AG 2007 10 15 - Laserfiche WebLink

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From: Mike Legg [mlegg@ci.kannapolis.nc.us] Sent: Monday, October 15, 2007 1:27 PM To: rcarruth@carolina.rr.com; John Day Cc: Eddie Smith; rmisenheimer@vnet.net; motorsports@ctc.net; kenneth.geathers@med.va.gov; geathersk@aol.com; rcauthen@ctc.net; ROYCEMCCOMBS@aol.com; Bridgette Bell; wsafrit@rutledgefriday.com; mdhinnant@carolina.rr.com; darrell@asiaapparel.net Subject: [heur] TIF pay back proposal Bob and John, Thanks very much for allowing the City to respond to the latest TIF proposal that would involve the City's payback of a portion of the TIF obligations to the County.. As I understand the proposal, it appears to have originated during a joint City-County meeting in June where Grace offered the notion that Kannapolis would become wealthier over time with the NCRC development and because of this potential prosperity, the County might consider helping Kannapolis with the TIF in the early years but that the City might be asked to somehow be "on our own" as time moved forward and the City got "richer." If you recall, this was the meeting at which the County agreed to support the TIF. As I recall it, the discussion about the City becoming more prosperous. ended when Edward Boyles with BofA (our underwriter) described to the two boards that it was highly likely that these bonds would be refunded (refinanced) at some point in the future (maybe 8-10 years away). By doing so, we would bring to. the table a much more attractive repayment schedule because the project would be built out and there would be an established revenue stream that would have been in place for several years. As a result, the bond market would likely react more favorably to that scenario with lower interest obligations. We never explored this payback scenario again because we assumed it was no longer an issue until John's email last week. Our concerns about this proposal are as follows: * On June 18, 2007 the Cabarrus County Board of Commissioners voted to support the NC Research Campus Project with the City of Kannapolis by providing one-half of the debt service payments on a bond issue not to exceed $168,000,000. There were no conditions attached to that action. The proposal would result in less than a SOo commitment. * Last month, both boards agreed to a project list with the inclusion of $15 million for the Cabarrus Health Alliance facility. There was no mention or discussion of the payback provision. * Based on the commitment by the County, the City has continued to move forward with the financing and plans to have the Development District established before the end of the 2007 calendar year. We are now at a critical juncture. All agreements must be completed by mid November at the latest. * The City will be faced with additional operating expenditures as a result of the NC Research Campus Project and has projected estimates of those expenditures as well as estimates of additional County expenditures through the Municap studies. The additional expenditures are estimates only and are subject to change. The City will use its projected excess incremental tax receipts to pay for the additional operating expenditures. * Should the County restructure the agreement to fund less than one-half o£ the debt service, the resulting overall bond issue will have to be reduced accordingly. The City must retain adequate incremental revenues to fund the projected additional operating costs. * The City and County negotiated and agreed to share the debt service burden equally to support this sizeable development and the City respectfully requests the County to honor its pledge. G t~ I