Olympics overrun 2010 costs jump to $2.5B

By WENDY COX Slam Sports
VANCOUVER (CP) - British Columbia taxpayers are already on the hook for more than double what their provincial government estimated for the 2010 Winter Olympics and audit reports released Thursday suggest things could get worse.
B.C. Auditor General Arn van Iersel's report indicates British Columbia has little wiggle room to meet its targets for the Games and that there are several risks that could blow the budget. The contingency fund the province has set aside has mostly been gobbled up and what's left likely won't be enough, he concluded.A report prepared for the federal government in May says that even with the $110-million boost in extra cash provided to the Vancouver Olympic Organizing Committee by the federal and provincial governments last month, more will likely be needed. Several venues are behind schedule and some are significantly over budget already, it noted. But Colin Hansen, B.C.'s minister responsible for the Games, and John Furlong, CEO of VANOC, said they are confident the Games venues will be completed on time and that the event will stick to the budget.The budget, said van Iersel's report, has increased to $2.5 billion for the B.C. and federal governments. Most of that - $1.5 billion - will be covered by British Columbia.But Hansen maintained the province is on track to contain costs to $600 million, as promised."When it comes to the direct cost of staging the games and living up to the commitments of the (International Olympic Committee,) there is a $600-million budget that has been put in place for that and we have no reason to believe that we would have to put up more money than that to live up to our obligation," he said.The discrepancy is in what's included.The auditor general counted such things as the upgrade to the highway between Whistler and Vancouver, which he pegs at $775 million.He noted the winding, often deadly, Sea to Sky highway was a matter of specific concern to the International Olympic Committee before it awarded the Games to Vancouver."The province and the bid corporation had identified the timely completion of the upgrade project as being essential to Vancouver being named the host city," van Iersel wrote. The province doesn't include the highway, or several other things, in its calculations. Even the government's estimate of how much the highway upgrade will cost is significantly lower than van Iersel's - $600 million versus $775 million. "Would the Sea to Sky highway upgrades have taken place if we had not won the right to stage the Olympic games? The answer is yes," said Hansen. "Had we not won the Games, guess what, that project would have been built." NDP Leader Carole James said van Iersel's report backs up the Opposition contention that the government hasn't been honest about the Games' true cost. "Gordon Campbell and Colin Hansen are probably the only two people in the entire province who believe that they are spending $600 million on the Olympic Games. "The number is much higher than that. This report proves what we've been saying and Gordon Campbell continuing to insist that $600 million is all they're spending is making him look ridiculous." But even without the controversy over how to account for the highway, the reports released Thursday point to several potential budgetary minefields. British Columbia has provided a guarantee to the IOC to cover any budget shortfalls incurred by the Vancouver Olympic Organizing Committee.
The guarantee would kick in if the committee doesn't meet its revenue or expense targets or faces items it can't control, like inflation and exchange rates. But van Iersel said the province might find itself responsible for a whole lot more than that. "In our opinion, the obligation of the province to ensure the financial success of the Games has the potential to cause the guarantee to be subject to a much broader exposure," the report says. For example, Richmond has committed to building a speed skating oval for $178 million. VANOC is contributing only $61 million. Richmond expects to get the rest of the money by selling or leasing city-owned land and redirecting casino profits. But if it doesn't meet its targets, the province might have to assume the costs. The federal report, compiled to advise the government on whether to grant the Vancouver committee's request for the extra $110 million, noted several venues are already significantly over budget.The Whistler Sliding Centre for bobsled, luge and skeleton runs will now cost $99.9 million, compared to the $55 million estimate in the bid book Vancouver submitted as part of its request to host the Games. Other venues are behind schedule and some have had to be completely redesigned, delays that cost money in Vancouver's overheated construction sector where costs are continually rising.
"Whether the revised, enhanced $580-million budget will be sufficient to deliver a venue package that meets IOC satisfaction is questionable," says the federal report. Furlong said at a news conference the federal report was prepared last spring. "We are dramatically better off now than we were ," he said. "Our view is we will surpass and we will deliver. . . We are on time and we are in good shape." Hansen disputed auditor van Iersel's suggestion that the province would be on the hook for more cost overruns than originally promised. "The province has a guarantee that has been given to the IOC and the Canadian Olympic committee that they would not bear the liability of shortfalls. "That does not automatically translate that the province will incur all cost overruns that might occur. But the important thing is that we have the systems in place to make sure that costs are managed and expenditures are controlled and that we are not facing those cost overruns." Despite the risks, the B.C. government didn't have a proper watchdog agency to monitor the amount being spent on building venues, van Iersel said. He noted that for the Sydney 2000 Games, an authority was established to manage the capital budget. A similar agency was created for the Turin 2006 Games. "With the 2010 Games, no one central agency is taking responsibility for managing these costs." On Thursday, Hansen's office announced such a strategy, called the Performance and Accountability Agreement. Early in his report, Van Iersel noted his office did not take into account lasting legacy benefits from the Games, partly because no information on the economic value of those benefits has been made available. But in his response, Hansen said job creation from venue construction, as well as the global exposure B.C. will get will mean economic benefits.