It's time for an Olympic-sized financial reality check

"Can you feel it?"

After 30 years, this question — the motto of Calgary's 1988 Winter Olympic Games — is back.

Most councillors weren't feeling it. Are you?

Following a few tense days of last-minute funding talks between the city, the province, and the federal government, Calgary city council voted 8-7 to pull the plug and cancel the bid for the 2026 Winter Games.

But since 10 votes were needed, the motion failed. So, the process continues and Calgarians themselves will have their say during the plebiscite on Nov. 13.

There are strong arguments in favour and strong arguments opposed. The Olympics are a mega-project unlike any other, with countless considerations and differences of opinion. There are numerous intangible benefits: the promotion of sport, community and national spirit, marketing Calgary to the world, and so on.

But tangible costs and benefits are the focus for many. Put plainly, we are talking about money. And it's here where bold claims are made by proponents and opponents alike.

Time for a reality check.

The Olympics won't fix everything

The bid corporation touts gains of $4.4 billion for the city, $1 billion in wages, over 15,000 jobs, and a 10-to-1 return for city funds invested. It's one of the main talking points of the Yes campaign and of the bid corporation.

But they're mistaken. Demonstrably so.

First, the broader employment and GDP gains are based on questionable economic models that few economists take seriously.

Second, and more importantly, to base our Olympic-sized decision on current economic challenges is unwise. In the coming year or two, there is every reason to believe many of Alberta's economic wounds will have healed. Today, the recovery is already underway.

Employment in the province remains approximately 35,000 jobs below where it needs to be to get back to 2014 levels (adjusting for population growth, aging, and other factors). But most of that is accounted for by young workers aged 15 to 24.

For many young people — predominantly young men — a large problem remains. High-paying, lower-skill jobs were available in oil and gas, construction, and manufacturing during the boom years. Those jobs aren't coming back anytime soon. And we should not think that hosting an Olympic Games will bring them back sooner.

Yes, Calgary's recovery is slower than elsewhere, and its unemployment rate was largely flat over the past year.

But recoveries are often painful and slow. There are no quick fixes. No magic bullets.

Retraining, changing jobs, or getting workers to move cities all takes time. Spending on the Games will be many years away, and are of little benefit to unemployed workers today. The much touted Olympic-related jobs are not the answer.

Returns are not 10-to-1

A particularly bold claim by the bid corp. is that Calgary will receive back $10 for each $1 the city puts in.

This is creative accounting.

It counts as "money coming back to Calgary" such things as: spending on soldiers, police, and so on. It counts spending by Calgarians themselves on such things as Olympic tickets and merchandise — money that would likely have been spent on other things anyway. It also counts spending on compensation for Olympic staff that aren't Calgarians. And it counts imported materials, equipment, and so on.

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Again, this $4.4-billion figure cited as a gain for the city is merely the cost of staging the Games. It's money the city won't be paying, but that doesn't make it all an economic gain for Calgary.

Yes, the Games do leverage significant public dollars from higher levels of government. As a result, Calgary may be left with valuable new and refurbished sports venues at a lower cost than would be on offer without the Games.

But as money is such an issue here, it's worth looking deeper at exactly who will pay what.

The Games come at a cost

The federal government will contribute $1.42 billion, while the province chips in $700 million, and the City of Calgary will contribute $390 million. These are manageable.

What does it mean to you? Well.

The city raises just over half its property taxes from businesses, and just under half from homeowners. Split between the two, the $390-million cost is equivalent to more than $350 per residential property in the city and nearly $15,000 per non-residential property (i.e., business).

We don't know how the city plans to fund this, but let's presume it simply takes out more debt. This means future interest costs and repayments that would require something around a 1.3 per cent increase in annual property taxes, or $25 annually for the median home owner, but significantly more for the typical business. (This is napkin math, but gives a good sense of scale.)

The city is already challenged by rising property tax bills on businesses in the city, as downtown vacancy rates are high. Without higher bills for residential property owners, business have made up much of the slack. The Olympics may make this challenge even more difficult.

And then there's the money the province would have to come up with.

Since oil prices fell, our deficits have soared. Despite the economic recovery, Alberta's financial situation today remains rough. The government has already made difficult choices, and may have to make many more.

The province has already reduced its infrastructure budget dramatically. In 2017, Alberta planned to spend $23.6 billion on capital projects between 2018 and 2021. In its 2018 budget, however, the government trimmed that to $18.4 billion over the same period. Balancing the books will require difficult decisions, and reducing capital spending by $5.2 billion was one of those decisions.

There are now roughly four dozen school modernization and construction projects on the government's unfunded capital projects list, and nearly two dozen road and highway projects.

Given such constraints, finding money for Olympic infrastructure means taking it away from somewhere else. It's fair enough to prioritize the Games above other projects, but we must recognize that is the choice before us. This is true even if the government borrows more to cover the costs — the trade-off is merely pushed into the future.

Public funds have alternative uses. It's a difficult reality. But it's a reality nonetheless.

What's next?

For the bid corporation to frame its primary talking point around overly optimistic economic impacts is unfortunate. And for the process to have been so opaque is disappointing.

To do this better, our leaders should engage with citizens with full information about all aspects of this decision. They should trust Calgarians with more than spin.

The costs of staging the Games are real, as are many of the benefits. But claims of enormous economic gains made by proponents are not. The right question to ask is whether the costs are worth the non-economic benefits. And on that, between now and Nov. 13, we will each have to reach our own conclusion.

This column is an opinion. For more information about our commentary section, please read this editor's blog and our FAQ.

Calgary: The Road Ahead is CBC Calgary's special focus on our city as it passes through the crucible of the downturn: the challenges we face, and the possible solutions as we explore what kind of Calgary we want to create. Have an idea? Email us at calgarytheroadahead@cbc.ca

More stories from the Road Ahead series:

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