The Round Rock City Council voted Dec. 15, 2016, on several agreements with Kalahari Resorts, including a Master Development Agreement, an Economic Development Agreement and a Ground Lease. Kalahari Resorts announced in June its intent to build a family resort, water park and convention center on 351 acres south of U.S. 79 near Old Settlers Park and the Dell Diamond.
The agreements provide for Kalahari to employ a minimum of 700 and invest at least $350 million in a 975-room resort, 200,000-square-foot indoor/outdoor water park and 150,000-square-foot convention center. The City will own the 351-acre tract of land, which will be leased to Kalahari for up to 99 years. In addition, the City will issue bonds to provide $40 million in net proceeds to construct the City-owned Convention Center, and $30 million to construct city-owned improvements. Also, the City will waive most development fees. After the debt payments are made each year, the City and Kalahari will share remaining select State and City tax revenues
, with 75 percent going to Kalahari and 25 percent to the City in years 1-10 and 50-50 in years 11-40. Based on projected revenues the incentive payments to Kalahari are estimated to be $7.5 million annually for years 1 through 10. The City expects to receive $4.7 million a year in new tax revenue after debt and incentive payments are made for years 1 through 10.
The bond debt will be repaid through select State and City tax revenues generated by the project -- which are State hotel occupancy tax and sales tax; and City property tax, general sales tax, regular hotel occupancy tax and mixed beverage tax generated solely by the project. Not included are the State mixed beverage tax, and the City’s half-cent sales tax for property tax reduction, half-cent sales tax for economic development and roads, and 2-percent hotel occupancy venue tax. The venue tax was approved by City voters in 2011 to fund debt and operation costs for the Round Rock Sports Center. The tax revenues not included in the agreement are retained by the City at 100 percent. Updated May, 2017
State hotel occupancy tax and sales tax; and City property tax, general sales tax, regular hotel occupancy tax and mixed beverage tax generated solely by the project. Not included are the State mixed beverage tax, and City’s half-cent sales tax for property tax reduction, half-cent sales tax for economic development and roads, and 2-percent hotel occupancy venue tax. The venue tax was approved by City voters in 2011 to fund debt and operation costs for the Round Rock Sports Center. The tax revenues not included in the agreement are retained by the City at 100 percent. Updated May 9, 2017
The City purchased the property for approximately $27.5 million on Dec. 21, 2106. Kalahari made an initial lease payment of $17 million which the City used for the purchase. In addition, the City will contribute $10.5 million towards the purchase. In eight years, Kalahari will make an additional lease payment of $10.5 million plus interest. An additional 1.5 acre tract is scheduled to be added to the project following a City Council vote on Jan. 26, 2017. The City will purchase the property with funds provided by Kalahari in the form of a lease payment. Updated Jan. 24, 2017
A debt payment reserve fund will be established that gives the City enough money to pay a full year’s debt payments. Here is the order in which the select State and City tax revenues will be spent:
- Debt payments for Convention Center and infrastructure
- Reserve fund equal to one year of debt payments
- Sharing of program incentive payments between the City and Kalahari
By owning the 351 acres and the Convention Center, the City has real assets. The City will not sell the property until all project public debt is paid. At that point, Kalahari will have the option to purchase the property for $1 per acre. Kalahari’s proximity to Old Settlers Park and Dell Diamond – two well-established venues that together draw more than a million visitors annually – bodes well for a successful, tourism-oriented development.
A company like Kalahari is highly prized as a corporate citizen, making recruitment very competitive and incentives often necessary. Kalahari will generate an estimated $4.7 million of new net tax revenue a year to the City and bring hundreds of new jobs to Round Rock. The City believes the project will attract additional businesses and development in Round Rock beyond the $350 million investment Kalahari will make for its resort. The City has used incentives in the past to attract other highly desirable companies to Round Rock and has a proven track record of providing performance-based incentives to businesses that expand employment opportunities and the tax base. Examples are Dell, Dell Diamond, Round Rock Premium Outlets, IKEA, Bass Pro and Emerson. These companies are assets to the community and our economy.
This project will diversify the property tax base by bringing a new industry – the resort/convention business – to Round Rock. We anticipate this project to generate an estimated $4.7 million in net direct annual tax revenue to the City, and will provide many jobs for varying experience levels including: full time, salaried, part-time and hourly opportunities. Kalahari has committed to invest at least $350 million in the project, which will create significant property tax revenue to the City, Williamson County and Round Rock ISD. And, while the City has successfully diversified our sources of sales tax revenue over the past 10 years, we have not had a single project add this much value to the property tax rolls.
The agreement calls for $15 million in onsite public improvements – roads, utility lines, etc. – and $15 million for offsite public improvements. The offsite improvements include a major upgrade to the intersection of U.S. 79 and Harrell Parkway – which will be a major entrance into the resort – as well as an upgraded railroad crossing further east on U.S. 79 that accesses a regional wastewater treatment plant. Improvements to the intersection of U.S. 79 and Joe DiMaggio Boulevard are also included. There will also a new public roadway connecting Kenney Fort Boulevard to U.S. 79 and improvements to public utilities. All onsite and offsite public improvements will be owned by the City.
The company will need to invest at least $350 million and employ at least 700. The shared revenues will be based on resort and convention center sales and increased property value. The more sales are generated by Kalahari, the more it will receive in incentive payments – after annual convention center and public improvement debt payments are made.