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Cabarrus County, North Carolina
<br />Notes to the Financial Statements
<br />For the Year Ended June 30, 2012
<br />which could have a material adverse impact on the County's condition, financial or otherwise. In Charlotte Motor
<br />Speedway, the plaintiffs originally filed suit in September 2009 against the City of Concord and the County alleging
<br />that the City of Concord and the County had entered into an economic development agreement in November 2007
<br />to provide $80 million for the financing, design and construction of road, pedestrian, utility and noise attenuation
<br />projects, and that the plaintiffs had relied upon that agreement in undertaking certain construction projects. The
<br />plaintiffs requested, among other things, specific performance of the agreement or damages in an unspecified
<br />amount caused by the misrepresentation by the City and County of their ability to fund the $80 million in economic
<br />incentives.
<br />The City and the County filed motions to dismiss this lawsuit, based primarily on the position that no agreement
<br />compliant with the mandatory economic development statutes was ever effectuated. Shortly before a scheduled
<br />hearing on these motions in June 2010, this lawsuit was voluntarily dismissed without prejudice by the plaintiffs. By
<br />voluntarily dismissing the lawsuit, the plaintiffs preserved their ability to re -file the lawsuit within one year of such
<br />dismissal. Shortly before the expiration of the re- filing deadline, the plaintiffs once again filed suit against the City
<br />and the County in May 2011. In late June 2011, the City and the plaintiffs settled the lawsuit as to each other at a
<br />cost estimated to be worth $2.8 million. The plaintiffs then amended their complaint, maintaining the same
<br />allegations and requests for relief, and simply deleting the City as a defendant. The County has not yet filed an
<br />answer to this amended complaint, but intends to do so in a timely fashion. The County believes that it has
<br />meritorious defenses to this lawsuit, and intends to defend itself vigorously. If it is found liable for all or a portion of
<br />the alleged damages or determines that it would be to its advantage to engage in settlement negotiations, the
<br />County could use a portion of its current undesignated fund balance to pay at least a portion of such damages or
<br />settlement. The County can also bring the City back into the lawsuit for indemnity or contribution.
<br />The County is the appellant in three cases consolidated and heard before the North Carolina Court of Appeals
<br />captioned Lanvale Properties, LLC and Cabarrus County Building Industry Association vs. County of Cabarrus and
<br />City of Locust; Mardan IV v. County of Cabarrus and Craft Development, LLC vs. County of Cabarrus. In these
<br />cases, the plaintiff developers brought actions against the County challenging the validity of the County's adequate
<br />public facilities ordinance (`APFO'), which the Board had adopted in 1998 as part of its zoning and subdivision
<br />regulations in order to assist the County in determining whether to issue or deny development permits. Under the
<br />AFPO, County planners would determine if public school facilities were adequate to serve the proposed
<br />development. If the Board determined that the public school facilities were adequate to support the proposed
<br />development, the proposal would be approved as proposed. If the Board determined that the public school facilities
<br />were presently inadequate to support the proposed development, then the Board could either deny the application
<br />or, alternatively, subject the proposal to conditions designed to mitigate the impact on school capacity. These
<br />conditions include deferring the proposed development, phasing the development, reducing the scope of the
<br />development, requiring the developer to construct school facilities, requiring the developer to pay a fee per
<br />residential unit (also known as a "voluntary mitigation payment," or "VMP "), or imposing other reasonable
<br />conditions.
<br />The plaintiff developers in the litigation mentioned above brought similar complaints against the County requesting,
<br />among other things, a declaratory judgment that the County lacked authority to adopt the APFO and that the APFO
<br />was invalid. The trial court concluded that the County had no statutory authority for the enactment of the APFO
<br />under its general zoning and subdivision powers, and the Court of Appeals affirmed this decision on September 7,
<br />2010. The County appealed the Court of Appeals decision to the North Carolina Supreme Court, and a hearing has
<br />been granted, but the County cannot predict whether its appeal ultimately will be successful or, even if its appeal
<br />were to be successful, whether it would prevail if these cases were remanded to the trial court.
<br />In a separate lawsuit currently pending in Cabarrus County Superior Court but stayed by court order pending the
<br />outcome of the above cases, certain developers have demanded that the County refund all fees paid by the
<br />plaintiffs pursuant to the APFO, including but not limited to VMPs. Although the County has a number of defenses
<br />to such claims, including the fact that each developer agreed to pay the VMP in order to proceed immediately with
<br />their projects, if the County does not prevail in this lawsuit, the County cannot predict whether it will be required to
<br />refund all or a portion of the approximately $8.4 million in VMPs collected since the adoption of the APFO, plus
<br />interest, to the affected developers and other interested parties. Although the County has not expressly budgeted
<br />funds to make this payment, a portion of the County's current undesignated fund balance could be used if such a
<br />payment were necessary. The County does not believe that use of such undesignated fund balance monies would
<br />have a material adverse impact on its condition, financial or otherwise.
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