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NASHUA AIRPORT AUTHORITY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the Year Ended June 30, 2021

the services that are the primary activities of the Authority. All revenues and expenses not meeting this
definition are reported as non-operating revenues and expenses.

Capital Contributions - Funds received from other governments for the purpose of constructing assets are
recorded as capital contributions.

NOTE 2—DEPOSITS AND INVESTMENTS

Deposits and investments as of June 30, 2021 are classified in the accompanying financial statements as
follows:

Statement of Net Position:

Cash and cash equivalents $ 541,873
Investments 237,378
Total deposits and investments $ 779,251

Deposits and investments at June 30, 2021 consist of the following:

Cash on hand $ 200
Deposits with financial institutions 779,051
Total deposits and investments § 779,251

The Authority’s investment policy requires that deposits and investments be made in New Hampshire based
financial institutions that are participants in one of the federal depository insurance programs. The Authority
limits its investments to demand deposits, money market accounts, and certificates of deposit.

Custodial Credit Risk

Custodial credit risk for deposits is the risk that in the event of a bank failure, the Authority’s deposits may
not be returned. The Authority does not have a formal investment policy for assurance against custodial
credit risk.

The Authority’s entire balance of deposits with financial institutions at year end was covered by federal
depository insurance.

NOTE 3—CAPITAL ASSETS

The following is a summary of changes in capital assets during the year ended June 30, 2021:

Balance Balance
7/1/2020 Additions Reductions 6/30/2021
Capital assets not being depreciated:
Land $ 4,026,795 $ 4,026,795
Construction in progress 212,886 $ 2,165,536 2,378,422
Total capital assets not being depreciated 4,239,681 2,165,536 § : 6,405,217

144

NASHUA AIRPORT AUTHORITY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the Year Ended June 30, 202]

Other capital assets:

Land improvements 30,946,937 30,946,937
Buildings and improvements 1,524,854 1,524,854
Equipment 3,244,353 3,244,353
Total other capital assets at historicalcost _ 35,716,144 : : 35,716,144
Less accumulated depreciation for:
Land improvements (13,064,575) (1,392,571) (14,457,146)
Buildings and improvements (1,092,537) (38,978) (1,131,515)
Equipment (1,268,841) (189,899) (1,458,740)
Total accumulated depreciation (15,425,953) (1,621,448) : (17,047,401)
Total other capital assets, net 20,290,191 (1,621,448) : 18,668,743
Total capital assets, net $ 24,529,872 $ 544,088 $ - $ 25,073,960

NOTE 4—OTHER POSTEMPLOYMENT BENEFITS
Plan Description

The New Hampshire Retirement System (NHRS) administers a cost-sharing multiple-employer other
postemployment benefit plan (OPEB Pian), The OPEB Plan provides a medical insurance subsidy to
qualified retired members.

The NHRS issues a publicly available financial report that includes financial statements and required
supplementary information for NHRS. That report may be obtained by writing to New Hampshire
Retirement System at 54 Regional Drive, Concord, New Hampshire 03301 or from their website at
www.nhrs.org,

The OPEB Plan is divided into four membership types. Political subdivision employees, teachers and State
employees belong to Group I. Police officers and firefighters belong to Group I]. The OPEB plan is closed
to new entrants.

Benefits Provided

Benefit amounts and eligibility requirements for the OPEB Plan are set by state law (RSA 100-A:52, RSA
100-A:52-a and RSA 100-A:52-b), and members are designated in statute by type. The medical insurance
subsidy is a payment made by NHRS to the former employer or its insurance administrator toward the cost
of health insurance for a qualified retiree, his/her qualified spouse, and his/her certified dependent children
with a disability who are living in the household and being cared for by the retiree. If the health insurance
premium amount is less than the medical subsidy amount, then only the health insurance premium amount
will be paid. If the health insurance premium amount exceeds the medical subsidy amount, then the retiree
or other qualified person is responsible for paying any portion that the employer does not pay.

Group I benefits are based on creditable service, age and retirement date. Group II benefits are based on
hire date, age and creditable service. Medical subsidy rates established by RSA 100-A:52 II are dependent
upon whether retirees are eligible for Medicare. Retirees not eligible for Medicare may receive a maximum
medical subsidy of $375.56 for a single person plan and $751.12 for a two-person plan. Retirees eligible
for Medicare may receive a maximum medical subsidy of $236.84 for a single person plan and $473.68 for
a two-person plan.

145

NASHUA AIRPORT AUTHORITY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the Year Ended June 30, 2021

Funding Policy

Per RSA-100-A:16, contribution rates are established and may be amended by the New Hampshire State
legislature and are determined by the NHRS Board of Trustees based on an actuarial valuation. The
Authority’s contribution rate for the covered payroll of employees was 0.29% for the year ended
June 30, 2021. Contributions to the OPEB plan for the Authority were $814 for the year ended June 30,
2021. Employees are not required to contribute to the OPEB plan.

OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of
Resources Related to OPEB

At June 30, 2021, the Authority reported a liability of $7,214 for its proportionate share of the net OPEB
liability. The net OPEB liability was measured as of June 30, 2020, and the total OPEB liability used to
calculate the net OPEB liability was determined by a roil forward of the actuarial valuation from
June 30, 2019. The Authority's proportion of the net OPEB liability was based on actual contributions by
the Authority during the relevant fiscal year relative to the actual contributions of all participating plan
members, excluding contributions to separately finance specific liabilities of individual employers or
NHRS. At June 30, 2020, the Authority’s proportion was approximately 0.0016 percent, which was
approximately the same as its proportion measured as of June 30, 2019.

For the year ended June 30, 2021, the Authority recognized OPEB expense of $780. At June 30, 2021, the
Authority reported deferred outflows of resources and deferred inflows of resources related to OPEB from
the following sources:

Deferred Deferred

Outflows of — Inflows of
Resources Resources

Differences between expected and actual

experience $ 21

Net difference between projected and actual

eamings on OPEB plan investments $ 27

Changes of assumptions 46

Changes in proportion and differences between Authority

contributions and proportionate share of contributions 13

Authority contributions subsequent to the

measurement date 814

Totals $ 900 $ 21

The net amount of deferred outflows of resources and deferred inflows of resources related to OPEB is
reflected as an increase to unrestricted net position in the amount of $879. The Authority reported $814 as
deferred outflows of resources related to OPEB resulting from Authority contributions subsequent to the
measurement date. This amount will be recognized as a reduction of the net OPEB liability in the
measurement period ended June 30, 2021. Other amounts reported as deferred outflows of resources and
deferred inflows of resources related to OPEB will be recognized in OPEB expense for the measurement
periods as follows:

146

NASHUA AIRPORT AUTHORITY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the Year Ended June 30, 2021

June 30,
2021 $ 4
2022 8
2023 10
2024 6

Actuarial Assumptions

The total OPEB liability was determined by a roll forward of the actuarial valuation as of June 30, 2019,
using the following actuarial assumptions, applied to all periods included in the measurement, unless
otherwise specified:

Inflation 2.00%

Wage inflation 2.75% (2.25% for Teachers)

Salary increases §.60%, average, including inflation

Investment rate of return 6.75% per year, net of OPEB plan investment expense,

including inflation for determining solvency contributions

Mortality rates were based on the Pub-2010 Healthy Retiree Mortality Tables with credibility adjustments
for each group (Police and Fire combined) and projected fully generational mortality improvernents using
Scale MP-2019.

The actuarial assumptions used in the June 30, 2019 valuation were based on the results of the most recent
actuarial experience study, which was for the period July 1, 2015 — June 30, 2019.

The following assumptions were changed in the current year:

Reduced the assumed rate of investment return from 7.25% to 6.75%

Reduced the discount rate from 7.25% to 6.75%

Reduced wage inflation from 3.25% to 2.75% (2.25% for teachers)

Reduced price inflation from 2.5% to 2.0%

Updated demographic assumptions, including merit and longevity salary increases, disability rates,
retirement rates, and mortality tables (specifically the new public pension plan mortality tables)

e Increased the medical subsidy margin for teachers from 0.20% to 0.50%

The long-term expected rate of return on OPEB Plan investments was selected from a best estimate range
determined using the building block approach. Under this method, an expected future real return range is
calculated separately for each asset class. These ranges are combined to produce the long-term expected
rate of return by weighting the expected future real rates of return net of investment expenses by the target
asset allocation percentage and by adding expected inflation. Following is a table presenting target
allocations and geometric real rates of return for each asset class:

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NASHUA AIRPORT AUTHORITY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the Year Ended June 30, 2021

Weighted Average Long-Term

Asset Class Target Allocation Expected Real Rate of Retum
Domestic equity 30% 3.71-4.15%
Intemational equity 20% 3.96-6,20%

Fixed income 25% 0.42-].66%

Alternative investments 15% 4.81-7.71%

Real estate 10°%> 2.95%
Total 100%

The discount rate used to measure the collective total OPEB liability as of June 30, 2020 was 6.75%. The
projection of cash flows used to determine this single discount rate assumed that employer contributions
will be made under the current statutes RSA 100-A:16 and RSA 100-A:53. Based on those assumptions,
the OPEB Plan’s fiduciary net position was projected to make al] projected future benefit payments of
current plan members. Therefore, the long-term expected rate of return on OPEB Plan investments was
applied to all periods of projected benefit payments to determine the collective total OPEB liability.

Sensitivity of the Authority’s Proportionate Share of the Net OPEB Liability to Changes in the Discount
Rate

The following presents the Authority’s proportionate share of the net OPEB liability calculated using the
discount rate of 6.75 percent, as well as what the Authority’s proportionate share of the net OPEB liability
would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point
higher than the single discount rate:

Current
1% Decrease Discount Rate 1% Increase
(5.75%) (6.75%) (7.75%)
Net OPEB liability $ 7,834 $ 7,214 $ 6,676

NOTE 5—DEFINED BENEFIT PENSION PLAN
Plan Description

The Authority contributes to the New Hampshire Retirement System (NHRS), a public employee retirement
system that administers a single cost-sharing multiple-employer defined benefit pension plan. The plan
provides service, disability, death and vested retirement allowances to plan members and beneficiaries.
Benefit provisions are established and may be amended by the New Hampshire State legislature.

The NHRS issues a publicly available financial report that includes financial statements and required
supplementary information for NHRS. That report may be obtained by writing to New Hampshire
Retirement System, 54 Regional Drive, Concord, New Hampshire 03301 or from their website at
www.nhrs.org.

Substantially all full-time state and local employees, public schoo] teachers, permanent firefighters and
permanent police officers within the State are eligible and required to participate in the Pension Plan.

The Pension Plan is divided into two membership groups. State and local employees and teachers belong
to Group I. Police and firefighters belong to Group II.

148

NASHUA AIRPORT AUTHORITY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the Year Ended June 30, 2021

Benefits Provided
Benefit formulas and eligibility requirements for the pension plan are set by State law (RSA 100-A).

Group | benefits are provided based on creditable service and average final salary for the highest of either
three or five years, depending on when service commenced.

Group II benefits are provided based on age, years of creditable service and a benefit multiplier depending
on vesting status as of January 1, 2012. The maximum retirement allowance for Group II] members vested
by January 1, 2012 (45 years of age with 20 years of service or age 60 regardless of years of creditable
service) is the average final compensation multiplied by 2.5% multiplied by creditable service. For Group
I] members not vested by January 1, 2012 the benefit is calculated the same way but the multiplier used in
the calculation will change depending on age and years of creditable service as follows:

Years of Creditable Service as of Minimum Benefit
January 1, 2012 Minimum Age Service Muttiplier
At least 8 but less than 10 years 46 21 2.4%
At least 6 but less than 8 years 47 22 2.3%
At least 4 but less than 6 years 48 23 2.2%
Less than 4 years 49 24 2.1%
Changes in Benefits

Ch 340 laws of 2019 (HB 616) grants a one-time, 1.5% COLA on the first $50,000 of an annual pension
benefit to members who retired on or before July 1, 2014, or any beneficiaries of such member who is
receiving a survivorship pension benefit. The COLA will take effect on the retired member's first
anniversary date of retirement occurring after July 1, 2020. The adjustment shall become a permanent
addition to the member's base retirement allowance.

Funding Policy

Plan members are required to contribute 7.0% of their covered salary and the Authority is required to
contribute at an actuarially determined rate. The Authority's contribution rate for the covered payroll of
general employees was 10.88% for the year ended June 30, 2621. The Authority contributes 100% of the
employer cost.

Per RSA-100-A:16, plan member contribution rates are established and may be amended by the New
Hampshire State legislature and employer contribution rates are determined by the NHRS Board of Trustees
based on an actuarial valuation. Contributions to the pension plan for the Authority were $30,550 for the
year ended June 30, 2021,

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of
Resources Related to Pensions

At June 30, 2021, the Authority reported a liability of $413,263 for its proportionate share of the net pension
liability. The net pension liability was measured as of June 30, 2020, and the total pension liability used to
calculate the net pension liability was determined by a roll forward of the actuarial valuation from
June 30, 2019. The Authority’s proportion of the net pension liability was based on actual contributions by
the Authority during the relevant fiscal year relative to the actual] contributions of all participating plan

149

NASHUA AIRPORT AUTHORITY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the Year Ended June 30, 2021

members, excluding contributions to separately finance specific liabilities of individual employers or
NHRS. At June 30, 2020, the Authority's proportion was approximately 0.0064 percent, which is an
increase of .0001 percentage points from its proportion measured as of June 30, 2019.

For the year ended June 30, 2021, the Authority recognized pension expense of $54,593. At June 30, 2021,
the Authority reported deferred outflows of resources and deferred inflows of resources related to pension
from the following sources:

Deferred Deferred
Outflows of Inflows of
Resources Resources

Differences between expected and actual
experience $ 11,160 §$ 4,437

Changes of assumptions 40,880

Net difference between projected and actual earings
on pension plan investments 25,561

Changes in proportion and differences between Authority

contributions and proportionate share of contributions 23,982 2,001
Authority contributions subsequent to the
measurement date 30,550

Totals $ 132,133 $ 6,438

The net amount of deferred outflows of resources and deferred inflows of resources related to pension is
reflected as an increase to unrestricted net position in the amount of $125,695. The Authority reported
$30,550 as deferred outflows of resources related to pension resulting from the Authority’s contributions
subsequent to the measurement date that will be recognized as a reduction of the net pension liability in the
measurement period ended June 30, 2021. Other amounts reported as deferred outflows of resources and
deferred inflows of resources related to pension will be recognized in pension expense in the measurement
periods as follows:

June 30,
2021 $ 30,122
2022 21,616
2023 22,745
2024 20,662

S_ 95.145

130

NASHUA AIRPORT AUTHORITY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the Year Ended June 30, 2021

Actuarial Assumptions

The total pension liability was determined by a roll forward of the actuarial valuation as of June 30, 2019,
using the following actuarial assumptions:

Inflation 2.00%
Wage inflation 2.75% (2.25% for Teachers )
Salary increases 5.60%, average, including inflation

Investment rate ofretum 6.75%, net of pension plan investment expense,
including inflation

Mortality rates were based on the Pub-2010 Healthy Retiree Mortality Tables with credibility adjustments
for each group (Police and Fire combined) and projected fully generational mortality improvements using
Scale MP-2019.

The actuarial assumptions used in the June 30, 2019 valuation were based on the results of the most recent
actuarial experience study, which was for the period July 1, 2015 — June 30, 2019.

The following assumptions were changed in the current year:

Reduced the assumed rate of investment return from 7.25% ta 6.75%

Reduced the discount rate from 7.25% to 6.75%

Reduced wage inflation from 3.25% to 2.75% (2.25% for teachers)

Reduced price inflation from 2.5% to 2.0%

Updated demographic assumptions, including merit and longevity salary increases, disability rates,
retirement rates, and mortality tables (specifically the new public pension plan mortality tables)

The long-term expected rate of return on pension plan investments was selected from a best estimate range
determined using the building block approach. Under this method, an expected future real return range is
calculated separately for each asset class. These ranges are combined to produce the long-term expected
rate of return by weighting the expected future real rates of return net of investment expenses by the target
asset allocation percentage and by adding expected inflation. Following is a table presenting target
allocations and geometric real rates of return for each asset class:

Weighted Average Long-Tenn

Asset Class Target Allocation Expected Real Rate of Return
Domestic equity 30% 3.71-4. 15%
Intemational equity 20% 3.96-6.20%

Fixed income 25% 0.42-1.66%

Altemative investments 15% 4.81-7.71%

Real estate 10% 2.95%
Total 100%

Discount Rate

The discount rate used to measure the collective pension liability was 6.75%. The projection of cash flows
used to determine the discount rate assumed that plan member contributions will be made at the current

NASHUA AIRPORT AUTHORITY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the Year Ended June 30, 2021

contribution rate and that employer contributions will be made at rates equal to the difference between
actuarially determined contribution rates and the member rate. For purposes of the projection, member
contributions and employer contributions are projected based on the expected payroll of current members
only. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to
make all projected future benefit payments of current plan members. Therefore, the long-term expected rate
of return on pension plan investments was applied to all periods of projected benefit payments to determine
the collective pension liability.

Sensitivity of the Authority’s Proportionate Share of the Net Pension Liability to Changes in the Discount
Rate

The following presents the Authority's proportionate share of the net pension liability calculated using the
discount rate of 6.75 percent, as well as what the Authority's proportionate share of the net pension liability
would be if it were calculated using a discount rate that is 1-percentage-point lower or |-percentage-point
higher than the single discount rate:

Current
1% Decrease Discount Rate 1% Increase
(5.75%) (6.75%) (7.75%)
Authority's proportionate share
of the net pension liability g 535,007 $ 413,263 $ 313,782

NOTE 6—LONG-TERM OBLIGATIONS
Changes in Long-Term Obligations

The changes in the Authority’s long-term obligations for the year ended June 30, 2021 are as follows:

Amounts
Balance Balance Due Within
Type 7/1/2020 Additions Reductions 6/30/2021 One Year
Compensated absences $ 18,187 § 6,051 § (959) $§$ 23,279 = § -

NOTE 7—OPERATING LEASES

The Authority leases land from the City of Nashua, New Hampshire under a master lease commencing
October 8, 1974. The lease expires December 31, 2115. The rent for the term of the lease is $1.

The Authority subleases a portion of this land pursuant to twenty-year operating leases. The base rent is
adjusted biannually by the consumer price index. The Authority also leases the control tower under terms
of a lease, which expires July 31, 2024. The base rent for the control tower is adjusted annually at a rate of
2.25%. For the year ended June 30, 2021, lease income was $415,153.

152

NASHUA AIRPORT AUTHORITY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

For the Year Ended June 30, 2021
NOTE 8—CONTINGENCIES
Litigation

There may be various claims and suits pending against the Authority, which arise in the normal course of
the Authority’s activities. In the opinion of Authority management, any potential claims against the
Authority, which are not covered by insurance, are immaterial and would not affect the financial position
of the Authority.

Federal Grants

The Authority participates in a number of federally assisted grant programs. These programs are subject to
financial and compliance audits by the grantors or their representatives. The amounts, if any, of expenses
which may be disallowed by the granting agency cannot be determined at this time, although the Authority
expects such amounts, if any, to be immaterial.

NOTE 9—RISK MANAGEMENT

The Authority is exposed to various risks of losses related to torts; theft of, damage to, and destruction of
assets; errors and omissions; injuries to employees; and natural disasters.

Property and Liability Insurance

The Authority obtained commercial insurance coverage to manage risks related to property and liability.
The coverage has not been significantly reduced from the prior year and settled claims have not exceeded
coverage in any of the past three years.

NOTE 10—IMPLEMENTATION OF FUTURE ACCOUNTING STANDARDS

The Government Accounting Standards Board (GASB) has issued Statement No. 87, Zeases, which the
Authority is required to implement in the fiscal year ending June 30, 2022. Management believes that this
pronouncement will have a potentially significant impact on the Authority’s financial statements, wherein
the Authority will be required to recognize a lease receivable and a deferred inflow of resources at the
commencement of the Jease term for all of its subleased land agreements.

153