Update on Los Angeles’ Bid for the 2024 Olympics

Update on Los Angeles’ Bid for the 2024 Olympics MAC TAYLOR • L E G I S L A T I V E A N A L Y S T • MARCH 2017 E S xEcutivE ummary In September, the International Olympic Committee (IOC) will choose Los Angeles or Paris to host the 2024 Olympic and Paralympic Games. Since we published our November 2016 report on Los Angeles’ bid, local Olympic organizers have updated the bid and their budget plans, including a new concept to increase public participation in the Opening and Closing Ceremonies. This report provides an update on those bid changes and discusses the federal government’s role in the Games, as well as an economic study released by Olympic organizers in January. As we discussed in November, Los Angeles city leaders have worked with local Games organizers to greatly reduce the financial risks that have plagued prior Olympics. Most importantly, Los Angeles’ 2024 bid relies exclusively on existing sports facilities or facilities already on track to be completed by 2024 (such as the new National Football League stadium in Inglewood). That being said, history tells us that significant financial risks can emerge after cities are chosen to host the Olympics. Last year, the Legislature passed a bill allowing the Governor to negotiate a backup financial guarantee of up to $250 million with Games organizers. In the coming months, state departments should be gathering information on potential 2024 Games impacts on state operations, as the Governor prepares to negotiate this guarantee. If Los Angeles is chosen to host the Olympics, the Legislature, with its ability to provide oversight to state departments, can play a constructive role in making the Games a success and keeping its financial risks low. In so doing, the Legislature can reduce the chance that any of the $250 million guarantee will ever need to be paid from the state treasury. B id u pdatE Los Angeles, submitted its final bid documents to the IOC at the beginning of February 2017. Los Angeles and Paris are competing to We described Los Angeles’ Olympic bid in host the 2024 Olympic and Paralympic Games. our November 10, 2016 report, Los Angeles’ Bid for (A previous candidate city, Budapest, recently the 2024 Olympics and Paralympics (see section withdrew its bid for the 2024 Games.) LA 2024, entitled “The Los Angeles Bid”). Since then, as the the private group of local bid organizers in AN LAO BRIEF February 2017 bid documents were finalized, there New Stadium and the Ceremonies. LA 2024 have been updates to the bid, especially LA 2024’s has proposed a new concept for the Games’ new plan for the Olympics’ Opening and Closing Opening and Closing Ceremonies, each of Ceremonies. Many of the updates—both those which will feature events at both the Los Angeles discussed in this section and otherwise—reportedly Memorial Coliseum and the planned Los Angeles came from feedback provided to LA 2024 by past Stadium at Hollywood Park in Inglewood (the Olympic and Paralympic athletes, as summarized “Rams/Chargers Stadium” on Figure 1, which in the nearby box. is updated from the comparable map in our Figure 1 Selected Venues for Los Angeles’ 2024 Olympic Bid Valley Sepulveda Basin Sports Park Rose Bowl International Broadcast Center City Hall and Grand Park UCLA Olympic Village and Training Center LA Convention Center Riviera Golf Course Figueroa St. Staples Center Santa Monica Beach USC Dedeaux Field Main Press Center Santa Monica LAFC Stadium LA Memorial Coliseum Venice Downtown Sports Park LAX The Forum Rams/Chargers Stadium Manhattan Beach South Bay Hermosa Beach Sports Park Redondo Beach Stubhub Stadium Honda Center Long Beach Sports Park Long Beach Arena Long Beach Waterfront Long Beach Note: Circles indicate the general location of sports parks—not the areas of their planned secure perimeters. 2 Legislative Analyst’s Office www.lao.ca.gov AN LAO BRIEF Athlete Feedback on the Los Angeles Bid In finalizing its bid, LA 2024 surveyed thousands of former U.S. Olympic and Paralympic athletes. Feedback reportedly fit into seven categories, which helped shaped recent revisions to Los Angeles’ bid. Those seven categories were: • Seamless Transition to Olympic Village. Survey results emphasized that the University of California, Los Angeles (UCLA) Olympic Village needs to feel instantly welcoming and comfortable for athletes from around the world. To that end, UCLA staff and others—plus LA 2024 volunteers—would assist arriving athletes. The bid also anticipates that Olympic and Paralympic athletes chosen to compete in Los Angeles would be provided handheld wireless devices with an application dubbed the LA 2024 Athlete Concierge. Via this app, athletes would access maps, dining, entertainment, and transportation information. • Nutrition, Rest, and Training Facilities. Olympic and Paralympic athletes demand facilities that allow them to stay healthy and rested. UCLA facilities will provide varied options to serve athletes’ differing nutrition, rest, relaxation, and training preferences, including blackout shades, quiet rooms, and stretching/meditation areas. • Family and Friends. LA 2024 plans a first-of-its-kind program to offer athletes’ families a partially subsidized village of their own. Further, two complimentary tickets would be provided for family or friends to attend each athlete’s competitions. The Athlete Concierge would notify athletes if additional tickets are available. • Get Around Without Hassle. Athletes told LA 2024 that past transport schedules between Olympic Villages and venues were often time-intensive and confusing. Helped by planned signage and volunteers, the Athlete Concierge also would provide athletes with clear transportation information in the LA 2024 plan. • Fun and Socializing. LA 2024 plans an Athlete House that athletes could reserve via the Athlete Concierge to eat and socialize with friends and family. Athletes would have access to transportation to Los Angeles-area attractions and special deals on Olympic merchandise, which athletes and visitors often trade for fun. • Transition to Post-Games Life. For many athletes, the Games are the concluding event in their sporting careers. Many athletes face challenges in transitioning to post-Games life. Working with California’s public and private educational institutions, LA 2024 plans to offer programs to address these issues, such as a symposium to explore educational opportunities, such as attendance at U.S. universities. • Enhance Opportunities for Women. Enhancing gender equality in sports is a priority for the Olympic Movement. LA 2024 pledges to emphasize gender equity in its operations and management staff, equal training and competition facilities, and new training opportunities for women judges and coaches. Further, with women representing most of the U.S. Olympic audience, LA 2024 commits to work with NBC, other broadcasters, and Olympic sponsors to promote female Olympians and Paralympians. www.lao.ca.gov Legislative Analyst’s Office 3 AN LAO BRIEF November report). By including both stadiums— in Los Angeles. The two-stadium ceremony concept, and other events throughout the city—the LA 2024 however, eventually received broad approval from plan would expand significantly the number of the Los Angeles City Council. Under the January residents and visitors able to participate in the 2017 memorandum of understanding (MOU) ceremonies. In the current plan, the ceremonies between LA 2024 and the city, any future change to would proceed as follows: the ceremony plan requires City Council approval. Moreover, essentially any change that moves a • Opening Ceremony (July 19, 2024). The planned competition venue, the Media Village, or the Opening Ceremony would begin with a Olympic Village outside city limits would require City torch relay at the Coliseum, which would Council approval, which shall not be “unreasonably have 70,000 spectators for a program withheld” or conditioned under the MOU. of entertainment and a live viewing Additional Venue and Village experience for all of the evening’s events. Announcements. Since the release of our The relay would proceed through city November report, LA 2024 has added a few venues streets to the Rams/Chargers stadium. At to its plan. As with the previously announced this second stadium, 85,000 spectators venues, all of these new venues either exist or are would witness the formal Opening already on track to exist by 2024, as summarized in Ceremony, including the Parade of Figure 2 (an updated version of a figure from our Nations, the official opening of the Games, November report). The events affected by the recent and the lighting of the Olympic Cauldron. venue announcements include: In the current plan, the cauldron lighting at the new stadium would trigger a lighting • Archery. A temporary venue at the planned of the Coliseum’s cauldron, which would Rams/Chargers stadium—extending remain lit throughout the Games. Average over a man-made lake in the stadium’s ticket prices are estimated at $1,783 at the entertainment district—is the new Olympic Rams/Chargers stadium (comparable to and Paralympic archery venue. prices for events like the Super Bowl and • Mountain Bike. Olympic mountain biking the NBA Finals) and $350 at the Coliseum. events are slated for the Frank G. Bonelli • Closing Ceremony (August 4, 2024). The Regional Park in San Dimas, which is Coliseum would host the formal elements a unit of the Los Angeles County park of the Closing Ceremony, including the system. According to bid documents, Parade of Athletes and the traditional with minimal enhancement required for performance by the 2028 Olympic host city the park, the region “will be left with a (scheduled to be chosen in 2021). Average world-class course” able to host future ticket prices at the Coliseum are estimated international mountain bike events. at $1,226. A simultaneous celebration at the • Modern Pentathlon. The modern Rams/Chargers stadium would have ticket pentathlon combines five different events— prices averaging about $300. pistol shooting, fencing, swimming, horse As bid planning proceeded last year, the possibility riding, and running—said to simulate the of shifting ceremonies from the Coliseum to the experience of a 19th Century cavalry soldier stadium in Inglewood caused concern among some 4 Legislative Analyst’s Office www.lao.ca.gov AN LAO BRIEF behind enemy lines. In the LA 2024 bid Satellite Olympic Village at UC Riverside. plan, all five events would occur at a single The bid plan also now includes a new satellite stadium: the StubHub Stadium in Carson. Olympic Village at the University of California, Figure 2 All Planned Olympic Venues Exist or Already on Track to Exist in 2024 StubHub Center Facilities Long Beach Waterfront/Pier LA Convention Center The Forum City Hall and Grand Park USC Dedeaux Field Sepulveda Basin UCLA Pauley Pavilion LA Memorial Coliseum Rams/Chargers Stadiuma Lake Perris USC Galen Center Some Sports Require Modifications to Existing Venues Riviera Country Club Existing or Already on Tracka Long Beach Arena Temporary Upgrades Microsoft Theatre Permanent Upgrades Honda Center Support Infrastructure Staples Center Olympic and Paralympic Village (UCLA) LA Football Club Stadiuma Satellite Village—Rowing & Canoe (UC Riverside) International Broadcast Centera (NBCUniversal) Rose Bowl Main Press Center (USC) Santa Monica Beach Media Village (USC) Bonelli Regional Park (San Dimas) a A venue or other facility that is already planned to exist in 2024, but has not been finished yet. www.lao.ca.gov Legislative Analyst’s Office 5 AN LAO BRIEF Riverside (UC Riverside) for rowing and canoe/ Figure 3 kayak channel athletes. The satellite village is LA 2024 Budget Plan needed because these athletes’ venue—Lake Perris 2016 Dollars (In Billions) (a state recreation area southeast of Riverside)—is Revenue some distance from the main athlete’s village at Domestic sponsorships $1.93 the University of California, Los Angeles (UCLA). Ticket sales 1.54 Athletes staying at UC Riverside would also have a IOC contributions (broadcast revenues) 0.73 bed at UCLA before and after their competitions. IOC Olympic Partner Program (sponsorships) 0.39 Licensing and merchandising 0.23 Leading Anti-Doping Resources at UCLA. Other revenues (net) 0.51 A legacy of the 1984 Los Angeles Games, the UCLA Total Revenues $5.33 Olympic Analytical Laboratory is one of the leading Spending research institutions in the field of athletic doping. Venue infrastructure It is also the world’s largest World Anti-Doping Temporary infrastructure $0.86 Energy (excluding consumption) 0.26 Agency (WADA) accredited sports testing facility. Capital investment 0.07 Just a few miles from the planned Olympic Village, Subtotal ($1.19) this UCLA facility would be the anti-doping lab for Sports, games services, and operations the Los Angeles Games. WADA standards require Venue operations management $0.31 Transport 0.18 strict sample collection and processing standards Sports 0.09 that the UCLA lab is well positioned to meet. Food and beverage 0.07 During the Games, samples will travel to the lab Test events 0.06 Logistics 0.06 using strict chain-of-custody procedures, including Other 0.22 electronically monitored vehicles and personnel. Subtotal ($1.00) In 2024, anti-doping discussions would be a part of Marketing rights and royalties $0.71 educational programs for athletes competing in the People management $0.69 Los Angeles Games. Technology Information technology $0.25 u O F p pdatEd lympic inancial lan Internet infrastructure 0.14 Telecommunications 0.14 With the submission of its final bid documents Subtotal ($0.53) to the IOC in February, LA 2024 updated its Corporate administration and legacy $0.29 financial plan. A summary of the plan is shown Ceremonies and culture in Figure 3 (amounts are in 2016 dollars). Using Opening and closing ceremonies $0.14 economists’ assumptions shown in the bid Torch relay 0.03 Other (net) 0.02 documents—specifically, an average annual Subtotal ($0.20) inflation rate of approximately 1.9 percent—the Communications, marketing, and look $0.19 $5.3 billion of revenues shown in Figure 3 translates Other expenses $0.05 to $6.2 billion in estimated 2024 dollars. Total Spending $4.84 10 Percent Contingency Fund Budgeted. Contingency The LA 2024 budget plan includes a contingency 10.1 percent of costs $0.49 fund of $488 million (2016 dollars)—equal to Note: Based on LA 2024 Stage 3 Submission to IOC, February 2017, Table 121A-121B. 10.1 percent of budgeted expenditures to host IOC = International Olympic Committee. the Games. In 2024 dollars, this amount equals 6 Legislative Analyst’s Office www.lao.ca.gov AN LAO BRIEF $567 million. The plan is for this contingency fund the most important of these guarantees is one to be divided into two pots of money: an “allocated in which the city commits to cover any potential contingency” of $250 million governed under financial shortfall of the Olympic organizing the terms of LA 2024’s MOU with the city and a committee. (Senate Bill 1465 limits the state’s flexible “unallocated contingency” for the rest of guarantee to cover Games shortfalls to a maximum the contingency account. Under the MOU, the of $250 million, but only after all other required allocated contingency could only be used to cover sources of funding have chipped in, including the Games budget shortfalls with the city government’s city. The city, in particular, must expend at least written consent, which may not be “unreasonably $250 million of its security for the Games before withheld, conditioned, or delayed.” The MOU the state guarantee pays anything.) As discussed in does not limit LA 2024’s use of the rest of the our November report on the bid, prior Olympics contingency. have experienced billions of dollars of cost overruns In LA 2024’s MOU with the city, Olympic or other shortfalls. Accordingly, city officials were organizers agree—beginning in 2022—to start well aware of the financial risks in approving this setting aside funds in the allocated contingency bid and spent months developing strategies to account. The bulk of LA 2024’s revenues would mitigate those risks, as discussed below. be received in 2023 and 2024, and under the Risk Mitigation Efforts. Perhaps the most agreement with the city, this allocated contingency important risk mitigation efforts undertaken by is scheduled to have a $70 million balance set aside the city and its partners occurred early in the bid by early 2024, with the remaining $180 million process, at which time a plan for an expensive to be deposited in early 2025. In 2025, the Games new Olympic Village was scrapped and replaced essentially would “close its books” and determine with the plan to use existing residential facilities at whether any debts remain to be repaid by LA 2024, UCLA to house athletes. In addition, bid organizers insurers, the city, the state, or other parties. If there and the city focused early on a plan to use existing are profits remaining, these would be disbursed or already-on-track venues and infrastructure pursuant to agreements with the U.S. Olympic exclusively for the Games, thereby eliminating the Committee and the IOC. In SB 1465 (de León)—the need to build big, new facilities that have escalated 2016 legislation allowing the Governor to agree to costs for prior Olympic Games. a backup financial guarantee for the Games—it The city and bid organizers also agreed that was envisioned that any Games profit would be LA 2024 would—if the IOC picks Los Angeles to devoted to legacy programs for youth and other host the 2024 Games—purchase an apparently Californians. This is similar to the manner in unprecedented set of insurance policies to cover which 1984 Games profits were devoted to youth certain financial risks. LA 2024 is required to sports programs in Southern California. maintain those policies “in accordance with prudent commercial best practices,” including c a ity grEEmEntS policies to protect against natural disasters, City of Los Angeles Is Lead Public Guarantor. terrorism, event cancellation, and coverage for Before LA 2024 submitted its final bid documents reduced ticket sales and other revenue sources to the IOC, the Los Angeles City Council formally should the events become less appealing. Public agreed to provide a number of contractual liability and indemnity insurance is required to guarantees required for Olympic bid cities. Among protect against financial risks associated with www.lao.ca.gov Legislative Analyst’s Office 7 AN LAO BRIEF death, injury, or damage to property suffered by level achieved among recent Olympics). third parties. The city and the state must be listed According to KPMG, this did not represent as “ additional insured” parties on these policies. a conservative approach of determining In addition, city representatives will make up at assumed ticket sell rates “based on the least one-sixth of the LA 2024 organizing committee popularity of the sport and timing of board of directors, with city representation also the session (weekdays versus evenings or guaranteed on board committees. Participation by weekends).” The report noted that very city representatives, it is thought, will help keep the popular events (ceremonies, basketball, city apprised of issues with planning for the Games, track, gymnastics, and soccer) typically including potential increases in costs or revenue account for 70 percent of ticket revenue. shortfalls. Agreements between LA 2024 and the city KPMG ran a stress scenario that reduced also include transparency requirements, including less popular sports’ sell rates by as much requirements to appear before City Council, as one-fifth. That stress scenario, the provide briefings with city staff, and submit various report concluded, reduced ticket and informational documents. corresponding food and beverage revenue KPMG Review. The City Council engaged by over $40 million—a very small potential an independent firm, KPMG, to prepare a public shortfall compared to the overall amount report reviewing the LA 2024 financial plan. That of ticket revenue ($1.4 billion). report was released in December. KPMG said that • Limited Comparability to Industry the level of rigor in the development of the budget Benchmarks. In the areas of professional was “detailed at this stage of the bid process.” staff costs, administration costs, and venue KPMG found the budget to be “substantially contingency, KPMG found that LA 2024’s reasonable, complete, and [that it] adhered to a generally thorough estimates were of a bottom-up conservative approach.” The report nature that made it difficult to compare further noted, “The strategy of using existing them to industry benchmarks. To some infrastructure rather than undertaking large scale extent, this is because of the unusual capital development reduces the overall risk of features of Los Angeles’ bid—for example, hosting the Games for the City of Los Angeles.” the lack of big, new venue projects. With While the report included no major negative regard to venue contingency estimates, findings, it did comment that the ongoing viability LA 2024 told KPMG that it included a of the LA 2024 budget depends on “continued 7 percent to 12 percent design contingency adherence to the assumptions and estimates made within its figures. Construction at this stage in the bid process.” contingency costs were estimated on a KPMG did note a few relatively minor critiques venue-by-venue basis “taking into account of the budget plan, such as the following: the risk of temporary overlay versus • Ticketing Estimates Deviated From permanent investment,” KPMG wrote. Conservative Approach. In its budget Furthermore, construction contingency plan, LA 2024 assumes that 97 percent was included in the overall contingency of available seats are sold—similar to line item. Thus, “even though LA 2024 did the overall ticket sell rate for the 2012 not set aside amounts for market risk and Games in London (reportedly, the highest 8 Legislative Analyst’s Office www.lao.ca.gov AN LAO BRIEF owner-directed changes,” as similar events Winter Games. Other federal agencies to be sometimes do, the budget’s “contingency is involved with COPPSC include, but are not limited reasonable given the temporary nature of to, the following: the works, the current level of design, and • Department of Homeland Security (DHS). present stage in the budget process.” DHS (which includes the Secret Service) would manage coordination of all federal, F g r EdEral OvErnmEnt OlE state, and local agencies delivering security Olympics are mega-events, requiring billions of services. dollars, years for preparation, and the involvement • Federal Bureau of Investigation (FBI). of every level of government, including the national The FBI would be the lead agency for crisis government. Both the U.S. Congress (through a management; hostage rescue; and detection resolution) and the new President have expressed of chemical, nuclear, and biological weapons support for Los Angeles’ bid. While the U.S. attacks. The FBI’s role includes coordinating government—unlike national governments of with other national and international other Olympic hosts—is not a direct underwriter intelligence agencies to identify, assess, of Olympic Games, it does play a significant role monitor, and prevent terrorist and other whenever the U.S. hosts the Games. We have security threats to the Games. learned more about the federal government’s role in a possible Los Angeles Games as the 2024 bid • Department of Defense (DOD). The has progressed. Below, we summarize the expected military, including the reserves and or possible federal role in the areas of security, National Guard, would support local immigration, and infrastructure funding. and other federal agencies with logistics, communications, explosives detections, Security and air support. For the 2002 Salt Lake U.S. Secret Service Coordinates Security. If City Games, DOD provided 4,500 military Los Angeles is selected, the federal government is personnel to support security operations. expected to designate the 2024 Games as a National • Federal Emergency Management Agency Special Security Event (NSSE). (Other NSSEs (FEMA). FEMA would coordinate federal include Super Bowls, presidential nominating responses, working with state and local conventions, and presidential inaugurations.) agencies, in the event of unexpected Federal law mandates a single chain of command incidents, such as natural disasters, during for integrated security operations at NSSEs, led the Games. by the U.S. Secret Service, which would be in charge of coordinating the design, planning, • Federal Aviation Administration (FAA) and implementation of Games operational and Coast Guard. FAA would implement security. LA 2024’s bid documents envision a temporary flight restrictions to protect security command structure called the California Los Angeles-area airspace during the Olympic and Paralympic Public Safety Command Games. Similarly, the Coast Guard would (COPPSC) that would include local, state, and implement temporary safety zones over federal agencies—similar to the unified command waterways affected by the Games. established in Utah during the 2002 Olympic www.lao.ca.gov Legislative Analyst’s Office 9 AN LAO BRIEF In total, the U.S. government would devote KPMG also has recommended that Los Angeles thousands of its personnel and potentially tens and other local law enforcement agencies “discuss or hundreds of millions of dollars of support to a the additional costs of security beyond those Los Angeles Games. That support would encompass covered by NSSE designation, with the view of years of planning and threat assessment aimed at determining the required timing for application keeping Los Angeles safe during the Games. to grant programs.” Such additional grants may Feds May Cover Portion of Security Costs. be desirable to cover some costs not reimbursed Under Los Angeles’ MOU with LA 2024, the city from either the Games budget or the NSSE-related and Olympic organizers agree to negotiate on a federal grants discussed above. level of enhanced municipal services necessary to Immigration support the Games, and LA 2024 will reimburse Los Angeles and other municipalities for that U.S. Immigration and the Games. Different level of service. The LA 2024 budget, according countries choose Olympic athletes in different ways to the analysis by KPMG, includes the cost of and on different schedules, with team additions requirements to support security activities in and and changes occurring until near the time of the around the venues—for example, fencing, power, Opening Ceremonies. Therefore, for a Games to cabling, tents/cabins, and some private security be successful, immigration authorities must act for pedestrian and vehicle screening. But KPMG’s quickly to facilitate quick turnaround of visas analysis makes clear that a host city may incur and other documents that allow athletes, coaches, costs associated with the Games that are outside officials, and others to enter the host country. In a of Olympic organizers’ budgets. For example, bid document transmitted to the IOC in October KPMG observed that “operational security costs 2016, LA 2024 stated its intent to work with the for the full deployment of law enforcement, U.S. Departments of Labor, State, and Homeland overtime, planning, and coordination activities Security to devise expedited immigration are not included in the budget except for a modest procedures similar to those used for the 2002 allocation” to municipal services. Salt Lake City Games. During the Salt Lake City In recent years, Congress has appropriated Games, work permits and entry visas for those funds to reimburse state and local law enforcement connected with the Games received priority status, for certain extraordinary security costs related to which reduced the average processing time to one NSSEs, which could cover a significant portion week. of extraordinary security costs not covered by President’s Executive Orders. On January funding from Olympic organizers. For example, 27, 2017, the President signed an executive order Philadelphia reportedly applied for and received that, among other provisions, temporarily $43 million in NSSE-related grants for overtime suspended entry of citizens from seven countries and added supplies needed to secure the 2016 (Iraq, Iran, Libya, Somalia, Sudan, Syria, and Democratic National Convention, and Cleveland Yemen). Following various court challenges, the reportedly received $50 million for similar costs implementation of that order was enjoined. The for the 2016 Republican National Convention. President signed a new order on March 6 that, Grants have been made to NSSE cities recently via among other things, temporarily paused entry to congressional appropriations to the Office of Justice the U.S. by nationals from six of those countries (it Programs at the U.S. Department of Justice. excluded Iraq), subject to various exceptions. This 10 Legislative Analyst’s Office www.lao.ca.gov AN LAO BRIEF order also is being challenged in federal courts in highlight that these new improvements—including Hawaii and elsewhere, as of the date this analysis improvements like those listed in the February 7 was finalized. On January 30, U.S. Olympic letter from the Governor’s Office—will aid the Committee (USOC) officials released a statement region in hosting the Games. Specifically, LA 2024 based on discussions with federal officials. The notes that Metro’s current fixed guideway transit statement said that the U.S. government had (including subway, light rail, and BRT) is slated advised the USOC that it will work “to ensure that to expand from over 120 miles and 111 stations athletes and officials from all countries will have now by adding about 20 miles of rail and 24 new expedited access to the United States in order to stations by 2024, including an automated people participate in international athletic competitions.” mover at LAX. Transit Key to Games Planning. Parking Infrastructure Funding near key venue locations will be restricted to Governor’s Request for Olympic-Related official Games vehicles and nearby residents and Infrastructure Support. At his inauguration on businesses only. The Olympic bid also aims to January 20, 2017, the President reiterated his intent reduce Games-time traffic volumes in Los Angeles to focus on improving the nation’s infrastructure. County by at least 15 percent in part to help At the request of the White House, the National ensure that athletes and other Olympic guests can Governors Association (NGA) has been assembling travel promptly to and from events in designated lists of possible infrastructure projects across Olympic Route Network lanes. For these reasons, the country, presumably for possible federal public transit options are key to the LA 2024 plan. funding support. In its response to the NGA on Ticketed spectators, as well as Games volunteers February 7, the Governor’s Office listed more than and others, will be provided public transport $100 billion in possible California infrastructure access to and from the events they are attending. projects, including expanding and improving the The ticketing technology platform will include Los Angeles County Metropolitan Transportation information on transit options. KPMG, in its Authority (Metro) purple line, the Metro project evaluation of the LA 2024 budget, noted that timely to connect the Los Angeles International Airport completion of ongoing infrastructure projects (LAX) central terminal area to the Crenshaw/LAX is important in ensuring an efficiently managed and green Metro line, and the orange bus rapid Games. Bid documents specifically note that the transit (BRT) line. The Governor’s Office list noted acceleration of the Purple Line to Westwood— that these Metro improvements would benefit funded from Measure M and anticipated to be commuters and the 2024 Olympic bid. completed in 2024—would be desirable for hosting Additional Infrastructure Funding Helpful, the Games. Added federal funding could boost that but Not Required. In its bid documents, LA 2024 construction effort. stated that no new infrastructure projects are E S cOnOmic tudy required for the city to host the Olympics—a fact that is unusual for Olympic cities. Nevertheless, The IOC requires candidate cities to submit improvements are ongoing to the Los Angeles economic impact studies with their Olympic bids. area transportation system, like those funded LA 2024 released its required study in January 2017. from the recently approved county sales tax The study was conducted for LA 2024 by Beacon measure (Measure M). LA 2024’s bid documents Economics, a California economics consulting www.lao.ca.gov Legislative Analyst’s Office 11 AN LAO BRIEF firm, and the Center for Economic Forecasting and Los Angeles-Long Beach-Anaheim metropolitan Development at UC Riverside. area had a gross domestic product (GDP)—the Study Uses Common Forecasting Techniques. estimated value of goods and services produced The LA 2024 economic impact study uses a there—of $931 billion in 2015—the lion’s share of “multiplier approach,” typical in such studies. In California’s $2.5 trillion statewide annual GDP. As short, the study considers likely levels of direct summarized in Figure 4, the study estimates that spending by LA 2024, Games attendees, and the net additional economic output in the City of visitors before, during, and after the Games— Los Angeles due to the Games would total between specifically during a period ending in 2025. $9 billion and $10 billion (in 2016 dollars). This As these expenditures occur—funded largely output would be spread across several years, mostly, from currency “exported” from other states and it appears, between 2020 and 2025, but with some countries into the Los Angeles economy—this of the economic activity occurring slightly earlier spending would create a “ripple effect,” resulting or later. In addition to the economic effect in the in even more spending in the area economy and a city, the study finds there also would be economic total economic impact that is greater than the level output gains elsewhere in California (estimated at of direct spending mentioned above. For example, about $3 billion in gross output) and in other U.S. LA 2024 will use funding from the IOC to hire states too (estimated at about $4 billion in gross contractors to make temporary improvements to output). venues, those contractors will buy supplies, and Job Creation and Tax Dollars. By increasing their employees will buy groceries and other goods economic output, the Games would temporarily and services. The study anticipates that there would increase employment in the Los Angeles area, as be between 2.6 million and 3.3 million people well as state and local tax dollars. The economic attending the 2024 Games and that 41 percent of impact study estimates that the net increase attendees would come from outside the Los Angeles in full-time equivalent jobs due to the Games area. Such visitors from elsewhere in the U.S. would total over 60,000 in Los Angeles, as and around the world Figure 4 will bring their money Estimated Economic Output Effects in Los Angeles and spend between Over Multiyear Period $1 billion and $2 billion in Los Angeles, according Includes Direct, Indirect, and Induced Effects (In Billions, 2016 Dollars) to the study, resulting Low End High End of Range of Range in hotels, restaurants, Pre-Games Olympic spending $1.9 $1.9 and other businesses During-Games Olympic spending 6.5 6.5 buying supplies and During-Games visitors 1.9 2.3 their employees, in turn, Pre-Games and Post-Games visitors 0.4 0.5 Gross Additional Economic Output $10.6 $11.2 spending some of that Offsetting effects (effects of fewer regular visitors) -1.2 -1.6 money close to home in Net Additional Economic Output $9.4 $9.6 Southern California. Full-Time Equivalent Jobs 62 65 Up to $10 Billion (Net Increase in Thousands) Net Increase in Source: Study conducted by Beacon Economics LLC and the UC Riverside School of Business Center for Economic Forecasting and Development, as commissioned by LA 2024. Local Economy. The 12 Legislative Analyst’s Office www.lao.ca.gov AN LAO BRIEF shown in Figure 4. The bulk of these jobs would with the Lake Perris venue), the California Science result from spending in the economy during the Center (adjacent to the Coliseum), and gambling Games—suggesting the jobs will be temporary. regulators (due to potential increases in illegal The study also estimates an increase in state and betting related to the Games). Given the issues local tax revenue throughout California of around that caused visitation declines in 1984, it would $700 million, as well as increases in federal tax also be important for the public-private California revenue. Travel and Tourism Commission (Visit California) Offsetting Economic Reductions. The to coordinate with local leaders in promoting 1984 Olympics caused a significant, short-term domestic and international tourism during the reduction in overall visitation to Los Angeles. Games. Analysts attributed the reduction in part to fears Future Legislative Oversight. In the coming of traffic congestion and of potentially exorbitant months, the executive branch needs to be hotel pricing. In addition, some facilities that increasingly well informed about potential issues usually host conventions and other visitors were related to the Olympics. State departments need unavailable for non-Olympics visitors at times. to help LA 2024 prepare, as well as make sure the LA 2024’s economic impact study acknowledges Governor is prepared as he enters into negotiations that there would be some similar concerns for the with LA 2024. Senate Bill 1465 envisions that the Los Angeles tourism economy in 2024. Specifically, agreement between the Governor and LA 2024 the study anticipates a 3 percent reduction in total for a backup state financial guarantee of no more visitor numbers. Nevertheless, the study’s authors than $250 million would “be determined on or anticipate that visitors coming for the Games would about the time” of Los Angeles’ selection as the spend roughly double the amount of a normal 2024 host city—which would occur in September, tourist to Los Angeles—more than offsetting the just six months from now. Given this time frame, anticipated decline in visitation. the Legislature may wish to enquire in the coming months as to the administration’s effort to prepare laO c OmmEntS for possible negotiations with LA 2024. For Big Intergovernmental Effort Required. example, what potential Olympic-related impacts Figure 5 (see next page) summarizes key elements have state departments identified to date? Also, of the timeline if Los Angeles is chosen this fall to does the administration have a plan to work with host the 2024 Games. Between now and 2024, the the city and LA 2024 to offset some state Games- focus of activity would be on Olympics organizers, related costs with federal NSSE funding and to their contractors working to get venues ready, meet regularly to discuss cost and operational and international athletics groups. Over time, issues? By learning more about the entire scope however, the city, other local governments, and the of potential Olympic-related impacts to state state—along with federal officials—would have an government, the Legislature would be better increasing workload to prepare to manage security prepared to provide feedback to the Governor in and other tasks related to the Games. Various advance of these negotiations and to monitor how state departments would be involved, such as the state departments’ activities evolve later. California Highway Patrol, Caltrans, the Military Efforts to Mitigate Financial Risk Noteworthy. Department, the Office of Emergency Services, the As we discussed in our November report, university systems, the state park system (involved Los Angeles’ bid makes significant efforts to www.lao.ca.gov Legislative Analyst’s Office 13 AN LAO BRIEF reduce the financial risks that have plagued host a fun, successful event for athletes and visitors, prior Olympic cities. Basing its bid on existing rather than focusing on keeping big construction or already-on-track venues and infrastructure projects on time and on budget. We agree with reduces the chance that cost overruns will occur. city officials that the current Olympic bid plan is More broadly, if Los Angeles is selected, Olympic fairly low risk for the city and, by extension, the organizers and local leaders can focus largely for state as well. Moreover, billions of dollars of outside the next seven years on preparing the region to money—from visitors and international broadcast Figure 5 Rough Timeline if Los Angeles Is Chosen to Host the 2024 Games 2017 • International Olympic Committee (IOC) Evaluation Commission visits city (May 10-12) • Commission publishes findings and LA 2024 given right to respond (summer) • Briefing for IOC Members and Sports Federations (July: Switzerland) • IOC selection of 2024 Host City and LA’s victory celebration (September 13: Peru) • City of Los Angeles must sign IOC Host City Contract without reserve or amendment • Formal establishment of LA Organizing Committee for the Olympic Games 2018 • Events related to PyeongChang Olympic and Paralympic Winter Games (February-March) • Launch of LA 2024 emblem and marketing program 2019 • Expansion of LA 2024 volunteer program • National partnership announcements • Launch of education and community youth programs 2020 • Update to Games plan and sustainability goals report • Community participation programs • Events related to Tokyo Olympic and Paralympic Games (July-September) – Including LA 2024’s performance at Tokyo Closing Ceremony 2021 • Launch of four-year cultural program, national promotional program • Launch of LA 2024 mascots and new product lines 2022 • Super Bowl LVI (February: Inglewood) • Events related to Beijing Olympic and Paralympic Winter Games (February-March) • Ticketing program launch • Unveiling of torch, medals, and “Look of the Games” 2023 • Torchbearer selection campaign • National Live Site plans announced • Test events begin 2024 • Olympic Torch Relay crosses the U.S. • Cultural Olympiad: arts and cultural activities leading up to the Games • Olympic trials • Final preparations across Los Angeles region • Ramp-up of security and transportation activities to support the Games • Promotional activity and sponsor activation in full force • The Olympic Games in Los Angeles (July 19-August 4) • The Paralympic Games in Los Angeles (August 16-29) • Post-Games activities (venue disassembly) 2025 • Post-Games financial reporting 14 Legislative Analyst’s Office www.lao.ca.gov AN LAO BRIEF contracts—will flow into the Los Angeles economy shortfalls. For example, if requests emerge to if it hosts the Games, generating some added local change a venue, city and state officials would need economic activity and potentially hundreds of to encourage LA 2024 to find ways to minimize millions of local and state tax dollars. We note any such costs. If ticket or other revenues fall short, that the Games will generate at least several billion these officials would need to encourage LA 2024 dollars of added local economic activity even to look for savings to offset that potential shortfall. if there are larger offsets to economic gains not In our view, both city and state officials, including identified in LA 2024’s economic impact study the Legislature, may be able to play a constructive (for example, a greater reduction in non-Olympic role in helping LA 2024 cope with these sorts of tourism than that study estimates). concerns. Resolve Needed to Keep Costs Low. While the Complexity for Every Level of Government. current Los Angeles bid appears to be low risk, The Olympics and Paralympics are among the it is easy to imagine that pressures could emerge world’s largest, most visible public events. They to change one or more elements of the bid plan bring organizational, financial, logistic, and in future years. For example, expectations about security challenges far beyond other events hosted venue amenities needed for a particular sport by large cities. If Los Angeles is selected, hundreds could change, and officials could push LA 2024 of millions of state tax dollars will be on the line, to make additional, costly improvements at one and the City of Los Angeles will have much more or more sites. Alternatively, owing to the strict on the line as the primary financial guarantor for timelines involved in planning for the Games, costs the Games. While the current bid is designed to for construction labor and supplies could escalate keep financial risks low, every level of government, more than Games organizers expect in the early including the federal government, will have a stake 2020s, and this could escalate venue improvement in making the Los Angeles Games a success. At costs. Ticket revenues could fall below expectations. the state level, the Legislature, with its ability to Faced with any of these challenges, to keep the provide oversight to state departments, can play a Games as a low-risk financial proposition, city constructive role in helping the Games and keeping and state officials would need to resolutely resist its financial risks low. any changes that could produce future financial www.lao.ca.gov Legislative Analyst’s Office 15 AN LAO B R I E F LAO Publications This brief was prepared by Jason Sisney and Carolyn Chu. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This brief and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 16 Legislative Analyst’s Office www.lao.ca.gov