3/17/21: MSD HEARING: OCEANFRONT PROPERTY OWNERS OBJECT TO PAYING MORE THAN THEIR ‘FAIR SHARE’ OF BEACH NOURISHMENT TAXES, SAY THAT ‘MORE EQUITY’ IN COST DIVISION IS NECESSARY; Town Council Will Cast First Vote on MSDs on April 13.

Eighteen Southern Shores property owners spoke last night either in person or via Zoom at the Town Council’s public hearing on the proposed establishment of two municipal service districts to fund the Town’s 2022 beach nourishment project. About 35 others submitted written comments that will be posted on the Town website, according to Town Manager Cliff Ogburn.* (See comment at end.)

The message delivered by the 15 of the 18 property owners who supported the project—and two of the three who squarely did not—was consistent: The cost of the townwide 3.7-mile-long beach nourishment project should be “equitably shared” and “more equitably distributed,” so as to “impose a more equitable burden on taxpayers,” especially those who own oceanfront property.

The Town Council took no action after the hearing. It will cast its first vote on approval of the municipal service districts at the Council’s April 13 meeting. N.C. law requires a municipal government body to vote twice to approve MSDs before they can be established.

The Town has proposed creating one district (MSD-1) that would include all properties that “abut the ocean” and all “oceanside” properties east of Ocean Boulevard that do not abut the ocean.

A second proposed district (MSD-2) would encompass all properties in MSD-1, all properties east of N.C. Hwy. 12 (both the Ocean Boulevard and Duck Road segments), and all properties west of and abutting Ocean Boulevard, from the southern town limit to 137 Ocean Blvd., and all properties west of and abutting Duck Road beginning at 139 Duck Road and extending north to 149 Duck Road.

No properties in Chicahauk or west of Duck Road in Southern Shores are included in either proposed MSD.

According to Mr. Ogburn, Dare County recently “fixed” the cost of the Southern Shores project, for purposes of determining how much it will contribute from the county Beach Nourishment Fund, at $14,538,000. The actual project cost estimated in January 2020 by the Town’s coastal engineering consultant was $14,755,600.

Dare County will contribute $7,774,375 of the total cost, Mr. Ogburn said; the Town will pay $6,123,873, or roughly 40 percent; and a grant from the N.C. Dept. of Environmental Quality will cover $1,408,247. The total of these amounts adds up to more than the project costs because of debt service over a five-year period.

“If the [construction] bid comes in over $14,538,000, then we either have to cut back somewhere or find the money,” Mr. Ogburn told The Beacon today in response to an email. “I don’t foresee going above the $14,538,000 though.”

(Mayor Pro Tem Elizabeth Morey brought up at the Town Council’s budget workshop yesterday the possibility of the Town contributing monies from its unassigned fund balance, which has “excess” millions in it, to the beach nourishment project, in order to “reduce the amount of tax on MSD taxpayers,” she said, as well as to reduce the amount of money that the Town would have to borrow. Town Councilman Jim Conners objected vigorously to this idea, saying that funding for beach nourishment, should be “self-sustaining,” while both Mr. Ogburn and Councilman Matt Neal pointed out that a significant amount of money—at least $1 million—would have to be invested before it would have an impact.

(Other Dare County towns, such as Duck, have appropriated monies from their general funds to pay for some of the cost of a beach nourishment project.)     

Of the Town’s $6,123,873, as Mr. Ogburn explained last night in pre-hearing remarks, the Town Council has tentatively decided that property owners in MSD-1 will pay 35 percent; those in MSD-2 will pay 30 percent; and property owners in the remainder of the town will pay 35 percent.

“Every town property will be taxed and should be taxed,” he said.

All Town tax rates will be set by the Town Council in an upcoming budget meeting. Mr. Ogburn nonetheless projected yesterday that the following tax-rate increases would be necessary in order for the Town to pay $6,123,873 or $1,224,775 per year for five years:

Townwide: 2.75 cents

MSD-2: 6.25 cents (plus the townwide rate of 2.75 cents, for a total of 9 cents)

MSD-1: 14.5 cents (plus the townwide rate of 2.75 cents and the MSD2 rate of 6.25 cents, for a total of 23.5 cents)

The annual tax assessments for beach nourishment would be indefinite—in effect as long as the Town is engaged in beach nourishment and maintenance—although the Town Council could decide to reduce the tax rates.

Several property owners suggested last night that equity in cost distribution means that:

• “all residents should be taxed the same” for beach nourishment, as Misty DeZutter of Pelican Watch said;
• all property owners “should pay a uniform amount,” according to Michael Iwashchenko, an oceanfront property owner and geologist who said he “adamantly” opposes beach nourishment; and
• the costs should be “applied across the board,” according to Tim Panoff, whose family has owned his oceanfront home since 1968.

“I marvel at the stability of the beach,” said Mr. Panoff, who appeared via Zoom and described a 66-year history with Southern Shores.

If all Southern Shores property owners paid equally for the beach nourishment project, Mr. Ogburn has estimated that each would pay 8 cents more per $100 of property value per year.

Jane Smallwood, a longtime permanent owner-resident of an oceanfront property on Mockingbird Lane, whose home has been in her family for multiple generations, suggested last night that oceanfront property owners who reside in their houses should pay less in tax than property owners in the proposed MSD-1 district who do not.

This would not be legal, nor would it be legal for the Town to tax property owners in the two proposed MSDs who rent their homes more than those who do not rent them, or otherwise to discriminate among property owners based on their residency status and/or the use of their properties.

The N.C. law (NCGS 160A-537(a)) that the Town Council is tasked with applying requires it to define a MSD only upon a finding that the “proposed district is in need of [beach-erosion control and hurricane/flood protection] to a demonstrably greater extent than the remainder of” Southern Shores.

We have made the argument that, except for the southern area of the coastline, at and near Pelican Watch, the Southern Shores project is proactive and not designed to address current damage to the beaches. The standard of “need to a demonstrably greater extent” cannot be met north of the southern area, and, therefore, if the Town Council chooses to proceed on a proactive basis, it should reject MSDs and tax all property owners equally.

A number of speakers last night spoke about paying their “fair share” of tax, but not more.

Echoing others, Ocean Boulevard property owner Paula Sherlock pointed out that she already pays higher real estate taxes for her home because it abuts the ocean, as well as higher insurance rates, and she said she has invested in sand fencing to protect the public-trust beach at her property.

Some property owners who rent their houses pointed out that they already indirectly contribute to the occupancy taxes collected by Dare County, one-third of which are set aside in the county’s Beach Nourishment Fund.

Mr. Ogburn said that Dare County is already collecting the maximum occupancy tax allowed by N.C. law. (This bears looking into, but not today. We are aware that Mecklenburg County levies an 8 percent occupancy tax, 2 percent of which is earmarked to fund a particular capital project.)

The N.C. sales tax levied in Dare County can definitely be increased, if the N.C. General Assembly gives the county permission to increase it.

In comments that likely tickled old-timers, Kenneth Rogers appeared by Zoom from his Texas home to say that his late father-in-law, Kern Pitts, who was mayor of Southern Shores from 1979 to 1997—before mayors were directly elected—and for whom the Pitts Center is named, would be delighted to see how much progress the Town has made in conducting business. Meetings of the Town Council were quite informal and not well-attended during Mr. Pitts’s era.

Mr. Rogers, who owns an oceanfront home on Ocean Boulevard, agreed with other speakers that the burden of additional taxes for beach nourishment should be allocated “as fairly as possible.”

*The Beacon disagrees with the decision not to read the written comments at the hearing. The public was informed that it had three ways in which to participate in the hearing, one of which was by written email. In fact, it only had two. Absent a reading of the comments at the hearing, there is no guarantee that each member of the Town Council read them. Certainly, neither the public nor the media got to learn their contents.

While the Town may have feared that the public hearing would “last well into the night,” that is what public hearings do. They are a crucial part of the democratic process and should last as long as they need to. Last night’s hearing only lasted 70 minutes.

(3/18/21 UPDATE: Having read some of the voluminous comments submitted by property owners, which are now accessible on the Town website by clicking on the “Beach Nourishment” link on the home page and then on the “2022 Beach Nourishment Project” link, we are even more disappointed with the Town’s decision not to read them aloud. Property owners in proposed MSD-1 and MSD-2 are overwhelmingly against establishing the municipal service districts and in favor of a townwide tax. Many of the property owners also attest to the stability of the dunes in Southern Shores and the accretion of sand on the beaches, indicating that there is no need to undertake a townwide sand fill.)

Ann G. Sjoerdsma, 3/17/21