Another Big Dig: Establishing a range for the cost of a Boston Summer Olympics

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1 Another Big Dig: Establishing a range f the cost of a Boston Summer Olympics No Boston Olympics February 26,

2 Estimating the Cost of a 2024 Boston Summer Olympics Pinpointing the cost of a Boston Olympics is a difficult task, but developing a minimum cost and an expected actual range is a rather straightfward exercise. The following analysis takes both a topdown and bottom-up approach, using the last eight Olympic Games as a benchmark. We conclude that a Boston Games would have a minimum cost of 5 billion, and is likely to total between billion, accounting f all costs. While this analysis provides a wide range, it is a reasonable starting point f any discussion of the potential costs of a Boston Olympic Games. I. Establishing a minimum cost : About seven years befe each Summer Games are held, the International Olympic Committee (IOC) chooses a handful of finalist cities. F the 2020 Games, those finalists were: Istanbul, Madrid, and Tokyo. 1 F the 2016 Games, those finalists were: Rio De Janeiro, Madrid, Tokyo, and Chicago. 2 Each bid city is required to estimate the full cost of the Games in its bid book, a document prepared by each local bid committee. Table 1 presents the projects costs from the 2016 and 2020 bid books. Table 1: In the most-recent 2020 round, Madrid s bid was commonly described as an austerity bid meaning it had only the minimum amount of investment required to successfully host a Games. 3 Indeed, the bid committee noted that 28 of 35 needed venues were already built. 4 Given this benchmark, and remembering that inflation will only have increased costs, even an austerity bid by Boston would be a minimum of 5 billion. Bid Value (B USD) City Games Istanbul Rio De Janeiro* Tokyo* Madrid Madrid Chicago Tokyo *IOC-selected city The 2000 Sydney Summer Olympics, considered by some to be a well-managed Games, provide another useful data point. In 2002 the Audit-General of New South Wales repted the cost of the 2000 Sydney Games at AUS 6.6 billion. 5 With exchange rates and inflation, this equates to 4.7 billion in 2014 US dollars. 6 However, it is imptant to remember that the Sydney Games took place befe the terrist attacks of September 11 th. All post-sydney Games have had to plan f far higher security costs than the Sydney Games. It is reasonable to conclude that the minimum cost of hosting the Summer Olympics is 5B olympics In 2000, the USD/AUD exchange rate fluctuated between 1.50 and 1.96 Australian Dollars to 1 US Dollar. Using a midpoint of 1.73, the Games cost 3.8B in Year 2000 USD. Then converting Year 2000 dollars to Year 2014 dollars, we estimate the Sydney Games cost 4.7B.

3 II. Establishing a true cost : Top-Down Analysis: The wk of economists at Oxfd University, in the UK, has led to the development of a costing technique called reference class fecasting (RCF), which advocates developing budgets through a comparison with similar completed projects. 7 The RCF approach has been endsed by the American Planning Association, which says: APA encourages planners to use reference class fecasting in addition to traditional methods as a way to improve accuracy. The reference class fecasting method is beneficial f non-routine projects such as stadiums, museums, exhibit centers, and other local one-off projects. Planners should never rely solely on civil engineering technology as a way to generate project fecasts. 8 The full RCF methodology requires an initial cost estimate by the planners of a megaproject, and will be completed upon the release of a cost estimate by the Boston bid committee. In the absence of a fecast by a bid committee, a benchmarking of the full costs of previous Olympics is the most practical and straightfward way of estimating the costs of future Olympics. In that efft, we have compiled actual repted costs of the last eight Olympic Games four Summer Games and four winter Games in Table 2. Table 2: Year Host Type Nominal Cost (B, USD) 2014 Sochi Winter London Summer Vancouver Winter Beijing Summer Turin Winter Athens Summer Salt Lake City Winter Sydney Summer 3.8 Please note these estimates include conversions to USD, but do not account f inflation. Table 2 shows that since 2000, the average Summer Games has cost 19.2 billion, and the least expensive Summer Games was Sydney at 3.8 billion in Y2000 USD, 4.7 billion in Y2014 USD. Average of Summer Games Average of Winter Games Median of Summer Games Median of Winter Games Minimum of Summer Games Minimum of Winter Games

4 Bottom-Up Analysis: A bottoms-up analysis using costs f the 2012 London Games leads to a similar range, presented in Table 3. Table 3: The list of items in Table 3 amounts to Item London Cost in M (USD) me than 7 billion present-day dollars. Note that it does not include investments f transptation infrastructure needed to suppt the games, which would need to be included in a full accounting of costs. The total cost of London s Olympics is estimated at over 14 billion in present-day dollars, equivalent to the cost of Boston s Big Dig project. Cost of Developing Bid 80 Security 850 Olympic Stadium 800 Olympic Stadium Conversion Post-Olympics 250 Aquatics Center 450 Velodrome 175 Olympic Village 1,750 Opening Ceremonies 45 Closing Ceremonies 30 Purchase of Olympic Park Land 1,200 Legacy Projects and Games-Related Activities 1,300 Total in 2012 Dollars 6,930 Total in 2014 Dollars 7,060 Conclusion While it is challenging to pinpoint the exact cost of a Boston Olympics, the data above provides an accurate starting point f the economic discussion. Given the necessary infrastructure improvements, the facilities that would need to be constructed, and the relatively tight timeframe, there is virtually no way Boston could host the Olympics f less than 5 billion, with a total cost in the range of billion far me likely. We believe there are much better ways f the city and the state to use public and private funds (as illustrated below), and call on our elected leaders to oppose effts to bring the Olympics to Boston.

5 Things Massachusetts Could Buy With 5 billion, the minimum cost of a Boston Olympics: Fully fund state assistance f local roads and bridge f next 15 years. 15,621 homes at the January, 2014, median MA housing price, enough to house every homeless family in the Commonwealth. 10 billion, our low estimate f the actual cost of a Boston Olympics: Waive all tuition and fees at UMass system f next ten years. Eliminate all of the MBTA s outstanding debt and have enough left over to build South Coast Rail, the Green Line Extension to Somerville/Medfd, and buy new rail cars f the Orange Line. 20 billion, our high estimate f the actual cost of a Boston Olympics: Repair all structurally deficient bridges on Massachusetts roads. Eliminate all income and sales taxes f one year. Provide a 15,000 college-savings bond to every child bn in Massachusetts over the next decade.

Learning from experience: How hosting the Olympics can leave a positive legacy

F E B R U A R Y 2 0 17 Learning from experience: How hosting the Olympics can leave a positive legacy Bill Hanway Careful planning and an eye on the future can help the cities that host them. Deciding