Pennichuck Water Special Committee

REPORT OF THE PENNICHUCK WATER SPECIAL COMMITTEE JUNE 6, 2013 A meeting of the Pennichuck Water Special Committee was held on Thursday, June 6, 2013 at 6:50 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 David W. Deane Donald L. Ware, Pennichuck PUBLIC COMMENT NEW BUSINESS – RESOLUTIONS R-13-119 Endorsers: Mayor Donnalee Lozeau 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 THE DRINKING WATER STATE REVOLVING FUNDS MOTION BY ALDERMAN PRESSLY TO RECOMMEND FINAL PASSAGE ON THE QUESTION Mr. Ware I’m here just to answer any questions you might have relative to the request. In summary this is for two loans through the Department of Environmental Services State Revolving Loan Fund program for two projects, both in the Pennichuck East Utility which is one of the three subsidiaries that the corporation owns that are regulated by the public utilities commission. These loans, one is to replace approximately 6,800 linear feet of water main up in Center Barnstead in the Lock Lake water system. The second loan is basically a new supply for a small system called Avery which is in Southern Londonderry. Currently the facility is in need of rebuilding and it’s in need of a treatment facility. In looking at it it was less expensive overall from a life cycle perspective to connect into the Hudson system and purchase water from Hudson. These loans, again which have been offered to us by the DES, are at a rate not-to-exceed a 2.72 percent for 20 years. For us and for our ratepayers that’s as good an interest rate and money that we can get. We’re all aware that when we borrow money there are basically three parties that we need to go to to get approval: our own board, the Aldermanic board, and also our bank that we do business with. We have approval of our current board and of the bank that we do business with which is RBS Citizens. We’re in the process of seeking approval by the Aldermanic board. I’d be happy to answer any questions relative to these loans that you might have. Alderman Pressly I assume you do not have to go to the Public Utilities Commission. Pennichuck Water Special Committee -2- 6/6/13 Mr. Ware Yes, we have four approvals. We have to go to the Public Utilities Commission. We have a docket open with the Public Utilities Commission, DW 13125 where we’re seeking the approval of these two loans. One of their data request is always show us that the city has approved the loan, that your board has approved the loan and that the bank has approved the loan. Alderman Pressly Would you say the interest rate again? Mr. Ware 2.72 percent. Alderman Pressly Is that a lot better than what you have on a lot of your loans? Mr. Ware Yes. Alderman Tabacsko Both of these are for the Pennichuck East entity? Mr. Ware That is correct. Alderman Tabacsko This financing and the cost associated with it will all be captured in that utility. Will any of the cost of this come back into the Nashua ratepayers? Mr. Ware No. Alderman Tabacsko I just wanted to get that clarified for the record. Thank you. Alderman Pressly Since you here, has there been any changes in that grouping? Do you have any new towns? It sounds like you’ve done a small expansion. The new, what town is that in? Mr. Ware One of them is in Center Barnstead Lock Lake. The other is in Londonderry. Those are both existing systems. There’s been no expansion beyond the existing customer service area that we have. Pennichuck Water Special Committee -3- 6/6/13 Alderman Pressly Would you clarify that? There’s been no expansion period or just in this application? Mr. Ware There’s been no; we’re only servicing the current areas that we serve. Alderman Deane What other additional debt to you have that’s borrowed money? Mr. Ware I can’t tell you off the top of my head. I think a couple good places you could go look and see a compilation of our debt by utility with the current filings that were just made with the Public Utilities Commission which are on our website. Alderman Deane Could we do the same thing we do here, Alderman McCarthy, with the Pennichuck debt? Chairman McCarthy What do you mean? Alderman Deane What are they paying for interest rates on the money they borrowed? Chairman McCarthy They’re actually all pretty good. I’ve looked at the table recently. There were some 7 percent loans at one points but I think those have all been refinanced down to at least under four. Mr. Ware Some of the loans cannot be refinanced. There is one particular one from I don’t know 15 some odd years ago through AULI which is a life insurance company which can’t be refinanced, but the bulk of the loans emanated through the construction of the water treatment plant. For instance in Pennichuck Water Works those were all through the Bond Finance Authority of New Hampshire at the time. Those were in the low fives at the time which at the time was a good interest rate. Chairman McCarthy You also have to remember that debt that’s held by the corporation is taxable. The interest payments are taxable which makes them run at an interest rate that’s a percent or two higher than the city will get. The low rates are the ones that come from the State SRF; the ones that are commercially will be higher than we pay for debt. Pennichuck Water Special Committee -4- 6/6/13 MOTION CARRIED PUBLIC COMMENT REMARKS BY THE ALDERMEN Alderman Pressly Have you set the date for the other meeting? Chairman McCarthy I have not because we haven’t finished the date for budget meetings yet. I have communicated with Mr. Patenaude and Mr. Leonard. I have a list of dates from them. It will be sometime within the next month but it’s going to depend on what the budget schedule looks like. POSSIBLE NON-PUBLIC SESSION ADJOURNMENT MOTION BY ALDERMAN TABACSKO TO ADJOURN MOTION CARRIED The Pennichuck Water Special Committee meeting was adjourned at 6:57 p.m. Alderman-at-Large Brian S. McCarthy Committee Chairman