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Money for nothing and teams for free [1]

['More From Author', 'February', 'Thomas Wolf']

Date: 2024-02-16

Before committing $1.5 million of public funds to a proposed project, you would expect the decision maker to have analyzed the deal pretty closely. How solid are the projected costs? How reliable are the projected returns?

Before committing a thousand times that amount – $1.5 billion—you would expect an irrefutably solid analysis, right? No reasonably intelligent person could possibly justify such a massive commitment without knowing for certain that the numbers behind the recommended investment were real. And the due diligence should be even more rigorous when the investment is to benefit a private individual who, having the means to make the investment himself, refuses to do so.

Let’s hope our Virginia legislators fall into the category of “reasonably intelligent.” On behalf of Virginia taxpayers, Gov. Glenn Youngkin is asking them to buy into his “free money for billionaires” scheme to build a sports and entertainment complex that will enable megarich Ted Leonsis to move his professional sports teams (NBA’s Washington Wizards and NHL’s Washington Capitals) from downtown D.C. to Alexandria. Unfortunately, the House of Delegates, which passed a bill to give Youngkin’s proposal the green light 59 to 40 on Tuesday, February 13, is hell-bent on creating an unprecedented new authority, with unprecedented power over taxes and debt creation, based solely on the governor’s propaganda promoting this deal. And they are willing to overlook the theft of a major asset in a Black-dominated sport from a minority neighborhood in our nation’s capital to move it to one of the whitest urban areas in America.

It remains to be seen what the Senate Finance & Appropriations Committee will do with the House bill (it killed the senate version), but the proposal is still part of Youngkin’s yet-to-be-debated state budget proposal and can be maneuvered into a no-amendment, up-or-down vote on the budget.

Just how gullible or negligent are our delegates and senators? Based on an undisclosed study, Youngkin insists the project will make tons of money for Virginia without costing taxpayers a penny. Will our legislators simply take the governor’s word that his secret study actually justifies the largest public subsidy of a sports arena in U.S. history? Can’t they figure out that, if the study really validated his proposal, he would be eager to share it? And, if he wanted a reliable study, wouldn’t he make sure it was done by disinterested experts?

Based on my conversations with several legislators in both the House and Senate, it appears that no legislator has demanded to see JPMorgan’s undisclosed study that — ”just trust me”— supposedly shows this will be the most wonderful investment ever of taxpayer money to benefit a billionaire. And no legislator has demanded to know whether the author of the study is unbiased or, instead, is irredeemably compromised by their own financial interest in the project.

As the City of Richmond learned through its arrangement to bring the then-Redskins to Richmond for summer practice, projections based on proprietary numbers from team owners are completely unreliable. That “can’t lose” proposition ended up costing Richmond taxpayers millions of dollars.

Ironically, JPMorgan named the study “Project Potter,” either because it’s pure fantasy, like the Harry Potter books, or it’s the very picture of uncontrolled greed, like Henry F. Potter in “It’s a Wonderful Life,” the richest guy in town who insisted on taking everyone else’s money to make himself richer.

Shame on any legislator who would vote to advance this proposal on such incompetent evidence.

Editor’s note: This column has been corrected to reflect that J.P. Morgan has no ownership interest in the land that would be sold to the arena authority. J.P. Morgan Global Alternatives is an advisor, on behalf of J.P. Morgan clients, to a private investor in the joint venture that co-owns the property.

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