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$280,000, respectively, were declared and paid to the City. The dividends paid to the City
during 2017 comprised approximately $279,000 of regular quarterly dividends declared and
paid; and ne special dividend was declared or paid in 2017. The dividends paid to the City
during 2016 comprised approximately $280,000 of regular quarterly dividends declared and
paid; and no special dividend was declared or paid in 2016.

Additional ongoing transactions occur in the normal course of business, between the
Company and the City, related to municipal water usage, fire protection and sewer billing
support services, and property taxes related to real property owned by the Company within
the City of Nashua. For the years ended December 31, 2017 and 2016, respectively,
approximately $3.2 million and $3.1 million were paid to the Company by the City for
municipal water consumption, fire protection charges, and sewer billing support services.
Conversely, the Company paid property taxes to the City of Nashua of approximately
$2.9 million for the year ended December 31, 2017, and approximately $2.8 million for the
year ended December 31, 2016.

Rate Stabilization Fund — Restricted Cash

As a part of the acquisition, Pennichuck agreed to contribute $5,000,000 of the proceeds
from the settlement transaction to PWW, which was used to establish a Rate Stabilization
Fund (“RSF”), allowing for the maintenance of stable water utility rates and providing a
mechanism to ensure the Company’s continued ability to meet its obligations under the
promissory note to the City, in the event of adverse revenue developments. Restricted cash
consists of amounts set aside in the RSF account and is adjusted monthly as required in the
PUC Order, as discussed in Note | of these financial statements.

Municipal Acquisition Regulatory Asset (“MARA”)

Pursuant to the PUC Order, Pennichuck established a new Regulatory asset (MARA) which
represents the amount that the Acquisition Price exceeded the net book assets of Pennichuck’s
regulated subsidiaries (PWW, PEU, and PAC) at December 31, 2011. The initial amount of the
MARA was approximately $89 million for the regulated companies, offset by a non-regulated
amount of approximately $4.8 million. The MARA is to be amortized over a thirty (30) year
period in the same manner as the repayment of debt service for the City’s acquisition bonds.
The balance in the MARA at December 31, 2017 was approximately $77.5 million, reduced by
the non-regulated credit of approximately $4.3 million.

Aggregate amortization expense for the years ended December 31, 2017 and 2016 totaled
approximately $1,917,000 and $1,884,000, respectively.

37

The following table represents the total estimated amortization of MARA:

Estimated

Amortization

(in thousands) Expense
2018 $ 1,958
2019 2,006
2020 2,061
2021 2,119
2022 2,183
2023 and thereafter 62,900
Total $ 73,227

Note 12 — Rate Cases

Pennichuck Water Works, Inc.

On September 23, 2016, Pennichuck Water Works, Inc. (“PWW”) filed a request with the
New Hampshire Public Utilities Commission (“NHPUC”) for a rate increase of 17.21% over
its current rates for the test year 2015, for which 7.86% was related to a permanent rate
increase, and 9.35% was related to a prospective step increase (associated with capital
investments and other allowable expenditures in the twelve months following the test year).
The overall rate increase is subject to the normal regulatory filing process with the NHPUC,
as followed for all prior rate case filings, and as such, the final permanent rate increase
granted will be effective retroactive back to the filing date, once approved by the NHPUC.
The step increase, once approved and granted, would be earned on a forward-looking basis,
as of the date of the order granting such increase. In addition, PWW requested that a
temporary rate increase of 6.21% be granted as a subset of the final permanent rate increase,
with the intention that this temporary rate increase would be approved very early in 2017.
The Company, NHPUC Staff and the Office of Consumer Advocate agreed to a temporary
rate increase at "current rates," and as such, there was no impact on ratepayers for any
temporary rate increases.

The request for the overall permanent rate increase was based upon increases in PWW’s
operating costs since the last allowed rate increase in 2010/2011 (for the 2009 test year), as
well as revenues needed to pay the debt service on over $40 million of infrastructure
replacements made since the last rate case, with those dollars being invested in its real
property assets, distribution and treatment systems, and other necessary capital items, to
ensure continued compliance with the Safe Drinking Water Act and prudent ongoing
replacement of aging infrastructure to properly maintain the company’s operating systems.

On November 7, 2017, the PUC issued Order No. 26,070 approving a permanent rate
increase of 3.12% and a 7.69% step increase for its customers. The permanent rate increase
was effective on a bills-rendered basis on and after December 7, 2016. The step increase is
effective the date of the order, November 7, 2017.

38

Pennichuck East Utility. Inc.

On October 18, 2017, Pennichuck. East Utility, Inc. (“PEU”) filed a request with the New
Hampshire Public Utilities Commission (“NHPUC”) for a rate increase of 21.24% over its
current rates for the test year 2016, for which 20.08% of this increase is related to a
permanent rate increase and 1.16% is related to a prospective step increase (associated with
capital investments and other allowable expenditures in the twelve months following the test
year). The overall rate increase is subject to the normal regulatory filing process with the
NHPUC, as followed for all prior rate case filings, and as such, the final permanent rate
increase granted will be effective retroactive back to the filing date, once approved by the
NHPUC. The step increase, once approved and granted, would be earned on a forward-
looking basis, as of the date of the order granting such increase. In addition, PEU requested
that a temporary rate increase of 13.70% be granted as a subset of the final permanent rate
increase, with the intention that this temporary rate increase would be approved in early
2018, and with permanent rates being set in the summer or fall of 2018.

The last general rate increase for PEU was in 2014, based upon 2012 as a test year. Since
then, PEU’s operating expenses have increased ratably, and for some items like local
property taxes, well above the rate of inflation. Additionally, since the beginning of 2013, the
Company has borrowed and invested over $7.5 million in new capital assets to serve its
customers through ongoing investments in infrastructure replacements and system
improvements. The rate increase being requested will allow PEU to pay the debt service
attributable to these new capital investments, pay its necessary operating costs, and continue
to meet the needs of its customers now and into the future.

A hearing was held on the Temporary Rate request on February 26, 2018, where the
Commissioners were asked to opine on a temporary rate increase of 12.24%, pursuant to a
Settlement Agreement entered into between the Company, the PUC Staff and the Office of
Consumer Advocate and other intervenors to the case. Upon receiving an order authorizing a
temporary rate increase, the new rates resulting from that will begin to be billed to customers
in 2018.

Note 13 — Subsequent Events
The Company has evaluated the events and transactions that have occurred through March 21,

2018, the date that these consolidated financial statements were available for issuance, for
which no reportable events were discovered.

39

25 MANCHESTER STREET
PO BOX 1947
MERRIMACK, NH 03054-1947

V2 PENNICHUGK"

1603) 882-5191
FAX {603) 913-2305
VIA HAND DELIVERY
WWW.PENNICHUCK COM
March 27, 2018

Mr. Steven A. Bolton
Corporation Counsel
City of Nashua

229 Main Street
Nashua, NH 03060

Re: _ Pittsfield Aqueduct Company, Inc. - Request for Approval to Refinance

Intercompany Debt with Pennichuck Corporation

Dear Attorney Bolton:

Introduction. As you know, the City of Nashua, New Hampshire (the “City”) is the sole corporate
shareholder of Pennichuck Corporation (“Pennichuck”). The City has been the sole shareholder since
the acquisition of Pennichuck on January 25, 2012.

The purpose of this letter is to request that the City, acting in its capacity as sole shareholder, approve
resolutions authorizing Pennichuck’s regulated public water utility subsidiary, Pittsfield Aqueduct
Company, Inc. (“PAC”), to refinance intercompany debt with Pennichuck Corporation.

Background. As part of the City’s acquisition of Pennichuck, in accordance with special legislation
enacted by the State Legislature, and as unanimously approved by the Mayor and Board of Aldermen
on January 11, 2011, the corporate structure of Pennichuck and its utility subsidiaries was retained.
This corporate structure was retained for several reasons. First, the Mayor and Board of Aldermen
desired to maintain stability and continuity for customers and employees of the Pennichuck utilities
and the communities they serve. Second, retaining the corporate structure provided continuity for the
existing relationships with regulatory agencies and financial/banking partners. Third, the Mayor and
Board of Aldermen unanimously agreed that the corporate structure would encourage business-smart
decisions and rely upon well-established governance principles of corporate law, pursuant to
Pennichuck’s Articles of Incorporation and its by-laws.

Shareholder Approval of Borrowings Required. Under Article IX of Pennichuck’s Articles of

Incorporation, the City, acting in its capacity as Pennichuck’s sole shareholder, must approve:

“(3) any action to (A) create, incur or assume any indebtedness for borrowed money
or guarantee any such indebtedness of any person, (B) issue or sell any debt
securities or warrants or other rights to acquire any debt securities of the
[Pennichuck] Corporation or any of its Subsidiaries, or (C) guarantee any debt
securities of any person.”

-2-

Intercompany Loan with Pennichuck Corporation

PAC is seeking the City’s approval to:

(1) refinance a 10-year $776,850 7% fixed rate intercompany note payable between
PAC and Pennichuck Corporation which matures on May 1, 2018; and

(2) convert $409,150 of variable rate short term intercompany debt to a long term note.

These two existing notes would be aggregated into one new long-term intercompany note payable as a
new single intercompany loan. The new intercompany loan would be in the aggregate amount of
$1,186,000, repaid over a 30-year term, on a fully amortizing basis, at an interest rate of 3.2%.

Approval by Pennichuck and PAC Board of Directors. The new intercompany loan has been

approved by the respective Board of Directors of Pennichuck and PAC.

New Hampshire Public Utilities Commission PUC) Approval Required. As a regulated
public utility, PAC must obtain approval of the new intercompany loan from the NHPUC. PAC has
filed a petition to request this approval on March 8, 2018. Said approval is conditioned upon
receiving shareholder approval from the City of Nashua, in conjunction with this request.

Requested Approvals. For the reasons described above, Pennichuck respectfully requests that the
City, acting in its capacity as sole shareholder of Pennichuck and pursuant to Article IX (3) of

Pennichuck’s Articles of Incorporation, authorize the following actions:

RESOLVED, that the City hereby approves the refinancing of a 10-year $776,850
intercompany note payable between Pittsfield Aqueduct Company, Inc. and
Pennichuck Corporation, and the conversion of $409,150 of variable rate short term
intercompany debt to a long term note; the two notes to be aggregated into a single
long term intercompany loan in the aggregate amount of $1,186,000 to be repaid over
a 30-year term, on a fully amortizing basis, at an interest rate of 3.2%.

FURTHER RESOLVED, that the City authorizes Pennichuck Corporation and
Pittsfield Aqueduct Company, Inc., their Boards of Directors, and their Officers, to
take any and all actions required to obtain ail necessary approvals with respect to the
actions described in the prior resolution and to execute and deliver such documents as
are necessary to effect the long term intercompany loan described in the prior
resolution.

Respectfully submitted,
PENNICHUCK CORPORATION

By: LA _
D. Goodhue

Chief Executive Officer

cc: Mayor James Donchess

OEE seer pment emer or

A regular meeting of the Board of Aldermen was held Tuesday, March 27, 2018, at 7:30 p.m. in the
Aldermanic Chamber.

President Brian S. McCarthy presided; Deputy City Clerk Judith Boileau recorded.

Prayer was offered by Deputy City Clerk Judith Boileau; Alderman Ken Gidge led in the Pledge
to the Flag.

The roll call was taken with 15 members of the Board of Aldermen present.
Mayor James W. Donchess and Corporation Counsel Steven A. Bolton were also in attendance.
REMARKS BY THE MAYOR

First | would like to welcome Dr. Mosley and our friends from the School Board and the School
Department to the meeting and | understand that Susan Porter is going to be sworn in as the most
recent member of the School Board. | would like to congratulate her and | am glad they came here for
the swearing in.

There are a couple of things on the Agenda that | wanted to mention. First the Ambulance Contract is
up for renewal under Communications. The contract, of course, is with AMR, they have been the
ambulance company for quite some time. They have done a very good job. This is for a one year
extension of the contract. The extension has been unanimously recommended by the Committee that
is in charge of supervising and evaluating their performance and they have done a very good job as |
said particularly with respect to the Safe Stations Program where Mr. Stawasz has been a particular
leader and | will mention that a little bit more in just a moment. | hope that you will agree with the
committee and approve the extension of the AMR contract.

Coming up this weekend on Saturday we have the Walk Against Heroin, beginning at 11:00 at Greeley
Park which comes down to City Hall and then goes back to Greeley Park. It’s led by a woman, a
Nashua Citizen, Darleen Pina, who has been leading all these marches and they take place several
time a year. It’s a very inspiring event and a lot of people usually show up, many people and many
families who have been touched very personally by the heroin crisis, by the opioid crisis. If you can
make it, | think it’s worth attending and showing your support for the many people who are working
against opioids and who have been tragically affected by the opioid crisis.

Along those lines | wanted to update you on the current status, we have had unfortunately 5 fatal OD’s
this month, the month of March, which is not a good month. Although for the first three months we are
on par, the same as last year with 8 fatalities. We are doing the right thing with the Safe Stations
Program. We meet every two weeks to evaluate the Program and to try to improve it. The fact-based
approach that we are developing along with AMR in terms of evaluating it has begun and AMR has
been very good in developing statistics and information regarding the people who report and those who
report to safe stations and many different respects. One thing that the analysis is showing and we are
continually trying to refine it, is it seems that the likelihood of a person who reports to Safe Stations, the
likelihood that they will OD after the report, is reduced by 62% as opposed to those who have not
reported to Safe Stations.

Another thing that seems clear, of course as we know, every single death is a tragedy but very few
people, a few but not many, have succumbed to a fatal overdose after reporting to Safe Stations and it
seems very obvious that the chances of succumbing to a fatal overdose are much, much reduced for
those who do report to Safe Stations. And of course this is due to the efforts of many people, including
many organizations, many people — Harbor Homes, the Fire Department, AMR, everybody who is
providing treatment. So it’s a big group, a community effort, so despite the fact that OD’s and some
fatalities continue it is doing a good job.

Board of Aldermen 03-27-2018 Page 2

The national trends are that overdoses and deaths were up significantly between 2016 and 2017 that
was not the case in Nashua. Thank God we were able to hold stable numbers as opposed to going up
like much of the nation. The Fire Department and Harbor Homes are continuing to get inquiries from
around the country regarding the program and asking advice and how other cities from Florida to
Rhode Island and other places could start and initiate a program. So | think it has gained an important
reputation and so | believe and | know we are doing the right thing. | wanted to update you and say |
appreciate all your support with respect to our on-going efforts.

This past weekend, we had the March for Our Lives staged by some of our High School students, Ben
Telerski and others. Alderwoman Shoshanna Kelly was very active in organizing that and it was a great
event. We had 500 or 600 people out in front of City Hall, the biggest rally | have ever witnessed. |
think people were inspired and the leadership by the young people, the high school students, was
extremely impressive and | have to think that over time this will have an effect in helping to bring
meaningful reform to our gun laws and reduce the rates of gun fatalities. So | wanted to congratulate
everybody who was involved in that effort.

Finally we also had the Meri Goyette Lunch on Sunday the 5™ Annual Meri Goyette Arts Lunch. A
number of you attended, Alderman McCarthy, Alderwoman Melizzi-Golja, Alderman Ken Gidge and
probably others. We raised some money for the endowment for the Performing Arts Center. We had
some great winners. The winners of the awards were Paul Shea, Michael Buckley, PRG Store right
next door and some of the Picker Artists who were able to successfully move from the Picker Building
to elsewhere in the Millyard. So overall, the event was really fun and we had a great turn out and | think
it's a wonderful event for the City and I’m glad at least some of the Board members were able to attend.
That’s all | have Mr. President.

RESPONSE TO REMARKS OF THE MAYOR

President McCarthy

Any responses to the remarks of the Mayor.
Alderwoman Melizzi-Golja

| would just like to join him in congratulating Ben and Alderwoman Kelly in organizing the March; | heard
it was very successful. | think that the parents of our students should be proud of the leadership they
are demonstrating. | would just add to the Mayor's comments about the luncheon that we also
celebrated Meri’s birthday, but | won't tell you how old she is, you'll have to ask her.

Alderwoman Kelly

| just want to respond as well. | think the leadership of the students was just so inspiring. But just also
the help that we had along the way from the City. The Police Department was incredible; people in the
City Clerk’s office just really came together and helped to get that off the ground. So | appreciate
everything.

Alderman Klee

| was unable to attend the march but | heard it was incredible and that you did a wonderful job. The
other thing is | wanted to mention about the Awareness March that the Mayor had spoken about. l’ve
spoken to Darlene and | really do think it’s important for as many of us that can go should go. It’s an
awareness, it’s healing and it’s to help break down walls to show that it’s not something we have to be
ashamed of. It’s something we have to bring out in the open and we have to talk and it takes a lot of
brave people to do that. And | went last year in the pouring rain and it was absolutely amazing to see
these people carrying pictures of their families and literally telling their stories. And this year they are

Board of Aldermen 03-27-2018 Page 3

going to put a line across and put pictures on it of all the people who have been lost and so on. And |
think it would be a great support. Hopefully the sun will be out this year.

Alderman Lopez

| just want to comment. At the March For Our Lives rally, the Police were very professional, they were
also very engaging and polite. | think it was very reassuring to the public, | think it’s a great example of
positive Police presence where a lot of people who might have been looking anxiously around felt very
much like the Police were there serving them, protecting them and all that. So | just want to give credit
to the Police for how they handled that in particular. | also wanted to echo sentiments about the
Awareness is Healing Walk. Mayor Donchess you might have some competition for the number of
people who were at that, because the first year, if | remember correctly there were like 800 people. So
you might see just as much of a turn out as we saw last weekend. And | think that’s the take-away that
the Alderman should be looking at.

The opioid crisis is a tragedy, people are struggling for recovery every day and we are losing people.
We can’t afford to, these are people with dreams, and they are people with families, people that could
be leaders. And one of the things that I’ve seen at the Awareness is Healing Walk and in our own
neighborhoods, more and more people who are choosing recovery and they are supporting each other
in it, are becoming leaders and they are people who may have once been identified as part of the
statistical problem are stepping forward to become part of the solution. When you go to the Awareness
is Healing Walk, it’s not just about everything that is lost it's about the resolution for what we are going
to do. Programs like Revive, GateHouse, the necessary pieces to help people re-build their lives, those
are born out of these kinds of walks. So | encourage everybody to attend so you can be part of that.

RECOGNITION PERIOD — None

READING MINUTES OF PREVIOUS MEETINGS AND PUBLIC HEARING

There being no objection, President McCarthy declared the minutes of the Board of Aldermen
meetings of March 6, 2018, March 14, 2018, and the public hearing conducted by the Human
Affairs Committee on March 12, 2018, accepted, placed on file, and the readings suspended.

COMMUNICATIONS REQUIRING ONLY PROCEDURAL ACTIONS AND WRITTEN REPORTS
FROM LIAISONS — None

PERIOD FOR PUBLIC COMMENT RELATIVE TO ITEMS EXPECTED TO BE ACTED
UPON THIS EVENING - None

COMMUNICATIONS REQUIRING FINAL APPROVAL

From: Mayor Jim Donchess
Re: Ambulance Contract Extension (Value: $0); Department: 152 Fire

MOTION BY ALDERMAN O’BRIEN TO ACCEPT, PLACE ON FILE AND AUTHORIZE THE ONE
YEAR EXTENSION TO THE AMBULANCE AGREEMENT WITH AMERICAN MEDICAL RESPONSE
OF MASSACHUSETTS, INC.

ON THE QUESTION

Alderman Lopez

The cost is zero but the value priceless.

Board of Aldermen 03-27-2018 Page 4
MOTION CARRIED

From: Patricia D. Piecuch, City Clerk
Re: Returns of Votes — Special Municipal Election held March 20, 2018

MOTION BY ALDERMAN CARON THAT THE RESULTS RECORDED ON THE CITY CLERK’S
RECORD OF RETURNS FOR THE BOARD OF EDUCATION RACE AT THE SPECIAL MUNICIPAL
ELECTION ON MARCH 20, 2018, BE DECLARED FINAL AND CONCLUSIVE, AND THAT SUSAN
PORTER,HAVING RECEIVED THE LARGEST NUMBER OF VOTES CAST, BE DECLARED
ELECTED TO THE OFFICE OF BOARD OF EDUCATION FOR A TERM TO EXPIRE JANUARY 5,
2020

MOTION CARRIED

President McCarthy declared Susan Porter duly elected to the Board of Education for a term to expire
January 5, 2020.

Oath of Office administered by Corporation Counsel.

There being no objection, President McCarthy suspended the rules to accept a communication
received after the agenda was prepared

From: Mayor Jim Donchess
Re: KRT Appraisal Contract

MOTION BY ALDERMAN WILSHIRE TO ACCEPT, PLACE ON FILE AND AWARD THE CONTRACT
TO KRT APPRAISAL IN THE AMOUNT OF $500,000

MOTION CARRIED

PETITIONS — None

NOMINATIONS, APPOINTMENTS AND ELECTIONS

Appointments by the Mayor
The following appointment was read into the record:

Environment and Energy Committee
Anita Arden Cala (New Appointment) Term to Expire: March 31, 2020

15 Taylor Street
Nashua, NH 03060

There being no objection, President McCarthy accepted the appointment by the Mayor as
read and referred it to the Personnel/Administrative Affairs Committee.

REPORTS OF COMMITTEE
Budget Review COmmittee........... cece cccccccceeeeesneeeeeeeeececneeeeeeeeeesentniseeeeteeeeeees 03/15/2018

There being no objection, President McCarthy declared the report of the March 15, 2018, Budget
Review Committee accepted and placed on file.

FINANCE COMMI*SE. .0 0... eee ccceccccuececcecceeececeeaveceueeecauceeeuceetaneettateetereettateeraess 03/21/2018

Board of Aldermen 03-27-2018 Page 5

There being no objection, President McCarthy declared the report of the March 21, 2018, Finance
Committee accepted and placed on file.

Human Affairs COMMIttee?.... oo cece ceeeccccececeuececeeceeeueceeaeeesaueeeraceesaeeentasess 03/12/2018

There being no objection, President McCarthy declared the report of the March 12, 2018, Human
Affairs Committee accepted and placed on file.

Planning & Economic Development ...0..00... 0. ccccccccec sees eneeeeeeeeeeeesnansaneeeeees 03/06/2018

There being no objection, President McCarthy declared the report of the March 6, 2018, Planning &
Economic Development Committee accepted and placed on file.

CONFIRMATION OF MAYOR'S APPOINTMENTS — None
UNFINISHED BUSINESS — RESOLUTIONS

R-18-007
Endorsers: Mayor Jim Donchess
Alderman-at-Large Lori Wilshire
Alderman Richard A. Dowd
Alderman Tom Lopez
Alderman June M. Caron
Alderwoman Mary Ann Melizzi-Golja
Alderman-at-Large Michael B. O’Brien, Sr.
Alderwoman-at-Large Shoshanna Kelly
AUTHORIZING THE FILING OF APPLICATIONS AND EXECUTION OF GRANT
AGREEMENTS WITH THE U.S. DEPARTMENT OF TRANSPORTATION FOR GRANTS
UNDER THE URBAN MASS TRANSPORTATION ACT OF 1964, AS AMENDED, FOR
FISCAL YEARS 2019 AND 2020
Given its second reading;

MOTION BY ALDERMAN DOWD FOR FINAL PASSAGE OF R-18-007
MOTION CARRIED

Resolution R-18-007 declared duly adopted.

R-18-009
Endorsers: Mayor Jim Donchess
Alderman-at-Large Lori Wilshire
Alderman Linda Harriott-Gathright
Alderman Richard A. Dowd
Alderman Patricia Klee
Alderman-at-Large Brandon Michael Laws
Alderman Tom Lopez
Alderman June M. Caron
Alderwoman-at-Large Shoshanna Kelly
Alderwoman Mary Ann Melizzi-Golja
Alderman David C. Tencza
Alderman Jan Schmidt
Alderman-at-Large Michael B. O’Brien, Sr.
Alderman-at-Large Brian S. McCarthy
RELATIVE TO THE TRANSFER OF CITY MATCHING FUNDS IN THE AMOUNT OF $2,985
FROM POLICE GRANT ACTIVITY “FY2018 VIOLENCE AGAINST WOMEN GRANT