Aubrey Layne was secretary of finance for a Democratic governor facing a Republican-controlled legislature in negotiations over the biggest economic development deal in Virginia history — Amazon HQ2, a national competition to land a $5 billion bid for the retail giant’s East Coast headquarters with up to 50,000 new jobs on the line.
Virginia won half of the prize — at least $2.5 billion in investment and 25,000 jobs, with potential for more — when Amazon chose a site in Arlington County’s Crystal City neighborhood in late 2018. It won in large part because of an unusual incentive package that legislators from both parties hammered out privately with then-Gov. Ralph Northam through a high-level commission that vets economic development deals.
More than five years later, a Republican governor and Democratic-controlled legislature face questions of credibility after the highly public collapse of a proposed $2 billion sports and entertainment district to lure two professional sports teams — the Washington Capitals and the Washington Wizards — to leave their home for a new arena in Alexandria that depended on Virginia’s credit rating to finance.
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Instead, the teams and their owner, Monumental Sports and Entertainment, will remain in Washington with a $515 million commitment from D.C. Mayor Muriel Bowser to renovate their downtown home at Capital One Arena and expand into the adjacent Gallery Place.
“It’s not a good look for Virginia,” said Layne, now a Hampton Roads health care executive, who had publicly supported the deal.
The blame game for the project’s failure is already in full swing, with Gov. Glenn Youngkin accusing Democratic leaders of letting “personal and political agendas” thwart “a deal with no upfront general fund money and no tax increases, that created tens of thousands of new jobs and billions in revenue for Virginia.”
Matt Kelly, CEO of Maryland-based JBG Smith, one of the governor’s private partners in the project, was even harsher, blaming “partisan politics and, most troubling, the influence of special interests” for killing the deal.
“The scheming and special interests that plagued this opportunity in the Virginia legislature will no doubt cause future employers and the next Monumental to question whether their opportunity will get a fair hearing,” said Kelly, whose real estate company is a partner of the state in the Amazon project under construction on property it owns or controls in Arlington.
Ted Leonsis, the teams’ owner, said Wednesday that some in Virginia never treated his $6 billion company with the respect it deserved, but D.C. did.
“And that was what the game changer was for us,” Leonsis told news media after signing the new deal with Bowser for the teams to remain at Capital One to 2050.
Virginia Dems blame Youngkin
But Democratic leaders, including those who supported the Monumental project, say the blame rests squarely with Youngkin, whom they say failed to include the legislature early in the process of putting together an agreement that could survive a close evaluation of its benefits and risks to Virginia taxpayers.
“That’s the role the General Assembly is supposed to play,” said House Appropriations Chairman Luke Torian, D-Prince William. He sponsored legislation for the project that ultimately died in the Senate because of concerns about its reliance on the state’s AAA credit rating for financing. “We’re supposed to raise the red flags and questions and have them answered. That is a part of responsible government.”
Torian is the newly appointed chairman of the Major Employment and Investment Project Approval Commission, known as MEI, which evaluates large economic development projects and state incentives for them. The commission played a central role in working with Northam and Republican leaders in both chambers to evaluate and shape an unusual incentive package to land the Amazon project without undue risk or up-front cost to the state.
The commission voted unanimously in December to pursue the Monumental project — then under the code name Project Potter — “with further details of the incentive package to be considered by the 2024 General Assembly.”
“Who would vote against this?” asked Del. Mark Sickles, D-Fairfax, a member of the commission and vice chairman of House Appropriations. “It is unlike any other MEI motion that normally includes a performance grant of some kind.”
House Speaker Don Scott Jr., D-Portsmouth, tried to keep negotiations alive when the project ran into trouble in the assembly, but he said, “I think the way MEI backed it was artificial.”
Scott said legislative leaders should have been at the table with Youngkin much earlier to evaluate the details of the proposed project and discuss their concerns about financing, transportation investments and protections for organized labor in a heavily Democratic city.
“MEI should not be a rubber stamp for the governor’s proposals,” he said.
Instead, Senate Majority Leader Scott Surovell, D-Fairfax, who sponsored legislation for the project, said Thursday, “As of today, there still has never been a meeting where all of the people got together in a room to talk about this.”
“If you don’t want this to be a partisan issue, you shouldn’t treat it like one,” Surovell said.
Timing was a factor
The timing also posed a challenge a little more than a month after legislative elections that gave Democrats the majority in both chambers. Many of the commission’s members were not returning to the assembly a month later because of retirement or election defeat.
“Notably, that included most of the senior leadership of the Senate who serve on MEI,” said Del. Lee Ware, R-Powhatan, a member who had resigned from the panel in 2018 in opposition to the Amazon deal but supported the Monumental project in December. “The new Senate leadership brought very different priorities to bear on the Monumental proposal in January.”
Chief among those missing in December was new Senate Finance Chair Louise Lucas, D-Portsmouth, the first African American to lead the powerful committee. Lucas acknowledged that she had received a “virtual briefing” in November from Secretary of Finance Steve Cummings, an ex officio member of the commission, but she felt shut out of the discussions that had shaped the proposal.
She ultimately blocked the proposal because of concerns Senate Finance staff expressed about using the state’s “moral obligation” to back a portion of the $1.5 billion in bonds that a proposed state authority would issue to finance the project. The debt would be repaid over 40 years by a variety of revenues, including future state taxes generated in the project’s first phase, covering 25 acres of the 70-acre site at Potomac Yard, including the arena and a Wizards practice facility.
Lucas prevented both Torian and Surovell’s bills from being heard by her committee. She cited “the chair’s prerogative,” just as then-Del. Chris Jones, R-Suffolk, did as chair of the House General Laws Committee to prevent his panel from hearing then-Gov. Bob McDonnell’s proposal to privatize the state liquor monopoly in 2011. She also excluded the proposal from the budget the Senate adopted and the subsequent compromise spending plan with the House.
Leonsis and D.C. kept talking
Meanwhile, Leonsis was talking to Bowser and other D.C. leaders about staying in Washington — with Youngkin’s knowledge and permission.
“Until 10 minutes ago, I had never signed a piece of paper,” Leonsis said Wednesday, emphasizing that he had no contract with Virginia. “And so my agreement with the governor was: I will work with you, we’ll work to do this. But if I’m sensing we’re not the center of attention, I should be free to be able to talk to anybody.”
Leonsis said Youngkin “gave me permission, if you will. ... He said: ‘Yeah, she’s your mayor, you’re in town, go for it.’ “
The District had already made clear that it intended to go to court to enforce the terms of its lease with Monumental, requiring the Capitals and Wizards to remain at Capital One through 2047. Leonsis said the legal threat did not prompt his decision.
But Torian said the teams’ potential legal obligation to the city and Leonsis’ ongoing talks with D.C. leaders vindicated Lucas’ concerns about Virginia being stuck with the responsibility for repaying the bonds if Monumental changed its plans in the future.
“At the end of the day, whether people want to acknowledge it or not, the senator was right,” Torian said.
Lucas will be one of the 12 members of the newly constituted MEI Commission when it meets next month.