Pennichuck Water Special Committee

REPORT OF THE PENNICHUCK WATER SPECIAL COMMITTEE JULY 11, 2011 A meeting of the Pennichuck Water Special Committee was held on Tuesday, July 11, 2011 at 7:05 p.m. in the Aldermanic Chamber. Alderman-at-Large Brian S. McCarthy presided. Members of the Committee present: Alderman-at-Large Barbara Pressly Alderman Michael J. Tabacsko Members not in Attendance: Alderman-at-Large Mark S. Cookson Alderman Jeffrey T. Cox Also in Attendance: Alderman Diane Sheehan James McNamee, Esq., Corporation Counsel John Patenaude, Interim CEO, Pennichuck Corporation Donald L. Ware, Sr. V.P. of Operations, Pennichuck Corp. Roland E. Olivier, Esq. General Counsel, Pennichuck Corp. Chairman McCarthy Alderman Cox is ill this evening and can’t be with us. PUBLIC COMMENT - None UNFINISHED BUSINESS - None NEW BUSINESS – RESOLUTIONS R-11-132 Endorser: Mayor Donnalee Lozeau AUTHORIZING THE MAYOR TO GIVE PRIOR WRITTEN CONSENT, AS REQUIRED BY THE PENNICHUCK MERGER AGREEMENT, TO PITTSFIELD AQUEDUCT COMPANY’S PROPOSAL TO SELL THREE PARCELS OF LAND IN NORTH CONWAY NEW HAMPSHIRE MOTION BY ALDERMAN TABACSKO TO RECOMMEND FINAL PASSAGE ON THE QUESTION James McNamee, Esq. Just to give you the introduction, as you mentioned in the motion, we have a merger agreement with Pennichuck, and as part of their ongoing business, when they have a sale of land of this magnitude which is coming before you now, they need approval from the City. This involves the sale of about 50 acres of land in North Conway, which has actually been pending for quite some time. Don Ware is here to give you more details on it, but basically it is being sold to a farm cooperative for use as farming land/agricultural land with easements on it for the necessary uses for the water system. John Patenaude, Interim CEO, Pennichuck Corporation The sale is to New Hampshire Institute of Agriculture & Forestry, it is 54.0 acres that were acquired in 2008. The sales price is $75,000. The assets on the books are at $71,248. With that background, Roland Olivier, Attorney for the Pennichuck Corporation, will discuss the details. Pennichuck Water Special Committee -2- 07/11/11 Roland E. Olivier, Esq., General Counsel, Pennichuck Corp. Thank you Mr. Chairman. We appreciate the opportunity of appearing before the committee this evening. I just handed out a map of the three parcels, which I am going to describe. Essentially these parcels are located between the Saco River and the West Side Highway in North Conway. As you know, North Conway is kind of divided into three parts; there is the Rt. 16 side, you have the Saco River, which bisects the town, and then the West Side Highway goes down to Conway from North Conway. You have Echo Lake Park on that side. It is off of the West Side Highway that we actually have the Birch Hill Community Water System that Pennichuck East Utility operates. On the chart that I have here, just to orient you, the West Side Highway is here (referring to the map) and the Saco River actually comes around the land in this area. There are three parcels of land the largest of which is in the middle, which is shown in this big outline here, it goes around this eddy. The Saco River actually from time to time when it overflows, backs up into this area called Allard’s Eddy. There is some additional land that is not owned by us here. There is a small parcel of land, which is 148, which is 4.6 acres. This is the 40.4 acre parcel. Then a 9.7 acre parcel is comprised partly of wood, partly of a swamp area that is in here, etc. It borders land that is owned by Richard Davis and Charlene Brown of the farm by the river. And that land runs the entire length of both this parcel and this parcel. The topography of this land it is important to understand; the West Side Highway here is approximately 75- 100’ above the floodplain area where these three parcels are located. These three parcels are located in the North Conway Floodplain Protection District, and as a result, there is only limited use that you can actually make use of for this land. What we did in 2008 when we determined that it was necessary to connect the Birch Hill Community Water System with the North Conway Water District is we ran a pipe under the Saco River from this point over to the North Conway District, and under this land to the bottom of the hill, which is located right here then up the hill, which is about as I said about 75’, to a point located here where we currently have a testing station and also a chlorination station, then we ran it under the West Side Highway and up into and connected into the Birch Hill Community system to spread the water across to the folks there. What you see here in orange is actually the location of the pipe and also the location of the 25’ easement on either side, there would be 24’ centered over the top of the pipe, which will be granted to Pennichuck East from the proposed buyer. Are there any questions on that? Alderman Sheehan What is the source of the water that is being transported in that pipe? Roland E. Olivier, Esq. The source is the North Conway Water District. They have their own water system and they provide the water to us at the present time. Don do you have any other insight on that? Donald L. Ware, Senior Vice-President of Operations, Pennichuck Corporation The North Conway Water Precinct actually is a series of gravel packed wells on the opposite side of the Saco River that provide water to the North Conway Water Precinct and also that we now purchase water from. Kind of the history on this was when we acquired this system in 2006 there were 7 small onsite bedrock wells without property sanitary radius and some water quality problems. We went to the Conway Precinct to see if we could purchase water from them. They, at the time, said no we are not interested in selling you water, and at that stage we began looking for potential other sources of water and we identified this land, which has some real good mapped gravel aquifers on it as a potential source of water. We purchased this land and began the process of permitting these wells, and surprise, surprise suddenly the Pennichuck Water Special Committee -3- 07/11/11 North Conway Precinct was there saying we have changed our mind, we will sell you the water now. Apparently there was some fear that we would develop that ground water and sell it to Saudi Arabia, and since we were going to be on the other side of the river from them that we would be pumping the river water before them. It was actually a good bargaining chip for us, allowed us to do what should have happened initially, which was to interconnect the two systems and purchase water from North Conway. Once that was done, the usefulness of this land was no longer necessary other than as Roland indicated there is an easement for the interconnecting pipeline. At this stage in time, that land, as he indicated, is all floodplain and we have leased it for two years or one year to the New Hampshire… Roland E. Olivier, Esq. This is the second year. Donald L. Ware …Farm Institute. From a rate making perspective, we are not allowed to collect the property taxes that we pay on this land, which is a little over $600 a year. That has to be paid out without ratepayer support. Also the initial investment in the land of about $71,000 is not recoverable in rates. Selling it will allow us to bring the money back in and invest that in other infrastructure necessary to support the water system up in that area or other areas. Alderman Sheehan Is it sharing watershed with the water supply on the other side of the river? Donald L. Ware There is a hydraulic divide between the two created by the river so this is not watershed, and even if it were, this is not developable property. In other words, again what is happening is the Farm Institute is going to farm the land and it has historically been farmed. The Hussey’s who owned it before did basically winter rye and wheat down in that area. Alderman Pressly Thank you. Could you tell me again the name of the purchaser and the government entity that they are connected to? Roland E. Olivier, Esq. The name of the purchaser is The New Hampshire Institute for Agriculture and Forestry. Alderman Pressly Are they connected to a governing body? Roland E. Olivier, Esq. No they are not connected to any governing body; they are a 501(c)(3) organization that was formed by Suzanne Brown who is the Principle in the organization. Their purpose is to essentially teach farmers in New Hampshire how to grow crops organically, i.e., without fertilizers. Pennichuck Water Special Committee -4- 07/11/11 Alderman Pressly It has sort of an institutional and an educational ring to it. Is that fair to say that? Do they expect to make a profit? Roland E. Olivier, Esq. That is absolutely correct. That is one of the things that attracted us to the organization last year when they asked us to lease the land for the first time. It is currently under lease this year for a nominal sum. Alderman Pressly May I continue? Chairman McCarthy Sure. Alderman Pressly Have they gone before local boards for any approvals? Roland E. Olivier, Esq. There are no approvals required here. Let me just explain a little bit about the limitations on the use of the land. As I said, it is in a Floodplain Protection District. The land can only be used for agricultural purposes, growing crops, etc., raising farm animals or forestry. No permanent structures can be erected on the land, on a permanent basis, no commercial development can occur. They did request permission to allow people to come camping on the land, which we said no because we didn’t want the liability, and they always wanted people to enjoy the edge of the water. There is about 650’ of water frontage over here through the tree line. We said no for that. Also the Conway Planning Department also said no to both of those for the very reason that it is a protection district. Chairman McCarthy What regulation is it that makes it unusable, is it because it is in the floodplain that it can’t be used… Roland E. Olivier, Esq. The zoning regulations of the Town of Conway. Alderman Pressly So it sounds like they have gone before the North Conway governing body in some way. Roland E. Olivier, Esq. I think they did an inquiry on both of those issues, but with respect to the Purchase & Sale Agreement that we are talking about and the use of the land, there is no requirement for them to go before North Conway. Alderman Pressly Okay. Further question. Was this put up for sale in a competitive way or did the institute approach the Pennichuck? In other words, have other people looked around and asked to buy this? Pennichuck Water Special Committee -5- 07/11/11 Roland E. Olivier, Esq. Yes. That is a very good question. I was going to get to that. The institute did come to us. They offered us $65,000 initially, which I said well we’re going to put this up for open bid with some people that we know. We didn’t want to put it on the open market simply because there wasn’t a great deal of money involved here, and we didn’t want to pay commissions for this purpose. I did offer the opportunity to Mr. Davis and his Wife who are the adjoining landowners who expressed an interest in purchasing at least a portion of the property. They did submit a bid of $12,000 for the 9.7 acre lot, lot 147. That compared to $14,000 bid that we got from the institute so that was less. In addition to that, they offered $2,000 to carve out a piece of property, which roughly runs down here and across and up there to protect their horse trails. They run a horse farm and have a trail business. They were concerned about what would happen with the land. That was $2,000 versus $4,350 for that portion of the land that the institute was going to pay for on the basis of what they bid. In addition to that, we were contacted by Justin & Julie Hussey. Mr. Hussey is the Grandson of Eugene Hussey who owned both of the two small parcels that we purchased from, and I believe a Nephew of the other Hussey family who owned the 40 acres. They submitted a bid of $65,000 for all three of the parcels. On that basis, what we did is we selected to sell to the institute at $75,000. Now, just to give you an idea of the assessed value of all three of the parcels is $22,900. That is the assessed value from North Conway. As Don mentioned, the book value for all three parcels is $71,248. Alderman Pressly Are you selling this with any restrictions? Any limitations whatsoever? Roland E. Olivier, Esq. The limitation is of course the 25’ easement for the water. Other than that there are two stipulations that will be in the purchase & sale contract; one that it requires Board of Aldermen approval for the City of Nashua of course and also because this is land that is owned by the utility that is servicing this area, it will require New Hampshire Public Utility Commission approval as well. Chairman McCarthy I think the question is there is nothing, other than the Conway zoning ordinances there is no covenence that restrict future use of the property correct? Roland E. Olivier, Esq. That is correct. Alderman Sheehan Could you say what you said though about the PUC again? Roland E. Olivier, Esq. Yes. The Public Utility Commission has to approve the sale of any land that is owned by a regulated utility, and since this land was technically transferred to Pennichuck East Utility, which operates the Birch Hill Water Community system, in January of 2010, then they have to approve this sale. Pennichuck Water Special Committee -6- 07/11/11 Alderman Sheehan Thank you. As a follow up, you said $22,000 assessed value versus $71,246 book value. Is that because of current use? Roland E. Olivier, Esq. Well part of it is current use yes. Also the fact that we bought this in 2008 at the height of the real estate market, I think we paid a lot of money for, maybe more… Donald L. Ware We paid $71,248. Roland E. Olivier, Esq. We paid more money than probably the land was worth at that time, but we had no other choice because we had no other place that we could bring the water pipe across in order to service the customers. Alderman Sheehan You said something else about people wanting to use the edge of the river and there was a reason why they could not. Roland E. Olivier, Esq. This is a protection area and so therefore that is an illegal use under the zoning code, and Ms. Brown was told that by the Zoning Administrator of the Town of Conway, whom I spoke to as well, and he confirmed that. Alderman Sheehan Protection from what? Is this a watershed considered? Roland E. Olivier, Esq. Well it is because it is the floodplain area. Every 10 or 15 years this entire area is under water, whenever the Saco River rises to a certain level. Alderman Sheehan Right. I have been up there when that has happened. It shuts the town down. Roland E. Olivier, Esq. They have deemed this as a protected area, and even though they allow agriculture and as Don said the Husseys have farmed this area for quite a while before we acquired the property. Alderman Sheehan It generally floods in the spring correct? Pennichuck Water Special Committee -7- 07/11/11 Roland E. Olivier, Esq. I’m sorry. Alderman Sheehan Generally that is only in the spring when that floods? Roland E. Olivier, Esq. Generally I would say yes only in the spring unless they have an unusual amount of rain. Alderman Pressly I presume you have access to the pipes. Any difficulty getting to it? Have you negotiated with these folks to be able to cross their land if you have a breakage? Roland E. Olivier, Esq. You will see there is a … we are going to maintain access here on this road, which actually leads up to the West Side Highway. This is the main access point and the only access point right now for any of this property because it is effectively landlocked on this side and the Saco River is on that side. The only access is down essentially an unpaved road to this point (referring to the map), and then one of the restrictions we are going to put in here is that they can’t do any farming over the top of the easement area nor can they install trees or anything like that. We have a fairly comprehensive set of restrictions that are in our easement provisions. Donald L. Ware It is a standard access and use easement that we have over pipelines through non-public right of ways that allows us access, allows us to repair, allows is to maintain, allows us to replace, and is there for that very purpose to take care of the pipe. Alderman Pressly This is owned by Pittsfield Aqueduct Company right? Roland E. Olivier, Esq. Pittsfield Aqueduct originally acquired the property. When the Public Utility Commission approved the transfer of property from Pittsfield Aqueduct to Pennichuck East Utility in January of 2010, shortly thereafter we had been contacted by the institute to lease the property, and they had said if they liked using it they might buy it. In fact, they actually presented a purchase & sale agreement last year, which we didn’t act on because we were negotiating the agreement with the City and we didn’t want to impact that. In fact, they decided to withdraw the P&S last year. We didn’t take action to transfer the property because we would have had to pay a transfer tax and the ratepayers would have had to pay that out of rates. The other property is in the process of being transferred; all property that was owned by Pittsfield Aqueduct. Chairman McCarthy So the system is now owned by Pennichuck East correct? Pennichuck Water Special Committee -8- 07/11/11 Roland E. Olivier, Esq. Yes. Chairman McCarthy But this parcel is owned by Pittsfield Aqueduct. Roland E. Olivier, Esq. Correct. Chairman McCarthy Who is the grantee in the easement? Roland E. Olivier, Esq. It will be Pennichuck East Utility. Chairman McCarthy Don’t you have the same problem with transferring the value of that easement from one utility to the other that you would have with the property? Donald L. Ware First of all in terms of a State transfer tax actually the way it worked out in the transfer, they were transferred at original value so there was very little tax, but there was no purpose to go through transfer from where the sale was potentially pending from Pittsfield to Pennichuck East and then over to this third entity so we just avoided adding to the cost of having to re-do the deeds, go through the transfer. Chairman McCarthy When we are done the only Pennichuck entity involved would be Pennichuck East. Donald L. Ware That is correct. Roland E. Olivier, Esq. Correct, and the transfer tax isn’t significant. It is like $600 or $700. Alderman Pressly So financially this will stay within the subdivision of Pennichuck East? Roland E. Olivier, Esq. That is correct. Pennichuck Water Special Committee -9- 07/11/11 Alderman Pressly Although it is Pittsfield. That is a little bit confusing. Chairman McCarthy It was acquired originally by Pittsfield and… Donald L. Ware I think to keep things clean what I am considering doing, assuming that the Nashua Board of Aldermen approves the transaction, is we may actually at the closing for this actually transfer the property from Pittsfield Aqueduct to Pennichuck East Utility then from Pennichuck East Utility over to the institute, which would keep it clean even though it might increase the transfer tax slightly. Roland E. Olivier, Esq. What is unique here is that this is property that is called property held for future use; therefore, the investment in it is not recoverable in rates. The property taxes in it are not recoverable in rates so it currently has no impact on rates, but it has a cost to the owner. That cost if you looked at the ability to take the sale money and reinvest it in something that would be usable for the ratepayer, between taxes, return on investment is almost $9,000 a year that it is costing us as the current owner and would cost the City in the future in the event that they chose not to sell these three parcels of land. Alderman Pressly Thank you. Can you tell us a little bit about the buyer? Do they own other property in the area? How does the community, do you have any feedback on how they interact with this group? Is it a pretty good arrangement? Roland E. Olivier, Esq. It is a small group. They are in the process of acquiring three parcels of land; one over near the seacoast and one I believe on the western side of the state. They recently received a grant from one of the families who owned Marcum Corporation before they sold it in order to acquire some land over in the Keene area. Their goal is to continue to educate farmers effectively and to grow crops organically for the community in the greater Conway area on this particular land. Apparently last year they grew a fairly large number of crops; mostly in a small plot that was located in this area here, this part of the open field, and they supplied those crops to families in need in the Conway area and other families who could afford to pay for the organically grown crops. Alderman Pressly Thank you. Alderman Tabacsko Thank you. Back to the overall transaction, I guess a question for Mr. Ware probably; am I correct in the numbers that were given before about what was paid for the property and what has been done so far and now the sale, that this ends up being about a break-even in the… Pennichuck Water Special Committee -10- 07/11/11 Donald L. Ware That is correct. The purchase value of the land was $71,248. We’re going to recover $75,000 for the sale so effectively the books will be clean from that perspective. Cash comes into the corporation in this case and is available for reinvestment in other projects. Alderman Tabacsko The other thing that has me thinking here is, as you just described, this was property, I forget the term you used, but for future use. Is there additional property in…how much additional property falls into this sort of category that is actually a cost as opposed to… Donald L. Ware We have various parcels. For instance because of the number of systems we have there are times …I will give you an example; Maple Hills Water System, which was a community water system originally owned by Consumers Water over in the Derry area, had a series of three wells that fed that area; low water volume, poor water quality. We looked at alternatives for that and eventually a couple of years ago we connected that to the Derry water system and purchased water from the Town of Derry, sitting on about 20 acres of land. That 20 acres of land is no longer used and useful, the initial investment in it isn’t recoverable in rates, but that is excess land. There is a portfolio of land that does not benefit the ratepayer that is potentially available for sale at an appropriate time. There is probably a total of about 12 or 13 parcels throughout the various systems that have primarily evolved through interconnections with other systems where there was a piece of land that was necessary for the wells, the wells are no longer useful and have been abandoned, and the land is sitting there potentially developable. Alderman Tabacsko Thank you. Roland E. Olivier, Esq. That includes a couple of parcels I believe in the Birch Hill Water System that we were using when we were providing water from wells in that area. Alderman Sheehan I would like to go back to Mr. Ware if I could. Is it possible to get a list of that portfolio of land not for the benefit of ratepayers I think is how you put it? If you could talk about a little bit was this particular, I don’t have the agreement in front of me tonight, but was this particular property listed on the agreement to purchase the company? There was a list of properties including property F, which … John Patenaude I will answer that. We are buying the shares of Pennichuck so any properties that they own whether it is in Southwood or the utilities, will be owned by Pennichuck, which the City will own. All of those assets will belong ultimately, through ownership of the shares, to the City. Alderman Sheehan I understand, but some things are moving and trying to change hands before we have ownership, and I would like to have a better understanding of what that inventory looks like, where it is, and the value of it. Pennichuck Water Special Committee -11- 07/11/11 Roland E. Olivier, Esq. We have actually disclosed the entire inventory of all of the land that Pennichuck Corporation, Southwood Corporation, all of the other subsidiaries own. We gave it to your attorneys as part of the due-diligence process, it is certainly available for anybody to come inspect. It comprises somewhere in the neighborhood of 1,200 to 1,500 parcels of land, and of course these three parcels were… Chairman McCarthy I think the question is just the ones that are considered reserved for future expansion. Donald L. Ware And I just want to address Ms. Sheehan’s question too. This parcel was not on the original disclosure list because it was not under a purchase & sale agreement at the time that the DMA was signed. Since that… Roland E. Olivier, Esq. The parcels were listed on the list of the property that was owned by the various subsidiaries. This does not comprise a material contract that was specifically listed on the disclosure schedule for the company, I think is what Mr. Ware means. Donald L. Ware But since the DMA requires that any sale of property in excess of $50,000 requires approval of the City, that is why we are here tonight, this is over $50,000. We’re here to seek approval to sell these particular parcels of land. Chairman McCarthy I guess the question is, and I realize it is outside the scope of the issue that is directly before us this evening, can we get a list of the 12 or 13 parcels that are considered excess land? Donald L. Ware It is one of those things it is kind of a project pending because the portfolio is always changing in terms of what is going on, but I certainly have a list that I would be more than happy to share of the parcels that are there; some in Londonderry, Litchfield, Milford, whatnot. Alderman Pressly Thank you. Alderman Sheehan sort of touched upon another area that I would like to bring up tonight not necessarily related to this, and since we have all of the experts here if we could, after this is decided, if they would be so kind as to stay and be able to discuss another issue regarding land? Chairman McCarthy What is the issue? Alderman Pressly I think the issue is the newspaper has reported a difference of opinion and I think it is important to clear that up. I know it certainly sent me back looking at old minutes and I know I’m concerned and would like to be able to discuss it. I would like to know how much land we have left… Pennichuck Water Special Committee -12- 07/11/11 Chairman McCarthy We will discuss that after we get this one dealt with. Alderman Pressly Yes. That is what I am making that suggestion that we be able to bring it up since they are here tonight. Chairman McCarthy Okay. Alderman Tabacsko I apologize, but I am trying to read the map. Roland E. Olivier, Esq. It is a little difficult. I should have brought a magnifying glass for you. Alderman Tabacsko Next to the tree line there appears to be a right of way. Is that a gravel road? Is that what I’m seeing? It kind of loops down… Roland E. Olivier, Esq. The tree line for this area runs right along here. Alderman Tabacsko Okay and right adjacent to that… Roland E. Olivier, Esq. That is correct. The gravel road actually runs over here. At this point it turns into like a pathway. Alderman Tabacsko But it is indicating that same sort of thing. Roland E. Olivier, Esq. You are right. Alderman Tabacsko Thank you. Just wanted to clarify that for my future reference. Chairman McCarthy Do the terms of the sale retain any rights to ultimately put wells on that property if that becomes a good idea? Pennichuck Water Special Committee -13- 07/11/11 Roland E. Olivier, Esq. That was one of those things that initially we investigated and looked at it, looked at the agreement that we have with Conway, look at the fact the Conway Precinct has about three times as much water as they needed and said trying to preserve the right to buy this back at some future point just simple does not make sense. The State has encouraged interconnection rather than individual sources of supply, and so at the end said we’re just, we’ve got a long-term agreement, the DES is going to see that this continues to be inter-connected and so we are not going to try to hold onto something that we don’t believe will ever be needed. Chairman McCarthy Even if that deal with the Saudi’s goes through? Roland E. Olivier, Esq. We try to avoid those kinds of deals. The other thing to consider, there are some test wells that we sunk, which are located here, these little round circle. In order to maintain the right to use those well or to make use of those wells we would have had to maintain a sanitary radius area of 250’ is it Don? Donald L. Ware Four hundred feet. Roland E. Olivier, Esq. Four hundred feet, which would effectively have taken up all of the open field area in the middle of that parcel thereby reducing significantly the value of that parcel for any purpose. Chairman McCarthy Okay. Alderman Sheehan How do you maintain a sanitary area? Would you fence it? Roland E. Olivier, Esq. Yes you could. Alderman Sheehan How is it generally done? Donald L. Ware It is generally not fenced. Normally these are in wooded areas and they are non-disturb areas so for instance we are required with individual bedrock wells dependent upon their capacity to retain actually ownership over a sanitary radius so when we say ownership we either have to have an easement with prescriptive rights that limits the use. For instance, there is a potential that you could have certain activities; passive recreation can exist within a sanitary radius, but you couldn’t be running powered equipment across the…you can’t have any buildings within a sanitary radius, no roads within the sanitary radius, certain types of activities aren’t allowed. So if we wanted to retain the potential use of these wells it would have involved Pennichuck Water Special Committee -14- 07/11/11 about 11.1 acres is what a 400’ radius is, and have this prescriptive language that DES requires in order to retain the effective control over the sanitary radius to know that there was no potential for contamination. Chairman McCarthy Would those restrictions effectively prohibit farming even organic in the sanitary radius? Donald L. Ware Probably the concern would not so much be with the organic farming, but the power equipment running over it with fuels and whatnot that they would not be real excited about on a consistent basis. Roland E. Olivier, Esq. And to be honest with you since they have a variety of different farmers who come in and out of the property to grow crops, I think we probably would have insisted on fencing off the area because of this location here in the middle of the field. Chairman McCarthy But at that point there is almost no point in even selling it because… Roland E. Olivier, Esq. That is exactly the point that we reached in our deliberations. Alderman Pressly I don’t pretend to understand this map. I just want to be assured that the buyer is able to access and to get to the land in a convenient way so that they can farm it appropriately. Roland E. Olivier, Esq. The only access to the land… Alderman Pressly Same as the one that you have? Roland E. Olivier, Esq. Is the same access that we have presently. There is an easement that allows us to come across this gravel road. From the West Side Highway, they bring their equipment down a steep hill. In the springtime this area down in here is flooded usually because the water simply its height, this is a low point. But then they can proceed down this gravel road to any other place on the property. Alderman Pressly Weather permitting I presume. Roland E. Olivier, Esq. Weather permitting. Pennichuck Water Special Committee -15- 07/11/11 Alderman Pressly So you are all landlocked? Roland E. Olivier, Esq. Yes. Chairman McCarthy Are there any other questions? The motion on the floor is to recommend final passage of R-11-132. Alderman Pressly Did Alderman Sheehan vote? Alderman Sheehan I did. Chairman McCarthy You are not a member of the committee are you? Alderman Sheehan No, but in the beginning of the committee I had asked if people wanted to come to the Pennichuck Special Water Committee would they be granted voting rights, and you… Chairman McCarthy We didn’t suspend the rules to do that this evening. Alderman Sheehan I didn’t realize it was an each and every time… Chairman McCarthy Yeah. Alderman Sheehan I thought it was on the setup of the committee. Okay. Never mind. MOTION CARRIED NEW BUSINESS – ORDINANCES – None PUBLIC COMMENT - None Pennichuck Water Special Committee -16- 07/11/11 REMARKS BY THE ALDERMEN Alderman Pressly Thank you. I would like to bring up a subject for clarification, and I think other members here might want to also be involved. There has been some confusion as to what the Board of Aldermen and its full membership knew and what they did not. This certainly sent me back to rehash and re-look at the minutes. From my perspective, I think there was some confusion at the last meeting of the non-public sessions to discuss and learn about them, would we be voting to purchase or not. The very last thing on the agenda, there was a mention on page 35 that there were some agreements to sell land… Chairman McCarthy What minutes are you reading? We don’t have them. Alderman Pressly This is from November 9, 2010. The meeting started at 8:15 p.m. so this put it pretty late. I think it was the last item before we took the final vote. Alderman Tabacsko Was this a special water committee meeting minutes? Alderman Pressly No this was the Board of Aldermen, this was a non-public session, this was, if you recall, we met many, many times, I don’t have the exact number, but we met many times to discuss the agreement with our consultants, and we were given I thought all of the information. I’m sort of confused why we were not given the details of the two purchases. It has been in the press lately and I know I’m resisting being a little bit angry with my own board and my own consultants as to why we were not given the details. Seemed to me we as the buyers had a right to know even if we had no ability to change it or disagree. I know the Pennichuck; I believe it was you… John Patenaude It was me. Alderman Pressly … that was quoted in the paper as saying yes I did know, and if you read the minutes it is yes I knew there was something, but had no idea. It was called Parcel F, and we were told that we could do nothing about it, that it was a done deal. Mr. President you are quoted in here quite a bit as saying oh it won’t affect the watershed, in these minutes. This is something I presume you have known about since you have been involved since the ad in the paper, you have been involved, so I would like… Chairman McCarthy I… Alderman Pressly …to have some explanation. Pennichuck Water Special Committee -17- 07/11/11 Chairman McCarthy …did not I don’t believe know that there was an agreement in place until that discussion. Alderman Pressly Until which discussion? Chairman McCarthy th The one on November 9 . Alderman Pressly You did not know that there were some agreements going back and… Chairman McCarthy No. Alderman Pressly …to 2005? Chairman McCarthy No. I knew and I don’t know how I knew that there had been discussion of development on that parcel… Alderman Pressly But you reference it in here … Chairman McCarthy Because I knew what parcel it was, and I know from looking at the parcels that it is downstream of the supply pond and certainly down stream of Harris Pond where the intake is, and, therefore, does not influence the watershed itself… Alderman Pressly Okay but … Chairman McCarthy …so I was not concerned about the sale of those parcels when that came up. Alderman Pressly Well from my perspective, if I may, protecting all of the watershed and all of the land owner by Southwood was probably the most passionate, emotional issue that the community voted on to protect any more of selling of the land. I trust all of the players have a notion that this is a pretty sensitive issue. I feel that I would certainly have been more responsible had I known up front. I still would have voted for the purchase, but I would have…I feel a little bit set up and deceived and I don’t like feeling that way. I would like to know who made the decision that we could not know the details of it. Pennichuck Water Special Committee -18- 07/11/11 Chairman McCarthy I don’t … James McNamee, Esq. I could perhaps answer that because I was the one who was in charge of the documents. There was no decision not to reveal the information to you. We received a great deal of information from Pennichuck just prior to the actual board vote and signing of the merger agreement. All of that was made available for review in the Mayor’s Office, but we are talking about at least 1,000 pages of documents that were given to us so to cull through them and to have gone through them it would have taken much more time than the many times that you indicated you met in order to go over each document. It was made available and there was no decision to keep it from the board at all. John Patenaude And my statement to the reporter, I wasn’t trying to put you in a bad position Alderman Pressly, what I was trying to do here was to make sure that we set the record straight that in fact Pennichuck had disclosed the fact that there was an agreement with respect to Parcel F and had disclosed it much earlier than 2 days before the agreement was actually penned, and in fact gave copies of the agreement under the Confidentiality Agreement back in September I believe in the first round of document disclosures that Attorney McNamee is referring to. We had actually discussed the issue, the negotiating team, quite a while before that because the issue of what is a material contract came up early on in the discussion because it was actually in Section 3.05 of the agreement, and there are some 30 or 40 sections in the agreement. It was used as one of the examples of what a material contract was. But the actual disclosure to be forthright and clear, did not occur until mid September when we started the non-disclosure procedure. Alderman Pressly Well I guess I’m confused because I have made an assumption, which is always dangerous, but I have made an assumption that all of our negotiators knew how truly sensitive all that undeveloped land was be it up stream, down stream from the watershed. It is a key part of why we feel passionate about owning and controlling our own water supply. Did anybody along this long period, did anybody suggest to you would you please not sell this particular parcel or did you… Roland E. Olivier, Esq. Well we had an agreement… James McNamee, Esq. If I can because Roland and I had the discussion and I think in that discussion when he discussed it in September I think, I indicated exactly what you said… Alderman Pressly September of 2010? James McNamee, Esq. Yeah, when we were disclosing information under a confidentiality basis until the final disclosure came out in November. I indicated exactly what you have indicated that this is a sensitive topic… Pennichuck Water Special Committee -19- 07/11/11 Alderman Pressly This is… James McNamee, Esq. … and not something that the City would favor having occur if it could do anything about it, and the response was that there was a Purchase & Sale Agreement in place and we were not in a position to tell Pennichuck to breach its agreement so there was nothing we could do about it. Alderman Pressly But there have been people representing the City of Nashua since 2002 having a certain level of communication, you yourself were probably not there at the time, but I have to resist really feeling very deceived by this… Chairman McCarthy There was no one on the City side of this negotiation that was in the room when Pennichuck negotiated a deal to sell that property… Alderman Pressly Oh I understand that. Chairman McCarthy …and there … Alderman Pressly The question is why… Chairman McCarthy ...is no reason why they would have told us about that until there was a purchase & sales agreement and we were looking at a definitive merger agreement… Alderman Pressly What I don’t understand, if you read the minutes from page 35 to the end of the discussion, it was the last meeting of many, it was right before the vote, we were all prepared and primed to vote, this was brought up rather casually with the statement at many places that we could do nothing about it, that we could not know the details about it, and it was referenced sort of esoterically as Parcel F. I just don’t… Chairman McCarthy The term Parcel F is defined and Mr. Ware can correct me if I’m wrong, in the Sasaki report from 1991, and has been known to anyone who looked at the maps of the Pennichuck land holdings in the last 20 years where it was. Pennichuck Water Special Committee -20- 07/11/11 Alderman Pressly Com on this was late at night. What I am saying is I think it would have really been very wise and appropriate for somebody on the team to have told us that this was going to happen and be more specific about the impact. Now the question today is when we started this there was about 500 acres of land that had not been developed by Southwood. After the sale of these two, how much do we have left and how many acres were there in the Merrimack site that John Stabile bought? John Patenaude If I may answer Mr. Chairman, the actual number of acres was closer to 450 if you count the acreage owned by Pennichuck Corporation with respect to Parcel F. Parcel F is actually owned mostly, is comprised of some 38 acres, roughly 37+ acres of land, most of that land is owned by Pennichuck Corporation not Southwood. It was the only parcel that wasn’t deeded over to Southwood when all of the land swaps occurred. Southwood actually only owns about ¼ of an acre of land that is in the process of being conveyed as part of Parcel F. The rest of the parcels remain undeveloped and will be sold to the City as undeveloped land because they are not under any agreement with any third party. Alderman Pressly So this was not Southwood land, this was the land that had been sort of deemed undevelopable right? John Patenaude This was developable land, but owned almost entirely by Pennichuck Corporation, the unregulated company, the parent company if you will. Alderman Sheehan Oh that is why. And that little bit of information is why it does not need to go before the PUC for approval of this sale? John Patenaude That is correct. Alderman Sheehan Very tricky, very tricky. Chairman McCarthy It wouldn’t have had to go to the PUC if it were in Southwood either. Alderman Sheehan I know. It was still a profiteering shell game that was played with land before this could go down and it bothers me too. I have some concerns, if I might continue. When this happened I asked if this needed to go to the ZBA for anything and was told on November 9th that no it doesn’t, everything is clean and clear and it is well within what is legal. Low and behold, I have a staff report that indicates they wholeheartedly disagreed and it is three pages long, and the timing of it, we’re beyond where we could do a regular appear except that it has been on the docket again three more times so there may actually be a window, but the nature of the appeal, there were many reasons given why it deserved to have one and then there were 7 examples that matched the same situations where they were given it, and sometimes they were upheld and Pennichuck Water Special Committee -21- 07/11/11 then other times the request was denied, but the staff felt clearly that there were many reasons why it should have been sent back for their special exception amendment. The first was it showed significant changes to the original special exception approved in 2004 as a 35 single family homes and 51 multi-family units are proposed on the property. The City of Nashua Land Use Code states an amendment to a special exception may be approved in the same manner as an application for a new special exception. Then there is another Land Use Code section that states the ZBA considers the nature and condition of all adjacent structures and uses when reviewing the points of law, and then the plan that was approved by the ZBA in 2004 showed a treed buffer and a limited clearing of about 55-60’ from the water tank, and the proposed plan indicates a clearing of trees and grading in the area, which was not contemplated in the original special exception. In regards to the original special exception in 2004 the response to question 3(e) was that the site will remain screened from abutting properties by the existing trees at the site, additional landscaping within the site is proposed to enhance the appearance of the property. The easement was not mentioned at either of the original ZBA hearing nor the subsequent Planning Board hearing. It was recorded several months after the Planning Board meetings. There were 7 examples of times that this should have been having the appeal denied. It should have gone back, and my concern is we have not taken the time to put this through the proper channels of where it should be. Roland E. Olivier, Esq. Actually Alderman Sheehan we have. The ZBA actually heard the appeal, I believe it was some time in July, might have been in June. They overturned the decision of the Zoning Administrator as not having a legal basis for the review on the basis that, as I understand it, there was no change to the special exception that was granted to the water tank, therefore, there was no jurisdiction by the ZBA to look to review the special exception. That is the reason why the sale of Parcel F was allowed to go to the Planning Board. Otherwise we would still be working on the appeal with regard to that. Now, we’re happy to answer any more questions you might have in general. Neither Mr. Ware nor I are in a position to be able to say what happened or didn’t happen with respect to the Board of Aldermen, your private deliberations on this. All I can say is that the matter with regard to the Zoning Board and the decision from which you are reading of the Zoning Administrator has been put to bed and thoroughly vetted by the ZBA. Chairman McCarthy Is there a recorded sub-division plan for this parcel/ Roland E. Olivier, Esq. A recorded sub-division plan? Chairman McCarthy Was a sub-division plan approved in 2004? Alderman Pressly Could have been one in 2004. They reference it. Roland E. Olivier, Esq. I’m not sure there was one that was recorded. Pennichuck Water Special Committee -22- 07/11/11 Alderman Sheehan It did say in here that it was done and it was significantly after the fact, and I can’t find that. Chairman McCarthy To answer your earlier question Alderman Pressly that would be how I know about the sale of that parcel because it went before the Zoning Board and the Planning Board several years ago. Alderman Pressly I think they only went for the water tank… Alderman Sheehan They did. Alderman Pressly …that was primarily what they went for. Chairman McCarthy Sounds like there was a sub-division plan that was heard by the Planning Board several months later. Alderman Pressly Okay. Alderman Sheehan The easement plan was not mentioned at either the original ZBA hearing or the subsequent Planning Board hearing, it was recorded several months after the Planning Board meeting. James McNamee, Esq. I had to do some research on this as it came up. Are you reading from the original Zoning Board special exception? Alderman Sheehan I’m reading from the appeal of the administrative decision, staff report. James McNamee, Esq. Just to be clear, when the original special exception was granted it was a special exception vote, it was for the water tank and it was for an easement on the property in order to support…and there were a number of other items that were in the special exception or that were dealt with that were on the main Pennichuck property. But the main reason for the original special exception was to obtain an easement for the water tank. Alderman Pressly Yeah I think it was strictly… Pennichuck Water Special Committee -23- 07/11/11 Alderman Sheehan Can I please get a copy of the original then because there is… James McNamee, Esq. I’m sure. Alderman Sheehan …also some question, there is ball fields on this property, which the Planning Board had issues with having it not be a part of the presentation because now they are looking to either eliminate them or provide parking and road access and this was not brought up. Somebody happened to mention what about the sidebar agreement for the ball parks that are on this plot of land, which were not reflected on any of the drawings at the meeting. James McNamee, Esq. I can tell you about the ballparks if you want. Alderman Sheehan I want to see the documents. Chairman McCarthy Actually I can tell you something about the ballparks, which is the Board of Aldermen passed, over my strenuous objection, some years back an issue to allow Pennichuck out of the requirement to have those ball fields in return for them paying for the lighting of the softball fields at Yudicky Farm. Alderman Pressly There was a swap. I remember that. Alderman Sheehan So that would be separate from that? Chairman McCarthy Yes. Alderman Sheehan Okay, and… James McNamee, Esq. The ones you are talking about are the ones beyond the Pennichuck fields, the Pennichuck football and softball field, there is another field that is raised up, that is actually on this parcel. Alderman Sheehan Correct. That is what Planning Board was a little upset that wasn’t included in the site map. Pennichuck Water Special Committee -24- 07/11/11 James McNamee, Esq. They can be upset by that, but it is not our property. Alderman Sheehan It is not our property, however, they are approving a site and now it doesn’t have parking or access, which is something apparently they require. Alderman Pressly Thank you. Back to our situation; I have learned in life that if you have some bad news to tell somebody you are much better off telling them right up front saying they are not going to like this, but this is what is going to be happening, we can’t do anything about it, but this is the reality. If you don’t do that then you become part of the problem because you lose trust if you don’t make it really clear, and I think it would have been really helpful for us, for me at least, as an Alderman to know that there was going to be a very unpleasant issue coming up as a result of one of these agreements. I think it would have prepared us better, we would have understood it, we all still would have, as far as I am concerned, would still have voted for the purchase. But I would have felt more responsible as an Alderman to know exactly that what I fought for 10 years ago and have fought for for ten years to protect all of the undeveloped land owned by the whole company, that I think I would have felt a lot better. I would encourage anybody in the future, if you have bad news tell it early, often, and up front because if you withhold it and wait for everything to come up later you become part of the problem. I just want to say this to these two gentlemen. Thank you. James McNamee, Esq. If I may, I couldn’t agree with you more Alderman Pressly, which is why we brought it up on November 9th out of all of the thousands of pages of documents of different items that could have been brought up, we selected the items that we thought would be of greatest concern to the Board of Aldermen and that is why that was raised at that meeting. Alderman Pressly That was not made clear at all. I can assure you. And I have consulted with just about everybody that I have been able to, did they fully understand this big development project, and not a single person I have consulted with has said they understood it at all. It was clearly not understood. Maybe it was late at night, it was the last item, but I think it would have served us all better if we had been fully apprised of it. I have one other question, something that has struck me; in my study of this all along and of course one of the reasons for the SEC investigation, was that there was just one developer who is developing every single parcel in Pennichuck and that was one of the reasons for the SEC fine. Is this the first parcel of Pennichuck land that has been sold to anyone other than the single developer up until this point? Roland E. Olivier, Esq., No. Alderman Pressly There have been other developers? Pennichuck Water Special Committee -25- 07/11/11 Donald L. Ware There is a parcel in Merrimack, which was Parcel B, which is adjacent and behind Pennichuck Square. It was sold to a developed named Robert Folsom. There was also the Parcel M1, the City bought M2 and M3, which was bought by oh the name of the developer is going to escape me now. Roland E. Olivier, Esq., It is the same developer that develops the Southwood spot. Donald L. Ware The end of Southwood… Chairman McCarthy Not Dave Winstanley? Donald L. Ware Winstanley yes. The developer Mo dealt with for years was Stabile… Alderman Pressly Right. Donald L. Ware …and like I said the last couple of developments, the Winstanley development, the Folson development, and now this is again…and again I have nothing to do with the real estate company. Alderman Pressly I know that. Donald L. Ware I try to stay clear of that… Chairman McCarthy A substantial portion of it was not done by Stabile, it was done by Winstanley when the… Alderman Pressly Well up until the SEC investigation Stabile was the single only one. That is what… Chairman McCarthy All of the stuff out at Westwood Park was in partnership with Winstanley… Alderman Pressly And when was that developed? Pennichuck Water Special Committee -26- 07/11/11 Chairman McCarthy …and that would have been in the late ‘90s. Delta Education, the… Alderman Pressly Well that is not what the SEC found so… Chairman McCarthy …the Corning site. He was part owner of the interests in those parcels when they were sold. Alderman Pressly Just one final comment; can we get some idea how much land is left? Chairman McCarthy I think you were just told it is about 412 acres if you take the 38… Donald L. Ware It is about 420 acres. Alderman Pressly Four hundred and twenty is that in Southwood or is that in the whole thing? Donald L. Ware It is all in Southwood. That is correct. Alderman Pressly Since this one came from Pennichuck Corporation, how much land that they could sell… Roland E. Olivier, Esq., Pennichuck Corporation? Alderman Pressly Yes. Roland E. Olivier, Esq., This is the only land that was in Pennichuck Corporation. Alderman Pressly This is the only parcel… Pennichuck Water Special Committee -27- 07/11/11 Donald L. Ware Let me give you a little history because I hear a lot of suspicion here and I want to allay that. I wasn’t around, but what happened was back in the early 1980s Pennichuck Water Works was the only company. Alderman Pressly Right… Donald L. Ware …It owned approximately 2,000 acres of watershed land. At that time it was told you need to build a filtration plant. They hired Sasaki Associates because they were unable to raise the equity in order to construct the plant, and they said let’s look at this 2,000 acres that was bought, and at the time when you bought land back in the late 1800s you bought the entire farm, they didn’t want to sell you off a smart part of it. They said let’s have this evaluated, look at the soils, the slopes, the cover, and determine is there land, based on the science at the time, that could be developed under certain constraints and not impact the water quality of the land. Sasaki identified, basically they said there is 500 acres of critical land that goes to Pennichuck Water Works, that was within the high water mark or directly adjacent to key wetlands and ponds. There was another 500 acres of that 2,000 acres that they identified as buffer that should never be developed was struck into an agreement with what would eventually be Southwood and then 1,000 acres that went to Southwood so the 2,000 acres for Pennichuck Water Works. What happened was Pennichuck Corporation was formed, Pennichuck Water Works passed all of the land up to Pennichuck Corporation. Pennichuck Corporation then passed the land down to Pennichuck Water Works, the 500 acres, and approximately 1,500 acres to Southwood. Somehow this single parcel of land did not get passed out, and my impression is that they realized that this land kind of straddled the watershed from a water supply perspective; some of it drained to supply pond, some of it drained downstream of supply pond, and they never got around to kind of running a knife through it and saying well this land should go to Pennichuck Water Works. If you look at that 37 acres there is about a parcel that is straight down adjacent to supply pond that should have gone to Pennichuck Water Works and the rest would have gone to Southwood under the original development consult that would say okay this can be developed in particular. This land was relatively easy to look at as well as Parcel N, which is adjacent to the D.W. Highway because it was downstream of the water supply. But for some reason after Pennichuck Corporation was formed and the land was pushed back down to Pennichuck Water Works and Southwood, this sole piece of land they didn’t distribute it back out. No idea why. I have looked at the history of it. In fact I thought it was Pennichuck Water Works when I went to build the water tank, said great here is the land we need for the water tank, went to put the water tank up and at that stage my partner on the other side of the isle says oh you want to use that land, you have to buy it from me. So we went ahead and we purchased an easement in order to put the water tank on it. Roland E. Olivier, Esq., When I came on board I came on as President of Southwood Corporation primarily an ad ministerial function and I was told Parcel F was part of Southwood and is actually shown on all of our internal charts as part of Southwood, but in fact Don is right it is owned by Pennichuck Corporation. Either way it is covered by the agreement with North Concord Street LLC, and that agreement has been in place, initially the agreement was signed in 2005. It was modified in 2007 and has remained in place since then. Actually March 22, 2007. Alderman Pressly Just to clarify, of the 1,500 acres of Southwood that was created in the early ‘80s there are 420 that… Pennichuck Water Special Committee -28- 07/11/11 Roland E. Olivier, Esq., Approximately 420. Don’t hold me to the 420, it is 423… Chairman McCarthy That is a little deceiving because we already own a good portion of it. We bought… Donald L. Ware M2 and M3. Chairman McCarthy M2 and M3 back in… Alderman Pressly Why are they claiming that is still owned by them? Chairman McCarthy They are not. Roland E. Olivier, Esq., No we are not. Chairman McCarthy Those were parcels that were for sale and the City bought them, which is a substantial… Alderman Pressly With the conservation fund? Chairman McCarthy Actually we paid for them with a bond. Alderman Pressly Okay. Chairman McCarthy And also… Alderman Pressly I think it really was important to clear this up because there is a big stir in the community. I would have much preferred to have it really clarified and then reading the minutes maybe it was the late hour and we were prepared to vote that night, but I think we all would have been more responsible Aldermen had we fully understood, and it would not have impacted the outcome of the evening I don’t believe. Thank you. Pennichuck Water Special Committee -29- 07/11/11 Alderman Sheehan I have a few. The one up north that we discussed is in a floodplain protection map. Isn’t this property F in a flood zone? Donald L. Ware No. Roland E. Olivier, Esq., No it stands what 75’ above the watershed area. Alderman Sheehan Okay. I would like to see a map. We have talked about getting a list. If it is possible to do it in a map format, a large map so we could see colors of what the City owns or to explain the history of land changes I think would be useful. Chairman McCarthy I think you are going to find the list that you asked for is primarily nowhere near Nashua. Alderman Sheehan And that is okay I just want to have a good… Chairman McCarthy It is going to be a map of New Hampshire with a couple of little dots on it. Alderman Sheehan And I’m okay with that, and if it was electronic I can zoom in, but I think we are taking on a big responsibility regionally and I would just like to understand. Roland E. Olivier, Esq., I’m not sure Alderman Sheehan that we have a map that shows all of the parcels. I certainly have a map that shows the remaining undeveloped parcels for Southwood, which by the way with the exception of the small portion of land that we are referring to as Parcel F, all of the rest of the land is in Merrimack. Alderman Sheehan Okay. I would still like to see it… Alderman Pressly That was my question; of the 420, how much of it is in Nashua? Roland E. Olivier, Esq., None of it is in Nashua. All of it is in Merrimack. Pennichuck Water Special Committee -30- 07/11/11 Alderman Pressly So this Parcel F is the last undeveloped spot in Nashua? Roland E. Olivier, Esq., That is correct. Alderman Pressly Owned by any part of the … Roland E. Olivier, Esq., Owned by either Pennichuck Corporation or Southwood that is correct. Alderman Pressly And one further…you know we go… Alderman Sheehan I’m sorry I’m not done yet… Alderman Pressly Pardon me. Alderman Sheehan …Alderman Pressly. I wasn’t finished yet. I’m sorry. You brought up the fact that this agreement was first done in 2005 and then amended in 2007. I’m very curious as to why all of a sudden now it is so urgent because to me the timing just sends up aggravation that we don’t need to have. This could have been done three years ago and none of this would have been an issue, but when I tell you my phone and my e-mail blew up today and yesterday and since this went…this is right under the wire, sliding in, and why did it take 6 years? I have never heard of a purchase & sales agreement sitting for 6 years, and the deal not closing. Could you talk to that please? Roland E. Olivier, Esq., All I could do is talk about the history since I have been here. In 2007/2008 was kind of the height of the real estate market in this area and that is when the purchase & sale contract, the current one, was signed with the developer, in March of 2007. That is why the price is what it is, significantly higher than what the market would bare today I believe with regard to those parcels. However, then the bottom fell out of the real estate market, the developer asked us to extend for some period of time their requirement to obtain final approval from the Planning Board for the development and for the site plan that they had at that time. We agreed to do that. That is a common thing. I think your attorneys will tell you that many sellers around the State have done that with developers over the last three years because no real estate was moving. There was a good business reason why we did it. The last time we extended that was in 2010, and we asked them to move on the property, which they did. They submitted their existing plan in February of this year in time for the plan to be approved they were actually scheduled as I understand it on the Planning Board agenda in April of this year. I guess you could say it is under the wire, but that was near the end of the time period. Pennichuck Water Special Committee -31- 07/11/11 Alderman Sheehan Do we have a copy of all of these extensions I’m assuming under disclosure and could we please get a copy of that? I’m not sure if it is possible for tomorrow night, but as quickly as possible. The last question I had was something that Attorney McNamee had mentioned saying at the meeting when we found out about Parcel F, I approached the Mayor and asked her to discuss with this company again the potential or interest of selling it outright. Are you telling me, you said the last time you have done that is in September. Has there been any inquiry made as to buying it outright? James McNamee, Esq. Is that a question for me? Alderman Sheehan It is. James McNamee, Esq. I’m sorry your question is you asked us to do that or you had asked the Mayor to do that and you are asking me to … Alderman Sheehan I did. James McNamee, Esq. …tell you whether the Mayor has? I actually don’t know if the Mayor has made that inquiry. Alderman Sheehan Okay, but you made that inquiry in September, you stated earlier. James McNamee, Esq. No, we were disclosing information, mostly Pennichuck was disclosing information to us during the course of the negotiations over the merger agreement, and one of the pieces of information they disclosed was the existence of this agreement. Alderman Sheehan Did I not hear you say something to the effect of you asked them if that is something they might be willing to be bought out of? James McNamee, Esq. No. I told them it is something that if the City had its druthers we would not like to see it developed. Alderman Sheehan So as far as you know it has never been brought up again? Pennichuck Water Special Committee -32- 07/11/11 James McNamee, Esq. There may have been some discussions. Alderman Sheehan If you could look into that, that would be great. James McNamee, Esq. Sure. Alderman Pressly Thank you. Those of us who tried to study this all of these years we always here of this Sasaki report, which was done in the late ‘70s, early ‘80s. Roland E. Olivier, Esq., No it was the mid ‘80s. Alderman Pressly Mid ‘80s and it was after the Federal Government said everybody had to have filtration plants. Has anything been done since? Has any independent group looked at this land? Sasaki goes back what 40 years? Roland E. Olivier, Esq., You mean Parcel F in particular? Alderman Pressly No, just all of the decisions as to which were needed to protect the water supply, which were not. Sasaki was employed by Pennichuck so… Donald L. Ware We’ve done extensive watershed studies and the waterworks over the full 27 square miles of the watershed beginning in 1995 looking at both parcels that we own but also parcels owned by various entities looking at storm water for instance. Out of that we built a storm water treatment system that is behind the VocTech school. We worked with; at least I worked with the engineers and the City to work on the water supply ordinance in order to put protective requirements in relative to storm water treatment in the late ‘90s as part of the watershed. But they did not specifically look at these parcels. You look at normal setbacks; again Sasaki report would say the setbacks that were recommended are the same that today would be recommended as prudent setbacks. That being said, in today’s environment you would say if you own land and it is in the watershed and you have already put the investment in, even if there is a potential to develop it safely, you would not develop it, you would preserve it. Alderman Pressly Right. I guess you have just sort of made my point. So there has been no independent entity take a look at this since the mid ‘80s other than yourself. You have answered my question. Pennichuck Water Special Committee -33- 07/11/11 Chairman McCarthy You have had some updates done by CEI right? Donald L. Ware Right and that is what I’m saying, we have spent a lot of money looking at the entire watershed, the land that we own, the zoning, working through those things, looking at best management practices for storm water treatment systems, evaluating those, doing some public/private partnerships for instance with Pennichuck Square; we worked with them and put in permeable pavement out there and roof leaders and things along those lines. Roland E. Olivier, Esq., Don didn’t the State also look at our best practices or our practice on managing the watershed as well and submitted an excellent report on us? Donald L. Ware The practices that we are following, again kind of common practice is if you own the land today would be, no matter where it is within the watershed, would be not to develop that land. If there is land that you don’t own, the cost of purchasing it typically far outweighs any value to buying it unless it is really critical and therefore the overlay district that is there that requires how storm water should be treated, infiltrated in order to maintain base groundwater flow, typically says don’t go out and purchase more land, if you are going to do anything preserve the land that you have and then work towards the maintenance of the storm water facilities that are in effect. I can literally give you a row of studies done both at the overall watershed level and then at a sub- watershed level and then down to individual project level throughout the City relative to the watershed and its treatment. Alderman Pressly Thank you. Alderman Sheehan That was a concern I had when I saw the date on the report, which I believe was 1981 because it clicked that it had been 30 years. In my work experience, I have never made a business decision based off of a 30 year old report so that was a concern to me that I would have liked to have seen one updated, and done without the intention of would you please study our water system and tell us how many inches we can carve off and sell to raise capital to build this plant. I think getting a just what do we need and not having that objective might give you a different outcome and also the way that technology has changed, I know that not too many meetings ago we had to approve a change in the flood zones or all Nashua residents would have their flood insurance cancelled. Some things have changed, and I would have liked to have seen that reflected before these things went forward, which was why I was disappointed this did not go in front of the ZBA or the Conservation Commission, and now I am disappointed it does not need to go through the PUC. I am not saying that at some point we might say gee this is the right decision; I’m just not sure we are doing the right due-diligence in getting there right now because 30 year old information is old. Donald L. Ware Again, I’m going to tell you from the waterworks end we don’t have 30 year old information. I think Brian will support me from the water works end and will almost say he and I are adversaries, my goal is to say do not develop that land, but that land is held by the shareholders, the decision was made by the board that they Pennichuck Water Special Committee -34- 07/11/11 could sell the land, DES has no problem with them selling the land, the PUC allowed it to be taken out. As Barbara indicated apparently that was a big driving factor and the rest of the land that is there will be preserved and not be developed. We have very current information on the watershed and both private and our own ownership and certainly our recommendation would be not to develop land within the watershed. That being said, again as Brian has indicated, Parcel F is not in the watershed to the drinking water supply of the City of Nashua. If you want to retain it for green space that is fine, but don’t say you are maintaining it to protect the water supply because it has no bearing on the water supply for the City of Nashua. Roland E. Olivier, Esq., I would like to make my own comments. Mr. Ware and I are colleagues not adversaries in this area. Chairman McCarthy I guess I would point out that when we held hearings on the water supply protection district Mr. Ware clearly identified himself as being from Pennichuck Water Works and Mr. Arel clearly identified himself as being from Pennichuck Corporation. Roland E. Olivier, Esq., I understand. We have been approached by several developers since the time I have been on board, which is about 3 years, and I will say that since we began the discussions with the City with respect to settlement of the merger agreement and settlement of our eminent domain disputes, we have ceased any and all discussions with any other developers except for North Concord Street, LLC. Why didn’t we cease with them because we had an existing agreement, which we would have breached, and as the company counsel, now I am really in adversary with myself, I couldn’t council myself to breach that agreement. Alderman Sheehan And yet it was about to expire and got extended according to your earlier testimony. That is … Roland E. Olivier, Esq., We bent over backwards like many other sellers in the State to make sure that we could preserve our right with the developer to sell that land. Why, because from the business perspective it made a great deal of sense. Now you can argue whether it made sense from a conservation standpoint. I recognize that there is an argument to be made on the other side, but from a business standpoint there is no way you could have gotten this price in today’s market for this property, and it was the highest and best use for that property. As Mr. Ware said, since it was south of the watershed and the water flow was shown, as a result of test wells and everything else, to flow away from the watershed or down into the Pennichuck Brook below the plant, there was no impact whatsoever on the water supply. Otherwise, we would not have developed that land. James McNamee, Esq. Which actually is a reflection, if I might, of the sort of negotiations that we had were clearly a clash if you will of the municipal sort of impulse toward preservation of the land, preservation of the asset, and the corporate need to act economically rationally from their point of view in the best interest of the shareholders. It was their decision to renew that because the price was good, and I believe it was around that time we had the discussion the druthers for the City would be not to have renewed it, but at that time we had no merger agreement, we had no say in it, and we couldn’t get in the way of their contractual arrangements. Pennichuck Water Special Committee -35- 07/11/11 Roland E. Olivier, Esq., And I will say also something that Alderman McCarthy has said to this committee because I remember hearing him say it some number of months ago when I was here as a member of the audience; the 2011 bonus plan, which has been disclosed to the City and the Board of Aldermen, at least the City’s representatives, as well as the Merger Agreement, both of those documents; 1) prohibit the inclusion of any profit made from the sale of Parcel F in either the bonus plan because it is a one off kind of a sale and we have never included, since I have been here, any sale of any land, including this land by the way, in any executive bonus or non-executive bonus plan, and 2) the Merger Agreement prohibits us from increasing any dividends to our shareholders beyond the level that we were at prior to the signing of the merger agreement. Neither the executives nor the non-executives of the company or the shareholders are going to benefit from the sale of either Parcel F or these three parcels in North Conway. Any sale proceeds, just to be clear, any sale proceeds from any of those parcels will remain in the company to be used for the operation of the company. I would presume, assuming we don’t use them all, which I doubt we will they will be available for operation once the City takes over the company. Alderman Sheehan Just to be clear you said the agreement was renewed in February. Is that February of 2010 or February of 2011? Roland E. Olivier, Esq., The agreement was renewed in June of 2010. Let me just be clear. The agreement has remained in place since then. What was extended was the time period for the performance relative to the conditions precedent specified in the agreement. The conditions precedent being obtaining the necessary permits and approvals both at the local and state level so they have obtained all of those approvals now. Alderman Sheehan Okay and I’m getting a timeline of those and a copy of the agreement? Unidentified Speaker Jaimee has those in the Mayor’s Office. Chairman McCarthy If there is nothing else, I see no need for a non-public session. Is there a motion? ADJOURNMENT MOTION BY ALDERMAN TABACSKO TO ADJOURN MOTION CARRIED The Pennichuck Water Special Committee meeting was adjourned at 8:37 p.m. Alderman Jeffrey T. Cox Committee Clerk  --- · -----.. ....-- -- .. - --- _.- • -- --- •· - -'- .--- ::._ -- -_.- - =--- - - --=--.......... :..:._.. • ... ':"::-"'"i-.._",,=-- ---:=.... :'~-:'-"':"'... ...:s..•-==:, -.£::1,,::,_ _ .. --- ::.=.. . . -".:: :.:: .. -~-"''f'::-"-"'='- ... -.::~::.':,,'"= .=,. .. _ ._,-~ - _ .. ... _ _..=':' .. -It=" ,,-- ....... - ••. - ..... == !£:i.I:..-- -- -. _.- " --. --- .~ • . . ..... 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