Evolution of the financial terms of the JIA-Linger Longer agreement
for the Jekyll town center project
Four candidates for Governor of Georgia—two Republicans, Jeff Chapman and John Oxendine, and two Democrats, DuBose Porter and David Poythress—have recently criticized the financial agreement reached between the Jekyll Island Authority and its private partner Linger Longer Communities, a firm presided over by the politically-connected Reynolds family. In an effort to shed some light on this issue, IPJI has drawn from JIA records to construct a chart showing how the terms of the financial agreement evolved over time, changing first to the JIA’s advantage when Linger Longer had not yet been selected as the Authority’s private partner and then to Linger Longer’s after the developer had won the private-public partnership contest. To view the chart, click here.
Note: Neither IPJI nor the four candidates cited above have questioned the concept of a Jekyll town center or the need for Park improvements. What they have objected to is what appears to be a sweetheart deal given to Linger Longer by Governor Perdue’s appointees to the JIA board.
A month prior to the selection of Linger Longer as its private partner, records show that the Jekyll Island Authority, in effect, rejected the financial terms of Linger Longer’s partnering proposal, stating that, “The financial return to the Jekyll Island Authority as presented in your proposal does not seem at all commensurate with the level of upfront public investment required and the long range financial benefit to Linger Longer from the development. We could not recommend the financial return to Jekyll Island Authority’s Board as sound financial stewardship for the future of Jekyll Island.”
Linger Longer then responded by sweetening its offer and was later selected as the Authority’s private partner, in part, due to the strength of its financial proposal. Yet when the partnership agreement was reached on December 1, 2008, the terms largely reverted back to the ones previously rejected or otherwise became more favorable for Linger Longer.
- The percentage of condo/time-share sales participation offered to the JIA by Linger Longer was cut in half.
- A promised $8 million in partnering contributions to the JIA was reduced to $3 million.
- Linger Longer’s offer to contribute 1 percent of condo/time-share sales to a Jekyll Environmental Fund is gone
- New to the agreement is a 10-year, multi-million dollar reduction in the percentage of hotel receipts to be paid to the JIA by Linger Longer.
- Also new is a JIA payment of $2.7 million in a combination of “program management fees” and up front money to Linger Longer for “participating in Jekyll’s revitalization.”
- Linger Longer’s promise to increase its share of infrastructure costs for its Jekyll town center project was apparently forgotten.
Linger Longer originally projected that the Jekyll town center would produce $102 million in direct revenue for the JIA over the first 15 years of its operation. However, when the project was scaled back in September of 2008, and Linger Longer’s investment dropped from $360 million to $120 million, the forecasted revenue for the JIA dropped to $20 million, which is disproportionate to the reduction in the project’s size.
Noteworthy here is the fact that the $20 million is referred to as a “net” gain yet does not take into account the repayment of the $50 million in bond debt that is needed to fund the infrastructure for the town center project.
Some may argue that the current recession accounts for the change in contract terms to LL’s favor. After all, it is difficult to find developers willing to invest in the hospitality industry these days. The recession argument, however, cuts both ways. The JIA is cash-strapped due to recession-related drop off in visitation to Jekyll Island, and state bond funds are tough to come by due to Georgia’s budget crunch. Sweetening the deal with Linger Longer, therefore, is hardly something the JIA is well-positioned to do. Moreover, if the financial terms that Linger Longer has now secured are supposedly a byproduct of the recession and a tight lending situation, why are they so similar to the ones that the developer offered, and the JIA rejected, in August of 2007, which was a boom time for the building/development industry and a full year before the recession started?
Ironically, the Jekyll Island Master Plan of 2004 recommended that if the Authority were to form a public-private partnership, the JIA’s contribution would be public land with reduced land lease terms or funding of infrastructure needs to facilitate Jekyll’s redevelopment, but in the JIA-Linger Longer partnership deal, the Authority ended up doing both. Why?
By definition, a public-private partnership should be a two-way street, with benefits and obligations flowing in both directions, but in Jekyll’s case, the road appears to be largely one way, running straight to Linger Longer Communities.