According to the most recent polling, half of Massachusetts voters oppose bringing the Olympics to Boston.
But even among the 42 percent who support the idea, more than half—53 percent—say they think taxpayer money will be required to pay for it (nearly 90 percent of opponents think so as well).
The specter of public financing has been the chief concern about Boston’s Olympic bid. Organizing group Boston 2024 has said it will privately pay for venues and Olympic operations, with the state covering some infrastructure costs. It has further said it will heavily insure the games to protect against needing the public’s financial support.
Even so, the poll shows doubts organizers can keep the pledge of a privately financed games. That may be because one key element of hosting the Olympics looms over it: the government guarantee to cover any shortfalls in the private budget for the games.
What is the guarantee?
The International Olympic Committee, which governs the games and selects the host city, requires a financial backstop should Olympic organizers fail to make ends meet. That goes for the costs both to operate the games and to build venues, such as the proposed Olympic Village in Dorchester.
The guarantee is part of the host city contract, which is signed after selection by the IOC.
Would the guarantee definitely be a part of the bidding process for 2024?
The IOC won’t make public the guarantees sought from 2024 bidders until September 16, the day after the deadline to formally enter the race. We won’t know what, exactly, the IOC wants until then. A spokeswoman for the IOC told Boston.com that as the 2024 bidding requirements are drafted, “a number of items will be discussed/reviewed.’’
The financial guarantee, though, has long been a part of the process, and that seems unlikely to change.
A document put out by the IOC in June describing the 2024 bidding process for prospective hosts says: “To ensure the financial security of each edition of the Olympic Games, the IOC requests that a guarantee covering any shortfall in the [operating] budget is provided in the candidate city phase,’’ indicating the guarantee isn’t going anywhere this bidding cycle.
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Boston before and after the 2024 Olympics
Who would provide this guarantee in Boston?
While some venues would be located in other parts of the state, Boston 2024 CEO Rich Davey has said the city of Boston would be asked to sign the host city contract.
Boston Mayor Marty Walsh has previously told WBZ-TV that he “won’t be signing any document that will have the City of Boston responsible for any overruns.’’ That indicated that Walsh may be unwilling to sign the host city contract as long as it includes the guarantee.
However, in a statement to Boston.com, Walsh spokeswoman Laura Oggeri said Walsh would sign the agreement if Boston 2024 secures an insurance package to render the guarantee moot.
“The mayor has been very clear that he needs to be absolutely certain that Boston 2024 has identified an insurance policy and other financial safety nets necessary to guarantee the city of Boston is protected from possible overruns before he commits to signing the IOC host city contract,’’ Oggeri said. “Boston 2024 is currently working to put together those details for the mayor’s review.’’
What do we know about this insurance plan?
Boston 2024 has said its goal is to secure a multi-faceted insurance package for a swath of concerns that might otherwise be covered by the financial guarantee required by the IOC.
“Our job is to make sure that guarantee, if signed, is never called upon, period,’’ Davey said last month on the WBZ radio program Nightside.
The group is budgeting $128 million for insurance premiums. According to the plans, insurance policies would cover things such as: developers walking away from projects, event cancellation, or sponsors failing to pay up due to bankruptcy.
The concept of insuring against Olympic shortfalls has become more common in recent years. Boston 2024’s strategy builds on a plan put forth by Chicago during its failed 2016 Olympic bid. And the IOC’s recently published document on the 2024 bidding process suggests that each bidding group should “secure adequate insurance cover across all areas of [Olympic] operations.’’
Would the insurance negate the guarantee?
Well, for the moment, the insurance is no definite. Boston 2024 has not identified any potential insurers at this point. According to the plan it published last month, the next step is to hire a broker who will begin seeking proposals.
If Boston 2024 secures the policy, it cannot plainly and completely promise that the public would not be called upon to cover budgetary shortfalls. Boston 2024 Chairman Steve Pagliuca has acknowledged that the level of risk cannot be lowered to zero.
Chris Dempsey, co-chair of opposition group No Boston Olympics, argues that Boston 2024 may be able to protect itself against losing the money it has earned, but not the money it projects. For example, Boston 2024 may be able to protect itself if a sponsor bails or a ticketed event is canceled. But it would not be able to insure against underachieving its projected sponsorship or ticket revenue in the first place.
Boston 2024 says its insurance plan would mitigate most risks. And aside from insurance, the group says it arrived at its private budget conservatively—meaning its projections serve as a cushion against a financial shortfall.
Could Boston just not agree to the guarantee?
No Boston Olympics has listed a rejection of the guarantee as a top change it would like to see to the bid.
Dempsey believes the guarantee provides the IOC with little incentive to make sure a bid is financially viable. Further, he says, if Boston 2024 is confident in its plan, and if it’s going to insure much of the bid anyway, it shouldn’t need the guarantee.
“They should say to the IOC, ‘We’re not going to provide the taxpayer guarantee, but we think you’re going to like our plan enough without it,’’’ Dempsey said.
In the 2024 selection, Boston is expected to compete with at least four other cities: Rome, Paris, Hamburg, and Budapest. If those cities all plan to offer the guarantee, rejecting it may not be competitively viable. The IOC will select a host in 2017.
“We could not move forward as a bid city’’ if Boston 2024 rejected the guarantee, Davey told the Boston City Council in June.
In its 2016 bid, Chicago resisted the guarantee. It tried to set an upward cap for the guarantee—$500 million from the city, and another $250 million from the state of Illinois. Even that didn’t seem to totally satisfy the IOC, which noted the restriction in its evaluation of the bidding cities for that cycle. Chicago’s mayor eventually relented, saying late in the bidding process that he would be willing to sign the contract as the IOC presented it.
Los Angeles eschewed the guarantee for the 1984 Olympics. The city’s voters had already moved to block putting any money toward hosting the games, and Los Angeles was the only city to bid by the time the IOC’s selection came along, giving it the ability to say no to the clause.
Could somebody else handle the guarantee?
Angela Ruggiero, a member of both the IOC and the United States Olympic Committee, addressed the city council in May. She said the IOC could be open to having other parties sign the document requiring the guarantee, such as a private organization.
Reforms passed by the IOC last year may open that door, by saying the organization would “accept other signatories to the [host city contract]…in line with the local context.’’
Even so, Davey has said the group plans to ask only the city to sign the contract.
Andrew Zimbalist, an economist critical of the Olympics, told Boston.com he does not think a guarantee from the city would carry much weight. Zimbalist points to the city’s budget, which is less than $3 billion per year, and says the city has too little money to adequately backstop a bid. Zimbalist said it’s more likely that, even if it’s not signing the contract, for all intents and purposes the guarantee would really fall on the state’s larger coffers.
A ballot question proposed for next November would ask whether or not state funds could be used for the guarantee. If voters approved the question, it wouldn’t prevent the city from signing the contract. But the question’s author, Evan Falchuk, said a guarantee from the relatively cash-strapped city—with the state barred from helping out—may not be much of a guarantee at all.
Another concern about the city’s ability to guarantee the games has been floated by City Councilor Michelle Wu. At council hearings, Wu has questioned whether agreeing to cover cost overruns could violate the city’s charter. She has argued that city appropriations must be for specific figures and cannot be the type of open-ended costs an unlimited guarantee would call for.