Fredericksburg would give back nearly half of the local taxes paid by Kalahari Resorts as part of a 20-year, $61 million incentives package that helped convince the Wisconsin-based company to build a water park hotel and convention center in the Celebrate Virginia tourism complex.
Mayor Tom Tomzak said as the terms of that package were released that Kalahari will transform the city as a tourist destination.
And on a night when the city manager called for a hiring freeze because of lagging sales tax revenues, Tomzak said this project is necessary for the city to meet the growing expenses of local government services and infrastructure.
The agreement calls for the city to waive $3.35 million in up-front development fees for the project.
The bulk of that is a waiver of the roughly $3.2 million in water and sewer availability fees Kalahari would have to pay to connect to the city's utility system.
In addition to fee waivers, the deal calls for the city to return 47.5 percent of the local tax revenues that Kalahari generates to the resort on a quarterly basis for 20 years.
In all, that means that of the $125 million Kalahari is projected to generate in local government revenue over 20 years, the city would get $64 million, and Kalahari would get $61 million in the form of tax breaks and fee waivers.
The agreement also includes the following:
Kalahari will include Fredericksburg in its marketing, and it will set aside up to 500 square feet in its lobby for the city to market other area attractions.
Kalahari will "work with" the city to provide transportation between the resort and the downtown, but that doesn't require the resort to make any financial commitment to such a transportation system.
Kalahari will develop a water conservation program.
The Fredericksburg Kalahari will be the only Kalahari resort in Virginia.
The agreement calls for the city to raise its lodging tax from 5.5 percent to 6 percent before the resort opens. Also, the city would raise the admissions tax in the Celebrate Virginia tourism zone alone from 5 percent to 6 percent before the resort opens.
Kalahari will buy water from the city at a reduced rate that basically amounts to what it costs the city to buy the water from Spotsylvania and transport it to the resort. That rate will rise with the city's water costs.
In order for the tax rebates and other parts of the agreement to continue for 20 years, Kalahari must make a $25 million investment in the second phase of its project, which would include 200 more hotel rooms and more water park space, within 10 years of opening. If not, all the tax breaks stop after 10 years.
The council will have a special meeting at 7:30 p.m. on Jan. 15 to hold a public hearing on the incentives deal, which has been posted to the city's Web site.
The council could vote on it Jan. 22.
Council members would likely get a more detailed performance agreement that would govern the distribution of the incentives at a meeting in March.
In the meantime, the city plans to hire an outside consultant to analyze what costs the city is likely to incur because of the resort.
The details of the incentives were released shortly before last night's city council meeting, after a 36-minute closed session that included more city staff members than council members.
Council members approved the basic framework of this package at a closed session before Kalahari announced its plans for Fredericksburg in November.
Emily Battle: 540/374-5413| For more on last night's discussion of the Kalahari incentives, and for a link to the document, click on the City Beat blog at Fredericks burg.com/blogs. |