City Council Speaker Gifford Miller is charging that the city’s Olympic bid committee may be acting beyond its authority by potentially putting taxpayers on the hook for billions of dollars should New York be awarded the 2012 Summer Games.
The challenge comes in the wake of unsuccessful efforts by City Council member Letitia James of Brooklyn to obtain a copy of the agreement the city is making with the International Olympics Committee to enter the final round of bidding to host the Games in 2012.
On Oct. 22, Ms. James sent a letter to Mayor Michael Bloomberg asking for a copy of the agreement. It is still unanswered, even though the city has to deliver its agreement to the I.O.C. by Nov. 15.
It’s important because, as several Olympics veterans have noted, these agreements usually require the city government to agree to handle any financial obligations the private bid committee cannot itself deliver.
Daniel Doctoroff, the founder and former head of the city’s Olympic bid committee, NYC2012, turned the bid company into a favorite charity of then-private billionaire financial-media mogul Michael Bloomberg; now he serves the latter as deputy mayor for economic development. According to Mr. Miller’s office, cutting the City Council out of negotiations about a financial commitment to the Olympics is illegal.
“If some or all of the financial burden is going to be put on the city, that needs an open public review in front of the city’s elected legislature,” said Steve Sigmund, Mr. Miller’s communications director.
NYC2012 has said publicly that the Games would be privately financed, and that taxpayers are only on the hook for a worst-case scenario backstop of $250 million, which was approved by the State Legislature in 2001.
But the 1998 City Council resolution that authorized NYC2012 to seek the Summer Games on behalf of the city concluded by stating, “No contractual or financial obligation related to [the Olympics] shall be accepted or assumed by or on behalf of the City of New York without subsequent, express authorization by the Council of the City of New York.”
‘”We’re very supportive of bringing the Olympics to New York,” said Mr. Sigmund, “[But] we think the resolution makes clear that we should see the Host City Contract [first].”
New York is among five cities competing to host the 2012 Summer Games. The deadline for each city to submit its final bid application is Nov. 15, and the I.O.C. will announce a winner on July 5, 2005. As part of that Nov. 15 application, however, each applicant city must pledge to sign an “Undertaking” document, in which the city pledges to sign the Host City Contract “without reserve or amendment,” should it be awarded the Games in July. In other words, New York will be effectively locked into the terms of the Host City Contract as soon as its signs the Undertaking on Nov. 15.
Ambitious plans attend the city’s Olympics bid: a $1.4 billion Olympic stadium, a $1.6 billion Olympic Village and a $600 million International Broadcast Center.
How much of that development the city commits itself to in the Nov. 15 contract is unclear. And since NYC2012 has refused to publicly disclose the terms of that contract, the question remains: Who exactly bears ultimate financial responsibility for the staging and organization of the Games?
Mr. Doctoroff has said that the burden will fall on the Organizing Committee of the Olympic Games (OCOG), a private entity that will shield taxpayers from financial liabilities.
History, however, suggests that it may be otherwise. In four of the last five Olympic Host City Contracts-Beijing’s contract was unavailable-nearly identical clauses put the financial responsibility for the Games at least partly on the host city itself.
“Financial responsibility for the planning, organization and staging of the Games,” each of the contracts read, “shall be entirely assumed, jointly and severally, by the City and the OCOG.”
This liability was so great-potentially billions of dollars in cost overruns-that two of the host cities had to get their state or provincial governments to assume the burden from the cities’ shoulders. In the case of the 2002 Winter Games, the state of Utah signed a contract indemnifying Salt Lake City from Olympics cost overruns. No limit was placed on the amount the state would cover. In the case of the 2010 Winter Games, the province of British Columbia signed a contract indemnifying Vancouver from cost overruns-again, the indemnification was unlimited.
“In 2001 the state legislature approved a $250 million guarantee fund as part of the city’s Olympic bid,” 2012 spokesman Jay Carson told The Observer . But the limit is worrying some public officials, since there is nobody besides the city to take on losses in excess of $250 million.
In fact, all recent Olympics Games, he said, have turned profits, so the $250 million is likely to cover the costs.
“The facts on this issue are clear and public, and have been so since the beginning,” he said. With five days to go before NYC2012 signs its undertaking, however, some are getting jittery.
“NYC2012 is basically saying, ‘Trust us,’ and they’ve shown that we can’t,’ said Brian Hatch, a former deputy mayor of Salt Lake City who oversaw part of that city’s buildup for the 2002 Winter Games, and who has become a fierce critic of building an Olympic stadium on the West Side. “They haven’t been up-front with the City Council by letting them know that the city has to assume unlimited liability and complete responsibility for the Games. So ‘trust us’ is an unacceptable answer.”
Mr. Doctoroff did not respond to interview requests to resolve this issue. However, he has long argued that neither the city’s nor the state’s taxpayers are liable for cost overruns stemming from the Games.
“Under no circumstances is the city or state on the hook,” with the exception of the State Legislature’s $250 million contingency fund, Mr. Doctoroff told The Observer last month.
NYC2012 projects that the Olympics will cost $3.7 billion-around $1 billion for capital costs-venue construction-and the remainder for operating expenses, the actual running of the Games. When Mr. Doctoroff says that the Games will be “privately financed,” he means that the $3.7 billion will come solely from Olympics-generated revenues like TV rights, tickets and corporate sponsorships. Mr. Doctoroff said that his staff has done incredibly detailed budgeting for each aspect of the two-week event. Each proposed new venue has a contingency fund in its construction budget, and the overall budget includes a $200 million general-purpose contingency-in addition to the $250 million contingency from the State Legislature.
The $3.7 billion budget does not include the price tag of billions of dollars in capital projects that are essential to the Games, but which remain “off-budget” because Mr. Doctoroff claims that they are such good ideas that the city would pursue them even apart from the Games.
And with the exception of a $600 million public subsidy for the stadium, NYC2012 expects the private sector to pay for all these projects-like the stadium, village and broadcasting center-because they are intended to house commercial, residential and sports-team tenants long after the Olympics. Mr. Hatch, the former Salt Lake City deputy mayor, scoffed at the idea.
“If private developers don’t step up to pay for these projects, the city’s taxpayers will be on the hook.”
Follow Blair Golson via RSS.