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EDA split over Kalahari fees; compromise proposal dies
Date published: 5/15/2010
Fredericksburg's Economic Development Authority indicated yesterday that it would not accept a compromise offer on the fees Kalahari resorts should pay on a $240 million taxable bond it plans to issue to fund its proposed resort in Celebrate Virginia.
Whether the city EDA now stands a chance to receive any of those fees remains to be seen.
A motion to accept the compromise died on a 3-3 vote. EDA members Joe Wilson, Mary Jane O'Neill and Michael Colangelo voted for it, and Chairwoman Dana Herlong, Amy LaMarca and Rick Pullen voted against it. Chris Hornung, an EDA member who works for Silver Cos., abstained.
Kalahari originally asked for a full waiver of the standard fee the EDA charges on bonds for which it serves as a conduit. That annual fee is one-eighth of 1 percent of the outstanding balance of the bonds.
But the EDA told Kalahari it wouldn't waive the fee.
City staff and City Council members have been working for the past several months to assist Kalahari in making the financing package work for its proposed resort--which is projected to net the city more than $3 million in annual tax revenue.
So City Manager Beverly Cameron proposed a compromise: In lieu of the standard fee, the EDA would receive $1.25 million over 10 years. That money would come from one-half of 1 percentage point on the lodging tax. Under the terms of Kalahari's incentives deal with the city, $594,000 of that total would be paid by Kalahari and $656,000 would come from the city.
That's the deal the EDA turned down yesterday.
But Fredericksburg's isn't the only EDA Kalahari and the Silver Cos. have been talking to about serving as a conduit for these bonds.
What's going on?
If the EDA issues the taxable bonds, they'll be municipal, not corporate, bonds. That would save Kalahari time and money with Merrill Lynch, the bank that is handling all of the bonds, and would help Kalahari avoid some of the costly financial reporting requirements that come with corporate bonds.So what's the problem?
Kalahari agreed to pay the EDA $312,500 over 10 years on the tax-exempt bonds.
Kalahari is exploring the possibility of issuing the bonds through another nearby EDA, which means any fees it pays will support economic development projects outside the city.