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Viewing cable 09VANCOUVER31, VANCOUVER 2010 OLYMPICS FEELING THE ECONOMIC PINCH IN

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Reference ID Created Released Classification Origin
09VANCOUVER31 2009-02-12 18:25 2011-08-30 01:44 CONFIDENTIAL Consulate Vancouver
R 121825Z FEB 09
FM AMCONSUL VANCOUVER
TO SECSTATE WASHDC 5102
INFO ALL CANADIAN POSTS COLLECTIVE
DEPT OF HOMELAND SECURITY WASHINGTON DC
FBI WASHINGTON DC
NCTC WASHINGTON DC
NSC WASHINGTON DC
AMCONSUL VANCOUVER
C O N F I D E N T I A L VANCOUVER 000031 
 
 
STATE FOR DS/P/MECU, DS/DSS/DO, DS/IP/WHA 
STATE FOR WHA/CAN 
 
E.O. 12958: DECL:  2/11/2019 
TAGS: CA PGOV KOLY ASEC ECON
SUBJECT: VANCOUVER 2010 OLYMPICS FEELING THE ECONOMIC PINCH IN 
PREPARATIONS, SECURITY 
 
CLASSIFIED BY: G. Kathleen Hill, Political/Economic Chief, US 
Consulate Vancouver, State. 
REASON: 1.4 (b), (d) 
 
1. (U) Summary: The global economic crisis and modern demands of 
post 9/11 security are proving to be huge challenges for the 
organizers of the 2010 Winter Olympics in Vancouver.  The 
competition and special events venues are complete and already 
hosting test events, but the financial crisis surrounding the 
Olympic Village has consumed local politicians and media (and 
was probably the determining factor in the recent Vancouver 
Mayoral election).  Finances are also looming large over the 
Games' security.  Original estimates of C$175 million have now 
ballooned to a figure somewhere between C$400 million and C$1 
billion.  While the Province and the Government of Canada (GOC) 
continue to negotiate who pays what, other costs, in the form of 
police and military resources, are beginning to be born across 
the region.  The impact may reach far beyond the Games, with 
significant reductions in policing activity and investigations 
nationwide.  Because of the economic downturn, the Vancouver 
Olympics Committee (VANOC) has already announced modest changes 
to save money, but is still promising to stage spectacular Games 
- within available financial resources.  End Summary. 
 
Ready to Compete, But Not to Sleep 
 
2. (U) Vancouver is set to host the Winter Olympics in February 
2010.  Optimism over the event remains strong, as evidenced by 
the recent phase one ticket sales for Canadians only, which sold 
out completely in just a few hours and left many subscribers 
with only a small portion of requested tickets.  However the 
global economic crisis is creating headaches not envisioned when 
the city bid and won the right to host the Games.  Controversies 
abound over the "true" costs of the Games.  The Olympics were 
used by Vancouver and British Columbia to jump start planned but 
expensive infrastructure projects such as the C$600 million 
upgrade of the Sea-to-Sky Highway between Vancouver and Whistler 
and the new C$2 billion Canada Line rapid transit system. 
Critics like to lump these costs in with the more direct 
Olympics costs, emphasizing an overwhelming burden placed on the 
BC and Canadian taxpayer. 
 
3. (U) Amidst the criticism, VANOC has shown remarkable 
financial astuteness, beginning serious revisions of the Games' 
operating budget in spring 2008, well before the serious specter 
of a global financial crisis became evident.  All competition 
venues, one of the main areas of responsibility for VANOC, are 
completed or will be completed on time and within budget.  VANOC 
recently announced a revision to the budget, increasing the 
final price tag on operating the Games by C$127 million to a 
total of C$1.76 billion. According to VANOC's Executive Vice 
President, David Guscott, the Organizing Committee has obtained 
enough corporate sponsorship and ticket and souvenir sales to 
bring it within sight of this budget, lacking only about C$30 
million to reach its goal.  But it has had to make sacrifices to 
keep on target, such as decreasing hiring and making changes in 
operational plans, including eliminating a nightly medal awards 
ceremony in downtown Whistler that has that community's 
residents feeling betrayed.  Despite the financial challenges, 
VANOC's revenue from ticket sales and corporate sponsorship 
remains on target and the organization appears weQ placed to 
meet its obligations. 
 
4. (U) The same cannot be said for the C$700 million-plus 
Olympic Village, a key element of the Games and a major 
responsibility of the City of Vancouver.  The Village is being 
developed by a private corporation on prime waterfront land 
provided by the city.  It's slated to become a mixed use 
residential/commercial area after the Games with high, middle 
and low-income housing.  The developer ran into problems in 
September, when more than C$100 million in cost overruns 
threatened to stop the project.  Then Mayor Sam Sullivan and the 
City Council held a series of closed door meetings where they 
developed a plan for the city to provide guarantees so a loan 
could be obtained to cover the increases. The secretiveness of 
the financial arrangements became a major factor in the December 
city elections, which saw Sullivan's coalition lose the mayoral 
seat and all but one city council position. In addition, the 
controversy caused the city manager, a senior deputy and the 
chief financial officer to lose their jobs.  In December, just 
after the elections, the primary financial backer of the 
project, U.S. company Fortress Investment Group, announced it 
would not deliver the final C$458 million in capital to complete 
the project due to financial losses from the sub-prime mortgage 
crisis. The new mayor, Gregor Robertson, found himself in the 
same hot seat, dealing with the possible collapse of the 
project.  In the end, he sought, and was granted, special 
provincial legislative authority for the city to seek loans to 
cover completion of the project.  Olympic critics have had a 
field day with the problems, promoting stories of taxpayer 
losses in the billions, and a combination of substantive factors 
led Moody's and Standard & Poor to place the City of Vancouver 
on credit-watch status.  Real estate analysts have been more 
optimistic, asserting that the city could make a considerable 
profit on the deal down the road and highlighting the fact that 
it is the last undeveloped piece of waterfront property in 
downtown and very desirable.  The city paid only C$50 million 
for the land through its Property Endowment Fund, a longterm 
investment fund estimated to be worth almost C$3 billion.  Even 
if the development makes only half of the originally estimated 
profit, the fund could cover the immediate loss without 
affecting the city operation's budget and, as a longterm 
investment, it could still be a win for the city.  VANOC's 
Guscott was confident the city would meet its part of the deal, 
presenting a completed, functioning Village on time.  In VANOC's 
view the project has been caught in an unfortunate cross between 
municipal elections and the downturn in the economy, with the 
financial problems severely overblown. 
 
Security - But at What Price? 
 
5. (U) Perhaps the biggest loss will be taken by the province of 
British Columbia and the Government of Canada (GOC) which will 
bear the brunt of cost overruns in the security of the games. 
The Integrated Security Unit (ISU) was set up to manage the 
Games' security.  It is headed by the RCMP, with representative 
from all major police, intelligence and defense entities. 
Original estimates on Olympics security were in the C$175 
million range.  But now no one is willing to give a number.  The 
provincial Finance Minister, Colin Hansen, will only say it's 
somewhere between C$400 million and C$1 billion. Hansen admits 
he was surprised at the estimates coming out of Ottawa for 
overall security. A special committee was established early on 
to determine B.C.'s and the GOC's shares of incremental costs 
above basic policing.  The ballooning nature of the security 
structure and programs has left the committee bogged down in 
"endless line-by-line micro-analysis," according to Hansen. 
Consequently the Province offered up a final, comprehensive plan 
on who pays what which is in Ottawa for approval. Realistically, 
as the ISU tests and refines its plans, the costs continue to be 
fluid and the final numbers will not be known until after the 
Games are completed. BC originally estimated its overall Games' 
costs, including infrastructure, venues and security, at 
approximately C$600 million.  Minister Hansen announced on 
February 9 that the new security numbers will force the province 
well over that mark.  With 2009 a provincial election year in 
BC, the cost of Games' security is becoming a major issue for 
the ruling BC Liberals, who are hoping a reasonable agreement 
with the GOC will soften the financial blow. 
 
6.  (C) Beyond monetary costs, the Olympics are beginning to 
create critical resource costs.  Law enforcement representatives 
working at the U.S. Consulate in Vancouver are reporting that 
more and more of their contacts are being pulled to work on 
Olympics security issues.  A DEA agent was told by one of his 
RCMP counterparts that by September all regional drug agents 
could be working on Olympics, with no investigations ongoing 
until March 2010.  Already the RCMP has all but stopped 
marijuana-related investigations. RCMP is also undergoing severe 
belt tightening with new, stricter enforcement of overtime 
rules. To highlight the Canadian constraints, an RCMP officer 
told us that the Italians put 30,000 Carabinieri in Turin for 
the 2006 Winter Games and the RCMP has less than 30,000 officers 
in all of Canada. 
 
Big Business, But no Room at the Inn 
 
7. (U) The 2010 Olympics are presenting significant financial 
opportunities for area residents and businesses.  In addition to 
the massive infrastructure and construction projects, VANOC is 
procuring millions of dollars in services and support for the 
Games.  And Canadians are not the only recipients of these 
contracts. U.S. firms have managed to win several major 
contracts thus far to provide everything from tents and portable 
toilets to tickeQprinting, dining services and flags for the 
games. 
 
8.  (U) One big concern for many in the tourist industry, and 
for those of us working the Games for the USG, is the question 
of accommodations.  The International Olympics Committee 
requires a host city to provide between 20,000 and 25,000 rooms 
for just the Olympic "family" alone (sponsors, officials, etc). 
This leaves little room for the spectators who come to watch the 
Games and the visiting dignitaries.  IOC rules give only five 
rooms to the National Olympic Committees (NOCs) for official 
delegations from participating countries.  If delegations, and 
their support and security, are more than five people, it is 
incumbent on the delegation to find its own additional 
accommodations.  Consulate General Vancouver has already secured 
accommodations for the agencies participating in the Olympics 
Coordination Office and the Joint Operations Center but would 
like to make an urgent plea for notification as soon as possible 
of the composition of the official delegations to the Opening 
and Closing Ceremonies of the Olympic Games. (The Paralympics 
are much smaller and accommodations will be more readily 
available.)  Accommodations are scarce to non-existent now and 
the sooner we know the make-up of delegations, the more likely 
we will be able to provide suitable rooms within reasonable 
distance of the major venues. 
 
9. (SBU) Comment:  It should be noted that in every meeting we 
have with Olympics officials the first question is "Who is 
heading your Opening Ceremonies delegation?"  Although the 
official invitation comes from the NOC, in this case the U.S. 
Olympic Committee, to the VIP, most Canadians involved are 
hoping that President Obama and his family will attend the 
Games.  The President is immensely popular in Canada and given 
the Games' proximity to the U.S. there are high expectations 
that the President and his family will make an appearance. 
 
10. (C) Proximity is also on our minds as we look at overall 
Olympic security.  With the Olympics being held within 30 miles 
of the U.S. border there are already numerous areas where 
security is a shared responsibility, such as our pre-existing 
shared responsibilities over airspace through Northcom.  The 
Canadians are doing an excellent job in developing their 
security strategy, but we are starting to see some small signs 
that they are feeling the pinch of economic and personnel 
shortages.    They are sensitive to the issues of sovereignty 
and we have been reminded repeatedly that they are responsible 
for the overall security of the Games.  Our Olympics 
Coordination Office and Olympics Security Coordinator are 
working very closely with VANOC and the ISU and closely 
monitoring developments with an eye toward any possible further 
assistance we can provide should the needs arise.  End Comment. 
 
 
CHICOLA