For New York, Victory In Defeat

Michael Ozanian of Forbes writes that while New York has lost its bid for the 2012 Summer Olympics to London (sorry Jacques), “New York City taxpayers should celebrate”:

History has taught us that hosting the Olympics serves as a redistribution of wealth from the middle class to the rich. New York’s politicians would have benefited had the city been granted the Games because they could curry favor from the hoteliers, contractors, union leaders and restaurant owners that would have profited. But much of those profits would have come from taking money from middle-class taxpayers who would derive no economic benefit.

The centerpiece of Gotham’s plan was based on a now-defunct project to build a stadium on Manhattan’s West Side, which would have become home to the New York Jets football team. Although team owner Robert Johnson would have financed the $600 million stadium, the city would have had an estimated $1.4 billion in land and infrastructure costs.

A group of 106 economists from around the country sent a letter to Mayor Bloomberg noting that the stadium’s astronomical cost–to be footed by taxpayers through higher levies and bonds–was over three times the price of any existing stadium in the National Football League.

The report also made it clear that a combination of tax exemptions and other subsidies to build the stadium were “both unnecessary for economic development and very inappropriate.” That plan collapsed in June but a similar plan to build a stadium for baseball’s New York Mets in Queens is now in the works. Such a plan, like the one that preceded it, will cost taxpayers billions of dollars by handing over extremely valuable real estate to a wealthy team owner for a song.

A look at other publicly financed Olympics shows what a debacle they usually are for taxpayers.

Greece was host to the 2004 Summer Games. Seven years before the Games, the cost to host the Olympics was estimated at $1.3 billion. Actual cost: $14 billion. Thanks to the Olympic profligacy, Greece now has a 6% budget deficit, which puts the country in breach of the European Union’s stability pact, and its economic growth rate is projected to slow from 4.2% in 2004 to 2.8% in 2005. The facilities it built for the Games go largely unused.

The 1992 Summer Games in Barcelona reportedly posted a $3 million surplus on revenues of $1.6 billion. But that’s before you factor in the $8 billion the city and country spent on capital projects like roads and airports. The increase in tourism has helped the wealthier folks who run the travel industry in Barcelona. But the debt used to finance these projects pushed up inflation in the period leading up to the Olympics, which hurt the poor and middle class much more than the rich. In particular, housing prices increased fourfold from 1986 to 1992, and are now about twice median income.

The 1976 Olympics in Montreal was funded almost exclusively with public city funds. Montreal turned a significant profit on operations from hosting the Games. But capital and infrastructure expenditures for venues such as the Olympic Village and the stadium spiraled so out of control that the city was left with a gaping deficit of $1.2 billion ($4 billion in today’s dollars).

Local taxpayers are still paying off the cost of the Games through a supplementary $2 billion tax on cigarettes. Taxes on tobacco are regressive–that is, they take a much bigger percentage of the average Joe’s income than that of the rich.

New York’s politician’s squandered a whole lot of time and effort campaigning for the Games. Now, thankfully, they won’t be able to waste anything more. Citizens should boot the politicians from office and be grateful the Games will be in London.

Meanwhile, Jayson of PoliPundit asks:

What