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Special Board of Aldermen 10-27-2020 Page 2

Mayor James W. Donchess, Corporation Counsel Steven A. Bolton were also in attendance.
ROLL CALL

Vice President O’Brien

Present, | am alone and practicing social distancing.

Alderwoman Kelly

I’m here, | have this guy, so I’m not alone but | will be and | can hear everyone.
Alderman Caron

| am here, | am alone and | can hear everyone.

Alderman Clemons

| am here, | am by myself and | can hear everyone.

Alderman Tencza

| am present, | am alone and | can hear everyone.

Alderwoman Lu

I’m here alone and | can hear everyone.

Alderman Jette

I’m here, I’m alone, | can hear the proceedings.

Alderman Schmidt

| am present and | am alone in the room.

Alderman Laws

| am here, | am alone and | can hear everything.

Alderman Cleaver

Present, my daughter is in an adjacent room and | can hear the proceedings fine.

Alderman Harriott-Gathright

| am present, | am alone and | can hear everyone.

Susan Lovering, City Clerk

You have 11 in attendance, Vice President O’Brien.

Special Board of Aldermen 10-27-2020 Page 3
Vice President O’Brien

Thank you to the Clerk. All the Aldermen that did not respond to the roll call have called and expressed that
they are tied up at this time with a proper excuse and therefore their leave will be allowed. Several of the
members will probably jump on the meeting at some point. Also in attendance is the Mayor James
Donchess; Corporate Counsel, Steven Bolton.

At this particular time we are going to have a presentation this evening but | would like to recognize Lisa

Fauteux, Public Works Director, to discuss tonight’s topic of sewer user fees and the presentation. Director
Fauteux, could you give us the introduction please?

PRESENTATION
Sewer User Fees

Lisa Fauteux, Director, Public Works

Absolutely, thank you very much Alderman O’Brien. Good evening Mayor Donchess, Vice President
O’Brien and Members of the Board of Aldermen. For members of the public who don’t know me, my name
is Lisa Fauteux and | serve as Director of Public Works in our City. This evening we will be presenting a
proposed increase in sewer user fees. These increases are being driven by the operating and capital costs
associated with compliance of our permits; permits that, of course, that are related to the Wastewater
Treatment Facility. | would like to thank our consultant, Frank Ayotte, from Hazen & Sawyer, our
Wastewater Team, Dave Boucher, Noelle Osbourn and Bill Keating, our City Engineer Dan Hudson and
Carolyn O’Connor, our Finance and Administration Manager and, of course, our CFO John Griffin for their
efforts in putting these together. There was a lot of time and effort that has gone into this. So now | will
turn this over to our consultant, Frank Ayotte from Hazen & Sawyer to begin the presentation. Frank?

Frank Ayotte, Hazen & Sawyer Ok thank you Lisa, Ladies & Gentlemen. Lisa mentioned my name is Frank
Ayotte, I’m with the Engineering Firm of Hazen & Sawyer. We are a long-time City Consultant on
Wastewater Treatment and Collection Systems for the City. And one of our service offerings is rate study
analysis and financial capability assessments. So with that, I’d like to take off the presentation.

From tonight’s Agenda, I’d like to discuss the historical rates of the City over the last 16 years. The
proposed rate increases from 2021 to 2023 that we analyze, what the drivers are for the required rate
increases. The planned major capital investments that are part of what is driving the increases. Funding
Strategies that is going to minimize the expenditures and rate impacts to the rate payers. And then | am
going to offer a comparison of the Nashua sewer rates versus selected cities in New Hampshire and
Massachusetts. We will talk about the affordability of Nashua’s proposed sewer rates using EPA metrics.
And the future strategies to mitigate future impacts of mandated capital expenditures such as an integrated
planning framework initiative which | am going to discuss what that’s all about and then offer some
conclusions.

So you see this bar graph here? This is over the last 16 years. What you can here is the equivalent of
basically a cost of living increase in the sewer rates over the last 16 years from about 2%. So really
nothing of a major impact in terms of funding major capital improvements. Next I'd like to offer a
comparison of Nashua’s residential sewer rates.

Unidentified Speaker

No that would be easiest. Especially because | have to keep — | think this is going to happen, | have to wait
‘til the end to say anything. It’s going to be way later.

Special Board of Aldermen 10-27-2020 Page 4

Unidentified Speaker
Oh it’s happening right now.
Director Fauteux

Could you, thank you. If everybody could please while not speaking because we have a lot of interference,
thank you.

Vice President O’Brien
Thank you, Director Fauteux.

Mr. Ayotte. And in this particular slide, I’d like to offer a comparison of Nashua’s residential sewer rates
with selected regional rates. And what you can see for 2020 based on the typical water consumption of 20
CCF, which is hundreds of cubic feet. You see Nashua’s quarterly bill as it compares to Manchester,
Concord, Keene, Portsmouth and some selected Lowell, Massachusetts, is really on the bottom in
comparison to all these cities and towns with respect to your current rates. And even the 2018 Nashua
State Average Quarterly bill is significantly higher.

With respect to the proposed sewer increases from ’21 to ’23, at this time a 20% increase in sewer user
fees in 2021 is being recommended, followed by a 15% increase in 2022 and no increase 2023. And as
you can see here, even in 2021 to 2023, that line here in the middle that’s bolded out, $94.97 and then in
2023, 2022 — there’s no increase in 2023, it’s $109.22. If we go back to the previous slide $129.22 is still
relatively cheaper than Keene, Portsmouth and some of the other cities and town. And that doesn’t take
into account what any future increases Manchester might be looking at, it’s ratepayers in those future
years.

So how is this considered from an affordability perspective? Well the EPA does have an affordability metric
and it uses 2% of the household income as the threshold for what is considered a sewer bill affordability.
And what we did was we analyzed the household income of, based in quintiles, of all your residents in that
regard. And notice on the 20" percentile, which is your lowest income residents, even in the years 2022
and 2023 as a percent of household income at 1.4% it is still well below the 2% metric that the EPA
considers affordable.

So what are the primary drivers of the required increase? Well, it is to fund the Annual Debt Service which
is projected to increase from $5.1 million in 2020 to $8.4 million in 2025 which is about a 10% average
annual increase as well as annual operating maintenance expenditures which are increased at a modest
rate of 3%. | got a note here that when we did this analysis, Nashua does an extremely good job of
keeping a lid on annual O&M expenditures. Some would consider 3% almost a cost of living increase in
that sense, so very well done there. And where is your source of revenue coming from? Well 94% of the
Wastewater revenues are really derived from the user fees and only a small amount is collected from the
permit fees. So it’s really the user rates that is the lion’s share of your revenues.

So what are the major capital expenditures that you know these rates will be funding? Well there’s up to
$52 million dollars in upcoming capital investments, required from 2020 to 2025. And a lot of this is age of
equipment as well as EPA mandated type projects. Pump station rehabilitation at $10.8 million, a CMOM
Plan which stands for Capacity, Management, Operation and Maintenance of your collection system. It’s a
collection system plan that allows you to clean all your collection system pipes, the main interceptors,
assess the condition of those pipes and whether or not they need to be lined or even replaced depending
on the overall condition. And then the sewer infrastructure program, $30 million over 6 years is really to fix
those pipes. There’s Wastewater Treatment primary tank upgrades at $3.9 million, (inaudible) removal,
and storage facility at about $1 million. The booster pump stations for wastewater just under $1 million.

Special Board of Aldermen 10-27-2020 Page 5

So what funding strategies is Nashua employing to minimize these ratepayer impacts? Well, you are taking
advantage of all the State SRF loans at low interest rates. | must note that the CMOM Program and pump
stations are financed through SRF and other projects, you know, financed through a mixture of bond
issuances as financing. Smaller projects are funded through cash where practical and maintaining
equipment cash reserves to reduce year-to-year impacts. The operation and maintenance cost, again,
keeping an annual lid of about 3% increase per year is almost the cost of inflation.

At the beginning of the presentation | talked about an integrated planning framework to reduce future cost.
So what is that? Well Nashua is currently developing this type of framework and it sanctioned, kind of, by
the USEPA and it allows the City itself to prioritize its capital projects that best address the most pressing
needs of the community. So you get the most bang for the buck, based on the urgency of the projects that
you see and the order that you see it, and the EPA allows that. So what that does, it allows you to defer
capital projects that confer fewer benefits in the future and really allow you to put the most pressing ones
that have the highest up front. It also allows you to smooth the cost curve, so you’re not doing everything
all at once. What that in turn allows you to do is create future rate increases at a gradual increase versus,
you know, as | presented earlier in the presentation, you had only for 16 years almost a 2% rate of inflation
increase and now you are looking at 20% increase and a 15% increase in 2021/2022. In the future, under
an IPF you may be able to say increase rates at a cost of say 5% on an annual basis and therefore
reducing any spikes that you might see otherwise.

So in conclusion, Plan Rate Increases are covering the cost to finance the capital investments that are
required to comply with regulatory mandates and provide that high level of service to its City and its
ratepayers. Despite the increases, Nashua Sewer Charges in 2023 will still be lower than its peer utility
charges in 2020 as well as the 2018 State average. The rates themselves will still be, based on our
analysis, will still be considered affordable, even in the lowest quintile, household income bracket, based on
the EPA’s 2% affordability metric. And the development of the Integrated Planning Framework, and Hazen
is also helping the City with developing a dynamic rate model that will further reduce the impacts required
for capital investments. So with that, I'll open it up to any questions that | may be able to answer for you
folks?

Vice Chairman O’Brien

Mr. Ayotte, | was going to, and thank you for reminding me | was on mute. Can you take down the
presentation screen, we can bring it back up if somebody has a question that you can refer to. That way |
can see the full room and recognize people for their questions. So at this particular time, | will open it up for
questions by members of the Board. Do | see any hands, any questions? Alderman Lu?

Alderwoman Lu

Thank you, Mr. Chairman. Mr. Ayotte, | heard a lot of data but could you just give me a sense of what’s — a
little bit of a sense of what is driving the cost increase? If you could just break it down into something a
little...

Mr. Ayotte

Sure, it’s mostly the fund — it is existing debt service and the funding of major capital improvements over
the next 5 years, $52 million in effect. And your debt service is basically like loans that you take out to fund
these projects over time, much like we all take out a car loan per se, as well as the increase in the funding
of annual operation and maintenance costs of your treatment plant and pump stations. That is really at a
modest rate of 3% per year. Nashua has done a good job with that. The major capital expenditures, some
of which are EPA mandated and some of which are just based on replacing equipment that’s at the end of
its useful life. Does that answer your question?

Special Board of Aldermen 10-27-2020 Page 6
Alderwoman Lu

Yes, could | just ask a follow up question? Would you say — so have there been deferred capital
improvements that now just need to be done?

Mr. Ayotte

Well | don’t know if deferred is the right term. | think with respect to equipment replacement, that equipment
has a useful life. So for the $52 million that | am talking about here, the particular equipment replacement
involves, you know, pump stations that are at their useful life, the wastewater plant booster stations, also
wastewater treatment primary tank upgrades. So that’s just a few of the major pieces of equipment that
need upgrade. There will be others, but those others will happen in the future because those pieces of
equipment are not at their useful life yet. So it’s an ongoing cycle and what is considered useful life? It can
be anywhere between 20 to 30 years of some of this equipment, is just the equipment in service.
Alderwoman Lu

And is much of the increase due to regulatory changes that were...

Mr. Ayotte

Some of the increase is due to regulatory changes. So I'll give you an example, the CMOM Plan is part of
a future regulatory requirement as part of your NPVES Permit, which is your discharge permit to discharge
your wastewater affluent into the Nashua River. And what that is, is it is a — | mentioned this in the
presentation, it’s a Capacity, Management, Operation, and Maintenance Plan for your correct collection
system. And that requires you to essentially clean and inspect your collection system and part of that plan
analyzes whether or not the pipes are cracked or whether or not you have any blockages or cave ins, or
there is an impending failure. So it will actually fund the sewer infrastructure program improvements, which
is $30 million over the next 6 years to either replace pipes that are completely defective or those with mild
defects, by able to line those pipes without replacing them, which is a cost savings.

Director Fauteux

Frank, can | just correct one thing? The release is to the Merrimack River, not the Nashua River.

Mr. Ayotte

I’m sorry, yeah, thank you.

Director Fauteux

| just wanted to correct that, thank you Lisa.

Alderwoman Lu

Thank you. Mr. Ayotte.

Mr. Ayotte

You’re welcome. Any other questions?

Vice President O’Brien

Any other questions? Yes, Alderman Schmidt.

Special Board of Aldermen 10-27-2020 Page 7
Alderman Schmidt

Thank you, Mr. Chairman. | just would like to ask if we could get copies of this please, your presentation.
Could you include a description of the acronyms that you are using.

Vice President O’Brien

And Director Fauteux is saying yes and | think copies ...

Alderman Schmidt

Thank you.

Vice President O’Brien

Any other questions by members of the Board? Seeing none, Director Fauteux, being your liaison and at
one of the Public Works Meetings, explain how the lining of the pipe is actually saving us a lot of money as
compared to digging that type of pipe up and replacing that particular piece of infrastructure and it’s a good
way to go to the taxpayers. Can you explain that please?

Director Fauteux

| absolutely can but | have somebody on this call that can do that even better, our City Engineer Dan
Hudson. So | will let him but that is a very good point and that is part of our CMOM plan as well, Alderman

O’Brien. So, Dan would you like to...

Dan Hudson, City Engineer

Sure I’d be happy to. It was explained pretty well but we are doing a pretty extensive program right now.
We are video inspecting pipes, some of these sewer pipes are 100 years old or more. Some of them
haven't been looked at at maybe the whole time or at least a long time. As part of the inspection we are
cleaning them as we do that so that gets us back capacity in our system, removing sediment and different
things. But the thing that we are trying to do is catch pipes before they fall into a more costly repair
category. If we can find a pipe and put a liner inside of it and repair it, to address cracking or whatever
issues it has, that’s about 10 to 20 times cheaper than having to dig that pipe up and do a full replacement.
And, of course, digging up the sewer mains, some of them are 20 feet deep, that’s a very disruptive
process and impacts a lot of people and utilities and things. So we find that it’s a great value in what we
are doing with this program, we are doing the CCTV and as much as possible, doing the lining.

Vice President O’Brien

Thank you, Mr. Hudson. And can the Clerk record that we are now joined by Alderman Dowd at the proper
time, please? Thank you. Any other questions by members of the Board? Seeing none, | thank you Mr.
Ayotte for your facts and your charts and your presentation. Director Fauteux, as always, good to see you
and thank you as well for your presentation with your team and everything. Seeing no more questions, |
will turn to Alderman Schmidt for the proper motion to adjourn by roll call. Alderman Schmidt, please?

Special Board of Aldermen 10-27-2020 Page 8
ADJOURNMENT

MOTION BY ALDERMAN SCHMIDT THAT THE DECEMBER 8, 2020, SPECIAL MEETING OF THE
BOARD OF ALDERMEN BE ADJOURNED BY ROLL CALL

A viva voce roll call was taken to adjourn the Board of Aldermen meeting which resulted as follows:
Yea: Alderman O’Brien, Alderwoman Kelly, Alderman Dowd,

Alderman Caron, Alderman Clemons, Alderman Tencza,

Alderwoman Lu, Alderman Jette, Alderman Schmidt, Alderman Laws,

Alderman Cleaver, Alderman Harriott-Gathright

12

Nay: 0
MOTION CARRIED

The meeting was declared adjourned at 6:59 p.m.

Attest: Susan K. Lovering, City Clerk

ld. lL

Agenda

¢ Historical Rates and Proposed Sewer Rate Increases for 2021-2023

¢ Primary Drivers of Required Rate Increases

¢ Planned Major Capital Investments

¢ Funding Strategies to Minimize Capital Expenditures and Rate Impacts

¢ Comparison of Nashua Sewer Rates with Selected Cities in New Hampshire and Massachusetts
¢ Affordability of Nashua’s Proposed Sewer Rates using EPA Metrics

¢ Future Strategies to Mitigate Impacts of Mandated Future Capital Expenditures: Integrated
Planning Framework Initiative

* Conclusions

Hazen 2

Historic Volumetric Charges for Sewer Services

The volumetric charge is the fee charged to a customer based on how much water the customer uses.

Volumetric Charge For Sewer Services 2004-2020

$2.50

$2.00

$1.50

$1.00

$0.50
S-

2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017 2018 2019 2020

The 2004 volumetric charge of $1.66 per hundred cubic feet is equivalent to $2.31 in 2020 dollars. The 2020 charge
was $2.36 equating to a “real” increase of just 2 percent over 16 years.

Hazen 3