Virginia budget bill leaves out $2 billion deal to relocate Wizards, Capitals to Potomac Yard

A proposal to lure the NBA’s Washington Wizards and NHL’s Washington Capitals to Alexandria took another big hit Thursday, when top Virginia lawmakers confirmed the budget they will take up later this week would not include language enabling the deal.

RICHMOND, Va. - A proposal to lure the NBA’s Washington Wizards and NHL’s Washington Capitals to Alexandria took another big hit Thursday, when top Virginia lawmakers confirmed the budget they will take up later this week would not include language enabling the deal.

The news does not necessarily mean the end of the road for Republican Gov. Glenn Youngkin’s ambitions of landing Virginia its first major pro sports teams through a $2 billion development district featuring a new arena. But it complicates the path forward for a top Youngkin priority that requires legislative approval.

In a news conference at the foot of the Capitol steps, the governor said he believed the Democratic-led General Assembly was poised to make "a colossal mistake" and argued that lawmakers should reconsider and restore the project language to the budget before sending it to his desk.

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A rendering showing the newly proposed entertainment district in Alexandria's Potomac Yard that features an arena for both the Washington Capitals and Washington Wizards, and the global business headquarters for Monumental Sports & Entertainment (JBG SMITH)

"They have a chance to stand up and do what's right. They have a chance to assess this one-of-a-kind, first-of-its-kind economic development opportunity on the merits of the opportunity," he said.

Democratic Sen. L. Louise Lucas of Portsmouth, who used her perch as chair of the Senate Finance and Appropriations Committee to keep the deal out of the pending budget legislation, stood on the Capitol portico as Youngkin spoke, looking down and sometimes smiling.

The deal's leading opponent and a sharp critic of the governor, Lucas told reporters she remains firmly opposed to the proposal, in large part because of its reliance on bonds backed by the state and city governments.

Both Lucas and Democratic Del. Luke Torian, who chairs the House Appropriations Committee and led negotiations for his chamber, confirmed that the arena-related provisions were removed from the budget legislation, which lawmakers are expected to take up Saturday.

The legislation had been in the hands of a conference committee — a small, bipartisan group of legislators that's been meeting behind closed doors to find compromise — after the two chambers passed competing budget bills earlier this session.

The budget was the last vehicle remaining this session for legislation to pave the way for the deal. Two other standalone bills were defeated after Lucas refused to grant them a committee hearing.

Youngkin and other backers have a few ways to try to keep the project alive. If lawmakers send the governor a budget without the arena language, he could pursue an amendment to restore it. Or he could call a special session, starting over with a new bill.

Legislators could also reject the budget and send it back to the conference committee, though Senate Majority Leader Scott Surovell said in an interview that's not likely to happen.

Surovell, who said he did not anticipate budget negotiators would be open to more last-minute talks before Saturday, also criticized Youngkin for what he called an unwillingness to consider some top Democratic top priorities.

"This is a process that requires compromise, and so far the governor has made very little indication that he’s willing to compromise," said Surovell, who has been more open to the deal than Lucas.

Youngkin rolled out the proposal with great fanfare in December when he and Ted Leonsis, an entrepreneur and the ultrawealthy CEO of Monumental Sports and Entertainment, the Capitals' and Wizards' parent company, announced that they had reached an understanding.

Their deal calls for the creation of a $2 billion development, partly financed by public money, in the Potomac Yard section of Alexandria that would include an arena, practice facility and corporate headquarters for Monumental, plus a separate performing arts venue, all just miles from Washington's Capital One Arena, where the teams currently play.

The company said in a statement that it is disappointed but remains "hopeful that the merits of the proposal will eventually get a fair hearing so this important project can advance for our fans, players, employees and the residents of Virginia."

In Washington, Council Chair Phil Mendelson welcomed the news and expressed hope that the teams would remain in the city, which has made a $500 million offer to renovate Capital One.

"The Arena and Monumental Sports have been partners with the District for almost 30 years, and a great asset to downtown," Mendelson said in a statement. "As a deal in Virginia remains uncertain, the Council continues to be ready to welcome Monumental Sports’ change of mind."

Under the Youngkin-negotiated terms, Monumental and Alexandria would contribute some funds up front, but about $1.5 billion would be financed through bonds issued by a governmental entity that lawmakers would set up.

The bonds were to be repaid through a mix of revenues from the project, including naming rights, parking fees and taxes on tickets, concessions and athletes competing at the arena. Proponents say that would more than cover the debt, creating new revenues for the city and state in the project’s first year. But about a third of the financing would be backed by the "moral obligation" of the city and state governments, meaning taxpayers could be on the hook if the project revenues don’t come through as expected.

Youngkin, a private equity executive before he ran for public office, emphasized that the state would not be putting in upfront cash and that revenues that "otherwise will not be here" would help finance the deal. And he warned that the Senate's handling of the deal could threaten Virginia's business-friendly reputation.

Lucas dismissed that concern and said she had serious worries about "putting taxpayers' money behind the project of a billionaire."

She acknowledged that blocking the arena could hurt the chances of securing Youngkin's support for top Democratic legislative priorities like a measure establishing marijuana retail sales. But she thought the trade-off was worth it.

"I just stood firm on what I believe in my heart to be in the best interest of the Commonwealth. And that was just to say no to the Glenn Dome," she said using a nickname she's given the proposed arena.

Torian, who had carried one of the standalone arena bills, said he was "perhaps a little disappointed" the arena language didn’t survive, but he emphasized other provisions that did, including pay raises for teachers and other public employees and increased spending on certain government services.

Also out of the budget are Youngkin's proposed tax cuts, he said.

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Associated Press writer Denise Lavoie contributed to this report.