Financial framework for arena complex in Northern Virginia revealed

Bonds

A proposed deal for a massive mixed-used arena project in Alexandria, Virginia, would be mostly financed through $1.05 billion in project revenue bonds issued by the newly named Virginia Stadium Authority.

Details and hardening local opposition are emerging regarding the development of a 12-acre site in Potomac Yard, a former rail hub that straddles Arlington County and the City of Alexandria. 

When completed the complex would serve as the new home of the National Hockey League’s Washington Capitals, and the NBA’s Washington Wizards who currently play at D.C.’s Capital One Arena, located in the Chinatown neighborhood.

Alexandria Mayor Justin Wilson tried to allay fears about where the funding for the project was coming from. “I have heard quite a bit over the last twenty-four hours about concerns that we are providing a billionaire with taxpayer money. That is not what is happening here,” he said.   

City of Alexandria

The proposed site is next-door to a Virginia Tech campus scheduled to open in 2024 and is about two miles south of Amazon’s HQ2 campus. The site is about a mile northeast of Alexandria’s Del Ray neighborhood.  On Wednesday, an estimated 500 people attended an online Del Ray Citizens Association meeting.

During the meeting Alexandria Mayor Justin Wilson tried to allay fears about where the funding for the project was coming from. “I have heard quite a bit over the last twenty-four hours about concerns that we are providing a billionaire with taxpayer money. That is not what is happening here,” he said, according to local press reports. 

The project’s organizers said that an extensive community outreach effort would take place throughout early 2024. The project is tentatively scheduled to break ground in 2025, with the arena opening in 2028.

The two teams are owned by Monumental Sports & Entertainment, which is helmed by Ted Leonsis. On Thursday, Monumental released  a project fact sheet breaking down the financial basics of how the $2 billion public-private partnership would be funded. 

Project revenue bonds issued by the Virginia Stadium Authority would cover $1.05 billion. Lease revenue bonds would provide $416 million. Monumental would pony up  $403 million with $106 million contributed by the City of Alexandria that would be used to build a performing arts venue. 

Revenue streams for servicing the debt include lease payments made by Monumental, business sales and use tax revenues generated by on-site parking tax revenues and naming rights.  

The deal depends on approval from Alexandria City Council and the Virginia General Assembly. Washington, D.C., has also offered Leonsis a $500 million renovation of the Capital One Arena to keep the teams where they are. The current downtown core location is served by three Metro lines, the new location has two. 

The project budget includes $110 million in infrastructure investment in roadways, intersections, signal improvements while upgrading fiber, electrical, and sewer connections. Local opposition to the project emerged the day it was announced and centers on accommodating the traffic and parking shortages that comes with lengthy NBA and NHL schedules. 

Capital One Arena was built in 1997 making it an old timer in the professional sports world but could still serve as viable venue for college basketball and concerts which raises questions about competing events and an eventual credit rating. 

“One of the biggest key rating drivers that we consider is the market position geographically,” said Aysha Seedat, analyst, Moody’s. “Where are you located and does the stadium, or the arena have to compete with other facilities to attract concerts and turnout?”

Prior to the announcement, the existing small area plan for Potomac Yards called for a high-density mixed-use development that would leverage the newly opened Metro station. But the allure of a tax revenue windfall has changed the thinking. 

“We’re not building new office space on top of Metro stations,” said Wilson. That’s just not happening anymore in this region and that’s likely to be a reality for quite a while. What we have been doing is having a conversation as a community about how we diversify our revenues.”         

The first community engagement meeting for the new project was set to be held on Dec. 16 at an Alexandria City Council meeting.

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