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Kalahari makes pitch to Spotsylvania page 2
Silver Cos. talking to other localities about their EDAs issuing Kalahari's bonds

Date published: 5/12/2010


Kalahari is borrowing more than the projected development price tag--roughly $260 million--to cover interest costs.

Kalahari agreed after the April 12 meeting to pay the Fredericksburg EDA's standard fee--one-eighth of 1 percent of the loan balance annually--on the tax-exempt bond. By issuing those bonds, the EDA would help lower Kalahari's interest rate from about 11 percent to 8 percent, and part of the savings would be passed along to the EDA to fund its economic development projects in the city.

Kalahari has agreed to pay the Fredericksburg EDA $31,250 a year for 10 years, for a total of $312,500, on the tax-exempt bonds.

Kalahari at first asked the city EDA to completely waive the fee on the roughly $240 million taxable bond issuance--which carries about the same 11 percent interest rate as an unrated corporate bond would. The company later agreed to pay the EDA a total of $593,750 in equal payments over 10 years. The payment would come from the occupancy tax Kalahari generates and that the resort would have otherwise received back as part of its incentive deal with the city.

The Fredericksburg EDA this week balked at that offer, in part because the agreement--which was drafted by Fredericksburg Manager Beverly Cameron--also involved the city paying the EDA a total of $656,250 over 10 years from the occupancy taxes. Several EDA members didn't like the idea of taking taxpayer money. None of the members at the Monday meeting suggested just taking the Kalahari payment and allowing the city to keep its part.

Honaker said he floated to Spotsylvania the same basic offer that the city EDA has received--about $90,000 a year to the county's EDA from Kalahari for 10 years to issue the $265 million in bonds.

Regardless of which EDA issues the bonds, Kalahari would be solely responsible for paying all the interest and principal. The EDA would bear no financial risk even if Kalahari defaulted.

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