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Fredericksburg EDA gives initial approval to issuing $35 million in tax-exempt bonds for Kalahari Resorts
Kalahari President and owner Todd Nelson said his company needs help to move ahead with the project here.
ROBERT A. MARTIN/THE FREE LANCE-STAR
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Date published: 4/13/2010
Rising borrowing expenses have increased the price of Kalahari Resorts' planned Fredericksburg water park hotel, and the company is asking the city to help bring down the costs.
Kalahari President Todd Nelson asked the city's Economic Development Authority yesterday to help him make the $260 million project financially feasible for his Wisconsin-based company. Nelson asked the EDA to either waive or reduce the fees it typically charges for bond issuances.
Kalahari previously negotiated an incentive agreement with the city that would allow the company to get back 47.5 percent of its annual local taxes.
Nelson was in front of the EDA yesterday to ask the group to approve up to $35 million in tax-exempt bonds that would help finance the 852-room hotel and indoor water park resort. The EDA, which would bear no responsibility for repaying the debt, unanimously voted to give preliminary approval.
The matter will now go before Fredericksburg City Council later this month, and be back before the EDA for final approval May 24. The EDA will then decide whether to waive or reduce the fee it usually charges for bond issuances--one-eighth of 1 percent of the outstanding loan balance.
Kalahari has access to $25 million in tax-exempt Recovery Zone Facility bonds, which it got as part of the American Recovery and Reinvestment Act. It's hoping to receive another $10 million. The EDA needs to approve the issuance to make the interest payments tax-exempt, which would lead to lower borrowing costs.
The EDA's standard fee on the $25 million issuance would cost Kalahari $31,250 for the first year, and progressively lower annual payments as the balance drops.
Kalahari revealed for the first time publicly yesterday that it also would like to do a taxable municipal bond issuance through the EDA for about $200 million. Those bonds, whose interest could be exempt from state taxes but not federal, would be issued after the RZF bonds. Kalahari would also put up about $30 million of its own money to complete the financing package.