Featured image credit: JBG SMITH
The ambitions of Monumental Sports & Entertainment (MSE), parent company of the NBA’s Washington Wizards and NHL’s Washington Capitals, to develop a $2bn (£1.56bn/€1.83bn) entertainment district in Alexandria featuring a new arena have been dealt a sizeable blow after the project was excluded from the proposed budget for the state of Virginia.
The framework of an agreement for a public-private partnership for the venture was initially announced to great fanfare back in December. The project has been heavily backed by Virginia Governor, Glenn Youngkin, who is attempting to attract the first major pro sports teams to the state, but has drawn strong opposition, mainly due to concerns over the levels of public funding it may entail.
Senior Virginia lawmakers confirmed yesterday (Thursday) that the two-year budget and spending plan will not include language that would allow the project to proceed. The Virginia House has previously indicated it backed forming an authority that would provide oversight of the scheme, however the Senate has not followed suit.
The Capitals and Wizards’ current home in Washington D.C., Capital One Arena, opened in 1997, and it has been proposed that the two teams would relocate around eight miles to Alexandria, Virginia in 2028.
Ted Leonsis, founder and chairman of MSE, in January defended the proposed relocation to a district that would include an “industry-leading arena”, a new Monumental campus featuring the global headquarters for MSE, a Monumental Sports Network media studio, the Wizards’ practice facility, a performing arts venue, and an expanded esports facility.
In a letter addressed to fans and supporters of the two teams, Leonsis said he acknowledged the concerns of some locals in Washington, D.C. but reiterated his stance that relocation to Virginia is the “best decision”. Leonsis said the relocation will accomplish two critical objectives: provide fans with the “best experience in all of sports” and establish a best-in-class set of facilities for athletes and employees.
Under the Youngkin-negotiated terms, Monumental and Alexandria would contribute some funds up front, but around $1.5bn would be financed through bonds issued by a governmental entity that lawmakers would form.
According to the Associated Press, the bonds would be repaid through a mix of revenues from the project, including naming rights, parking fees and taxes on tickets, concessions and athletes competing at the arena. Backers of the project believe this would more than cover the debt, creating new revenues for the city and state in the project’s first year.
However, a third of the financing would be backed by the “moral obligation” of the city and state governments, translating to taxpayers being potentially liable if projected revenue targets aren’t reached.
Yesterday’s news doesn’t necessarily kill the project outright. If lawmakers send Youngkin a budget without the arena language, he could seek an amendment to restore it or potentially restart the process with a new bill.
Speaking at a news conference, Youngkin said: “I believe that the Senate is about to make a colossal mistake. And it reflects the fact that three months ago, I had the privilege to announce a truly unprecedented opportunity. An unprecedented opportunity to welcome two professional sports teams to Virginia.”
He continued: “We had no upfront cash, none, no impact on our triple-A credit rating. No new taxes. In fact, revenues that otherwise would not be here are being utilised to finance part of the construction activity through bond issuances. This project can be done and we can move forward.
“It creates 30,000 jobs and generates $12bn of economic impact for the Commonwealth of Virginia, billions in direct cash flow that flows right back into important priorities like transportation… that benefit the entire Commonwealth of Virginia.”
Senator Louise Lucas, chair of the Senate Finance and Appropriations Committee, and the deal’s most vocal critic, yesterday stated she remains firmly opposed to the deal, mainly due to its reliance on bonds backed by the state and city governments.
Lucas said she had serious worries about “putting taxpayers’ money behind the project of a billionaire.” She added: “I just stood firm on what I believe in my heart to be in the best interest of the Commonwealth. And that was just to say no to the ‘Glenn Dome’.”
In response, MSE told the AP that it is disappointed but remains “hopeful that the merits of the proposal will eventually get a fair hearing so this important project can advance for our fans, players, employees and the residents of Virginia.”
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