It's just that, well, you know that island that the Bay Bridge (from the East Bay to San Francisco) is sitting on? It's called Treasure Island. My grandpa was the lead engineer when they built that island, that's right. I'm not shitting you. My very own grandpa built Treasure Island! One day, I thought, wouldn't it be neat if they named that island after Grandpa? It would be called Grandpa Island.
So, yeah. In reality, Grandpa wasn't tryin' to make a utopia or anything like that, like the song suggests. I wouldn't be surprised if ghosts lived there, though.