Brandon Figliolino
PUAD 6600 Economic Development
Denver and the
Economics of the Winter Olympics
March 4, 2018
An
exploratory committee in Colorado is investigating the feasibility of Denver
hosting a future Winter Olympics. Their
discussions have renewed the debate over the economic benefits of hosting such
a large-scale event. Proponents of the
games believe it could be a catalyst for economic growth, not just in Denver
but across the state. However, opponents
are skeptical of such benefits and believe the Games would leave Denver paying
off massive amounts of debt.
In
the past, host cities have focused on public funding to build the necessary
infrastructure for the Games (McBride, 2018).
Over the decades, this infrastructure has proven to be expensive. This is a primary economic argument against
hosting. Since 1960, no Olympic Games
has finished under budget, and only a few host cities have made a profit on
them (Aleem, 2018; McBride, 2018). If
past Games’ performance are a good predictor of performance, it is unlikely
that revenues would exceed expenditures if Denver undertook hosting.
Opponents
also argue that the infrastructure that is built for the Olympics is not sustainable. The Olympic Stadium in PyeongChang is set to
be demolished after only several days of use because it is too big to be used
again (Aleem, 2018). Infrastructure that
is not torn down is left to decay, all while the government makes payments on
the construction loans used to build it.
In Rio, for example, stadiums and highways were abandoned, and athlete
housing has yet to be converted to affordable housing (McBride, 2018).
The opportunity
costs for hosting are also extensive.
The money used for Rio’s infrastructure could have gone towards cleaning
up pollution in their rivers, which might have drawn more tourists and
businesses to the area (McBride, 2018).
Land use can also be an expensive opportunity cost, especially if the
use is abandoned after the Games or not aligned with the needs of the community
(Applebaum, 2014). Lastly, taking on
debt for the Olympics might make it more difficult for host cities to secure
financing for future projects (McBride, 2018).
Supporters
of their cities hosting the Olympics believe that the Games can act as a
catalyst for economic development. While
there are mixed results, some host cities have seen a positive impact on
tourism during and after hosting an Olympics (McBride, 2018). This additional revenue may not have come
without the help of the Games.
Hosting
an Olympics also spurs major development projects, proponents argue. Such projects can include transportation
infrastructure, like highway improvements, railways, and airports (Aleem, 2018;
Murray, 2018). Transportation projects,
when done well, can lead to economic growth (Adams & VanDrasek, 2007). Because of its size, hosting an Olympics would
require a host city to invest in the transportation system, which would improve
mobility for residents long after the Olympic torch is extinguished.
The Olympics
exploratory committee in Colorado is moving forward with their investigation
into the feasibility of hosting. Over
the past several months, they have engaged with community members and
stakeholders to identify whether Mayor Hancock and Governor Hickenlooper should
submit a future bid. A primary focus of the
committee is reducing the negative effects seen in past Olympics. The committee is doing this by forging
partnerships and leveraging resources.
To reduce taxpayer
costs, they are looking to finance most of the Games privately. Athlete housing, for example, would be built
by a private developer, and any expansion of I-70 West would be managed by a
public private partnership (Dutta, 2018; Murray, 2018). Supporters of this plan believe using private
financing, coupled with federal funds, would eliminate potential risk to
taxpayers if the Olympics fail to generate projected revenues, since very
little public money would be used to pay for it.
The committee is
also looking at how it can leverage current assets. Instead of constructing large stadiums, they
are hoping to use utilize existing properties, like Coors Field and Mile High
Stadium (Murray, 2018). Any other
required stadiums, including a venue for skiing, would be privately financed and
temporary, so it could be dismantled afterwards (Dutta, 2018).
Denver should
approach the Olympics with caution. Much
of the opposition to hosting the Games comes from concerns over how to pay for
it (Hernandez, 2018). While the
committee plans on having private partnerships fund projects, they have no
identified any partners yet (Hernandez, 2018).
If Denver fails to secure financing partners, taxpayers may have to pay to
the developers’ share. Some proponents
argue that hosting the Games would bring in federal funds to improve
infrastructure, including I-70 (Hernandez, 2018). The President’s infrastructure plan, however,
shifts most of the funding responsibility to localities, so federal funding may
be minimal (DePillis, 2018).
Compatibility
is another issue that needs special attention.
The committee discovered that hosting would require Summit County to
build 12 to 15 story housing structures (Dutta, 2018). In a county with small-scale towns, such
large buildings would be out of place, and may not be utilized to full capacity
much after the Games conclude. Infrastructure that is built but does not
provide long-term benefits to the communities might become derelict and cause
negative externalities, as seen with Rio’s athlete housing projects (McBride,
2018).
Lastly,
the committee should look at the jobs that would be created by hosting. Many of the jobs that come with the Olympics
are in construction or are short-term (McBride, 2018). For a state that is experiencing a shortage
of construction workers, it may not be realistic for Denver to find skilled
workers to build the infrastructure (Douglas, 2017). Focusing on attracting businesses that can
bring in long-term, high-paying jobs may be a better return on investment for
city and state staff than courting the Olympics.
Hosting
an Olympic Games is neither easy nor affordable. It poses challenges and opportunities for
cities and their regional partners to undertake. If Denver does decide to bid, it will be
imperative for decision-makers to review past Games’ successes and failures, and
work with community and business partners to reduce risks. Hosting is a challenge, and it will take
thoughtful planning to ensure it produces more economic benefits than costs.
References:
Adams, J &
VanDrasek, B. (2007). “Transportation as Catalyst for Community Economic Development.”
Center for Transportation Studies. Retrieved
from: http://www.cts.umn.edu/Publications/ResearchReports/reportdetail.html?id=1546
Applebaum, B.
(2014) “Does hosting the Olympics actually pay off?” The New York Times. August 5, 2014. Retrieved from: https://www.nytimes.com/2014/08/10/magazine/does-hosting-the-olympics-actually-pay-off.html
Aleem, Z. (2018)
“Why almost no one wants to host the Olympics anymore.” Vox. February 21, 2018. Retrieved from: https://www.vox.com/world/2018/2/23/17008910/2018-winter-olympics-host-stadiums-cost-pyeongchang
DiPillis, L.
(2018) “Trump unveils infrastructure plan.” CNN
Money. February 12, 2018. Retrieved from: http://money.cnn.com/2018/02/11/news/economy/trump-infrastructure-plan-details/index.html
Douglas, E.
(2017) “Colorado faces massive shortage of construction workers. A fix won’t be
easy.” The Denver Post. July 2, 2017.
Retrieved from: https://www.denverpost.com/2017/07/02/colorado-massive-shortage-construction-workers/
Dutta, D. (2018)
“2030 Olympic bid for Denver would require major land, housing commitments for
mountain towns.” The Summit Daily. March 1, 2018. Retrieved from: https://www.summitdaily.com/news/2030-olympic-bid-for-denver-would-require-major-land-housing-commitments-for-mountain-towns/
Hernandez, E.
(2018) “Cross-section of opinions at latest Olympics bid listening session.” The Denver Post. March 4, 2018. Retrieve
from: https://www.denverpost.com/2018/03/03/olympics-bid-listening-session/
McBride, J.
(2018) “The economics of hosting the Olympic Games.” Council on Foreign Relations. January 19, 2018. Retrieved from: https://www.cfr.org/backgrounder/economics-hosting-olympic-games
Murray, J. (2018)
“Cost of a Denver Winter Olympics—and how to pay for it—are chief concerns in
bid question.” The Denver Post. February
26, 2018. Retrieved from: https://www.denverpost.com/2018/02/26/how-to-pay-for-denver-winter-olympics/
