This week, the Village Council submitted its Notice of Intent to Seek Approval for Issuance of General Obligation Bonds. The intent of this action is to have everything in place, should the Bald Head Island Transportation Authority and Bald Head Island Transportation be unable to reach an agreement on the purchase and sale of the transportation system in accordance with the Act that formed the Transportation Authority and LGC regulations. The Village steps are designed to avoid the transportation system being sold to a privately-owned third-party or broken into pieces and purchased by several parties, which has been suggested by the current owner, should acquisition by a public entity fail to go through. Letting the transportation system fall into the hands of third-party owners and investors would be the worst-case scenario for Bald Head Island.
The latest proposal before the Local Government Commission (LGC) was for the Bald Head Island Transportation Authority to acquire the system from Bald Head Island Limited, the current owner, for $47.75M, and to finance the acquisition with a $56.1M revenue bond issue. The Village continues to believe this amount is too high. All parties are waiting for issues identified by the LGC to be addressed, including the Bald Head Island Transportation Authority’s new appraisal of the mainland and BHI ferry terminals and facilities. The new appraisal was advised by the Local Government Commission when recommendation was made by LGC staff to deny approval of the bond issue. The LGC is expected to reconsider the BHITA application at its August 3, 2021 meeting.
The Village has performed a preliminary analysis of what the Village’s financing would look like if it acquired the transportation system. The Village could secure a general obligation (“GO”) bond offering at approximately half the interest rate of revenue bonds by the Transportation Authority, which would result in substantial interest payment savings. Also, the cost of issuance of GO bonds, versus revenue bonds, would be much lower. This and other savings available to the Village mean that the Village financing request is for an amount up to $52.25M with the operations intended to fund the debt and not by increasing property taxes, versus the Transportation Authority’s $56.1M revenue bonds proposal. The Transportation Authority is a start-up entity, with no credit record or assets beyond those financed. Its proposed BBB- bond rating is one level above “junk” bond rating. These savings would mean that necessary capital improvements identified by the Village could be planned and paid for sooner, rather than later. The Bald Head Transportation Authority would not initially be able to afford these capital improvements without considerably raising fees. The purpose of the Village financing, as stated in its Notice, contemplates not just acquisition but expanding and improving the ferry and ground transportation assets and services.
There are other advantages to the Village owning the transportation system and those will be discussed thoroughly, should it be necessary for Village acquisition to move forward. Currently, the Village wants the transportation system users to know that this is not a competitive endeavor. The Village is not trying to take the system away from the Bald Head Island Transportation Authority. The Village is planning to be able to prevent the worst-case scenario from happening.