An Olympic-Sized Mess

Today, the International Olympic Committee announced that Rio de Janeiro will host the 2016 Olympic summer games — beating out Madrid, Tokyo, and Chicago, despite the lobbying of U.S. President (and former Chicago resident) Barack Obama. The announcement met with cheers in Brazil and shock in the United States. But Obama and other Chicagoans shouldn’t fret. They need only look across the pond to realize they might have just dodged an Olympic-sized bullet.

Three years out from the 2012 summer games, the host city of London remains enthusiastic about the prospect of five thrilling weeks of international athletic competition. But it is nevertheless stuck in multibillion-dollar mud. The numerous oversight bodies and local and federal agencies are locked in turf wars. And the British government has little choice but to spend its way out, recession be damned.

For the planners of the games, indignities abound. Take, for instance, London Mayor Boris Johnson‘s ill-starred attempt to cut as much as $65 million from the games’ cost with a single venue change. This month, he asked that rhythmic gymnastics and badminton use Wembley Arena, a massive venue in northwest London, rather than a temporary structure the organizing committee planned to build in the Olympic Park (undergoing construction in Newham, an industrial area east of the city).

Johnson’s idea was quickly swatted down by Badminton England. The governing body (which  represents one of the sports Britain expects to medal in) forcefully argued that traveling to Wembley would take too much out of athletes, possibly "[damaging] their performance." The plenary discussions aren’t over, but the British press reports that badminton will, at the very least, likely play at a venue in the Olympic Park. Lesson learned: Don’t mess with Big Badminton.

But the problems posed by the venues are small compared with the problems posed by transporting the expected 25,000 visitors an hour to them. England is ancient. London is huge, and it is crowded nearly everywhere. Roads follow the routes of old cow paths. Highways are narrow and difficult to expand. The Tube, the city’s underground subway system, is 146 years old. London’s Olympic organizing committee has announced that there will be no cars allowed at the events, to make them greener. But Britain’s government long ago scrapped plans to build a much-needed cross-London train line. Instead, it purchased high-speed "Javelin" trains to run on existing tracks — meaning no new capacity — which the masses will take from St. Pancras station in central London to the Olympic Park three miles to the east.

For now, the games are still mostly popular with the British. But the public is taking notice of the expensive drawbacks. And with months to go and billions more to spend, the Olympics have waned in popularity. A series of media debacles hasn’t helped. Take, for example, London organizing committee chairman Sebastian Coe’s announcement of the logo for the 2012 games, a graphic representation of the number "2012" in neon colors with graffiti-inspired design.

Simply put: The public howled. Commenters said the logo most resembled a broken swastika, Stone Age art, or Lisa Simpson performing a sex act. "[This] screams 1985 at me like a dodgy set of legwarmers," one wrote. "It doesn’t look professional: it does, however, look like a fucking disaster area, so it probably suits the Olympics rather well," wrote another. A Tory member of Parliament, Philip Davies, called for a do-over and noted, "It is incredible that someone has been paid … to come up with this garbage."

One blogger asked: "How much of my money did they blow on this pink day-glo pig’s abortion of a logo, I wonder?" The answer? £400,000 — nearly $1 million — paid to top design firm Wolff Olins, which took more than a year to produce it.

Which gets to the big problem behind the games: money. The budget for the games has quadrupled to a truly Olympic size: £9.3 billion ($15 billion), and rising. Jack Lemley, the ousted chair of the Olympic Delivery Authority, forecast the games might at the end of the day cost Britain as much as the 2008 Beijing games cost China, in the region of $40 billion — more than Britain’s stimulus package, a mayday measure designed to save the country from economic ruin last November.

That was a cost China — an expanding economy with very low labor costs and the need for infrastructure anyway — could bear. It’s less clear that Britain can. For one, London hardly needs the facilities it’s building, and they are of questionable legacy value. More importantly, such exorbitant costs are coming at the same time that the British economy is struggling beneath the weight of the credit crunch and recession.

The recession is bedeviling the Olympic effort in two ways. First, a number of supplementary private funders have declared bankruptcy or dropped out, leaving Britain to bear costs alone. For instance, a $55 billion private effort to upgrade the Tube foundered when its primary contractor, Metronet Rail, filed for bankruptcy. The company had to be nationalized, costing taxpayers about $800 million and delaying work to modernize tracks and upgrade stations before the games. This spring, the organizing committee failed to find private investors to build the Olympic athletes’ village, which it plans to sell as an apartment complex after the games. Now, the government has to work out the project itself, and the prospect of turning a profit after the Olympics seems dim because the housing market has collapsed.

Second, costs are spiraling out of control at the precise time the government has less capacity to bear them. In response, it has burned through existing monies at a breakneck pace, exhausting or earmarking 78 percent of its contingency fund, for instance, with 34 months to go. It has plundered hundreds of millions in lottery money. All of which means London almost certainly faces raising taxes or going into debt to cross the finish line. There’s a Keynesian argument to be made that it could use the spending — and businesses have benefited and will absolutely continue to benefit from the windfall. But the burden of the cost will fall mostly on London’s taxpayers, not Britain’s, and they’ve already faced considerable tax hikes.

The common rejoinder to spiraling costs is that the Olympics make money for host cities. But the record is somewhat spottier than boosters admit. Athens and Beijing lost billions. Montreal, which hosted the games in 1976, took 30 years to pay off its loans. Los Angeles and Seoul made a tidy profit. Atlanta and Sydney broke even. It also depends on how you count: Is building a stadium factored into the cost? How about improving the subway? Expanding the housing stock? All this can leave a city with new and gleaming infrastructure — or a bunch of costly new houses no one wants to buy and stadiums no one wants to use.

That seems the most troubling trade-off of hosting the Olympics: Britain gets the glory of the games, but to do so will spend money it does not have on things it does not really need. So the spectacle in London should be giving Chicagoans Olympic-sized headaches.