Ted Leonsis’s Charitable Giving Part of Quid Pro Quo on New Arena in DC

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September 24, 2015; Washington City Paper

A tiny mention in the “Loose Lips” coverage of plans for new stadiums, arenas, and other sports complexes in Washington, D.C. caught our eye. Mayor Muriel Bowser and Washington Wizards and Mystics owner Ted Leonsis have cut a deal to build a new practice facility and arena for the basketball teams on the site of the St. Elizabeth’s hospital, the nation’s first federally operated psychiatric hospital, now largely abandoned and shuttered.

Will Sommer, the “Loose Lips” columnist for the City Paper, noted that the contribution of Leonsis to the plan is a commitment to a rent of $15 million plus “neighborhood philanthropy.” Adding a little more detail later in the column, Sommer added, “The District will put in $23 million, while Events D.C., the quasi-public agency funded by taxes, will operate the facility and pay $27 million. Leonsis, meanwhile, will put in $5 million in rent and $10 million in investments and charitable contributions over 20 years.” In other words, it’s really going to be $5 million in rent plus $10 million in some mix of Leonsis investment and Leonsis charitable giving.

For those of us who have been public officials and have negotiated deals with private developers, usually the developer doesn’t get to determine how his or her payment will be spent, much less that the payment would be a charitable deduction of potentially significant charitable benefit to the developer’s federal taxes. In this case, that’s what Leonsis gets with the charitable giving component of the St. Elizabeth’s arena quid pro quo.

Again, former public officials would guess (or hope) that the city’s ability to shape and direct the Leonsis charitable component of the deal wasn’t entirely given away. With a net worth of roughly $1 billion, Leonsis himself is a charitable donor of some note. According to GuideStar, Leonsis is listed as a board member or trustee of several charitable entities:

  • The Leonsis Foundation, his family foundation, distributed $117,500 in grants in 2013, none larger than $25,000, to seven recipients: Best Buddies International, the Community Foundation of the National Capital Area, the D.C. College Access Program (where he was a board member along with just about every other important person in DC), D.C. Central Kitchen, Junior Achievement, Arcadia Food, and the Children’s Charities Foundation. The Leonsis Foundation’s 2012 giving was $107,500 to a similar array of charities, except for $50,000 to the See Forever Foundation. In recent years, the foundation’s grantmaking has hovered around $100,000 to $120,000 or so.
  • Leonsis also chairs the Monumental Sports and Entertainment Foundation, the combined philanthropic arm of the three local DC teams Leonsis owns—the Mystics, the Wizards, and the Washington Capitals (hockey)—boasting a larger grants budget than the family foundation–$590,345 in 2014, $508,791 in 2013. The grantmaking of Monumental Sports is not hugely different from the family foundation’s priorities, but for large grants such as $89,910 to KaBoom, $50,000 to PlayWorks, and $141,696 for the Tragedy Assistance Program for Survivors.

In the “Loose Lips” column, Mayor Bowser’s statements reference the significant economic benefit the generally low-income Congress Heights neighborhood in Washington’s Anacostia area will get from the development. From the 2013 and 2014 990s of the two foundations, there is no specific indication that Leonsis’s institutional philanthropy had been aimed at ginning up neighborhood support in Congress Heights the way Walmart did with its philanthropic giving to D.C. area charities as it tried to secure sites and avoid a big box-specific minimum wage law. If Mayor Bowser is thinking that this project will bring jobs and investment to Congress Heights, presumably the Leonsis philanthropy would benefit the long-struggling neighborhood also.

Notwithstanding whether a government-subsidized arena at St. Elizabeth’s is a good thing for the city or not, there could be some question about making charitable giving by the developer part of the financial package and, in some ways, substituting for payments that would go to the city to be determined in the public arena by the mayor and city council. The local government in D.C. has long been interested in getting development to Wards 7 and 8 east of the Anacostia River, historically somewhat isolated and generally excluded from the development boom that has swept much of the rest of Washington. That might explain some of Bowser’s negotiating flexibility with Leonsis. It might also be, as “Loose Lips” hinted, that Bowser, like most mayors, looks forward to leaving office with credit for a visible edifice for the ages, an arena or a stadium (she’s planning a stadium for the soccer team, too), regardless of the questionable benefits of publicly subsidized professional sports arenas and stadiums.

Nonetheless, the notion of charitable donations, meant to be given without compulsion by the donor, being included as a quid pro quo in a development deal seems a little odd—except that we suspect it occurs more often than one might guess. For example, in the scrum of moguls to capture casino gambling licenses, corporations have been trying to win voters’ approval not only by liberally distributing charitable gifts in the lead-up to casino designations, but in a number of cases making commitments to charitable giving as part of the casino’s proffer to local government decision-makers.

NPQ isn’t going to pronounce the Leonsis arena at St. Elizabeth’s a good or bad thing for the economy of Congress Heights, Anacostia, or Washington D.C. more broadly. That is an analysis we will leave to Ed Lazere at the Fiscal Policy Institute, whose previous analyses of stadium boondoggles have been important factual information to the local policy debate. The inclusion of charitable giving, presumably controlled by the developer and benefitting the developer’s federal tax position, is a different kettle of fish. This is one charitable giving practice that in some circumstances could be more like a business investment for private inurement than a charitable investment for the public good.—Rick Cohen