Village of Bald Head Island voters said “yes” on Tuesday to issuing $52 million in general obligation bonds, a key step before the small government is considered a potential buyer for the island’s transportation system.
Though results – from 165 affirmative ballots – are still not certified, the “nos” fall just 45 votes behind, with 118 voters unwilling to back the bonds.
If referendum results hold, it means the village has the potential to access the financing necessary to purchase the ferry system from the private seller, Bald Head Island Ltd.
Limited developed the island in the ’80s and has been selling its assets over the past several years in an effort to settle the estate of the late Mitchell family patriarch, oil tycoon George Mitchell.
The transfer of Limited’s transportation assets has been contentious, with the village competing with another public entity to purchase the system. Village officials say they can spend less to purchase the system and will manage it more closely compared to the state-created Bald Head Island Transportation Authority.
Turnout was markedly higher this election among island residents, given the divisive and high-interest decision at stake. It brought out at least 280 voters (so far), compared to 101 in the past municipal election and 172 the previous cycle in 2017.
Three Bald Head Island provisional and 11 absentee ballots have yet to be counted as of midday Friday, according to Brunswick County Board of Elections director Sara LaVere. Absentee ballots must have been postmarked by Election Day and arrive by mail by the end of the business day Friday to be eligible.
“Bond referendums, when you get money involved, that does tend to increase turnout,” LaVere said.
Both the village and the Bald Head Island Transportation Authority are vying to purchase the transportation system. The Bald Head Island Transportation Authority was first to formally submit an offer in December 2020, which village officials promptly objected to, eventually entering the equation as a competitor.
Now, the N.C. Local Government Commission – the body tasked with approving the issuance of large amounts of debt for public entities – has two valid bond applications in hand. The village is seeking general obligation bonds, and the authority is aiming for revenue bonds.
Before Tuesday’s vote, State Treasurer Dale Folwell said he held the village’s general obligation bond application as a courtesy, considering voter approval is required before the Local Government Commission could greenlight the village’s debt. Authority representatives have repeatedly asked Folwell to put its application on the agenda this past year.
Folwell said Wednesday that not moving ahead on the applications was “just plain old common sense” to see what voters would approve this week.
Three potential outcomes
Which entity purchases the system will determine how ferry and barge rates are allowed to be increased and whether a state agency would continue to have oversight.
Multiple parties control the strings in this complicated deal: The private seller, Bald Head Island Ltd., may sell to whomever it pleases. Backed by the Mitchell Family Corp., Limited has a preference for the authority and has indicated an unwillingness to partner with the village. In fact, Limited’s CEO Chad Paul told Port City Daily
in September the company had already begun a competitive sale process on the open market, including possibly selling the system off in pieces and to a third party.
The Bald Head Island Transportation Authority, created through Senate Bill 391
in 2017, could buy the system at or below its appraised value.
The village’s potential bonds would be backed by taxpayers, securing the creditors’ investment with the assurance tax rates could rise if need be; however, the village has said this is unlikely.
The bond amount of $52 million would cover the village's purchase, if it is allowed to buy the system, and consultant fees.
"The Village is pleased that the voters on Bald Head Island expressed their desire to acquire the Transportation System assets by passage of the General Obligation Bond referendum,” Mayor Andy Sayre wrote in a statement. “We look forward to the Local Government Commission hearing the Village’s Bond financing application at a meeting in the near future."
Though its consultants have labeled the authority the highest-rated ferry system on earth, it will garner comparatively higher interest rates. The village contends it will save $13.3 million
over the 30-year life of the bonds compared to the authority.
Limited has invested more than $1 million in exploring the sale to date, according to the Mitchell family.
State auditor continues to question valuation
At the LGC’s midday meeting Tuesday – before tentative election results were known – State Auditor Beth Wood, one of the commission’s members, criticized the Bald Head item being on the agenda.
She previously discarded the authority’s first valuation of Limited’s transportation assets, which placed the price tag at $50.94 million, because the appraiser’s value of Deep Point Marina in Southport came in at less than half of the county tax value. The authority issued a second appraisal issued a valuation opinion of 7% and $2.9 million less than the first; the village hired a consultant to review the second appraisal, which determined
the appraiser didn’t use appropriate methods.
Wood asked Tuesday if there was a third appraisal for her to review – one with numbers she could work with. “Where’s the valuation for Bald Head Island and ties to something that makes sense to me?” she asked. “The two I’ve seen, they’re not worth the paper they’re written on.”
The appreciation of the assets is well understated in the two evaluations, Wood said, and she has yet to see depreciation schedules she said would more accurately reflect the system’s value. “Somebody is trying to shove a valuation that has been brought down my back,” she said.
Susan Rabon, chair of the Bald Head Transportation Authority, said the entity is waiting for LGC approval.
“The Authority continues to pursue its statutory mandate to purchase the ferry transportation system, and has an agreement with the seller that is consistent with the statute,” Rabon wrote in an email Thursday. “The Authority has an application for approval before the Local Government Commission and is waiting for that body to take action.”
LGC to review in December
Folwell said he sees the LGC as the only objective party in the matter. He compared the LGC’s role in overseeing the two applications to its recent intervention in the New Hanover County government complex financing arrangement – “it’s the same recipe.”
In that deal, the LGC saved the county roughly $20 million by rejecting a county-approved deal for a lease-to-own arrangement with Cape Fear FD Stonewater, according to WHQR
. Instead, the county sought a limited obligation bond and financed the deal itself.
Folwell said he believes this is the first time the LGC has ever reviewed two competing applications for the same assets, and potentially one of the first times it’s ever overseen the public purchase of a private enterprise.
“The LGC doesn’t have a loyalty to the seller,” he said. “The LGC has a loyalty to making sure that the amount of financing is appropriate, the valuation is appropriate, the transparency of the transaction is appropriate, and the ability to run the system is appropriate.”
As chair of the LGC, Folwell said he promised the board he would try to clear the December agenda to review the bond applications.