Lawmakers Vote in Favor of Plan to Bring Capitals, Wizards to Virginia

The Washington Post / Teo Armus, Laura Vozzella, Sam Fortier, Gregory S. Schneider

14:58 JST, December 12, 2023

A group of Virginia state lawmakers voted Monday in favor of a deal to bring the Washington Capitals and Wizards to a new arena in Northern Virginia, according to four people with knowledge of the situation.

Under the plan, which would still require approval from the full General Assembly and local officials, both teams would move to a new facility anchoring a massive mixed-use development in Alexandria’s Potomac Yard neighborhood, according to three of those people and four others. All of them spoke on the condition of anonymity because they were not authorized to discuss details of the plan. A Virginia stadium authority would own the larger complex and lease it to Monumental Sports & Entertainment, which owns the Capitals and the Wizards.

Monumental has not definitively said whether it would move the pro teams to Virginia. If the deal went forward, the company would put hundreds of millions of its own dollars into the project, according to two people briefed on the matter.

The deal, if ultimately approved, would constitute a major economic development win for Virginia Gov. Glenn Youngkin (R) after his party’s losses in last month’s state elections. It could also be a step in Monumental owner Ted Leonsis taking the company public – a move he openly considered in an interview with Bloomberg over the summer.

And while the plan would supercharge development in a part of Alexandria that is newly accessible by Metro, it could amount to a crushing blow to D.C.’s struggling downtown. District officials have been in talks with Monumental over renovating the Capitals’ and Wizards’ home at Capital One Arena as they attempt to revitalize the surrounding area.

The arena, built in 1997, is one of the older facilities in the National Hockey League and the National Basketball Association. Monumental has asked the District for $600 million in public funds for a major renovation, but D.C. is also juggling onerous budgetary constraints with requests from pro sports owners and looming competition over the future site of the next Commanders stadium.

“Monumental Sports & Entertainment is committed to delivering the best fan experience, winning championships, giving back to our communities, and becoming the most valuable regional sports and entertainment enterprise in the world so that we can continue to reinvest in our fans and community,” a Monumental spokesperson wrote in a statement before the vote. “Our commitment to the DMV is unwavering and we look forward to sharing plans for future investments.”

A spokeswoman for D.C. Mayor Muriel E. Bowser (D) sent a statement from the mayor’s office before the vote: “Mayor Bowser and [D.C. Council] Chairman [Phil] Mendelson have worked together closely, and in lockstep, to put forward a strong proposal to Monumental Sports, and after several months of negotiations, we are committed to seeing this through as a vital component of DC’s Comeback.”

A representative for the Virginia Economic Development Partnership did not respond to requests for comment Monday. A spokeswoman for Youngkin’s office and a spokeswoman for the Alexandria Economic Development Partnership both declined to comment.

It is unclear when the deal with Virginia would be announced after getting the green light. The state’s Major Employment and Investment Project Approval Commission, which is made up of a dozen state lawmakers, voted on the proposal late Monday afternoon, according to three people with knowledge of the plans. The vote was unanimous, according to two of those people. Proceedings for the commission are private under an exemption in state code because it works on economic development deals.

One person on the body moved to recommend that Virginia pursue “Project Potter” and that next year’s General Assembly consider “further details of the incentive package” for “an entertainment-anchored mixed-use development,” according to public documents regarding the meeting.

Additional approvals would be required from the Alexandria City Council and the full General Assembly for the plan to fully advance.

Alexandria Mayor Justin M. Wilson (D) declined to comment Monday but said the city was “bullish” about economic development in Potomac Yard.

A person who was briefed said the development would feature a basketball and hockey facility as part of a larger complex that would also include a “huge” underground parking area and a separate, smaller concert venue. The person described an artist’s rendering as a “little mini-city development” and said it would be built on land owned by the real estate developer JBG Smith. A spokeswoman for JBG Smith declined to comment Monday.

A Virginia stadium authority would borrow from Wall Street to pay for the project and pay that money back later. The creation of the stadium authority would allow the developer to leverage state and municipal bond rates – which are well below market rate – to finance construction.

State lawmakers would need to vote to create the stadium authority, which would issue bonds and collect tax revenue to pay them down. Revenue generated on things like ticket sales would be used to pay back the bonds. Such an arrangement probably means that the cost to taxpayers would not be entirely clear until the stadium authority determines what kind of rate it could get on the bonds.

Capital One Arena could still host concerts and college basketball games if Monumental’s deal with Virginia goes forward. Leonsis’s business has also significantly expanded into neighboring Gallery Place as it has “outgrown” the arena; the company plans to open a TV studio for Monumental Sports Network there in early 2024.

For years, Leonsis has grumbled about having a mortgage with unfavorable terms on Capital One Arena, which in 2016 he estimated cost him $36 million annually. He called it “the worst building deal in professional sports” and suggested that he could leave the city when he paid off the mortgage.

Two D.C. Council members, Mendelson (D) and Charles Allen (D-Ward 6), have championed retaining Monumental instead of attracting the Washington Commanders to the RFK Stadium site because the arena hosts far more events than an NFL stadium would and drives more economic activity downtown.

Leonsis has in recent years complained about the area around Capital One Arena and the city’s lack of investment in the building as his relationship with Bowser has worsened. He was particularly bothered by buskers playing loud music outside his office.

Moving to the Virginia site could offer Monumental more opportunities for non-sports revenue than it is afforded in the District. Franchise owners across professional sports have taken note of the Atlanta Braves’ move to suburban Cobb County, Ga., where the team developed an entertainment district around its new ballpark, making that site a destination and turning the whole complex into a moneymaker.

Monumental would have a more than 30-year lease on the Alexandria property, according to two people familiar with discussions around the project. The complex’s concert venue would be on par with D.C.’s Anthem, which can hold up to 6,000 people. Leonsis’s teams can leave D.C. as early as 2027. The arena has a ground lease – meaning Monumental owns the arena and the city owns the land below it.

In 2007, in exchange for the city’s $50 million investment, then-arena owner Abe Pollin exercised two 10-year options to extend the lease from its original end date, 2027, to 2047. But if the bond on the lease is paid in full – and Monumental is allowed to pay the remaining principal in a lump sum – the lease extensions would be nullified, meaning the end date would revert to 2027. Earlier this year, the remaining principal was $35 million.

Virginia is the largest state in the country without a major league sports franchise, a fact that politicians and sports fans alike have bemoaned as they’ve sought to attract teams. Over the years, Virginia has been willing to offer large financial packages for sports facilities but has lost out to D.C. on venues like Nationals Park, Entertainment and Sports Arena in Congress Heights, and D.C. United’s Audi Field.

A plan to lure the Commanders to a new stadium and entertainment complex in Virginia enjoyed support early last year from Youngkin and leaders of both parties in the General Assembly, who were initially prepared to forfeit about $1 billion in state tax revenue on the project. But the plan fell apart amid concerns about the cost, the impact on traffic and numerous scandals swirling around the team’s then-owner, Daniel Snyder.

A deal with Monumental could help Youngkin turn the page on the defeat he suffered in General Assembly elections last month, dashing prospects for his conservative agenda and a potential last-minute 2024 presidential bid. Saddled with an all-blue state legislature for his remaining two years in office, he will need to focus on broadly popular economic development projects and other bipartisan priorities to get any wins out of the Capitol.

This is not the first time Virginia state officials have sought to bring a professional sports stadium to Potomac Yard, a former rail hub in Alexandria that has for decades been eyed as a prime target for redevelopment. Plans fell through to put a football stadium there in the 1990s amid intense local opposition, giving way to a mix of apartment buildings and big-box stores just south of Reagan National Airport.

The arrival of Amazon’s second headquarters in nearby Arlington County – and a new Potomac Yard Metro station served by the Blue and Yellow lines – has accelerated efforts to further build out the Alexandria neighborhood. Local officials have promoted the area, where Virginia Tech is building a graduate engineering campus, as part of the larger tech district they call “National Landing.”

JBG Smith is also working on that billion-dollar “innovation campus,” which was a key part of the package to win over Amazon and is set to open the first of three buildings next fall. The company has frozen some plans to construct residential buildings on the remainder of the area, once the site of a movie theater.

(Amazon founder Jeff Bezos owns The Washington Post, and the newspaper’s interim CEO, Patty Stonesifer, sits on Amazon’s board.)

Alexandria lawmakers in 2010 voted to approve a blueprint for the northern end of Potomac Yard that envisions carving the neighborhood up into a street grid of smaller blocks, including a mixed-use entertainment district that would bring people to the area near the Metro in the evening. An arena and adjacent complex would probably accelerate redevelopment in the entire area. JBG Smith in 2019 said that it intends to redevelop a strip mall west of Virginia Tech and replace it with 13 new mixed-use buildings, potentially including a hotel.

Any effort to bring a new sports arena to Potomac Yard is likely to draw fierce opposition from some homeowners in nearby low-density neighborhoods like Del Ray, a former bedroom community for rail yard workers now better known for its charming strip of small, independent businesses.

Some residents in Del Ray – where quaint bungalows now sell in the high six figures – have spoken up vociferously against city lawmakers’ votes to add more development in Alexandria in recent years. The Monumental project would almost certainly divide residents between those who see the project as a threat to their city’s small-town sensibility and those who support additional amenities and a boost to the city’s sagging finances.

The only concern at the moment for lawmakers is transportation and transit along Route 1, according to two people. The General Assembly would need to approve funding for traffic-calming measures and other road improvements.

State officials are considering a plan to lower a segment of Route 1 – which connects Potomac Yard with downtown D.C. – from an elevated highway into a flattened “urban boulevard,” and a new arena would be all but certain to add to traffic in an area that already experiences heavy gridlock.