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Burning cash

Prague's unrealistic Olympic bid may cost the country hundreds of billions of crowns — but that may be the point

By František Bouc
Staff Writer, The Prague Post
February 21st, 2007 issue

Illustration by Artyom Efimov/The Prague Post
Czech Olympic Committee (ČOV) Chairman Milan Jirásek has said the likelihood of Prague hosting the Summer Olympics in 2016 is “close to zero.” But that hasn’t stopped the ČOV from making plans to bid for the world’s biggest sporting event.
Prague City Hall and the ČOV agreed Feb. 20 to set up a public company, Praha
olympijská, that will start commissioning works leading to developing Prague’s bid for the 2016 Olympics starting in mid-March. Prague City Council will decide whether to bid on the 2016 Olympics March 22.
“So far, we’ve been just leading discussions, but it’s high time we turned to business,” Jirásek said.
He called the 2016 bid, which needs to be submitted by Sept. 15, a trial run at hosting the 2020 games, which analysts say is just as much of a long shot. The new state-run company will dole out hundreds of billions of crowns in expert studies and communication strategies. It will also force major zoning changes. But analysts say that’s the point.
“The Olympic planning sets particular deadlines for many development projects that have been in the works for a long time,” said Vladimír Pikora, an economist with Next Finance. “That will mean lucrative business for companies.”
Pikora pointed to politicians’ calls to build a ring road around Prague. The road has been held up by zoning and funding concerns. The Olympics are a factor that could push those problems aside.
“The bid would stand as a guarantee that works would start soon,” Pikora said.
Form a line
Once Praha olympijská gets going, it expects hundreds of companies to line up to participate because of the prestige of building something for the Olympics. But that’s not the only reason. There will be plenty of money — 600 billion Kč ($28 billion) by some estimates — doled out for the infrastructure changes needed to host the games.
Some are already cashing in, for example, Martin Němec, an architect with Prague-based A.D.N.S. architekti, which developed the first studies of building an Olympic center in Prague 9–Letňany for an undisclosed amount.
“The whole project is only at the very beginning,” Němec said. “It’s clear there would be many companies, domestic and international, bidding for particular assignments.”
City Hall also spent about 15 million Kč for a financial study by consultancy PricewaterhouseCoopers (PwC).
Miloslav Mašek, general director of the Union of Entrepreneurs in the Building Industries, admitted that companies are ready to lobby for the games.
“The Summer Olympics would bring about an incredible boom in the construction of sporting facilities, and investments in this field and in other infrastructure projects would equal tens of billions of crowns,” Mašek said.
Early estimates of the cost of preparing for a strong bid start that low, but they quickly ramp up when other factors are taken into consideration.
Up and up
Preliminary financial studies commissioned by City Hall show that some 21 billion Kč would need to be invested into the development of various sports facilities alone.
Prague Mayor Pavel Bém said the overall costs of hosting the games could reach 132 billion Kč, but that’s not all. PwC’s detailed study of the business ramifications of the Olympic bid showed that another 600 billion Kč would have to be invested in infrastructure development.
According to the study, the private sector would likely finance about 20 percent of total direct expenses connected with the games.
The significant involvement of public finance in the considered Olympic budget makes the bid a sensitive political issue.
Representatives of regions that could benefit intensified lobbying for regional state subsidies.
The Olympic bid is also a political dilemma for the central government, Pikora said, adding that the ambition to host the games in Prague should be put in balance with the country’s intention to adopt the euro.
“The [PwC] study counted on public finance reform to be completed before the possible games in Prague,” Pikora said. “However, since there is no sign of reforms, it is likely the preparation of the Olympics would raise the state budget deficit about 50 billion Kč a year until 2020. Given the current cash-strapped state coffers, such an additional burden looks critical.”
The A.D.N.S. studio intends to develop the Olympic center through temporary conversion of the business exhibition center in Letňany, which is currently under construction and should open between 2010 and 2015.
“Our solution consists of developing the exhibition area that could later be turned into an Olympic center and then back into the business center,” Němec said.
The city’s ability to push for an “Olympic legacy” will be essential to its plans, Mayor Bém said.
“It is important that the Olympic facilities are later turned into commercial and other objects,” Bém said. “The Olympics here would only make sense if it contributes to the regional development and brings profit to businesses and the whole economy.”

František Bouc can be reached at fbouc@praguepost.com


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