Commonwealth Games officials initially sought a “multibillion-dollar” payout from Victoria’s Andrews government for its cancellation of the 2026 event, and independent mediators were crucial in containing it to a $380 million deal that went down to the wire.
Premier Daniel Andrews revealed the payout on Saturday, nearly five weeks after making the shock announcement that his government would abandon the Games, claiming the costs had blown out from $2.6 billion to more than $6 billion.
Sources familiar with the negotiations but gagged from speaking publicly told The Australian Financial Review the government was “deeply relieved” over the deal after the parties were “galaxies apart” initially. They also confirmed that the deal was still being finalised late into Friday night and came close to collapsing.
The Victorian government is estimated to have spent more than $250 million in preparing for the Games, thus taking the total figure for not holding the event to about $630 million.
But questions continue to emerge over the debacle, which will be investigated by Victorian auditor-general Andrew Greaves. It will also be scrutinised by a parliamentary inquiry after the opposition secured crossbench support.
The government faced fresh claims on Wednesday that former Victorian sports minister Martin Pakula told his federal counterpart that no money was needed from Canberra for the Games, despite the business case assuming the federal government would provide up to half the costs.
Financial workings released on Saturday revealed the Andrews government was told when it signed up that the event might generate only 70¢ in economic benefits for every $1 invested.
A new one-page budget document also details the claimed cost blowouts, including more than $1 billion for the athletes’ village, a fourfold increase.
It also claims $2 billion in “additional cost pressures”, which Treasurer Tim Pallas has linked to the war in Ukraine and the “hyper-escalation” of expenses.
Mr Andrews says the initial budget estimate, which involved accountants EY, was “hardly the greatest piece of work” but that fighting a payout would have become a “lawyer’s picnic in courts all over the world”.
The financial fallout could have been much worse, and insiders suggest that the Games’ ambit claim centred on Victoria’s initial $2.6 billion budget to provide an incentive for another city to step in at this late stage.
Last month, the Financial Review revealed that Victorian lawyers and Arnold Bloch Leibler lawyer Leon Zwier – who also negotiated a settlement for Mr Andrews over the cancelled East West Link that ended up costing taxpayers $1.1 billion – left London after negotiations stalled.
However, the appointment of independent legal mediators is said to have played a crucial role in helping Games’ officials focus on what a realistic battle through the courts could produce.
The mediators were former New Zealand judge Kit Toogood, KC and former WA Supreme Court chief justice Wayne Martin, KC.
The Victorian government emphasised during the negotiations that the regional model was never planned to drive high revenue, financial returns or ticket sales, or to draw a major television broadcast deal, meaning the Games were unlikely to have been deprived of a big financial boost, making the potential losses much lower.
Mr Andrews’ lawyers also said that if a deal fell through, the Victorian government had the resources to fight the dispute for years in the courts, although the result would be highly uncertain.
“It would drag on for years. Who knows what the ultimate number would have been, who knows who wins and loses in those sort of matters and inevitable appeals and appeals on appeals?” Mr Andrews said on Saturday.
On Wednesday, the Victorian Liberals called for more transparency on the deal and said Mr Andrews was never serious about hosting the Games.
“Today we know not only was [money offered by the federal government] but it was turned down by Daniel Andrews. What a joke,” said David Southwick, the opposition spokesman on the Games.
“What it basically boils down to is Daniel Andrews was never serious about the Commonwealth Games in the first place. It was a big con job on the Victorian taxpayer. It was all about buying votes in regional towns.”