Olympic Games: Legacy or Money Pit?

Despite the feel-good effect, the games are always a budget buster.

The Sochi Olympics end on Sunday. Another Olympic torch extinguished. Another bank vault full of gold medals awarded. On to the next town—Rio de Janeiro in 2016.

Though it may be too early to sum up the Sochi effect, other than hotels-built-while-you-wait, "bars that look like dentists' offices" (in the words of a New York Times reporter), and tweeted photos of communal toilets, a postmortem of the 2012 Summer Games held in London and earlier venues can be done.

Olympi-philes may remember that when London squared off against Paris to vie for the right to host the 2012 Summer Games, the deal clincher was this: London would not merely celebrate sport. It would use the games to jump-start the renewal of East London, the historically wrong-side-of-the-tracks part of the city that by any measurement—income, unemployment, life expectancy, health—sits at the bottom of the social and economic barrel.

Touted as the "Legacy Olympics" (and at $14.8 billion, a bargain compared to Sochi's reported $51 billion cost), these games would be, promised then Foreign Secretary Jack Straw, "a force for regeneration," a chance to address East London's maladies.

"The bid," said Jerome Frost, head designer of the Olympic Delivery Authority (ODA), "was positioned on what we would leave behind. The Olympics should be based on what happens afterwards instead of during."

After the Olympics, said the planners, buildings would find new life as community sports centers, and the athletes' village would become private housing (half to be earmarked for low-income buyers). The economic uplift would raise all boats.

A cautionary note: It is not uncommon for the Olympics to be long on promise and short on delivery, not to mention unintended consequences, such as the forlorn remains of stadia left behind like decaying whale carcasses. The Montreal Games in 1976 nearly bankrupted the city and left it with a spectacularly ugly stadium—"an architectural excrescence," a Canadian journalist called it, that was prone to roof collapse from too much snow (yes, it does snow in Montreal). Meanwhile, paint is peeling on Beijing's $423 million Bird's Nest stadium, now a mediocre tourist attraction with an annual upkeep of $11 million.

He Said, They Said

So how did London do? Let's examine the report card, then look at other host cities post-Olympics.

A 70-page report published last July by the government and the mayor of London says the games turned out just dandy. "They said we couldn't run a bath—and we delivered the greatest Olympic and Paralympic Games the world has ever seen," Boris Johnson, London's mayor, gloated. The report went on to trumpet the "accelerated progress of urban regeneration in East London," an increase in sports participation, and the boost to the economy, among other benefits.

In November, the House of Lords presented its report, warning that the Olympic legacy is "in danger of faltering" because of squabbling over major projects and "little evidence" of a postgames boost in sports participation.

Take your pick.

"The government report was a bit of a puff," says John Lock, director of the University of East London's 2012 center, which coordinated the university's engagement and research associated with the games.

Lock gives pretty good marks to London anyway. For one thing, the Olympic buildings were successfully repurposed. The stadium will be used for next summer's Rugby World Championships, then rented to the West Ham soccer team. The aquatic center opens next summer for community use at affordable prices. The media center is being expanded to contain 1.2 million square feet (0.11 million square meters) of office space and already has BT Sport network and its TV studio—the largest in Britain—as a tenant.

Do Mention the War

The most remarkable thing about the games happened before the first sprinter left the starting block. In developing the East London site, the ODA took a square mile of land contaminated by the toxic rubbish of industry and leftover rubble (and the occasional ordnance) from the Blitz, cleaned it up, buried power lines, and created 200 acres (80 hectares) of new parkland. "It took five years to take the land from a wasteland and backyard sewer to an entirely usable space. Left to the private sector, it might have taken 50 years," Tony Travers, of the London School of Economics, said.

Housing, says Lock, is another matter. The regeneration bounty was supposed to spill over into London's housing shortage, particularly on the low-income end. "That's a bit slow off the mark, but then it's not that the Olympics could ever be a solution to London's housing situation," he points out.

And the promise of employment? Rushanara Ali, Member of Parliament for Bethnal Green and Bow, one of the boroughs that hosted the games, says that unemployment actually rose in host boroughs during the Olympics. Despite a commitment to ensure that 20,000 Olympics jobs went to locals, fewer than half actually did. That's the disappointing short-term view, she says. "Long term, the jury is out."

Folie de Grandeur

The Olympics were supposed "to start the regeneration of East London, but that was a mistake," Lock says. "The regeneration of East London started 30 years ago. For the legacy to work, the Olympic park really has to become a fully functioning bit of urban fabric."

For an assessment of the afterlife of other Olympic venues, we looked to Allison Stewart, a fellow at the University of Oxford's Saïd Business School. Stewart, co-author of a study on Olympic cost overruns released before the London Games, explains that by nature they're financially risky for any host city. Going over budget is the norm. Every one of the 17 Olympic cities studied ran into fiscal overtime.

"There's no incentive to get it right," Stewart says. "People say: We know it's going to cost more, and we accept it." The host city signs a contract with the IOC saying the city will have to cover cost overruns. "It's a blank check. Is the overrun a surprise?" she asks. "Not really."

Stewart's group didn't do a cost/benefit analysis, but others have. "The studies haven't found any conclusive evidence that there is a net benefit to hosting the games. It's too early to make a judgment about the London Games, though."

Here are her thoughts on some other former venues.

Sochi, 2014 This was the Winter Olympics, which are typically meant to be smaller, but Sochi was done on a large scale. Will this become the new normal? We don't really know how much Sochi cost. The figure of $51 billion was announced once, with no update. If the cost is $51 billion, how much legacy can you get for that? The idea was to make it a winter resort (it already is a summer resort), but you have to have a lot of visitors come skiing for that to make sense. We will probably never be able to conduct a quantitative cost benefit analysis on Sochi because they haven't communicated their costs.

Beijing, 2008 The objective seemed to be that China wanted to emerge on the world stage: "We are here!" was the message. That was achieved, but whether it was done with the best investment of resources is another question. In building the stadiums, they cleared quite a bit from the central core of the city, making it more sterile, with less soul. Cost overrun: 4 percent. But take that number with a grain of salt.

Athens, 2004 Generally seen as not successful. The stadiums were late in going up; many have been empty for years. There is some suggestion the games may have contributed to the current recession. Cost overrun: 60 percent.

Sydney, 2000 Usually regarded as a positive example. Though quite a few of the facilities are empty, Homebush Bay, the Olympic venue outside Sydney, was regenerated. And there was a significant investment in creating a bank of knowledge in how to manage the games. Cost overrun: 90 percent.

Atlanta, 1996 The bombings were a blot on the record [of these Olympics]. The games were quite commercial—lots of sponsorship. There didn't seem to be too much of an impact one way or another. But it certainly didn't do any damage. Cost overrun: around 147 percent.

Barcelona, 1992 Held up as the model of a successful Olympics, even though it was over budget. There was a strong urban development objective. They knew what they wanted and the Olympics was a way to get there. Thanks to improvements in infrastructure—upgrades to subways, the airport, roads—the city, once seen as declining, has taken the stage as a world-class city. Cost overrun: 417 percent.

Montreal, 1976 The city's mayor, Jean Drapeau, was famously quoted as saying the Olympics can no more have a cost overrun than a man can have a baby. Famous last words. The Montreal Olympics was 800 percent over budget. The stadium is currently not in use. The Olympic park has been turned into a tourist attraction, so there is activity. But was it worth it? It took 30 years to pay off the cost of the games and is considered an example of how not to do it.

The "L" Word

Money spent on the Olympics, says Stewart, is money not spent on other things a city may need. Take Delhi's Commonwealth Games in 2010, which ran 16 times over budget. Could the money have been spent more wisely?

The accounting, unfortunately, doesn't fall into neat, tidy rows. There is, for example, the problem of putting a numerical value on the "feel-good factor" of the Olympics—described by Rushanara Ali, the MP, as a "lift to the spirits of Britain."

Finally, there is that slippery word "legacy," so beloved of officials, so freely used in headlines and reports.

"You cannot create 'legacy' any more than you can decide to become 'cool,' " says Stephen Bayley, a London design critic. When the word is hitched as an adjective to the Olympics, he regards it as something to handle with protective gloves and tongs at far remove.

"Legacy," he writes by email, "is determined by history and public acclaim. Not by the greedy short-term ambitions of politicians and bureaucrats. The Olympic park is a scruffy desert, elegiacally returning to the state it was found in ... but with the addition of expensive, melancholy wrecks of sporting buildings."

Olympic legacy? The jury is out. Time will tell.

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