Bon Secour Village Seeks Tax Deal From Gulf Shores

City invites more detailed proposal for financing more than $30 million in public improvements
Wednesday, April 18, 2007

Published By Mobile Press Register
By RYAN DEZEMBERStaff Reporter
GULF SHORES -- The developers of Bon Secour Village are asking the City Council for help in financing between $30 million and $40 million in roads, sewers and other public improvements planned at the 1,000-acre development, and elected officials said Monday that they'd entertain a more detailed proposal.
David Bodenhamer, formerly Gulf Shores' longtime mayor and now a consultant for the project's developers, told council members that his clients would pay for all the work up front by issuing bonds. But the developers seek some sort of tax rebate with which the debt could be repaid, Bodenhamer said.
Developers of the $500 million mixed-use project, which fronts the Intracoastal Waterway, are Atlanta-based Rick Skelton, Eddie and Josh Canady of Cullman and Clinton Guthrie of Birmingham.

Improvements funded in any deal would be only things that were made public, such as roads, water lines and sewerage, riprap along the Intracoastal Waterway and parks, Bodenhamer said.
"It would seem to me it would certainly qualify for consideration just due to the economic impact that this project proposes," Councilman Philip Harris said. "Especially if our participation was to come from new generated taxes and not funded off our bond issue capacity or our general budget."
Bodenhamer said that the developers wish to recoup sales and property taxes, not including millage designated for schools, to pay off the bonds they would issue.
"Rebating of the sales tax is not a very controversial issue; the property tax issue sometimes gets to be a little more controversial," the former mayor said, adding that local governments frequently offer ad valorem tax abatements in industrial parks to entice tenants.
Among the most expensive public improvements proposed is a new road branching off of Alabama 59 between the former Tommy Thunder's Motorsports Cafe and an unopened city right of way to the north, Bodenhamer said. The road would then curl around the back of the Faulkner State Community College campus, cross a stretch of wetlands via a bridge and then enter the Bon Secour Village property to the south, he said.
Public Works Director Mark Acreman said the city's long-term transportation plan calls for a similar road and at one time several other developers, whose plans in the area have either folded or been delayed, were interested in working with the city to build it. At one point such a stretch was estimated to cost about $12 million, but that price is likely outdated, he said.
Mayor G.W. "Billy" Duke III was absent from Monday's council work session and Councilman Robert Craft said he wouldn't participate in the discussion because of a possible conflict of interest with the developers. But other council members said throughout the course of a 25-minute discussion with Bodenhamer that a deal was worth exploring. Though several large-scale developments have been proposed along the Intracoastal Waterway in recent years, Bon Secour Village is one of few in Gulf Shores to show any tangible signs of progress.
Bodenhamer said a deal would bring much of the planned work to fruition sooner than if it was entirely privately financed.
"I mean we're talking about $30 (million) to $40 million of infrastructure improvements that could be involved here," he said. "So while a developer by themselves could maybe pull that off if they had deep enough pockets, it's a whole lot more viable and accomplishable if you can work with local government.
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"This is basically just an economic catalyst is what it is, just as the project that the city embarked on with Colonial Properties."
In the second part of 2004, the council, still headed by Bodenhamer, negotiated a deal with the developers of Colonial Pinnacle at Craft Farms in which Gulf Shores is buying 42 of the 66 acres the 270,000-square-foot outdoor mall is being built upon. The purchase price -- half paid up front and half to be paid when the mall is built -- is $10 million.
Approved by Baldwin County Circuit Judge Robert Wilters in November 2005, the agreement essentially allows publicly traded Colonial Properties Trust to pay the rent it will owe Gulf Shores with the sales and use tax its shops will generate until the city's bond debt is retired.
The mall deal also includes provisions in which the developers can lease the land long term or buy it back from the city, and provides ad valorem tax savings to the Colonial Properties Trust.
Bon Secour VillageDevelopers of Bon Secour Village, a $500 million mixed-use project under way along the Intracoastal Waterway in Gulf Shores, seek a tax rebate deal with the city that would help pay for more than $30 million in public improvements in and around the 1,000-acre property. This artist's rendering shows an aerial view of the project's town center and marina.

Gulf Shores - Lawyers Explain Coastal Insurance Proposals

Published By Mobile Press Register
Wednesday, April 18, 2007
By RYAN DEZEMBERStaff Reporter

Seeking to build momentum for various proposals aimed at making coastal property insurance more available and affordable, the cities of Gulf Shores and Orange Beach will host a forum Thursday evening.
Scheduled for 6 p.m. at the Orange Beach Adult Activity Center on Canal Road, the forum is slated to include presentations by state legislators, representatives of the Alabama Department of Insurance and a board member of the Alabama "Beach Pool," which is also working to create a new type of government-backed insurance company that will allow businesses and condominium associations to self-insure.
"Obviously the insurance issue on the coast is a major problem for our area, and if it's a major problem for our area, the trickle-down effect impacts the whole state," said Orange Beach Mayor Pete Blalock.
Since the back-to-back hurricane seasons of 2004 and 2005, which featured some of the most destructive storms on record, annual premiums for property insurance have skyrocketed along the nation's shorelines, and many insurers have withdrawn coverage completely from coastal areas.
In Orange Beach, for example, one Gulf-front high-rise saw its annual premium rise from about $40,000 to nearly $1.1 million last summer. Many other properties saw less dramatic but still substantial increases, which have stalled sales along the beach.
Thousands of Alabama homeowners have seen their coverage dropped as insurers have shed exposure on the coast, which, in insurance parlance, extends 50 miles inland. Since Hurricane Ivan struck in September 2004, the state's three largest insurers of property -- State Farm, Allstate and Alfa -- have announced that they would discontinue hurricane coverage for more than 17,000 policyholders combined.
State Sen. Bradley Byrne, who will be joined by state Rep. Steve McMillan, R-Gulf Shores, said he would first discuss how Hurricanes Ivan and Katrina affected the insurance and reinsurance markets.
"You can't understand what the best policy initiatives are until you understand how these markets work, and these insurance markets don't work like we think a regular market works," Byrne said.
While most property owners deal with primary insurers, such as Nationwide, Farmers and Alfa, the international reinsurers that back those companies -- Lloyds of London syndicates, Lexington, Munich Re -- are in the driver's seat when it comes to coverage availability and cost, he said. And while lawmakers in Alabama won't be able to do much to sway businessmen in Munich, Byrne, a Montrose Republican, said he'll talk about some local initiatives aimed at bolstering the market.
Last year, legislators passed a law to allow the formation of captive insurers, a form of self-insurance.
Byrne and state Sen. Ben Brooks, R-Mobile, have also proposed a bill in the current legislative session that would remove prohibitions against captive insurance companies offering homeowner and automobile liability coverage.
Byrne said he would also talk about legislation in the works that would prohibit insurers from dropping policyholders based simply on where they live, a practice often called "redlining." Also in the offing, Byrne said, is a proposal that would create a rate discount system for homeowners who make their homes more likely to withstand storms.
Tim Russell, the former mayor of Foley and president of Baldwin Mutual Insurance Co., said he will bring attendees up to speed on his $20 million plan to form a government-sponsored captive.
The former mayor also serves as treasurer for the Alabama Insurance Underwriting Association, commonly known as the Beach Pool. He said he'd talk about an anticipated change that would allow the state's insurer of last resort to increase its maximum coverage of homes from $350,000 to $450,000, and other proposals the association will consider at its annual meeting, scheduled for Friday in Orange Beach.
Also scheduled to participate in the forum are two officials from the Alabama Department of Insurance, Ragan Ingram and David Parson

Gulf Shores Beach Access for Lagoon Front Condos

City may seek judicial guidance, but that could jeopardize residential zoning

Published By Mobile Press Register
Tuesday, April 17, 2007
By RYAN DEZEMBERStaff Reporter

GULF SHORES -- City leaders said they may seek a court ruling to determine the extent to which condominiums on the north side of Alabama 182 can use surfside lots along West Beach Boulevard as Gulf access for their owners and guests.
But in doing so, Mayor G.W. "Billy" Duke III and City Attorney David Whetstone said the south side of the beach highway, which has traditionally been zoned for single-family homes, could lose that designation. The reason, they said, is because many of those beach houses are vacation rental properties that are more commercial than residential.
The option of seeking a judicial opinion on the matter was discussed Friday as part of a work session involving members of the City Council and Planning Commission as well as several West Beach property owners. Spurring the meeting was an opinion Whetstone recently authored that clears the way for three high-rise developments that have recently been erected on the north side of Alabama 182 to use property on the south side of the highway for beach access.

The City Council approved an ordinance last year that restricts the practice, forcing condo developers to seek a "conditional use permit" before using residential property for beach access, Whetstone said. But the former district attorney said that the three condominiums -- Bel Sole, Lagoon Tower and Mustique -- were already far enough along in their planning or construction when the law was passed to be exempted.
"You can't change the rules after they've spent money, a lot of money," Whetstone said. He added that although the developers' beach access plans may not have been part of the designs the council approved, he has seen evidence that the developers had contracts to buy -- or already owned -- Gulf-front property and had advertised Gulf access when they sold condos.
"You can't call (a developer) and say, 'erase all those promises you made for beach access,'" Whetstone said.
Some West Beach homeowners were not pleased with Whetstone's decision.
Bill Porter, president of the West Beach Property Owners Association, said that the developers of those three condos "should have known the legal use of the southside lots."
Michael Reilly, who lives near Atlanta and owns a home on West Beach, said Gulf Shores, through its zoning ordinance, promised home buyers that stretch of Gulf-front -- essentially from Little Lagoon pass to the Laguna Key subdivision -- would be zoned for single-family residences.
"If you're now changing it due to the inability to define what a single-family residence is, you're ripping out the fabric about what zoning's all about." Reilly said. "We bought because we thought we were going to have a residential area on the beach, period."
Greg Kennedy, a builder and former council member, said that while he has frequently dealt with vacationers staying on the north side using his property to get to the Gulf, he thought it might be better if
multi-family developments have designated places to access the beach.
Duke said that was a consideration of council members when they passed the ordinance restricting access. Out-of-towners don't know the local rules, he said, and it may be easiest to funnel them into specific, development-owned lots.
"One of the things we struggled with is do we require a condominium owner to buy a lot on the other side ... so that they know where they've got to go instead of just going haphazardly up and down the beach," the mayor said.
Whetstone and Community Development Director Steve Foote said there are no rules dictating how the conditional use permits will be awarded. Whetstone said city officials will likely require condos to acquire a full lot as opposed to a narrow easement between houses and would probably want access to the parcel to be restricted to that development's owners and guests.
Duke said that he would like to form a committee including some elected officials and some West Beach homeowners to develop guidelines for such permits.
No matter how the rules turn out, city officials may have trouble enforcing them, former Mayor David Bodenhamer said.
Say a group of condominium owners, be it five or 50, buys a Gulf-front lot together, leaves it undeveloped and uses it as place to get to the beach, Bodenhamer said. What, the former mayor asked, would prevent them from visiting their property?
"I think the city should be commended for doing what they're doing and it is certainly in good faith that they are trying to prevent condominium developments from going across the street in residential zoned lots and building swimming pools and parking lots and things that do make it more nonresidential from a use factor," Bodenhamer said. "But this use issue and property rights, I think the city is treading on very, very sensitive ground unless they get a definitive declaration from the courts as to what they can or cannot do."

Duke said Gulf Shores may seek judicial guidance, but warned that changes could be in the offing because the city would not be able to treat residentially zoned areas on West Beach and inland neighborhoods differently. The courts could find that West Beach is actually a commercial district because many addresses there are registered with the city as licensed businesses, Whetstone said.
The city attorney mentioned a recent case in Baldwin County Circuit Court in which Presiding Judge James Reid invalidated 1950s-era covenants that restricted a strip of Gulf-front in Orange Beach to residential construction because so much commercial activity was going on in the area to render the prohibitions moot.
That ruling, involving the second phase of Larry Wireman's Turquoise Place development, has been challenged and is currently before the Alabama Court of Civil Appeals, court records show.

Mustique is one of three West Beach condominium projects that will be permitted to use property on the south side of Alabama 182 for beach access because they were under construction or planned prior to the City Council banning such use of Gulf-front residential lots.
Lagoon Tower, right, and Bel Sole condo owners will be able to use Gulf-front property for beach access despite a city ordinance restricting such in the residentially zoned West Beach area. City Attorney David Whetstone said the projects, along with another called Mustique, were far enough along in planning or construction to be exempt from the new rule.

Gulf Shores - Courts Favor Condos

Published By Mobile Press Register

The Alabama Court of Civil Appeals has upheld a lower court's decision to prevent two Fort Morgan residents from challenging the validity of plans for an oft-litigated-against high-rise condominium proposal.
The ruling gets the Gulf Highlands project -- which was originally pitched in 1997 as a 400-unit surfside subdivision and later morphed into a 500-unit high-rise project -- past one of its legal battles. But the project still faces a separate federal court challenge related to the endangered Alabama beach mouse.
In early 2005, Fort Morgan residents Tom Hodges and Robert Adair Jr. asked the Baldwin County Board of Zoning Adjustment for District 25, which oversees the Fort Morgan peninsula, to re-examine whether the County Commission's approval of plans for Gulf Highlands had expired.

Specifically the two men questioned whether a swap of 10-acre parcels between Gulf Highlands Development LLC and the developers of a neighboring condo project, Beach Club West, two years earlier triggered an extension of the designs' expiration date. The swap was aimed at allowing the Beach Club West developers, the Head Companies, to get out of a separate lawsuit that challenged whether they had enough connected land to build 473 condos they had planned.
County officials and Gulf Highlands' developers argued that the change in property boundaries constituted enough of an alteration to restart the two-year period developers have between approval and the start of construction.
To prevent the appeal to the county zoning board, Gulf Highlands Development and Merrill Land Co., a Pensacola-based firm that has an agreement to purchase the project, sued Hodges, Adair and the Fort Morgan area Board of Adjustment.
The developer's lawyer, Daniel Blackburn, said in an affidavit that members of the board had protested against the project in public forums and should not be able to hear the appeal. Nor, Blackburn argued, was a letter from a county planner that verified the renewed time period something that could be appealed.
Presiding Baldwin County Circuit Judge James Reid ruled in favor of the developers early last year, granting a permanent injunction that prevented the board from considering the residents' appeal. Hodges and Adair then challenged Reid's ruling to the higher court.
In a nine-page decision released earlier this month, Civil Appeals Judge Tommy E. Bryan sided with Reid, finding that the county planner's verification letter was not an administrative act that could be appealed to the Board of Adjustments.
Adair wrote in an e-mail to the Press-Register last week that he was "very disappointed" in the appellate court's ruling. He wrote that he was "in current discussions with the appropriate parties" as to what his next move might be in the fight against the four-tower development.
Blackburn, in an interview, said that while the ruling clears one of Gulf Highlands' legal hurdles, there is no certainty as to when and how the property will develop because it is still tied up in the federal beach mouse litigation.
Merrill Land Co., which built Crystal Shores and Crystal Shores West in Gulf Shores, still has an agreement to buy the Gulf Highlands project, Blackburn said.
And because of a change in county policy that occurred after the challenge of Hodges and Adair, the two-year time limit to start construction on the condos will not begin until the development has cleared all of its legal challenges, Blackburn said.