Every two years, the greatest athletes around the world join in one city to participate in the Olympics. The host cities are determined well in advance, usually between 7 and 10 years ahead of time, so that the necessary preparations can be made. When the costs of building new arenas, landscapes and hotels are added up, hosting the Olympics can cost billions and billions of dollars. Taxpayer dollars of course.
In October, the United States lost their bid to host the 2016 Summer Olympics in the city of Chicago to which most residents of the windy city rejoiced. One would think that with the Olympics comes a ton of tourists, sponsorships and an overall upward tick in the local and national economy. While that can be true, history has shown that it can also be very false.
The upside to hosting the Olympics can be very high. Cities are forced to enhance and upgrade their infrastructure, which creates a ton of new jobs for local residents. While new buildings and arenas are being constructed, residents are getting ready for a steady flow of tourism, which should grow many small businesses in the area. Some economists would even argue that while jobs are created, the future impact of the Olympics could actually cause cities to lose jobs, as money spent could have been better spent. When you add in the amount of fame that the host city receives from television exposure, the monetary gain becomes tough to measure.
However, what’s easy to measure is the negative impact that hosting the Olympics has. The budget needed to entertain the Olympics continues to grow year to year and can now cost a city over $15 billion. Most of that money will flow into the city through sponsorships, endorsements and other Olympic revenue streams, but generally speaking the host city still calls upon taxpayers for around 10% of the bill. If Chicago had won the rights to the 2016 summer games, its residents could have been on the hook for up to $1.5 billion in costs or about $700 per person. We know there’s not going to be flat tax, so some people could pay in the thousands.
But that’s just immediate tax cost. When tourists come to town, prices rise for everyone, so residents can expect to pay more for everyday items during the month or so the Olympics are around. Everything from groceries and fast food to taxi rides and gasoline is going to cost more. So if you are on a tight budget, remember to save a little extra when the Olympics begin to roll in.
Property taxes are sure to rise, as the second the host city is announced by the Olympic Committee, property values go up. This means that those who are living in low-income housing are going to have to pay more for it, which they likely cannot afford. The 2012 Summer Olympics, which are being held in London, is facing this very issue, as thousands of family’s have had to move due to the rise in rent. According to a recent study by the Centre on Housing Rights and Evictions (COHRE), over 5 million people have been permanently displaced from their homes in order to host the Summer Olympic games over the last 25 years.
The cities of Seoul, Barcelona, Atlanta, Sydney, Athens and Beijing have hosted the last six Summer Olympics and economically, the only one that can show a benefit from the Olympics has been Sydney. Montreal, the host of the ’76 Olympics is still in a major deficit, specifically because they built massive complexes that haven’t been used since 1976. While the immediate effect of hosting the Olympics is intoxicating to every city on this Earth, its long-term impact is usually negative and any city would be foolish to risk bringing the Summer Olympics home.The views and opinions represented in guest posts are not necessarily representative of The Weakonomist.