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Kalahari tax deal a win-win

Andy Ouriel • Sep 14, 2013 at 11:05 AM

An agreement between the area’s largest indoor water park and Erie County’s government resulted in a victory for everyone involved.

But how?

Here’s a quick snapshot of the major points in the agreement:

The project

In March 2011, Kalahari Resort began a $26.8 million expansion project to double the size of its convention center and add seven five-bedroom units, accommodating 22 guests per suite. The project finished in January 2012.

The deal

Executives banked on receiving a tax break to start and complete this project. Erie County officials approved a 15-year tax abatement that provided a 75 percent reduction on the property tax produced strictly from this addition of the resort from January 2012 through December 2026. Both parties also agreed that the remaining 25 percent would be allocated to the school districts in Huron and Perkins Township. In June, the resort paid the first of the scheduled 15 payments based on 2012 figures.

The breakdown

The pay structure based on 2012 figures showed:

• $273,600 in taxes generated from this development.

• $52,700 in taxes given to Huron Schools.

• $15,700 in taxes given to Perkins Schools.

• $205,200 in total taxes forgiven.

The resort straddles portions of both school districts.

“Huron, like all school districts, welcomes additional revenue to support innovative programming and student initiatives,” Huron City Schools superintendent Dennis Muratori said.

The reasoning

Tax abatement programs are designed to encourage development. The $205,200 waived under the agreement is revenue that would not have been collected at all, if the expansion had not occurred. Tax abatement programs — by encouraging development — also create other tax revenue.

Chief among the benefits: The deal allowed Kalahari to increase staffing levels.

Today, the resort employs 1,049 full-time workers and 1,590 part-time workers, reflecting all-time highs.

More workers also increased Kalahari’s present- day payroll to $18.3 million.

"The company has far exceeded any goal,” Erie County’s financial consultant Greg Sherman said.

More rooms, about 900 now, and a larger convention center that can serve up to about 5,200 attendees — up from 2,200 previously — entices more people to visit Erie County and spend their money in the area, Erie Regional Planning director Steve Poggiali said.

“The government is always looking for development, and people look for different incentives to do a project,” Poggiali said.

A deal also kept Kalahari — among Erie County’s largest water customers — happy.

Then, after 2026, the deal stipulates Kalahari must pay the full amount of property taxes on the expansion.

"When the abatement comes off, the development of the land is at an increased value, and then you are getting that increase in property taxes.”

The figures

Kalahari’s total value equals about $66 million, which includes any improvements, according to Erie County auditor data.

The resort also payed out about $1 million in taxes based on 2012.

Kalahari representatives declined comment for this story.

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