Leaders offer postmortem on dead arena proposal

Leaders offer postmortem on dead arena proposal
The arena deal was proposed with fanfare, but ultimately fell apart. (Rendering/JBG Smith)

By Caitlyn Meisner | cmeisner@alextimes.com

It’s official: The proposed Potomac Yard arena and entertainment district is dead. The Washington Wizards and Washington Capitals are now slated to remain in Washington, D.C., according to a flurry of press releases and conferences on March 27.

This leaves the Potomac Yard area next to the Virginia Tech Innovation Campus without a solid plan and secures Target’s 20-year lease with JBG Smith on the adjacent property.

This announcement comes just three months after the deal was announced to much fanfare by Virginia Gov. Glenn Youngkin and Wizards and Capitals owner Ted Leonsis on Dec. 13, 2023, at the Potomac Yard Metro station. Now, Monumental Sports & Entertainment will work with the District to create a “transformative renovation and modernization” of Capital One Arena with $515 million in cash.

The first to announce was the City of Alexandria around 4 p.m. through a five-paragraph news release and a video message from Mayor Justin Wilson that was just over three minutes. The statement expressed disappointment in the process above all else.

“We negotiated a framework for this opportunity in good faith and participated in the process in Richmond in a way that preserved our integrity. We trusted this process and are disappointed in what occurred between the Governor and General Assembly,” the statement reads. “We engaged in substantial community engagement over the past months that informed our negotiations and would have made the proposal even better for our community.”

Wilson, in an interview with the Times, said in the earlier part of last week, many conversations were had and it became apparent the deal wasn’t going to move forward.

“We had prepared a statement, so we knew that [the deal] was headed in that direction,” Wilson said. “We were exploring some last-ditch alternatives that could perhaps preserve some consideration of this proposal, but we suspected those were a very, very unlikely scenario.”

Wilson emphasized that the deal was not officially dead yet when preparations were being made. According to him, there was likely about a week or so where the city was working to figure out how it would close out the arena negotiations process.

The aftermath

Finger-pointing was the name of the game following the announcement.

JBG Smith was quick to toss blame onto the Virginia General Assembly, specifically the Senate, where negotiations had stalled in the Finance and Appropriations Committee with Democratic Sen. Louise Lucas from Portsmouth refusing to let the bill go to the Senate floor.

“Despite our best efforts, this project was unable to get a fair hearing on its merits with the Virginia Senate,” CEO Matt Kelly said in the JBG Smith statement. “It is now clear that our efforts may have been complicated and ultimately blocked, in part, by special interests seeking to move the Monumental arena to Tysons Corner and to combine it with a casino.”

The Washington Post reported a group – which consisted of Christopher Clemente, CEO of Comstock, a developer; Fairfax political consultant Ben Tribbett and Majority Leader Sen. Scott Surovell of Fairfax – formed to shift the arena to Tysons in combination with a casino. According to the Post, MSE and Youngkin shot down the proposal.

“While we had made great strides in advancing the project’s transportation plan, overall design and financing structure, the opportunity was derailed largely due to partisan politics and, most troubling, the influence of special interests and potential pay-to-play influences within the Virginia legislature,” Kelly also said.

Youngkin also released a statement, placing much of the blame on the General Assembly.

“This transformational project would have driven investment to every corner of the Commonwealth. This should have been our deal and our opportunity, all the General Assembly had to do was say: ‘thank you, Monumental, for wanting to come to Virginia and create $12 billion of economic investment, let’s work it out,’” Youngkin’s statement reads. “But no, personal and political agendas drove away a deal with no upfront general fund money and no tax increases, that created tens of thousands of new jobs and billions in revenue for Virginia.

Stephanie Landrum, Alexandria Economic Development Partnership CEO, placed blame on the General Assembly as well in an interview with the Times.

“I mean, their process failed; it’s broken,” Landrum said. “It did not produce a project for our consideration at the local level. … By the middle of [the week of March 18], we had no indication that anything was going to come from that process, so we could not continue to spend time and move forward knowing that nothing was going to come to us.”

Landrum said when the city entered into the project, there was a shared understanding of the process moving forward. But, some actors deviated.

“It’s clear to me that there were many, many layers of strategy, politics [and] interests that impacted the Richmond process,” Landrum said. “We’re all agreeing to the process. And so when that process breaks at any point, it’s frustrating and it’s disappointing.”

Wilson said the deal coming to an end was an accumulation of things and did not cite one particular reason.

“As long as we felt like there was still an opportunity to do a good economic tool that align[ed] with the values of our community, we wanted to keep that discussion alive,” Wilson said. “The window for that kind of deal was closing rapidly and so we started preparing for our exit.”

Former Vice Mayor Andrew Macdonald, leader of the Coalition to Stop the Arena at Potomac Yard, said, in an interview with the Times, that he was happy to hear that negotiations had ended and hoped the Coalition’s efforts contributed to its demise.

“I do think we played a significant role in bolstering [Sen. Louise Lucas’] efforts. Would she have voted against it without us being involved? We’ll never know,” Macdonald said. “But, I think all the work that we did to expose weaknesses in the project … certainly helped her and contributed to the victory.”

The new deal

Not all of the major players lost in this deal; Leonsis, around 6 p.m. on March 27, held a scheduled press conference with District Mayor Muriel Bowser and Council Chairman Phil Mendelson, announcing their plan – pending District City Council approval – for renovations of the existing arena.

“We are going to have time to talk about our experience in Virginia, but that is not today,” Leonsis said in his statement following the evening press conference. “… We got to this place because we kept an honest dialogue with the Mayor and her staff, and we both took the high road as we didn’t know how things would end. This is more than an investment from the city – it’s a true partnership demonstrated by all of these investments which the city has committed to for our fans to have an exceptional gameday experience.”

The evening before the announcement in December 2023 that Monumental and the teams were moving to Virginia, Bowser unveiled a plan to support renovations of Capital One and promised $500 million. The District also pledged to provide $15 million toward improvements of the alley connecting Gallery Place to the arena.

Monumental was not going to abandon Capital One altogether; it was going to move the Washington Mystics, the area’s Women’s National Basketball Association team, to the arena as their full-time facility. The team currently plays in the Congress Heights neighborhood of the District.

Landrum said because of this transition, ongoing talks between Monumental and the District were not unusual.

“We knew that they were talking to the leadership in Washington, D.C. the entire time because they were still negotiating … their Capital One space and what would happen there,” Landrum said.

Many more concessions were made by Bowser and the District, according to the March 27 news release, including an additional 200,000 square feet of programming space, 17 dedicated officers before and after game time, a new Wizards practice facility, maintenance and landscaping, expanding public right of ways and dedicated rideshare/drop off zones, just to name a few.

What’s next for Alexandria

Now that the arena and entertainment district are no longer coming to Potomac Yard, public and elected officials are already discussing possible solutions to catalyze economic growth.

That growth is needed because Alexandria has grown increasingly dependent on residential property taxes in recent years to fund the city’s budget. As the fiscal year 2025 budget works its way through the approval process, the city’s tax base will certainly be a hot topic due to the increasing tax burden placed on residential homeowners by increased property assessments and a possible four cent hike in the property tax rate.

Wilson said the loss of the arena project comes with consequences for the community. Now that Target’s lease remains for another 20 years, there is limited acreage on which to grow the commercial tax base.

“I think we all need to understand that certainly limits us from the economic perspective and … the density [of] North Potomac Yard is part of how we are paying off the debt that was encumbered to construct the Metro station,” Wilson noted. “As that property does not develop over the next couple of decades, that has consequences for how the economics of the city and the economics of that property, or say, that project, are ultimately shaped.”

Landrum echoed this, warning Alexandrians from finding solutions in constructing office buildings or complexes. With the arena proposal, almost 70 acres of land was available; now, only 12 acres can be utilized.

“The reason that I think we as economic developers, and our City Council members, wanted to bring this forward is because it is one of very few viable commercial uses in our current market,” Landrum said. “And with it now not on the table, we can’t just go back to the original plan, which was offices. There is no demand.”

And, according to Landrum, the most viable markets right now are higher education, medical and entertainment; two of those are already, according to her, “well-represented” in the area, leaving only entertainment to fill that gap.

“We don’t have a pipeline of people in those spaces just waiting for this deal to fall apart to step up,” Landrum admitted. “But we will continue to talk to people and to try to see what sort of demand we can create.”

She also said the land cannot be planned for anything other than dense development as required by the North Potomac Yard Small Area Plan from 2017.

While Wilson, Landrum and others lamented the withdrawal of the arena proposal on March 27, Vice Mayor Amy Jackson had already been calling for a different vision for the site.

“[The arena project] is not the right move for the city, and we need a new plan for Potomac Yard that maintains our vision of innovation,” Jackson said in a statement issued March 18 in which she announced her opposition to the arena proposal. “The Potomac Yard location is a huge opportunity for our city that needs a new strategy.”

Jackson suggested something similar to Fairfax County’s Mosaic District – a popular shopping center with dozens of retail stores, restaurants, services and activities for people of all ages – would be a good long-term plan for the site.