DATE: Monday, November 10, 1997             TAG: 9711100020

SECTION: LOCAL                   PAGE: B1   EDITION: NORTH CAROLINA 

SOURCE: ASSOCIATED PRESS 

DATELINE: TOPSAIL ISLAND                    LENGTH:  105 lines

U.S. STORM AID WENT TO HOPELESS CAUSES MILLIONS HAVE BEEN SPENT ON SITES THAT ARE ON PRECARIOUS BARRIER ISLANDS.

Since Hurricane Fran struck North Carolina on Sept. 6, 1996, Uncle Sam has paid for many projects on the state's fragile barrier islands, which are in danger of washing away.

Among them: a resort hotel that is about to fall into the ocean; fishing piers that are regularly dashed by storms; and beachfront houses that have no protection from the surf.

All together, federal agencies have spent or allocated $116 million in disaster aid on the three barrier islands most heavily damaged by Fran, an analysis by The News & Observer of Raleigh has found.

That amounts to about $10,500 for each year-round resident of Topsail Island, Wrightsville Beach and Pleasure Island, which includes Carolina Beach and Kure Beach.

The taxpayer-financed bailout has reimbursed resort towns for just about any piece of public property that blew away in the storm, including parking meters, recycling bins, trash cans, even palm trees. And it has also been generous in replacing private property.

Critics say the federal disaster aid has undermined years of efforts to discourage unwise development and has merely set the stage for a more expensive bailout after the next big storm blows through.

``We're really sitting on a powder keg,'' said Todd Miller, executive director of the N.C. Coastal Federation. ``With all the damage along the oceanfront, we have the potential for an even more catastrophic event next time. Every time this occurs, the price tag gets higher and higher.''

Marc Basnight, a Democratic coastal legislator and president pro tem of the state Senate, added: ``We're not curing how we build on the beach, which is what we should be doing. You need to properly review these practices if you expect taxpayers to pick up the tab.''

North Carolina's coastal policy since the 1970s has boiled down to this: If you want to build on the beach, do it at your own risk. But relatively calm weather meant the policy went untested for years.

That ended last year after Hurricanes Bertha and Fran, when the flood of federal relief aid reduced the state's policy to tatters.

The federal approach is a deliberate one, developed in response to criticism of the government's slow, bureaucratic response when Hurricane Andrew clobbered South Florida in 1992.

Federal agencies now arrive on the scene as soon as a disaster strikes. Money flows quickly, with a minimum of review and red tape.

But the government also has invested millions in extraordinarily risky projects.

Take the Shell Island Resort. When it was threatened by erosion, its homeowners association asked the state for permission to build a wall of giant sand tubes to hold back the sea.

In January, the state Coastal Resources Commission reluctantly said yes, but decreed that the seawall could serve only as a temporary measure and would have to be removed after two years. It was constructed last summer.

Shell Island's battle with the ocean has been financed by federal taxpayers, who provided a $1.5 million loan to build the seawall and renovate the resort.

The loan contradicts statements that Shell Island's representatives made before the seawall was approved. At the meeting, members of the Coastal Resources Commission pointedly asked whether any public money would be used in the project.

Shell Island's attorneys, Kenneth Shanklin and Susan McDaniel, said no.

When told of the loan, Courtney Hackney, a commission member and a marine biologist at UNC-Wilmington, said the seawall proposal almost certainly would have been rejected had the commission known about the federal money.

Hackney said two commissioners told him privately that they voted in favor of Shell Island only after being assured that the seawall would not be financed with taxpayer money. The commission voted 5-4 in approval.

``I guarantee you there will be some very upset people on the CRC when they find out about this,'' said Hackney, who voted no.

Shanklin, a Wilmington lawyer who represents Shell Island, confirmed in a telephone interview that some of the federal money was used to pay for the seawall, but he would not say how much.

The rest of the loan was used to make repairs to the resort itself, Shanklin said. He referred all other questions to his partner, McDaniel, who declined to comment.

The loan was given to the nonprofit Shell Island Homeowners Association by the Small Business Administration, a federal agency that handed out $108 million in disaster-relief loans after Fran. The Shell Island loan was the largest of its kind in North Carolina and the maximum allowed under the law.

Don Waite, an SBA spokesman in Atlanta, said Shell Island sustained $3.7 million in damage from Fran. But the SBA refused to provide details, saying it considered all other loan information confidential.

Waite said the SBA doesn't worry about whether the resort might become marooned in the ocean. If it did, he added, insurance proceeds would probably help pay off the loan.

``Being a controversial project doesn't bother us,'' he said. ``We just look at the financial side. We don't go in and worry about what the state has to say or what anybody else has to say.''

Waite said SBA policy prevented him from disclosing whether Shell Island has enough insurance to fully cover the $1.5 million loan.

But Hackney said he doubted the loan would ever be repaid, given the risks. He said state officials have already raised the possibility that more public money might be needed to dismantle the resort if it slides into the ocean and becomes a public hazard.

``I'd say their chance of paying that money back is slim to none,'' he said. ``This was a dumb one.'' ILLUSTRATION: Color photo

ASSOCIATED PRESS

Sandbags hold back the sea from Shell Island Resort in Wrightsville

Beach in this photo taken Oct. 21. KEYWORDS: DISASTER RELIEF

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