4/10/21: TOWN COUNCIL TO TAKE 1ST VOTE ON MSDs TUESDAY, CONSIDER EXCLUSION REQUESTS; THE BEACON CITES MANY IRREGULARITIES IN THE MSD PROCESS.

The Southern Shores Town Council will take its first vote next Tuesday on whether to establish two proposed municipal service districts (“MSDs”) in town that would enable it to levy higher ad valorem taxes on properties on or near the oceanfront to pay for its $14.5 million beach nourishment project.

Before the Council votes, according to the meeting agenda. it will rule upon three written requests for exclusion from the proposed MSDs submitted by property owners, only two of which merit any real discussion. (See below.)

The Southern Shores Civic Association, which has substantial land holdings on the oceanfront—an area designated as MSD-1—has submitted a request for exclusion “out of an abundance of caution,” according to its cover letter to the Town Council.

The SSCA is a tax-exempt, non-profit corporation and will not bear any tax burden for the beach nourishment project, which is scheduled to occur from May to October 2022.

See agenda at https://www.southernshores-nc.gov/wp-content/uploads/minutes- agendas-newsletters/Agendas_2021-04-13.pdf.

The Town Council’s meeting will be held at 5:30 p.m. Tuesday in the Pitts Center. Anyone who attends the meeting in person must wear a face covering and observe other COVID-19 safety protocol. The meeting will be live-streamed on the Town of Southern Shores’ You Tube website.

Before the Town Council can establish the proposed Southern Shores MSDs, North Carolina law requires it to approve them by a majority vote of the voting members present at two separate meetings. The MSDs would be effectuated by the adoption of a Town ordinance.

If the Council rejects the proposed MSDs on its first vote, it will not take a second vote. 

While the process for creating MSDs is fairly well defined by N.C. statute, the process for evaluating requests for exclusion is not. Beyond what the exclusion claimant must include in his or her request, the State’s MSD statutory scheme is silent—leaving the municipality to decide how to proceed.

(N.C. General Statutes sec. 160A-536 through sec. 160A-544 deal with municipal service districts. NCGS sec. 160A-537 defines MSDs and outlines the process for establishing them. NCGS sec. 160A-537(c1) gives property owners the right to petition to have their properties excluded from a proposed MSD.)

We believe that in making a “staff recommendation” in his agenda item summary that the Town Council not exclude any properties from the MSDs, Town Manager Cliff Ogburn has exceeded his authority. The exclusion request is made of the “city council,” according to the statute, not the Town or the Manager.

You may access the meeting packet at https://www.southernshores-nc.gov/wp-content/uploads/minutes-agendas-newsletters/Meeting-Packet_2021-04-13.pdf.

We actually find Mr. Ogburn’s intervention in this matter one of a number of irregularities that occurred in the MSD-creation process in Southern Shores.  

IRREGULARITIES IN THE PROCESS

The first such irregularity dates to a motion unanimously approved by the Town Council at its Jan. 21, 2020, workshop to have its financial consultant, DEC Associates, Inc., of Charlotte, work with Town staff to prepare actual beach-nourishment tax-rate increases, based on whether the Town levied a tax increase town-wide or used MSDs to fund the proposed 2022 project.

The problem that we have with this directive is that it was made without any reference to the legal standard imposed by N.C. statute for establishing an MSD, which requires the Town to find that a proposed MSD is in “need” of beach nourishment to a “demonstrably greater extent than the rest” of the districts in town. (See N.C. Gen. Stat. 160A-537(a).)

In January 2020, the Town Council had not yet approved a project and was considering four options presented by its coastal engineering consultant, Coastal Protection Engineering of North Carolina, Inc. (CPE), then known as APTIM.  

Newly elected Councilman Matt Neal, who made the motion—which Mayor Pro Tem Elizabeth Morey seconded—set forth three tax assessment/MSD scenarios that he said the Council wanted DEC and Town staff to investigate and “price”:

1) A town-wide tax levy in which all property owners would pay the same amount;

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.

Both Mr. Neal and Ms. Morey said they wanted to get a sense of the “pain” that beach nourishment would cause taxpayers before they reached a final decision on doing the 2022 project.

(See The Beacon, 2/2/20.)

Less then two months later, Interim Town Manager Wes Haskett announced at the Council’s March 4, 2020 regular meeting, that “We have finalized a map showing proposed MSDs,” whose boundaries were drawn on the basis of property values provided by the Dare County Tax Dept.

These values, Mr. Haskett said, had been forwarded to DEC Associates so it could work up “models and funding options for the County to consider.” (See The Beacon, 3/8/20.)

Subsequently, Mr. Haskett presented to the Town, and disseminated to the public through online Town Council meeting materials, four “beach nourishment financial models,” one for each of CPE’s project options, prepared by DEC. Each showed a proposed town-wide tax rate and tax rates for three MSDs.

You may see these models at https://www.southernshores-nc.gov/wp-content/uploads/minutes- agendas-newsletters/Meeting-Packet_2020-05-19.pdf.

We have long maintained that this exercise in MSD definition and tax-rate assessment was improper and misleading.

In determining district boundaries, Mr. Haskett, who was assisted by Councilman Neal, did not apply the “need to a demonstrably greater extent than the rest” legal standard imposed by N.C. statute.

No, they formed the boundaries of the MSDs on the basis of mathematical calculations, looking at the sum of assessed values of properties on and proximate to the oceanfront—heading westward—proposing tax rates that were comparable to what other Dare County towns have used, and then multiplying the property values by the tax rates to arrive at the number of properties that would need to be in the various MSDs to pay for what was then presumed to be a $14 million to $16 million project.

Their method was a matter of number-crunching, not an assessment of need.

Mr. Neal has since characterized this exercise in a Town Council meeting as “ad hoc,” meaning, we suppose, that it was for discussion purposes only. But we do not believe that it was perceived that way by the public. 

When Southern Shores property owners spoke at the June 16, 2020 public hearing on beach nourishment—before the Town Council voted on whether to move forward with a 2022 project—they did so with what they believed was knowledge of what their likely tax increase would be if the three MSDs were approved.

At the time, the proposed town-wide tax rate was 1.96 cents per $100 of property value.

In fact, Mr. Neal had paperwork with him at this meeting so that he could tell an individual property owner what the likely dollar-amount tax “hit” would be for him or her.

This Town Council-Town staff “ad-hoc” exercise served as the foundation for the two currently proposed MSDs and the statutorily mandated report, prepared by Mr. Ogburn, that demonstrates and justifies the proposed district boundaries.

We understand that Mr. Neal—and the rest of the Council, which backed him—had good intentions in doing these computations.

Nonetheless, we consider this “ad-hoc” exercise to be an irregularity that unduly influenced the June 16, 2020 public hearing on beach nourishment; the Town Council’s decision to pursue beach nourishment; and the creation of the two MSDs upon which the Council will vote on Tuesday.

It was a classic case of putting the cart before the horse. In this case, however, the horse was a well-established statutorily mandated legal process and a legal standard that was ignored.

THE EXCLUSION REQUESTS

In their request to exclude their property at 121 Ocean Blvd. from proposed municipal service district 2, Charles and Janan Usher contend that the Town’s proposed MSDs “were constructed without explicit criteria” and that, as a result, properties were not consistently classified.

The Ushers looked at Dare County’s assignment of oceanfront and ocean influence (OI) ratings to Southern Shores land parcels and determined that “significant groups of OI-rated parcels” in town were arbitrarily excluded from MSD-2, and that other parcels were inconsistently assigned to MSD-1 and -2.

They quite reasonably ask the Town Council to “clarify the criteria used to assign parcels to MSD-1 and -2 and to demonstrate that they were applied consistently across all parcels in the Town.”

The only criterion that the Town should apply is the one pronounced by the N.C. General Assembly: An MSD must “need” beach erosion control to a “demonstrably greater extent than the rest” of the districts in town.

This legal standard was not stated at a Town meeting until Mr. Ogburn presented his proposal and report for the two MSDs at the Council’s Feb. 2, 2021 meeting.  

In a preview of this meeting, we wrote on 1/31/21 that the Town Manager had failed in his MSD report to meet the “need” standard:

“We believe the report that Mr. Ogburn has filed in support of these two MSDs, which are defined solely by their proximity to the ocean, is inadequate to meet the standard imposed by North Carolina law for such special tax districts . . .

“The law requires a showing of need, not benefit, and the Town Manager’s report contains no shoreline data supporting the need for a townwide sand fill. With the exception of the beach section south of Skyline Road, the 2022 project is specifically designed to limit future, speculative damage, not to address current need.”

Homeowner Thomas Peabody, of 13 Sixth Avenue, uses the critical need-benefit distinction to argue in his request for exclusion that the need for beach-erosion control at the Sixth Avenue oceanfront does not exist—and surveys done by the Town’s coastal-engineering consultant evidence the lack of need.

We agree.

We would refer Mr. Peabody, whose property is in proposed MSD-2, to remarks made by Mayor Tom Bennett and other Town Council members at their Feb. 2 meeting about limiting the “scope” of the 2022 beach nourishment project to only those areas of the coastline that have a “critical need.”

The northern section of the town’s 3.7-mile-long coastline, which CPE defined as being from about Third Avenue north to the Southern Shores/Duck line, “has gained sand,” the Mayor said, and is “not as vulnerable as far as the dunes and the properties behind” them.

Addressing complaints last year by Seventh Avenue homeowners about the width of the northern beach, the Mayor said, the beach “is definitely wider this year than it was last year.”

Later in the meeting, he noted: “I don’t see the north beach in trouble.”

Even Councilman Neal, who has been a consistent proponent of beach nourishment, acknowledged at this meeting that Dare County’s 50-percent financial contribution, not the Southern Shores coastline’s need, “has been the driving force” for the Town’s 2022 project.   

(See The Beacon, 2/5/21.)

In recommending that the Town Council not exclude Mr. Peabody’s or the Ushers’ properties from MSD-2, Mr. Ogburn says only that “Staff finds nothing unique about these properties that distinguishes [sic] them from the rest of the district. Granting these requests could imply that those adjacent to these properties were also not in need.”

All that is legally germane for purposes of evaluating an exclusion request is the “need . . . to a demonstrably greater extent” standard stated in the N.C. statute. “Uniqueness” need not be established. If granting these two exclusions would “imply” that adjacent or other properties “were also not in need,” so be it. The MSD boundaries should be changed.

‘FOR DISCUSSION PURPOSES ONLY’

The Ushers point out in their exclusion request that the maps of the proposed MSDs in Mr. Ogburn’s MSD report are labeled as “Conceptual Municipal Service Districts” and described as “preliminary and intended for discussion purposes only.”

The notice of the March 16 public hearing that was mailed four weeks in advance to property owners in the proposed MSDs specifically informed them that the outlined MSDs were preliminary and, therefore, subject to change.

But the proposed Town ordinance—upon which the Council will vote Tuesday—reproduces verbatim the language in Mr. Ogburn’s MSD report about the two proposed MSD boundaries. There has been no discussion. The preliminary “conceptual” MSD boundaries are, in fact, as the Ushers allege, the “final” MSD boundaries. It would seem that the Town has misled people.  

Was the public hearing really nothing more than a pro forma exercise that the Town conducted only because the State required it to do so?

Like the Ushers, we had assumed that the “for discussion only” language meant the Town Council was actually going to listen to what property owners had to say and discuss what they had heard.

We were flummoxed when the Council adjourned the March 16 meeting—the hearing lasted only 70 minutes—without responding to, much less discussing, any of the public comments.

At the conclusion of the June 2020 beach nourishment public hearing, the Council conferred and unanimously voted to “pursue” beach nourishment. At the conclusion of the MSD hearing, it said nothing.

In his recommendation to the Council about the exclusion requests, Mr. Ogburn writes:

“An alternative to the maps as originally presented could be considered by the Council. However, some changes may be considered substantive and could require reinitiating the public hearing process.” (Our italics.)

Members of the Town Council have publicly stated that changes to the proposed MSDs could occur. But Mr. Ogburn’s latter statement clearly discourages members from making any changes—even though they have heard from dozens of property owners in Southern Shores who might have convinced them otherwise.

We don’t like it.

Further, if we are going to be advised about the possibility of “reinitiating” the public hearing process, we would like Town Attorney Ben Gallop to do the advising.

We also view as irregularities the fact that the notice mailed to property owners, many of whom are non-resident, failed to offer them the option of presenting their comments via Zoom—although the general public notice mentioned this option—and did not inform them that their written comments would not be read aloud at the hearing.

We do not believe that posting written comments on the Town website is an acceptable substitute for reading them into the public record and airing them at a public forum. We also wonder how many property owners who submitted written comments know where they ended up.

MISLEADING ‘NEXT DOOR’ THREAD

Finally, we find it inappropriate that on March 24, Town Councilman Jim Conners, who had been circumspect about not commenting publicly about the emails the Council had received regarding the MSDs because of the on-going “legal process,” participated in a comment thread on the social-networking service, Next Door, that was initiated with the misleading title of “New tax districts in Southern Shores.”

The Town Manager has proposed levying an additional ad varolem tax of 23.5 cents per $100 of property value on properties in MSD-1; an additional 9 cents per $100 of value on properties in MSD-2, and an additional 2.75 cents per $100 on remaining properties.

These are not definite tax rates. Only the Town Council can set tax rates, and it will set MSD tax rates only after it approves the MSDs and adopts a Town ordinance.

Unfortunately, a homeowner on South Dogwood Trail did not know this. Her “New tax districts” comment on Next Door, which we believe was posted in good faith, reminded people “to send in comments to the city of southern shores regarding the new districts 1 and 2.” She continued:

“The city is considering having Districts 1 and 2 pay a higher portion of the multi million beach nourishment project as they more directly reap the benefits. There have been a lot of comments from [these] owners . . . that everyone should share the cost equally. There are very few comments from residents outside of these two districts. If you have an opinion, please take the opportunity to read through the information on the city’s website and send in comments so that you can be heard.”

Although the Town gave ample notice of the March 16 public hearing, and no one was precluded from participating in the hearing, this homeowner was unaware of it.

In the conversation that ensued among her and others in Southern Shores, she stated that “I do not believe that a final determination of the increased tax rates for each of three areas has been finalized.”

Councilman Conners intervened in the thread here, replying to this post: “As an individual councilperson, I feel comfortable station [sic] that as of this date, you are absolutely correct.”

We find this comment troublesome. Despite the homeowner’s reference to “district 1 and 2 property owners,” Mr. Conners gave no indication that the municipal service districts had not yet been established. In not correcting this misconception, he perpetuated it.

Subsequently, the Councilman urged property owners to submit comments, writing:

“As an individual councilmember in SShores, I’d like to HIGHLY encourage everyone to relay your thoughts to the town of Southern Shores. Humongous decisions are being discussed and made on beach renourishment, but unfortunately, sites like this have little, if any, influence on those decisions. If you’re a resident or property owner in SShores, PLEASE send your thoughts to the Town.” (The capitalizations are Mr. Conners’s.)

Property owners are certainly free to email their comments to Town Council members at any time, but it seems to us to be both inappropriate and improper for a Council member to encourage people on a subscription social-media website to do so—especially after a duly noticed public hearing has been held and when they clearly are misinformed.

Mr. Conners went a step further when he expressed his belief that off-the-public-record Next Door chat should have more influence on the Town Council’s decision-making than he believes it currently does. Judging from how uninformed the participants in this Next Door thread were, one might more reasonably argue just the opposite.

At no point did the Councilman explain the legal process for establishing MSDs, including the “need to a demonstrably greater extent” standard, and reveal that the public hearing had been held. He also mistakenly implied that residents of Southern Shores who do not own property have a stake in the creation of the special districts.

We consider this social-media exchange both improper and prejudicial. Another irregularity.

Ann G. Sjoerdsma, 4/10/21

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