SOUTHPORT — Five minutes of open session, two hours of closed session with an attorney. That’s how Bald Head Island Transportation Authority’s Wednesday meeting went, and it’s about how all meetings have transpired since the authority’s inception.
The authority, now more than two years old after being created in July 2017 with the passage of Senate Bill 391, is required by statute to acquire Bald Head Island LLC and Bald Head Island Transportation, Inc.’s ferry assets, privately-owned since 1983.
Related: Bald Head Island Transportation Authority set to acquire ferry assets, no price tag yet
As with other government property acquisitions, the bulk of the Bald Head Island Transportation Authority’s (BHITA) work is shielded from the public under §143-318.11(5).
Unlike most property acquisitions, the state isn’t competing with other known prospective buyers for the ferry system, comprised of tens of millions of dollars in privately-owned assets comprised of: two terminals (Deep Point Marina in Southport and Bald Head Island Terminal on the island); 36-acres of developed parking; two aluminum monohulls built in 1987 and 1976 and two aluminum catamarans built in 2003 and 2006; one 2017 tug boat and one deck barge; and 12-seat trams.
Though the BHITA has had the private property appraised, it’s likely the public won’t learn of the price tag until the point of sale.
“Not a lot of juicy stuff for open session,” Henry “Hal” Kitchin Jr., partner at McGuireWoods LLP and the BHITA’s counsel, said after Wednesday’s meeting. “Once they have something to operate, then the open sessions will be much longer and the closed sessions will be much shorter.”
The 11-member board’s records don’t live on any website (but are available upon request). “It’s an interesting situation,” Kitchin said. “There aren’t many brand new government entities established in this fashion.”
With no employees, and minimal budget, Kitchin said the BHITA will one day hire an executive director. As required by Chapter § 160A-685 (the Act that governs the authority’s power and activities), the BHITA submitted its annual report and audit to the Joint Legislative Commission on Governmental Operations Oct. 1.
According to the annual report, BHITA’s revenue has been provided by the Village of Bald Head Island via three interlocal agreements, that total $200,000 in grant funding. Consultants will be paid once acquisition financing is secured, according to its recent annual report.
What money will buy the system?
The Board of Trustee’s Chair, Susan Rabon, is North Carolina Governor Roy Cooper’s appointee on the authority.
“We’re doing our due diligence,” Rabon said after Wednesday’s meeting. “This is a brand new organization started from the ground up. There has never been one. We’re covered by municipal regulations so we’ve had to get set up.”
Comprised of separately appraised pieces, Rabon said she sees the acquisition occurring in one transaction.
With little to no credit history, how would a lender be open to granting the authority the financing it needs to acquire the system? “That is the process we’re going through,” Rabon said. The authority would have to get its credit rated, Rabon said, and lenders may assess the board members’ qualifications and the existing credit history of Bald Head Island Transportation.
Debt the authority is required to take on will not come from the General Assembly or the Department of Transportation (from which it operates entirely separately).
The precise financing method has not yet been decided. “The money’s going to have to be borrowed by the authority. And there are different ways you can borrow money. You can go to banks and get a bank to loan you the money or you can issue bonds to the public bond market. It would be essentially like a revenue bond,” Kitchin said. “They don’t yet know which option would be best.”
By law, the authority is required to purchase the private assets “at or below their appraised value” (it’s also worth noting the legislature granted the authority the power of eminent domain).
Davenport & Company LLC, the authority’s financial advisor, has coordinated with the Local Government Commission and various underwriters. Initial rates are required by law to remain the same as the privately-owned system at the date of acquisition.
Public ferry systems generally operate at a loss, subsidized by state funds that keep rates low. Bald Head Island’s ferry system has also operated at a loss in recent years, with a half-million-dollar loss in 2016, according to the LLC’s CEO, Chad Paul. Compared to the publicly-operated Southport-Ft. Fisher ferry, Bald Head Island’s private pedestrian ferry rates are more than 11 times more expensive (roundtrip $2 vs. $23).
Currently undergoing a bond feasibility study, the authority is on track to make a purchase during the current fiscal year, which ends June 2020, according to its recent audit.
Is there a way to describe how close the authority is to reaching a deal? “No,” Rabon said. “We’re negotiating. You don’t play any of your cards.”
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