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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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Fredericksburg EDA, Kalahari come to agreement

The Fredericksburg Economic Development Authority and Kalahari Resorts reached an agreement this afternoon on bond fees, and the compromise appears to cut Spotsylvania County out of the picture.

The compromise involves the city’s EDA charging Kalahari its one-eighth of 1 percent standard annual fee on the $30 million tax-exempt issuance, while also approving Fredericksburg City Manager Bev Cameron’s plan for a fee on the roughly $240 million in taxable bonds. 

The result is that the city EDA will receive $37,500 a year from Kalahari on the tax-exempt bonds, which will be issued through the EDA to give the bonds municipal status and the resultant tax savings for investors. The city EDA will get that fee as long as the bond balance remains at $30 million. It’s possible that Kalahari might refinance or pay off the tax-exempt bonds — which carry about an 8 percent interest rate — after 10 years. It’s also possible that Kalahari might get an additional $5 million allocation of Recovery Zone bonds from the governor’s office later this summer (the city has asked for that).

The EDA will receive $125,000 a year for 10 years on the taxable issuance. About half of that money will come from Kalahari and half from the city, which will fund the payment from a small part of the occupancy taxes that Kalahari creates. The city EDA will then use the money to fund economic development projects.

The compromise allows the EDA to set a precedent of demanding its full fee on tax-exempt bonds, which make up the vast majority of the bonds it issues. 

Kalahari attorney George Consolvo said after the meeting that the compromise is acceptable to the company, and he sees no reason why the bonds would need to be issued through another EDA such as Spotsylvania County’s. A special meeting of the Spotsylvania EDA was called today to discuss that possibility, but it doesn’t appear that the county’s EDA will be involved going forward.

People interested in knowing more should read tomorrow’s FLS, and here is a link to a long list of previous articles we’ve written on this topic.

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Permalink: http://news.fredericksburg.com/businessbrowser/2010/05/24/fredericksburg-eda-kalahari-come-to-agreement/

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  • http://MAVRICKinc7@msn.com Martin (Marty) Work

    SEE…that didn’t take very long but is there and end in sight?

  • http://cruisetip.tpkeller.com TPKeller

    Except now city tax money will be going to the EDA, and those tax dollars are going to have to come from somewhere else, where I’m sure they would be better used.

    A better solution would have been to simply cap the amount of bond funding that is subject to the EDA fees. As best I can tell, the EDA incurs no direct cost pro-rated to the value of the bonds issued. Why should they be the windfall recipients of a cash cow just because a large project is choosing to come to the city?

    The mere existence of Kalahari will do more to promote development in the city than the EDA has done in the past 10 years, yet they have insisted on getting “their cut” of the deal. Sounds like we have a Godfather organization here.

    I am very disappointed in this solution. The EDA is not acting in our best interest, and I wish they had been forced to accept a solution more beneficial to the taxpayers.

  • navyorchid

    It’s also possible that Kalahari might go belly up and the city will get nothing! Personally, I’m celebrating that Spotsy was cut out of the deal…..our taxes are high enough already!

  • fredburger

    I could be wrong, but isn’t the tax money going to the EDA coming from a new occupancy tax. It may not be that large a difference, but at least it’s not coming off a current line item.

  • rufus

    The taxpayer has a right to know exactly what he is in for in this deal. The City needs to tell us now how much each and every taxpayer has got to pay because of Kalahari. How much time exactly are City employees spending on Kalahari. How much time has the EDA ands Council spent working on kalahari? We taxpayers pay all their salaries.
    Remember the Chambers Brothers lyrics, “Time” :
    Now the time has come (Time)
    There are things to realize (Time)
    Time has come today (Time)
    Time has come today (Time)

  • susan

    Kalahari was hit with an additional tax of .05% for coming to Fredericksburg on top of the current occupancy tax of 5.50 making it now 6%.Spotsy and Stafford fund their EDA from the general fund. The EDA funds projects and helps local businesses, arts, the new riverfront park etc.. in attempt to make the entire city more appealing. All of their money is reinvested into the city and at probably gets a return on many different levels.

  • susan

    The money referred to from this office comes from the additional targeted tax on Kalahari, not real estate taxes or state and federal funds.

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