Pennichuck Water Special Committee

REPORT OF THE PENNICHUCK WATER SPECIAL COMMITTEE JANUARY 29, 2013 A meeting of the Pennichuck Water Special Committee was held on Tuesday, January 29, 2013 at 7:00 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 Alderman-at-Large Mark S. Cookson Alderman-at-Large Lori Wilshire Also in Attendance: Alderman June M. Caron John Patenaude, CEO, Pennichuck Corporation Jay Leonard, Chairman, Pennichuck Board of Directors Larry Goodhue, CFO, Pennichuck Corporation PUBLIC COMMENT – None COMMUNICATIONS Chairman McCarthy What I would actually like to do since we have several representatives from the company and the board here is to take the second and third communications out of order and then take up Resolution R-12-39 so that we can dismiss them as quickly as possible. MOTION BY ALDERMAN PRESSLY TO GO OUT OF ORDER MOTION CARRIED From: Arthur T. Craffey, Jr., Alderman, Ward 4 Re: Request Meeting with Pennichuck Water Works Company Board of Directors and CEO Referred to Committee – 12/11/12 MOTION BY ALDERMAN TABACSKO TO ACCEPT AND PLACE ON FILE MOTION CARRIED From: Thomas J. Leonard, Chairman of the Board, on Behalf of the Board of Directors John L. Patenaude, Chief Executive Officer, Pennichuck Corporation Re: Response to Alderman Craffey’s Communication MOTION BY ALDERMAN TABACSKO TO ACCEPT AND PLACE ON FILE MOTION CARRIED Pennichuck Water Special Committee -2- 1/29/13 Chairman McCarthy We probably should take up the last communication which is also from Pennichuck Corp. From: Pennichuck Corporation Re: R-13-92 Referred to Committee – 01/22/13 MOTION BY ALDERMAN TABACSKO TO ACCEPT AND PLACE ON FILE MOTION CARRIED R-13-92 Endorsers: Mayor Donnalee Lozeau Alderman Michael J. Tabacsko Alderman-at-Large Brian S. McCarthy Alderman-at-Large Barbara Pressly APPROVING THE PROPOSAL OF PENNICHUCK CORPORATION TO GIVE PENNICHUCK EAST UTILITY, INC. AUTHORITY TO ENTER INTO LONG TERM LOANS FROM COBANK, ACB MOTION BY ALDERMAN TABACSKO TO RECOMMEND FINAL PASSAGE OF R-13-92 ON THE QUESTION Mr. Goodhue Our request is for two loans from CoBank, ACB. One in the amount of $925,000; one in the amount of $1,723,500. Both of these are loans that are refinancing of existing or preexisting obligations on the books of PEU, Pennichuck East Utility, Incorporated. Both are loans that will be in effect of lowering the overall interest rate that was incumbent on those loans as they existed on the books of the company. Alderman Tabacsko Just to get right to the nuts and bolts, this is essentially refinancing existing debt. What is the old and the new rates that we’re looking at? Mr. Goodhue The $925,000 loan, and understand the new rates will not be locked in until the time of closing, so they are an estimated rate. That loan had a rate of 4.5 percent and will be now in the range of about 4 percent. The million seven twenty-three was at a rate of 7 percent and will be in the range of about 3.5 percent as is delineated in my communication, I believe. Alderman Tabacsko Thanks, I appreciate that. There was a lot of paper in our packet this week. Pennichuck Water Special Committee -3- 1/29/13 Alderman Pressly I’m more than happy to support this. I recall very explicitly that this was one of the things to be expected. I’m pleased that you come before us. One difficulty in taking things out of order, one thing I was looking forward to tonight was to sort of establish how often we meet from here on out. It appears as though this is one of the times that by statute, you must come and talk to us. I’m grateful for that. What I’d like to do; I hope we don’t have to wait until the next type of thing like this to have a chance to talk with you. I’m happy to support this, but I hope that you will stay the rest of the meeting to answer questions. My hope and goals since it’s been almost six months since this committee has met that we somehow structure what this committee does going forward and how we can interact appropriately with the company in the future and not have to wait for an event like this to have the chance to get together and talk. But I know what you’re asking for is expected. It’s part of the agreement, and I’m happy that you’re here. Any word from that group? Did they have any message to send to us? The Pennichuck East Utility? I know it’s a totally different group of communities. Mr. Patenaude It’s all part of the consolidated group of Pennichuck Corporation. Alderman Pressly I know that. Mr. Patenaude We’ve been working on this Pennichuck East. We’ve got some rate hearings that will be starting June 1st. By June 1st we have to file three rate cases, but we haven’t heard anything. Through the PUC there’s been no comments from our customers relative to the operation. Alderman Pressly How many communities now are involved in the East group? Same number or have they added or subtracted any? Mr. Patenaude No. It’s been the same number. Alderman Pressly There had been talk at one time of Pittsfield hoping to break away. Any discussions like that going on? Mr. Patenaude Not yet, no. MOTION CARRIED Pennichuck Water Special Committee -4- 1/29/13 Alderman Pressly Do you want a roll call on that since it’s a bond? Chairman McCarthy It’s a recommendation to the full board. If it has a requirement it will be on the full board vote. Did we need to take up the date of the shareholder meeting tonight? Mr. Patenaude We don’t have to. Chairman Leonard sent the letter based on the timeline we expected. I can give you an overview of where we thought it would be if you’d like. Chairman McCarthy Okay. Mr. Patenaude The Nominating Committee made its recommendation to the Board at the last meeting on January 25th. The Board of Pennichuck will be taking up those nominations at our February 22nd meeting. Then shortly thereafter, either the 25th or 26th, it’s a Monday or Tuesday, we will send a proxy to the Board of Aldermen as the sole shareholder for the vote relative to the recommendation to recommend its slate and also some minor changes to the by-laws. That would be taken up at the Annual Meeting which we are presently anticipating to be Saturday, March 23rd. Chairman McCarthy I guess I hadn't thought about the fact that we'd do that with a proxy. We sort of have to given that the Board has to ratify a single action beforehand. We would basically decide what that is and at the shareholder meeting cast our single vote via the proxy. Mr. Patenaude That would be the intent. Alderman Pressly If you're suggesting by-law changes, would this give us the opportunity to also participate in that since this Board was very active in creating the by-laws? We might have some recommended changes. Will we have sufficient time to do that? Mr. Patenaude That would be up to the Board. Chairman McCarthy Will we see by-law changes in the... Pennichuck Water Special Committee -5- 1/29/13 Mr. Patenaude Yeah. We can send you those in advance. Again, they're minor changes. Chairman McCarthy I'm trying to remember the exact process by which by-law changes originate. If the Board wants to suggest changes after we've received the proxy, I would assume that some representatives of the company and the Board would be willing to come and meet with this committee to discuss that. I assume the by-law changes would have to be ratified by your board...if we were to propose a change; it's got to be then slated for the shareholder meeting in between whenever you meet with us and the annual shareholder meeting right? Mr. Patenaude The by-laws as I understand them can be changed by the sole shareholder. The board cannot change the by-laws... Alderman Pressly The Pennichuck board. Mr. Patenaude The Pennichuck board yes. Chairman McCarthy But you would recommend changes. Mr. Patenaude What we're sending you is recommended changes. Chairman McCarthy So unilateral action does not require action by the...if this Board decides to change the by-laws as the single shareholder, that does not require either an advisory or a ratification vote by the Board of Directors? Mr. Patenaude That is my understanding yes. Chairman McCarthy Do we think that would have to be done at the shareholder meeting? Mr. Patenaude I don't think so. Pennichuck Water Special Committee -6- 1/29/13 Thomas J. Leonard Good evening. For the record, my name is Thomas J. Leonard. I'm Chairman of the Board of Directors and I must confess right up front here that I don't know the by-laws in real detail. My understanding is that the shareholder amends the by-laws and that does not have to occur at an annual meeting but it can occur at an annual meeting. Our proposal is basically very minor amendments to the by-laws such as changing the names of different officers to be more consistent with the way we operate. We would be looking for the shareholders to approve our proposal in a formal vote at the annual meeting. Alderman Cookson If I understood that correctly, the only changes that we will see with regard to changes to the by-laws maybe where we call - I'll take you for an example. So you're identified as Class C, Thomas Leonard, Nashua. That's what's expressed in the by-laws. Thomas J. Leonard Yes. Alderman Cookson You're telling me that the changes to the by-laws will modify how you're represented or how a person is represented in that chart? Thomas J. Leonard No. I'm saying that the modifications are minor in the sense of for instance calling the head of our company the CEO instead of the President. They're more like housekeeping. They're not of real substance. That's what I'm suggesting. They're important because they correctly refer to our officers. That's one area we are proposing to change. I think along Alderman Pressly's concerns, there's no real overall change. They won't feel any different. We're not changing operations. We're not changing any parties' rights or interests. Alderman Cookson But we will see other minor modifications... Thomas J. Leonard Yes. Alderman Cookson ...beyond what you've expressed this evening? Thomas J. Leonard Yes. Again, along the lines as I'm suggesting. Pennichuck Water Special Committee -7- 1/29/13 Alderman Cookson Will those be provided to the entire Board or will they be provided to the Pennichuck Water Special Committee? Chairman McCarthy It would be transmitted to the Board because the Board has to vote on them as the shareholder to make the changes. I assume when we get to that, we'll refer those to this committee. Alderman Cookson And provide a recommendation back? Chairman McCarthy Yeah. Alderman Cookson Thank you. Alderman Pressly Thank you. Since we're on the subject of by-laws if I heard the discussion correctly, it's only the Board of Aldermen that can make changes to the by-laws. Is that correct? Chairman McCarthy Yes. Alderman Pressly So what happens in the future if there's a change that the Board of Aldermen would like to initiate? Would they do that at any time through legislation? Chairman McCarthy I believe that's the case. Thomas J. Leonard This is kind of a new area for us all. If you can think of it as the Board of Aldermen is an institutional owner of stock. So the Board of Aldermen acts as one. The only share of stock in our company but we have to work from within that structure. So the Board as the shareholder has to take action or we would suggest takes action as a group and then would actually vote that share at our meeting which would be at a special meeting or an annual meeting but still respecting the structure of the corporation. It's not the same as a piece of local legislation but in many regards it includes at least some of the same steps. Pennichuck Water Special Committee -8- 1/29/13 Alderman Pressly So the question would be how would you want - let's say there was something in the by-laws that we would like to see changed. How would you expect to be notified of that or how would you like to be notified of that? Thomas J. Leonard Well I think that's part of the letter that I wrote earlier to this committee. I think it's one of the ones that was placed on file here tonight. I think that's something we need to talk about. It's not best addressed in the abstract. It's best addressed when we have a potential matter. We're very open to sitting whenever this committee would like to discuss it. I do think it's important to think about the process and make sure we're respecting of course the municipal entity and the corporate entity. Chairman McCarthy It seems like the best way to handle it would be for the Board through its legislative process to pass a resolution which authorizes a representative of the Board to vote on behalf of the single shareholder at a meeting held specifically for that purpose to make the following by-laws change and then enumerate what the changes are. So the Board would then pass that inform probably you as the Chairman of the Board of Directors that that action had been taken so that a pro forma meeting of the Pennichuck and the shareholder where that vote can be cast would be scheduled. Thomas J. Leonard Yes something along those lines. Certainly that sounds reasonable and I think does exactly what we're talking about. Alderman Tabacsko Along those lines, it would be the format would then be similar to whatever the format is going to be for this annual meeting that's coming up and we're going to have to vote by proxy because that will take action by this Board prior to that. Then that vote will get cast. So I suppose we're going to have to address that when we get that proxy and get it here and have our discussion so that we can get our vote taken. Then whatever the mechanism is at the Pennichuck annual meeting for casting the vote I guess would be the same thing right? Mr. Patenaude Yes if I may Mr. Chairman. I think (inaudible) and what we were trying to do was just kind of set up a tentative schedule for this first annual meeting. As I'm sure this committee knows, perhaps some members of the Board know, there is at least one annual meeting every year and that's required. So we're going to have that in March. That's what we're setting up right now. Not all meetings have to follow exactly that same course. We're primarily focusing on the annual meeting. Pennichuck Water Special Committee -9- 1/29/13 Alderman Pressly I personally think it would really be wise to memorialize this process only because if you think about it, we're one year into the purchase. In another year, there'll be changes on the Board by law. I think the Mayor goes off. I think Mr. Patenaude only has a two year commitment. Mr. Patenaude I'm not on the board. Alderman Pressly Right but if I recall, you're... Mr. Patenaude May of 2014. Alderman Pressly We're a year plus away from some significant changes. We're going to maybe have changes on the Board of Aldermen. So I think the more specific that we are, the better off it's going to be going into the future assuming this is a multi hundreds of year arrangement. I think it would be very nice for our successors to have something pretty clear so that we don't have to invent the wheel every time an issue comes up. Chairman McCarthy I think once we've done a piece of legislation that accomplishes this, it will be memorialized. We can draft an ordinance or something to lay out the process but I would recommend that we do that after we've been through it at least once. To be frank about it, most of our procedures for this Board are memorialized in the history of the Board and legislation that has been previously written and we'll just drag one of those out and change some of the words to get the new one. I think the (inaudible) and see how that works. There are some changes we're going to have to make as we go along. For example in the steady state at some point in the future, I would suggest the enabling would be to authorize the Mayor to vote the shares on behalf of the Board. However, that's probably not the right thing to do given the Mayor's inherent conflict as a Director for the duration of that period. I guess I would suggest, as much as I hate to commit myself to a meeting, I'm probably the right one to do it in her stead until her term on the Board of Directors is up. I'll be happy to talk to legal about that and see what their opinions are on how to word that. Alderman Pressly Before we take the vote, I think everybody feels pretty good about this. I'm hoping that these gentlemen will stay. Can they stay at the table? I know there's a couple of other things I was hoping to bring up and I would hope they would stay for discussion. Pennichuck Water Special Committee -10- 1/29/13 Chairman McCarthy First of all, I don't think we have anything to vote on at the moment. I don't think we need to take a vote on the scheduling of the meeting. It will get scheduled and we'll get a proxy that we'll have to take action on at some point. I guess I don't see any problem with the timeline that we're looking at. Alderman Cookson I know that it was stated that the shareholder meeting would be held on Saturday, March 23rd. Has a venue been identified? Mr. Patenaude Actually the Radisson. Alderman Cookson And this shareholder meeting would not be open just to the Board of Aldermen and elected officials but it would be open to any taxpayer within the City or any ratepayer of Pennichuck? Mr. Patenaude Both any taxpayer and any ratepayer of Pennichuck. As a matter of fact, we will notify the towns that we serve but the meeting will be held and provide them a copy of the... Alderman Cookson Is that coming out in the next bill? Is that how you're going to communicate? Mr. Patenaude No we're going to communicate with the towns. We'll write them a letter directly or call them to let them know. They may want to post it in their municipal type... Alderman Cookson So you aren't making a communication to each individual rate payer? Mr. Patenaude No. Then it gets into the PUC and the PUC has jurisdiction as well. We can. Alderman Cookson What do you mean it gets to the PUC? Pennichuck Water Special Committee -11- 1/29/13 Mr. Patenaude Well all the bills ultimately end up being approved - not approved but the format being approved by the PUC. We can work on that if you feel it's important to put it on the bill and notify the ratepayers. We can do that. Alderman Cookson I don't know. I just know if we put something in the newspaper, it often gets overlooked. People don't subscribe to a paper. I know that the City's been quite successful in its communications when it sends out registration renewal motor vehicle that it sometimes includes an independent piece of literature within that bill that would share something. Mr. Patenaude We can add it as an insert. I'll talk to our customer service. Chairman McCarthy Bills go out monthly now right? Mr. Patenaude Yes. Alderman Pressly You just brought up an interesting point. Does the PUC...if you put an announcement in with the bill as far as something news like when you're going to flush the pipes and stuff like that. Do you have to have the PUC approval for that? Mr. Patenaude No. We put an insert. Alderman Pressly So an insert - I personally think that would really be a nice gesture. I doubt that many people would come but the fact that they're invited and... Mr. Patenaude We would also send a communication to the towns as well. Alderman Pressly The more people you let know I think the more transparent and eager to speak with people and communicate with people the better. Pennichuck Water Special Committee -12- 1/29/13 Chairman McCarthy I guess if there are other specific questions members would like to ask of the company, let's do that now. I don't want to ask them to stay any longer than they have to. Alderman Pressly Thank you Mr. Chairman. One thing that has certainly affected me and I have some strong opinions on it that I may or may not express tonight but I was very unhappy that our local newspaper took what I thought was the heart and soul of our public, private partnership between a corporation and a municipality which was the Right to Know Law. That was the one part of municipal government that survived in our debate as to how to structure this unusual entity. I'm really disappointed in our local paper. I think what they did they didn't understand the significance of that and the fact that it involved much more. They turned it into a labor and a privacy issue. I think that's really unfortunate. I don't know why they did that. There's so many other things that people were interested in knowing about that. But since it's been done and the court has ruled against what a lot of us who supported the Right to Know Law as the only surviving aspect of municipal government, I'm really upset about this. I had a moment before the meeting to speak with Mr. Leonard. I think we need to have on the record what ramifications do you think that is going to have and what, if anything, should we do about this to clarify the transparency that we seek and we think that we as the owner are allowed to have? Chairman McCarthy I guess I don't believe that it affects it that much. I haven't read the text of the order but my understanding is that the thrust was that we can't violate the third party agreement with the collective bargaining units in our conduct of what we perceive to be the Right to Know Law. There's nothing that stops us from disclosing any general information about our company as we see fit under terms that look just like the Right to Know Law. In fact, I think there are other places that would not be protected. Mr. Patenaude Under the by-laws, the by-laws still rule and under the corporation by-laws, it states that the Board meetings will be conducted under the Right to Know rules. So we still honor those. We post the meetings, we put our minutes out, our meetings are open for the public to attend. In that context, nothing has changed. Our website has information. It will continue to have information going forward. From the board meetings themselves and the information in those board meetings, it's still open. We're not hiding that information. It's open and no different than it was before. Alderman Pressly I guess what I'm thinking of the way it works at City Hall if any citizen had a question as to how something took place, they can go to any department and ask for public records. Could the same thing happen at Pennichuck? Say I don't specifically have anything myself but say a citizen wanted to know something specific about maybe water testing or anything that you do. Could they come to the company and say under the Right to Know Law I would like to see your documentation of X, Y, Z? What would happen then? Pennichuck Water Special Committee -13- 1/29/13 Mr. Patenaude Don Weare can correct me if I'm wrong here. A lot of that information is available through the Department of Environmental Services. It is available and people could ask for it there as well. Most of our information is either available through the PUC, the DES, or through our website that we have available. It would depend on the information obviously. We're not there to hide information if somebody made a request and it was reasonable, we try to honor that request. Alderman Pressly Further I'd like to hear from you people. Was your interpretation of the court ruling just exclusive to privacy laws, and labor unions, and employment issues? You consider that court case was exclusive to that and that in all other areas, the Right to Know Law was as we understood it was applicable? Mr. Patenaude I think that a court case is by its nature specific to a set of facts. I don't mean to dodge your question but it's just kind of the nature of the situation. What John has said what our Board is trying very hard to do is be open and transparent in our own operations. So we operate our Board very much like this Board operates. As soon as we get into areas that are kind of hypothetical and not yet developed in a factual sense, we have to be careful because I think one thing the court did say is don't forget there are other people's interests that must be balanced. Rather than guess at a particular result and how we might handle something, we should probably just leave it that our first goal is to be open and transparent in our operations and in particular our Board operations and all decision making. I think the court order does cause everybody to think about well there are some private interests that may get considered along the way. Just how that works, we're going to have to take them step by step, case by case. It's really not our decision. Alderman Pressly One thing that this Board does that most Boards in City Hall do not do and that is we keep verbatim minutes. That is a wonderful tool. If you have audio, you go back and you have to listen to this. It's really hard to understand. Hard copy verbatim minutes of happens at your meetings I think it's one of the strengths of this Committee and I think a lot of us refer to those minutes on a regular basis to try to understand what took place last week, last year, 10 years ago. Would it be a hardship do you think for Pennichuck to keep verbatim minutes so that there's no question about what was said and how it was said? The problem that I think our other boards have is that somebody comes along and abbreviates them. It's that's person's interpretation of what was said. You really do lose a lot. Would you consider keeping a verbatim record of your meetings so that an individual could go back and more comfortably and easily understand what took place at your meetings? Mr. Patenaude We've made very conscious and strong efforts to follow what is typical in a corporate business structure. That is not what most corporations do. I think the practice in corporate structure and corporate governance is not to have verbatim minutes for a number of reasons not the least of Pennichuck Water Special Committee -14- 1/29/13 which is the difficulty of getting accuracy, the difficulty of the length of the minutes and all of that. So we actually considered and decided to be more typical and to follow what other corporations do. We do take care and we actually have a process. Again, one of these processes that we developed after a couple of steps, we have our Board and because there was a request for some information immediate, we actually make available a draft with notation that it's a draft and we ask the Board to explain or express any concerns or making available that draft. If any member has concern, then we don't post it until we get the formal minutes. Now the formal minutes have to get approved at the next meeting, which of course is a month later. You have these practical considerations that need to be addressed as well. So far we haven't run into any concern about the minutes and them not being complete enough. Alderman Pressly Do you keep audio? Mr. Patenaude No we don't. Alderman Pressly I would hope you would reconsider that at some point. Alderman Cookson I just had one question and I appreciate the efforts to be transparent. I know that back in December this Board received a communication from Alderman Craffey which has been responded to. During the course of those deliberations, that discussion we had in these chambers, there was a document that was referred to from the Pennichuck website. I believe it was a budget snapshot of 2012/2013. It showed two things. It showed that 2012 was profitable. I believe in the neighborhood of $4.4 million. Mr. Patenaude That was 2011. Alderman Cookson Sorry 2011 and then 2012 was a deficit of $1.1 million. While you're here and you have your CFO and you're able to address this, could you speak to that? I'm not sure that's what we expected. Mr. Patenaude The books themselves are kept on a gap basis generally accepted accounting principles which are different than what we looked at relative to the acquisition. The main items there are the treatment of severance and some of the ancillary expenses like the tail insurance that was acquired for the officers and directors before they were leaving. That is money that while is in the P & L for gap basis was funded through the acquisition. So I view it as a non cash item. It never gets into the rates but just under generally acceptable principles, it has to be included in the P & L. So that's the major difference there. Pennichuck Water Special Committee -15- 1/29/13 Alderman Cookson So you provide that document that follows the gap procedures on line. Your ledger - would you make that available in some capacity on line that maybe shows what you perceive not to be... Mr. Patenaude We actually do because in the bottom of those financial statements, we have I'll call it a reconciliation for lack of a better term, of earnings before depreciation (EBITDA) and we add back those items - we call them one-time items, eminent domain items or acquisition items, and the one-time events that may occur during the year and come up with an adjusted eBITDA and then from there, we subtract debt payments outside of debt payments for the City and the City's debt payments, which was about $8.6 million last year because there was one month lag sort to speak because we started at the end of January. After those, it shows up as a profit or a positive number I should say of $1.3 million. So we show the cash... Alderman Cookson That same time span, 2011/2012, where it shows a positive of $4.4 million and a negative $1.1 million the following year. Those two numbers are actually adjusted both of them? Chairman McCarthy Actually if I could ask another question on the same difference. One of those is the last year of Pennichuck as a private corporation. Mr. Patenaude Exactly. Chairman McCarthy The other is the first year of public ownership. The money that Pennichuck paid to its shareholders in dividends will show up in that profit of $4 million. Mr. Patenaude Yes, it's before that for those dividends. Chairman McCarthy When we use that to service the debt instead, it shows up as a liability prior to the calculation or profit. The apparent $5 million that went away actually went from the profit side of the ledger to the pre-profit liability. Mr. Patenaude It went from dividends...as we reclass, we had an 80/20 roll and that goes mainly to interest in the first few years. Then we had about $269,000 of dividends that were paid to the City as well on its equity basis. Pennichuck Water Special Committee -16- 1/29/13 Chairman McCarthy Basically publicly held debt to the shareholders if you will shows up in a completely different place than the balance sheet then the privately held debt to the bond that we have in the current situation. So the balance sheet is going to look very different from 2011. Mr. Patenaude In comparison yes. Comparing the two. Alderman Cookson Thank you. I had one additional question and that was you indentified or stated that on June 14th there are going to be 3 rate cases. I know that prior to December 31st of 2012, you had to identify or at least make note that you were going for WICA caprice. Is that one of the rate cases that you're referring to here or is... Mr. Patenaude What happens with the WICA is the WICA gives you the opportunity to fund part of the assets which you're putting in the ground. At the next rate case, the order that allowed the WICA says then there's a re-examination of that. So that temporary rate gets cranked into the full rate at the end of the order for the rate cases. The PUC then has a choice either to allow a WICA process to continue going forward or not to continue. It's all wrapped into the right cases at that point in time. It's really a prefunding. Alderman Cookson But we're still expecting to do the annual bonding. That's not affected by the WICA. You're still expecting to bond approximately $8 million a year. Mr. Patenaude That's correct. Alderman Cookson So this is above and beyond the capital improvements that we were anticipating? Mr. Patenaude The WICA only applies to a piece of the cap backs and its specific and only for Pennichuck Corporation. So there's PEU impact as well. So the bonding what we would do is bond the net if we're getting another $200,000. So we look at our cash flow at that point in time and determine what the bonding needs are. Some of the CAPX is funded internally. I can tell you that in... Alderman Cookson But you wouldn't consider decreasing the bonding? Pennichuck Water Special Committee -17- 1/29/13 Mr. Patenaude I'd only bond for what I need for the cash needs to go forward. In other words if I funded - I'll give you an example. Let's say we had $7 million of CAPX and we have not earned enough money out of cash to pay $2 million of that. Then I would only bond $5 million. As a matter of fact, last year we did not borrow anything for CAPX. It was all funded out of our operations and cash that the company generated. Alderman Cookson So there's 3 rate cases that are going before the PUC on the first of June that is for each one of the companies? Mr. Patenaude Yes and that was mandated by the settlement agreement. Alderman Cookson And we will continue to go before the PUC annually forever? Is there a... Mr. Patenaude It's up to the PUC. If they stop that process, they have the right to say no after the next rate case of the WICA or they can say yes you can continue and we would go on an annual basis. Alderman Cookson What's your fiscal year? Mr. Patenaude December to January. Its calendar year and we would go on an annual basis. Alderman Cookson What's your fiscal year? Mr. Patenaude December 31. It's calendar year. Alderman Cookson Thank you. Alderman Pressly Thank you Mr. Chairman. Recently I think you and those of us who have supported the purchase have had a public relations crisis I think because there's been talk of the rate increase and a lot of people say wait a minute. We weren't supposed to have any rate increases. Those Pennichuck Water Special Committee -18- 1/29/13 of us who worked on this for 10 and now close to 12 years knew all along that there's always going to be rate increases. It's a water company. Water delivery system is always an expensive operation and ongoing maintenance. The way it had always been explained to me was that municipal ownership and what we have done will have it be where the rate increases are lower and less than they would have been if it had been owned by a profit corporation owned by stock by many people. What I want to ask maybe impossible but when you have the ability to do your discussion with the media and put out these, is it possible to indicate what the rates would have been under the old system or is that sort of impossible... Mr. Patenaude We intend to do that when we file for these 3 rate cases. We intend to show what the rates are we're requesting and what they would have been under the prior ownership. So they'll be a comparison. One of the items that we told the PUC was the same thing. Rates under the municipal ownership would be less than the rates under a publicly trade ownership. So as proof of that, we will run both concurrent so people will be able to see if the company were still existent in its same form... Alderman Pressly Old format. Mr. Patenaude This is the rate that would be required and under the new format this is the rate. Alderman Pressly Is it possible to indicate a little bit of that now? Since rate increases have been in the press and a lot of people I know approached me - citizens saying wait a minute. We weren't supposed to have rate increases. From what my understanding was, we're right on schedule and probably the increases will be much less than what they would have been under the old system. Is there some way you can bring forth that in an accurate and fair disclosure at this point? Mr. Patenaude For the piece for the WICA itself, we have done that. We talk about $.39 currently versus $.60 or $.61 under the former ownership. Alderman Pressly I think it's really important to get that message out and to get it out early and often and indicate...my understanding of the WICA also is to avoid rate shock. The whole point of that is to make sure that there's not a huge balloon increase at one time. I think it's important. It behooves and ourselves also to make sure that when you talk about rate increases, indicate that they're the normal routine expected time frame and amount of rate increases and that they are less than what it would have been under the old system. I think it would be important to do that just for those of us who worked so hard to have this happen too. Pennichuck Water Special Committee -19- 1/29/13 Mr. Patenaude We agree with that. Alderman Tabacsko Just also it's on the record and somebody doesn't have to dig through, it's on page 3 of the letter dated January 4th from Pennichuck. I'm pretty sure this was your letter signed by both Chairman Leonard and Mr. Patenaude. That page 3 clearly points out that the customer rate increase of .85, less than one percent, results in an average increase of $.39 per month under current municipal ownership or shareholdership and that without that under the old Pennichuck, it would have been 1.29 percent versus the .85 and $.60 per month on the average bill. I agree with your earlier comment Alderman Pressly that people tended to hear that there would be no increases and that was never really ever stated. It was always that it would be less and that ownership and the cost of ownership and the cost of running the company would be more favorable for the ratepayers. I think we're starting to see that and we want to make sure we continue to recognize that. Thank you. Chairman McCarthy I just want to ask one more question about the WICA because I think that the WICA itself actually saves money in the end because if you have to fund the capital improvement and then don't recoup the cost for it until the next rate case, whatever the finance charge is on holding that money with no payback or principle for a year or two becomes a liability that doesn't exist if the rate goes up when the capital improvement comes on line. Mr. Patenaude That is correct. Alderman Cookson I just had a quick question. Based on the paragraph that Alderman Tabacsko just read and the statement that I heard earlier from either Mr. Goodhue or Mr. Patenaude, I thought that I heard that the rate under the previous ownership would have resulted in $.62 versus the $.60 that's stated here in this paragraph that was drafted on January... Mr. Patenaude I said either $.60 or $.61. Alderman Cookson I thought I heard $.62 this evening. Mr. Patenaude I thought I said $.60 or $.61. Pennichuck Water Special Committee -20- 1/29/13 Alderman Cookson Okay and that's accurate? So a 6 year $.61 there's... Mr. Patenaude At $.60. I hadn't turned back to the page. Alderman Tabacsko I'm guessing that decimal extends out a few places. Alderman Cookson I'm guessing a penny over the several ratepayers goes a long way. Alderman Pressly I had two other issues I'd like to bring up. Since we've been out of order on the agenda, I had about 6 months ago sponsored legislation that's just now coming before us regarding hoping that there would be the ability to get some of the money into our conservation fund. As I'm sure many of you know, there are many of us that are still smarting from Parcel F and feel it was a great loss for the community and those of us who worked very hard on the citizen effort for this. It was the passion for the land that really motivated most people to vote. I've heard this enough that I do believe it. So I tried to find some ways that we could ease the pain of that and I hope you've had that chance to read some of the legislation and it has to do - and the heart of it is that the profit that you received from the sale of Parcel F be donated to the Nashua Conservation fund. That was one of them. The other one was that when there is payback on the part of it, it's been 6 months. I have to stretch my memory a bit. I think it had to do with the eminent domain payback money. That that also go to the conservation fund. I'm wondering if you've had any chance to read those or if you have any reactions or have any thoughts on it? Chairman McCarthy Before anybody tries to answer that, the second of those questions has nothing to do with the corporation. It's equivalent to if I'm a shareholder, how do I spend my dividend money? We're getting payback money that we invested in the corporation as a matter of policy. What we do with that is entirely up to us. It has nothing to do with Pennichuck Corporation. With regard to the proceeds from Parcel F, that is a decision that could only be made collectively by the Board of Directors of Pennichuck Corporation. So it's absolutely inappropriate to ask the management how they would feel about that. I don't think it's appropriate to ask the Directors in a vacuum to discuss that outside of a Board of Directors meeting. Mr. Patenaude Just one comment on that and I made the comment before when this was brought up. Our loan agreements for the line of credit prohibit us from paying more than the city debt that we're Pennichuck Water Special Committee -21- 1/29/13 paying back plus the $500,000 for (inaudible) eminent domain. So we're restricted by our covenants and our loan agreements. Alderman Pressly Thank you. I think that's been answered then. One other question. Since we are almost a year away on seeking new people to serve on your Board of Directors, do you have in place a search system or any system in place to replace the people that... Chairman McCarthy There are Directors whose term is up now. As I understand it, your Board has received nominations from the Nominating Committee for replacements or continuity of some of those Directors? Thomas J. Leonard That's correct. We have a Nominating Committee as every corporate board does and the committee is charged with suggesting a slate to fill the open directorships or whatever. That's part of what the next...the letter that I had written to the Board suggesting a schedule prior to the annual meeting addresses just that. What our Nominating Committee has done is provided the slate to the full board of Pennichuck that will be considered and voted on at the next Pennichuck meeting which is in February. I think February 22 and then from that meeting, it will be forwarded to the Board of Aldermen through this Committee. So we're in that process. That's all part of the process that we're in the middle of and we do hope to have a formal process that is written down so that we can do it again the next annual meeting. Alderman Pressly Thank you. Chairman McCarthy Anything else from the Committee? Alderman Cookson Sorry I just had a question about the letter that Mr. Leonard just referenced identifying a communication that you're in possession of or it's one that's included in our packet. Chairman McCarthy I don't believe it's in the packet. We received it late last week and I haven't had a chance to do anything with it yet. Alderman Cookson Could Mr. Leonard go in a little more detail about the communication or will we be receiving it? Pennichuck Water Special Committee -22- 1/29/13 Chairman McCarthy The communication went over the timeline that we talked about earlier. Alderman Cookson That was the communication? Thomas J. Leonard Yes. Basically all we're trying to do is keep the communication lines open and we don't want to set dates and a schedule without at least this committee and the Board having an idea of what's going on. It's just an effort to keep in communication. We don't always know when meetings are and I'm sure they're out of sync with the agendas, etc. here. Alderman Cookson I guess it's just unfortunate that it didn't make it into this week's packet. As Alderman Pressly has said, we don't meet very often so it would have been nice to see the communication. Chairman McCarthy I don't think there was anything in it except the claim for when we're going to meet next. Alderman Cookson Who's it addressed to? Chairman McCarthy It probably came to me as President of the Board. Alderman Cookson At that point is it your determination of whether it was meant for you or whether it was meant for the entire body? Chairman McCarthy It has not gone to the Board yet because it was just received. Alderman Cookson You said it was received last week. Chairman McCarthy No I said the end of last week. Today is Tuesday. I did not get it in time to put in the packet. Pennichuck Water Special Committee -23- 1/29/13 Alderman Pressly Thank you. Since you're here, would it be appropriate to sort of talk among us about how often it would be good for us to get together? Do you want to just meet with this Board when an issue comes up or do you think there should be a more frequent...this Committee itself hasn't met for 6 months. So we probably need to talk about that too. I'm hoping that we'll meet on a more regular basis now. What are your thoughts? I know you brought quite a crowd with you which is very nice. I don't know that we would need all of you. Would you prefer on an as needed basis or would you like to send somebody to the water committee meetings? What are your thoughts on communicating with us in a comfortable way? Thomas J. Leonard I think our thoughts are we'd like to hear what you'd like. We think that it's open for discussion and that's why we wrote the letter to the committee. Alderman Pressly Can you elaborate on this letter that we haven't seen yet? Thomas J. Leonard Well I don't have it in front of me. It was I believe there was a letter and I apologize because I don't know when it went out. We've had a series of meetings this month and I'm not sure of the timing of things. There was one letter which may have been a part of it. In any event, there was a letter in which I suggested that this committee concern how they would like what kind of information they would like from us and how we should exchange and communicate. We're open to that discussion. I think it needs to be a discussion because we do have to take into consideration a number of different things. We're happy to have that whenever you'd like. Chairman McCarthy We will likely have another meeting before the annual shareholder meeting so we can discuss that at that point. Thomas J. Leonard As it happens as we approach the shareholder meeting, a lot of these issues are coming up. I think in the past the shareholder meeting is an annual meeting that is always available for shareholders and you're the shareholder. You're the Board of Aldermen. So we knew that was coming up but as we approach it, we start to realize there might be some other things that we need to think about. We're working through all of that. Alderman Pressly Just trying to think about how this might work. Would you welcome having someone come from your Board of Directors to every water meeting and just tell us what's happening in the company just sort of a general this is what's going on? Is that something just to keep us informed? Pennichuck Water Special Committee -24- 1/29/13 Thomas J. Leonard I think what we need to do is have some suggestions and then talk about it from our Board. I think we'd also like to have perhaps a consensus from your Board or your Committee. That makes sense to me but... Alderman Pressly May I clarify that? So you would not like to come and sort of give a report. This is what's happening at the company. You would prefer that we ask you? There has to be a give and take here. Thomas J. Leonard No I'm not saying we wouldn't come. What I'm suggesting is that I think the Committee needs to decide the information and the process that they think is appropriate and then we can respond to that. Maybe that we simply say okay or maybe that we suggest well that (inaudible) standpoint. Let's think about a slight modification. Alderman Pressly So you'd like for this Committee, and hopefully we'll have that discussion tonight, how often we want to meet. How we would like to interact with you and then give you a chance to respond. Chairman McCarthy I guess I would rather see us determine what information is that the Board needs to see and then we can decide whether and when that requires meetings. I don't like the concept of let's decide how often to meet and then when we meet we'll decide what to do when we're meeting. Let's figure out what the Board needs to do to stay informed as the shareholder and then we'll ask their Board to address how do we get that information so that we stay as informed as we'd like to be. Thomas J. Leonard Yes and to support that concept, I think the one thing our Board is very concerned about is to be sure that we remain a corporate board. So we want to act as one all the time. That's kind of the context that we think of these things. So the suggestion of the Chair makes sense. Chairman McCarthy Anything else for the company? Thank you gentlemen. Alderman Pressly Thank you. Thomas J. Leonard Thanks very much. Pennichuck Water Special Committee -25- 1/29/13 From: Alderman-at-Large Barbara Pressly Re: Proposed Amendments to R-12-39 Referred to Committee – 8/14/12 MOTION BY ALDERMAN PRESSLY TO ACCEPT AND PLACE ON FILE MOTION CARRIED UNFINISHED BUSINESS - None NEW BUSINESS – RESOLUTIONS R-12-65 Endorser: Alderman-at-Large Barbara Pressly REGARDING AN INTENTION TO APPROPRIATE FUTURE FUNDS RECEIVED FROM PENNICHUCK CORPORATION FOR EMINENT DOMAIN COST REIMBURSEMENT INTO THE NASHUA CONSERVATION FUND MOTION BY ALDERMAN PRESSLY TO RECOMMEND FINAL PASSAGE ON THE QUESTION Alderman Pressly One of the problems for me is that this was all composed 6 months ago. I'm a little bit frustrated. I'd like to air my thoughts. I know Mr. President you've encourage committees not to meet unless they had work to do and legislation to deal with. I hope you'll sort of discuss that a bit too. Both of the pieces of legislation that I've sponsored are not really binding but they're more in the request mode. It would be to sort of make a statement as to what this governing board, what the attitudes of this governing board are. It does not bind any future board but my sense of it is that a lot of us have felt that the loss of the land has been a real loss for the community. The only structure set up and place to deal with it is the Conservation Commission. Although there's not much land left to buy in Nashua, the company like Pennichuck does have other natural land in other communities that could be purchased. I think it behooves us to take a stand that we would like some of this fund to go back into the preservation of land, the management of the lands. One thing that the Conservation Commission is looking at long term is to have some source of revenue which is drying up at this point. The current use law there isn't much left. They're going to have some conservation land and not have the ability to manage it and maintain it. I think both of these laws I don't know if they're ready to be voted on tonight. Certainly happy to table them. They've been hanging out there for over 6 months already. If you want time to think about them and think of the ramifications and if it would be a helpful thing to have this Board take a stand, that we recognize that the hope in purchasing Pennichuck was to save some land and that did not happen. This is sort of a backup plan that has the same philosophy and theory behind it. I don't care if this is passed tonight. I'd be happy to table it if people want a chance to think about things. I also hope Mr. President that we'll set up some method to meet more often than every 6 months. Alderman Tabacsko This is the piece you mentioned earlier that really has to do with what we want to do with these funds as a City. I'm really not certain whether or not - I'd like to see the conservation fund Pennichuck Water Special Committee -26- 1/29/13 beefed up to the extent possible but I don't know if this makes the most sense. I guess I'm really not certain that this is...I think the way its worded right now if I'm reading this right, it looks like unless we amended this, we would be locked into putting $500,000 a year into conservation for 4 years because it's a $2 million anticipation right? Did I misunderstand that? This is from the eminent domain. So this is the eminent domain proceedings of which we're going to get back - we can only get $500,000 a year. That's limited. Pennichuck is limited in how much they can reimburse on an annual basis and this calls for in the second paragraph calls for $2 million. I'm assuming that we would anticipate doing this over a multi-year period if I'm reading this correctly. Was that her intention? Alderman Pressly Well basically that is it. However it could be overridden at any time. I think this sort of sets a policy that that would be the intention. Again, every governing board can do what they want to do. It's not binding but it's just sort of makes a statement as to what the policy and the intent is of this Board since this was the group that really was instrumental in the purchase. The understanding that the conservation land that we did not get is not there. This would be a backup to at least maintain and protect those that we do have. A lot of the conservation land in fact Alderman McCarthy was instrumental in purchasing a lot of Pennichuck land over the years with the conservation money. So that land would be part of that that would be managed and maintained. It's not totally binding. It's more of an intentional. Again, I haven't really studied it. I've been unable to read the last 10 days. I have not been able to do my homework to get up to speed on this as I would have liked to. Alderman Tabacsko There is in the analysis and just so that it's out there for everybody, the legislation states an intent of the Board of Aldermen that any future funds up to $2 million would go to Conservation. It points out that whenever any eminent domain cost reimbursement funds are received from Pennichuck, the then current Board of Aldermen would have to pass a two-thirds vote for supplemental appropriation not in the Mayor's budget to appropriate that revenue into the conservation fund. The supplemental appropriation would become part of the combined annual budget in that year for spending cap purposes and would thereby reduce the amount of surplus. It's just another piece not to forget that that $500,000 could have a pretty big impact on our budget process in any given year depending on what else is going on. I haven't looked at this in 6 months either. I'm kind of with you. I'm not sure which way. I don't feel real strongly right now enough to... Alderman Pressly After this period of time, I'm a little ambivalent myself. I would ask Mr. President wouldn't there be the case if that money comes in that it would impact the cap no matter how it was spent? Chairman McCarthy It depends on what we do with it. If we appropriated in the fiscal year for an expenditure, yes. Alderman Pressly For an expenditure. So what would the other choices be to do with it? Pennichuck Water Special Committee -27- 1/29/13 Chairman McCarthy Put it back in the general fund. Alderman Pressly Okay. Alderman Tabacsko So moving it to Conservation fund is considered an appropriation. Alderman Pressly So spending it on anything specific would impact that? Chairman McCarthy Yes. I'm not in favor of doing this for a couple of reasons. As you pointed out, there isn't that much conservation land left to acquire in the City of Nashua. We can't acquire anything in another community from the conservation fund because I don't believe the City has the authority to buy property in other communities for fairly good reasons because basically you're taking property inventory out of the tax rolls of another community when you do that. Pennichuck has that ability. So if you want to make it possible to buy land to preserve the water supply, the better thing to do would be to tell them don't pay us back, keep it and invest it in conservation lands around the watershed. That's the only way we're going to be able to achieve that. In terms of if it comes back to us, this is going to be borrowed out of CERF and out of other capital funds. Frankly it ought to go back to the places it came from. We basically didn't appropriate conservation money. We borrowed money from other appropriations in order to be able to afford the upfront expenses of buying a water company with the intent that we would get paid back at some point in the future and allow those funds to get reimbursed. I don't favor moving it all to the conservation fund. I haven't seen a plan for what we would acquire with the conservation fund. We've made some major acquisitions in the past 2 years that actually begin to finish up the inventory of properties we were looking at that are still available. I think the two are not related at this point and likewise with the other one with the proceeds from Parcel F. First of all you heard that they can't do that and second, when we asked the Conservation Commission if the conservation fund should get used to buy back Parcel F, they said no. If we didn't think it was important enough to spend it on that with regard to the watershed, what would we spend it on? I think the fund as it is has a fair amount of money in it. I think we need to understand stewardship of the conservation lands that we've already got and figure out how to put mechanisms in place that will allow us to continue that stewardship in the future. I don't want to mix up the water money with conservation money. If we there's money we need to spend on conservation, let's come up with a plan that uses the existing conservation fund and let's come up with a plan that figures out how we're going to fund it. We took a lot of money out of CERF and other accounts and we ought to look at putting it back where it came from. Those are also key needs for the City in the future. Pennichuck Water Special Committee -28- 1/29/13 Alderman Cookson I had a question with regard to the $500,000 that's received reimbursement funds for the eminent domain costs. Do we know what time frame we received that in? Chairman McCarthy I think it's anticipated that when they close the books out every year, they'll determine whether there's enough profit to pay us some. Alderman Cookson So it wouldn't happen until the end of December the beginning of January? Chairman McCarthy Right. Alderman Cookson Do we know if we're received any funds? Chairman McCarthy I do not. Alderman Cookson Last month? Chairman McCarthy No. I can tell you however that if we did, there is some portion of them that are encumbered to pay back the water district for its investment which we'll...so we wouldn't get $500,000 a year under any circumstances at the moment. We'd get somewhat less than that. Alderman Cookson I guess in going back to former Alderman Dick Flynn, I mean his whole premise was with regard to these eminent domain costs and the reimbursements that we were going to receive that was to make the citizens whole again for that money. I'm of the perception right now that that's exactly what we should do. I'm not sure that conservation is the right thing. I think that we should be looking at making our citizens whole, our taxpayers whole whether it's going into CERF or the accounts that it was withdrawn from. At some point in time, do we recall what the total amount was in total eminent domain costs that we were going to receive? It was... Alderman Pressly $2 million. Pennichuck Water Special Committee -29- 1/29/13 Chairman McCarthy According to the... Alderman Cookson I thought it was more than $2 million. Its $5 million right and that legislation capped it at $2 million for conservation but there was still $3 million that was available to come in after that after several years. Alderman Tabacsko And we have that in the - it's right in the body of this legislation. If you look at that paragraph just second to last, the $500,000 per year and provided further that the aggregate of all distributions in respect of such eminent domain shall not exceed $5 million. That's just quoting the enabling repayment legislation. Alderman Cookson I would hope that we get to a point that when we do get CERF funded to an appropriate level, that we would then start using these eminent domain costs that we're getting in reimbursements potentially to help offset some of the tax rates. I think what we're going to see sooner than later is I think we all saw the news about BAE and the 200 layoffs. I know it affects people in Nashua. These are still difficult economic times and people are still trying to make ends meet. I think we need to be looking out for our taxpayers. Hopefully again Dick Flynn's wishes were that this money is going to go back to the taxpayer and I agree that there are plods that it needs to go towards but eventually like I said once we get them to an appropriately funded level, that this should be used to offset the tax rates. Alderman Pressly Thank you. Mr. Chairman just to clarify. I have never, ever suggested that Nashua Conservation Commission try to buy conservation land outside of our boundary. Chairman McCarthy I thought you had said that moments ago that there were lands outside. Alderman Pressly That's the other bill. There are two pieces of legislation here. The other one was that Pennichuck would take the $2 million from Parcel F and that they then would buy conservation land in other areas. In discussion, I combined the two ideas. I certainly know enough to know that we cannot do that. I'm happy unless somebody else would like to speak to this. I would be happy to put it on the table. Alderman Tabacsko Either that or I think both Alderman McCarthy and Alderman Cookson have reminded me of the fact that this was borrowed money in the first place. I think that's an excellent point that escapes me initially. I particularly remember taking money from CERF and recognizing after Pennichuck Water Special Committee -30- 1/29/13 that some of the pain that that caused and there are other places that were similar. If we were going to force this tonight, I would probably go that way as opposed to prolonging this. I'm happy to consider changing this. I guess we maybe want to talk to the other piece as well or not. I had missed that point earlier and I want to thank my colleagues for bringing it up. That has swayed my opinion tonight. Alderman Pressly Just a further question. When this money comes in if we don't put it in the general fund and we were to put it into CERF, would that still not affect - I mean if we do anything other than that. Chairman McCarthy We're going to have to do an appropriation to put it anywhere in the budget. Alderman Pressly So maybe it is the right thing...whatever is happening on the Board of Aldermen at the time that this money comes in. It's probably appropriate and I think that would still be the case for that current board to take a look at what the condition of the general fund is and all those things. I'm happy to move to table unless Mr. Cookson were you... Alderman Cookson I do have a quick question if you don't mind. So I think that our spending cap is somewhere relatively close to $500,000 maybe a little bit less than $500,000. So my question would be if we do get this reimbursement and I know that we have to expend some amount to the water district, do we accept the entire amount prior to the disbursement to the water district or is the amount that we receive less the water district? Chairman McCarthy That's a good question. I guess my gut reaction to it is we probably received the whole thing and have to appropriate even the part that we pay to the water district. Alderman Cookson We're really close to our spending cap. Chairman McCarthy It's possible that there's a way to get around that. If we were to authorize the...I'd have to talk to Legal but we could potentially authorize the company to reimburse the water district directly whether that is entangled in the budget cap or not. We'll probably require a great deal of thought. Alderman Cookson Do you happen to know how close we are to the spending cap? Pennichuck Water Special Committee -31- 1/29/13 Chairman McCarthy I think you're in the right ball park - $300,000 to $600,000. Alderman Cookson The money that we would receive for this reimbursement would happen in this current fiscal year's budget and not the next fiscal year budget that we're going to be contemplating very shortly. Chairman McCarthy I believe that's correct. It's whatever fiscal year is in progress and when we receive the payment we would have to amend. It is complicated by the fact that if it results in appropriations that are above the cap, then we have to take a vote to exempt the capital debt, we can only do that once a year so you want to make sure that we do that sufficiently to leave enough headroom for anything else that might come up before the end of the fiscal year. Alderman Cookson Well we may receive the disbursement of funds for the reimbursement, I think you said this and I just want to make sure I heard it correctly, we have to accept it in the fiscal year that we received it? Chairman McCarthy It will basically become a part of the fund balance as excess revenue. Potentially you could appropriate it in the follow year and adjust the fund balance appropriately to take it back out. Alderman Cookson You could accept it in fund balance and then this be your 14 budget, you could appropriate it? Chairman McCarthy I don't think you're going to find a year when there's more headroom in the cap than there is this year. That just defers the problem by a year. It doesn't solve it. Alderman Tabacsko You can also since Pennichuck is on a calendar fiscal year and we're on the July fiscal year, if we suggested - I think they might listen - that we would want that payment on whatever it's going to be on July 1st of any given year as opposed to the year we're already into. Alderman Cookson We could plan for it at that point. Alderman Tabacsko If we know at the annual meeting that it's going to be X coming in July... Pennichuck Water Special Committee -32- 1/29/13 Chairman McCarthy This would have to talk to them about what affect that may have on their books. MOTION BY ALDERMAN PRESSLY TO TABLE MOTION CARRIED NEW BUSINESS – ORDINANCES – None TABLED IN COMMITTEE R-12-39 Endorsers: Alderman-at-Large Jim Donchess Alderman-at-Large David W. Deane Alderman-at-Large Barbara Pressly Alderman Daniel T. Moriarty RELATIVE TO ASKING PENNICHUCK TO CONTRIBUTE THE PROCEEDS OF THE SALE OF PARCEL F TO THE CITY CONSERVATION FUND Tabled 8/2/12 PUBLIC COMMENT - None REMARKS BY THE ALDERMEN Alderman Pressly Mr. Chairman and President of the Board, it's been a long time since we have met. Are you still going to the original Water Committee meetings and have any information to share with us from that group? Chairman McCarthy The Regional Water District hasn't met in probably the best part of a year at this point. They are entitled to a seat on the Board of Directors. There has been no motion to get one only to remind the committee that the board that they ought to do that. There has been very little administrative support for the Water District since the acquisition of the company. Some of the members are of the opinion that its purpose has been served by Nashua buying the company. Some believe there is some need to have that representation. I suppose I should track down Rick Sawyer and have him call a meeting so we can figure that out. They had proposed a director but that person was ineligible to serve because they were a selectman in one of the towns. I think there was some initial confusion over whether those preclusions in the by-laws applied to the member from the Water District and the conclusion was that they do. Alderman Pressly May I ask another sort of a personal question of you? Have you entered into any discussions with anyone - it's been since August since this committee met. Do you met with anybody to discuss the water issues say the Pennichuck Board or the Mayor? Pennichuck Water Special Committee -33- 1/29/13 Chairman McCarthy There are no issues to discuss that I'm aware of. Alderman Pressly I'm just wondering if you as the President of the Board and the Chairman of this Committee are being updated at all during this time frame. Chairman McCarthy No as far as I know, that process is basically working. We have a Board of Directors in place and management that takes care of the daily operations of the water company. When they need help from the City, they ask. That's why we're here tonight. Alderman Pressly Okay. Any idea when we might be meeting again? Chairman McCarthy I think we'll schedule one after we get the proxy statement from their board. It will probably be the end of February beginning of March. Alderman Pressly Thank you. Alderman Cookson Just a really quick question. I know you mentioned it earlier and that proxy process. I'm assuming that once we receive that we'll address it at our next meeting. The idea even down the road beyond that is I thought you had mentioned that maybe we could provide the Mayor the opportunity to as that person to deliver the proxy vote. Chairman McCarthy Yeah I think we need to pick somebody who is the representative of the proxy vote. Like I said, it's probably appropriate for that to be me as the President of the Board this year and for it to be the Mayor as soon as the Mayor is not a member of the Board of Directors. Alderman Cookson And I don't know how I feel about that. I think I'm perfectly fine with having the President of the Board be that person even beyond the Mayor's term off that board. I think we as the sole shareholder, the Board of Aldermen are the sole shareholder. I would be of the mindset right now unless I'm provided another argument that the President of the Board should be the individual. Pennichuck Water Special Committee -34- 1/29/13 Chairman McCarthy I guess I would say I think to me it seems the same as any other transaction the City engages in that requires aldermanic approval. When we vote to buy a piece of property, it is the Mayor who signs the purchase and sales and the closing documents. Everything that we do we empower the Mayor to do that on behalf of the Board. Alderman Cookson I think it would be an interesting conversation when it happens. Alderman Pressly Thank you. I have a question and it didn't seem appropriate to ask it when Mr. Patenaude was here. If my memory serves me correctly, he has a two year time certain also or his contract I think definitely ended at a certain time. Chairman McCarthy It did come up when he was here. It ends in 2014. Alderman Pressly Right. If I understood it correctly, it is not renewable. It was strictly to be a specific time frame and that they have to go out and they have to have a search after that. Is that your recollection? Chairman McCarthy I don't know that it's not renewable. I don't think there are any automatic renewals included. I mean we certain can agree if it's what we want to do to craft another contract with Mr. Patenaude or the Board of Directors can. Alderman Cookson Thank you. Just to add to that. My understanding was that we brought on Mr. Patenaude as the interim CEO. He was charged with a succession plan for himself. So I think it might be an interesting conversation to bring that up. Chairman McCarthy Yeah but I think it's actually not an issue for the Board of Aldermen. It is the Board of Directors responsibility to hire a CEO. Alderman Cookson No I don't dispute that fact. I think it would be interesting to know from or Committee's perspective as to whether with a succession plan in place and with just a little bit over a year to go what has been identified as his term, whether that successor plan is in place and whether it's actively being worked. Pennichuck Water Special Committee -35- 1/29/13 Chairman McCarthy We can ask them then. Alderman Pressly I think that's really important to inquire about. I've always had the impression that what has been created here is really most unique and a lot of national water professionals would really be interested in a situation like this. I think it would be fun to find out what sort of - I assume they would do a national search for someone to step into this situation. It will be interesting to know as you've just mentioned what sort of plan is in place for that to happen. Thank you. POSSIBLE NON-PUBLIC SESSION ADJOURNMENT MOTION BY ALDERMAN PRESSLY TO ADJOURN MOTION CARRIED The Pennichuck Water Special Committee meeting was adjourned at 8:45 p.m. Alderman-at-Large Mark S. Cookson Committee Clerk