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The Real Estate Games

The Fiasco Behind Chicago’s Olympics Bid

by ANDY THAYER

Anti-Olympics organizers sprinted into the home stretch with a City Hall rally yesterday ahead of Friday’s International Olympic Committee vote on which city will get the 2016 games.  About 300 attended the protest which – not to take anything away from the talents and hard work of the organizers – should have been considerably larger. 

Pre-event publicity for the protest in the major media was uncharacteristically good, with many pro-Olympics media outlets grudgingly reporting "the other side," giving time, date and place of the protest.  Moreover, a recent Chicago Tribune poll found that more Chicagoans opposed the bid than supported it – 47 per cent to 45 per cent – and 84 per cent oppose using any public money to support the games. 

That these poll numbers couldn’t be translated into larger numbers of people on the street yesterday is a reflection of the fact that many religious and community organizations that focus on survival issues that would be directly impacted by these games – food, housing, education, jobs – are apparently intimidated into keeping their opposition silent. 

Mayor Daley has hung practically his entire legacy on winning the games, and he is notoriously churlish against those who oppose even his minor projects.  Any opposition to D’Mare’s primo pet project would likely translate into funding cuts, if not city inspectors and other harassment towards those organizations who opposed the mayor’s edict.

That said, despite a multi-million dollar barrage of pro-Olympic advertising, including obnoxious audio ads on the city’s buses, pro-Games forces in Chicago have generated no appreciable enthusiasm on their side.  With poll numbers slipping, the Chicago’s Olympic Committee was forced to launch a belated, all-ward campaign of public meetings to sway public opinion in its favor.  But this has not translated into large rallies of public support.  By way of contrast, about half a million Spaniards reportedly rallied for Madrid’s bid on Monday.

Coverage of the bidding war by Chicago’s media establishment has been a study in transparent bias.  The Chicago Tribune,  which apparently hopes to position itself as a gate-keeper to the world’s media descending on the city, wrote a glowing review of the Chicago bid committee’s insurance plan which supposedly will shield taxpayers from cost over-runs.  By contrast, Crain’s Chicago Business,  voice of Chicago’s business elite, wrote a review of the same plan and apparently strove not to sound like a Merrill Lynch executive on the eve of last year’s crash.

Facing sullen opposition to the games – highlighted when many school principals revolted against a school board edict to have the schools fly flags supporting the bid – Mayor Daley pledged that the Games would not cost the taxpayers a dime.  The reality is that if Chicago gets these games, and even if there is no massive fraud and sweetheart contracts (a truly ridiculous "if" in this city and state!), City taxpayers will pay for them – the 84 per cent opposed to such funding be damned. 

First to be tapped will be the hidden sources – the TIFF funds which have siphoned off property tax revenue for years.  Originally set up supposedly to help impoverished areas of the City be redeveloped, for years the TIFF districts have deprived the city’s schools, libraries and other social services of money by putting huge amounts of city revenue into slush funds which the mayor and his allies have in turn doled out to large private businesses owned and controlled by mayoral allies – Boeing, United Airlines and Borders Bookstore, to name a few.

The bid committee’s vaunted insurance policy to protect taxpayers?  Read the fine print.  Crain’s notes that while it provides very good protection against unlikely Olympic disasters – cancellation of the games, tornados, terrorism – it’s piss poor in protecting against the most likely Olympic disaster, construction cost overruns.  The reason is simple.  You can pay a reasonable premium to insure against something that’s improbable, but to insure against something that’s almost certain, you’d have to pay a premium that equaled the cost of the pay-out, plus a profit margin for the insurer.

A crucial factor ignored by most of the popular press accounts of the Chicago bid is that its wildly optimistic financial projections were written up before the depths of the current recession became apparent.  So the Chicago boosters are projecting record ticket revenue from the Games – surpassing all previous ones.  They are projecting record donations by charitable organizations.  Record corporate donations for naming rights.  Seamless sale of the Olympic village facility by the private market following the Games, and no problem raising private capital for the construction.

Laughable even before the crash, these projections seem to be more the product of some truly strong, mind-altering drugs than any sober analysis.  Let’s break these down one by one:

**  RECORD TICKET REVENUE.  Ticket prices at Olympic events have already long priced out working class people from the market.  Many venues at Beijing’s Olympics featured thousands of empty unsold seats, at substantially lower prices than that which Chicago will have to charge to get the projected record ticket revenue.

A teacher at today’s rally asked his students how many of them had ever attended a Chicago Bears game, and thus had at least in a minor way benefited from the millions in taxpayer money given to the notoriously miserly Bears ownership.  Only a couple of students raised their hands, he said.  ‘Nuf said.  Working class Chicagoans won’t be at these games, but we’ll pay for them.

** RECORD DONATIONS BY CHARITABLE ORGANIZATIONS.   Between the crash and the multi-billion dollar Bernie Madoff ponzi scheme, many previously flush foundations have seen their portfolios cut by a third or even one half. 

Because the foundations’ funding cycles were already well advanced prior to this past fall’s market crash, donation cuts by these organizations are projected to really hit their stride beginning in 2010 rather than this year.  In other words, whether we’re talking about cuts in foundation grant funding for AIDS services, homelessness or whatever, we probably haven’t seen anything yet. 

As the State of Illinois budget situation goes from bad to worse (highest unfunded pension obligations in the nation, for example), and the joblessness increases, the demands on the diminished resources of private foundations will probably only increase in the near-term.

Huge, let alone record, donations by charitable foundations for these games is a fantasy.

** RECORD DONATIONS FOR CORPORATE NAMING RIGHTS.   The only thing that prevented Mayor Daley’s Millennium Park (rolled out years late and way over budget) from being an even greater financial disaster was the copious pasting of corporate logos all over the edifice. 

Boosters of Chicago’s Olympic bid, in a rare attempt to appear fiscally responsible, note that a relatively high number of Chicago venues will be pre-existing sites, rather than ones constructed totally from scratch.  Very good, but naming rights for a venue completed decades ago typically commands a much lower price than those of a completely new edifice.  So record naming rights revenue from these Games?  Not likely.  Certainly not something you can bet the bank (or our tax money) on.

**  EASY PRIVATE DEVELOPMENT AND SALE OF THE OLYMPIC VILLAGE. Okay, so the local private condo market has tanked – even worse than the homes market.  So what does the Olympic bid committee want to do?  BUILD MORE CONDOS! 

Oh, and at a time when major development projects across the city are stalled due to lack of private financing, DON’T WORRY!, we’ll miraculously raise the private capital that big time developers around the city have failed to raise for their own projects.

But wait, there’s more!  We’ll build in a relatively undesirable section of the city’s worst local condo market!  Yes, the South Loop saw the greatest year-to-year decline in condo sales of any section of the city this year, according to a recent Chicago Tribune article.  So let’s build even more condos there, in a section of the neighborhood which is even farther from the Loop than the current unsold units!  Location location location.  Great thinking, guys!
  
An unspoken assumption in the Chicago bid for the Games is that the local and world economies will substantially improve over the next few years.  But no one (including me) has a crystal ball.

The economy (and tax revenues) may improve in the near-term, or they may not.  Certainly there are important factors that would suggest that a near-term recovery is not in the offing:

* Consumer spending has been the main engine of U.S. (and world) economic expansion for the past several decades, and yet U.S. consumer debt is at near-record highs, and consumer income is declining.  Consumer net worth was blown out of the water by the combined effect of real estate devaluations and stock market / 401k / money market crashes.  In contrast to the consumer-led recoveries of the past few decades, the consumer will likely be AWOL from the next recovery, and there is no other sector of the U.S. economy that is anywhere near large enough to fill that void.

* Japan recently emerged from a similar economic contraction, something dubbed "the lost decade."  This is a very likely scenario for the U.S. economy.  How did the Japanese economy finally drag itself out of the gutter?  Well it wasn’t stimulus spending.  They tried that, and its effects were ameliorative at best.  Theirs was an export-led recovery.  Good for them, but given that U.S. manufacturing is increasingly uncompetitive on an international level, how could we export our way out of the current crisis, and who else in the world has the money to buy higher-priced U.S. manufactured goods anyway?

Amidst this likely continuing economic crisis, the Olympics are an unseemly boondoggle.  Just when the needs for social services are likely to increase and the resources available for them shrink dramatically, we are being asked to pump out millions, if not billions for a 17-day party attended by the world’s rich.  Add to this the depredations of graft that Chicago and Illinois are rightfully infamous for, and these Olympics are potentially catastrophic to working class living standards for decades to come. 

And for a final whammy, just as private and tax-payer dollars begin to finally stream into working class neighborhoods like Washington Park and other areas of Olympic venues, watch for the current residents to be gentrified out of their homes by rising property tax and rental rates.  This has been the pattern in all previous Olympic games.  The displacement of tens of thousands in Beijing was done by rude government fiat. 

Watch for the kinder, gentler private market to do it here in Chicago.  The effect is the same.  Working class residents, disproportionately dependant upon public transportation, once again forced to move to the transport-poor outer reaches of the city, not unlike that which happened following the destruction of public housing high rises over the past few decades.  Amidst the Olympics-driven real estate and construction contracts scrambles, working class people of color will be displaced for games they could never dream of attending in the first place.  And we will all pay for it, through the nose.

ANDY THAYER is a co-founder of the Chicago-based Gay Liberation Network (www.GayLiberation.net).  He can be contacted at LGBTliberation@aol.com