Disturbing Rumors

When I was appointed to the County’s Economic Development Advisory Board in 2009 we worked as a Board to develop a business-like investment strategy methodology the County could use to assess investment options. The Commissioners at the time were briefed and approved the approach for use by County Management. This was successfully applied several times over the next couple of years to inform Commissioners on pay back of investments to attract new businesses, or to help existing business to expand. It was even used to assess a proposed purchase of a privately owned waste water treatment facility.

However, the business-like investment approach was not applied to the then on-going investments of more than $3 million to build the Maple Commerce Park or several other investments championed by the County manager. The inconvenient truth of “running the numbers” ran afoul of what management was trying to accomplish, too many questions were asked. This happened often enough that the EDAB was suspended for a time in 2013 or so - allegedly to save money by merging the group with the Airport Advisory Board.

In several publications the County Manager has touted the importance of a strategy to build a mainland tourism business to offset any losses that might occur as Currituck’s beach appeal wanes, or as a result of a disruptive storm disaster. The idea of building stronger commercial presence in the County that does not directly depend on the tourism industry is a good one. The idea to sacrifice investments in beach tourism to do so only helps kill the Golden Egg.

An even more troublesome rumor is that in County management has been siphoning Occupancy Tax dollars, not to grow the tourism business, but to keep the general property tax rate low. Low property tax rates are seen correctly as a symbol of good management, especially in a County with a reasonable quality of service. However, good management does this by making the cost-to-serve more efficient; not by shifting millions in general costs to Occupancy Tax and Special Tax Districts. Special tax districts are good when used efficiently to address unique local needs that are requested by and over-seen by the locals. They are a bad idea when used to hide cost growth elsewhere, or to build a management empire, as seems to be happening with our Fire and EMS services.

A Business Like Investment Strategy

As you may know I spent more than twenty years of my business career advising governments and commercial businesses on investment strategies to enhance competitiveness and profitability while a partner of Booz-Allen-Hamilton.  This was followed by six years as a Professor in UNC’s Business School, training MBA students in corporate strategy development and guiding the students to apply their new skills to help North Carolina small businesses through the UNC STAR Program I created.

 For six of the past seven years I have served the County as a member of either the Economic Development Advisory Board and the Steering Group for the new Land Use Plan. Although the workload for this service is significantly less than what you have as an elected Commissioner, it has given me an opportunity to understand some of the economic and management issues facing the County.   In early November I shared with each of you my analysis of the County’s wealth of information in your Tax department database and other public sources that I used to track growth, development investments and issues across all five Land Use areas.

I began looking at the County economy in 2013 when our EDAB was shocked by the 50% tax rate hike driven by a collapse in Outer Banks property values. I have continued my analyses while on the LUP.  Although Occupancy Tax revenue shows growth this is due to inflation and the increase in the number of bedrooms.  Rents per bedroom have been slightly declining while costs continue to grow. The issues I address are real and critical to the County’s future economic health.  The purpose of this note is to urge you to include in your discussion agenda for your Winter Retreat several topics that I can improve County’s future economic health and help keep mainland taxes low. 

Three topics address issues of immediate concern: 

·     Adopting a Business-Like Occupancy Tax Investment Strategy, 

·     Beach Nourishment

·     Regulation of Housing Density on the Outer Banks.  

Two others could have longer-term positive impact on the County:  

·     Improved Access to State and Federal Lands

·     Improved Access to the Off-Road Area.  

In the following I will briefly outline the rationale for your discussion of each of these topics.  I’ve included some factual data from your tax records and other objective sources to support my arguments.  If there are questions about my data sources or analysis results I would appreciate the opportunity to discuss any concerns and show the factual basis for my assertions.

1. A BUSINESS-LIKE INVESTMENT STRATEGYFOR OCCUPANCY TAX

In 2005, despite protestations from the Chamber of Commerce of a weak rental market, the County approved a 50% increase in the Occupancy Tax Rate.  This increase has generated $40 million of additional County tax revenues since that time.  Rather than invest this increase in preserving and protecting the beach assets that generated this income, a major portion was spent to save property tax expenses for public safety services and to fund questionable “tourist attractions” on the mainland.  This is not an argument to restrict investment only to the beach areas, but to apply business-like criteria to the selection of the best alternatives.   I ask you to begin discussions of what such a strategy might be and how to apply it to the use of discretionary County revenues including OT.  

Below is an outline of a systematic process to develop a long-range County investment strategy, drawn from my decades of experience addressing these issues for commercial and government clients.  This is adapted from a methodology that I developed for Currituck County ED investments while a member of the EDAB.

·     Identify Five Year Projections of Potential Investment Resources

·     Publish Investment Objectives and Legal Restrictions for Each Resource

·     Solicit Ideas for Investments and Assess Cost, Risk & Returns

·     Prioritize Legal Investment Options for Each Source of Resources

·     Report Annually on Cost and Returns versus Projections

Had such a strategy been in place for previous Boards it would have raised business and perhaps legal questions about some past uses of Occupancy Tax funds as listed in the reports of the County’s auditor:

o  How does a Fire Hydrant in Grandy help attract tourism?

o  How do our “tourist attraction” baseball fields compete for tourism dollars with the pro & college baseball teams and facilities in Norfolk and KDH?

o  How many tourists use each of the County’s recreational and historic “tourist attractions” such as the YMCA, ball fields, climbing walls, Rural Center, Jail, Colored School, Maple Commerce Park, Whalehead and other attractions funded by OT?

o  What percentage of all users of each site are tourists?

o  What percentage of OT construction and operating costs are recovered by stimulated tourism related revenues for each of the County’s recreational and historic tourist attractions?

o  Why was only $40 k of the $40 M spent on beach nourishment when beach nourishment was a major element of the law allowing the 2005 tax rate increase?