As you may have heard, the Village is considering acquiring the BHI Transportation assets. Factoring into its consideration are:
- Lower Debt: significant savings because of less funds borrowed and at an interest rate of approximately 2.43% – 2.92% versus 4.25% or more for the Bald Head Island Transportation Authority (“BHITA”) – savings that can be put to work to improve operations.
- Established Operations: the Village has a long history of owner/operator experience with public assets and utilities in order to transition the transportation assets in efficient and fiscally responsible manner; and
- BHI-Focused Governance: all members of the Village Council are accountable to the users of the transportation system. The BHITA Board has eleven members, but only three are required to be Island appointees.
The Village has found that:
- The Village can issue General Obligation (GO) bonds at a lower interest rate, saving $18-23M in debt service obligation over the life of the issue, or between $590,000 and $760,000 per year. These funds can be expended to make improvements to the transportation system or pay down debt.
- The Village can save $5M in debt service reserves and bond issuance costs versus the BHITA’s proposal ($0.45M versus $5.5M) due to the technical differences between Revenue Bonds and GO Bonds.
- The Village proposal should require at least $2M less funds to be borrowed than the BHITA proposal ($56M to $54M).
- The Village proposes to immediately fund nearly $5M more than the BHITA for needed equipment and facilities enhancements.
- Assuming operating revenues and expenses are similar to those in the BHITA proposal, the Village will NOT have to raise property taxes.
Assumptions:
Acquisition purchase price not to exceed $47,750,000 Bond Referendum approval in November.
For more information about the difference between BHITA and VBHI ownership and operations, view a comparison table HERE.
Background:
The Village previously accepted in good faith that the BHITA would provide the best long-term solution to provide transportation services to and from BHI. However, when the BHITA proposal was first made public in December 2020, issues of the purchase price, transparency, and governance were raised. Due to non-disclosure agreements, the Mayor and Mayor Pro Tem could not discuss the status, including their repeated objections to the deal, of BHITA negotiations with the Council until the proposed deal was made public in December 2020. The Village investigated these issues and determined the BHITA proposal would not be in the immediate and long-term best interest of the users of the parking, ferry, and barge and of the Island as a whole.
Consequently, the Village took the following actions:
March – announced its intent to step into the shoes of the BHITA, if it could be determined that the Village could present a better proposal.
April/May – obtained satisfactory answers to legal questions as to the Village’s ability to acquire and operate the transportation assets of the financing. See the Village’s May 3, 2021 letter to the LGC HERE.
May/June – employed experienced bond counsel (Robinson, Bradshaw & Hinson) and financial advisor (First Tryon) to develop the bond application and schedule to obtain NC Local Government Commission (LGC) approval.
Next Steps:
There will be a public hearing on the Village proposal at the August 20 Village Council meeting, preceded by a public presentation at a date and time TBD. The Village is awaiting action by the LGC on the Village’s and BHITA’s separate financing applications.