State senator requests audit of Jekyll Island Authority
November 20, 2008 at 2:53 pm by Thomas Wheatley in News
State Sen. Jeff Chapman, R-Brunswick, along with Democratic state Reps. Debbie Buckner of Junction City and Stephanie Stuckey-Benfield of Decatur, was one of the few voices during last year’s legislative session to criticize the Linger Longer project on Jekyll Island, a historic state park.
The op-ed below by Chapman is the first in three that the senator says will lay out the case for increased examination of the Jekyll Island Authority, the Governor-appointed state agency that oversees the park, and the idea of “selling off” state land to the private sector. In closing, he says he’s requested the state conduct an audit of the authority’s activities during the last three years.
Chapman admits it may seem strange for a senator to write a series of articles about the topic, but:
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, responsible 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.
Senator, the Internetz are yours. Below and after the jump is Chapman’s full editorial:
Last year, when the Jekyll Island Authority (JIA) granted a rent reduction of some $10 million to hotel developer Trammell Crow (TC) to replace the Buccaneer Resort, there were many who saw it as a sweetheart deal. Now the authority is spreading the love.
On October 20, 2008, JIA approved a hotel-condo contract for the Oceanfront Resort located on the north end of the State Park. Unfortunately, like the TC 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 TC rent reduction was unnecessary. Six months prior to the TC deal, JIA had negotiated a contract 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 3 years and set at 4.5 percent thereafter. Jekyll Ocean Oaks—a company with twenty 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 too was enthused about the deal, having drafted the agreement with the intention of establishing a model for all future hotel development contracts.
Yet, in June of 2006, JIA, under new leadership, approved an agreement with TC which obligates the developer to pay nothing to the Authority for the first year, only 1 percent of gross receipts after 4 years, and 4 percent after the rent abatement expires—so much for a model agreement.
Furthermore, unlike the arrangement with Jekyll Ocean Oaks, TC’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? JIA has offered a couple of answers to this question.
1) JIA says that TC’s rent reduction was needed to offset the risk of investing in Jekyll. Fact – a marketing study done for TC in December of 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 exceptionally small. JIA, having received a copy of the marketing report, knew the project was a low risk venture yet gave TC a massive incentive anyway. Why?
Furthermore, if investment in Jekyll is so risky, why had TC already purchased a second Jekyll hotel—the Oceanside Inn and Suites? Why did TC attempt to become JIA’s private partner in the long-term redevelopment of the park? Why did a TC partner recently pay a rival developer $800,000 for the right to redevelop a third Jekyll oceanfront property?
2) JIA claims that the cost of the TC project justifies a larger rent reduction. Fact – the Oceanfront Resort project, which is just one-third the cost of TC’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. JIA’s excuses, by failing to pass muster, make clear what the TC 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 activities during the previous 3 years related to contracts with Jekyll Ocean Oaks, Trammell Crow, Leslie Lurkin and Linger Longer Communities, with the recommendation to halt further JIA contract signings until the investigation is completed.
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