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