Virginia’s Legislature is about to start debating a $2 billion arena project that would bring the NHL’s Capitals and the NBA’s Wizards to the state.
Here’s what we know so far, and what the next steps are.
Where will the money come from?
Monumental Sports and Entertainment, which owns the Capitals and Wizards, is touting the project as one that does not create any new taxes, but instead uses the taxes the arena will generate to pay for the project itself.
There are several financing mechanisms at play.
Monumental is ponying up $403 million for the construction of the facility, which will include an arena as well as an adjacent mixed-use development.
Monumental will pay $416 million to rent the facility for its teams for 35 years. The state of Virginia and the city of Alexandria will guarantee this money, but unless the NBA or NHL folds in the next 35 years, there is no risk to taxpayers on this portion of the funds.
The city of Alexandria kicks in $106 million upfront for a 2,500-space parking garage beneath the facility and a 6,000-seat performance venue that the city will co-own with Monumental. For comparison, The Anthem in D.C.’s Wharf district also holds 6,000, and opened in 2017 at a cost of $60 million.
Virginia will also dedicate up to $200 million for transportation projects at the site. Gov. Glenn Youngkin and other politicians supporting the project have said this money would need to be spent whether the project was approved or not for needed improvements to Highway 1 and the new Potomac Yard Metro station.
The remaining $1.05 billion will be issued as “moral obligation bonds” by Virginia and Alexandria.
Investors would buy the bonds now and be repaid later by the tax revenues generated by the development. Moral obligation bonds do not create a legal obligation for repayment if revenues fall short, merely a “moral” obligation. In practice, the state would almost certainly find a way to pay, so as not to damage its credit rating.
What if the revenues fall short?
Youngkin and others have stressed that their projections are extremely conservative to avoid a potential shortfall. The governor told the Richmond Times-Dispatch that the project would bring in a projected $4.6 billion over its life, well above the $1.05 billion needed to repay the bonds.
There are reasons to be skeptical of the $4.6 billion number — the projections, for example, estimate that the new facility will host 220 events each year. The Capitals and Wizards each play just 41 regular-season home games, and Capital One Arena in the District has fallen short of that number each of the last four years.
And projections for revenue are based on the site remaining essentially the same if an arena deal isn’t passed. Stephanie Landrum, CEO of the Alexandria Economic Development Partnership, said that’s not out of line in the current economy.
“I understand how people think, looking at this property, there should be an in-between,” she said at a recent town hall. “But the reality is the market has changed in a post-pandemic world, and there isn’t demand for office space and other commercial uses like hotels without a catalyst driver.”
Who gets to vote?
Approvals are needed from the Virginia General Assembly, where lawmakers will have their say in the next couple of months, and the Alexandria City Council, which will also have to approve the project.
Asked at a town hall if there would be a public vote, Virginia Sen. Adam Ebbin said it was unlikely.
Youngkin proposed the arena as part of his state budget, but lawmakers requested it be separated and put to a vote by itself. The first step in that journey is a hearing in the Senate Finance and Appropriations Committee, which could come as soon as Thursday but is most likely to happen next week on Tuesday.
The full Senate has to approve the bill by Feb. 13, and the House would then have to approve it by the March 9 adjournment, though, like a sporting event, the General Assembly often goes to overtime. Youngkin’s support of the project means his signature is a mere formality in the process.
Alexandria has not set a date for a vote yet, but Mayor Justin Wilson has signaled his support for the proposal.
Is there opposition?
The biggest legislative pushback is coming from Senate Democrats, who see an opportunity to use the project as a bargaining chip against Youngkin, a Republican.
“Anyone who thinks I am going to approve an arena in Northern Virginia using state tax dollars before we deliver on toll relief and for public schools in Hampton Roads must think I have dumba— written on my forehead,” Senate Finance Chair Louise Lucas, who is from Hampton Roads, posted on social media.
Among other things, Democrats want Youngkin to provide an extra $100 million in funding to the Metro system.
Locally, opposition is beginning to coalesce and is being led in part by former vice mayor of Alexandria Andrew Macdonald, with a group called the Coalition to Stop the Arena at Potomac Yard.
“Alexandria doesn’t need a sports and entertainment complex to thrive,” he wrote in an open letter. He added: “Democrats should not support a pet project being pushed by a Republican governor to help his good friend, Ted Leonsis, owner of Monumental Sports, just to gain budget support for Metro, and other important funding priorities.”
What about transportation?
The project will have a 2,500-space parking garage, not nearly enough to handle arena events. The intent would be to push fans to use Metro to reach games.
Wilson, the Alexandria mayor, said work is already underway to ensure neighborhood parking won’t be disrupted, including potentially issuing residential parking permits in the area, something that has already been discussed because of the impact of the new Metro station on commuter traffic.
“The intent is to ensure that we do not have people, beyond a small core, accessing this by vehicle, and that’s certainly going to be the encouragement,” Wilson said at a town hall. “And we will continue to push to keep the parking at a minimum.”
What about the Target?
Wilson said the Target store will remain.