Finding creative ways to get out of complex situations is an art for wealthy folks. Today’s example is Bald Head Island, where there’s a dispute over whether the state should back nearly $50 million of bonds to buy a privately owned ferry system that transports people to and from the beautiful island.
The seller is the estate of the late Texas billionaire George Mitchell, who bought the island out of receivership in 1983. It is famous for its trees, sea turtles and lighthouse. Mitchell’s day job involved real estate development, including The Woodlands community near Houston and commercializing natural gas fracking after decades of false starts. He gained legendary status in the oil industry.
In North Carolina, the Mitchells brought electricity to the 10,000-acre Bald Head Island, but mostly kept it pristine with no cars allowed. The development charges $23 for a 20-minute round trip ferry from Southport to the island, a price that hasn’t changed since 2011, when it was bumped from $15. Folks who buy and trade the island’s big houses — some of which have traded for more than $10 million — factor in the cost when thinking about their property investment.
Mitchell died in 2013 at 94. His estate is selling off his assets, and they want to dispose of the ferry, which has a municipal function in providing public access to the village. About 350,000 passengers made the trip in 2019, a lot of whom were contractors and service workers.
State lawmakers created a 11-member independent authority in 2017 with Gov. Roy Cooper naming veteran state government executive Susan Rabon as chairman. Its main purpose was to transition the ferry from the Mitchell’s ownership to a public system, though no one was clear on how that would happen.
The authority has had more than 40 meetings, leading up to the bond issue plan, says Rabon, a former N.C. Utilities Commission member and top aide to former Gov. Mike Easley. It calls for the authority to collect the ferry revenues, which will be used to make bond payments.
It’s a unique concept in N.C. municipal finance, Wilmington real-estate investor Chad Paul, the CEO for the Mitchell’s Bald Head Island Limited, told the Port City Daily. Investment firms UBS and Davenport & Co. are involved, along with the McGuireWoods and Parker Poe Adams & Bernstein law firms, and assorted other service companies, providing plenty of momentum for a deal.
All seemed on track until earlier this month when State Treasurer Dale Folwell took a look. Folwell made his first visit to the island, discovered some property owners weren’t happy and is raising questions on the state’s role. Folwell fears the new system will lead to much higher ferry costs, burdening blue-collar workers who rely on jobs servicing wealthy property owners. “It’s not about the people who own the boats, it’s about the people who wash them,” he says. Plans call for the ferry charge to increase to $27 next year, Rabon says.
So Folwell issued a press release that may sound more like liberal icon Alexandria Ocasio-Cortez than a Forsyth County conservative: He suggests that the Mitchell estate “gift the ferry system to the people of Southport, the village of Bald Head Island and/or the authority. … It would be a win-win for everyone concerned” because of tax benefits to the family’s estate.
The Mitchells aren’t positioned to do that, Chad Paul told a Southport newspaper. Estates have fiduciary responsibilities so it’s unclear if such a plan could be arranged, adds Rabon. George and Cynthia Mitchell had 10 children and lots of folks are involved.
“We’ll keep moving forward,” Rabon says, hoping that the state’s Local Government Commission will approve the bond plan in February.
Of course, the commission is chaired by Folwell. He says he’ll keep asking questions.