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A post Games analysis

Halifax has withdrawn its bid for the 2014 Commonwealth Games.The decision was announced just as the Canada Winter Games were wrapping up.

Halifax has withdrawn its bid for the 2014 Commonwealth Games.

The decision was announced just as the Canada Winter Games were wrapping up.

Nova Scotia and the Halifax city council decided it just wasn’t worth it.

The process in Halifax seems decidedly less boosterish and more levelheaded than the one Yukon residents saw in the leadup to the Canada Winter Games.

In the Maritimes, government officials actually commissioned a study to assess how the bid process worked.

And to determine whether the Games would be a boon to the city. Or a bust.

Its findings are troubling, especially when considered in the fading euphoria of Whitehorse’s staging of the Canada Winter Games.

Central to its findings is the wrongheaded use of economic impact analyses to determine the costs and benefits of major sporting events — the very arguments used to justify the Canada Winter Games.

Such an analysis “assumes that expenditures generate jobs and therefore considers expenditures to be a measure of the benefits from the Games when clearly they are costs,” said economists James Wildsmith and Michael Bradfield in their 18-page report.

“The experiences of other major Games events show that estimates of benefits are usually overly optimistic and costs grossly underestimated.

“Could the public funds necessary for the Games provide greater benefits for Halifax and Nova Scotia if spent to meet recreational sport or other more fundamental needs?”

Governments host such events because the cost of staging them is never met by the revenues they generate — if they were, private business would do it, said the report.

Governments do it for the spillover benefits, usually urban renewal and a post-Games tourism boost generated by all the hoopla.

Sound familiar?

The authors suggest a better approach would be to draft a detailed cost-benefit analysis of such events, similar to those used by profit-generating businesses.

“To our knowledge, a cost-benefit analysis has never been conducted of a major sporting event in Canada.”

Instead, governments prefer the economic impact analysis.

It assumes government spending creates jobs that otherwise would not exist.

“In this view, the more money spent (i.e. the higher the cost) the greater the impact (i.e. the more jobs created).”

Thus, write Wildsmith and Bradfield, cost overruns can be considered a plus — they generate more jobs.

To assume the jobs would not otherwise exist is to assume that there are no other more pressing needs for public expenditure in health, education, social services, recreational sports, transit or other things, they write.

“It also assumes that individuals would not spend their increased disposable incomes if they had lower taxes because the provincial and city governments did not subsidize the Games.”

When it comes to tourism benefits, they are often overstated, said the report.

In many cases, tourism actually drops in the year a major event is held.

And the economic impact analysis is often flawed.

Such an analysis assumes a multiplier. That is, for every dollar spent, $1.25, or more, will flow to the economy.

This is what really deep-sixed the Halifax bid. The multiplier was overstated.

Again, there are troubling findings in the report when examined from the perspective of the Yukon.

“The size of the multiplier depends on the fraction of each expenditure spent on local production rather than on imported goods and services.

“Expenditures outside a jurisdiction are called a ‘leakage’ from the local spending stream.

“This leakage of expenditures lowers the multiplier effect and this loss is higher the smaller the economic base.”

And so, in the end Halifax pulled out.

It cited, among other things, a lack of transparency in the bid process.

“These issues about appropriate methodology for estimating costs and benefits need to be understood for future public undertakings,” said the report.

Of course, the decision to withdraw was controversial.

The report deals with that as well.

“If there is an embarrassment in this saga, it is not that our politicians stopped the bid too early, but that they tolerated a flawed process too long.” (RM)