Crain's: City's Olympics Insurance Could Still Leave the City Exposed

By Kevin Robinson in News on Sep 22, 2009 3:40PM

Crain's Chicago Business took a look at the insurance policy the City Council authorized that Mayor Daley's consigliere Jack Ryan to procure against Olympic losses, and the outlook is downright frightening. According to Crain's, the insurance policy "would cover only about $1.1 billion of the $3.8-billion operating budget that the mayor's Olympic point man has drawn up for the games."

What's worse is that "In many key areas, no insurer stands between taxpayers and the risk of revenue shortfalls or cost overruns." In fact, the policies leave gaping holes in some critical spending areas, in a city famous for cost overruns and behind schedule projects. According to Crain's, the city is left without protection if the nearly $2 billion in corporate sponsorship sales doesn't materialize, and nearly $250 million in private donations to put on the games. Olympic planners anticipate that corporate sponsorships will generate more than two-thirds the income they have in London, which is hosting the 2012 Games.

"It's a leap of faith," 49th Ward Alderman Joe Moore told Crain's. Of course, Moore still voted to authorize Daley to sign the host-city contract with the IOC. But not to worry, says Chicago 2016 CFO Rick Ludwig. "The taxpayers are adequately protected by insurance and the validity of our budget, which the IOC found to be reasonable." In classic Chicago style, though, the proposed Olympic Village is wide open to cost overruns from construction, potentially leaving taxpayers on the hook for some $1 billion. The city "hopes to hand it off to private-sector developers," who will bring cash and expertise to the development. Ryan has secured $250 million in capital-replacement insurance, which will provide funds if an investor promises financing but backs out of the deal, as happened in Vancouver. "This doesn't protect you if nobody shows up to develop the project," says Civic Federation President Laurence Msall.