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bae Jekyll Island Lessons Learned FMFADA Board July 16, 2009
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bae Today’s Agenda Quick Comparison Jekyll Island as “City” Challenges Commercial Lessons Learned Residential Lessons Learned Key Insights
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bae Quick Comparison Fort Monroe: Urban context; more residential and office Jekyll Island: Large natural setting; more acreage and lodging facilities
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bae Almost all municipal services provided by Jekyll Island Authority (“JIA”) Fire/EMS Water and waste water Roads, beaches, and trails Sanitation Law enforcement services provided by Georgia State Troopers Office and dispatch at entry No cost to JIA Permitting services provided by Glynn County Building and construction permits for new construction Jekyll Island as “City”
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bae Jekyll Island Fire Department Small permanent staff (4 FTEs) Use part-time firefighters employed by other fire departments Three pumper trucks and ambulance Current budget $825,000 to provide fire and EMS service demand With new resort redevelopment expect fire fee revenue to permit expansion of permanent staff (new budget = $1.2+/-M) Specialized services Small local department can provide niche services: Example: rescue swimmers at high tide on sand bar Off-road rescue trailer for bike-path and trail access Hurricane disaster preparedness
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bae Taxes and Fees JIA levies: Hotel tax 5% on rooms and rentals ($1.7M) Fire service and other municipal fees ($1.6M) Fire fees based upon assessed value Glynn County Property taxes Building and construction permit fees Overall, there is “room” for the JIA to levy extra charges Need to look at overall “holding costs” of property Millage rate, fees, and lease payments Other Georgia island communities charge $300 to $500 annually for association dues for amenities and services that the JIA provides at no cost
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bae Jekyll Island Residential Program Residential 801 single-family homes, duplexes & condos Homeowners lease lots 50% of units are available for vacation rental Local brokers specialize in Jekyll Island $209,000 generated by residential leases
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bae Jekyll Island Lodging Program Lodging/Retail/Commercial Six hotels/motels with 828 rooms Plans for up to 2,100 rooms/new and expanded properties Shopping Center, 3 restaurants, gas station, bike rentals, & gift shops $3.2M in business lease revenue Jekyll Island Club Hotel Days Inn
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bae JIA Amenities & Enterprises JIA owns and operates a variety of visitor amenities and enterprises Convention center (62,000 sq.ft.) Restaurants Museum & Summer Wave Golf and other concessions Total Visitor Amenity Revenue $8.9M (half of operating budget) Summer Waves Water ParkConvention Center
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bae Jekyll Island Challenges
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bae Lessons Learned Commercial Declining Visitation Visits declined by 10% Hotel/motel occupancy fell to 52% Competition among leisure destinations in southeastern U.S. Conference center losing business to other locations Obsolete Lodging Facilities/Conference Center Older properties needed reinvestment/replacement Limited services and lack of amenities Lack of architectural guidelines - uneven design quality, including condos and homes Several hotel/motels went into bankruptcy (prior to current downturn) Old commercial leases lacked strong provisions re: maintenance, reinvestment, and overall quality standards Lack of Focal Point/Community Center No focal point to Jekyll Island Heavy automobile orientation Lack of connectivity between facilities
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bae Commercial Revitalization Master Plan Update in 2004 Design and Conservation Standards formulated Demolition of 700 rooms Selection of development partner (Linger Longer LLC) Formulation of “Beach Village” concept 22 acres - $100M+ of private investment Redeveloped and expanded convention center to 76,000 SF Mid-scale hotel (200 rooms) Economy hotel (150 rooms) Vacation ownership (160 units) Retail (30,000 SF) $25 G.O. million bond Road realignment Conference center upgrade New beachfront park Issued by state; repaid by JIA
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bae Lessons Learned Residential Original JIA leases did not have escalation or reappraisal clauses Started at market but now substantially under-market ($420 annually versus $8,000) Major foregone revenue generation Rents for lots should be priced between 5 and 7 percent of value 40-year lease term and lack of affordable flood insurance has limited reinvestment Major effort to restructure leases and encourage investment Homeowner stakeholders resistant to change - balancing economic interests State extended lease to JIA to 2089; JIA can now renegotiate lease terms and offer another 40-years JIA now formulating “preferred alternative” for renegotiating leases Ideas: add CPI-based escalation, levy leasehold “transfer fee,” Apply new structure only when leaseholders voluntarily sell, refinance, or obtain reverse mortgages
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bae Key Insights There is precedent for operating as a small city with modest building base Commercial leases need to be structured to ensure high quality development, maintenance, and customer service Lease structure needs to provide incentives for reinvestment Once FMFADA and its master developer establish a residential leasehold program there is no going back…so careful structuring is a must FMFADA needs to identify non-real estate based revenue streams to support its operations and programming
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