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Kalahari eyes Expo Center

Kalahari to buy Expo Center

BY EMILY BATTLE

Date published: 3/21/2008

BY EMILY BATTLE

Kalahari Resorts plans to eventually buy the Fredericksburg Expo and Convention Center and operate it as part of the water-park hotel and conference center it plans to build in Celebrate Virginia, according to Jud Honaker, the Silver Cos. president of commercial development.

For that reason, Kalahari has asked that the 18.8-acre Expo Center property be included in the tax increment financing, or TIF, district the city proposes to create to distribute incentives to the resort operator.

The addition of the Expo land to the Kalahari TIF district became public Tuesday, when a legal ad in The Free Lance-Star and a map released at a City Council work session both indicated these boundaries for the district.

City officials say this is because Kalahari asked for this land to be included in the TIF district last week. City Council members were briefed on this development in a closed session last Tuesday.

City Economic Development Director Kevin Gullette said this new development does not change the basic nature of the Kalahari incentives package.

But it has raised questions among some council members, particularly because as recently as January, council members were publicly debating whether the city should grant the Expo Center $225,000 a year for three years to help it enhance its operations.

Councilman Marvin Dixon said he never supported the Expo subsidy, and "Once you tie Expo to Kalahari it complicates the policy discussion."

Gullette emphasized that the inclusion of the Expo property in the Kalahari TIF district was not a way to revive the Expo grant, which was tabled in January.

"In no way is the city backing into an incentive package for the Expo Center through the TIF district," Gullette said yesterday. "Everything we are doing is for Kalahari Resorts."

KALAHARI PLANNED TO WORK WITH EXPO

Honaker said the idea of Kalahari and the Expo Center being connected in some fashion has been part of talks about the project from day one.

TIF stands for "tax increment financing." That is a mechanism governments can use to pledge the future revenues from a tax base that is expected to increase to pay for a public project. City Attorney Kathleen Dooley has defined the public project in this case as, "the commitment by the Fredericksburg Economic Development Authority to pay Kalahari a performance grant, in return for it selecting Fredericksburg for the location of its new Virginia resort." To do this, the city will have to adopt an ordinance that sets boundaries on a specific "TIF district" for this project. That ordinance will dictate that all new revenues that the land, buildings and businesses on that district generate after Kalahari opens for businesses will go into a designated Kalahari TIF fund. Of that money, 47.5 percent will go to the EDA, which will give it to Kalahari as its incentive grant. The rest will revert to the city's general fund. All of the revenue that the land is generating now will not be subject to the 47.5 percent rebate. Jud Honaker, president of commercial development for the Silver Cos., took issue yesterday with mayoral candidate and Councilwoman Debby Girvan's claims that Fredericksburg "can't afford" the incentives package it is offering to Kalahari Resorts. "One of the candidates in this year's race keeps saying over and over again that the city can't afford this deal," Honaker said. "The city can't afford not to do this. This is all new revenue the city needs." Honaker then added, "A vote against Kalahari is a vote for future tax increases." Girvan has said publicly that the Kalahari incentives package, under which the city would return to the resort 47.5 percent of the new tax revenue it generates over 20 years and waive several development fees, is out of proportion to what the city will get from the more than $225 million project. "I'd ask him if he would approve this if he were on council," Girvan said. "I think he would have driven a harder deal than this." Honaker said the new revenue that Kalahari is projected to generate--which would be just over $3 million a year, based on the resort's estimated tax payments, after the incentives are paid out--is crucial to funding city services in the future. Proponents of the Kalahari project on the council have pointed to flagging sales tax numbers as a sign that the city needs a strong tourist attraction to broaden its tax base, and to keep homeowners from having to shoulder the soaring costs of local government through the real estate tax. But Girvan said she doesn't think all of the potential costs the project could add to city operations have been exposed. She acknowledged that many of the costs she brought up--a third fire station and improvements to Fall Hill Avenue among them--would be necessary regardless of whether Kalahari comes to town, but said she thinks the city has "settled for" the deal it's struck with Kalahari, and that it has compromised too much. Mayor Tom Tomzak, Girvan's opponent in the May 6 mayoral election, said the costs to the city have been studied and presented publicly, and "there is a very positive balance." He agreed with Honaker. "If we don't have tourism as our economic engine, we are going to have to look at other options," he said. "That is a distressing thought." --Emily Battle The City Council will hold a public hearing on the proposed TIF district, as well as the performance agreement that will govern the Kalahari incentives, on April 8 at 7:30 p.m. at City Hall. THE KALAHARI INCENTIVE DEBATE THE ISSUE: The addition of the Fredericksburg Expo and Convention Center's property to the special tax district for the Kalahari incentives is causing some confusion. THE RESPONSE: The city and Silver Cos. both say this is not a way to give incentives to the Expo Center, which Kalahari will take over. The Silvers are working on a possible solution that could remove the Expo property from the district.

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Date published: 3/21/2008

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