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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