11/9/19: BEACH NOURISHMENT FUNDING, COUNTY AND TOWN; AN ADDENDUM

After speaking with Dare County Manager and Attorney Robert (“Bobby”) Outten by telephone late yesterday afternoon, I would like to take another stab at explaining the mathematics of beach nourishment funding. I also would like a clean slate:

$7.5 million is currently available in Dare County BNF for project(s)

Currently, Mr. Outten explained, there is $7.5 million in the Dare County Beach Nourishment Fund (BNF) that has not been allocated for other purposes, such as paying debt service and covering maintenance of the projects that have been completed. Part or all of this money is available to be given to a town for its beach-nourishment project.

As The Beacon explained yesterday (11/8/19), the county’s occupancy tax is 6 percent. One-third of the occupancy taxes collected is set aside for beach nourishment. This amount is often referred to as “2 percent,” but it’s actually one-third of the 6 percent. These “2 percent” monies can be used for no other purpose, but to “put sand on our beaches,” Mr. Outten said, and to maintain that sand fill.

The county puts a premium on maintaining beach nourishment, thereby protecting its investment, and anticipates, for planning purposes, that maintenance will occur every five years. In a given beach town, however, maintenance may not be necessary that frequently. Nags Head performed maintenance just this year of its 2011 beach nourishment project.

The occupancy tax money comes into the county as it is collected, according to Mr. Outten, so the BNF “grows and grows, then we spend it down.” What this means is that the unallocated amount can be expected to increase.

Formula for determining how much each town should pay for nourishment

As Mr. Outten explained at the Wednesday Town Council meeting, Dare County paid about 50 percent of the costs for Nags Head’s 2011 nourishment project, which was the first one on the Outer Banks. According to online reporting by the Town of Nags Head, the project’s total cost was $37 million.

When Kill Devil Hills, Duck, and Kitty Hawk subsequently came to the county to ask about funding for nourishment of their beaches, Mr. Outten said he had to figure out “how to fairly allocate county funds” among them. The BNF had insufficient funds to support a 50-50 split for each town, as was done in Nags Head.

What the County Manager eventually did was ask: “How much did Nags Head tax its taxpayers” in order to pay its share of the beach-nourishment project? Mr. Outten said he looked at how much Nags Head “spent out of its coffers,” and divided that number by its tax base, to arrive at a tax rate paid by “everybody” in town. It was about 7.85 cents, as he recalled, or 0.0785 per $100 of property valuation.

When each of the three towns applied that formula—i.e., multiplied their tax bases by the 7.85 factor—they all could afford a nourishment project, Mr. Outten said. The county intended to make up the difference in the costs of each town’s project, as I understand it.

Because its tax base is so large, however, when Kill Devil Hills applied the 7.85-factor formula, it “got virtually none of the occupancy-tax money”—because it could afford to do without it—“and that didn’t seem fair,” Mr. Outten said.

KDH and the county negotiated, arriving at a 5.2 factor instead, Mr. Outten said, so “they had skin in the game at some level, and we put some skin in, too, to make it fair.”

Of course, like Nags Head, the three towns didn’t actually apply the 0.0785 tax rate to every property because they used municipal service districts to tax oceanfront and oceanside property owners at a higher rate than other property owners.

It seems to me—and I defer to accountants and other numbers people—that if the Town of Southern Shores applied the 0.0785 tax rate to its tax base, it could estimate how much Dare County would expect it to contribute to its estimated $16 million beach nourishment project. It also would discover just how far short it falls.

The Town’s auditor provided the numbers needed to do the math in her FY 2018-19 report. See the section on ad valorem taxes in: https://www.southernshores-nc.gov/wp-content/uploads/2019/11/Town-of-Southern-Shores-2019-financial-statements-View.pdf.

$250,000 awarded for Southern Shores beach nourishment study

As The Beacon reported yesterday, Chairman Robert Woodard told the Town Council Wednesday that the County Board of Commissioners had unanimously voted Monday, at its monthly meeting, to give Southern Shores $250,000 to pay consultants for a beach-nourishment study. The county has done the same for other towns.

Southern Shores has spent considerably less than $250,000 for the survey work that its engineering consultant, APTIM Coastal Planning & Engineering of North Carolina, has performed on the town’s 3.7-mile shoreline in the past two years.

When I asked Mr. Outten in our telephone call yesterday if Southern Shores could use this money for other purposes, he said no. When I asked him if Dare County might reimburse the Town for money it has spent on coastal engineering surveys—another of which is scheduled for next spring—he replied that he was not sure.

“I hadn’t thought about that,” he said.

The Board of Commissioners’ action came as a surprise to Town Council members and Interim Town Manager Wes Haskett. Although Mr. Outten mentioned such study funding in his Jan. 3, 2017 talk with the Town Council, which was referenced in yesterday’s blog, its availability was never brought up by former Town Manager Peter Rascoe or the Town Council in any public meetings in which beach nourishment and/or APTIM’s surveys were discussed.

It is abundantly clear that, since APTIM submitted its beach-nourishment study last December, which it called a “vulnerability assessment” and updated this year, the Town has not conferred with Dare County Manager Bobby Outten–who lives in Chicahauk.

Ann G. Sjoerdsma, 11/9/19