Let the Bailout Games begin

Posted by admin on Jan 11th, 2010

By BOB MACKIN, 24 hours, Jan 11, 2009

All levels of government have had to come to the financial rescue of the 2010 Winter Olympics, leaving you on the hook for the tab. Once upon a time, when Vancouver 2010 was an itty-bitty bid they were called the “Sea to Sky Games.” Then the International Olympic Committee voted July 2, 2003 in Prague and president Jacques Rogge declared “Vonn-KOO-vah!” had won. Hello, “Canada’s Games.” Years turned to months and months turned to weeks. Now we count the days until the “Bailout Games.”

Even with some of the world’s biggest corporations involved, the 2010 Winter Olympics are held together by government spending.

Amid the Great Recession a year ago, VANOC’s message was all about being the shining light to guide B.C. to recovery because it had a billion dollars to spend. Spring came and chief executive John Furlong admitted a profit was unlikely.

Canadian Olympic Committee CEO Chris Rudge said in May that venues and pride would be the only legacies.

VANOC chief financial officer John McLaughlin said it best June 16, 2009 in a teleconference to discuss quarterly financial results.

“While some experts are suggesting the worst is behind us, we don’t believe we’ll see a marked improvement,” McLaughlin said.

Boom busted

Not since London 1948, the first post-World War II Games, has an Olympic organizer faced such economic challenges.

VANOC has continuously stated that sponsors are fulfilling core obligations of goods, services and cash.

But organizing committees expect sponsors to spend double or triple their rights fees on “activation,” which includes tickets, hotel rooms, souvenirs and advertising. Slow out-of-home advertising sales coupled with the failure to sign two more global sponsors led the IOC to pledge in August to help cover up to $22 million in losses after the Games.

Ultimately, B.C. taxpayers are responsible for balancing the budget when VANOC winds up in 2011.

VANOC was simply not prepared for the boom to go bust. The 196-page, $1.63 billion operations budget and business plan published in May 2007 included a $100 million contingency and just one reference to recession.

“The Canadian economy will remain relatively strong, with no recession, through Games time,” said the first of five assumptions on page 94.

Summer brought the U.S. sub-prime mortgage meltdown, foreshadowing recession. By fall 2008, founding VANOC chairman Jack Poole – a victim of the 1982 real estate market crash who was born during the Great Depression – declared the climate “scary.”

The Olympics are sport’s biggest marketing property and marketing money fuels an organizing committee’s operations. When a recession comes, advertising spending is the first casualty. The five rings aren’t sacred for pragmatic, results-oriented executives and shareholders.

VANOC postponed, with just two days public notice, the closed-door Nov. 19, 2008 board meeting. That week’s world press briefing was cited, but the delay until the first week of December offered executives and directors a chance to buy time to plot their next move.

Rookie Vancouver Mayor Gregor Robertson began 2009 with a bang, proclaiming Vancouver taxpayers “on the hook” for the entire $1.1 billion Olympic Village. An emergency sitting of the legislature granted Vancouver borrowing powers and a TD-led syndicate helped the city buy-out Wall Street’s Fortress Credit Corporation.

Parent Fortress Investment Group still holds debt-laden Whistler Blackcomb owner Intrawest, which is saddled with a US$524 million debt. The site of sledding sports and alpine skiing may be in receivership during the Games.

Sponsors Nortel in January 2009 and General Motors in June 2009 sought bankruptcy protection on both sides of the border. While most Nortel equipment was ordered or installed, Pontiacs and Saturns in the VANOC fleet disappeared when GM discontinued those brands. A US$57.6 billion infusion from the Obama administration and $9.5 billion from our feds and Ontario kept VANOC with wheels. Government help didn’t go unnoticed. Last June, the billboard across from VANOC’s 3585 Graveley St. headquarters thanked the 22 government partners in both official languages.

March madness

London 2012 CEO Sebastian Coe and Sochi 2014 CEO Dmitry Chernyshenko both travelled halfway around the world to Denver for the Sportaccord convention in late March where the IOC executive board held its only North American meeting of 2009. VANOC CEO John Furlong didn’t make the short trip to the Mile High City. He updated the IOC via teleconference on March 26.

That’s also when CFO McLaughlin sent a letter to Philip Steenkamp, head of the B.C. government’s Winter Games Secretariat, seeking more money for ceremonies and the torch relay.

McLaughlin has never commented on the amount, which was redacted by the secretariat for fear of financially harming the government.

The B.C. government claims it’s spending $765 million. Skeptical auditor general John Doyle plans to examine the books after the Games. Predecessor Arn van Iersel estimated in 2006 that the cost to taxpayers was $2.5 billion. Costs have since risen and a layman with a calculator can estimate $6 billion on Games-related road, rail, infrastructure and security alone.

The provincial government quietly decided last summer to spend $8 million on the fourth floor of the Vancouver Art Gallery for a B.C. Pavilion that wasn’t previously planned. It also assumed more Paralympic spending. Meanwhile, the Liberals cut community arts and sports before a throne speech that declared “the cupboard is bare” and a $2.8 billion deficit budget.

Ottawa went on a $37 million spree over two weeks last September, pledging $11 million for Own the Podium, $10 million for a Canada pavilion, $7.7 million for bilingualism, $6.2 million for tourism and trade promotion and $400,000 on the Cultural Olympiad.

Robson Square’s GE Plaza opened a year late Nov. 23. GE is the biggest private funder of the Olympics, mainly because NBC Universal is the biggest broadcaster. GE CEO Jeff Immelt told investment analysts in December that Vancouver 2010 would cause a US$200 million loss.

At Salt Lake 2002, NBC scored a US$75 million profit. CTV/Rogers hope to break-even, with sales of Believe souvenirs and tickets to high definition Olympic telecasts in movie theatres.

Expect to see B.C. tourism ads on NBC and CTV. Victoria has come to the rescue, effectively propping up the broadcasters who anticipated selling more ads at higher prices to private companies.

Enjoy the Bailout Games. You’re paying for them.

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