; and (II) after the Secretary takes into account— (aa) the goals the State intends to achieve through the demonstration project; and (bb) the participants the State intends to serve under such project. (C) Agreed level for performance on expected levels of performance Prior to approving an application for a demonstration project submitted by a State, and using the expected levels of performance described in such application, the Secretary shall reach an agreement with such State on the expected levels of performance for each of the indicators of performance. In reaching an agreement on such expected levels of performance, the Secretary and the State may consider the factors described in section 116(b)(3)(A)(v). (2) Sanctions (A) In general The sanctions described in section 116(f)(1)(B) shall apply to a State, local area, or consortium beginning on the 3rd year of the demonstration period for such State, local area, or consortium, except that the levels of performance established under subsection (f)(1)(C) of this section shall be— (i) deemed to be the State negotiated levels of performance for purposes of this paragraph