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Kalahari Resorts agrees to pay Fredericksburg Economic Development Authority's fee on tax-exempt bond issuance
BY BILL FREEHLING
Kalahari Resorts has agreed to pay the Fredericksburg Economic Development Authority's standard fee on the tax-exempt portion of its financing package.
Wisconsin-based Kalahari, which plans a massive water park resort and convention center in Celebrate Virginia South, is still asking for a fee waiver on the taxable bond issuance.
The EDA doesn't do the lending, but does serve as a conduit that allows the financing to receive municipal status. Because investors buying the bonds often don't have to pay taxes on the income, they agree to a lower interest rate--usually a few percentage points lower. That reduces the borrower's cost of capital.
The borrower, in turn, passes some of the savings along to the EDA in the form of a bond fee that is used for other economic development projects in the city. The EDA's standard annual fee is one-eighth of 1 percent of the loan balance.
Kalahari President Todd Nelson called the bond fee "unnecessary" and "ridiculous" when he was before the EDA on April 12. He said the project would be a "tax-generating machine" for the city and would increase the momentum at Celebrate Virginia. He asked the EDA to help him reduce the project costs to make it feasible.
The company has since agreed to the fee on the tax-exempt part of the financing. The city received a letter from Kalahari's attorney dated April 22 that said the company appreciates the city's support of the project and is "understanding of the need of the EDA to have some sources of revenue to fund its annual economic development activities."
In January, Kalahari received access to $25 million in Recovery Zone Facility bonds through the American Recovery and Reinvestment Act. The city and Kalahari are asking the Virginia governor's office for another $10 million of RZF bonds; a decision could come within the next month.
Kalahari is responsible for all interest and principal payments. Neither the city nor the taxpayers are responsible for the payments.
Documents relating to this article are on the Business Browser blog on fredericks burg.com. These include Kalahari's fiscal impact statement, the two letters Kalahari's attorney sent the city and a letter the city sent the governor's office asking for another $10 million in RZF bonds. http://blogs.fredericks burg.com/business browser