The Olympic village fiasco unfolding in Vancouver is worth monitoring for so many reasons.
Even from this distance, it’s an eye-catching train wreck, of course. Behind schedule and over budget at more than $1 billion – the cost has doubled in the past three years – the 1,100 condo units that will house 2,800 athletes during the 2010 Olympics is one of those private-public projects (P3) that seem de rigueur in certain circles.
The private part of the deal going south, the City of Vancouver has been scrambling to find additional funding to keep the project going. What was vaunted as a formula that would cost taxpayers nothing is now looking like leaving the public on the hook for hundreds of millions of dollars.
Having been born and raised in Montreal – site of the boondoggle that was the 1976 Summer Games – I’ve seen how this plays out. It took Montrealers three decades to pay off the debt, despite then-mayor Jean Drapeau’s assurances, “The Montreal Olympics can no more have a deficit, than a man can have a baby.”
The Vancouver situation has many parallels, particularly when it comes to cost overruns growing steadily as the drop-dead completion date gets closer (the city is supposed to turn the village over to the Vancouver Organizing Committee by November).
The original deal saw the city provide prime land to the developer at a cost of $193 million. The company, Millennium Development Corp., put a $29-million deposit on the site, with the rest to be paid off in 2010. Financing was to be provided by New York-based hedge fund Fortress Investment Group.
As the overruns grew, Fortress began withholding cash – more than $450 million of the $750 million total – leaving the city scrambling to make up the difference. It now wants the province to grant it special powers to do just that.
After maintaining for years taxpayers would take no hit, council finally admitted this week the city is on the hook for the entire $1 billion cost.
That reality is especially troubling as the economic downturn sees Vancouver’s vastly overinflated real estate prices dropping. Millennium’s goal had been to sell many of the units as high-priced luxury condos. Of the 1,100 units, 250 have been allocated for social housing and 120 as rental apartments. The rest are to be sold as condos once the Games are over. About a third of the 730 condos have been presold, and are said to be priced at between $600 and $1,200 per square foot.
My quick math, taking $1.075 billion and dividing by 1,100, yields a per-unit construction cost of $977,000 – an awfully steep starting point, even in overpriced Vancouver.
Of the Olympic Village costs so far – remember, we’re just talking about the housing, not the other massive expenditures associated with hosting the Games – the federal government has chipped in $30 million towards the social housing portion. It’s not hard to imagine the city and province will be looking to the rest of the country to help as the project becomes more like a crisis, despite less-than-encouraging words to date from Prime Minister Stephen Harper.
I’m sure Vancouverites are second-guessing the decision to host the Olympics. But, really, they should have seen this coming. Most of the Games have run in the red, despite assurances to the contrary from eager organizers. The cynic in me would warn that those arguing loudest in favour of such projects are the ones who stand to gain the most, leaving others to worry about the shortfalls when they occur.
The deadlines and the Olympic obligations put host cities over a barrel, with developers and contractors happily taking advantage of the exposed backside.
We’ve all seen enough examples of Olympic costs to know the numbers trotted out in advance are no more than fairytales. Promised tourism dollars, even if they materialize, are a one-time deal, while the debt payments go on for years.
Even those Games purported to have made money employ creative accounting, forgetting to add in much of the infrastructure and operational costs, such as security, for example, that are covered by governments as a matter of course.
No fan of the Olympics, I’d sooner see them discontinued rather than waste more money on them. Far too commercialized, politicized and corrupt, the Games should be scrapped or, at the very least, overhauled. Stripped down to only those sports requiring no judging and without international competitions of their own, the Games should be held in permanent venues, one each for winter and summer. That would end the wasteful spending replicating facilities already in existence elsewhere, eliminate the corruption so entwined in the International Olympic Committee, and save the taxpayers of other cities and countries from lining the pockets of the small group of people who benefit.