Special Bd. of Aldermen — 05/20/2019 Page 2
type of conversation. | say that to you because we are pricing the tax credit at $.85 cents on the dollar; that’s
a good conservative estimate. It is subject to market principles so therefore it may be a little north of that
maybe a little south of that, but that’s a good target for us to be using.
So here it is here again, if we have a net equity of $281,000.00 off of that million dollars, the credit would be
$390,000.00 it would net us $281,000.00 which is approximately a 28% leverage on our debt. So that’s the
idea of the New Market Tax Credit that we are working toward. Some other key elements just to remind you,
compliance period is 7 years for a New Market Tax Credit and we will be working with CDE’s. The CDE’s are
the entities that receive the allocation from the US Treasury, technically the CDFI Fund. They are the entity
that is empowered to go out and place that allocation in various projects and they are critical to making New
Market Tax Credit Projects happen.
Here is the deal structure we presented to you back on December 20", and | wanted to point this out to you
because we ended the conversation right here at “master tenant” and | point that out to you because as this
conversation evolves, we are developing the governing structure for this transaction. But ultimately it had
everything that we had discussed previously; we were what we were referring to as an intermediary lender
here is now what we are referring to as a senior lender and here is the QALICB. But this was also modeled on
a little bit higher numbers, we were looking at netting around $5.2 off of New Market Tax Credit of $7.2. We
have now advanced this model a little bit further and this an updated model for today’s conversation where we
are actually looking to net about $4.2 million. All these numbers are in your handout, but essentially it’s the
same thing that we discussed previously. The City of Nashua has a bond, we would push part of the bond
through to a senior leverage lender; the senior leverage lender would put it into an investment fund with the
CDE. The CDE would create this sub-CDE investment fund structure. The equity investor, which is our private
sector money, would come in on the other side, and we would push it all down into the QALICB. There would
be some money from the City of Nashua that would go down into the QALICB directly. Then the City would be
the Master Tenant, as we previously discussed.
Here is where the deal structure has updated a little bit and | do want to take a moment and just let you know
that this is a working concept over here, we are still working through some various issues. The reason we are
here before this evening is really just to authorize these two structures in red, and that’s what the Resolution
explicitly speaks to. But we will be coming back before you if all goes according to plan to bring, hopefully in
one night, one Resolution, one omnibus type of legislation, this structure right here that we are discussing this
evening.
So you have the Master Tenant and then what ultimately will be over here is another entity that | would suggest
would be substantially similar to wnat we have in place right now for the Hunt Building, the Hunt Library. And
that entity would be charged with overseeing Spectacle Management as well as the building itself. And then
there is another entity which is the 501(c)3 which in theory would have the endowment fund and that would be,
it cannot be the same two entities, to be clear. But it would be a fourth entity to place the funds that we would
be raising for that endowment.
Very quickly, what does R-19-136 do? It authorizes the City to form up to two voluntary non-profit corporations
under the provisions of RSA 162-G pursuant to RSA 162-G15, it ordains these two entities as public
corporations. Why is that important? The City of Nashua cannot directly participate in the New Market Tax
Credit transaction as a QALICB. Furthermore, the industry the prefers municipal corporations to not be a
Senior Leverage Lender.
We are doing this now in an effort to be in good position to act expediently for these Community Development
Entities. We want to be able to move quickly so they can place their New Market Tax Credit allocation; project
readiness is a key to being successful. So just a couple additional pieces of context for this conversation this
evening, the entities we are talking about the QALICB and Senior Leverage Lender; they are specific entities
being created for a sole purpose. And they are only to be executing their one function whether that is to be the
QALICB and actually manage the development of the building itself for the sake of the New Market Tax Credit
transaction or the Senior Leverage Lender which is an entity basically to lend into the project.
