State delay hurts Jekyll prospects
The Atlanta Journal-Constitution
By Dan Chapman and Leon Stafford
September 28, 2012
Keen to boost the state’s tourism industry, Gov. Nathan Deal signed tax rebate legislation 16 months ago that has yet to be tapped by developers and won’t likely be used for months — if ever.
The missing tax incentive, by one account, has already cost Jekyll Island the 2014 opening of a hotel considered key to upgrading its ability to host meetings. Other potential developments, including some in the Atlanta area, may not receive the tax break either, state and business officials said Thursday.
Georgia taxpayers already have spent $50 million on a new Jekyll convention center which needs adjoining hotel rooms to lure convention-goers and repay construction debts.
Yet a handful of conventions recently canceled plans to return to Jekyll upon learning that the Westin Hotel, which expected to take advantage of the sales tax rebate, won’t break ground this month as planned. Jekyll has so far lost $3.8 million in canceled bookings and related spending, according to the state authority that runs the island. The authority blames the delayed tax break for holding up financing for the Westin project.
“It’s unfortunate that we stubbed our toe on this particular project because we’ve got so much at stake,” said Rep. Ron Stephens, R-Savannah, who authored the tax break. But “there are a lot of (other) projects out there; I know of at least five that are greatly depending on this rebate.”
Stephens mentioned a 1,400-acre sports complex in Bartow County, a $1 billion indoor ski resort near Lake Allatoona and another project “that has connections to the film industry” as candidates to be boosted by the incentive.
The Georgia Tourism Development Act, passed by the legislature in 2011 and signed by Deal that May, aims to encourage development of museums, racetracks, marinas, water parks, convention hotels and other tourist sites. Developers would be eligible to recoup as much as 25 percent of construction costs via sales tax rebates over 10 years.
The governor gets final say in which projects qualify for the tax break. A key requirement: at least 25 percent of attendees must come from out of state. And the chosen projects must not compete with other businesses, i.e. nearby hotels.
The problem, state officials say, is that the agencies responsible for turning the legislation into regulations have struggled with the complexity of the tax break and haven’t satisfied legislators or the governor. Verifying out-of-state use is a major regulatory challenge, Rep. Stephens said.
Brian Robinson, spokesman for Deal, said the legislation is “going to require tweaks before implementation,” adding Deal will ask the General Assembly to revisit the tax rebate in January.
On Jekyll Island, developers of the proposed 200-room Westin Hotel expected the tax break would help secure a $25 million bank loan for the $39 million project. Groundbreaking was scheduled for this month. Jekyll Landmark Associates, the developer, expected the tax break to save $8.5 million over a decade, money to help repay the loan.
Jekyll Landmark could not be reached Thursday.
Jekyll Island, which has struggled since the recession began to redevelop hotels and shops, opened the bond-funded convention center last March. Three hotels and a retail district remain on the books, and all have struggled with financing.
“The whole project is designed as an integrated project; we have to have it all to realize the fullest potential,” said Eric Garvey, the Jekyll Island Authority’s spokesman. “We made the assumption, along with the developer that (the Westin) would qualify (for the tax break).”
Nearly 50 groups had tentatively booked Jekyll conventions for 2014, when the Westin was expected to open, Garvey said. Seven, including the Association County Commissioners of Georgia, have backed out and will meet elsewhere.
“We’re disappointed; we’ve been planning for several years to go back to Jekyll,” said Beth Brown, spokeswoman for the ACCG, which needs at least 800 hotel rooms for its annual gathering. Its April convention will return to Savannah. “Jekyll just won’t be ready in time for 2014.”
Robinson, the governor’s spokesman, said Jekyll should never have assumed approval of the tax rebate.
“It’s wrong to say that the tax rebate under that law was always part of the (redevelopment) plan,” Robinson said. “What hotel comes to Jekyll knowing that their competitor is getting a better tax deal than you are? Gov. Deal has said that he is not going to grant the rebate to businesses competing with existing Georgia entities”
The LakePoint Sports Development Group, which plans16 baseball fields, a dozen soccer fields and other facilities off of I-75 in Bartow County, has said it would like to get the tax break.
“LakePoint will benefit greatly by any incentives the state has to offer,” said LakePoint partner Judy Sparks.
Backers of the College Football Hall of Fame and the National Center for Human and Civil Rights, two attractions planned for downtown Atlanta, investigated the incentive but did not include it in their financing.
Spokesmen said it was unclear if the break would apply to the projects and they decided to wait until that was clear.