January 15, 2010 - Kalahari Resort's Celebrate Virginia water park project secured a $25-million boost from Gov. Tim Kaine's office this week through the federal stimulus act.  The tax-exempt financing should help Kalahari as it continues talks with banks and investors. 

Fredericksburg expects the Celebrate Virginia located water park will generate $64 million in new city revenues, after the incentives are accounted for. In the meantime, the construction alone is expected to serve as an economic stimulus for the area.  

January 15, 2010 12:00 am
BY EMILY BATTLE

Gov. Tim Kaine’s office told Fredericksburg officials Friday that $25 million in tax-exempt financing would be made available through the federal stimulus act to Kalahari Resorts’ proposed waterpark hotel in Celebrate Virginia.

Officials with the city and the Silver Cos. saw the news as a huge step that will put Kalahari in a better position to secure the financing it needs for the $260 million project.

“It’s a real solid building block,” City Manager Beverly Cameron said. “It positions them to get the remainder of their financing in place.”

City, Silver and Kalahari officials have worked for the past two months on pursuing these bonds. They expected to hear this week about their application, but as Kaine’s final hours in office ticked down, they began to wonder whether the decision would be passed to incoming Gov. Bob McDonnell.

Scott Little, Silver’s project manager for Celebrate Virginia, said there is still work to do to complete Kalahari’s financing package, but that the state’s allocation of these bonds through a highly competitive process is a vote of confidence that will help immensely as Kalahari continues to talk to banks and other potential investors.

A Kalahari spokeswoman said company President Todd Nelson was out of the country with family and could not be reached for comment.

The bonds are known as American Recovery and Reinvestment Act Recovery Zone Facility Bonds. The Recovery Act made many new types of financing available to states and municipalities for various projects, but these tax-exempt bonds are specifically for private projects in areas under economic stress.

Kalahari will be the entity responsible for the debt, but a public entity—in this case, Fredericksburg’s Economic Development Authority—will act as a conduit for the bonds, in much the same way the EDA allows other private entities, such as the University of Mary Washington Foundation or Mary Washington Hospital—to access low-cost financing for private projects.

“There is no real pledge of public funds involved,” Cameron said.

Kalahari’s allocation of $25 million represents more than one-fifth of the total amount of recovery zone facility bonds the state made available through the competitive process. The city had requested $30 million.

A letter to Cameron from Kaine Chief of Staff Wayne Turnage said the state received nearly $199 million worth of applications for the $112 million it had available.

Kalahari’s allocation represented the largest allocation to a single project that Kaine made. The next largest allocation was $17 million in bonds allocated to an industrial expansion project in Waynesboro.

Other projects that were allocated bonds included a convention center in Norfolk, the Main Street train station in Richmond and the SportsQuest Family Entertainment and Sports Campus in Chesterfield County.

City officials and Little all said it was good to see the state throw support behind the project, for which Fredericksburg approved a 20-year, $61 million package of tax-based incentives in 2008. Over that same 20-year time period, Fredericksburg expects the resort to directly generate $64 million in new city revenues, after the incentives are accounted for.

“It’s a project that benefits the city, but it’s also a project that benefits Virginia,” Vice Mayor Kerry Devine said.

“It’s nice to see the state and the locality and the business in partnership.”

Little said that the construction alone will be an economic stimulus, and he thinks that’s part of what made the project a good fit for the recovery zone financing.

He said it is expected to take 1.5 million work hours to build the resort, and between 85 and 90 percent of Kalahari’s construction budget is expected to go to Virginia contractors.

“Just to feed these contractors every day is going to be a huge business opportunity,” he said.

When Kalahari signed its incentives agreement with Fredericksburg, it was planning to open by the end of 2010. Shortly after that deal had been made, the housing market collapsed, the recession hit, credit markets dried up, and Kalahari’s schedule became a matter of when it could complete its financing package.

Nelson has continued the design phase of the project throughout the uncertainty, though. City building officials have received shipments of detailed plans, and a local firm was given the green light this past summer to start working on the site plan for the project.

“Everybody’s going 100 miles an hour on this,” Little said, adding that the team aims to be in a position to begin construction within 45 to 60 days of completing the financing package.

“If there’s anyone out there who still believes that this is just a flash in the pan idea, this should help them understand that this is a truly authentic project that is going to happen,” Little said.