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Ron Judd's Olympics Insider

Ron Judd, an Olympics junkie and Seattle Times columnist who has covered Olympic sports since 1997, will use this space to serve up news and opinion on the Summer and Winter Games -- also inviting you to chime in on Planet Earth's biggest get-together.

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January 13, 2009 11:14 PM

Vancouver's Olympic Village scandal grows -- and grows

Posted by Ron Judd

WHISTLER, B.C. -- Wet snow, lots of it, is piled up all around Whistler. Doubt and angst, even more of it, are piled up all over the City of Vancouver.

In what should be a joyous phase leading up to next month's one-year-out celebration for the February, 2010 Winter Olympics, Vancouver residents are snarling. Anti-Olympic protesters, with told-you-so glee, are coming out of the woodwork. And even Olympic loyalists are looking a bit sheepish.

Reason: The waterfront Vancouver Olympic Village, which has now teeters right on the edge of official debacle-dom.

You can get the straight skinny from multiple sources, here or here or here.

But here's the gist:

The City of Vancouver and the Vancouver Organizing Committee, in a move that must have seemed logical at the time, opted to do what many other host cities have done in finding a place to house 2,800 of the world's athletes: Put them in rooms later scheduled to be sold as apartments, or, in this case, condos.

Except in this case the rooms were not just condos, but high-priced, prime-real estate condos. Waterfront, along False Creek.

Seemed like a win-win-win. The developer, Millennium Development Corp., would build the high-rise condos by November, 2009. The project, originally budgeted for $750 million, Canadian, was backed by a jumbo loan from Fortress Investment Group, a U.S. hedge fund. Coupled with pre-sales and other financing, the 1,100-unit complex, In the always-up world of Vancouver real estate, would turn a handsome profit for all involved.

But as we all know, since then, always-up has gone upside down. The village is far from complete, and pre-sales of condo units has tanked. So have the likely sales prices of remaining ones. What's worse, the project is overbudget by $125 million. At least. Cash-strapped Millennium has teetered on the edge of default.

They needn't look to its banker for any more beyond the $317 million reportedly already loaned. Fortress (or FIG, as it is traded), like many of its ilk, has laid the big golden egg on Wall Street. A look at its share price is all you need to know: On April 16, 2007, FIG was selling for $34.03. Day before yesterday, you could get a share for about the price of 10 Tim Horton's Timbits -- $1.66.

Result: The total, perhaps $1 billion tab might be left to the generous citizens of Vancouver, B.C., whose leaders two years ago signed a "completion guarantee" backing the project fully.

Short pause for perspective: This is nothing new in the Olympic world. After having a couple host cities bail out on it (raise your hand, Denver), the big cheeseballs who run the world Olympic movement learned to get everything in writing. Before you even bother applying for the rings in your town, state, province, or country, every government inj the land has to sign over its entire world as collateral. It's the very sort of insurance that first caused the City of Seattle to balk -- rightly so, we would suggest -- the last time Olympic organizers began making noises about attracting a Summer Games to the Emerald City.

But in Vancouver, where a public vote for the Games five years ago wound up solidly in the "yes" category, officials were quick to "back the bid," as the slogan went at the time. They went even farther in 2007, when the city very quietly -- OK, secretly -- agreed to ensure what amounts to the entire project.

This in spite of the fact that the city knew as early as June of that year that the project was going upside down on them -- or at least coming in over budget, according to a Globe and Mail report today.

FIG's last check to Millennium reportedly was cashed in September. Vancouver issued an emergency $100 million loan to keep work going -- also negotiated in secret, and leaked to the press during the recent municipal elections. Alas, that might have been just the beginning of Vancouver taxpayer's slow dance over a cliff with Millennium.

New Mayor Gregor Robertson last week cried from the rooftops that the city is on the hook for the entire thing -- or at least a solid half of it.

The city yesterday was seeking an emergency session of the provincial legislature, asking for emergency (caution: theme emerging here) authority to borrow $458 million, which normally would require a public vote, but in this case, there just isn't time, it being an emergency and all.

Vancouver, with the scent of debacle wafting, has not even bothered to officially ask the provincial and federal governments -- both already on the hook for general Games overruns with their own guarantees, not to mention some undefined escalating costs, such as the security budget. Good thing. Canadian Prime Minister Steven Harper yesterday sent this torpedo across Vancouver's bow:

"I will be crystal clear. We will not be funding cost overruns at the Olympic Village."

Not a terrible amount of of wiggle room apparent there.

Other pols, meantime, are howling for a criminal investigation into the matter.

All of this news went over like a flock of lead doves in Vancouver, where, over the weekend, hundreds if not thousands of fed-up Vancouverites began uttering the words no organizer ever likes to hear: "Cancel the Olympics!"

The truth, of course, is that it's too late for that now. Contracts have been signed. Test events are being staged. Flights have been booked, skis are being waxed. It's coming, Vancouver, whether you've read the fine print on the sales contract or not.

The city is promising the thing will be built. So is VANOC CEO John Furlong, who told Reuters yesterday he expects the project to be completed on time.

So there it is. The city is scrambling to find the cash (good luck with that), while Standard & Poors looks on disapprovingly and warns about tarnished credit ratings. Vancouver officials also are said to be attempting to renegotiate a deal with FIG, which is about as flush with cash these days as General Motors. Is there room at the Westin for another 2,800 bodies?

Then there's the question nobody even seems to want to ask: What happens if no one will loan Vancouver the money?

To be sure, Olympic defenders -- and there are many -- insist this is all much ado about very little. Not a good turn, clearly. But the deal will get renogiated, they say. Property values will recover. The condos will sell. The world will come, taxpayers will be made whole, everyone will get paid, and everyone will go home happy.

But the Olympic Village debacle is the first dark, foreboding cloud over these Olympics. And it looks to have some serious staying power.

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Blogroll and links The official International Olympic Committtee site, with news releases, a searchable Olympic medals database and other archival information. Olympic news site from one of the Games' primary sponsors.
NBC Olympics columnist Alan Abrahamson's column/blog
Chicago Tribune Olympic sports writer Philip Hersh's blog U.S. Olympic Committee's athlete web site. Ed and Sheila Hula's Olympic News Service (subscription). News service with audio, video and text coverage of Olympic sports, during and between Olympics. Free, but charges for live video feed subscriptions. Beijing Organizing Committee Web site. Vancouver Organizing Committee's 2010 Winter Games site. London 2012 Summer Games site. Sochi, Russia's 2014 Winter Games site. Candidate city Chicago's summer 2016 bid committee site.
Olympic swimmer Tara Kirk's highly entertaining WCSN blog
Bellevue Olympian Scott Macartney's WCSN alpine ski-racing blog
Other WCSN Olympic athlete blogs.