Olympics Marketing Agreement Among Issues Raised at City Council Hearing

Chris Dempsey, the co-chair of No Boston Olympics, spoke at a City Council hearing Friday.
Chris Dempsey, the co-chair of No Boston Olympics, spoke at a City Council hearing Friday. –AP

The Boston 2024 roadshow strode into City Hall Friday morning, as the City Council’s special committee on Boston’s Olympic bid held its first hearing. Boston 2024 officials and a No Boston Olympics co-chair testified at the hearing, making for a rare public discussion in which both sides presented their arguments.

New concern for No Boston Olympics

Speaking for No Boston Olympics, co-chair Chris Dempsey repeated a number of the group’s previous points. (You can read his full testimony here.) But he also hit on a new one that hasn’t seen much discussion to this point: The “joint venture’’ agreement that would need to be struck between Boston 2024 and the U.S. Olympic Committee as part of a bid.

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The International Olympic Committee requires that Olympic organizing committees (like Boston 2024) and National Olympic Committees (like the USOC) reach an agreement in which they share sponsorship revenue as a condition for awarding the games to a given city (Boston). In Boston 2024’s bidding document about its budget, the group said it would pay $600 million to the USOC as part of the joint venture agreement, a figure Dempsey highlighted in his testimony.

“We hope you agree that it is outrageous that the United States Olympic Committee would receive a $600 million payout made possible by Boston’s hosting long before the boosters have followed through on the myriad promises they are making to neighborhoods in Boston and communities across Massachusetts,’’ he said. “…We believe that if the bid moves forward, the $600 million should be held in escrow and only sent to Colorado, when elected leaders here in Massachusetts agree that Boston 2024 has fulfilled 100 percent of its community promises.’’

Boston 2024 disputed that characterization of the joint marketing agreement. Doug Rubin, who co-chairs Boston 2024’s marketing and PR committee, spoke to Boston.com after the meeting. Here’s how he explained the marketing agreement. Get ready—it’s kind of complicated:

The USOC already has its own set of sponsors, as do other National Olympic Committees. USOC sponsors are able to use Team USA and Olympics branding. If, come 2017, Boston is awarded the 2024 games, Boston 2024 and the USOC would form a “joint venture’’ that would take on those sponsors. The venture would be managed by Boston 2024, and it would effectively put the USOC and Boston 2024’s branding rights under one umbrella for sponsorship purposes.

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The USOC would receive a share of sponsorship revenues through the joint venture. Overall, the bidding document estimates, $1.6 billion would be raised in domestic sponsorships, with $600 million going to the USOC. Boston 2024 would get the rest, to go toward Olympic operations.

Rubin said the revenue sharing system is meant to ensure that the USOC gets the sponsorship money it would otherwise be generating through Team USA if it hadn’t entered the joint venture. An IOC document from the 2012 bidding process backs that description up, saying: “Revenue from the joint marketing programme is to be shared between the OCOG [such as Boston 2024] and the host NOC [such as the USOC], with latter foreseen to receive a share equal to what it would have received had the Games not been staged in the host country.’’

While Boston 2024’s budget says the USOC would get $600 million as part of this agreement, the actual joint venture agreement has not yet been negotiated and would not be finalized until after Boston’s bid was selected in 2017. It would likely cover a six-year period. In the four-year period ending in 2012, the USOC reported “marks rights income’’ and “licensing royalty income’’ of about $313 million; extrapolated over six years and accounting for inflation, that’s closer to $480 million.

Got all that? If nothing else, the joint venture system is an example of the complexity of the Olympics budget, much of which remains to be communicated to the public.

Following the meeting, Dempsey defended his organization’s position on the joint venture, and argued the USOC would be able to generate more “incremental’’ revenue than it would during the normal Olympics cycle due to being the host country, and Boston being the host city. (He said he did had not looked at the figures, but this would likely refer to the difference between the $600 million and $480 million figures above.)

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“We have no problem with the USOC making money,’’ Dempsey told Boston.com. “We have a problem with the idea that the USOC would get paid first, when Boston 2024’s promises have been made [to Boston and Massachusetts residents].’’

Councilors with questions

City councilors peppered Boston 2024 with questions for about two hours, covering a wide range of concerns. Councilors were provided with details about the bidding schedule between now and 2017, on how public input bid from throughout the city and the state will affect the bid, whether events could be held in other parts of New England or the country, and reforms adopted by the International Olympic Committee last year to attract more cities to bid for the Olympics.

Councilor Josh Zakim, who has moved to get four non-binding Olympic-related ballot questions in front of Boston voters in the fall, asked Boston 2024 Chairman John Fish whether Boston 2024 would support holding a referendum on the Olympics. “We would never want to ask anybody not to exercise their right,’’ Fish said, which is similar to Mayor Marty Walsh’s position that he would not “stand in the way’’ of a ballot question.

Some critics of hosting the Olympics in Boston have spoken about the “opportunity cost’’ of doing so, saying that any energy put into bidding is time that could have been put elsewhere. Councilor Charles Yancey raised that point to Boston 2024, arguing that there has been a lack of investment in schools. “Why should we spend this amount of time and effort looking at hosting an event that really will be a limited duration?’’ he said.

“I have a lot of faith in this body that you can do multiple things. You can talk about [education and transportation] and talk about the Olympics at the same time,’’ Boston 2024 CEO Rich Davey said, adding that getting students and youth sports programs involved in the Olympics would be a priority for Boston 2024.

The special committee was formed by City Council President Bill Linehan of South Boston. He said he made himself chair of the committee because his district—which includes the site of the proposed Olympic Stadium and the Boston Convention and Exhibition Center—would be widely affected by the Olympic plans, at least in their current format.

No councilor took a clear position for or against the Olympics. Most had multiple questions, and several urged transparency in the bidding process. Some seemed more skeptical than others, though. “If there’s any city in America that deserves to host the Olympic games, it’s the city of Boston,’’ Linehan said. Linehan said he wants to approach the Olympic idea with the question of: “Why can’t we host the games?’’

On the other end, Councilor Tito Jackson said: “The question is not can we, it’s should we.’’ Jackson said he was concerned about the possibility of residential displacement as a result of the games, and that he worried Boston 2024’s fundraising efforts could effect nonprofits in the city.

Middle ground?

During Boston 2024’s testimony, City Councilor Tim McCarthy said he felt No Boston Olympics is an asset to the bid, by challenging it to become better. “The better competition you get, the better you get,’’ McCarthy said. “Their competition truly could assist you.’’ Other councilors agreed.

Fish called that analysis “spot on,’’ and said Boston 2024 and No Boston Olympics have been in conctact, including for a meeting earlier this week. He said Boston 2024 hoped to take “the fever out of the conversation.’’

During Dempsey’s testimony, Yancey asked whether the group was absolutely opposed to hosting the games. No, it turns out. “We don’t think it’s inconsistent to oppose the bid and make the bid better,’’ Dempsey said. “We could see ourselves potentially supporting a different bid or a changed bid. We’re just not there at this point in time.’’

Asked to name what No Boston Olympics would like to see worked into the bid, Dempsey argued that the city should “draw a line in the sand,’’ and refuse to guarantee cost overruns for the games, as past host city contracts have required. (Boston 2024 and the city have said they plan to take out an insurance policy to protect it from that possibility, though Dempsey noted Friday that the group’s budgeting documents do not explicitly include any premiums for a policy.)

Dempsey also suggested there should be an independent auditor to dig into Boston 2024’s plans and to watch over the games as they move forward. And he said he would like to see Boston 2024 develop more alternative ideas for the bid so that they are not forced into a corner if the games come to Boston.

Correction: An earlier version of this article cited the USOC’s four-year 2012 sponsorship revenue as $285 million. That figure excluded revenue from licensing, which would also be included in the joint venture program.

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