July 2017 Update

Los Angeles’ Bid for the Olympics and Paralympics

By enacting into law Chapter 802 of 2016 (SB 1465, de León), the California Legislature expressed its support for Los Angeles’ bid to host the 2024 Olympic and Paralympic Games. The President, the Congress, the Los Angeles City Council, and the Southern California Association of Governments also have expressed their support for Los Angeles’ bid. Los Angeles previously has hosted two successful and financially profitable Olympic Games: the 1932 Games that resulted in construction of the Los Angeles Memorial Coliseum and the 1984 Games, the 40th anniversary of which will be commemorated in 2024.

Our office has published two reports (here and here) about the California state government's role in Los Angeles' bid. Our office continues to monitor the Olympic bid process, which is expected to conclude in September with the 2024 Games being awarded to Los Angeles or Paris. Further, the city that is not awarded the 2024 Games now is widely expected to be offered the chance to host the Games four years later in 2028.

This post discusses: (1) the new report of the International Olympic Committee (IOC) Evaluation Commission reviewing the Los Angeles and Paris bids and (2) the possibility of Los Angeles being awarded the 2028 Games rather than the 2024 Games. While the Legislature authorized the Governor to undertake various responsibilities in SB 1465—and this post discusses possible gubernatorial actions in that regard—we continue to advise the Legislature to provide regular oversight to the executive branch as it helps Los Angeles prepare for the Games over the next decade.

Strengths Noted in IOC Report

“Low Risk” Bids Offered by Los Angeles and Paris. The IOC Evaluation Commission report finds that both the Los Angeles and Paris bids are “low risk and high reward…both for the Olympic Movement and for the cities.” Importantly, “by incorporating a record number of existing and temporary venues into their plans, the [two cities] have reduced costs and significantly simplified Games delivery,” the report notes. (For Los Angeles’ bid, this is consistent with our office’s prior finding that the bid proposal by the LA 2024 organizing group greatly reduces the financial risks that have plagued prior Olympics, mainly by relying on existing facilities or others already on track to be completed by 2024.) The IOC notes that this year’s evaluation report identifies “fewer challenges than in the past” because the two remaining candidate cities “began with very strong proposals,” and recent changes in the Olympic bid process—part of the IOC’s Olympic Agenda 2020 (discussed in our prior reports)—have “offered the cities multiple opportunities” to refine their candidacies along the way.

Shortfall Guarantees Provided by Los Angeles and Paris. Prospective Olympic host cities must commit to execute the IOC’s Host City Contract upon being awarded the Olympics. The contract requires the host city to deliver the Olympics and Paralympics as scheduled, using funds from domestic and IOC sources and working cooperatively with the IOC and other stakeholders. As such, while both Los Angeles and Paris have presented plans now believed to be feasible with significant contingency funds budgeted, bid cities must also anticipate “worst case” scenarios: specifically, how the Olympics will be delivered even if costs rise and/or revenues fall substantially. Accordingly, bid cities must provide various guarantees ensuring that any financial shortfalls will be covered. In Los Angeles’ case, the IOC report’s understanding of these shortfall arrangements matches our understanding: “the City of Los Angeles would cover the first $250 million of any cost overrun, the State of California would cover the next $250 million, and the City of Los Angeles would cover any remaining cost overrun.” (We note that, under the terms of SB 1465, the Governor still must execute a contract detailing the state’s $250 million backup financial guarantee for the 2024 Los Angeles Games.)

Strengths Noted for Los Angeles’ Bid. The report notes numerous strengths of the two cities’ bids for the 2024 Games. Figure 1 summarizes just a portion of the strengths of LA 2024’s bid, as described in the report.

Challenges Noted in IOC Report

While the report notes at length the two bids’ strengths, it also describes a few challenges facing prospective Games organizers in both Los Angeles and Paris. This section focuses on some of the challenges identified in the IOC report, especially those with potential ramifications for the state government, given its $250 million backup financial guarantee for the possible Los Angeles Games in 2024.

Venue Costs Not Fixed, Subject to Various Arrangements. Los Angeles sports venues typically are privately operated facilities. As such, facility operators presumably do not plan to subsidize Olympic events that occur there. The venue use agreements already in place with Olympic organizers, therefore, sometimes involve “a range of cost or revenue-recovery arrangements rather than fixed rents,” according to the IOC report. The report notes that this creates some financial and operational risk for LA 2024 organizers, but this “is somewhat mitigated by the availability of other existing venues.”

Overall, while the report describes the Los Angeles plan’s financial risk as “low for this stage of planning and budget development,” the lack of fixed venue costs emphasizes the possibility that Games budgets could rise in the years between now and 2024. For this reason, we have emphasized the need for state and local officials to push LA 2024 organizers in future years to address any cost overruns quickly and decisively in order to keep plans on budget. If costs at a particular venue rise notably, using another available venue could be proposed by public officials or Olympic organizers.

In his contract with Games organizers, the Governor might wish to take the opportunity to formalize the manner in which LA 2024 will keep the state apprised of possible rises in venue costs or other Games budget problems. Such a process could build off of the process already in place to keep city officials informed, so as to minimize additional governmental relations work by LA 2024 organizers.

“Extensive Planned Upgrades” at Existing Velodrome Facility. The Los Angeles bid relies exclusively on existing facilities (like the Los Angeles Memorial Coliseum) or already-planned sports facilities (like the NFL stadium in Inglewood, which will be built regardless of whether the Olympics are awarded to Los Angeles). The existing velodrome at the StubHub VELO Sports Center in Carson, however, has been slated for “extensive” permanent upgrades in order to host Olympic and Paralympic track cycling events in 2024. The IOC report notes that $66 million of planned upgrades—to be funded in the Olympic organizing budget—to remove inside pillars and increase seating capacity “would require further discussions between all relevant parties,” including the international cycling federation, to “find the most cost-effective solution with the best legacy outcome” for later users. Following publication of the IOC report, LA 2024 officials reportedly have discussed the possibility of downscaling the velodrome renovation plans, as discussed in an article at insidethegames.biz.

Cost overruns for this type of upgrade are among the ways the Games could go over budget, and, therefore, such costs—at the cycling and other venues—require monitoring by the public entities that have committed to cover cost overruns. Similar to the discussion above on venue costs, it also would be in the interests of state and especially local officials to prod LA 2024 organizers in future years to continue seeking a low-cost solution to the velodrome’s facility needs. Moreover, as changes to other venues are requested by international sports federations (including those for any new sports added to the 2024 Olympic and Paralympic programs in the future), it will be important for public officials to push organizers to keep those new costs low too.

International Broadcast Center (IBC) Construction Funding. The IBC is the location at which broadcasters house their studios to provide round-the-clock coverage of the Games to viewers around the world. LA 2024 organizers plan for their IBC to be in Universal City. The IBC would consist of sound stages and offices to be built as part of improvements to NBCUniversal’s facilities there, including temporary modifications funded by Olympic organizers to make it suitable for Games-time use. The IOC report notes that NBCUniversal has committed to deliver and finance the IBC by 2022 as part of a long-term investment plan, but “there is no confirmed amount of investment for the IBC at this stage.” In our November report (see page 20), we noted that the Governor may wish, in his future contract with Games organizers, to clarify the extent to which state guarantee payments under SB 1465 could be used to cover any future cost overruns related to private facilities, such as those of NBCUniversal.

Significant Efforts Needed to Meet Games Transportation Goals. The IOC report opines that Los Angeles will face challenges in meeting its goal of all Olympic spectators using public transportation. The report notes, in particular, limited public transport capacity to the Games’ Carson (South Bay) and San Fernando Valley locations. In response, according to the report, Los Angeles organizers have recognized there would need to be “mobility hubs across the city to allow spectators…to connect to dedicated shuttle bus services and new cross-regional bus services.” In addition, in our March report (see page 11), we discussed LA 2024’s goal of reducing Games-time traffic volumes in Los Angeles County by at least 15 percent to help ensure that athletes and other Olympic guests can travel promptly to and from events. Among the challenges listed in the IOC report is that “successful implementation of the Games transport strategy…would require significant efforts to manage and reduce traffic.” (We note that the IOC report also identifies the need for effective traffic management measures as a challenge facing the Paris bid.)

Past experience—especially the experience of Los Angeles when it hosted the 1984 Games—shows that public agencies can help reduce traffic volumes substantially during the Olympic Games. State-level technical assistance—through the California Department of Transportation (Caltrans) and the California Highway Patrol (CHP)—will be required, however, to achieve these ambitious transportation goals. In his contract with Games organizers, the Governor could spell out greater detail of the process by which this technical assistance will be provided over time. For example, the agreement could formalize in general terms the roles that Caltrans and CHP are expected to play in coordinating with federal and local security and transportation agencies.

“Further Clarification Needed” on Tax Provisions. In our November 2016 report on the Los Angeles bid (see page 14), we discussed the possibility that changes in federal or state tax legislation or regulations would be requested to comply with requirements of the Host City Contract—for example, LA 2024’s commitment to work with U.S. tax authorities to avoid “potential forms of double taxation” for certain Olympic stakeholders. The IOC report notes that “further clarification” is needed “as to what measures will be implemented to comply with tax-related” Host City Contract requirements. In our November report (page 20), we suggested that state tax changes related to the Olympics were among the issues the Governor might wish to address in the guarantee contract he negotiates with Olympic organizers. For example, the Governor could specify officials in the Franchise Tax Board and the California Department of Tax and Fee Administration to confer as needed with IOC or LA 2024 officials on any Games-related state tax policy issues that are identified in the future. (The IOC report notes that the Paris bid would require future legislative measures in a number of areas, including ones to facilitate the tax requirements of the Host City Contract.)

More Public Awareness of Paralympics Sought. The IOC report states that the “awareness of Paralympic sport in the United States needs to be further developed.” The report opines that the sports presentation experience, technology, and entertainment capabilities of the Los Angeles community could help raise awareness of Paralympic sports and athletes. Noting that all public transport in Los Angeles is 100 percent accessible due to our country’s accessibility requirements, the report adds that certain areas within the UCLA Paralympic Village “would be difficult for wheelchair users due to steep gradients.” In his contract with Games officials, the Governor—consulting with the University of California—may wish to specify one or more UCLA officials with whom LA 2024 organizers would confer regularly on Olympic and Paralympic Village issues, including improving accessibility of UCLA facilities both for the benefit of Paralympians and future members of the university community. In future oversight activities concerning LA 2024, the Legislature—as well as Los Angeles city officials—also can build awareness of the Paralympics by scrutinizing both Olympic and Paralympic preparations.

More Public Awareness of Less Popular Olympic Events. The IOC report notes that some Olympic sports are less popular than others in both the United States and France. In the case of Los Angeles, the report notes that “for a number of less popular sports in the United States, in particular those using temporary venues, a carefully planned test event schedule would need to be established” in advance of the Games. (Temporary facilities include, among others, those planned for the Lake Perris State Recreation Area for rowing and canoe sprint events, as well as those for shooting, equestrian, and other events planned at the Sepulveda Basin Recreation Area.) Test events give Olympic and Paralympic organizers the chance to iron out how new facilities work, as well as crews of new volunteers and staff who support events there. The state government has an interest in ensuring that ticket revenues for less popular events are as large as possible because more revenues mean less chance of cost overruns. In his contract with LA 2024 organizers, the Governor may wish to specify that state officials stand ready to provide technical assistance not only with the Games, but also with test events.

Coordination Between LA 2024 and Public Authorities. The IOC report critiques the “governance structures” of both the Los Angeles and Paris bids. In the case of Los Angeles, the IOC report notes as a challenge that “no official structure [is] in place for interface between OCOG and public authorities at regional, state, and national levels to coordinate government services.” LA 2024’s bid documents do envision that such structures will be developed over time, and especially in the case of the City of Los Angeles, prior agreements with Olympic organizers already provide a basic framework for coordination. The City of Los Angeles—as the key guarantor of the Games—is the primary public entity with which LA 2024 will have to coordinate, followed closely by the U.S. Secret Service, which will coordinate federal, state, local, and international security activities related to the Games (as discussed in our prior reports).

Beyond coordination with the city and the Secret Service, the 1984 Los Angeles Games provide one template for the state government’s future coordination with Games organizers. As we have noted in prior reports, both houses of the Legislature designated oversight committees to follow activities of the 1984 Olympics. (Earlier this year, the Assembly established a select committee to monitor preparations for the 2024 Games.) In the state’s executive branch, Governor Deukmejian named three key aides to serve as liaisons to the 1984 Olympic organizing committee, as well as a task force to coordinate state government efforts. That task force included representatives from the following departments and agencies: Corrections, General Services, Parks and Recreation, Alcoholic Beverage Control, Justice, Transportation, Motor Vehicles, Health and Welfare, Business/Transportation/Housing, Peace Officer Standards and Training, Emergency Services, State and Consumer Services, the California State University, the State Fire Marshal, CHP, the Office of Tourism, Caltrans, Economic and Business Development, the Athletic Commission, and the Labor Commissioner. The Department of Finance also provided key information to the Legislature on Games costs incurred by departments. In addition, other state departments were involved in Olympic preparations: the University of California (Olympic Village host), the Military Department (state-federal military operations helping to secure the Games), Food and Agriculture (animal and border inspections), and the California Science Center (facilities adjacent to key Olympic venues).

In his contract with Games officials, the Governor may wish to clarify the key mechanisms through which the state government will interact with LA 2024 in the future—in the ways specified above and in our prior reports, as well as designating one or more “key state government contacts” responsible for coordinating state responses and keeping the Governor and Legislature informed of key issues related to the Games. One possibility is that a task force—like that of Governor Deukmejian—be established, with one official designated as the chair to be a key point of contact for LA 2024 and the key deliverer of good news and bad news about Games preparations to the Governor and the Legislature. If it wishes, the Legislature could work with Games organizers and the Governor to enact a law requiring such an oversight and support group at the state level. Ideally, such a group would not be viewed as a distraction for Games organizers (in 1984, for instance, Los Angeles organizers specifically asked the Legislature to minimize the number of required meetings and public hearings). Instead, this group could be structured to receive periodic reports on Games preparations and provide a source of contact to help Games organizers solve problems when they arise.

The 2028 Games

2024 Remains the Focus. Los Angeles city officials and LA 2024 organizers have made clear that they believe the Olympic movement would be best served by choosing California to host the 2024 Games. In various statements, they have made it clear that the 2024 bid remains their key focus.

Troubled Olympic Movement Seeks Big Changes in Bidding Process. The Olympic movement has, in recent years, been facing a severe threat to its future operations. The prospect of hosting the Olympic Games has become controversial in most major world cities—with many viewing the Olympics as wasteful exercises that saddle taxpayers with massive costs for building infrastructure and facilities that may be little used just a few years after the Games. As such, there are fewer and fewer cities willing to undertake the complex task of hosting the Olympics and Paralympics. During this bid cycle, several cities—including the initial U.S. bid city, Boston—have dropped out of the running, leaving only Los Angeles and Paris as prospective 2024 Olympic hosts.

In response, IOC leaders have begun to implement Olympic Agenda 2020, which, as we described in our prior reports, aims to reduce the cost and complexity of bidding for and hosting the Olympics. In different ways, both the Los Angeles and Paris bids further the goals of Olympic Agenda 2020, especially in their widespread use of existing (rather than new) facilities, which reduces substantially the financial risks that have plagued prior Olympics. In recent months, virtually everyone involved in the Olympic Movement has noticed that the IOC has two very strong bids on offer for 2024. The IOC—especially its current president—seems eager for there to be “no losers” in the 2024 bid process. In part, this eagerness stems from a desire to show future bid cities that they would be wise to emulate the risk reduction strategies adopted by Los Angeles and Paris. Moreover, the IOC may be reluctant to go through another Summer Olympics bid process anytime soon. Perhaps more significantly, for 2024 and beyond, a reduced emphasis by bid cities on costly, difficult infrastructure projects would allow their organizers to spend more time making the Olympics and Paralympics fun, cool, and successful events for both participants and spectators.

Awarding the 2028 Games Now? Next week, the IOC is expected to release a proposal for a process to award the 2024 and 2028 Games “at the same time” later this year. The expectation of many is that one of the cities bidding for 2024—Los Angeles or Paris—will be awarded the 2024 Games, and the other city will, if it wishes, be awarded the 2028 Games. The exact details of the proposal, however, are not yet clear.

Future Process Concerning 2028. Assuming the IOC approves such a proposal, LA 2024 and city officials will have to respond in some way. The date of any such response is not known, but at the very least, it seems that city officials would have to take a formal action at some point in the future to agree to host the 2028 Games in the event that Paris is awarded the 2024 event. The state’s legislation to authorize the Governor to negotiate a $250 million backup guarantee covers only 2024. Further legislative action, therefore, would be needed to amend that legislation to cover a possible 2028 Olympic and Paralympic Games in Los Angeles. One question in that event would be whether a larger backup guarantee is needed. Put simply, due to the time value of money, $250 million from the state will buy less stuff in 2028 than it would in 2024.

2028 Opportunities and Challenges. Los Angeles officials are focused on winning the 2024 Games. If, however, Los Angeles were offered the chance to host the 2028 Games, this change would bring both opportunities and challenges.

• 2028 Opportunities. Four more years would mean more time for Los Angeles to complete its ambitious public transportation infrastructure plans, which would help achieve the Games’ transit goals. Some also have suggested that the IOC could “sweeten the deal” by providing more money to the 2028 host. More IOC money could reduce Games budgetary risks and/or fund more youth sports activities in Southern California, but others have suggested such a deal is not feasible for the IOC.

• 2028 Challenges. On the other hand, four more years means there is a possibility that some existing venues will not be available or viable as the needs of Olympic sports evolve. (The velodrome in Carson—for which “extensive planned upgrades” might occur before the Games—opened just 13 years ago, which shows that major upgrade needs could be identified at some facilities between now and 2028.) There is a possibility, furthermore, that the Olympic and Paralympic program of events will change more with the passage of four more years—with events added or dropped—necessitating further changes in the Los Angeles venue plan (beyond those event changes that might already occur between now and 2024). Finally, with the Games funded largely by broadcast contracts, corporate sponsorships, and ticket revenues, there is the possibility that the Olympic brand will become less popular over time, reducing the amount of money flowing into IOC and Olympic organizing coffers.

Conclusion

Los Angeles’ Low-Risk Bid a Role Model for Future Host Cities. The IOC Evaluation Commission report—like our prior reports and those of other reviewers—finds Los Angeles’ bid to be fairly low risk for the city and the Olympics. The primary reason for this is that the bid implements the goal of Olympic Agenda 2020 to rely on existing or already-planned infrastructure and venues, rather than costly new construction for the Olympic Village, major venues, and transportation infrastructure. Like other observers, we think that Los Angeles’ bid is a role model for future Olympic and Paralympic host cities.

Legislative Oversight of Executive Branch Activities. Under SB 1465, the Governor is expected to execute a contract implementing the state’s $250 million backup guarantee for the 2024 Games just a few months from now—“on or about the time” of Los Angeles’ possible selection as the 2024 host city in September. To protect the state’s interests, this contract needs to reflect a detailed understanding by the executive branch of Games operations and finances, as well as the state government’s likely role in interacting with Olympic and Paralympic organizers over the next decade. With the possibility that this contract will be executed within just a few months, the Legislature soon can begin ramping up its oversight, which—assuming Los Angeles is selected—would continue through future gubernatorial administrations and conclude after the Olympic Cauldron is extinguished in August 2024. We advise the Legislature to focus its oversight on (1) encouraging Games organizers and other public officials to stick with the bid plan to keep Games-related costs low and (2) ensuring that the state executive branch is helpful to Games organizers in their efforts to deliver a successful Olympics and Paralympics for athletes and spectators alike.

2028? Los Angeles organizers remain focused on their 2024 bid. If, however, Los Angeles pursues an opportunity to host the 2028 Games, we advise the Legislature to consider carefully any future request to amend SB 1465 to extend the backup state guarantee to those Games. If Los Angeles hosts the 2028 Games and the state provides a backup financial guarantee, there will still be a need for the same type of legislative oversight we have recommended for 2024. In any event—2024 or 2028—the Legislature, in its oversight role, can help ensure this Governor, the next Governor, and their executive branch departments further the goal of hosting a third successful Summer Olympics in Southern California.