Does Los Angeles Really Need a Money Pit Like the Olympics?
Business + Economy

Does Los Angeles Really Need a Money Pit Like the Olympics?

Jack Gruber

And then there were two.

Since Budapest dropped out of the running this week, there are now just a pair of contenders for the 2024 Olympics -- Paris and Los Angeles.

And as Forbes points out, both bids could be problematic because of politics: Donald Trump’s immigration policies rankle the International Olympic Committee, and if far-right, anti-immigrant candidate Marine Le Pen wins the French presidential election in May, the IOC will be faced with a conundrum when it comes time to pick a winner next September.

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But does Los Angeles need a potential money pit like the Olympics? The average cost of Summer Olympics from 1960 to 2016 was $5.2 billion, according to an Oxford University study last summer – and that doesn’t include capital costs for infrastructure, which are often higher than “sports-related costs.” The most expensive was the London Olympics of 2012, which vaulted to $15 billion. (The Sochi Winter Olympics of 2014 was even more costly at a record $21.9 billion.)

The Tinseltown elite is apparently willing to gamble that the Summer Olympics will be a success. Disney, Fox, NBC Universal and Warner Bros. have all gotten behind the bid, according to The Hollywood Reporter. “Our diverse city is the perfect setting for a global audience to experience the Summer Games,” the website quoted Universal chief Ron Meyer as saying in a statement.

However, other global and diverse cities have gambled on the games and lost.

“For a city and nation to decide to stage the Olympic Games is to decide to take on one of the most costly and financially most risky type of mega-project that exists, something that many cities and nations have learned to their peril,” the study by scholars at Oxford’s Saïd Business School said.

Exhibit A is the 2004 Games in Athens. The Saïd study found that “cost overrun and associated debt … weakened the Greek economy and contributed to the country's deep financial and economic crises, beginning in 2007 and still playing out almost a decade later.”

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The most recent Summer Games in Rio cost less than average at $4.6 billion, but have a projected cost overrun of 51 percent – about $1.6 billion.

Most concerning for taxpayers is a finding by the Oxford study that it’s hard to ferret out honest information about the cost of the games. Deliberately misleading the public “treads a fine line between spin and outright lying,” the analysis by Bent Flyvbjerg, Allison Stewart and Alexander Budzier said. “We can therefore not count on organizers and governments to provide us with reliable information about the real costs and cost overruns of the Olympic Games.”