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County Talks Beach Nourishment Funding; New Requirement Costly

The New Hanover County Board of Commissioners discussed beach nourishment funding at their September 4th, meeting. The Army Corp of Engineers is requiring the County to sign an agreement to be 100 percent responsible for cost overruns and any liabilities incurred with the project. Historically, the federal, state, and local governments shared in unanticipated costs. 

Managing Editor

NEW HANOVER CTY - The New Hanover County Board of Commissioners discussed a new requirement affecting beach nourishment funding at their Tuesday September 4, meeting.
Projects are scheduled for Carolina Beach and Kure Beach later this fall and may end up costing substantially more than originally anticipated. Dwindling federal and state funding has long been a fear for County leaders and the three beach towns. A contingency plan was adopted last year to allow the County to attain a permit similar to the Army Corp of Engineers permit for beach nourishment should federal funding fall short in the future. That plan splits the cost between the county and beach towns.
Unfortunately, federal funding was eliminated for Kure Beach’s project set to begin later this year. Since the federal government isn’t funding it, the State of North Carolina will not fund their share. Leaving only local room occupancy tax dollars available. Carolina Beach and Kure Beach leaders met with County leaders to find a way to shift funding from the Carolina Beach project to help fund the Kure Beach project.
Now the State has said they will not sign a memorandum of agreement for funding because it would require them to pay for any increased additional costs above the original project cost.
The Towns of Carolina Beach and Kure Beach traditionally receive beach nourishment projects at the same time. The project is called, "Carolina Beach and vicinity." Both projects are combined into one to save on mobilization and permitting costs.
Projects have historically been paid for by federal, state and local funds. Locally the County and the three beach Town’s of Carolina Beach, Kure Beach and Wrightsville Beach have a Room Occupancy Tax on all hotels, motels and vacation rentals. Over the years that fund has grown to $40,165,475 with another $711,189.00 generated from a room tax in the unincorporated area of the county.
According to New Hanover County Manager Chris Coudriet, the United States Congress has authorized the federal government to spend $4,400,000 on the Carolina Beach project but has authorized no funds for the Kure Beach project. The state government is authorized to contribute $1,180,000 for the Carolina Beach project, for which Carolina Beach has been authorized to transfer to Kure Beach who is receiving no federal funds. Both beaches are on a three-year renourishment cycle where fiscal year 2013 is the next renourishment cycle.
Coudriet explained under “contributory authority”, which was recently approved by Congress, projects can now be designed with an expanded scope above the minimum standards authorized by the federal government. Both the Carolina Beach and Kure Beach projects are designed with an expanded scope. However, under this design, the federal government is only responsible for 65% of the costs of the minimum standard and the state and local government are responsible for the remaining 35% of the minimum standard plus 100% of the costs above the minimum standard.
The State of North Carolina is not willing to sign the Memorandum of Agreement with the United States Army Corp of Engineers to accept their share of the liability above the estimated project amounts. These liabilities could result from bids received at higher costs than the estimated project or other unforeseen risks such as dredged sand being inferior quality, lawsuits, insurance claims, etc. This translates into increased exposure to the County for those potential liabilities.
Coudriet explained county staff has estimated this could be as much as $3,525,000 excluding any unforeseen risks.
Town of Carolina Beach:
It is estimated the Carolina Beach project will cost approximately $7,700,000. Congress has authorized spending $4,400,000. The balance of $3,300,000 will be shared between the State and County. The County's portion will be approximately $2,120,000 paid from the Room Occupancy Tax (ROT) funds. The State's share will be $1,180,000. The existing permit for this project expires in 2014.
Town of Kure Beach:
For Kure Beach, no funding is being provided from either the Federal or state governments. Therefore, the entire cost of this project would come from local funds. The Town of Carolina Breach has agreed to transfer the state's portion of the Carolina Beach nourishment of $1,180,000 to Kure Beach if the nourishment project at Kure Beach proceeds. The estimated cost of this project is $6,400,000. The existing permit for this project expires in 2043.
In order to reduce the overall costs, the Army Corp of Engineers plans to bid both projects as one.
Previously the County was liable for 17.5% of costs above the estimated project amount. These additional costs could be the result of bids coming in higher than estimated for various reasons. Under the new arrangement the County is responsible for 100% of costs above the estimated project amount.
If the Board of Commissioners decide to move forward and take action on the issue at their September 4, meeting, and the Army Corp moves forward, a 30-day public announcement period would begin the following day with receipt of bids following that period. A contract would be awarded on October 20. The nourishment projects would have to take place between November 15, 2012 and April 30, 2013 outside of sea turtle nesting season.
On Friday August 31, County Commission Vice Chairman Jonathan Barfield sent out a statement titled, “Beach Renourishment, The lifeblood of our tourist economy”.
Barfield wrote, "The lifeblood for tourism in our community is our beaches.  Healthy, sandy beaches with easy access for visitors and residents alike lead to full hotels, diverse retail shops, and quality restaurants throughout New Hanover County. Sustaining the quality and accessibility of our beaches is a key priority for our community’s long term success."
Barfield wrote, "Congress passed a bill allowing contributing authority earlier in the year.  The benefit of contributing authority is that we can use federal permits to conduct a larger nourishment project than Congress funded.  Doing so is good for the overall management of sand and protects more of the beach longer.  However, the consequence in using this new authority is the aforementioned exposure of owning 100 percent of any cost overruns or project liabilities."
Barfield wrote, "The county manager has told the board of commissioners that beach nourishment projects managed by the federal government rarely exceed the budgeted amount. That’s good news.  However, if the project exceeds its planned amount it could be as high 25 percent more than the plan contemplated."
He explained, "If we don’t agree to execute the MOA with the US Army Corps of Engineers then we lose not only the chance to nourish Carolina and Kure beaches this winter, we’ll lose the shared revenue the federal government and state government have authorized for the nourishment projects.  It could be another 3 years before Congress and the state fund nourishment projects at Carolina and Kure beaches if we don’t proceed this year.  In effect we could go 6 years without nourishment on Pleasure Island if we don’t proceed with signing the MOA.  That’s a lot of erosion and shoreline loss that we simply can’t afford."
Commission Chairman Ted Davis commented at the September 4th meeting that, "The thing I don't like about it is the fact that the Corp of Engineers will approve the contract and they will approve the price of the contract and if that price does have an overrun the county is on the hook to pay it. I wasn't real happy about that, but I do understand why the Federal and State government does not want to sign the agreement because of the fact that it's more involved than it was when previously planned. I certainly understand that. It puts Carolina Beach and Kure Beach in a predicament. While I don't like that I will support it... because the beaches and waterways are just so critical to our tourism and our local economy and we've got to do everything we can to keep our beaches replenished and waterways dredged so people can travel them safely so that this tourism will keep coming and our economy will keep booming because of that."
Davis said all local governments worked towards a common good to overcome the obstacles in the process.
Commissioner Rick Catlin said five years ago the federal government would occasionally contribute 65%, the state would contribute 75% of the remaining 35% and the County would fund the rest. He said over the years, "We continued to protect our sand portion of the beach fund because we knew it could not last forever. So now we're at a level of over $35 million dollars and we've done projections on what this new scenario is going to look like and how long we can sustain being able to take care of our own beaches without federal participation."
Catlin said, "With the advent of the earmark ban in Washington, it's unlikely that we are going to get any federal dollars unless there's a hurricane and they can do some disaster funding" noting this time the money came from federal funds for Hurricane Irene last year.
He said not moving forward could jeopardize future federal funding.
The Board voted unanimously to move forward with signing the agreement and agreeing to the terms.
A letter will be sent to the federal government asking them to provide additional funding if possible and to consider not viewing this as a plan for the future.