Federal Storm Damage Mitigation Project History and Summary

As there has been some confusion about the Federal Storm Damage Mitigation project, we’d like to offer the following brief on the history, management, and financing of the project in North Topsail Beach:

The Federal Storm Damage Mitigation Project has been underway for well over two decades, repeatedly approved but never funded. The announcement of the funding of the project in late 2019 was an unexpected surprise to North Topsail Beach, Surf City, and to the local region of the U.S. Army Corps of Engineers. No one expected this project to be funded, and no one had planned for it. Surf City, which had done nothing in terms of beach nourishment during the preceding 20 years, had contracted with T.I Coastal to perform their own private beach nourishment project. North Topsail Beach, realizing that the area of beach in Phase 5 was in critical danger, financed a project to give you a FEMA “engineered beach” – a beach which protected the area through hurricanes Matthew, Florence, Dorian, and Isaias.

Shortly after the announcement of funding, the U.S. Army Corps of Engineers, which hadn’t initiated a beach nourishment project in over 20 years, began providing information which raised more questions than answers. Consider – the project feasibility study they rely on was published in 2008. In 2010, they estimated the initial construction cost at $123 million, and the periodic renourishment cost over the 50-year lifespan of the project at $205.500 million. (This was to be split 65% Federal, 35% local. The 35% local was to be paid 50% by the State with the other 50% divided between Surf City at 60% and North Topsail at 40%). Total cost for North Topsail for the initial construction was originally projected to be $8,617,000.

Five years later, in 2015, the Corps updated their estimates. Initial construction was now estimated to be $144.3 million with renourishment at $245.4 million. The initial project cost to North Topsail was then estimated at $10,101,000.

Five years later, when the project was approved in 2020, the costs were $237 million for the initial construction and $893 million for periodic renourishment (later revised downward to $672,074,000). The initial project cost to North Topsail is now $16.5 million, nearly twice as much as original estimates. The substantial increase in cost made our Board of Aldermen pause and seek answers on these figures. To be clear, the Board was never opposed to participating in the project but rather set about deliberately to find a way to afford to participate.

The first hurdle — protection of the Phase 5 area was — in the opinion of many, unnecessary. North Topsail had recently constructed a FEMA engineered beach in that area during the Hurricane Mathew truck haul in the winter of 2019-2020. This expense is being borne by all of the taxpayers of North Topsail Beach, the bulk of whom have received no beach projects ever due to their location in the CBRA zone.

Next hurdle – in order to finance the Phase 5 FEMA engineered beach, the Town of North Topsail Beach received a loan from the USDA. This loan was actually for a 30-year period, but to approve a loan of this magnitude for sand, the Local Government Commission required an accelerated 11-year payment. While the Corps is extending 30-year financing for the initial construction of the Federal Storm Damage Mitigation Project (and is not subject to the LGC), taking on this obligation will require that the Town pay off the USDA loan. With a balance of approximately $16 million, this is another significant expense. However, contrary to some of what appears on social media, the town is current with its payments, maintains the required sinking fund, and maintains the required reserve.

To help us find a path where this project could be affordable for a town with no industrial or commercial tax base, we contracted with a well-respected government financial advisor, DEC Associates out of Charlotte, to review the Town’s obligations, finances, future capital requirements, etc. DEC was asked to give multiple scenarios for how we could afford participating in the project.

To begin with, they were very clear that this would not happen without a tax increase. They asked that we look at alternative revenue sources – which we did. The first was paid parking. We have contracted with a vendor to implement paid parking in all town-controlled parking lots and select side streets. Conservatively estimated to bring $550,000 into the town, the incremental parking revenue is all slated to go into the beach fund to help pay for this project. If we collect more, less will be required form taxpayers.

Our next effort was to try to increase accommodation taxes, which is set by the state. Vacation renters pay 6% for an accommodation tax in vacation rentals. In Surf City and Topsail Beach, 3% goes to the municipality and 3% to Pender County. Pender County recognizes the value of its beaches and returns their 3% to the towns for beach maintenance. Onslow County simply keeps their 3% which – in this Covid-19 affected year – will amount to approximately $1.5 million – half of the $3 million dollars we estimate we’ll need each year in order to participate in the federal project. Onslow County turned a deaf ear to our request to return that money, but agreed to support our efforts to get a 1% increase in the occupancy tax through the state legislature. Mayor McDermon, Alderman Leonard, and Town Manager Gilbride recently spent a day in Raleigh working to get this bill through the Assembly Local Government Committee. The accommodation tax is also directed to the beach fund, and the additional 1%, if approved, will be earmarked for the Federal project.

While residents of Phase 5 are understandably concerned with the 3.6 miles of beach at the south end of town, we as elected officials must concern ourselves with the entire 11 miles of North Topsail Beach. With the help of our legislators in Raleigh we are continuing to vigorously pursue the construction of a terminal groin which will help stabilize erosion rates at the northern end of town where large sandbags now protect the property and infrastructure. With the help of our congressional delegation in Washington, we have worked tirelessly to lift the restrictions imposed by the Coastal Barrier Resources Act (CBRA) on Phases 2, 3, and 4 of our beach – areas which also pay taxes and have never received any beach project due to restrictions on federal funding in a CBRA zone. At the same time, we are moving ahead with Town Hall renovations and exploring the replacement of the structurally unsound Fire Station located in the Phase 5 area.

While the Federal Storm Damage Mitigation Project is ultimately a “good deal” for the area (in terms of quantity of sand compared to cost to the town), it is being placed on top of a FEMA-engineered beach the entire town is paying for. The project will benefit only the property owners in the project area, and will be of more benefit to those closest to the ocean. We intend, therefore, to create two Municipal Service Districts, one on the ocean side of Island Drive, one on the sound side. We will continue to make every effort to mitigate the tax impact in these districts, directing money from the beach fund, the accommodation taxes, paid parking, and any other revenue generation program we can devise. The creation of these MSD’s will require a public hearing, probably to be held in May. Please periodically check the town website for more information on the public hearing and other updates on the federal project.

Other documents on the Federal Storm Damage Mitigation Project can be found at ntbnc.org/shoreline-protection-1.

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