2/2/20: BEACH NOURISHMENT: FOLLOWUP AND FINANCING: HOW MUCH DOES THE TOWN COUNCIL REALLY UNDERSTAND ABOUT MSDs AND OTHER FINANCIAL OPTIONS? Last October, It Put the Cart Before the Horse

beachnourishment2
The same Southern Shores beach as the one depicted yesterday, only this time the view is to the south and Hurricane Dorian has passed. After a storm, beaches need time to recover.

The Beacon would like to thank everyone who wrote to us in response to yesterday’s post. We greatly appreciate your comments, observations, suggestions, etc., and will share some of them at the end of this article.

First, though, we pass along information about the Town Council’s regular meeting Tuesday. Then we try to address some of the confusion and lack of information that surfaced at the Council’s Jan. 21 workshop when the discussion turned to beach-nourishment financing.

The Council’s Tuesday meeting will be held at 5:30 p.m. in the Kern Pitts Center. Here is a link to the agenda and meeting packet:

https://www.southernshores-nc.gov/wp-content/uploads/minutes-agendas-newsletters/Meeting-Packet_2020-02-04.pdf.

“Consideration of a Potential Beach Nourishment Project” is the fourth item of four listed under “Old Business” on the agenda. The other three items concern appointments to the Capital Infrastructure Improvement Planning Committee; the recycling contract with Bay Disposal, which is no longer taking curbside recyclables to a recycling center; and “Consideration of Consulting Firm for Hiring a Manager.”

Whether “consideration” on the agenda means that the Council will make a decision on any issues is anyone’s guess. The Beacon certainly hopes that a majority will finally select a consultant to manage the hiring search for a new town manager, making a decision that is long overdue.

***

The upshot of the Jan. 21 workshop discussion on beach-nourishment financing appeared to be that the Council would not select and approve a project option until it has in hand a monetary sense of what new Council members Elizabeth Morey and Matt Neal both called the “pain” Southern Shores taxpayers will feel. They want to know how much taxes would have to increase to pay for APTIM’s recommended projects.

It does not seem to bother the Town Council, as it bothered members of the public, that it has never had a public discussion about the merits of various financing methods, only one of which involves defining multiple service districts and levying tax increases according to those districts.

As Sea Mark coastal engineer and geologist Spencer Rogers told me by telephone Friday: “Nationally, there are lots of ways to fund beach nourishment.” Consider, for example, that many people rent out rooms to vacationing beachgoers via Airbnb and VRBO, but they do not live near the oceanfront.

In Southern Shores, however, those other ways are not being considered. The “done deal” nature of the Council’s discourse Jan. 21 on MSDs was obvious.

The Council unanimously approved a motion to have its financial consultant, DEC Associates, Inc., of Charlotte, work with Town staff to prepare actual tax-rate increases for it to consider, according to whether the Town levies a tax increase town-wide or uses multiple service districts (MSDs) as a tax framework and a town-wide contribution to pay for beach nourishment.

Councilman Neal, who made the motion—which Mayor Pro Tem Morey seconded—set forth three tax assessment/MSD options that the Council would like DEC and Town staff to investigate and “price”:

1) A town-wide tax levy in which all property owners would pay the same amount for a beach nourishment project;

2) A tax-increase levy on property owners in an oceanfront MSD, with a contribution made by the Town’s General Fund revenues; and

3) A tax-increase levy on property owners in three MSDs—the oceanfront and two more districts heading west from the oceanfront—with a contribution by the Town.

Not surprisingly, this task initially rocked Doug Carter, the father in the father-son team that owns DEC Associates, because, as he explained, that is not what he does: “We take little part in defining MSDs,” he said. Of course not, that is a legal job.

It would have been helpful to have had Town Attorney Ben Gallop present at the workshop to fill in the many legal blanks that arose, but, because the Council lacks information, were not addressed. MSDs are a matter of N.C. statutory definition and process, not town discretion. (As The Beacon previously noted, property owners have the statutory right to petition to be excluded from an MSD.)

In support of Mr. Neal’s requests, Councilman Jim Conners described the Council as being presented with a “chicken-and-egg” dilemma. Until Council members know, as Mr. Conners said, “how much [beach nourishment] is going to cost on your tax bill,” an apparent majority of them do not want to move forward with selecting one of APTIM’s recommended options.

That apparent majority does not include Mayor Tom Bennett, who has long appeared ready to make a commitment to beach nourishment and did so again on Jan. 21.

TOWN CONTRACT WITH DEC ASSOCIATES: WHAT THE FIRM DELIVERED AT WORKSHOP WAS NOT WHAT THE COUNCIL WANTED

On Oct. 1, 2019, a Town Council majority of three voted to approve spending $35,000 to hire DEC Associates, a beach-nourishment financial planner, to advise the Council about financing a project even though it had not yet committed to doing a project—and still has not. Rather than chicken-and-egg thinking, The Beacon views this as classic cart-before-the-horse planning.

As dissenting former Councilman Gary McDonald said at the meeting, and The Beacon reported 10/2/19: “We can come up with [the] scenarios” for financing, without a consultant’s assistance. It made no sense to him or former Councilman Fred Newberry to commit monies to a cart-before-the-horse contract with DEC Associates, which, according to Mr. Neal on Jan. 21, requires the consultant to do “MSD construction.”

But Mayor Bennett and Councilmen Jim Conners and Christopher Nason disagreed with Councilmen McDonald and Newberry. The three voted in favor of a $35,000 budget amendment that represented “half of the total amount due for financial planning from DEC Associates, Inc. for beach nourishment.” As is routine with budget amendments, the money came out of the town’s unassigned fund balance.

Not only are the scenarios or financing “modes” well known, as Mr. McDonald observed, they were presented by Doug Carter and his son, Andrew, at the Town Council’s Feb. 26, 2019 planning session.

You may access the Carters’ power-point presentation in the minutes of that meeting, at pp. 17-21: https://www.southernshores-nc.gov/wp-content/uploads/minutes-agendas-newsletters/Minutes_2019-02-26.pdf.

In explaining the reasoning behind this premature consulting contract, the Mayor said last October that DEC Associates would shed light on “how we finance this thing” and provide insightful “recommendations.” He also said that the hiring of the financial consultant would show Dare County that Southern Shores is “serious” about a nourishment project and about asking the county for funding.

If you heard the Carters’ presentations at both the Feb. 26, 2019 planning meeting and the Jan. 21 workshop, as The Beacon did, you experienced déjà vu. Much of what the Carters said two weeks ago was what they said nearly a year ago. Their new power-point presentation is duplicative, in part, of last year’s. For their latest, see https://www.southernshores-nc.gov/wp-content/uploads/2020/01/DEC-Carter_Presenation.pdf. (The figures provided for debt service reflect a 3 percent interest rate.)

In their latest presentation, they included a bottom-line number for what Doug Carter described as the Town’s “skin in the game”—a phrase that Dare County Manager Bobby Outten also uses—if the Council approves one of the nourishment project options recommended by APTIM and the county pays 50 percent of the costs. This number is $1,073,928 per year.

The problem with this calculation, which is short of what the Town would need to cover its share of the debt service, is that Mr. Outten informed the Town Council last November that the maximum contribution currently available from the Dare County Beach Nourishment Fund is $7.5 million. That the Carters did not know that the county is not guaranteeing 50 percent payment of project costs is disconcerting, to say the least.

The Beacon pointed this out in a blog on 1/21/20, in which we reprinted an article that we wrote 11/9/19 shortly after Mr. Outten spoke to the Town Council. Mr. Outten explained then that the county could not split costs 50-50 with the various towns that have done replenishment because its Beach Nourishment Fund did not have sufficient funds to do so.

More disconcerting to Council members—who were led by Councilman Neal—was that the Carters did not provide the data that they wanted and expected: to wit, suggested municipal service districts in Southern Shores and tax-rate increases on property owners, according to those municipal service districts.

The disconnect between the Town Council and the Carters, especially the elder, who is the firm’s primary spokesperson, was near-palpable. Doug Carter did his North Carolina folksy best (I say that affectionately) to clear the dense fog in the Pitts Center, but his face appeared pained when he finally said about the Council’s expectations: “We did not have that understanding.”

(That there was a gap in understanding accentuates for The Beacon the need for a permanent full-time town manager to run interference.)

We daresay that when Doug Carter told the Council, “MSDs will require some time and effort,” no one on the Council had any idea what he meant. They should ask Mr. Gallop about all of the statutorily imposed requirements.

In the power-point description that Mr. Carter gives of his “preferred method” of financing beach nourishment—through special obligation bonds and MSDs—he omits mention of the notice, reporting, and public hearings that are required by law if the Town drafts an ordinance defining MSDs and passes it.

This omission may have been intentional by the Carters so that these bonds appear more appealing to municipalities than the more familiar general obligation bonds, which Mr. Carter called “laborious” because a voter referendum is required.

When The Beacon asked former Councilman Christopher Nason at the Council’s meeting last October what he knew about general obligation bonds and other modes of financing, he honestly admitted that he knew nothing. This is not acceptable

In explaining to the Council that his firm does not define MSDs, Mr. Carter said, “We talk to you about how you blend your resources between MSDs and taxes at large. . . .” DEC is all about blending funds. MSDs are the Town’s business with its attorney.

Until now.

Interim Town Manager Wes Haskett told the Council that he and DEC would have the tax-rate increase data, according to Mr. Neal’s proposed MSDs, “as soon as possible,” which at the earliest is probably Feb. 18, the date of this month’s Council workshop.

FOLLOWUP TO YESTERDAY’S REPORT

One reader wrote to tell us that the Southern Shores Civic Assn. makes available to its members a PDF of Spencer Rogers’s book, “The Dune Book,” which he co-wrote with the late David Nash, who was an extension agent in coastal management in Brunswick and New Hanover counties. I meant to provide an Internet link yesterday. You may download the book here:

“The Dune Book” (pub. 2003): https://ncseagrant.ncsu.edu/ncseagrant_docs/products/2000s/dune_book.pdf.

The book is a fast read, but if you are short on time, I recommend that you spend your time reading chapter two about how the beach works.

To say that the beach is moving, changing, shifting, doing many dynamic activities all of the time, is to engage in layperson understatement. I defer to Mr. Rogers, who last year received one of N.C. State University’s Office of Research and Innovation’s prestigious Awards for Excellence. A member of the Sea Mark staff since 1978, Mr. Rogers is THE go-to person in the state for coastal construction and erosion knowledge along and about the North Carolina shoreline.

The very affable coastal engineer/geologist/erosion specialist gave a presentation about “How the Beach Works” at the January 2017 Southern Shores beach nourishment forum. The graphic portion of his talk is on the Town website at: https://www.southernshores-nc.gov/wp-content/uploads/2017/01/Beach-Dunes-S-Shores.pdf. Take a look.

Another reader reminded me of how limited Duck’s 2017 beach nourishment project was. This is important to understand. The teetering houses that I mentioned yesterday are on Duck’s northern end, north of the Army Corps of Engineers’ Field Research Facility and far removed from the commercial village and nearby developments, which were more recently constructed.

(In the 1970s, Duck was little more than a church and a campground. There was no public road north of what is now the commercial district. I remember it well.)

Here is a map of Duck’s 2017 beach-nourishment project area: https://www.townofduck.com/beach-nourishment-project/beach-nourishment-project-area-map/.

According to the Town of Duck website, the project cost $14,057,929, of which Duck paid $6,963,000 through its General Fund and increased taxation on property owners in municipal service districts that it identified. The Dare County Beach Nourishment Fund paid the remaining $7,094,929. The debt-service cost to the town is $1,221,390 per year for five years.

In contrast, Kitty Hawk replenished its entire 4-mile shoreline, for the primary purpose, as Mr. Outten told the Town Council last November, of preventing storm-related ocean overwash in the streets between N.C. 12 and Hwy. 158. That project cost about $18.2 million. Kitty Hawk, too, used MSDs to finance its portion of the costs.

Ann G. Sjoerdsma, 2/2/20

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