Washington D.C. Council approves $515 million for Capital One Arena modernization efforts

Washington D.C. Council approves 5 million for Capital One Arena modernization efforts

The D.C. Council on Tuesday voted unanimously to spend $515 million over the next three years to help Washington Wizards and Capitals owner Ted Leonsis modernize Capital One Arena and expand his company into some of the surrounding area, following an agreement Leonsis and Mayor Muriel E. Bowser reached last week to keep the teams playing in the downtown arena.

The vote marks the first step toward a renovation project that city leaders hope will transform the Gallery Place and Chinatown neighborhood into an entertainment district that could boost downtown’s ailing economy. Council member Vincent C. Gray (D-Ward 7) was absent for the vote.

It also comes one day before Bowser (D) is expected to deliver her budget for fiscal 2025 to the council. Lawmakers, who are bracing for cuts to mitigate a likely budget deficit, have stressed that funds for the arena’s renovation will come from the District’s capital budget as opposed to its cash-strapped operating budget.

“We are grateful to the Council for passing legislation that builds a true partnership between the District and Monumental Sports to revitalize downtown in an integrated way for our fans and the community,” Monumental said in a statement on social media Tuesday after the vote. “Our shared vision for a transformational entertainment district that is a destination for neighbors and visitors will ensure the vibrancy of downtown for years to come.”

The council’s move to allocate funds toward the arena’s renovation and expansion is separate from a nonbinding 14-page term sheet detailing the more specific elements of Bowser and Leonsis’s agreement, which was the focus of a council breakfast meeting Tuesday with Deputy Mayor for Planning and Economic Development Nina Albert.

The terms of the tentative agreement, a copy of which was obtained by The Washington Post on Monday afternoon, go to significant lengths to address Leonsis’s concerns about public safety around the arena as well as his desire to grow the footprint of his company, Monumental Sports & Entertainment. But some of its provisions raised early concerns from lawmakers seeking to ensure the District gets sufficient return on its investment.

Under the tentative agreement, which could change as D.C. and Monumental continue negotiations, Leonsis would be able to use $15 million in public funds that were added to the city’s original $500 million offer from December toward improvements in the alleyway between Capital One Arena and Gallery Place. The term sheet details perks for Leonsis ranging from security enhancements to parking incentives, and includes a clause that would exempt his company from any future tax that is intended to support other professional sports franchises.

Council member Kenyan R. McDuffie (I-At Large) told Albert that he was concerned that some provisions in the term sheet might require the city to incur additional costs, questioning whether the District should be in a stronger negotiating position when Leonsis’s original plan to relocate the Capitals and Wizards to Northern Virginia fell apart.

“We’re going to have a process that allows us to ask some questions to work through those details, recognizing that we want Monumental to be here, but we don’t want to give up everything and the kitchen sink in the process,” McDuffie said.

In response, Albert stressed that the terms were nonbinding. D.C. and Monumental are expected to begin working toward a final term sheet over the next 45 days; any agreement will be subject to approval from the NBA and NHL, according to the tentative terms.

She called the document a “guidepost” for the city to help Monumental expand while executing a shared vision to create an entertainment district — fortifying area businesses and tax revenue for the city in the process. Some components of the deal, she said, are likely to come back to the council for approval — including any significant amendments to the ground lease with Monumental or terms that would require legislative changes.

Council member Charles Allen (D-Ward 6), speaking on the proposal to exempt Monumental from any taxes that would support other pro sports franchises, questioned whether it was the right move to carve out a large business from a future hypothetical tax. “Let’s say, for fun, someone is interested in another stadium, and they use a ballpark tax financing mechanism. Are we saying Monumental doesn’t have to pay that?” Allen asked.

He noted that patrons at Capital One Arena must already pay an additional sales tax to help pay off bonds that were used to upgrade the arena in 2007: “Rightfully so, Monumental is sensitive to their patrons in particular paying multiple taxes,” Albert said, reiterating that the terms haven’t been fully worked out. “That’s why we’re willing to explore this.”

Under the agreement, if feasible, Monumental would aim to build a new practice facility for the Wizards in the Gallery Place office tower — a neighboring retail center that has been half-vacant for months. If that doesn’t work out, the company could explore building the practice facility at other D.C. locations, including the RFK Stadium complex.

Albert said Monumental’s plan is to begin construction on arena improvements in the summer of 2025, during the offseason for the Capitals and Wizards, and continue that work the following two summers to prevent interruptions to gameplay for either sports team. And in another perk for Monumental, under the term sheet, D.C. would expedite permitting approvals for the company during its renovation projects and assign a government point person to address its needs.

Turning the area into an entertainment district could come with new restrictions on vending, noise and loitering. On the heels of the council’s vote to create controversial “anti-loitering drug-free zones” as part of a major public safety bill this year, the agreement between the city and Leonsis calls for creating a drug-free zone around the arena. D.C. would also need to have a public safety plan before every event at the arena as well as dedicate 17 officers for patrol for two hours before and after events.

Council member Zachary Parker (D-Ward 5) asked about the potential impact that the provision would have on the city’s already strained police department and how a drug-free zone would work at the arena when they are temporary under current law. Albert said the details have yet to be worked out, but speaking with reporters, she said the police staffing expectations are in line with events held at Nationals Park and Audi Field.

In return for some of the District’s offerings, Monumental will be required to do community projects such as building a new playground and basketball court or hockey rink, while also preserving jobs for D.C. residents on the renovation project and submitting to certain contracting requirements to help local small businesses.

Council member Brooke Pinto (D-Ward 2) argued that while some lawmakers were wary of the city’s negotiating position, the investments will ultimately benefit the entire city. “I don’t want it to get lost on anyone that this isn’t a traditional kind of win-loss environment,” she said. “This is really beneficial to us as a District to make this investment, not only for the return on investment that we’re going to get in tax revenue, but in experiences that we’re creating for residents and businesses.”

Allen later argued that the city should have moved more swiftly and cohesively to come up with a plan to modernize the arena, noting that lawmakers were given copies of the term sheet less than 24 hours before Tuesday’s vote. He agreed with McDuffie that there would probably be more costs to the city related to the project, citing a tentative provision to expedite Monumental’s application for a clean-energy financing program that would be supplementary to the $515 million investment.

“That is a program that has a cap on what is available every year. So every dollar we now are sending to Monumental for the arena is a dollar we’re not investing in affordable housing somewhere else,” Allen said.

The council pushed Tuesday’s appropriations bill forward on an emergency basis without any formal opportunity for public comment. Faced with questions at a Monday news briefing about the transparency of the process for a $515 million investment of taxpayer dollars, Chairman Phil Mendelson (D) defended the process: He said residents had the opportunity to make their opinions known to him through emails or phone calls to his office since December, when he and Bowser first pitched a half-billion-dollar public financing package to Leonsis.

He said residents can also provide public comment on the capital budget this spring.

The legislation capped off a raucous legislative meeting that was interrupted at various points by three separate protests on unrelated issues. Demonstrators from the Save Chinatown Solidarity Network came to protest the appropriation for Monumental, noting that if the District had half a billion dollars to help a billionaire sports team owner upgrade the arena, the city needed to do more to invest in the several hundred remaining Chinese residents in Chinatown and the few remaining businesses that support them.

Another group of demonstrators had interrupted the meeting to oppose a bill that would expand the use of project labor agreements in the District — agreements made with labor organizations that establish terms and employment conditions specific construction project — making them applicable to contracts of at least $50 million versus $75 million.

A half-hour later, demonstrators called on the council to support a cease-fire in Gaza, being escorted out of the chamber into the hallway where they yelled, “Blood is on your hands!” and “Cease-fire now!” so loudly that lawmakers paused for several minutes.

They tried to continue while chants could still be heard in the hall.

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