dcist: Metro, Stadium Deal, Data Centers Among Northern Virginia Issues On The General Assembly Docket

Virginia lawmakers will head to Richmond on Jan. 10 for the start of the General Assembly session, which lasts until mid-March.

There’s a brand new legislative office building, and many of the people jockeying for the best offices will be new, too. Both parties saw a raft of post-redistricting retirements and incumbent losses, leading to a cohort of newly minted legislators headed to Richmond.

The balance of power has shifted, too, after Democrats won narrow majorities in both the House of Delegates, which had been held by Republicans, and holding on to the state senate in the November election. They now have unified control of the legislature — and the threat of Republican Gov. Glenn Youngkin’s veto pen.

That will be the new balance of power in January as lawmakers consider legislation on a number of enormously consequential issues in Northern Virginia, including state support to assuage Metro’s massive budget woes, the proposed stadium deal to bring the Washington Wizards and Capitals to Alexandria, and calls to better regulate the data center industry.

Some political watchers in Northern Virginia raised questions about whether the retirements of veteran lawmakers like longtime senate Majority Leader Dick Saslaw (D-Fairfax) and state Sen. Janet Howell, the former co-chair of the powerful Finance and Appropriations Committee, would hurt the region’s clout in the General Assembly. Many veterans of the legislature will indeed be gone, taking their longstanding relationships and legislative know-how with them. But some early indications suggest the dire predictions of loss of influence for the region won’t come to pass: Northern Virginia lawmakers will reportedly control more than half of the committee chair positions in the House of Delegates, and Senate Democrats picked another Fairfax Democrat, Sen. Scott Surovell, to succeed Saslaw as Majority Leader.

Surovell will become the first new caucus leader Senate Democrats have had since 1995.

“I sort of liken the job to being the chief border collie,” Surovell said in an interview with DCist/WAMU. “You basically have to keep people together by sort of gentle nudges and a lot of talking and keeping your relationships strong.”

Surovell and other Northern Virginia leaders will have plenty of herding to do. The primary focus of the session is likely to be deliberations over the Youngkin administration’s proposed two-year budget. The General Assembly must pass the budget in time for the July 1 fiscal year changeover. With such a short legislative session, lawmakers typically end up down to the wire, finalizing the budget in a special session.

Youngkin’s budget plan, released in late December, reduces personal income taxes by 12% and fills that gap in state revenue with an increase in sales tax from 4.3% to 5.2%. The proposal also expands the sales tax to apply to digital purchases like streaming services, data storage, and downloads. It would also slightly raise the state’s earned income tax credit refund, which would benefit lower-income Virginians (Democrats have long pushed for a full refund). Over the two-year budget period, the state would lose about $1 billion in tax revenue overall.

Virginia Democrats have already voiced skepticism at Youngkin’s proposals, which they say generally shift the tax burden from higher to lower income people and will result in less funding for K-12 education.

In the lead-up to the budget announcement, Youngkin highlighted support for early childhood education, funding to strengthen the state’s mental health system, and help for students behind in school after the pandemic. Those priorities could be areas of agreement between the administration and Democrats in the General Assembly — assuming they can work out the specifics.

Metro’s dire funding outlook

Metro is facing a major budget deficit of $750 million that could force it into dramatic service cuts, including the closure of 10 stations and the elimination of close to half of all Metrobus routes.

Metro General Manager Randy Clarke and Metro leadership hope to ultimately convince local leaders to chip in $665 million in additional subsidies, including $180 million from Virginia, a more than 50% increase over recent annual subsidy levels. By law, Virginia and Maryland cap the annual increases to their Metro subsidies at 3%, a hurdle lawmakers will have to overcome through legislative or administrative means. The negotiations over that funding will need to happen by April, when the Metro Board passes its own budget — and approves the possible service cuts.

Even if Virginia lawmakers manage to help Metro in the immediate term, there are also long-term structural issues in how the service is funded to consider.

The 3% cap is a legal limit that “[does] not include any indexing or factors for inflation,” the Northern Virginia Transportation Commission notes in its end-of-year report on Metro.

Youngkin’s proposed budget includes no new increases for Metro. After his budget announcement, the governor said he recognizes the importance of the service but isn’t convinced it has a viable “business plan,” and wants to see one before Virginia offers up additional funding.

That approach sets up a disagreement with Northern Virginia Democrats. Surovell, a longtime transit advocate, calls Metro “the rocket fuel of the DMV economy.” He says leaders in the General Assembly are working on coming up with $150 million in this year’s budget to help solve the immediate fiscal crisis at Metro.

Funding Metro in the state budget in Virginia has traditionally been a tough sell for lawmakers outside of Northern Virginia, but Surovell argues the transit service is a crucial state priority, not solely a regional one.

“40% of the state’s income tax revenue comes out of Northern Virginia,” he says. “Northern Virginia’s tax revenue is what funds education and health care in the rest of Virginia.” And much of that revenue, he says, comes out of dense new development near Metro stations.

The Northern Virginia Transportation Commission, for its part, estimates that Metrorail alone generates about $1 billion personal income tax and sales tax revenue for Virginia. (The NVTC is in charge of managing Virginia’s funding for Metro.)

Surovell wants Virginia lawmakers to eventually come up with “a long-term, sustainable funding source for Metro,” and says he’s heard discussions about a regional sales tax or regional hotel tax as a dedicated stream of money to keep the service going. But that broader discussion won’t happen this session, he says.

“There just isn’t enough time for all three states to reach consensus and agree in just two or three months,” he says.

Stadium deal

In a surprise move in mid-December, the Youngkin administration announced a deal with Monumental Sports owner Ted Leonsis to bring the Washington Wizards and Capitals to a brand new stadium in Alexandria’s Potomac Yard neighborhood in 2028, meaning the teams would abandon their home at Capital One Arena in downtown D.C. for the Northern Virginia suburbs.

The stadium would be part of a larger entertainment district, with a concert venue, offices and practice facilities for Monumental and its teams, an underground parking garage, plus mixed-use retail and apartment buildings and two hotels. The full complex would generate 30,000 permanent jobs and produce 2.5 times the economic output of other possible development options for the site, according to an analysis commissioned by the Alexandria Economic Development Partnership.

The deal, which is not yet finalized, will need to be approved by the General Assembly, which would have to vote to create the Virginia Sports and Entertainment Authority, the future owner of the stadium. The plans will also require approval from the Alexandria City Council.

Youngkin’s budget plan includes $500,000 to fund further negotiations for the stadium deal, and has language setting up the structure and powers of the proposed sports authority.

Since the announcement, city and state officials have sought to allay resident concerns about the impact an influx of sports fans on traffic and transit in the area. They’ve also talked up the partnership with Leonsis as a good deal for Alexandria and the commonwealth, noting the debt on the project will be repaid through a combination of lease payments from Monumental, parking fees, naming rights to the new stadium and entertainment district, and “incremental taxes generated by the facility.”

Tax increment financing (TIF) is a method for paying back the debt on major capital projects through the increase in property tax values created by those projects.

A study of the deal’s financials by JPMorgan Chase suggests the proposed complex could receive $1.35 billion in state and local funds, the largest-ever public subsidy for a stadium project, according to The Washington Post, which first reported the study. Much of that very large number, Virginia officials argue, will come from tax revenue from the entertainment district, which they say otherwise wouldn’t exist.

The ultimate structure of the deal — which is still being worked out — is likely to determine the level of exposure for Virginia taxpayers, particularly their responsibility for paying back the debt on public bonds used to build the project should the project’s much-touted economic benefits not materialize. Critics note sports stadiums often fall flat as public investments, failing to deliver on the economic gains they promise.

In an interview, Surovell said the initial agreement was a sign of Virginia’s economic success, but maintained the General Assembly will need to examine the project more closely before approving it.

“The deal itself needs to be vetted to make sure it’s financially prudent, make sure there’s no taxpayer risk, and make sure that we know how we’re going to move people in and out of the project,” he said.

In 2022, the General Assembly considered but ultimately didn’t move forward with a plan designed to lure the Washington Commanders to a new suburban stadium in Loudoun or Prince William counties. Support for the project fell apart over concerns about the financing of the project and skepticism about poor organizational culture under then-owner Dan Snyder.

Surovell said the General Assembly’s decision in the Commanders case isn’t predictive of how the Monumental deal could go.

“Football teams only play, you know, at home like eight, nine, ten times a year, whereas we’re talking about 200 events a year in this facility,” he said.

Data centers

Land-use decisions of all kinds can be controversial in Northern Virginia, where space is at a premium and costs are high. That’s especially been true lately of data centers, the massive warehouses that are home to the physical infrastructure of the internet.

Northern Virginia is home to the largest concentration of data centers in the country, mostly focused in Loudoun County and (increasingly) Prince William County. Many local officials are eager for the large sums of commercial tax revenue the data centers bring with them. In some cases, that’s paid off: Loudoun County receives more than $600 million in tax revenue from data centers annually. Prince William County’s recently-approved (and highly-controversial) Digital Gateway proposal is expected to net the county $400 million per year.

But environmental groups — and some state lawmakers — are increasingly raising concerns about the industry’s expanding footprint and what it means for Northern Virginia’s rural landscapes, drinking water, and power demands. Thirty such groups banded together in December to form the Data Center Reform Coalition, which will advocate for limits on the industry. The Coalition’s announcement featured all three members of western Prince William County’s future General Assembly delegation: Del.-elect Josh Thomas (D-Manassas), Del.-elect Ian Lovejoy (R-Bristow), and state Sen.-elect Danica Roem (D-Manassas).

Advocates particularly point to questions about how the state’s electrical grid will sustain what PJM, the grid operator for the Mid-Atlantic, calls “an unprecedented rate” of demand for power from data centers, which could double Virginia’s peak energy demand through 2038 and complicate the state’s clean energy transition.

Until now, decisions about where to put data centers and how to regulate them have fallen almost entirely on local land-use decision-making, with no overarching consideration for the cumulative impact of the industry regionally or on a statewide basis. But now the state’s independent legislative auditor, JLARC, is undertaking a study of the industry’s impact across the commonwealth.

Surovell said he anticipates the report will provide a direction for state lawmakers in tackling the issue. Data centers, he said, are “the goose that lays the golden eggs” for localities, but he also acknowledged the need for a closer look at the energy requirements of the industry.

“Unbridled data center growth is kind of like how we built out the suburbs over the last 40 years and then didn’t even think about who was going to pay for the roads to get everybody from their houses into their jobs,” he said. “It’s something we have to think about.”

Roem, who will be new to the Virginia State Senate but has served in the House of Delegates since 2018, has made attempts in the past to curb what she and advocates refer to as “data center sprawl.” Last year, she put forward bills to limit data centers’ proximity to state and national parks and pushed to require some of the high-voltage transmission lines required to power data centers to be buried underground.

In an interview, Roem told DCist/WAMU she’s also considering a new proposal this year to require localities to complete certain environmental assessments, like water studies, on data center projects before approving them, as well as possible ways to ease the impact of the light and noise of the centers.

Roem said data center reform has been an uphill battle in the General Assembly in the past.

“They’re like, ‘Danica, have you tried this new meditation called shutting up?’ … that’s pretty much how I get treated when I bring up data center stuff in the General Assembly,” she said.

But she believes politics may be changing on the issue. The industry is concentrated in the Northern Virginia exurbs, which was a key battleground for Democrats this past November and will likely be again in future elections. Roem and Thomas both won races that were crucial in handing Democrats their new majority in the House of Delegates and holding onto the state senate. Now, Roem says, those voters expect action.

“Our Democratic majority understand intricately that we need to have deliverables on controlling data centers sprawl that’s not just studies,” she said.

That may come into conflict with Gov. Glenn Youngkin’s veto pen, however. Youngkin has celebrated industry expansion in Virginia, and the state’s economic development authority counts data centers as a “targeted industry.”