By James Matheson | jmatheson@alextimes.com
The Alexandria Economic Development Partnership released an impact study document on February 16 for the proposed $2 billion Potomac Yard entertainment district and arena project.
HR&A Advisors – a Washington, D.C.-based real estate consulting company – was hired by AEDP in June 2023 to conduct an impact analysis assessing both the economic and fiscal impacts of the project.
The partnership released the 29-page HR&A study with the permission of JBG Smith and Monumental Sports & Entertainment. The document expands upon the seven-page executive summary released in December 2023.
“We’ve never provided a report like this to the public because there is a ton of information in it that is sensitive and proprietary to the company that we’re trying to attract,” Stephanie Landrum, president and CEO of AEDP, said in an interview with the Times.
The document’s release comes as resistance to the arena proposal continues to build. In the past week, State Sen. Adam Ebbin (D-39) and the Virginia AFL-CIO have criticized the proposal, while the Coalition to Stop the Arena at Potomac Yard has opposed the initiative since its announcement.
What’s in the report?
The HR&A document details two potential development scenarios: a “baseline” scenario that reflects development under current market conditions; and an “arena and accelerated development” scenario that includes the proposed arena, entertainment district and an accelerated build out of the site based on demand generated by the entertainment uses.
The baseline development has a timeline of completion from 2030 to 2046. The second scenario includes the arena and entertainment uses to be completed in 2028, along with three phases to be completed in 2029, 2031 and 2036, respectively.
HR&A estimates that 221 arena events and 115 concert venue events will take place in Potomac Yard annually, some occurring on the same day. These numbers surpass those of Capital One Arena, the current home of the Washington Wizards and Capitals.
“In the four years prior to the COVID-19 pandemic, an aging Capital One Arena hosted an average of 216 events annually, including a high of 228 events in 2018,” according to the document, citing a CSL International analysis in 2023. CSL was hired by Monumental to develop a business model.
“A new arena in Potomac Yard would include modern design features that would provide the ability to host NBA and NHL games on the same day, which releases highly sought after event space and days,” the report states. “Moving forward, the arena can shift away from flexibility for the Wizards and Capitals and focus on event maximization, including back-to-back concerts, family shows, combatives and additional sports content.”
The implementation of this plan would be dependent upon Potomac Yard Metro station adjustments to be able to accommodate large numbers of people moving through the station. Gov. Glenn Youngkin proposed $159 million each year for the next two years to contribute to the Washington Metropolitan Area Transit Authority despite WMATA calling for more than $460 million to offset the budget.
A transportation study commissioned by Youngkin’s administration, Monumental Sports and the City of Alexandria found a need for $135 to $215 million in transportation investments.
“We’re going to be working with Monumental to potentially package a Metro pass with your ticket,” Landrum said. “Or the ability for people to park at a garage at Huntington and then hop on the Metro and go two stops to get to the venue.”
HR&A advisors also suggest in the second scenario the new complex will bring nearly 30,000 permanent jobs for the Commonwealth of Virginia, more than 17,000 temporary jobs over a 10 to 15 year period and $7 billion in positive economic impact to the Commonwealth.
Who’s footing the bill?
Each year before City Council decides the budget for the year, they receive a budget first from the city manager, which usually includes inflation-related increases, according to Landrum.
“In order for us to keep doing the exact same thing that we do – operate schools, libraries, police, all of that – it’s going to cost us about 3 to 4% more just based on the way that inflation and operating a business or an organization like a government traditionally happens,” Landrum said.
According to Landrum, the major revenue streams for the City of Alexandria are property tax and business activity. But, she said the ratio of property tax to business is 75% to 25%.
“The opportunity to bring in this headquarters with this arena and performance venue, is that we can move the needle very significantly on commercial revenues [which can] contribute more to the city’s revenue than residential. … If we don’t grow commercial[ly] we either are going to be paying more as residents or the city’s going to have to cut services.”
It is unknown what the city’s cost increase would be when the arena is predicted to begin construction in 2025 and open for service in fall 2028, according to Landrum.
“I don’t think we should be using the credit-worthiness of the state or Alexandria to finance this sort of project,” Andrew Macdonald, founder of the Coalition to Stop the Arena at Potomac Yard, said. “Fundamentally, I think that’s wrong. There’s great concern that if the revenue projections are not met, then taxpayers in Alexandria [and] Virginia will end up footing the bill.”
Why now?
The release of the document follows a lack of support around the project from Alexandria residents and some state legislators who feel the proposal has been rushed.
“The basic concern that everybody has is that none of these are really independent economic studies,” Macdonald said. “We don’t have a full understanding of the basic assumptions that are being made. Therefore, the conclusions are quite suspect.”
Landrum said the reason for this unprecedented release was to provide more transparency to the public, not a result of any outside pressure.
“We weren’t worn down or anything like that. We have wanted to be able to provide it,” Landrum said. “We started from a space where these things just don’t get released. And it’s not just with Alexandria, it’s everywhere.”
According to Landrum, AEDP has been preparing a publishable version of this document for a month. In that month, HR&A and AEDP worked to protect Monumental Sports and JBG Smith’s sensitive information.
“People have commented on the report and it seems to have a lot of information about economic outlook, but not about revenue projections,” Macdonald said. “Still a lot of details that are lacking.”
Macdonald grew up in Alexandria and served as vice mayor in 2006. He said the deal doesn’t fit the fabric of Alexandria from a transportation or quality of life viewpoint. He added that last month, the Coalition to Stop the Arena at Potomac Yard sent a Freedom of Information Act request for all reports and any contacts be- tween Alexandria city officials, elected officials, Monumental Sports and consultants for the last six months.
Ebbin, Senate President Pro Tempore Louise Lucas (D-18) and Alexandria Delegate Elizabeth Bennett-Parker (D-45) have all come out against the bill as it makes its way through the General Assembly, and have said the proposal is underdeveloped.
In an email sent on February 12, Ebbin said in order to have his vote, the bill must: enhance the lives of Alexandrians through commitment to affordable housing, contain a long-term commitment from the Commonwealth to support the growth of the Potomac Yard Metro and include binding agreements to create good-paying jobs.
“I prefer that consideration of this proposal not be rushed because it is clear to me that adequate answers have not yet been provided to fundamental questions,” Ebbin said.
Lawmakers in the Virginia House of Delegates passed their version of the bill to create the Sports and Entertainment Authority – which would purchase the land and build the facilities and will be paid back through lease payments, onsite revenues – which would purchase the land and build the facilities and will be paid back through lease payments, onsite revenues and admissions taxes, according to city officials – by a 59-40 vote on February 13.
The bill stalled in the Senate, as Lucas, chairman of the Senate Finance and Appropriations Committee, and other legislators did not docket the bill.
“Governor’s Arena Bill is not on the Senate Finance and Appropriations docket be- cause his proposal is not ready for prime time,” Lucas posted on X, formerly known as Twitter. “This is what happens when [the] Executive Branch doesn’t operate in good faith and doesn’t have respect for the Legislative Branch.”
What’s the rush?
Any sense of haste coming out of the project may come from the pressure the city was under to announce it back in December 2023 due to a deadline on the Target store’s lease.
AEDP began working on the Potomac Yard entertainment district plans in May 2023, according to Landrum. JBG Smith negotiated a deal with Target stating if the project was announced by the end of 2023, Target would cancel its lease extension that would have kept the store in the Potomac Yard Shopping Center for another 20 years.
“That is why we were hustling and trying to figure out if this project could work,” Landrum said. “Frankly, if we hadn’t figured it out and announced it by the end of the calendar year, the land was no longer going to be available.”
JBG Smith will work with Target to allocate a different site within the entertainment district to build a new store if the project proceeds.
“We were, and are competing against an opportunity for Monumental to remain in their current location and just kind of grow in place,” Landrum said. “So it has been competitive the entire time.”
The analysis done by HR&A used forecasted production from the shopping center that is home to Target. The scenario is based on the plaza remaining the same over the next 20 years due to existing obligations and lease negotiations.
This plan, referred to as “the comparison case,” is what the property owner intends to do if the Potomac Yard deal falls through.
The shopping plaza would remain in its current format and there would be space for residential and additional commercial development of the 1.3 million square feet immediately adjacent to the Metro station.
“So it really is just residential with the existing shopping center or this entertainment district concept,” Landrum said. “Unless we change the [ratio] of business to residential [development], the burden of paying those additional taxes falls on residents. A key strategy for the city and my office has been to bring in more business and commercial activity so that the burden of the revenue is coming more from the business community.”
The most recent opposition to the project comes from the Northern Virginia Chapter of the AFL-CIO, which announced its objection to the arena and entertainment district Tuesday.
“Construction and hospitality jobs in the campus’ privately-owned entertainment district will be low-wage jobs because the developer would not accept any labor agreements,” Virginia Diamond, president of the Northern Virginia AFL-CIO, said in a press release. “Taxpayers should not make a massive investment in a project that is only going to create more low-wage jobs for local workers.”
Macdonald expressed dissatisfaction with the process being followed.
“I’m interested in why the city is proceeding so quickly without public support and consent. It’s just acting as if it’s a done deal. Why did they think this is the right way to go about doing things?” Macdonald asked.