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Niel Cannon
Finance & Development Consultant
nielcannon 1 6@gmail.com

MEMORANDUM

DATE: September 20, 2018

TO: Tim Cummings
Director of Economic Development

FROM: Niel Cannon, Consultant

RE: New Markets Tax Credit Financing for Performing Arts Center

ee

The purpose of this memorandum is to bring you up-to-date on efforts to obtain
NMTC financing for the proposed Performing Arts Center (“PAC”).

1. Budget and Deal Structure. We have developed a budget and deal
structure that is: (a) consistent with estimated construction costs
referenced in the feasibility study; and (b) will allow us to maximize the
NMTC program for the Performing Arts Center’s benefit. Currently, we are
projecting approximately $5.4 million in New Market Tax Credit equity,
which will translate into approximately $4.0M in private sector investment
(i.e. “cash”) for the project.

2. Securing a Sub Allocation of NMTC’s. We have contacted several
Community Development Entities (“CDEs”) regarding the possibility of
obtaining a NMTC sub-allocation in the amount of approximately
$16,575,000. While there is some interest, especially from Mascoma
Community Development, most CDEs have a sufficient backlog to fill their
current NMTC allocations from the U.S. Treasury. Certainly, some projects
will fall by the wayside. This will improve our chances of obtaining access
to current allocations. However, it is most likely that we will not receive a
commitment from one or more CDEs until after the next round of
allocations is awarded in February 2019.

3. Timing/Scheduling. Provided we implement the “next steps” outlined
below, the most likely scenario is that the City receives a conditional
commitment of a sub-allocation in May/June of 2019. This would allow for
a financial closing and commencement of construction in the fall of 2019.

4. Next Steps. Here are the most critical steps that the City must take in order
to meet the ultimate objective of a construction start in the fall of 2019.

a. Prepare Detailed Proposal. In order to respond to requests of CDEs
and to properly highlight the economic development benefits of the
proposed project we are in the process of developing a
comprehensive project proposal and narrative. This document is
about 80% complete and will be circulated to CDEs in early October.

b. Confirm Budget. The strength of this project is that the non-NMTC
financing (i.e. the bond issue) is already committed. That will
certainly be a positive element as CDEs review our proposal.
However, the weakness is that we have not confirmed the
construction cost; and a CDE will not close on a deal until there is a
Guaranteed Maximum Price (“GMP”) contract executed with a
General Contractor or Construction Manager. Therefore, it is
absolutely imperative that the City procure both
architect/engineering services and a Construction Manager as soon
as possible. \t is my understanding this process is underway, but
needs to move quicker.

c. Overview Briefing — At a Steering Committee meeting in the near
future a presentation providing a high level overview of how the
NMTC program works and briefing on how the deal should be
structured.

d. Select Lessee/Operator —A 3 party operating entity will be
responsible for all aspects of operations, including attracting and
staging performances, ticket sales, paying artists and/or show

producers, staffing, promotions, scheduling, etc. This operator would
likely pay a token rent to the City and be entitled to all profits earned
(if any). It is essential that this operator be experienced and present
a business plan and budget, i.e. a pro forma that is acceptable to City
staff, the Steering Committee, and the CDE. This business plan and
budget may require an annual payment from the endowment fund.
The NMTC investor will be particularly interested in this business plan
and budget as it seeks assurances that the deal is financially viable
and its investment will not be at risk during the 7-year NMTC
compliance period. Finally, early selection of a lessee/operator will
allow that entity to participate in the planning/design process. An
RFP is currently being drafted and should be circulated in early
October.

| think that this covers the current status of the project. Please do not

hesitate to contact me if you have any questions or desire additional
information.

Thank you.

A Strategic Document To Nelp Develop an Operational Plan - & - Provide Guidance to Responders of the RFP

Recommend 8y the Steering Committee an: 6/13/18

NON-PROFIT’S MISSION

To enhance the quality of life for all people in the greater Nashua area by providing the premier venue in
southern New Hampshire for high quality performances and a favored location for family celebrations
and business events. To serve as a beacon for visitors to experience Nashua’s vibrant arts scene. To
Manage the Center as a public/private collaboration with a sustainable business plan that ensures its
continued success.

OPERATING GOALS

The following has been established to guide objectives and operations of the PAC. In addition, the
future Non-profit Board has established specific standards of operation, which constitute a framework
for the management of this facility by a private management firm (“Operator”).

Objectives — The private management firm (“Operator”) must operate the PAC so as to achieve the
following:

e Present high-quality arts and entertainment programming of interest to the permanent
population and other visitors to the area.

e Support local businesses, government and citizens with professional meeting and event
facilities.

e Contribute to the economic vitality of Nashua and the wider region with active facilities that
drive economic and community development.

e Utilize a sustainable business model primarily driven by earned income.

e To provide a broad mix of events appealing to all segments of the community.

e To promote the City of Nashua, thus maximizing the economic impact of the PAC on Nashua,
especially in terms of local businesses and restaurants.

e To effectively control costs.

® To maintain the Facility in first class condition so as to enhance its suitability for public
enjoyment.

e To provide competitive alternatives to the Boston markets

This will be done by:
e A 3" party operator managing the facility through a service contract

Operating Policies — The following are the operating policies that must be implemented by the
private firm managing the Facility:

*The PAC should strive to maximize revenue(s) while making it equally important that programs are
being brought in that are making a positive economic impact on the downtown
merchants/restaurants and business owners.

Accountability - ls paramount to ensure the program/marketing/budget and other major business
elements relating to the operations of the PAC are carefully maintained. Metrics will be outlined and
the 3" party operator will be held to these expectations.

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4 Strategic Document To Help Develog an Goerational Pian - & - Provide Guidance to Responders of the RFP
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Secommend By the Steering Cammitiee on: 9/13/18

Guiding Principle

As a guiding principle and the foundation for making decisions is predicated off of the following
programming assumptions:

=» 50% Music Performances (Concerts)
= 40% Live Performances (No Concerts)
» 10% Special Events/Meetings

Event Mix — The private management firm must submit for approval to the non-profit an annual plan
indicating the general mix of events to be offered during the subject period for the Facility.

= Events may include, but not be limited to the following as described:

0 Concerts of a variety of o Civic events and
genres ceremonies

o Touring Productions/Acts o Celebrity Series

o Variety Shows oO Ted Talks

o Comedy o Sport Events

o Theatre o Conventions

o Dance Performances o Corporate

o Symphony/Orchestra o Religious
performances o Trade Shows/Exhibits

o Film or Movie o Graduations
Festivals/Series or one off o College
screening type events o Readings - Author/Book
Educational programs Signings
Family and children’s o Psychic Readings
programming oO Magic Acts

Opportunity — The idea would be of the 3 party operator to oversee and manage the entire building
(except for a space being set aside for a restaurant) this would include the following:

A 500 — 750 Seat - Flexible Space
There is a large basement where storage would be a primary use, but there is
opportunity for programming.
o An approx. 2,500 square foot space on the 1“ floor (identified as Retail/function space)
=» Of which approx. 800 sq./ft. shall be used as gallery space
e It is the expectation that the 3"? party operator would program the
gallery either directly or through a strategic partnership.

(Please see the enclosed concept site plan)

it is the expectation that the operator would be part of the design processes to help ensure the PAC
is being designed appropriately

‘To Help Devel n Operational Plan - & - Pravide Guidance to Responders af the RFP

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Recommend By the Steering Committee on: 8/13/18

Staffing/Personnel — It is the expectation that the 3% party operator will have the appropriate on-site
staff. The initial request will be for 1 full-time person to act as a Manager for the PAC. The individual
would work for the 3 party management firm

o Based on responses — The PAC Steering Committee may elect to hire full-time Executive
Director to report directly to the Non-profit should proposals come back indicating there
is not an interest.

The operator shall provide:

= all program supervisor(s),
= ushers,

® ticket sellers,

= ticket takers,

"door guards,

™ ~~ announcer(s),

= concession staff

Essentially all “front of the house labor” shall be the responsibility of the Operator acting as the 3”
party manager. There should be no expectation that the Non-profit and/or the City of Nashua will be
involved whatsoever with the operations

The operator shall provide:

= All stage manager(s) & stage hands

= Sound system and lighting system designers & operators,

= Necessary labor for house set-up conversion, including personnel to install and
remove seating

Essentially all the “back of the house labor” shall be the responsibility of the Operator acting as the
manager. There should be no expectation that the Non-profit and/or the City of Nashua will be
involved whatsoever with the operations

Box Office — The private management firm will assure the ongoing operation of an on-site box office
for the convenience of the public.

Marketing — The private management firm will market the facility and the various shows
appropriately. There must be a Web Site offering the public information on upcoming shows
including the ability to purchase tickets on-line. A season ticket holder program. The marketing
should also include promotion of the venue for special events.

Proceeds From Endowment — The Proposal will outline that approximately $160,000 will be
available to help offset the “risk” for the private operator to procure the type of programming that
will add an additional “wow” factor to Nashua. It will be used in a manner to help the private
operator push the potential market for Nashua’s benefit. This fund proceeds will be given out ona
case by case basis at the discretion of the Non-Profit Board (and shall act like a credit enhancement).

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A Strategic Document To Neip Develop an Operational Plan - & - Provide Guidance to Responders of the RFP

Recommend By the Steering Committee on: 3/139/18

© 4f proposals come back stating there is no interest for a full time person to be onsite
being provided for by the private sector operator then the endowment proceeds can be
used to support the operations of the nonprofit in order for the mission to be carried
out.

o The city will not fund operations of the Performing Arts Center

Budget/Cost Containment - The private management firm must submit to the nonprofit an annual
budget, which details both operating and capital improvement plans. In addition, long term five year
Capital plans are required.

Security - Contractor shall provide all security forces (‘Security Services’) as shall be required in
connection with City Events and Activities and all other Events and Activities, including security
personnel in the Facility, fire personnel and any other necessary personnel required to assure that
all City, Municipal, County, State or Federal laws, ordinances, regulations and rules applicable to the
Contractor and the operation of the Facility are observed and obeyed.

Maintenance — It is the expectation that the Operator/Contractor shall provide all custodial and
ordinary maintenance services required to maintain Facility in good order and repair and in a clean
and sanitary condition during the term of the agreement. Contractor shall be responsible for the
ordinary maintenance and repair (but not replacement) in an amount not to exceed one thousand
five hundred ($1,500) dollars, by competent and qualified employees or contractors of Contractor,
of all HVAC, mechanical, electrical, plumbing, seating, elevator, public address and sound systems,
lighting and lighting systems, fire and security systems, telecommunication, cable and internet, roof,
ceilings, doors, windows, floors, walls, housekeeping and custodial services in the public areas and
yards constituting the Facility in connection with City Events and Activities and all other Events and
Activities in the Facility. Contractor will promptly notify City’s representatives of the need for the
repair of: or any apparent defect, malfunction or other inadequacy in, any of the above. Any
ordinary maintenance and repairs, in an amount not to exceed one thousand ($1,500) dollars, shall
be made by Contractor to the extent that operational funds are available to make such repairs,
including any revenues derived from performances held in the Facility. Items which costs are in
excess of five thousand ($5,000) dollars will be reviewed by Contractor and the non-profit/City to
determine if an item is a repair or a capital improvement. Any amount less than five thousand
($5,000) dollars will be determined by the Board of Directors of the Non-Profit. Contractor is not
responsible for any capital improvement. Contractor shall not be responsible for any capital
improvements, extraordinary repairs and any repairs required due to operational neglect which
occurred prior to commencement of this Agreement, unless caused by the Contractor. If Contractor
refuses or neglects to perform any services required under this Agreement then the Non-profit/City
shall have the right to perform such services for the account of Contractor, and Contractor will
reimburse City for the cost thereof; after five (5) days written notice of its intention to perform such
services.

Contractor’s Duties — Contractor/Operator will provide and pay for the necessary utility connections
and services, including water, sewer, electricity, refuse disposal, cable, telecommunication, heat,
ventilation and air conditioning and fire and security monitoring systems and costs, at the Facility for
the Contractor’s operations pursuant to this Agreement.

Revenue

Appropriation

COMMUNITY DEVELOPMENT 162
153 | BUILDING INSPECTION 51 166
155 | CODE ENFORCEMENT 168
166 | PARKING LOTS 52 169
170 | HYDROELECTRIC OPERATIONS 53 171
181 | COMMUNITY DEVELOPMENT 172
182 | PLANNING & ZONING 54 174
186 | TRANSPORTATION 176

EDUCATION 177
191 | SCHOOL DEPARTMENT 55 180
DEBT SERVICE, CONTINGENCY & INTERFUND
TRANSFERS 184
193 | DEBT SERVICE 185
194 | CONTINGENCIES 189
198 | INTERFUND TRANSFERS 190
CAPITAL IMPROVEMENTS 191
CAPITAL IMPROVEMENTS 192
ENTERPRISE FUNDS BUDGET DETAIL - (Green Section) 194
6000 | SOLID WASTE DISPOSAL SYSTEM FUND 195 197
6200 | WASTEWATER USER FUND 203 207
SPECIAL REVENUE FUNDS - (Pink Section) 213
CITY SPECIAL REVENUE FUNDS:
2501 | PUBLIC HEALTH CLIENT FEES FUND 214
2502 | POLICE LAW ENFORCEMENT TRAINING FUND 215
2503 | PARKS & RECREATION PROGRAMS FUND 216
2504 | HOLMAN STADIUM EVENTS FUND 217
2505 | GOVERNMENT & EDUCATION CHANNELS FUND 218
2506 | HUNT BUILDING FACILITY RENTALS FUND 220
2507 | FIRE TRAINING FACILITY RENTAL FUND 222
2508 | SPECIAL ROAD & HIGHWAY FUND 223
2510 | PENNICHUCK CORP ACQUISITION FUND 224

A Strategic Document Te Help Develop an Oserational Plan - & - Provide Guidance to Responders of the RFP

Recommend By the Steering Committee on: 9/13/18

Area Around Building - The operator/contractor shall perform all grounds keeping, custodial and
maintenance services in the grounds constituting, adjoining or adjacent to the Facility, except for
the streets and parking lots. (Essentially, the frontage on Main Street/West Pearl Street and Garden
Street’s pedestrian area)

Snow Removal — the Contractor will perform snow removal in the grounds, stairs, adjoining or
adjacent to the facility, except for the streets and parking lots (Essentially, the frontage on Main
Street/West Pearl Street and Garden Street’s pedestrian area)

No Smoking — The operator will post and enforce the requirements that there is No Smoking.

Capital Maintenance Fee — A Request will be made that a term or condition be included into the
service contract that a negotiated fee charged on top of a ticket shall be included and set aside for
the purpose of capital maintenance. Monies collect will be forwarded to the non-profit quarterly
and held in a separate account.

Food and Beverage — At this time there is no expectation that a certain percentage of food and
beverage receipts come back to the non-profit/city. (This item may be subject to future contract
negotiations after the 1 contract expires)

Social impact — To the maximum extent possible an effort should be made to provide access to well-
equipped performance, rehearsal, and support spaces for users that are working towards the
cultural development of Nashua and the region. To the maximum extent possible to provide
low/moderate income children access to live performances

Grant of Exclusive Right - The city/nonprofit understands and grants/confers upon the
Operator/Contractor the exclusive right to occupy, operate and use, subject to all the terms and
conditions in the agreement.

The Exclusive Right - To control, sell, rent, supervise or give away (or assign to others the right to do
so advertising, refreshments, beverages, candies, food, snacks, souvenirs, T-shirts, programs and all
other merchandise, in connection with the Performing Arts Center.

City Seal and Trademarks - The City will reserve its rights relative to use the City’s name, seal and
other trademarks or service marks in connection with contractor’s audience development and
Facility activities promotion/marketing pursuant to applicable laws and the contract agreement.

Labor Relations — The Operator/Contractor will be responsible for its labor relations with any trade
or union representative among its employees or any union representing such employees.
(Whenever the Contractor has knowledge of any actual or potential labor dispute, immediate notice
to the nonprofit and City must be given).

Property — The Contractor will not, without the advance written approval of the Non-profit/City,
remove or permit the removal of, any equipment, furnishings and all other personal property of the

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A Strategic Document To Helo Develog an Operational Plan - & - Pravide Guidance to Responders of the RFF

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Recommend By the Steering Committee an: 8/13/18

Nonprofit/City. Contractor will not alter, disfigure or cover up any equipment, furnishings, markings
and all other property of the Nonprofit/City.

Changes - Contractor will not install or remove any fixtures, partitions, equipment, furnishings or
other property where to do so will deface, injure or damage floors, wails or ceilings of the Facility,
and will not cause any structural alteration or other physical change in the Facility, without advance
written approval by the Nonprofit and City. A consent to a particular alteration, addition,
improvement or change will not be deemed a consent to alterations, additions, improvement or
changes in the future.

Proper Permits — The Operator shall procure, pay for and maintain all permits and licenses that may
be required or necessary for its operation and use of the Facility.

Length of Term — The Request will be for a proposal asking for a service contract, which shall be (5)
five years, with a mutual option to extend the contract for up to an additional (3) three years at the
conclusion of the original term (Total would be 8 years).

Notice of Termination — The Operator will need to provide a sufficient amount of notice should they
opt not to continue providing services. The expectation is the PAC will not go dark during a
transition.

Insurance — The proper insurance will be necessary and maintained during the life of the agreement

GOVERNANCE

A 3" party management firm acting as an operator will enter into a service contract and lease
agreement with a nonprofit empowered to oversee and guide the mission by executing on the outlined
objectives

o Aendowment to help offset the operations shall be raised

Fiscal Agent

The Fiscal Agent shall be City Arts Nashua until such time a non-profit 501 c3 and a Trust is established.

*This is a draft conceptual strategic plan to help the RFP process and is subject to change