Caps, Wizards complex in Virginia could get largest arena subsidy ever

Caps, Wizards complex in Virginia could get largest arena subsidy ever

Alex caruso

A Northern Virginia sports arena that would move the Washington Capitals and Wizards out of downtown D.C. would receive the largest-ever public subsidy for a project of its kind, an estimated $1.35 billion in state and local funds, if it goes forward.

To build the $2.2 billion project, Virginia would need to create a sports and entertainment authority that would issue two bond offerings and would need to contribute an additional $300 million from existing city and state funds, according to a 37-page study produced by investment bank JPMorgan for the state, a copy of which was obtained by The Washington Post.

The plan would require significant investment from the teams’ ownership group, Monumental Sports & Entertainment, which would provide a total of $403 million up front and sign a 40-year lease with rent beginning at $29.5 million annually and rising to $34.5 million, according to the study. That would make the company’s total contribution $819 million.

The net cost to taxpayers would ultimately reach an estimated $1.35 billion, according to the study. That includes $1.15 billion directly for the project — more than any comparable facility on record, according to J.C. Bradbury, a Kennesaw State economics professor who studies sports facilities and reviewed the study for The Post.

Borrowing for the project would come from two bond sales by the sports authority, according to the study and Virginia officials. One bond issuance of approximately $1.05 billion would be paid back with tax receipts from the project, parking revenue and the proceeds from the eventual sale of naming rights for the campus. The other bonds, for $416 million, would be repaid by lease payments from the team.

Bradbury, who has calculated the public cost of 220 venues going back to 1909, said Virginia’s subsidy could top even much larger venues such as Olympic Stadium in Montreal and the planned Tennessee Titans stadium, both of which received about $1.2 billion in 2020 dollars. Earlier this week, Oklahoma City residents approved at least $850 million of public funds for a new NBA arena, which will be a record subsidy for a basketball facility.

“There’s just a lot of public money here,” Bradbury said.

Virginia Gov. Glenn Youngkin (R) and the owner of the Capitals and Wizards announced on Dec. 13 a nonbinding agreement to move the sports teams to Virginia. (Video: AP)

Gov. Glenn Youngkin (R) in an interview Friday said that the funds Virginia was offering for the project largely came from revenue that would not exist without its being built.

He said the arrangement was “pretty darn unique” because it would collect most of the needed funds from within the project’s boundaries, rather than by levying additional taxes across the commonwealth.

“This is the quintessential public-private partnership that takes revenues that otherwise would not exist and uses those as the underpinning to support the project,” Youngkin said.

For its investment, Virginia would get more than just an arena. The project would also include a concert hall, underground parking, a conference center, a Wizards practice facility and Monumental’s corporate offices and media studio, all built behind an existing Target-anchored shopping plaza and next to the new Potomac Yard Metro station. Additio…. to be continued
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