Chicago touted its financial strength in its 2016 Olympic bid Friday, with organizers saying they have at least a $1 billion safety net if the games exceed an estimated $4.8 billion price tag.
Chicago is competing against Tokyo, Madrid and Rio de Janeiro. The four cities submitted their bid files to the International Olympic Committee this week before making them public Friday.
“Our aspirations for welcoming the world to Chicago and the United States are represented in nearly 600 pages in this three-volume document,” said Chicago 2016 Chairman and CEO Patrick Ryan. Ryan is founding chairman of Aon Corp., the largest insurance broker, which is based in Chicago.
Chicago’s bid, supported by President Barack Obama, proposes centering the games along the city’s scenic lakefront. The IOC will choose the 2016 host city Oct. 2.
Chicago organizers said their financial safety net includes a $450 million “rainy day fund,” as much as $375 million in IOC cancellation insurance, another $500 million in insurance coverage — and a “last-resort” $500 million guarantee of taxpayer money from the city of Chicago.
Olympic games are notorious for going over budget. The 2012 Olympics in London will cost an estimated $16.5 billion, three times its original estimate.
Ryan said Olympic costs often rise when the scope and scale of venues change after a city gets the games, but he doesn’t expect that to happen in Chicago because he doesn’t expect plans for a $397 million Olympic stadium and a $976 million lakefront Olympic village to be altered.
Chicago’s Olympic organizers instead predicted a $500 million operating profit on the games that would run from July 22 to Aug. 7. The paralympics would run from Aug. 17 to Aug. 28.
Despite the rosy financial picture, the ongoing economic crisis cast its shadow on Chicago’s bid. Ryan has said the bid committee adjusted its surplus estimate from $725 million to $500 million because the sale price of the Olympic village to a real estate developer for mixed-use housing may not meet initial expectations.
But Ryan also said the committee’s expectation of $246 million in private donations is realistic, suggesting the plan can outlast the recession.
“We have seven years to raise the funds,” he said.
Chicago organizers are looking to collect $705 million from sales of 7.6 million tickets, as well as additional revenue from corporate suite and skybox sales. They’re also counting on $240 million in private donations that include non-Olympic related naming rights for permanent structures or other building projects.
Rob Baade, an economics professor at Lake Forest College, is skeptical of Chicago 2016’s revenue projections. He notes that studies of games in other cities have shown money pumped into the local economy is largely offset by decreased spending in the weeks before and after the games.
Baade said both tourists and residents stay home or go elsewhere, anticipating higher prices everywhere from restaurants to hotels in the weeks surrounding the Olympics.
“Summertime is the peak tourist time (in Chicago) so you have to look at people who might ordinarily go to the city don’t go because they don’t want to deal with crowds and congestion,” Baade said.
He also noted the Olympics mean more police on duty and increased government spending to handle a city teeming with visitors.
“That comes out of somebody’s budget,” he said.
Chicago is counting on the federal government to come up with the money, staff and equipment needed for Olympics security because it would be designated a national special security event. Organizers say the precedent was set at the Summer Games in Atlanta and Winter Games in Salt Lake City.
Organizers also anticipate federal and state money for transportation infrastructure improvements. Olympic officials had identified transportation as an area Chicago had to address in its bid.
“Chicago has very good rail right now, it’s just that it needs modernization,” Ryan said Friday.
Ryan even argued a worldwide recession could actually help keep Chicago’s Olympics cost in check. “Clearly, as a result of the recession, a lot of construction costs have come down,” Ryan said, pointing specifically to cement and steel prices.
The next major dates in Chicago’s Olympics quest are April 4-7, when the IOC’s evaluation commission is set to visit.
Organizers hope the IOC will be as impressed as the U.S. Olympic Committee seems to have been with a feature Chicagoans love to brag about: Lake Michigan. Chicago is emphasizing that most of its Olympic venues would be clustered along the sprawling lakefront, giving the games a vibrant core.
Organizers also take every opportunity to remind the IOC that Chicago is Obama’s home. The president has made no secret of his support for Chicago’s bid, which competitors can’t discount.
“I would have preferred that in the moment of the decision that (President) Bush would have been in office since he’s been so bad for the world,” Spanish Sports Minister Jaime Lissavetsky said earlier this month.