Economic impact study of Boston 2024 Olympics finds positive impact, potential risks

Researchers from UMass Donahue Institute find short-term positive impact of construction, operations and tourism, but many issues remain

Boston – A 2024 Olympic Games in Boston will provide a short-term net positive impact on the local economy, according to new research by the UMass Donahue Institute that was commissioned by the Boston Foundation. The study, A Preliminary Economic Analysis of the Boston 2024 Olympics: Impacts, Opportunities and Risks, was released today by the Foundation and the Institute.

The Donahue Institute team, led by Senior Researcher Mark Melnik and Director Dan Hodge of the Economic and Public Policy Research group, used a customized economic impact model for the State to estimate the direct, indirect, and induced effects of the Boston 2024 Summer Olympics, in terms of employment, labor income, business sales (output), and value added to the local economy.  Overall, the research found the spending related to Olympic construction, Game operations, and tourism would have a positive short-term impact on the state economy.  It found that the Games would create more than 24,000 job-years of construction employment and about $4 billion in economic impact in the six years leading up the Games, along with about 50,000 jobs and $5 billion in economic impact from Game operations and about $514 million in added tourism income (and 4,300 jobs) in 2024.

But the researchers caution that longer-term opportunities, risks and challenges of hosting the Games for the city, state and region must still be ironed out, as plans evolve in the coming years. Those include the longer-term economic opportunities that bringing the Games to Boston could provide, the ability of Boston 2024 organizers to raise money from private funding sources, the possibility of cost increases and overruns as plans become more concrete, and the need for other transportation and public infrastructure investments that would enhance the Olympics but were outside the scope of the study.

“When you look at the Games based on current plans, our analysis shows that a Boston Olympics has a net positive economic impact. Clearly this kind of a major international event in our region can be a real driver of jobs and new investment,” said Hodge. “However, the ultimate determinant of whether the Olympic Games in Boston will be perceived as a longer-term success will depend on a number of variables that are difficult to quantify right now. How well the Olympics stimulate and catalyze investments in transportation and other infrastructure will play a deciding role in whether the bid lives up to its promise.”   

Boston Foundation President and CEO Paul S. Grogan commented on the Foundation’s impetus for commissioning the report last fall.

“While the Boston Foundation has taken no position on the Boston 2024 Olympic Games bid, we do want to help the community comprehend the benefits and risks associated with potentially hosting the Summer Games,” Grogan said. “The Foundation sees this initial analysis as potentially the first of a series of studies that might be done throughout the course of the Olympic bid in order for the community to feel informed and engaged in the costs and benefits of this major undertaking.”

Construction Economic Impact

The Donahue Institute researchers analyzed the Boston 2024 “proof of concept” as it was submitted to the United State Olympic Committee to evaluate the direct, indirect and induced economic impacts of the construction and operation of facilities directly required for the Boston 2024 bid. The researchers used information provided by the Boston 2024 organizers and a customized input-output model to estimate job impacts, labor income, value added (in terms of sales and costs to business) and output over the six-year period leading up to and including the summer of 2024 when the Games would be held.

The researchers separated construction and venue operations costs, estimating about $3.8 billion in construction activity associated with the Games, of which $2.1 billion would be net new construction activity – activity that would be work for Massachusetts firms and would not be happening without the Games.

That $2.1 billion would create nearly 1,900 jobs each year (a total of 10,998 job-years) in construction, and would support another 13,387 job-years of support work and nearly $1.9 billion in economic value.

Operations and Tourism Impacts

While the construction impact will happen in the six years leading up to the Games, much of the spending and economic impact would happen in 2024. Simply operating the Games, researchers estimate, would cost about $5.3 billion. Of that, the researchers estimate that about $3.7 billion would be spent with Massachusetts firms, and of that amount, just more than $2.9 billion would be money coming into the state from elsewhere.

This operational spending for the Games would create nearly 34,000 jobs, which would support another 17,000 jobs and together provide an economic impact just short of $5 billion.

The tourism impact of the Games is fueled by an influx of 166,000 daily spectators and other visitors (a total of 2.38 million visitor days) during the Games, plus more than 13,000 media members and 16,500 athletes and officials.

But the impact is mitigated by the likelihood that visitors who might otherwise come to Boston will choose other times – or that they would have visited Boston regardless of the Games. The researchers estimate of the influx of visitors, about 713,000 would be considered “net new visitor days”, with those visitors spending about $300 million and a resulting economic impact of nearly 4,300 jobs and about $514 million in tourism related impact for the city and region.

Longer term impact more difficult to determine

While researchers estimate positive short-term economic impacts associated with the Games, they also note that there is a great deal about long-term and other expenses and investments related to the Games that are less easily quantified.

Among the possible opportunities are three that Boston 2024 proponents have cited – the opportunity for longer-term economic development of Olympic sites, the ability of the Olympics to drive regional planning and the benefits of heightened exposure from three weeks of global coverage to drive longer-term tourism.
 

Concern about possible cost increases and overruns

The Boston 2024 bid also faces a number of challenges and risks – including the possibility of costs rising above the current estimates. The report points to previous research that suggest that past modern Olympic Games have cost anywhere from 4% to 796% over their original cost estimates.  However, the last three U.S.-hosted Olympic Games all proved to be cash positive in terms of Olympic operating expenses. The Donahue Institute researchers also note the need for a more complete understanding and definition of “cost overruns” and whether and how they relate to potential risks to the public sector.

Other new variables include a set of recommended reforms put forward by the International Olympic Committee last December that aim to rein in costs and encourage the use of existing or temporary facilities, a framework embraced by the Boston 2024 bid. 

Boston 2024 also faces possible challenges of managing issues with displaced businesses in the Newmarket section of South Boston and other parts of the city, and the well-publicized question of transportation, as the winter of 2015 has again highlighted Boston’s aging transit system and overall transportation infrastructure. Many of the transportation improvements that Boston 2024 identified as important to support the Olympics are on their way to funding and construction through the Transportation Bond Bill and other commitments. However, a number of projects, including the South Station Expansion, the expansion and improvement of Dorchester Avenue near the potential Olympic Stadium and road improvements near the planned Athletes’ Village still need funding sources determined.

Other key questions regarding transportation infrastructure as 2024 approaches include:  whether Boston-area transportation projects related to the Games would be prioritized over transportation improvements in the rest of the state, and whether pressure to win and host the 2024 Games would force the region to take on more ambitious set of projects and force the City and the Commonwealth to use greater public funding to accelerate transportation enhancements.

Many on all sides of the Olympic discussion have weighed in on these longer-term challenges and opportunities. The researchers note that it would be impossible to assign dollar values to any of these longer-term items now, however they are all issues that require attention as the planning and bidding process continues.

The full report, A Preliminary Economic Analysis of Boston 2024 Olympics: Impacts, Opportunities and Risks, can be downloaded from the Boston Foundation website at tbf.org.

   
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The Boston Foundation, Greater Boston’s community foundation, is one of the largest community foundations in the nation, with net assets of some $1 billion. In 2014, the Foundation and its donors made more than $112 million in grants to nonprofit organizations and received gifts of nearly $112 million. In celebration of its centennial in 2015, the Boston Foundation has launched the Campaign for Boston to strengthen the Permanent Fund for Boston, Greater Boston’s only endowment fund supporting organizations focused on the most pressing needs of Greater Boston.  The Foundation is proud to be a partner in philanthropy, with nearly 1,000 separate charitable funds established by donors either for the general benefit of the community or for special purposes. 

The Boston Foundation also serves as a major civic leader, provider of information, convener and sponsor of special initiatives that address the region’s most serious challenges.  The Philanthropic Initiative (TPI), an operating unit of the Foundation, designs and implements customized philanthropic strategies for families, foundations and corporations around the globe. For more information about the Boston Foundation and TPI, visit www.tbf.org or call 617-338-1700.

The UMass Donahue Institute (UMDI) is the public service outreach and economic development unit of the University of Massachusetts President’s Office. Established in 1971, the UMDI coordinates multi-campus initiatives that link UMass, other public and private higher education, and other external resources with the needs of government agencies, corporations, and nonprofit organizations. UMDI provides significant economic and public policy analysis, organizational development, training, education, financial management education, research and evaluation to federal and state agencies, nonprofits, industry associations and corporations. The Economic and Public Policy Research Group (EPPR) is a leading provider of applied research, helping clients make informed decisions about strategic economic and public policy issues. Their trademark publication is called MassBenchmarks, an economic journal that presents timely information concerning the performance of and prospects for the Massachusetts economy, including economic analyses of key industries that make up the economic base of the state.