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NEGOTIATIONS CENTER ON VALUE OF EDA TO KALAHARI PROJECT AUTHORITY EARNS ITS FEES BY ACTING AS A LOAN CONDUIT page 2
Extent of value provided by Fredericksburg EDA is at heart of fee negotiations with Kalahari

Date published: 5/13/2010

continued

That lack of direct financial savings, as well as the sheer size of the taxable bond, has led Kalahari to ask the EDA to waive its fee on the taxable part. Kalahari last week agreed to pay a reduced portion of the fee on the taxable bond, but the EDA hasn't signed off.

Kalahari has mentioned several reasons for why it wants to issue the taxable bonds through the EDA instead of doing a standard corporate issuance:

Merrill Lynch, which is handling the financing package, has separate operations for its corporate and municipal fixed-income business. Issuing the taxable bond through the EDA means that Kalahari doesn't have to work with two different teams of lawyers and bankers, which saves the resort time and money.

Kalahari plans to sell the bonds in a private placement to institutional investors. Institutions located in Virginia could avoid state taxes on the bond income if it's structured as municipal.

Municipal bonds avoid some of the costly financial reporting requirements that come with corporate bonds.

Doing both issuances through the EDA is simply quicker than alternatives. That is important because Kalahari must issue the $25 million in tax-exempt bonds by June 15 to satisfy Virginia rules (unless the deadline is extended, which is possible). Kalahari is also eager to open in Fredericksburg so it can start taking in revenue from the complex.

Unlike the 3 percentage points saved on the tax-exempt, it's harder to put a price tag on what value the EDA is providing on the taxable bond. And that explains some of the ongoing negotiations between the city, EDA and Kalahari.

Bill Freehling: 540/374-5405
Email: bfreehling@freelancestar.com


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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:

$178,248

What the EDA paid to commission the JumpStart! 2010 Plan, in which consultants developed an economic vision for Fredericksburg.

$39,500

Olde Town Steak & Seafood got that for its expansion plans, including awnings, a sprinkler system and a handicap-accessible bathroom.

$20,000

The Bavarian Chef received that for new signs and improvements at its restaurant at the city's former train station.

$50,000

The Surgi-Center of Central Virginia received that to help with its move from Stafford County to the city.

$50,000

J. Brian's Tap Room was helped in opening an outdoor entertainment area behind its Hanover Street bar and restaurant.

$20,000

The Free Lance-Star Publishing Co. got that to help it extend Belman Road into Print Innovators' property in the Battlefield Industrial Park.

$40,000

The Fredericksburg Expo and Conference Center got that to help it compete with other convention centers.

$50,000

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 with facade and exterior improvements.