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SEIFFE:  Ten Summers Hence

Saturday, March 17, 2007

By Ralf Seiffe

Quick!  Can you name a local, state or federal capital project that finished under budget or on time? Whether it’s one of those monster police stations that have become so popular in the suburbs, a state highway project or a prescription drug program, I cannot think of a single one since Hoover Dam that met its initial projections. This lesson applies to host cities all over the world that have fallen for the siren of the Olympics and have over-spent on the projects the Games require.  Chicago taxpayers will certainly learn this lesson anew if the Olympic boosters and Mayor Daley are able to capture the 2016 Games. 

One of the reasons the Olympic Games are so dangerous to the municipal fisc is that they occur on a date certain.  Right now, the International Committee has probably already set the actual dates on which the Games will occur ten summers hence.  The problem is meeting this exact date which is normally not the strength of municipal enterprises.  Think of the Brown Line project or O’Hare expansion; have these projects issued an exact time and hour they will begin operating?  Obviously not but, the opening ceremonies do occur on a schedule and to meet it often requires heroic--that is to say very expensive--efforts. 

Experience shows the difficulty in meeting Olympic cost projections.  Just this morning, The Chicago Tribune reported that the London Olympics Committee will miss its original estimate by 200%; their initial $6 Billion estimate has risen to a staggering $18 billion.  That’s a cost over-run that’s twice as large as the whole project was supposed to cost.  The French, whose own Olympic bid was bested by the English, must certainly be putting the results of this contest with their cross-channel rivals in the same category as the Battle of Hastings. 

That unforeseen money has to come from somewhere and the only outfit able to swallow cost overruns of this magnitude are taxpayers.  The Olympic organizing committee knows this, too.  By insisting the city put up a half-billion dollar completion bond, these experienced athletic impresarios refuse to even consider the local bid unless they know the taxpayers are the final guarantors of the project.  If this was really a private venture that will not require public money--as the mayor promised--the sponsors would purchase a surety bond in the private market.  This shouldn’t be too hard a task for Pat Ryan, one of the smartest insurance execs in the nation. 

That the private sponsors must enlist the city’s credit means they can’t find some private guarantor willing to underwrite the project’s promises to the International Committee.  This tells me all I need to know about the likelihood that the project will perform, financially. While the USOC is certainly right to insist that the city guarantees bureaucratic problems will evaporate without its usual political tax, it should not be necessary for the City to financially obligate itself for a private venture. 

One question the Olympic Committee should ask is whether the city’s guarantee is any good.  Chicago has huge and growing obligations promised to its employees; yesterday’s paper reports the CTA is so broke that even a doubling of fares would not cover its capital and operating expenses; O’Hare is starting to vacuum up spare cash that the airlines now refuse to contribute and the Governor’s tax plans, over the next ten years, will create Detroit-style economic problems for the city. 

Worse for Chicago, the suburbs are starting to see the folly of enabling the city’s financial foolishness.  By paying county taxes that cover costs that are almost exclusively generated by Chicago, suburban voters effectively provide the money that supports the city’s political set-up.  It’s no accident the man controlling the county’s money is also named Daley. One might call this “Strogerism” where even Republican County Board members see their duty as representing the government employees, rather than the taxpayers.  Suburban voters will eventually tire of Strogerism and will ask for Cook County to be broken into three of four counties--all of which will still be the largest counties in Illinois. 

If that happens, Chicago will no longer be able to use the artifice of the county to tax the suburbs so it can provide services to Chicago residents.  If Chicago residents had to shoulder the total costs of the city, their taxes would rise substantially.  If so, one wonders if all those big, new condo buildings along the lake would become “see-throughs.” 

So, the Mayor and the City Council have agreed to trade a half-billion that could otherwise be spent on permanent and useful infrastructure improvements.  In exchange, these Jack-in-the-Beanstalkers have bargained for a two week party leaving stadia that are only good for sports that have long passed from vogue.  After all, when’s the last time you copped tickets to a shot-put tournament even if the warm-up act was the triple jump? 

If this giant wad of cash must be spent, better to clean up the subway or use it for some other long-term benefit to the city.  If it must be spent on circuses, how about this suggestion: a half-billion in cash should be more than enough to buy every parcel of property in Green Bay, Wisconsin. The city should buy the town and then under, the Kelo eminent domain decision, condemn Lambeau Field and turn it into a luxury condo project.  Sell the condos for well under market to retiring city workers whose pensions cannot be paid.  Then, move the Green Bay Packers here--as the home team when the Bears are on the road.  Better yet, schedule them as the late game as a football “double header.”  I bet the ratings the Chicago Packers would generate--over years and years--would dwarf any benefit of a 2016 Olympics.  

© 2007 Ralf Seiffe

Ralf Seiffe advises business start-ups and product launches from Chicago, Illinois and is a political analyst and columnist for the Illinois Leader and Illinois Review.

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