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Special Bd. of Aldermen — 05/20/2019 Page 4

Mr. Cummings

Not necessarily. The City would have to raise $4 million dollars in private money or somehow other way come
up with a funding source. But think to your point this New Market Tax Credit is essential to closing the gap in
this project.

Alderman Caron

It’s just acomment. This group that because they are two committees, should that have come to Personnel or
is it because it is a short-term group of people for a section of the PAC project? Just a question.

Mr. Cummings
If | may | am going to ask Deputy Corporation Counsel Celia Leonard to answer that.

Celia Leonard, Deputy Corporation Counsel

Oh sure, this is Celia Leonard, Deputy Corporation Counsel. This isn’t a traditional committee for the City
because it really is naming incorporators for a non-profit under another statute, under the 292, there’s a 1 in
there somewhere, | never know if it’s 291, yeah 2921. So by naming them in the Resolution, we figured that
would allow the board to then refer internally however they saw fit but it does terminate, these organizations
will terminate after their compliance period is done. So it is distinct from other things that the City has done
before.

Alderman Caron

Yes thank you, great clarification. The question has come up as to why, so | appreciate that thank you. Not
that | need more work.

Alderman Lopez

So just to start, nothing dies unless we let it. So if we did run into a problem with the CDF, | can’t even
remember the initials anymore, if we do run into the New Market Tax Credit issue, these two structure are not
necessarily relevant to the City doing an individual or like its own fundraising system or any other strategies,
that correct?

Mr. Cummings
That’s correct.

Alderman Harriott-Gathright

| think I’m still struggling a little bit with the non-profits. So in short terms, what or how would you separate the
two.

Mr. Cummings

This is essentially going to be a non-profit created to own the project; this is going to be a non-profit created to
finance the project or to lend into the project. Very simple.

Alderman Harriott-Gathright

Ok so if | was donating, which one am | donating to, the top one?

Special Bd. of Aldermen — 05/20/2019 Page 5

Mr. Cummings

This one over here.

Alderman Harriott-Gathright

The one over there in the white?

Mr. Cummings

Yep, this one is the non-profit charitable organization which would be the 501(c)3, | mean of course these
groups probably would be happy to take your money but you wouldn’t get your tax deduction | think you’d be
looking for.

Alderman Harriott-Gathright

Ok that’s my question.

Mr. Cummings

So I’m being obviously glib with that answer but the relationships that we’ve developed with City Arts Nashua,
the Fiscal Agent for City Arts Nashua is really speaking to this organization over here.

Alderman Harriott-Gathright

Ok thank you that clarified it for me.

Alderman Dowd

So we already have an established organization that can accept private funds for this project?
Mr. Cummings

Yes.

Alderman Dowd

Good answer.

Alderwoman Melizzi-Golja

And | guess to follow up on that, the legislation that we are having the Public Hearing on, is just the non-profits
in red?

Mr. Cummings
Correct.

Alderwoman Melizzi-Golja

Not the ones in the lower right hand corner, so there’s 4 of them, but only 2 are with the legislation.

Special Bd. of Aldermen — 05/20/2019 Page 6

Mr. Cummings

So if | may Madam President, that’s actually a great segway to just call your attention to the communication
that was in the agenda where Attorney Leonard put together an additional document that kind of outlines; and
this was done at this body’s request at our December 20" meeting. You wanted to get a high level overview
and by no means is this 100% it is subject to change, but it gives you an idea of the various approvals that will
still be forthcoming by the body to effectuate the transaction that we are working toward. The goal that | would
like to work towards is to try to get these all bundled into one document so we can have one conversation later
on this summer to make it as expedient as possible. But nonetheless these are the various differing elements
that are still going to be necessary to move this forward. We are here this evening really to once again show
the CDE’s that we are very serious about this project and that we are doing everything we can to put the best
foot forward.

Alderman Tencza
Can | just ask the two non-profits that we are talking about tonight, the two that are up there in red, will they
have any relevance after this conversation on New Market Credit Tax Credits after the 7 year period or we will

be essentially be able to get rid of those? Then the two that will stand are entities C and D that you have on
the right side of your graph?

Mr. Cummings

That’s correct, you are understanding the graph appropriately.

Alderman Tencza

Ok. If | could just clarify maybe, so these two that we are setting up, are really just kind of pass-through non-
profits for the purpose of accepting the money or in accepting the bond proceeds to therefore transfer into the

project and then have the project up and running. Then the rest will then be managed by the two non-profits
that are left?

Mr. Cummings

Correct.

Testimony in Favor

Fred Teeboom | think | am the only member here tonight and you’ve got a two hour meeting scheduled so
we'll take a little bit of time. My name is Fred Teeboom and | live at 24 Cheyenne Drive in Nashua. | have a
few questions and I'll make some comments and I’m done. |’m glad you put the deal diagram Mr. Cummings
and I’m trying to figure out first of all the need for two non-profits. Now the left on top collects the money and
the bottom operates the venture? Could you explain again what these two red positions mean?

Mr. Cummings
Thank you Madam President, | am actually going to defer to Niel Cannon on this.

Niel Cannon, the city’s Finance and Development Consultant,

Yes you need two organizations as we said earlier, two different governing bodies not directly overlapping
because you can’t, number one, you can’t have organization A lending to itself. And number two, the City
cannot own, under the Statutes, cannot be the beneficiary of the project except indirectly. So you need
Organization A which is not identical to B to make the loan; then you need Organization B which is not identical
to A to receive the proceeds of the loans and execute a Master Lease with the City of Nashua.

Special Bd. of Aldermen — 05/20/2019 Page 7
Mr. Teeboom Something about transferring the property to $2 million dollar building to one of these
corporations?

Mr. Cannon

One of these corporations, the QALICB, Organization B will purchase the building the building for $2 million
dollars.

Mr. Teeboom How can the City of Nashua by the Master, it will no longer own the buildings.

Mr. Cannon

That’s the point. It will be a tenant of the QALICB.

Mr. Teeboom_ Ok so Nashua is going to be a tenant.

Mr. Cannon

Because it cannot own the building and take advantage of this program.

Mr. Teeboom Ok that’s the lower left, | still don’t quite understand the upper left red.

Mr. Cannon

The upper level becomes the lender. The bond proceeds are passed on to that lender, called the Senior
Leverage Lender and it makes the loan into an investment fund and where it is combined with the equity
investment by the New Market Tax Credits buyers and forced down through a sub-CDE into loans to the

QALICB.

Mr. Teeboom The loans? What loans are we talking about? $2 million dollars is donated apparently to this
loan entity?

Mr. Cannon

There are two loans, one is for $4.2 million dollars, which is the New Market Tax Credit amount and one is for
$10.4 million which is the amount of the bond that goes into Organization A.

Mr. Teeboom Where does that come from?
Mr. Cannon

Bond proceeds.

Mr. Teeboom What, the bond proceeds?
Mr. Cannon

The bond proceeds are $15 million dollars. Of that $10.4, a little more than $10.4, let’s call it $10.5 goes into
the Senior Leverage Lender, which is Organization A.

Mr. Teeboom | thought that Cummings that had written a Memo which | have been hounding him for a long
time where he claimed that the construction funds were $11.5 million. The building has already been paid for.
There’s architectural fees, so you take the $15.5 million dollar bond, you subtract the $2 million dollars already

-3-

The Company currently has 114 employees. The employees are committed to supporting the
Company’s mission. Each of our managers has goals and objectives to support the strategies
supporting the mission. Pennichuck is an Equal Opportunity/A ffirmative Action Employer. It is
the policy of the Company to hire, train, promote, and otherwise provide terms and conditions of
employment without regard to race, color, religion, sex, sexual orientation, gender identity,
national origin, ancestry, age, marital status, pregnancy, disability or veteran status. All
employment and promotion decisions are based solely on valid requirements, in accordance with
the principles of equal employment opportunity and affirmative action.

Financial Performance During the Last Year. The Company’s audited consolidated financial

statements for the year ended December 31, 2015 are attached to this report.

($ Millions)
4tn Quarter Year-to-Date
2015 2014 2015 2014
Revenues $8.9 $ 8.2 $ 40.8 $ 38.8
Operating Expenses (8.1) (7.2) (32.0) (29.9)
Operating Income 0.8 1.0 8.8 8.9
Interest Expense (3.1) (2.6) (10.9) (10.1)
Other Income 0.1 - 0.1 -
Pre-Tax Income (Loss) (2.2) (1.6) (2.0) (1.2)
Income Tax Expense (Benefit) 0.3 0.6 0.3 0.6
Net Income (Loss) (2.5) (2.2) (2.3) (1.8)
Dividends Paid to the Shareholder 0.1 0.1 0.3 0.3
Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA) — 2.7 2.6 15.4 15.2

¢ Consolidated revenues for the fourth quarter increased by $0.7 million from
$8.2 million in 2014 to $8.9 million in 2015. The increase is primarily
attributable to higher water usage for Pennichuck Water Works, Inc.

¢ Consolidated year-to-date revenues increased from $38.8 million in 2014 to $40.8
million in 2015. Revenues from the regulated utilities increased primarily due to
increased consumption in 2015 resulting from the dry weather patterns during the
summer months.

¢ Consolidated operating expenses increased by $0.9 million for the fourth quarter
of 2015, over the same quarter in 2014. The increase is related to higher water
treatment and production costs related to higher year-over-year consumption, as
well as increases in property taxes and higher depreciation costs associated with
ongoing capital investments.

e Consolidated operating expenses increased by $2.1 million from 2014 to 2015
mainly due to higher water treatment and production costs related to higher
consumption levels, depreciation adjustments, property taxes, and pension and
labor related costs.

Special Bd. of Aldermen — 05/20/2019 Page 8

spent and you spend another million, $1.7 | think already spent or allocated to the architecture firm, that is not
down to $10.4. How did you come up with the $10.4 million?

Mr. Cannon

The total project cost is over $19 million.

Mr. Teeboom ’ll get to that a minute. I’m talking how did you come up with the $10.4 million?
Mr. Cannon

That is the portion of the bond that we can get really difficult here, but we made a decision, | forced this on Tim,
that the Qualified Equity Investment that we thought we were competitive to get, was $15 million dollars. That’s
the most we thought we could get. So in order to get that, it requires that we put $10.4 million dollars through
the system and the balance of the project cost goes directly, the $4.5 goes directly down the side and into the
QALICB.

Mr. Cummings

If | may. What! believe is being also discussed here is a cash flow issue and what we are doing is we are
actually putting in money for the sale of the property, that $2 million dollars, which the City would get paid back
at closing. But we are taking the opportunity while we can to leverage those funds. So you have items like
that and you have items like soft costs, which are all on top of the building costs which are going to be in
excess of $15 million dollars when it’s all in, the total project. But what we are doing is we are leveraging $10
million dollars for our benefit to yield something in the range of about 28% leverage. That is essentially what
we are trying to do here. That other differential of that $10 million for this conversation let’s just keep it simple
and say it’s $5, we will be pushing it down in through to the QALICB and that is what we are referring to as our
equity investment which is how you yield that 19ish figure that we just mentioned.

Mr. Teeboom Let me understand something, the $4.5 million is your New Market Tax Credit money. Now I’m
really confused. | don’t know where the $10.4 comes from and now he says that there are $2 million dollars
from the building that you are going to deed over to this corporation and then generate a loan. Now if you
deed over the building how do you generate the loan unless this corporation takes a loan on the building. Is
that what you are talking about.

Mr. Cannon

That’s exactly what we are talking about.

Mr. Teeboom Alright so why didn’t you say so? So you expect the City, nothing to smile about, that’s the first
I’ve heard of this one. So as | understand it, you take the building, deed it over to this corporation, whatever.

Mr. Cannon

Sell it to the corporation.

Mr. Teeboom | can’t, the numbers, you know, QBR don’t mean anything to me because you are going to take
the building, deed it over to the corporation and they are going to borrow against it, $2 million. How does that
$2 million become $10.4 million.

Mr. Cannon

They are going to borrow $14 million against it. $14,700,000.00 against it.

Special Bd. of Aldermen — 05/20/2019 Page 9
Mr. Teeboom Against the building?

Mr. Cannon

Against the building as improved. Yes.

Mr. Teeboom $14 million dollars against a $2 million dollar building, who is going to do that loan?

Mr. Cannon

No, no no, the building when improved will be valued at ...

Mr. Teeboom Oh when it’s improved.

Mr. Cannon

When it is improved.

Mr. Teeboom Oh OK you didn’t make that clear, so when it is the Performing Arts Center you figure you’re
going to have $14.7 million dollars against that building.

Mr. Cannon
We are going to have that plus the $4.5.

Mr. Teeboom So the $4.5 is the market... ok so now it becomes clearer to me. Alright and the purpose of
that lower red one again?

Mr. Cannon

It is the owner of the building and borrower.

Mr. Teeboom And then what is the purpose of the top left?

Mr. Cannon

It’s the lender.

Mr. Teeboom The lender, let me understand that one. The top left guy owns the building.
Mr. Cannon

No.

Mr. Teeboom Who owns the building?

Mr. Cannon

Who’s on first? I’m sorry, Entity B which is the bottom of the diagram, the bottom one is the borrower and also
the building owner.

Mr. Teeboom Ok then why do you need the top red guy?

Special Bd. of Aldermen — 05/20/2019 Page 10
Mr. Cannon

Thanks Tim for leaving me out here like this. Because we need an entity to make the loan and we don't, the
regulations discourage the City from being that lender. So the City receives bond proceeds of $15 million
dollars. It is going to make a loan to Entity A who is going to pass that through to the investment fund. The
investment fund is going to combine that loan proceeds with equity investment of $4.9 million dollars which is
39% of $15 million at $.85 cents a dollar, to total that up. And then they are going to push that down to the
Sub-CDE in the amount of $15 million after they take out their fees; the Sub-CDE is going to take out their fees
and lend $14,700,000.00 to the bottom entity. The total project cost is $19.2. So the rest of that, the balance of
that, $19.2 minus $14,700,000 is $4.5 and that’s coming down directly to the QALICB.

Mr. Teeboom From the New Market Money?

Mr. Cannon

No from the City of Nashua.

Mr. Teeboom_ Where is that additional $4.5 million coming from then?

Mr. Cannon

$4.5 plus $10,482,500.00 - $4.5 plus $10.5 equals $15 million which is the amount of the bond.

Mr. Teeboom Haven't we already spent quite a bit of money on that bond? Haven’t we already paid for the
building with that bond? How did we buy the building.

Mr. Cummings
Cash.

President Wilshire
Cash.

Mr. Cannon

In this instance your QALICB is going to, with the proceeds of the loan is going to buy the building from the
City, the City is going to receive $2 million dollars.

Mr. Teeboom They are going to get $2 million dollars back OK. Awfully complicated. What is your target for
the New Market Tax Credit, what do you hope to get for the New Market Tax Credits?

Mr. Cummings

We are looking to net $4.2 million, again | just want to caution everyone that these are project modeled
numbers and they are subject to change but that’s what we are currently looking at.

Mr. Teeboom That’s after the 15% fee?
Mr. Cummings
That’s net so that is after the fees.

Mr. Teeboom So you expect to get about $5. Something million.

Special Bd. of Aldermen — 05/20/2019 Page 11

Mr. Cummings

Correct.

Mr. Teeboom Well one more question, | thought the RSA that this whole scheme is based on, with these two
corporations that you are forming was for low income areas. Is that incorrect.

President Wilshire
That's true.
Mr. Teeboom Well since when is downtown a low income area.

Mr. Cummings

Thank you so | wanted to clarify that the RSA was not created for low income areas, what | believe you are
referring to is the New Market Tax Credit Program specifically which is created for low income areas. And | will
actually defer to Niel Cannon who can speak to this very specific point.

Mr. Cannon

Really negative but something really positive, but negative. The downtown Nashua census track which is the
sub-city areas upon which eligibility for New Markets is based; there are 104 census tracts in the State eligible
for New Markets; this one ranks the 104" worst. It’s the worst census track in the state in terms of percent of
median family income versus the State average. The worst, 104" out of 104.

Mr. Teeboom So this qualifies.

Mr. Cannon

So this qualifies because it is severely distressed, that’s the whole purpose of this project, to attract people to
spend money downtown.

Mr. Teeboom | know that’s the purpose of the project, but | didn’t know it was a low income area.
Mr. Cannon

Oh it is.

Mr. Teeboom So the median income area in downtown, what is the number?

Mr. Cannon

It's something like $23,000.00.

Mr. Teeboom That’s about 40% or 50% for a single person.

Mr. Cannon

That’s 30% of the State Median.

Mr. Teeboom 30%, yeah that’s low income. Ok well that’s the questions | have, now let me make my
comments. You know | have not been against the Performing Arts Center, | prefer to have it at Court Street

Special Bd. of Aldermen — 05/20/2019 Page 12

but that battle was long ago lost to put it at a deferred location. The problem that | have and | am not going to
comment on this whole subject, is there is a Memorandum from Tim Cummings who said the construction
costs and | have a copy of it with me in case somebody says “that didn’t apply”. I’m holding it right here in my
hands. Construction costs for this job is $11.5 million dollars. He added $2 million dollars for the building; $1
million dollars for visual; $1 million dollars for architecture. So basically $11.5 million dollars to build this new
construction.

Well there’s finally the Steering Committee finally posted the minutes, it took a while, and on 6 March there is a
notation in the minutes and | read most of them, not all of them, but | caught that one. Mr. Cummings says that
the project is going to cost us between $18 million and $19 million dollars. That is the first time that has ever
been announced by Mr. Cummings. You may recall that | have mentioned many times here that the Fennessy
Construction Company working with Webb on the original design of the 550 seat theater estimated the project
to be $16.4 million dollars. The $16.4 million dollars included 33% in overhead costs and inflation costs and
contingency costs, and insurance cost and bonding cost. Well guess what? Last week the architects met with
the Steering Committee, Mr. Laws was there, and Ms. Melizzi-Golja was there, | don’t know who else, oh Mr.
Cummings was there, and Mr. Dowd was there.

Alderwoman Melizzi-Golja

And President Wilshire.

Mr. Teeboom And President Wilshire was there and guess what? The architect announced that the cost of
this project for the 750 seats which you need, I'll get to that in a minute, the project cost was announced to be
$18 million dollars, not including soft costs, which are typically D&A, bonds, insurance, profit and contingency.
You can ask Mr. Dowd who runs the School Construction Projects, typically, and I’ve been involved with the
School Construction, | think the contingency and all the rest, the hard costs, are typically 25% to 30%. Let’s
give it20%. But they also mentioned inflation costs because the project hasn’t started and what they call a
new cost called tariff costs because of Trump’s very expensive tariff costs. So if | add to that $18 million
dollars and that includes by the way $1 million dollars not for the theater but a $1 million to fix the roads and
the street and pull the transformer over and the utility poles and all the rest of the stuff outside the theater. If
you add 30% D&A which | think is the more reasonable number for something of this size, you got $23.5
million dollars. If our low ball D&A costs, and inflation costs, tariff costs, contingency costs, bond cost and
insurance cost, then the project is going to cost $21.5 million dollars. Construction, not counting the architects,
not counting the building and not counting audio-visual, so you have a disparity here, let’s take the $21.5
million dollars against the $11.5 million dollars of the original estimate of $10 million dollars deficiency. So now
you are trying to do is make up $10 million dollars with the combination, not the hocus pocus you are talking
about but the $10 million dollars made up with New Market Tax Credits and private contributions. So | do have
a question, how many private contributions have you collected so far, not counting New Market Tax Credits?

Is there a number?

President Wilshire
Director Cummings do you have a number?

Mr. Teeboom Nobody knows a number, my assumption is zip or close to it. | know, I’ve raised money for the
Memorial and it was four years of agony and it didn’t cost anywhere near this kind of money. So how are you
going to make up this deficiency of $10 million dollars, maybe as high if the D&A is 30% or for Fennessy 33% it
is going to be $12 million dollars. Now if somebody on this Board will begin to address what the City of
Nashua is going to do in case you can’t make up the deficiency of $10 or $12 million dollars. Start getting
realistic. I’m not against the Performing Arts Center. | don’t think you can start turning these architects into
magicians because they are trying to create a 750 seat theater, why? So there’s no endowment fund required
because the operator called Spectacle Management says that they will operate this place for 3 years and
guarantees it in writing without any subsidy, after 3 years maybe they do require a subsidy but right now
there’s no subsidy.