City Council Members Scrutinize Downtown Resort Hotel Incentives Package

Mar 12, 2019

Several Jacksonville City Council members expressed concerns Monday over a $36 million package of public incentives for a developer planning to build a waterfront resort hotel with games and rides — including a 200-foot tall observation wheel — at downtown’s partly-built Berkman II property in a deal that includes an unusual provision for the city to subsidize the hotel’s operation.

Our Florida Times-Union news partner reports the Downtown Investment Authority invited council members to a “lunch and learn” where they asked about details of the deal and how Mississippi-based Barrington Development plans to transform the skeletal tower into a $122 million resort called Watermark Jacksonville with a 341-room hotel, a water park for hotel guests, an indoor-outdoor entertainment complex open to the public, and a parking garage.

The Berkman II has been an eyesore for more than a decade. The original developer envisioned building a condominium tower, but construction abruptly stopped in 2007 after an adjacent parking garage collapsed on workers, killing one person and injuring others.

The $36 million in city incentives would be paid out over a 20-year period based on the developer achieving contractual benchmarks.

City Council member Danny Becton said council members have supported using taxpayer incentives for downtown development, but he does not have a “clear understanding of why this project beyond all others” should get such a large financial package.

“The moral to your story almost sounds like we’re desperate,” Becton said to Brian Hughes, interim CEO of the Downtown Investment Authority.

Rendering of a proposed entertainment resort in downtown Jacksonville.
Credit Barrington Development

“We’re not desperate, but 12 years of blighted skyline is what it is,” Hughes said.

Hughes said based on long-range projections for tax revenue that Jacksonville would get as a result of the development, the city will gain $1.22 in taxes for each $1 it invests through the incentives “which means taxpayers are getting out more than they put in. In return for that, a blighted piece of our skyline gets converted in the next two years.”

He said the redevelopment will result in extending the riverwalk and “activating the riverfront” while adding an attraction that brings visitors into downtown.

After construction abruptly halted in 2007, a lengthy legal battle saw the construction company in charge of the project, Choate Construction, take ownership from the original property owner. Choate failed to sell the property in an auction in 2014 but found a buyer last July.

Late last year, the Downtown Investment Authority board approved the proposed incentives, which were prepared by the agency’s staff.

The bulk of the incentives is a property tax rebate based on the actual taxes generated by the development. The city would refund 75 percent of those property taxes to the developers over a 20-year period. The total rebate is capped at $20 million.

However, more than $10 million of the potential incentives would be hard cash. Under the proposal, the city would give the developer a $3.25 million grant after the resort is built and pay a yearly subsidy for the hotel’s operation equal to 5 percent of its annual revenue. The city would subsidize the hotel for 15 years but would pay no more than $8.25 million. The subsidy would come from the city’s general fund.

The city also would pay $3.5 million toward the cost of constructing a 630-space garage. In return, the garage would have 200 spaces set aside for public parking at all times. The final piece of the incentives package would be up to $1 million to help pay for clean-up of contaminated soil on the piece of the development that once was a shipyard.

While property tax rebates are a common part of public incentive deals, some council members are still trying to understand how and why City Hall will subsidize the hotel’s operation.

“We have not seen, to my knowledge, an operational incentive before,” Councilman Greg Anderson said in an interview. “I still need to spend some time understanding how that works.”

A longer version of this story that includes additional comments from City Council members is at Jacksonville.com.