Posted on December 13, 2021
SURF CITY — The Town of Surf City has waited forever — literally — to renourish its beaches. Now, it will have to wait a little longer after North Topsail Beach pulled out of a joint federal project that would provide partial funds.
The neighboring towns were tied together, based on proximity and project scope, for the U.S. Army Corps of Engineers (USACE) Coastal Storm Risk Management Project (CSRM), a 50-year beach nourishment project.
The 2014 federally authorized deal would replenish 10 miles of beach from Surf City to North Topsail with roughly 15 million cubic yards of sand in an effort to protect oceanfront infrastructure. The project was appropriated $237 million in 2019 from the Disaster Relief Act, which provides supplemental funds to help with expenses caused by natural disasters, such as hurricanes.
North Topsail withdrew from the joint renourishment project in July 2021, when it was supposed to formally sign the partnership agreement with Surf City and USACE. This came after the towns’ leadership reported three years ago that if the project procured federal dollars — which would cover 65% of the costs — both municipalities would be on board.
Of the remaining 35%, the state pays half, and then the two towns split the difference. Surf City, comprising 6 miles of beach, would be responsible for 60%, and North Topsail, with 4 miles of beaches, would have to finance 40%.
“North Topsail changed administration and went through an election and had some questions and decided to not be part of the process,” Bob Keistler, USACE project manager, said.
In a letter to USACE, North Topsail Mayor Joanne McDermon expressed the town’s concerns over the viability and price tag.
“The cost of the Project and costs to the town has risen substantially over the past twenty years, more than doubling,” she wrote.
This project hit its first milestone in 2010 when a feasibility study was conducted for the North Topsail and Surf City beaches, identifying federal interest. Back then, USACE estimated construction costs at $123.1 million and $227.8 million for the continued renourishment over 50 years. It increased to $144.3 million and $245.4 million respectively by 2015. In 2020, it rose again to $237 million, with the 50-year plan costing an additional $672.1 million.
McDermon wrote in the letter the original estimate that Topsail would pay increased by 56% by 2021. She suggested the town would be unable to fund the project with costs continuing to increase.
“Meeting regularly, we knew they had concerns from the financial standpoint,” Surf City Town Manager Kyle Breuer said. “We needed their reaction so that we could move forward with the project, essentially.”
Surf City Mayor Doug Medlin said he was apprehensive when he found out the two towns would be lumped in one. “I guess because [Topsail] didn’t have an awful great track record as far as financing,” Medlin said.
North Topsail Alderman Rick Grant said the project “would have bankrupted the town.” The 10.2-mile town has an average annual revenue of $10 million and has invested an estimated $61 million toward beach renourishment efforts since 2013, which includes future 2022-23 costs.
In 2015, North Topsail obtained a USDA loan to purchase 600,000 cubic yards of sand on the same 4 miles of beach the federal project would cover.
“We still owe $16 million for the sand we just put there,” McDermon told Port City Daily. “So, that’s one of the reasons we’re not able to engage in another project. We won’t get approval from LCG (Local Government Commission) until that loan is paid off.”
The loan helped the town create what is known as a FEMA-engineered beach, providing needed sand to the south side of town, known as Phase 5.
“An engineered beach gets much better treatment from FEMA after a storm,” Grant said. “It means it is eligible for a lot more federal funding in the event of a hurricane than the other areas of the beach. That has saved us millions and millions of dollars and added millions and millions of dollars.”
Based on initial numbers for the joint federal project, the Town of North Topsail — which Grant said until this year never had a capital projects fund — would have been obligated for $16 million of its share. But when town officials met with the USACE in June, numbers had escalated to an “impossible” level.
“Our number went from — this will blow you away — borrowing $16 million to putting up $19 million up front, before they even put it out for bid and having to borrow another $26 million on top of that,” Grant said. “We went from $16 million to a $45-million obligation.”
The reason for the increase is because USACE’s federal project funds do not cover areas of the beach without properties.
“It doesn’t mean you don’t have to [renourish] it, it means they’re not paying for it,” Grant explained.
The town is responsible for these areas, which Grant said consists of around 14% of the project. To borrow funds, the town must go through the Local Government Commission and prove they can come up with the revenue.
“The only tax a town can control is property taxes; 10 cents, which is a 25% increase, of property taxes only raises about $900,000. We have to raise $19 million and pay it off in six years. We would have had to quadruple the town’s property taxes, in addition to borrowing the $26 million,” Grant said. “Oh and tell people, ‘By the way, we’re just going to put it away in case this project happens.’ And the problem is, everyone in the town is paying for the USDA loan, which is associated with the beaches in Phase 5. Why in the world would we pay all this money to put sand in the same spot?”
According to the alderman, one of the USACE’s stipulations with the project would be for the town to create 500 more parking spaces.
“So the people down there, we would have had to take their yards, which are, frankly, right of ways, to get that approved; or that’s another penalty,” Grant said.
What’s next for Surf City
The only time Surf City has taken steps to renourish its beaches came after hurricane damage, with partially reimbursable FEMA funds.
Breuer confirmed the town put $14 million into beach repair efforts in spring 2020, following damage from Hurricane Florence. Mayor Medlin, who’s been active in Surf City government for 30 years, said prior to that the 5.3-mile town spent roughly $6 million in 1996, following damage from Hurricane Fran. To supplement these efforts, Surf City has done some short-term fixes, such as sand pushes.
To save up for the federal renourishment project, Surf City created a long-term plan for its share by allocating 10 cents of its 41-cent ad valorem tax. It also provides $600,000 per year from accommodation taxes and revenues from its newly implemented paid parking plan.
Though Surf City doesn’t know the final costs of the project, the city
“planned for the worst possible case, which is $237 million,” according to Breuer. “We set up our long-term funding mechanisms to account for that.”
This leaves Surf City, with the help of the USACE, to figure out how to still receive necessary dune and berm construction along its 6 miles of beach. For this to happen, USACE needs to revamp its plan to justify a stand-alone project for Surf City.
The 50-year beach renourishment project would help protect all 6 miles of Surf City’s coastline every six years for half a century. It would rebuild sand dunes and beach berms that have eroded and washed away, and provide some protection to the area from future storms.
USACE-Wilmington District Col. Ben Bennett provided an update at the Town of Surf City’s Tuesday council meeting to explain the current snafu. He and his team are working internally to find a way to move forward with Surf City on its own.
“You can’t build half a project,” Bennett said. “It was appropriated for an entire thing and we at the Corps of Engineers and especially at the district level don’t have the authority to just build part of it because it was funded as an entirety.”
The results from the 2010 feasibility study estimated initial construction costs at roughly $130 million, with renourishment marked over $215 million. The cost share breaks down to 65% coming from federal funds and 35% from the non-federal sponsors – in this case, Surf City and North Topsail. Of that 35%, 17.5% comes from state funding and the other half is the responsibility of the local governments.
Bennett explained the way to do that is “within what we call our chief’s discretion.” USACE Lt. Gen. Scott Spellman has the authority to allow appropriated projects to proceed if conditions change, through a validation process within a roughly 20% (plus or minus) threshold.
In other words, if USACE’s research reveals that the Surf City portion constitutes 80% of the original project, it may be able to move forward without having to send the process back through Congress.
If that route doesn’t come to fruition, Bennett said USACE would need to pen an authorization report to recommend a change to a standalone project. He stressed it doesn’t mean the project is dead, but “it becomes more bureaucratic.”
In the meantime, the USACE is re-evaluating the economics of the renourishment to avoid redoing its three-year, $3-million feasibility study to identify federal interest. The Wilmington District, with guidance from the South Atlantic District, will look at:
- How much infrastructure is in the 6 miles within Surf City
- What the value of that infrastructure is
- Latest costs for construction, including gas prices
- Changes to the beach profile since 2019 and surveys of the dune and berm structure
The length of that process is still unknown, though Bennett said the pressure is on his team to work diligently.
“We’re very cognizant of hurricane season and aware of Surf City’s desire to aggressively proceed with this project and we’re moving out as quickly as we can … But we have to be accurate and make sure our analysis is correct and we can stand behind the data,” Bennett said.
Concerned citizens at the Tuesday meeting feared this would set the town back even further in its progress and were hoping for construction to begin before the next hurricane season.
“We will redo parts of the economics, but the feasibility justifies the project,” Bennett said. “We’re just looking to take that work and break out the Surf City information that’s already been done and see where that stands by the metrics we evaluate. I do not expect to have to redo the feasibility study.”
Though it’s still unclear what the best solution is, Bennett’s confident the project will eventually result in fresh sand on the beach.
“Based on the scope, we feel much of the benefits are in Surf City,” Keistler said. “And we feel the project will stand alone, whether it’s with the easy button or we have to go a little farther with more detail.”
