By Stephen Young
By Stephen Young
By Stephen Young
By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
The U.S. Olympic Committee is smiling down on the two cities because Texas is well on the way to becoming the first state to acquiesce to its demands that the games be backed with a generous financial guarantee. The Legislature is ready to pledge as much as $100 million in taxpayer money that could be lifted from the state and host city and diverted to the International Olympic Committee in the event the games end up in the red.
Before any taxpayer money could be set aside, however, local voters would have to approve a referendum, one of several protections legislators folded into the bill. The legislation requires the local Olympic organizing committee to disclose its contributions and expenditures and to provide public access to its meetings and documents. Just for emphasis, lawmakers also incorporated the state's bribery statute into the bill.
Some of the folks who are all tingly at the prospect of bringing the Olympics to your fair city already are in the campaign mode even though an election would be a couple of years away. They want to divert you from the possibility that the games may be subsidized by taxpayers and instead want you to consider the chance as "slim to negligible" that even one public penny would ever be spent.
"This legislation is not really intended to be a mechanism for funding the games," says George DeMontrond III, chairman of the Houston 2012 Foundation. "It's to satisfy a technical requirement."
The shrewd plan to satisfy the USOC requirement, however, looks an awful lot like a mechanism to provide some public financing for the Olympics. The bill sets up a trust fund, capped at $100 million, which would siphon state and municipal sales-tax revenues directly connected to staging the games.
Think of it as a $100 million insurance policy for the IOC, which fronts a host city billions of dollars to present the games. If the local organizing committee couldn't pay back the IOC, taxpayers would. If the local committee can reimburse the IOC, then the stash returns to the state and city. The IOC would like an unlimited financial guarantee instead of one capped at $100 million, but DeMontrond says that "no one thinks that is politically doable."
It takes a lot of guesswork to assess the chances of whether the games will make or lose money. The 1998 Winter Olympics in Nagano, Japan, had a surplus but benefited from public financing. Atlanta either broke even or lost money on the 1996 Summer Games, depending on whose numbers are to be believed. Atlanta, though, built $550 million worth of sports venues that were paid through Olympics receipts, which drained a good portion of the revenue. One thing is clear: The Olympics are volatile and therefore risky. A world crisis, for example, can disable the games as quick as you can say Slobodan Milosevic.
Under the Texas plan, the state comptroller would determine what revenues would be considered Olympics-related and therefore packed away into the trust fund. If Houston or Dallas is awarded the games, shortly thereafter the comptroller would compare the actual tax revenues from the city to revenue estimates of what they would have been had the games not come there. The bump in revenues would be attributed to the games, says James LeBas, the comptroller's chief revenue estimator. In coming up with an amount to be shifted into the fund, the office also would look at the direct economic effects of things like new facilities and any sporting events held in preparation of the games. The local organizing committee's expense budget also would be considered.
The office's preliminary estimate is that $63.8 million in sales tax revenues could be diverted into the fund from the time the games are awarded to three months after the torch is extinguished. The comptroller's calculation assumes a $3.5 billion total estimated economic impact from hosting the games. LeBas predicts that the comptroller would be conservative in determining amounts for the stash fund.
"Our bias, if we have one, is to protect the financial interests of the entire state," LeBas says. "These are state dollars at stake for what some people consider primarily a local project."
Supporters of the bill are fond of saying that taxpayer dollars aren't really at stake. They emphasize three things: As they see it, the Olympics almost assuredly won't run a deficit, so the money would never have to be spent; the trust fund would contain only tax revenues that come from hosting the Olympics and therefore include money the state and city would otherwise never earn; and the vast majority of Olympic-related tax revenues would come from out-of-state visitors.
"It's heads, the state wins, and tails, it still doesn't lose," DeMontrond says.
The USOC, which will select its favorite among the eight U.S. bidders in spring 2002, has bought into the line. Richard Schultz, USOC executive director, told the Dallas Observer that the public guarantee will be a major consideration when evaluating bids and that he considers the Texas legislation "kind of the ideal model."