Pennichuck Water Special Committee

REPORT OF THE PENNICHUCK WATER SPECIAL COMMITTEE AUGUST 2, 2012 A meeting of the Pennichuck Water Special Committee was held on Thursday, August 2, 2012 at 7:08 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-at-Large Lori Wilshire Also in Attendance: Alderman-at-Large Jim Donchess John Patenaude, CEO, Pennichuck Jay Leonard, Pennichuck Board of Directors Directors of Pennichuck Corporation Chairman McCarthy Alderman Cookson had indicated that he would be unable to attend this evening. The first order of business is Public Comment period. If you wish to address the Committee, please come to the microphone and give your name, address, and your comments. PUBLIC COMMENT Geoff Daly Good evening Mr. Chairman. Geoff Daly, 48 Walden Pond Drive. I'm here tonight in full support of Alderman Donchess's 12-39. I would like to remind everybody at the same time that this is being under constant discussion for over a year. Parcel F, the playing fields and the bog. We've discussed at great length what Alderman Donchess is trying to do is save that for the City. I did ask tonight if the new easement had been circulated. I find out from several aldermen that they haven't received copies but it is around. We're back to O-96-06 again. That easement if it has been rewritten and is being approved by the City Legal Department I'm sorry, we got a conflict of interest again with the Mayor and the Attorney for the City. I really request that whatever we do 1) Alderman Donchess' bill get passed immediately and at the same this chamber revisit as was stated last year and in fact earlier this year, the Ordinance O-96-06. It goes to the Mayor and the Attorneys and stated on numerous occasions the parcel that was part of the easement including the bog now was never supposed to be in the sale of the property. I understand having looked through the unsealed minutes this special water committee wasn't fully aware of this until basically the sale was concluded. That is not right. That to me is illegal. With that, I believe we got an opportunity with the people from Pennichuck here and if Mr. Slattery was present, we could resolve this once and for all. I requested last year and again this year that parcel of land be deeded, the bog be deeded to the Conservation Commission and the Audubon Society. The playing fields Pennichuck Water Special Committee -2- 8/2/12 and the access road be deeded to the City. Nothing's happened. Mr. Slattery can't do anything with any of that land. Nothing has happened. The Mayor has not involved anybody apart from I hear the School Department is now laying claim to some of the boardwalk stuff that will go around the bog. I'm sorry there are other people who put those ideas forward way before anybody at the school put it forward, including two gentlemen from the Audubon Society. It was even mentioned and discussed at our own Conservation Commission. That money should go into a proper fund set aside for that area to be remediated and properly organized. If you want, I can actually forward an e-mail that I forwarded and sent out to a certain people within the City and I believe Alderman Donchess you did get a copy of that. You didn't Chairman McCarthy; I will make sure that you get a copy of it. It outlines specifically the timeline of what has gone on from the day this all happened. We have people present here who have been a party to this whole deal. The citizens who are now basically the shareholders of Pennichuck Water Works in name have been left out. A lot of the stuff has been done behind locked doors. People are being not made aware of what's going on. Tonight I think we have to settle this and people have made some errors, we all do - nobody is perfect. We have to fess up to it and make it right for the citizens of Nashua. Thank you. Dave MacLaughlin Good evening. I'm Dave MacLaughlin. I live at 4 Heritage Village Drive here in Nashua. As you know, I have the privilege of Chairing the Conservation Commission. I'm here in support of the resolution being proposed by the 4 sponsors R-12-39 asking that the Board consider moving the proceeds from Parcel F as currently in Pennichuck's possession to the Conservation Fund. I do so for several reasons among which are the fact that we feel it is an appropriate place for those funds to be designated. As you know, the Aldermen know, those of you who are on this Committee and the others who comprise the full Board, our fund has a finite amount left in it for a fund balance. Those funds that are there were generated in the past by conversion and taxation on current use properties, which are now more scarce than ever as the City has reached near build out. Within the last year and a half, the Board of Aldermen in conjunction with the Conservation Commission invested heavily in protecting some of our remaining nature resources, notably the purchase and acquisition of the two large tracts of land that we now call the Terrell Homestead Conservation Area. Going forward, this area which is being designed for use by the public for passive recreation will incur some expenses. We invest in easements, the trail management and other activities on that property as well as the maintenance, and the cleanup, and reclamation of other areas that are in the City's possession designated as conservation areas. Our Commission recently formed a subcommittee to focus on the budget and the management of the resources that we have remaining in the conservation fund. We're doing so because we realize that we have to be very careful with the remaining monies so that we don't run the fund down to a zero balance and leave future commissions with very little ability to manage our resources for possibly invest in future ones. There are other properties in the this City that could be protected and purchased just as we decided to do with the Terrell properties. We can't accomplish our goal of adding to or future funding of a conservation fund very easily without some strong steps towards considering different sources of revenue. Nobody likes taxes. So that's not something we're thinking of but we have to come up with some other thing. It can't be funded at the scale we need it to be to maintain a healthy balance through activities like one time bake sales and those sort of things. This has to be something where our Pennichuck Water Special Committee -3- 8/2/12 Commission can find a way to substantially add to the fund balance. The money that is sitting there in Pennichuck's possession that it received from the sale of Parcel F is an obvious source and an obvious place to begin. I'm very enthusiastic and I know members of the Commission are as well to support this resolution. I hope that in your careful consideration of it and some of the testimony that you're going to have following me, you will find a way to find it acceptable and support this resolution and urge a positive or favorable recommendation to the full Board of Aldermen. I ask that you please do consider doing that. Thank you for taking my comment. Tracy Dye Good evening ladies and gentlemen. Tracy Dye, 170 Concord Street, Nashua. I'm a blue star mother. I am here to support and hopefully add to 12-39. We appreciate this. I know the citizens of Nashua and Conservation are going to enjoy this area once it is developed into conservation. You're going to conserve not only the birds, the flowers, the bog itself. It's going to be a wonderful teaching tool for future generations. I don't know all the legalities of it. All I know is that my prayers to save the bog and to save that area for future generations because we all are connected. It's all relative. Once you start destroying one area, you destroyed yourselves. My prayers are pretty much almost been answered - to save the bog, and to save the wildlife, and for future generations, all those species and for the education of our children. Thank you. Fred Teeboom Good evening. I'm Fred Teeboom. I live at 24 Cheyenne Drive. I want to address R-12-39 which is on the agenda this evening which deals with specifically with the money. It came from the proceeds of around $2 million left over as I understand it to be transferred to the City for purposes of conservation funds. I support that fully. The reason I support that fully is most likely in my view shown in the minutes, and I'm going to take you back to the minutes on November 9, 2010. This evening - I was not there as I was not an alderman then, it was a very lengthy evening (inaudible) to the approval on the $220 million bond. It's what was discussed. A lot of compression; a lot of push to get the bond approved. Therein lies my problem because I think it's very limited disclosure about Parcel F. The details of these minutes in the record is not all that lengthy. It starts with Alderman Flynn. Alderman Flynn being very perceptive of these kind of things and I think he's sorely missed. Alderman Flynn - "Something that came up a little while ago, I was trying to remember what the other side of that was and when we were talking about the property over there, the Salmon Brook property, how is that other property being resolved in this? That Hebron Cove property. Isn't the City taking control of that as well? Are we getting that as part of the acquisition of Pennichuck?" I believe John is in the audience. John Patenaude - "That's Parcel F." Mayor Lozeau - "That's the parcel. It is right across from existing Hebron Cove and there was an agreement Pennichuck and the developer of Hebron Cove and I think..." John Patenaude interrupts and says - "But it is the developer that has basically the right to purchase all the property. Pennichuck Water Special Committee -4- 8/2/12 I'll interject my comment. Clearly the property had not been included in the sale as a right to purchase. Subject to approval of the development by the City and I'm trying to remember that from memory here. (inaudible) surprise is the number of lots that are approved. So I think that's 47 lots. I could be off by one or two here but at 47 lots it was $2.1 million that the sale had transpired. I think that's the property. Mayor Lozeau - "There actually are 2 properties in some form of development agreement. One is the property right behind land that is now on Concord Street that abuts Pennichuck School which is an agreement that the note is describing. The other one is Merrimack across from Hebron Cove. If there is an agreement with the developer, I can't recall it. It has been I think a 50/50 split with it is the..." and John Patenaude - "It is the hiccup five with John Stabile." Mayor Lozeau - " Right and I can't recall a developer bought the Pennichuck share of it 50/50. It is still 50/50 and the developer is a general partner on that one and they are a limited partner if it is under development." Alderman Flynn always got to the heart of it. So what transferred to the City of this agreement here? Mayor Lozeau - "Whatever the deal is that they have right?" John Patenaude - "Under that bill..." Alderman Flynn - "Under the agreement that we have, we are assuming the same position as Pennichuck had?" John Patenaude - "We get 50 percent and we are in the same position." (Fred Teeboom) Nobody mentions the dollar figure. We're talking about 5 hiccup buildings in which John Stabile is 50 percent partnership and therefore the City becomes the owner and the transfer gets 50 percent partnership. Nobody mentions the price even though Alderman Flynn asked for this specifically. Alderman Flynn - here it is - "What is the value? What value is there to that?" John Patenaude - "Pardon me?" Alderman Flynn - "What money value is there to them? John Patenaude - "I can't remember. I really can't remember that." The high price consultant, a CEO of a substantial corporation can't remember the price of the sale pending on the 5, this is in the millions. They had a nonpublic session...I was still aldermen when the price of the hiccup dollars came up and was in the area of $5 to $10 million. I don't know what the price is. I don't know what the price is with the partnership is. No one ever talked about the money that accrued the Pennichuck Corporation. Mind you the Pennichuck Corporation is an independent for profit corporation. The Board of Aldermen cannot direct them what to do with this money. They can direct them with the money in R-12-39 as a request. Pennichuck Water Special Committee -5- 8/2/12 Certainly they can request what to do with the hiccup building. It all goes to Pennichuck Corporation. The people sitting behind me. Mr. Patenaude at that time couldn't remember. President McCarthy - "Depending on the time, we either get the interest on the property that Pennichuck currently has or if they transcribed the bill by the time we close, we can get the cash that comes from it as part of the cash reserve of the corporation." That's correct. We can get the cash or you get the property. Alderman Flynn - "That is anticipated to be $2 million or $3 million?" John Patenaude - "No. That's for the F lot." (Fred Teeboom) Parcel F that's in back of the Pennichuck School the Mayor has talked about. Mayor Lozeau - "You're right." James McNamee, Esquire - "These two agreements are confidential." Now I ask you, during a nonpublic session why aren't these confidential agreements disclosed to you? If you had to, I'm sure Attorney Donchess can attest to that, you just sign another disclosure agreement. When I was alderman, we did it all the time. We were privy to deals that signed non disclosures to understand. Here's a deal pending not included as part of the discussion about buying Pennichuck as a confidential agreement and the aldermen are not made privy to it. It's not an exception. It's certainly not appropriate. I sympathize with the alderman personally. He questioned this again and again but it's too late because you're either there or he should have asked for it and he didn't. Now is the time to ask for it. If there's a confidential agreement, where is the confidential agreement? We are not in disclosure session; we're not in private session - nonpublic session. If you want to, I will sign it on disclosure. James McNamee - "The two agreements are confidential." John Patenaude - "Yes they are confidential." Alderman Sheehan - "Is that part of the watershed that we might be looking at making conservation?" President McCarthy - "Downstream supply for them." It then talks about setting up the conservation fund. It talks about the airport and it really gets off track. Then on page 38 it says... President McCarthy - "What else do we need?" The subject goes off talking about the PUC and that's it. With that discussion, the aldermen approved the sale of Parcel F - basically the sale of Parcel F it hadn't been sold yet. In fact the sale of Parcel F didn't go through until days before Nashua closed on the Pennichuck deal - 2 days or so. This is the whole problem that Daly had with the court when he tried to bring this up O-96-06. Pennichuck Water Special Committee -6- 8/2/12 So in conclusion, absolutely Pennichuck Corporation owes the City this money - $2.2 million. I would argue that Pennichuck Corporation owns the hiccup building money but no one ever asked for that. It's certainly the compensation of Parcel F. That was an absolute disregard of public interest here. There was negligence on the part of the aldermen following through. There's negligence on the part of the Mayor not being totally open about it, and it's negligent on the part of Mr. John Patenaude because he couldn't remember anything. At least not about the hiccup building. I will support fully R-12-39. Thank you. Peggy Trivilino Peggy Trivilino, 14 Profile Circle. This is just a thought. I am very much in support of this resolution. This money going into the conservation fund in addition to taking care of Parcel F and probably buying new parcels, I think Nashua has to understand that we're rapidly approaching a point where we need to redefine our paradine for progress. Physical growth and expansion that never happens indefinitely. We have to start looking at models that lead more to sustainability and livability. In pursuit of that putting this money to conservation funds would enable us to do some work reclaiming and repairing some very badly degraded wetlands area - brooks, streams, marshes, ponds. The livability - the human factor, the sustainability of any municipality depends upon preserving its natural resources. Our wetland resources are sorely degraded and if this money were put into the conservation funds, it would do a great deal of good not only with Parcel F, not only by possibly buying more conservation land, but most importantly repairing and reclaiming what we already have that does not have to be allowed to disintegrate completely. Geoff Daly Geoff Daly, 48 Walden Pond Drive. This is a letter addressed to you by Attorney Bennett on March 30, 2012. I refer to the last paragraph which actually pertains to Parcel F and the ongoing negotiation. May I bring it forward to you? Chairman McCarthy To the Clerk please. Is there anyone else who wishes to address the Committee? Jay Leonard Good evening Mr. Chairman. My name is Jay Leonard. I'm a resident here in Nashua at 16 Berkley Street but I'm also the Chairman of the Board of Directors for Pennichuck. We have many members of the Board here and we also have with us the CEO Mr. John Patenaude. While I don't have any general comments, certainly willing to comment at the appropriate time on this resolution. I look to the Chairperson on direction to that. Chairman McCarthy I was planning to invite you and Mr. Patenaude up when we have the discussion later. Is there anyone else who wishes to address the Committee? Mr. Leonard I wonder if you might just introduce the members of the Board of Directors who are here. I don't know that everyone on the Board has ever met everyone except for myself. Jay Leonard Pennichuck Water Special Committee -7- 8/2/12 Certainly. To make it simple on me, I hope you don't mind but I'll just ask them to introduce themselves. Then I get all the last names wrong. Introduction of Board of Directors for Pennichuck Jay Lustig John McGrath Alderman Donchess Would you mind if each member said where they live. Jay Lustig Jay Lustig, 14 Olympia Circle, Nashua. John McGrath John McGrath. I'm a resident of Londonderry, New Hampshire. Elizabeth Dunn Elizabeth Dunn. A resident of Windham. Jim McMann Jim McMann. I live at 29 Danbury Road in Nashua. Paul Ondalia Paul Ondalia. I live in Amherst. David Bernier David Bernier, North Conway. Steve Genest Steve Genest, 20 Sherwood Drive, Nashua. Preston Stanley Preston Stanley. I live at 16 Archery Lane in Nashua. Pennichuck Water Special Committee -8- 8/2/12 Chairman McCarthy Thank you. If there's no further public comment, we'll move on to Communications. COMMUNICATIONS – None UNFINISHED BUSINESS - None NEW BUSINESS – RESOLUTIONS R-12-39 Endorsers: Alderman-at-Large Jim Donchess Alderman Daniel T. Moriarty Alderman-at-Large Barbara Pressly Alderman-at-Large David W. Deane RELATIVE TO ASKING PENNICHUCK TO CONTRIBUTE THE PROCEEDS OF THE SALE OF PARCEL F TO THE CITY CONSERVATION FUND MOTION BY ALDERMAN PRESSLY TO RECOMMEND FINAL PASSAGE OF R-12-39. ON THE QUESTION Chairman McCarthy Would either of you gentlemen like to comment on the Resolution. John Patenaude John Patenaude, CEO of Pennichuck. Just as a point of clarification and background for the Resolution - for the record so far this year since Pennichuck has acquired - the City has acquired Pennichuck, Pennichuck has paid over $5 million to the City relative to the principal and interest on its acquisition bonds. When the City testified before the NH Public Utilities Commission, there was an indication that we would not seek to make distributions over and above the obligations of the City acquisition bonds plus an amount not to exceed $500,000 a year for the reimbursement of eminent domain costs. Also Pennichuck's ability to make distributions to the City is constrained by restrictions set forth in its current boring agreements with RBS Citizens. That agreement provides for an express exception for dividends relative to the City for the bonds and for the $500,000 annually. With respect to any other dividends requires that the bank provide written consent. So we can't issue a dividend without the written consent of the bank. Part of this also was presented to the NH Public Utilities Commission and the Aldermen - our intent is to borrow all of our capital needs going forward. A distribution at this point in time could create problems in that any favorable banks or organizations that would be willing to loan us money relative to help us in our efforts for capital would probably take that as a negative and at a minimum increase our borrowing rate, which would cost the ratepayers and the water users money. The final point I'd like to make is that when we went around to the various communities other than those that Nashua served, there was an indication that distribution should be limited to the Pennichuck Water Special Committee -9- 8/2/12 city acquisition bonds, the amounts to fund that and to the repayment of the eminent domain over time. This could create an issue with our relationship with other communities. That's the extent of my comments. Chairman McCarthy If I understand this correctly, you do not believe that PUC approval of the purchase by the City allows the transfer of more than the compensation to the bond sale and the potential time based reimbursement of... John Patenaude That's at the regulated company but the agreement, the credit line with the RBS Citizens is at Pennichuck Corporation. The parent company. Therefore, there is a limitation there. Chairman McCarthy Let me ask you a blunt question which is if this Resolution were to pass, do you believe that your fiduciary obligations company prevent you from complying with a request that's embodied in the Resolution? John Patenaude I would say yes. The reason for that is that this is a highly leveraged company. We have a responsibility to pay back the loans to the City which currently is being done by the ratepayers. We also have an obligation to our lenders and the context that we can't distribute without their agreement. It would make it difficult to continue business in our current form. Chairman McCarthy Could I ask just as a point of clarification? During the public comment there was discussion of both the Parcel F transaction and the hiccup properties in Merrimack. What is the status of the hiccup properties? John Patenaude The hiccup property it's hiccup 4. That's undeveloped properties and it's a partnership between John Stabile and Pennichuck. The value of that land is roughly $170,000 - between $170,000 and $200,000. Chairman McCarthy So the company still owns a half interest... John Patenaude Yes we still own half interest in that. Chairman McCarthy What about the developed properties? Pennichuck Water Special Committee -10- 8/2/12 John Patenaude Those were sold years before we had the City purchase the shares. Chairman McCarthy Discussion? Alderman Pressly Thank you. The last paragraph of the Resolution where it says "NOW THEREFORE BE IT RESOLVED..." Do you have a copy of this? It specifically says "...and if the Public Utility Commission approved this..." which suggests to me that it would have to be something that would be created and prepared and presented to them as an exception to what they already have agreed to. I think they deal with things like that on a regular basis. John Patenaude The dividend comes out of Pennichuck Corporation, which is it would come out but it's not a regulated company but the matter of getting the monies up there would probably come out of the regulated companies. They would not have to rule on that. Alderman Pressly I thought you just said that they would restrict you from doing it? John Patenaude There was an agreement overall. If you look at the testimony before the PUC, there was an indication by the City overall but distributions because they the PUC and the outside communities were concerned about the City of Nashua taking funds in excess of the acquisition bond and the $500,000 that was agreed to escrow. At that point in time, there was testimony indicating that the City had no interest in buying fire trucks with cash from for instance cash from Pennichuck. It was going to limit itself to repayment to the bond and making sure that the debt service is serviced and also over time repay the $5 million that the eminent domain cost. Alderman Pressly I believe I understand that and I can understand your position on it and also regarding the towns and even the citizens of Nashua one of the objections to even purchasing the company was that it would be co-mingled with the city budget, and that it would become a cash cow for the City of Nashua. I'm just as concerned and protected as I believe you are to not have that happen. I think this is a one of a kind exception and I think we can make a case to the towns and I think to all the players that have the understanding that this type of thing could not happen. I think we could make a strong case for this exception to be made. To do that, I think it would behoove us to be more specific about where the money is going to go. We have it going to the conservation fund but I think we'll have to go a step further and say for what purpose in the fund. One of the Commission members has mentioned repair and reclaim. I think we would have a stronger case if it were to purchase conservation land as close to the Pennichuck property as Pennichuck Water Special Committee -11- 8/2/12 possible. If we were to make it very, very clear that this fund is never going to be used to buy the trucks as you speak of but it would be very, very specific to only exclusively to the purchase of land for conservation purposes in close proximity to the Pennichuck property. I think we could make a strong argument and case before the PUC, and anyone else that you have to go, any federal agency to do that that I think we could make a very logical case. I would like to speak to that further but I'd like to stop at this point and let other members have a moment to speak. Alderman Donchess If possible I would like to ask Mr. Patenaude a question and speak in favor of the Resolution. Could you Mr. Patenaude please remind me at what rate was the money borrowed to make the Pennichuck acquisition? John Patenaude It was 4.09 percent. Alderman Donchess Well Mr. Chair first of all I want to thank the members of the Board for coming in and introducing themselves. I know that you have met them in the past. I never have and I wanted to thank them for that. Of course the Board members... Chairman McCarthy I assume you've had an opportunity to meet Mr. Leonard. Alderman Donchess I have met Mr. Leonard. His picture is right next to mine. So yes. I've know Mr. Leonard for a long time. The other members of the Board I have not. I want to thank them for coming in. The reason I propose this is that when the City and its people supported the Pennichuck acquisition, I think that one of the main reasons or big reason that people in the public supported this, or supported the acquisition is they wanted the sale of the land to stop and they were upset that over the years Pennichuck had sold either watershed land or land close to the watershed and retained the proceeds. I think Mr. Chair that many members of the Board of Aldermen that was part of their rational in supporting this. I don't think the public was aware regarding the fact - before the purchase went forward that the last remaining - I know there's debate over whether this is watershed or not but whatever it is, the last big piece close to the watershed, or in it, or whichever was actually going to be sold despite the acquisition. Then it came to light in the summer of 2011 that low and behold the last piece was going to be sold for $2 million right before the acquisition. Then that sale went forward the day before the City acquired Pennichuck. As the recipient of the $2 million of the sale that took place the day before the acquisition, the Resolution proposes that we the Board of Aldermen on behalf of the City ask, request. We're not demanding; we're requesting that the proceeds of the sale be contributed by Pennichuck to Pennichuck Water Special Committee -12- 8/2/12 the city conservation fund for the purposes of conserving and preserving land elsewhere in the City of Nashua or wherever the Conservation Commission might recommend. It also provides for the contingency that Mr. Patenaude mentioned that if PUC approval is required that Pennichuck seek that approval, and it could be amended that if other communities need to agree or if the bank does the permission from those parties be sought. I think that what could be accomplished is that money that was obtained to the sale of land close to the Pennichuck watershed could be recovered by the City to be used for conservation also. Mr. Chair I am and I have to comment and I'm somewhat surprised by Mr. Patenaude's remarks tonight where he suggests that somehow the company needs this $2 million in order to - otherwise there's all these consequences - financial consequences. Having watched the Pennichuck acquisition presentations fairly carefully, I know that when the plan was proposed in late 2010 and ultimately adopted in January of 2011, the projected interest rate for the acquisition bonds was 6 1/2 percent. I heard Mr. Patenaude say that this was a very stable acquisition that financially there was no risk whatsoever, that there was more than enough margin to make sure that there was no risk to the City of Nashua. Now what surprises me about his remarks tonight? What surprises me is that the actual interest rate was 4.09 percent. Now that's $150 million. The difference being 2.4 percent, $150 million. That is nearly $4 million a year of interest that is not being paid but which was anticipated at the time the sale was proposed - $3.5 million of interest a year that Mr. Patenaude was not counting on at the time he was proposing the acquisition. So I ask if - it just doesn't seem right to me that this could have been a solid financial transaction. Suddenly there's a huge windfall in the form of lower interest to the tune of $3.5 million a year which is like 10 percent of the company's proceeds, annual revenue. Yet we're being told that if a single contribution of $2 million, which is not even coming from the revenue stream of the ratepayers, if Pennichuck had to pay that or decided to contribute that to the conservation fund that that would somehow threaten the financial stability on status of the company? It is hard given what I've heard before and what I know the interest rate was to give that a lot of creed. What I would ask is that the Board of Aldermen pass this; that we make this request; that the President of the Board, if this passes, sit down with Mr. Leonard who I know to be an eminently reasonable person and see if this can be somehow approached in a way that it can be in the end realized. I would ask the Board to pass this, the Committee to pass it with the caveat that this is only a request. It only authorizes the Board, the City to make a request to Pennichuck and work with Pennichuck to see if this can be accomplished. Chairman McCarthy Before I ask Mr. Patenaude to elaborate on the financials, I'm going to point out that as far as I know the problem is the difference between the 6 1/2 percent and the 4.09 percent is in fact that that's a windfall through the ratepayer and not to the company. The $3.5 million savings a year may exist this year but if we have a rate case, it will not exist after that because that is one of the things that goes into the rate base is what the cash requirement is to pay back the City. That is passed on directly to the consumer. We can't say well we anticipated 6.5 percent so let's put that in the rate base and good news for us we have 4.09 percent. The rates if we were to go to the PUC with a rate case today, the rates would likely go down because of that interest in the interest rates. At that point, that cash cow dies. We don't have that savings anymore because we don't collect the revenue anymore because the rate goes down. We're looking at probably $3 million to $5 million that we can save total. That goes into the fact that this is a Pennichuck Water Special Committee -13- 8/2/12 fairly austere company given that it is essentially not for profit. We're not building a profit base into that. In the past, the company was entitled to a 10 percent approximate return on investment which gave it a substantial amount of cash that you could use for example to invest in improvements and new ventures. That doesn't exist now. We have to find that cash from somewhere because we are still a regulated utility. Improvements to the system cannot be put into the rate base until they are finished. So the company has to either borrow money or expend cash from equity in order to do any expansion into new territories where we are expected to give service or to replace pipe and replace infrastructure that exists that has reached its service life. That's a tough act to balance under the circumstances. With that, I'll ask Mr. Patenaude if he wants to comment on that. John Patenaude That's correct because at the next rate case the PUC will allow us to cover the principle and interest in our rates. So that interest will be at the 4.09 percent. So that will be impacted in the rates. When I was talking about the ability to borrow, I wasn't saying we can't borrow. What I'm saying is that the fact that the City would take out $2.2 million adds to one's certainty to borrowers. So therefore where we could borrow a lower rate, a borrower might charge us a higher rate just because there's uncertainty whether more money would come to the City or not. It's not that we're in dire straits here; it's the fact that we need to borrow money going forward and that was all presented in the models that were presented to the City relative to capital improvements. Whether it's in the City here or other locations and borrowing that is to the extent we can get the lower rates possible, that goes directly to the ratepayers. Lower rates for the ratepayers, higher rates impact the ratepayers negatively. That's my comment. Alderman Donchess I wanted to see if I understood your remark. So are you suggesting that there's going to - I guess that's 3 questions, so are you suggesting that there's going to be a rate case which would propose lower rates? Chairman McCarthy I don't know yet whether it will propose lower rates or not. I suspect it will because of that fairly vast difference in the interest. When we get to the rate case, what will be presented is the exact numbers for principle and interest that are required to repay the City plus the operating costs of the company. That's pretty much all we can build into the rate. So unless the operating costs increase by more than $3.5 million a year before the next rate case, I would expect that that rate case necessarily anticipates a lowering of the rates. Alderman Donchess It seems to me that Pennichuck has the revenue coming in from the rates, which are used to pay for operations and that's on an ongoing basis this year, next year, and the year after, and on and on. Of course with the long term, the revenue coming in needs to support the cost of operations. I see this $2 million as something different and why do I see this as something different? This is a onetime revenue, a non-recurring revenue that Pennichuck now has on its books which was derived from the sale of this last parcel on the Nashua side. Therefore I don't Pennichuck Water Special Committee -14- 8/2/12 really think you're saying to me that the $2 million is needed to lower the rates. Since its a onetime revenue item outside the normal cash flow of the company, I based on what Mr. Patenaude has said, can't see why requesting this of Pennichuck would be such a disaster. All we do is make the requests and if the request is made what I would expect of Pennichuck is to make a good faith effort to see if they can deliver on it. If they go to the bank whoever this bank entity is and if given a good faith effort and if bank approval is required by the loan documents or whatever documents back up that transaction, if the bank will not approve it as long as Pennichuck makes a good faith effort, there's really nothing we can do. I just can't see that this $2.2 million, which is not really within the normal revenue stream of the company is essential to Pennichuck's operation. Chairman McCarthy I don't know that it's essential to the operation. I know that we promised the PUC we wouldn't do this and my real concern with this and the reason I'm not going to support it is exactly the purpose of conservation of lands in the watershed. I have sent 10 years plus trying to get us to buy this corporation so that we can protect the lands in the Pennichuck brook watershed. It is true that we don't have much left in the watershed in Nashua that we haven't already protected because we bought 500 and some odd acres out near the Pennichuck Pond several years ago and we bought some of the other pieces over time. We now own most of those wetlands. When we purchased the company, we got another 500 or 600 acres of wetland out in the Pennichuck Pond area because we bought what was essentially the developable upland for conservation purposes. Pennichuck we're paying the wetlands that were part of the ponds system we now own those through the corporation. We now own 400 acres that is eminently developable along the northern shores of the ponds in Merrimack. That was protected as well. My concern is there are other properties up stream that are not protected that have tremendous impact on both the quantity and quality of water that can be withdrawn from the Pennichuck. I would rather see the company use the $2.2 million if it's to be used for conservation to acquire those. The company has the right to petition the PUC to take properties by eminent domain for protection of the water supply in communities other than Nashua. Nashua cannot do that. If that money goes into the Nashua Conservation Fund, we cannot use it to buy properties in Amherst that abut the Pennichuck Ponds. As Mr. Daly will tell you I'm correct on, there are companies who are storing fuel oil trucks within 100 feet of our water supply and dumping oil into very pervious sand that abuts the stream. I would from a conservation standpoint rather have the corporation retain the money and designate it to be used for acquisition of other water supply lands for protection. I was actually very pleased when I met with the Pennichuck folks to look at the current condition of things like supply pond and the intact to find that we have not on an average day been pumping out of the Merrimack River for I believe it was a year as of the time I talked to them. We are able to draw the amount of water that we need from the surface water in Pennichuck which I believe to be a much better quality than what we pump out of the Merrimack when we run low on water this time of year. I'm very concerned. I've always been concerned with the conservation of our water supply. I think it is best served by allowing the Directors of the Corporation and the management to decide what things we need to preserve along the course of the Pennichuck Brook to preserve that supply and to spend the resources that were gained by selling downstream properties to acquire those. Alderman Donchess Pennichuck Water Special Committee -15- 8/2/12 Just a follow up question Mr. Chair. So are any of the parcels that you were speaking of are any of them within the boundaries of the City of Nashua? Chairman McCarthy I don't believe so. I think we own everything that is adjacent to the brook and undeveloped at this point which is within the City of Nashua. Alderman Donchess Do you feel that if this Resolution were not to pass that there's a commitment by Pennichuck to use the money to preserve land adjacent to the watershed? Chairman McCarthy I would certainly hope that there is an intent and there has always been an intent to get a long term resource plan...I'll let Mr. Leonard address that but I believe that one of the committees of the Board of Directors was established to look at that and that would be the direction that I hope they take over time to make sure that we have a stable water supply for the foreseeable future. Jay Leonard I would like to make a couple of comments. First off let me say that yes I am Chairman of the Board but the Board has not taken a position. We are trying to understand everybody's concerns. I think it's worthwhile mentioning that the Board takes this whole responsibility very seriously. There was a careful process of selection as you know but even after that, each individual member takes it very seriously and takes the initial purposes very seriously. I know we had talked - I have personally talked with Alderman Pressly. I have not had a chance to talk with Alderman Donchess. So I'm kind of looking at this as an opportunity to restate that. To give you a sense of things here, we were told in the beginning that the most important thing we could do for the City of Nashua was be an independent board, run this company like a well run, high quality water utility that was financially sound and was independent of the budgets and the political process of the City. The primary purpose for that was...perhaps not the primary purpose but a major purpose was to protect all of the assets of the water utility and be sure that as you suggest they're used for protection of watershed and directed at the purposes of acquiring this business. In addition to that our primary purpose was to convince all those who finance it - those with providing money through bonds, etc., that the political process would not interfere with the financial stability and the good business decisions of what is really a very tight business. I think that the members of our Board I feel very...I don't even know what the right word is, but I'm certainly proud and honored to be a part of it. They're all very, very thoughtful, very expert in their particular field. We have environmental scientists. We have energy consultants. We have human resource people. It's a very diverse group and believe me they take it very, very seriously. They also take the independence seriously. We've talked just in a discussion sense exactly about what you raise. While we have not made decisions, through our discussions there have been comments to the affect that if you have $100,000 or a piece of land that's outside the watershed, it may very well be that it's best to buy an easement over watershed. It maybe that it's best to improve those 150 year old pipes. You have to have a plan and you have to follow your plan carefully. We're in the process of developing that plan. A primary target of the plan is Pennichuck Water Special Committee -16- 8/2/12 improving our protection of the watershed. I would agree with the Chair that our tasks should be to protect the watershed as opposed to general conservation. That is exactly where we're headed. I think the independence is a very important thing that I worry about giving up early in the process. I think it might have a longer term effect that kind of you get your nose in the door and then where are we. I say that with all respect because I understand the process. I understand how important conservation is in a general fashion. I understand how important the schools are. Part of the reason that we're set up the way we are is to make sure that the water utility is the very best that it can be in all regards. That's how our Board views it. So we are concerned about the independence. I say that there's been no formal vote if you will. From the comments of my fellow board members, I can sense there's a serious concern. I'd just ask this committee to please take that into consideration early on. I can see that small steps have become bigger and more of a problem. There were a couple of...I'm not sure if that answers the specific question but there were a couple other comments that I'd like to make just in passing. I think what perhaps our Board is not good at yet, and I hope that we will be good at, is public relations if you will. We have a new kind of public relations that we have to do. We've been focusing on the consumer. The actual people who need our water. I think perhaps we need to talk to this Board more often and let you know where we're headed. I actually think we probably have many, many - 98 percent common goals. I hear the comments of the public. We work hard with the developer of Parcel F to try to accomplish what everybody was trying to accomplish. I think I heard one of the members of the public suggest that we actually got very close to where she had hoped for. We do have common goals. We are trying to do the same things. I think it's important to respect the structure of the original deal because once it changes - once we lose that independence, I don't know where it takes us. That's a major concern. I think Mr. Patenaude works extremely hard. He has all the same goals everybody here in this room has. It upsets me to hear members of the public that think that we're at odds. We're really not. It's just a question of perhaps working together earlier on but we really do have the same goals and we can accomplish exactly what you're talking about within the structure of independence and a properly run utility. I'm happy to answer questions. I don't want to give the impression that I speak for the Board. I'll listen to them and I'm part of it. Chairman McCarthy I think we're all familiar with that problem. Pennichuck Water Special Committee -17- 8/2/12 Alderman Tabacsko Thank you. I just have a couple of comments. First I'd like to start out by also thanking Mr. Patenaude, and Mr. Leonard, and all of the members of the Board for coming out tonight. I, too, had not met the rest of the members. I was not able to participate in the robust process that was undertaken to name a very strong board. I know that was mentioned earlier and I think that's worth noting. Just a couple of comments that have been made as I look through my notes, a lot of this stuff has already been mentioned. I recall sitting in this room working on the by-laws that created this Board, and we were very careful to create that arms length distance and to build that independence into the arrangement. One of my concerns - this legislation came in and it looks really good on the surface but I'm having trouble with it because it's relatively this soon. Mr. Leonard just said this but if we're going to the Board now, what's to keep us from really making this a City event and it really should not be. So I think that it while we should talk and recognize that we have common goals particularly in the conservation of the watershed as opposed to general conservation, I do think that keeping that independence for the Pennichuck Board is very important. Also on the deal itself, the Parcel F as a part of the entity - when we were trying to make the acquisition of the water a reality, the entity that the City was trying to acquire consisted of all of the stuff that they had. Parcel F was either an asset in terms of property or cash but it was part of that entity. On the day that that deal was consummated, that became part of that. If I live in any of the other towns, I'd be very concerned about this money coming out. It would look like Nashua is using their ability to do so to grab $2 million. I don't think that that's the right image that we want to project. That's where I'm coming down on this. I will not be voting in favor of the motion tonight. Chairman McCarthy Alderman Tabacsko makes a very good point which is we purchased all the assets of the corporation on a bond whose interest rate is 4.09 percent. So if we take $2.2 million of those assets out and transfer them to a conservation fund, the ratepayers are essentially paying 4 percent interest on the $2 million that's now in the City's conservation fund. It would be cheaper for us to bond as a general obligation bond of the City that's not taxable. The $2.2 million at an interest rate of 2.9 percent or whatever we're getting at the moment would be lower than 4.09 percent. If we need money for the conservation fund and we're willing to pay for it, we can do that. This was an asset we had to buy at 4 percent and I'd rather have it related to the use that we paid 4 percent interest of which is protecting our water supply. Jay Leonard Well if I could make one small comment on that idea. I think the other thing that I'm trying to suggest and Mr. Patenaude has suggested to me is that 4.09 depends on a structure that this Board worked hard on. To interfere with that structure, the indirect costs is that it won't be 4.09 the next time. So not only would we be doing just as you suggest but we're also indirectly hurting the overall plan. That's a big worry of ours. Thank you. Pennichuck Water Special Committee -18- 8/2/12 Alderman Donchess I forget if it was in a meeting or informally or whatever. I recall that in some form or another that we spoke of these other conservation lands in the past and you had expressed that point of view that the company should look to preserve land along the watershed where it exists. I don't really agree with everything that's been said in terms of why this $2 million is so important to the company given what happened with the interest rate. I do have confidence in the good faith of the Board that they're trying to handle a very complex transition and task with the public interest in mind. I think that obviously this Board has just come in and is trying to do the best they can with what they've been given. I believe the Resolution should still pass and we should make a request which in my mind does not interfere in any way with the independence of the Board of Pennichuck. They can ultimately just say no. But, but I see two of my colleagues on the committee have already said that they do not favor this resolution and have explained their thought process. I am interested and even though I think this should pass, I see that there is opposition to this. Therefore, I would if the Committee goes along with this, I would be interested in hearing if there are any...if there's more at another time. Maybe if this were held at another meeting, are there concrete is maybe too strong a term but are there plans in the works? Is Pennichuck the company trying to acquire or have plans to acquire land that would help to preserve the quality of the water and the water supply and at least I think for me and for others if this Resolution were not to pass, it would provide a little relief if we knew that Pennichuck down the road was going to be using some of this money or all of it for conservation purposes that might affect the water. So I guess what I'm saying in a very long winded fashion is I still support the Resolution but I see what Mr. Chair and what Mr. Tabacsko have suggested and is there a way that we could ask for a report later on regarding the company's plans to preserve watershed land and maybe that would be a way to give us some assurance that this $2 million won't just be spent on something unrelated to conservation. Jay Leonard I can give a general comment there. Certainly we're very happy to share our plans. We're going through that process now. The Board is trying to first off understand the operational budget and then we will go through a capital expense and expenditure plan. I suspect that in the fall - we've actually got it on a schedule that Mr. Patenaude is keeping us on track in a tight fashion. So we're happy to share that. We're happy to take comment. Our meetings are open. There's a lot of numbers but it's a thoughtful discussion. The only other thing I'd like to say is we don't look at this money as a separate pot. It's part of the overall plan. We are considering separate components of the capital expenditure plan which will include addressing watershed issues but they as I said earlier need to be balanced against other capital projects. To give this Committee a sense, that generally amounts to about $8 million a year. It depends who and where you talk to what one should get priority. So that's part of the difficulty in the process. Certainly we're happy to share our decisions, etc. but even more happy to discuss them as we go through the process. Pennichuck Water Special Committee -19- 8/2/12 Alderman Pressly First I would like to ask a question. I don't know if it's an appropriate time for it but there has been public discussion of the possibility of improving that interest rate based on a congressional action. Does anyone have an update on that? Chairman McCarthy I don't know at this point whether that is...I don't think there is anyone here who would know what position that's in but that savings contemplated dissolving a corporation and making the assets actually belong to the municipality. The issue was that if we were to do that, we recognize a deferred capital gains tax of about $60 million because of the way the depreciation is done in the private sector on the difference due the way it's done in the public sector. So the only way to actually reduce the bond rate is to make the bonds nontaxable. We're not going to get a taxable bond rate that's below 4.09 percent in all likelihood. If they became nontaxable bonds, then we'd get a rate similar to what the City did. That incurs the $60 million tax liability. So what the legislation was that was proposed was to modify the tax code to not invoke that penalty when we transferred the assets. I think after the discussions that took place during acquisition, it's not clear that that's a big advantage to us in the long term. That would also require another trip to the PUC that I'm not sure we have the resources or the stomach for at this particular moment in time. I don't see that one as happening in the near future. Alderman Pressly Thank you. That was not my understanding. I thought the Mayor was proceeding to get congressional action. Chairman McCarthy The congressional action may happen but it's not clear that we're going to do anything based on that in the near term. Alderman Pressly I also wanted to thank all the members of the Pennichuck Board for being here. I have met all of you but it's been a long time. It was really interesting to meet all of them and understand the talents that they bring to the Board and also that we have a good cross section. We have a lot of people from the towns because they're ratepayers too. I think we do have a great Board. I guess I'm the eternal optimist but I think we should try to accomplish both. That would be to somehow make whole the citizens who voted on this expecting that we would save the land that we could somehow pass this and also have the Pennichuck Board proceed with protecting the land that Alderman McCarthy referenced. I think one thing that got lost over the 10 years that it took to purchase the company was why the people voted. It has to be understood that there's a geographic difference here. I know Alderman Donchess and both he and myself live up near the Pennichuck. I happened to represent in the State House those areas. The passion and the frustration that the people up in Wards 2 and 3 felt as over 20 years the land that they had thought was protected eternally was Pennichuck Water Special Committee -20- 8/2/12 just chipped away and sold. There's not a single doubt in my mind that the vote that took place 10 years before the actual purchase was based passionately on saving the land. Having been the Senator for that section, you have no idea how important that was. In my mind, there's not a single doubt that the reason we had such an enormous turnout for that election was because they had watched this beautiful, beautiful land both part of the watershed and part of it was not. The average citizen had no idea if it contributed to the protection of the water or not. All they knew was that Pennichuck was selling off this land and just crazily building. I do believe that in the 10 years that took place that got a bit lost. Just as an interesting aside, the negotiating team that was negotiating the purchase - and I'm certainly am fully aware that there main goal was to find a way to buy it and all the technical legalities. It was a very complicated situation. Ironically with the exception of the Mayor who lives in Ward 5 some distance from Wards 1, 2 and 3, there really wasn't anyone - I know even she was not that involved when the vote was taken as she was not particularly supportive of it. There was nobody on that direct negotiating team that had any understanding that the land was the key. I personally feel that it was a big error and not an intentional one but just because they didn't understand how important that was to the people. Parcel F should have been saved. It's difficult to place blame but it's understandable. I do happen to know for sure that the other consultants had no idea that it was the last parcel. I asked them that on the record. Did you know that this Parcel F...after we found out as aldermen what really had happened. I asked the consultants directly. Did you know that this Parcel F was the last remaining piece of land the reason that the people had voted to buy? Both of them said no they did not. I understand that because their main job was to purchase. It seemed I'm sure to them a very small thing. I know firsthand that it is a big, big thing to the citizens of Nashua. I happen to feel that the citizens of the towns would understand that. They all are very protective and take good care of their conservation land. At the same time, I also worked very hard to make sure that the new Pennichuck Board was going to be independent. I think you could still be independent and if we were to find out more what you're going to be doing, we could still consider this. You could still say no. I think we owe it to the people who voted in the City of Nashua that we make an effort to do this. I would like to propose an amendment to the language. MOTION BY ALDERMAN PRESSLY TO AMEND THE MOTION TO SAY BE IT RESOLVED THAT THE $2 MILLION PROCEEDS FROM THE SALE OF PARCEL F TO THE NASHUA CONSERVATION FUND FOR EXCLUSIVE PURCHASE TO REPLACE OTHER LAND FOR CONSERVATION ON THE QUESTION Alderman Pressly The reason I do that I think as having authored the source of funds that the Conservation Committee has had all these years, I know that money is drying up but I also know that that is a fund that a lot of people like to raid. I think the only argument you can make to have this money is to use it to exclusively to replace what was lost. Therefore, I would want it to be exclusively for the purchase to replace land for conservation. I am also very, very happy if you'd be so kind as to consider that as a good amendment to it. I would be happy to further if you're willing to table this to get more sentiment and more feeling Pennichuck Water Special Committee -21- 8/2/12 onto this. I do think having been there and those of us who live near the site and worked hard to get out the vote. I cannot tell you the number - I was the Chairman of the citizens group to get out the vote. It was all about the land. We had no issue whatsoever with how the water supply was delivered. We in fact we would often say we think Pennichuck is a good corporation. We have no problem with the way that they're delivering the water but they have destroyed. They have not taken care of the land. Our precious land. So there's not a doubt in my mind that the passion to save the land be it important to the watershed...the average citizen had no idea what land was critical to delivering the water and what was not. People used the word "rape" when the say the way the bulldozers would come in. It was never known publicly. Up in Ward 3, you'd go along Tinker Road and all of a sudden where did all of these bulldozers come from? There was never a public discussion as to when that land was going to be torn up. I have to feel that we should try for this and the new Pennichuck Board might very well say we can't do it. I think if we spend some time making this very clear as to the purpose of it, that it will only be money used to replace what we feel was lost up in the area near the Pennichuck Corporation where all the destruction took place. It is a geographic issue because those of us that lived up there and watched it, and represented the people up there we saw it, we felt it. I know the land was the key to getting the vote to purchase. I would hope you would consider this amendment and maybe if we then after that table it and see if there isn't some other language that we could work on to make it more attractive to the PUC to make it more understandable to the towns. Anything else that we could do so that those of us who do really care about this will give us some time to improve it. Chairman McCarthy Could you repeat the wording? Alderman Pressly Oh dear. I'm open to further amending the amendment. "For the exclusive Nashua Conservation Fund for the exclusive purchase of replacement land for conservation." The sentence before it references Parcel F to the Nashua Conservation Fund for the exclusive purchase of replacement land for conservation. The reason I think that's a help, it really means that this is not for any other purpose other than to make an effort to rectify what so many of us feel really was an understandable oversight in the negotiating with the company. Chairman McCarthy I understand where you're coming from however, every penny that's in the conservation fund came from the fact that some piece of land that was viewed as pristine land that would always be preserved by the people who lived around it now has houses or other buildings on it. We don't have that restriction for the rest of the conservation fund. The money that's in there I would have to say that the vast majority of it came from the loss of current use properties in the southwest quadrant. Yet I am happy to have the Conservation Commission in charge of proposing how money from the conservation fund gets used. I think it is just as important to allow them to have projects that work with stewardship of the lands we already own and work on natural resources such as the natural resources inventory that was paid for out of the conservation fund some years ago. There's a process in place to approve expenditures out of the conservation fund. I think that's sufficient and I don't think we need to restrict the funds as they go in there. I'm not actually sure we can because the State law and our Ordinance that Pennichuck Water Special Committee -22- 8/2/12 constructs the conservation fund basically expressed the way the money is expended out of there and allow purposes other than replacement land. I believe that at any point 8 members of this Board can vote to appropriate money from the conservation fund to do something else. So I'm not sure the amendment has any affect and I'm not generally prone to put things into resolutions that don't have any affect in the long term. Alderman Pressly Thank you. I'd like to respond to that. Part of the rational that I have for proposing that is to make it clear to the PUC, to the towns, to everyone what the purpose is. I think if it's in here as exclusive they do have other funds that they can do their repair, and the reclaim of land, and do the other things you speak of. You've also mentioned that the City at any time could come up with the money do that sort of thing. Part of the rational for proposing this language is to make it clear to go before the PUC to make it clear to the members of the Pennichuck Board of Directors what the purpose of this is. To me, that's absolutely critical that we understand that. Chairman McCarthy Any further discussion on the amendment? Alderman Tabacsko I guess I can keep coming back to what we're still asking whether it's this amendment or some other wording. The problem I have with this is that we're asking the Pennichuck Board to spend money, or dedicate money, or whatever to utilize funds for general conservation for the City as opposed to protecting the asset - the watershed of the water supply. While I think that protecting the water supply of Pennichuck in total is what Pennichuck should be doing, I think there's a distinction to be drawn here and I don't know that I can support asking that question and bring back to the reason we created this independent Board. We probably shouldn't be knocking at the door asking for money every time we turn around. That's where I continue to come from. I'm afraid I can't support the amendment either. Alderman Pressly Given the sentiment from the two gentlemen from Ward 5, I will withdraw my suggestion and if no one chooses to speak at this time, I would move to table the motion. MOTION BY ALDERMAN PRESSLY TO TABLE R-12-39 ON THE QUESTION Alderman Donchess That's fine with me. MOTION CARRIED Chairman McCarthy Pennichuck Water Special Committee -23- 8/2/12 We don't take points of order from the audience Mr. Daly. You can raise it during public comment in a few minutes if you'd like. Geoff Daly (inaudible) Chairman McCarthy Mr. Daly, we are not taking comments from the audience at this point in time. DISCUSSION Potential Discussion Relative to Conservation Easement, Parcel F Chairman McCarthy I'd actually ask you to stay. Alderman Pressly This is your easement. Chairman McCarthy Mr. Patenaude do you want to talk about the easement? John Patenaude Sure. The easement if you look at the right lower side is the bog which abuts the recreation easement that the City has currently. That is the easement that we would be working with the Audubon Society to work on the educational side. On the top side up by the tank is the easement that just goes along the tank that protects that side of our tank that we currently own. There's a little mistake here on the parcel next to that that's called...that's actually owned by Pennichuck Water Works today. I don't think that was ever transferred in any sale. The one next to the tank is the easement we get for that and then the other one was never sold. That's a piece of land that we currently own that's under Pennichuck Water Works. What we're really talking about education is really the bog side. As indicated by the paper articles, the Board has approved up to $40,000 to make sure that it can become an educational progress working with both the schools and the Audubon Society relative to educating on people relative to how bogs work, the flora, the flona, animals, and the whole thing. You name it. That was that bog. Up above is merely that's just next to the tank and that just abuts our property which is below grade on the supply bottom but still the developer had no real use for it so we took it on as a conservation easement to protect that area. Alderman Pressly Pennichuck Water Special Committee -24- 8/2/12 A related issue. I've been quite shocked to not see what I thought was going to be a buffer around the tank that you could see from the highway...see from the public road. John Patenaude My understanding in talking with the developer is that their plan is to plant fast growing trees. He gave me the name of the trees but I... Alderman Pressly But there were lots of trees there. John Patenaude But they plan on... Alderman Pressly But they took down the existing tall trees and are going to put up short new ones. John Patenaude I'm not the developer but I can tell you that I was told that his plan was to put trees there so that it would hide the tank. Chairman McCarthy From the aerial, like the trees had been... John Patenaude Those are dots. I don't' think they've been planted. Maybe they have. Alderman Pressly You can't see them from the road. Chairman McCarthy It looks like they have. I would suspect they're Arborvitaes or something that will grow within 5 years. Alderman Pressly Bear in mind I don't think any of us have actually seen the language of the easement. First off, thank you for doing this. I think it's an effort to accomplish much of what I have spoken to as far as the people's desire for the land and protecting it. The question came up is it strictly for the schools or will this be available for... Chairman McCarthy Pennichuck Water Special Committee -25- 8/2/12 I will point out that we actually all do have the language to the easement. It was sent to us by the Mayor in and e-mail several days ago. Alderman Pressly Okay. I don't have it with me. Is there any chance of getting some copies of that for everyone here? Is it exclusively for the school as indicated? John Patenaude It's for educational purposes. It can be used at certain times for the general public under supervised areas. WE don't want anyone getting hurt there, liabilities issues and things like that. There is a time frame. It's from I think 8 a.m. until dusk at night. Obviously we don't want people walking around the bog at night. Alderman Pressly I would just hope that it would be reasonable available to the public. Not having a copy in front of me...I think it's great for educational purposes but not just children. I think adults enjoy that sort of thing too. Chairman McCarthy Any other questions? Alderman Donchess Yes Mr. Chair. I'll have to go back and look. I don't recall getting an e-mail from Mayor Lozeau but I'll have to go back. If I did, I didn't realize it was the language of the easement. I did have a question in general. On a few occasions these paper streets back here that are in the middle of the map have been referenced in some way. What is the status of this? Who owns that land and what is the story with the paper streets? Chairman McCarthy It is a platted subdivision. The majority of the lots are owned either by Pennichuck or by the City of Nashua. There are several individuals and institutions who own I think 4 or 5 of the lots altogether. Alderman Donchess Are those streets within in the area that has been recognized by the PUC as watershed land? Chairman McCarthy I believe so. The dividing line for the watershed actually looks like across right about here so that all of this is actually in the watershed itself. If I recall correctly, there are 2 individuals who own lots in there. St. Joseph's owns two of the lots in there and the City I believe owns the rest of it. Pennichuck Water Special Committee -26- 8/2/12 Alderman Donchess So there is no realistic way that anything could ever be built in there? Chairman McCarthy I don't believe we have a way of stopping one of the two individuals who owns the property from developing it at this point because that is a subdivision that is quite old. I've actually looked at all of the properties and some of them changed hands in the very early 1980s. Alderman Donchess But there would be access problems. Chairman McCarthy There is an access right of way that runs down...if you look at right here running from Manchester Street along the back of the Pennichuck property; there is in fact a street easement public right of way there. John Patenaude Harris Road is it? Chairman McCarthy The old Harris Road as opposed to Harris Road which is somewhere else entirely. I think one of the things that I would ask the Corporation to look into is trying to acquire the last of those and extinguish that subdivision. Any other questions or comments on the... Alderman Tabacsko Would it be worthwhile to...cause this e-mail came from the Mayor on the 27th of last week. If you'd like, I can at least and it's pretty straightforward but would it serve any purpose to read it into the record the cover memo? Chairman McCarthy The language of the easement is way too complex. This was to the Board of Aldermen from Mayor Lozeau on July 27 regarding Parcel F easement: "As you know, some months ago I informed the Board of Aldermen that Mr. Slattery was willing to grant a perpetual conservation easement on the land adjacent to the development on Parcel F. This is an approximate 14 acre site and includes the bog. Today the Board of Directors of Pennichuck Water Works voted to approve the attached Conservation Easement Deed. You will note it allows the land to be used for educational purposes, including the building of an associated boardwalk. The Board is in discussions with the New Hampshire Audubon Society Pennichuck Water Special Committee -27- 8/2/12 to establish a program for this purpose. We anticipate the program development will include the Nashua School District. Also worthy of note, the Board of Pennichuck Water Works voted to fund the cost related to the education program. I will speak with President McCarthy relative to some discussion about this being presented to the Special Water Committee at their next meeting. I hope you will agree that this is a great outcome for conservation preservation and education." Alderman Pressly Will that require or is it important to have any legislative action or to accept it? Chairman McCarthy No. It was an action of the Corporation. Alderman Pressly So the whole management of it comes under Pennichuck Corporation? John Patenaude Correct. Alderman Pressly So will it take action on the School Department? Chairman McCarthy I don't know that the School Department is involved. It's for educational purposes that doesn't necessarily convey any rights to the School Department in Nashua. Alderman Pressly I have a question. So does Pennichuck Corporation have any other conservation groups like this for educational purposes or is this one of a kind? Is this a beginning? John Patenaude What we talked about was really a lot of this is working with trying to get input from the science teachers for instance and to help them so we can work this into their curriculum during the year. Pennichuck Water Special Committee -28- 8/2/12 Chairman McCarthy I know the Audubon Society has looked at having education programs in Nashua in the past and never reached a conclusion on where to do that. Alderman Pressly So who will own this land? Chairman McCarthy The land is owned by North Concord, LLC, and will continue to be owned by them. I would point out will continue to pay real estate taxes to the City of Nashua on its value. Alderman Pressly So it will be owned by the developer and that corporation. Managed by Pennichuck? John Patenaude Permanent conservation easement. Alderman Pressly Who owns the easement? John Patenaude Pennichuck Water Works. Alderman Pressly It's granted to you so it's now become your land. So it has now become Pennichuck's land? John Patenaude We have the rights to the easement. Alderman Pressly My question was is this the first effort of this sort that the Corporation has ever done? Have you ever accepted easements for this purpose? John Patenaude Not since I've been there. It's only been a few months. I can't speak for prior to that. Chairman McCarthy There are other conservation easements. Pennichuck Water Special Committee -29- 8/2/12 John Patenaude This is the only conservation easement. Chairman McCarthy Doesn't Pennichuck hold a conservation easement on the back of the properties on White Oak Drive on the Sanderson Farm development? John Patenaude I'm not sure. Chairman McCarthy I think there is. John Patenaude We have some easements but I don't know whether they're conservation or not. Chairman McCarthy Any other questions, comments on the easement? Alderman Donchess Why was the conservation easement granted to Pennichuck as opposed to the City of Nashua? There must have been some thought... Chairman McCarthy I don't know if anybody has an answer to that. John Patenaude I don't have an answer for that. We negotiated with the developer. Alderman Pressly Who's "we"? Who negotiated with the developer Pennichuck did? John Patenaude Yes. Alderman Pressly Would it be appropriate while the people from Pennichuck are still here to open questions from the public at this point while they're still in attendance? Chairman McCarthy Pennichuck Water Special Committee -30- 8/2/12 I don't believe that they've come prepared to answer questions. Alderman Pressly Would it be possible to set up a particular meeting for discussion of this on the easement? I've learned a lot tonight. I didn't realize the difference as to who owns it and what it actually means. Chairman McCarthy I don't see a need for another meeting other than this one. If there are questions about the easement after you've read the text that was supplied, ask them and we'll get answer to them. If that requires another meeting, then we'll do that. I did want to comment by the way that one of the Directors is not here, which is Mayor Lozeau who felt that this is one of those cases where there is enough - I don't want to say conflict but tension between her position as Mayor and her position as a member of the Board of Directors that she felt was better to let the rest of the Board attend for this evening's meeting. I appreciate her candor on that point. Alderman Pressly For the discussion on R-12-38 you mean? Chairman McCarthy Yeah. Alderman Pressly But as far as this goes, I assume she played a role in putting this together. I'd like to hear the thinking. I think it's an interesting concept. I'd like to know more about it, and how it's going to work, and maybe it will be a new model for the future. Chairman McCarthy Any other questions or comments on the easement? If not, we will move on the remainder of the agenda. NEW BUSINESS – ORDINANCES – None PUBLIC COMMENT Chairman McCarthy If there is anyone who wishes to address the Committee, please come forward. Give your name and address and your comments. Geoff Daly Pennichuck Water Special Committee -31- 8/2/12 Thank you Mr. Chairman. My name is Geoff Daly, 48 Walden Pond Drive. The parliamentary point I wanted to make if the two gentlemen could remain seated for a minute, I would like a question placed through the Chair. We talked about Parcel F being sold. Parcel F came under the Southwood Corporation's real estate division... Chairman McCarthy No it did not. Parcel F was owned by Pennichuck Corporation and not Southwood Corporation. Geoff Daly Not according to the records and the minutes of the meeting that I've gone through. Southwood Corporation signature was on the original document dated in 2005 as the seller. Chairman McCarthy Mr. Ware and I asked him this question yesterday. He told me that the property was transferred from the ownership of Pennichuck Corporation to North Concord, LLC. Geoff Daly How come then that Southwood's signature is on the original document that Mr. Slattery insisted was part of the sale and why he fought so hard to make sure that it didn't get taken away from him even though this chamber authorized the Mayor to offer him $4.85 million. That money that they took, the $2.2 million went into Pennichuck and not Southwood, whose signature was on the original agreement? That's one aspect. The other aspect, and I have an e-mail here and I'd like it to go on the record, the 1996 Ordinance which gave city easement for city purposes, it had no limitation to youth sports. You must not forget that the City Attorney failed to let the aldermanic board know as he was the one who apparently without consent of the aldermen and with the prior Pennichuck owners, offered an easement which restricted solely to youth sports. This is now in the Registry as such. Bottom line is that the new Pennichuck action is nearly an official restating of what old Pennichuck has done illegally. An alderman acceptance this would be making official the illegal action of the City's Attorney. Let Slattery still build his elder housing within the watershed area. We're back to the Ordinance. We've heard tonight from Mr. Patenaude and Mr. Leonard that Pennichuck owns the easement and yet we have on record on the City that that property is owned by North Concord Properties, LLC, who owns that section of the land. It can't be an easement owned by Pennichuck and North Concord Properties. There is something wrong somewhere. That is why I come back to what I stated last year and earlier this year. Get Mr. Slattery to deed over that area of the property to the City, mainly the playing fields and the access road and the bog to the Conservation Commission and the Audubon Society. That gets rid of all of this aggravation. If we don't do this, we're just going to add in perpetuation plus I understand within the PUC agreement that Pennichuck Corporation as such is duty bound to look at purchasing and preserving land in and around its watershed area in the future. I believe Mr. Chairman that you yourself have spoken to that point as well and you and I have also talked about what's going out in the Amherst area. DES will be looking into it further but right now they've got lots of constraints. This whole situation of ordinance O-96-06, this chamber is the only chamber that can make any change to that. No private corporation, no private individual may make Pennichuck Water Special Committee -32- 8/2/12 an agreement. If our City Attorney has been a party to it again, there needs to be some form of censorship. It's not right. Mr. Patenaude talked about school people, and the teachers, and the Audubon Society. Well I'll tell you there's only one person in the Audubon Society who was contacted and it's not a local person, it was a person up in Concord. The teacher you're talking about got the whole idea from a whole bunch of other people. She came in at the last minute. So let's give credit where credit is due please. Involve the people of the City. As Alderman Pressly pointed out, we fought for this land because we wanted to preserve the watershed. By the way, we have a paper that was sponsored and written by a Cornell University student with the assistance from the Pennichuck Corporation that clearly shows that the kettle bog is part of the supply water that flows down into the natural springs. We do know also that the City has a number of storm drains that flow into that bog, down then into the natural springs, and into the supply pond. That is why as Alderman Pressly said, we've got to start preservation and continue preservation and that's why the vote went out. This whole business of this easement being negotiated behind locked doors, by our own City Counsel with a private corporation that happens to be part of the City now, is wrong. We're back to square one with your own charter and your own city ordinance is being bypassed and we can't have that. Even you said this yourself Mr. Chairman. We should look into it. We should find a way at rectifying this. My opinion is that that land gets deeded to the City, not the way it's being written now, perpetual no. If the City says we don't want to be in the water business any longer, we're back to square one. That land gets sold and we lose it. Perpetuity should be the word if anything. That's why we should have it deeded to the City for the land where the playing fields are and the bog to the Audubon Society and the Conservation Commission. I'd love to know why if Southwood was the original signatory on Parcel F, how did it get changed to Pennichuck Corporation and has Southwood being dissolved as a Corporation within the new entity? Chairman McCarthy No. Geoff Daly So we're going to sell land then? Chairman McCarthy No. Geoff Daly Then it should be dissolved. There is no necessity to have a real estate corporation if we are not going to be selling land. Pennichuck Water Special Committee -33- 8/2/12 Chairman McCarthy That's probably true but I don't understand whether dissolving that sub corporation has tax implications or whether there is... Geoff Daly Has no tax implications...it was a real estate... Chairman McCarthy I'm not a tax expert. I'm not going to have the argument with you. Geoff Daly I know. Chairman McCarthy We're going to make the decision at some point but there's no reason to dissolve it today. It's not going to be doing any real estate transactions. Geoff Daly Okay. Is that correct from the people here at Pennichuck tonight? Can they comment on that through you? Chairman McCarthy Mr. Daly please finish your comments. We're in the public comment period. Geoff Daly I want it clearly understood you yourself Mr. Chairman has stated in Ordinance 96-06 has to be revisited. This new easement docket, and none of us have seen it - the only thing we've seen is this map that's been handed out. We don't know what the words are. Chairman McCarthy I will simply comment that whatever easement was struck between North Concord and Pennichuck does nothing to the rights the City has under the easement that it already has on that property. Whatever we do to resolve the conflict with O-96 or whatever it is, is independent of the current easement. It is perfectly feasible for both Pennichuck Corporation and the City to have easements on the same piece of property that grant non conflicting rights to the two parties. Geoff Daly But they were restricted. Pennichuck Water Special Committee -34- 8/2/12 Chairman McCarthy From looking at the map, I'm not even convinced that the easement applies to the property on which the City holds the current easement. They are separate lots as far as the map shows. Geoff Daly The bog and the playing fields originally were part of O-96-06. Chairman McCarthy The bog was not. The part on which the easement is conveyed by O-96-06 is approximately 3 1/2 acres at the end of the Pennichuck playing fields. The bog was not part of that. This is a subsequent agreement between the owner and Pennichuck to grant rights to Pennichuck on the bog. Geoff Daly I disagree. We'll sort it out. Fred Teeboom A couple of clarifying remarks. Since I was the original sponsor of O-96-06, that's a totally separate easement. The bog is not part of that easement. It was just the separate 3 1/2 acres set aside for unfettered public use. It's now recreational use for the kids and that still hasn't been worked out. That recreational use of 3 1/2 acres is separate from the 14 acres as I see it. I just wanted to make a comment. First of all Mayor Lozeau ought to be congratulated. I wanted to publicly say that. I do think this is a win/win. She pulled a chestnut out of the fire here. I think she did an excellent job putting this thing together. I think it's a good reason for Pennichuck to have the easement to the City because Pennichuck has agreed to do the maintenance. So the City does not have to do the maintenance. That's a good thing. The final comment. The question came up about why is this not a nonprofit? Why is this a for profit corporation? As you know, I was part of the team. I was the signatory to the merger agreement. My signature is on the bottom. As Mr. Patenaude knows, I called a meeting because I was very insistent on making this a not for profit for operation. Why? Because a not for profit operation would have paid lower bond costs - we all knew that; it pays no property taxes; and it pays no income taxes. The current corporation has to pay property taxes; it has to pay income taxes; and it has to pay high bond costs. So why not have a nonprofit. Well that's where the whole thing comes in about this congressional action. The federal government takes a pound of flesh when you take a profit corporation and form it into a nonprofit corporation. You don't pay taxes anymore. So the federal government by federal law, this was all explained to me by the tax attorney. The federal law says the federal government gets their due. It's about $40 million worth and not 65 - $40 million. So the actions would have been can that congressional action - special act of congress. Can Nashua be exempt from having to pay that $40 million? It's possible. Is it likely in today's environment and the US Congress? I mean hell has to freeze over in my opinion before the federal government would agree to that. It was an interesting question. I had a meeting. Attorney McNamee actually arranged a meeting for me to meet with the financial advisors. Mr. Patenaude was there; Mr. Don Ware was there. We Pennichuck Water Special Committee -35- 8/2/12 had a big meeting about it. It was quickly pointed out to me that you can justify paying $40 million with a lower bond cost. If we didn't know about the 4.09 percent, we figured 5 1/2 bond cost at the time. The 4.09 is not a big win. It's a low bond. The interest rates are low. You get almost nothing in your savings account. So the City pays 2.89 percent is very low on its tax exempt bonds. Pennichuck is a profit corporation pays only 4.09 percent. I think I would agree, you don't want to touch that. You do not want to touch that situation because that's good for 30 years. Finally, I don't want to take any more time, I would like to again congratulate Mayor Lozeau on an outstanding job. Thank you. Tracy Dye Tracy Dye, 170 Concord Street. First of all I'd like to thank Pennichuck Corporation. This has been most enlightening. I'd like to thank Mr. Donchess and Barbara Pressly and the rest of the folks that have spoken here. I have NEVER IN MY LIFE seen such a SONG AND DANCE from you two. I am just appalled. I just don't know how to say that I'm embarrassed for you two for throwing one side - oh we need conversation; then it's no we can't afford it...either you can or you can't. I'd also like to thank the Mayor for this wonderful meeting. I'm sorry she's not here. Mr. (inaudible) is here. At least HE'S HERE. Okay. Mr. Slattery is not here. So who are we to believe? What's going on? All right. That bog should be saved. Okay. Is it going to be saved? I don't know. I have heard a lot today. I am angry. I'm upset and we need to have more discussions. If we can't have another "meeting" Sir, what's the point? Thank you and have a good night. REMARKS BY THE ALDERMEN Alderman Pressly Thank you. Some of the questions brought up have been ones that I had heard before that somewhere along the line that the Parcel F before we purchased the company somehow did get removed from Southwood through the utility. Can we find out why that happened? Chairman McCarthy I can check but I think what happened is this. The company had proceeded with the assumption that it was owned by Southwood because when the split was done in the 80s, all of the non watershed lands were moved into Southwood. When the purchase and sale was being finally drafted and somebody did the deed research, they found that that property had not in fact been transferred into Southwood's ownership. The company in good faith believed that it was Southwood that owned that when they were negotiating with the developer. When they found out that it was not, the transaction took place between Pennichuck and North Concord, LLC. Frankly and maybe Mr. Donchess can comment on it, I suspect the fact that the wrong entity signed the initial purchase and sales probably would not impact the validity of that purchase and sales as an obligation of the corporation in the end. If you want to comment on that or not? Alderman Donchess Mr. Chair I know as much about real estate law as probably you do or maybe less. Mr. Leonard I think does a lot of real estate. I think you're correct yes. A technical problem such as that would not enable Pennichuck to get out of the deal. Pennichuck Water Special Committee -36- 8/2/12 Chairman McCarthy I believe that is the resolution of that issue. We can check on that. Alderman Pressly I'd like to comment on that. I just find it curious then. It really was not...if it was still in the utility side... Chairman McCarthy It's not utility. It was in the ownership of the parent corporation - Pennichuck Corporation and not Pennichuck Water Works. Alderman Pressly But they were not in the business of even dealing with developable land. Chairman McCarthy They were until Southwood was formed. Alderman Pressly Okay. I was just wondering if it changes the status. Could it even have been under agreement? The other question I do have, and I don't have any suggestion on seeking it, this O-96-06. We have tried to deal with that. I find it very confusing. I'm not sure what we should be doing. I think we have to deal with it. Sweeping it under the rug I don't think... Chairman McCarthy I don't think we're sweeping it under the rug. I think it's been neglected for a couple of months while we were doing the budget. I know that the Mayor and Attorney Bennett were trying to renegotiate the original agreement to be more in keeping with the Ordinance. I believe that that is proceeding. I'll ask for an update on that. Alderman Pressly If we could get an update, that would be nice. I think we all were concerned and we didn't know what to do about it. Thank you. Pennichuck Water Special Committee -37- 8/2/12 Chairman McCarthy I guess I just want to comment that I'm actually embarrassed by comments that were made a few minutes ago about two members of the Board. I'm kind of sorry that others members of this Committee are not stepping up to that. Frankly, I don't think anybody can question my record on conservation on this Board. I have convinced the community to spend millions of dollars for preserving empty space in the southwest quadrant and in the northwest quadrant. I was involved in other activities to preserve more space in the northwest quadrant in the purchase of some of the properties to prevent them from being sold by Southwood and I have never said we can't afford it. I didn't say that all. What I said was that the money would be better used if we don't put it in the City conservation funds where it's going to sit there. Particularly if you don't designate it to buy $2 million worth of property, that doesn't even exist. There isn't that much property left in the City of Nashua. I object... Tracy Dye I OBJECT TO THAT... Chairman McCarthy Don't. This is not public comment. This is when I get to talk. The money is better spent in Southwood Corporation and I truly believe that or I would vote to support this resolution. I take great offense at anybody standing up at that microphone and attributing motives that are not honorable to anybody around this Board because I believe all of us spend the majority of our lives here doing work to make this City better when in fact we could be home with our families. Alderman Pressly Thank you. Since I think I'm the only member on the Committee that you would have hoped for a defense, I would like to say if the comment has been made by another member of the Board, I believe I would have jumped to your defense. I think members of the public have no understanding what anybody's history is as far as what position they've taken. I also feel that as elected officials that part of the job we are available for criticism. I did not jump to your defense had it been another member of the Board I would have. I don't know that members of the public are held to any obligation to know the full history of the members of the Board. Chairman McCarthy I don't think it makes for better government for the public to treat their elected officials more poorly than they would like to be treated themselves. Is there any other discussion amongst the Committee? ADJOURNMENT MOTION BY ALDERMAN TABACSKO TO ADJOURN MOTION CARRIED The Pennichuck Water Special Committee meeting was adjourned at 9:25 p.m. Alderman-at-Large Brian S. McCarthy, Chair