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Bill Freehling is a business writer for The Free Lance-Star and Fredericksburg.com. This blog is on Fredericksburg-area business. Send an e-mail to Bill Freehling.

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May 10th, 2010, 2:33 pm

No vote taken on Kalahari at EDA meeting today

The Fredericksburg Economic Development Authority discussed the latest proposal involving Kalahari Resorts today for nearly three hours, but no vote was taken. The EDA is scheduled to meet again at 4 p.m. Friday to continue the discussion.

At issue was the 1/8th of 1 percent fee that the EDA typically charges businesses for being the conduit for bond issuances. Kalahari has agreed to the fee on the $25 million tax-exempt bond that it plans to issue for its Fredericksburg project, but the water-park hotel operator asked the EDA to waive the fee on the $240 million taxable issue. The EDA previously indicated it didn’t want to do that, so Fredericksburg City Manager Beverly Cameron drafted a compromise plan that would involve the EDA getting $125,000 a year on the taxable issuance from the occupancy taxes generated on the project. About half of that payment would come from city tax revenues and half from Kalahari. The EDA expressed concern that taxpayer money would be going to fund their activities.

One proposal that seemed to have the EDA’s approval was charging Kalahari the full 1/8th of 1 percent on the taxable bond issuance, but capping the amount assessed to $100 million. That would result in the same $125,000 annual payment that Cameron proposed, but it would avoid tying the payment to the performance agreement Kalahari signed with the city and would also keep taxpayer money out of the matter. That proposal will likely be taken to Kalahari’s executives, and a vote could come at the EDA’s meeting Friday.

Click here for the last article I wrote on this late last week, and see tomorrow’s FLS for more.

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Permalink: http://news.fredericksburg.com/businessbrowser/2010/05/10/no-vote-taken-on-kalahari-at-eda-meeting-today/

  • http://Clarification Matthew Kelly

    The revenue from the city would come from the .5% of 6% hotel tax generated from Kalahari. No payment would be made until after the project was up and running and generating revenue.

  • http://ClarificationIITheSequal Matthew Kelly

    Kalahari is paying the fee on the tax-free bonds. The issue is paying a fee on taxable bonds where there is no financial savings, only time, to Kalahari.

  • Martin (Marty) Work

    MATT: is it possible, or even practicable to provide some details to your lay audience on the ISSUE of “paying a fee on taxable bonds where there is no financial savings (TO WHO), only time (delays?), to Kalihari. Simply said, who’s holding all the cards, and what’s the bet, on how, within a reasonable framework and parameters, is this deal going to float or go down the drain, OR must we wait another 3 years, as with the Slavery Museum project, that Kalihari is in the process of changing the bet, by lowering the ante as well as the bet?

  • ellis

    Matt, do you think the EDA should treat Kalahari different from others using the EDA as a conduit for funding?
    Do you think the City should pay for a new business’s bond fees?

  • http://ClarificationIITheSequal Matthew Kelly

    Businesses that qualify go to the EDA for bonds because they can be purchased at a better rate than in the regular market. In exchange for that better rate the EDA collects a fee. Even with the added fee the cost is still below normal bond rates. For this reason Kalahari agreed to pay the fee on the 25M non-taxable portion of the bonds. The 200M+ taxable bonds for the remainder of the project will be purchased at market rate which is in the area of 11%. Of all the bond projects the EDA has handles only a small portion of one bond issuances involved taxable bonds. There is no monetary savings involved. The reason for going through the EDA is primarily to save time and get the project going faster. Thus the request for waiving or reducing the fees. The revenue return to the City for this project is a lot greater than any fee to the EDA. So my answer is yes.

  • CassyM

    In the day of Enron and “too big to fail”, it behooves the City and City Council to take a good look at Kalahari’s 2009 Financial Statements before it commits any more City funding to this project. The City should have more documented assurances other than Mr. Nelson’s verbal statement that Kalahari is indeed doing as well as he says it is during the economic downturn. He may think the EDA is ridiculous but the City should not, in its haste to please, be a reckless, uninformed investor.

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