The Chicago 2016 Olympics committee is determined for Chicago to host the Games, come hell or high water.
But Chicagoans, who are being asked to guarantee the Games, need to worry about what will happen if we get both hell and high water.
The Civic Federation gave a remarkably robust go-ahead to the Olympics bid on Wednesday. The financial watchdog group’s president, Laurence Msall, stepped before microphones in City Hall and declared that the Chicago 2016 projection of a $451 million financial surplus is “fair and reasonable.”
More Top Picks Best Chelsea Boots For Runners
Everyone expects Chicago 2016 to puff up the potential of their Summer Games. By the same token, there are people with every bit as strong a motivation to take a careful look at how much it would cost if things go terribly, financially wrong.
For such worrywarts, a close read of the Civic Federation report reinforces their skepticism of all this Olympics hoopla.
Take a careful look at Msall’s report, and one can only wonder: Did he read the darn thing?
For starters, there is that problematic graph that shows a variety of potential shortfalls that add up to $864 million in red ink. That’s enough to wipe out the Olympic committee’s projected budget surplus and then some.
We’re not talking doomsday scenarios, either. Between now and the Games, a mere 1 percent difference in the annual growth rate of sponsorship revenue adds up to a $234 million shortfall. A 10 percent increase in construction costs would lop $146 million from the budgeted surplus, not that construction projects in Chicago ever go over budget.
Other assumptions and projects not delineated on the graph further compound the sense of risk. Naming rights figure prominently in the Chicago 2016 budget: $15.7 million for the velodrome and another $19 million for two facilities, the rowing and shooting venues.
In other words, the bid committee expects revenue that approximates the most lucrative naming deal in sports: slapping Citibank’s name on the New York Mets’ new stadium at a cost of $20 million a year. Chicago’s most lucrative deal to date, for U.S. Cellular Field, nets all of $3.4 million a year.
Employee benefits are budgeted at 25 percent of salary, when the going rate in Chicago is 30 percent, the report notes. The cost difference? Some $25.5 million.
The bid committee budgets $9 million in outside legal costs. That may sound like a lot, but it’s less than one-third the estimate of the bid committee’s own legal department, which pegged the cost at between $25 million and $40 million.
Much is made of all the insurance to be taken out to cover any budget shortfalls. The bid committee boasts plans to secure $1 billion in various policies, on top of the $500 million city guarantee and $250 million in state backing.
“We talk about it as ‘belt and suspenders’ protection,” said Rick Ludwig, chief financial officer of the Chicago bid. The sort of shortfalls spelled out by the Civic Federation would happen only in a “perfect storm,” he added.
Here’s what the bid committee doesn’t talk much about: The insurance would not cover a great many of the shortfalls laid out in the Civic Federation report.
The insurance is meant to cover major disasters: cancellation of the Olympics, for example, or a sponsor’s bankruptcy.
The worst likely will not happen. The Games likely are not headed for financial disaster. If professionally managed, with careful oversight and a little luck, chances are the Chicago Olympics can succeed.
But in guaranteeing the Games — unequivocally, without limit, come hell or high water — that’s a chance Chicago taxpayers are being asked to take.
———-