By WILLARD KILLOUGH III
CAROLINA BEACH - The Carolina Beach Town Council voted four to one at their Tuesday April 11th, meeting to expand the number of "beach services" permits from two to three at the request of Tony Silvagni of Tony Silvagni Surf School in Carolina Beach.
The following day Silvagni went to Town Hall to apply for the third permit and found that he wasn't the only one applying for it. Now Town Manager Michael Cramer must decide who will be granted the permit.
During the April 11th, meeting Town Senior Planner Jeremy Hardison explained, "The applicant, Tony Silvagni, applied for a text amendment to increase the number of beach service permits from two to three for the municipal beach strand. A beach service permit allows an existing business that has a primary business in the Central Business District (CBD) to rent items on the beach. Town Council tabled the item at the March Council meeting per the applicant’s request. Along with the applicants request staff proposes to issue an annual permit versus a contract."
Historically two companies have operated under beach services contracts with the Town. Those are Wheel Fun Rentals and Pleasure Island Rentals.
Hardison said records provided by those two companies show they increased their inventory by approximately 30 to 35% over the past five years. Those items include beach chairs and umbrellas. For the year 2016, Hardison said one company listed they sold out of items one day that year.
Assistant Town Manager Ed Parvin said, "There was one day where they were completely sold out and couldn't meet the demand."
Council member Leann Pierce said, "So we contracted with [them] because the Town wanted to provide those services to the guests."
Town Manager Michael Cramer said, "Really what we are trying to clarify is really we don't go into business or contract with a business to provide a service for us. We provide permits to allow businesses to do certain things on the beach. That's why you see in the presentation... that we are changing the word contract to permit. Originally the contract process was a five year process. Where you had it for five years and you have to come back and renew again and each one of our vendors have renewed in the past I believe."
Pierce said, "We have created a permit to provide something we feel like we need. So we've allowed them certain privileges... and do certain things. So we have asked them to invest to be able to fulfill that contract."
Mayor Dan Wilcox said, "A better way to term that would be the Town made available two beach services permits for five years and based on that availability, those companies went out and invested to be able to provide those services."
Duke Hagestrom of Wheel Fun Rentals spoke to the Council during a public hearing. He explained, "Requirement to have a beach services permit is a prerequisite for setting product on the beach strand" and, "I don't believe it's in the best interest of the Town to allow every business that can deliver equipment to also set up that equipment on the beach unless they have been granted a beach services license and can demonstrate that they have the appropriate insurance in place. Beach umbrellas and canopies can be a very dangerous hazard on the beach strand. Vendors that carry the appropriate insurance are motivated by their insurance providers to learn appropriate safety guidelines and techniques. Acts of nature can play a significant role in beach services and it's important that the Town have appropriate measures in place to mitigate liability."
Hagestrom said, "Competition is a healthy aspect of a consumer economy and I am typically in favor of free competition. If you want to open an ice cream shop right next door to my ice cream shop, you have every right to do so. However, when you've been placed in charge of a natural resource such as a beach strand, you have an obligation to balance commercial activity with the quiet enjoyment of the beach that locals and visitors have every right to expect. On one hand, you want a visitor to have access to services that allow them to maximize their enjoyment. On the other hand, you want to protect them from unwanted commercial solicitation. A great beach is one that finds the right balance of amenities with quiet enjoyment."
He explained, "As I mentioned last month, I realize that any opinion I have on this may be construed as an existing business trying to obstruct competition. But there are some very real ramifications that should be considered. It's my opinion that Wheel Fun Rentals an Pleasure Island Rentals are currently able to meet or exceed the demand on the beach and have done so in a courteous and professional manner. Our approach to offering rentals is a passive approach. Neither business aggressively solicits customers and we value the quiet enjoyment of the beach that locals and visitors rightfully deserve."
He explained, "Neither business interferes with each others transactions. Customers have a choice if for some reason they are not satisfied with one of our businesses, neither of us has a monopoly. An additional vendor could introduce a more competitive atmosphere by going after the current demand resulting in market saturation. The result could be a more commercial feel on the beach as vendors compete for business."
Hagestrom explained that he could apply for the right to use a motorized vehicle or ATV, but it's not necessary and, "Therefore able to minimize the impact another motorized vehicle on the beach strand would introduce." He said an additional vendor could apply for the permit to use an ATV vehicle on the beach and, "That would introduce additional traffic on the beach strand."
He said, "It's not up to me how many beach services vendors is an ideal number for Carolina Beach. What I do know is that the current scenario seems to operate effectively and the expansion to additional licenses could introduce the unknown ramifications of additional commercialization, demand saturation and beach traffic."
Pleasure Island Rentals currently operates a John Deere Gator all terrain vehicle to deliver rental items to the beach front.
Tony Silvagni applied for the amendment to expand the number of permits from the two to three.
Silvagni said, "I secured the location at 101-G Cape Fear Blvd in the Central Business District. My hopes were that aligning with insurance, being able to have a business in the Central Business District, and the investment that I made into the chairs and umbrellas. I was told false information in 2013 in February. I've been playing very nice. Tonight I would like to present to you that I would be able to make an investment for more chairs and umbrellas of a 30 to 35% increase that many of my competitors have currently done. The reason why I have not able to do that was because I was told false information from a Town official who works for the bureaucracy."
Silvagni currently operates as an Itinerant Merchant permitted by the Town who can rent and deliver items to the public on the beach but cannot solicit or conduct monetary transactions on the beach.
He explained, "The reason why I have been able to do that is because I was told false information by a Town official" and, "I've been wanting to deliver the chairs and umbrellas out to the beach as long as I took the transaction from my location, therefore I was unable to. I lost a significant amount of money because I had beach patrons who walked up to our location wanting to rent chairs and umbrellas and they were unable to. Because they either had grandchildren or they had their hands full. There is enough demand for three beach service permits. Carolina Beach is growing. There is exponential growth here."
Silvagni explained, "The one goal that I sent over to Jeremy Hardison was that if I had an ATV and I was permitted a third beach services permit, I could limit the hours of the ATV to 6 to 9am in the morning delivering the chairs that were already booked. Therefore, from 9 to 5 I would be able to deliver chairs and umbrellas by a vehicle. Now if 5 o'clock, you feel the beach is still too busy then, I would say that 6 o'clock to 8 o'clock we could pick up the chairs and umbrellas."
He said, "I'm a professional at this. I'm highly capable of delivering a quality service at a good price and reaching the demand that Carolina Beach is receiving. Everyone is looking for shade. Everyone is trying to enjoy their vacation while they come and visit Carolina Beach. I made an investment and however, on June 10th of 2016, that was when I was granted that I was able to go and deliver chairs and umbrellas and use an auger bit to drill the holes to" place the umbrellas in the sand.
He explained, "I would like to let you guys know that this is your take on this but I am a citizen of Carolina Beach. I'm a hard working businessman and I would like to be treated fairly with an even playing field. I really appreciate all of your time tonight and consideration to approve a third beach services permit."
Numerous members of the public addressed Council and expressing support for Tony. Some expressed concerns the Town was violating anti-trust laws.
Mayor Dan Wilcox asked Town Attorney Noel Fox, "Could you clarify that this Council is in violation of the law or that we've got some trade agreement problem here? Those were fairly strong accusations."
Fox explained, "You have broad discretion when it comes to issuing permits for the public trust, but the Sherman Act is not applicable here."
Council member Leann Pierce said, "This is a third vending permit we are talking about. It's not a permit for Tony. I keep hearing give Tony this permit... this doesn't mean you are giving Tony the permit. It means you are allowing a third party. I don't know who it's going to go to. I need to say that."
Fox said, "I think that is a very important thing to keep in mind because there do seem to be many comments in here towards the folks who are operating now and the applicant. This will be an amendment to the Town's ordinance for the number of permits that can be issued. There is no guarantee that the parties that are currently in possession of a contract, which will become a permit, will be granted that in the future."
Councilman Steve Shuttleworth said Town staff proposes to, "Move this from a five year contract or period to an annual permit and that those permits are automatically renewable as long as you're not in violation" and, "Our two current permit holders, unless they are in violation would continue to be able to renew their permit without someone sliding in and beating them to the wire."
Parvin said those existing permit holders will have first right to apply for renewal and, "They could continue to hold that permit. You would have to meet all of the conditions of the permit... there is a limited number of businesses in Town that could meet those conditions. The main one being you have to have a business in the Central Business District which Tony does and so do the other two that are out there today."
Shuttleworth said, "A potential third permit would be to whoever is first come, first serve, if they meet those requirements."
He explained, "The big change in this from someone that currently could rent beach umbrellas and chairs is this would allow a permit holder to store on the beach, potentially have a Gator used on the beach and allow them to do money exchanging on the beach. Which is the key thing right now. Some people that are renting umbrellas and chairs can't collect revenue on the beach."
He said, "Those are the three significant changes between what anybody could go do right now. If Tom wants to start renting beach chairs, he could do that he just can't collect money and can't do the other things." He added that anyone can deliver rental items to the beach without insurance as long as they don't collect money, operate a motorized vehicle, and can't store equipment on the beach.
Shuttleworth said, "We've had another hotel built. We've had a huge explosion in ten years in terms of population. It's tough for me because I'm good friends with Duke and Tracee and I've had conversations with them."
He explained, "The competition part and the increase in people looking for services... I'm having hard time saying no."
Councilman Tom Bridges asked, "We're changing from a contract to a permit and just like anything else, if you permit somebody to do something and they violate what you were expecting them to do, can you pull that within the year or wait until the end of the year to say we're not going to reissue it?"
Town Manager Michael Cramer said a permit could be revoked at any time.
Mayor Dan Wilcox said, "I really appreciate all the people out here supporting Tony tonight. I know he has a lot of followers and a lot of friends. I support Tony. I like Tony. I appreciate what he brings to the beach. I also like Shawn and Duke and appreciate what they bring to the beach. So this is not about whether I like one person or like another person. We hear a lot of stuff up here tonight. Most of it is, it's time for another beach services vendor."
He said, "We had two companies that have gone out and made a major investment. They have continued to improve on that investment. The numbers that I have seen do not show anyone going without services. To me that's somewhat telling. You have two people, let's say they are right at the peak on a busy weekend where they are just about out of chairs and umbrellas. Now let's introduce a third person to that scenario. The market share should destabilize because they are not running out. So that should kind of tell you where the market is. We can talk about what we think it is all of the time, but the only thing empirical so to speak is those numbers. So if you introduce a third person in beach services it has to affect those other two companies. Some people say that's well and good because we want to create a fair playing field. We want another beach services. Ok, what about next year when the forth person comes and wants to do beach services and the following year when the fifth person comes and wants to do beach services?"
Wilcox said, "The lottery situation. We talked about that a lot when we created the ordinance. You couldn't do a lottery situation because no one was going to go out and invest fifteen or twenty thousand dollars as startup to do chairs and umbrellas thinking that the next year when the lottery came around that their inventory was going to be sitting there not earning them any money."
He explained, "I have serious concerns about the claims that we have this exponential growth when we don't see any numbers that indicate that people aren't being serviced by the umbrellas."
He said, "Tony made an investment in his chairs and umbrellas under what was allowed to him at the time which was to service from his location as an itinerant merchant. That hasn't changed. He's allowed to do that at this time. If he's selling out of his umbrellas and chairs and wants to invest more, he can do that. Nobody is stopping him from doing that. The question is, is another beach services needed. Do we need more Gators, commercialization on the beach and I'm struggling with that."
Councilman Gary Doetsch said, "I don't have a problem with a third vendor. I think the competition between businesses is probably good for everybody. Keeps everybody's equipment good and new. Plus the fact that it offers you one more person that is experienced in putting a canopy or tent or umbrella in the ground that more than likely will not blow out on a gust of wind."
Councilman Tom Bridges said he was concerned with storing beach chairs on the beach and the issue of those chairs hindering federally protected sea turtles from traversing the beach. He said, "Right now we don't have that much but as we start talking about more and more of these and the convenience of the businesses, I don't want to see chairs at posts all the way up and down the beach."
Shuttleworth said, "The fairness issue becomes, if we issue the permit or not and if Tony gets it or not, Tony's going to rent chairs. So now he's driving his truck up there and hauling them out on foot and we're letting some else" using a Gator to deliver on the beach and, "To me we've created an unfair advantage."
Wilcox said, "If I make a decision that's going to introduce more competition in this particular environment that's at the same time going to decrease revenues to the people that made the investments under the previous rules then I struggle with that."
Shuttleworth said, "Dan, I'm not sure how you can subjectively say it's going to decrease their revenues. You don't know that anymore than Tony can say he's going to increase revenues."
Wilcox said, "You have to have something to base it on. What's been presented to me is anecdotal. Oh, we're growing and there's room for more. And the numbers that were actually presented. The numbers are numbers that have been tracked for five years. That's the most solid thing I have to look at it" and, "You have some better information, I'm glad to look at it."
Shuttleworth explained, "The increase in Room Occupancy Tax Collections says we are exponentially growing. We have more hotels. I understand it's a difference between the public trust property and the fair market. But hotels come where and build rooms and they anticipate a vacancy factor, but they make an investment. We have someone that said I want to make an investment and I'm willing to take that business risk, you know as much as I care about Duke and Shawn, I'm not sure our job is to protect their business interests. Our job is to make sure that the services are provided in a manner that may meet the need."
Shuttleworth added, "In all fairness Dan, the numbers are provided by the vendors. Of course they're going to say we're never sold out" of chairs and umbrellas. He made a motion to adopt the ordinance as presented to expand the number of permits to three and to revisit the issue next year with regards to motorized vehicles and storage on the beach. The Council voted four to one to adopt the amendment. Council members Shuttleworth, Pierce, Bridges and Doetsch voted in favor. Mayor Wilcox voted no.
The following morning Tony Silvagni and Tracee Hagestrom were both waiting at Town Hall to submit applications for the third beach services permit to Town Manager Michael Cramer. Tracee Hagestrom is the wife of Duke Hagestrom of Wheel Fun Rentals.
On Monday April 17th, Cramer explained, "The ordinance does not indicate a timeline for making the decision, so I am being very diligent and looking at all aspects before I make a decision" and, "I had two applicants: Tony Silvagni Surf School and the Fundgeboat."