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August 14, 2006 (Recessed Meeting) Page 40 the Incremental Tax Revenues were calculated using current City and County property tax rates; and the projected property values and the incremental tax revenues will be important during the process of negotiating the size of the TIF bond issue. He also reported the City has hired a nationally recognized, independent feasibility consultant to review and verify the projections. The negotiations related to the size of the TIF bond issue will not be completed until the feasibility consultant has submitted its report in mid October. He said some of the data will likely be completed earlier thus allowing the negotiations to mature. (3) Will there be sufficient tax revenues to repay the bonds? He said the Local Government Commission (LGC) will require conservative assumptions in structuring the bond issue. For example, he said the City's financial advisors have recommended using a minimum 2.OX debt service coverage ratio in sizing the issue unless other credit enhancements are included. He said it is likely that.the term of the debt will be 20 years, although 30 years is permitted and such a term will be considered. (9) Will the City or County need to increase tax rates to repay the bonds? He stated the tax rate will not be increased as a result of this project and all the financial projections have assumed a zero increase in the tax rates. (5) What if something goes wrong with the development of the project and there are not enough revenues to repay the bonds? First, he said the City and County's incremental tax revenues from the project will be used to repay debt service; second, Castle & Cooke, Inc., will guarantee payment of the debt service through a minimum tax payment agreement (terms to be negotiated); and third, there will in all likelihood be a bank letter of credit paid for by Castle & Cooke, Inc., that will be available to pay the debt service on the bonds if Castle & Cooke, Inc., defaults on their minimum tax payment agreement (terms to be negotiated}. Finally, he said there could be other pledged City revenues. (6) What will be the terms of the InterLocal Agreement? He said the terms of the InterLocal Agreement will be set by the City and County after the feasibility study is completed and other details of the bond issue are more certain. He reported the current expectation is that the Agreement would probably contain provisions similar to the following: the term of the InterLocal agreement would match the term of the bonds; the City and County would each pledge a portion or all of their incremental tax revenues to pay the annual debt service on the bonds; and after each year's debt service payments are made, and any reserve funds are funded, all excess payments will be returned to the City and County. Summary of Commitments Mike Legg, Kannapolis City Manager, reviewed the financial commitments for the City of Kannapolis and Cabarrus County. He said the City will pledge all of its Incremental Tax Revenues and Interlocal Agreement revenues; obtain a Minimum Tax Agreement from Castle ~ Cooke, Inc.; and provide other pledged revenues (i.e., sales tax) if necessary. The County would pledge all or a portion of the County Incremental Tax Revenues through Interlocal Agreement with the City. Next Steps Mike Legg, Kannapolis City Manager, reviewed the next steps in the TIF financing project as follows: hold a pre-conference with Local Government Commission (LGC) in the next several weeks; notify property owners, publish notice and hold public hearing on establishment of Development Financing District; receive the Feasibility Study and Fiscal Impact Analysis and complete the Financing Plan; publish notice and submit formal application to the LGC; application will be reviewed by the LGC for their consideration and approval; and sell bonds early next year. He said the goal is to have LGC approval by December 31, 2006. estion and Answer Session In conclusion, Mike Legq, Kannapolis City Manager, opened the floor for questions. Mr. Legg and Edward Boyles, with Bank of America, responded to a variety of questions on TIF financing. Adjournment Mayor Misenheimer thanked everyone for attending tonight's meeting. Chairman Carruth adjourned the meeting of the Cabarrus County Board of Commissioners at 8:20 p.m. Cler to he ar