Tuesday Talk -- IOC Member, PASO Treasurer Offers Sober Financial View

(ATR) An IOC member recognized for his accounting expertise says the global recession will impact sports events of all sizes, both in the bidding and in the hosting stages. More in this Tuesday Talk…

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(ATR) Richard Peterkin, treasurer of the Pan American Sports Organization and the Association of National Olympic Committees, tells Around the Rings the worldwide economic woes may cast a spell on the Olympics and smaller international sports events.

He made that sobering assessment earlier this month when delivering his treasurer’s report to the general assembly of the Pan American Sports Organization in Guadalajara.

Peterkin, an accountant by profession, is president of the St. Lucia Olympic Committee and was elected an IOC member in 2009.

Around the Rings: What do you see on the horizon with regard to the recession? Will host cities be able to deliver on their promises? Are the Olympics in a precarious position?

Richard Peterkin: I wouldn't say precarious. We don't really know when this recession will end. The word is that we are not hearing the real truth, and it might be worse than it might sound.

We just don't know when it’s going to end. From those cities that have already bid and won to host the games, they may find trouble getting the revenue sources they had hoped for because everybody is cutting back. So probably the ones in the greatest danger are the ones that have commitments, and all they have to try out and go and meet them and they made their budgets on some things that now may not happen entirely.

Those that are bidding – that's the interesting part, and a number of them are bidding at a time when all levels of government – municipal, state and federal – are cutting back. As you know, in many instances Games are funded largely by governments, and all different government levels and for them to be able to bid with the certainty the government is going to have the money at a time when it’s not necessarily a priority makes it difficult.

Dick Pound [senior IOC member from Canada] actually came out recently and said quite publicly that he felt that Madrid and possibly Rome may have problems meeting the promises that are contained in their bids. They have been quick to deny that this is so.

The counter argument is that when you have the Games or when you have a multi-sports event or even a single-sport championships, the level of expenditure is effectively an economic stimulus, so that is the kind of thing that governments want to create employment to create economic activity, so the verdict is not quite out yet whether the governments will buy that and they will be happy to commit money to things which their own citizens will complain about, but they have to try and sell it as an economic stimulus, an activity that will be helpful to the country for the things they have to do.

ATR: Do you think this will affect the second and third tiers of games more than it will affect the Olympics or big regional games like the Pan Ams?

RP: Probably so because the European bids have come out and stated that they don't think they will have a problem and because of the sheer magnitude and attractiveness of the big games maybe it will not be as bad for them as it will be for the smaller games that don't have that level of sponsorship and depend almost entirely on government revenue and governments saying "Well, maybe this isn't as important as the bigger games," so yes you are entirely right in that regard.

Again, in PASO, the Toronto 2015 Pan Am Games bid which started off at a $2 billion bill is now down to $1.4 billion. They've found ways to compromise. They told me some of the cutback they learned early enough so they made adjustments so it's not a problem for them.

A lot of governments are saying well this is a budget and that's it and there's no question that if you go above it, government money will follow and will pay out so it will force bidding cities and host cities to be very particular about their expenditure and to be very particular about what they can promise if they know there is no open check or blank check for governments to pay for it.

ATR: Toronto 2015 chair Roger Garland says they have the political support, but not for spending any more money.

RP: Yes, that is correct. They've been told that.

ATR: That's going to put pressure on them to toe the line more than any recent host. Could the Games suffer?

RP: They could, but I think that Canada is not immune from everything that's going on. They are feeling the pinch as well, but Canada has fared better than most other countries, and Toronto is a booming city. So to some extent, if the government sees the benefit early from the activity leading up to the Games, then maybe they’re prepared to open their checkbooks and make sure that it happens and it happens well.

There's always the possibility that Toronto wants to bid for an Olympic Games as well sometime in the future, so they have to look at all these things in determining to see if they are prepared to pay for cost overruns and additionalcosts that nobody budgeted for.

ATR: Two years from now, the IOC will be voting for the 2020 host city. There are concerns the economy will affect those bids in September 2013. How do you think you and your colleagues in the IOC will look at finances and whether you feel that cities will deliver on their promises?

RP: One of the things that the IOC is now going to try and deal with is avoiding placing a financial burden on cities that are either bidding for or hosting Games because the last thing you need is for people to point to a failed legacy because costs got out of control and they tried to put on a Games that are too expensive.

The IOC is proud of its economic criteria. When looking at bidding cities, we want some assurance of what you are doing not only in terms of public support but also in terms of not placing a financial burden on the city afterwards, so you must live within your means and not be too extravagant. Now everyone points to Greece and what happened there. The IOC does not need this legacy of people saying "You were the ones that caused this country to be in the position it’s in now."

ATR: Do you see the spending that Greece went through to prepare for Athens 2004 as one of the factors that pushed the country into its current troubles?

RP: That is what the economic people see. Greece's bigger problem is its level of debt, which is not all just a result of the Olympic Games. But clearly they had an effect, and they are not using the facilities that they had to build, and so clearly you can say that maybe they overstretched and you don't want that to happen again.

ATR: I hearthere’s $45 million in PASO reserves right now. What does that mean?

RP: Jacques Rogge told me at an IOC Finance Commission meeting that his financial strategy was to have sufficient money in a reserve so that in case an Olympic Games was cancelled, he would be able to have the funds that he would normally get in a quadrennial so that they could carry out all the programs without real cutback, but in a case like that there would be some cutback to some extent.

When you look, PASO mirrors a lot of the IOC strategies, and Don Mario [Vazquez Rana] has said that he would like to at least see the same things. Right now, if you look at the Toronto bid, we gave them $20 million from Toronto for marketing rights and $28 million for marketing, so that's 48 million. If for some reason we didn't have the Games and we couldn't attract that money, that's the reserve we have right now. In a sense, we've hit that mark.

It's not having money to put on a Games. This is the money that we would have gotten had we had a successful Games so that we could carry on for another four years.

ATR: This is money you've received from your marketing rights?

RP: Essentially that. PASO is not as dependent on Olympic Solidarity money as it used to be. We have a Pan American Games. The brand has become more popular, and it attracts money not only from those who host Games but also from broadcasters, especially from Latin American countries like Brazil.

ATR: There’s more coverage of these Pan American Games in the U.S. than in the past, but it’s on the lower tiers of ESPN and on the internet rather than the top tier. That would be the objective, I assume?

RP: It is, and that's a tall objective because there are so many professional sports in the U.S. and Canada, so that's who you are competing with. Since the Pan Ams do not attract as many of the top stars as the Olympic Games do, clearly it will affect the sponsors and the amount of money the networks can raise, so it reduces the impact. When you are looking at Brazil, Brazil is really looking at its domestic audience and saying, "Hey, the Brazilian athletes are going to the Pan Am Games, so we are covering them and it's great."

ATR: What do you think has to happen in North America. Is the timing of the Pan Ams a problem?

RP: No, I don't think the timing makes a difference. Quite frankly, I think the Pan Am Games need to get to the level where we know that we have the best athletes, where qualifying is at stake for the Olympic Games the year after, or just so that the best athletes will want to come for any reasons.

Right now, many of them are missing because they are concentrating on London. We need to make the Games either a qualifier or something. The athletes clearly want to be there, and we can attract the best, which will do the brand wonders in that market again. There's then a lot more money for that. I think that's one of the things that Rana will like to see as his legacy as he has been able to expand the popularity so that it’s across the entire Americas and not just South America like it has been now.

Interview conducted in Guadalajara by Ed Hula

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