How Boston plans to do the Olympics for $5 billion

Against most expectations, Boston is the U.S. entrant in the bidding war for the 2024 Summer Olympics. Now the question is whether it can sell the International Olympic Committee on its vision for a bargain-basement pricetag for the Summer Games.

United States Olympic Committee president Lawrence F. Probst III, flanked by Boston mayor Martin J. Walsh (left) , talks about the USOC selecting Boston as its applicant city to host the 2024 Olympic and Paralympic Games during a press conference at the Boston Convention Center and Exhibition Center last Friday.
Greg M. Cooper | USA TODAY Sports | Reuters

Last week, the United States Olympic Committee chose Boston as its 2024 representative, to compete with such cities as Rome, Melbourne and Doha. It beat out the city many assumed would win, Los Angeles, which hosted the games in 1932 and 1984. (CNBC's parent company, NBCUniversal, holds the U.S. broadcast rights to the Olympics through 2032.)

Boston 2024, the group organizing the bid, presents the city as an ideal host for the games—and says Boston can pull it off in under $5 billion. The boosters contend that the city's many existing universities, with their athletic facilities, can host both events and athletes, while good public transportation can make the three-week event less of a burden on Boston's streets.

Erin Murphy, executive vice president of the booster group, told CNBC that the plan is to make this a "cost-effective game that will also be walkable and on mostly on existing university land." 

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"The fact that we don't have to reinvent the wheel is part of why we feel this is a very responsible plan," Murphy said. 

But $5 billion is a remarkably low figure when it comes to hosting the Olympics. London 2012 originally proposed a budget of $4.5 billion but came out over $15 billion by the end. The 2014 Winter Olympics in Sochi topped $50 billion after an initial proposed budget of $12 billion. 

Many cities have a project somewhere in their past that has gone over budget, but the city of Boston has an especially unfavorable precedent: The "Big Dig"—a series of tunnels and bridges in the heart of the city—took two decades to complete and cost almost 10 times initial projections. 

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"One can only hope that the jump from $2 billion to $15 billion for the cost of the Big Dig would not be replicated by hosting the Olympics," said Andrew Zimbalist, professor of economics at Smith College and author of the book  "Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup. "

The notion that existing college stadiums can be used for hosting Olympic sports is "a good example of silliness" said Zimablist, who resides close to the city. He said those facilities are missing the amenities like Wi-Fi, luxury boxes, media hookups and ample concession booths that the IOC will require. 

"For Tufts University to build something like that would be totally irresponsible," he said.

Any bid that makes economic sense is unlikely to win at the international level, and any bid that would win at the international level is unlikely to make economic sense.
Victor Matheson
professor of economics, College of the Holy Cross

In the meantime, Boston will spend $70 million to $100 million just on its bid to the IOC. That will include planning for the venues, architectural drawings, public relations and economic impact studies. Chicago dropped $100 million on its failed bid to host the 2016 summer games. 

Victor Matheson, a professor of economics at the College of the Holy Cross, considers Boston a city that makes economic sense as an Olympics host precisely because of its many college and professional sport legacies.  

"That being said, the question is whether you can win with a bid that tries to be too cost-conscious," said Matheson, who is also a Boston resident. "And as the bid progressed, it seemed clear that despite all the really good infrastructure in place we are missing the stadium with an Olympic-size track." 

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He also pointed to the cost of security, which he estimated at a $1 billion, if not more. And, he said, if Boston were chosen and able to come in under $5 billion, it would be a shock to everyone. History shows that most cities come nowhere near their original proposed budgets once everyone goes home after the games. 

Chris Dempsey, co-chairman of No Boston Olympics a local opposition group, said city residents do not want to see public diverted from schools, health care and infrastructure to prepare for the games. 

"We have concerns about what promises are being made behind closed doors," he said. "This process has been entirely opaque—we couldn't read the bid and it still hasn't been made public."

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Dempsey added that taxpayers would bear the burden of a "three-week, one-time event that's 10 years out." 

Murphy counters that no taxpayer dollars would be put toward the "operation of the games," although public spending would go toward infrastructure costs like roads, buildings and transportation. 

According to Matheson, the trend of cities spending upwards of $10 billion to host the games is troubling and speaks to a broader problem the IOC needs to address. It's the more lavish proposals that have tended to prevail over the last two decades, in an environment "in which nothing is good enough for the IOC," he said.

"Boston is well positioned to make a bid that makes economic sense, but any bid that makes economic sense is unlikely to win at the international level, and any bid that would win at the international level is unlikely to make economic sense," he said.