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Summary
I.
State Agency Services to be Provided and Estimated Budgetary Impact
II. Estimated Budgetary Impacts
on Local Governments and Their Effect on State Budgets
III.
Estimated Economic Benefits to the State
IV. Other Estimated
Costs or Benefits
V. Possible Conceptual
Framework for Consideration / Payment for State Services and
Mitigation of Impact on
State and Local Budgets
Tables - Provided in Adobe Acrobat Format
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Table One - Estimated Summary Fiscal Impacts from the 2002 Olympic
Winter Games
Table Two - Estimated Expenditures by State Agencies for the 2002 Olympic
Winter Games
I.
Impact on State Services Due to Olympic Activity
Public Safety
Public Health
Workplace and Labor Safety
Transportation - Operations
Transportation - Projects
Economic Development
- State Promotion - Housing
State Park Winter Operations
Other Governmental Services
II. Contractual Obligations
SLOC Purchase
of State-Built Sports Facilities
Wasatch
Mountain State Park - Soldier Hollow
University
of Utah Student Housing (Athlete Village)
University
of Utah Rice Stadium (Ceremonies Venue)
Indemnification Agreement
When Utah hosts the 2002 Olympic Winter Games (Games), people from around
the world will visit our state, and economic activity will increase. This
activity should result in significant additional tax revenues for the state,
and create additional service demands on government as well. This report
provides an estimate of these impacts through FY 2003 on state and local
governments. It should be noted that:
The services that state agencies will provide for the Games are divided
into two categories.
1) State Services Requested by SLOC - The Salt Lake Organizing
Committee for the 2002 Olympic Winter Games (SLOC) has already entered
into several contracts with state agencies to provide specific services
or for exclusive use of state facilities. SLOC may further contract with
state and local governments to provide additional support services as development
of its new budget and venue planning continue. Facility rental or use agreements
signed, or currently in final negotiation, include:
2) Required State Services Not Requested by SLOC - State
agencies must provide appropriate service levels for certain public health
and safety activities for both Utah citizens and our many out-of-state
visitors during the Games. Every state agency, including colleges and universities,
has been asked to project the additional service needs they will face in
hosting the Games. The state agencies most impacted have estimated what
additional services are required, and will continue to work with SLOC,
the federal government, and local governments to refine the service requirements
for the following areas:
Preliminary Budget Estimates for State Services - State agencies estimate the cost for direct services that the state will provide for the Games to be $28.1 million, including a $7.0 million contingency. Direct costs are those required specifically to accommodate visitor impacts from the Games. These costs are well below the $47.4 million additional General Fund revenues that the Governor's Office of Planning & Budget (GOPB) projects will be collected by the state from Games related economic activity, as discussed below in Section III - Estimated Economic Benefits to the State. For more information on projected revenues and estimated expenditures, see Table One "Estimated Summary Fiscal Impacts from the 2002 Olympic Winter Games" and Table Two "Estimated Expenditures by State Agencies for the 2002 Olympic Winter Games".
II. Estimated Budgetary Impacts on Local Governments and Their Effect on State Budgets
The State Olympic Officer is coordinating with local officials to determine the impact of the Games and its visitors on local governments. At this point it is difficult to determine exactly what services will be required, but many critical issues face venue cities and counties for which a framework is needed to move forward:
Provo City and Utah County have entered into an agreement with SLOC for Games support services. As partial consideration for the $5.9 million SLOC payment for facility use, local governments will provide $160,000 of public safety services. If the cost of public safety services provided at the Olympic ice venue in Provo exceeds $160,000, SLOC has agreed to reimburse the city and county at normal billing rates. However, SLOC does not anticipate that added reimbursement will be required.
III. Estimated Economic Benefits to the State
According to the "2002 Olympic Winter Games - Economic, Demographic
and Fiscal Impacts" report prepared by GOPB in April 1998, the Games will
generate significant economic activity in Utah. Based upon economic models
employed by GOPB, the Games will generate the following economic impacts
between 1996 and 2002:
State economic models provide the basis for this range. These models calculate that state and local governments will (1) receive $236.4 million in gross tax revenue because of economic activity created by the Games, and (2) incur $120.0 million in additional indirect expenditures because of services provided to an enlarged economy and population. The difference between the gross revenue of $236.4 million and the indirect expenditures of $120.0 million is $116.4 million, the approximate midpoint of the estimated range.
The direct expenditures required to accommodate visitors during the Games are estimated separately from state economic models and are not included in the $116.4 million net revenue estimate. In the case of state government, as noted earlier, the direct costs for services the state will provide for the Games is estimated to be $28.1 million. The direct costs to local governments to provide services for the Games have not yet been specifically estimated. This is the major reason why GOPB published a range for total net revenue.
The estimated $116.4 million in net revenue to state and local governments includes $47.4 million in state General Fund, $23.7 million in state school funds, and $45.3 million in statewide local government revenue. It is this breakdown of the $116.4 million that the detailed figures in Table One are drawn from.
Table One provides more information about the revenue impact to the state from the Games. In addition to the $47.4 million in additional General Fund collections, the Sports Authority Special Revenue Fund, established by the legislature to account for the 1/32 of 1% sales tax diversion for construction of Olympic facilities, is projected to have a balance of $33.7 million in 2003. Present law calls for this balance to be transferred to the General Fund on May 5, 2003. More information on the economic impact of the Games can be found on the state's website at http://www.governor.state.ut.us/dea.
IV. Other Estimated Costs or Benefits
Utahns should experience many non-economic benefits from the Games as well. The construction of winter sports facilities should provide Utahns an unprecedented opportunity to participate in winter sports as both athletes and spectators. Rental payments made to the state by SLOC for use of state-owned facilities has allowed the state to construct student housing and to renovate Rice Stadium sooner or better than otherwise possible. With the possible acceleration of the state's transportation plan, Utahns could enjoy improved transportation systems years sooner than otherwise. In addition, the state will benefit from improved communications and public safety systems.
The Games are providing the state with excellent public relations and promotional opportunities as well. State agencies have identified potential investment opportunities, that in conjunction with the Games, could benefit Utah citizens, including media housing and Wasatch State Park improvements. Refer to the attached Appendix for more information.
Utah Athletic Foundation - The non-profit Utah Athletic Foundation
(UAF) was established by the legislature to own and operate state-built
Olympic facilities following the Games. The UAF will administer a $40.0
million legacy, funded by SLOC, to cover operational costs for the Winter
Sports Park and the Oquirrh Park Oval for twenty years following the Games.
Other responsibilities of the UAF include the promotion of winter sport
and sports development programs, and the development and promotion of amateur
athletic events. Given the 2-3 year time frame for scheduling major international
winter sports events, it is not too soon to develop an organizational structure
and mission for the UAF.
V. Possible
Conceptual Framework for Consideration / Payment for State Services and
Mitigation of Impact on State and Local Budgets
To address the various issues regarding government services for visitors
during the Games, a conceptual framework is needed that has the support
of the Executive and Legislative branches of government. This framework
should represent a fair and equitable approach to cover the costs incurred
by state and local governments resulting from the increase in visitors
coming to Utah, given the significant tax revenue government is projected
to receive from Games related economic activity. Some possible concepts
for consideration and discussion are:
I. Impact on State Services Due to Olympic Activity
Preliminary estimates prepared by state agencies identify $28.1 million in state funds that are needed to support the additional demand for state programs and services generated by the Games, including a $7.0 million contingency. The estimated cost of these expenditures are shown in Table Two "Estimated Expenditures by State Agencies for the 2002 Olympic Winter Games". Most of these funding needs are one-time.
For many state agencies, the impacts will be minimal enough to absorb
within existing resources. However, the impact on critical public health
and safety services will require additional resources and funding to protect
the public interest during the Games. The areas for which significant impacts
are anticipated include:
Service Impacts - During the Games, it is anticipated that SLOC will provide security and crowd management "within the fence" at all Olympic venues. The remaining security and public safety issues surrounding Games visitors and activities will be dealt with by federal, state, and local governments. State and local governments will need to pool resources and work significant overtime to meet the public safety demands of the Games.
To coordinate public safety efforts across the various government agencies,
the 1998 State Legislature passed S.B. 159 - Government Relationship to
the Olympics, which established the Olympic Public Safety Command (Command).
Essential public safety services the Command is responsible to provide
for the Games visitors and activities include:
It is anticipated the overall cost of public safety services will be shared by federal, state, and local governments, although the portion covered by each governmental entity, including the state, has yet to be determined. The Command has already received a $2.0 million federal grant to initiate the planning process, and it is anticipated additional federal funds will be sought once a strategic plan is complete and detail costs are identified. The Command anticipates a substantially complete version of its comprehensive strategic plan will be available by December 1999.
Service Impacts - Utah will experience additional demand for public health and environmental management services due to the increase in visitors, competitors, dignitaries, and business activities surrounding the Games. Areas of particular concern include infectious disease control strategies including sanitation and safety inspections for temporary food, waste, and waste water facilities, as well as immunization management for foreign visitors.
The role of the Utah Department of Health (Health) and the Utah Department
of Environmental Quality (DEQ) will focus on policy and coordination, surveillance
and investigation, and medical facility inspections. The greatest impact
on food, drinking water, and waste water inspections will be felt at the
local government level. Health and DEQ have entered into a written agreement
with several Wasatch Front county health departments to develop a comprehensive
strategic public health plan for the Games. The local health departments
include:
Local health departments estimate their related costs at $1.8 million, including $1.6 million from sources yet to be identified. With the completion of the comprehensive strategic plan in the Fall of 1998, each impacted government agency can begin developing their individual detail plans and cost estimates.
Service Impacts - The increase in temporary business activity,
combined with an increase in construction before, during, and after the
Games, will result in an increased need for workplace safety inspections.
Previous host cities have also experienced an increase in labor complaints
related to the Games employment activity, particularly regarding temporary
employers. Essential Workplace and Labor Safety issues include:
Service Impacts - Since the Department of Transportation (UDOT) already provides timely snow removal and road maintenance during the winter months, it anticipates only a modest increase in its operating activities during the Games. The most significant of these is overtime associated with the operation of the new Traffic Control Center twenty-four hours per day during the Games, using the Advanced Traffic Management System currently under development.
Preliminary Cost Estimates - UDOT anticipates new state funding of $100,000 is sufficient to cover its Games related activities.
Service Impacts - The state would like to accelerate projects
from the long range transportation plan in order to provide critical transportation
systems in time for use by visitors during the Games. This means several
projects originally scheduled for completion over the next 20 years could
be completed by 2002. The acceleration of these projects will provide improved
transportation systems for all Utahns much sooner than originally scheduled.
Some key projects the state would like to complete in time for the Games
include:
Preliminary Cost Estimates - Every effort is being made to accelerate the federal funds for the planned projects to coincide with the accelerated construction schedules. As a result, the Utah Department of Transportation (UDOT) anticipates these planned road projects can be completed within available state transportation funds. Because of the level of state funded transportation projects either planned or currently underway, additional federal funds can be received by the state without the need for additional state matching funds.
For the access roads at mountain venues, UDOT estimates the cost of the Winter Sports Park and the Soldier Hollow access roads is $7.5 million, including up to $1.5 million in local match. The Forest Service estimates the cost of the Snowbasin access road to be $15.0 million in federal funds, with no local match required.
Utah Transit Authority Projects - In addition to the road projects,
the Utah Transit Authority has been authorized $640.0 million in federal
funds to complete transit projects for the Games:
Service Impacts - The Olympics offers a unique opportunity for
Utah to promote business development and tourism in the state. The Department
of Community and Economic Development (DCED) has identified the following
opportunities:
Economic Development - Housing
Service Impacts - DCED recognizes that the development of new housing in time for the Games could benefit both Utahns and Games visitors. If additional housing is constructed prior to the Games, it could be rented to the media and other Olympic visitors during the Games, and then be available for Utah families after the Games.
Preliminary Cost Estimates - DCED estimates $10.0 million in additional state funds could be invested in a partnership utilizing federal funds and Olympic rental charges to fund the development of much needed housing. However, since the state is not required to provide housing for the Games, it is recommended this request be viewed as an investment opportunity rather than an impact on state services from Games activity.
Service Impacts - Based upon the experience of past Winter Olympic Games, the Division of Parks & Recreation anticipates a dramatic increase in winter visitation to state parks along the Wasatch Front before, during, and after the Games. If this occurs, Parks will need to acquire snow removal and other winter equipment, and provide additional staff for these parks during the winter months.
Preliminary Cost Estimates - Parks anticipates the additional costs from increase winter camping to be $1.77 million between FY 2000 and FY 2003. Of this amount $750,000 should be offset by user fees, with the remaining $1,020,000 coming from new state funds.
Service Impacts - Many regulatory state agencies should experience
an increase in demand for services resulting from the increased business
activity surrounding the Games. Examples of impacted business regulation
programs include:
SLOC has contracted with the state for the use of several state-owned facilities. An important aspect incorporated into these contracts by the state is the establishment of the state in either first or second position, as a creditor, to the future television and sponsorship revenue flows of SLOC. Each of the existing contracts are discussed below. In addition to these contracts, SLOC may choose to contract for additional services from state agencies, at SLOC's expense, once its new budget is completed.
SLOC Purchase of State-Built Sports Facilities
Contractual Requirements - SLOC has agreed to purchase state-built winter sports facilities (Winter Sports Park and Oquirrh Park Oval) from the state for $99.0 million. Of that amount, $59.0 million is dedicated to repay the state and local governments for the sales tax diverted to the Utah Sports Authority to construct those facilities. The remaining $40.0 million is dedicated to establish a legacy fund to operate the state-built facilities for twenty years following the Games. Under the terms of this agreement, the ownership and operation of the facilities, and management of the legacy fund, will be turned over to the non-profit Utah Athletic Foundation no later than May 1, 2002.
The $59.0 million sales tax repayment is due from SLOC on January 10, 2002 - or one month prior to the Games. Nations Bank, who is providing SLOC with a $170 million line of credit, has agreed to allow SLOC to use this line of credit to make this payment. Five days later, on January 15, 2002, the state will reimburse the local governments, with the exception of Salt Lake City, for their share of the sales tax diversion, including interest earned by the state on the local share of any diverted sales tax collections in excess of $59.0 million. Current projections indicate total diverted sales tax collections of over $69.0 million. Fifty percent of these excess collections belong to local governments.
Since Salt Lake City has an indemnification agreement with the state (discussed below), it will be reimbursed for its sales tax diversion on May 5, 2003. Initially, the sales tax reimbursement to all local governments was scheduled to take place after the Games.
SLOC's $40.0 million legacy fund payment is due to the state on March 7, 2002. This is one day after the $170.0 million line of credit with Nations Bank must be repaid by SLOC using the final $229.0 million NBC payment due to SLOC March 6, 2002. The state has second rights, after Nations Bank, to this NBC payment. Since the NBC payment amount exceeds the line of credit by $59.0 million, the state is ensured rights to the remainder of the NBC payment for the legacy fund.
Preliminary State Budget Impacts - The state portion of the sales tax repayment, or $29.5 million, will be deposited into the Sports Authority Special Revenue Fund. Another $5.0 million in diverted state sales collections is anticipated to be deposited into this fund as well. If these funds are not appropriated by the legislature before May 5, 2003, they are required by law to be transferred to the General Fund. To date, only a small portion of these funds have been appropriated or allocated by the legislature to pay for the State Olympic Officer.
The $40.0 million payment to the legacy fund is expected to provide sufficient funding for the operation and maintenance of the state-built Olympic facilities (Winter Sports Park and Oquirrh Park Oval) for twenty years following the Games. It should be noted that the legacy fund is not intended to support the Soldier Hollow cross-country / biathlon venue that will be constructed by SLOC and owned by the state Division of Parks & Recreation (discussed below).
Wasatch Mountain State Park - Soldier Hollow (Cross-Country / Biathlon Venue)
Contractual Requirements - SLOC has contracted with the state Division of Parks & Recreation (Parks) to develop a cross-country/biathlon venue at Wasatch State Park's Soldier Hollow for use during the Games. The construction of these facilities by SLOC will provide a legacy to Utah citizens, including 26 kilometers of cross-country/biathlon trails with snow making equipment, a shooting range, and limited support structures.
Under the terms of the agreement, SLOC is responsible to design and construct, at its own cost, all permanent and temporary facilities needed for the Games, following review and approval of both Parks and the state Division of Construction & Facilities Management (DFCM). The state will retain ownership of the land and the permanent improvements made by SLOC.
The only cash outlay required by Parks under the terms of the agreement is to provide a sewer line from the park boundary to the venue stadium, to operate and maintain the park once it is completed, and to provide a venue representative for SLOC from November 1, 2001 through the end of the Games. During the periods the facility is used by SLOC, Parks is required to provide the same level of support at the site as during non-use periods.
Preliminary State Budget Impacts - The cost to Parks for the sewer line is estimated to be $200,000. The annual operating costs for the cross-country/biathlon venue is estimated to be $165,000 annually (which will require an ongoing appropriation from the legislature). In addition, Parks may need to install an irrigation water line from the park boundary to the stadium site at an estimated cost of $135,000.
Potential Park Enhancements - In addition to the contractual requirements, Parks has identified additional development opportunities at Soldier Hollow that would greatly enhance the post-Games use and financial stability of the park. Potential enhancements include camping sites, additional support buildings, permanent electrical supply, and a 36 hole golf course. With these additional features, costing an estimated $11.8 million, Parks anticipates Soldier Hollow could generate a profit of $200,000 per year as opposed to requiring a general fund subsidy of $165,000 per year. However, since these enhancements are not required for the Games, it is recommended this request be viewed as an investment opportunity rather than an impact on state services from Games activity.
Local Government Contractual Requirements
Under the terms of the agreement, several local governments are required
to provide infrastructure improvements for Soldier Hollow as well:
| Wasatch County | Operate & maintain access road (constructed by UDOT
with federal/state funds)
Arrange for construction of main sewer line to park boundary |
| Charleston Water Conservancy District | Construct water tank and culinary water system to within 300 ft. of
stadium
Provide culinary water (at SLOC expense) during SLOC Use Periods |
| Midway Irrigation Company | Construct snow making water system main line to park boundary
Provide irrigation water (using Parks water shares) during SLOC Use Periods |
University of Utah Student Housing (Athlete Village)
Contractual Requirements - SLOC has agreed to pay the University of Utah the equivalent of $25.0 million (in 2002 dollars) for exclusive rights to use newly constructed student housing for the Athlete Village, plus another $3.0 million (in 2002 dollars) for use of the Officers Circle at Fort Douglas for the International Center. SLOC's exclusive use period is from January 9, 2002 through March 3, 2002 for the entire village, plus a smaller portion of the village through March 27, 2002 for use during the Paralympic Games.
The University is using the funds paid by SLOC to help offset the total construction costs of $120.0 million for the new student housing. The additional SLOC funds should help enhance the capacity and quality of this facility.
The University is required to construct housing to facilitate 4,000 guests, a 17,000 sq. ft. food service area, and a polyclinic to provide health services. In addition, the University is required to upgrade 10 historical buildings in the Officers Circle to current building code. These buildings, located near the village, are the site of the Games International Center. The cost to the University for these upgrades is capped by the agreement at $3.0 million, and it is hoped that sponsors can be obtained to help reduce this amount.
Under the terms of the agreement, the University is required to provide its normal ongoing level of staffing, support services, and utility services for the village area during SLOC's exclusive use period at no cost to SLOC. SLOC is required to pay the University for any costs related to support and staffing levels in excess of its normal ongoing activity. SLOC also has the right to negotiate with the University for additional staff and support services at SLOC's expense.
Budget Impacts - Since the University is only required to provide the normal level of ongoing support during the exclusive use period, it should incur only minimal additional costs to remove and store certain equipment and furnishings not needed by SLOC during the used period. In addition, the University is required to provide a Venue Representative and Assistant Venue Representative at its own expense to coordinate with SLOC in preparation and operation of the village. Finally, in its financial planning for the new housing, the University has taken into account the revenue that will be lost from not collecting student rents during SLOC's exclusive use period.
It is anticipated that the State Building Authority will soon issue a $23.0 million revenue bond to provide funds to help pay for the construction of the student housing. The bond will be repaid in a lump sum amount of approximately $33.0 million on May 15, 2005. The value of this bond in April, 2002 is approximately $28.0 million.
This financing arrangement was made to help SLOC manage its revenue flows. SLOC will receive a portion of its sponsorship revenues between 2002 and 2004. The state has first creditor rights to these sponsorship payments, which will be placed in escrow until May 1, 2005. At that time $33.0 million should be available in this escrow account, funded solely from SLOC revenues, to make the $33.0 million bond payment due May 15, 2005.
University of Utah - Rice Stadium (Ceremonies Venue)
Contractual Requirements - SLOC has agreed to pay the University of Utah $8.0 million in cash (in 2002 dollars) plus $250,000 in HVAC equipment for exclusive rights to use the expanded Rice Stadium for the Opening and Closing Ceremonies during the Games. This payment will be used by the University to help offset the cost to expand and renovate Rice Stadium to 46,500 permanent and 3,500 temporary seats. The total cost to expand the stadium is over $50.0 million.
SLOC's exclusive use period is from November 25, 2001 through March 15, 2002. Under the terms of the rental payment, the University will cover the cost of all utility usage during the use period, as well as all necessary maintenance, custodial service, snow removal, and normal security. SLOC will cover the costs for all temporary facilities, additional utility hookups, additional security, and operating the ceremony events.
Under the terms of the agreement, SLOC also receives various use rights for other University facilities including the Huntsman Center, hospitality areas, meeting rooms, and parking lots.
Budget Impacts - Since the University is required to provide above normal support services and staffing during the SLOC use periods, the University could experience some one-time additional costs related to the ceremonies.
SLOC is required to make a single cash payment of $8,350,000 to the University on January 1, 2003, or $8.0 million plus nine months interest. The interest is included in the payment since it was originally agreed SLOC would pay the University on April 15, 2002. This financing arrangement was made to help SLOC manage its revenue flows. SLOC will receive a portion of its sponsorship revenues between 2002 and 2004. The state has first creditor rights to these sponsorship payments.
The State of Utah has entered into an indemnification agreement with
SLOC, Salt Lake City, and the International Olympic Committee (IOC). The
agreement establishes an indemnification hierarchy as follows: