All News & Blogs
Kalahari Resorts agrees to pay Fredericksburg Economic Development Authority's fee on tax-exempt bond issuance
The RZF bonds, which Kalahari must issue by June 15, are tax-exempt for investors. By agreeing to the EDA's fee on this $25 million, Kalahari has committed to a $31,250 annual payment for 10 years--or a total of $312,500 paid to the EDA.
Paying the fee on the taxable part would be much costlier for Kalahari. Merrill Lynch is working on a taxable bond package for between about $220 million to $240 million that would be issued through the EDA and sold privately to institutional investors. Paying the EDA's annual fee on that amount would cost Kalahari as much as $300,000 a year.
Kalahari's April 22 letter to the city notes that the interest rate on the taxable portion is currently about 11 percent--"much higher than hoped for by Kalahari." Adding the EDA fee would pose "a very serious obstacle to finalizing the overall project financing plan," the letter states.
Kalahari also plans to put about $30 million of its own money into the financing package, which would exceed the $260 million cost of purchasing the land and developing the resort because of the interest costs. Kalahari has already spent about $3 million of its own money on the project, the April 8 letter states.
The April 22 letter states that paying the fee on the tax-exempt issuance and getting it waived on the taxable part "represents a fair and reasonable compromise and is consistent with the collaborative efforts of the City, the EDA and Kalahari to make sure this magnificent project becomes a reality."
The City Council is expected to approve the bond resolution tonight, and then the matter will be back before the EDA May 10. The EDA will decide at that time whether to waive the fee on the taxable portion and approve the payment plan for the tax-exempt part.
If that is accepted, the EDA would meet May 24 to give final approval.
Bill Freehling: 540/374-5405
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