Like many Angelenos, I celebrated the news that Los Angeles had reached an agreement with the International Olympic Committee on hosting the 2028 Summer Games. As a sign that preparations are already underway, Los Angeles Mayor Eric Garcetti on December 2 announced the “28 by 28” initiative that aims to complete 28 regional transit projects prior to the city hosting the games.
The Olympics promise to result in hundreds of millions of dollars in revenues and an economic boost for LA.
As major infrastructure plans are laid, so too must thoughtful consideration be given to jobs, construction and a post-Olympics plan.
On both a human and economic level, the 2016 Olympics is Rio de Janeiro failed to deliver in the long-term. ESPN has reported that the Rio 2016 Organizing Committee still owed $40 million to creditors. Buildings constructed for the Olympics in the Brazilian city have been vandalized, and some are falling apart or stand eerily vacant. Despite the billions of dollars that were invested in infrastructure in the belief that the Olympics would turn around the city’s financial crisis, and thus decrease crime, ESPN notes that Brazil’s Institute of Public Safety had reported post-Olympics increases in street robberies, deadly assaults, and violent crimes.
I believe we will see a different story in Los Angeles for three reasons:
First, much of the investment that cities must make for the Olympics is in the development of infrastructure and construction of large venues for competition. Greece, host of the 2004 Games, infamously spent close to a reported $11 billion on infrastructure and facilities, and the country went bankrupt not long afterward. However, Los Angeles is already investing in infrastructure and already has much of the necessary infrastructure in place.
Second, the appeal of Los Angeles as a destination for tourists doesn’t begin and end with the games. Los Angeles enjoyed a record-setting 48.3 million visitors in 2017, a 2.2 percent increase from the previous year. The likelihood of vacant hotels and facilities in the aftermath of the games seems implausible given the city’s standing in the larger, ongoing tourism and hospitality market.
Third, Los Angeles city officials and the bid committee negotiated deliberately, with pitfalls in mind. Two smart moves were to insist on an early $180 million advance – part of which will go toward youth sports programs – and a provision that a portion of a $476 million contingency fund would convert to a surplus for Los Angeles if the Games finish at or under budget. The surplus from the 1984 Olympics led to the formation of the LA84 Foundation, which has awarded $230 million in grants to the region since its inception. Those wins help to ensure that Los Angeles taxpayers share in the benefits of economic gain.
It’s important to keep in mind that in order to avoid the post-Olympics economic malaise experienced by other host cities, we must do more to build on the strong foundation in the contract. First, we must ensure that job creation is centered not just on the Olympic Games, but on long-term benefit. Although Olympic host cities tend to experience significant games-related short-term employment, those jobs quickly depart. We can offset some of those losses by investing the windfall from the shrewd negotiation of the LA Committee into workforce development, skills training, educational opportunity, and other programs that yield long-term benefit to individuals, families and communities.
We can already boast that the 1984 Olympics in Los Angeles were the only games to have produced a surplus. With will and intent and LA’s knack for creativity and innovation, we’ll do the same in 2028.
David M. Smith, PhD, is an associate professor of economics at Pepperdine Graziadio Business School.
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