Chicago's 2016 Olympics Bid Leaves Pricey Legacy 7 Years Later
By Kathy Bergen and Stacy St. Clair
Chicago's Washington Park was nearly empty on a recent Friday afternoon as Bronzeville resident Rosemary Jarrett power-walked her usual five laps around the perimeter of the graceful meadowland where a temporary Olympic stadium could have risen this summer.
The school crossing guard shook her head at the memory of the city's failed bid for the 2016 Summer Games. She had opposed it back then, she says, because she found everything to be alarmingly temporary -- temporary jobs, temporary venues, temporary peace in a city plagued by gunfire.
"I'm relieved we didn't get the Olympics," she said. "We have too much violence, too many problems. Why would we want the rest of the world to witness it?"
Come August, a downtrodden Chicago will watch the Summer Games taking place in Rio de Janeiro -- an in-your-face reminder of what could have been had then-Mayor Richard M. Daley been able to pull off his high-octane push for the 2016 Olympics.
Daley and his lead salesman, insurance titan Patrick Ryan, touted the enterprise about a decade ago as a way to polish Chicago's image on the world stage and create thousands of jobs as facilities were built in some of the city's neediest neighborhoods -- a point of view still held by some civic leaders. But for a city with a hobbled public school system, a massive debt load and a soaring homicide rate, the prospect of spending an estimated $4.8 billion in private and public money on an Olympic Games looks far less appealing to many now than it did in 2009 when Chicago lost its bid.
"As a city, we might be in trouble, like Rio is in trouble," said Cecilia Butler, president of the Washington Park Advisory Council, a liaison between residents and the Chicago Park District. "The trouble they are in is really unimaginable."
Preparations in Brazil have been marred by polluted waterways, faulty construction, the mosquito-borne Zika virus, and the country's political and economic upheaval. In June, the governor for the state of Rio de Janeiro declared a financial state of emergency that threatens a total collapse in public security, health and transportation in the lead-up to the $12 billion Summer Games.
Mounting Chicago's bid was an expensive but privately funded endeavor. Nearly $76 million was raised from donors, who also kicked in $16 million worth of goods and services.
But it left a pricey legacy for taxpayers. The city is on the hook for about $140 million in principal and interest on the purchase of property for an Olympic Village to house athletes, and it was saddled with costly, 10-year union contracts that were hammered out to ensure labor peace during the Games.
A report by the city's inspector general, in the waning days of Daley's administration, found the 34 union pacts "unduly hamstrung not only the current management of city government, but the next six years of management as well." The deals were made in 2007, shortly before the country's economy cratered and the public realized the depth of the city's own financial woes, leaving it with little flexibility to reduce labor costs as it dealt with a massive deficit.
The restrictive deal prompted Inspector General Joseph Ferguson to recommend that the city pass an ordinance limiting labor deals to no more than four years, though the City Council so far has ignored that suggestion.
Perhaps the bid's most lasting legacy will be even more expensive.
Eager to lock in property for an athletes' village, the Daley administration agreed in 2008 to pay Medline Industries nearly $2 million per acre for the former Michael Reese Hospital site even as the economy and housing market were tanking. The city planned to resell the 49-acre Bronzeville parcel to a developer who would build apartments for Olympians, then convert the housing into a mixed-income residential community after the 2016 Summer Games.
The city had five years from the time the deal closed in 2009 to resell the land before any payments came due. Today, the tract west of the McCormick Place truck yards remains vacant and in city hands. A nearby parcel recently sold for $300,000 per acre.
"This inherited deal was a bad one for taxpayers," Peter Strazzabosco, the deputy commissioner of planning and development, said in a prepared statement. "Mayor Rahm Emanuel is taking steps to ensure taxpayer exposure is reduced and to bring the property back to productive use."
So far, a solution has been elusive and the meter is ticking. Unless the city can pay off the loan in advance, it ultimately will pay nearly $50 million in interest on a $91 million purchase. The financially strapped city used short-term borrowing to cover the deferred interest payments from the first five years of the deal, then used long-term bond proceeds to repay that borrowing.
"This is analogous to using credit cards to pay off a credit card," said bond expert Brian Battle, director at Performance Trust Capital Partners.
Emanuel's administration said that since 2015, quarterly payments on the Reese property have been made from the operating budget.
But no workable redevelopment plan has surfaced.
Laurence Msall, president of the Civic Federation, a government watchdog group, called on the city to publish plans for the site "because the city is paying extraordinarily large amounts of interest on the loan."
The city is finalizing plans to solicit development proposals this year, Strazzabosco said. The city will seek proposals "that will have a positive, long-term impact on the Near South Side, the lakefront and adjacent neighborhoods," he said in a written statement.
If Chicago had won the bid, the sweeping property, in theory, would now boast 21 high-rises, a focal point in a city that would have looked and felt immensely different this summer as tens of thousands of visitors poured in from around the world.
On the South Side, an 80,000-seat temporary stadium was supposed to dominate historic Washington Park. On the West Side, Douglas Park was to sport a cycling facility. At the downtown lakefront, Monroe Harbor was envisioned as a rowing venue and Northerly Island as a canoe/kayak slalom course. A new tennis center was expected to augment Lincoln Park.
The bid team said contributions from wealthy donors, corporate sponsorships, television rights and ticket sales would cover costs. But hundreds of millions of dollars in local, state and federal tax money also had been earmarked for the Reese land purchase, some venue construction and security.
The city agreed to an unlimited financial guarantee to cover any losses but said it would be protected by an array of insurance plans -- an innovative approach that won support from the Civic Federation, and that later was used as a model by Boston for its 2024 bid. Boston's bid was dropped last year in the face of strong public resistance.
"I refuse to mortgage the future of the city away," Boston Mayor Martin Walsh said at a July 2015 news conference. "And I refuse to sign a guarantee that uses taxpayer dollars to pay for the Olympics."
After the United States Olympic Committee withdrew the Boston bid, Los Angeles stepped forward to bid for the Games with a plan that has broad community support. Though it uses a mix of existing and temporary venues like Chicago's plan, LA organizers are opting to house competitors on the UCLA campus instead of building an athlete's village like the one Daley planned for the Reese property.
The Los Angeles plan also adheres to an International Olympic Committee decree, issued in December 2014, that encourages bid cities to incorporate as many existing facilities as possible into their proposals. The selection of a host city for the 2024 Games is expected in September 2017.
"LA's takeaway from Chicago and many of the other bids was that the village can be a tricky spot," said Patrick Sandusky, a spokesman for the U.S. Olympic Committee and former spokesman for the Chicago 2016 team. "It was a great opportunity for them versus having to be speculative on the real estate market."
A recent Oxford University study found that every Olympics -- regardless of location or season -- has blown its budget. Calling initial budgets "a fictitious minimum that is consistently overspent," the researchers warned potential host cities against bidding on the Games if they don't have the resources to absorb escalating costs and related debts.
Costs typically end up 3.5 times greater than original estimates, said Olympics expert Andrew Zimbalist, an economics professor at Smith College, citing London's ultimate tab of $18 billion for the 2012 Games.
The Sochi Olympics in 2014, which initially had a $12 billion budget, ended up costing about $55 billion, according to a recent study by the University of Birmingham in England. That figure does not include the estimated $1.2 billion per year required to maintain little-used infrastructure and subsidize the struggling tourism industry, researchers found.
Insurance policies only go so far in affording protection, Zimbalist said. "You can never fully insure a process that would go over due to your own mismanagement," he said.
The risk of overruns would have been especially perilous for Chicago, which together with its school system is straining beneath the weight of unfunded pension liabilities. Fifty schools were closed in 2013.
"We're in debt up to our heads, even without it," said Butler, of the Washington Park Advisory Council, which had supported the bid in exchange for a community benefits agreement. "In most African-American communities, we lost one or more schools."
Yet a number of civic leaders still feel the risks involved in hosting the Games would have been worth it. The preparations and operation of the Games would have created jobs, while the international attention focused on the city would have made it a more prized destination for business investors and tourists, they say.
Terry Mazany, president and CEO of the Chicago Community Trust, says the Games would have pumped money into poor neighborhoods.
"We would've had a more coherent plan of infrastructure investment ... all of which concurrently creates jobs and opportunities," he said. "Those jobs would've stopped hundreds of bullets. The reality in our neighborhoods would be completely different."
John Murray, chief bid officer for the 2016 effort, said the bid energized and unified the city in a way that held huge promise. "Despite the problems with the economy and certainly the many issues facing the city, I'm a believer that that positive energy would have allowed us to not only overcome some of the issues we're facing today but would present new opportunities for us," Murray said.
Because Chicago's bid relied heavily on private funding and did not involve massive infrastructure projects, the city would have sidestepped some of the runaway cost issues faced by other host cities, said Murray, who is currently president of Arena Partners, a sponsorship and event company.
"The tide would have raised all boats and we would have seen, hopefully, less suffering in some of the communities from an economic perspective as more jobs were created and perhaps more positivity and unity in how we got things done," he said.
Mazany and others think the prospect of welcoming the world to a Chicago Olympics might have been a sweet enough incentive to persuade Daley to seek re-election in 2011 and beyond. Daley and Ryan did not respond to interview requests.
Bronzeville entrepreneur Mell Monroe, who runs a bed-and-breakfast in a rehabbed Queen Anne-style mansion, had hoped a Chicago Olympics would reinvigorate the South Side and polish its image. He envisioned worldwide media reports on Bronzeville's role in the Great Migration and its ties to the likes of Louis Armstrong and Gwendolyn Brooks, rather than headlines about murder rates.
"The Olympics would have meant a more aggressive approach to cleaner streets, to finding the knuckleheads out there causing the problems and getting rid of them," he said.
But he and others -- including Emanuel -- see more promise in permanent projects, such as the Obama Presidential Center planned for the South Side or the proposed Lucas Museum, which last month dropped plans to locate here.
Emanuel, who supported the 2016 bid, has publicly said the Obama library and museum was a bigger victory for the city. Calling the presidential center "an Olympics with an annuity that gives every year," he has said it will bring tourism, jobs and economic development to the South Side when it opens, likely in 2021.
Emanuel said he has studied the Olympics issue and agrees with experts who conclude only Sydney, Australia, and Barcelona, Spain, benefited significantly from the Games. His administration has preferred to lure events such as the NFL and NHL drafts, the America's Cup sailing races and the Copa America soccer games -- high-profile gatherings that boost the city's image without straining its budget or taxing its infrastructure.
"I mean, could London still be London if it didn't have the Olympics?" Emanuel asked in April 2015. "Yes."
Still, some South Side residents can't help but imagine what might have been.
LaVaughn White, who lives three blocks from the site of the proposed Olympic stadium, still recalls how excited he was about the possibility of having the Games within walking distance of his family's home. He wanted to see the world's greatest basketball players compete in his city. If tickets were too expensive or tough to get, he planned to attend an archery event or turn out for the marathon just to say he had been to the Olympics.
Now a 24-year-old mechanic, he realizes the other losses that came with Chicago's first-round elimination. All those jobs -- constructions workers, security guards, landscapers, concession stand workers -- were erased with a secret vote of the International Olympic Committee.
"We lost a lot of jobs that day, that's for sure," he said, while waiting for a bus near Washington Park. "With all the problems the city has right now, I'm not sure that I'll miss the Olympics being here. But I think lots of folks will miss those jobs."
Bid leaders pledged the $76 million campaign itself would bear dividends for the city, among them a youth sports organization, launched and funded by the bid, that would serve 10,000 kids a year.
The youth athletics not-for-profit, World Sport Chicago, served just 2,000 kids last year. It hopes to reach 2,500 to 3,500 this year, said former Chicago Cubs executive Kam Buckner, who joined World Sport Chicago as its executive director in early 2015.
Sandusky, who is on the World Sport Chicago's board of directors, said he is proud of the organization's record with helping at-risk youth and points to studies showing that strong youth sports programs help reduce violent crimes in communities.
"Had Chicago won the Games, I think it would have been even bigger," he said. "But even if it's just touching 2,000 kids a year, that's an admirable thing for something that was part of a bid that in 2009 stopped functioning."
Bid leaders also had promised a burnished image for the city, which seems a distant goal given recent tumult. Since losing the bid, Chicago's reputation has suffered a series of setbacks stemming from the police shooting of African-American teenager Laquan McDonald, the escalating murder rate, and the fiscal instability of the city, its schools and its state government.
Meanwhile, the vision of a vibrant new community on the former Michael Reese site has failed to materialize.
Developing a post-bid strategy has proven difficult. Emanuel's administration awarded an $885,000 contract to Skidmore Owings & Merrill to come up with redevelopment strategies but none of the ideas in its May 2013 report have proven workable so far.
Each scenario envisioned different anchor uses, either a casino, a cluster of convention hotels or the Obama library. State approval for a Chicago casino has remained out of reach; the Obama library is expected go in either Jackson or Washington parks, and expansion of convention hotel offerings is taking place closer to McCormick Place and the planned DePaul arena.
Change can't come soon enough for Rosemary Jarrett. As she finished a vigorous lap around Washington Park, she envisioned a day when the city is both safe and financially secure enough to consider another bid.
In the meantime, she'll be watching the Games -- including those in Rio next month -- on her television.
"We will be ready to host the Olympics at some point," she said. "But that day is not today."
Chicago Tribune reporter Hal Dardick contributed.
(c)2016 the Chicago Tribune