Sailing to Success; Valencia is sure it can dodge the financial storms that often slam host cities, and it might be right.(2007 America's Cup, Valencia, Spain)(Cover story)

Byline: Eric Pape

As Valencians watch some of the world's most high-tech sailboats run sprints on the Mediterranean, they hope to blow past a group of perennial losers: the hosts of sports spectacles. Spain outbid Marseille, Porto and Naples to win the right to host the 2007 America's Cup for Valencia, promising to spend about [eurn]1 billion, largely for port improvements. That's more than the take of the two previous America's Cup races in Auckland, New Zealand, combined. "There's a lot of money coming in," says Rosa Mari Roig i Berenguer, a cabinet member in the regional government, "more than most people have ever known."

So what's the chance Spain will recoup its money? The record is pretty grim. Montreal will pay off the last of its 1976 Olympic debt only at the end of this year. The [eurn]8 billion Greece spent on the 2004 Olympics left the most indebted country in the EU saddled with even more debt, and an [eurn]80 million annual maintenance bill. Yet big cities still line up to host these events, no matter how unclear the benefits. Bidders for the 2012 Olympics included London, Paris, Madrid and New York. Says economics professor Victor Matheson at Holy Cross University in Massachusetts, "These cities just don't need more tourists in the summer."

On the other hand, the little-known regional capital of Valencia fits the profile economists look for: it's a small city on a roll. The America's Cup is about the right scale for Valencia (population: 800,000). The city can count on at least [eurn]600 million in funding from the 12 competing teams and their corporate sponsors--far more than Auckland. And the Cup highlights summer water sports in a coastal city where tourism makes up one eighth of the local GDP, after a 50 percent rise in the first half of 2005 alone. A dozen low-cost European airlines fly or are preparing to begin flying into Valencia, and work ...