Council to borrow from bed-tax revenue to fund Port Royal Plantation beach renourishment

Hilton Head Island officials will borrow against expected tax revenue from overnight lodging to pay for a $12.5 million project to preserve a one-mile stretch of beach at Port Royal Plantation.

Town Council voted unanimously Tuesday to approve a staff recommendation to issue $11 million in revenue bonds to be repaid over 12 years with money collected from the 2 percent accommodations tax, also known as a bed tax. The remaining cost would be covered by existing tax revenue and a $1 million grant.

Council also approved using $1.45 million in tax increment financing to pay for Coligny Beach Park instead of using beach preservation fees, freeing the money to pay for beach renourishment.

Officials on Tuesday also said they are confident the town can pay for future renourishment projects over the next two decades through borrowing.

"We do have the ability to have a sustainable, islandwide beach renourishment project," said Susan Simmons, town finance director.

Town Council members previously expressed concern that funding for future renourishment was washing away as quickly as the island's heel.

In 2006, council borrowed instead of using cash on hand for renourishment, so it could set aside money for an emergency renourishment fund in case of a hurricane.

About two-thirds of bed-tax money earmarked for renourishment is needed to pay off the 2006 debt, which comes due in 2014. The town expects to collect $4 million to $5 million a year in bed-tax money for renourishment over the next 13 years.

Simmons said the town should be able to pay for the Port Royal project and mid-island renourishment in 2015, but that will mean drawing the $13 million post-hurricane renourishment fund down to about $5.3 million by 2023.

To be safe, Simmons recommended -- and council approved -- the town not drop below $4.25 million in the post-hurricane fund. At that level, the town could meet a 25 percent local match required for federal reimbursement to pay for renourishment in the event of a disaster.

The fund is projected to drop to its lowest point -- $4.8 million -- in 2027, Simmons said.

"We can respond to disasters with a good cash balance. This will not affect our bond rating," she said.

Council members said renourishment is crucial to continue to attract residents and visitors, provide a buffer against storms and protect the island's natural resources.