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Municipal Acquisition Regulatory Asset (“MARA”)

Pursuant to the NHPUC Order, the Company established a new Regulatory asset (MARA) which
represents the amount that the Acquisition Price exceeded the net book assets of the
Company’s regulated subsidiaries (Pennichuck Water, Pennichuck East, and PAC) at
December 31, 2011. The initial amount of the MARA was approximately $89 million for the
regulated companies, offset by a non-regulated amount of approximately $4.8 million. The
MARA is to be amortized over a thirty (30) year period in the same manner as the repayment
of debt service for the City’s acquisition bonds. The balance in the MARA at December 31, 2020
was approximately $71.1 million, reduced by the non-regulated credit of approximately $3.9
million.

Aggregate amortization expense for the years ended December 31, 2020 and 2019 totaled
approximately $2,061,000 and $2,006,000, respectively.

The following table represents the total estimated amortization of MARA:

Estimated

Amortization

(in thousands) Expense
2021 $ 2,119
2022 2,183
2023 2,253
2024 2,328
2025 2,409
2026 and thereafter 55,910
Total S 67,202

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15. Segment Reporting

For the years ended December 31, 2020 and 2019, and as of those dates, the following
financial results were generated by the segments of the Company:

(in thousands) 2020 2019
Operating Revenues:
Pennichuck Water $ 36,688 $ 32,280
Pennichuck East 9,805 8,819
Pittsfield Aqueduct 808 775
Subtotal Regulated Segment 47,301 41,874
Service Corporation 2,778 2,893
Other 12 12
Total Operating Revenues $ 50,091 §$ 44,779
Depreciation and Amortization Expense:
Pennichuck Water $ 7,341 $ 7,211
Pennichuck East 1,212 1,239
Pittsfield Aqueduct 116 116
Subtotal Regulated Segment 8,669 8,566
Service Corporation - -
Other (120) (117)
Total Depreciation and Amortization Expense $ 8549 $ 8,449
Operating Income:
Pennichuck Water $ 8,961 $ 5,303
Pennichuck East 1,148 355
Pittsfield Aqueduct 80 62
Subtotal Regulated Segment 10,189 5,720
Service Corporation 119 165
Other 21 -
Total Operating Income $ 10,329 §$ 5,885
Interest Expense:
Pennichuck Water $ 4903 $ 3,517
Pennichuck East 777 937
Pittsfield Aqueduct 40 42
Subtotal Regulated Segment 5,720 4,496
Service Corporation 2 6
Other 6,174 6,670
Total Interest Expense $ 11,896 §$ 11,172

(continued)

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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

Total 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)
507 314
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)

City of Nashua

Purchasing Department
Administrative Services Division (603) 589-3330
229 Main Street - Nashua, NH 03060 Fax (603) 594-3233

May 25, 2022
Memo #22-280

TO: Mayor Donchess
Finance Committee

SUBJECT: Lockers in the amount not to exceed $189,854 funded from 81200 Buildings &
Improvements/General Fund

Please see attached communications from Karen Smith, Buisiness Office Manager, dated May 18, 2022 for
project specific details related to this purchase. Below please find a summary of the purchase approval
request:

Item: Replacement of 142 Lockers at the Nashua Police Department
Value: not to exceed $189,854
Vendor: Material Handling Sales Inc

Department: 150 Police Department
Source Fund: 81200 Buildings & Improvements/ General Fund

Ordinance: Pursuant to § 5-78 Major purchases (greater than $25,000) A. All supplies and
contractual services, except as otherwise provided herein, when the estimated
cost thereof shall exceed $25,000 shall be purchased by formal, written contract
from the lowest responsible bidder, after due notice inviting bids.

A competitive bidding RFP for this project was issued on 3/21/2022 and the following proposals were
received:

Vendor Location Amount Note
Material Handling Sales Yarmouth, ME | $189,854
Turnstone Corporation Milford, NH $353,328

We recommend this to be awarded to the lowest total cost vendor who met the RFP specified
requirements.

The Nashua Police Department and the Purchasing Department respectfully request your approval of this
contract.

Regards,
Kelly Parkinson

Purchasing Manager

Ce: K Smith

16.

(continued)

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

and unamortized debt insurance costs):

Pennichuck Water $ 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 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.

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;

e 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 capital 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:

e 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;

e reprioritizing the use of DSRR 0.1 funds;

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e 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

o 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 operating
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;

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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
methodology for its approval, 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 global
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
COVID-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 fiuid, 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.

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— | THE CITY OF N ASHUA "The Gate City"

Adniunistrative Services Division

Date: April 21, 2021
To: Mayor Donchess
Board of Aldermen
From: Kim Kleiner, Administrative Services Director

Subject: Coronavirus Disease COVID-19 Policy Amendment

To Mayor Donchess and the Honorable Board of Aldermen:

On March 16, 2020 the Board of Aldermen approved the City’s Temporary Policy on Shutdowns
and Emergency Leave due to Coronavirus Disease COVID-19. The policy paid employees
regular wages if they were unable to work due to closure of City buildings, and to employees
who should quarantine themselves due to potential exposure to or presence of COVID-19, and to
employees who could not make necessary child care arrangements due to effects of the
pandemic.

On July 6th the policy was changed and stated that employees would be required to physically
report to work or work remotely, unless they are quarantined “pursuant to a Federal, State, or
local government order or advice of a health care provider;” or pursuant to the Families First
Coronavirus Response Act (FFCRA), because of a bona fide need to care for an individual
subject to quarantine or care for a child whose school or child care provider is closed or
unavailable for reasons related to COVID-19. The policy provided for up to 12 weeks of leave
for child care at two-thirds the employee’s regular rate of pay.

An additional amendment was approved in November which stated that any employee
quarantined due to a Federal, State, or local government order requiring quarantine following
out-of-state or out-of-region travel will receive pay for up to two weeks (2x regularly scheduled
work week) maximum and should there be subsequent quarantines for that reason, employees
must utilize personal leave time if available and as prescribed by their collective bargaining
agreement or policy.

The Families First Coronavirus Response Act (FFCRA) expired December 31, 2020. Due to
transmission rates and the number COVID19 cases the city held the temporary policy in effect to
reduce barriers or challenges that could result in employees reporting to work sick.

In consideration of the current levels of vaccination, the opening of our public schools and after
discussion with public health officials we are requesting that the Board of Aldermen remove the
Temporary Policy on Shutdowns and Emergency Leave due to Coronavirus Disease COVID-19,
effective May 1.