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Bowser, Leonsis reach tentative deal for Wizards practice facility at St. Elizabeths

The Wizards plan to open a state-of-the-art practice facility at the former St. Elizabeths hospital, in Southeast. Other redevelopment efforts there have failed. (Bill O’Leary/The Washington Post)

D.C. Mayor Muriel E. Bowser has reached a tentative deal to build a $56.3 million Wizards basketball practice facility and Mystics arena for majority team owner Ted Leonsis on the east campus of the former St. Elizabeths hospital in one of the poorest corners of the nation’s capital.

Details are still in flux, but officials said the city plans to build and own the facility while the teams’ owner would contribute $10 million to aid the surrounding neighborhood. Events DC, the District’s quasi-public convention and sports agency, would manage the property and contribute up to $32.5 million of the cost.

The project would include a modern training center similar to those other NBA teams have built in recent years. The Mystics would move their home games to a 5,000-seat arena at St. Elizabeths from the Verizon Center.

Max Brown, chair of Events DC, said the project marked a chance to bring entertainment and sporting events to a neglected part of the city.

“This has been an under served area for a long time, and this project is going to catalyze and transform the St. Elizabeths campus,” Brown said.

The talks are further evidence that Bowser wants to make new sports venues a central part of her economic development efforts.

Early in her administration she pushed through a deal to provide $150 million in land and infrastructure, plus tax breaks, for a new D.C. United soccer stadium. She was a fervent backer of the failed bid to attract the 2024 Olympics, and she has said she would like to see the Redskins play in a new D.C. football stadium, though she considers the team’s name offensive.

Bowser (D) is slated to outline the deal Wednesday, and it would require approval by the D.C. Council. Bower’s top economic development aide, Brian Kenner, said D.C. was “close to a deal” and that the administration “is excited about the prospect of delivering on Mayor Bowser’s commitment to the future of St. E’s and the residents of Ward 8.”

How much District taxpayers would pay isn’t clear. The board of Events DC approved funding of up to $32.5 million for the project Monday, depending on whether the teams’ owner would make an up-front payment or pay rent. Events DC is funded with hotel and restaurant taxes and the money would come from a 2014 surplus.

Another official said the mayor had committed to using city funds for “less than half” of the cost of the building. The council previously approved more than $100 million in capital improvements on the site, the majority of which is still available.

Professional sports have provided an economic boost to D.C. before, though economists say publicly financed sports facilities rarely generate the full benefits their backers project.

The arrival of the Verizon Center (then the MCI Center) in D.C.’s Chinatown neighborhood in 1997 helped turn Gallery Place into a regional destination, home to a lively restaurant and entertainment district and one of the region’s priciest residential districts. District officials expect a similar revival around Nationals Park in Southeast gain speed.

In targeting St. Elizabeths, Bowser is hoping to avoid the fate of her predecessors, who  repeatedly failed to capi­tal­ize on one of the District’s most promising economic development opportunities east of the Anacostia River.

The 173-acre east campus, once part of a mental hospital that opened in 1855, is sandwiched between Anacostia and Congress Heights. Its grassy campus lined with historically protected brick buildings was the backdrop for the opening scene of the 1992 military drama “A Few Good Men.”

Repeated economic development efforts there however have not taken hold, leaving many residents of neighborhoods east of the Anacostia River feeling like they haven’t received even support.

The neighborhood was expected to benefit dramatically from the federal government’s plan to move 14,000 Department of Homeland Security employees to the west campus, but the plan is more than a decade behind schedule and $1.5 billion over budget.

[DHS has plan to cut costs for and bring more workers to St. Elizabeths site]

Only one portion, a U.S. Coast Guard headquarters, has been completed. The federal government had planned to put the headquarters for the Federal Emergency Management Agency on the east campus, but backed away from that plan this winter over funding concerns.

With the DHS plan stalled, other mayors have been unable to generate much economic activity with a city-owned site across the street. Officials under Mayor Adrian M. Fenty floated the idea of adding a Metro station and surrounding it with offices, housing and shopping, but those aspirations were cut short by the crash in the real estate market and his inability to win a second term.

Under Vincent C. Gray, D.C. built a community pavilion there and announced plans to build a Microsoft Innovation Center and hub of technology companies. He later proposed adding a hospital for low-income residents, an idea the council scuttled.

Gray selected a developer, Redbrick, to oversee a mixed-use development on another portion of the east campus. Bowser retained the firm but has not said when work would begin.

Like other NBA owners, Leonsis has been pushing for a state-of-the-art venue to replace existing practice space at the Verizon Center as he tries to attract marquee free agents including four-time scoring champion Kevin Durant, who grew up nearby in Prince George’s County.

[No one is certain where Kevin Durant will go. But the Wizards are all-in.]

The Wizards currently use a single practice court at Verizon that has no stands, as well as a weight room the team shares with other sports teams using the building. Leonsis’s company, Monumental Sports & Entertainment owns the Wizards, Mystics, Capitals hockey club and the Verizon Center.

Leonsis had considered other locations for his basketball franchises, including in Arlington, Silver Spring and on Howard University’s campus. But when Bowser’s staff proposed St. Elizabeths, they likely offered Leonsis the best financial deal.

Verizon is on District-owned land but, unlike the Nationals, Leonsis’s company pays a mortgage on the building, which it inherited when the team changed hands from the late Abe Pollin. Leonsis has repeatedly chaffed at the mortgage in public and at St. Elizabeths he would presumably get a mostly taxpayer-funded deal closer to what the baseball team enjoys.

Jeffrey S. DeWitt, the District’s chief financial officer and a member of the Events DC board, said he was comfortable with the funding plans on the table.

“We are trying to negotiate the best deal for the District and for Events DC,” he said.

St. Elizabeths would provide Leonsis the chance to a play a role in advancing neighborhoods east of the Anacostia River the way he hoped the 2024 Summer Olympics would. As the most prominent member of the bid committee that got Washington into the final four among American cities being considered, Leonsis repeatedly preached the need to better connect communities on either side of the river.

Randall Boe, executive vice president and general counsel for Monumental Sports & Entertainment, cautioned that many of the details were still being worked out.

“It’s not a completely done deal yet. We’re still working on it but there are still negotiations ongoing,” he said.

Staff writer Jorge Castillo contributed to this report.

Follow Jonathan O’Connell on Twitter: @oconnellpostbiz