Cost overruns have been a ubiquitous feature of the Summer and Winter Olympic Games — since 1980, the Summer Olympics have experienced an average cost overrun of 252%.
The Lake Placid Games in 1980 required more than $200 million in bailout funding from the State of New York and the federal government. The Atlanta Games in 1996 received more than $800 million in government money and had cost overruns of 147%. The 2012 Games in London had a nearly threefold overrun, with a final cost in excess of $18 billion. The Sochi Winter Olympics in 2014 is thought to have cost between $50 billion and $65 billion and required massive subsidies from the Russian government.
And the costs don’t end when the games are over. Beijing is struggling with the ongoing cost of maintaining its Olympic stadium. Athens and Rio de Janeiro are letting many of their Olympic venues crumble into ruins.
Of course, it is possible to have a cost overrun and still have a positive cash flow. But Olympic reports of positive cash flows should be taken with grains of salt.
Consider the Winter Games in Sochi in 2014, which reported a positive cash flow despite a final cost in the range of $51–67 billion. The positive balance came from a massive financial transfer from the Russian treasury to the books of the Sochi organizing committee.
Other Games have also reported a positive cash flow. This usually results from the official report only considering the operating budget of the Games, not the larger budgets for venues or infrastructure.
One striking exception to the pattern was the Los Angeles Games in 1984. The previous three Summer Games were financial or political debacles. Mexico City 1968 was plagued by political repression, militant protest, and air pollution. Munich 1972 was haunted by the terrorist operation at the Israeli compound of the Olympic Village. Montreal 1976 suffered from incompetence and corruption, resulting in a final cost that rose to more than nine times the original estimate.
When the bidding took place in 1978 for the 1984 Olympics,
the IOC received only one bid, and Los Angeles recognized and
took advantage of its position. The IOC had to choose between
accepting the city’s terms or having no host. Those terms included
that the city would not financially backstop the Games and that
it would use old venues left over from when it hosted the 1932
Olympics, as well as using dormitories at UCLA and USC to house
the athletes.
The International Olympic Committee recently announced that Los Angeles will host the 2028 Summer Games. The city is once again vowing to reuse existing structures for the Olympic Parks and to use campus dorms for the Olympic Village.
Will Los Angeles be the latest victim of massive Olympic debt — or will we see a repeat of 1984?