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2016 Bid cities told ' No financial guarantee, no olympics'.

Chicago's 2016 bid committee hopes the 80 pages of information it sent last week to the International Olympic Committee will help distinguish the quality of the city's Summer Olympic bid from those of its six rivals. After all, the IOC will pick finalist cities in June largely on the basis of that information.

At least one of those pages certainly will set Chicago apart, and it is a distinction that puts a U.S. bid city at a disadvantage.

Among the IOC questions the applicant cities had to answer by a Monday deadline was, "What financial commitments have you obtained from your national, regional and/or local governments?" The IOC specified those pledges were to include "a commitment to cover any shortfall in the OCOG budget" and "a commitment to undertake and finance the necessary infrastructure developments."

Those are the financial guarantees that caused such uproar when U.S. Olympic Committee officials demanded before choosing Chicago as its candidate that the city must have "some skin in the game."

IOC rules and its contract with Olympic host cities assume an unlimited guarantee, which is what the other leading candidates -- Madrid, Tokyo and Rio de Janeiro -- will be able to provide with the backing of their federal, regional and local governments. U.S. bidders do not get that backing.

"I think people have come to understand that the United States will get the job done, and nobody really knows what the guarantee means," IOC member Richard Pound of Canada said. "But somebody will make an issue of it. If I were Madrid or Tokyo or Rio, I would."

Chicago has come up with a $1.15 billion guarantee, based on $500 million from the city, $500 million from projected operating budget surplus and a $150 million pledge (not yet approved) from the state.

That is substantially more than the $450 million ($200 million from surplus) New York guaranteed it its failed bid for 2012, when the other four finalists all had unlimited government backing. New York finished next to last.

To some of the 100-plus IOC members who will choose the 2016 host in October 2009, the lack of an unlimited guarantee could be an issue because they see it as an unnecessary risk for the IOC.

"We never know why people vote, but probably that [hurt New York] because they did not get the Games," said Gilbert Felli, the IOC's executive director of Olympic Games.

"If you have a close vote like that between Paris and London at the end of the 2012 decision, one or two members can be the difference. So you could say [the lack of an unlimited guarantee] is a disadvantage."

That does not mean the IOC will not sign a host-city contract with a U.S. bidder, but it does so in something of a "wink, wink, nod, nod" compromise of its own rules.

"Even if Lausanne (IOC headquarters) winks, you're vulnerable to the membership being wound up about a bid that 'violates the charter,'." said Brian Hatch, deputy mayor when Salt Lake City won the 2002 bid after getting the state of Utah to agree it would indemnify the city for losses.

"The host-city contract is very clear: The city assumes the responsibility for everything."

Alex Garvin, managing director for planning, development and design of the New York 2012 bid, said he is sure the IOC would have pushed New York for an unlimited guarantee, but he said it would have been impossible.

"We're dealing with American democracy, not with states able to give unlimited guarantees, like China," Garvin said.

The Olympic Games Facilitation Act, passed by the New York state legislature in 2001, capped the liability for the city and state at $250 million.

If New York had won, Felli said, "We would have had to take the proposal they made, but if they lost money, the city of New York would have had to find a way to pay. That is why when you make a [bid] proposal, you should try to diminish the risk as much as possible."

The IOC tightened its guarantee rules in the host-city contract after the 1996 Atlanta Games, when it was still unclear who would be responsible for both funding the operating budget to ensure successful Games and for paying third parties in the case of shortfalls.

Article 37 (1) of the Olympic Charter, referring to liabilities, reads:

"The NOC (national Olympic committee), the OCOG (Olympic Games organizing committee) and the host city are jointly and severally liable for all commitments entered into individually and collectively concerning the organization and staging of the Olympic Games, excluding the financial responsibility for the organization of such Games, which shall be entirely assumed jointly and severally by the host city and the OCOG. ? The IOC shall have no financial responsibility whatsoever in respect of the organization and staging of the Olympic Games."

The host-city contract spells out even more clearly that the organizers must guarantee all shortfalls, with no limit. It also exempts the IOC from any liability for "damages paid to third parties" and assures that the city, NOC and OCOG will indemnify the IOC for any payments it is forced to make to third parties.

The impact of the liability and indemnification waiver is to free the IOC of any financial obligation if a massive lawsuit is filed in a worst-case scenario, such as a stadium collapse that kills spectators.

That means a city must take out insurance against such a scenario or, as Salt Lake City did for the 2002 Winter Olympics, shift some risk for potential large and small problems to contractors, vendors and suppliers.

"Clearly, we will design and handle risk management in a way that appropriately mitigates risk for the city of Chicago and for Chicago 2016, recognizing that the IOC by contract puts itself in a different position," said Chicago 2016 Chairman Patrick Ryan, founder and executive chairman of insurance giant Aon Corp.

"We won't win unless we give [the IOC] a comfort level, and we will be prepared to do that."

The impact of Article 37 also is to assure the organizers pay for everything, including cars and drivers for every IOC member and many other international sports officials during the Games.

"[The IOC] wants to be treated like royalty," said Roger Cutler, the Salt Lake City attorney when it signed the host city contract for the 2002 Winter Olympics. "Having to guarantee things like drivers on call 24/7 offended me.

"We found out you can't negotiate with the IOC. They would tell us, 'We are partners, and we have never sued anybody.'

"But they like to change the rules as they go along. First they told us any disputes would go to London courts, and later it was Swiss courts. They retain the right to review the contract as they see fit."

The IOC takes out insurance against cancellation of the Olympics for force majeure, such as terrorist acts. In case of such cancellation, the IOC must rebate all broadcast revenues to its rights-holders.

In London's documents for its successful 2012 bid, its share of those TV revenues accounted for 24 percent of its operating budget. Loss of them would have serious consequences for London's bottom line even if the Games did not take place.

The documents Chicago submitted last week do not include such a detailed breakdown, required only at the finalist stage. London's final documents, called the bid book, were three volumes encompassing 550 pages.

If the host city fails to comply with the Olympic charter or breaches its obligations, Article 37 gives the IOC the right to take away the Games and still sue for compensation, while none of the parties involved can sue the IOC.

"When you say that isn't fair, they answer, 'If you don't want to bid, don't bid. If you want to play our game, you play by our rules,'." Cutler said.

From: IOC writes its own rules, Financial details put Chicago's 2016 bid at a disadvantage, By Philip Hersh, phersh@tribune.com, Tribune Olympic sports reporter

January 12, 2008,Source: Chicago Sports

Tribune staff reporter Kathy Bergen contributed to this report


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