FROM: Heather Marlow, Planning Director/Klamath Enterprise Zone Manager

DATE: December 7, 2005

RE: County/COB Written Agreement for Enterprise Zone Exemption

The COB Energy Facility was last before the BOCC on May 10, 2005. At that public hearing, the BOCC agreed with COB on conditions and terms to incorporate in a written agreement, as required, to facilitate a property tax exemption for the facility. The COB facility is attempting to qualify for a Long-term Rural Oregon Enterprise Zone Exemption, as established by Oregon Revised Statute and the administrative rules of the Oregon Economic and Community Development Department.

County staff including the Public Works Director, Assessor, County Counsel and the Planning Director/Enterprise Zone Manager, worked with COB to incorporate the agreed upon conditions and terms of the subject agreement. Both parties to the agreement have the approval of their legal counsel, with regard to the form and content of the agreement.

During the process of drafting an agreement with the County, and executing a separate agreement with the Bonanza Rural Fire District, COB identified changes to the conditions and terms of the County/COB agreement, which are requested to be considered at this time. The following changes to the previously approved conditions and terms of the agreement are required to be considered in a motion by the BOCC.

1) I.C.1. – With regard to the 50% payment of the total annual property tax, which will be paid during the period of construction, the following language is proposed to be added, to allow for the Bonanza Rural Fire Protection District to receive $50,000 for training and similar costs, in advance of serving the Facility:

2) I.C.2. – With regard to the annual payment to the County when Phase I is placed in service, the following language is proposed to be amended, to offset the COB contract payment to the Bonanza Rural Fire District:

3) I.C.3. – With regard to the annual payment to the County when Phase I is placed in service, and Phase II is also placed in service within two years of Phase I, the following language is proposed to be amended, to offset the COB contract payment to the Bonanza Rural Fire District:

4) I.C.4. – With regard to the annual payment to the County when Phase II is placed in service, the following language is proposed to be amended, to offset the COB contract payment to the Bonanza Rural Fire District:

5) I.C.7. – With regard to a previously identified BOCC condition, the following language is proposed to be deleted, to reflect the COB contract obligation to the Bonanza Rural Fire District:

If the BOCC were to pass a motion to commit to and include the above changes in the COB/County Agreement, then the BOCC would vote on whether to commit to the conditions and terms, and to execute, the amended agreement document.

In addition, the BOCC is required to adopt a resolution sanctioning the property tax exemption. The City of Klamath Falls will also review the agreement and consider a resolution sanctioning the property tax exemption. If both resolutions are passed, copies will be forwarded to Oregon Economic and Community Development Department, along with a copy of the Agreement and an Enterprise Zone Application for the facility.