The United States Olympics Committee last month formally announced that Los Angeles will be the nation’s bid for the 2024 Summer Games. This decision has been met with local excitement and support – a stark contrast to the reaction from the Boston community, USOC’s original choice. Boston’s campaign for the 2024 games was faced with such heavy opposition from locals earlier this year that it eventually forced the committee to reopen its selection process.
Why the difference?
The decision to host the Olympics is – in large part – an economic one. Both Los Angeles and Boston addressed many of the same considerations that investors face when determining whether an opportunity is a good investment. Ultimately, Angelenos felt the economic investment could support the city’s ongoing tourism goals and infrastructure plans, and outweighed the costs and perceived risks.
Angelenos feel they have less to risk when it comes to hosting the games for multiple reasons. The city stands out as having previously hosted a profitable Olympics that brought $200 million to the city in the summer of 1984. This fond memory appears to have instilled confidence in Mayor Eric Garcetti, who has repeatedly referenced this past achievement and noted that the 2024 games might result in a $150 million surplus, partially as a result of private investors, who were some of the primary sponsors of the 1984 games. This confidence is also in part due to the fact that the price point for Los Angeles to host the games would likely be lower than in many other cities.
Recent Olympics have infamously cost cities upward of $14 billion, much of which is used to fund infrastructure that often loses its functionality when the games are over. But Los Angeles already plans to fund many infrastructure projects suitable for the Olympics that will be valuable regardless of whether the games ever arrive. For years, the city has worked to expand its Convention Center and modernize the Los Angeles International Airport to meet tourist demand, while USC recently announced that it will be renovating its world-class Coliseum. Hosting the games could provide a source of funding for the city to jump-start and justify many of these ongoing infrastructure projects.
Another major infrastructure-related investment Los Angeles has been pursuing for many years is a National Football League stadium. Just this year, developers announced plans for a $1.86 billion stadium project in Inglewood and a $1.7 billion stadium in Carson. L.A.’s long-term plan to host an NFL team, and the infrastructure to suit it, could be supported with a tandem opportunity to host the 2024 Summer Olympics.
In contrast, while the prospect of building a $550 million stadium – as outlined in Boston’s original bid – would be less costly than the one proposed in Los Angeles, it ultimately would not support Boston’s long-term economic goals and generate long-term rewards. This was made clear in Boston’s original bid that stated plans to disassemble the stadium within months of the games and provide the remaining pieces to local university sports teams. Even investors who might otherwise have been interested in supporting Boston’s bid would recognize that a planned disassembling makes for a poor long-term investment.
The massive infrastructure costs associated with the Olympics are already in part incorporated into L.A.’s budget and goals for tourism and entertainment in the future while Boston faced a proposition that would distract from a booming sports economy and leave little long-term benefits behind. When the cities look at the basic investor principles to evaluate the cost-benefit, risk and rate of return associated with hosting the games, Los Angeles emerged as the more suitable investor.
Larry Palmer is a financial adviser with the global wealth management division of Morgan Stanley in Los Angeles.
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