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Could S.L. be liable for Olympic losses?

Salt Lake officials are getting hot and bothered about something they thought was taken care of a long time ago: whether the state will indemnify the city for any losses from putting on the Olympic Games.

In 1991, the state, city, local bid committee (now the Salt Lake Organizing Committee) and Utah Sports Authority signed a contract in which the state agreed to indemnify the city for any loss.The city, in return, gave up most of its supervisory authority over the Games.

But now, notwithstanding the contract, at least one member of the organizing committee is telling state legislators that the state need not worry about the committee's finances since the state won't have to pay for any loss.

That means Salt Lake City will be left holding the bag if the Games lose money.

City Attorney Roger Cutler calls it "double-dealing - we need to stop this idea in the bud."

The problem arises from a provision in the state constitution prohibiting the state from lending credit to any "private individual or corporate enterprise or undertaking." Some have argued that the state's indemnification agreement with the city, since the Olympics is a hybrid private-public undertaking, is illegal and unenforceable.

The drafters of the 1991 agreement were aware of the provision and took pains to get around it.

"Nothing in this Agreement is intended to legally bind the taxing power of the State, require the State to assume debt or lend the State's credit in contravention of any constitutional provision or laws of the State of Utah, and this Agreement shall be construed to be consistent with any such constitutional or legal requirement," it states.

No formal opinion has ever been rendered on the legality of the contract. At the time of the contract signing, all sides apparently agreed not to press the constitutional issue in order to finalize the agreement so that Salt Lake City would be prepared to sign the required, and stringent, host-city contract with the International Olympic Committee.

"The state didn't sign the agreement with their fingers crossed behind their backs," Cutler said.

The agreement was signed just a month before Salt Lake City lost the 1998 Winter Games to Nagano, Japan, and was in place when Salt Lake City was selected to host the 2002 Winter Games in 1995.

"I don't think there was any need to resolve (the constitutional issue) at the time the document was entered into, nor do I think there's any need to resolve it now," said Utah Sports Authority Chairman Randy Dryer, an attorney, who signed the agreement. ". . . The issue has never really come to a legal conclusion because the governor has always felt there would be a moral obligation of the state to both ensure that the Games didn't run a deficit and to cover any losses."

Potentially large losses are a worry to city officials, given the financial scope of the games. Olympic organizers expect to spend more than $1 billion on the 2002 Winter Games, mostly from private sources such as corporate sponsors and television networks although some federal assistance is expected. They have pledged not to spend more money than they can raise.

"I think there's only a theoretical possibility that there'll be a deficit, and I suspect that if there is a deficit - which in my view is unlikely - what happens will be decided on grounds other than legal determination," Dryer said.

Nevertheless, some state legislators are now exploring the state's legal responsibility. Sen. Alarik Myrin, R-Altamont, for example, has asked legislative counsel to take a look.

"What we need to do is identify just what the liability is and have it agreed on by the city and the state," said Myrin, the co-chairman of the Legislature's Sports Advisory Committee.

The state senator said he's not seeking a formal legal opinion but wouldn't be surprised if someone else did. He agreed with Dryer that the issue goes beyond legalities: "There's also an obligation - the governor made an agreement. We kind of need to figure out what that agreement is."

The contract contains a provision that might protect the state if the issue ends up in court: The city is idemnified only "to the fullest extent permitted by the Constitution and the laws of the State of Utah . . . ."

Officially, the organizing committee is saying nothing on the indemnification issue. Why, then, are some members of the committee now bringing it up?

City Council Chairwoman Deeda Seed noted that various legislators are drafting bills that would create financial oversight over the organizing committee's budget. According to her, some committee members don't want financial oversight so they're telling the state, hey, you don't have to worry about losing money - the city will have to pay any losses - while telling the city, hey, you don't have to worry - the state will pay.

"Members of the organizing committee are playing the state against the city," Seed said. "They're confusing us into submission."