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AG19910325
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AG19910325
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Last modified
3/28/2003 9:14:47 AM
Creation date
11/27/2017 12:03:10 PM
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Meeting Minutes
Doc Type
Agenda
Meeting Minutes - Date
3/25/1991
Board
Board of Commissioners
Meeting Type
Regular
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I <br /> Second, the actual effect on lenders of having a non-appropriation clause, should the <br />i right be exercised, is no different than that produced by having a no deficiency provision <br /> alOne. In both c~es the len.der receives nothing but the property financed. Since this is the <br /> practical result, what is the harm in making abselutely clear the unit's righls? The courtier <br />I argument to this point iT that not having a non-appropriation clause does maim a difference to <br /> the governing body. Without one them, this argument states, its members will feel more of <br /> a moral obligation to continue with the payments than they would with a specific non- <br />I appropriation provision. <br /> The third argument promulgated for including non-appropriation clauses in these <br />Icontracts is that by having them in, should the governmental unit actually desire to cease <br />making payments under the contracts, such nonpayment will not result in a 'default.' There <br />are many reasons why governmental units should wish this to be true. For example, many <br />sta~ laws dealing with the issuance of securities require affu'mativ¢ statemenls that the <br />issuers have 'never been in default.' 'Therefore, there might be a legal problem in the sale <br />of its genera obligation bonds, in cemin other states after a North Carolina unit faUs to <br /> I appropriate on an installment sale conuact without a specific non-appropriation clause. <br /> It might be possible to structure pro~;isions close to what was used in the Wayne <br />I County by governmental appropriate not result in <br /> documents <br /> where <br /> failure <br /> the <br /> unit <br /> would <br /> a 'default.' If this is done, then that might be the best of both sides. Such a provision <br /> would almost eeminiy be sufficient to 'reserve the right' to the extent neo*,~.,,3,, under <br />i Section 159-13 as well as preventing the stigma of a 'default.' Yet there would not be a <br /> specific non-appropriation clause and the lender should therefore have somewhat more <br /> <br /> I comfort. <br /> l~ote that the position of the rating agencies on the ~e,sity for non-appropriation <br /> i clau~.~ is not a hard and fa~t role.. They m7 that it ver~ much dq~nd~ upon the <br /> circumstances of thc pazficular governmental unit, thc property to be financed and other <br /> factors. Sometimes the lack of a non*appropriatiun clause will have no positive effect on thc <br /> I rating, somedmc~ it will. <br /> The result of all this is that care should be taken in s~'ucturing installment <br /> I t~nsacfions, notwithstanding the exceUent result in the Wayne County ~. There arc many <br /> factors and arguments to be wcighod which will have an impact on the structure. Iust <br /> l~cause one potential ?rob!,~rn cr canecm h~, b,~n cl *ear~ up d~:s not mean these <br /> Ih'ansacfions arc ensy or uncomplicated. <br /> <br />I <br /> <br />! <br />! <br /> <br /> i <br /> <br /> <br />
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