Yaroslavsky: 1984 Olympics Hold Lessons for LA's 2024 Bid

We are often counseled not to repeat the mistakes of history. In the case of Los Angeles’ bid for the 2024 Olympic Games, we can actually learn from history’s successes. The principles that underpinned LA’s bid for the 1984 Olympics are as applicable today as they were then.

What were the historical circumstances that led the city and its Olympic organizing committee to success? What lessons can be learned by today’s city officials and Olympics promoters from the ’84 games?

The 1984 Olympics

As the bidding for the ’84 Games got underway in 1978, Los Angeles was the only credible applicant.

However, there was considerable public angst over the city getting stuck with a big bill for staging the Olympics, as had happened with the 1976 Montreal Games. Moreover, California was in the throes of the Proposition 13 taxpayer revolt.

The city commissioned a Field Poll to gauge public sentiment regarding bringing the Olympics to Los Angeles, which showed 70 percent support—but only 35 percent support if taxpayers had to share the costs.

Members of the Los Angeles City Council and several influential neighborhood organizations demanded that the city be held harmless from costs associated with the games. Olympics boosters, including then-Mayor Tom Bradley, warned that the International Olympic Committee (IOC) would never agree to such a condition since they had always received host-city cost guarantees.

The first half of 1978 saw a tug of war between Olympics boosters and doubters. After difficult and sometimes contentious negotiations, agreement was finally reached on cost-control language for the voters’ consideration. The city council placed City Charter Amendment N on the November 1978 ballot, and it was approved by a 74-26 percent margin.

Faced with the inevitability of a “no tax-supported Olympics,” Bradley ratcheted up the city’s negotiating position with the IOC.

The end result was an agreement signed in October 1978 with the IOC that held the city harmless from financial liability and allowed for the host committee, not the city itself, to be awarded the Games. The United States Olympic Committee (USOC) would serve as the ultimate financial guarantor.

In the aftermath of the 1978 negotiations, the Los Angeles Olympic Organizing Committee (LAOOC) went to work under its newly appointed president, Peter Ueberroth.

Ueberroth and his team had no recourse but to bring the Games in on budget.

Ueberroth succeeded in pioneering a new model of exclusive licensing and sponsorship. Rather than having hundreds of corporate sponsors, he auctioned off the sponsorship rights for each product area and required each sponsor to make a minimum contribution of $4 million to the LAOOC.

This approach yielded excellent returns. For example, a television contract with ABC yielded $225 million—exceeding the television revenue of all prior Winter and Summer Olympic Games combined.

These sponsorships, plus interest, covered the majority of the Games’ expenditures and enabled the LAOOC to return an unprecedented profit.

One thing Charter Amendment N permitted was the levying of taxes that could be used for certain Olympics-related expenditures. In fact, the city did enact a tax on Olympic tickets and raised the hotel bed tax. These taxes, which would be paid only by tourists and area residents who attended the games, were not controversial and were used to offset security and other costs.

1984 vs. 2024

As Los Angeles contemplates another bid to host the Olympics, it must be mindful of significant changes to the Games’ bid requirements.

In 1984, the LAOOC sold the television rights, received the proceeds, and negotiated their distribution to the IOC and the USOC. Today the protocols are reversed. The IOC controls the television rights negotiation, receives the proceeds, and determines how they will be distributed to the local organizing committee. The same goes for the sale of sponsorships. It is unknown how much television and sponsorship revenue the host city will receive from the IOC for 2024.

In the area of capital investments, Los Angeles clearly has an advantage over other bidders, as it did in 1984, due to its large number of existing sports venues.

Los Angeles will have to provide a new Olympic village. In 1984, the LAOOC housed the athletes at local universities at very little cost. Today, for security reasons, a single unified village is required. Games promoters believe the village can be privately financed and built, and the housing units sold at the conclusion of the Games. This is a huge gamble.

The Olympics can also be a catalyst for building or accelerating important infrastructure projects. Such was the case with double-decking the LAX roadways in 1984. Today, Los Angeles is expanding its mass transit system and may wish to expedite the completion of certain projects if awarded the 2024 Games—such as finishing the Purple Line to Westwood, where a number of venues are proposed. Investments in projects like these, which are not part of the Games’ budget, can pay huge dividends for generations to come.

In 1984, the LAOOC paid $35.3 million for security, while London spent $1.6 billion on security in 2012. The level of financial participation by the United States government would be determinative as to whether these Olympics could break even.             

The city’s ability to raise hotel and ticket taxes to support the games has changed. Under Proposition 218, the city may not impose or raise a tax without a two-thirds vote. Even if this is achieved, the amount of revenue to be collected is limited. Some of the city’s newest hotels have agreements with the city that allow them to retain the full value of bed taxes paid by their guests for many years.

LA’s Olympic organizers believe that due to the abundance of ready-made venues, enormous sponsorship opportunities, and a huge audience base, 2024 revenues will far exceed expenditures. They have confidently predicted a surplus of $150 million. Olympic proponents have argued that no city’s guarantee has ever been needed in order to balance the books. Still, Olympic history is rife with cost overruns and budget increases, for which host cities have assumed liability.

How to Structure a 2024 Bid

Like the 1984 Games, the 2024 Games could bring a raft of positives to the Los Angeles region and to the Olympic movement.

But this depends on achieving a fiscally successful Games. It may be that the conditions that allowed city leaders to refuse to guarantee the costs in 1984 no longer exist—we do not have the upper hand in negotiations, since there are several other viable bidders for 2024. However, the Olympic Charter does not require that the host city itself guarantee all costs. Rule 33, Bye-Law 2.4 reads: “Each candidate city shall provide financial guarantees as required by the IOC Executive Board, which will determine whether such guarantees shall be issued by the city itself, or by any other competent local, regional or national public authorities, or by any third parties.” The city could provide the guarantee with negotiated limits, or could ask the state, the USOC, or other private parties to share the financial burden, or could limit its liability by securing insurance. It could sign a side agreement with the private organizing committee, giving the city some level of control over expenditures. Finally, city officials could consider passing an ordinance, or asking voters to approve a charter amendment prohibiting or strictly limiting the city’s financial liability.

The question is whether LA could hedge its commitment and still win the Games. Los Angeles’ boldness in 1984 was perhaps only possible due to the paucity of bidders. For 2024, several European cities are apparently willing and able to sign the guarantee.

The history of the guarantee after 1984 is instructive. For the 1996 Games, a tripartite agreement was executed among a state agency, the city of Atlanta, and the local organizing committee, through which that committee accepted all financial responsibility. The IOC allowed this approach, but was ultimately unhappy with it.

Since 1996, a governmental body has always guaranteed the cost of the games. Sometimes the financial responsibility has been shared between the host city and its state and/or federal government, as was done in Sydney and in Salt Lake.

Recommendations

A pre-requisite for a fiscally responsible 2024 bid is for the bid committee to conduct its business in an open and transparent manner. Thus:

• All documents concerning the staging of the Games in Los Angeles should be made public.
• The city’s chief administrative officer should prepare and make public an analysis of the proposed budget and of the financial commitments being asked of the city.
• The city attorney should publicly share his legal analysis of the financial commitments being asked of the city.
• The City Council should conduct hearings on these important matters.

The city should also seek to limit its financial liability for the games:

• The most direct way to insulate the city from financial liability is to enact a charter amendment or voter-approved ordinance analogous to Charter Amendment N, the cost-control measure for the 1984 Games.
• The joinder agreement must not preclude a charter amendment or voter-approved ordinance that would limit or prohibit the expenditure of city funds on the 2024 Olympics.
• The City Council must make clear that its approval of the joinder agreement, if given, does not constitute its acceptance of sole financial responsibility for the Games.
• The City Council could insist on retaining the authority to approve any aspect of the organizing committee’s budget that would impact the city treasury beyond an agreed-upon threshold.
• The city and the bid committee should negotiate with the IOC, pursuant to IOC Rule 33, to allow for financial guarantors other than the city, such as the USOC, the State of California, private entities, or insurance companies. If Los Angeles is nominated as the American bid city, it will have approximately two years to explore these options.

Such an exercise would be worthwhile. In 2004, the Los Angeles Times published a series on the legacy of the 1984 Games. In these stories, it was argued that in a city with no discernible sense of community, “no event but the Olympics had ever forged communal bonds in Los Angeles.” According to the Times’ Bill Dwyre, ”The city that is too big to work, worked.”

It is this spirit that animates Angelenos’ reported 81 percent support for another Olympic bid, as the USOC claimed recently. But it is doubtful that we would have experienced near-universal satisfaction with the Games if local taxpayers had been stuck with the bill in 1984. At that time, the mayor and City Council concluded that the Olympics were not worth the risk of putting our treasury on the hook. The principle of financially protecting the city remains as valid today as it did in 1984.