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News Release, January 16, 2002
Economic Impact of the Winter Olympic & Paralympic Games  
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The Economic Impact of the Winter Olympic & Paralympic 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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