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Analysis: Calgary's potential Olympic bid

April 02, 2018
Analysis: Calgary's potential Olympic bid

A lot of Calgarians have fond memories from the 1988 Olympics … and a lot of new Calgarians seem to be excited about the idea of hosting the 2026 Olympic Games.

But if an Olympic bid proceeds, it needs to be based on a sound business case – not based on fond memories from the past or the thrill of hosting the enormous event.

Unfortunately, analysis released to date suggests the Olympics would be a costly event, one that doesn’t make much sense for taxpayers.

A June 2017 report by the City of Calgary looked into the costs and implications of hosting the 2026 Winter Olympics. The report calculated that the cost of the Games would be approximately $4.6 billion.

Revenues from ticket sales, merchandising, TV rights and other means are estimated to come in at $2.2 billion.

That leaves a gap of approximately $2.4 billion – one that would have to be paid for by taxpayers.

However, a little while after the City of Calgary’s report was issued, the city indicated the $4.6 billion price tag estimate is expected to rise. How much will it increase? The city hasn’t provided an update yet.

Further, it should be noted that the $4.6 billion figure doesn’t include the cost of a new ~$500 million arena – a necessity according to the City of Calgary’s report. (Note: the Calgary Flames would likely pay some of the cost for the arena)

We also need to keep in mind that the federal government and Alberta government are currently running deficits of $18 billion and $11 billion respectively. Thus, their respective share of the bill would have to be paid for with borrowed funds. What’s the cost of interest of those funds? It’s too early to tell but, you could likely add hundreds of millions of dollars to the total.

Finally, in terms of costs, we would also note that cost overruns are a sure bet if Calgary hosts the Olympics. The University of Oxford issued a report in 2016 that concluded the last 19 Olympic Games (for which they could obtain data) all went over budget. To see the report – click here

 

Benefits?

Proponents like to suggest there are enormous benefits from hosting the Olympic Games. Without a doubt, there would be some benefits.

The games would attract some visitors from outside Alberta to attend Olympic events. Many of those tourists would stay in hotel rooms, dine in Calgary restaurants and buy souvenirs from Calgary businesses. Each transaction would support our economy and contribute taxes to the government.

Some visitors may even visit Alberta months or even years after the games. Why? Because they watched the Games on TV then decided to visit Calgary, Banff or another one of Alberta’s many gems.

These are legitimate examples of economic “benefits” that come from hosting the games.

Conversely, proponents also like to tout the reality that some Calgarians would visit local pubs and watch Olympic events on TV. We’ve also heard about “benefits” from Calgary construction companies winning contracts to help build or repair a new venue – employing workers at the same time.

But what if the Olympics don’t come to Calgary? What would you do with the money you would have spent at a local pub watching speed skating? Would you throw it in the garbage? Not likely, you would probably use the money for some other purpose – perhaps you would go to a pub and watch a Stanley Cup playoff game or go to a movie instead. Thus, the money would still be spent in Calgary’s economy; it would just be used for a different purpose.

Further, if the Olympics didn’t roll into town, and the government didn’t have to tax you more to build a new sports venue, the government could leave those dollars in your pocket and you could support a business by buying its product or using its service.

The City of Calgary hired University of Calgary economics professor Trevor Tombe, and University of West Virginia Professor Brad Humphreys, to take a look at economic impact reports related to hosting the Olympics (reports authored by the Conference Board of Canada and Deloitte).

I’m paraphrasing, but Tombe and Humphreys concluded the “benefits” of hosting the Olympics are not nearly as significant as proponents claim. In fact, hosting the Olympics could actually hurt Canada’s economy.

Consider this snipit from a Globe and Mail story on their reports:

Hosting the 2026 Winter Olympic Games in Calgary could damage Canada's economy and might not even create any jobs, says an independent report commissioned by municipal bureaucrats that has not been made public.

The story also notes:

"To claim that GDP and employment will increase – at all, but especially by the magnitudes suggested in the third-party reports – is to go far beyond what the evidence suggests," Prof. Tombe's report said.

"A more reasonable estimate of the effect on employment of hosting the games is for a change in the type of jobs in which people work, not a change in the total number of jobs,"

One has to wonder how many businesses in Calgary would close as property taxes rise in order to pay for the city’s share of preparing for the Olympics. 

 

Conclusion:

Personally, I’m a big sports fan and like the concept of the Olympics – a global sporting competition where the best in the world rise to the top in different sporting events. The Olympic Games are often fun to watch on TV.

However, in my opinion, the International Olympic Committee (IOC) really needs to rethink its business model. Too many cities have been left mired in debt after hosting the Olympics – many cities also left asking questions after promised economic “benefits” never really materialized.

Calgary’s economy is still in a difficult spot – many people are still unemployed and many businesses are struggling. Now is certainly not the time for Calgary, and other levels of government, to cross their fingers and take a chance on hosting the Olympics.

Until the IOC changes its Olympic model, Calgary should take a pass.

By
on April 02, 2018
The conclusion of this article says it all.

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