Death, Taxes and Olympic Spending Over Budget
The Japanese government’s Board of Audit has determined the country will spend at least $25 billion in preparation for the 2020 Summer Olympics, nearly 4x the amount projected in their ’13 winning bid ($7.3 billion at the current exchange rate). In December 2017, the Tokyo organizing committee operated under the assumption that the 2020 Games would cost $12 billion, but in January ’18 Tokyo Governor Yuriko Koike authorized a project that included “barrier-free facilities for Paralympic athletes, training programs for volunteers, and advertising and tourism plans”, adding $7.1 billion to the budget. Some poor accounting (Tokyo organizers excluded $5.6 billion in expenses from the initial budget) and an increase in national government spending (+$5.8 billion) has pushed the total expenditure on the Tokyo Games to just shy of $25 billion, with the event still 2 years away.
Howie Long-Short: The only guarantee in this life as certain as death and taxes are the Olympics coming in over budget. In fact, “The Oxford Olympics Study 2016” was unable to identify a single Olympiad that came in on or below budget.
The reason the math ($12 + $7.1 + $5.6 + $5.8 = $30.8, not $25) doesn’t make sense is because of ongoing disputes surrounding what is (and what is not) an Olympic expense (think: road construction, incoming tourism) and who bears the responsibility for paying for it. The IOC and local organizers claim much of the money being spent is on “regular administrative costs”, expenses that fall “outside of the overall Games budget.”
It’s remarkable that local organizers and the IOC have said they’ve been committed to cutting spending (by using existing venues, slashing other construction costs) over the last several years and the 2020 Tokyo Olympics are still going to cost upwards of $27 billion, as a “large amount of spending is expected to continue after 2018 leading up to the event”, but tight deadlines and little transparency between government branches, the IOC and local organizers makes it difficult to control costs.
Wondering who is going to pick up the $25+ billion check? The IOC will contribute $1.7 billion and sponsorship, merchandise and ticket sales should account for another $3.6 billion; the balance (80%) falls on Japanese taxpayers.
Fan Marino: The IOC has a new TOP sponsor with Allianz (OTC: AZSEY) agreeing to an 8-year deal (begins in ’21, runs through ’28 LA Summer Games) worth an estimated $400 million; an agreement that also extends the company’s global partnership with the IPC. The German insurance provider intends on using the games to “demonstrate its digital transformation and attract younger customers”. While Allianz has minimal sporting presence in the U.S. (American Jews haven’t gotten over their association with the Nazi party), the company holds the naming rights to 2 major European venues; Bayern Munich’s Allianz Arena and Juventus’ Allianz Stadium. For those wondering, the IOC generated $1.02 billion from its TOP sponsorship program during the 4-year cycle ending in ’16, a +7.6% increase over the quadrennial ending in ’12.
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