With the proposed sale of the private Bald Head Island Ferry system to a public body still stuck on a political sandbar, the road to a final deal has taken yet another twist. According to Village of Bald Head Island Mayor Peter C. Quinn, the ferry’s owners are now exploring a sale to a private entity. Such a transaction has the potential to bypass government oversight of the sale, which, at least for now, has left the purchase proposals at a standstill.
Meanwhile, N.C. Treasurer Dale Folwell told WHQR that the ferry is not on the agenda for the next meeting of the Local Government Commission, which Folwell chairs and which must approve the public financing that is proposed in the deal.
Both the state-created Bald Head Island Transportation Authority (BHITA) and the Village of Bald Head Island (VBHI) are vying to buy the ferry system, the only public route from the mainland. The multi-component system is owned by Bald Head Island Ltd. and Bald Head Island Transportation, Inc., private concerns formed by the island’s original developers, the Mitchell family.
Since both would-be buyers are public bodies, the sale of bonds to finance a purchase must be approved by the LGC. Consideration of the purchase proposals has been delayed, with Folwell and State Auditor Beth Wood, an LGC member, maintaining that further due diligence is required.
Potential private interest
In addition to VBHI and BHITA, Quinn said recently that a private buyer also is being considered, a development that has village officials concerned.
In a Jan.13 letter to the ferry system owners, Quinn said village officials had learned that a sale of all or portions of the system to “a private-equity firm or other business or investor” is being considered. (When asked by WHQR if he could identify possible private purchasers, the mayor said he could not offer any new information at this time.)
In the letter, Quinn praised the Mitchell family for its years of good stewardship of Bald Head Island, but went on to express major concerns about ownership by a different private entity.
“We are concerned … that a private purchaser would not have similar ties to the Island and may seek unreasonable profits from the Transportation System’s monopoly or otherwise not operate with due consideration and regard for the needs of the Island’s residents, property owners, businesses and visitors,” Quinn wrote in the letter, which also was sent to several state and local officials.
He continued: “Given our strong interest in the operation of this utility for the benefit of the public, we believe it is important for us to articulate these concerns and, if necessary, to take action to protect the interests of the Village, including its residents, property owners, businesses and visitors.”
Quinn said that possible actions include:
- Petitioning the N.C. Utilities Commission to formally assert its power over certain parts of the ferry system that, the village maintains, fall under the commission’s regulatory authority.
- Exercising a 1999 right of first refusal (ROFR) agreement between the village and the two corporations.
“The village expressly reserves and does not waive its rights under the ROFR,” Quinn wrote.
He went on to say that before the corporations formally accept any offer to purchase the system, or any of its components, the ROFR agreement states that they must notify the village and wait 60 days for it to exercise its right to purchase.
Asked if the ferry owners had responded to his letter, Quinn again said he could not offer any new information at this time. The two owners of the ferry system have not responded to requests for comments.
Financial conerns
As state auditor, Wood has been adamantly opposed to the LGC considering a public-purchase proposal until the necessary due diligence is completed. A major concern for Wood is the total sale price of $47.75 million, which includes Deep Point Marina near Southport, a fleet of four ferries, among other assets.
She is especially skeptical of the appraised value of the Deep Point Marina land. The land, which is valued at about $16 million by Brunswick County, was valued at $36 million in one private appraisal and $33 million in another. Wood also is concerned that the appraisals were provided by the sellers.
“Without a credible and reliable valuation of the assets to support the amount to be borrowed for the purchase of the assets, the application is not complete and should not be on the agenda,” Wood said.
She said that as both state auditor and member of the LGC she has the responsibility to ensure local bodies have met all statutory requirements before any request to sell bonds comes before the commission. Wood went on to say she has been unfairly accused of blocking a deal.
“I have not ‘blocked’ anything,” she said. “I have, however, insisted that the Bald Head Island applications not be treated any differently than any other applicant.”
“I have reminded commission members and the treasurer that neither of the applications to sell bonds to purchase the Bald Head Island Transportation assets have met the criteria required to appear on the agenda,” Wood said. “I do not understand why anyone would expect them to be on the agenda for approval until they have done so.”
The only public route for workers, who outnumber BHI residents
Folwell said the long-term financial viability of the ferry system has a wide-ranging impact on the public.
“We're actually talking about a type of highway, something that somebody has to ride in order to get to work,” Folwell said. “The number of workers who use that ferry system is seven times greater than the number of people who actually live on Bald Head Island.”
He said the purchase of a private ferry system by a public body is unprecedented in North Carolina and the consequences must be fully considered.
“This type of transaction has never happened before,” Folwelll said. “The reason why I've been so focused on it the past two years is an effort to protect not just the residents of Bald Head Island, the Village of Bald Head Island, but also the workers.”
“This transaction deserves to have the correct amount of governance, the correct amount of transparency and the correct value (applied),” Folwell said.
The treasurer said that it's the LGC’s responsibility to ensure that a public purchase would not jeopardize the system. Folwell added that the LCG cannot approve such a purchase until they are satisfied that the ferry will operate properly and safely, that its operations are transparent, and that it has the financial certainty to make the fares predictable.
“At the end of the day, when this ferry system is sold, the money to pay for it is going to come mainly on the backs of workers.”
