The New South Wales Olympics Minister, Michael Knight, who is also president of the organising committee, said legal advice prevented the committee from signing the sponsorship contracts because they offered accommodation that could not be guaranteed.
"We have an Olympic accommodation problem and that is increasingly turning into an Olympic revenue and sponsorship problem," he said. SOCOG would lose an "almost immediate" payment of pounds 5.6m from a sponsor because it could not sign a sponsorship contract, he said.
The accommodation impasse arises because hotels continue to withhold 17,000 hotel beds from SOCOG needed for Olympic officials, media and sponsors. They are upset by a 10 per cent inner-Sydney bed tax, which was passed into law on Wednesday.
The tax takes effect on 1 September and is estimated to be worth about pounds 24m a year to the state government. Hotels still to be signed include the Regent and the Menzies, which are to be used by the International Olympic Committee.
The New South Wales government said it would spend pounds 10m to clean up pollution at Homebush Bay, near the site of the Sydney 2000 Olympics. The clean-up will be aimed at ridding the area of dioxin contaminants, the Ports Minister Carl Scully said. He was confident the operation would be completed in time for the Games.
Earlier this month Greenpeace said that samples taken from an illegal stockpile of toxic waste at Homebush Bay showed it contained dioxin contamination 60 times worse than the world's first major dioxin accident 20 years ago.
Members of the International Olympic Committee have dropped a complaint against the men's ski course at next year's Winter Olympics in Nagano, Japan, and praised local preparations for the Games. They warned, however, that traffic jams may affect some events.
Yielding to a Japanese request, the committee said the starting point for the men's downhill ski course will remain at 1,680 metres, making the course less than three kilometres, the shortest in recent times.
The international skiing federation, headed by an IOC executive board member, Marc Hodler of Switzerland, had pressed for the starting gate to be moved to 1,800 metres.
Nagano refused to lengthen the course under pressure from environmentalists, who said raising the starting gate would mean encroaching on a national park.
The biggest concern for planners is that the narrow roads and long distances between sites are likely to create serious traffic problems at the Games from 7 to 22 February.
Kiyomitsu Kodaira, the vice-president of traffic planning for the Nagano police, said earlier this week that jams could be as great as 120km (75 miles) in some areas.Reuse content