Ted Leonsis, the billionaire owner of Washington’s NBA and NHL teams, wants a $2 billion entertainment district with a new arena for his teams as the centerpiece, and only wants to have to pay $403 million for what would be an obvious moneymaker for him and his sports-entertainment company.
And he has another rich guy, Gov. Glenn Youngkin, not quite a billionaire, but close enough, willing to go to bat for him to get local and state taxpayers to give him the rest of the money as long as the project is built in Virginia.
“This is the most visionary sports and entertainment development in the world, bringing together entertainment, sports, and technology in the most advanced innovation corridor in the United States: a once-in-a-generation and historic development for the Commonwealth, sports fans, and all Virginians. The Commonwealth will now be home to two professional sports teams, a new corporate headquarters, and over 30,000 new jobs – this is monumental,” said Youngkin, in a statement in a news release from his office issued on Wednesday.
Youngkin – net worth: $470 million – and Leonsis – net worth: $2.8 billion – were together Wednesday morning at an event in Alexandria, where what was touted in the news release as a “world-class Entertainment District” would be located, pending, obviously, approval by the Virginia General Assembly, which isn’t guaranteed.
Leonsis appears to be leveraging Virginia’s interest in giving him money against the interests of local leaders in Washington, D.C., where Mayor Muriel Bowser, on Tuesday, introduced what the Washington Post termed “an 11th-hour bill” that would give Leonsis’ Monumental Sports & Entertainment $500 million toward a project to rehab Capital One Arena, the current home of the District’s NBA and NHL teams.
That bill would also extend the lease for Monumental at Capital One Arena, currently set to expire in 2027, through 2052.
The public money is just part of the issue here, though. Leonsis, like other pro-sports franchise owners, is interested in building something on the model of what the owners of the Atlanta Braves MLB team did with their new ballpark in the Atlanta suburbs, which used the ballpark as the centerpiece of a development district that includes retail, restaurants, hotels and residential spaces.
Capital One Arena, which opened in 1997, is landlocked in the heart of the Chinatown district in D.C., so it’s hard to imagine that Leonsis and Monumental could do anything in that densely packed area along the lines of what was done with The Battery Atlanta down in Cobb County.
The proposed location in Alexandria, in Potomac Yard, is envisioned as a home for a new arena, practice facilities for the two pro-sports teams, and the other money-making ventures – the restaurants, retail, hotels and the rest.
“We are committed to providing world-class fan experiences while continuously evolving our teams, deepening community ties, and solidifying our role as leaders at the forefront of sports and technology,” Leonsis said in a statement in the news release from the governor’s office. “The opportunity to expand to this 70-acre site in Virginia, neighboring industry-leading innovators, and a great academic partner, would enable us to further our creativity and achieve next-generation, leading work – all while keeping our fans and the community at the forefront of everything we do.”
The financing on the proposed Alexandria project includes a $403 million investment from Monumental, and bonds that would be issued by a state authority that would be repaid through annual rent paid by MSE, arena parking revenues, naming rights, and incremental taxes generated by the development.
Per the news release from the governor’s office, “there is no upfront investment or inclusion of any taxes already being collected by the Commonwealth to repay the bonds, and there will be no tax increases for local residents.”
The characterization there is at least a tiny bit misleading.
The City of Alexandria, under the terms of the deal laid out on Wednesday, would be on the hook for $56 million to go toward the construction of a performing arts venue that is part of the project plans, and $50 million toward underground parking development.
Alexandria may very well have $106 million sitting around doing nothing; if it doesn’t, it will have to come up with that money from somewhere, and money doesn’t come free.
State taxpayers would also be responsible for $110 million in on-site infrastructure costs, including site development and roadway, signal, and intersection improvements funded through the bonds.
And that’s only roughly $200 million of the $1.6 billion that the city and the state would be putting toward this project.
The governor’s office news release touts “a combined $12 billion in economic impact for the Commonwealth and City of Alexandria” as the payoff for the public investment, but numerous studies have shown that the real-world impact of the billions of dollars that local and state governments have given to billionaire pro-sports team owners for new arenas is negligible, and in many cases ends up being a net loss.
The bulk of the retail and restaurant spending that goes into the projected economic impact is money already being spent elsewhere, for one, and two, the impact on local and state tax revenues is negated at least in part, and probably borderline significantly, by the tax-increment finance structure of the deal proposed by Youngkin.
Basically, local and state taxpayers are being asked to tie up a lot of money to give to a billionaire so that he can make even more money, and what we get out of the deal is, what?
We get to say that Virginia finally has a pro-sports team?
Whatever fun there’d be there would be lost in the fact that they’re still going to be called the Washington Wizards and Washington Capitals.
Whoopee.
But the news is out there, so Youngkin, who has nothing else to hang his hat on, given that his effort to win control of the General Assembly utterly failed, shuttering his presidential ambitions, is going to go at this like he would have gone after the abortion ban that he promised back during the election cycle.
Yep, we’re to the politics part of this deal now.
“While some people want sports stadiums … I want tolls to disappear from Hampton Roads *and* I want recreational sale of marijuana. Guess we will have to find compromises this session,” State Sen. L. Louise Lucas (D-Portsmouth), the incoming chair of the Senate Finance and Appropriations Committee, wrote in a tweet on Tuesday, as news of the deal was beginning to break.
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Chris Graham
