Olympic math: why LA 24 makes for a good deal

BEIJING — Last Friday, the Los Angeles city council found itself under some pressure regarding city guarantees for any potential Summer Olympic Games. The council, sensibly, asked not just for more time but more involvement in the process. Compare: when Boston’s Mayor Marty Walsh wavered last month on the same issue, that was, essentially, the end of the Boston bid.

LA 2024’s bid will go forward, indeed on Tuesday, and to places Boston’s didn't and couldn't. Why? Walsh had eight months to make up his mind. In Los Angeles, the city council had three days. This time, more time proved a reasonable request.

In doing enough to let a bid go forward, while keeping a careful eye on its coffers, the city of Los Angeles has provided the U.S. Olympic Committee’s 2024 ambitions that rarest of things in American life: a genuine second act.

Casey Wasserman, who along with Mayor Eric Garcetti, is leading the LA 24 effort // Getty Images

To be explicitly clear about what’s next: the city and the USOC ought to be, and will be, partners. That said, the USOC will not in the near term have an easy ride, nor does it particularly deserve one.

To be plain, too, about expectations: there are always – stress, always – going to be naysayers, worriers and criticisms about events in public life, especially civic-minded projects with budgets that run into the billions. That’s billions with a b.

No problem.

Indeed, one of the fundamental reference points for this 2024 election is the understanding, for sure at the most senior levels of the International Olympic Committee, that it must – again, must – confront the $51 billion hangover from the 2014 Sochi Olympics. That $51 billion is the figure associated with the cost of those Games, and that number is why a remarkable number of cities in western democracies bowed out of the 2022 Winter Games process, leaving only Beijing and Almaty, Kazakhstan, Beijing the winner in the election last month.

Partially in response to Sochi and that $51 billion, the IOC last December enacted a 40-point would-be reform plan, dubbed Agenda 2020.

The starting point for real understanding of the LA 2024 project is that it is not – repeat, not – Sochi.

Nor is it 1976, and cost-overruns in Montreal, the sort of tiresome allusion that surfaced in my former newspaper, the Los Angeles Times, in an article published Saturday.

That was before 1984, for goodness’ sake, and the LA model that showed the world how to run an Olympic Games.

Here is how long ago, and how irrelevant and immaterial Montreal 1976 is to Los Angeles 2024: in Montreal in 1976, Caitlyn Jenner was a winning decathlete named Bruce.

The reason cities have gotten into trouble over the years with Olympic-related budgets, and the reason Montreal is irrelevant, is that there are, in fact, two budgets – one for the operation of the Games, the other for all the stuff that get built around them, anything from airports to metro lines to stadiums.

In LA, concerns about that second budget – the construction or infrastructure budget – should be minimal. All the major sports venues are already built, including, most importantly, the stadium, site of not just the 1984 but 1932 Games.

Outside the famed peristyle end of the Los Angeles Memorial Coliseum, venue for the 1932 and 1984 Summer Games // Getty Images

This is why it’s also inappropriate for the Times – which should know better if the concern is, truly, taxpayer protection – to lump the infrastructure column in with the operating column, and declare that the “cost” of the LA Games would be $5.8 billion.

They’re totally different – organizing committee expenses at $4.1 billion, non-committee expenses $1.7 billion.

Big picture, and more numbers will follow below:

LA was Agenda 2020 before Agenda 2020 was a thing. If that’s really, truly, genuinely what the IOC wants, it wants LA for 2024.

In conversations here in Beijing amid the 2015 track and field world championships with members of the IOC’s policy-making executive board — they were here for a joint meeting with the IAAF, track’s international governing body — it’s clear that an LA bid is eminently winnable.

The corollary: LA, and its taxpayers, should have no fear of the IOC, or the Olympics. Just the other way around. An LA 2024 Games, should they come to pass, would be the sort of success that makes 1984 look modest.

Starting again with last Friday’s city council session:

Showing the remarkable candor of an executive whose tempered self-assuredness will likely serve him well in the company of Olympic champions, IOC members and those who are both, bid leader Casey Wasserman explained to the city council the open secret that most everyone in the Olympic movement already knew: how LA was rejected in the first place.

In summary: LA was always the choice of the USOC’s chairman, CEO and staff. But board members with links to Boston were at the heart of a group that overruled the USOC’s staff and leadership.

This was, as we all now know, a mistake.

In public life, mistakes rarely come cheap.

Already, LA mayor Eric Garcetti and his team have exacted an unprecedented concession on behalf of taxpayers. LA’s city operations, estimated at $200 million, will now be paid for by a future organizing committee. 

To see the legalese that says just that, click here, and scroll to page D-3, Article II, Section 2.02.

As a point of contrast, Boston assuredly did not get any such concession. See here, again page D-3, Article II, Section 2.02.

LA mayor Eric Garcetti // Getty Images

The USOC has also offered an immediate contribution of at least $1 million to kick-start the bid. Frankly, that’s the very least it could do after denying LA 2024 eight months of fundraising opportunities.

There is more to come.

On top of the money the USOC could reasonably expect to have made during the LA 2024 lifecycle, already covered in a joint venture payment, the USOC wants a whole chunk of change – for elite athlete support – that escaped general notice throughout the whole Boston process. The line in LA 2024’s budget says TBD, suggesting some serious haggling.

Rightly so.

The USOC says it wants $100 million from a future organizing committee while it prepares for the Games, together with a $100 million endowment based on a 50 percent cut of any future surplus. That’s on top of the 20 percent of the surplus that would already go to the USOC under the host city contract. 

To see the outline of the "Los Angeles Fund for Team USA," click here and turn to page 46. To see the standard 20 percent share a national Olympic committee is due under the host city contract, click here and turn to page 40 of 69.

Apply the USOC’s now-plus-later demands, take out the standard shares for the IOC and USOC and the projected surplus shrinks from $161 million to $6.11 million.

Here is the math that explains that calculation:

A starting net surplus of $161.1 million, less $100 million elite athlete support now = $ 61.1 million. From $61.1 million, subtract 50 percent for USOC endowment = $30.55 million, 20 percent for USOC = $ 12.22 million, 20 percent for IOC = $12.22 million, for a total of $54.99 million. That would leave $6.11 million for LA.

That’s not fair to Angelenos.

And it absolutely would raise more than a few eyebrows among those in Olympic circles around the world who continue to believe the USOC’s natural instinct is to gouge everybody else.

The LA 84 deal was no extra money for the USOC during Games prep and 40 percent of the surplus after. Total. It was fair then. It is fair now. And a fair deal is needed to help LA play catch-up.

Let’s be clear, again. Had it been picked eight months ago, LA would have started the race as favorite. The delay and uncertainty since means that’s just not the case, even if not being a favorite can also be a good thing.

Paris, making the early running, has used the same eight months to line up $37 million in government funding for its bid. They have a head start on lobbying, too. Bid leaders and French sports ministers have been pressing all the flesh they can find this week, here at the track championships in Beijing. 

That all these details — about the LA bid and the USOC — have come to light is a good thing. The transparency lacking in Boston is now where it should have been all along. As Sir Martin Sorrell, the British executive, told the IOC members a month ago at the general assembly in Kuala Lumpur, sunshine is a good thing.

Transparency and oversight have big upsides too. The LA city council’s decision to maintain an active role will ensure serious measures of certainty and clarity accompany LA 2024’s bid.

One certainty is that the success of LA 84 has provided the IOC with a commercial model for supporting the Olympics that shows exactly how much money can be brought to the table.

Here, then, is where the numbers show so clearly what a crazy good deal LA 24 would be — for LA 24, of course, but also for the USOC, the IOC and, most important, for taxpayers.

It works both ways. There is absolutely no doubt -- not an over-reach -- LA would generate substantially more than any other city possibly could in revenue from sponsorships, ticket sales and more. At the same time, since the LA venues are already on the ground, the committee there can put on the Games for significantly less expense than anywhere else.

More detail:

Based on IOC guidance, LA has forecast $1.5 billion as the contribution it can expect to receive from the IOC.

That, though, is the number the IOC is giving organizers of the Rio 2016 Games.

It’s another open secret that by 2024 this will rise to as much as $2 billion, thanks to the success of IOC president Thomas Bach and his team in selling TV rights and top-tier sponsorships.

The London 2012 IOC contribution? $1.05 billion. This figure went to $1.5 billion for Rio and is going to keep going up, up, up -- thanks to the IOC's enhanced revenues.

The LA 24 estimate calls for $1.4 billion in domestic sponsorship. That is, in the parlance, conservative.

The Games have not been held in the United States since 2002, in Salt Lake City; the Summer Games since 1996, in Atlanta. That means there is 20-plus years of pent-up sponsor demand.

Tokyo 2020 blew threw its $1.2 billion target already: five years out from its Games.

Interestingly, the LA sponsorship projection of $1.437 is less – repeat, less! – than Boston had put forward, $1.52 billion. To compare, click here and turn to page 6 or, for that matter, page 47.

Come on.

Which is more appealing – a market of maybe 4.5 million people or the entirety of Southern California, at least four times as large?

What’s going on, here, obviously, is that the LA bid — and the USOC — are trying to make it clear that they are not the stereotypical Americans, interested in the Olympic sphere only in making money. Instead, they are being smart – doing the one thing that always plays well internationally for any U.S. effort, being humble.

Nonetheless, it’s super-obvious that more money from the IOC, and more sponsorship dollars, mean more revenue. Which means that the revenue projection of $4,827.3 billion is low. Which means there will be more than the currently forecast $400 million for contingencies until 2024 and that potential future surplus.

Way more. 

Like, way, way, way more.

The real projected surplus can't even start to be fixed until LA would win and then start selling. 

Again, what’s certain is that most of the venues LA will need are already in place. Which means a clear focus on what’s missing: an athletes’ village.

The city council already has its eye on this and that’s a good thing. The reassurance the council will need over the village is exactly what the IOC will need, also.

In an evaluation of Chicago 2016’s bid that explained the USA was a risk simply not worth taking, the IOC had unkind thoughts about financing for the village. LA 2024 cannot afford to take a similarly half-baked scheme to the final vote. The council’s aversion to taxpayer risk means LA 2024 won’t.

Frankly, though, it’s really not a worry. Anyone can worry about anything, and of course a project that’s budgeted at $1 billion is the kind of thing likely to make reasonable people, ask, OK, explain.

So, here:

The organizing committee would contribute $75 million. A developer will pick up the rest, $925 million.

Who is going to be that developer? Unidentified.

Is that a worry? No.


Are you kidding?

Los Angeles, like any city, has problems. But, with the support of the mayor, finding a developer who wants to invest in housing on a site near downtown – the new hipster capital of the United States – in a market that’s housing-scarce, is a no-brainer. And it’s not as if Los Angeles is lacking for real-estate developers.

With certainty on the venues and the village, there can – finally – be clarity on what will make this a winning bid: everything else LA has to offer in service to the Olympic movement.

The movement needs, more than anything, to stay relevant. To do that, it needs to attract young people.

And what’s this in the LA 24 bid book?

Skateboarding, on Santa Monica Beach. Click here for the bid book; skate is mentioned any number of times; to see the schematic that would put it literally on the beach, scroll to page 86.

Santa Monica: home not only of the sport but also to Activision, the company that made the Tony Hawk games.

Like no place else, LA gets the convergence of sports, entertainment and electronic gaming. And how to put on a sensible, financially responsible Olympic Games.