Regional Business News
regarding the 2010 Olympics
in British Columbia, Canada
OlyBLOG is for businesses across Canada,
especially in Vancouver / Whistler and throughout B.C. We also
hope companies in Alberta and United States (i.e. Washington, Oregon,
Idaho, Montana and California) will find OlyBLOG interesting and informative.
to purchase the book
Published June 2006
HIDDEN OLYMPIC COSTS
IDENTIFY - AVOID - FIX ...
If you have to pay for it,
shouldn't you benefit too?
It costs more to live in, and do business in an Olympic
region. Prices rose rapidly during the first three years of Olympic frenzy.
Everything ramped up; including property values, taxes, staples and supplies.
On top of that we had to deal with exploding world prices for cement,
copper and gas, and a too strong dollar.
On the upside we have low interest rates, a good job market, and people
are happy and confident.
The challenge is that you see all this Olympic activity around you, but
you probably don't understand what is happening. There are too many loose
ends, and already way too much controversy. If you expect to leverage
Olympic momentum you have to learn to manage all the carnies, animals,
and clowns that come with the 5 ring circus.
If you recognize Olympic issues before they arrive you will have
more time to plan how you're going to either leverage, or minimize them.
Unfortunately, in most Olympic regions, the tail often wags the dog. Your
job is to reverse this role.
Most people want so badly to make the experience good for Olympic organizations they ignore what makes it good for them. The reality is that we are
the Olympics, and you, are included. If it's not good for you,
it's a failure for our community. It might already seem like costs are
out of control, and that it's too late to do anything about it, but it
is not. All you need is a little new information.
The info we share here is not only unique, but you're learning about it
before the Games hit town, and that in itself gives you an advantage.
Most people in past Olympic regions figure it out only after the Games
are long gone and a big tax bill lands in the mailbox. The more you know
the better you will be able to make the Games work for you and your community.
Even if you don't have anything to sell to Olympic organizations, there
is still abundant opportunity.
The challenge is that Olympic organizations work hard to make themselves
the centre of attention, and as you've seen at the last three Olympic
events in Salt Lake City, Athens and Turin, they also racked up respective
deficits of $1.2 billion, $12 billion, and "still counting."
Hidden costs are hard to identify, but the community has
to learn to manage them if they expect to succeed over the long run. The
old Olympic business model hasn't worked for a couple of decades. Calgary
did all right in '88, but probably not as good as you might think. They
negotiated a good television deal, which got them off to a strong start.
And the only reason Sydney did as well as they did in 2000 was because
the Aussie COMMUNITY put their own spin on it and managed the IOC very
aggressively. Quite unlike anything Vancouver / Whistler is currently
It is only the very rare region that benefits economically and the successes
are spaced quite far apart. Olympic challenges broadside most regions,
and by the time you realize what happened, it's too late. Vancouver / Whistler
must adpot a more global perspective in order to leverage 2010 to its
full potential. It is impossible for community business associations,
for example the chamber of commerce, and also for "watchdog"
groups to have any effect without the support of everyone in the community.
However, make sure you know who to align with, and who will work to protect
your community and company.
The first hidden cost wake-up call for Vancouver / Whistler arrived on
June 12, 2006. Mike Greer, a highway rock scaler and blaster
was unfortunately killed in a construction accident while working on a new Olympic road
in the Callaghan Valley. Our most sincere condolences go out to Mr. Greer's
family, friends and colleagues.
I hesitate to tie his memory to this issue, but if it wasn't for Mr. Greer's
untimely passing, we would still not have a clue our taxes are picking
up the tab for what is clearly an Olympic expense. As you'll
see below, it is only the tip of the iceberg, and it makes me wonder what
else VANOC CEO, John Furlong is slipping by unnoticed. I trust that mainstream
news media, with their big budget teams, are working hard to uncover other
** This article was published October 19, 2006, and on September 22, 2007,
The Vancouver Sun reported it was possible hardcore drugs were involved
respective of Mr. Greer.
Olympic events like ski jumping and biathlon will take place at the Whistler
Nordic Centre (which is being built specifically for the 2010 Olympics
in the Callaghan Valley). VANOC revealed after the accident that the brand
new road Mr. Greer was working on, that only services the Nordic Centre,
is for some convoluted reason not considered by VANOC to be an Olympic
project, and therefore not an Olympic expense. Local news media barely
challenged this ridiculous notion even though a month pervious we heard
ad nauseum about the Eagleridge Bluff protest, which by the way, was another
hidden expense -- protest police and gear are paid for by you.
You might not realize it, but protests create mega advertising opportunities
for mainstream news media, which means they have great incentive to promote
protests, as opposed to investigate an issue like the Nordic road where
they only invest time and money sourcing information.
What would you rather do, make it or spend it? Me too.
After the Nordic Centre road debacle you now know exactly what people
are talking about when they criticize VANOC's lack of transparency. It is only one small example of an Olympic organization deferring costs
to taxpayers without their knowledge.
Unfortunately, if you don't do something to change the way Olympic organizations
do business you will have to pay for a very long list of hidden costs
over the next decade -- and probably a lot longer. Even more unfortunate,
over the course of time local news media will try to outdo each other and consequently
become part of the problem, not the solution. One seasoned local media
pro, whom I can't name, but who plays a highly visible role in Vancouver,
recently told me news media feel no responsibility to protect our community.
I believe it, especially considering some newspapers will eventually become
Olympic sponsors. [The Vancouver Sun and Globe & Mail newspapers announced their paid affiliations with the 2010 Olympics over a year later in 2007 and 2008 respectively]
News media with sponsor interests use "journalistic
integrity" to back a thinly veiled position of unbiased intent, but
I have to ask, where was their community loyalty when they worked
hand in hand with developers and realtors to convince the naive that obscenely
inflated house and condo prices (as a result of Olympic gouging frenzy)
are good for the community?
Unfortunately, journalistic integrity in Olympic
regions often goes to the highest bidder.
Newspapers become Olympic sponsors just like Visa or RBC, and when they
do, they are pressuried to sign legally binding agreements stating they cannot take
action detrimental to Olympic organizations, including reporting
news that hurts the Olympic image. Makes sense to me. If you're going
to partner with someone and be privy to their strategies and secrets,
it really wouldn't be appropriate to expose your partner if you saw them
do something wrong. Would it?
A couple of local media pros criticized OlyBLOG.com when
we brought to light that their news companies put Olympic interests in
front of the community's interests.
We think our community should come first, then Canada, then Olympic
sponsors. If the BIG guys make a profit off the Games, then small
and midsize companies should also benefit proportionately. It doesn't
seem like a lot to ask. What happened recently in SLC, Athens and Turin
is not acceptable.
After the accident in Whistler almost two weeks ago I fully expected local
media to do a feature about "hidden Olympic costs," but nothing
of any consequence showed up in media in the last ten days so I pulled
a few appropriate "hidden cost" excerpts from my new book, Leverage
Olympic Momentum. It will give you an idea of what you will likely
have to deal with and pay for regarding 2010. The following examples occurred
in other Olympic regions and there is no indication or reason to believe
it will not happen in Vancouver / Whistler. In fact, as you now know,
it already has, right under your nose.
Own the Podium ... or own your home and business?
Hmm. Think about that as you read this;
page 65- LeverageOlympicMomentum.com
The latest reports in 2006 bumped the Salt Lake City deficit up to $1.2
billion (up from $400 million originally reported by the government).
The reality is that taxpayers pick up the overrun. It rarely becomes public
knowledge because politicians and Olympic organizers know how to bury
overrun costs. As you will see in your region (GVRD), there will be many
arguments, protests, and court battles to try and decide exactly what
an Olympic cost is, and what taxpayers should pay for directly. It is
your job to separate your reality from their dream. (si1;cbc1)
page 214- LeverageOlympicMomentum.com
Security companies soon grasp they can often realize a higher net by contracting
privately to businesses and homeowners rather than pursuing Olympic contracts.
Consequently, it puts added pressure on local police to pick up the slack.
Increased police involvement means costs go up. It's common for highly
trained, armed police officers to be assigned duties more suitable for
a theatre usher. In Sydney, 4,875 police officers were hired at $174 million.
Five hundred police alone were stationed at the athlete's village. Four
thousand five hundred private security officers were hired along with
230 trained canines. Three thousand five hundred casual security staff
was also recruited from fire departments, lifeguard associations, and
state emergency agencies. Background checks had to be performed well in
advance of anyone being considered for security positions, whether paid
or volunteer. All aircraft were prevented from flying anywhere near the
Olympic perimeter. It was primarily established to prevent terrorist attack,
but it was also to prevent ambush marketing, which meant taxpayers paid
sponsors to protect Olympic monopolies - another hidden cost. (hjl33)
Ground Contamination False Creek - published March 2006
page 228- LeverageOlympicMomentum.com
Here is what we do know regarding ground contamination in Vancouver as
of early April 2006; the soil where the Olympic Village is to be built
has been extensively tested. According to Jody Andrews, Project Manager
for the Southeast False Creek project, they drilled hundreds of core samples
throughout the site. The samples revealed a wide variety of contaminants
spread in a variety of areas on the property, like hydrocarbons (derivative
of petroleum), waste from a smelter, by-products from a wood mill, and
other miscellaneous industrial waste. The contamination reaches down in
some places to a depth of nine meters, almost three stories deep. The
land was used industrially from the early 1800's, so you can image what
has been dumped there over the last 100 years before environmental regulations
were in place, plus from unscrupulous companies that made midnight runs
to the deserted property in order to illegally empty their tanker trucks
of poisons like lead, arsenic, or who knows what else. It happens every
night in all big cities and this area is an easy target. Over the last
100 years there have been "sawmills, foundries, shipbuilding, metalworking,
salt distribution, warehousing, and a municipal public works yard" on
the land at different times. In order to build out the Olympic Village
area, approximately fifty acres, nine meters deep has to be excavated,
and either treated onsite, or hauled to another location for safe disposal.
Would you want to live on this land? In Sydney when they undertook a similar
soil remediation task in the Homebush Bay Olympic site area, costs escalated
out of control, plus, it created untold health problems for people living
and working in the vicinity. Digging up fifty acres of contaminated soil
three stories deep puts an incredible amount of dust in the air. Plus,
the property borders the Pacific Ocean, which means not only is there
an impact to air quality, but to water too. Residents in the Homebush
Bay area complained of increased asthma, bronchitis and skin rashes, plus
there was evidence of chromosomal damage. Health care costs increased
proportionately, which meant another hidden cost. The city did not take
the concerns of residents seriously until international media started
reporting the information. Andrews freely admitted we would not know what
lies in the ground until the entire site is excavated. Quite literally,
it is anybody's guess what it will cost to make the site safe for residents.
This particular piece of land also has a very unique microclimate, which
contributes to the dispersal of air contaminants. Prevailing winds in
the summer are from the west, off the ocean. During the day as the air
over the land heats up it rises and the cooler ocean air moves in to displace
it. When this happens the contaminants in the air are pushed up and into
the valley. In the evening the cycle is reversed, but to a considerably
lesser extent. Basically, the microclimate sets up an ebb and flow system
that will spread the contaminated dust among millions of residents. Homebush
Bay had a very similar challenge. During a public forum, when I asked
Andrews if he knew about Homebush Bay, he looked puzzled and said, "No.
Never heard of it." (cv1;cf1)
[Jody Andrews resigned in January of 2009 during a period of intense pressure regarding financial controversy respective of the Athlete's Village.]
page 238- LeverageOlympicMomentum.com
Olympic organizations partner with universities for a number of reasons,
and another reason is for access to a volunteer workforce that is at least
eighteen years old. University students are hard and trustworthy workers.
Sun Tzu's old, "Keep your friends close and your enemies closer" tome
is exactly what Olympic organizations do. They know university students
are independent thinkers, but they also know they need them to work within
their system. What better way to keep them on your side then by offering
Olympic curriculums on their campuses? It is a brilliant strategy because
not only does it create an educated workforce with built in Olympic ideals,
but also the students pay for the education and then act as volunteers.
It is a perfect closed loop system. Plus, by keeping the students under
their wing they reduce the likelihood of critical debate regarding Olympic
Forcing university students to comply through a written agreement is almost
impossible, but suckling them creates a relationship that borders on maternal.
University administrators enter into agreements with Olympic organizations
on a number of levels that include "education, training, sponsorship support,
value in kind, workforce, facility and equipment leasing, rental space,"
etc. Universities also create relationships with media by supplying trained
students to do research for background material for accredited journalists
during the Games. Students also develop and manage internet outlets throughout
Olympic facilities where spectators can send messages to athletes. Students
usually work as volunteers, but in some instances are paid a token salary.
In many cases they also earn credits. (hjl83)
There is no doubt some university students will benefit from the relationship,
but the tradeoff is that the entire university is muzzled in the process.
It will however present an opportunity for some SMBs. Obviously, not all
students will enroll in Olympic study courses, and the large numbers that
don't will have relationships with their peers who have enrolled. This
relationship can support a transfer of Olympic knowledge invaluable to
independent contractors. Knowing how the system is set up and managed
internally will give shrewd SMBs a jump on the competition. Universities
pride themselves on offering free and open debate on all matters, but
when Olympic culture is introduced the freedom to explore and expound
openly upon certain trains of thought is impeded. Some students find it
unconscionable, especially when they realize the university will place
undue stress on their education by putting Olympic needs over the needs
of the student body. It doesn't take long to sink in when costs escalate
and students are evicted from dorms or forced to cram a three-month semester
into eight weeks, etc. A university can generate revenue in the million-dollar
plus range as a result of leasing rooms and sport facilities to Olympic
organizations. Students often take a back seat. Olympic organizations
not only directly sway students they also influence media through professors.
By doing so they legitimize their position. What better way to get the
media to believe than to hear it from a respected academic? (hjl84)
Every hour university administrators and academics spend managing Olympic
projects taxpayers pay for, which, as you probably guessed, is hidden
and not included in budgets. SMBs will always be caught in the middle
due to the inherent nature of the Olympic business model, which primarily
represents big business interest. When SMBs create a new Olympic business
model, invariably they will promote some form of critical discourse in
order to demonstrate that small and midsize businesses have a place at
the table too. And also inevitably Olympic organizations will launch a
campaign to undermine the SMB's position. Olympic organizations cannot
allow anyone outside of their circle a toehold. If they do thousands more
waiting in line will move up an inch. Monopolizing and controlling the
market is critical to their success. Olympic organizations have a long
list of strategies to turn the public against anyone who criticizes or
threatens their revenue flow. They work slowly and methodically in collusion
with select local media to make the public feel that even legitimate criticism
regarding doping athletes, cheating judges or bribery scandals are off
limits for anyone outside of their realm to deal with or even discuss.
Olympic organizations work to turn criticism of their operations around
to make it look like it is criticism against all athletes and even the
country. They target the less educated and most gullible and position
criticism to sound like treason. Sponsor newspapers play an import role
in the manipulation.
page 241- LeverageOlympicMomentum.com
In some Olympic regions the social impact is so great that many governments
do not have the resources even after the Olympics leave town to make up
for the shortfall. It knocks communities into a slump that can easily
last ten years, if not more. Hidden costs are always a challenge. Olympic
organizations and their partnering governments concoct complex strategies
to defer and divert costs so taxpayers and SMBs have no idea how to differentiate
between an Olympic expense, and legitimate costs to operate a community.
Olympic budgets often only include "direct costs," but not "indirect revenues."
In other words, they take more than they promised and return less than
they generate. What else is new? The difference is that too many people
don't expect Olympic organizations to operate like this. They hold them
up to higher standards, and by the time SMBs and taxpayers figure it out
it is too late. The Olympic spectacle simply moves on to another region.
As you have seen throughout this book, Olympic organizations expect SMBs
and taxpayers to put their businesses and lives on hold while sponsors
reap huge multi-billion dollar benefits. During the 2000 Games in Sydney
the Olympic organizing committee brought in 3,500 buses from across the
country to work the Games routes, but they had little if any regard for
the communities forced to live for almost five weeks without their transportation
systems. It affected everyone around the country including the disabled.
VANOC is considering using 'mini-buses,' which make up a large part of
municipalities' handicap fleets. When it comes time to tally up the expenses,
the cost of removing the buses from current transportation infrastructure
usually isn't included. Communities end up paying for it themselves. (hjl62)
Unbelievably, in Salt Lake City the same thing happened again, except
this time it was even worse. SLC was so poorly managed they couldn't source
enough buses and at the eleventh hour scrapped plans to bus fans across
the Wasatch Mountains between SLC and Park City. Instead they had people
drive personal cars, which means they had to clear cut forest to provide
last minute parking lots. There is tremendous potential in this area for
Page 242- LeverageOlympicMomentum.com
Here's another example of a hidden cost. Government workers are often
assigned Olympic related work and are awarded a bonus for their efforts.
Again, it is pitched as an "once-in-a-lifetime" opportunity. Most people
don't realize taxpayers cover the cost of government workers who work
the Olympics while sponsor organizations make huge profits. Instead of
spending time on government matters they log time and use government supplies
for Olympic projects. The rationale is twisted, but in the past, governments
tried to justify the expense by saying government offices close down during
the Olympics anyway, so civil employees have to do something. Government
staffing for a summer Games could approach $2 million, so it's quite substantial
and would not be included in the cost analysis. These numbers refer only
to municipal governments. At a federal level the hidden contribution could
easily be in the neighborhood of $500 million - all unreported as an Olympic
expense, which means taxpayers cover it directly. Many governments also
try to convince their workers to take holidays or a leave of absence during
the Games, preferably a leave because then they don't have to pay wages.
It also takes pressure off the transportation system. More and more governments
set up civil employees to work from home during the Games. It means investing
in hardware, connections, and training that is also a hidden cost. It
is virtually impossible to travel during the Olympics and companies that
can't afford to close down have little choice but to make arrangements
for their staff to telecommute. Unfortunately it is not a solution for
companies that are primarily blue collar and hire manual laborers. It
only works for knowledge-based companies. Universities and many schools
also close down for the duration. Parents had to fend for themselves if
they needed day care. Costs like this are also hidden. (hjl69)
page 244- LeverageOlympicMomentum.com
In Sydney they were far below recruitment levels (7,000 short a few months
before the Games) and looked to the welfare system to boost numbers. Consequently,
welfare recipients were 'forced' to search out Olympic-related jobs or
they would have their payments cut. They were ordered to devote at least
fifty percent of their time looking for Olympic work. Basically, it was
free labour that was also never included in the Olympic cost analysis
and became a hidden cost paid for by taxpayers. I've mentioned repeatedly
that one of the reasons Olympic organizations partner with governments
is because it makes it easier to change rules and regulations midstream.
Workforce recruitment is one of those areas. There is sometimes a penalty
if welfare workers go home to a region with elevated unemployment numbers,
but in Olympic regions that rule is often suspended in order to attract
workers. However, as soon as the Games are over the workers have to leave
and go back where they came from. Many do not have the financial means
to do so and it causes tremendous hardship on their families. Governments
occasionally foot-the-bill for the move, but again it is not reported
as a cost. It is hidden. Ironically though, suppliers wanted workers who
already had jobs and were motivated. They wanted good workers with good
records and did not want people they deemed to have an attitude problem.
Consequently, many welfare recipients are not hired. (hjl72)
page 245- LeverageOlympicMomentum.com
In Sydney, rural fire service volunteers were given free board during
their duties, but they were expected to pay almost twenty dollars for
breakfast. Olympic organizations have also looked to the government, their
partners, to offer last minute incentives. For example, in past Olympics
for every day a civic employee volunteered for an Olympic project they
were awarded the same amount of days off - another hidden cost picked
up by taxpayers. (hjl74)
page 249- LeverageOlympicMomentum.com
Everyone in an Olympic region gets in the ticket-selling game including
students, parents and the school system, whether they want to or not.
The public school system in most countries is already stressed, and adding
a heavier workload severely impacts their primary mandate, which is to
improve the educational experience for children. Olympic organizations
don't see it that way. They see the public school system as an organized
association with a captive audience. It's one thing for universities to
get involved, but at the public school level it causes a myriad of problems
that aren't easily resolved. To begin with, students in the public school
system are younger and cannot take on the more complex administration
workload that a university student can assume, which means it is passed
on to teachers and parents. (Taxes pay for teacher's wages, which is a
"hidden cost") Students can however be counted on to do the
grunt work. Inviting the Olympic enterprise into the school system also
opens the doors for corporations like McDonalds and Coca-Cola. In Sydney,
Olympic education kits sponsored by Coca-Cola and IBM were distributed
to schools as early as 1995. It was a sophisticated branding project to
get students tuned into Olympic ideology and subsequently introduce them
to Olympic commercialism. The programs were presented using an educational
sub-text, but in reality provided a direct channel to impart the associated
brands into the young budding psyche. School documents were branded with
corporate logos, and students did literacy and numeric tests with Olympic
themes. When interviewed by media one young student thought there should
be a "test to see how much McDonald's you could eat in an hour."
The imprinting plan worked incredibly well. Visa also got in the game
and presented an "Olympics of the Imagination" program. The
idea was to have kids create art that symbolized what the Olympic motto,
"faster, higher, stronger" represents. The contest was featured
in a regular Herald (newspaper) insert called "Olympic Insight."
Teachers managed the competition in the classroom and as Lenskyj pointed
out, through default became "Visa and Olympic volunteers." Art
contests were also promoted that attracted 54,000 entries. In order to
enter, students had to give up their copyright and agree to let Olympic
organizations use the artwork for free to promote the Games. The artwork
was reproduced on t-shirts, mugs, pins, ties, etc. It generates considerable
revenue that is channeled to poorer Olympic countries. VANOC used a similar
contest to entice artists to design their logo (Ilanaaq the Inukshuk),
except in Vancouver artists had to actually pay a fee upfront to enter
the contest. (hjl80)
page 265- LeverageOlympicMomentum.com
Vancouver/Whistler already announced $110 million in overrun costs in
early 2006. The challenge for SMBs and residents is to carefully screen
what Olympic organizations claim as being either an Olympic or a community
expense. They often convince taxpayers to pick up the tab directly for
something that is solely an Olympic cost. Sponsor shareholders have tremendous
influence in this regard, not directly, but indirectly through the company's
board of directors. There is great incentive to pass the bill on to the
community. Even though taxes pay for it the accolades go to the sponsor
when the world sees what an incredible job has been done with 'sponsor'
money. No one around the world has a clue that local taxpayers subsidized
it. Sometimes even taxpayers don't know. "Double-dipping" is a common
strategy used to find more funds. A frequent ploy is to agree to use an
old structure for an Olympic venue. Olympic organizations agree to rebuild
and fix it up, but what they don't say is that they expect the municipality
to pick up costs for things the community will benefit from in the future.
In other words Olympic organizations will upgrade the building in only
areas they want to use for sport competition, or as a backdrop for television,
or that provide an operational value like freight elevators, parking,
etc, but when it comes to spiffing the place up in public washrooms or
concession areas, that has to be paid for by taxpayers. Every time this
happens out come the protest signs. Each time taxpayers protest, renovations
and construction slow down and sometimes stop. Each time it does the whole
schedule gets pushed back. When schedules get pushed back costs increase
because third party suppliers get held up. When they get held up their
costs increase. It sets off a chain of events that trickles all the way
down the line. Suppliers, possibly you, who are at the end of the line,
end up having any small profit they thought they might generate disappear.
Once SMBs sign Olympic contracts they are locked in. Contracts are almost
exclusively based on a fixed delivery price with no contingencies to renegotiate.
Don't even think of bailing either because if you do, Olympic organizations
can easily turn it around to make the public think you unfairly backed
out and left them high and dry. And remember, sponsors often supply 'value
in kind' products and services in house, but they often only provide the
products and services they know they can deliver at a reasonable cost.
When they sub-contract to an outside company, possibly yours, watch for
signs that they are only looking for a third party to provide a product
or service that will be extremely hard if not impossible to deliver profitably.
If you doubt this happens try to negotiate a contract with an escalation
clause to cover circumstances beyond your control. If you're successful,
you'll be one of the few to do so. I'd like to hear from you if it happens,
but unfortunately you'll be prevented from telling us about it due to
the stringent confidentiality agreement you were forced to sign when you
bid for the project. (hjl95;tw48)
- THE BOOK
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