AN OLYMPIC-SIZED CONTINGENT LIABILITY

By David Stanczak, WJBC Forum Commentary  (Expanded)         

          Earlier this week, Mayor Daley’s explained a commitment he recently made in Switzerland for Chicago to unconditionally cover all operating losses of the 2016 Olympics should they be held in Chicago.  That seemed more exposure than the qualified guarantee of $500 million the city council had already approved.  Hizzoner assured everyone that the city was on the hook for only the same $500 million.

            Daley needs to cover the amount of the additional guarantee.  One way he intends to do it is through the purchase of insurance.  The thought that an insurance company would cover the difference between the $500 million and the actual liability is reassuring, except for two things.  First, if you were an insurance company, how much of a premium would you charge for assuming an exposure that could run into billions, keeping in mind that the proposed insured is the same entity that completed Millennium Park at triple the cost, the same entity that sold the city’s parking meters for half of what they’re worth, and the same entity that, according to the Sun-Times, rents real estate from politically connected landlords at above-market rates?  Second, isn’t AIG an insurance company? 

            The other way Daley is covering the excess is by bamboozling the General Assembly to enact The 2016 Olympic and Paralympic Games Act (65 ILCS 120/1 et seq.)  Under that act, once the city goes through $250 million, the state will pay up to another $250 million from a special trust fund that the statute requires it to fund by 2016.  Of the General Assembly members who voted for this law, even knowing of the Millennium Park and parking meter fiascos, I would like to ask, “Are you crazy?”  The guys who voted for and approved this law are the same guys who now tell us we need a tax increase because the state’s so broke that it can’t fund critical programs.

            When the Olympics legislation was pending in Springfield, an objection was made by non-Chicago legislators: why should they vote to put this risk on their constituents for an activity that will primarily benefit Chicago?  A good question.  But the problem was solved in a fashion typical of the General Assembly.  Section 5-20 of the Act provides in part:

                        For each dollar that is expended from the Olympic Games and

                        Paralympic Games Trust Fund, the State shall expend an

                        equivalent amount of State funds for road projects outside of

                        the county in which the candidate city is located.

 

If the situation is looked at solely from a Chicago v. non-Chicago viewpoint, the provision makes sense.  But it is fiscally insane for a state as impoverished as Illinois.  By enacting this provision, the General Assembly just doubled the risk to the state.  If things go south for the Olympics, the taxpayers of the state will be paying not only the $250 million their legislators obligated the state to spend on the Olympics, but also an additional $250 million in otherwise unbudgeted road improvements, the main criterion for which is that they will be located outside of Cook County.  It’s like a guy who takes his just-cashed paycheck to a casino and, decides that if he loses it all, he’s going to go on a Caribbean cruise to cheer himself up over his gambling losses.   The General Assembly should take the advice given on the lottery commercials: play responsibly.     

            Atlanta lost $100 million when it hosted the Olympics; London’s projected costs for 2012 ($12 billion) are triple their original estimate.  Maybe with the city’s and state’s White House connections, they can arrange for the treasury to make a mistake and print up an extra few billion dollars to funnel back to Illinois.  With a few trillion in debt, who would notice?