Monday, July 30, 2012

Why Olympic Bids Go Bad

I recently wrote about how the urban renewal potential of Olympic host cities is often unrealized.  With the London Olympics now underway, more experts are weighing in about the challenges of being a host city and how host cities can do as well as possible.  Although the Olympics would seem to be at an impossibly large scale, the thoughts can have application to the North Bay.

Andrew Zimbalist, writing in Atlantic Cities, describes the three points on which Olympic bids go astray.  Zimbalist, an economics professor at Smith College, is well-respected author on the subject of public financing of sports venues.

In Zimbalist’s view, the problems for the host city begin early, during host city selection.  As he describes it, the issue is what economists call a “principal/agent” problem.  It describes what happens when the incentives of the principal and the agents acting on behalf of the principal are different.

A bid to be a host city is often encouraged by private entities which stand to benefit financially from the bid process and also from pre-Game efforts if the bid is successful.  But these entities have relatively little risk if the bid is unsuccessful or if the pre-Game costs exceed budget.  They are the agents of the city, but their risk/reward situation is very different from the city, which would be responsible for most overruns.  That misalignment leads to excessive and flawed bids.

It’s akin to the concerns often expressed about the banks which struggled during the recent recession and received government support.  In the words of many, “The risks were socialized, but the rewards were privatized.”  The same phrase can apply to the bid for an Olympics.

Zimbalist’s next point is that, in a competitive bid situation, the winner is often the city which most greatly overestimates the financial upside.  Cities that accurately assess the financial issues probably can’t win a bid because their plans won’t be sufficiently grand.

I’m reminded of the story of a developer with long-standing friendships in the local development community. He was in a hard-fought price competition to secure a key downtown parcel that he eventually won.  When he was congratulated by the press, he responded “I just paid more for the parcel than all of my best friends thought it was worth.  I’m not sure I deserve congratulations.”  Perhaps the mayor of a city which wins an Olympic bid should feel the same.

Zimbalist’s final point is the costs will always escalate between winning the bid and the start of the Games.  From my personal experience, there are always surprises during conception, design, and construction.  Only rarely do those surprises result in lower costs.  Here in the North Bay, we need only look a little south, to the 2013 America’s Cup, to see how pre-event planning can go in odd and unexpected directions

Urbanist Brent Toderian would likely grant Zimbalist the validity of his arguments, but presents three lessons from the 2010 Vancouver Winter Games to mitigate some of the risk.  Writing in Atlantic Cities, Toderian proposed that every venue should have another intended use after the Games.  In his words, “If you don’t really have a viable use for that huge stadium after the Olympics, it just might be that you’re not the kind of city that should host the Olympics at all.”

Next, he proposes that having the local citizens treat the Olympics as a public festival creates a sense of goodwill that will have lasting benefits.  He notes that London 2012, like Vancouver 2010 and many preceding hosts, had an anxious and skeptical air in the days before the opening ceremony.  He then recalls that Vancouver 2010 quickly changed into a civic celebration that impressed observers and created long-term optimism.

Toderian acknowledges that celebrations must ultimately be grassroots upwellings, but suggests that Olympic organizers do everything possible to lay the groundwork for the public to spontaneously embrace the Olympics.

Lastly, Toderian suggests that the Olympics are an opportunity to revisit the municipal transportation system, including the use of transit.  He notes that Vancouver expanded its transit system and induced more people to use transit, both during the Games and afterwards.  “Most importantly, post Olympics research found that over a quarter of those who got out of their cars and tried transit, biking, and walking, stayed out of their cars after the Olympics ended, and many more came back to transit in the intervening years, citing the Games as a perception-changer.”

So, how much, if at all, does this palaver about the Olympics pertain to the North Bay?  Even if we assume that the Bay Area never secures an Olympic bid, the lessons above still apply, albeit at a much smaller scale.

Every year, North Bay communities are offered opportunities, such as a new drugstore in Sebastopol, a new retail shop in Sonoma, or a downtown development in another city.  These opportunities have risks and rewards.  The questions that potential Olympic host cities must answer aren’t that different from the questions that the North Bay cities must answer.

Looking at downtown Petaluma, one can argue that Theatre Square was the local Olympic bid of the last decade.  Were the principal and agent incentives aligned?  Did Petaluma overbid to secure the project?  Had adequate allowance been made for cost overruns?  Was the public ready to embrace the project with enthusiasm?  Did Theatre Square adequately accommodate the transportation future of the community?

None of the questions have clear or definitive answers.  But the Olympic lessons provide a prism through which to reexamine the process.

With all this now said, go find a television and enjoy the Olympics.  These really are two great weeks of entertainment.  Worries about the redevelopment issues can be set aside until after the closing ceremonies.

Schedule note: The monthly meeting of Petaluma Urban Chat will be Tuesday, August 7.  (We moved from our established date because of scheduling conflicts.)  As usual, we’ll convene at the Aqus Café at 5:30pm.  We’ll talk about meeting dates for the fall, an interesting offer for a future meeting, summer travel insights, and whatever else might arise.

Milestone: This is the 100th post that I’ve written for this blog.  Thanks to all who stop by.  You make the effort worthwhile.

As always, your questions or comments will be appreciated.  Please comment below or email me.  And thanks for reading. - Dave Alden (

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