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Olympics Delay Means $12 Billion Games Just Got More Expensive

Isabel Reynolds

(Bloomberg) -- The decision to delay the Tokyo 2020 Olympics until next year means taxpayers and sponsors likely will have to fork over billions of dollars more just as the global economy caves in during the coronavirus pandemic.

Japanese Prime Minister Shinzo Abe and International Olympic Committee Chairman Thomas Bach agreed on an unprecedented postponement of the event for about a year as the world grapples with the coronavirus infection. It’s the first time the games have been delayed since they began in the 19th century.

Now Abe’s administration, along with organizers and the Tokyo local government, have to start figuring out the costs associated with that decision — and who’s going to pay them.

“When you have to change your plans in projects like this, it’s like turning a supertanker around, and it’s really expensive,” said Bent Flyvbjerg, a professor at the University of Oxford’s Said Business School who wrote a study of Olympic cost overruns. “The only thing you can do at this stage is keep paying the bills.”

Japan’s organizing committee said in December the event would cost 1.35 trillion yen ($12 billion), the bulk of which would be covered by themselves and the Tokyo Metropolitan Government.

The Nikkei newspaper, citing the group, said Wednesday the delay would trigger about 300 billion yen in additional costs.

A professor at Kansai University, Katsuhiro Miyamoto, recently published an estimate of 422 billion yen in extra costs for a one-year postponement, with another 218 billion-yen hit to the economy on top of that, excluding any effects from the pandemic.

Japan’s organizing committee will be seeking more cash from sponsors and the government, with individual sports associations likely to face financial difficulties, the body’s president, Yasuhiro Yamashita, said Wednesday. The amount of funding needed isn’t known yet, he said.

Much of the extra costs likely will accrue from having to retain staff, who otherwise would’ve been let go once the games ended, Flyvbjerg said. Mitigating these outlays by putting workers on other projects likely will be hard, given the current global economic stagnation.

“The world is not the same as it used to be, so who needs more people right now?” Flyvbjerg said.

Olympic Facilities

Maintaining venues that suddenly will be empty during the July-September schedule for the Olympics and Paralympics also will be a burden. Miyamoto estimated that extra care for the 45 venues will cost about 22 billion yen.

Some Olympic facilities already are booked for other events next summer, potentially forcing organizers to pay for alternatives. And sports federations may need to hold extra competitions to select representatives for the 2021 games.

Not least of the concerns is the fate of the athletes’ village, where many apartments already were sold to people expecting to occupy them in 2023.

The Covid-19 outbreak also introduces a huge element of doubt in planning for next year. Abe bills the event as one to mark humanity’s victory over the virus, yet no one knows whether the pandemic will be under control by then.

With Tokyo Governor Yuriko Koike calling on the capital’s residents to stay at home this weekend in a bid to slow infections, further delays can’t be ruled out, nor can the eventual abandonment of the effort.

Flyvbjerg’s research shows that Olympic costs always outstrip estimates, with the most extreme example being Montreal in 1976, which had a 760% overrun.

“If it happened, God forbid, that the games got canceled altogether, it would be a huge waste of money,” he said.

(Updates with Tokyo governor’s announcement)

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