Wednesday, April 17, 2024

Transparency concerns cause at least three-month delay on sale of Bald Head Island ferry system

Passengers on the ferry to Bald Head Island in early 2019, months after Hurricane Florence hit the island. (Port City Daily/Mark Darrough)

BALD HEAD ISLAND — An expected early February closing on a $47-million purchase of the Bald Head Island ferry system did not come to pass. Concerns arose with lack of transparency in the appraisal and financing process, and limited information on the nature of operations once the system becomes publicly owned. 

RELATED: Deep Dive: Inside the three-year, unique, $47 million private-public Bald Head Island ferry transaction

In late February, the Bald Head Island Club Board of Governors submitted a letter to North Carolina State Treasurer Dale Folwell outlining complaints, along with concerns surrounding an aged fleet of ferries, a maxed-out parking lot in summer months, and various infrastructure issues. 

The board — which represents two clubs on the island that together consist of 1,200 member families and employ about 200 employees — requested Folwell to defer the Local Government Commission’s (LGC) consideration of a bonds purchase by at least six months. This followed a similar request to Folwell on January 19 by the Village of Bald Head Island.

On December 8, the Bald Head Island Transportation Authority (BHITA) — an 11-member body established by Governor Roy Cooper in 2017 to facilitate the sale — voted 7-to-4 to approve the purchase of the ferry system’s assets. 

“Based on the 7-4 vote in favor of moving forward with all four island representatives voting ‘no’, it appears that the concerns of those closest to the island’s needs might not be heard by the Authority in the future … The desire is to allow island residents, businesses, employees, and vendors time to consider the details of the [LGC] application and to provide input to help ensure the future success of the transportation system,” the board stated in its letter.

On February 2, the LGC asked the public authority to hold a public meeting and delayed any consideration of the bonds purchase application by three months. Thus giving BHITA necessary time to “carry out its due diligence in addressing the concerns” of the Village of Bald Head Island Council.

The LGC outlined a plethora of concerns raised by the council, including an insufficient analysis of cash reserves, a lack of employee compensation analysis, an apparently insufficient net cash flow for parking improvements. Council told LGC that BHITA had not informed the public of any details of the proposed sale, nor had it provided any opportunity for public input and comment.

After a February 26 public hearing, BHITA issued a 13-page document in attempt to address the public’s concerns about the pending purchase. The document stated it “will continue to work with LGC staff to request consideration of the bond issuance” at a meeting on April 13, with hopes of a sale of bonds in April and a closing in May.

“Thereafter, the Authority will begin the process of hiring a CEO and operating the system as a publicly owned ferry transportation system,” according to the document.

A ferry arrives at the Deep Point Marina in Southport. (Port City Daily/Mark Darrough)

Once a transition period after the sale is finalized, the public authority will own and operate a wide network of assets, including the mainland and island marina, 36 acres of vehicle parking, a 2003 and 2006 catamaran, two aluminum monohulls built in 1987, a 2017 tug boat, deck barge, and all of its 12-seat trams.

One of the chief concerns that has been raised is how BHITA arrived at the purchase price of $47,750,000 for the system. In response, the document outlined the appraisal process, which included four independent valuations of the assets that “set an upper limit of the purchase price at $50.9 million.” That’s more than $3 million over the eventually agreed-upon price.  

RELATED: Deep Dive: State treasurer asks Bald Head Limited to donate $47 million ferry system, company denies request

It also outlined a capital plan to address improvements to facilities, equipment, and operations, including a new ticketing and reservation system for $250,000 in FY 2022; and adding 167 parking stalls at the entrance to the main lot (areas 6W and 6E in Figure 10 of the Feasibility Study) for $347,000 in FY 2022. 

  • Replacement of the ferry San Souci — $4.6 million over the fiscal year 2023-2024;
  • Regular, perpetual replacement of the tram trucks and tram trailers (typically four trams/year), including $707,000 to replace all 24 tram trucks between now and fiscal year 2028; $371,000 to replace half of the trailer fleet between now and fiscal year 2028, and remaining trailers to be replaced during fiscal years 2029-2032. $280,000 to expand the Truck and tram fleet when ferry passenger volume reaches 400,000/yr. 
  • Developing additional parking stalls as needed: $2.5 million over the period 2026-2040 to increase total stalls from 1,955 to 2,625;
  • Rebuilding of the passenger dock at the Island – $1,065,000 in FY27/28;
  • Acquiring property for additional parking at Deep Point: $ 1.2 million in 2037-2040;
  • Replacement of the freight barge in fiscal year 2029-2030;
  • Regular, engine overhaul or replacement, including $1.05 million between fiscal years 2021 and 2030;
  • The Authority’s share of annual maintenance dredging and periodic major dredging at Deep Point and the Island.

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