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employees will elect the original higher payout formula. This will result in sick leave payouts of
720 hours each for a total estimated additional cost of $175,000.

R-18-066 is unfair to 12 employees hired in the same 1995-2001 period who have already left
City employment. It is unfair for the City to grant expanded sick time payouts to younger
employees who are still working, while denying the extra payouts to older employees hired in the
same 1995-2001 time window who have retired a few months or a few years ago. Equalizing the
benefit for the 12 retired employees would cost another $152,000.

For these reasons I am vetoing R-18-066 and asking the members of the Board of Aldermen to
reconsider the vote taken on December 11, 2018.

Cec

Patricia Piecuch, City Clerk
Sue Lovering, Legislative Affairs Manager
Steve Bolton, Corporation Counsel

AMENDED
R-18-066

RESOLUTION

RELATIVE TO ADDRESSING POSSIBLE INEQUITIES IN SICK
LEAVE POLICY FOR CERTAIN UNAFFILIATED EMPLOYEES

CITY OF NASHUA

In the Year Two Thousand and Eighteen
RESOLVED by the Board of Aldermen of the City of Nashua

WHEREAS a change to the policy related to sick leave accumulation and
severance payment upon retirement was made effective July 1, 2001;

WHEREAS said change to the policy in certain cases may have resulted in
employees being deprived of a benefit that had already been earned;

NOW THEREFORE it is hereby resolved that the Unaffiliated Employees
Personnel Policies Section B. 3. Sick Leave shall be amended by deleting the
redlined language and adding the bold language in paragraphs 4 & 5.

Accrual Maximum & Retirement Payout —- Employees (currently employed as
of passage of this resolution) hired prior to July +995-2001 may accrue up to a
maximum of ninety (90) days of sick leave and receive a payout of one
hundred percent (100%) of their sick leave balance upon retirement from the
City, or can accrue an unlimited amount of sick leave and be eligible to
receive a payout of twenty percent (20%) of their unused sick leave
balance upon retirement. (This choice must be communicated to and
confirmed by Human Resources no later than twenty (20) business days
following passage of this resolution.)

Employees hired on or after July 1, 4995-2001 can accrue an unlimited amount of sick
leave and are eligible to receive a payout of twenty percent (20%) of their unused sick
leave balance upon retirement.

A special meeting of the Board of Aldermen was held Thursday, December 20, 2018, at 7:00 p.m. in the
Aldermanic Chamber.

President Lori Wilshire presided; City Clerk Patricia D. Piecuch recorded.

Prayer was offered by City Clerk Patricia D. Piecuch; Alderman Richard A. Dowd led in the Pledge to the Flag.
The roll call was taken with 14 members of the Board of Aldermen present.

Corporation Counsel Steven A. Bolton was also in attendance.

COMMUNICATIONS

From: Lori Wilshire, President, Board of Aldermen
Re: Special Board of Aldermen Meeting

There being no objection, President Wilshire accepted the communication and placed it on file.
PRESENTATION

New Market Tax Credit Program for the Performing Arts Center presentation by Niel Cannon, Finance and
Development Consultant.

President Wilshire
Tonight we have a presentation on the New Market Tax Credit Program for the Performing Arts Center
presentation by Niel Cannon, Finance & Development Consultant. Tim would you please join us, and Mr.

Cannon?

Tim Cummings, Director of Economic Development

Yes thank you Madam President, for the record Tim Cummings, | am the Director of Economic Development
here in the City and with me | have our New Market Tax Credit Consultant Niel Cannon who has been a
blessing to say the least to be involved in this project. He has brought a wealth of knowledge and he is a very
technical expert in this very complex process. What | have asked him to do this evening is to give you a high
level overview, basically a New Market Tax Credit 101 and then speak more specifically to how we would
structure the specific Nashua project.

Before we get there, | put together a small little YouTube video that | want to show you and then lastly, if need
be, | can give you a very specific example of how this tool was used in another community here in New
Hampshire and it mirrors very much what we are trying to do here. With that being said, the YouTube video
that I’m about to pull up is a YouTube video that was done for another area of the country that is a good tool to
help give you an orientation, but some of the details are not 100% accurate in terms of what we are talking
about specifically. But it is very close to what we are trying to do here and it is a good 10 minute snapshot. So
| thought | would play that at the beginning of this conversation, it will help inform the more broader
conversation that will come about when Niel starts his presentation. But again, it is not completely accurate
but it is very, very close.

YouTube video plays.

Mr. Cummings

So we are all experts now in New Market Tax Credits. So that was just a very quick high level overview, again
| want to just re-emphasize, it is not an apples to apples to what we are doing here in Nashua but it is a good
thumbnail to help to give you an overview as to what we are going to need to do for the most part. One of the

Special Bd. of Aldermen — 12/20/2018 Page 2

big issues that | want to talk about that is a little bit different that Niel will get into a little bit more detail in a few
minutes is the idea of the ground lease. We are not going to be able to do that ground lease concept for a
couple of reasons and one of them is a municipal corporation should be as far away from the New Market Tax
Credit deal as possible. So transferring the asset into the QALICB and then having a reverted later on down
the line is how we are looking at structuring it. That will protect and ensure the City that the asset returns to
the City but nonetheless it won’t be that explicit ground lease type model that was mentioned in the YouTube
video.

With that being said, | am going to bring up Niel’s power point presentation and turn it over to Niel where he will
go into a little bit more detail about the program itself and the specific way we are going to structure the project
here in Nashua.

Niel Cannon Thanks Tim, my name is Niel Cannon and | am a consultant to the City on New Market Tax
Credits. | have been working with Tim and his people for 2 or 3 months now intensely and I’ve enjoyed every
minute of it. There is a lot of leadership in this City and a lot of excitement over this project.

The New Market Tax Credit Program is a federal economic development initiative that started about 12 years
ago. The purpose of the program is to encourage investments in low income communities. Low income
communities are defined as census tracks that meet certain income criteria, most commonly used is a census
track that has median household incomes of 80% or less of the Statewide average. A census track is just an
enumeration district, ita geographic area from which census data is collected separate from census data for
the whole City in this case.

Nashua has 17 census tracks. They can be bounded by municipal boundaries, they can be bounded by
railroad tracks, streets, roads, whatever. There are 17 census tracks Nashua as | said and of those | think 5
qualify. The census track in which the proposed Performing Arts Center which we are in right now as a matter
of fact, is among the poorest in the State. | told you that the criteria was 80% or less | think | said median
household income, it should be median family income. In this census track in which we are located and in
which the project is located, the median family income is 31% of the State average, it is way low. It has also
got almost a 30% poverty rating. So not only is this eligible it is classified as severe distress which makes it an
ideal target for this program.

Before getting into the details, I’d like to focus on five of the concepts that were referred to in the video we just
looked at. The first thing is the idea of what is a QALICB; a Qualified Area Low Income Community Business.
Assisted business must be a corporation or partnership that exist in a qualified area and we just talked about a
qualified area. This is called a qualified area low income community business or QALICB, that is the box at the
bottom in the diagram we looked at. This means that the City of Nashua cannot be a direct beneficiary of the
program but it can participate as a lessee of QALICB property because the City is not, by IRS definitions a
corporation or partnership. But it can master lease a property that is developed by a QALICB.

This kind of arrangement has been done before. The first City to really use this aggressively and benefit as a
master lessee of a property was the City of St. Louis which did a lot and used it for waterfront development on
the Mississippi River. Boston has used it a lot in conjunction with its redevelopment efforts. And in little old
New Hampshire, Keene has used it twice this way. We probably had 20 projects in New Hampshire for the life
of the program, Keene has used it twice where the City was the master tenant of the project

Initially | was involved in this one | think it was about 5 or 6 years ago. The Cheshire County Court House was
threatening to leave downtown so we put together a New Market Tax Credit Program and we set up non-
profits, QALICB that built a new courthouse, leased it to the City so the City had some control. They sub-
leased it to the State of New Hampshire and after the 7 year compliance period, the State of New Hampshire
will be able to buy it

Special Bd. of Aldermen — 12/20/2018 Page 3

The second one they just did last year was a library, about a $13 million dollar library they used to leverage
general obligation bonds, much as we are suggesting here.

The second point I’d like to bring up is, the amount of the tax credit is 39% of the investment, we call that the
qualified equity investment which they talk to in the slide. For example, if you have $1 million dollar investment
or project cost, the credit amount is $390,000.00. We want to raise cash, reduce debt by selling that credit, we
don’t want the credit, we want the cash. Right now the market is about .85 cents per $1.00. So | can sell that
$390,000.00 in credits to investors, private investors, who will pay us .85 cents a dollar or $331,500.00 cash.

In an ordinary real estate deal you go to the bank and you say to the bank — I'll put up 20% cash, you loan me
80%, | don’t have to put up cash, I’m selling my credits for cash. That is reducing the amount | have to borrow.
That is shown on the next slide.

What else is new? There are fees involved in this and generally they reduce the value of the equity investment
by about 15% as those fees are collected. So that $331 goes to $281,775.00 net. But that is still 28% of your
deal. Earlier in the slide they said it was about 25%, but right now the price is really strong at .85 cents. So
that brings it up to about 28.2%. We don’t know what the price is going to be when we sell these, but my best
guess, we are marveling at .85 cents. In a Concord project | was involved in, we recently got .89 cents. Until
we are ready to close, we are not going to know; the impact of that is if the price per credit goes down the City
bond proceeds put into the project would have to go up or other money that is put in the project would have to
go up. If the price goes up, the price of the credits goes up, we get more for our money and the City’s
exposure goes down. | wish | could tell you what it is going to be, but | can’t.

Number 4, there is a 7 year compliance period. So the structure we put into effect to make this deal happen
has to stay the same for 7 years. Because the investors, the private investors are receiving their tax credits
over a 7 year period; it goes 5% a year for the first 3 years and then 6% for the next 4. So the deal has to stay
in place, the structure of the deal. After 7 years it is by the door, if the City wants to own the property instead
of leasing it, it can. If the City, you know, any kind of deal can happen after that 7 years but because of IRS
regulations and because those investors that are putting the private money in the deal want it to stay together
for 7 years so they can get their full 39%, we can’t do anything. It has got to stay the way it is when we initially
sell the deal and structure the deal.

And finally, number 5 — you heard again in the video touched, well actually the narrator is a CDE. CDE’s are
the key to an MTC funding. They are awarded credits by the US Treasury and they can in turn sub-allocate
these credits to worthy projects that meet their program guidelines. Therefore it is our job to convince at least
1 or 2 CDE’s that the proposed project has financial strength and results in positive community impacts;
whether that includes jobs, more private investment, benefits to low and moderate income residents, all those
things are included. There are several hundred CDE’s in the United States. They all compete for a pot of
authority, right now there is a pending allocation of $3.5 billion dollars, probably 50 or 60 CDE’s will get an
allocation. We are talking to several of them that traditionally get allocations and we will be putting out a
proposal within the next few days, shortly after the 1*' of the year, that we will send to about a dozen CDE’s to
ask them for an allocation of tax credits. What we are asking for in allocation of $18.5 million dollars.

So now take a deep breath and let’s go to the fun part. Dave Fredette is in the house so this is always the one
that he has. Would you like to explain this Dave? So let’s start in the upper left hand corner and we are going
to work our way down all the way to the QALICB and then we will go back up to the top so we are coming
down with how the money is invested, go back to the top how it is paid off. So in the upper left hand corner
you have the bond purchaser. You have authorized the sale of up to $15.5 million dollars of bonds to support
this project. We are estimating that the total bond proceeds that are required for this project are going to be on
the order of $12,927,250.00. So that money comes into the City coffers when they sell it and the City would
then make a loan to what we call the senior leverage lender but it is really an intermediary lender. It is an entity
that we set up that is basically a pass through lender, it is an intermediary, it keeps the City one step away
from a deal which is where the City wants to be, where your lawyers are probably going to want you to be and

Special Bd. of Aldermen — 12/20/2018 Page 4

where the equity investors would like to see you be. They don’t want to get into a hassle with the City of
Nashua.

So that intermediary lender in turn, which would be a non-profit in this case, would loan that same amount to
an investment fund. Remember the key to this is you get the credit by making an investment in the community,
so we’ve got to set up an investment fund to make that happen. That investment fund, in order to create an
$18.5 QEI which nets loans of $18,130,000.00, that investment fund needs to collect $19 million 60 thousand
dollars and the way it does that is it takes the $12 million and change and then it sells the tax credits and
receives for those tax credits $6.1 million dollars. So it is selling $7.2 million dollars at 85% and receiving $6.1.
That $6.1 is added in the investment fund to the $12.8 or whatever it was, $12.9 and that creates a total
capitalization of $19 million 60 thousand dollars.

Then, the investment fund makes the qualified equity investment of $18.5, that is a big number because that’s
what this is based on and it is what the allocation of credits from the CDE will be, it will be for $18,500,000.00.
That moves into a CDE and we talked about, they are another intermediary that not only has the capacity to
award the credits, but serves as the lender. So they will take the $18.5, they will take their fees of 2% of that
and we will have $18, 130,000.00 which we are going to loan to the QALICB And the QALICB is going to be a
to-be-determined non-profit to be created or another entity that steps into this role.

There will be two loans, there will be the $12,900,000 and change loan which equals the bond proceeds and
there will be the $5.2 million dollars which is the net New Market Tax Credit cash. In other words instead of the
City having to pay $18.13 in bonding it is paying $5.2 less than that. The reason it is two loans is that after
seven years, loan B goes away. But it has to stay in there as an obligation to QALICB for 7 years, it is a 0%
loan. It has to stay in there for 7 years because that is the compliance period for the New Market Tax Credit
Program.

Then we are now envisioning that the QALICB owner will be a passive LLC, all it will do is own the building and
collect rent and pay debt service and it will lease it to the City of Nashua. The City of Nashua would in turn
either sub-lease to an operator and we have an operator, Tim and his group the Steering Committee have
selected an operator, that would either be a lease or it would be a contract with the operator. I’m not sure
which it is going to be yet. In most cases the sub-lease for a buck. That is the model, that is the going down
model.

Now we have a business transaction instead of a municipal bonding transaction and that makes it work. So
how do we service the debt on the bond? Well the City of Nashua pays an annual lease payment here, which
is equal to the annual debt service on the bond. The borrower, the QALICB pays the debt service up to the
CDE, the CDE pays it up to the investment fund, the investment fund pays it to the lender, the lender pays it to
the City and the City pays it to the bond purchaser. It is all simple but it is going to take, it is just the way it is
done to qualify under the regulations of IRS and that transaction | just traced can take place in a day with wire
transfers etc. But it is the way we have to do it to make it legitimate private investment. It is relatively simple
when you think about it, it is generating a check from the City that ends up with the City after going through a
couple of other channels. So there are going to be 4 or 5 bank accounts that it is going to pass through on the
way up.

| just have one more slide just to clarify how that cash is raised. So we have the $18.5 equity investment, the
total credits awarded are 39% of the $18.5 which is the $7.2 million, the credit price is .85 cents, that gets a
gross amount of $6.1 million. Down here we go to the $6.1 million and we convert to cash by taking these fees
off and we come up with $5.2 million which is the same as Loan B right there, which goes away and is forgiven
after 7 years. Thatis private investment. | believe that meets the private investment criteria of your resolution.
The investors are usually banks, financial institutions, the big ones, Merrill Lynch, Chase Manhattan, etc. etc.
who are investing their money in turn for some tax shelters.

Special Bd. of Aldermen — 12/20/2018 Page 5

| don’t Know who we are going to use, the one group that has been very, very active in New Hampshire of 95%
of the deals | have done is US Bank out of St. Louis, they are very active in this. Remember there are other
tax credits too that these investors are used to getting involved in. There is the Historic Tax Credit that you get
for rehabbing historic buildings in your historic district, which works very similarly to this. It is a 20% credit
taken over 4 years and there is a low income housing tax credit that institutions such as Chase and Merrill
Lynch and Bank of America and US Bank invest in on a regular basis.

So that is it for now, | would be glad to answer any questions you may have.

Mr. Cummings

Before we get there, may | just — one thing. | just wanted to take what Niel said and give you a real life example
of what was done here in New Hampshire. This is the deal structure that Keene went through for their library
project. This is essentially the very high level overview deal structure that Keene went through for their library
expansion project to be clear. So the City of Keene, they had equity of $2.5 million that was the current
building and land, they had about $8.96 in a loan which was a bond, bond proceeds, they took the $8.9 put it
into this leverage lender model and that leverage lender moved the money over to the CDE The CDE then
leveraged it with the equity investment by US Bank of a full total of just over $5 million, but that wasn’t what
was actually in the project itself, the project netted $4.3 million of cash for a total of about $13 million dollar.
The $13 million was eventually pushed down into the QALICB. The QALICB then separately the City of Keene
transferred the $2.5 down into the QALICB for a $15 million dollar project which then they were the ultimate
operator and master tenant of the library. This is how Keene structured theirs

Mr. Cannon Itis a standard structure. And just one more thing, one of the advantages of this is Keene’s
counsel has done this twice now, for the courthouse and this and is talking to your counsel, so that is really
going to help | think and smooth the deal along as we go forward.

Mr. Cummings

So my last comment that | want to make is to make this all happen there is going to need to be approvals by
the Board of Aldermen along the way. Some actions that will be necessary: development agreement,
approval to push, if you will, the $12.9 down through the system, a transfer of 201 Main Street into the
QALICB, approval of a Master Lease. So there are going to be 4 or 5 resolutions that are going to come
before this body that we are still trying to understand and still try to figure out as we are putting this deal
together. But we are going to need those approvals to ultimately make this work.

A couple of other points | want to make, as you can note, we are only suggesting $12.9 million in this model;
we have authorization for $15.5 so approximately $2.5 million wouldn’t necessarily have to be pushed through
this model. That could be used still for the project or not used at all, and maybe you could potentially reduce
the bond obligation, or if there are other items within the project that you would like to undertake that isn’t in the
current scope, you could use some of that money for, if you will, upgrades or amenities.

Lastly not shown on this deal structure flow chart but is still coming together is the private investment that
would be coming from local charitable contributions which we are targeting at approximately $2.5 million. That
would be a separate non-profit that would be involved with transferring basically those private dollars into the
operator to make that work as well. So that would be underneath the City of Nashua Master Tenant, there still
could be 2 or 3 boxes that are evolving as we are putting this all together.

This took about 3 to 4 months of really serious back and forth with Niel and other members of the team here in
City Hall to get a comfort level to understand the direction we are going and it is constantly evolving. When we
first started this, it looked very similar to this but there were slight differences and tweaks along the way. | just
want to make sure you all understand that this will continue to get refined as we move forward. What we
wanted to do tonight was to introduce the concept, give you a high level overview, have you comfortable with

Special Bd. of Aldermen — 12/20/2018 Page 6

the ideas, because once this train leaves the station, we really need to make sure we have the approvals
necessary to be able to execute on this project. So with that being said, Madam President.

President Wilshire
Thank you and thank you Mr. Cannon for your presentation. | am going to start on this side.

Alderman Gidge

That is if everything goes correctly and every deal obviously Keene a courthouse it certainly or library is
certainly different than what we are doing down here. You must have something that you can show us where
mistakes have been made where this has not worked, where are the weak spots of this? There has to be, it
just doesn’t work like this.

Mr. Cannon Yés it does, especially in this sense. The places it doesn’t work is where the QALICB defaults on

the loan. In this case the loan is the full faith and credit of the City of Nashua. So | don’t see any, unless the
City of Nashua goes into bankruptcy, | don’t see a problem.

Alderman Gidge

Well there are moving parts obviously, when you rent something to somebody and then you rent it individuals
let’s say to run the business, when there are contracts that go into that obviously which has nothing to do with
this, has something to do with us. That is a weak spot if that doesn’t work out.

Mr. Cannon We have had more discussion about that than the numbers.

Alderman Gidge

Is there a place though to have something to show us where it doesn’t work? All this works all the time?

Mr. Cannon Yes because you are going to control, you control the purse strings at the top and building

through a Master Lease at the bottom. The strength of that lease is up to you as is the strength of the
relationship of the City as the Master Lessee in any sub-leases to operators or whatever.

Alderman Gidge

| would just like to ask, please is there anything like this that hasn’t worked? Is there anything we can look at
Has this not worked someplace?

Mr. Cannon | mean the only ones | know that have failed have failed because of default on loans. There are a
couple in Claremont that failed in the mill building. But it was a financial failure not a compliance failure

President Wilshire
Are you all set Alderman Gidge?

Alderman Gidge

Yes | am, thank you.

Special Bd. of Aldermen — 12/20/2018 Page 7

Mr. Cummings

So to Alderman Gidge’s point though there are ways where there are weaknesses that we are thinking about.
An example of that is the operator and you know one of the things that | was really concerned with and we
have been internally struggling with is making sure we have an operator in place and make sure that operator
is reputable. Originally we were thinking we were going to create a non-profit and have that non-profit execute
and then we moved away from that and we have a really respected operator who has done this time and time
again that should give us confidence that they can replicate it here.

But then in addition to that, what | recommend and | hope will finally occur is the minimum contract that we
enter into with that operator be 7 years. So that way the equity investor and the CDE all know what they are
buying for the 7 years. So we do have weaknesses, we are trying to think through where those weaknesses
are, we are trying to strengthen them so that we have the best project as we move forward. Again, this is
evolving; each different element brings about a new surprise which we are trying to address.

Alderman Dowd

| am pretty sure | understand the process and hopefully my questions aren’t quite as innocuous. The question
| have, oh and before | say that, everyone that is involved in each one of those blocks has a vested interest in
this being successful. So for it to fail -— somebody would have to have a least invested interest in making it
successful and | don’t think you’d find that

The first question | have is in the upper left hand corner, the $15.5, as | understand it we would have to sell the
bonds for that to start. So my question is when is that and how is the amount of time to set up the rest of it?

Mr. Cummings

Thank you, so when you'd have to sell it is going to come about after we get basically a letter of commitment.
So it is a two-phased type of approval process; a CDE if they are interested in us will give us notice that we are
eventually receive the credit or the allocation. Once that occurs, there is a window of period in-between that, 3,
4, 5 whatever it is months and we would need to begin the process of selling the bond and using the bond
proceeds. During that time is when you actually set up all these other structures that go along with supporting
this deal.

Alderman Dowd

What do you feel is the time-frame to get from the upper block to have everything in place?

Mr. Cannon The bond funds have to flow into the project at closing, and we expect, we hope to hear, get some
kind of commitment from CDE’s the next round of funding for CDE’s is in February, we hope to get some kind
of positive reaction, whether it be one CDE or two CDE’s by the end of March. Given that we would expect to
fall 2019 closing. Once the closing date is set, the bond can be sold.

Alderman Dowd

So | have a question for Mr. Fredette if he’s still here.

President Wilshire

Treasurer Fredette, could you come up to the microphone please?

Special Bd. of Aldermen — 12/20/2018 Page 8
Alderman Dowd

Don’t worry it’s not going to be a hard question.

President Wilshire

He’s up for it.

Alderman Dowd

So my question is with what is happening with the Fed right now are bond interest rates going up and could we
sell the bond ahead and keep that money aside or do we have to sell them when this starts?

David Fredette, Treasurer Tax Collector

| would not recommend selling it ahead. There has been discussion this bond might be sold as taxable the
rates would be a little higher for a taxable bond versus non-taxable. | wouldn’t sell it ahead. We will be ready
and prepared to sell when we have to. We could do it fairly quick.

Alderman Dowd

Ok | trust your opinion.

President Wilshire

Director Cummings did you have something to add to that?

Mr. Cummings

Yes and also | just want to point out that it is somewhat of catch 22 that we are in, we are in a chicken and an
egg because we technically can’t sell the bond until we raise $4 million dollars. So in our resolution unless we
were to amend that again and | really don’t want to amend that resolution again, we can’t sell it anead of time.
But we as a team here internally in City Hall, Finance, Legal, you know Economic Development along with our
consultants have been working on this regularly and we are trying to line everything up and making sure we
have all our ducks in a row so when we need to, we can just cut this loose and go as quickly as possible.

Alderman Dowd

As we are trying to, and | know | have had some discussions with | can’t remember her name, the person who
is trying to raise money?

President Wilshire

Betsy McNamara?

Alderman Dowd

Yes, thank you. It appears like we are trying to get some of this private money just locally but have we had any

thought of going to say Boston and people with a lot of money, especially if you are looking at naming rights,
quite frankly | don’t care whose name is on it if they are going to give a few million bucks for it.