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Special Board of Aldermen 6-13-2022 Page 2

totaling $2.33 million, enterprise funds which total $1.85 million, capital project funds. Capital project funds are in here
because the Board of Aldermen is approving the borrowing allowing the Mayor and |, City Treasurer to borrow funds
to construct several of our projects. The total amount is listed as $76,399,000. | am going to pass out, if you’ll let me,
an exhibit that details each one of those Resolutions and the amount of the Resolutions. Some of the Resolutions
you're going to be very familiar with - $21 million for the TIF for the Riverwalk Project, $37.5 million for the bond
paving program, but there are others as well. They add up and they're for good purposes. So essentially you get the
total - supplemental appropriations you add the two together and you get that little over half a billion and then you
move on to Fiscal ’23 which is the Mayor’s proposed budget.

Using the same ingredients you’ve been reviewing over the last several weeks — the general fund appropriation
proposal, enterprise funds, special revenue funds including the grants. Because of the amount of ARPA funds we
received fortunately by the US Treasury and what’s called the ESSR funds on the school side, we’ve had a reduction
in the number of grants but we still have the mainstays which I’ve reviewed with the Committee a few weeks ago
reviewing the grants that we have. The interesting part of the grants is the Board of Aldermen not only accepts the
grants but they appropriate the grants. So it’s very important note as we proceed with this discussion.

So if we move forward with the Fiscal 23 the total appropriations at the front first two pages of this particular
Resolution is the $406,663,584. The reason why there’s nothing in the supplementals is you haven't had the
opportunity to supplement the budget yet. As we do, part of the calculation would be to add that supplemental
appropriation and inform the Board how much under the cap we remain. Very consistent with the prior calculations of
spending caps that I’m familiar with. We get into the calculation, we have the total Fiscal ’22 appropriations, which is
the original appropriation of the budget and the supplemental appropriations. You take that number and the cost of
living or the adjustment that we are allowed to make is referred to as “the State and Local Government Implicit Price
Deflator”. It was a replacement of what you may recall the CPIU Northeast. The residents of the City voted for that
thinking that might be a better description of how your budget should increase relative to State and local government
spending. So that number is 2.8. So if you take the 2.8, multiple it by the total appropriations online 19, you get about
$14.1 million, add that to the appropriations, and add that to the base which is $520 million, or to get $520 million
subtract the current budget on line 5 under the Fiscal ’23 column. You end up with about $113 million under the cap
for this calculation.

So this approach is what is what | refer to as “gross basis budgeting” from the municipal guidance. | think the issue is
that the municipal guidance for accounting and finance sometimes differs from the possible uniqueness to a spending
cap calculation. Attorney Bolton and | have had discussions on that and he is prepared to explain that difference but
what | wanted to do is go through the mechanics. If | may, | will pass out that exhibit that will further detail the
calculation of the supplemental appropriations that have been passed through the Fiscal ’22 period.

So if | may, the first thing | want to do is apologize for how small this font is but | really didn’t have time to put it on — it
really looked good on 11x17. Essentially this is the entire calculation. It’s got the description left hand side. It’s got
the Resolution numbers. It’s got the broken out by General Fund, Special Revenue Funds, Grant Funds, TIF District.
People are very interested in that being budgeted and appropriated. Capital Project Funds — that’s the lion’s share of
that Supplemental Appropriation. You’re probably familiar with most of those Resolutions and then the Enterprise
Funds. From time to time are supplemented during the year, but the totals are on lines 23 and the creation of base
budgets on line 26. You can see that on the right-hand side if we take the total base budget times that percentage,
we get the new cap value.

So that Madam President is a brief overview of how | calculated the spending cap analysis, why | thought it was
important that it get put next to the Resolution because everything ties together, and also included in the Resolution
were the guidance of the Mayor and Corporation Counsel. | put in there the spending cap pages so you don’t have to
look at the big book and figure out what page it’s on, etc. So with that, I’d be happy to answer any questions.

President Wilshire

Questions? Alderman Dowd?
Alderman Dowd
Just out of curiosity based on what’s happening with the economy right now, where is the SNLIPD going up or down?

John Griffin, CFO/Treasurer/Tax Collector

The SNLIPD is going up. And to that point if | may, that particular metric is a three year average. So if you can

Special Board of Aldermen 6-13-2022 Page 3
imagine, it was a lot lower three years ago than it was last year. So my expectation is that it will increase next year.

Alderman Sullivan

Thank you. In preparation for tonight, and | would appreciate someone explaining to me, | understand the tax cap
was passed in 1993 and it went away for a little while and now it’s back. | would love an understanding of that
timeline but before | do that, | was looking at some budgets from prior years specifically Fiscal Year 17,18 and ‘19
where the layout for the spending cap when the spending cap was in effective for those three Fiscal Years, it wasn’t
laid out the way that the Fiscal Year ’23 is laid out. By that, | mean in the upper section you had your general fund
and then it was broken out by Enterprise Fund, Solid Waste, Waste Water, and then City Special Revenue Funds,
School Special Revenue Funds, and then below it you backed out the Enterprise Fund for both Solid Waste and
Waste Water. Then you backed out City Special Revenue Funds and School Special Revenue Funds. | don’t see
that in Fiscal Year ’23. I’m curious why we didn’t do that because that took the total appropriations from Fiscal Year
2017 from $289 million, less $29 million, with a total appropriation of $260,526,617 and that is where they applied the
cap on top of that. So I’m just curious why we didn’t do that for Fiscal Year ’23?

John Griffin, CFO/Treasurer/Tax Collector

Madam President and other members. | think Corporation Counsel who was with us in his position in ‘17 and so on,
he is our expert on the cap. | can say that when | came in 2010, | inherited a very complicated, in my opinion, not
simple cap structure which you just referenced where things were taken out of the calculation through ordinance.

Alderman Sullivan

Could you understand why | would be confused where in three consecutive years we took it out and the cap went
away, and now the cap is back, and now we're not taking them out?

John Griffin, CFO/Treasurer/Tax Collector

The only thing | can say to that, if | may and | was actually relieved, that the cap didn’t have - | was under the
impression and Corporation Counsel could further the details — but | was under the impression that we were finally
going to be able to go to gross budgeting and include everything with nothing subtracted. That’s my professional
opinion but there’s a better answer with regard to the process from creation, to ordinance changes that changed the
calculation many, many years before | was here, and then finally the decision that the current spending cap that we
had at the time was unenforceable. So we went back to just budgeting without a page that talked about the spending
cap. This is a reintroduction with what’s called “gross budgeting”. Putting in all the appropriations so people have an
understanding of what you folks are appropriating and not carving out things.

Alderman Sullivan

So we just changed it. We just changed the way that we’re going to factor it in. We went from this system to gross
budgeting which you mentioned and that’s how we're factoring it? I’m trying to connect the dots.

John Griffin, CFO/Treasurer/Tax Collector

| understand. Let me see if | can give it a shot. The prior spending cap, the one that | came in with, had items that
were subtracted by ordinance from the calculation. | don’t see anything to subtract going forward because I’m relying
on a spending cap in place with all appropriations appropriate and there’s no need to subtract anything. | don’t know if
that’s a better answer for you Alderman Sullivan but there’s no need of subtracting anything because everything is
included.

Alderman Sullivan

I’m just not understanding. You are saying “by Ordinance”. The Ordinance is what made us subtract these specific
funds in those three years that | mentioned and now those Ordinances...

John Griffin, CFO/Treasurer/Tax Collector

If | may Madam President and members. We didn’t even include the bonds back then. So there’s no need to
subtract. Some of the confusing part of the former spending cap was what to do with the Wastewater Treatment Plant
and the costs associated with it. The Special Revenues are added, subtracted, because they don’t have an impact on

Special Board of Aldermen 6-13-2022 Page 4

the calculation at the end of the day. This particular spending cap has all the appropriations in it from last year and
this year and then you apply the metric which is the State and Local Government Implicit Price Deflator Multiplier and
then you get a new number.

Alderman Sullivan

| understand how we get it. My bigger question is what are we building that number off of - that multiplier? |
understand what the multiplier is but if we’re taking total appropriations and in prior years we subtracted certain
monies to bring down those total appropriations, and then we built the spending cap off that net number, and now
we're not taking anything out of those total appropriations, and then we’re applying it 2.8% increase off of that. It
really just misses the mark for me.

Then the other question | have is the grant funds. So you’re saying grant funds if we get $100,000 from the State or
the federal government, that’s a grant. We’re counting that as an appropriation because it goes to a specific cause?
Are you counting that as $100,000 or are you counting that as $200,000?

John Griffin, CFO/Treasurer/Tax Collector

Madam President, | would count that as a $100,000.

Alderman Sullivan

Because we are getting it.

John Griffin, CFO/Treasurer/Tax Collector

Right but some of these questions are more the legal interpretation of the spending cap. This isn’t something that the
Comptroller and | would be learning at the Department of Revenue Administration. This is the interpretation of a cap.
It’s not a tax cap. It’s a spending cap and what | like about it is it didn’t subtract anything. As a purist accounting
person where every appropriation that you folks rule on is in the cap.

President Wilshire

Attorney Bolton would like to weigh in.

Steve Bolton, Corporation Counsel

| think | can help with some of these questions. Taking the grant question first. The grant is revenue but when we
spend it, it’s an expenditure. There are many things like that throughout the budget. You've got a whole section on
revenues and another larger section on expenditures. So the motor vehicle funds that are collected when people
register their cars downstairs, that’s revenue for the City but then that gets spent. That part of the money that funds
those appropriations on the expenditure are half the budget. Similar with grants, revenue comes in. Part of the
arrangement with the State but more likely the federal government is we get that money because we promised to do
certain things with it. We promised to spend it on the program that we spend it in. When this Board approves the
acceptance of that, they’re approving that agreement and authorizing the expenditure of money for the purpose
therein contained. So that’s an expense. That’s part of what the City Charter refers to as “total expenditures” and
that’s what builds the base.

There’s another reason why grants should not be treated specially, or subtracted, or something and that’s because
the State Statute would allow that in a City Charter. In fact, RSA 49-C:33 | says “a tax cap provision in the City
Charter may provide for specific exclusions for dedicated enterprise or self-supporting funds, or accounts, capital
reserve funds, grants, or revenue from sources other than local taxes, or interest in principal payments on municipal
bonded debt, or capital expenditures which shall be by a super majority vote as determined in the Charter”. So the
Charter could say that you’re going to subtract grants. Our Charter does not say that, meaning grants have to be
included.

Now there is an Ordinance that was passed back in 94, had some amendments over time that attempted to say what
things should be subtracted. | have long been of the opinion that those Ordinances were contrary to the City Charter.
You cannot change a City Charter by Ordinance. Clear you can’t. The Charter talks about total expenditures. It
doesn’t say anything about subtracting out grants, or special revenue, or other things. It could but it doesn’t. Since it
doesn’t, those things have to be included.

Special Board of Aldermen 6-13-2022 Page 5

Alderman Sullivan

My only question was why did we do it for three years in a row and now we're not doing it?

Steve Bolton, Corporation Counsel

| think it was illegal to do it for those three years. Former Alderman Teebow and then Alderman Moriarty took the City
to court over that. In that case, the court found it did not have to reach the question of whether the budget in that
year, | believe that year was '18, those Ordinances should have been followed as they were then in effect. The court
didn’t reach that question because it founded the entire spending cap itself did not comply with State law. State law
last year in 2021 was amended to essentially say “regardless of what the Supreme Court said, that spending cap is
okay, go with it”. So we're going with the spending cap as is contained in the budget. What was done in prior years, |
think, was illegal.

Mayor Donchess

Now | see the confusion. | get why it’s confusing. | can state and you haven't given a timeline. So this is my
understanding subject to correction by either of our other two experts - Attorney Bolton or Mr. Griffin. But if you look at
the spending cap, it is very basic. It says in Section 56c of the Charter. “In establishing a combined annual municipal
budget for the next fiscal year, the Mayor and Board of Aldermen shall consider total expenditures” and that’s the only
guidance it gives - “total expenditures”. That’s it and then it goes on to say “the percentage increase etc.” Total
expenditures, that the only language in the Charter that really says what’s in and what’s out. Now that is a very, very
broad term. It includes every check, every appropriation, every bond issue, everything.

So back in the 90’s when this passed, people saw the difficulty of that broad concept and there would be huge
volatility because of capital expenditures and bond issues. So the Board of Aldermen at that time passed interpretive
language. Here’s what it means - this is in and this is out. There were Ordinances that defined what was in and what
was out. For example, the enterprise funds were out but one of those Ordinances said that only half of the
wastewater fund was in and half was out. The Board of Aldermen and the City continued to follow those interpretive
Ordinances and | always considered them myself to be valid. Attorney Bolton did not, but he is the expert. | thought it
was reasonable that the City was interpreting what that broad term meant.

Well then several years back, the wastewater fund was half in and half out, the Board of Aldermen passed an
amendment saying well look the wastewater fund is not tax dollars. It’s a separate - it’s not property taxes so it makes
no sense to have it half in and half out, so we'll put it all out. So they amended the Ordinance to say the wastewater
fund is no longer part of it. That was challenged in court and the Superior Court decided, without the Cities request,
the City never requested to invalidate the cap but the Court on its own volition decided the spending cap is invalid
because it doesn’t contain an override.

Okay. Then the legislature got into the act and over the unanimous objection of the House Delegation at least,
everyone was against it, unanimous opposition. The Legislature adopted an Act which attempted to put the spending
cap back into effect. In doing so, suggested that only the language of the Charter is meaningful. Ordinances cannot
amend, or interpret, or change, or anything else. That all these Ordinances that have been passed in previous years
which resulted in those deductions which you were pointing out. Only the Charter language means anything. So the
Ordinances no longer apply and therefore, we do not have those Interpretive Ordinances anymore. We don’t have the
thing that says “this is in and this is out”. All we have is this simple language in the Charter that says “Total
expenditures should be included”. What Attorney Bolton was saying right at the end is yes you could exclude
enterprise funds, or grants, things like that but the Legislature in its wisdom made it clear that those kinds of
exclusions would have to be in the Charter itself. They can’t be in an Ordinance and they’re not in the Charter. So
the difference is the Legislature changed the landscape and said that, in essence, these interpretive Ordinances that
had been passed and applied resulting in those deductions are no longer applicable. All we’ve got is the language
total expenditures. Mr. Griffin, the CFO, is telling you what total expenditures are. He is applying the strict language
of the Charter.

Now is that is inaccurate, which it could be, if that requires correction please make the correction.

Alderman Sullivan

Around grant funds and building our appropriations off of grant funds, I’ll just ask this in a common sense way. Do
you think counting grant funds, money that we got in 2022 and then spent - | understand that, and included those as
total appropriations to build our spending cap off of, do you think that’s a good decision? Because to bring it back to

Special Board of Aldermen 6-13-2022 Page 6

my home budget if | got a loan or a grant for $25,000 and | went out and bought something and then | had to whatever
| did and then that relied on normal income, those payments would then be in my home budget. If | didn’t get that
grant again the next year, then I’d be hamstrung because | wouldn’t be able to afford it. Does that make sense?

Steve Bolton, Corporation Counsel

No and let me tell you why. When we don’t think we’re going to get the same amount of grants, we reduce the amount
we’re assuming for grants in the next years’ budget. So if you look at what Mr. Griffin has given you, you see that the
amount of grants last year in ’22 was, Special Revenue Funds including grants, last year was approximately $96
million. This year, it's down to approximately $60 million. So you can see when your anticipation of what you’re going
to get in grants changes, you make that assumption in your budget. So in your home budget if you have a $25,000
grant or windfall from something else and you didn’t think you were going to get it the following year, exactly you don’t
plan or spending it the following year just as this budget and this calculation does.

Alderman Sullivan

Okay. | appreciate you pointing that out.

Mayor Donchess

And you’re right, it doesn’t make sense. That's why these ordinances had been passed. Again, | always thought they
helped. | always equated it with Congress passes laws that help to interpret things like the 14 Amendment or
whatever. But the Legislature invalidated ordinances that help make this more workable saying that only the language
of the Charter applies. So we come up a result that has the problems that you've just identified.

Alderman Clemons

Thank you. This bring up something | want to talk about, which is | did a calculation. Just a quick calculation here
and | took the $59 million that we’re budgeting this year for the FY ‘23 budget for grants. | multiplied by a factor of 3%,
so that comes out to be approximately $1.787 million. Are what you're telling me here is that in Fiscal ’24 if the
spending cap calculation is 3%, we cannot accept any grants above $59,581 plus the $1.787 million because we have
to stay under the spending cap?

Steve Bolton, Corporation Counsel

No. You have to stay under the spending cap in the gross budget, but it doesn’t apply line for line.

Alderman Clemons

Assuming the other lines go up by the same 3%, would that be true? In another words, here’s a better way of putting
it. If we come into a $20 million grant or a $16 million grant like we did this year with the ARPA Funds, right, we can’t
take that money? Is that correct or we can take a portion of it only?

Steve Bolton, Corporation Counsel

It would be theoretically possible to get into that situation, but there are things that can be excluded by vote of ten
Aldermen and that would be capital projects. | have to get the Charter out so | can remember exactly what it is. You
can exclude the principle and interest payments on municipal bonds or you can exclude expenditures for capital
improvements. Typically we have a significant amount of expenditures to capital improvement. So if you exclude
that, that gives you some wriggle room but in fact, you do not have an override provision that you can go to for
essentially and unlimited ceiling. There will be a ceiling of debt some level even if you take advantage of excluding
everything that you can exclude.

Alderman Clemons

So would a grant (theoretically) that went to fund let’s say firefighters gear for example, would that be a capital
improvement that could be excluded from the spending cap?

Steve Bolton, Corporation Counsel

| would say probably not unless you were telling me that the gear that you're talking about has a lifespan of 10 or 15

Special Board of Aldermen 6-13-2022 Page 7
years.

Alderman Clemons

So what | am coming to the understanding here is that we are this Fiscal Year ’23 we have $113 million under the
spending cap. It seems to me that if we don’t receive a significant sum of grants in the next year or before July 2023
that we could be in trouble?

The other question | have is around the same lines and that’s for the Enterprise Funds. If we see an uptick in
revenue, we can only spend — we can take the revenue in but we can only spend a portion of it out, correct?

Steve Bolton, Corporation Counsel

You could run into that issue. | mean you’ve got a significant gap here between the limit on total expenditure and the
amount of this proposed budget. | guess | didn’t understand you before saying that if we don’t by June 30 get a large
number of grants we’re in trouble because | don’t see that.

Alderman Clemons

Well here’s my question. Rather than talk about grants, let’s talk about the revenue fund. So as we all know, the
sewer system has continually plagued us with different - especially the overflow — has plagued us for years on having
to raise the rates for example so we can pay for projects. Are we constrained with how much we can raise the rates
because we are constrained with how much we can spend the following year on any particular project because of the
spending cap?

Steve Bolton, Corporation Counsel

Capital expenditures can be excluded.

Alderman Clemons

Okay. So they would have to be excluded and that would take a vote of ten Aldermen?

Steve Bolton, Corporation Counsel

Right but you never constrained on raising the rates. | mean your constrain is what you think is prudent and what you
think your constituents would be agreeable to. So the revenue side there’s no cap on the revenue side. The cap is on
the expenditure side.

Alderman Clemons

| guess my point is though is that if we are constrained on the spending side of it, you would only raise rates if you
thought you were going to do some big project or something you were anticipating in the future but if you don’t have
ten Aldermen come to agree to do that to exclude that out of the spending cap calculation, you probably wouldn’t want
to raise rates anyway. | don’t know. These are the conversations that come back with having the spending cap the
way that the State has decided that we must apply it. | agree with the Mayor and | agree with what Alderman Sullivan
was saying which is that it doesn’t make sense to have these calculations in there and | think the Ordinances we had
in place before were us recognizing or the Board of Aldermen recognizing that the Charter language is too strict and
too harsh. I’ve always felt that way as an Alderman. | always thought it was ridiculous that - and there have been
cases, there have been instances when I’ve been on this Board of Aldermen when we have received $500,000, $1
million and it can’t be spent because we're up against the spending cap, especially in those low inflation years. It’s
probably not going to be an issue in the next coming years but it happens. I’ve seen it happen. | think it’s something
that we need to think about how we want our Charter to read in the future. | don’t necessarily mind the spending cap
that or spend some kind of — | don’t really like the spending cap to be honest with you but if there is a spending cap,
we really need to think about not including grants and enterprise funds.

Steve Bolton, Corporation Counsel

If you are asking me if | think it makes perfect sense, I’ve never said it makes perfect sense. If you are asking me if |
think it could be better written, yeah | do.

Special Board of Aldermen 6-13-2022 Page 8

Alderman Clemons

And | would agree with you. Thank you.

Alderman Cathey

Thank you Madam Chair. | believe this question will be for Attorney Bolton among many questions. In the language
of the SB52 it states that “such a tax cut shall provide for an override threshold”. Am | to understand that piece of
legislation is dictating to us to create an override when it says “shall”? Like it’s telling us you have to put this into the
language of your tax cap laws or it just saying it can include it?

Steve Bolton, Corporation Counsel

No. The Statute requires that there be an override. That’s what the Supreme Court of New Hampshire held in 2019.
The spending cap in Nashua’s Charter was invalid because it did not have such an override provision. Last year in
2021, the Legislature passed a law that said essentially, not in these precise words, but essentially said that any tax or
spending cap passed prior to 2011 was valid regardless of any other problem. So the fact that it doesn’t have the
override which would otherwise be required, the Legislature basically said it’s valid anyway.

Alderman Cathey

So does that mean that we are in violation of this Statute that was passed in SB52 because we did not create an
override provision in our Charter to an Ordinance? Is that something that we need to do?

Steve Bolton, Corporation Counsel

No, it has to be in the Charter.

Alderman Cathey

Has already exist in the Charter.

Steve Bolton, Corporation Counsel

It has to be in the Charter.

Alderman Cathey

But we could add one?

Steve Bolton, Corporation Counsel

If you amend the Charter.

Alderman Cathey

But we’re not being told we have to now go do that?

Steve Bolton, Corporation Counsel

Well as the Supreme Court decided in 2019 without it, that provision in the Charter was invalid. The Legislature
basically said no the Charter is valid even without it. So we don’t have to do anything. Basically we’ve got the Charter
language as it is basically to do the best we can to make sense of it. It’s already been pointed out in some places it
may not make perfect sense.

Alderman Cathey

Thank you. For my own edification and maybe for others, are there any accounting principles, laws whether they’re
federal, or State, or even local that dictate how our accounting system works? Because to Alderman Sullivan’s point,
there is a difference between what they did then and what we’re doing now. And so for me, | need to go to what is the
underlying principle and process for how municipal budgets are completed whether it’s in Nashua or anywhere around

Special Board of Aldermen 6-13-2022 Page 9

the Country, what guardrails do we have that we say we have to include capital projects, or we don’t have to include?
Do we have to include enterprise funds or we don’t? Is there some metric, or some guideline that we can point to, or
can we sort of pick and choose how we would like to?

Steve Bolton, Corporation Counsel

| think the Municipal Budget Act has something to be said on what the budget is.

John Griffin, CFO/Treasurer/Tax Collector

Madam President and other members of the Board, this certainly very descriptive, detailed requirements on the proper
municipal accounting. This is an off book calculation that somebody was interested in making. That’s why when it
passed, me being a kind of practical person | said who is in charge? Who was actually going to tell us how this should
be constructed? Fortunately | had Attorney Bolton and Mayor Donchess and they said read this very literally and
present. It’s not even in the budget book because all the accounting is proper in there. It’s literally a calculation that
folks decided through Charter amendments and so forth are proper. So what | want to explain to everybody here,
don’t worry about the accounting. We've got like 15 years of unmodified opinions. We've got AAA bond ratings.
We've got an excellent presentation of our information. This is like one paragraph in the official statement of the City
and maybe even the GFO submittal to get the Award for Excellence on Financial Reporting. So you’re not going to
find it. You’re not going to be able to call anybody up at the DRA and talk to them about it because there’s a lot of tax
caps and spending caps.

Now | come from Massachusetts where good, bad, or indifferent where we had Proposition 2 1/2 back in 1982.
Extremely prescriptive, but a lot of outs. So here we’re just trying to take the best information we can and craft a
budget. But if | thought for one minute that anything in here was going to effect the accounting of the City, | gota
problem with that.

Alderman Cathey

Thank you. | appreciate that Mr. Griffin. | was just curious because as Aldermen | know a little bit about accounting
but not enough to know the rules and regulations of how these budgets are put together so | appreciate that.

To clarify an earlier statement | believe it was Mayor Donchess. The Ordinances that we used to have that were
related to the spending cap, those Ordinances no longer exist and/or apply to our current situation. Am |
understanding that correctly?

Mayor Donchess

As | understand it, they no longer apply because the Legislature said you have to go by the Charter language only and
you cannot alter it, interpret it, or modify it by an Ordinance.

Alderman Cathey

We can’t alter the spending cap Ordinance?

Mayor Donchess

Correct.

Alderman Cathey

Two questions, kind of together. One - I’m guess why we would include grants only because | don’t see them as
expenditure. | see them as revenue and even when we spend them now, it’s sort of like we’re the conduit for how the
federal or State government is spending money so it’s not really us.

And then two, wastewater is funded by users fees so how does that play in? That’s not necessarily | guess related to
expenditures because we’re getting revenue in to cover the cost of what we’re spending. So how do those two things
factor into the budget and how they apply to the cap when | feel like the cap is supposed to constrain us from
spending taxpayer money and grant money and wastewater money is not that. At least to my understanding, but |
could be incorrect.

Special Board of Aldermen 6-13-2022 Page 10

Steve Bolton, Corporation Counsel

Well | think that was the goal but that’s not what it says. It talks about total expenditures. Furthermore, the State
Statute about spending caps says you can exclude certain things by a simple majority vote of the Aldermen if your
Charter allows it. Our Charter only allows it in those two places where | mentioned - the interest and principle of
bonded debt and capital expenditures. So yes, would it make sense to treat things that have no impact on taxes
differently? It may well make sense. Our Charter does not make that distinction.

Alderman Cathey

Thank you Madam Chair. Mr. Griffin the Capital Project Funds you mentioned one was the Riverwalk Bonding
Project, and the Paving Bonding Project, and I’m sure there are a lot of other project listed in there. To my
recollection or understanding, those bonds have not been sold at least for all the paving project or the Riverwalk
project and in the case of the paving projects, it’s my understanding even though we have the approval for the bonds
you're not going to sell them all right away because it’s a five year project. So how do those numbers get to be
calculated into a 2022 budget when they actually haven’t been — you haven’t gone out and sold the bonds and won't
do so until maybe the 2023 year or maybe even beyond. So how does that get to apply to the 2022 because that sort
of changes the numbers?

John Griffin, CFO/Treasurer/Tax Collector

Madam President and members of the Board. Great question. | struggled with it but you are appropriating the
spending of $37.5 million at that evening or day that you approved it. You’re approving the $21 million. The spending
cap total expenditures, the spending cap language didn’t talk about vintaging, when you are going to spend it. Can
you imagine the calculations and the date of selling bonds, versus using general fund, and it became overly
complicated. So the Comptroller and | with the team basically said let’s put it all. It's an authority to spend.

Corporation Counsel - the plan could be expedited potentially notifying you folks if we wanted to be aggressive with
the paving or the Riverwalk. We wanted to turn a 3-year project into a 2-year. So | relied on the fact that you folks
appropriated the authority to borrow and spend money on the project.

Steve Bolton, Corporation Counsel

| mean is itan even more fundamental problem because you could say that about a lot of things. When departments
are preparing the budget in February for each individual department, there’s another five months of payroll that hasn’t
been expended yet. You’ve got to go by something. If you can’t go by what’s been authorized to be expended, then
you'd have to wait until July 1S‘ to add up all the checks that were actually written and you wouldn’t know what the
spending cap number is until after we were required to have a budget by August 1%. We'd certainly like to have it by
July 1 when the fiscal year starts but if you go by when you actually expend the money, it’s just practically as a
practical matter impossible to know those numbers in time to prepare a budget.

Alderman Cathey

| understand that and it makes sense. As a process and procedure guy, I’m always wanting to protect against future
instances. So my mind goes to what if someone wanted to artificially inflate the numbers and ask for an appropriation
that they may or may not need so we have more room in the spending cap. I’m not saying anyone is doing that, but
I’m just sort of thought exercise. Should we not come up with some way to protect that in the future?

Steve Bolton, Corporation Counsel

You. You vote against that appropriation. That’s why you’re here.

Alderman Cathey

I’m thinking more like - | don’t know — that’s sort of off the top of my head. If we say we need $21 million for
Riverwalk, then we go and sell bonds but we only sell $17.5 because we figure out that’s what we need not $21
million. Well that effects the budget and then obviously the cap because it’s $4 million extra dollars. So | didn’t know.
| don’t know. I’m just trying to think through the accounting principle wise how that works, why it works that way.

Steve Bolton, Corporation Counsel

Special Board of Aldermen 6-13-2022 Page 11

The good news is eventually it gets paid back because if you don’t spend it, it’s there. It doesn’t just go to the general
fund. It has to be either transferred to another capital project which the Aldermen find necessary to do or it gets paid
back to retire the payments on those bonds - retire that debt or a portion of it. So it’s not a waste and assuming
there’s no theft or misappropriation involved, it effectively lowers to the extent it’s not needed and never spent it
lowers taxes in the future.

Alderman Klee

Thank you Madam President. This conversation to somewhat does frustrate me a little as a State Rep. | worked very
hard to get the language of the State to become and change SB52 to allow for Nashua override. The only
municipality in the entire State that does not have that and sadly many residents from Nashua came and spoke and
as well as a certain Senator and so on. So it did not happen. The clear question here - | shouldn’t say that. | should
make a statement is that the spending cap is not the same thing as a tax cap. Just because we have a spending cap
does not mean that the taxes won’t go up. People conflate the two things. | know logic says if | don’t spend a lot of
money, then | don’t need a lot of money and so on. | disagree that grants should be excluded. Grants are still
expenditures. It may be free money and in end we may look at it and say it was a wash, money coming in and money
going out but how is that different from any other revenue source that we have? If we can get enough money ina
particular revenue source, why shouldn’t we be able to spend all that money and that’s not the way things work.

The way it works is that part of the spending cap is you have a limit of how much you can do on the spending cap. In
this particular year, it’s 2.8% and it’s a rolling three year average. So if you have a good year, or a bad year, or
whatever, it’s going to effect that. It’s very frustrating trying to work on a budget in that particular way especially in a
year where there has been a lot of grants that have been given. | can tell you that the City has a $1 million grant for
Locke Street and | sweat it all the time. Are we going to suddenly hit the spending cap and now we can’t use that
money? This has been promised since 2017, 2018 and that would be a horrible thing to do to these people. But just
putting that aside when our police and everybody works very hard to get grant money and the citizens say okay yeah
that’s a good thing because it’s not costing me anything out of pocket, it means that something else can’t be
purchased. Something else can’t get done because we got this free money. We tried very hard in the legislation to
put just that statement in that the override would be allowed in the one municipality. It got voted down because it was
not understood. | can see in looking at the horseshoe that it is a very confusing wording and so on. It is what it is.
The only way | know to change a Charter is to have a vote on it. The truth is if you go to the people and say let’s
change the spending cap, or let’s remove the spending cap, or let’s change it to a tax Cap, there’s going to be an
equal amount of people that are going to go out there and say no, no, no don’t do that because this is nefarious and
soon. So do we leave it? Do we change it? How do we educate people?

The bottom line is it’s there. | think that what Mr. Griffin has done is keeping it as simple as possible. As frustrating as
itis, | appreciate the work that you’re doing. The City does not have an override no matter what anybody tells us we
do not have an override. If you look at 56-D, the exception to the budget limitation is very, very limited and that’s what
we're stuck with and that’s what we're living with. Basically, pardon my language, but they gave the perforable finger
to our Supreme Court Justice when they put SB52 through and it was meant to hit Nashua and only Nashua because
it did not affect anybody and anybody who says or thinks differently is wrong.

Alderman O’Brien

Well stated.

Alderman Clemons

Thank you. | had a lot of thoughts but my question comes to the end of what Alderman Klee had just said and that is
has anyone challenged or is there going to be a challenge that you know of or to the Constitutionality of that Law?
Because if what you are telling me is that the State Supreme Court said one thing and the Legislature said another
that usually leads to the Court deciding who wins. So | don’t know if you think that...

Steve Bolton, Corporation Counsel

It’s not quite that simple Alderman Clemons. The Court interpreted what the Legislature had said. The Legislature

then amended the Statute so it said something slightly different with the clear intent to change the interpretation that
the Supreme Court gave. One - | know of no effort to challenge that; and two - | don’t think any challenge would be
successful. The Legislature had the perfect right to change its Statute.

Alderman Clemons