State faces internal squabbling, competing bid in Bald Head Island ferry sale

State Auditor Beth Wood has blasted a pair of appraisals that are key to a state effort to buy the ferry run by the Bald Head Island Transportation System. The appraisals, which influence the sale price, relied on estimates from the seller and don’t provide enough evidence to support the estimated value, Wood says, and she’s concerned that the Local Government Commission will blindly approve the sale of $56 million in bonds to finance the deal.

At the same time, the state authority that was created to buy the ferry system, which runs from Southport to the Brunswick County island, is facing competition from a new bidder: the Village of Bald Head Island. So far, the family that owns the boats – heirs of a Texas billionaire – wants no part of the second deal.

Meanwhile, at least one state official is suggesting that Gov. Roy Cooper tinkered with the makeup of the Local Government Commission in an effort to sway the sale – a claim Cooper denies.

“This is a mess,” said Susan Rabon, chairwoman of the Bald Head Island Transportation Authority. “We’ve been on hold since January of last year.”

The authority hoped the Local Government Commission would resolve the matter next week, approving its bond sale at a Tuesday meeting. But on Thursday, State Treasurer Dale Folwell, who chairs the commission, said that a vote won’t be on the agenda, putting the matter on hold in favor of a side-by-side comparison of the two bids.

"The LGC has a responsibility to 'measure twice and cut once,' and it is not intended to function as a 'rubber stamp,'" Folwell said in a statement announcing his decision.

The Bald Head Island Transportation Authority, pushing to seal the deal, sent the commission a letter this week, warning that ferry system owners, frustrated by the back and forth, may sell to the private company instead. They fear such a transaction would lead to bigger increases in fares for Bald Head Island residents, tourists and workers who commute to the island from the ferry’s Southport dock.

Wood, a member of the LGC, has been adamantly against moving forward without more due diligence, saying to do so would violate state law. She sent Folwell a letter last month demanding a delay and insisting the issue be taken off the agenda for Tuesday’s meeting.

“Until the applications to sell bonds to purchase the assets of Bald Head Island Transportation System is supported by a valuation/appraisal that accurately and reliably sets the value of the assets, no application should be allowed on the commission agenda at any time,” she wrote in the letter.

Wood said “extreme pressure” was placed on Folwell to put the applications on the next agenda. She also said the topic should be delayed because three new commissioners on the LGC will not have had enough time to educate themselves on the issue before making an informed vote.

Cooper’s decision to appoint the new commissioners, replacing members who were already five months past the end of their terms, wasn’t related to the Bald Head Island ferry project, but it does reflect the “constant drama” coming from the LGC, a Cooper spokesman said.

“As chair, my goals have never changed: governance, transparency and, to the auditor’s letter, a correct valuation that brings reasonable price certainty to the average blue-collar worker is paramount,” Folwell, said in his statement Thursday.

For most of the last century Bald Head Island, which juts out from the North Carolina coast south of Wilmington, was privately owned.

In 1983, George Mitchell, a Texas developer who pioneered natural gas fracking, took control, keeping parts of the island natural and developing others. Mitchell died in 2013, and since then, his heirs have largely divested from the island.

But they still own the ferries that are the only way to reach Bald Head Island and the land the vessels need to operate through a company called Bald Head Island Ltd. The General Assembly created the Bald Head Island Transportation Authority in 2017 with a single purpose: Buy and operate that ferry system.

The system, including Deep Point Marina on the mainland, was valued just under $51 million in an appraisal completed in 2019. The authority negotiated a sales price of $47.75 million.

When the appraisal was questioned, a second one was done and came in at about $48 million, lower than the first appraisal but still above the proposed purchase price.

Wood questions both appraisals on several fronts, but the biggest issue in terms of money is the land cost. The larger parcel of land that Deep Point Marina sits on is valued by the Brunswick County tax office at about $16 million. One of the appraisal reports tied to the deal values Deep Point at about $36 million, and the other values it at $33 million. It’s the most expensive asset in the deal.

Tax values often run below appraised values, but Wood – a certified public accountant and the state’s elected auditor for more than a decade – told WRAL News last month there’s “no way” the tax and appraisal values are that far apart.

Brunswick County Tax Administrator Jeff Niebauer declined to comment. So did Greg Becker of Newmark Valuation & Advisory, who authored the second appraisal. Earl Worsley, who authored the first appraisal, did not respond to requests for comment.

If the valuation is off, then the project’s cost ceiling is off, and Wood says the Local Government Commission shouldn’t make a decision until that gets worked out.

“I don’t care who gets the assets,” she told WRAL. “But they should not be borrowing more money than they’re worth.”

The Bald Head Island Transportation Authority has 11 members, three from the Village of Bald Head Island.

As the ferry deal moved along, the village contingent became more and more concerned.

“We never understood why it was considered a regional ferry authority,” Bald Head Island Village Councilman Scott Gardner said in an interview. “Because there’s only one destination.”

Local leaders decided the village should buy and run the ferries and argue they can do it cheaper, in part because bonds issued to finance the deal under their plan would be backed by tax dollars, bringing a lower interest rate.

The authority wants to issue $56 million in revenue bonds, backed by future income from the ferries. Either deal requires Local Government Commission approval – a state check on local borrowing authority meant to keep local and regional government entities from taking on too much debt.

The interest rates for the competing deals, which would determine the ultimate cost as the bonds are paid off in the coming decades, wouldn’t be set until after the LGC makes its decision.

But the authority has a deal in place to actually buy the system; the village does not. A spokesperson for Bald Head Island Ltd. declined comment and referred any questions about the sale to Rabon, the authority’s chair.

As the issue has simmered, the normal terms expired for three appointees to the Local Government Commission. They expired June 30, but Cooper let them stay on until last month, days after the village approved its bonding plan.

Folwell said in his statement Thursday that Cooper replaced the appointees less than 48 hours after voters approved bonds to purchase the system. He acknowledged that it was Cooper’s right, but he said the decision “caused the loss of years of combined institutional knowledge on this transaction.”

Folwell said in an earlier interview that he doesn’t know why the governor made changes when he did. But he is suspicious, saying he believes the governor prefers the authority deal.

“I think that this move … after the voters overwhelmingly approved this transaction, is the evidence that we need,” Folwell said. “That’s where my hardened instincts are.”

Cooper’s office said the decision wasn’t related to Bald Head Island, but the governor “is concerned about the constant drama” at the LGC and the process for putting things on, or leaving them off, the commission’s agenda, which affects the speed of projects.

Cooper’s decision removed former Concord Mayor Scott Padgett, Currituck Chamber of Commerce President Josh Bass and Edgecombe County Commissioner Viola Harris from the LGC. Bass and Harris told WRAL they didn’t know why they were removed.

“Suddenly, we all got a call on the same day letting us know we were being replaced and that was the end of it,” Harris said.

Padgett said he didn’t think the move had anything to do with the ferry deal but was “just the normal course of giving somebody else a chance to serve.”

“It’s certainly not over Bald Head,” Padgett said. “I see no ulterior motives at all.”

Nearly three weeks after telling the appointees their time was done, Cooper announced their replacements: former Wake County Commissioner John Burns, Novant Health executive Vida Harvey and Greensboro City Councilwoman Nancy Hoffman.

Burns said the governor’s office didn’t bring up Bald Head Island in the appointment process, other than noting the appointments had been delayed in hopes the issue would be settled by now.

“Nobody asked me my position on any of it, and nobody tried to sway me,” Burns said.

Rabon served in Democratic Gov. Mike Easley’s administration, as well as on the North Carolina Utilities Commission, before Cooper appointed her to the Bald Head Island Transportation Authority. Sen. Bill Rabon, R-Brunswick, is her husband’s cousin.

Susan Rabon said she didn’t have any discussions with the Governor’s Office on the new LGC appointments and that she doesn’t believe there’s a connection to the ferry deal.

Wood, who like Cooper is a Democrat, said she couldn’t speculate why the governor changed appointees. But she and Folwell, a Republican, said it will take the new members time to get up to speed on the Bald Head Island deal, which is one of the more complicated and contentious issues to come before the commission.

“It’s disappointing … that the governor decided to replace half the institutional knowledge that has spent two years analyzing this,” Folwell said.