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Cabarrus County, North Carolina
<br />Notes to the Financial Statements
<br />For the Year Ended June 30, 2011
<br />2. Contingent Liabilities
<br />The County has received proceeds from several federal and state grants. Periodic audits of these grants are
<br />required and certain costs may be questioned as not being appropriate expenditures under the grant agreements.
<br />Such audits could result in the refund of grant moneys to the grantor agencies. The amount, if any, of such refunds
<br />cannot be determined at this time although management believes that such amounts would be immaterial. No
<br />provision has been made in the accompanying financial statements for the refund of grant funds.
<br />At June 30, 2011, the County was a defendant in various lawsuits. Although the outcome of these lawsuits is not
<br />presently determinable, it is the opinion of the government's counsel that resolution of these matters will not have a
<br />material adverse effect on the financial condition of the government. Two of the lawsuits are described below.
<br />Charlotte Motor Speedway, LLC and Speedway Motorsports, Inc. vs. City of Concord and County of Cabarrus,
<br />there is no litigation pending or, to the best of the County's knowledge, threatened, against or affecting the County
<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
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