Senior Democratic lawmakers introduced legislation on Friday to create an authority to finance a $2 billion sports and entertainment district that Gov. Glenn Youngkin proposed in Alexandria for the new home of the Washington Wizards of the NBA and Washington Capitals of the NHL.
Senate Majority Leader Scott Surovell, D-Fairfax, and House Appropriations Chairman Luke Torian, D-Prince William, sponsored the legislation despite lingering concerns among lawmakers about the project’s financing and the need for major investments in the Washington Metropolitan Area Transit Authority and surrounding transportation network.
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If approved, the bill will create the Virginia Sports and Entertainment Authority, a body that would issue bonds to pay for the development’s construction. The bill’s introduction is a preliminary step toward greenlighting the massive project.
Youngkin said the arena and its surrounding development would create $12 billion of economic development and 30,000 jobs in the state.
“I am encouraged by the thoughtful and productive conversations I am having with legislators in the General Assembly,” the governor said in a statement.
The companion bills mirror language that Youngkin included in his proposed revised budget for the current fiscal year, but Torian and other Democrats said they wanted the General Assembly to debate the proposed project in legislation, not just the so-called “caboose” budget for the year that began on July 1.
“I don’t favor doing this in the caboose budget process,” said Sen. Adam Ebbin, D-Alexandria, whose district includes the proposed 70-acre site at Potomac Yard near the Potomac River. “This is a serious enough topic that it deserves the forum that a bill would bring to it.”
“I have a lot of questions,” Ebbin said this week. “I don’t have a lot of answers yet.”
Surovell has hesitations, too. His sponsorship of the bill does not mean he approves it in its current form, he said Friday. In addition to transportation, legislators have concerns over the state backing some of the bonds, whether workers at the development will be fairly compensated and the accuracy of the financial projections.
Surovell sponsored the bill because Youngkin has agreed to help address Metro’s funding problem, “which is a critical piece of Northern Virginia and the overall Virginia economy,” he said, and because the project represents a long-term investment for the entire state.
He has ideas on how to improve the bill but declined to share them, saying it would be premature.
Transportation questions
Ebbin’s biggest questions focus on the transportation improvements that would be necessary to handle crowds at the proposed 20,000-seat arena, which the Youngkin administration expects to host hundreds of events, along with an adjacent performing arts venue and pedestrian plaza.
Metro built a new station, Potomac Yard, adjacent to where the arena would go. But Alexandria Mayor Justin Wilson said the current station is not equipped to handle so many visitors and will require improvements. And the arena will not have a significant number of parking spaces.
On Friday, Youngkin said he and legislators share a mutual commitment to solving WMATA’s short-term funding needs.
In its first phase, to be completed by 2029, the project would also include a practice facility for the Wizards, hotels and a conference center, and an office building for the headquarters of Monumental Sports & Entertainment, the teams’ owner. The company plans to move with its regional sports network from their current quarters in downtown Washington and share the new building with the adjacent Virginia Tech Innovation Campus. Subsequent development phases would include offices, residences and retail businesses.
The administration has outlined up to $200 million in improvements to expand capacity at the new Potomac Yard Metro Station and highway intersections on Route 1 and Interstate 395.
But Northern Virginia legislators are not satisfied by the plans they have seen to address concerns already raised by opponents of the project in Alexandria.
“I am disappointed that they didn’t have a transportation plan in mind when they announced the project,” Ebbin said.
But the project provides Democrats with leverage to secure an estimated $100 million in state funding in each of the next two years to help the Washington Metro system close a projected $750 million gap in its operating budget.
“That’s a prerequisite for anything to happen,” Ebbin said.
Torian said it is still up for discussion whether the tax revenue from the project will be spent on transportation. It is unclear how much work needs to be done so that up to 20,000 spectators can come and go for games and events.
“The bill was filed today,” Torian said Friday. “The real discussion begins next week.”
Andrew Macdonald, former vice mayor of Alexandria, has been rallying opposition as a member of the Coalition to Stop the Arena at Potomac Yard. He called the site “a terrible location for a stadium of any type.”
“The transportation infrastructure is inadequate and no amount of Metro funding is going to change that picture,” Macdonald said in a letter to state lawmakers last week.
The proposed project also gives legislators from Hampton Roads and other parts of the state leverage to get the governor’s approval of their priorities. Senate Finance Chair Louise Lucas, D-Portsmouth, has already made clear publicly that she will demand lower tolls at crossings of the Elizabeth River between Portsmouth and Norfolk.
“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 dumbass written on my forehead,” Lucas posted last month on X, formerly known as Twitter.
Torian suggested those critical of the project wait and see how things unfold. The bill will be given its due diligence, he said, and amendments will be made where necessary.
Cost of bonds: $2.8 billion
Other questions focus on the project’s financing, which would require Virginia to backstop $577 million of the $2 billion in moral obligation bonds that the proposed authority would issue to finance the project, which a legislative oversight committee approved unanimously last month.
The authority would then collect revenues from various sources to pay off the bonds and debt service, totaling $2.8 billion over 40 years. Most of the money would come from taxes on tickets, a 2,500-space underground parking garage, naming rights on everything except the arena itself and lease payments by the teams. Monumental Sports is also contributing $403 million to finance the project.
The only up-front public subsidies come from Alexandria, which would contribute $56 million toward construction of the 6,000-seat performing arts venue and $50 million for the parking garage.
The state and city would also pledge future incremental tax revenues generated by the arena and other uses in Phase 1 of the project, which would cover 25 acres. The administration estimates that the state would generate more than $1.3 billion in new income and sales taxes from the first phase of the project, compared to what would come from current and planned uses on the property now. Similarly, the city would generate about $1.6 billion in future sales, property and hotel taxes.
But repayment of the bonds would require only a portion of the revenues from the proposed use of “tax increment financing,” which Virginia previously has not applied to income taxes. The administration estimates that future state taxes would represent 12% of the bonds and 11% of the future local taxes.
Youngkin said the payoff would be huge for both Virginia and Alexandria. He estimates the net economic impact of the project at $12 billion over 40 years, including $4.6 billion in direct cash flows to the state after debt service — $1.7 billion in the first phase alone. The administration estimates direct cash flows to the city of $4.2 billion after all three phases of development. It estimates spinoff economic benefits of $2.4 billion for the state and $700 million for the city.
The proposed legislation would create the nine-member authority governing board, with the governor appointing six and the City Council naming three. It would outline the powers and responsibilities of the board, as well as its entitlement to the various revenues to repay the bonds that it would issue.
It would give the authority the power to hire contractors, enter contracts, buy property and borrow money. Unlike other state government agencies, authorities can bypass the slow and tedious processes involved with government spending.