Contrary to his earlier promises, Mayor Richard Daley will have to pledge local funds, at least as collateral, if he wants Chicago to beat Los Angeles to become the U.S. bidder for the 2016 Olympics.
This imperative became clear Wednesday when the U.S. Olympic Committee evaluation team briefed reporters after a two-day visit to size up the city and its bid proposal.
“I’m sure you know there will be either legislation going through or city council meetings at which very important guarantees or commitments, perhaps, might be voted upon,” USOC Vice President Bob Ctvrtlik said.
“We definitely want the government to have some skin in the game,” he said. “We have been assured by the mayor that this is the case with the City of Chicago.”
The USOC team was asked whether it believed a city that saw huge cost overruns in the creation of Millennium Park could be expected to deliver an Olympic stadium and village on budget. “That is certainly one of the items we are going to have an ongoing dialog on,” said USOC Chief Executive Jim Scherr.
The city has until March 31 to spell out its guarantees to the USOC, which will decide April 14 whether Chicago or Los Angeles will move into the international competition, to be decided in 2009.
“We just have to see what their final package entails,” Ctvrtlik said. “So, at this time, they made some representations, and we’ll see exactly what comes concretely presented to us by March 31.”
Asked about Ctvrtlik’s remarks, Daley told reporters, “We are presently working on the guarantee, both with public and private” entities.
“We’re looking at that–the concern the USOC has, rightfully so,” the mayor said. “We will be coming up with a plan very shortly.”
But Daley repeatedly refused to provide any details during a press conference by Chicago’s bid team, which followed the USOC briefing. And he dodged the question of whether he was amending his promise not to use any local, public funds.
When asked about the promise, Daley said, “We are presently looking at a number of options in regards to the commitment we’ll make.”
Daley has amassed two big pots of money over the past two years, though uses for the cash have been earmarked for purposes other than the Olympics.
In 2005, the city leased the Chicago Skyway to private operators for $1.83 billion. Of the total, $500 million was set aside for a long-term reserve that generates about $25 million a year in investment income. A $325 million annuity also was created to fund various city programs over the following eight years.
Last fall, Daley announced a deal to lease four downtown parking garages–one owned by the city, three by the Chicago Park District–for $563 million. More than half of the money was used to pay outstanding debt associated with the garages, but $122 million was reserved for a variety of park system improvements.
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Daley often has said that the city expects the private sector, Olympic-generated revenue and the federal government to cover the costs of the games and has vowed that local taxpayers would not be at risk. Wednesday’s change of tone came eight days after Daley was re-elected.
Later in the day, the Chicago 2016 bid committee issued a statement on guarantees, attempting to clarify what will be needed.
The private developer selected to build the $1.1 billion Olympic Village south of McCormick Place would be required to obtain its own private-market guarantees, the committee said.
And the contractor on the $366 million temporary stadium in Washington Park would have to commit to delivering it at a pre-established cost and set up its own construction guarantees.
“As for everything else, the International Olympic Committee, and thus the USOC, require a guarantee against any operating budget shortfall from every bid city,” Patrick Sandusky, a Chicago 2016 spokesman, said in a statement. “This is what the city and the committee are working to develop.”
Given the experience of previous U.S. host cities, it is likely Chicago will find a lender or consortium of lenders to extend a line of credit to cover costs that occur before Olympic-generated revenue starts to pour in.
But such a financing plan will need to be backed up by government.
The IOC “wants financial guarantees and assurances from a government that bills will be paid,” said A.D. Frazier, who was chief operating officer of the 1996 Atlanta Games.
“This is something New York struggled with on its bid for 2012,” said Kevin Walmsley, an Olympic historian with the International Centre for Olympic Studies at the University of Western Ontario. “This is hard and fast with the IOC.”
If the Games generate enough revenue, from television rights, ticket sales, sponsorships and the like, the city could pay off a line of credit without ever having to tap taxpayers.
And that is what the Chicago 2016 Committee projects will happen.
“The fact is, the recent Games in the U.S. have returned surpluses,” Sandusky said in the statement. “Looking at the current trend in Olympic revenue generation, we anticipate a Games in Chicago will return a significant surplus. Therefore, the likelihood of having to tap this guarantee is minimal.”
The IOC’s insistence on an ironclad guarantee stems from a mix-up surrounding the Atlanta bid, Frazier said.
A state authority set up to have financial oversight of the Games was given bonding power but no ability to levy funds to pay off bonds, he said.
“When the IOC realized there was effectively no government backing for Atlanta, they were furious,” he said.
Speaking to the issue of cost overruns at Millennium Park, which the USOC acknowledged was something of a concern, Daley said, “The scope changed 100 percent, and it went from a small green space to what we have–an internationally acclaimed park, one of the best in the world.”
Originally estimated to cost $150 million when plans were unveiled in 1998, the price tag ballooned to about $490 million by the time it opened in 2005.
Private donors covered roughly $220 million of the total, the city the remainder.
The Chicago 2016 Committee until Wednesday had been putting off providing details on guarantees, noting the city was in a competitive situation and saying the information would be shared at some later date. But at the dual press briefings, the issue bubbled over.
“The USOC asking for a guarantee was not a surprise for us, or for any other Olympic bid city,” said Sandusky. “It has always asked for this kind of guarantee. … From the beginning, we knew about it and worked on it.”
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IN THE WEB EDITION: See photos and videos of the Olympic committee’s visit to Chicago and review the city’s plan at www.chicagotribune.com/olympics2016