Virginia Lawmakers Pass Budget Without Funding for Alexandria Arena

The proposal calls for $1.5B in taxpayer funds

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The proposed $2 billion arena in Alexandria, Va., that would bring the Washington Capitals and Wizards to the state has hit a huge snag.

The Virginia General Assembly passed the state’s $188 billion budget for fiscal years 2024-26 Saturday without the funding Gov. Glenn Youngkin needed to get the deal done. 

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Youngkin and Monumental Sports owner Ted Leonsis had agreed to a handshake deal that would bring the two sports teams to Virginia back in December, but needed approval from the General Assembly to fund it through $1.5 billion in taxpayer funds. 

Reports that the funding for the arena deal was removed from the budget started to percolate late last week, during final budget negotiations. While some Democratic lawmakers were opposed to the arena deal itself, others were ready to negotiate with Youngkin if he agreed to include Democratic priorities, such as  language allowing recreational retail sales of marijuana, increased highway tolls and a rise in minimum wage. 

Youngkin called the action of removing the arena from the budget “a colossal mistake” at a news conference this weekend. But the governor would not compromise, putting the future of the proposed JBG Smith (JBGS)-developed arena project in question.

“This is a process that requires compromise, and so far the governor has made very little indication that he’s willing to compromise,” Senate Majority Leader Scott A. Surovell said in a statement.

A key player blocking the move was Sen. Louise Lucas, who through her position as chair of the Senate Finance and Appropriations Committee had the power to kill the deal, which she said was a gift to billionaires. “A better deal would be if they paid for it themselves,” Lucas told the Washington Post referring to Monumental, which owns both sports teams. 

Monumental released a statement that it was “disappointed but 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.” 

While Monumental and the City of Alexandria were expected to contribute some of the funding, according to the plan announced in December, Youngkin said that $1.5 billion would be financed through bonds from a new governmental entity that lawmakers would create. These would be repaid through revenue streams such as naming rights, parking fees and taxes from tickets and other things related to the arena.

While the removal from the budget certainly puts a damper on the project, Youngkin has some other actions he can take. For one, he could pursue an amendment to restore it, though there’s little belief that another time through would make a difference. Another option is for the governor to call a special session, starting over with an entirely new bill. 

The proposed development would be built on a 12-acre site between the recently delivered Potomac Yard Metro station and the first phase of  Virginia Tech’s Innovation Center.

Along with the arena, the 9 million-square-foot complex would include a global corporate headquarters for Monumental Sports & Entertainment, a Monumental Sports Network media studio, the Wizards’ practice facility, a performing arts venue, and an expanded e-sports facility.

The development was expected to generate a combined $12 billion in economic impact for Alexandria and create approximately 30,000 jobs over the next several decades, according to Youngkin.

With Washington, D.C. Mayor Muriel Bowser not giving up hope that the NBA and NHL teams will stay at Capital One Arena, offering $500 million in financing for upgrades distributed over a three-year period, starting in 2024, the future of both teams will be an exciting battle to watch. 

Keith Loria can be reached at Kloria@commercialobserver.com.