Beacon Hill leadership released Tuesday the long-awaited Brattle Group report on Boston 2024, indicating that despite bid organizers’ assurances, Massachusetts taxpayers would have been “the ultimate risk bearers.”
The nearly 200-page economic analysis, commissioned by Gov. Charlie Baker and conducted by the Cambridge-based global consultancy firm for up to $250,000, pivoted from a diagnosis to a post-mortem with the demise of the Olympic bid last month. In compiling the report, The Brattle Group spoke with members of Boston 2024, No Boston Olympics, the Metropolitan Area Planning Council, the Massachusetts Smart Growth Alliance, Transportation for Massachusetts, MassDOT, and the MBTA, as well as Professor Edward Glaeser of Harvard University.
The report pokes holes in a number of Boston 2024’s rosy cost projections. For example, the report states that bid organizers’ miscalculations of improvements needed for the MBTA alone “could have increased the costs by approximately $1.1 to $1.3 billion, if they were able to be completed at all prior to 2023.”
It also places the Boston bid in the context of past Games, including London’s, to which organizers often drew parallels throughout the bid’s brief existence. “The experience of the 2012 London Olympic Games suggests it is possible that the Boston Olympic Games would have been at risk of generating over $300 million less than projected,” the report says.
One section, titled “Analysis of Risk Bearing,” states in no uncertain terms who would have been left on the hook for potential overruns (emphasis theirs):
The IOC does not bear any of the financial risks associated with the Olympic Games.
The USOC has limited ability to bear risk, and does not provide any financial guarantees.
The local organizing committee can nominally take on risk, but has limited ability to bear risk. It does not provide the required financial guarantees. It can, however, partially mitigate risks borne by others by exerting control over some costs and revenue streams, as well as through insurance, as suggested by Boston 2024 in Bid 2.0.
The Federal government would be responsible for security costs and Paralympics.
The State and Local governments, while having only limited ability to influence and shape the bid, would bear significant financial risks as the ultimate guarantors under the financial Letters of Guarantee. All of the risks associated with public infrastructure spending would fall completely on the Commonwealth. The taxpayers of the Commonwealth of Massachusetts would be the ultimate risk bearers.
The report found that the risks it examined are inherent to the bidding process as specified by the International Olympic Committee, calling them “inflexible elements” of any bid. “In requiring these guarantees, the IOC imposes financial risk on the part of those entities providing the guarantees and, ultimately, in the case of Boston, on city and state taxpayers,” the report says.
“Many of the concerns raised in the report mirror the same questions Mayor Walsh had throughout the bidding process,” Walsh’s spokeswoman Laura Oggeri said in a statement. “Ultimately, without yet having confidence that the proposed financial plan would not result in any cost overruns, the Mayor was unable to commit to signing a financial guarantee that put taxpayers at risk.”
“This independent analysis completed by experts hired by the state confirms that Boston 2024 was a risky deal for taxpayers. The healthy skepticism expressed by voters and leaders in the State House was warranted. Massachusetts dodged a bullet,” No Boston Olympics said in a statement.
The report highlights four broad categories of risk: those associated with revenue shortfalls; with increased operating costs; with relying on private developers; and with infrastructure investments needed to host the Games. “The biggest sources of risk, however, were related to securing commitments from private developers to construct the Midtown area and the Athletes’ Village, and those related to the necessary infrastructure investments,” the report says.
“This report highlights our bipartisan efforts to protect Massachusetts taxpayers and I want to thank Governor Baker and Speaker DeLeo for their partnership,” State Senate President Stan Rosenberg said in a statement. “Even though the bid was withdrawn, this report demonstrates that there were a series of real risks associated with bringing the games to Massachusetts.”
The report devotes a section to Boston 2024’s cost estimates for its venues, which were notably lower than actual costs in past games. The contingencies built into Bid 2.0’s budget were “considerably lower than those typically used in the construction industry for projects at such an early stage of development.”
“Similarly, Bid 2.0 had not fully developed its proposals for the Aquatics Center, the Velodrome, or the media center to allow a proper evaluation of the cost,” the report says. “However, past experience suggests that Boston 2024 would have been unlikely to meet those cost estimates, and a more reasonable cost estimate would have been over $970 million higher than reported in Bid 2.0.”
You can read the full report below.
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