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§ THE CITY OF NASHUA “The Gate City’

Financial Services

Purchasing Departnsent

March 10, 2016
Memo #16-119

TO: MAYOR DONCHESS
FINANCE COMMITTEE

SUBJECT: | PURCHASE OF ONE (1) NEW 2014 FORD TRANSIT CONNECT WAGON XLT
(VALUE: $24,357)
DEPARTMENT: 130 PURCHASING
ACCOUNT DESCRIPTION: 2016 CERF-VEHICLES

Please see the attached communication dated January 28,2016 from David G. Fredette, Treasurer/Tax
Collector for the information related to this purchase.

Pursuant to § 5-78 Major purchases (greater than $10,000) A. All supplies and contractual services,
except as otherwise provided herein, when the estimated cost thereof shall exceed $10,000 shall be
purchased by formal, written contract from the lowest responsible bidder, after due notice inviting bids.

Purchasing attempted to buy this vehicle through the NH State Contract and MHQ in Marlborough, MA
but the lead time quoted by both was 120 days and we need to replace this vehicle now so we put it out
to Bid.

A Bid was sent to 5 area Ford Dealers. We received 2 Bids which are shown below:
Ford of Londonderry, Londonderry, NH $22,835
Stoneham Motor Co. Stoneham, MA $25,971

The low bidder, Ford of Londonderry, had no vehicles in stock and quoted 24-26 week lead time. The
next low bidder, Stoneham Motor Co. has offered an alternate vehicle from what they originally Bid with
options that match up with our original Bid specifications for a cost of $24,357. It is in stock and available
for immediate delivery. The purchase amount is less than the estimated replacement value of $25,699 in
David G, Fredette’s attached memo which was approved at the February 10, 2016 BOA Meeting.

The Purchasing Department recommends the purchase of this vehicle In the amount of $24,357 from
Stoneham Motor Co. of Stoneham, MA.

Respecttully, / oa

Sb. KEKE.

ae a : fine S

\ jDan Kooken
Purchasing Manager

om,

Ce: J. Griffin

229 Main Street » Nashua, New Hampshire 03061 © Phone (603) 589-3330 © Fax (603) 589-3344

City of Nashua

Office of The Treasurer
- 803
229 Main Street - Nashua, NH 03060 ren pees =

To: Board of Aldermen January 28, 2016
From: David G. Fredette, Treasurer/Tax Collecto:7 \ YG 4 ‘

Re: Purchase replacement for the 2003 Dodge Caravan
Capital Equipment Reserve Fund (CERF)

The purpose of this communication is to request approval from the Board of Aldermen for an item that
was planned to be listed in the FY2017 CERF Replacements list. Recently the 2003 Dodge Caravan —
messenger van, which was used by Purchasing for various tasks throughout the city, was totaled in an
accident. This vehicle was planned to be replace in FY 2017 at an estimated cost of $25,699.

Currently the city has to date purchased 19 of the approved items listed on the planned FY 2016 CERF
replacement schedule for $1,913,779 which is $151,159 below the planned replacement cost of
$2,064,938. As a result, the CERF has sufficient funding for the city to purchase a Ford Transit Van
for a net cost to CERF of $18,500 ($22,500 less $4,000 reimbursement from the Risk department).
The Purchasing department is currently using the Building Maintenance and Information Technology

vehicles to perform their work.

Pursuant to NRO 5-127.1 D Capital Equipment Reserve Fund, which states: “During that fiscal year,
the city may purchase that equipment, or equipment that will serve the same stated purpose as the
listed equipment as long as the price does not vary by more than ten percent of the estimated
replacement value. All purchases from the Capital Equipment Reserve Fund must comply with the

city’s purchasing approval process. Any other requests to use funds from the Capital Equipment
Reserve Fund must be approved by the board of aldermen.”

I respectfully request the approval from the Board of Aldermen for the purchase of a 2016 Ford Transit
Van used by the Purchasing department. The purchase would proceed through the Finance Committee

approval process.

Cc: Mayor James Donchess 16-002
John Griffin, CFO/Comptroller
Dan Kooken, Purchasing Department

BID SPECIFICATIONS
1FBO170-030416

TITLE: Ford Transit Connect Wagon XLT

Quantity: 1
Nashua Purchasing Department, 229 Main Street, Nashua, NH 03061

The City of Nashua Purchasing Department invites bids from qualified suppliers for one (1) new and
unused, model year 2016 Ford Transit Connect Wagon XLT.

List the exact manufacturer specifications for the vehicle you are bidding for In each of the

categories listed. If any additlonal Information Is to be suppiled regarding any item, please indicate
beside the Item and type the Information on pages to be attached to the bld submittal. Failure to

respond to any Item may be cause for the bid to be rejected as “non-responsive”.

Inclusion of manufacturer's specifications will not be considered as a substitute for filling in the specifications.

It is encouraged that the bid be supplemented by the manufacturers printed literature.
You are encouraged to elaborate on any aspect of the vehicle not listed in the bld specifications but such
explanations should be typed on supplemental bid paperwork. Equipment bld must be new and unused and

model year 2016.

Ail shIpping costs must be included In the bid. The vehicle is to be delivered to:

Nashua Purchasing Department
229 Main Street
Nashua NH 03061

The following specifications are minImum guidelines and, as noted above, must be filled in completely:
SPECIFICATIONS MANUFACTURERS SPECIFICATIONS

2016 Ford Transit Connect Wagon XLT Front Wheel Drive

Exterior Color Preferences: #1 Magnetic, #2 Deep Impact Blue,
or #3 Frozen White

Interior Color Preferences: # Medium Stone, #2 Charcoal Black

Includes all XLT Equipment Package Options

Daytime Running Lamps

Quickclear Electric Windshield Defronster

Rear Carpeted Floor Mats

Rear Cargo Liner Vinyl Floor Cover

All Weather Floor Mats Front and Rear

Vehicle ratings conform shall conform to SAE, EPA,
and DOT Standards

(FBO1 70-030416 Ford Transit Connect Wagon XLT
229 Main Street « Nashua, New Hampshire 03061 « Phone (603) 569-3330 « Fax (603) 589-3344

ee

pt sane

MOTOR VEHICLE JDEALER CYC”) STONEHAM MOTOR COMPANY INC. |
PURCHASE CONTRACT 186 MAIN STREET
FLEET SALES STONEHAM, MA 02180 www.stonehamford.com
LL 781-438-0490 FAX: 781-438-2148 _]
DATE Moree NO, STOCK NO, SALESPERSON
3/7/2016 141685 PAUL J BETTENCOURT
PURCHASER’S NAME(S) (‘I or "Me") STREET ADDAESS
i CITY OF NASHUA 229 MAIN ST
CITVISTATE/ZIP HOME PHONE | BUSINESS PHONE
NASHUA NH 03061 603 589 3333
ENTER MY 1 1 NEW FORMER USE DEMONSTRATOR [ POLUCE CAR [J REBUILT INSURANCE TOTAL [)
ORDERFOR (QUANTITY) USED (IF APPLICABLE) FORMER LEASED CAR (} FORMER DAILY RENTAL [] Taxicaa
Your Make Model Name Body Styfe/Type Model No. Transmission {Speeds} | Cyl. Pass. | Doors
Standard
2014 FORD TRANSIT CONNECT MINI VAN ESF Automatic 4 5
Vehicle identification No. Color ist Interior 1st Top Odometer Delivery Date
2nd 2nd I,
NMOGE9F76EL1144630 a¢ Ss WHITE a@_ STONE km. C]
Yoar Make WARRANTY INFORMATION Social Security No.
Model Type Color This vehicle carries an express war- | Date of Birth
VIN, fanty. Purchaser may obtain a copy of Employer ID No,
such warranty from the dealer upon
Odometer (mi. ‘km.(3) | request at time of order and will receive | E-mail Address
Transmission [] Standard (Speeds) DAuto the warranty at time of delivery. Price of Unit 3
No. of Cyl. |Pass. Doors.
Salvage Title Yes] _no(] REGISTRATION FEE/TITLE FEE
SALES TAX Additional Equipmentiitems
INLCUDES ALt SEA
City/State/Zip Application for Title
Application for Reg. (] New [1] Transfer
Address Registration No.
City/State/Zip Registration Fee | $
Acct. No. | Titte Fee $
Mass, Seles Tax | $
LIENHOLDER
Address * Sales Tax amount is included in
City/State/Zip right hand column only whe n
dealership check is issued in
ENS URANGEICS: payment of Mass. Sales Tax.
Agent/Branch
Address/City
In the event I fail to take delivery of the vehicle purchased by me within forty-
eight (48) hours after | have been notified by you that it Is ready for delivery and
pay the total contact price in the manner indicated, my deposit in the amount of
$ may. at your option, be retained by you to
compensate you in whole or part of any loss sustained by you. Your right to
tetain my deposit shall be in addition to and not instead of any other right or
remedy provided by applicable law Including, without limiting the generality of
the foregoing, the sale of the car or truck | agree (o purchase. If the amount of
my deposit exceeds actual damages sustained by you, you will promptly refund
the difference to me.
Purchaser's Initials { ]
ALL REBATES AND SALES INCENTIVES OFFERED BY THE MANUFACTURER OR
DISTRIBUTOR ARE HEREBY ASSIGNED TO THE DEALER. Total Price $ 24,367,
Purchaser's initials [ I Discount $
This contract is not binding upon either dealer or purchaser until the follawing conditions are met! Trade-in Allowance $
{1} The contract is signed by dealer or his/her authorized representative; SS
(2) Other, Rebate(s) Cosas
{3) Other: | | $
Price Difference $ 24,357.00
Sales Tax $
PURCHASER MAY CANCEL THIS CONTRACT AND RECEIVE A FULL REFUND AT
ANY TIME UNTIL S/HE RECEIVES A COPY OF THIS CONTRACT SIGNED BY AN |_(8). Inspection Sticker s
AUTHOR-IZED DEALER REPRESENTATIVE. PURCHASER MUST GIVE WRITEN | (2,3), Registration
NOTICE OF CANCELLATION TO THE DEALER $
(E). Door to Door Delivery Charge $
The front and backof this order (8). Freight in From Trading Dealer ;
compromise the entire agreement
between the dealer and purchaser, and Purchaser's Signature (8). Courtesy Delivery Fee $
no other agreement or understanding (1). Plate Processing Fee $
has been made or ententered into.
Co-Purchasers Signature Subtotal $ 24,357.00
Ooposit $
Authorized Dealer Representative TOTAL PAYMENT $ 24,357.00

REPORT OF THE FINANCE COMMITTEE
MARCH 2, 2016

A meeting of the Finance Committee was held on Wednesday, March 2, 2016, at 7:00 p.m. in the
Aldermanic Chamber.

Mayor Jim Donchess, Chair, presided.

Members of the Committee present: Alderman-at-Large Mark S. Cookson, Vice Chair
Alderman-at-Large Lori Wilshire
Alderman-at-Large Michael B. O’Brien
Alderman Benjamin M. Clemons
Alderman June M. Caron
Alderman Ken Siegel

Also in Attendance: Mr. John L. Griffin, CFO
Mr. Dan Kooken, Purchasing Manager

Mayor Donchess

We have had some technical difficulties and the sound was not on for the first five minutes of this meeting. To
recap what has happened we took the roll call and we accepted a communication from John L. Griffin, CFO,
regarding the audit prepared by Melanson Heath.

PUBLIC COMMENT - None
COMMUNICATIONS

MOTION BY ALDERMAN SIEGEL TO TAKE FROM THE TABLE THE COMMUNICATION REGARDING
THE MELANSON HEATH PRESENTATION
MOTION CARRIED

From: John L. Griffin, CFO/Comptroller
Re: Melanson Heath Presentation
e Tabled 2/17/16

MOTION BY ALDERMAN SIEGEL TO ACCEPT AND PLACE ON FILE
Mr. Scott McIntire, Shareholder, Melanson Heath & Company, PC

| am one of the principals responsible for the audit here | Nashua and the gentleman to my left is Mr. Ed Boyd
who is one of our audit managers who manages the day-to-day execution of our audit of your financial
statements. We are here to give you a quick walk through of not only the financial statements but even more
importantly than that, an overview of how our audit went because we do think that is perhaps the most
important communication we can make to you. We provided you with a governance letter which in essence
tells you really what | am going to orally communicate tonight which is essentially how the audit went. | am
really pleased to be able to report to you that our audit of your financial statements for the year ended June 30,
2015, went very well and in essence what that means is we found the books and records to be in good working
order. The key reconciliations, the cash, receivables, long-term debts and accounts payable; that those key
balance sheet accounts were reconciled on a regular and timely basis and as a result of that and of our audit
procedures we did not need to propose any significant audit entries. The numbers that you see here in your
financial statements are directly traceable back to the books and records of the city and they get uploaded

Finance Committee Page 2
March 2, 2016

through a system and inputted into this comprehensive annual financial report. Each one of these numbers
can be drilled down into and you can actually see the specific general ledger of accounts from your financial
management system. A couple of other quick things in the governance letter and again they are required
communications so | need to take a moment to relay them to you. There were no disagreements in how to
apply generally accepted accounting principles; those are the rules that you use to complete your accounting
and financial reporting. In terms of accounting estimates, there were definitely a couple of significant estimates
in these financial statements and one | suspect will get a fair amount of conversation tonight. The two most
significant estimates in there are the city's net GAAP obligation and the city’s net pension liability. East of
those are actuary determined so there are certain actuarial standards that go into and they are professionally
calculated and they are now require to be presented in your long-term prospective financial statements. With
that overview, | would like to start with our opinion of your financial statements which is on pages 15-17.
Everything else is in this document is directly traceable back to the books and records here in Nashua. In
summary it says that after following the various audit standards that we did, in our opinion, your financial
statements are totally in accordance with generally accepted accounting principles for local governmental
entities here in the United States of America which is no different than prior year but certainly a key highlight
and a key take away from the audit. Following that on pages 18-32 are your management discussion and
analysis. It's a great resource to go back to at a later point in time to understand why certain key account
balances change. I’m going to talk orally about some of those and that’s why | think the MD&A is a great
resource to go back to at a later point in time. That brings us to page 33 and that’s where I'll start looking at
some of the key accounts on the balance sheets and the operating statements or the income statement,
although that’s really not a term that used in the governmental financial world. Before | do that, there are two
very distinct financial statements in here and that’s the model that you folks are required to follow by the GASB
or the Governmental Accounting Standards Board. One model is the long-term perspective financial
statements and that begins on page 33. The second model is what | would refer to as the short-term
perspective which begins on page 36. | learned a long time ago that when | say there is a long-term
perspective and a short-term perspective that | need to follow-up by saying that it’s not as if the city has two
sets of books, it’s just a long-term perspective way of looking at those with certain accrual-based entries
associated with them and in the short-term basis financial statement are not quite a cash basis but quite
similar; there are more definitions in the notes to the financial statement should you choose. The long-term
perspectives again, beginning on page 33, a significant portion of any exit communication that | have had with
my audit clients for the year ending June 30, 2015, have focused on long-term perspective financial
statements. That’s because for this year end, June 30, 2015, it is the first year that you and all of the cities and
towns in the state and throughout the country were required to implement a new accounting standard called
GASB 68. Essentially this standard required that for local governments to reach out to... you are contributing
employer to the New Hampshire Retirement System and that system has a piece that is unfunded. There is an
unfunded liability with that particular retirement system. Essentially what this new accounting standard is
saying is that while it’s not a liability of the system it is a liability of the underlying employers because the
contributions that have gone into the system don’t yet match the expected benefits to be paid out to the
retirees. This new standard requires the NPL or the net pension liability that you as a contributing employer,
you are about a 5% member of the New Hampshire Retirement System. That translates to, as you see on
page 33, and it’s a couple of inches up from the bottom in the first column of numbers, you see an account
description called the net pension liability. In that first column of numbers it’s about $185 million. That is a
very large number and as a result | think it’s important to talk about it tonight. A couple of the things that |
would like to point out to the group here is while this balance sheet here as of June 30, 2015, it’s the first time
it's present on this page. It’s not as if, in our opinion, and in the opinion of rating agencies that it’s a new
liability; rating agencies have always known that the pension system not only here in this state but throughout
the country have an unfunded piece. They have always known that the unfunded piece of the liability is
attributable to the underlying employer’s, the City of Nashua. While it’s the first time you see it here on this
particular page, and of course as your liabilities goes up your equity or net position goes down and you can
see that in the first column of numbers; the second number up from the bottom that’s in parentheses, while it’s
the first time being present here, again it’s been a known liability to the credit rating agency communities and to
the financial institutions. | was speaking with Mr. Griffin earlier tonight and he reminded me that the credit

Finance Committee Page 3
March 2, 2016

rating agencies have affirmed your rating quite recently, even after they have seen this long-term perspective
balance sheet with now this net pension liability of almost $190 million. | think that sort of supports the
assertion that while it’s new to the balance sheet and never having been on this particular page of your
financial statements before, the credit rating agencies communities have always known that liability existed
and very likely have factored it into past ratings as they are incorporated into current ratings as well. That
really in the nutshell is all | wanted to speak about on the long-term perspective financial statements. I'll touch
quickly on the general fund and if the committee has questions on the NPL then between Ed and myself we
can answer them. At this | would like to turn your attention over to page 36 and this takes us from the long-
term perspective financial statement to the accrual based financial basis over to page 36 which is a more
traditional looking balance sheet for local governments in this country. Even with your MD & A and the long-
term perspective financial statements, this really is the first page that most readers are going to turn to, the
general fund balance sheet and they are going to focus on that first column of numbers, the unassigned fund
balance as of June 30, 2015, with an account balance of about $27.7 million. To put that into perspective, that
account balance is virtually unchanged from the prior year. It’s up about $400,000 but as a percentage it’s not
much of fluctuation from the prior year. Another way to look at that number is what is that unassigned fund
balance as a percentage of your operating expenditures and as disclosed in your MD & A. That $27.7 million
represents about 11% of your general fund operating expenditures for the year ending June 30, 2015. It’s
essentially unchanged from the prior year. The only other specific page I’d like to draw your attention to is
page 40 and this is a budget and actual comparative statement. The next page people will very likely turn to
are the budget and actual comparative statement. You'll see in the last column of numbers is the variance
between your actual results of operation on a budgetary basis compared to the final budget. You can see in
the last column of numbers that revenues came in greater than anticipated or greater than the budget by about
$3 million. Moving down the page the total expenditures and other uses, you can see that there were unspent
appropriations or turn backs of appropriations of about $1.7 million. Collectively the excess revenues of $3
million and the unspent appropriations of $1.7 million give you that number of just under $4.8 million from
budgetary results of operations. How does that translate into essentially your unassigned fund balance being
unchanged? One of the things that you have to factor in on this particular page in the budget versus actual
page is that one of the financing sources that the city used for its FY 2015 budget was that it used some of its
fund balance; it used about $5 million of its fund balance as an anticipated financing source. In essence you
anticipated that your outflows of dollars were going to exceed your inflows of dollars by about $5 million. When
you factor out approximately $5 million from this $4.7 million and | recognize that | am using some round
numbers but all of the detail is available in the disclosures to the financial statements but if you look at those
positive budgetary results of about $4.8 million having essentially softening those by the use of your fund
balance of about $5 million you are coming to within essentially a break-even point for the fiscal year. There is
a wealth of other disclosures in this document on the cash position of the community, the receivables, the long-
term debt and the payout of your long-term debt which | know in the past has been cited as a credit strength
because of the rapid payout of your long-term debt. Very often credit rating agencies don’t just look at the
amount of long-term debt but how much is being paid out generally speaking in the next ten years; they look
for a rapid payout of the bonds payable that exists in communities and Nashua has always showed up very
strongly in that credit classification. That is a very quick walk through of our audit and just a couple of the
highpoints in your financial statements. In summary, as | indicated our audit of your financial statements went
very well and we did not need to propose any significant journal entries as a result of the test work that we did.
The long-term perspective financial statements; the issues that you are facing are the same as every other
government in the state and essentially throughout the country with implementing statement 68 and presenting
and effectively recognizing this liability called the net pension liability. On the short-term perspective or the
general fund, in summary | think it’s a very stable balance sheet and | think that’s supported by what the credit
rating agencies have said. It being stable means it’s consistent with the prior year in that 11%, that unassigned
fund balance representing about 11% of expenditures is consistent with communities that are similarly rated to
the City of Nashua. With that | will open it up to any questions that the committee may have.

Finance Committee Page 4
March 2, 2016

Alderman Siegel

The unfunded liabilities for pension, that number is large and | assume that is not only the unfunded liability to
make up the gap that we have had at the state level but also the general funding that we have to do to pay for
the pension liabilities that the city has incurred, is that correct?

Mr. McIntire

I’m not sure | understand what you mean by the general fund liability.

Alderman Siegel

No, I’m sorry; | am trying to find the exact page that that’s on. That line was a large number.
Mr. Mcintire

On page 33, it was $190 million.

Alderman Siegel

Right, it was the $184,879,000. It says net pension liability. That’s not just the overhang related to the shortfall
of the pension is it?

Mr. McIntire

Let me try to describe it in a little bit more detail. The disclosure there is the net pension liability. As a
contributing employer you are contributing to a cost sharing plan which means your contributions don’t
necessarily only...the liability is spread amongst the employers based on your level of contributions. After
what you have contributed to the system each year since its inception essentially, the state system has a
shortfall and as a 5% contributor it’s a little bit more complicated than this but essentially 5% of that shortfall is
attributable to the City of Nashua and that’s what is presented here on your financial statements.

Alderman Siegel

Okay, | am familiar with the shortfall but | didn’t realize that this is what we are paying off or is it another 18
years or so?

Mr. McIntire

| think maybe now | understand your question and | am sorry about that, sir. Some of the comments that |
made on the net pension liability earlier, because it’s large | just think part of what | wanted to accomplish
tonight and maybe missed a point or two was to put it in perspective and that is that the plan and as a result
the underlying employers; you are following a funding schedule and | believe the date is 2039 that under the
current funding schedule, if actual results of operations hold true to actual projections, the system and as a
result the underlying employer's will be fully funded by 2039.

Alderman Siegel

So it’s 23 years and not 18. It wasn’t a 25-year payout; it was a 30-year payout.

Finance Committee Page 5
March 2, 2016

Mr. McIntire

Probably, yes. | thank you for that question because | think that it is important for readers and listeners to
understand because it’s such a significant account balance that there is a funding schedule of the city and all
of the underlying employers who are following to help mitigate this liability.

Alderman Siegel

Thank you. | think we are all too painfully aware of the funding liability. It was just that it is a very large
number and | wanted to understand if that was the overhang that we have to pay back because of the handling
of the state pension funds in the past or if that was really a combination of that plus ongoing obligations over
some period of time. You have answered that, it’s the overhang over the next 23 years that we are obligated
to pay.

Mayor Donchess

As a follow-up to the last questions from Alderman Siegel, on the current schedule the pension would go to a
100% by 2039, do you know what the assumption is with respect to the rate of return that will be achieved with
the assets that are in the state pension fund in order to arrive at that 2039 date?

Mr. McIntire

| got really lucky. | happened to turn to page 82; | honestly didn’t have it tagged. The current discount rate
that’s used is 7.75% and to the GASB credit, some of the required disclosures, on page 80 — 82, is here’s
essentially what the net pension liability is using the current discount rate that the Mayor just spoke about at
7.75%. Then adjacent to that disclosure is what the liability would be if that discount rate increased by a
percent or decreased by a percent. | think that’s probably a really good disclosure for financial statement
readers to take a look at because there can be significant fluctuations and it is widely anticipated that this net
pension liability will have significant swings based on market results of operations, more than in the past and
the reason for that is the underlying requirements and the new standards on what are acceptable actuarial
estimating techniques.

Mayor Donchess

What are the numbers for 1% less and 1% more than 7.75%?
Mr. McIntire

If we were looking at a liability in the range of $184 million before on page 33, if the discount rate increased a
percent then the liability drops to $135 million and if it decreased by a percent then the liability increases to
$244 million.

Alderman Siegel
It’s $50 million a point.
Mr. McIntire

| did try to draw a distinction between the long-term perspective and the short-term perspective financial
statements and it’s for that very reason, Mr. Mayor and committee members that | recognize that talking about
that net pension liability number is a daunting number. Hopefully we have done a reasonable job at helping to
putting it into perspective talking about the funding schedule and the like. While it's necessary for us to bring

Finance Committee Page 6
March 2, 2016

this up because of the significance of it, it is with purpose that | tried to talk about the long-term perspective
financial statements and this which may be a little bit unfavorable to talk about it but then when you turn to the
general fund and you see the stability; | did try to talk about those as two distinct issues because one may
seem a little more unfavorable but as | indicated earlier the stability in that general fund balance sheet is
certainly a strength.

Alderman Cookson
Do you have the ability to share with us who manages the state pension fund?
Mr. Mcintire

| think it’s all on-line at the NHRES.ORG website. There are some great disclosures on there. We go to that
website all of the time to use their audited financial statements and the audit of the actuarial evaluation which
essentially allocates the liability to you and all the other employers. They have a whole page on their
investment returns and things like that.

Alderman Siegel

| recognize my question might not be specific to Nashua but what extent has the pension obligation gone up? |
know that it is reset every couple of years, an actuarial reset based on returns. What percentage are we going
up or down in our contribution?

Mr. McIntire

That’s a great question. Let me start with a little bit of background. As | indicated earlier, FY 2015 was the first
year that you were required to implement this net pension liability but of course in that implementation the
actuaries needed to determine the net pension liability at the beginning of the year so there could be the proper
income statement impact there. With GASB 67 and 68 and some of the restrictions on the actuarial
assumptions that can be used, it is widely anticipated that there will be significant swings in this liability. Again,
| say those two things as quick reminders because the answer to your question may surprise listeners in that
from June 30, 2014, to June 30, 2015; this net pension liability actually went down about $4 million. | have my
theories on that but | am not an actuary. My theory is for the period ending...the liability that you see present
here on your June 30, 2015, financial statements is actually measured as of June 30, 2014. It’s on your
balance sheet for June 30, 2015, but it really relates to the year prior and the timing of all of this getting done
and to be able to produce timely financial statements is why that’s permitted to be that way. The market
returns through June 30, 2014, as | recall, were quite favorable. For June 30, 2015, | am not sure if your
liability that will be present on this page on your June 30, 2016, financial statements. We've looked at the new
reports that have come out, the June 30, 2015, reports which will report your June 30, 2016, liability and if your
liability decreased in this report then the liability is going up for your next report.

Alderman Siegel

We are under the constraint of a spending cap so unfortunately that’s an external factor that we have to deal
with so anything above 1.5% in an increase is a big problem for us. It sounds like we have a big problem.

Mr. McIntire

Well, just remember that, and | tried to draw the distinction between the long-term perspective financial
statements and the short-term being your general fund, so there is a little bit of a distinction there but certainly
there have been a lot of legislative changes in the system in recent years that have put pressures on the local
communities, there’s no doubt about that.