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August 10, 2006 (Special Meeting) Page 30 The Board of Commissioners for the County of Cabarrus held a Special Meeting in the Multipurpose Room at the Cabarrus County Governmental Center in Concord, North Carolina on Thursday, August 101 2006, at 6: 00 p.m. The purpose of this meeting was to discuss the North Carolina Research Campus; to conduct a Closed Session, if needed, to discuss the location or expansion of businesses or industries in Cabarrus County as authorized by North Carolina General Statue 143-318.11 (a) (4); and further to consider action relating to such in open session. Present - Chairman: Robert W. Carruth Vice Chairman: Joni D. Juba Commissioners: Carolyn B. Carpenter Robert M. Freeman Coy C. Privette Also present were John D. Day! County Manager; Attorney; Frankie F. Bonds, Clerk to the Board; Kay to the Board; Pam Dubois, Deputy County Manager; County Manager. Richard M. Koch, County Honeycutt, Deputy Clerk and Mike Downs, Deputy Others present were Steve Cordell, Bond Counsel with Helms Mulliss & Wicker, PLLC, and Joe Niggel, Financial Advisor with aBS Securities, LLC. Chairman Carruth called the meeting to order at 6:04 p.m. Chairman Carruth stated there had been much confusion since the meeting on July 31, 2006 concerning the N.C. Research Campus and the proposed Tax Increment Financing (TIF) for the project. He said the purpose of this meeting was to learn more about TIF's and the options concerning the county's participation in the project. Commissioner Carpenter and Richard M. Koch, County Attorney, arrived at 6:06 p.m. and were present for the remainder of the meeting. Steve Cordell, the County's Bond Counsel, presented a general overview of Tax Increment Financing (TIF) in North Carolina. He reported TIF debt can be issued in North Carolina to finance public improvements in a development financing district. He identified the incremental increase in ad valorem tax revenues in the district as the primary source of repayment of TIF debt. If the TIF project debt will affect the tax revenues in more than one unit of local government, he said those units can enter into an InterLocal Agreement that specifies each unit's commitment to the project. Although North Carolina General Statutes afford the units considerable flexibility in drafting the precise provisions of an InterLocal Agreement, he recommended the County agree to pay Kannapolis (the TIF debt issuer) a specified percentage of incremental tax revenues actually collected if the County chooses to support the project. Further, he said annual and lifetime caps can also be drafted into an InterLocal Agreement and the provisions of the Agreement are subj ect to specific performance by the courts. Mr. Cordell also identified the following risks associated with TIF debt financing: (1) the anticipated incremental tax revenues are not realized; (2) insufficient incremental increase in the assessed value of taxable property within the district; and (3) payment defaults by property owners within the district. In addition, he reported other additional assets, such as a percentage of sales tax revenues, can be pledged to payoff TIF debt. In an attempt to assure there will be sufficient incremental ad valorem tax revenues generated in the district to service the TIF debt, he said the issuer of the TIF debt (Kannapolis) can enter into "minimum valuation" agreements with the property owners in the district. Under this scenario, he said property owners within the district agree to pay ad valorem taxes at a rate that generates sufficient incremental ad valorem tax revenues to service the TIF debt. He also presented the following information on minimum valuation agreements: minimum valuation agreements typically have a term that runs concurrently with the final maturity of the TIF debt and then expires; minimum valuation agreements are recorded in the Register of Deeds office and become a covenant that runs with the land and obligates future owners during the term of the minimum valuation agreement; and the minimum valuation agreements remain in effect regardless of whether the anticipated improvements are completed or continue to exist during the entire term of the minimum valuation agreement. He also explained there is an inherent payment/bankruptcy risk associated with a private owner's contractual payment obligations under a minimum valuation agreement. Joe Niggel, the County's Financial Advisor, explained how the County's participation in a TIF project through an InterLocal Agreement could affect the County's bond rating based on earlier conversations with Moody's. He presented the following information: (1) participation will be factored into