Chicago's blueprint for the 2016 Olympic is "fair and reasonable, and provides adequate protection against financial risk to Chicago taxpayers," according to a report issued by the Chicago Civic Federation. However, the report warns that the proposed development of the Olympic Village on the existing site of Michael Reese Hospital, exposes the City to "continuing real estate risks that must be managed."
The report was requested by the Chicago City Council.
The authors said they found the $3.8 billion budget, as proposed by Chicago 2016, to be "fair and reasonable." But they warn that some revenue estimates appeared to be optimistic, compared with previous Games.
"Local sponsorships are predicted to be substantially higher than previous Games," the report says. "Estimated revenues from donations are aggressive, when compared to past Olympic budgets."
The researchers also say they believe some ticketing projections are optimistic compared with recent Summer Games, but they add that those estimates were "fairly conceived," and say that none of the revenue projections appear to pose significant risk to the financial viability of the 2016 Games.
The Civic Federation report says the 2016 Committee's cost projections for venue construction and operations appeared to be on target, noting that while they are lower than previous Games, they rely heavily on existing facilities and temporary construction. The authors say that would reduce the risk to taxpayers after the Games leave town..
The lone warning in the report concerns the Olympic Village.
In announcing the billion-dollar complex, to be developed just southwest of McCormick Place, Mayor Daley declared that the village would be constructed, whether Chicago wins the Games or not.
But the Civic Federation warns of the volatility of the current real estate environment, and recommends purchase of a new kind of protection, known as capital replacement insurance, to cover a potential loss of financing during construction. They note that the organizing committee has not included such a policy as part of its proposed $68.3 million insurance budget for the Games, and say without it, taxpayers would be exposed to risk.
Perhaps the most important portion of the report, concerns the necessity of signing a host city agreement which includes a blanket city guarantee to cover any potential losses. Such guarantees are standard for cities bidding on the games, but the revelation that Chicago would be required to sign such a document unleashed a firestorm of controversy earlier this summer.
The report seems to suggest that such concerns have little foundation. Noting that the 2016 planners have proposed several layers of insurance to be used prior to any specific financial guarantees kicking in from the city or state, the authors say that plan provides "adequate protection to taxpayers" from any risk associated with venue construction or the actual operation of the Games.
There is a quick warning, however, that those guarantees do not satisfy concerns about potential risks in the Olympic Village.
Perhaps as a nod to the city where these Games would be staged, the authors warn about the need to inform the public at every turn.
"Increased public transparency about Olympic finances is needed, to safeguard taxpayers interests," it says. "The City Council must exercise its oversight role and require regular reporting on the status of the Games."
Chicago 2016 applauded the report's findings. "We appreciate the thorough analysis of Chicago's bid," said committee chief Patrick Ryan. "While we have not yet had an opportunity to review the report in detail, we are gratified to learn that the Civic Federation (agrees) that the financial projections upon which our bid is built are fair, reasonable, and provides adequate protection against financial risk to Chicago taxpayers."
The winning city for the 2016 Summer Olympic Games will be announced October 2nd in Copenhagen, Denmark.
Full Coverage: Chicago's 2016 Olympic Bid