Kalahari Project

Why the Kalahari Resorts project is a Big Deal

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A lot of the news media coverage and some of the social media comments about the Kalahari Resorts announcement June 15 focused on the indoor/outdoor water park that’s a major element of the project. We understand why, but the project is so much more than that.

Here’s why: As currently proposed, the 1,000-room hotel and 150,000 square foot convention center would be the second largest in Central Texas.

That’s B-I-G big.

How big? Here’s how they would compare (according to the Austin Business Journal):

Largest hotels in Austin metro area

  1. JW Marriott, 1,012 rooms
  2. Hilton Austin, 801 rooms
  3. Renaissance Austin, 492 rooms

Largest indoor meeting spaces in Austin metro area

  1. Austin Convention Center, 369,000 square feet
  2. Hyatt Regency Lost Pines Resort and Spa, 60,000 square feet
  3. The Expo Center, 55,000 square feet

That’s why we characterize this proposal as a game-changer for Round Rock. It puts us in the hospitality and conference business in a big way. By way of comparison, the Marriott in La Frontera has 12,900 square feet of meeting space. The United Heritage Center at Dell Diamond has 5,400 square feet. They’re both great spots for a meeting, but nowhere close to the scale Kalahari is planning.

Kalahari is unlike any hotel/convention property in Central Texas. It’s a family resort destination that will draw approximately 1 million visitors annually. That’s 1 million folks coming to town, having a great family vacation or unique conference/convention experience, spending their dollars here and then heading back home. The project will generate millions of dollars a year in local and state government revenue. We can’t estimate just how much yet, because there aren’t enough details worked out in the development proposal.

A minimum of $250 million invested in property and capital, along with at least 700 jobs, is why we are negotiating an incentive package with Kalahari. We are working on a deal that will benefit both sides. The memorandum of understanding approved June 23 by the City Council lays out some of the parameters of the still-being-negotiated agreement. (In case you’re wondering what an MOU is, visit this FAQ.)

Here are 5 key points of the MOU:

  1. The City intends to loan Kalahari $11 million to purchase 155 acres of the 350 acres or so it has under contract. The loan will be in the form of a real estate lien note, with a reasonable rate of interest, secured by a first lien deed of trust. So what’s a real estate lien note and first lien deed of trust? Real estate lien note means the City will hold the land as collateral on the loan, which we anticipate funding from City cash reserves. First lien deed of trust means that any private financing Kalahari gets for project will be “second in line” as collateral on the 155 acres.
  2. The City plans to borrow money for the Convention Center and related infrastructure. The City would own the Convention Center until it is paid off. This will allow us to take advantage of favorable financing options (see point 5 below). We anticipate Convention Center debt will be backed by local hotel occupancy tax (HOT) funds and Type B sales tax funds. However, we plan to make the actual debt payments from the tax revenues generated from the project.
  3. The City intends to issue debt, likely Certificates of Obligation (COs), to pay for road improvements and other public infrastructure necessary to the project. COs are backed by property taxes, but, again, we plan to make the actual debt payments from the tax revenues generated by the project.
  4. The MOU lays out the types of revenue the City intends to share on the project. They include the local 7 percent HOT tax, 1 percent general local sales tax, local mixed beverage tax, City property tax and any eligible state taxes. What’s not included is the 2 percent local venue tax that helps pay for the Round Rock Sports Center; the half-cent sales tax that reduces property taxes and the half-cent Type B sales tax that pays for transportation improvements and economic development activities.
  5. We plan to use a recently-amended state law that allows the City to use state hotel occupancy tax revenue and state sales tax revenue to pay for a number of eligible uses related to the hotel and convention center. The key to the law is the City has to own the Convention Center. Using local HOT funds and local sales tax funds are the norm for major projects like this one. Leveraging the state’s 6 percent HOT tax and the state’s 6.25 percent sales tax is, ahem, a B-I-G part of this proposal.
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