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Extent of value provided by Fredericksburg EDA is at heart of fee negotiations with Kalahari
BY BILL FREEHLING
The question of what value the Fredericksburg Economic Development Authority is providing to Kalahari Resorts seems to be at the heart of the ongoing negotiations.
The city EDA is scheduled to meet tomorrow at 4 p.m. in City Hall to continue its discussions on what fee Kalahari should pay to issue the bonds for the company's Celebrate Virginia South resort through the EDA.
The EDA has not reached an agreement on bond fees with Kalahari. That's led Celebrate Virginia developer the Silver Cos. to contact Spotsylvania County about the possibility of that locality's EDA issuing the bonds.
Kalahari plans a huge hotel, water park and convention center. The company wants to issue all of the $265 million in bonds it plans to sell through the EDA, a process that grants the bonds municipal status. The EDA is not the lender and bears no financial risk.
Of the $265 million in bonds, at least $25 million will be tax-exempt for the investors who buy them. Kalahari is trying to get at least another $10 million in tax-exempt financing through the federal stimulus and is talking with the Virginia governor's office.
The EDA's value on the tax-exempt bonds is clear-cut. Kalahari is projecting that the interest rate on these bonds will be about 8 percent--or 3 percentage points lower than the rate on the taxable bonds. That represents significant savings for Kalahari, which is why the company has agreed to the EDA's standard one-eighth of 1 percent annual fee on the loan balance. Kalahari has agreed to pay the EDA $31,250 a year for 10 years.
Kalahari also wants to issue $240 million in taxable bonds through the EDA, but the value the resort gets by using the EDA on that part is less obvious. Kalahari faces an 11 percent interest rate on the taxable part, and structuring the bond as municipal doesn't lower the rate.
NEGOTIATIONS CENTER ON VALUE OF EDA TO KALAHARI PROJECT
The Fredericksburg Economic Development Authority, which was created in 1969, is tasked with fostering projects that will help the city's economy. Its members are appointed by the City Council for four-year terms.
The EDA's revenues come from the fees taken in for being the borrowing conduit for various businesses and organizations. The EDA currently has an annual operating budget of about $300,000. The fees from Kalahari could substantially increase the EDA's annual revenue. City businesses and organizations apply for grants from the EDA.
The EDA has a strategic planning session scheduled for June 17 to discuss what it wants to do with its revenues, as well as other topics.
Here is a list of some of the bigger grants that the EDA has given out in the past several years. The EDA has also made a large number of grants for less than $10,000 each:
$178,248What the EDA paid to commission the JumpStart! 2010 Plan, in which consultants developed an economic vision for Fredericksburg.
Olde Town Steak & Seafood got that for its expansion plans, including awnings, a sprinkler system and a handicap-accessible bathroom.
The Bavarian Chef received that for new signs and improvements at its restaurant at the city's former train station.
The Surgi-Center of Central Virginia received that to help with its move from Stafford County to the city.
J. Brian's Tap Room was helped in opening an outdoor entertainment area behind its Hanover Street bar and restaurant.
The Free Lance-Star Publishing Co. got that to help it extend Belman Road into Print Innovators' property in the Battlefield Industrial Park.
The Fredericksburg Expo and Conference Center got that to help it compete with other convention centers.
The EDA contributed toward the work at the city's riverfront park on Sophia Street between Charlotte and Hanover streets.
$25,000 and $24,000
Capital Ale House and Kybecca got, respectively, help