AG 1996 12 16 - Laserfiche WebLink

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MEMORANDUM To: Frank W. Clifton, Jr. From: Blair Bennett ~ Date: December 5, 1996 Subject: Financing $1.9M Upfit K-Mart Building At the last Board of Commissioners meeting, Cabarrus County entered into a lease with Kannapolis Land, Inc. to provide for office space in the former K-Mart building in Kannapolis, NC. A condition of that lease provides that on June 1, 1997 the landlord shall pay to Cabarms County an allowance for leasehold improvements in the amount of $1,060,000. The County has estimated total improvements for the upfit of the building amounting to approximately $2,960,000, which would obligate the County for $1,900,000. Opportunity for borrowing these funds through lease financing among banks was explored. Because of the complexity of this lease, banking officials differ on their opinion as to whether lease financing proceeds could be available for this project. Since the bank perfects their loan by using the asset of the unit as collateral for this type of financing, some questions exist in properly structuring this type deal. Therefore I recommend and feel comfortable requesting that the County appropriate from fund balance the amount needed for the upfit. Considering that undesignated fund balance at 6/30/96 was $13,298,332 or 18.57% of expenditures, this appropriation of $1.9M would reduce that to 15.92%. I have informed the Board of Commissioners on several occasions that I feel comfortable with a level of 15%. However, in the future, when the County sells the property at the fairgrounds or receives other undesignated discovered funds, consideration should be given to earmarking these funds to replenish or improve existing fund balance. I have attached the necessary budget amendments per your approval of the above matter. I will be available at the Board of Commissioners meeting of December 16, 1996 should further questions arise.