Kalahari tax deal a win-win

Abatement creates jobs and new revenue for schools
Andy Ouriel
Sep 14, 2013
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.

Comments

Unassumer

And minimum wage employees are doing all the work but not sharing much of that $66 million.

Yellow Snow

Please explain my mathematical problem. Does this basically say homeowners are now responsible for $205,200 that Kalahari doesn't have to pay? Did Kalahari "assume" an abatement when none was promised? What would a homeowner have to do to get a 75% discount on property taxes for 15 years?

arnmcrmn

A homeowner is not responsible. They are just giving this business an abatement which is like giving them a pass on the their tax portion in turn for generating more jobs.

A homeowner is not a business, therefore is not eligible for a tax abatement.

bigdad1205

I suppose if a homeowner made 26.5 million dollar improvement to their home that added jobs to the local economy. They probably could apply for an abatement.

bigdad1205

66 million is the property value. Payroll is 18.3 million and I would venture to say most of that made by minimum wage employees is injected back into this economy. Minimum wage employees are not know for their outstanding saving abilities.

Sam

Minimum wage jobs with many of them foreign students, only one making out on this deal are the owners of Kalahari.

arnmcrmn

Its Kalahari, not Med Central.......most of the jobs are going to be based on skill set......minimum wage or just above. You cannot pay someone 20 bucks an hour to sit behind a counter and hand out toys.

Señor Clown

It seems a bit redundant that a hotel is charged a real estate / property tax when they are already collecting a bed tax. Granted, my stance is strongly anti-property tax anyhow. You're already collecting sales tax on goods sold, bed tax on services rendered, and income tax on the business and its employees - how many leeches can you attach to an industry before you suck all of the blood out of it?

titanfan84

And working there is like legalized salivary work 20hrs a day and then come back and do it again the next day and that's with little or no breaks