The 1976 Summer Olympics in Montreal resulted in cost overruns totaling 720 percent of the city’s projected expenses. Amid Cold War tensions, a boycott of the 1980 Summer Olympics in Moscow by 65 countries, including the United States, and financial struggles of the host city further put the future of the games into question.

Mayor Garcetti announced a report on economic benefits of the Olympics as the city prepares a final push to be the host city in 2024.
(courtesy of the Mayor’s office)

Los Angeles was the only city to put forth a bid to host the 1984 Summer Games. While the city was criticized for using existing facilities and corporate sponsors, according to the International Olympic Committee, the games resulted in a $223 million profit and became a model for future Olympics.

The city council took another step on Tuesday toward bringing the summer games back to Los Angeles in 2024, while minimizing the city’s financial risk after a series of substantial cost overruns in other cities hosting the games in recent years.

“We may very well again say to the world, ‘the Olympics can be done, they can be cost effective and you can turn a profit,’” said Councilman Mitch O’Farrell, 13th District, on Tuesday.

During the council’s Jan. 17 meeting, it unanimously approved a memorandum of understanding among the city, the Los Angeles 2024 exploratory committee and the United States Olympic Committee that specifies terms the city will adhere to if its bid wins.

Budapest and Paris are also in contention to host the 2024 Summer Olympic and Paralympic Games. The host city will be elected by International Olympic Committee members in September in Lima, Peru.

The memorandum of understanding states that $491.9 million, or approximately 10 percent of the city’s projected costs for the 2024 Games, will be allocated for cost overruns. It also states that the Organizing Committee for the Olympic Games will “obtain a range of insurance policies” to protect the city. And it specifies standards for city representation, council oversight and transparency.

The average cost overrun for Summer Olympics is 176 percent of projected costs during the bidding stage, with a median of 83 percent, according to a 2016 University of Oxford report based on a sample of Olympic Games from 1960 to 2016. The 2008 Summer Games in Beijing limited cost overruns to 2 percent, the lowest among winter or summer games.

The Olympic Games Knowledge Management Program was implemented in years prior to the 2000 Summer Games in Sydney to help host cities learn from past games. The average cost overrun of Olympic Games has been 75 percent since the program began, compared to 230 percent before, according to the Oxford report.

“The budget is more like a fictitious minimum that is consistently overspent,” the report said. “Each budget is established with a legal requirement for the host city and country government to guarantee that they will cover the cost overruns of the games. Our data suggest the guarantee is akin to writing a blank check for the event, with certainty that the cost will be more than what has been quoted. In practice, the bid budget is really more of a down payment than it is a budget, with further installments to be paid later.”

The report evaluated sports-related costs; costs for other aspects of hosting the Olympics, such as infrastructure, were excluded.

In a preemptive strike against financial risks, LA 2024 last month released a “no surprises” budget projecting $5.3 billion of revenue and cost, with 10 percent of projected costs allocated for cost overruns.

Olympic Games from 2004 to 2014 had an average cost of $8.9 billion, according to the Oxford report. But the LA 2024 budget lists the city’s existing venues, public transportation upgrades already underway and existing accommodations for the Olympic and Paralympic Village at UCLA as some of the “favorable conditions” for cost-efficiency if Los Angeles hosts.

City officials would not likely be able to determine whether there is a profit or a deficit from the 2024 Games until events come to a close, according to the city’s Olympic committee. Part of the profits from the 1984 Games were used to create the LA84 Foundation, which supports youth sports organizations throughout Southern California.

During a Jan. 13 meeting, the city’s Olympic committee, which consists of O’Farrell and six other city council members, said it would want profits from the 2024 Games to be put to similar use.

Los Angeles also hosted the 1932 Summer Games, but the city’s organizing committee did not disclose any financial information, according to a report on Olympic costs by economics professor C. Frank Zarnowski. Newspaper accounts claimed the 1932 Games resulted in a $1 million profit.

A recent economic assessment conducted by Beacon Economics LLC and the University of California, Riverside determined the Olympic and Paralympic Games could increase economic output in Los Angeles by up to $11.2 billion, and $18.3 billion nationwide.

“The worry is always that these benefits come at too high a cost,” said Christopher Thornberg, founding partner of Beacon Economics and director of the UC Riverside School of Business Center for Economic Forecasting and Development, in a statement. “But because Los Angeles already has many of the assets needed for a successful Olympic experience, the upside is far greater than it would be for many other cities who would be hosting for the first time.”

In December, the International Olympic Committee’s executive board confirmed that LA 2024 would advance to the third and final stage of the candidature process. The committee will evaluate the three remaining cities’ plans for delivering the games and providing a positive experience for athletes. It will also visit all three cities.

“On behalf of LA 2024, we are honored to proceed to the next stage of the IOC’s candidature process and thank the IOC for their continued support and valuable feedback,” said Casey Wasserman, LA 2024 chair, in a statement.

The deadline to submit necessary materials for the final candidature stage is Feb. 3.

“We are 100 percent united,” said Councilman Paul Koretz, 5th District, at Tuesday’s meeting. “I think we’ve made the best proposal in Olympic history, and I look forward to [2024] being the best Olympics in history.”

The next summer games, in 2020, will be held in Tokyo.