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May 15, 2006 - Regular Meeting Page 588 remaining COPs would be issued after the Turner contract is amended again in August or September to reflect a new GMP that includes the Sheriff's Office and Detention Center. There would be no delays in construction of the project and the County would not be exposed to rising interest rate risk. 2. Finance the Jail Annex with COPs and finance the Sheriff's Office and Detention Center with GO Bonds, if approved. The first step of this option is to approve a COPs resolution in an amount sufficient to finance the Jail Annex (e.g. $16 million). There will be no delay in constructing the Jail Annex due to the financing method employed. The next step is to hold a referendum on financing the Sheriff's Office and Detention Center with GO bonds. Assuming the referendum is held concurrent with the November general elections, and is approved, construction of the project will be delayed at least three months. Turner Construction estimates the project cost will escalate by about $2.5 million as a result of the three-month delay. If the referendum on GO bond financing fails, the only remaining financing alternatives are to hold another referendum in the future or employ COPs financing. The process of preparing to issue COPs will take approximately three to four months, leading to a delay in the construction of the Sheriff's Office and Detention Center of an additional four months. The total delay in this scenario compared to Option Number 1 is about seven months. Turner Construction estimates that the project cost will escalate by over $5 million as a result of the seven month delay. 3. The third option is a combination of Numbers 1 and 2. Approve the COPS resolution authorizing the issuance of a sufficient amount of debt to construct the Jail Annex, Sheriff's Office and Detention Center and also adopt a resolution calling for a referendum on financing the Sheriff's Office and Detention Center with GO bonds. Under this option, COPs would be sold after the Board approves an amendment to the Turner Construction contract specifying a guaranteed maximum price for construction of the Jail Annex. Then, the Board would wait for the outcome of the November referendum on GO bond financing for the Sheriff's Office and Detention Center. If the GO bond financing method is approved, then the Board would move forward with that process. If the GO bond financing option fails, then the Board would immediately move forward with the COPs financing. Either way (unlike Option No.2) the delay over Option No. 1 is about three months. As discussed in Option No.2, the County will be exposed to interest rate risk and may have to levy higher taxes due to increased borrowing costs. Mr. Day also referred to the following financial analysis of the use of COPs versus GO bonds as prepared by Joe Niggel, the County's financial advisor, and included in the Agenda: "Including all costs associated with the issuance of the GO bonds or COPS, the Cabarrus County COPS financing will only have an approximate 0.20 percent higher interest borrowing cost. The COPS financing can be completed approximately four to six months sooner than a GO bond sale. Thus, a 0.20% rise in interest rates during this period would eliminate the lower borrowing costs of GO bonds verses COPS. Interest rates have already risen approximately 0.40 percent since January 1st. Interest rates are generally expected to rise throughout the rest of the year as the Federal Reserve continues to increase short term interest rates. The County may have to levy additional taxes to cover the increased interest expense on the GO financing should interest rates rise more than 0.20 percent due to a delay caused by (1) a failed referendum or (2) the additional time required to complete the referendum process even if successful." Joe Niggel, financial advisor, responded to questions regarding the use of COPs and GO bonds and cost differentials. He commented on the rising interest rates and the increasing cost of construction. Mr. Niggel stated that GO bonds would be cheaper if both the GO bonds and COPs were sold the