Monday, September 21, 2009

Daley's Olympic insurance leaves city exposed to billions

Crain's Chicago Business reports:
Mayor Richard M. Daley and Patrick Ryan assure Chicago taxpayers that a safety net of insurance would insulate them from the financial risks of hosting the 2016 Olympics.

But the insurance policies Mr. Ryan says he'll secure would cover only about $1.1 billion of the $3.8-billion operating budget that the mayor's Olympic point man has drawn up for the games. In many key areas, no insurer stands between taxpayers and the risk of revenue shortfalls or cost overruns.

For example, there's no insurance against the risk that private lenders won't shell out $1 billion to finance construction of the Olympic Village, as Messrs. Daley and Ryan predict they will. And there's no coverage against shortfalls in corporate sponsorship sales, which they predict will rake in $1.8 billion, two-thirds more than London expects to collect for the 2012 games.

Insurance against overruns on the construction of Olympics venues tops out at 10% over budgeted costs, in a city where major public works projects have come in at two or three times estimates. Another uninsured assumption in the budget is $246 million in contributions from private donors, a source already tapped for $72 million to finance the city's bid.
You'll want to read the whole article. This might be the best single article on the Olympics.