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Toronto will have some explaining to do when the International Olympic Committee arrives this week to evaluate the city's bid for the 2008 games. The IOC's first question might be something like: "Uh, shouldn't you frozen folks be bidding for the Winter Games instead?" The second might be: "You're gonna host a party of this size for a mere $3-billion? And are those Canadian dollars?"

While there is a reasonable chance that global warming will give Toronto a decent summer by 2008, there are no assurances that the $3-billion estimate -- Canadian dollars, by the way -- has any bearing in reality because so many costs are excluded. If Olympic history is a guide, revenue is overestimated and costs are underestimated, the result being a deficit that becomes the taxpayer's responsibility.

While the Games should not be judged on monetary terms alone, Torontonians are particularly sensitive about their tax burden -- real and potential -- at the moment. Just look at the writhing and gnashing of teeth caused by Toronto's current $305-million budget shortfall. Services -- from the mayor's chauffeur to police walking the beat -- are bound to be cut, and still city taxes probably will rise.

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Now imagine a shortfall of billions of dollars. If the Toronto Games lose, say, $300-million, is that okay? Sure, because the Games' publicity value alone would be worth it. Look what the 2000 Olympics did for Sydney. The images of the harbour and the opera house are fused into the frontal lobes of billions of viewers. How about a $500-million deficit? Well, maybe, as long as the province or the feds help in some way. A billion or more? Forget it.

There is little doubt that Toronto could host a spectacular Olympics and, done properly, the city would benefit enormously. At minimum, they would kick start the development of the decrepit and polluted waterfront, an effort that has gone nowhere since the first royal commission on the lands was published almost a century ago. But cost overruns could trigger a financial crisis from which the city, Montreal-style, might take decades to recover.

For PR purposes, you can't sell the Games by forecasting a deficit. In fact, the Toronto bid-organizing group, know as TO-Bid, predicted the Games would generate a surplus of $79-million. To arrive at this figure, the group totalled the revenue from broadcast rights, ticket sales, licensing and other items and then subtracted expenditures for construction, transportation, security, administration and the like.

Conveniently, the net result was a positive figure. The problem is the budget excludes a lot of expenditures. The costs of the land for the Olympic village, stadium and other facilities are not included, nor is the potentially enormous cost of cleaning the land (known to contain dangerous hydrocarbons, such as benzene).

The cost of moving the harbour -- estimated by the Harbour Commission at $400-million -- is absent, as are the bills for the construction of the Olympic village, the media village, the broadcast centre and the athletes' training centre. The price tag for these four items alone was estimated at $823-million in a 2000 city report.

TO-Bid's argument that the Olympic budget should not have to pay to acquire and clean the waterfront lands is valid. But if the Olympic budget won't pay for this, whose will? We don't know, for example, whether the developers will be given publicly owned land free in exchange for cleaning it up, or whether they will assume only part of the cost. TO-Bid says the cost of the Olympic village, media and broadcast centres is excluded because these facilities will be leased during the Games, then returned to the developers when they're finished. But what incentives will the developers require to convert these properties to residential or municipal use?

Finally, the estimated $296-million construction bill for the main Olympic stadium seems wildly optimistic even though the stadium is designed to be partly dismantled through the removal of 80,000 temporary seats.

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Rebuilding Denver's Mile High Stadium cost $1-billion and the final bill for the SkyDome was $600-million. And what if no use can be found for what's left of the Olympic stadium after the games? If there's one thing Toronto has in abundance, it's useless arenas and stadiums.

Toronto would make a fine Olympic host. Taxpayers, though, need to be given more answers about the Games' true potential cost. Forecasting a profit when there are so many variables is the most dangerous form of optimism. ereguly@globeandmail.ca

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About the Author
European Columnist

Eric Reguly is the European columnist for The Globe and Mail and is based in Rome. Since 2007, when he moved to Europe, he has primarily covered economic and financial stories, ranging from the euro zone crisis and the bank bailouts to the rise and fall of Russia's oligarchs and the merger of Fiat and Chrysler. More

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