Another day, another report of costs increases for the Olympics. Just a few days after we learned that the Rio organizing committee’s debt from the 2016 Summer Games was more than three times higher than what it was originally supposed to be, we have a report that cost overruns are already plaguing the 2020 Olympics in Tokyo. This time it’s the cost of the opening and closing ceremonies that has gone up. The ceremonies, which were originally budgeted at the bargain basement price of $82 million—that’s just $40 million per ceremony—will now cost $117 million. That’s an increase of 43 percent.
I don’t know what the “right” price tag is for spectacle like the opening and closing ceremonies. The biggest event I’ve ever put together was my mother’s 70th birthday party and all I did there was call the restaurant and reserve the space and order a cake. (I’m lazy; she deserves a better daughter.) The problem isn’t whether this is an appropriate budget for something on the scale of the ceremonies; it’s the fact that, once again, organizers vastly underestimated how much things will cost. Recent estimates have put the total costs for the 2020 Olympics at $25 billion, which is four times what the bid committee said the Games would run when Tokyo won in 2013. This means that the bid committee, whether unwittingly or otherwise, presented a budget that was very far out of line with reality when they made the bid.
And guess who bears responsibility for the cost overruns? The taxpayers. A condition of hosting the Games that the IOC mandates for all cities is that they must agree to sign a taxpayer guarantee. This “safety net” hardly incentivizes careful budgeting and cost-saving behavior if, at the end of the day, someone else will have no choice but to pick up the tab.
Bent Flyvberg, an expert on Olympic budgeting, recently authored a study that concluded that not a single Olympic games has ever come in on or below budget. “It’s the most amazing thing that the Olympic Games are the only type of mega project to always exceed their budget,” he said.