Vancouver 2010 Olympic Bid

March 5, 2003

Tourism BC Begging for Guidance on Olympic Bid

A major part of Premier Campbell's economic plan is missing. Convention Centre expansion, Sea to Sky highway construction, a possible rapid transit line and various Olympic venues could result in thousands of construction jobs over the next seven years. It is rather ironic that the government that promised economic revival based on tax cuts is turning to public sector mega-projects to stimulate job growth. In the long term, growth from a successful Olympic bid is primarily related to tourism which also relies on the public sector for successful marketing. The plan for tourism marketing does not exist.

In a free society people are able to continue to voice their opposition to the Olympic bid even though both the Vancouver vote and various public opinion polls show that a majority support the bid. More constructive criticism might be targeted at weaknesses in the economic plan so as to encourage government to fill in the gaps.

The Auditor General's report on the 2010 Olympic bid said "the economic impact scenarios with the biggest payoffs will require an exemplary tourism marketing program both before and after the Games for the whole of British Columbia (in addition to the Games marketing planned for by the Bid Corporation)." Tourism British Columbia, the crown corporation responsible for tourism marketing and accountable to Minister of Competition, Science and Enterprise, Rick Thorpe, quoted the Auditor General's report in the"service plan" for 2003-2006 that it tabled with this year's budget. It did not include the Auditor's parenthetical remark that marketing must be "in addition to the Games marketing planned by the Bid Corporation." It observed that "In partnership with other destination marketing organizations such as Tourism Vancouver, Tourism Victoria, Tourism Whistler, Tourism Richmond and the Canadian Tourism Commission, Tourism British Columbia has identified a need to develop a framework that identifies key priorities for a 2010 tourism strategy, including discussions of product, infrastructure, human resources, marketing and relative funding requirements." Unfortunately, and shockingly, that is all the three year service plan for Tourism BC says about the 2010 Olympic bid!

It should be noted that over half of the tourism benefits identified in the economic impact report prepared for government is related to the Convention Centre Expansion rather than to the Olympics. The federal and provincial governments have assured British Columbians that the Convention Centre Expansion will proceed even if the Olympic bid is unsuccessful. A marketing plan for the Convention Centre Expansion is necessary by the time ground is broken for the project. Big conventions are planned years in advance.

There is a catch 22 in all of this. When the Campbell government announced that the Convention Centre Expansion would be funded by the tourism industry as well as by the federal and provincial governments, it was revealed that the tourism industry's share will come from the hotel tax that is currently used to fund tourism marketing.

Tourism British Columbia receives 1.65 points of the 8% British Columbia Hotel Room Tax. It is planning to spend $106 million on its marketing programs over the next three years which is more than its expected income ($25 million per year of which is from the hotel tax). Tourism Vancouver, Tourism Victoria, Tourism Whistler, and Tourism Richmond also receive hotel tax revenue equal to 2% of the accommodation purchased within their boundaries. Somewhere out of that pool of money that is currently going to marketing, $90 million is going to be diverted to pay for part of the Convention Centre Expansion at the same time that a significantly expanded marketing effort is necessary. The updated economic impact study for the Olympic bid said that the tourism organizations mentioned here are working with the Canadian Tourism Commission as a committee called "Tourism 2010" to develop a tourism marketing plan for the province. It noted that "In addition to the need for partnerships and co-ordination, there is also a need for sufficient levels of funding to support the marketing effort. The tourism projections in this model depend on the assumption of coordinated and successful tourism marketing. Further analysis should be undertaken to ascertain the level of coordination and funding that will be necessary to achieve the successful marketing on which the tourism economic impact is computed." In other words, someone else needs to figure out how to obtain the results government has assumed will be achieved. No wonder the Auditor General said the economic benefits are subject to "material" error!

February 5, 2003

Translating the Auditor General's Report
on the 2010 Vancouver Olympic Bid

Some people are putting a misleading spin on the Auditor General's Report (http://www.bcauditor.com/PUBS/2002-03/Report6/OlympicGames.pdf ) on the Vancouver 2010 Olympic bid. This handy guide attempts to translate some of the passages found in the report. Some quotes from the Auditor's Report have bold emphasis added to draw attention from readers.

Report: "The Province is the sole guarantor of the Games. This is an important commitment. Predicting costs, revenues and economic conditions seven years into the future is inherently difficult and imprecise. To protect the Games, the IOC requires a guarantee that unforeseen costs will be covered. The Province is making that guarantee. Any cost increases or revenue shortfalls the OCOG cannot control-arising from inflation, interest or exchange rate fluctuations, the state of the economy, world threat levels, weather events and so on-are a financial responsibility of the Province."

Translation: A successful bid is an enormous risk to the province.

Report: "Estimating revenue is not an easy task, given the inherent variability of many of the revenue sources. Obtaining the estimated levels of revenues provided through the IOC-broadcasting and international sponsorship-is essentially outside the OCOG's control. And, achieving some other revenue goals-for example, for Canadian sponsorship-will need a favourable economy and a very good marketing program."

Translation: The revenue estimates are probably unreliable and depend on good luck.

Report: "The Province's costs shown in this report do not include those related to an expanded Vancouver Trade and Convention Centre or a new rapid transit link from the Vancouver Airport to downtown. The Trade and Convention Centre would be useful to Games organizers, but not essential-in fact the Bid Corporation has developed a budget and plan for an alternative location for the media centre. The rapid transit link is not necessary for transporting people during the Games, and may not be ready in time for them."

Translation: $2.5 billion in capital costs are not included in the report. Over half the benefits previously attributed to a successful bid are due to the Convention Centre but are not included here because the Bid Corporation has an alternative plan that makes the Convention Centre expansion unnecessary.

Report: "…the economic impact scenarios with the biggest payoffs will require an exemplary tourism marketing program both before and after the Games for the whole of British Columbia (in addition to the Games marketing planned for by the Bid Corporation)."

Translation: A major part of the plan is missing.

Report: "The Province has guaranteed to the IOC and others (including the City of Vancouver) it will cover any unforeseen costs of the Games. It is providing for this obligation by including a $139 million contingency in its budget. We are concerned this contingency allowance may not be sufficient to cover the many possible cost increases or revenue decreases that could affect the Games between now and 2010."

Translation: There is not enough money in the budget to cover the blank cheque.

Report: "… the estimated minimum cost related to putting on the 2010 Olympic Winter Games and Paralympic Winter Games, including the costs covered by Games operating revenues, is $2,892 million."

Translation: Minimum means it will go up from there.

Report: "The Province's economic impact studies estimate that the Games could, over the next 12 to 17 years, generate incremental provincial Gross Domestic Product increases of $2.0 billion to $4.2 billion, and incremental provincial tax revenue increases of $214 million to $538 million. Readers should be aware that all of these estimates are future oriented; actual results achieved will vary from estimates, and the variations may be material."

Translation: "Material" is auditor speak for very, very big. The estimated benefits amount to less than 1% of GDP, are subject to major errors and may not be capable of measurement 17 years from now.

Report: "The estimates we examined were developed based on the assumption that all aspects of the Games would be well managed."

Translation: The games had better not be managed like the computer project in the Premier's office.

Report: "We also concluded that some revenue targets-in particular, local sponsorship, donations, and other revenue-will require favourable circumstances and effective marketing if they are to be met. This combination of inherent variability and challenging revenue targets means revenues are a high-risk part of the Bid Estimates."

Translation: You cannot count on the Premier's assurance with respect to how much taxpayers will have to pay to cover the shortfall. It will likely be higher than $1.248 billion.

Report: "Bid Corporation staff believe that the contingency in the Games expenditure budget would also cover any revenue shortfall, should one occur. We believe that although this contingency may be adequate to cover expense variability, it may not cover revenue shortfalls as well."

Translation: Don't believe what they tell you about contingency funds.

Report: "Bid Corporation acknowledged to us that its local sponsorship revenue estimate is greatly increased in size over revenues generated by past major events in Canada or by the Canadian Olympic Committee. Nevertheless, because the Olympic brand is exclusive and valuable, they believe the revenue goal is achievable-given a favourable economy, strong sponsorship support and effective marketing."

Translation: The estimates for local sponsorship revenues are heavily padded and not reliable.

Report: "Vancouver's revenue estimate is based on selling more tickets than either of the two previous winter Games, because its venues are larger and it plans to sell tickets to the medal ceremonies separately. The ticket prices for premium events are generally higher than the local market is used to, based on the IOC view that the Games are a once-in-a-lifetime event."

Translation: The estimates for ticket revenue are also inflated and probably not attainable.

Report: "Unlike licensing, some other revenue sources such as donations are only proposals. A further $28 million of other revenue is a projection of revenue sources yet to be fully identified or properly defined. As such, these amounts are not supported by assumptions that can be assessed for reasonableness at this time."

Translation: The padding of revenue never ends!

Report: "The Province, through its guarantees, has agreed to be responsible for a number of currently unquantifiable costs. In its approved funding envelope for Games-related expenditures, the Province has included a $139 million contingency for such costs. However, we have been unable to find a reasoned methodology to support that amount, and are concerned that it may be insufficient."

Translation: The spending side is also a wild guess.

February 17, 2003 UPDATE - The Province has ended the uncertainity by annoucing the land purchase and a construction schedule. Minister Thorpe said that the expansion will proceed with or without the Olympics.

January 18, 2003

Convention Centre Expansion at Risk

The Auditor General's report on the 2010 Olympic bid (http://www.bcauditor.com/PUBS/2002-03/Report6/OlympicGames.pdf ) contains some disturbing news about the promised Convention Centre expansion. According to the Auditor's report "The Trade and Convention Centre would be useful to Games organizers, but not essential - in fact the Bid Corporation has developed a budget and plan for an alternative location for the media centre." (page 3)

What that "alternative location" might be is not clear, but section 16.5 of the Bid Book says "The International Broadcast Centre (IBC) will be located in the proposed Richmond Trade and Exhibition Centre (RTEC) which will be built on land currently owned by the federal government in the community of Richmond, immediately south of Vancouver and adjacent to Vancouver International Airport." It goes on to say that "The Main Press Centre (MPC) will be located in the Vancouver Convention and Exhibition Centre (VCEC) on Vancouver's central waterfront." Only one sentence is devoted to the possible expansion of the convention centre. The bid book notes that "A project to expand the VCEC is underway, and is being coordinated and supported by both the federal and provincial governments." If the expansion is a done deal, why does the Auditor's report say that "the Bid Corporation has developed a budget and plan for an alternative location for the media centre"?

At the time federal participation in the Convention Centre expansion was announced, the federal news release contained information about a delay when it said "Prime Minister Chrétien and Premier Campbell also announced that their governments would sign a formal agreement confirming this commitment within the next six months." That was on December 4th. If six months becomes seven months, as it often does in government, it would put signing the deal after the IOC announcement on the successful bidder. Toronto got its waterfront improvement without winning a bid. Vancouver should get the convention centre expansion whether or not it gets the Olympics.

The expansion of the Vancouver's Convention Centre accounts for over half of the economic benefits attributed to the Olympics in the province's economic impact study. A November 22, 2002, news release claimed that the combined impact of the 2010 games and an expanded Vancouver Convention and Exhibition Centre could generate $10.7 billion in economic activity. By contrast, the Auditor General's report says "The Province's economic impact studies estimate that the Games could, over the next 12 to 17 years, generate incremental provincial Gross Domestic Product increases of $2.0 billion to $4.2 billion …" The difference of $6.5 billion or more is due to different time lines (20 -30 years vs. 12 to 17), and the inclusion or not of the Convention Centre expansion. With so much of the economic impact of the Games really attributable to the Convention Centre expansion, the words of the Auditor General that the expansion is not essential are particularly troublesome.

In the absence of the Convention Centre Expansion, the most optimistic forecast for benefits from the games, $4.2 billion over 12 to 17 years, amounts to a lift of only 2 tenths of one percent for GDP (14 years times current GDP of $130.1 billion divided into $4.2 billion). The $1.2 billion that will be spent on the games plus several billion more for infrastructure could no doubt generate far more economic growth than that on a variety of alternative projects.

The provincial government should immediately respond to the uncertainty created by the Auditor General's report. If the Auditor is wrong, then what else is inaccurate in his report? If he is right, then what games are being played by the federal and provincial government on the expansion of the Convention Centre? Perhaps the Auditor's words refer to nothing more than what would happen if the expansion is not completed in time, but it is hard to believe that Vancouver would host the games in a construction zone. Keep in mind that the attempt to expand the Centre with a private-public partnership has already failed. Has the Auditor signaled that both levels of government are prepared to back out of their commitments?

To end any uncertainty, the Premier should clearly state that the Convention Centre expansion will proceed whether the Olympic bid is successful or not.

December 17, 2002

Salzburg 2010

Recognition of the strength of the Salzburg bid will not stop critics from blaming Mayor Larry Campbell and COPE if Vancouver loses the bid. Part of that spin is that COPE would never have approved a vote on the Olympic bid if the NDP were in power. Those who advance that argument, including Vancouver Province columnist Mike Smyth, demonstrate that they know nothing about COPE. Premier Gordon Campbell seemed to be a big fan of citizens voting on anything they desire when he introduced a private members bill in 1995 to amend the Recall and Initiative Act, and as Premier he insisted that a vote on treaty principles was the right thing to do no matter what the cost. As is too often the case, what is right seems to depend on whose side you are on and let the facts be damned.

Critics of Vancouver's upcoming vote tend to forget that there is no guarantee that Vancouver will win the bid, vote or no vote. Since everyone's costs are someone's income, the $35 million spent on the bid will benefit someone even if it doesn't produce the games for Vancouver-Whistler. One of the beneficiaries of the bid, even an unsuccessful bid, should be tourism in British Columbia. The economic case for an expanded convention centre is much stronger than the case for the Olympics. Perhaps that is why the economic study for the bid declines to separate the future benefits of the convention centre from the marginal benefits of the bid. Ottawa and Victoria should be crystal clear that the convention centre expansion will proceed with or without a successful Olympic bid. Attention to those details seems to be lost as debate shifts to the merits of COPE honouring its election promise.

GamesBid.com is a website that describes itself as "an authoritative review of Olympic bid business". Its bid index has consistently put Vancouver in second place to Salzburg. Those who believe that a successful bid would distort priorities and lose money might be inclined to shout "Go Salzburg". Readers of the GamesBid.com website will discover that Salzburg also has its Olympic bid critics. In a news story dated November 7, 2002, Helmut Huettinger, spokesman for a concerned citizens committee, appears to have gotten the director of the Salzburg 2010 to admit that the worst case scenario could be that the 2010 Games would create a 20 per cent deficit or about 100 million euro. That may sound like a lot but it is small relative to the $6 billion price tag that some put on the Vancouver bid. Of course, followers of the competing bids know that the Salzburg bid does not depend on the massive, and perhaps inappropriate, infrastructure spending that is required for Vancouver.

Does anyone really believe that an expensive expansion of the Sea to Sky Highway would be BC's top highway project if it weren't for the bid? Critics of Mayor Larry Campbell's vote on the bid say that anyone denied a community grant in the future may say that the money spent on the vote could have gone to their community group. The same applies thousands of times over for every denied or postponed highway project that must wait while the Sea to Sky is upgraded beyond all reason. Those who point to deaths on that highway should consider the number of single vehicle fatalities on the Coquihalla Highway. Spending hundreds of millions will not prevent fatalities from reckless driving.

Some economists argue that any form of government spending, even building a pyramid in the desert, will help the economy when it is down. Others believe that any government spending should always be done on the highest possible priorities. Who would have thought that the Campbell Liberals are in the pyramid camp?