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Lack of appraisal of BHI transportation system prompts State Auditor to request pause on bond sale

Passengers wait to board the Bald Head Island ferry (file photo)
Passengers wait to board the Bald Head Island ferry (file photo)
Published: Nov. 22, 2021 at 10:59 PM EST
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RALEIGH, N.C. (WECT) - State Auditor Beth Wood sent a letter (see below) to State Treasurer Dale Folwell November 15, 2021, asking that the Bald Head Island (BHI) Transportation System bond sale applications be removed from December’s agenda citing a need for an accurate appraisal of the assets.

Folwell is Chairman of the Local Government Commission (LGC) to which the Village of Bald Head Island has applied for approval of the sale of bonds to purchase the BHI transportation system.

Wood expressed concern about the lack of evidence supporting the asset valuation and is anxious for the three new commissioners that have yet to be confirmed to be sufficiently educated to make an informed decision.

  • The Commission has not received sufficient evidence, required by State statute, to support the value of the assets. To date, two valuations of the assets of the Bald Head Island Transportation System have been submitted. However, these valuations used assumptions that have raised a number of questions and fail to provide evidence that the amount proposed is, as the applicable statute requires, adequate and not excessive.
  • Consideration of bond applications that fail to meet all of the statutory requirements (in this case the absence of an appraisal that accurately and reliably sets the value of the assets) gives the appearance of preferential treatment of these applicants and risks setting a precedent for other units applying for approval to sell bonds.
  • Three Commissioners, whose terms ended June 30, 2021, were not reappointed. There is not enough time for new appointees to educate themselves well enough to make an informed vote at the December 7, 2021 meeting, especially since the appointments for the vacated positions have not been confirmed as of this date.

The Village of Bald Head Island wants to take control of its transportation system, which includes the ferry service and operation, an on-island tram service, and the mainland parking operation for the ferry.

Concerns about the Bald Head Island Transportation Authority (BHITA) arose when a proposal was first made public in December 2020.

A public hearing was held on February 17, 2021, by the Board of Trustees of the BHITA to determine the feasibility of the purchase by the Village of Bald Head Island at a price of $47,750,000 set by the Authority. Many questions were raised at the hearing about the purchase price, which was determined by independent appraisers hired by the Authority.

In the summer, the Village hired legal counsel and a financial advisor to develop a bond application to schedule and obtain NC Local Government Commission (LGC) approval to develop a bond application for the purchase. An application was submitted in July and a bond referendum was added to the November 2021 ballot. Another public hearing was held before the election.

The outcome of the municipal elections in November was that residents approved a $54-million bond referendum with 58% in favor of the bond purchase. The bonds are to be repaid over a 30-year term through transportation and parking revenue. However, the sale of the bonds still has to be approved by the LGC.

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