- Published on Friday, 04 May 2012 22:33
- Written by Super User
By STEVE SHUTTLEWORTH
Carolina Beach Town Councilman
Some of you may have heard through our local media, that in a meeting with the Governor and her staff, our Mayor, Mayor Pro-Tem and Town Manager were informed that the state will not have the money to fund a Pier in Carolina Beach.
I agree with DA Lewis on some points mentioned in his letter this week in the Island Gazette. The current Town Council, in its' first meeting, developed a plan to address the unfunded pier project, the debt, and the potential sale of the hotels and land. It is not as simple as just throwing up a for sale sign and hoping some buyer will pay what is presently owed on the property. Running head long into a rash decision is what got the Town in this money loosing boondoggle in the first place. That is why we, your current Council members, unanimously agreed to think before we act. Council decided to restructure the $4.3 million in debt at a lower rate. Council also directed CBP3 to hire new management to oversee hotel operations. These two actions resulted in new projections that net revenues will now pay nearly all operating costs, including debt, taxes and insurance. The plan further detailed a strategy to either receive the grants awarded or sell the property.
What this current council is doing is making well reasoned and thought out decisions. We don't want to compound the problem we inherited from those former Council members who made hasty decisions that resulted in huge debt and poor asset management. This property , like many others in Carolina Beach, has been revalued at nearly 40% less than the previous valuation.
Let's review a few facts:
The former Carolina Beach Town Council, through CBP3, a non-profit entity , purchased over $3.6 million dollars worth of property to be used for a pier project in Carolina Beach. That property, along with property that had just previously been purchased by the Town Council, was wrapped into one BB&T bank loan to the tune of $4.3 million.
The Town of Carolina Beach has been offered, but has yet to accept, slightly more than $600,000 in grants to help pay down the debt on the property.
These are " matching" grants, meaning that the Town is required to come up with an additional $600,000, out of the Town's reserves, to match the State's grant money offering.
The Town has also been awarded an additional $1,100,000 in CAMA and Aquarium funds. These funds have not been released to the town, and remain frozen in the State budget battle. Their is no guarantee that these funds are going to be released. There was just recently a meeting between the Governor and Town officials over the release of these funds. The Governor supports the release but it is not her decision alone.
THERE ARE STRINGS ATTACHED TO THESE "GRANTS" Even if we are successful in getting these funds released, the total money available, (through grants and matching Town taxpayer funds) to the Town would be approximately $2,300,000. These are acquisition only funds and would be used to pay down the CBP3 loan, leaving a $2 million dollar balance.
However, the grants require that the Town tear down the hotels. The demolition money would again need to come from Town reserves. Compounding the problem is that once that was done, there would be no revenue stream from the property to make the payments on the loan. In other words, the Town would then need to spend an estimated $200,000 from its reserves to tear down the hotels, and it would then be left with no hotel income with which to service the debt on the remaining $2,000,000. The Town would then need to come up with an estimated almost $2,500,000 to create a park with a gazebo , a water feature and parking. The plan originally was to get some of those funds from future grants. Obtaining those grants is now also highly unlikely.
As I see it, the Town has a gazebo at the Boardwalk, we have a water feature called the Atlantic Ocean, and we have lots of parking in that area now.
So I agree with D.A., that we don't need another park and that it makes little sense to keep this money draining property (even though some citizens and prior council members expressed an interest and a willingness to do just that) I question whether in makes sense to throw good money after bad in order to extract millions of dollars more from the Town's taxpayers to pay for an additional park?
Where I part company with D.A is in his assertion that Council can simply, and should immediately, put the property up for sale. The property was in dire need of repairs and maintenance. Furthermore, the income and expense statements from the prior operator did not represent a clear understanding of the income potential of the property. The Town recently received two extremely low offers from local business people indicating their perception of the property's value is millions of dollars lower than the purchase price. Council countered those two offers and that is the last we heard from the prospective buyers".
To establish a market selling price for income/investment or business property, the property's value should be determined, in part, by the established revenues. This is why the Council elected to invest some money in repairs that were needed in order to generate more revenue. These much needed repairs will, hopefully, increase the commercial value of the property. Here are some figures if we keep the property and have develop a park.
Costs to date:
• $70,000 in legal fees plus past due property taxes for bankrupt prior owner paid out of loan at closing.
• $700,000 in holding cots ($350,000 per year for 2 years on loan, taxes and insurance)
• $200,000 in repairs (approved by this council to increase revenues)
• $30,000 in additional legal costs to date on grants, and management contract plus untold staff resources.
• $600,000 in required in matching grant funds
• $200,000 to demolish hotels
• $2,500,000 in development of park (some of which could be grants)
• $2,200,000 in future loan payments $220,000 per year 10 year loan at 2% for the remaining $2,000,000 loan
• $6,500,000 total from the Town of Carolina Beach.
We should have a decision on the grant awards mentioned in this article in the next couple months and can make a decision at that time as to the direction for these parcels of land. Unfortunately, it appears that the tax payers are going to loose money on this property. The question is, how much are the taxpayers willing to loose. This Council is doing everything possible to mitigate that loss. Time will tell.
Mayor Pro Tem
Carolina Beach Town Council