Proposed Arena Prompts Sports Authority, Transportation Discussions

ALEXANDRIA, VA — State lawmakers representing Alexandria and local officials fielded questions from residents and shared what’s next for the Potomac Yard arena proposal during a Del Ray Citizens Association town hall Monday. The town hall came as major discussions on a sports authority and release of a transportation study are coming up.

An estimated 900 residents signed up to sign the virtual town hall through Zoom, but many were not able to join at the beginning due to technical issues. The citizens association continued the meeting after providing a new meeting link and posted a meeting recording for residents who missed the meeting.

The town hall centered around the proposed $2 billion entertainment district with an arena for the Washington Capitals and Wizards in Alexandria’s Potomac Yard. Along with an arena, the district would have corporate headquarters for Monumental Sports & Entertainment, a Monumental Sports Network media studio, Wizards practice facility, performing arts venue and expanded e-sports facility.

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JBG Smith’s mixed-use development in Potomac yard is already planned to have new retail, residential, restaurants, hotels, conference and community gathering space uses. Virginia Tech’s Innovation Campus is also under construction in Potomac Yard, and a Metro station opened last year near the proposed entertainment district.

The massive project would require various approvals from the City of Alexandria, as well as Virginia General Assembly approval for a Virginia Sports and Entertainment Authority in its 2024 session. The authority would own the land and buildings and would enter a 40-year lease with Monumental Sports & Entertainment.

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The 40-year lease term includes five years anticipated for construction. If the project moves forward, Monumental Sports & Entertainment said the Capitals and Wizards would continue playing at Capital One Arena in Washington, D.C., through 2027. Construction on the arena project could begin in 2025 with an expected opening in 2028.

What’s Next for the Proposal

A key consideration for the project will happen when the Virginia General Assembly’s 2024 session begins Wednesday and continues through March 9. Del. Elizabeth Bennett-Parker, who represents much of Alexandria in the 45th House District, said a bill to create the Virginia Sports and Entertainment Authority could be introduced in the Virginia House and Senate.

A crucial date is Feb. 13, when bills from one chamber can pass to the other chamber for a vote. Bennett-Parker said the bills would first go to a committee when introduced. If amendments are introduced, the bill could go to a conference committee to work out differences between the House and Senate versions.

“Normally, large issues are decided through their own bills, an individual piece of legislation,” said state Sen. Adam Ebbin, who represents Alexandria. “However, the governor has included his proposal for the sports and entertainment authority in the budget, as well.”

Ebbin believes it is unlikely that the sports authority issue would happen through the budget and hopes it will be discussed through individual legislation.

So far, Ebbin has observed a mixed reaction to the arena proposal from legislators in Richmond.

“There have been some legislators who have announced their opposition, but there are others who are more supportive,” said Ebbin. “I think most legislators have taken more of a wait and see posture. The legislators are going to evaluate it through their own lens, or for me, the local lens is really, really important and foremost. But people want to see a net benefit to the state, also, and there are others who are concerned as we are about transportation mitigation.”

Bennett-Parker, who lives near where the entertainment district would be located, is scrutinizing the proposal.

“If the vote were held today, I would vote no. But I will be continuing to ask questions that I have and their community has and I will continue to evaluate the information that we received,” said Bennett-Parker. “It is my job to fight for the residents of this community and fight for the taxpayers to make sure this is a net positive for Alexandria. I’m going to work to make sure that if this deal moves forward, it would positively benefit our community and its residents and it’s good for workers and local businesses.”

Stephanie Landrum, president and CEO of the Alexandria Economic Development Authority, said there are two key decision points on the local level. First would be entering the deal with Monumental Sports & Entertainment, but that wouldn’t be possible without action from the Virginia General Assembly on the sports authority.

The second part on the local level would be the city’s entitlement process to build the components of the entertainment district. That process could happen over several months in 2024, according to Landrum. She also noted that the illustrations of the district and buildings are not final designs and would be subject to the city review process.

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The city has announced community engagement events on the entertainment district proposal starting in January.

Economics of the Proposal

To partially fund the district, the sports authority would issue bonds with repayment from Monumental Sports & Entertainment’s rent payments, arena parking revenues, entertainment district naming rights, and incremental taxes from the arena and mixed-use development. Along with the bonds, funding for the project would come from $403 million in contributions from Monumental Sports & Entertainment, $56 million from the city for the construction of a performing arts venue, and $50 million toward underground parking development from the city. The city government says no existing taxes or proposed tax increases would support the project.

Landrum explained there would be two types of bonds: one backed by the lease payments without variability in the amount and bonds backed by tax revenues affected by things like the amount of tickets sold. But she said the deal was structured to provide two times the amount of required debt coverage.

“So that gives us a cushion, that our projections could be as much as 50 percent off, or we could do 50 percent worse than we had planned and still be totally covered,” said Landrum. “What that means is that every year, every average year that we operate this facility, we the authority will pay the bond debt, and then we will have a balance left each year. That balance will be divided between the city and the commonwealth.”

The city and commonwealth of Virginia would be “backstopping” about one-third of the debt and would be required to split the cost to cover a shortfall if one ever occurred.

“There are some protections of sharing in shortfalls that happen over multiple years, and that is, that’s something that we’re still negotiating with the team and with the company,” said Landrum. “There are protections for both the commonwealth and the city in terms of non-relocation agreements. The company cannot relocate either one of the franchises for the entire term, so that we wouldn’t find ourselves in a situation where there was no revenue being generated.”

Landrum also addressed resident criticism about limited information shared with the public from an economic impact analysis. The analysis compares the economic and fiscal impacts of two scenarios: baseline development with residential, retail, and office space and no immediate development of the Potomac Yard Shopping Center, and an entertainment district scenario with a part of Potomac Yard Shopping Center development. She said additional information could be shared as soon as this week. The state is also conducting its own economic study.

“Our goal is to provide anything that’s not proprietary, and that will help the community understand the benefits of this deal or the workings of this deal,” said Landrum.

Landrum noted that no “in between” scenario was provided, as the arena development would be an incentive for a faster redevelopment of a portion of Potomac Yard Shopping Center.

“I understand how people think, looking at this property, you think that there should be an in between, but the reality is that the market has changed in a post-pandemic world, and there isn’t demand for office space and other commercial uses like hotels without a catalyst driver,” said Landrum. “A significant difference in the baseline scenario versus this scenario, is the ability to achieve new development and the ability to achieve 20 years faster than the market would support.”

Transportation Considerations

The state is also conducting a large transportation study expected to be released in January, “presumably before votes would occur,” according to Ebbin. Landrum said $200 million in potential projects “that would be needed to help move people through this district” have been floated. Along with plans for a 2,500 underground parking garage, suggested improvements include upgrades to I-395 at the Glebe Road and Glebe Road intersections, additional lanes on Route 1, Potomac Yard Metro station capacity improvements, neighborhood parking protections, a study on a potential Virginia Railway Express station in Potomac Yard, bike connections and a water taxi service near Potomac Yard.

“One of the takeaways that we’re that we want to focus on is that this site was always planned for a significant amount of people coming to it. We talked about 8 to 9 million square feet of space, a lot of it being office, that’s what the vision was,” said Landrum. “That was 1,000 people coming to work every day in an office building and leaving from work, so people moving in and out of this district. What we’re now talking about is a similar amount of people coming and going but at a different time, different peak times. And so that is going to require a different set of transportation and transit investments.”

“Transportation is probably the number one quality of life concern that I’ve heard about from the residents who have written to me, and it’ll be really key to me in making my final decision,” added Ebbin. “The bottom line is, you know, we have to ask ourselves with this project, ‘can traffic be managed or even improved? Or would it become unacceptable?’ So this study is really important, and I’ll be looking at it closely.”

Bennett-Parker said providing funding for Metro also remains a question.

“I think there’s a lot of attention and focus being paid on this, and we’ve gotten some very unique niche issues, and then obviously the big ones like transportation and traffic and quality of life that we’ve discussed,” said Bennett-Parker. “I think state funding for Metro is a big question for me. Obviously, we know that Metro is not the only way that people will get to this site, if it were to happen, but it is on the Potomac Yard Metro site. This project doesn’t work without the Metro and so wanting to see a commitment from the state for how that will be funded, including the improvements that are necessary to make to the Potomac Yard Metro.”

Ebbin said state legislators are receiving public feedback through email — senatorebbin@senate.virginia.gov and DelEBennett-Parker@house.virginia.gov. Ebbin is also doing a survey by mail to about 15,000 homes, mostly in the City of Alexandria before mid-January.

A town hall with state legislators from Alexandria and one from Arlington will be held at 1 p.m. on Sunday, Jan. 21 at Alexandria City High School. The town hall will focus on different topics, including the arena.

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