Youngkin’s ‘vision’ puts Virginia taxpayers on the hook

OPINION:

What is it about professional sports arenas that makes politicians practically drool at the thought of securing one in their own jurisdiction, even a conservative politician like Virginia Gov. Glenn Youngkin?

Unlike the boring functions of government, such as maintaining roads and enforcing laws, sports arenas offer the electorate a tangible promise of fun and games in addition to the ribbon-cutting exposure for the politicians themselves.

But when state and local government officials directly help already wealthy team owners build stadiums, they stray far from the system of limited government envisioned by our Founding Fathers.

So Mr. Youngkin’s “visionary” offer to help finance a new $2 billion stadium complex so the Washington Wizards and Washington Capitals can relocate from the District of Columbia to a 70-acre tract in Alexandria’s Potomac Yard is an exercise in government overreach, no matter how much voters may like pro basketball and hockey. This is true even if the project does produce the revenue it predicts.

At a news conference in December announcing a tentative deal with billionaire owner Ted Leonsis’ Monumental Sports & Entertainment group, Mr. Youngkin pledged that no upfront state funds would be allocated to pay for the new stadium complex. Instead, the Republican governor said he would ask the 2024 General Assembly to authorize a new Virginia Sports and Entertainment Authority, or VSEA, that would have the legal authority to buy the land and issue construction bonds. It would then rent the stadium to Monumental under a 40-year lease.

Monumental would pay rent and fork over parking fees and money collected from naming rights, but any new tax revenue generated by the project would not go into state coffers. It would be used to pay the bondholders at an agreed-upon return on investment.

This amounts to a roughly $1.5 billion subsidy to the company, which would kick in just $403 million. The city of Alexandria would add $106 million, bringing the combined total to just about one-quarter of the total cost. The public VSEA would be on the hook for the other three-quarters, and any revenue shortfall would be covered by taxpayers.

Judging by the Wizards’ and Caps’ recent history (both teams moved from Maryland to their supposedly forever home in the District), VSEA could eventually become the proud owner of an empty and obsolete venue.

There’s a name for this kind of deal: Capitalize profits, socialize risks. Mr. Leonsis must know that obtaining purely private financing on Wall Street for such a venture is risky. Investors could lose their shirts if some unforeseen event ruins current plans.

But under this tentative agreement, Virginia taxpayers would be on the hook for any losses, not investors. In fact, this deal would amount to the largest public subsidy for a sports team in U.S. history.

This is why billionaires love these “public-private” ventures. The risk to the public might be acceptable if Mr. Leonsis were building new road capacity or hardening the state’s energy infrastructure — projects that would provide a direct benefit to Virginians and which require a massive influx of capital the state doesn’t have.

Taking a $1.5 billion gamble on a sports stadium complex is a totally unnecessary risk. But because so many politicians have acquiesced to these projects, Mr. Leonsis and his fellow team owners now expect white-glove treatment as they play one jurisdiction against another.

The argument that the project would generate thousands of new jobs is a red herring meant to distract voters from noticing that many of these jobs would be low-paying service jobs in an area where the cost of living is exceptionally high. Where would all the people needed to staff the stadium live? They would have to commute to work on a nearly bankrupt Metro system or on roads that are already nearing gridlock.

And the idea that Northern Virginia needs more “economic development” underwritten by taxpayers is preposterous. Alexandria is the second-to-last place in the state that needs such a boost. The first is its next-door neighbor Arlington, where Amazon HQ2 is receiving a whopping $1.8 billion in government subsidies, according to one study.

Plenty of other jurisdictions in Virginia could use the state’s help repairing roads and bridges, replacing aging schools and enhancing public safety. That’s a better use of the commonwealth’s bonding authority.

But building stadiums is how the rich get richer, and why they then turn around and contribute generously to the campaigns of politicians they can count on to subsidize them.

If this new sports complex on the Potomac is the great investment they make it out to be, Wall Street investors should be jumping at the chance to get a piece of it. Members of the General Assembly should tell both the governor and Mr. Leonsis that Monumental, not Virginia, should float the bonds for the project.

Then let’s see if the big rollers are ready to put their own money where their mouth is.

• Barbara Hollingsworth is a visiting fellow with the Thomas Jefferson Institute for Public Policy. She may be reached at Barbholl3@gmail.com.