Sun Sentinel Palm Beach Edition
$28M Margaritaville tab is on taxpayers
Hollywood leaders puzzle over how loan became grant
HOLLYWOOD — A few commissioners say they lost a lot more than a shaker of salt when the city made a deal to bring Margaritaville to town.
Taxpayers kicked in $28 million to help bring the Jimmy Buffett-themed resort to Hollywood beach. Turns out it was a loan that became a grant between the third draft and final version of the 99-year lease agreement.
“The residents are going to say, ‘You got duped’ — and the truth is, we did,” said Commissioner Peter Hernandez, Hollywood’s only elected official to oppose the deal that won commission approval five years ago.
Hernandez and fellow Commissioner Traci Callari say they were fooled into thinking they’d made a $28 million loan to Margaritaville developer Lon Tabatchnick.
“We were duped, and I voted for it,” Callari said. “I feel it is totally unfair what
happened.”
Commissioners Linda Sherwood, Dick Blattner and Kevin Biederman also said they didn’t realize the loan had become a grant when they approved the 194-page lease agreement in 2013.
For his part, Tabatchnick says he can’t understand all the hullabaloo.
“It’s not a big surprise,” he told the South Florida Sun Sentinel. “All of a sudden no one can remember. There are three grant agreements — one for $13 million, one for $10 million and one for $5 million. Without those grants, the project would not have been built.”
In a recent public meeting, Tabatchnick — who developed the resort in partnership with Starwood Capital — vigorously defended the deal.
“We didn’t hide anything, or bait and switch you,” he told commissioners. “These things were laid out in the lease specifically.”
Still, commissioners said they had not been told of the change and were mystified as to how it came about.
City Attorney Doug Gonzales told commissioners that previous versions of the lease agreement described the $28 million provided by Hollywood’s redevelopment agency as a loan.
“In the final version, that loan became a grant,” said Gonzales, who was not city attorney when the deal was made. “I can’t explain why that happened. But that did occur.”
The bombshell detail came to light April 18, when commissioners approved the sale of the 17-story, 349-room resort to a private equity firm, KSL Capital Partners.
The property sold for $190 million on April 12.
In papers provided to City Hall, the developer is claiming he did not make a profit on the sale, Hernandez said. Had he made a profit, the city would be owed a 5 percent cut of that profit, as called for in the lease agreement.
Tabatchnick told the Sun Sentinel the project was originally budgeted at $147 million but ended up costing $187 million.
He initially declined to say whether he made a profit, saying it was a complex deal. When pressed, he acknowledged he made a profit but declined to say how much.
City officials say they are reviewing the numbers to make sure Hollywood is not owed any money. Under the agreement, they have 60 days from the sale date to dispute the developer’s numbers.
“The city has 60 days to look at all of the documentation regarding costs and raise any questions or concerns that we have related to the final amount that may or may not be due to the city,” Hollywood spokeswoman Raelin Storey said. “We are in that process now.”
The resort opened to great fanfare in fall 2015, transforming five cityowned acres at Johnson Street and State Road A1A into an entertainment mecca.
Mayor Josh Levy defended the deal, but was not sitting on the dais in 2013 when it was struck.
“In the end, we have a great hotel and a great destination,” Levy said. “It’s Monday morning quarterbacking over the terms of the deal.”
Blattner and Biederman say they believe they did the right thing in approving the project, pointing to a development boom on the beach and the millions in tax money and rent Margaritaville brings in every year.
The resort has paid $4.9 million in property taxes since 2016, property records show.
“Over the next seven years, property values are going to go up — which will increase the amount of taxes Margaritaville pays,” Biederman said.
Hollywood began collecting $1 million a year in rent from Margaritaville in 2016 and has been paid another $702,250 in “participation rent” in that same time frame, city officials say.
Hernandez was the only commissioner to vote against the project, saying at the time he didn’t think it was a good deal. “Let’s not forget, it’s sitting on city-owned land,” he said. “We are 5 percent partners in Margaritaville. When it sold, we were supposed to get 5 percent of the profits. There’s something wrong here.”