First in a six-part series

On Dec. 21, the organizers of the Tokyo Summer Games announced that the 2020 sports extravaganza will cost no more than ¥1.8 trillion, boasting of their efforts to save money for the taxpayers in Tokyo and indeed all of Japan.

But even if they manage to keep the price tag that low, it will still be more than twice the initial estimate Tokyo publicized in 2013 when it was bidding to bring the world’s biggest sporting event back to Japan.

Experts warn that the cost will likely exceed the ¥1.8 trillion ceiling in the end, given the number of past host cities that greatly underestimated their total spending — whether intentionally or not.

If Tokyo fails to keep expenditures to a reasonable level, other major cities may be discouraged from bidding for future Olympics, possibly endangering the sustainability of the games, they say.

“The budget overrun of (the 2012) London Olympics has already had a major impact on potential host cities for the future,” said Tomoyuki Suzuki, a former Tokyo Metropolitan Government official in charge of the failed campaign to bring the 2016 Games to Tokyo.

“Everyone is watching how Tokyo is going to deal with the costs,” said Suzuki, now director of the Japan Sports Law Association.

In fact, Rome Mayor Virginia Raggi in September killed off her city’s bid to host the 2024 Summer Games, citing financial concerns.

The decision followed a July referendum in Boston in which voters rejected seeking the same 2024 Olympics.

According to the Tokyo Organizing Committee of the Olympic and Paralympic Games, the total cost of the 2020 Games is now estimated at between ¥1.6 trillion and ¥1.8 trillion.

In the 2013 presentation to the International Olympic Committee (IOC), the total cost was estimated at a mere ¥734 billion.

One of the key reasons for the sudden cost surge is that the initial estimate did not include certain financial burdens to be shouldered by the central and other local governments, as stipulated in rules set by the IOC, most notably security and transportation costs, Suzuki explained in a recent phone interview.

“The International Olympic Committee requires candidate cities to submit only figures for construction of (new) facilities” in their initial presentation, Suzuki said.

“There are no sections concerning counterterrorism security costs or transportation. The overall cost isn’t presented at the bidding stage, which is why Tokyo estimated the 2020 Games at some ¥700 billion,” he said.

Other experts say candidate cities tend to intentionally underestimate the total cost for political reasons.

“One reason for this, and one that probably applies to Tokyo, is that the bid committee seeks political approval in its home country,” said Andrew Zimbalist, an economist and professor at Smith College in Northampton, Massachusetts.

“In order to garner that approval, they produce a bare-bones, low-ball bid estimate,” he told The Japan Times by email. Meanwhile, local groups trying to lure the Olympics often put their own interests first, rather than those of the host city or its taxpayers, which results in huge expansions of actual spending, Zimbalist said. “All hosts since 1960 for which we have adequate records have had cost overruns,” he said.

He pointed out that the average cost overrun for the Summer Olympics since 1980 stands at about 2.5 times the original budget.

Zimbalist warned that the envisioned size of the Tokyo budget could “deter bids from future host cities.”

During the bidding process, a candidate city is often tempted to set an unrealistically low budget goal while trying to outdo its competitors, he said.

“If you say you’re going to reduce the cost to less than ¥2 trillion, in reality it will be around ¥2.5 trillion,” said Suzuki of the Japan Sports Law Association.

Suzuki also pointed out the lack of transparency for how the organizers estimated Tokyo’s costs.

In September a study team under Gov. Yuriko Koike said the total could reach as much as ¥3 trillion, while the organizing committee later said it will be less than ¥2 trillion. Then, after consulting with the IOC and the metropolitan government, the estimate was shaved to ¥1.6 trillion to ¥1.8 trillion.

“There was no information why the cost would exceed ¥3 trillion and why it could be slashed to less than ¥2 trillion,” Suzuki said. “(But) the nation really had believed it would only be around ¥700 billion.”

Which parties will end up shouldering the financial burden is another major headache for the organizers. The committee plans to raise about ¥500 billion through ticket sales, sponsorship fees and broadcasting rights, and to spend roughly that same amount out of its own budget.

The remaining ¥1.1 trillion to ¥1.3 trillion is to be paid by the Tokyo Metropolitan Government, the central government and other cities around Tokyo that will host some Olympic events.

But how much each party will pay has yet to be decided, and political negotiations between those parties will be very tough, Suzuki said.

The Tokyo Metropolitan Government originally trumpeted a “compact Olympics” plan, meaning that existing facilities would be used, and that most events would be held within a 10-km radius in central Tokyo.

But the metropolitan government has long since abandoned that key concept because of the soaring cost estimates and instead will use some facilities outside Tokyo, including in Saitama, Chiba, Kanagawa and Shizuoka prefectures.

Those local governments have recently expressed concerns that the organizing committee will impose additional costs on them.

This New Year’s series — Gearing up for the Games — examines how Japan is preparing for the Olympics and Paralympics.

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