Troubles in Sochi
Hosting the Olympics proves to be more detrimental than beneficial
Article: Allan Hall – Contributor
With an estimated cost of $51 billion ($USD), the 2014 Sochi Winter Olympics will have the dubious honour of being the most expensive Olympic Games ever held.
The Sochi Olympics are projected to cost more than all of the other Winter Olympic Games ever held, combined. The cost of the Sochi Olympics is greater than the nominal GDP of more than 110 nations. With such a large price tag, it raises the question about whether it is worth hosting the games.
One of the most financially disturbing trends about the Olympics is how the actual cost of the games dwarf their initial budgeted amount. When presented initially to the International Olympic Committee, Russia estimated that the Winter Games would cost $12 billion. The current estimated cost is more than four times the initial budgeted amount.
This can also be seen in other games as well. The Summer Olympics in London and Athens had initial budgets of $4 billion and $6 billion respectively, and their total costs were $14 billion and $15 billion.
The cost of hosting the games can take a sizable period of time to pay off. It took Montreal 30 years to pay off the billion-dollar debt that they incurred for the 1976 Summer Olympics. Ironically, the mayor of Montreal at the time, Jean Drapeau, boasted that the games would be self-financing and that the “Olympics can no more have a deficit, than a man can have a baby.”
According to an NBC interview with Robert Barney, the founding director of the International Centre for Olympic Studies at the University of Western Ontario, there has never been an Olympic Games that did not incur a true financial loss. Barney asserts that the reported cost of the Olympic Games does not properly factor in the funds used by governments to subsidize the cost of the games.
More often than not, the Olympics are awarded to host cities that do not have the existing infrastructure, venues, and accommodations to properly support the games. The host cities are typically given seven years to make these improvements after they are awarded the games by the International Olympic Committee.
The largest costs associated with hosting the Olympics are from these infrastructure improvements and building projects to accommodate the influx of visitors to the city and to support the games. These building projects are massive in their scope, and frequently come in over budget.
One of the biggest concerns about the cost of the Olympics is the financial aftermath of supporting the newly built sporting venues and accommodations created for the 17-day event. After the Olympics, the host cities end up with large venues that carry a huge operating cost and little practical use. Unless the city develops an efficient plan for the venues after the Olympics, it is very common to see these “white elephants” become abandoned desolate buildings.
In an interview with the Associated Press, Sergei Stepashin, the Chairman for the Russian government’s auditing agency, estimates that the maintenance of venues from the Sochi Olympics will cost Russia at least 60 billion rubles ($2 billion) a year.
While the Sochi Olympics carry a huge financial risk, Russia is hoping that this massive investment will turn Sochi into a destination for winter sports after the games have ended. Like other nations that have hosted the Olympic Games, they are hoping that this will result in an increase in tourism for the region, and to gain positive exposure from the rest of the world.
Russia is also expecting that the infrastructure improvements to Sochi can provide long-term benefits to the residents of the city. By improving the roads, highways, public transportation, and focusing on the beautification of the city, it can potentially enhance the quality of life for Sochi residents.
As a result of hosting the Olympics, it has provided a huge financial stimulus to the region and numerous employment opportunities for Russian citizens. Bankole Olayele, an Economics professor at the University of Regina does see some benefits in hosting the games.
“As a result of employment from the Olympics, some folks that may have not have been employed … now have skills that enable them to [better transition themselves] in the labour market,” he said.
It will take a few years after the Sochi Olympics to determine whether the event was a story of great success for the country or a cautionary tale of fiscal incompetence.Image: huffingtonpost