Is Stadium Construction Wave Over?

Publicly subsidized stadiums are the ultimate partnership between sports teams and the public. The concept of stadium subsidies is not novel, but as the cost of stadiums reaches unprecedented levels, opponents of the “stadium construction wave” have started to impose significant setbacks on the projects. 

The Virginia legislature’s decision to exclude the $2 billion stadium deal for the NBA’s Washington Wizards and NHL’s Washington Capitals from their budget could signal a shift towards opposition to public-subsidized stadiums. It may also be a unique case, stemming from a dispute over the stadium’s location. Nevertheless, the decision by the Virginia General Assembly and the preceding debates offers valuable insights into the complexities of publicly funded stadiums. 

Background

On March 7, 2024, The Virginia General Assembly released its final state budget of the legislative session. [1] Despite Republican Governor Glenn Youngkin’s best efforts, the budget bill did not include the $2 billion stadium deal. One of the biggest opponents of the deal, Senator Louise Lucas, played a pivotal role in the deal’s demise. As the chair of the senate’s finance committee, Lucas refused to put the proposed bills on the locket, stating that it is a bad investment which enriches club owners at the expense of taxpayers’ money. [2]

The stadium deal has been under development since December 2023. Although there were debates over the stadium’s location, after both DC and Virginia elected officials proposed bids to either renovate Capital One arena or relocate it to Virginia, [3] The Monumental Sports & Entertainment CEO, and owner of Washington Wizards and Washington Capitals, Ted Leonsis announced the plan of moving the stadium across Potomac River to Alexandria, Virginia. 

The deal is a private-public partnership between Virginia and The Monumental. According to the terms of the deal, the Monumental would invest $400 million and the rest would come from public sources across the city or state. [4] In an announcement, Leonsis has tried to boost public support for the new deal, stating that new location, the Entertainment District at Potomac Yard, would provide best state-of-art facilities and best fan experience. [5]

After the legislature rejected to fund the stadium on March 7, Youngkin expressed his frustration. He stated, “I believe the Senate is about to make a colossal mistake. It was truly— and could truly be—a monumental opportunity.” [6] The deal can still move forward if an amendment to the budget bill is introduced and voted on during the April 17 session or in a special legislative session. [7] 

Analysis

Under the framework outlined by Ryan Gauthier’s good governance principles in stadium financing, [8] the stadium deal raises significant questions about transparency, public participation, social responsibility, and review. 

Transparency is the degree to which the actions and intents of an actor are made visible or “readily knowable to interested parties.” [9] In general, the lack of openness of sports teams with regards to their financial information raises transparency issues in stadium deals. In this case, limited access to the financial details of Wizards and Capitals, D.C. Mayor Muriel Bowser’s bid for renovating the Capital One Arena, [10] and the subsequent decision to move the stadium to Virginia has created additional ambiguities about the intentions of the parties involved in the deal. Balanced against the substantial impact the new stadium is expected to have on the city, the ‘readily knowable’ actions and intents of the lawmakers and Leonsis appear to fall short of the transparency standard. 

Further, public participation is “the process through which an organization enables key stakeholders to play an active role in the decisions and activities which affect them.” [11] According to Gauthier, there are two forms of public participation: passive and active. [12] Passive forms of public participation include “providing information or engaging in consultation and dialogue,” whereas active forms of public participation include “actions such as codesigning solutions, engaging in co-decision making between actors and stakeholders, and empowering stakeholders to make decisions themselves.”[13] While D.C. lawmakers maintained that they were negotiating several offers, Leonsis claimed he never received the $500 million dollar renovation bid until after the decision to move to Virginia has been made. The handling of the matter by D.C. Mayor’s administration and Leonsis remains unknown to the public. Therefore, the major impediment to public participation here appears to be the absence of public input and collaboration in the decision to move the stadium from D.C. to Virginia. On the flipside, there have been efforts from the representatives of a consulting firm to engage in community discussion about the project. [14] Leonsis also highlighted his efforts to boost public participation, stating that “All involved parties have undertaken an extensive community engagement process that is well underway. This process will provide a venue for all stakeholders to have input on this project.” [15] The extent of public participation seems to hinge on whether the project moves forward or not. 

Narrowly defined, “social responsibility” is the “voluntary contribution of finance, goods or services to community or governmental causes.” [16] The strongest arguments in favor of the new stadium deal fall under this category. Potomac Yard, the planned location for the stadium, is a vacant former rail yard. [17] The proposed plan estimates that the area will “catalyze 9.4 million square feet of office, residential and retail space,” [18] creating opportunities for new businesses, increased employment, and residential growth. Leonsis also asserts that infrastructure development of the Entertainment District is underway, which will lead to improve in the Metro system in Alexandria. [19] However, the current stadium has excellent transit access, therefore, fans most likely would have to transition from using transit to driving if the stadium is relocated to Alexandria, regardless of the investments to improve the Metro system in Alexandria, potentially leading to environmental drawbacks. [20] 

Lastly, accountability can be said to exist where “some actors have the right to hold other actors to a set of standards, to judge whether they have fulfilled their responsibilities in light of those standards, and to impose sanctions if they determine that these responsibilities have not been met.”[21] Here, the proposed plan would be funded from by corporate taxes paid by businesses operating at the arena, personal income taxes from employees of those businesses, and income taxes from high-earning athletes and performers. [22] Hence, the revenue generated, predicted as $12 billion over the next few decades, is directly linked to the success of the project. Given that $2.2 billion worth of state and local income taxes of Potomac Yard would be redirected to the arena instead of schools, police, traffic, or other public services, it would be challenging for the public to validate the claims of such high financial needs for a new stadium. The problem exacerbates considering the ‘bad record’ of publicly-subsidized stadiums, which often fail to meet return on the investment. As a result, the arguments regarding review and accountability have been the critics’ strongest points, especially considering the significant financial investment at stake and the potential risks that insufficient returns could pose. 

While Virginia lawmakers refused to pay for the new stadium, Oklahoma City seems to be eager to put the taxpayer’s money on their stadium. [23] This discrepancy warrants a question: are lawmakers’ decisions to fund new stadiums based on purely financial considerations aimed at boosting city’s overall prosperity through sports, or do they serve as rewards for successful sports teams while penalizing others? 

Zeynep Karageldi is a passionate first-year law student at Cardozo School of Law with a keen interest in soccer and basketball. Serving as one of the 1L representatives of the Cardozo Sports Law Association, she delves into the intersection of sports and law, particularly focusing on intellectual property, antitrust, and contract law.

References:

[1] Hodjat, A., So is the Potomac Yard Stadium Deal Dead? An Explanation, Washingtonian

(2024). https://www.washingtonian.com/2024/03/07/so-is-the-potomac-yard-stadium-deal-dead/ 

[2] 7News Staff, Gov. Youngkin, Group against Potomac Yard Sports Arena respond after Va. Budget released, WJLA (March 7, 2024). https://wjla.com/news/local/gov-youngkin-stop-thearena-potomac-yard-alexandria-virginia-entertainment-sports-complex-budget-senate-financeappropriations-richmond-washington-dc-wizards-capitals-richmond-politics-concerns#  

[3] DiMargo, C., Wilder, D., & Segraves, M., Virginia officials and wizards, caps owner agree on $2B plan to bring teams across the river, NBC4 Washington (Dec 14, 2023). https://www.nbcwashington.com/news/local/wizards-capitals-owner-announces-2-billion-planto-move-teams-to-virginia/3493235/ 

[4]               Hardy, K., More taxpayer money benefits pro sports owners Amid “Stadium Construction Wave”, Stateline (Feb 20, 2024). https://stateline.org/2024/02/20/more-taxpayer-money-benefitspro-sports-owners-amid-stadium-constructionwave/#:~:text=That%20hasn%27t%20stopped%20the,for%20the%20NFL%27s%20Buffalo%20

Bills. 

[5]               Pusatory, M., & Gregory, M., Ted Leonsis writes letter to fans explaining decision to move, WUSA9 (Jan 25, 2024). https://www.wusa9.com/article/news/local/virginia/ted-leonsismonumental-arena-letter-backlash/65-d6b3cf1e-26ba-43ba-85ac-3ecf1a6d07ae 

[6] Hodjat, A., Washingtonian, (2024).

[7]  Id. 

[8]  Ryan Gauthier, Publicly-Subsidised Stadiums: Changing the Game Through Good Governance, 30 Jeffrey S. Moorad Sports L.J. 231 (2023). Available at: https://digitalcommons.law.villanova.edu/mslj/vol30/iss2/2  

[9]  Thomas N. Hale, Transparency, Accountability, and Global Governance,

14 GLOBAL GOVERNANCE 73, 75 (2008); See also Daniel C. Esty, Good Governance at the Supranational Scale: Globalizing Administrative Law, 115 YALE L.J. 1490, 1533 (2006).

[10] Aldridge, D., With Virginia Arena deal roadblocked, Ted Leonsis and Muriel Bowser have a chance to save face, The Athletic (March 12, 2024). https://theathletic.com/5275584/2024/03/12/wizards-capitals-arena-washington-dc-leonsis/ 

[11] Monica Blagescu, Lucy De Las Casas & Robert Lloyd, Pathways to Accountability: A Short Guide to the GAP Framework 2 (2005).

[12]  Gauthier, 30 Jeffrey S. Moorad Sports L.J, (2023)

[13]  Erik Mostert, The Challenge of Public Participation, 5 WATER POL’Y 179, 183 (2003).

[14]  Umeh, M., Virginia sen. Lucas Doubles Down on opposition to Potomac Yard Arena Plan, FOX 5 DC (Feb 19, 2024).  https://www.fox5dc.com/news/virginia-sen-lucas-doubles-down-onopposition-to-potomac-yard-arena-plan 

[15]  Leonsis, T., A letter from Ted Leonsis - Monumental Sports, Monumental Sports (Jan 25,

2024). https://monumentalsports.com/2024/01/a-letter-from-ted-leonsis/ 

[16] Jeremy Moon, The Social Responsibility of Business and New Governance, 37 GOVERNMENT & OPPOSITION 385, 385 (2002).

[17] Capps, K., Plan to move Washington Capitals, Wizards to Virginia funded with income tax, Bloomberg.com (Feb 17, 2024). https://www.bloomberg.com/news/articles/2024-02-17/plan-tomove-washington-capitals-wizards-to-virginia-funded-with-income-tax 

[18] Id.

[19]  Leonsis, T., Monumental Sports (2024).

[20]  Opinion | questions on the Capitals and Wizards Arena Deal, Washington Post (Feb 14, 2024). https://www.washingtonpost.com/opinions/2024/02/14/capitals-wizards-arena-dealmetro-timeline/ 

[21]  Ruth W. Grant & Robert O. Keohane, Accountability and Abuses of Power in World Politics (2005) 99:1 AM. POL. SCI. REV. 29, 29 (2005).

[22] Capps, K., Bloomberg.com (2024).

[23] OKC voters approve new downtown arena, News List, City of OKC (Dec 12, 2023).

https://www.okc.gov/Home/Components/News/News/4658/140#:~:text=Oklahoma%20Ci ty%20voters%20approved%20a,%2C”%20Mayor%20David%20Holt%20said.