Capitals and Wizards staying in Washington after Virginia arena deal collapses

WASHINGTON — The NBA’s Washington Wizards and NHL’s Washington Capitals are staying in the District of Columbia for the long term after ownership and the city reached an agreement on a $515 million arena project.

Mayor Muriel Bowser and owner Ted Leonsis signed a letter of intent on Wednesday for the deal, which keeps the teams in the District through 2050. They announced the development at a joint news conference at Capital One Arena minutes later.

“It’s a great day, and I’m really relieved,” Leonsis said.

The project is set to include 200,000 square feet (18,580 square meters) of expansion of the arena complex into the nearby Gallery Place space, the creation of an entertainment district in the city’s surrounding Chinatown neighborhood and safety and transportation upgrades.

“We are the current home and the future home of the Washington Capitals and the Washington Wizards,” Bowser said. “As Ted likes to say, we’re going to be together for a long time.”

In a statement, D.C. Attorney General Brian Schwalb said residents “could not have been louder or clearer in expressing their desire for the teams to stay.”

“This outcome will have significant positive impacts on economic development, public safety, and overall District energy and spirit generated by the millions of people who attend games, shows, and concerts at Capital One Arena,” Schwalb said.

The Council of the District of Columbia will take up the deal next week and is expected to pass it, Chairman Phil Mendelson said at the news conference.

The agreement between Monumental Sports & Entertainment and the city came as Alexandria officials said talks for a new arena that would have moved the teams to Virginia had ended. Leonsis acknowledged Virginia had land as an advantage D.C. didn’t.

“You’re in this arms race to build bigger and better and higher quality and we’ve been running out of space,” Leonsis said, referencing the new entertainment community the agreement envisions. “We now have 200,000 square feet that we can expand to. It’s not 12 acres, but it’s enough.”

Alexandria said earlier Wednesday that the Potomac Yard proposal “will not move forward,” a blow to Republican Virginia Gov. Glenn Youngkin, who announced months ago with fanfare the outlines of a proposal negotiated with the teams’ parent company to bring them across the Potomac River.

In a statement, the governor expressed disappointment and frustration over the demise of a plan he said would have created $12 billion in economic investment, laying blame with the Democratic-controlled state Legislature.

“This should have been our deal and our opportunity,” Youngkin said, adding: “But no, personal and political agendas drove away a deal with no upfront general fund money and no tax increases, that created tens of thousands of new jobs and billions in revenue for Virginia.”

Alexandria, which first announced the news, said in a statement posted to its website that it was disappointed in the outcome.

“We negotiated a framework for this opportunity in good faith and participated in the process in Richmond in a way that preserved our integrity,” the statement said. “We trusted this process and are disappointed in what occurred between the Governor and General Assembly.”

In December, Youngkin and Leonsis announced at a public event that they had reached an understanding on the outlines of a plan to move the teams to a proposed new development district in Alexandria, with not only a new arena but also a practice facility and corporate headquarters for Monumental, plus a separate performing arts venue.

The proposal called for the General Assembly to set up an authority that would issue bonds to finance the majority of the project, backed partly by the city and state governments and repaid through a mix of projected tax revenues recaptured from the development.

Youngkin and other supporters said the development would generate tens of thousands of jobs, along with new tax revenues beyond what would have been needed to cover the financing.

But the plan faced opposition from labor unions, Alexandria residents concerned about traffic and D.C. officials who feared the loss of the teams would devastate downtown Washington.

Youngkin and other backers also failed to win over powerful Democratic Sen. L. Louise Lucas of Portsmouth, who chairs the Senate’s budget-writing committee. She used that position to block the legislation, citing a range of concerns but foremost the financing structure of the deal: The use of moral obligation bonds put taxpayers and the state’s finances at risk, Lucas said.

Lucas celebrated the proposal’s demise Wednesday. On social media, she posted a cartoon of herself swatting away a basketball with the word “REJECTED” superimposed. She wrote, “As Monumental announces today they are staying in Washington DC we are celebrating in Virginia that we avoided the Monumental Disaster!”

Leonsis had shifted his tone on social media in recent days, pointing to large crowds in Capital One Arena this month for everything from the Capitals and Wizards to ACC Tournament basketball and a Zach Bryan concert. He posted Wednesday that Monumental expected over 400,000 fans to pass through turnstiles in March.

Leonsis was notably not on the ice Sunday for a ceremony honoring longtime Capitals winger T.J. Oshie for reaching the milestone of 1,000 NHL games. He was booed by some fans when his message to Oshie came up on arena video screens.