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Fredericksburg EDA doesn't approve compromise offer on Kalahari Resorts bond fee
Date published: 5/11/2010
A compromise regarding Kalahari Resorts didn't go over well yesterday during a meeting of the Fredericksburg Economic Development Authority.
The discussion was on the fee that borrowers are charged to issue bonds through the EDA, which gives the bonds municipal status and results in tax savings for investors who buy them. The EDA's standard annual fee is of 1 per-cent of the loan balance.
Kalahari, which plans to build a huge water park, hotel and convention center at Celebrate Virginia South, agreed to the EDA's standard fee on the $25 million tax-exempt bond that it plans to issue. Kalahari got access to that financing through the American Recovery and Reinvestment Act and hopes to get another $10 million this summer--and potentially more next year.
But Kalahari has balked at the EDA's fee on the roughly $240 million in taxable bonds that the resort plans to issue. Kalahari at first asked for a fee waiver but then agreed to a compromise plan drafted last week by Fredericksburg City Manager Beverly Cameron.
Cameron's plan involved the EDA getting $125,000 a year for 10 years as a fee on the taxable bonds to be paid from the occupancy taxes Kalahari generates. About half of the money would have come from Kalahari, which otherwise would have received the funds as a tax rebate under the incentives it negotiated with the city.
The other half would have come straight from the city to the EDA, and that is the part that many EDA members objected to. Many members also feared setting a bad precedent of leniency for future bonds issuances.
EDA members voiced support for Kalahari, but many said they thought the company should pay the standard bond fee and expressed doubt that the fee would make or break the project.
The EDA adjourned yesterday without voting on the matter, but one compromise plan seemed to have the approval of a majority. That would involve Kalahari paying the standard fee on only the first $100 million of the taxable issuance--which would result in the $125,000 annual payment for 10 years but would avoid injecting taxpayer money into the EDA, which uses the money to fund economic development projects in the city.
That compromise plan will be discussed with Kalahari's executives. The EDA will meet again at 4 p.m. Friday, and a vote could come then.
There is some sense of urgency, because Kalahari must issue the $25 million in tax-exempt bonds by June 15 under the current rules.
Bill Freehling: 540/374-5405