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Olympic costs questioned in light of possible tax increases

Municipality spending money to maximize 2010 opportunities
1446olycosts
2010 Spending The municipality is leveraging the 2010 Games for countless opportunities for Whistler but the pressure is on the 2008 budget. Photo by Maureen Provencal.

Next year’s potential property tax increases have many taxpayers like Brian Buchholz thinking about just how much the 2010 Games are costing Whistler.

“I think most people agree that it’s this once in a lifetime chance so let’s exploit it to its maximum, but at what cost?” asked Buchholz.

“We deserve to have absolute clarity.

“I love the Olympics and I’m proud they’re coming here. That doesn’t mean I have to, or anybody should, turn a blind or lazy eye for the accounting of it.”

But just how much exactly are the 2010 Games costing Whistler?

That’s a question Buchholz has asked of council repeatedly, to no avail.

Whistler is taking a big picture look — it’s not counting the paper clips.

“It’s not how much the Games are costing,” explained Mayor Ken Melamed, after pausing to consider the question. “It’s about leveraging an opportunity.”

But even the mayor was hard pressed this week not to acknowledge the connection between possible rising property taxes and the looming spectre of hosting the largest event in Whistler’s history. There’s no denying that the municipality is heading into the second year of one of the busiest capital spending programs the resort has ever seen and that taking advantages of all those Olympic opportunities and readying the resort for the Games is all costing money.

“I think there’s a connection,” admitted the mayor. “I think it’d be hard to argue that there wasn’t.”

This, despite repeated promises that the Games would not cost Whistler taxpayers money. But was that the promise?

The mayor was quick to stress that the council of the day, of which he was a part, never made a promise not to raise taxes to pay for the Games. Rather, in its guiding principles council said it would ensure the financial exposure of the Resort Municipality of Whistler is limited and that it would operate the Games within a balanced budget.

“I think we knew when we went into it that there would be Olympic costs,” said Melamed. “What we wanted to reassure the community was that we would try and be as fiscally responsible as we could given the commitment to host the Games. Remember — this was a community decision. The community told council ‘yes we want to do this.’ Council said ‘we’re going to do it and promise to manage the costs’, remembering that nobody in Canada will forget anytime soon — for a couple of generations — what happened in Montreal.”

The Montreal Olympics in 1976 left Montreal taxpayers with a $1 billion debt. Much of the cost overruns were attributed to rampant corruption and lack of financial controls, a charge that is far from Buchholz’s mind when he asks Whistler council for a true cost accounting.

It’s not that he believes there’s corruption and misspending at municipal hall. Nothing of the sort. He just wants to see for himself how much the Games are costing and then decide accordingly, as a taxpayer and voter, if council has made the right decision with taxpayers’ money.

But what constitutes an Olympic expense? That is the golden question that has already been debated on a provincial scale.

The province maintains the Games are costing $600 million. Its former auditor general, Arn van Iersel however, had a different take on the issue last year when he released a report saying the Games will cost British Columbians more than twice that amount, a total $1.5 billion.

That depends entirely on what’s included in the accounting.

For example the auditor general said the $600 million upgrades to the Sea to Sky highway were an Olympic expense. The province disagrees. The upgrades, they argued, were always on the Ministry of Transportation’s books.

“There lies the Olympic debate, the grey areas,” said the mayor.

The result is perhaps a foggy, rather than clear picture, of direct and indirect spending related to the Olympics.

One that is open to interpretation said Richard Rees, CEO of the Institute of Chartered Accountants of B.C. There is no right or wrong way of accounting for it.

“At the end of the day… what one is always looking for is full disclosure of what is going on,” explained Rees. “If there are significant incremental ‘investments’… being made as a result of the opportunity (of the) Olympics, then it probably is reasonable to expect that they should own up to them.”

Whistler’s approach to Games’ accounting is similar to the province’s — if the line item is not a direct Olympic cost, needed to put on the Games, it is not accounted for as an Olympic expenditure.

A glance of the municipal Five Year Financial Plan shows just four line items that fall under the 2010 Games Initiatives. They are: the Games Office (or the municipal department dedicated to the Games), legal fees, hosting and gifting and the reserve contribution.

“Boy, that’s not a lot of information,” said Buchholz.

Those costs total more than $850,000 in 2007 and climb to close to $2 million by 2010.

But a deeper look at the budget shows several more line items that are connected to the Games but don’t fall under that Games budget.

Take Whistler’s Look and Feel program, budgeted to cost $1.5 million from 2008-2010. This program is essentially what the village and municipal streets are going to look like in 2010, be it banners waving on the flagpoles or lights strung high in the sky.

“It’s not an Olympic expense,” said the mayor. “It’s a party expense.”

“We’re saying the Olympics are here, this is a way of leveraging the Olympics. It’s not an Olympic direct cost because it’s not inside the fence. It’s not required to put the Games on. It’s a way for us to take advantage of the marketing opportunity. So you could say this is more a marketing investment…. In this case we’re taking an opportunity around this party.”

There have been several opportunities like this such as the line item called Volunteerism and Community Pride (more than $1 million from 2008-2011) and Community/Volunteer Engagement ($475,000 from 2007-2010).

The municipality is also funding an $8 million contribution to the athletes’ village — the biggest capital project the municipality has ever undertaken at $131 million.

Remember, said the mayor, Whistler didn’t need to build this village which will turn into desperately needed employee housing after the Games.

The community decided to take advantage of the $35.5 million contribution from the Vancouver Organizing Committee for the Games (VANOC), rather than see a potentially wasted opportunity pass by in the form of a temporary village which would have been wholly VANOC’s responsibility.

“There’s a whole host of other opportunities that have presented themselves, that would not have otherwise presented themselves if it hadn’t been for the Games,” said Melamed.

Similarly, other programs have been accelerated in a booming construction economy amid a labour shortage, which is also compounding the problem.

Take the $1.25 million upgrades to the Whistler Conference Centre, which will be home base for the world’s media during the Games. The bulk of those upgrades are slated for completion before 2010, at a time where construction projects are costing more than ever before.

And so with an $8 million total contribution to the athletes’ village here, a $1.5 million contribution to one special program there, another $1.25 million for upgrades to the conference centre, the costs have started to add up and things are coming to a head as the Games loom ever closer.

All of these specific budget items are coming out of the four per cent hotel tax, so technically from the pockets of guests and not local taxpayers. And the provincial government, which granted that four per cent hotel tax to Whistler this year as part of Olympic negotiations, said that tax, which amounts to some $6 million a year, cannot pay for Olympic expenses; rather, it must go toward programs that ensure the long-term viability of the resort.

These examples, they say, fall under that definition.

Even though all those costs are coming from the four per cent hotel tax and therefore not from the pockets of local taxpayers, Whistler is still feeling the pinch.

And while the argument can be made that the hotel tax could fund other municipal programs, the mayor reminded once again that it was the prospect of the 2010 Games that began the conversation on increased hotel tax.

“Not only does it allow us to maximize the opportunity… but after the Games we get to use this for other ways to improve and enhance the resort and make us successful in an increasingly competitive market,” said the mayor.

That seems far in the future, however, when the pressures of the 2008 budget are being felt today. And compounding the money spent on Olympic opportunities are the other pressures — a tax cut for strata hotels implemented by the province but felt at the municipal level, increased labour costs and additional utilities costs.

Even with significant cost cutting measures council is faced with a potential eight per cent property tax increase.

“I think everybody (on council) pretty much understands that there’s a responsibility that comes with hosting the Games that is going to result in impacts, financial considerations,” said the mayor. “Are they unreasonable costs? Are they providing a long-term financial burden on the community? I don’t think we believe that to be the case. I think everybody on council believes we’ve managed the risk as much as we can.”

Council would like feedback from the public on the potential property tax increases for next year’s budget.

A dialogue café will be held at the GLC on Friday, Nov. 16 from 7 to 9 p.m.