Likewise with Vancouver; one of our major downtown streets, Granville, got a complete overhaul. Gone were the old, broken stones, the cracked sidewalks, the run-down streets and sickly trees. It's now a much better place to walk around and explore.
We also have a new mass-transit line connecting our downtown core with South Vancouver and Richmond, as well as the airport. Catching a flight used to be $25-35 by taxi, or god knows how much in parking. Now, it's about $4 per person, and that gets you there and back if you're dropping someone off. The project was a public-private partnership that was within budget and opened fifteen weeks early, and has made Richmond far easier to travel to and from (making everyone's life easier). The project was a no-brainer improvement to the region, but I doubt we would have had as much support and funding if we hadn't had the olympics coming to town.
Whether the other renovations to the city will prove useful, it's hard to tell yet, but I'm cautiously optimistic that they will.
However, similar arguments are made all the time in support of building new sports stadiums. And at least in those cases, the arguments simply don't hold water: the beneficiary is the team ownership, NOT the taxpayers.
See http://www.cato.org/pubs/pas/pa-339es.html : The economic facts, however, do not support the position that professional sports teams should receive taxpayer subsidies. The lone beneficiaries of sports subsidies are team owners and players. ... Indeed, the results of studies on changes in the economy resulting from the presence of stadiums, arenas, and sports teams show no positive economic impact from professional sports -- or a possible negative effect.
When your spending on beautification to show the world your city for 3 weeks, major infrastructure projects like sewer systems aren't high on the list.