Memo-07-10-2018-Item-13

July 10, 2018

MEMO TO:        Mayor Barber and Board of Commissioners

FROM:             Frank A. Rush, Jr., Town Manager

SUBJECT:       Revised Financing Plan – Eastern Emerald Isle Beach Nourishment Project - (Summary & Suggested Motions)

The Board of Commissioners is scheduled to consider 3 formal actions to revise the financing plan for the planned beach nourishment project in eastern Emerald Isle in winter 2018-19.  These actions would maintain the previously determined project scope and cost, but adjust the amount of State, County, and Town funding allocated for the planned $9.2 million project.

As discussed by the Board several times in recent months, the Town requested a total of $4.6 million from the new NC Coastal Storm Damage Mitigation Fund (the State) for this project earlier this year.  Additionally, in response to a Town request earlier this year, the Carteret County Beach Commission allocated a total of $3.45 million for this project, and the Board allocated $1.15 million from the Town’s Future Beach Nourishment Fund.  As discussed previously, the project would be constructed in partnership with the Town of Pine Knoll Shores, the Town of Indian Beach, and Carteret County (Salter Path), and these other communities collectively requested an additional ~ $9.5 million from the State for this project.  Thus, including Emerald Isle’s request, a total of ~ $14.1 million was requested from the State, which is a significant sum of money that we anticipated would be challenging for the NC General Assembly to appropriate in the FY 18-19 State budget.

The NC General Assembly recently adopted the FY 18-2019 State budget, and (thanks to Representative Pat McElraft) the State budget includes a total of $5 million for the planned beach nourishment project.  Although this amount is considerably less than the collective ~ $14.1 million requested, we are thankful for this appropriation and greatly appreciate Representative McElraft’s assistance.  As a result of recent discussions among the three towns and the County, a revised financing plan has emerged that simply allocates the $5 million of State funding proportionally based on the amount of sand to be placed in each community.  Emerald Isle would receive approximately 38% of the sand financed with State funding, and thus would receive approximately 38% of the $5 million.  Thus, Emerald Isle would receive a total of approximately $1.883 million (instead of the originally requested $4.6 million) of State funding for the planned Emerald Isle project this winter.  This amount is still significant, and, combined with an increased contribution from the Carteret County Beach Commission and an increased contribution from the Town, would enable the project to proceed this winter.

The financing model that was approved earlier this year by the Carteret County Beach Commission includes the use of County funds (derived from room occupancy taxes and specifically reserved for beach nourishment activities) for up to 75% of non-State project costs.  Based on recent discussions, it appears that the Beach Commission may be willing to provide additional funding for the planned project, consistent with the financing model approved earlier this year.  As a result, the amount provided by the Beach Commission for the Emerald Isle project would increase by $2.038 million, from $3.45 million to $5.488 million. 

If the Board concurs, the Town would increase its contribution from the Future Beach Nourishment Fund (derived from special property tax levies and specifically reserved for beach nourishment activities) for this project from the previously authorized $1.15 million to $1.829 million - an additional $679,000.  As of June 30, 2018, the Future Beach Nourishment Fund is projected to have a total fund balance of approximately $2.1 million, and this adjustment would reduce this fund balance to approximately $1.4 million.  The Town’s next planned use of fund balance in the Future Beach Nourishment Fund is currently scheduled for FY 21-22 for a potential realignment of the Bogue Inlet channel and beach nourishment in western Emerald Isle, with a projected Town cost of approximately $1.25 million.  With the use of an additional $679,000 for the planned eastern Emerald Isle beach nourishment project this winter, and anticipated additional annual appropriations to the Future Beach Nourishment Fund over the next 3 years, we project that the total fund balance in the Future Beach Nourishment Fund will be approaching $4 million by the beginning of FY 21-22. 

To summarize, the financing plan for the planned beach nourishment project this winter would be revised as follows:

                                    Original Financing Plan              Revised Financing Plan

 

NC Coastal Storm  

Damage Mitigation Fund             $ 4,600,000                               $ 1,883,000      

 

Carteret County Beach

Commission                                $ 3,450,000                               $ 5,488,000

 

Town of Emerald Isle

(Future Beach Nourishment        $ 1,150,000                               $ 1,829,000

Fund)

TOTAL                                        $ 9,200,000                               $9,200,000                   

If the Board concurs, and assuming favorable construction bids this fall, the project would proceed this winter.  Approximately 471,000 cubic yards of sand would be placed in eastern Emerald Isle, generally in the area between the Indian Beach town line and the Eastern Ocean Regional Access / “Dog-Leg” vehicle ramp.  The project would involve the placement of approximately 30 cubic yards of sand per linear foot along this ~ 3 mile segment of the beach, and would restore a healthy flat berm to this area (likely adding approximately 50 feet of additional flat beach width in these areas). 

If everything proceeds according to plan, construction would begin in late 2018 and be complete by April 2019.  It is anticipated that work would begin in Emerald Isle, then move to Indian Beach and Salter Path, and then to Pine Knoll Shores.  The specific bid strategy is still being formulated, but if it is advantageous, it is possible that the Pine Knoll Shores portion of the construction contract may be delayed until winter 2019-2020. 

As discussed previously, the beach in most of Emerald Isle remains in reasonably good shape, however, the flat beach berm is narrower than desired in some locations, particularly in eastern Emerald Isle.  As you know, the County conducts annual beach profile surveys on behalf of the Town, and the “Master Plan” has established new nourishment “triggers” intended to provide reasonable protection for the 25-year storm event.  Based on the most recent survey data, nearly the entire length of beach in Emerald Isle exceeds the necessary volume of sand in the profile that is necessary to withstand the 25-year storm event.  However, due to the fact that it’s now been nearly 6 years since the last beach nourishment project, the concerns about the flat beach berm width in eastern Emerald Isle, the desire to be as proactive as possible and avoid a future “crisis” condition, the desire to provide as much storm protection as possible, and the allocation of significant State funding, it is prudent to proceed with the proposed eastern Emerald Isle beach nourishment project at this time. 

Resolution Amending Requested Funding from the Carteret County Beach Commission

The attached resolution formally conveys the Town’s request to increase the amount provided by the Carteret County Beach Commission from the previously allocated $3.45 million to $5.488 million, an increase of $2.038 million.  Based on recent discussions, there appear to be sufficient funds in the Carteret County Beach Commission’s reserve to accommodate this request and also provide additional funding to Pine Knoll Shores and Indian Beach.

The $5.488 million included in the amended request represents 75% of the non-State cost of the project. 

I recommend approval of the attached resolution.

Capital Project Ordinance Amendment

As noted above, the estimated cost for the eastern Emerald Isle beach nourishment project would not change, and the attached capital project ordinance amendment includes a total project budget of $9.2 million.  The attached capital project ordinance amendment simply adjusts the amounts provided by the State, County, and Town as described above.

Importantly, the adoption of the attached capital project ordinance amendment formally conveys the Town’s agreement to divide the $5 million of State funding proportionally among the Town of Emerald Isle, Town of Pine Knoll Shores, Town of Indian Beach, and Carteret County (Salter Path).  I expect that the other towns and the County will also formally convey their agreement with this approach in the coming weeks.     

I recommend approval of the attached capital project ordinance.

Budget Amendment – Future Beach Nourishment Fund

The attached budget amendment is procedural in nature, and simply transfers the additional $679,000 of reserve funds in the Future Beach Nourishment Fund (an annual fund) to the multi-year capital project ordinance for the eastern Emerald Isle beach nourishment project.

I recommend approval of the attached budget amendment.

I look forward to discussing the revised financing plan for the eastern Emerald Isle beach nourishment project with the Board at the July 10 meeting.