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Back You are here: Home Opinion Opinion Section Editorials View of a Councilman: State not moving forward with Pier Project for Carolina Beach

View of a Councilman: State not moving forward with Pier Project for Carolina Beach

By STEVE SHUTTLEWORTH
Carolina Beach Town Councilman

Dear Editor,
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.
Future costs:
• $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.
Steve  Shuttleworth
Mayor Pro Tem
Carolina Beach Town Council