The Timeshare Beat: Time, money fell short in attempt to land Marriott resort

Time, money fell short in attempt to land Marriott resort

By JOHN BOZZO
Staff Writer - Daytona Beach News-Journal
Friday, July 14, 2000
DAYTONA BEACH - Time and money apparently doomed plans by Horizons by Marriott Vacation Club International to build a beachside time-shared resort, a review of city documents showed Thursday.

"We just didn't have the funding available," Peter Aluotto, the city's Development Services director, said Thursday.

Construction cost estimates for the 250-unit resort had risen to $64 million from $55 million since the proposal was announced in April, according to a June 28 Marriott memorandum on file with the city. Environmental concerns and an increase in size of the units were among the reasons for the increase, Aluotto said.

Marriott's request for city investment also rose to $10.8 million from $6.5 million. Plus, Daytona Beach agreed to provide 190 parking spaces at a cost of about $1,500-$2,000 per space - about another $380,000.

Costs would increase even more if eminent domain proceedings were needed to acquire property for parking, staff memos stated.

Timing came into play with a Sept. 1 deadline that Marriott faced to acquire four beachside hotels in the 800 block of South Atlantic Avenue for the project.

Complicating the time schedule was Marriott's request that the city purchase, demolish and clear the project site. A city staff memo in May stated doubts that a $6.5 million bond issue could be floated to purchase the property within the time frame.

Ed Kinney, Horizons by Marriott spokesman, said Thursday the company decided that costs of the project were too high for the demographics of Daytona Beach. He declined to comment on the city's financial discussions, but said the company's costs include construction, sales and maintenance. Time-share owners at the proposed project would have been assessed a maintenance charge equal to competitive lodging accommodations in the area, Kinney said.

"We needed to have a product economically sound from a development aspect and economically advantageous to the owners," he said.

Horizons by Marriott remains interested in the Daytona Beach area, he said. But Kinney declined to comment when asked directly if the company was targeting the Boardwalk area where city staff is seeking development proposals.

The Boardwalk area includes a vehicle-free beach zone from Seabreeze to International Speedway boulevards. Marriott officials had requested extending the vehicle-free zone for its project.

City documents estimated that if the no-driving zone was extended, possibly in the third phase of a seven-year construction schedule, it would be necessary to build a parking garage with 340 to more than 500 spaces. Cost of a parking garage was estimated at $10,000 per parking space.

"It was not an absolute request (for a no-driving beach zone)," Aluotto said. "They certainly would have liked it some time in the future. It was not a deal-killer."

Because a redevelopment district had yet to be established for the proposed Marriott project site, there was no proven revenue stream available. Once a redevelopment district is established, increases in property tax revenues go into a trust fund devoted to projects in that area. This is called tax-increment financing.

Meanwhile, the City Commission plans to continue action to declare an area of South Atlantic Avenue that includes the former Marriott project site blighted, a necessary step to create a redevelopment district. The item is scheduled for discussion at Wednesday's commission meeting at 7 p.m.

"We want to be ready when the next project comes in," Aluotto said.

He estimated the redevelopment district could be created at the earliest by October, but possibly as late as January. However, Aluotto said the city has no plans to seek redevelopment proposals for South Atlantic Avenue immediately. City staff could re-visit the issue of requesting development proposals for South Atlantic Avenue early next year, he said.

According to a May 22 memo, Finance Director Jim Maniak said the city would probably have to guarantee additional funding sources besides tax-increment revenues to repay bonds issued for a new redevelopment area.

"A new redevelopment district has no track record and it would be difficult to get investors interested," Maniak said Thursday.

In the same memorandum, Aluotto proposed financing the city's investment in the Marriott plan solely with tax-increment funds generated by the project. The same method was used for the Ocean Walk condominium/retail project now under construction near the Bandshell.

"The reason is, it would make this project self-financing and not set a precedent for others to follow," Aluotto wrote in the May 22 memorandum.

Daytona Beach staff in May proposed a "no-risk" counteroffer to Marriott. The city plan required Marriott to purchase the project site and offered the company 60 percent of tax-increment revenue generated by the project, with 40 percent going to the city for other projects.

The Horizons project would have produced $322,000 in taxes in 2003, rising to $953,000 in 2007 when construction was complete.

Aluotto characterized the Marriott requests and city responses as the normal give-and-take during negotiations and a good experience for Daytona Beach staff.

"We hope to do business with these people again in the future," he said.