Kalahari Resorts announced June 15 its intention to build a hotel, conference center and water park in Round Rock. It has around 350 acres under contract across U.S. 79 from the Dell Diamond. The City Council unanimously approved June 23 a memorandum of understanding with Kalahari that outlines the parameters of an incentive package.
It’s a big deal for Round Rock, as the company will invest at least $250 million into the project and hire at least 700. So it’s important for all of us to be up to speed on the project. To that end, we’ve put together an extensive Q&A on the proposal at roundrocktexas.gov/kalahari. If friends or customers ask you questions, visit these pages to find the answers.
Second, here’s a few facts you should know about the proposal. 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 big.
How big? Here’s how they would compare (according to the Austin Business Journal):
Largest hotels in Austin metro area
Largest indoor meeting spaces in Austin metro area
- Austin Convention Center, 369,000 square feet
- Hyatt Regency Lost Pines Resort and Spa, 60,000 square feet
- The Expo Center, 55,000 square feet
And the magnitude of the project is why the City is negotiating an incentive package. Here are 5 key points of the MOU:
- 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.
- 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.
- 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.
- 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.
- 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.