BC Business
You don’t have to look far in the Lower Mainland these days for evidence that the 2010 Olympics are pumping hundreds of millions of dollars into B.C.’s economy. Take, for instance, the $315-million athletes village currently under construction along Southeast False Creek.
Or drive up Cambie Street, hang a left at 29th Avenue and check out the $82.2-million Hillcrest curling centre, the catalyst for an Olympics-driven makeover of Nat Bailey Stadium Park. Out at UBC, there’s a $48-million winter sports centre, where most of the 2010 Olympic ice hockey games will take place, while in Richmond there’s a $180-million speed skating oval. And up in the mountains, an estimated $270 million has been spent on outdoor venues for alpine and Nordic events at Whistler and Cypress mountains.
Then there’s the spending on major infrastructure projects that have been fast-tracked or expanded to be ready in time for the Olympics, notably the $775-million Sea-to-Sky Highway upgrade, the $885-million Vancouver Trade and Exhibition Centre expansion and the new $1.9-billion Canada Line transit system. With so many tax dollars flying around, it’s worth pausing to consider the costs and benefits of the Olympic and Paralympic Games – not just in terms of dollars and cents, but long-term community legacies as well.
Admittedly, it’s a task fraught with uncertainties. The degree to which the province’s megaprojects are driven by the 2010 Olympics remains a matter of opinion, with the B.C. NDP opposition levelling accusations of overspending and the Liberal government claiming the projects are unrelated to the Games.
As for the return on investment, there’s no guarantee the promises of increased tourism, investment and employment will all come true. And then there’s the issue of measuring benefits that don’t show up on the balance sheet: the economic value of improving the highway to Whistler, the social impact of affordable housing projects woven into the Games and the quality-of-life benefits from all the leftover sports facilities. Nor is there an easy way to put a dollar figure on the marketing cachet that 17 days in the international spotlight will bring.
As with most investments, the payoff will take time to materialize. For the moment, the larger question is, “How much are we spending?” And with 18 months left until the Games begin, even that’s not crystal clear.
Probably the most reasonable and objective look at Olympic spending is contained in a September 2006 report from former auditor general Arn Van Iersel, who pegged the federal, provincial and municipal tax contributions to the 2010 Games at $2.5 billion. Van Iersel attributed $1.5 billion of that total to the Province of B.C., an estimate that includes the province’s venue construction budget and the entire cost of the Sea-to-Sky Highway, which, the report notes, was included in the original 2010 Olympic bid book. The report also includes $41 million in funding for the province’s Olympic Secretariat, $20 million for building roads to the Nordic Centre in Callahan Valley and $8 million for the Canada Line’s designated stop at Vancouver’s athletes village.
B.C. Minister of Economic Development Colin Hansen insists that the province’s direct Olympic costs are no more than $600 million. Infrastructure projects such as the Sea-to-Sky Highway do not meet the government’s definition of Olympics spending, he says. Harry Bains, the NDP’s Olympics critic, argues the auditor general’s report didn’t go far enough, citing the omission of the province’s $130-million 2010 Legacies Now Fund, created to “develop sustainable legacies” for sports and community recreation. Meanwhile, the anti-Olympic citizens group 2010 Watch predicts the Games will cost taxpayers a whopping $6 billion, an estimate that includes all of the above, as well as an extra $1 billion they claim will be needed for security. Hansen says the government’s critics are distorting the truth. “They’ve made up this grand definition of things that are actually Olympic-related,” Hansen told BCBusiness. “They put a lot more things into the Olympic basket than I would.”
With estimates ranging from $600 million to $6 billion, there’s little chance of a consensus on the final tally. But whatever the final costs, those estimates have been steadily escalating. When the Olympic bid book was released back in 2002, the cost of venue construction was pegged at $470 million, including a $110-million legacy fund, split evenly between Ottawa and Victoria. In all, the two senior levels of government were expected to spend $620 million on the Olympics, although organizers pointed out the numbers hadn’t been adjusted for inflation. By 2006 the Vancouver Olympics Organizing Committee (VANOC) was facing a $195-million cost overrun for venue construction alone, due in large part to an unexpected 20 per cent spike in building costs. The federal and provincial governments rode to the rescue with an extra $110 million for the build program, while VANOC trimmed $85 million from its budget to balance the books.
Municipalities have also felt the pinch, as their contributions to Games venues jump proportionally to rising costs. But while some costs have stayed in step with inflation, others have risen to dizzying new heights. The price tag for Whistler’s Nordic venues increased a mere 12 per cent, from $103 million to $119 million, and the cost for the upgraded alpine facilities rose about 22 per cent, from $23 million to just under $28 million. Costs for the Hillcrest curling facility and the UBC hockey facilities have gone up by about a third – from $60 million to around $80 million in Hillcrest’s case, and from $36 million to about $48 million in the case of the hockey facilities. The sliding centre – home to bobsled, luge and skeleton events – nearly doubled in price, from $55 million to $105 million, and the Richmond skating oval – once envisioned as a $68-million project at SFU – is now over 2½ times more expensive at $178 million.[pagebreak]
As the bills mount, governments at all levels continue to offer millions for the Olympic cause. In December the City of Vancouver, already faced with hefty increases for its share of the venue budget, diverted $20 million from general revenues to cover the cost of entertainment, communications, hosting dignitaries and sprucing up the city for the Games. Not to be outdone, the federal government promised an additional $45 million in February – $25 million for the Olympic torch relay and $20 million for the opening and closing ceremonies.
But the largest extra expense looming on the Olympic horizon has to be the as-yet-undetermined cost of providing security. Last summer RCMP brass admitted they’ll need far more than the original $175-million budget – split 50-50 between Ottawa and Victoria – to safeguard the Games against terrorism. Security for the 2002 Salt Lake City Games cost about $354 million, while in Turin in 2006 the bill came to about $290 million. Critics such as Senator Colin Kenny have suggested 2010 security costs could top half a billion dollars.
Hansen acknowledges there has been “lots of speculation” about increasing the Olympic security budget but argues that B.C. taxpayers shouldn’t have to shoulder the extra burden. Big-ticket items such as airport, border and port security are all areas of federal jurisdiction that should be funded by Ottawa, he says. “To date nobody has shown me any evidence that our $87.5-million investment will not be adequate,” Hansen says. One thing seems clear, though: unless Canadian authorities have found a way to provide seamless security more cheaply than other Winter Games in the post-9-11 era, taxpayers will end up paying far more than they were originally asked for – regardless of whether it’s Ottawa or Victoria sending in the invoice.
Costs be damned, some might say – the benefits are already palpable. Just look at the province’s booming economy: anyone who wants a job has one and anyone who owns a house (in Vancouver, anyway) is a millionaire. Many economists, however, see Games-related spending as a small part of a much larger picture. “If you look at what’s happened in the provincial economy, the boom that’s taken place, the Olympics are a small part of it,” says Ken Peacock, director of economic research with the Business Council of B.C. As for the total economic impact, Peacock estimates the 17-day event will boost the province’s GDP growth by one percentage point in 2010. While there aren’t many one-off events that can generate this kind of boost, it’s hardly overwhelming for an economy that generated $158 billion in goods and services in 2007.
And while the Games are expected to boost tourism, history suggests that most Olympic cities enjoy a spike in tourism before and during the big event, with growth rates returning to normal in the ensuing years. “There was definitely a big surge in U.S. visitors during the [Calgary] Olympics,” says Tourism Alberta spokesman Don Boynton. “But I would say on average we’ve probably grown about four per cent a year since 1988.” A more recent example, 2002’s Salt Lake City Games, had the disadvantage of taking place six months after the 9-11 terrorist attacks, which lowered expectations of tourism operators. A VANOC report on Olympic legacies states that 17.3 million people visited Utah in 2002; that number dropped slightly in 2003 but climbed to 18.2 million in 2005.
One body that has consistently exceeded expectations, at least financially, is VANOC. The most recent quarterly update shows the organizing committee in a break-even situation, with $1.63 billion in planned expenditures and roughly the same amount of projected income. Although that’s almost double the estimate in the original bid book, VANOC’s budget has benefited from increased government funding and sponsorship commitments that have topped $700 million, far more than originally anticipated. While the build program has cost more than planned, it’s been quick, efficient and largely devoid of controversy. All the Whistler competition venues will apparently be ready for the 2009 ski season, the Vancouver venues should be complete by the end of this year and the ambitious Richmond skating oval is reportedly on time and on budget.
If the Games make money, VANOC’s share of the profits will be used to offset the cost of operating leftover facilities and high-performance sports programs in the post-Olympic era. There’s no guarantee VANOC will end up in the black, however. The 1988 Calgary Winter Games generated a $100-million profit, about the same as the 2002 Salt Lake City Olympics, but organizers of the 2006 Games in Turin, Italy, declared a $38-million loss on expenditures of $1.87 billion. Cathy Priestner, VANOC’s executive vice-president of sport and venue management, says the organization will have a better grasp of its financial situation by this time next year. “We’re moving into the implementation phase, and we’ve still got a lot of cash and a lot of spending to do,” Priestner says. “We’re not going to go over budget. We’ll operate our Games within the budget that we have.” That’s a safe promise to make, since B.C. Premier Gordon Campbell has promised that any losses incurred by VANOC will be covered by provincial tax dollars.
Canadian Taxpayers Federation spokesperson Maureen Bader says the arrangement does nothing to promote fiscal restraint. “It’s impossible to hope that VANOC would have any spending discipline when governments are so willing to provide more funding,” she says. If the 2010 Games are a fiscal success, that legacy will be shared with the taxpayers who footed most of the bill. And if they’re not, we’ll be first in line to pay off any outstanding debts.[pagebreak]
Whatever the cost to taxpayers, there’s no denying that the municipalities involved in the Games are big beneficiaries. The 2010 Olympics will clearly usher in a new era of success for Whistler. It’s already a ski destination of international repute, and the 2010 Olympics will put the village on par with household names such as Innsbruck, Lake Placid, Nagano, Sarajevo and Lillehammer. Michele Comeau-Thompson, communications manager for the Resort Municipality of Whistler, says the Olympic cachet is already starting to pay dividends. The recently completed Olympic downhill and Nordic skiing facilities drew several international events in their first winter of operation, and efforts are underway aimed at making Whistler a regular stop on the World Cup circuit, she says. The Whistler Sliding Centre, adds Comeau-Thompson, is also expected to attract high-profile events for decades to come.
There’s also a social sustainability component in Whistler, with post-Games renovations slated to turn the $131-million athletes village into 300 units of affordable housing. The units will be sold and rented by the municipality, which has pledged to sell 90 per cent of them for about half their market value. While the Games have helped leverage some federal and provincial affordable-housing funds, close to $90 million of the cost will be covered by Whistler taxpayers, giving local government more claim to the legacy than the 2010 Olympics.
In Richmond, where city officials herald the convergence of the new Canada Line and the skating oval project as the catalyst for a new downtown core, Olympics optimism abounds. “It’s really about reshaping our city centre and our community as a whole,” says City of Richmond spokesperson Ted Townsend. “Our city is going to grow by 35,000 people over the next 10 years.” After scrapping plans for a much cheaper facility at SFU, VANOC settled on Richmond’s proposal for a $155-million skating oval on a piece of waterfront land near Vancouver International Airport. The 34,000-square-foot facility, the largest of any 2010 venue, will be repurposed after the Games for myriad sporting and community uses, with two Olympic-sized ice rinks and an indoor basketball venue. The planning department’s vision for the surrounding areas includes transit-friendly village hubs surrounded by high-density housing, an arts precinct and a commercial district linked by waterfront parks.
The city has spared no expense on the skating oval, opting for frills such as a “wood-wave” ceiling made of homegrown beetle-kill lumber and a $5.3-million piece of public art. The total price tag jumped from $155 million to $178 million when a $23-million parkade was added to increase the program space within the building and to help prevent it from settling into the river delta’s sandy soil. In December Richmond council agreed to allocate up to $16 million to help fund post-game renovations, bringing the potential cost to $194 million. While the oval’s growing price tag has been roundly criticized by the Canadian Taxpayer’s Federation, opposition elsewhere in the community has been muted by pent-up demand for improved recreation facilities – the city has reports on the issue dating back a quarter century – and by Richmond Mayor Malcolm Brodie’s pledge to build the oval without raising property taxes.
Starting with a $63-million contribution from VANOC, Richmond committed $50 million in future revenues from River Rock Casino and added $43 million to the budget from the sale of land next to the site; an additional $12 million in funding will come from development cost charges. With no extended borrowing required, there was no need for a counter-petition or referendum to approve the project. “For as much as the building costs, the debate has been pretty minimal,” Townsend says. Richmond’s financing plan might have been an easy sell, but the city also mortgaged part of its future by committing valuable land assets and long-term casino revenues to the skating oval. Still, if the vision laid out by the planning department comes to pass, the project could mark a turning point in Richmond’s evolution as a city.
While less concentrated than Richmond’s Olympic nexus, the array of Games-related facilities in Vancouver also holds significant promise for lasting legacies. In terms of venues, the Hillcrest curling centre is the big-ticket item. Costing close to $80 million, the project is part of a City-funded makeover of Nat Bailey Stadium Park that will feature a new community centre, pool and library following extensive post-Games renovations. Two practice and training rinks, Killarney and Trout Lake, will cost a combined $26.5 million. But it’s the long-term vision for Vancouver’s athletes village that city officials tout as the Games’ most enduring legacy, both in terms of social housing and environmental sustainability.
The $315-million complex will consist of 15 to 20 buildings, constructed to the highest Leadership in Energy and Environmental Design (LEED) standards. The 1,100 living units will house 2,800 athletes during the Games and be converted to a mix of market and subsidized social housing afterwards. Developer Millennium Development Corp. will take ownership of 850 units, and the remaining 250 will be turned over to the City of Vancouver for use as affordable housing. However, city politicians have been slow to define exactly how “affordable” the units will be. “They started out calling it ‘social housing,’ then it became ‘affordable housing,’ then it was ‘non-market housing,’ ” says Chris Shaw, spokesperson for 2010 Watch. “They’re playing games with the terminology.”
Vancouver deputy city manager Jody Andrews says a report on affordability options will go to city council this fall, once all of the construction contracts for the units have been finalized. But with no senior government funding to support the initiative, Vancouver’s ability to subsidize the project may be limited, Andrews says. “The definition of affordability will be whatever we’re able to determine in that context,” he says. For Vancouver more than any other municipality, the Olympics represent an opportunity to make a rare bit of headway in the fight against poverty, addiction and despair. But with so much of Vancouver’s social housing initiative still to be defined, that opportunity is in danger of slipping away.[pagebreak]
If there’s one area where the Olympic movement has a proven track record of enduring legacies, it’s fostering the development of future Olympians. In that regard, the 1988 Calgary Winter Olympics must be considered an unqualified success.
After the ’88 Games, the bulk of that city’s Olympic facilities were turned over to the Calgary Olympic Development Association (CODA) for the nominal fee of $1. Starting with a $70-million nest egg – most of the profit generated by the Games – CODA’s facilities quickly developed into the epicentre of high-performance training for Canadian athletes. CODA spokesperson Chris Dornan says that Canada Olympic Park and other facilities have played a direct role in the success of Olympic medallists such as Jeremy Wotherspoon, Pierre Lueders, Catriona Le May Doan and Elvis Stojko. “We went from five winter Olympic medals in 1988 to 24 in 2006,” Dornan says. “Make no mistake; the road to 2010 goes through Alberta, right here in Calgary.” Between November 2007 and March 2008, Canada Olympic Park alone drew more than 275,000 visitors and hosted 36 sporting competitions, including five World Cup events. CODA’s self-generated income, coupled with interest from its Olympic seed money, has all but eliminated the organization’s reliance on government funding.
Whether Vancouver-Whistler 2010 will achieve a Calgary-like level of success remains to be seen. But organizers have laid the building blocks for a similar legacy. In 2003 the federal and provincial governments anted up $110 million to create the 2010 Games Operating Trust; the fund now sits at more than $130 million with interest and will provide ongoing support for the skating oval, the sliding centre and the Nordic centre after the Games. The 2010 “legacy facilities” will also receive a share of any profits from the Games. VANOC’s Priestner says that whether the legacy programs can become self-funding depends on how much interest the fund produces and how much money the facilities are able to generate from public use and hosting events.
“When you have a high-performance sports program, that part would not be self-supporting,” she says. “But they’ll have some endowments and they’ll be generating revenue. Each of the venues has a business plan.”
All businesses need customers, however, and the measure of success will be the number of people who actually use the impressive array of sports, recreational and fitness training facilities that the 2010 Olympics will leave behind.
Were it leaner times, all the tax dollars flowing into the Olympic kitty might be having a more profound fiscal impact on B.C.’s bottom line. But with the province’s current economic boom, those effects seem to have been dwarfed. In a 2003 study, Vancouver human resources consultant Roslyn Kunin predicted Games-related projects would create 220,000 jobs – or 76,813 person-years of employment – through 2010, adding about 8.4 per cent to “baseline” job growth. “When I wrote that report, the Olympics and the related projects were the only game in town,” says Kunin. “Now you have to look to find it among all the other activities.”
As for the promise of Games-related sports and recreation legacies, much depends on VANOC’s ability to turn a profit. A windfall in the neighbourhood of Calgary’s $100 million would go a long way to ensuring that leftover Olympic facilities don’t turn into cash-guzzling white elephants. And the final verdict on long-term social benefits – affordable housing; green, sustainable communities; the transformation of downtown Richmond – is years away.
But one thing is for sure: B.C. is gearing up for one of the biggest bashes the province has ever thrown, and politicians are in no mood to skimp on the party favours. When it’s all over, we’ll either wake up with a bit of an economic hangover or with a clear head and a few extra bucks in our pockets. In the meantime, the Olympics are coming so we might as well savour the moment. After all, we’re paying for it.