Olympics to rely more heavily on donors to fund construction
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By John Pletz
Feb. 13, 2009
(Crain’s) — If you’re trying to envision how Chicago plans to pull off the Olympics, think of Millennium Park.
Facing a tough economy and pressure to make good on Mayor Richard M. Daley’s pledge that taxpayers won’t foot the bill to host the Olympics, the city’s bid team will lean even more heavily on private donors than previously expected.
If Chicago is chosen to host the games, it will try to raise $246 million from private and corporate donors to pay for some of the costs of constructing facilities such as the Olympic Stadium in Washington Park. That’s in addition to the nearly $50 million the city has already raised from private donors to pay the cost of bidding for the games.
Patrick G. Ryan, CEO of the Chicago 2016 bid committee, said money would be raised from donors who would get naming rights for the venues after the games. It’s similar to how the city raised $200 million to complete Millennium Park when the project went over budget.
Mr. Ryan on Friday unveiled the city's bid book that was submitted to the International Olympic Committee. Bids from rival cities of Tokyo, Madrid and Rio de Janeiro were also revealed on Friday.
He detailed the city’s $4.8-billion proposal to host the games. The city estimates it would cost $3.3 billion to operate the games and another $1.5 billion to construct facilities. The two biggest construction projects are a $1-billion Olympic Village to host 16,000 athletes on the former site of Michael Reese Hospital, and a $400-million stadium in Washington Park. Private developers are being counted on for the village. Donors will help pay for the stadium and other venues.
“The question for taxpayers is can we raise the money privately to build the venues that have to be built?” Mr. Ryan said. “Their risks will be supported by the generosity of the private sector.”
He was careful, however, not to take the Millennium Park analogy too far. The project was $350 million over budget and four years behind schedule, leaving questions about how Mr. Ryan could deliver the Olympics on time and on budget in a city that has a history of failing on both measures.
He insisted that Millennium Park’s problems were caused by changes in the size and scope of the project, “which kept getting bigger.”
“The stadium has been vetted thoroughly,” he said. “We are very confident we will not change the size of it or the scope of it.”
The bid committee expects the games to bring in $3.8 billion in revenue. Mr. Ryan is counting on making a $450-million profit.
Should that profit fail to materialize, he’s banking on a $500-million insurance policy to cover any shortfall before tapping a $500-million guarantee put up by the city of Chicago. He said an insurer, which he declined to identify, will provide the policy should Chicago be chosen to host the games.
“No U.S. games has ever lost money,” Mr. Ryan said.
Nearly half the revenue, or $1.8 billion, will come from corporate sponsorships, which would be the most ever raised for an Olympics. Mr. Ryan insists Chicago will be able to raise the money, banking on the strength of the U.S. media market, which is the most lucrative in the world.
“The numbers are high, but they deserve to be because of the uniqueness of the market,” he said. “We believe Chicago and the Midwest markets are relatively untapped in terms of Olympics sponsorship.”
Rob Prazmark, president of New York-based 21 Marketing and a veteran of selling Olympic sponsorships, said Mr. Ryan’s optimism isn’t unfounded.
“On paper, the potential is there, even in this economy,” Mr. Prazmark told Crain’s in a recent interview.
He estimates there are 200 to 300 big companies in the United States and abroad that are potential sponsors.
“The Midwest market has over 100 large companies to draw from. Atlanta was much smaller,” Mr. Prazmark said. “It’s a long-term commitment between the companies and their communities. People will want to be involved.”
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Chicago rivals release their Olympic bids
Feb. 13, 2009
(AP) — The four cities vying for the 2016 Olympics released their detailed bid plans Friday, touting compact venue layouts, lasting sports legacies and financial security at a time of global economic turmoil.
More than ever, financial issues will be closely scrutinized, with each candidate trying to portray its multibillion-dollar projects as best placed to cope with the recession.
The documents run up to 600 pages and provide details on 15 criteria requested by the IOC, including plans for competition venues, infrastructure, environmental protection, accommodations, transportation, security and financing.
The IOC evaluation commission will study the bid files and visit the four cities — Chicago from April 4-7, Tokyo from April 16-19, Rio from April 29-May 2 and Madrid from May 5-8.
The panel will issue a report assessing the bids a month before the IOC votes on the host city in Copenhagen on Oct. 2.
Tokyo, which hosted the 1964 Olympics, claims its bid is "recession proof."
"In these troubled economic times, the Olympic movement can be 100 percent assured that the Tokyo 2016 Games will be exactly as described in our bid files," Tokyo 2016 chairman Ichiro Kono said. "Most of our venues are in place, most of the games infrastructure is in place and the $4.4 billion maximum budget to complete these tasks is in the bank."
Tokyo's biggest venue expenditure is $942 million for the 100,000-seat Olympic Stadium, which would be downsized to 80,000-capacity after the games for soccer, rugby and track and field. The stadium would be built on Tokyo's waterfront using solar panels set on the roof to produce renewable energy.
Tokyo says its use of venues from the 1964 Olympics and new facilities would offer a unique "100-year legacy." Japanese officials said the bid offers the most compact games with 95 percent of venues located less than 5 miles from the main stadium and 70 percent of venues within 10 minutes of the Olympic Village.
Madrid, meanwhile, says it has 77 percent of its venues completed or under construction, offering the most financially viable bid at a time of economic crisis.
"The crisis rejects virtual projects," said Jaime Lissavetzky, the Spanish sports minister. "Ours is real."
Madrid's proposed budget is just under $5.6 billion, with the government having guaranteed to cover any surplus costs.
This is Madrid's second consecutive Olympic bid. It finished third in the race for the 2012 Summer Games, which went to London.
Rio's bid projects the highest spending of the four cities — $14.4 billion — for non-Olympic organizing committee costs, such as venue construction and security.
The bid centers on the facilities Rio used for the 2007 Pan American Games, and envisions building upon the new and renovated facilities Brazil will use for the 2014 soccer World Cup. Rio is trying to bring the Olympics to South America for the first time.
"Rio is ready and the time has come," Brazilian Olympic Committee president Carlos Nuzman said. "This city, with its natural beauty, is an unrivaled stage to hold the Olympics."
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