Sunday, February 25, 2024

Bald Head Island Transportation Authority set to acquire ferry assets, no price tag yet

The Authority is only six months old and has an uphill battle to transition the multi-million dollar private entity into a public one. Previously operating with a $500,000 average deficit with Bald Head Island LLC's deep pockets, now, the Authority must find a way to balance its budget

BALD HEAD ISLAND—Dubbed an “unusual entity” by its own treasurer, the Bald Head Island Transportation Authority is looking for solid ground. The Authority was created last year and held first official meeting in December.

Intended to transition Bald Head Island Limited LLC’s privately-owned island transportation system into a public one, the Authority is unique in that it operates separately from the rest of the state’s existing public ferry systems.

RELATED: UPDATE: Newly appointed Bald Head Island Transportation Authority set to meet for the first time

The Authority was established in 2017 with Senate Bill 391, which then received Governor Roy Cooper’s signature in July. Following the passing of George Mitchell, the patriarch of the island’s original developers, Bald Head Island Limited LLC indicated the desire to pass on its ferry operations as part of the family’s estate proceedings.

Operating at a loss

The privately-owned ferry system has served the island for decades, with financial backing from Bald Head Island Limited LLC and revenue generated from passenger tickets.

Since 2010, the ferry has been operating at a loss, with $500,000 deficit in 2016 according to the LLC’s CEO, Chad Paul.

An entire system comprised of ferries, tugboats, barges, trams, parking and parking services, buildings, equipment, vehicles, shuttle buses, docks, terminals and more could be worth tens of millions of dollars.

The price tag? The Authority isn’t sure, but under the new law, it is required by the General Assembly to purchase all of the private system’s assets.

During its meeting on April 18, the Authority hired Davenport & Company LLC as its financial adviser, tasked with determining a purchase price of the ferry system.

Compared to the Southport-Fort Fisher ferry, a member of North Carolina Department of Transportation’s Ferry System, Bald Head Island’s pedestrian rates are 22 times higher. Though just half a mile away from each other, with Southport’s ferry based on Ferry Road in Southport, the two ferry systems have drastic differences.

Bald Head Island has a strict no-car policy for residents and visitors and its ferries are designed around pedestrians. In contrast, NCDOT’s two Fort Fisher ferries are made to carry over 30 vehicles per trip.

Who’s going to pay for it?

So how will an Authority, with “no employees” and “no money” according to its treasurer David Jessen, afford to purchase a multi-million dollar entity?

With a revenue bond, secured by revenue the ferry system generates through ticket sales, parking, and other fees. But if the system’s trend is following the same pattern, that revenue will be shadowed by its recent pattern of debt.

During its first meeting, Paul indicated that the LLC would provide a grant to cover the Authority’s expenses, “in increments in the neighborhood of $25,000 to $50,000 or possibly up to one-hundred thousand dollars $100,000.”

Under state statute, both North Carolina and the Authority’s surrounding municipalities are not obligated to pay the principal or interest on the Authority’s future and anticipated revenue bonds.

Still, the Village of Bald Head has lent its helping hand to help the Authority during its start-up period.

On March 16, the village voted to grant the Authority $50,000 of taxpayer funds to use during and after its acquisition process in an interlocal agreement. Southport signed off on its own interlocal agreement on April 22, which allows the Authority to rent office space in Southport City Hall for $10 a year.

The Authority passed a resolution in April which would allow it to “advance its own funds” or borrow funds on a short-term basis before going into debt.

“The Authority may advance its own funds to pay expenditures related to the Project, may borrow funds on a short-term taxable or tax-exempt basis in order to pay such expenditures or may enter into contracts obligating third parties to make certain expenditures relating to the Project (the “Expenditures”) prior to incurring indebtedness and to receive reimbursement for such Expenditures from proceeds of tax-exempt bonds or taxable debt, or both,” the resolution states.

A spokesperson for the Authority’s financial advisor, Ted Cole, said his team is working on supplying a credit rating “by late fall.”

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