I love it when I receive comments like the one following. It was sent in response to this post, but like many of the comments that arrive here, I think it deserves its own feature!
Obviously the people of Dare County and Nags Head DO NOT WANT Nourishment. If they did, they would have voted for it. Your experience in the lending industry, surely you know math and what makes economic sense... better yet, find someone to finance it... see how fast $30 mil floats into the ocean.
OK Anon. First, some numbers…..
$1.156 BILLION DOLLARS—Total personal income in Dare County---2006 US Census
$853 MILLION—Total earnings generated in Dare County--- 2006 Census
$86 MILLION---Dollar value of annual manufacturing shipments—2002 Census
$51.6 MILLION—Annual Retail Sales 2005-06 Fiscal Year—Dr. James Kleckley—ECU
$288 MILLION—Occupancy Tax Revenues Collected—2005-06 Fiscal Year—Ibid.
28.6%--Percentage of work force engaged in tourism/entertainment/hospitality—Ibid (vs. 9.4% state average)
18.6%-Percentage of work force engaged in retail sales –Ibid. (vs. 11.7% state average)
11.4%-Percentage of work force employed in real estate, primarily for rental/vacation homes—Ibid. (vs. 1.6% state average)
8.6%--Work force employed in construction and related-Ibid. (vs 6% state average)
$13 BILLION—Estimate of tax value of Dare County residential property
$1.8 BILLION—Estimate of tax value of Dare County commercial property
Next, a little risk management theory. Typically, risk mitigation (insurance, a hedge, loss control techniques) is called for if the marginal cost of reducing the risk is equal to, or less than, the marginal cost of taking the risk. Secondly, risk managers typically try to insure or mitigate large, unpredictable catastrophic losses (such as acts of nature) while retaining funds (self-insuring) for predictable, financially manageable losses.
Virginia Beach looks at the property tax and commerce value of their ocean front economy (and remember, they are a far more diverse economy than the Outer Banks) and still arrives at the conclusion beach nourishment is a cost of doing business. They treat sand replacement as an insurance policy.
Critics of nourishment are fond of reciting one mathematical fact---$30 million in, $30 million washed away. A zero-sum equation. Look again at the numbers above. I can show you with numbers what beach nourishment will cost, and I can show you facts relative to the dollar value of the local economy, which I assume to be almost totally reliant on not only our beaches, but the tax base "at risk", as well as the infrastructure. Would you bet $30 million a year to mitigate extreme damage that serves as the basis for a $1.1 billion dollar personal income base? Would you bet $30 million to preserve $853 million of annual, local earnings? How about $30 million to protect $13 BILLION of tax base, much of it east of Hwy 158 and on Hatteras, Highway 12? And what if we got "lucky" and the sand lasted two years, bringing our annual costs down to $15 million, while doubling the amount of personal income, earnings, and tax revenues protected? Go three years and the costs drop to $10 million per annum with a tripling of the wages, revenues and taxes saved. If we go five years, as the plan called for, the expense is a mathematical drop in the bucket.
Now, I've shown you my opinion of the math. Show me yours. Give me more thought than telling me $30 million is going to be flushed out to sea. As an opponent of beach nourishment, tell all of us what amount of tax base we will lose as we incorporate the concept of retreat. Estimate or project not only that number, but the effect on personal income, other non-property taxes, and lost infrastructure. Tell us how much "clean up" of destroyed ocean front structures will cost, and what will the debris do to our beaches? Explain to us, as Eye on Dare mentioned today, how we obtain a "revitalized" natural beach in South Nags Head when the present beach-- filled with the ghost's of homes and roads lost in the past-- is full of old septic tanks, foundations, and pilings in the surf zone.
Take your equation further. Let's say we do nothing and let ALL of the ocean front go, at any place and at any time. How far will you and your fellow travelers go? Do we abandon Highway 12 in certain places? If we let that go, do we abandon those homes and businesses on the west side of Highway 12? Once the beach front begins to fall into the ocean in earnest, how many tourists will cease to visit? Can you confidently tell all of us that not only will the lost revenues and taxes not harm those remaining (by raising our taxes to replace those lost), but that a battered beach in various stages of disrepair will continue to attract visitors? Show us your numbers.
So yes, I can do math. I can even do rudimentary risk management calculations. Now show me your stuff!!!
13 comments:
Russ,
We simply have to stop trying to compare the cost/benefit ratio of beach nourishment for the Outer Banks with such places as Virginia Beach, VA or Florida. Without question, there is no place on the entire east coast like the Outer Banks. And, putting all cost/dollar arguments aside, (1)the Outer Banks beaches are not conducive to successful beach nourishment projects; and (2) the residents of the Outer Banks are not affluent enough to subsidize the cost of continually have to renourish these beaches. These two important factors are consistiently ignored by your side of this issue.
Ray
"...the expense is a mathematical drop in the bucket."
True.
The real question though is who is paying for those drops?
If the locals decide to vote themselves a tax increase to pay their own way great!!
Unfortunately that is not usually how it works out.
Your $30M figure is that the total project cost? If so, is that to be funded locally or is it most likely that the majority of that $30M will need to come from "other sources" (aka State, Federal, Chinese governments)?
P.S. - I'm a different Anonymous - not the one you were quoting at the start of your post
Ray--I don't disagree that there are vast differences in the wealth of our area vs. Va Beach. However, the cost benefit ratio doesn't go away. The original plan, as I recall was about $1 billion for 10 years, so the numbers work, if the plan works as designed. I suspect we're closer to $2 billion if we were to try now. Even at that number, the 10 yr cost/benefit still works. A sales tax, while regressive, would not have hurt locals as much as your side claimed, and the bulk of the revenues would have been collected by the visitors---the majority users of the beach.
Whether the ACE plan would have worked as advertised is another story.
Funding doesn't have to come locally. Regardless of where the funds come from, the cost/benefit math is still there.
Anon 2--The $30 million Anon 1 mentioned I assume is for the defeated Nags Head project (which was actually $32 million I believe). Since Nags Head comprises the majority of the public northern Dare beaches, its beach, followed by KDH are the most important. Kitty Hawk is already a lost cause. I am comfortable using county figures for Nags Head costs given its proportion of beach property. That project was to be self funded, with OF owners paying the bulk of the tax, and west side residents a significantly smaller amount.
Estimates to fix the entire north beach are well north of $1.5 billion currently. The plan rejected by voters a few years back called for a $1 billion investment for 10 years of sand, with a 70-20-10 split between Fed, State and local sources, although the state never signed on and the Feds were iffy about the project all along. On a 10 yr basis, IF the Army Corp plan worked, the cost benefits were still there at $1 billion county wide, even if annual costs to fix hot spots was factored in. At $2 billion, the numbers still make sense over 10 years, but confidence in the durability of the project and it lasting a decade would need to be very, very, high. Sadly, the debate doesn't go in this direction---its more about class warfare on supposedly rich oceanfront property owners vs. the rest of the county, whom opponents believe derive no actual benefit from maintaining the current shoreline in its current location. Practical economics hardly ever enters the debates, much less serious talk about the efficacy and workability of various plans.
Russ, do you recall that the Army Corps study said that, based on the cost/benefit ratio, Kitty Hawk beaches did not qualify for gov.funded nourishment payment? Now, do you think south Nags Head would qualify? I doubt it.
Ray--yes. There was some debate as to whether they calculated the loss of Hwy 12 correctly, but most of the OF homes were deemed not salvageable. SNH, however, has many more homes east of Old Oregon Inlet Rd, so its hard to compare. However, the longer it drags out and the more homes that find their way east of the building zone, the less likelihood exists that SNH will continue to qualify.
But, Russ, how can YOU say that Kitty Hawk is a lost cause? Take a look at the west side of Old Oregon Inlet Road. What's there? Marshland! (low sea level)...Take a look at the west side of Kitty Hawk beach. What's there? Valuable residential and commercial properties! (higher sea level) If I were going to put my monies on renourishing a beach (which I won't)..I'd have to pick KH over S.NH...10 to 1.
Ray:
This where engaging you gets kind of silly and long-winded. First of all "YOU" meaning me did not ever, not once, or even hint that Kitty Hawk was a lost cause. YOU, meaning you--Ray Midgett asked, three comments above, and I quote:
"Russ, do you recall that the Army Corps study said that, based on the cost/benefit ratio, Kitty Hawk beaches did not qualify for gov.funded nourishment payment?"
To which I, (the YOU you referred to when you were referring to me) merely responded, and I quote:
"Ray--yes. There was some debate as to whether they calculated the loss of Hwy 12 correctly, but most of the OF homes were deemed not salvageable"--which was referring to the ARMY CORPS study that YOU (meaning you, Ray Midgett) referred to in YOUr original query. Not my opinion, but only the reasons ACE cited for Kitty Hawks non-inclusion.
As far as I am concerned, ALL (meaning the entirety of Dare's beaches, including Hatteras Island) should be a candidate for beach nourishment, especially any place where Hwy 12 is threatened, particularly Kitty Kawk and north Hatteras.
Russ, I still haven't gotten my first cup of coffee down yet..so my feeble brain is not entirely awake.
So, if I am wrong, I apologize, but I was refering to these comments in your second post in this 'comments thread' above, which says...."Since Nags Head comprises the majority of the public northern Dare beaches, its beach, followed by KDH are the most important. Kitty Hawk is already a lost cause..."
Help me out...did I misread something?
Kitty Hawk is a lost cause because a) the Feds won't fund it, and b) to my knowledge, they haven't supported, participated in, nor joined the other two towns in funding a local plan. Again, since Hwy 12 is so important, I think Kitty Hawk beaches need major renourishment. In terms of what is left of their oceanfront however, the dollar value of KDH and Nags Head proper far exceeds what is left in Kitty Hawk in pure $$. On the other hand, the older, smaller cottages are aesthetically pleasing and affordable to middle class visitors, so I want them preserved.
Take it easy on the vino, Russ. :)
Ray--if I did that, what the hell would be left? A Democrat president, no beach nourishment, no real estate sales.....all that is left is wine and Capt Frank's hot dogs....
One out of four isn't too bad, especially when it's one of them delicious dogs.
Merry Christmas, Russ.
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