Consider the following statement: “Governmentfunded projects intended to serve as ‘prestige projects,’ such as the Sochi Olympics, should not be judged on the basis of cost.” Do you agree or disagree with this statement? Why? The Olympics happen every two years and the focus is usually centered mostly on the athletes, but 2014 proved to be different. Instead, topics of overspending, terroris threats, graft and corruption in high places, and criminal activities took center stage during these winter games. With an initial budget of $12 billion, the final price tag on the Sochi Olympics is estimated to have surpassed $51 billion, leaving many people scratching their heads. How could the Winter Games become so expensive, and where did all the money go?

Previously, the most expensive games were the 2008 Beijing Summer Olympics. However, at an estimated price tag of $40 billion, that total was still far less than the Sochi Olympics. Summer Olympics are also generally more expensive than the Winter Games due to more events being conducted, the need for venue construction, and the higher housing costs for larger teams.

When it comes to hosting the Olympics, it seems that preliminary budgets are quickly abandoned, with higher and higher price tags accruing. Countries view hosting the Olympics as an opportunity to showcase their national achievements, so little effort is made to spare expenses. Even by these standards, the Sochi Olympics set a new standard for profligate spending.

Historically, the average budget overspending for Olympics between 1960 and 2012 is 179% in real terms and 324% in nominal terms. The final bill for the Sochi games is far worse than these historical averages.

In 2007 when Russia won the bid to host the Winter Olympics against fellow finalists from South Korea and Austria, it promised to spend $12 billion. Although this figure was reasonable (and perhaps even excessive)

at the time, it was quickly overtaken by events involved in developing the Sochi site. The key question is, how did the original budget of $12 billion become a final price tag of $51 billion? There are several reasons for the escalating cost of the Sochi Games, including:

1. Although host to the Winter Games, Sochi is a subtropical climate. Temperatures average 52 degrees in the winter and 75 degrees in the summer.

There are even palm trees in this location. So the majority of the skiing events had to be held in the mountains of Krasnaya Polyana, a distance of about 25 miles from Sochi. The cost of constructing the roadway and infrastructure used to transport athletes and spectators back and forth came to a mind-boggling $9.4 billion. At a price of $220 million per kilometer, the roadway was more expensive than the entire budget of the 2010 Vancouver Winter Olympics.

2. Vladimir Putin, President of Russia, had the goal of developing Sochi as a world-class ski resort to attract winter tourism to the country. Thus, he was a highly visible spectator throughout the project’s development, offering suggestions and criticisms of the work being done. Rework on several of the venues and facilities added to the final bill.

3. Fears of terrorism and other disruptions led to an unprecedented level of security around the Sochi site. For example, troops from Russia’s Interior Ministry cordoned off the Olympic area to a depth of nearly 20 kilometers to enforce a safezone around the Games. The costs of heightened security added significantly to Sochi’s costs.