The Olympic Delivery Authority (ODA)’s budget for London 2012 Olympic venues has risen by £106 million since November, and costs will probably continue to rise, according to a report commissioned by London mayor Boris Johnson.

The report by David Ross, a member of London’s Olympic organising committee nominated by Johnson to act as an Olympic watchdog, said that savings elsewhere have helped offset the £106m increase, meaning the overall cost of staging the games has increased by around £16m.

The ODA’s estimated cost of London’s Olympic stadium in Stratford alone has risen to £525m from £496m in November, according to the report. The stadium was originally priced at £280m during London’s bid for the games.

At least £1bn in contingency funds will now be spent on the games, Ross said, adding that containing cost pressures and avoiding further calls on the contingency will be difficult.

Ross said that the state of the economy, along with illiquidity in the banking system, is putting pressure on the project.

“This will impact on sale values, availability of private finance, appetite for sponsorship opportunities and tenant demand for space in legacy developments,” he said, adding that the rising prices of oil and raw materials and the treat of terrorism were also increasing costs.

The report said the credit crunch and falling house prices have caused problems for Olympic Village developer Lend Lease, which is having trouble securing private funds for the project and calculating the amount of additional financing required.

The ODA is working with Lend Lease and its banks to secure funding and exploring other options, including involving Registered Social Landlords, Ross said. “In all scenarios some significant public sector funding is likely to be required to deliver the project,” he added.

Ross also expressed concern over the delivery of an Olympic Park legacy, which he called the most important aspect of the project.

“I am concerned about how far there is a clear vision for legacy and whether it has the right profile and sufficient resources devoted to it,” he said. “I am disappointed that we find ourselves at an advanced stage of the procurement process without clear and agreed plans for legacy for a number of important venues.”

The ODA has already worked to cut legacy spending, Ross said. But Grant Thorton’s early business planning work for the London Development Agency (LDA) has already identified the need for additional investment in the park to establish “an environment of the highest quality that is capable of being a destination in its own right,” he said.

Ross noted that the LDA is also concerned about potential shortfalls in the transformation budget for sports venues, as it is not clear whether the existing budgets will provide turnkey legacy facilities at the Olympic stadium or aquatic centre.

“Given the overall cost pressures affecting the Olympic budget there is a real danger that legacy budgets will be seen as the soft option for achieving reductions and savings,” Ross warned.

A £10m per year commitment by the Greater London Authority towards the revenue costs of maintaining Olympic Park and any revenue deficits for the venues may not be enough to meet costs, he added.

“Additional specialist resources, including input from experienced venue and leisure operators, should be deployed and there should be a full and open examination of all options to provide the most sustainable legacy uses for the main venues,” Ross said.

An ODA spokesperson responded that though the projected cost increase for the games has increased by £16m, it remains “within the budget set out by government.”

“The net cost pressure on the overall budget is £16m so it is not correct to talk about a £100m increase in costs as has been reported in some areas,” he said. “The project is well managed and ahead of schedule in some areas. We are confident we can deliver as we enter the big build phase. 75p of every pound we spend is for long-term regeneration so a great deal of work is already being done to create a lasting legacy for the project.”

It is expected that the level of public investment in the Olympic Village will be finalised later this year, given the challenging economic environment, he added.

“[Ross] highlights some important issues including how important it is to have greater transparency and openness about cost forecasts for the games than has been the case so far,” the mayor said in his response to the report.

“I want to take this opportunity to reaffirm that Londoners will not pay a penny more council tax to pay for the games—no matter the circumstances,” he added.

Johnson said he has asked Ross to quickly establish a board to advise the mayor’s office exclusively on Olympic Park legacy after the games.