Cardinal Way: Civility Rules encourages constructive dialogue on difficult issues. You can participate in the project by filling out this survey that asks your views: 1. Should the proposed arena be treated differently from any other economic development project? If so, why? 2. What economic impacts on Southwest and Southside should legislators look for when deciding whether to support the plan? 3. Would you be OK if this project went to Maryland? 4. What’s your favorite NBA or NHL team or do you have one?
See the other article in this package: “Proposed Alexandria arena would be economic benefit for Southwest Virginia.”
It might seem a bit presumptuous for someone who lives in Northern Virginia to try to explain to taxpayers of Southside and Southwest why building a sports arena in Alexandria is bad deal for them. But I think it’s important to explain why everyone in Virginia should be opposed to this deal regardless of where they live.
You probably have heard that Gov. Glenn Youngkin wants to commit close to $1.5 billion in state financing to entice Ted Leonsis, the billionaire owner of the Washington Capitals and Wizards, to relocate his teams from D.C. to Alexandria’s Potomac Yard. You certainly might be wondering why such a short move makes any sense at all from a financial or transportation perspective (Hint: It doesn’t), or why a lot of residents of my hometown are strongly opposed to this deal too (Hint: traffic and other quality-of-life impacts).
The governor says that the project would be good for Virginia taxpayers and won’t affect the state’s ability to fund things like education or roads because it’s going to issue bonds that will be paid for by revenue generated by the new sports and entertainment complex. If this all sounds too good to be true, it is.
You might think that stadiums or arenas are great economic engines for cities, but it turns out that decades of research show that such venues do not provide a net economic benefit to their host communities. They are in truth fairly small businesses that operate for only a few hours a few days a week, and the majority of the profits are captured by a very small number of very wealthy individuals. The Battery in Atlanta, for example, in total produces the same revenue for the entire complex as an average-size Target store.
Stanford University sports economist Roger Noll says that stadiums do not generate significant local economic growth and that the so-called incremental tax revenue is not sufficient to cover any significant financial contribution by cities or states. Noll points out that “[a]ll publicly subsidized football and baseball stadiums are money losers. A few arenas have broken even if the subsidy was low enough, but no facility with a subsidy of more than two hundred million has ever broken even. A subsidy approaching $1 billion is likely to be a disaster.”
The problem is that huge public subsidies for stadiums, and this may be a record-breaking one, are mostly benefiting the owners of the sports teams, who can demand outrageous sums from politicians who want to say they brought professional sports to their town or state.
Supporters of this subsidy, including Gov. Youngkin (R) and some key Democrats, say that this sports arena is different since it will host basketball and hockey games and have a concert venue as well. Unfortunately, no sports economist who has looked at the numbers thinks that the proposed arena and concert venue at Potomac Yard will generate $12 billion in new revenue and create 30,000 long-lasting jobs. They do not think that it will be any more successful financially than any other such project.
J.C. Bradbury, the president of the North American Association of Sports Economists, said that Alexandria would likely be better off economically keeping the current development as it would produce higher overall revenue and more tax revenue than the proposed arena complex. The Target in Potomac Yard is a real money-earner without being subsidized by taxpayers.
As anyone who has ever taken out a home loan knows, it must be paid back, or you will lose your home. Similarly, if the arena is not generating enough revenue to cover all the borrowing costs or to pay for renovations, or the billionaire owner decides to move to another city after 20 years, taxpayers will be left to pay off the balance owed. Every taxpayer in Virginia is backstopping the financing of this arena whether they know it or not.
But revenue bonds are not the only reason to be concerned about this deal. Virginia and Alexandria taxpayers are also being asked to contribute upfront another $300 million (though this number may go up) to pay for all sorts of transportation improvements in Northern Virginia. These fixes are supposed to make it possible for 18-20,000 fans to access the arena by car and metro. But they won’t. Potomac Yard is a terrible location for a sports and entertainment complex and no amount of funding is going to fix that issue. It’s not even a band-aid.
The upfront contributions that members of the General Assembly are discussing will have an immediate impact on other priorities like education funding. That money could be used to help build schools and pay teachers’ salaries. There is also a lingering question about whether the state’s and Alexandria’s credit rating will be negatively affected by all this borrowing for a project that is so inherently financially risky.
So, who benefits from building this arena in Alexandria? Certainly not D.C., which stands to lose the hundreds of millions it has invested into its sports venues. And let’s not forget the hundreds of small D.C. businesses that will be affected if Ted Leonsis, the teams’ owner, gets Virginia taxpayers to build a new arena for him in Alexandria.
Alexandria residents, who will see increases in traffic, crime and housing prices, will not benefit. The rest of Virginia will not gain anything either. All the revenue from the arena will be siphoned off for 40 years to pay back all the interest and principal on the money borrowed to finance this boondoggle. And when, not if, that revenue fails to materialize, Virginia taxpayers will be on the hook to pay that bill.
The arena project is a lose-lose proposition for everyone except the billionaire owner of the Wizards and Capitals. My advice to every taxpayer in Virginia is to let your elected representatives in the General Assembly know that you don’t approve of Gov. Youngkin’s plan to create a powerful sports authority whose sole purpose is to fund this monumental disaster.
Macdonald is a former vice mayor of Alexandria and a member of the Coalition to Stop the Arena at Potomac Yard.