ECONOMIC
IMPACT OF THE 2010 WINTER GAMES
II. What are Incremental
Economic Benefits?
Note : The following definitions are fundamental to an
understanding of the conclusions of this paper. These terms may be
used differently or given different definitions in other works.
When a resident of British Columbia spends the pay cheque on
food, lodging, entertainment, transportation and the other normal
household purchases, those expenditures become income to the
suppliers of those goods and services, wages to their employees,
taxes to governments and investment in new business, among other
things. Those owners and employees similarly spend their wages on
goods and services, with similar effects on taxes, employment and
growth. The collective impact of these individual transactions by
all of the residents, across the economy, is economic impact
and is measured for our purposes in terms of the size of the
economy, Gross Domestic Product or GDP, tax revenue to governments
and in the number of jobs created or maintained. The jobs data in
this report does not include the many volunteers who would be
engaged to assist with the Games delivery. An interpretation of the
jobs data is included in Appendix A.
This input-output approach significantly understates the
true economic impact of a Games in British Columbia in at least two important respects. First, the
federal and provincial tax calculations do not include corporate
income tax due to technical difficulties in estimating it. Secondly,
the economic impact is understated to the extent that incremental
social benefits or non-quantified monetary benefits accrue to
residents from the project. For example, improvements in
transportation infrastructure may incidentally lead to reduced
travel times, reduced travel costs, fewer accidents or the opening
up of new business opportunities. Similarly, Games facilities left
after the Games, which induce residents to spend their recreational
budget in the province rather than elsewhere, will have a positive
additional but uncounted impact on the province which is not
captured in the summary tables in this paper.
Finally, the input/output approach cannot capture extraordinary
changes in foreign direct investment into, or exports from British
Columbia and Canada, which are attributable to increased
international awareness created by the Games publicity. While there
is anecdotal evidence of significant investment and export effects
associated with Olympic Games, we have not yet determined whether
these impacts can be isolated. Accordingly, no estimate of potential
incremental benefit from trade or foreign investment is included in
the summary tables.
The input-output approach assumes all of the "inputs"
required to complete the project, workers, machinery, steel beams
and so forth, would be unemployed if not engaged in the Games
project. To the extent non-Games projects would have employed these
inputs in the absence of the Games and those projects did not
proceed, or were delayed, because of the Games, then an opportunity
cost is incurred for these missed or delayed opportunities. These
potential opportunity costs are very difficult to identify before
they occur and are not quantified in this analysis. Such opportunity
costs can be minimised by VW2010 and the Province through timely
scheduling of the elements of the Games construction program over
the period 2003 to 2009 so as to reduce or eliminate spikes in
demand for the inputs.
Incremental economic impact occurs when new money is injected
into the economy from external sources. This occurs most commonly
when domestic goods and services are sold to buyers not normally
resident in the province, foreign tourists for example, or, in the
case of the Olympic Games, when corporate sponsorships,
international broadcast rights or Games souvenirs, among other
things, are sold to non-residents. These foreign "sales" arising
from the Olympic initiative are uniquely a product of the Games,
would not otherwise occur and hence are purely incremental to the
domestic economy. If the incremental impact on the provincial
Treasury created by externally generated spending exceeds the cost
of any Treasury spending that would not have occurred in the absence
of the Games project, the Games can be said to be self-financed and
"profitable" for the Treasury.
The Games Legacy must not be confused with the incremental
economic impact. The Games Legacy is an IOC term which captures the
value of the Games facilities and improvements to community
facilities that are turned over to communities or sports
organisations after the Games. The legacy is intended to includes a
sports facility endowment fund for on-going operations of sports
facilities, venues and events. It is an important feature as some of
the facilities required to host the Games, the bob/luge track for
example, may require on-going operating subsidies. Not providing
such facilities is not an option in bidding for or hosting the
Games.
This Legacy fund is defined by the surplus of VW2010
revenues over VW2010 costs and as such is a subset of the broader
revenue concept used in the incremental economic impact calculation.
Because the VW2010 revenue calculation is specific to the delivery
and operation of the Games themselves and does not capture any pre
or post-Games tourism impacts, it is possible to have a legacy
deficit but still have a positive incremental economic impact for
the province.
The VW2010 office will need to examine all opportunities to
minimise both the capital and the operating costs of the Games
facilities and to maximise the post-Games revenue potential in order
to maximise the legacy fund. It has been suggested that the IOC may
be ready to switch to a standard North American size hockey surface.
That initiative alone would generate substantial cost savings.
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