What is more eternal than the famous Olympic Eternal Flame? Eternal cost overruns by Olympic sponsoring nations.
By all accounts, the Tokyo Olympics are extremely unpopular among Japanese citizens, and the reasons have nothing to do with the resurgence of COVID in that country. The events are taking place with no live spectators allowed in the seats while medals are handed out and world records are broken, which is surely annoying. But the real irritation is cost.
Hosting such a major gathering, and constructing the athlete village, arenas, and other venues for 67 different types of sporting events, from baseball fields and bicycling tracks to equestrian arenas and synthetic kayaking rivers, is extraordinarily, indeed monumentally, expensive. The prize for most money ever spent to host an Olympic event goes to Russia’s Sochi winter Olympics, which reportedly cost just under $22 billion. London’s summer Olympics cost an estimated $15 billion of taxpayer dollars; Brazil spent an estimated $13.7 billion on the 2016 Rio Olympics, and every Olympic host from 1992 to the present has spent at least $2 billion of public money—often much more.
The 2020 Tokyo summer Olympics, delayed to 2021, has broken all records, costing the Japanese government (and, by extension, its citizens) an estimated $28 billion. Part of the cost was the inevitable one-year delay, which added roughly $2.8 billion to the final tally. But like virtually every other Olympic bid, the Tokyo event was estimated to cost far less than it eventually did; the Japanese bidding committee proposed to spend just $7.3 billion when they were awarded the event back in 2013.
There are several lessons here. One is that if your local officials are thinking about contending for the privilege of hosting an Olympic spectacle, you should think about drafting an opposing petition. Another is that, if your local officials succeed, be skeptical of any of their cost estimates. The citizens of Montreal learned that lesson the hard way, when their 1976 construction costs came in 720 percent over budget. Barcelona, in 1992, reported 266% cost overruns, while Russia’s Sochi Olympic construction costs ran 289% over the initial estimates.
But of course, the host city still has those newly constructed venues, which are surely worth some decent fraction of the cost of building them. Right? As it turns out, the fancy ‘bird’s nest’ stadium built in Beijing, and similarly extravagant venues in Sarajevo, Athens, and Rio, are now crumbling and largely forgotten—or, at least, the government hopes they are fading from their citizens’ memories. The same fate may or may not happen to the city of Tokyo but given the enormous cost of hosting games that will proceed without spectators, one might forgive the citizens of Japan for deeply resenting their part of the “bargain.”
This article was written by an independent writer for Brewster Financial Planning LLC and is not intended as individualized legal or investment advice.