Calgary 2026 Olympic bid supporters cheer during a rally in Calgary, Alta., Monday, Nov. 5, 2018.Jeff McIntosh/The Canadian Press
Calgary’s bid for the 2026 Winter Olympics hinges on a plan to avoid the cost overruns that have plagued past Games by buying an insurance policy, but some on city council have questioned whether it would be worth the cost.
With the price tag for the Calgary Games expected to reach $5.1-billion – $3-billion of which would need to come from the public sector – the federal and Alberta governments have said they will not cover any cost overruns.
Without the backing of a senior level of government, Calgary’s bid commits the city to paying for an insurance plan to cover $200-million in unforeseen costs. The insurance comes along with a nearly $1-billion cushion built into the bid’s cost to cover potential overruns.
The Calgary 2026 bid corporation told council’s Olympic committee on Tuesday that the city’s insurance broker has confirmed a $20-million or 10-per-cent premium should cover the required plan if a company can be found to provide it.
“We’ve been given some assurance by Calgary 2026 that this is possible,” city manager Jeff Fielding told the council committee.
The search for an insurance plan is happening as Calgarians prepare to vote in a Nov. 13 plebiscite on whether the city should pursue the Games. The vote has become a divisive issue in Calgary as campaigns in favour and opposed have duked it out in public forums.
Speaking at council on Tuesday, councillor Peter Demong expressed reservations about the cost of the city’s plan to secure insurance, which is expected to also include a further 10-per-cent deductible before the insurance would take effect.
Mr. Demong said he was bothered by information provided to council by the bid corporation about two exclusions from any insurance plan: Money would not be paid out if costs went over budget as a result of changes in any project or because of overruns caused by contractors.
“Why would we go down this route if the exclusions are basically the areas that the majority of overruns come from? If scope changes aren’t included, change orders aren’t included, overruns by contractors aren’t included, what is included then?” he asked the city’s bid corporation.
According to Calgary 2026, any insurance would cover overruns caused by the weather, labour unrest and unforeseen environmental issues, among a number of other potential problems.
Councillor Jeremy Farkas, an opponent of hosting the Games, also expressed concern on Tuesday about whether the insurance plan would be useful when the city actually needed it. “It’s like buying health insurance that doesn’t kick in if you get sick,” he said.
According to Trevor Tombe, an economist at the University of Calgary, Olympics tend to generate cost overruns. “Overruns happen all the time. For the past half-century, all Games have gone over their initially projected cost,” he said.
According to Mr. Tombe, one of the risks facing the city’s bid would be a rebound in the price of oil that would jump-start the province’s economy and lead to a rapid escalation in labour costs.
Anne Kleffner, a professor in risk management and insurance at the University of Calgary, said the insurance the city is considering is a rare type of plan. The 10-per-cent premium would also make it an expensive option, she added.
“A 10-per-cent premium is expensive. I think the value in the policy, as the city sees it, is managing the uncertainty. They can budget the upfront premium cost better than the uncertain cost down the road. The reality is when you’re talking about this size of project and this type of time frame, it’s unlikely you’ll get the costs right,” she said.