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Kalahari President Todd Nelson (left), shown talking to Fredericksburg Mayor Tom Tomzak in 2008, is in agreement with the compromise that was reached.
FILE/ROBERT A. MARTIN/THE FREE LANCE-STAR
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BOND IMPASSE RESOLVED
Fredericksburg EDA, Kalahari Resorts reach compromise on bond fees
BY BILL FREEHLING
Date published: 5/25/2010
BY BILL FREEHLING
The Fredericksburg Economic Development Authority and Kalahari Resorts reached a compromise on bond fees yesterday, ending six weeks of negotiations and likely cutting Spotsylvania County out of the loop.
The compromise involved the EDA signing off on City Manager Beverly Cameron's plan for a fee on Kalahari's taxable bonds in exchange for the company agreeing to pay the standard fee on the tax-exempt issuance.
Kalahari attorney George Consolvo and Silver Cos. executive Scott Little said after the meeting that the compromise is acceptable to Kalahari President Todd Nelson, and that means Spotsylvania's EDA, which held a meeting yesterday to discuss the matter, won't be issuing the bonds.
The compromise allows the Fredericksburg EDA to set a precedent of demanding its full one-eighth of 1 percent annual fee to issue tax-exempt bonds while agreeing to a significantly reduced charge on the taxable bonds.
Little said Nelson was pleased with the EDA's actions, though disappointed that the EDA put off approving an amended performance agreement dictating the tax incentives Kalahari will receive from the city. Kalahari needs to resolve all contingencies before selling the private placement bonds.
The EDA will likely take up the performance agreement at its June 14 meeting. The EDA asked that City Council insert a provision into the agreement that would require Kalahari to reserve a certain number of jobs at its Celebrate Virginia water park, hotel and conference center for city residents.
Little said that requirement would be nearly impossible to enforce. An alternative suggestion by EDA members was to simply have a job fair in the city that gives Fredericksburg residents first crack at applying.
Though the final performance agreement remains a work in progress, the EDA and Kalahari now have a deal on the fee structure.
BOND PACKAGE INVOLVING UMW IRRITATES EDA MEMBERS IN CITY
Fredericksburg EDA members expressed displeasure yesterday over the way City Council and then City Manager Phil Rodenberg handled a bond package that the University of Mary Washington Foundation used to buy a large home at the corner of William Street and College Avenue. The foundation bought the house at 1201 William St. in March 2007 for $2.1 million.
City Council that year passed a resolution allowing the foundation to run the bond through the Stafford-Staunton Industrial Development Authority, which was set up to handle financing for the Virginia Municipal League and Virginia Association of Counties. The UMW Foundation was charged a small upfront fee on the bond issuance.
Fredericksburg EDA members said yesterday that they had never heard about the bond issuance until very recently, and they were dismayed that City Council never consulted them. The EDA generates its fees by serving as the conduit for tax-exempt bonds.
"I feel blindsided," Fredericksburg EDA Chairwoman Dana Herlong said yesterday. "We're not being communicated to by council."
City staff said they'll research the matter and provide more information about the transaction at the EDA's June 14 meeting.
--Bill Freehling
SPOTSYLVANIA EDA MEETS ON BONDS, SAYS IT ISN'T 'POACHING'
Spotsylvania County's Economic Development Authority appeared willing yesterday to serve as a conduit for a roughly $240 million taxable bond issue by Kalahari Resorts, even though a decision made by Fredericksburg's EDA will likely make that unnecessary.
But county EDA members and an official from the Silver Cos. who presented the bond possibility to them were all adamant that the county's willingness to issue the bonds did not constitute "poaching" an opportunity from Fredericksburg, as city Vice Mayor Kerry Devine suggested in a letter to The Free Lance–Star.
"I would hope going forward that this would be the kind of thing that the city would look more kindly on," EDA member Robert Stuber said. "I think this would be a good start in regional cooperation for tourism."
"If the city's EDA were to help finance a large company that was to come to Spotsylvania, my response would be, 'Thank you, we'll send you a dozen roses next week,'" said EDA Chairman Steven Thomas.
Silver Director of Development Scott Little said his company approached the county because "I think we're very much at the end of the road with the Fredericksburg EDA," not the reverse.
"To be very clear, nobody came knocking from Spotsylvania on our door," Little said. "It was our company who came knocking to Spotsylvania."
Little also took issue with Devine's assertion that a four-month extension of the state deadline for issuing Kalahari's $30 million in tax-exempt bonds means governmental boards should have more time to deliberate.
"The cost of delay in all of these matters is astronomical," Little said. "That extension was not something to let us sit back and breathe."
Had Spotsylvania's EDA been tapped to issue the bonds, Kalahari was prepared to pay it the same annual fee of $57,375 for 10 years it had committed to Fredericksburg.
The city's EDA had not agreed to accept that fee until yesterday, at the same time Spotsylvania's EDA was meeting.
Little also offered the following as sweeteners to convince the county EDA to help with the bonds:
- He pledged that Silver would commit to build a Class A office project in the county, although he did not state which project, and added that building it would be dependent on lining up tenants.
- Little said Silver would help in any way it could to pave the way for a new entrance to the Spotsylvania Towne Centre to be built at State Route 3 and Carl D. Silver Parkway, although he acknowledged that Silver did not own the land and did not have the authority on its own to make that happen.
- Little said Spotsylvania County could have a "marketing presence" inside the Kalahari resort if its EDA issued the bonds.
—Emily Battle
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Date published: 5/25/2010
Most recent reader comments:
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Junk Bonds are commercial bonds not municipal
(posted by
soldat65
, June 25, 2010 8:29 pm)
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 0 likes
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read my lips..default rate is 2% and you can bail out in real time on the open market. So if you can pay attention to your money you can make money on "high yield bonds".
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Junk bonds are heading the same direction as the rest of US financial industry
(posted by
tpifos
, May 27, 2010 7:45 am)
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0 likes
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many experts expect municipal bonds to be the next to fall.
Reason is, these loans were intended to fund relatively
stable projects that benefit the entire community such as
hospitals, privately owned utilities, etc., usually in small
communities w/o other resources, NOT to to pad the profits
of a private co. w/no financial disclosure. As risky as it gets.
Just look at the business model. This guy succeeded in the
economic hayday when he could poach customers from
other parks.
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That Nelson fella looks like Caveman in that picture..anyway..
(posted by
soldat65
, May 26, 2010 9:35 pm)
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0 likes
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I make 25% of my living off junk bonds. And I am proud to call them that. It is just as appropriate as calling a water park "Kalahari". Junk bonds are not as risky as you think..only 2% default and believe me that's a drop in an ocean. Of course they are traded like stock so they go up they go down in value..but the interest paid moves in the opposite direction...so pretty much you make out either way. Just don't sell em when they are low. BIG mistake.
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Junk Bonds
(posted by
MGWork
, May 26, 2010 4:20 pm)
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0 likes
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MATT...if you will take the time to look at your response to TPIFOS, you will see that you did not answer him, but chose to dance around the real issues of high-yield bonds and Kalihari. Calling someone a Kalihari-hater, IMO, is more childish and political rhetoric than substance. Call Freehling and see what he means by "high yield bonds." I sincerely don't believe his editor would have allowed Bill to use "junk bonds" as being discriptive and chose "High-Yield" which is more non-discript..
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WSJ Headline: "Junk Rated Companies Get Shut Out"
(posted by
tpifos
, May 25, 2010 6:23 pm)
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0 likes
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Kalahari was desperate to use the EDA to avoid financial
disclosure & because no one else would finance such a high
risk project. A junk bond is any high yielding bond. Look it up.
What I dislike is elected officials who don't understand the
basic financial terms they're voting on.
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