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Cost of Glory: Why Do Cities Pay for Olympic Bids?

Broken seats are seen at the abandoned baseball stadium at the Hellenikon Olympic complex in Athens July 16, 2014. YORGOS KARAHALIS / Reuters

Four U.S. cities are politicking, pining and, yes, paying to become the American candidate to host the 2024 Summer Olympics – a curious competition given the lack of financial punch typically felt by bringing the Games to town.

Leaders of the United States Olympic Committee listened Tuesday to sales pitches from delegates of the final four possible American nominees – Los Angeles, San Francisco, Boston and Washington, D.C.

Following those sessions, held in Redwood City, California, USOC officials classified the race as a “four-way tie,” and vowed to deliberate further before deciding “in early part of next year” which American metropolis is best suited to compete with the likes of Paris, Rome and Berlin for a shot to host the 2024 Summer Games.

The International Olympic Committee will select the winner in 2017.

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But some economists don’t see any chosen city as a financial winner – and their stances are not necessarily driven by the fact that, in the past, some host candidates invested $10 million just to hawk their local, Olympic merits.

“The evidence we have from independent studies – not from promotional studies – is that there are less than a handful of Olympic host cities, both winter and summer, since 1960, that have benefited from hosting,” said Andrew Zimbalist, an economics professor at Smith College in Massachusetts.

That short list, Zimbalist said, is known to include Los Angeles in 1984, “basically because they didn't have to build anything,” and Barcelona, Spain in 1992, because that city already had launched a massive, civic restructuring, “so the Olympics were just fitted into that plan.”

Previous hosts

Now consider other previous Olympic hosts.

For London in 2012, the overall cost for staging the Games eclipsed $14 billion. But within that larger outlay, the organizers spent $808 million on venue security, $215 million for “operational provisions” plus a bit more for plush ceremonies – all money from taxpayers, reported by the UK government's Department for Culture Media and Sport.

“The evidence we have from independent studies – not from promotional studies – is that there are less than a handful of Olympic host cities, both winter and summer, since 1960, that have benefited from hosting.”

Those same Games, however, churned just a small bump in consumer spending. According to Visa, during the week the London Games opened, global visitors to England plunked down only 4 percent more money at local businesses as compared to the same week in 2011, Forbes reported.

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A study of the 2004 Athens Summer Games, conducted by the U.K.’s University of Bath in 2009, found “the long-term economic legacy effects with respect to both GDP and unemployment appear to be quite modest.”

Then, there is Montreal, the 1976 Summer Games host. In 2011, Forbes reported that Canadian city was “still paying down Olympic debt 30 years after the fact.”

Why do it?

“So, why do cities do this? It’s pretty clear,” said Zimbalist, author of the soon-to-be published book, “Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup.”

“In city after city, what you see is a group of executives from industries like construction coming together and pushing the plan, going to politicians, saying, ‘We want this to happen.’ Then they have a whole list of things that will presumably help the city by being on the world’s stage – attracting tourism, and getting roads and infrastructure built that will be conducive to development,” Zimbalist added.

“The construction executives and the construction unions will benefit privately from hosting the Games because they're going to get all the construction contracts. Politicians respond to executives who support them and who are important in a local economy,” Zimbalist said. “That’s what’s happening in most places. You have a privately interested group that hijacks the political process.”

But modern IOC leaders share a fiscally conservative outlook that is far friendlier to the budgets of host cities, said Larry Probst, USOC chairman and an IOC member.

“What the IOC is trying to do is make this process more cost effective, more efficient, and they want to see bids that harmonize the long-term plans of the city with the Olympic Games,” Probst said Tuesday.

“So that’s perceived as a very positive thing by all of the cities that we’re considering.”