Potomac Yard arena could add $34 million in yearly tax revenue, study says

An arena in Potomac Yard could add $34 million in yearly tax revenue for Alexandria, according to a report published Friday.

HR&A Advisors performed the study for the Alexandria Economic Development Partnership to determine potential tax revenues and job creation for the proposed new stadium at Potomac Yard. The report found that the project would generate 29,555 permanent jobs and 17,645 one-time construction jobs in Virginia.

The current outline for Potomac Yard includes a new stadium for the Washington Wizards and Capitals, team headquarters, a music venue, housing units, and retail spaces. The development’s economic impact would total $40 million yearly for the state with $34 million staying in Alexandria. Without the arena, tax revenue would drop to $5 million annually for the area.

The analysis includes financial data from Monumental Sports and Entertainment, which owns the District’s NBA and NHL teams.

Monumental estimates that the site would host 221 events at the stadium and 115 at the concert venue each year. The organization expects $117 million in parking and retail revenue yearly while accumulating $293 million in operating expenses.

“The City remains committed to providing facts and information to our community to consider economic development projects based on their merits and facts, considering the benefits of proposals and what they bring to our community,” Alexandria officials wrote in a statement.

In a memo to D.C. council members, the city’s budget director questioned the economic cost and impact of an arena. The report suggested that Virginia taxpayers could be responsible for more than $5 billion.

“While the reporting on the document has stated it will cost about $2 billion, briefing documents provide a better estimate of the project’s total cost, including interest payments and maintenance costs,” the memo said. “In all, the documents indicate the arena project cost is at least $5.5 billion, and likely more.”  

The budget director’s office noted that Virginia officials would be responsible for maintenance costs at the arena. The report also said Monumental would need to increase ticket prices to meet revenue goals.

“Of the seven most recent football arenas built, every single one cost more than the initial cost estimates used to pitch the arena,” the memo said. “These cost increases were, on average, more than $300 million above the first public estimates. Presumably, the state, through the new sports authority, would be responsible for paying any such cost increases at the new arena, since Monumental would not own the arena.”

A bill to establish a Virginia stadium authority passed through the House of Delegates last week. The proposal, which would allow officials to use public bonds to finance a sports arena, still has to clear the Virginia Senate. 

State Sen. L. Louise Lucas, a leading Democrat, has expressed frustration with the bill. She believes that Republican Gov. Glenn Youngkin has not worked with lawmakers on legislation.

“It places too much risk on the commonwealth,” Lucas said. “The governor’s proposed deal has many unanswered questions and potential conflicts of interest.”

Youngkin believes tax revenue from the arena could assist in public projects throughout the state. 

“From toll relief in Hampton Roads to WMATA investments in Northern Virginia, from education investments in rural and urban school divisions to critical transportation arteries like I-81, Virginians know the revenues from this project will be felt in their communities,” he said in a statement.

Transportation concerns have been front of mind for many opponents of the arena. 

A report commissioned by the state said Alexandria officials would need $215 million to improve local roadways and the Metro. The Potomac Yard Metro station opened in May 2023. Experts noted that it is not equipped to handle stadium-sized volumes.

With its current set-up, the station would be “extremely crowded” for up to 90 minutes after an arena event, the study said. With improvements, the station could handle high volumes of passengers, but it would still be crowded for 30 minutes after a game.

Alexandria Mayor Justin Wilson said the city will host a “community conversation” on Thursday to address transportation concerns. Representatives from state agencies will answer residents’ questions.

Current plans for the arena include a $400 million upfront investment from Monumental Sports alongside $1.4 billion in public bonds. Arena revenue from naming rights, sales taxes, and income taxes would pay off the bonds. 

In a video posted online, Monumental executives said there would be no new taxes to support the project.  

“We are really paying for this entire facility and the state of Virginia is helping us to do that financing upfront,” said Zach Leonsis, president of media and new enterprises at Monumental.

Arena opponents continue to outline concerns about Monumental’s plans on social media.

“The ‘new’ jobs at the two ‘new’ sports teams won’t support local priorities,” George Billings, transportation director for the Georgetown Business Improvement District, wrote on X. “Literally the sales tax, parking revenue and income tax revenue will go into financing the arena. Complete lies. The only winner is [Monumental CEO] Ted Leonsis’ bank account.”

If the proposal does not clear the Senate, arena opponents believe Youngkin could still work to advance the stadium plans. The governor could bring the proposal back during budget negotiations.