Contrary to conventional wisdom, Boston’s floundering Olympic bid is suffering from too much spin doctoring, not too little.
The bigwigs running Boston’s bid are bemoaning their bad press, yet their bid reads more like a pie-in-the-sky public relation brochure, not a serious proposal. A case in point is the decision to use 2016 dollars to estimates the cost of Olympic construction work that is easily a half decade or more out. With construction prices on a tear, Boston 2024’s estimate of $2.18 billion to build everything from a new stadium to thousands of new Olympic Village could be significantly off.
How much? Anywhere from a couple hundred to several hundred million dollars.
“We are back up again to levels where construction prices were and maybe a bit ahead of where they were in 2007, at the height of the last peak,” James Kirby, president of Boston-based Commercial Construction Consulting, who estimates project costs for a living.
Scott Van Voorhis
A Disturbing Pattern
A spokesman from Boston 2024 was nonplussed, waving off the old bid documents as a first try of sorts, and assuring me a new and more accurate proposal will be coming soon, probably later this month.
Let’s hope so, for the proposal, as it stands now, is hardly one that anyone should be taking seriously. In fact, finding holes in the Olympic bid plan is like shooting fish in a barrel. It is packed with some astonishingly shaky assumptions.
First and foremost, there’s the tiny little problem of either corralling or building thousands upon thousands of new rooms and apartments in housing-starved Boston for the all those Olympic athletes.
No problem, say Olympic boosters. After dithering for years on building student housing, UMass Boston will take the bull by the horns, defy its cranky Dorchester neighbors, and start building dorms. In fact, the university won’t just put its toes in the water; it will roll out 6,000 dorm rooms, conveniently ready for athletes to crash in.
Then there’s the giant mail-sorting plant next door to South Station on Dorchester Avenue, which just happens to sit smack dab in the middle of the planned Olympic Boulevard.
No problem, say Olympic boosters. The U.S. Postal Service, which has played around with moving its mail plant for the better part of two decades, will finally get its act together and pull together this complex deal.
Maybe the biggest whopper, though, involves the several events Olympic boosters have penciled into the now-dead, $1-billion expansion of the Boston convention center.
And while it may not be as glaringly ridiculous as the other misfires, the failure to build in inflation for construction prices certainly fits the larger pattern.
Crunching The Numbers
OK, the likelihood of anyone accurately predicting exactly where construction prices will be in 2021 or 2022 is admittedly slim, but that’s not the point.
It’s rather like home prices. I can’t tell you what the median price in Massachusetts will be a decade from now, but it’s hardly a leap to think that it will be higher than today.
Whatever happens, construction prices surely won’t be the same as today, and, if the past few decades are any indication, they are likely to be higher, and possibly considerably higher.
Sure, prices might temporarily dip, as they did in the Great Recession, but they have not been in the habit of going down in absolute terms.
Crunching the numbers, Kirby sees the potential for a 10 percent, possibly 15 percent increase in construction costs by the time work starts to kick off on various Olympic venues at the turn of the next decade.
A 10 percent rise would push that construction bill up by a substantial $200 million. Plug in 15 percent – or even 20 percent if costs keep soaring like they are now – and suddenly it’s $300 million to $400 million more.
That’s a big problem. After all, it’s not really clear where Boston 2024 is going to come up with the billions needed to turn the Hub into an Olympic showcase, despite happy talk of tapping into a goldmine of corporate sponsorships and contributions.
The recent revelations that Olympic boosters are interested in tapping into tax credits and other public sector goodies only highlights the hollowness of the claim that the project will be completely paid for by the private sector.
An extra $200 million or $300 million is far from chump change.
Above All, Don’t Lowball
Olympic boosters may also be tempted to lowball the construction costs as they try and sell the public on the viability of the massive undertaking, but local history shows that would be a big mistake.
Better in the end to be upfront about the potential for rising costs than to lowball and become a political punching bag later.
The classic example is the Big Dig, but the $850 million Boston Convention and Exhibition Center provides another great example.
The project was originally slated to cost $700 million, but as work got underway in the early 2000s, bids for steel and other crucial materials came in far higher than expected, causing an uproar.
There was talk of canning the project. Instead, angry state lawmakers intervened, ordering a temporary halt in construction and forcing a round of “value engineering” to reduce the costs.
The good news for Boston 2024 is that there is still time to get it right and finally produce a solid proposal, with all eyes now on a promised rollout of a new Olympic plan in late June.
Hopefully that new plan will include some realistic construction numbers. If not, I can guarantee you we will be hotly debating those crazy Olympic cost overruns come 2022 and 2023.
