"Make no little plans. They have no magic to stir men's blood ... Make big plans; aim high in hope and work."  
—Daniel Burnham, Chicago architect. (1864-1912)

Tuesday, July 7, 2009

The Uninvited Guest

University of Chicago sports economist Allen Sanderson talks about your tax dollars, Olympic stadiums, and what makes Chicago a bad party host

Rachel Cromidas: You and others have argued that the city’s financial plans for the 2016 Olympic bid will put taxpayers “on the hook” for more money than the city has. Could you unpack what costs the Olympics will place on the city if Chicago gets the bid?

Allen Sanderson: The budget of building the Olympic Village, stadium, tennis courts, swimming pool, and whatever else, plus the operating budget, is at $4.8 billion dollars now. That’s what it will cost to build the facilities and have the two month-long Olympic and Para-Olympic Games. The U.S. government will largely pick up the security costs, which will probably be huge because this the first Olympic games on American soil since 9/11. If we end up spending the $4.8 billion dollars, the city would get some fraction in ticket revenues, sales taxes, and a slice of the broadcasting pie. This means there is enough potential revenue to cover $4.8 billion dollars.

But the Chicago 2016 has also provided a guarantee. [The committee] says that if we can’t recover the expenditures, we have guaranteed the [International Olympic Committee] that we will cover all losses. This means that the taxpayers or the city or the state are on the hook—it’s not like the U.S. government or [Mayor Richard Daley] has put up their own money. We’re liable.

The Mayor let the cat out of the bag in Switzerland [when he announced that the city will sign the IOC’s host cities agreement]. But this was not new news. If a city really wants to be viable it has to sign this contract that says, “You are 100 percent liable for any budget deficits.” So now that’s unlimited exposure for Chicago. If we spend $4.8 billion dollars, will we be able to cover it? Yeah, I think so. If we spend $5.8, will we still be able to? Yup. The problem is, what if we don’t spend $4.8, but $14.8, or $24.8 [billion]? If that happens, Chicago or IL taxpayers will be advised to get out of state and take up residence somewhere else.

Allen Sanderson discusses the city's 2016 Olympic bid in his office amidst paraphernalia from past Games

RC: Do you think it will likely cost the city more than $4.8 billion to host the Games?

AS: Athens, Greece had a huge problem because they estimated it would cost $4 or $5 billion [to host the summer Games] and depending on how one counts, they spent between $20 and $25[billion] . London will spend over $20 billion. Beijing spent $45 [billion]. The mayor, or Mr. Ryan will say that Athens wanted to build a transportation system, London wanted to redo the whole East End…But so do we. The way cities get in trouble is that you can’t just stop spending money, because there are special interest groups all over the place—every construction unit, developer, every printer and alderman in town.

If you build a rail-line or a housing structure, it will last for 50 years. The Olympics lasts for two months. [Chicago] is letting this short-term project drive long-term, capital investments. Could we use more affordable housing, and more public transportation? Yes. But we should ask what makes [sense] for the city of Chicago in kind of a Burnham Plan sense, in terms of parks, recreation, transit, and then say “Oh, by the way, we’re having this party in the summer of 2016.” But instead of fitting the “party” into our long-term plans, Chicago is saying “We’re going to have a party in the summer of 2016. Now how can we reconfigure our neighborhoods, our transportation, our infrastructure and everything else to accommodate the Olympics?” That’s just stupid.

RC: Don’t you think the prospect of a party, or some other event that brings international attention, is sometimes the stimulus a city or community needs to start redeveloping?

AS: I’ve heard people say: “We never clean our house unless we have people over for dinner.” Well, if that’s the only time you clean your house, you’re sort of a slob. So I don’t really buy that analogy with regard to the Games.

RC: Some supporters of the bid have argued that the Games will bring new jobs and commercial activity to Washington Park, one of the city’s lowest-income neighborhoods. What do you think about that?

AS: I don’t want to point fingers here, but the city has spent more money on the North Side than the South Side. So, irrespective of anything and totally without any consideration of the Olympics, do I think the city should spend more money on the South Side? Absolutely. It’s a shame that they haven’t. But, on what exactly? That’s a larger conversation; a Daniel Burnham conversation, not a 2016 conversation. A possible scenario—I might even say a likely scenario—is that one would bring the Olympics athletes down Lake Shore Drive, they go across the Midway and they go into the park to compete, and then eventually they go back to the Olympic Village and then back to O’Hare. In that narrow model, there’s no need to do anything north, south or west of the stadium itself. To go back to the dinner party example, if we didn’t have the excuse to clean up, we would never do it otherwise.

Some people really believe that here’s a golden opportunity to fix up a huge chunk of the city. But come 2017, I think it’s very possible that things will look a lot like they do in 2009.

RC: You’ve written several Op-ed pieces about Chicago’s Olympic bid, and you have been quoted in the Chicago Tribune and elsewhere saying that the Games would have a negative impact on Chicago. Why have you been so vocal?

AS: I don’t think this [bid] is much different in some ways than a car salesman or the AARP, or the National Rifle Association; the 2016 Olympic committee is just a special interest group. And somebody may regard them as having a wonderful mission, but other people are going to disagree. I think its important for there at least to be another side; in other words, somebody to say “Well yes, but…” I think it’s important for somebody to say [to Chicago 2016], “Can you explain this? What’s the other side?” I’m not pro-Olympics or anti-Olympics, I just want to be that person, and keep Mr. Ryan and the mayor as honest as I can.

RC: Do you think the city officials behind the bid need someone to “keep them honest?”

AS: Let me put it this way. If I were gong to buy a car, I would want some information first. In this case, I’m trying to provide the information or ask the questions that will force [Chicago 2016] to ante up. For the mayor to have a press conference in Laussane, Switzerland to announce that he’s going to sign the [host cities’ agreement] is, quite frankly, bizarre. He’s the mayor of Chicago, not Laussane, and he’s a citizen of the U.S., not Switzerland, so why didn’t he have a press conference here first?

RC: You wrote an article on May 12 for the Chicago Tribune asking Chicago's committee to write a bid book for Chicagoans What more information about the bid do you think the city needs to hear from Chicago 2016?

AS: I said if you’re going to send a bid book to Laussane, why don’t you write a bid book for Chicago? Tell us, when are you going to start closing off Washington Park, and how long will it be closed? A few of the reporters for the Tribune picked up on that, and they were able to find out that Washington Park will probably be closed for four or five years. I’m not a heavy user of Washington Park, but a lot of people certainly are seven months out of the year. Closed, for a two month long party, we understand that. But are you saying that for 4 or 5 years we have no access to that park?

RC: Have you looked at the various Olympic stadium proposals that may be built in Washington Park, which include plans for either a large, collapsible stadium or a smaller permanent one?

AS: Let me give you a real minority opinion here – not that I haven’t already. Ten years ago [the city was] having similar discussions about what to do with Soldier Field. [Soldier Field] is kind of a mess; it’s not really very good as a football stadium… because they have built the smallest stadium in the National Football League. It’s ugly, it’s horribly dysfunctional, and there’s very little else you can do in a stadium of that size. We should build a stadium that we can be proud of as a city [for the Olympics]. One that would probably have a retractable dome; the Bears could use it, but we could also have bigger events, from political conventions to the Super Bowl to Miley Cyrus or whatever.

RC: So you would advocate for the Olympics Committee to build a larger stadium in Washington Park?

AS: No. Take Soldier Field—we could level it. I wouldn’t put the Olympic Stadium in Washington Park, I would put it at Soldier Field. People might say, “Well isn’t that expensive?” But it’s not that much more expensive. I don’t want to build a facility that we’re going to use for two months. I want a stadium that can be used for years. Now, that’s a really unpopular, minority opinion around here, but I don’t think it’s stupid. If I had to spend a billion bucks [on a stadium], that’s where I’d spend it.

…Also, its not obvious to me what the $350 million [budget to build the Washington Park stadium] is going to cover. Is it just building the stadium? Is it tearing down the stadium, or is that extra? [Chicago 2016] hasn’t made that clear.

RC: Pat Ryan, chairman of Chicago 2016, has said that the economists who argue that the Olympics will be a bad investment for the city don’t really understand the financial approach the committee is taking. What would you say to him if you could sit down together and go over the numbers?

AS: I have nothing against Mr. Ryan. He’s been a good corporate and individual citizen to the city of Chicago. But I’m not unknown to Mr. Ryan, and I’m easy to find. I know he’s got a lot on his plate between now and Oct. 2, but nevertheless I would have welcomed at any point a conversation or several conversations with him [about the bid’s finances]. Sometimes in press conferences the press will say, “Allen Sanderson says this…” and Ryan says he’ll give me a call and explain it. That never happens. I have told [Chicago 2016] my phone number and my teaching schedule and that I’ll make any other times work.

When they wanted to do an economic impact study—which they did—I would have been glad to do it for free…but they never asked. There were hundreds of firms and individuals they could have used that I think would have given them a more accurate proposal, but [the assessment they used] is horribly inaccurate. Until Mr. Ryan can convince me otherwise, that’s the story I’m going to tell. And I can’t really call Mr. Ryan up and say, ”I’ve got something to tell you,” can I? It’s his party, not mine; I can't just invite myself over.

Allen Sanderson is a Senior Lecturer in the Department of Economics at the University of Chicago and a Senior Research Scientist at the National Opinion Research Center (NORC). The interview transcript has been edited to fit this space.

1 comment:

  1. A non-issue now, but Sanderson starts here with a silly error:

    ...this the first Olympic games on American soil since 9/11...

    Which is only true if Salt Lake City 2002 didn't count as the Olympics.

    But I'm pretty confident it did, and it took place four-ish months after 9/11, and the possibility of an attack in Salt Lake was a major news story during those games and in the months preceding them.

    I think it's a telling oversight by Sanderson, who was trotted about by local media as the arbiter of all issues concerning Chicago 2016. His expertise was rarely questioned, but errors like this one, which are easily caught even by a casual observer, were reason enough to be wary of anything else Sanderson said.