Search

ATTACHMENT B
FINANCIAL PLAN
July 1, 2017-June 30, 2018

Personnel] Costs ........0.cccc ccc cec cece ee cecncce cece ceeeeenecccceeueeeceveecvenettsersnenss $46,800.00
Vehicle Usage oo... ccc cccceccec ccc ec ence cceeececeececentececeeaensenseusensersensenentees $ 4,125.00
Supplies & Equipment. ..........0 0c cece cece eee ee ee neeeceeeeeea eases esas eeeneaeenen ees $1,850.00
Subtotal (Direct Costs) ......:ccccecsececeeseeceseeeveeeeerees ee $52,775.00
Pooled Job Costs ...........cccccececeeceecceceececeecueerseeeeseeunes ne deeceseceeeteeteees $9809.25
Indirect CostS oo... ecceeccesecevessecseeuuabous Be acc ecesonscccesenace ot tlbe stcneessers $8,523.16

TOTAL 22. c cece cce cece enc neee ence $67,103.41

The distribution of the budget from this Financial Plan may vary as necessary to
accomplish the purpose of this agreement, but may not exceed $67,103.14

_ Financial Point of Contact

Cooperator: City of Nashua Financial Services (603) 589-3171
Phone
APHIS, WS: Raquel Young (603) 223-6832

Phone

ATTACHMENT B
FINANCIAL PLAN
July 1, 2018-June 30, 2019

Personnel Costs ............ 000 c cece cece cence ce cucceseucceecacceeveuccecensecaesecsengeees $47,970.00
Vehicle Usage oe... cece ce ccce cece ec ecn ences tence eee cecesseee sata en eeseeeeeeeentaeeeenea $ 4,125.00
Supplies & Equipment. ...... 0.0.0... ccceeeceeeeeeeeceeeececeeeeeeereeeeerseeeseueseraeets $1,850.00
Subtotal (Direct Costs) 2.0... ...ccccccceccccececeeteesveeceseecscuceetecesecearencususcecens $53,945.00
Pooled Job Costs 20.0... ccc cece ccc eccceececcceeveneeececeacereacseeccseeecereceteneeusenes $5,933.95
Indirect CostS oe. eee eeeeceececeeeeceeceeeee revs vecurerscnavessecsucecsces SMe asucees $8,712.12
TOTAL Bais... .eccccscscercectlati $68,591.07

The distribution of the budget from this Financial Plan may vary as necessary to
accomplish the purpose of this agreement, but may not exceed $68,591.07

Financial Point of Contact

Cooperator: City of Nashua Financial Services (603) 589-3171
Phone
APHIS, WS: Raquel Young (603) 223-6832

Phone

ATTACHMENT B
FINANCIAL PLAN
July 1, 2019-June 30, 2020

Personnel Costs ........0....cccccc cece ee cee cence een eeeegeeeeeeegeceereneeetesteesetenenes $48,970.00
A) 01 (ed (oll © hoy 2 <n $ 4,125.00
Supplies & Equipment. ........... 00... cece ce ee ee eee ec ec eee nce enetaeeeeeereaeaeceaenenenees $1,850.00
Subtotal (Direct Costs) ......... cc. ccc cece eee cce cee ec eee eeceuaeneeeeeceeaseceeeetaeeseeeses $54,945.00
Pooled Job Costs ........c. ccc cccececeececececcececeneuceenescescenceecegeseeseetenesepeeess $6043.95
Indirect CostS oc. ccccccecc cece eee nne ence sea tense ee eee eeneeeaeenesseeeipeateseteneeaes $8,873.62
TOTAL 1... ccc ccc ceee ee eee ee eeen eee $69,862.57

The distribution of the budget from this Financial Plan may vary as necessary to
accomplish the purpose of this agreement, but may not exceed $69,862.57

Financial Point of Contact

Cooperator: City of Nashua Financial Services (603) 589-3171
Phone
APHIS, WS: Raquel Young (603) 223-6832

Phone

REPORT OF THE FINANCE COMMITTEE
MARCH 15, 2017

A meeting of the Finance Committee was held on Wednesday, March 15, 2017, at 7:00 p.m. in the
Aldermanic Chamber.
Mayor Jim Donchess, Chairman, presided.
Members of the Committee present: Alderman-at-Large Mark S. Cookson, Vice Chair

Alderman-at-Large Lori Wilshire

Alderman-at-Large Michael B. O’Brien

Alderman Benjamin M. Clemons

Alderman June M. Caron

Members not in Attendance: Alderman Ken Siegel

PUBLIC COMMENT — None
COMMUNICATIONS

From: John L. Griffin, CFO/Comptroller
Re: Melanson Heath Presentation — March 15, 2017

MOTION BY ALDERMAN CLEMONS TO ACCEPT AND PLACE ON FILE

ON THE QUESTION

Mayor Donchess

We have Mr. Griffin and Mr. McIntire are here to report on the audit.
Mr. Griffin

Scott McIntire is the principal at Melanson Heath. He is responsible for the audit that was recently conducted
for year ended June 30, 2016.

Mr. McIntire

There’s a wealth of information in here, nearly 200 pages long. Our objective tonight is to hit some high points.
We think the most important communication an audit firm to make to a committee like this of elected officials is
to talk about how our audit went. Our audit field work here in Nashua, I’m very pleased to tell you that it went
very well. When we came in here to audit your books and records, we found them to be in good working order.
All the key accounts: cash, receivables, long term debt, various accrued liabilities that exist on your balance
sheet, we found the books and records to be reconciled on a regular and timely basis. That is really probably
the most important thing that | can communicate with you tonight. That’s one of the three things we are
required to communicate. A couple of the others were if there were any disagreement between the city finance
department and our firm as to how to apply generally accepted accounting principle. Those are the rules in
which you prepare your general ledger and prepare your financial statements. Again, | am pleased to report
that there were no disagreements with the city as to how to apply generally accepted accounting principles.
The third of the three mandatory pieces of communication to deliver tonight deals with accounting estimates.
There’s only a couple of estimates in your financial statements. They are some of the largest numbers in the
financial statements. They are what we refer to as the NPL, or the net pension liability and also the net OPEB

Finance Committee - 3/15/2017 Page 2

obligation. Both of those liabilities are estimated but they are actuality determined. There is this whole set of
standards that your actuary uses in developing those estimated liabilities that are presented in your financial
statements.

Our opinion of your financial statements begins on page 16-18. It is what we refer to as an unmodified opinion.
It may be referred to as a clean audit opinion. In summary, it says in our opinion your financial statements are
totally in accordance with generally accepted accounting principles for local governments here in the United
States. Following the opinion is management discussion and analysis, sometimes referred to as MD&A. It’s
on pages 19-32. It’s an excellent resource to go back to at a later point in time to understand why certain key
account balances may have changed as a result of Fiscal Year 2016. That brings us to page 33, which is
where | am going to start looking at some of the numbers on your balance sheet and some of your operating
statements. Page 33 and the following two pages are what are known as long term perspective financial
statements. The net pension liability that was introduced on the balance sheet last year will be the primary
focus of that discussion. Then we will move to the short term perspective, your general fund which is
essentially a cash basis set of books.

Beginning on page 33, the focus is on that column of numbers, which is titled as “Governmental Activities.” It
includes your general fund, all of your special revenue funds, capital projects and many of your trusts. It is
essentially everything except for your enterprise funds but it is reported on the accrual basis of accounting.
The focus here is very typically on that second number up from the bottom in the first column of number. You
will see that the unrestricted net position, with an account balance as of June 30, 2016, is in parentheses
indicating that the liabilities outweigh the assets by a little bit more than $156 million. A couple of inches up
from the bottom of that first column of numbers in the noncurrent liability section, you have a net OPEB
obligation with an account balance of approximately $25 million and then you have your net pension liability
which is approximately $198 million and then the net pension liability associated with the public works system
which is another $9 million. Collectively those liabilities is approximately $230 million in liabilities. This is not a
general fund liability. Those $230 million in long term liabilities are the reason why that unrestricted net position
number is in parentheses of $156 million. It was a year ago, June 30, 2015, that the net pension liability first
appeared on this balance. That wasn’t necessarily a new liability but it was present on the balance sheet for
the first time. Prior to June 30, 2015, that liability was buried in the back of your footnote disclosures. Only
rating agencies and certain financial institutions would probably be reading into that to understand what that
liability was. Accounting standards changed and now that disclosure of those liabilities are now required to be
presented here on your long term perspective financial statements. That’s why your net position has gone
from a couple of years ago of being a very positive number to being in parentheses of approximately $156
million.

Page 36 is a little bit more of a traditional looking balance sheet for governmental entities. This is the first
place almost all readers of your financial statements are going to turn to. The focus here is in the first column
of numbers, the third number up from the bottom. Unassigned fund balance with an account balance as of
June 30, 2016, over $28 million. That $28 million as of June 30, 2016, is up about $400,000 from June 30,
2015. It didn’t have a significant change. | would view that in an entity of this size as essentially remaining the
same, constant and steady. Another way readers will look at that number is they will look at that $28 million as
a percentage of your FY2016 expenditures. That $28 million unassigned fund balance represents about 11
percent of your general fund expenditures. That’s really where rating agencies expect to see communities that
are rated similar to you. The consistency in that account number shows stability and the 11 percent puts you
in a group with peer rated communities. Rating agencies like to see a substantial, and | would classify that as
greater than 10 percent, of an unassigned fund balance compared to the general fund expenditures as a
whole.

Over on page 40, the budget and actual comparative schedule. It deals with strictly the general fund. The
focus is almost always on the last column of numbers. It tells the reader how are operations compared to what
was expected. And to what was expected, I’m referring to the balanced budget. Looking at that last column of
numbers, about half way down, you see total revenues and other sources with a total of $6,128,000. That
means that the city collected $6.1 million more than it anticipated through the budget process. If you look at
the top number in that column of approximately $3.6 million, you can see that over half of that excess revenue

Finance Committee - 3/15/2017 Page 3

came from motor vehicle collections. You also had some strong building permit revenue as well as some
rental income that contributed to the collection of $6.1 million more in revenue than the budget anticipated.

On the expenditure side of the equation, the bottom half of this page, the number just above the bottom
number of just short of $43,000, represents unspent or unencumbered appropriations that were provided for to
the various departments. That number is significantly down from the prior year. There are some specific
reasons for that. Right at the end of Fiscal Year 2016, the city took approximately $900,000 and put it into a
pension reserve fund and put another $700,000 in to the CERF fund. Without those two actions taken, that
unspent appropriation would have been much more consistent with prior years. Collectively, the $6.1 million in
excess revenues and the $43,000 in unspent appropriations gives you a total budgetary performance
compared to budget of $6,171,000 in favorable operating results. That number needs to be softened a little bit
because that increase that you see doesn’t really translate to the unassigned fund balance essentially
remaining the same as the prior year. It went up by about $400,000. What has to be factored in on page 40 is
one of the financing sources. In the revenue section, about halfway down, you will see other sources. You
see $5.1 million. That’s the use of fund balance where the budget was balance and expected to use $5.1
million that was already in the treasury, already in fund balance from the beginning of the year. Since those
dollars were already present at the start of the fiscal year, you almost have to take this $6 million that is in the
lower right hand corner and soften it by the use or the draw on the fund balance so you come down to a net
number of approximately $1 million in budgetary performance. The revenues and expenditures were a positive
$6.1 million but you then have to subtract the use of the fund balance, the drawing on the reserve because you
expected the outflows of resources to exceed the inflows of resources. That gives approximately a million
dollar net number that gets distributed amongst the various fund balance components that we saw on the
general fund balance sheet.

Following that, there is three or four pages on enterprise funds and some pages on your fiduciary funds,
followed by a wealth of footnote disclosures from cash position to investment disclosures to the debt position.
It shows you the debt amortization schedules in your footnotes, which | know have been mentioned quite
recently as the city has a rapid payout of its debt. There was a letter that we issued that | understand was
provided to the committee. It’s a four-page letter that we refer to in our profession as a governance letter.
Auditing standards require us to communicate certain things. Many of those things that | orally communicated
are documented in this letter. It summarizes what | tried to articulate here for you orally tonight. With that, |
will turn it back to the Mayor and do my best to try to answer any questions that the committee may have.

Alderman Cookson

| have last year’s CAFR as well as this year’s CAFR. I'll refer to page 33. |’m looking at your net pension
liability, State of New Hampshire. That number is $198.5 million. Last year’s number for that same line item
was $184.9 million. The difference between those two numbers is going to be explained by what?

Mr. McIntire

The liability that is present on your June 30, 2016 CAFR, the state system has an actuary valuation and the
unfunded piece gets essentially allocated to all of the contributing members. You're approximately a 5%
member. It’s not quite this simple, but it’s not much more difficult. Approximately 5% of the unfunded liability
gets allocated to the City of Nashua. The liability that is present in your June 30, 2016 CAFR is actually
measured as of June 30, 2015, which means your June 30, 2015 CAFR for that liability was measured as of
June 30, 2014. The increase in that liability comes from a number of factors. The biggest one deals with
investment performance. If the contribution requirements to the members are all based on expected earnings
and certain other assumptions. When those assumptions or interest earnings aren’t achieved that liability is
going to go up. If the system was expected, to use very simple numbers, a million dollars in investment
income and only generated $750,000 that’s going to increase the liability that gets distributed by Nashua and
all of the members. The big piece that drives the increase in that liability are the investment returns and
various assumptions that are involved in the actuary valuation.

Finance Committee - 3/15/2017 Page 4
Alderman Cookson

The investment returns, what are we seeing historically from the New Hampshire Pension System?

Mr. McIntire

A lot of that information is disclosed in the financial statements of the state’s plan. I’m not really prepared to
speak to that tonight; | would be speculating and | don’t really like to do that. As you pointed out there was
approximately a $13.6 million increase in this liability. Typically as a liability goes up, there’s recognition of an
expense and therefore a corresponding decrease in equity or net position. The GASB has made it a little more
difficult than that. This $13.6 million increase in the net pension liability is predominantly driven by investment
performance. The accounting treatment for this is when that liability goes up, the impact to expense gets
amortized into your financial statements over approximately a 4-5 year period. This $13.6 million in liability is
going to impact pension expense on your accrued based financial statements over the next 4-5 years. Prior to
the implementation of the pension standards for June 30, 2015, the accumulation involved a smoothing of the
assets. That’s no longer permissible, but | think in some respects they achieve the same end game by
smoothing out the impact to expense over a 4-5 year period.

Alderman Cookson

The $13.5 million increase in the pension liability, and yet your unrestricted is basically a $2 million difference
from last year. Can you speak to that?

Mr. McIntire

It’s very much a lot of what we just talked about. This $13 million increase in the net pension liability, we talked
about how the impact gets amortized over the next 4-5 years. If you look on page 33 in that first column of
numbers, right before the total assets and deferred outflows, you have those related to pensions at $29.2
million, as that liability went up so did that deferred outflow of resources. If you are looking at just a balance
sheet, the liabilities went up and the assets went up. That deferred outflow is not technically an asset but that’s
getting more technical than | should. That $29 million is going to be amortized over the next 4-5 years. Over
the 4-5 years, absent anything else changing, that $29 million will get amortized into expense and ultimately
reduce that second number up from the bottom.

Alderman Cookson

You magnify that portion of page 33, deferred outflows of resources. Last year’s CAFR only indicates that as a
single line. This year you have broken it out. You have it related to pensions and then another category of
basically $854,000. What does other mean?

Mr. McIntire

It deals with a bond refunding that is also being amortized. It’s close to being called an asset but it’s something
that is technically a little bit different. We did this year break out deferred outflows because we anticipated this
type of a conversation. Often times the liability can go way up, but in your case it really didn’t impact
unrestricted net position. It was laying the ground work for hopefully illustrate this for users of the financial
statements.

Alderman Cookson

| want to go to page 36 and ask a question with regard to the unassigned fund balance. The statement of 11
percent of your general fund expenditures. The $28 million is being divided by which number?

Finance Committee - 3/15/2017 Page 5

Mr. McIntire

It’s actually over on page 38 in the first column of numbers. You see your total expenditures of $253.8 million.
Alderman Cookson

So $253.8 million is the denominator. Your unassigned $28 million is going to be 11 percent of that $253.8
million?

Mr. McIntire

Yes.

Alderman Cookson

That’s the calculation you’re using to determine the percentage?

Mr. McIntire

Correct. One other issue that may come into that calculation is on page 38. You have some other financing
sources and uses. The transfer out of $5.3 million or almost $5.4 million, | didn’t recalculate this but | think that
$5.3 million may be in the denominator number.

Alderman Cookson

So it is going to be $253.9 million less the $5.4 million?

Mr. McIntire

No, plus the $5.4 million.

Alderman Cookson

So it’s actually going to be 258 something million.

Mr. McIntire

Yes.

Alderman Cookson

Your total expenditures is not even a $500,000 difference over last year. Your statement was there’s a
$400,000 difference. It’s staying just about the same. We’re not doing anything differently. We're expending
the same amount year over year over year. We're getting more in revenues, whether it be motor vehicles or
some other line item, we’re bringing in revenues but we’re not truly expending anything more.

Mr. McIntire

That’s a very difficult question to give a yes or no answer to. You've identified the total expenditures on page
38 in the general fund. You’re suggesting, and | assume, they are very close, but one of the things when we
were looking at the budget and the actual page, where the unspent appropriations were just under $43,000,
there’s some year-end transactions that are sometimes encumbered, sometimes they are escrowed,
sometimes they are transferred out. All of those factors, and I’m trying to not make this overly complicated, but

to just give a yes or no answer to your question, | would want to get a little more technical before | would
answer that with a yes or no.

Finance Committee - 3/15/2017 Page 6
Alderman Cookson

Maybe we can follow up and have an additional discussion. | can put my questions in writing and get the
opportunity to get the response well thought out.

Mayor Donchess

Why don’t you send an email to Mr. Griffin.

Alderman Cookson

Happy to. | just have one last question. On page 40, the $900,000 and the $700,000, the first one going to

pension and the second one going to CERF, that was under Mayor Lozeau’ s or was that you, Mayor? Was
that your first budget?

Mayor Donchess

It was post budget. It was during the escrow process. It was the assignment of some of the excess revenue,
the appropriation of funds. Any other questions? | don’t see anymore. Thank you very much. How many
years have you been doing the audit now?

Mr. McIntire

Fourteen, something like that.

Mayor Donchess

We appreciate your help.

Mr. McIntire

Thank you. | actually love the questions and we certainly anticipated them on the net pension liability.
Mayor Donchess

Thank you.

MOTION CARRIED

From: Mayor Jim Donchess
Re: McFarland Johnson Contract Amendment for Park and Ride Project Engineering

MOTION BY ALDERMAN CLEMONS TO ACCEPT AND PLACE ON FILE
ON THE QUESTION
Alderman Cookson

| want to confirm that by us accepting and placing it on file, we are also agreeing to the amount of $6,500 that’s
going to be paid by the grant.

Mayor Donchess

Correct.

Finance Committee - 3/15/2017 Page 7

MOTION CARRIED

From: Mayor Jim Donchess

Re: Hoyle Tanner and Associates Contract Amendment for Nashua Canal Pedestrian Bridge
Engineering Services

MOTION BY ALDERMAN CLEMONS TO ACCEPT AND PLACE ON FILE

ON THE QUESTION

Alderman Cookson

The additional fee associated with the contract amendment for technical services is $715 of which $143 is the

match portion that the city is responsible. Again by us accepting and placing on file, we are agreeing the $143
match?

Mayor Donchess
Correct.
MOTION CARRIED

From: Dan Kooken, Purchasing Manager
Re: NPD Main Electrical Panel and Breaker Upgrade (Value: $48,900)

MOTION BY ALDERMAN CLEMONS TO ACCEPT, PLACE ON FILE AND AWARD
THE CONTRACT TO ELECTRONICS ENVIRONMENTS CORPORATION IN THE AMOUNT OF $48,900.

FUNDS ARE AVAILABLE IN DEPARTMENT 150 POLICE; BUILDING & IMPROVEMENTS TRUST FUND
MOTION CARRIED

From: Dan Kooken, Purchasing Manager
Re: NPD Main Fire Panel Replacement (Value: $26,532)

MOTION BY ALDERMAN CLEMONS TO ACCEPT, PLACE ON FILE AND AWARD

THE CONTRACT TO STELLOS ELECTRIC SUPPLY, INC. IN THE AMOUNT OF $26,532. SOURCE

OF FUNDING IS DEPARTMENT 150, POLICE; BUILDING & IMPROVEMENT TRUST FUND

ON THE QUESTION

Alderman O’Brien

| Know you have a generator so this is going to enhance and upgrade any back power feeding for temporary

power to the call center and the switchboard. This is a definite 911 upgrade that would help out in that
situation?

Captain E.Z. Paulson

Correct. The main panel, some funds were allocated for the generator upgrade. We completed that as part of
that project. There was some testing. We identified some failed components. So far we‘re okay, but it is
getting close.

Alderman Cookson

| do have a question on this one and the next if | could consolidate those.