Fredericksburg City Beat

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Vice Mayor: Let EDA and Kalahari negotiate

Vice Mayor Kerry Devine was administering SOL tests to her students at Walker-Grant Middle School during Friday’s on-air feud among Mayor Tom Tomzak, Councilman Matt Kelly and EDA member Rick Pullen. But as she heard over the weekend about what was said, she composed the following, which was submitted this afternoon as a letter to the editor intended for tomorrow’s paper. Don’t forget that tomorrow is the EDA’s scheduled meeting to discuss fees on the tax-exempt portion of Kalahari’s bond issue.

Devine said in an interview today that she feels the extension of the deadline for issuing the tax-exempt bonds from June 15 to Oct. 15 should give everyone some breathing room, and that any threats that a decision must made now or else is just “a scare tactic” by Kalahari.

Devine also brought up the standing policy among regional local governments against poaching economic development opportunities from one another. She mentioned that the city got some criticism a few years ago when it discussed a possible incentives package with a Spotsylvania firm (That move never happened, read about the situation here.) Devine said Spotsylvania County’s public willingness to bring the bond issue to its own EDA could be considered a breach of the non-poaching policy.

“I think Spotsy should never have said, ‘Sure, we’ll take it,’” Devine said today.

Here is Devine’s letter:

May 23, 2010

Kalahari Fees to the EDA

Let me begin by saying I am a Kalahari supporter and plan to remain one.

The current dispute between Kalahari and Fredericksburg’s EDA has pitted EDA members against each other and EDA members against City Council.  At question are the fees the EDA charges for issuing bonds, both tax-exempt and taxable. In the past those fees have been used for various economic development projects throughout the city for the benefit of all residents. Some of those projects include the brick wall at Hurkamp Park for the farmer’s market, business incentives along the Princess Anne corridor and several new downtown businesses, partnering with UMW and the Eagle Village project, and recently awarding grants through the Arts Commission for public art works downtown. Were the fees charged that generated money for those projects “ridiculous” or exorbitant? Kalahari has often talked about its involvement in community programs – this is certainly a step in that direction.

As the EDA meets today, I am hopeful of several outcomes.  Kalahari has indicated its acceptance of fees on the $30 million tax-exempt portion. That should be finalized and off the table.

The EDA and Kalahari should then negotiate the fees on the balance of the $240 million taxable bonds. The one exception the EDA has made on its fees was for the hospital, a project of great magnitude and benefit to the city. As Kalahari stands to be another project of great magnitude and benefit to the city, the EDA should be given the opportunity to further meet and negotiate with Kalahari. While city staff worked diligently to come up with a compromise, I do not fault the EDA for doing its job and needing additional time to negotiate and look out for the interests of the city.

The initial negotiations with Kalahari took many months and caused many gray hairs (I have to blame them on something) and hours of hand-wringing. Having been at the table I can tell you that getting to the agreement was arduous, with tempers on the rise at many times. Both sides had to give and accept; that is why it’s called negotiations.

If the discussions with the EDA take some time, so be it. The deadline on the tax-free bonds has just been extended 4 months. The best action council can take is none at this point. Having appointed responsible, thoughtful members of our community to that board, let them work. There is a cost of doing business, Kalahari should recognize that and come to the table willing to talk. The EDA should, knowing that its fees are pumped back into the local community, be willing to look at the big picture and consider a reduction in fees.

Council should not vote to send the deal to Spotsylvania. Our economic development departments have a tacit agreement not to poach on our neighbors – treat this no differently. The Governor should not override local authority and remove the city from the equation.


  • Holden

    Holy cow.

    The Vice-Mayor thought the “arduous” negotiations with Kalahari were somehow normal? This explains a lot. Clearly, Fredericksburg just doesn’t get it.

    The negotiations with Kalahari were needlessly arduous and uncommonly protracted because city officials never quite understood what they were doing. A repeat of these same exercises in naivety now could kill this project — why isn’t that obvious?

    The very idea that Kalahari and the project’s developers should sit around and fiddle with EDA fees because a deadline has been extended is patently absurd.

    The project is behind schedule now, time is money and, quite obviously, those who are focused and intent upon making the project a reality don’t have free time to help the EDA look bad.

    The EDA is not a place for “responsible, thoughtful members” who fail to realize that time is always a make or break factor in of itself. The EDA needs responsible, thoughtful members with some drive, and those who know how to act when an opportunity is knocking.

    So, if the EDA thinks it needs more time, “so be it?” That kind of lackadaisical approach to economic development is why negotiations with those who are willing to invest in Fredericksburg are “arduous.”

    It’s also a little embarrassing the way some elected officials think Spotsylvania is the only other Virginia jurisdiction willing to step in to ensure this project happens. It’s possible, but it would certainly be a shock if Stafford and other localities were not also calling upon Kalahari to let them issue bonds.

    More sophisticated leaders elsewhere in Virginia understand the tremendous residual economic impacts of the project. Neighboring localities will reap financial benefits if Kalahari is built anywhere in the region, and they obviously don’t want Fredericksburg to blow it.

    If the Vice-Mayor were really a Kalahari supporter, she would demand an immediate vote to authorize all the bordering localities to step in and issue the bonds.

    If Kalahari doesn’t lose patience with our fair city, and if they succeed in achieving the financing to build and open here, the city will reap millions of dollars in new revenue that can build a lot more brick walls like the one at the Hurkamp Park farmer’s market, or provide exponentially more in incentives to small businesses downtown or far more significant commissions to local artists.

    Sad to say this letter from our otherwise respectable Vice-Mayor reads like it was written by Rick Pullen, or another EDA member who thinks the EDA primarily exists to generate money for itself instead of for the city. I hope the rest of our city council understands the folly of the EDA, what is really at stake and why time is not a negotiation luxury.

  • http://ClarificationIITheSequal Matthew Kelly

    I had not seen the Vice-Mayor’s letter . As it is now public I will post my questions and concerns in public and hope that we can continue this discussion in a public forum.

    With a 3-3 split and one abstention on the EDA which side will lead the negotiations? Will the one abstainer get to participate and/or vote on the negotiations? Is it the Vice-Mayor’s position that the EDA be allowed to re-negotiate the Performance Agreement between the City and Kalahari? Will the City Council have any say in that regard? The EDA can negotiate their fees. Kalahari has the right to accept them or not. I do have serious issues with the EDA renegotiate the performance agreement as that goes well beyond establishing fees.

    As for the comment on the city poaching business I would be remiss if I didn’t remind the Vice-Mayor that then City Manager Phil Rodenberg contacted his counterpart in Spotsy when contacted by the business in question. The city was told by the owners of the business that they planned to either move to the City or out of the region. Spotsy was advised that If that was not the case the City would back off. We went through a similar process with the Surgi-Center. Working with our counterparts in Stafford before making any type of offer. I am surprised that the Vice-Mayor, who was aware of both situations, would make such an accusation.

    I look forward to the Vice-Mayor’s response.

  • Holden

    Mr. Kelly, are you saying the Vice-Mayor shot this letter off without informing you or possibly your other colleagues?

    Even though I recall reading about the Vice-Mayor’s disdain for Councilwoman Girvan when she did the same thing, and as much as I disagree with her now (profoundly), all council members should be able to speak up and out whenever they want (and at their own risk). It gives us a better measure of them.

    So why not let the Silver EDA member follow the Vice-Mayor’s example and simply disclose he works for the Kalahari developer? Or shouldn’t we have people actually involved in economic development professionally making EDA decisions?

    How is this situation different than when the Vice-Mayor votes on the budget for schools while she is also a teacher paid with those very same taxpayer funds? Is there no conflict? If not, why the double-standard?

    Do abstentions apply only for those who work for Silver or other big scary developers? If a simple disclosure is all that is required of the Vice-Mayor, why is the Silver EDA guy denied what she is allowed?

    The EDA needs more people who have actually been involved in economic development. Working on a city council campaign or sitting around a coffee shop talking about how wonderful it would be if shops downtown stayed open later does not qualify one to be on the EDA.

    Maybe the city council should consider appointing more economic development professionals or individuals actually involved in economic development to our local economic development authority. Crazy idea?

    Maybe a reasonable safeguard against allowing for any one interest alone (like Silver) from “controlling” the EDA would be to then limit the number of employees or representatives from any one business or interest who can be appointed.

    Mr. Kelly at least looks and acts like he supports real economic development in the city. And please, let’s get real, it’s not “poaching” when the city EDA (even unknowingly) constructs a massive flashing neon sign that yells, “Please! Save us from ourselves!”

  • ellis

    Matt, Who told the City Manager to offer a compromise solution?
    Also, something I think everyone needs to be aware of is that the EDA should not be subject to making decisions because of ‘political’ pressure but because of their charter, because of their local rules, and because of good economic development.
    Can someone tell me why 1/8th of 1% is such a big deal when Kalahari/bondholders are going to subscribe to 11% junk bonds? How about the money the Silver Cos will make off this project? How about the profit from this project that will go back to Wisconsin?
    My thoughts are that if the owner is so chinzy with the meager 1/8th of 1% EDA fee, and will readily pay 11% bond interest, that the owner will pay most anything to get access to that easy money.

    If Kalahari wants to be a good citizen, then they will pay the nominal 1/8th of 1% fee. Nominal is subjective. If Kalahari wants to be a good citizen, then they can play by the local rules when coming into our community.

    I welcome Kalahari, but not on their terms. I welcome to discussion on the fees, but not with Council undermining the EDA.

    We should be acting as a community together with Kalahari, EDA, Silver, City, and Spotsylvania. I am not in favor of ‘poaching’ agreements. I am favorable to free market. I hope all parties get this resolved, the project gets built and is a economic engine for the City. Kalahari should pay the fee and get on with the project – this is not a big ticket item unless is comes out of Mr. Little’s or Silver’s pocket.

  • SteveThomas

    This is a most unfortunate letter.

    First, Spotsy isn’t going to “poach” anything from the City. Regardless of how the deal is financed, the resort will still be in the City. That does not change.

    Second, If the financing was private, would the VM have a case to make? The issue that’s problematic here is the deadlock on the City’s EDA. If the City Council and the resort come to Spotsy and need help with financing, and Spotsy gives it, it’s not poaching. It’s regionalism. It’s one neighbor helping another, and that’s the spirit we’re approaching it with.

    Matt, you and the City Council and the Mayor should be commended for your desire to bring jobs to the City. Folks who are out of work need them now, not “in time”.

  • http://ClarificationIITheSequal Matthew Kelly

    Ellis–I’m off to an EDA meeting. I’ll post answers to your questions later today.

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  • http://ClarificationIITheSequal Matthew Kelly

    Ellis–It needs to be remembered that the EDA has not handled taxable bonds before. As such there is no such thing in this case as a normal fee.

    Mr. Cameron consulted the Council about a possible compromise offer after Dana Herlong, EDA Chairman, sent a letter to Kalahari representatives (so much for claims the EDA was being blocked from direct negotiations with Kalahari) saying the EDA was not prepared to waive fees. As I was advised by Mr. Cameron ALL Council members, after individual conversations, gave him the go ahead to float a compromise. I should say that formal approval of that action would require a Council vote. THE EDA received the compromise and where briefed on it prior to their last meeting. It was not sprung on them nor were any statements made that they should take it our else.

    Have yet to understand the term political pressure in this case. The EDA is an independent body that can set fees as they see fit. I hope you are not implying that I have no right to voice my opinion on an issue or consider such action as political pressure.

    If you are referring to the actions taken by the Silver Cos. regarding going to another EDA that was done by them after it became clear there was no clear majority view on the EDA on what action to take. It looked like a 3-3 deadlock. With a 6/15 deadline looming they cannot be faulted with lining up other options.

    11% on the taxable bonds are not junk bonds. Don’t take my word for it that came from the EDA’s bond counsel at their last meeting. That is neither the highest or lowest he had seen under the current economic conditions. For those who say if the fees were an issue maybe Kalahari shouldn’t move forward–I would agree. However, Todd Nelson wants to move the project forward even under the worst economy we’ve seen in decades.

    I will again state that the normal bond sold through the EDA is non-taxable giving the borrower a lower rate. Even with the added EDA fee the borrower still saves money as opposed to going to the normal bond market. In this case, with the purchase of taxable bonds, there is no savings, other than some time, to the barrower so the fee is nothing more than an added cost.

    Council seems determined to move forward on some significant projects for which they have no revenue other than through significant real estate and personal property tax increases. The Kalahari project meets our long term tourism goals, and will generate revenue to cover those costs. Agonizing over EDA fees didn’t seem the way to go.

  • Martin (Marty) Work

    STEVE, if you want to sell REGIONALISM, much like Matt and elected leaders in Virginia’s Planning District 16, make sure your audience knows what REGIONAL means, what it entails, who wants to run it and that REGIONALISM is not about one neighbor helping another. If that were the case Stafford County wouldn’t be sitting on the side line twiddling their thumbs on Kalihari.

    It’s about one government, one pocketbook and led by County and City elected officials who wish to govern from within a REGION or as in Virginia’s Planning District 16, aka FAMPO and the George Washington Regional Commission who has brought us VRE and its Master Agreement without anyone knowing anything but how much the County might get back from a gas tax that varies from day to day.

    REGIONALISM is a Federal and State enterprise who no longer wish to conduct business across County and City lines any longer and the only way to get there is governance from outside City and County parameters but made up of the same elected leaders who serve on County Boards as well as FAMPO’s and GWRC’s boards. It’s called “market share” and the stakes are high and getting higher as we follow the Regional concept to its eventual placement in another level of politics you couldn’t possibly imagine. If you need a roster of the players, I suggest you pull up the FAMPO/GWRC website or attend their meetings. You are permitted to attend but make sure you arrive early. There aren’t that many seats available for the public.

    For your sake, I hope you will one day get off your political run for office, stop kissing butt and get down to the business of the PUBLIC domain.

    Sorry I couldn’t put more sugar coating on this comment, but thought it should be said without any reservations on my part.

    By the way, has the NBA playoffs concluded or can we still fill our weekends with more hoops instead of political foreplay?

    I’ll just be around the corner if you have any questions.

  • ellis

    Matt, thanks for the information on how Cameron became involved. We disagree about that intervention. I do agree that Kalahari will be a big boost in our local economy and more so if they use local contractors and local employees. I could not see the owner of such a large project hasseling over 1/8 of 1% fee when the owner was paying 11% on the bonds. Glad to see everyone come to an agreement and hope they start construction sooner using the stimulus funded bonds prior to the junk bonds being sold. 11% is junk status but that is ok as there are institutions in line to buy them.

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