Why city officials are warning that the Olympics could bankrupt Los Angeles

L.A. City Councilmember Monica Rodriguez warned this week that Los Angeles could face bankruptcy if it doesn’t make an airtight deal with Olympics organizers over how it will be reimbursed for its expenses during the coming 2028 Summer Games.

The Olympics have long been promoted as a “no cost” deal for taxpayers that will be hosted by the city, but funded and orchestrated by private organizing committee LA28.

But a key agreement outlining what city services Los Angeles will provide for the Games – like policing and traffic control – and how the cash-strapped city will be reimbursed for its extra work is now more than six months late.

In a letter to LA28 CEO Reynold Hoover sent Tuesday, Rodriguez warned that if it isn’t changed, the current draft agreement could leave L.A. vulnerable to spending hundreds of millions even if LA28 turns a profit.

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“Every dollar owed to the City must be reconciled and paid before any surplus is retained or repurposed,” Rodriguez wrote. “Bankruptcy cannot be the legacy of these Games.”

The major concern is who will pay security costs for the Olympics, including LAPD overtime. The federal government has allocated one billion dollars to security costs for the mega-event, and has put the Secret Service in charge of security planning.

Despite those plans, city officials are concerned about who will be left with the bag if the federal funding doesn’t come through, or if it doesn’t cover all of the city’s security costs.

LA28 has not included security spending in its $7.1 billion budget – a point that City Attorney Hydee Feldstein Soto raised in a March report sent to the city council. The billion dollars in federal funding will also be allocated across all the law enforcement agencies that police the Games – meaning the actual amount the city of L.A. will receive is unclear.

“What happens if the City’s actual extraordinary expenses exceed $1 billion?” Feldstein Soto wrote in her report.

The city made a gamble when it agreed to host the Olympics. To score the host bid, L.A. agreed to be the financial backstop for the Olympic Games, meaning if the organizing committee runs into the red, L.A. will pick up the bill, along with the state of California.

In their missives over Olympic expenses, both the city attorney and Councilmember Rodriguez raised a new potential nightmare scenario for the city: that the Olympics could make a surplus, and L.A. could still be left in debt.

“The City requires unambiguous language in the [agreement] to foreclose any scenario in which funds might go back to the wealthy backers and investors of the LA28 organization without reimbursing taxpayer-funded extraordinary costs,” the city attorney wrote.

LA28 did not immediately respond to a request for comment. Next Tuesday, the city council’s ad-hoc committee on the Olympic Games will meet for the first time since January.