The Caps, Wizards and a new era for sports team relocations

Team owners want more than just stadiums and some cities might not fit the picture.

Photo by EJ Yao on Unsplash

This week’s newsletter is going to be a little different. I’m thinking a lot about the surprising announcement this week that the Washington Capitals and Wizards are moving to Virginia and what it means for D.C. So, thank you for indulging me as I share my reaction and—of course—maintain my nerd street cred (is that a thing?) by connecting it back to public finance.

The Abe Pollin gift

When I first arrived in D.C. as a college student in 1998, the city’s Chinatown neighborhood was in the early stages of its transition from hollowed-out city center to a bustling center of nightlife. Back then, the rule was to explore that part of the city in packs and not to traverse too far past the newly minted sports arena (then called the MCI Center).

By the time I graduated college, that was no longer true. Chinatown and the entire Gallery Place neighborhood was becoming less gritty and more targeted by trendy restaurateurs and real estate developers. By the late 2000s, it was basically D.C.’s Times Square, anchored by the flashing jumbotrons outside the (then named) Verizon Center and lit-up signs and people stretching out in all directions.

The arena and the economic development that followed has lived in D.C. lore as the gift and legacy of Abe Pollin, who owned the city’s NHL and NBA teams for several decades.  “I don’t want to sound corny, [but] this is the nation’s capital,” Pollin reportedly said the night the arena opened in 1997. “It’s been good to me all my life. And I decided to do it. Not everything is dollars and cents.”

As the legend goes, back in 1993 Pollin wanted to move the teams from their paltry homes in the Maryland suburbs. After some back-and-forth between city officials, Pollin agreed to finance the cost of a new $200 million downtown arena (about $370 million in today’s dollars).

The District would pay for other costs, including purchasing the portion of the land it did not already own, preparing the site, and leasing the land back to Pollin below market rate. The city also expanded the Metro station, adding an entrance as part of the new arena.

This type of deal structure is more common now. But during the two decades after Pollin built the downtown arena with his own money, his approach stood out as a rarity while other sports team owners took a different tack. They wanted publicly financed stadiums with either upfront cash or tax breaks to cover the cost of building a new arena or stadium.

Wealthy team owners and the money we throw at them

Ironically, the success of DC’s downtown after the sports arena opened provided more ammunition for sports teams elsewhere to justify their claims that cities should pay for sports arenas because they’re good for economic development.

Team ownership isn’t really about sports anymore

Maybe it was inevitable that, as team owners looked around at all that economic activity they inspired, they’d want that too.

The new model for maximizing profit, as The Washington Posts’ Barry Svrluga puts it, is the Atlanta Braves’ Truist Park—a nondescript ballpark that opened outside Atlanta in 2017 and is surrounded by a brand new neighborhood teeming with life before and after every game. The team and Cobb County split the cost of the ballpark while the adjacent development, known as “Battery Atlanta,” is owned and financed by the Braves.

In 2020, SoFi Stadium opened in Inglewood, California, outside of Los Angeles. (Inglewood has long been passed over by developers, so I’ll concede location on this one.) Now home to the NFL’s LA Rams and Chargers, SoFi cost Rams owner Stan Kroenke $5 billion to build and is one component of his “Hollywood Park,” a master planned neighborhood in development. 

• Speaking of inevitable, Kroenke (practically a four-letter-word in St. Louis) purchased the 60-acre parcel years before he ended up moving the Rams from St. Louis back to Los Angeles.

And this year, negotiations between the MLB’s Baltimore Orioles and the state of Maryland have been dragging on. The team’s lease expires at the end of the year and Orioles’ CEO John Angelos has said he wants a long-term lease for the ballpark to include rights to redevelop areas around the park (most of which is owned by the state).

In this context, Caps and Wiz owner Ted Leonsis and his Monumental Sports & Entertainment group is only the most recent in what will probably be the next era of sports stadium development: real estate partnerships. Leonsis’ preliminary deal to move the teams to the D.C. suburb of Alexandria, Virgia, is a public-private partnership between Monumental and the state of Virginia on a $2 billion, 12-acre mixed-use entertainment complex. 

• Virginia agreed to contribute up to $200 million in transportation improvements for the project and issue $1.4 billion in bonds. The debt would be repaid using revenue generated by the project, including annual rent from Monumental.

• Monumental has agreed to contribute at least $400 million and its portion of the campus will include a new corporate headquarters, arena, team practice facility, television studio, a performing arts venue, and an expanded esports facility. 

Where does the new era of pro sports leave cities?

Cities may be losing what little leverage they do have. I was never a fan of giving tax breaks and cash to team owner, but—especially in the 1990s when the urban renaissance of the 2000s was still in the future—it was what cities had to give. Finding 12 or 60 spare acres in a good location to partner on is another story.

Pro sports in America has also changed a lot since Abe Pollin’s time. Nowadays, teams are just one slice of an entertainment mega-company’s portfolio and being a loyal team fan can feel like a one-sided relationship.

• Ted Leonsis makes wonderful promises. Ask D.C. what they’re worth.

• SF to Lose Historic Candlestick Park with 49er Move to Santa Clara

• Chargers fans angered by announcement that team is leaving San Diego for Los Angeles

Moreover, the quest for more of everything comes at a difficult time for cities as they face rising violent crime and have to reimagine their traditional downtown economic structure in the remote work era.

D.C. was prepared to offer Leonsis $500 million of the $600 million he said he wanted for arena renovations. But what Leonsis wanted wasn’t even really about the arena anymore. And a lot of cities might have a hard time measuring up to that.