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Pamela Gould reports on City Hall. You can reach her at 540-735-1972 or pgould@freelancestar.com. Robyn Sidersky reports on city schools. You can reach her at 540-374-5413 or rsidersky@freelancestar.com.

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Mayor: EDA “irresponsible”

Economic Development Authority member Rick Pullen and City Councilman Matt Kelly spent an hour hashing out their differences on the role the EDA is playing in Kalahari’s financing package on Kelly’s radio show on WFVA AM 1230 this morning.

If you would like to catch up on the EDA’s deliberations on this issue, read this and this.

Pullen is one of six members of the EDA that can vote on this matter (member Chris Hornung has abstained from these votes because he works for the Silver Cos.). He is one of three who have voted against a compromise on the Kalahari bond fees.

The crux of Pullen’s arguments is that the purpose of the EDA is to support economic development throughout the city through the grants it makes to small businesses and sometimes the city itself for various projects it believes will generate tax revenue. The funding stream for these grants are the fees the EDA charges on the mostly tax-free bonds it serves as a conduit for businesses and institutions to access. By asking for a significant break on these fees, Pullen fears Kalahari could set a precedent that could jeopardize the future of that funding stream. In other words, he doesn’t want every other business, nonprofit hospital or university telling the EDA that the only way their project can work is if they get a break on the fees.

Kelly pointed out that the EDA has never handled a taxable bond as big as the projected $240 million bond Kalahari has proposed to run through the EDA. He also has pointed out that compared to other projects that have used EDA financing, like Mary Washington Hospital and Eagle Village, Kalahari’s projected tax impact is much larger. He said the EDA’s role is to work with the city to advance economic development in the city. The city has been working for more than two years to bring Kalahari to Celebrate Virginia, and Kelly said the economic slump that has slowed that project is a unique situation that merits some cooperation from the EDA in terms of what fees should be charged.

Then Kelly told Pullen that he didn’t think the EDA, in not approving a fee compromise with Kalahari, was working in the city’s interests.

“You’re looking a little more toward the EDA than you are toward the long-term interests of the city,” Kelly told Pullen.

At the end of the show, Mayor Tom Tomzak called in from shaky cell phone connection to echo that position.

“It’s very irresponsible for some people on the EDA to play politics with this,” Tomzak said. “Your guest [Pullen] is trying to micromanage Kalahari. Why does he think that his role on the EDA is to micromanage and to possibly hassle one of the greatest things that will ever happen in Fredericksburg?”

Pullen said those accusations were inaccurate.

“It’s silly to say we’re trying to micromanage Kalahari,” Pullen said. “All we’re trying to do is come up with a financial package that everybody can live with. We haven’t even had two weeks to work on this. … Anybody who thinks we are trying to torpedo this is just plain wrong.”

Some other points to come out of this morning’s discussion:

- Pullen said that if the City Council votes to allow the Kalahari taxable bonds to be issued by an EDA outside Fredericksburg, it would be undercutting its own EDA.

- As a bargaining chip, Pullen pointed out that the EDA will need to approve the changes to the performance agreement that the council will consider on Tuesday (including extending the Dec. 31 opening deadline by three years). He opened up the possibility of the EDA bargaining for substantive changes to that 2008 agreement, such as requiring that all or a portion of the resort’s 800 jobs go to city residents (This was discussed in 2008, and there was some concern that fair hiring laws would prevent it.).

- Pullen said the extension of the closing deadline for the tax-free bonds from June 15 to Oct. 15 should give everybody some breathing room, and should take some of the “you must act now” element out of things.

- Pullen also complained that the EDA’s ability to negotiate directly with Kalahari on the bond fees had been undercut by the city’s own attempts to broker compromise, and by the City Council’s signals that it would allow the bonds to be issued through another EDA.

The next things to look for:

Fredericksburg’s EDA will meet Monday at noon to talk about the fees on the tax-free bonds. At the same time that day, Spotsylvania’s EDA will meet for an informational session on the Kalahari taxable bonds.Then on Tuesday, the City Council and Planning Commission will hold a joint public hearing on a number of planning items related to Kalahari (including a height variance and their proposed sign on Interstate 95) and the council will consider changes to the performance agreement.

Permalink: http://news.fredericksburg.com/citybeat/2010/05/21/mayor-eda-irresponsible/

  • Rodger Provo

    Ms. Battle -

    It has been my understanding the enabling legislation
    that creates ERAs and IDAs in Virginia was designed
    to allow those bodies to be insulated from political
    pressure and to make the best business decisions for
    their communities.

  • Rodger Provo

    Ms. Battle -

    I apologize for the typo in the previous note it should
    read EDASs not ERAs …

  • Rodger Provo

    Ms. Battle -

    One more try EDAs not ERAs ….

  • Jesse

    I see the EDA looking out for the future of the city and all of the OTHER businesses and prospective businesses. Not the instant gratification that some see by bowing again to big business. As was stated, this project has been in the works for several years now. Why is this a surprise to the Kalahari people that they agreed to this in the first place and now are back pedaling? The cold feet I keep reading about makes me wonder if this is too much for Kalahari to take on and it will become an economic anchor for the city, its residents and current businesses. Yes, the economy has changed and the finacial health of this project needs to be reviewed.

  • Mr. R.

    I must agree with the Mayor and Mr. Kelly. The EDA seems to be operating in a vacuum as to its ultimate purpose; i.e., promoting economic development. Throwing a wrench into the Kalhari deal because the EDA demands its usual bond fees (regardless of any financial realities Kalahari faces) seems a little short sighted. Manifestly, the EDA exists to assist city government in economic development; time for them to get with it. This has nothing to do with “big business” and everything to do with good business.

  • Rodger Provo

    Ms. Battle -

    The city needs to know the budget for this project
    and what profit being sought by the developer.

    Between the tax concessions and fee waivers, etc.,
    are those gives required to make the project work
    or to increase the profit margin for the developer.

    No further concessions should be made by the EDA
    without this information being disclosed.

  • Mike

    There seems to be a pattern of appointed and elected city representatives formulating rules, fees, regulations and then tossing them out the window when some corporation of large private interest requests to be made an exception to the rules. Land gets zone as commercial until someone really really wants to build townhouses. A tax rate is set until someone really really thinks they should pay less.
    This Kalahari controversy is just another in a long line. Either we need too rethink the rules or we need to stop making exceptions every time someone squawks enough.

  • rufus

    Kelly and Tomzak are all wrong on this. The City has got to get the money it is entitled to from Kalahari. This Project has already gotten much, much more than it deserves from the City taxpayers. Kalahari needs to stop asking for more cash breaks, now.

  • Tom

    The great political powers (well in their minds at least) decided to try to steamroll the EDA into agreeing with Kalahari’s conditions immediately without a proposal and without proper review. It also seems that certain members of Council and Silver conspired behind the scenes on alternatives before the taxable bonds were ever presented to the EDA. This is understandable for the developer but is way out line for Council. It clearly undercut the EDA as Mr. Pullen pointed out.

    It seems sweet justice that now they must obtain EDA’s approval of the changes to the performance agreement in order to do anything. Someone has real egg on their face.

  • ellis

    Looks like silver footprints all over kalahari’s demand to reduce EDA fees. Perhaps people who do business w silver should request silver reduce their rental rates.
    Council should not have undermined the EDA’s efforts lest someone undermines Council. Politics at its worst.

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