In other words, will L.A. still be solvent come 2028?
By now you probably know that Los Angeles has the honor, or should I say heartburn, of hosting the 2028 Olympics.
Long gone are the days when such an announcement would fill the locals with pride, as it is now generally understood that local residences will have to put up with increased traffic, never-ending infrastructure headaches and a soul crushing financial commitment by the host city that gets little financial return for its investment.
Within moments of the announcement, the blogosphere was full of articles of how this could become a financial boondoggle for Los Angeles. So as not to go down the well-worn path again, let’s look at the situation in a fresh light. The question isn’t whether the 2028 Olympics will break Los Angeles financially, but whether the City of Los Angeles will enough of a viable concern going into 2028 to then have the Olympics ruin it completely?
But first a little bit about the financial commitment Los Angeles has just made to the Olympics. The Los Angeles bid committee estimates it will take $5.3 billion to facilitate the games or $1,400 per resident of the city. Not to worry, of course. The bid committee assures us that all this cost will be taken care of via sponsorship and ticket sales. Anyone believe that 11 years from now the financial commitment won’t rise from $5.3 billion and sponsorship revenue will cover all the costs? Never mind that every recent Olympics have exceeded costs predictions by wide margins, and from Athens to London to Rio and all the Winter Olympic stops in-between, the Olympics have yet to meet their rosy financial expectations.
But let’s leave the Olympics alone for the moment and keep 2028 well in the future for the time being. Financially, Los Angeles has its hands full just dealing with the here and now.
First let’s start with the Los Angeles School District. In 2016 the Independent Financial Review Panel, which was created at the request of retired superintendent Ramon Cortines, warned the school district would be broke by as early as 2020 and could be carrying a budget deficit of $600 million by then unless drastic changes are made. In California, school districts get funding from the state via student enrollment, and Los Angeles has seen its student enrollment drop by more than 200,000 since 2002. Of course with the loss of these students, there was no proportional offset of teachers to reflect this decline, and in L.A. a majority of the school teachers make over $76,000 a year.
Next we come to the pension crisis looming over the City of Angels. In 2003 pensions only accounted for 3% of the city’s expenditures, a figure that has now ballooned to 20%. Pensions in Los Angeles are some of the more generous in the country, and of course they aren’t fully funded. Current projections of L.A.’s pensions anticipate sterling returns. If more conservative calculations are used, the city will show a $26 billion pension debt.
Let’s not forget Los Angeles’ current budget, which projects a $224 million deficit. Things are so shaky with city funds, Richard Close, president of Sherman Oaks Homeowners Association predicts, “If we have a catastrophe, like an earthquake or rioting, the city is going to have problems.” In this year’s budget we find a record $176 million set aside for the homeless and more money allotted for union civil servants.
If Los Angeles is expecting to be bailed out by Sacramento, it shouldn’t. California is facing its own $3.3 billion budget shortfall this year, prompting Governor Moonbeam to vow, “Make no doubt about it: Cuts are coming over the next few years, and they’ll be big.” All of which will mean fewer state funds trickling down to cities like Los Angeles.
Add into the mix the over four million illegal immigrants who live in Los Angeles County where they receive an estimate of $3 of public assistance for every $1 they contribute, a minimum wage law driving small business out of the city, and you get the picture.
Assuming by 2028 Los Angeles hasn’t gone the way of Detroit and into the bankruptcy courts, they will probably still be in financial dire straits. There are some who believe that because Los Angeles isn’t committed to building new stadiums like other former Olympic hosts, the games will help Los Angeles’ financial situation. These people are delusional.
Photo Opening Ceremonies, 1984 (Wikimedia Commons)