Two new reports have illuminated public debate over the merit of building major sporting venues and chasing big events.
LAST December, Prime Minister Kevin Rudd stood alongside Football Federation Australia chairman and Westfield shopping centre magnate Frank Lowy to announce that Australia would bid for the 2018 or 2022 FIFA World Cup.
He said the federal government would spend $46 million over the next three years to support Australia’s bid.
If the bid is successful, the cost of building new and upgraded facilities will be many times that amount ... but nobody knows how much.
One component will be the cost of rebuilding Subiaco Oval to be an FFA-compliant venue.
Premier Colin Barnett, who early last year rejected the Major Stadia Taskforce’s carefully constructed arguments in favour of building a new stadium at Subiaco, changed his tune in December, pledging that the creaking AFL stadium would be rebuilt if Australia won the right to host the world cup.
In support of its proposed bid, the FFA has rolled out wildly positive estimates about the economic spin-offs of hosting the world cup – $3.9 billion in ticket sales, accommodation and meals, 4.7 million spectators, 74,000 full-time jobs, etc, etc.
Estimates of this kind invariably accompany taxpayer-backed events, but do they stack up?
A study published in the International Monetary Fund’s Finance and Development journal, titled ‘Is it worth it?’, suggests the answer is probably no.
The study analysed the experience of cities that have hosted the Olympic Games, and acknowledged the potential for multiple benefits.
Direct economic benefits can include increased construction spending, improved road and rail networks, and spending by tourists and other visitors.
Indirect benefits may include the advertising effects that showcase the host city as a potential tourist destination or business location, and an increase in civic pride and sense of community.
But there is also a potential downside, resulting from possible cost over-runs, poor land use, inadequate planning, and under utilised facilities.
Perth’s new indoor stadium, currently under construction in the city, illustrates some of these risks.
A report released last week by Auditor General Colin Murphy was scathing in its assessment of the project.
“The effect of these failings has resulted in the arena project budget increasing to $483 million, three times more than originally budgeted and scheduled to open in November 2011, almost three years later than planned,” it said.
“There also remains a risk of further delays and cost increases.”
The failings he referred to included the lack of proper planning and evaluation – the kind of things that happen when the political desire to proceed with a project gets ahead of sensible planning.
The IMF study found similar outcomes in a host of Olympic cities, concluding that “projected budgets are never enough to cover actual costs”.
London expected its 2012 games to cost less than $US4 billion, but they are now projected to cost $US19 billion.
The main Olympic stadium will no longer have a retractable roof but it will still end up costing $US850 million, against the initial projection of $US406 million.
The 2014 winter games in Sochi, Russia, were initially budgeted at about $US12 billion; the projected cost in late 2009 reached $US33 billion.
The IMF study questioned the extent of the positive economic stimulus.
“Additional visitors for the games, however, are likely to be at least partially offset by fewer visitors for other purposes (tourism or business), as the latter seek to avoid the higher prices and congestion associated with the Olympics.”
It also concluded that the advertising benefit was modest, citing several studies that found low public recall of Olympic host cities.
“And if accompanied by bad weather, pollution, unsavory politics, or terrorist acts, the games may actually damage a location’s reputation.”
One of the largest risks for host cities is the legacy of seldom- or never-used venues that take up valuable land and are expensive to maintain.
“For example, in Sydney, Australia, it now costs $US30 million a year to operate the 90,000-seat Olympic stadium.”
Athens and Beijing also have a legacy of under-used buildings.
In contrast, Los Angeles and Atlanta were rated a success because, among other things, they used existing facilities or converted Olympic venues to other sports such as baseball.
The advice from the IMF study is universally applicable: steer clear of the inevitable hype and take a long, hard, and sober look at the regions’ long-term planning needs and development goals beyond the sporting event.
