In May 2011, Gov. Nathan Deal signed the Georgia Tourism Development Act, which encourages development of museums, water parks, convention hotels and other tourist magnets by allowing those businesses to keep a portion of the sales taxes they collect for up to 10 years. State officials said the law is so complex and writing the necessary regulations has been so tricky that lawmakers may need to amend the tax break next year before it can be implemented.
Developers of a new 200-room Westin hotel on Jekyll Island were counting on that tax break to secure a loan that would have allowed them to break ground this month. Jekyll Island officials, who just opened a new convention center in March, have dozens of groups lined up to check into the finished hotel starting in mid-2014.
But now construction is in limbo. The state still isn’t offering the tourism tax incentive that Jekyll Island officials say the developer needs to get its $25 million bank loan. Meanwhile, uncertainty over when the convention hotel will get built has caused a handful of groups to back out of plans to meet at Jekyll Island. Officials say the lost business is worth about $3.8 million.
“Because of what’s happening with the hotel, we definitely will not be there in 2014,” said Beth Brown, spokeswoman for the Association County Commissioners of Georgia, which holds a conference for 1,200 people every spring.
A long delay for the Westin could deliver a huge setback to state-owned Jekyll Island’s comeback from years of slumping tourism and convention business. Georgia taxpayers invested $50 million in a new 128,000-square-foot convention center and beachside park as the centerpiece of a tourism makeover that includes private development of new hotels.
When Deal attended a ribbon-cutting at the convention hall in March, more than 200 groups had booked meetings there through 2016. But much work remains unfinished. The Westin and another convention hotel still need to be built. And the Jekyll Island Authority, which manages the island, plans to build new retail space in the beachfront area.
“Our convention center is not sustainable sitting there all by itself,” said Eric Garvey, Jekyll Island’s marketing director. “We need the hotel and the retail to be built to make it work.”
Garvey said 46 convention groups tentatively booked 2014 meetings on Jekyll Island on the condition that the Westin would be ready. Of those, he said, seven groups backed out and plan to go elsewhere because of the hotel delay.
The Westin’s developer, Jekyll Landmark Associates, did not comment. Garvey, who’s familiar with the project, said the developer had a commitment letter from PNC Bank to loan it $25 million of the hotel’s estimated $39 million construction cost.
However, Garvey said, the developer planned to secure that loan using the tourism tax break passed last year. Jekyll Landmark Associates expected tax refunds to save it $8.5 million over a decade. That money would help it repay the loan.
Why did Jekyll Landmark Associates tell a lender it would get a tax break before the state was taking applications? That’s not clear. The developer’s spokesman, David Curtis, did not return several phone calls seeking comment Tuesday, Wednesday and Thursday.
The state departments of Revenue and Community Affairs were tasked with the bureaucratic rulemaking needed to implement the tourism tax break. Community Affairs spokeswoman Saralyn Stafford said it’s been tough because the law has a number of unusual eligibility requirements.
Applicants are to show their projects will draw at least 25 percent of visitors from outside of Georgia and that they won’t compete for tourism dollars with existing businesses. An outside expert is supposed to evaluate each application. The final call on whether projects get approved or denied is to be made by the governor alone — something no other Georgia tax incentive requires.
Stafford said it’s possible the tax break won’t be available until next year. Deal and the rulemaking agencies are considering asking the Legislature to change some provisions before issuing final regulations, she said.
“The General Assembly and the governor feel like this is a good idea for Georgia,” Stafford said. “However, in trying to develop these rules and regulations, it’s becoming pretty clear it’s going to be hard to implement the current legislation. They are currently looking at a second possibility, which is a legislative fix. That’s why it’s sitting in limbo”
Deal’s office referred all questions about the tax break to the rulemaking agencies.
State Rep. Ron Stephens authored the tax break and said it got bogged down with complex and subjective requirements to appease fellow lawmakers. The Savannah Republican is chairman of the House committee on tourism and economic development. He said most tax incentives he’s worked on took about a year to clear the rulemaking process.
Garvey said Jekyll Island officials are working to help the hotel developer find new financing. If construction starts by the end of this year, he said, the hotel could still meet its mid-2014 deadline.
Meanwhile, the delay means a loss of convention dollars not only for Jekyll Island, but for all of Georgia.
The Georgia Forestry Association was interested in booking Jekyll Island for its 2014 conference of about 350 people. But with no guarantee the convention hotel will be open, the group decided instead to go to Hilton Head Island, S.C.
“We will not go to Jekyll Island without a new convention hotel,” said Steve McWilliams, the association’s president. “It just won’t happen.”