The Civic Federation’s Analysis of the Financial Aspects of the Chicago 2016 Olympic Bid
On June 30, 2009 the Chicago City Council passed a resolution asking the Civic Federation to conduct a review of the financial projections made by Chicago 2016 for the City’s bid to host the 2016 Summer Olympic Games. Specifically, the resolution asked the Federation to deliver a report and recommendations to the City Council on Chicago’s financing of the 2016 games and any financial impact on taxpayers. Click here to download a copy of the resolution.
On July 14, 2009, the Civic Federation accepted the City Council’s request and agreed to undertake an independent review of the revenue and expenditure projections of the proposed 2016 Chicago Olympic Games. Click here to read our letter to the City Council.
In order to give the Chicago City Council adequate time to evaluate and consider the findings of the report, a narrative summary and full report were delivered to the Council members on Wednesday, August 26th and released to the public on this web page.
The Civic Federation and L.E.K. Consulting presented our findings to the Chicago City Council Committee on Finance at a public hearing on Tuesday, September 1, 2009.
On September 9, 2009, the City Council approved an ordinance authorizing Mayor Richard M. Daley to execute the International Olympic Committee's Host City Contract. The ordinance also implemented one of the Civic Federation's recommendations, described below, by requiring the Organizing Committee of the Olympic Games to provide regular financial reporting to the Chicago City Council should the city be chosen to host the 2016 Games. Click here to download a copy of the ordinance.
Findings and Recommendations
The proposed operating budget for the 2016 Olympics provides adequate protection for taxpayers. However, the development of the Olympic Village still exposes the City to continuing real estate risks that must be managed. In order to effectively carry out this plan and manage the risk associated with construction of the Village, the Civic Federation and L.E.K. recommend the following:
- The Organizing Committee for the Olympic Games that will replace the Bid Committee must be led by a professional and experienced management team that understands and executes the proposed Chicago 2016 plan. Contractors and employees must be chosen based on objective, non-political criteria.
- The proposed insurance coverage must be purchased to manage the risk to taxpayers that comes with guaranteeing delivery of the Games. The capital replacement insurance should be purchased to cover all financing for the Village by either the developer or the OCOG to make sure the taxpayers do not have to pay to complete the project.
- Increased public transparency about Olympic finances is needed to safeguard taxpayers interests because many areas of the Olympic plan are subject to change in the years leading up to the Games. The City Council must exercise its oversight role and require regular reporting on the status of the Games, including public disclosure of budgets, contracts and construction updates to the City Council. Any financial reports submitted to the IOC should also be filed with the City Council, with reasonable exemptions for competitive sponsorship details and other proprietary information.
Purpose, Methodology and Cost of the Project
The purpose of the project was to determine whether the plan to host the Games, as proposed, is fiscally reasonable or if it poses a significant financial risk to the taxpayers in the City of Chicago.
The methodology included a review of the fairness and reasonableness of the underlying financial assumptions and current projections contained in the 2016 Olympic bid proposal, including:
- Revenue and expenditure reports;
- Construction cost estimates; and
- Insurance guarantees.
Given the limited time to complete the review and the complexity of the proposed financial plan for hosting the Olympic Games, the report is not a financial audit. It is a high-level review focused on testing the assumptions and budget process used to develop the cost and revenue estimates as proposed for hosting the Games.
The Federation anticipates the final project cost will exceed $100,000, including L.E.K.’s consulting fees and the Civic Federation’s own research and analysis expenses. We secured funding from many local private foundations, listed below, to cover the cost of the project and have also contributed funds from our own sources.
In order to maintain the independence of this project, the Civic Federation Board of Directors did not find it appropriate to seek or accept funding from the Chicago 2016 Committee or the City of Chicago.
Who was Involved in the Analysis?
The Civic Federation
The Civic Federation is a non-partisan government research organization working to maximize the quality and cost-effectiveness of government services in the Chicago region and State of Illinois.
The Federation’s membership includes business and professional leaders from a wide range of Chicago-area companies and institutions. Click here to download our press kit, including information about the organization’s mission, history and work to improve government efficiency at the state and local level in Illinois.
Douglas Cameron, President, HIGroup, Inc.
Kevork Derderian, President, Continental Offices, Ltd.
Deborah Harrington, President, Woods Fund of Chicago
Thomas McNulty, Partner, Neal, Gerber & Eisenberg, LLP
Chunka Mui, Consultant
Holly O’Connor, Consultant, True Partners Consulting LLC
Aurie Pennick, Executive Director, Field Foundation of Illinois
Joseph Starshak, President, Starshak Winzenburg & Co.
William Testa, Vice President, Federal Reserve Bank of Chicago
Given the extremely tight time frame in which to complete the project, the Civic Federation engaged L.E.K. Consulting to assist in its analysis. L.E.K. is an international strategic financial consulting group headquartered in London with extensive experience examining Olympic-sized sporting events. Click here to read more about L.E.K.
Our sincere gratitude goes out to the following foundations for their generosity and counsel:
- The Chicago Community Trust
- The Field Foundation of Illinois
- The John D. and Catherine T. MacArthur Foundation
- The Joyce Foundation
- McCormick Foundation
- Polk Bros. Foundation
- Woods Fund of Chicago
- Elizabeth Morse Genius Charitable Trust