Buried in a long Washington Post article today about local opinions in Alexandria, Virginia on plans for a new $2 billion development complex including an arena for the Washington Capitals and Wizards — the opinions, you will be shocked to learn, differ — is this section about the project’s finances:
City leaders have emphasized that the arena and surrounding development included in the deal will more than break even. For every dollar being borrowed to build the stadium and which would need to be paid back, they say, it would generate at least another dollar to increase city services.
“The asset will generate revenue every year, and we will pocket that. The asset will pay off our investment,” [Stephanie Landrum, president and chief executive of the Alexandria Economic Development Partnership, the city’s public-private development agency] said. The city would separately put in $106 million contribution to build the parking facility and the concert hall, she acknowledged, but revenue on tickets would eventually make up that cost, too.
Oh, will it now? How much money the arena complex is expected to generate isn’t in the project summary released last week: That seven-page document weirdly includes methodology for calculating the fiscal impact — or rather the list of tax revenue streams that it looked at, not actually how those were projected — but then only includes numbers for economic impact, which is how much money changes hands between anybody thanks to the project, not how much new cash Alexandria and Virginia would actually have available to spend. And since the projected public costs are around $1.5 billion, it’d require a ginormous stream of new tax money to break even.
What about AEDP’s own web page on the project? Nope, that just says this:
Roughly 2.5 times the economic output of what would otherwise be built based on current development plans*
Which is back to “economic output,” which isn’t actual city or state revenue. And that asterisk just leads back to the same project summary as above, so this fails the show-your-math Snel test, boo Washington Post.
Does Landrum mean anything at all real by her “asset will pay off our investment” statement, then? If we go back to her quotes in the previous Post article analyzing a JPMorgan report on the project finances, we see that she said then, “This money doesn’t exist unless we do the projects”; reading heavily between the lines, this suggests that she’s assuming that any tax revenue collected at the new development would be 100% new, which is the assumption behind TIFs and is generally not true. (It’s also not clear whether Landrum’s group has included the additional costs of services to the new development, which can be substantial.)
The $1.5 billion public cost and how it would be paid off is far from the only objection being raised by Alexandria residents — that would probably be the impact of increased traffic, because America — but it is part of the mix, as befits what would potentially be the biggest sports subsidy in history. And part of the job of informing the public about the finances of a project is actually, you know, informing the public about it, not just reprinting whatever a local advocate claims. So, seriously, boo Washington Post, you can do a lot better than this.
Can the Washington Post (owned by Jeff Bezos) do better? How much money did Alexandria give to Amazon for HQ2? This could be a new back scratch for a back scratch previously provided.
Roughly $500M, I think? (In the usual tax breaks and incentives and whatnot.)
It wouldn’t really be anything new if a media outlet, no matter who owns them, touted without analysis, the benefits of public money being used for sportsball or jobs or some nonsense.
I just…don’t know when (or if) this all ends? Like when does the man behind the curtain get revealed as just a guy? Or is the fact that we seem to be producing credulous journalists (and bloggers) at a much faster rate than watchdogs mean it will actually never end?
Potomac Yard (a former rail yard) is a brownfield site located on filled in wetlands, a site that still contains active wetlands as it is adjacent to a tidal section of the Potomac River. Potomac Yard is already flood-prone: https://www.axios.com/2023/12/19/virginia-stadium-dc-teams-coastal-flood-threat and https://www.alexandriava.gov/sites/default/files/2022-12/5155190033F%20%281%29.pdf.
Flooding problems are sure to intensify as sea level rises: https://potomacclimatereport.org/part-two/. Moreover, the federal government has identified the Potomac Yard area as part of a flood “inundation zone”: https://www.weather.gov/lwx/PotomacInundationMaps (see Washington Channel at DC Southwest Waterfront (map WASD2).
The grand opening of the adjacent Potomac Yard Metro Station (which will require substantial improvements to serve arena crowds, per Metro’s general manager) was significantly delayed due to instability of the soil beneath: https://www.alxnow.com/2022/09/30/breaking-potomac-yard-metro-station-opening-pushed-back-to-2023/ and https://alextimes.com/2023/04/city-readies-for-metro-ribbon-cutting-environmentalists-seek-post-remediation-soil-reports-lament-wetlands-destruction/.
In addition to the poor-quality economic impact study and its failure to include added costs of government services (and as-yet-to-be-studied transportation improvements), as noted in this article, there are costs associated with flood risk, flood damage, soil instability and disposal of potentially hazardous fill material that may be excavated (not to mention the huge increase in impervious surfaces added to a flood-prone area).
Will the $1.5 billion in public subsidies being proposed cover all costs associated with the risk of building an expensive arena on what is essentially swampland in Virginia? “According to Jeremy Porter, head of climate change implications for First Street, the stadium’s surrounding area ‘has tremendous risk.\'”
How much of this risk is being transferred from a billionaire onto the public? Would he still build the arena on this vulnerable site if no public dollars were provided? Does the property’s owner/developer, JBG Smith, have an obligation to conduct and disclosure geotechnical studies of the site’s and area’s flood risk and soil instability, since this is a “public-private partnership”?
Should JBG Smith and Leonsis (the arena’s owner) be required to guarantee that construction of the arena, and especially the excavation and construction of the underground garage, won’t increase flood risk and/or geologic instability on this site and/or on nearby sites—including the Potomac Yard Metro Station site?
Interesting stuff Suzanne. I really hope the teams stay at their current site in a renovated Capital One Arena. Are the politicians that decide whether or not to help fund this joke of a sports complex aware of everything and ready to make it a part of their pitch on whether to say yay or nay on this thing?
Unfortunately, politicians aren’t all that detail-oriented. There is a lot of political juice coming from U.S. Sen. Mark Warner, a pal of Leonsis and Gov. Youngkin. All of them wealthy men who run in the same social circles, as I understand it. On the flip side is former Lt. Gov. Bill Bolling (R) who penned thinly veiled criticism of this $2 billion bonanza to benefit billionaire Leonsis: https://bluevirginia.us/2023/12/former-va-lt-gov-bill-bolling-r-we-were-initially-told-proposed-new-wizards-caps-arena-would-not-involve-the-use-of-any-direct-public-taxpayer-funds-however-that-does-not-appear-to-be-t.
And then there is VA Senate President Pro Tempore L. Louise Lucas’s (D) reaction: https://twitter.com/SenLouiseLucas/status/1737311529949692269?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1737311529949692269%7Ctwgr%5E171caa7f6a16ff1b938ec98381ee591ba9b836e8%7Ctwcon%5Es1_&ref_url=
https%3A%2F%2Fwww.fox5dc.com%2Fnews%2Fva-lawmakers-raise-red-flag-on-spending-state-money-on-new-wizards-capitals-arena
Generally speaking, it is up to the public to present the inconvenient information to elected officials. You cannot count on elected officials receptiveness, but at least they cannot henceforth claim not to have known the truth.
And if this were to happen in VA, how long before we hear the calls of “we need DC teams to play in DC (at another brand new arena, of course)? I’d guess less than 15 years.