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(continued)

(in thousands)
Income Taxes Provision (Benefit}:

Pennichuck Water
Pennichuck East
Pittsfield Aqueduct
Subtotal Regulated Segment
Service Corporation
Other
Total Income Taxes Provision (Benefit)

Net Income (Loss):

Pennichuck Water
Pennichuck East
Pittsfield Aqueduct
Subtotal Regulated Segment
Service Corporation
Other
Total Net Income (Loss)

Total Net Assets:

Pennichuck Water
Pennichuck East
Pittsfield Aqueduct
Subtotal Regulated Segment
Service Corporation
Other
Total Net Assets

Totai Liabilities:

Pennichuck Water
Pennichuck East
Pittsfield Aqueduct
Subtotal Regulated Segment
Service Corporation
Other
Total Liabilities

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2020 2019
1,728 1,521
738 415

21 14
2,487 1,950
34 49
(2,014) (1,685)
S07 314
2,409 387
(361} (980)

19 6
2,067 (587)
84 111
(4,135) (4,861)
(1,984) (5,337)
298,004 292,311
61,881 58,203
3,056 3,278
362,941 353,792
(12) 24
(15,631) (15,672)
347,298 338,144
194,433 184,942
53,757 49,143
1,402 1,509
249,592 235,594
(31) (22)
97,325 99,833
346,886 335,405

(continued)

16.

(continued)

(in thousands) 2020 2019
Total Long-Term Debt (including current portion

and unamortized debt insurance costs):

Pennichuck Water S 105,447 §$ 94,323
Pennichuck East 22,067 19,842
Pittsfield Aqueduct 140 143
Subtotal Regulated Segment 127,654 114,308
Service Corporation - -
Other 102,169 104,570

Total Long-Term Debt $ 229,823 § 218,878

Rate Cases

Pennichuck Water

On July 1, 2019, Pennichuck Water filed a request with the NHPUC for a rate increase of
11.91% over its current rates for the test year 2018, effective August 1, 2019. The proposed
permanent rate increase includes a 2018 Qualified Capital Project Adjustment Charge
(QCPAC) surcharge of 1.69%, a proposed 2019 QCPAC of 2.37%, and further modification to
its ratemaking structure. The overall rate increase is subject to the norma! 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.

The request for the overall permanent rate increase was based upon increased Pennichuck
Water operating expenses since the last allowed rate increase in 2017 {for the 2015 test year),
and to provide enough revenues to pay for investments made in plant and treatment systems
to ensure its continued compliance with the Safe Drinking Water Act.

In addition to the requested rate increase, Pennichuck Water has proposed several
modifications to its current ratemaking structure which are designed to provide adequate
and timely cash coverage of operating expenses so that Pennichuck Water can avoid incurring
additional debt. The proposed modifications include:

* creating a Material Operating Expense Factor (MOEF), an expense factor on top of its
material operating expenses to cover inflationary increases between rate filings; as a
component of allowed revenues in determining permanent rates;

* including the actual cost of Federal and State corporate income taxes in Pennichuck
Water’s Operating Expense Revenue Requirement (OERR) component of allowed
revenues;

e reprioritizing the use of Debt Service Revenue Requirement (DSRR) 0.1 funds;

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e reallocating the value of components of the aggregate RSF; and

e changing the treatment of debt issuance costs for long-term debt, other than tax
exempt and taxable bond issuances.

On July 24, 2020, the NHPUC issued Order No. 26,383 which approved the following
modifications to its current ratemaking structure: (1) the creation of the MOEF. The MOEF
percentage factor will be applied to Pennichuck Water’s MOERR and established in each rate
proceeding; (2) the inclusion of actual NHBET cash payments in the revenue requirement,
included as part of the MOERR component; (3) reprioritization of DSRR 0.1 funds to include
funding of deferred assets, replenishment of RSF fund balances to their imprest values, and
for funding of capita! improvements.

On November 24, 2020, the NHPUC issued Order No. 26,425, which approved a MOEF of 9.5%
to be applied to the MOERR, as a factor determining that overall portion of allowed revenues
in determining permanent rates.

In this Order, the Commission also approved an overall permanent rate increase of 11.85%,
becoming effective with services rendered on the date of the order. The permanent rate
increase is inclusive of a QCPAC of 4.06% previously approved by NHPUC Order No. 26,298
on October 19, 2019 for 2018 capital expenditures, resulting in a net increase of billed rates
to customers over and above the QCPAC surcharge already in place, of 7.79%.

Pennichuck East

On November 24, 2020, Pennichuck East filed a request with the NHPUC for a rate increase
of 21.05% over its current rates for the test year 2019, effective December 24, 2020, for which
15.0% of this increase is related to a request for a temporary rate increase effective for
services rendered on or after December 24, 2020. The temporary rate increase is subject to
approval by the Commission which is separate and distinct from the final rate increase
approval, as the Commission’s final determination on the permanent rate increase request is
processed to completion. The 15.0% temporary rate increase would be inclusive of a 2.98%
QCPAC surcharge which was approved on December 6, 2019 in Order No. 26,313 anda 1.97%
QCPAC surcharge which is currently pending in DW 20-019.

In addition to the rate increase requested, Pennichuck East has requested certain
modifications to its ratemaking structure which were similarly approved for Pennichuck
Water on July 24, 2020 by NHPUC Order No. 26,383. These modifications would include:

*® creating a MOEF, an expense factor on top of its material operating expenses to cover
inflationary increases between rate filings, as a component of that portion of its
allowed revenues in determining permanent rates;

e inclusion of actual NHBET cash payments in its revenue requirement calculation;

¢ = reprioritizing the use of DSRR 0.1 funds;

136

® recovery of State Revolving Loan Fund and Drinking Water Groundwater Trust Fund
debt issuance costs; and

e re-establishment of imprest levels of the components of the RSF account and the
retention of a previously approved reconciliation mechanism.

Pittsfield Aqueduct

On November 16, 2020, PAC filed a request with the NHPUC for a rate increase of 11.18%
over its current rates for the test year 2019, effective December 17, 2020. 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, with final approval by the NHPUC in the Fall of 2021.

The request for the overall permanent rate increase was based upon increased PAC operating
expenses since the last allowed rate increase in 2014 (for the 2012 test year), and to provide
sufficient revenues to pay for investments made in its treatment systems to ensure its
continued compliance with the Safe Drinking Water Act.

In addition to the rate increase requested, PAC is requesting certain modifications to its
ratemaking structure which were similarly approved for Pennichuck Water on November 7,
2017 by the NHPUC in Order No. 26,070 and July 24, 2020 by Order No. 26,383. These
modifications would include:

e use of a five-year trailing average of revenues and expenses as a test period;

e creating an MOERR RSF, a DSRR RSF, and a City Bond Fixed Revenue Requirement Rate
Stabilization Fund (CBFRR) RSF to provide rate stabilization and cash flow coverage for
operating expenses, debt service, and the CBFRR portion of revenues, between
permanent rate filings;

e creating three “buckets” of allowed revenues comprising the allowed revenues for
the Company, in their component levels, including:

o OERR
« Comprised of the MOERR and the NOERR

© DSRR
= Comprised of the DSRR 1.0 and DSRR 0.1

o CBFRR
® Which already existed in PAC’s rate structure, but is being redefined as an
overall component in determining allowed revenues;

e creating a MOEF, an expense factor on top of its test year material cperating
expenses, in defining the overall value of the MOERR portion of allowed revenues,
and to cover inflationary increases between rate filings, as a component of that
portion of its allowed revenues in determining permanent rates;

137

17.

e inclusion of actual NHBET cash payments in its revenue requirement calculation; and

e the establishment of a revenue requirement structure, and the mechanics and
methedology for its appreval, resetting and funding, inclusive of the RSFs and allowed
revenue “buckets” shown above, which is the same as approved for Pennichuck Water
by NHPUC Order Nos. 26,070, and 26,383

Qualified Capital Project Adjustment Charge

On February 19, 2020, Pennichuck Water filed a petition with the NHPUC for a 3.83% QCPAC
surcharge on all capital improvements completed and placed in service by Pennichuck Water
in 2019. The Commission has not issued an Order approving this requested surcharge. When
the Commission issues the Order, the surcharge will become effective retroactively on a
service rendered basis back to April 30, 2020. The Order will allow recoupment of the
surcharge from all its customers based on their actual bills incurred between April 30, 2020
and the final effective date of the Order.

On February 13, 2020, Pennichuck East filed a petition with the NHPUC for a 1.97% surcharge
on all capital improvements completed and placed in service by Pennichuck East in 2019. The
Commission has not issued an Order approving this requested surcharge. When the
Commission issues the Order the surcharge will become effective retroactively on a service
rendered basis back to November 23, 2020. The Order will allow recoupment of the surcharge
from all its customers based on their actual bills incurred between November 23, 2020 and
the final effective date of the Order.

COVID-19 Pandemic Impact

in March 2020, the World Health Organization (“WHO”) recognized COVID-19 as a globai
pandemic and the President of the United States of America declared the COVID-19 outbreak
in the United States a national emergency. This prompted many national, regional, and local
governments to implement preventative or protective measures, such as travel and business
restrictions, temporary business closures, and wide-sweeping quarantines and stay-at-home
orders.

During the COVID-19 pandemic, the Company’s services have generally been considered
essential in nature and have not been materially interrupted. As the situation continues to
evolve, management is closely monitoring the impact of the COVID-19 pandemic on all
aspects of the Company’s business, including how it impacts customers, subcontractors,
suppliers, vendors, and employees, in addition to how the COVID-19 pandemic impacts the
Company’s ability to provide services to customers. We believe the ultimate impact of the
COVIG-19 pandemic on operating results, cash flows and financial condition is likely to be
determined by factors which are uncertain, unpredictable, and outside of our control. The
situation surrounding COVID-19 remains fluid, and if disruptions do arise, they could
materially adversely impact our business.

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18.

Subsequent Events

The Company has evaluated the events and transactions that have occurred through

March 23, 2021, the date that these consolidated financial statements were available for
issuance.

139

Nashua Airport Authority
Notes to Financial Statements

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NASHUA AIRPORT AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies of the Nashua Airport Authority ("the Authority") conform to accounting principles
generally accepted in the United States of America for local governmental units, except as indicated
hereinafter. The following is a summary of significant accounting policies.

Financial Reporting Entity

The Authority was established on August 27, 1961 by legislative act, as a separate legal entity. The
Authority is located at Boire Field in Nashua, New Hampshire and provides general airport operations as
well as airplane tie-down rentals. The Authority meets the criteria as a component unit of the City of
Nashua, New Hampshire (“the City”). Such criteria includes appointment of the board of directors by the
Mayor of the City, debt service guarantees by the City, inclusion of the Authority's employees in the City's
retirement system (New Hampshire Retirement System) and budgetary appropriations from the City.

Basis of Accounting

The financial statements are presented on the accrual basis of accounting, wherein revenues are recognized
when earned and expenses are recognized when incurred.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America require management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results may differ from those estimates.

Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Net Position

Cash and Cash Equivalents - For purposes of the Statement of Cash Flows, cash and cash equivalents are
comprised of demand deposits and cash on hand.

Investments - Investments are recorded at their fair value. Certificates of deposit with a maturity of greater
than ninety days from the date of issuance are included in investments.

Accounts Receivable - At June 30, 2021 accounts receivable includes unpaid tie-down fees and land lease
rental fees. An allowance for estimated uncollected receivables is not deemed necessary as of June 30,
2021.

Capital Assets - Capital assets are recorded at cost and updated for additions and retirements during the
year. Donated capital assets are recorded at their acquisition value as of the date received. Improvements
are capitalized; costs of normal maintenance and repairs that do not add to the value of the asset or
materially extend an asset’s life are not. AJ] reported capital assets except for land and construction in
progress are depreciated. Depreciation is recorded using the straight-line method over the estimated useful
lives of the related assets.

142

NASHUA AIRPORT AUTHORITY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

For the Year Ended June 30, 2021

Estimated useful lives are as follows:

Years
Land improvements 5-25
Buildings and improvements 10-39
Equipment 3-30

Compensated Absences - Employees earn vacation and sick leave as they provide services. Employees earn
1.25 sick days per month. Employees hired before July 1, 2014 may accumulate an unlimited number of
sick days and upon retirement will be paid out 20% of unused sick time at current rates of pay. Employees
hired after July 1, 2014 may accumulate up to 24 sick days and upon retirement will be paid out 50% of
unused stick time at the current rate. Vacation amounts accrue according to length of employment.
Employees may carry forward vacation days into the next year up to two times their annual accrual rate.

Other Postemployment Benefits - For purposes of measuring the net OPEB liability, deferred outflows of
resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the
fiduciary net position of the New Hampshire Retirement System (NHRS) OPEB Plan and additions
to/deductions from NHRS's fiduciary net position have been determined on the same basis as they are
reported by NHRS. For this purpose, NHRS recognizes benefit payments when due and payable in
accordance with the benefit terms. Investments are reported at fair value, except for non-registered
commingled funds valued at net asset value (NAV) as a practical expedient to estimate fair value.

Pensions - For purposes of measuring the net pension liability, deferred outflows of resources and deferred
inflows of resources related to pensions, and pension expense, information about the fiduciary net position
of the New Hampshire Retirement System (NHRS) and additions to/deductions from NHRS's fiduciary net
position have been determined on the same basis as they are reported by NHRS. For this purpose, benefit
payments (including refunds of employee contributions) are recognized when due and payable in
accordance with the benefit terms.

Net Position - Net position represents the difference between assets, deferred outflows of resources,
liabilities and deferred inflows of resources. The net investment in capital assets consists of capital assets,
net of accumulated depreciation, reduced by any outstanding balances of bonds, notes or other borrowings
used for the acquisition, construction or improvement of those assets. Net position is reported as restricted
when there are limitations imposed on their use either through enabling legislation adopted by the Authority
or through external restrictions imposed by creditors, grantors or laws or regulations of other governments.
Unrestricted net position is the net amount of the assets, deferred outflows of resources, liabilities and
deferred inflows of resources that are not included in the determination of net investment in capital assets
or the restricted components of net position.

The Authority’s policy is to first apply restricted resources when an expense is incurred for purposes for
which both restricted and unrestricted net position is available.

Revenues and Expenses

Operating Revenues and Expenses - Operating revenues for the Authority are those that result from
providing services and producing and delivering goods in connection with its principal ongoing operations.
Operating expenses, which include depreciation on capital assets, are necessary costs incurred to provide

143