The plan to build a new arena in Alexandria for the Washington Capitals and Wizards was dealt a major blow Thursday, as Virginia lawmakers declined to provide the necessary funding in their annual budget.

Senate Finance and Appropriations Chair L. Louise Lucas told The Washington Post Wednesday evening that the arena language wouldn't be in the budget agreement that lawmakers would unveil Thursday.

Lucas, who also posted a meme on X, formerly Twitter, of her celebrating the death of the arena project, posted a release with the highlights of the budget agreement Thursday afternoon that didn't mention the arena funding.

After Lucas made the decision official, Gov. Glenn Youngkin, who announced the deal alongside Wizards and Capitals owner Ted Leonsis in December, held a press conference Thursday to lambast the decision.

“I believe the Senate is about to make a colossal mistake,” Youngkin said.

The deal would have Virginia provide $1.5B in taxpayer-backed bonds that would be paid back from revenue generated by the arena and surrounding development over four decades. The funding, alongside money from Leonsis' Monumental Sports and the city of Alexandria, would spur the development of a $2B mixed-use entertainment district in the Potomac Yard neighborhood.

Youngkin said his team worked with legislators to fund their priorities, such as funding for the D.C. area's Metro system and toll relief for Hampton Roads — an issue Lucas raised after the deal with Monumental was announced.

The Virginia House of Delegates passed a bill on Feb. 13 to fund the arena through the creation of a new Virginia Sports Authority that would issue the bonds to finance the project. One week later, Lucas declined to give that bill a hearing in her committee.

Youngkin argued the funding would have passed if it had been included in the budget legislation and brought up for a vote, lamenting the possibility that Virginia could miss a “truly unprecedented opportunity” to add thousands of jobs and billions in economic impact.

“The way the Senate has handled this opportunity I fear damages Virginia’s business environment,” Youngkin said. “It’s a clear signal that opportunities to welcome new investment and jobs, even ones of historic magnitude, will not be evaluated on their merit but instead will be viewed through the lens of partisan, parochial interests.”

Youngkin said he will keep “trying to convince” the legislature to fund the arena project. Other avenues still exist after the end of the session Saturday, such as a budget amendment or a standalone bill, but those could prove more difficult than including it in the must-pass budget, the Post reported.

House Speaker Don Scott Jr. told the newspaper Wednesday night that the arena project isn't dead.

“There have been several conversations back and forth. It’s not final until it’s final,” he said, according to the Post.

Still, the lack of funding in Virginia's budget will come as welcome news to D.C. Mayor Muriel Bowser, who is pushing to keep the Capitals and Wizards playing downtown. The loss of those teams could have devastating economic consequences for downtown D.C., business and real estate leaders told Bisnow in December.

Bowser and Council Chair Phil Mendelson offered Leonsis $500M to renovate Capital One Arena and keep the teams playing in the Chinatown facility where they moved in 1997. After Leonsis announced his intention to move, Bowser said the deal was still on the table.

A Monumental spokesperson declined to comment.