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THE PUBLIC TRUST BETRAYED
Editor’s Note: Republican State Senator Jeff Chapman, from
Brunswick, has led the fight to prevent Jekyll Island from being
changed from a moderately priced resort open to all Georgians to
a high-end enclave for the wealthy, with attendant encroachment
on its unspoiled natural beauty. Now, as Sen. Chapman points
out in this Comment (and on his web site www.jeffchapman.us),
things have taken a change for the worse.
A state Senator writing about the practices of an authority
entrusted with stewardship of public property may seem a bit
unusual; however, in the case of Jekyll Island State Park, there
are issues involved which demand the attention of elected
officials who have been given the honor to serve the public
good. Transparency and accountability in government, respon
sible management of publicly owned assets, and respect for the
public trust are all wrapped within the Jekyll issue, as is the
principle of eminent domain, not in the traditional form but
in an upside down way with the taking of publicly owned land
and using it for private profit—a kind of eminent domain in
reverse.
The focus here will be on the terms of the contractual
agreements worked out between the Jekyll Island Authority
and companies involved with the State Park. The message is
a clear one—when the facts and figures are considered, the
Authority's fiscal practices are in need of official review.
WHO LET THAT HAPPEN?
Last year, when the Jekyll Island Authority (JIA) granted a
rent reduction of some $10 million to hotel developer Trammell
Crow to replace the Buccaneer Resort, there were many who
saw it as a sweetheart deal. Now the authority is spreading the
love. On Oct. 20, 2008 the JIA approved a hotel-condo con
tract for the Oceanfront Resort located on the north end of the
state park. Unfortunately, like the Trammell Crow deal, it also
contains a 10-year rent reduction.
With even bigger contracts poised for signature, the time
has come to question the practice of doling out fat incentives
for private development on prime oceanfront land owned by
the people of Georgia. To begin with, the facts show that the
Trammell Crow rent reduction was unnecessary. Six months
prior to the Trammell Crow deal, the JIA had negotiated a con
tract with Jekyll Ocean Oaks—the operators of the Jekyll Club
Hotel—to replace the Holiday Inn in which annual rent was
reduced by a modest 2 percent of gross receipts for just the
first three years and set at 4.5 percent thereafter. Jekyll Ocean
Oaks—a company with 20 years of experience in the Jekyll
hotel market—obviously thought the deal was a good one or
else it wouldn't have agreed to it.
The board toe was enthused about the deal, having drafted
the agreement with the intention of establishing a model for
future hotel development contracts, according to former JIA
board chair Richard Wood, who helped negotiate the agreement
Yet, in June, 2006, the JIA, under new leadership, approved
an agreement with Trammell Crow which obligates the devel
oper to pay nothing to the Authority for the first year, only
1 percent of gross receipts after four years, and just 3.5 per
cent annually after the rent reduction expires. Furthermore,
Trammell Crow's deal exempts food, beverages and banquet
sales from gross receipts—a huge sum of money and a further
giveaway of publicly-generated revenue.
Why would the JIA board cut such a deal after having set a
precedent with the Jekyll Ocean Oaks agreement? The JIA has
offered several answers to this question.
1) The JIA claims that financial incentives are a "standard
practice" used to help development projects get off to a good
start. Fact: a recent survey done in cooperation with the
National Association of State Park Directors shows that finan
cial incentives for private development on state park lands are
rarely used, and in the few instances when they are the incen
tives are modest and based on cost savings for the park.
2) The JIA says that the rent reduction was needed to offset
the risk of investing in Jekyll. Fact: a marketing study done for
Trammell Crow in December, 2006 concluded that the new hotel
was ideally situated and would be highly profitable, showing
that the element of risk involved with the project was excep
tionally small. The JIA, having received a copy of the market
ing report, knew the project was a low-risk venture yet gave
Trammell Crow a massive incentive anyway. Why?
3) The JIA claims that the cost of the Trammell Crow project
justifies a larger rent reduction. Fact: the Oceanfront Resort
project, which is just one-third the cost of Irammell Crow's and
less than the cost of the Jekyll Ocean Oaks project, recently
received a similar deal, proving that project cost has nothing
to do with rent reduction size.
The JIA's excuses, by failing to pass muster, make clear
what the Trammell Crow deal really is—a lease of the public's
oceanfront property to a private company at an inexplicable
discount: an agreement that I believe violates the public trust
and requires investigation.
Therefore, I have requested that the State Department
of Audits and Accounts initiate a Performance & Compliance
audit of all JIA lease agreements over the past three years
that include financial incentives, with the recommendation
to halt further JJA contract signings until the investigation is
completed.
WHO GOT THE REAL DEAL?
While a response to my request was pending, the JIA Board
announced, on the day after Thanksgiving, an emergency tele
phone conference meeting for the following Monday morning
to approve the long-term contract with its private partner,
Linger Longer Communities. The contract, which has a 50-year
term, was approved by a seven-to-one vote, despite the fact
that it is grossly unfair and includes the same inexplicable
financial incentives that I have previously questioned.
Originally, the public-private partnership was based on the
idea that the JIA would contribute either public land or pay
for infrastructure costs to facilitate Jekyll's redevelopment, not
both. The partnership agreement recently approved, however,
has the JIA doing both in the Jekyll town center project—
Linger Longer takes ownership of the profitable parts of the
project (two hotels and a time-share complex) while the JIA
assumes $25 million in bond debt to pay for a new convention
center and project-related infrastructure needs.
Adding insult to injury, the bond debt will be paid off
through revenue generated by Jekyll's visitors, meaning the
public foots the bill for project components that benefit the
private partner.
Furthermore, Linger Longeris time-share complex will dis
place Jekyll's most heavily used beachside parking area, yet
the JIA has accepted the financial responsibility of rebuilding
this facility elsewhere while handing Linger Longer this valu
able oceanfront public land free of cost.
The timeshares alone can generate Linger Longer roughly
$100 million in net revenue, thanks to the JIA's agreeing to
accept a mere 1 percent cut of time-share sales, even though
much of the time-shares' value is based upon their location
on prime state park land. The partnership contract continues
to tilt to the advantage of Linger Longer through a 10-year,
multi-million dollar rent reduction for its tv/o hotels, courtesy
of a JIA Board that has handed out a massive "start-up incen
tive" for a private project on beachfront public land.
FAIR OR FOUL?
If Georgians must see prime oceanfront acres of their state
park privatized through commercial partnership, they should
expect a partnership that is fair for both parties. Fairness,
however, is not the word that comes to mind when looking at
the partnership contract.
Responsibility for this lopsided relationship, and for the
JIA's giveaway of millions of dollars of visitor-generated rev
enue, does not rest with the private partner, who is simply
trying to maximize his profits, but rather falls squarely on tiie *
shoulders of the JIA Board appointees who have failed the
people of Georgia.
The Georgia Code states that authority appointees should
"never engage in conduct which constitutes a breach of public
trust." By depriving the people's park of millions of dollars of
needed revenue while enriching a private partner, and by jam
ming through a critically important contract without public
review, the JIA Board's leaders have violated the public's trust
and compromised their standing as park stewards. Jekyll Island
State Park and the people of Georgia deserve better.
Sen. Jeff Chapman
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DECEMBER 10,2008 • FUGPOLE.COM 11