Olympic bidding group Boston 2024 may face no greater challenge than convincing the public that it will protect against financial calamity, which could require the city or state to step in and clean up the mess.
The group has said it plans to guard against that possibility by taking out various forms of insurance if it is named host city. On Wednesday night, it published more details about how that would work.
You can see the entire presentation here. A few quick takeaways:
It starts with the budget.
Boston 2024 says its operating and construction budgets are both based on conservative assumptions. (Olympic critics have disputed the conservative notion.) As an example cited in the presentation, Boston 2024 says it did not include revenue from the Paralympics in its cash flow projections but says costs for running the Paralympics are included in its expenses.
Boston 2024 projects more than $200 million in profits. It would not be able to protect against failing to meet its projections for costs or revenue, but Boston 2024 says the surplus and conservative budgeting method would help make sure that isn’t an issue.
Developers take some risk.
Aside from the operating budget, to host the Olympics, Boston 2024 would also have a capital budget for big venues such as the Olympic Stadium site at Widett Circle and an Olympic Village in Dorchester.
Both of those areas are being pitched as private developments that would eventually become new neighborhoods. These major projects have to be built in order to stage the games, so not completing them is not an option. Boston 2024 wants the private sector to take on almost all of the risk, saying the developers and contractors would be required to insure against their financing falling through or failing to complete the project.
Boston 2024 says it would protect against costs spiraling out of control for other venues by requiring contractors to agree to guaranteed maximum prices for the work.
A bunch of different policies.
Several policies would be secured to protect against things like canceled events, decreases in ticket sales due to star athletes missing the games, losses for sponsors failing to pay up, and general liability issues, Boston 2024 says. The presentation says the group plans to protect itself for more than $2 billion. The city, and for some insurance the state, would also be covered. Boston 2024’s budget includes $128 million for insurance premiums.
No policies are getting put in place any time soon.
Boston 2024 would not purchase insurance unless it is named the host of the 2024 Olympics, which would happen in 2017. It could try and line up some or all of the policies ahead of time. But with as many different types of insurance as it’s looking to secure, there wouldn’t just be one big contract sitting there, contingent on Boston being named the host down the line.
Boston 2024 says it is putting out a request for proposals for insurance brokers this month to further work on the plan.
Before and after the Boston Olympics