‘Zero-Cost’ Olympics: Los Angeles Promises Taxpayers a Free Games, and History Suggests Reading the Fine Print

A proposal to write a no-subsidy rule into the city charter is the right instinct, but mega-events have a way of sending the bill to people who never bought a ticket

LA 2028 Olympics and the Taxpayer: Can a Mega-Event Really Cost Nothing?

In two summers, Los Angeles will host the Olympic and Paralympic Games. Surfing is on the programme, and Southern California’s coast will be part of the show. The organisers are a private committee, and they have said for years that private revenue will cover the cost. One city council office wants that promise made binding.

The office’s published list of actions for the year includes a motion to formally establish a “Zero-Cost Principle” for the 2028 Games, ensuring the city is fully reimbursed for all costs associated with hosting, on the grounds that Los Angeles taxpayers should not be asked to subsidise the event. The proposal would place the principle in the city charter.

From a limited-government perspective this is welcome. It is also worth understanding why it is needed.

The Record of Mega-Events

Studies of Olympic budgets over half a century have found that every Games for which reliable data exist ran over its initial estimate, often by a wide margin. Host cities have been left with debt and underused venues. Montreal took three decades to pay off 1976. More recent hosts have spent sums many times their bids.

Los Angeles has a better story than most. The 1984 Games used existing stadiums, relied on private sponsorship and ended with a surplus. The 2028 plan follows the same model: no new permanent venues, private operating budget.

Where the Costs Hide

The difficulty is that an organising committee’s budget is not the whole cost. A city provides police, fire, sanitation, traffic management and emergency services. It repairs streets and pavements near venues. It may guarantee the organisers against a shortfall. Those are public expenditures whether or not they appear in the Games’ accounts.

Some of this is already visible. As local television reported in April, the city council authorised 9.5 million dollars for sidewalk repairs near Olympic venues, fan zones and key routes, with part of the money covering staff costs, salaries and overtime. Sidewalks need fixing regardless. But the timing and location were set by the Games.

What “Reimbursed” Means

The zero-cost motion seeks reimbursement for all costs. The test will be in the definitions. Does it cover overtime for officers reassigned from regular duties? The opportunity cost of services not delivered elsewhere in the city during the event? Accelerated capital projects? Security costs borne by other levels of government are paid by taxpayers too, just different ones.

A charter provision would at least give the city a legal basis to send an invoice. Whether the organisers can pay it depends on ticket sales, sponsorship and broadcast revenue performing as forecast.

The Case for the Games

Supporters make arguments that deserve a hearing. The 1984 precedent is real. Using existing venues removes the largest source of overruns. The event brings visitors and attention, and some infrastructure spending that would otherwise wait decades gets done. Many residents simply want the Games and consider some public cost acceptable for a civic celebration.

Economists who have studied the question generally find that the promised boosts to tourism and growth are small or absent once displaced visitors and diverted spending are counted. But they also find that hosts who avoid building do far better than those who do not.

The Guarantee

The largest risk is contingent. Host cities typically sign as financial backstop. If revenues fall short, for reasons ranging from a recession to a security incident, the public covers the gap. Los Angeles and the state of California have both made such commitments for 2028, with the city first in line up to a set amount.

A zero-cost principle that does not address the guarantee addresses the smaller exposure and leaves the larger one in place.

The Libertarian Point

The underlying objection is to the structure. A private committee collects the revenue. The public carries the tail risk. That is privatised gain and socialised loss, and it would be criticised in any other industry. If the Games are the sound commercial proposition their organisers say, private insurers and investors should be willing to underwrite them. If they are not, taxpayers are being asked to take a bet that markets declined.

Surfing’s Stake

For the surf community there is a narrower interest. Olympic surfing will bring crowds, closures and security to a stretch of coast. Local surfers will lose access to a break for a period. Nearby businesses may gain. Those are costs and benefits to particular people, and they will not appear in any budget. They should at least be acknowledged.

What Would Make the Promise Credible

Three things. Publish a running account of every city dollar spent on Games-related work, including staff time. Define reimbursable costs before the event, not after. And disclose the terms of the financial guarantee in plain language, with the maximum public exposure stated as a number.

A promise that taxpayers will pay nothing is easy to make two years out. It is kept, if at all, in the audit afterwards.

Meanwhile, in London

The 2012 Games taught Britain a good deal about budgets. The London Prat still draws on the experience in its London satirical news on Olympic budgets and English satirical news about mega-events. Bohiney Magazine watches the American preparations.

SOURCE: https://bohiney.com/