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Winning round one at DC’s Gallery Place

WHEN you have an opponent by the short hairs and they know it, gloating is in poor taste. Proper etiquette for the victor is to “smile, generously, then move on,” my grandfather advised me during my youth, after hearing me taunt a player who had just lost to my team. 

“A smile, delivered at the right time, can be a kick-butt message,” he added.

Last week, Mayor Muriel Bowser executed a victor’s decorum, flashing a cheshire cat grin, as she stood next to Ted Leonsis, founder and CEO of Monumental Sports & Entertainment (MSE), during a press conference to announce that, in fact, he would not be moving the Washington Wizards and Capitals to Potomac Yard in Northern Virginia.

“We are going to have a state-of-the-art urban arena in Downtown DC and that’s a great deal for DC, for the teams, and for the fans,” Bowser said in a prepared statement. “We made a great offer — and kept that offer on the table — because we have known all along that this is a win-win for our city and the teams. 

“This is a catalytic investment in Downtown DC. We are excited to have Monumental as our partners in DC’s Comeback and we look forward to working together to win for DC,” she added.

No need to rub Leonsis’ face in any told-you-so taunt. In remarks soon after his memorable December handshake with Virginia Gov. Glenn Youngkin declaring their intentions, Bowser noted that decades earlier someone else had attempted to move to that same site and things didn’t quite work out — go ask former Gov. L. Douglas Wilder. So, everyone should calm down, she said back then.

Turns out Bowser got at least that much right. However, after reviewing the terms of the deal currently being finalized by the mayor and her economic development team, there may be a legitimate question about who’s really in control here.

Still, the general perception is that retaining Monumental and its sports teams is a political victory for Bowser. “This is an opportunity to have a real showcase and anchor in a part of town that people want to come to,” said former DC Council member Jack Evans, who was among District leaders who helped persuade Abe Pollin to bring the Capitals and the Wizards (then called the Bullets) to Gallery Place-Chinatown in 1997.

“It was the catalyst for the rebirth of the area. We want to do it again,” added Evans.

“You have to give kudos to the mayor for not jumping off the cliff and defending her position that the teams should stay in DC,” said Robert Bobb, founding president of The Robert Bobb Group LLC, which with Evans’ participation recently completed a city-commissioned fiscal study related to the feasibility of bringing the Commanders football team to the District. When he was DC’s city administrator, Bobb was involved with negotiations around Nationals Park, a facility owned by the DC government. 

“Maybe five years from now when the city regains its financial strength, [it] can consider repositioning the arena so it doesn’t turn its back to 7th Street,” said Bobb, adding that such a move would create another “great street from Pennsylvania Avenue to the convention center” while also better showcasing current neighborhood amenities like “outstanding hotels, great theaters and transportation.”

“Except for the land, Virginia offered zero competition to what the District has,” added Bobb.

The Wizard-Capitals relocation saga that angered so many DC residents — causing some to accuse Bowser of mishandling the initial negotiations with Leonsis, prompting him to attempt the taking-my-ball-and-leaving maneuver — seems to have ended. 

But keeping the teams in place won’t be cheap.

“It’s a good day to celebrate. I think Monumental is where it belongs,” DC Council Chair Pro Tempore Kenyan McDuffie said earlier this week during the legislature’s usual monthly breakfast before its legislative session. At the same time, he noted some related costs — such as economic incentives associated with closing an alley near the arena and helping provide a practice facility for the Wizards — could increase the city’s obligation beyond the $515 million the mayor discussed last week. 

“We need to make sure we are bringing the nuances to light to make sure the public understands what District investments are going to be,” added McDuffie.

Actually, the specifics have not been fully fleshed out. It feels like the making of a game of three-card monte. Speaking at the council’s breakfast, DC Deputy Mayor for Planning and Economic Development Nina Albert said that for the next 45 days the administration would be working with MSE to do “due diligence” and to finalize technical details that may involve architects, engineers and lawyers.

You can bet there will be plenty of the latter. 

Despite the unknowns, the council earlier this week approved setting aside $515 million from the city’s capital improvement funds. There would be three installments beginning in fiscal year 2025 and continuing through 2027. It’s unclear whether that amount accounts for the cost of inflation for materials and labor. It won’t matter much to Leonsis; he’s only throwing in $300 million of his company’s money.

DC will carry a heavy fiscal burden for a sports billionaire to have his teams and his toys. And given his tendency to want to control the room and everyone in it, you can bet working with him through the improvements and finalizing the new lease agreement that is expected to run through 2050 will be a gigantic headache for District government officials.

Moreover, other proposals like the five-year, $401 million Downtown Action Plan developed by an array of business leaders — including those with the DowntownDC and Golden Triangle business improvement districts — may be left on the shelf while Leonsis’ pockets are being lined. 

Gerren Price, the head of the Downtown BID, did not reply to my request for comment, although on Friday a spokesperson from the corporation had promised to do so.

The Downtown Action Plan, as currently written, would require only $39 million for this coming fiscal year 2025. A detailed proposal will be presented publicly next month. A preview of the document indicates business leaders beyond MSE would like to expedite tax abatements for downtown housing; improve parks and open spaces across all of downtown; retain as many office users as possible; support retailers, including grants for short-term pop-ups; and establish a global learning hub. They also want to establish a “strategic ombudsman” in Albert’s office.

In other words, they seem to be looking beyond the market value of MSE and its teams. 

Will it matter or will Leonsis be allowed to suck all the air and money out of the concept of making Gallery Place-Chinatown into a world-class Arts and Entertainment District? Isn’t there a danger in having one company or facility dominate a city’s long-term economic strategy and plan?

With the council’s approval of the Downtown Arena Financing Partnership and Revised Budget Emergency Amendment Act of 2024, the ball moved back to Bowser and Leonsis.

This all comes at the opening of budget season when councilmembers likely will be bogged down by the city’s FY 2025 fiscal deliberations. Bowser submitted a $20.9 billion operating budget and an $11.8 billion capital spending plan earlier this week. In both cases, District residents need focused elected officials who are asking the right questions at the right time. 

Unfortunately, the legislature hasn’t demonstrated a real expertise in simultaneously counting and chewing gum.

Interestingly, last week, after the announcement that Monumental wasn’t going anywhere after all, Mendelson acknowledged that the deal presented by Bowser was “similar to the deal we discussed” in December. Additionally, the idea of providing Leonsis more space — including part of the Gallery Place retail plaza — had “surfaced at a December meeting.”

If there is relatively little difference between the offer presented to Leonsis in December and the preliminary deal reached last week, what was all that talk by Leonsis about coming to realize that DC is really home, as if it were some epiphany or an Oprah-style “aha moment”?

“I look at outcomes, not process, and we got to the right outcome,” Leonsis said in the prepared statement he made last week. “I know this was a difficult process and I want people to understand how much I love Washington D.C. and how much I’ve always loved Washington DC. 

”Mayor Bowser and her team heard us and worked with us and gave us the tools for us to meet the needs of our business to expand right here in downtown,” he added. 

Chalk that all up as spin designed to minimize an altar-standing rejection and embarrassment inflicted, in no small measure, by L. Louise Lucas, president pro tempore of Virginia’s state Senate. As chair of the finance and appropriations committee, she seemed to be channeling the now-deceased Washington Bullets star Wes Unseld Sr., blocking and essentially rebounding for DC. She refused to advance the Youngkin-Leonsis proposal, ultimately deleting it from the state budget altogether.

Maryland political leaders also closed the door to the billionaire sports owner. 

Where was there left for him to go?

If Leonsis was desperate then, he seems to have recovered quickly from his previous bad hand and is squeezing every possible concession from the District, whose hand in reality still isn’t that great.

For example, according to the terms under negotiation, MSE will not only modernize the arena but may also expand its footprint at the ground level and above via the use of air rights over the entire premises. That will surely mean the company will increase its revenues. Nevertheless, its lease payment to the District will remain the same. 

While the city tried to limit MSE’s future ability to up and run, the tentative agreement allows for a two-year notice to terminate the lease if DC fails to provide the funding outlined. 

The city also will not charge MSE for dedicating 17 police officers for the arena two hours before and two hours after any events. While councilmembers asked about the cost related to that amenity, Albert sidestepped the inquiry, offering that the responsibility falls under the public safety cluster.

Bowser also has agreed to close off streets on game days to improve traffic for MSE customers. The company also will be able to use parking facilities at nearby government-owned buildings. 

Monumental may take over management of the Sports & Entertainment Arena in Ward 8 where the Mystics, Leonsis’ WNBA team, now play. In fact, according to the draft agreement, MSE would be “allowed to designate 4 games per season and all playoff games [to] be played at Capital One Arena.” Another lethal blow to residents and businesses east of the Anacostia River may be that Leonsis will have the right “to terminate existing vendor contracts.” 

These are significant issues that councilmembers, including McDuffie and Ward 6’s Charles Allen, pointedly acknowledge will boost the District’s costs of retaining MSE and its teams well beyond the budgeted $515 million. At the mayor’s budget presentation on Wednesday, McDuffie expressed concern about another $5 million apparently added to the Leonsis fund. 

But no one seems ready to deem any of this a disqualifying foul. Instead, during their breakfast meeting, what seemed to generate the most interest was the possibility of moving a bus stop on H Street near the Metro station to a location two blocks away.

“We want transit to be near the arena,” said Allen, who is chair of the Committee on Transportation and the Environment. “I will push back.”

Far more than that should generate concerns. But, I guess, with the District having to overcome a budget gap of at least $700 million and seemingly relying on mediocre sports teams to help keep it in the black, it’s hard to raise much objection. 

That depressing realization led me to ponder the question one business leader asked me: Who did you say had who by the short hairs?

A version of this article was originally published in The DC Line

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