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The Nags Head Board of Commissioners received a detailed update last week from planning director Kelly Wyatt on the town’s progress in establishing a new on-site wastewater loan program, which aims to assist homeowners in repairing or replacing aging septic systems—particularly in areas vulnerable to environmental risk.

Earlier this year, Nags Head was awarded $500,000 through the North Carolina Department of Environmental Quality’s Division of Water Infrastructure (DWI). The funding will support a 0% interest loan initiative intended to improve wastewater management and protect local water quality. At its April 30 meeting, the town’s Septic Health Advisory Committee (SHAC) began discussions to shape the structure and priorities of the loan program.

Wyatt explained that the proposed program would prioritize properties adjacent to water bodies such as canals, stormwater ditches, marshlands and particularly the front canals along Memorial Street and southern portions of the town. Using GIS mapping, staff has begun analyzing septic maintenance records from the past five years to identify which properties may be most at risk. Properties already serviced recently, or those with alternative (non-conventional) systems, are being excluded from the high-risk designation.

Properties still falling under the high-risk criteria will be actively targeted for outreach once the data review is complete. Wyatt emphasized that even those not meeting the high-risk threshold will still be eligible to apply for assistance—though the 0% interest loans will be reserved for the most vulnerable properties. All applicants, regardless of risk classification, will have access to support through the town’s existing low-interest septic loan program.

SHAC also recommended prioritizing vulnerable populations, including elderly, disabled and low-income residents, regardless of their geographic risk status. The current low-interest loan program, which will remain in effect, is capped at $12,000 per household. For those deemed high-risk, the new 0% interest loans may offer up to $20,000, particularly in cases requiring more extensive work, such as the installation of low-pressure pipe (LPP) or mound systems.

To comply with DWI requirements, all participating contractors must adhere to prevailing wage standards and the federal American Iron and Steel provision. Town staff are developing a streamlined pre-qualification process to ensure contractors meet these federal criteria efficiently.

Applicants will need to submit permits from the Dare County Health Department, contractor estimates, proof of tax compliance, and bank draft information. Loan agreements will include a standard five-year repayment schedule.

Wyatt noted that while a draft scope is under development, additional work remains. The committee plans to reconvene in late May to finalize the high-risk property criteria and complete necessary data mapping. Once complete, the draft program will be submitted to DWI for approval, with implementation anticipated by early summer.

Following the presentation from Wyatt, the board motioned to allow staff to participate in the state-centric Hazard Mitigation Grant Program (HMGP), a FEMA-funded initiative that assists communities in reducing long-term risks to people and property following a presidentially declared disaster.

Deputy planning director Joseph Costello presented an overview of the HMGP, which currently has funding available under disaster declaration DR-4827, related to Tropical Storm Helene. Although the storm primarily affected western North Carolina, grant funding is available statewide for eligible mitigation projects.

Costello explained that the HMGP supports a range of efforts, including the elevation of homes above the base flood level, acquisition and demolition of flood-prone properties, installation of generators at critical facilities, and infrastructure improvements to reduce hazard risk. Notably, the program covers 100% of project costs, 75% through FEMA and 25% through state funds, meaning neither private property owners nor the town incur any direct expenses.

One significant feature of the program is its broad eligibility: income level is not a factor, and both primary and secondary residences, as well as commercial properties, may qualify. In recent weeks, Nags Head has received inquiries from oceanfront property owners interested in using the program for potential buyouts.

Mayor Ben Cahoon commented that if such a program had been available in years past, it may have helped the town address hazardous conditions in vulnerable oceanfront homes. He noted that applying for the acquisition component of the program could benefit properties east of the static vegetation line or in similarly high-risk areas.

Following the discussion, the board unanimously approved a motion authorizing staff to formally opt into the state-centric version of the HMGP for property acquisition. Nags Head is already participating in the program for home elevations, but this move will expand the town’s eligibility to include buyouts and demolitions of flood-prone properties, which must then remain as undeveloped open space.

Town manager Andy Garman then formally presented the recommended budget for fiscal year 2025–2026, along with the proposed Capital Improvement Program (CIP) for fiscal years 2025–2030 and updates to the town’s consolidated fee schedule.

The proposed general fund budget of approximately $31 million marks a $9 million decrease from the previous fiscal year. This reduction is attributed to the conclusion of several grant-funded initiatives and lower inter-fund transfers. Garman highlighted four primary drivers shaping the budget: the countywide property revaluation, evolving shared revenue trends, a significant health insurance cost increase, and persistent inflation in capital expenditures.

Dare County’s recent revaluation substantially increased property values. To remain revenue-neutral, town staff calculated a rate of 20.84 cents per $100 of assessed value. The proposed rate of 22 cents—modestly higher—would generate approximately $566,000 in additional funding to maintain essential services and address future infrastructure needs.

Adjustments were also recommended for Municipal Service Districts (MSDs) supporting beach nourishment, including the elimination of taxes in MSD 5, where nourishment is no longer anticipated. Staff continues to evaluate revenue neutrality and equity in funding across districts.

Garman noted the town is adopting a more cautious fiscal approach after recent unpredictability in shared revenue, such as sales and occupancy taxes. While 2021–2022 saw significant surpluses, FY 2024 revenue fell below budgeted expectations. Moving forward, Nags Head is projecting shared revenues 3% below anticipated collections to avoid overestimation.

A notable development this year was the unexpected dissolution of the North Carolina Municipal Health Benefits Trust, which has long provided health coverage for Nags Head employees. The town will now join a new self-funded pool with other local governments, resulting in a projected $440,000 increase in health insurance costs. Despite this, Nags Head remains committed to covering 100% of employee premiums and 80% for dependents, while also offering cost-of-living adjustments, 401(k) matches, and a performance-based pay structure.

The town’s CIP reflects the growing cost of maintaining and upgrading infrastructure. A sanitation truck that cost $265,000 in 2020 now costs more than $400,000. Similar cost escalations have impacted bathhouses and other public facilities. Major investments for FY 2025–2026 include beach nourishment planning, stormwater improvements, multi-use paths, IT infrastructure upgrades, and new fleet and heavy equipment purchases.

Garman emphasized that while basic municipal services remain a priority, Nags Head is now addressing more complex and long-term needs. One emerging need is housing for seasonal ocean rescue staff. Garman cited nearly $3 million allocated for housing initiatives that hadn’t been necessary in the past, noting that future budgets may need to account for more workforce housing across departments. The town is also seeking legislative authority to expand its capacity to provide employee housing—not just in Nags Head, but across Dare County.

Garman pointed to ongoing expenses related to beach nourishment and stormwater infrastructure: two areas requiring consistent reinvestment due to changing environmental conditions and past development. He acknowledged that grant funding has been instrumental in enabling Nags Head to pursue new initiatives without overly burdening taxpayers. The board expressed appreciation for staff’s efforts in preparing a comprehensive and forward-looking budget.

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