "I think the potential of this 2016 Olympics to showcase Chicago and metropolitan Chicago and the state of Illinois is as important as it was in 1893 and 1933."

gwashburn@tribune.com

phersh@tribune.com