This week, Michael is joined by Greg LeRoy of Good Jobs First to break down the latest on the Northern Virginia arena deal which died in the General Assembly Session. While there's still a chance it'll get resurrected this year, that's looking unlikely--with Senator Lucas holding fast to her opposition and the one-page report full of questionable estimates. Plus, what does it mean that a Monumental executive cancelled last-minute before appearing on this episode?

Episode Transcript

Michael Pope  

I'm Michael Pope. And this is Pod Virginia, a podcast that may be seeing the final days for the proposed sports arena in Alexandria. The General Assembly has already rejected this thing once. Now, Governor Glenn Youngkin can resurrect a proposal by making a budget amendment or maybe even calling for a special session later this year. But all that might be futile because opposition to that plan may have outstripped the ability of supporters to make it happen. And we've got a great guest here today to help us understand the latest developments and what might come next. He is the author of The Great American Jobs Scam, Corporate Tax Dodging, and the Myth of Job Creation. He's also the executive director of Good Jobs First, a nonprofit research group on economic development. He appeared on this podcast back in December when the arena proposal was first announced, and he is now returning to Pod Virginia. Greg LeRoy. Thanks for joining us. 

Greg Leroy  

Great to be with you, Michael. 

Michael Pope  

So much has happened since you were last on the show. I want to start by talking about the guest who is not joining us for the show today. We were supposed to be joined by the chief administrative officer and President of External Affairs for Monumental Sports and Entertainment, Monica Dixon. It was an interview that was actually scheduled weeks in advance to coincide with a panel discussion hosted by Agenda Alexandria next week. And at the last possible minute, she canceled on us citing immovable pieces on the calendar. Greg Leroy, what do you make of this Monumental executive agreeing to be on the podcast and then pulling out at the last possible minute? 

Greg Leroy  

Well, it suggests that the company is pessimistic about its prospects in Virginia. You know, it's just axiomatic that if she thought there was still a fight to be had or a victory to be snatched from the jaws of defeat, she would make every effort to make their case to the public. And this is a high-profile podcast; why would you dodge it? 

Michael Pope  

I mean, I was giving her a runway to let our listeners know her side of the story. And I guess they decided that was an opportunity they didn't want to take. I want to follow up with a topic our listeners have heard me talk about many times, perhaps too many times. And that is the prediction that the arena proposal will create 30,000 jobs. So the city of Alexandria, Monumental, and the Alexandria Economic Development Partnership have all yet to provide any serious documentation as to exactly how they arrived at that number. However, they finally provided some details to me 54 days after I made the inquiry back in January. Greg Leroy, why do you think the city waited 54 days to provide a one-page document to me outlining their thinking on this?

Greg Leroy  

I think that's because it's a document that doesn't stand up to scrutiny very well. I've been looking at it again today. And there are problematic issues here; a big chunk of, more than half, the job numbers come in these office jobs. These service sector jobs, they assume, will be attracted to adjoining development in the footprint. But that's very speculative because you don't know. It's reasonable to assume that many of the spaces that would get occupied would be companies moving from elsewhere in Northern Virginia. Maybe they want a better location, maybe they want to be closer to a metro station, maybe they want to be closer to the National Airport. Maybe they think it's class A space instead of the Class B that they're currently in. Obviously, to the extent that the project would just be pirating activity from other places in Northern Virginia, it would not be a net gain for the region; it would just be moving things around. So, to me, that really stood out, and obviously, the whole problem now is with Office Space jobs. We know commercial real estate values have plunged since the pandemic because so many people are not working in their offices anymore. The rate of rent that can be commanded, the resale prices, and property tax assessment rates of commercial office properties are going down as a result of that. So, in the same way, we're having big vacancy rates with malls and retail space because of the rise of e-commerce and the rise of the internet and online shopping. I think we're seeing a sea change in the office building market as well. And yet the numbers, the projected benefit numbers, and the job creation numbers for that study justifying the arena deal rest very heavily on those kinds of jobs. I just don't think it's a good bet.

Michael Pope  

This week, I was finally able to interview Stephanie Landrum, the president and CEO of the Alexandria Economic Development Partnership. She explained to me that the reason for that 54-day delay was that they never intended to release the information at all. She says they cannot release information while they are still negotiating. So perhaps the problem is with you, Greg Leroy, for expecting to have public information about a private negotiation. 

Greg Leroy  

Yeah. So, look, this comes up sometimes. But in this context, that's a completely false argument, in my humble opinion. And here's why. You know, when negotiations are happening for incentives, and especially in a very public facility like this, where there's gonna be lots of taxpayer exposure, lots of big land use changes, lots of people's daily lives affected, you can't allow the underlying paperwork to remain secret, it has to be subject to public scrutiny, especially for the very issues we're talking about tonight. The underlying assumption is, is there a reasonable bet for the government to bet on these kinds of numbers this many years out? In markets that are so uncertain today. By hiding documents like this, the partnership would be saying, we know best; we don't want to crowdsource any wisdom on this; just get out of our way, and trust us. And for huge projects like this, with so much on the line, I can't buy that.

Michael Pope  

One more thing: Stephanie Landrum of ADP told me this week that I'd love to get your opinion; she says the kind of detail I was asking for is not a normal part of what gets released to the public because it includes proprietary information. So she told me this quote shows other businesses how we evaluate projects, and it will give them better information to negotiate with jurisdictions moving forward, unquote. So, I'm curious about your thoughts on this. Are these kinds of details about public financing always hidden behind this wall of secrecy in the name of protecting proprietary information?

Greg Leroy  

I am laughing at two accounts. For one, there's nothing proprietary in this document that she finally coughed up. By definition of proprietary, we mean information about Monumental Sports Incorporated that would harm it if a competitor saw it. There's no competing company; there's nothing here. These are very broad stroke numbers based on regional economics. They're not even specific to the company, its business plan, its intellectual property, patents, or anything that would normally be classified as proprietary business information in an incentive proposal. So I'm laughing on that account. And second, documents like this are all over the place. There are hundreds of firms that generate studies like this. Thousands of deals have been covered by journalists, written up by academics, and discussed by nonprofit people like me for decades. So, anybody who wants to learn how the game is played is there to see.

Michael Pope  

Well, you say there was nothing in the document that they finally coughed up that was proprietary. I think you could argue that they withheld all the proprietary information. I mean, is there some level of concern about releasing proprietary information? For example, they didn't release any proprietary information here.

Greg Leroy  

Without any notation here saying what it was, they might have left out; it's hard to know. There was a little bit of redaction, as I noticed on page 11. I guess they're talking about revenue from some specific kinds of retail establishments that might be Target. And again, that's ludicrous because you're saying we're going to have a clothing store. We don't name the clothing store. We don't say the style of clothing. We don't say how many square feet it's gonna be. You know, how can you redact that kind of information? I just think it strikes me as kind of laughable. And again, by redacting that kind of information, you're denying knowledgeable people the right to look at this and say, Gee, I think that's a high number for clothing, or Gee, wouldn't we sell more clothing than that? Let's let it all air out.

Michael Pope  

I think this discussion about keeping so-called proprietary information secret kind of aligns with a topic of discussion that I've talked about in this podcast many times in a different context, which is what I call the fetish for secret government. Part of the process of the General Assembly is when everything goes behind closed doors. They make decisions in meetings with conference committees that are not open to the public or the press, and they're all sort of done in secret. And as much as I complained about this on the podcast, I can't seem to get people to care about it. I think a lot of people just assume, if it's in secret, that it shouldn't be in public and that we shouldn't know about it. I mean, is this information that the public actually has a right to know?

Greg Leroy  

Absolutely. Look, if the CIA is briefing the Senate Intelligence Committee on a threat from an enemy, that's one thing, that's not what this is. This is people debating in Richmond the terms of a deal they want to give a company. That's a public issue. And it should be public, you know, Open Meetings Act, and in my opinion, it's not a personnel issue. It's not a personnel litigation issue that you might properly keep secret in order to protect somebody's personal privacy. That's not what this is. So no, in my opinion, it's completely unjustified, especially for huge projects like this involving a billion dollars of state and local debt in which the taxpayers could be on the hook if a single company's business plan doesn't pan out over 40 years. You know, that's a big bet.

Michael Pope  

Well, speaking of the big bet, I want to talk about some assumptions that are behind that bet. So, our friends at the Washington Post got their hands on a document that outlined some of the financial assumptions here. A few examples are the expectation that people would pay $75 for a parking space and $730 for a hotel room. What did you make of that report in The Washington Post?

Greg Leroy  

Well, I'm glad they got their hands on it. And this is a fascinating story here. First of all, the company that did the report is called MuniCap, which is based in Maryland. It's a very prominent company in the space here on the eastern seaboard. And two of the primary services that MuniCap provides are doing studies like this one. You know, verifying the financing plan of a proposed economic development project. They also run such projects, administer TIF districts, and redevelop authorities in certain areas. So they have a self-interest, frankly, in the creation of new entities around these big projects. Because sometimes they also make money managing them. It's not a company known for saying, no, let's put it that way. So for them to even use these oblique, faint praise terms that the Post quoted, say, Gee, that's kind of aggressive, and take together those who are a little bit on the high side. In my opinion, that's remarkable for a firm like that to be saying it. The Post, in its fairness, points out that there are some premium hotel rooms that players and entertainers use when they visit the existing facility at Capital One Arena in DC. And they make the point that, at least at the Capital One arena parking garage itself, they get a high rate for some spaces, so there is a premium market for some of these spaces. But again, betting that you're going to get enough revenue off of those to pay all this debt. Because it's those fees and other fees generated in this little footprint that is going to back up all that debt, the state is going to float. That's a risky bet.

Michael Pope  

Well, I mean, they do have to make some kind of assumptions about the revenue that would come from parking and the revenue that would come from hotels. I mean, is this a logical expectation of the money they would pull in? Or were they just inventing numbers to get the result that they wanted?

Greg Leroy  

I take them at their word that they looked at some comparables, but what the Post pointed out is that the prevailing hotel night rate in Northern Virginia nearby is less than 1/3 of $751. The prevailing parking rate and other garages nearby is $15, or $20, not $75. So you can't assume everybody going to the concerts or games is going to pay for this. You also have to assume that the existence of new capacity is going to cannibalize some of the businesses going to their existing hotels and existing parking garages. 

Michael Pope  

I also want to ask you about a report in the Baltimore Banner. The headline is Ted Leonsis has talked to Governor Wes Moore about arena plans. And the story includes this nugget, quote, a source with direct knowledge of the situation told the Baltimore Banner that Maryland governor Wes Moore and Leonis discussed the idea of bringing the NBA and NHL teams to Maryland after Virginia lawmakers left out plans for a new Wizards and Capitals arena from the state budget this month. What do you make of this development? 

Greg Leroy  

Well, the cynical assumption would be that this is a move to put pressure on everybody in Richmond by creating the appearance of having an alternative bid from a neighboring state, which is pressure. You know, I can't read Monumental's mind, but certainly, if that's their intent, it may be having that effect. There may be some people in the legislature saying to wait a minute, maybe take another look at this thing, or gee, we didn't think about that option. Youngkins people may be using it as leverage to say we told you so. So, who knows? It's certainly a classic site location manipulation behavior. We know that companies, not entertainment companies, but manufacturing companies and financial services companies when shopping for a place, play places off against each other. Usually, they're done in secret; the auctions are done secretly. This is an unusually public auction because of the very public nature of the entertainment business. But is this classic site location 101 playing places off against each other to up the ante? Even if you think where you want to go, play dumb and get everybody to put as much money on the table as they can. Hoping that your preferred location comes up with lots of cash for you. It's a comment on how the balance of power and negotiating power between the public and private sectors in economic development in America has evolved since the 1930s. There's a lot of history and moving parts of this history that I talked about in my book. The corporate side of the table really dominates because they dominate the information, hence all the secrecy about negotiations, for example. 

Michael Pope  

So, do you think one possible scenario would be that either Leonsis or Monumental intentionally leaked this story to pressure members of the General Assembly to take action?

Greg Leroy  

If that was their intent, that would be a rational act. I'll put it that way.

Michael Pope  

I mean, a rational act, that's what they expected. But is that the kind of thing that would work? I mean, members of the General Assembly who are opposed to this have a long list of reasons for their opposition. And I don't see this changing for those reasons.

Greg Leroy  

Perhaps not. I mean, again, who knows the calculus here. Do they think they have so much power they can muscle their way back? By making a threat like this or creating an appearance like this? Who knows what their calculus is? Maybe they feel they don't have anything to lose. Obviously, Mayor Bowser in DC is waving her $500 million rehab flag, again, publicly, I noticed. So it could just be the company playing hardball down the stretch to see if they can get what they want in Richmond.

Michael Pope  

I'm also interested in getting your thoughts on the PR approach here. They waited 54 days to respond to an information request about the 30,000 jobs. They scheduled an appearance on a podcast from one of their main executives and then canceled at the last minute. I just feel like the public relations part of this has been lacking over and over again. What do you make of that? And is that standard for this kind of deal?

Greg Leroy  

So, obviously, we're talking about two different entities when you refer to these things, right. One is the Alexandria partnership, and one is the team itself or the sports company itself. In my opinion, if a company is asking for a big favor like this, and it's very public because of the public nature of the entertainment business. And the high degree of public ownership and involvement in the project itself and forthrightness works. I think you don't act secretively; you don't act like you're trying to hide something. When you hide something around a high-profile project like this, it creates the appearance that there's something worth hiding. And that's the last thing you want. You need the people in the middle; you're going into a system, and you'll have your supporters and your detractors, who may be known already to some degree. But there's a whole bunch of people in the middle who you can persuade to your side if you look reasonable and positive and not suspicious. And this doesn't help in that middle area of persuasion. 

Michael Pope  

On the topic of persuasion, I want to talk about Senator Louise Lucas from the Hampton Roads area. She is chairwoman of the Senate Finance and Appropriations Committee. She started the General Assembly session in January with a hard no and said that she would not change her mind. Nobody seemed to listen to her or take what she said to heart. I spoke to her a number of times during the session, and she kept telling me that she was hard No and that she would not be changing her mind. So when the session ended, she killed the deal. I think a lot of people were surprised. But those people who were surprised were not listening to Senator Lucas, who told people all along that she was a hard no and would not be changing her mind. In terms of persuading people, I think the supporters of this thing are clinging to some kind of hope that Senator Lucas is going to change her mind. Still, I just don't see that happening. I mean, what is the path to victory here from your perspective? What would you imagine a path to victory would look like in order to make this happen?

Greg Leroy  

You know, I've never met the senator, and I've never spoken with her. But what you're telling me about her is consistent with things I've heard and read about her from other sources. She sounds like she's really got principles, and she's sticking to them. And I applaud her for that. Anybody who looks hard at the economics of stadium and entertainment arena deals has to be skeptical; it's a recurring theme nationwide. You know, we generally don't work a lot on stadium and sports deals at Good Jobs First. We comment on them, and we look at them when asked, but we don't take them seriously as economic development. Because there's just a 50-year bipartisan consensus, a very resounding consensus, that they don't equal economic development. When you build a new arena, and you say you're gonna attract 51 more shows a year, what does that just mean? You're gonna capitalize and take from Jiffy Lube live Wol,f Trap, and Capital One. How do you justify that kind of activity? Those kinds of claims, I guess, are what I'm saying. Obviously, there are so many other things that the state of Virginia could do with that much money to improve transportation, improve education, improve health care, and be ready for the next pandemic; there are lots of unmet needs. Obviously, the amount of aid coming from the federal government post-pandemic is tapering off now. It's affecting a lot of local government budgets, especially so I, again, I don't know Senator Lucas and have never talked to her. Still, I applaud anybody in public office sticking to their principles. 

Michael Pope  

You just said something I want to unpack, which is 40 years of data that show us pretty consistently that this is a bad deal for taxpayers. And there's not a good example of when this ever was a good deal for taxpayers. One of the questions I asked Stephanie Landrum this week is Okay, give me an example. We've got all this data about really bad examples. Give me a good example that would be a model for what the city wants to do. And so she pointed to the battery district in Georgia. So this is in Cobb County; the county spent $300 million in taxpayers' funds to construct Truist Park to host the Atlanta Braves. So, advocates said the deal would be a home run. But I think there's some question as to whether or not this district has really been good for the taxpayers who made the investment.

Greg Leroy  

Yeah, there's an economist at Kennesaw State University named J.C. Bradbury. He's one of a number of sports economists in the space who have looked at many different cities and deals, but he lives there and has unpacked this deal on its fifth anniversary because it played out in 2019. And he's basically saying that none of the projections for net gains to Cobb County have played out, not in sales or tax revenue, not in property tax revenue, not in property values. So it's not paying for itself; the way it was supposed to be what he's finding. And that's not unusual. Because people in Cobb County, just like people in Northern Virginia, are not going to have more money with which to entertain themselves, because they have a new place to entertain themselves, they're not gonna have more money or more time, frankly, to entertain, or recreate. If Ted Leonsis wanted to take on all that debt risk and make it work for himself and be on the hook for defaulting on that much debt. That would be one thing. But entertainment is not a vital economic activity. This is not solving polio. This is not in longing for people's life expectancies. This is not improving people's quality of life or solving climate change. These are basketball and hockey games, which are wonderful. And we're going to have them here because we're a big market, a big, fat, wealthy market. And we're always going to have professional sports teams here that entertain us. But we don't have to put ourselves on the hook for it.

Michael Pope  

I'm going to ask you a trick question next—the same question people ask me all the time. I live in Alexandria, and when I run into people at the grocery store or at the gym, they always ask me the same question: Is this going to happen or not? 

Greg Leroy  

I would not bet on it at all. It looks very wobbly to me at this point. 

Michael Pope  

Why do you say that? 

Greg Leroy  

Well, the latest data point, obviously, is the Monumental Sports Vice President dodging and canceling on you for this podcast. To me, that says we're not pushing this idea to the Northern Virginia audience anymore. But I also think the MuniCap revelations, the job creation, questionable assumptions. And a lot of local outcry, let's not forget, there's a lot of people in Northern Virginia who have been down to Richmond to voice their opposition to this and on the merits of quality of life. You know, opportunity costs, there are better things to do with the land. It doesn't do great things for your neighborhood to have tons of people 200 times a year come and stay for a very short period and then leave; they want to go to the arena. They don't care about your community, necessarily, and most of them don't live there. So that's on the merits. 

Michael Pope  

For our listeners who are in Northern Virginia, I wanted to let you know about an event. Next week, Monday night in Alexandria at the Lyceum in Old Town at seven o'clock. There's going to be a panel discussion about the arena proposal. We've got former Alexandria Vice Mayor Andrew McDonald. We also have Dr. Dennis Coates, a professor of economics at the University of Maryland Baltimore County. Plus, Katie Waynick, who's president of the Delray Citizens Association. Tom Kopko is a board member of the Cameron Station Civic Association. So that is Monday night at 7pm at the Lyceum in Old Town, Alexandria, we would love to see you there. This podcast was actually supposed to be a promotional vehicle to let people know about that event by having Monica Dixon from Monumental on here. Still, she's not here to talk about it. That's why we invited Greg Leroy to come back to Pod Virginia. We really appreciate you coming back to Pod Virginia to help us understand the latest developments with the arena proposal. And the other thoughts here. What should people be thinking about when they read the latest headlines or listen to the podcast? What should people be thinking about?

Greg Leroy  

People should be grateful that it looks like Virginia is going to dodge a bullet and not take a big bet on a risky deal whose benefits are very likely inflated. And they should be looking forward to better use of that valuable land in that wonderfully situated area. Building on all the good ripple effects already occurring from the Amazon HQ 2 project and the Virginia Tech campus project. Good things are happening adjacent to the site, and the economy will be great. People can still go and see the Caps and Wizards over at Capital One Arena in Washington, DC.

Michael Pope  

Or maybe even in Maryland.

Greg Leroy  

Who knows. 

Michael Pope  

All right. You have been listening to Greg Leroy, the executive director of Good Jobs First, a nonprofit research group on economic development. Thanks for coming back on Pod Virginia.

Greg Leroy  

Great to be with you, Michael. Good evening.