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Part of Kalahari Resorts' financing plan up before Fredericksburg's Economic Development Authority
Kalahari hopes to build a resort here similar to this Kalahari resort in Sandusky, Ohio.
Ken Love/Akron Beacon Journal
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BY BILL FREEHLING
People who want to weigh in on tax-exempt financing for Kalahari Resorts' planned $260 million Fredericksburg water-park resort can do so at noon tomorrow.
Representatives from Kalahari will attend a public hearing in front of Fredericksburg's Economic Development Authority in a conference room at the new Print Innovators plant at 1381 Belman Road.
Kalahari President Todd Nelson said he and Mary Bonte Spath, the Wisconsin-based company's chief financial officer, both plan to attend along with attorneys and a representative from Merrill Lynch, which is helping Kalahari put together the financing package for its massive planned park in Celebrate Virginia South.
Nelson said his group will share with the EDA details of how the financing quest is going. Kalahari has had a hard time arranging the financing package in the midst of a global credit crunch, but Nelson believes they're making good progress toward getting the park started.
"We all continue to work hard on getting Fredericksburg in the ground as soon as possible," Nelson wrote in an e-mail.
Kalahari got a boost in January when outgoing Gov. Tim Kaine granted the company access to $25 million in Recovery Zone Facility Bonds, which are part of the American Recovery and Reinvestment Act and are intended to spur economic development.
That doesn't mean taxpayers are providing Kalahari with the $25 million. The company will be solely responsible for paying the bond investors interest and eventually principal. The advantage of the RZF bonds, for Kalahari, is that the income on the bonds will be tax-exempt for investors. That means the interest rate will be lower, which makes it a cheaper form of financing.
The EDA must issue the bonds to give them that tax-exempt status. But neither the city nor the EDA is in any way responsible for the debt, even should Kalahari default on the payments.
Here are some of the frequently asked questions that have been raised regarding the Kalahari project of late:
1. How is Kalahari doing financially at its two parks
In its application to the state for the RZF bonds, Kalahari reported that its consolidated revenues through July 31, 2009, were up 5.3 percent over 2008, and its earnings before interest, taxes, depreciation and amortization were up 27.8 percent. Kalahari President Todd Nelson reports that the company has had record sales over the past two years, which he attributed to competitive room rates, popular water parks and a trend toward two- or three-day vacations that don't involve flying. "Kalahari has fared very well during the recession," Nelson wrote in an
2. Why shouldn't Kalahari have to give the city/EDA more financial details as part of its application for the RZF bonds to be issued?
As a private company, Kalahari does not have to publicly report its financial results. However some people believe that the company should have to open up its books more to the city before the bond issuance is approved. The city's response has been that Kalahari would be solely responsible for the interest and principal payments, so the city would bear no financial risk.
3. What types of salaries would Kalahari pay at its Fredericksburg facility?
In its Fiscal Impact Statement to the city, Kalahari states it would employ about 1,000 people a year. The salary range would be between $18,000 and $175,000 per year, with an average of $45,000 for salaried employees and $19,000 for hourly employees.
4. What will Kalahari mean for the city?
The Fiscal Impact Statement says that Kalahari would generate about $7.7 million a year
5. What will Kalahari mean for area economic development?
Kalahari has said that 95 percent of the construction costs would go to Virginia contractors. About 600 construction jobs would be created during the 21-month development process. The presence of Kalahari could also help the adjoining Fredericksburg Expo and Conference Center and quicken the pace of Celebrate Virginia South's development.
Here is a timeline of events involving Kalahari Resorts' plans in Fredericksburg:
Nov. 16, 2007: Kalahari and city officials hold press conference at Fredericksburg Expo and Conference Center announcing that Kalahari will build its third U.S. park in city's Celebrate Virginia South complex.
January 2008: Fredericksburg's City Council members travel to Sandusky, Ohio, to see one of Kalahari's two water-park resorts.
May 2008: City Council passes an incentive package that would return 47.5 percent of Kalahari's local tax payments to the resort on a quarterly basis for 20 years, along with more than $3 million in upfront fee waivers.
September 2008: Global financial panic freezes credit markets, thwarting Kalahari's plans for financing the $260 million project. Quest for financing continues to this day.
June 2009: Kalahari President Todd Nelson gives Keith Oster, vice president of Spotsylvania-based Prime Design Engineering, the go-ahead to complete the site plan for the massive project.
January 2010: Outgoing Virginia Gov. Tim Kaine announces that Kalahari has received access to $25 million in tax-exempt bonds to help finance the project. The bonds were part of the American Recovery and Reinvestment Act.
April 12: Fredericksburg Economic Development Authority will vote on whether to issue up to $35 million of bonds for Kalahari. Neither the city nor the EDA is on the hook for the payments. Kalahari hopes to get another $10 million in tax-exempt financing through the American Recovery and Reinvestment Act.
April 27: Fredericksburg City Council to vote on bond issuance.
Mid-May: EDA to vote
June 15: Deadline for Kalahari to issue the tax-exempt bonds. Construction on the project must begin by the end of June.