Special Board of Aldermen 10-27-2020 Page 5
So what funding strategies is Nashua employing to minimize these ratepayer impacts? Well, you are taking
advantage of all the State SRF loans at low interest rates. | must note that the CMOM Program and pump
stations are financed through SRF and other projects, you know, financed through a mixture of bond
issuances as financing. Smaller projects are funded through cash where practical and maintaining
equipment cash reserves to reduce year-to-year impacts. The operation and maintenance cost, again,
keeping an annual lid of about 3% increase per year is almost the cost of inflation.
At the beginning of the presentation | talked about an integrated planning framework to reduce future cost.
So what is that? Well Nashua is currently developing this type of framework and it sanctioned, kind of, by
the USEPA and it allows the City itself to prioritize its capital projects that best address the most pressing
needs of the community. So you get the most bang for the buck, based on the urgency of the projects that
you see and the order that you see it, and the EPA allows that. So what that does, it allows you to defer
capital projects that confer fewer benefits in the future and really allow you to put the most pressing ones
that have the highest up front. It also allows you to smooth the cost curve, so you’re not doing everything
all at once. What that in turn allows you to do is create future rate increases at a gradual increase versus,
you know, as | presented earlier in the presentation, you had only for 16 years almost a 2% rate of inflation
increase and now you are looking at 20% increase and a 15% increase in 2021/2022. In the future, under
an IPF you may be able to say increase rates at a cost of say 5% on an annual basis and therefore
reducing any spikes that you might see otherwise.
So in conclusion, Plan Rate Increases are covering the cost to finance the capital investments that are
required to comply with regulatory mandates and provide that high level of service to its City and its
ratepayers. Despite the increases, Nashua Sewer Charges in 2023 will still be lower than its peer utility
charges in 2020 as well as the 2018 State average. The rates themselves will still be, based on our
analysis, will still be considered affordable, even in the lowest quintile, household income bracket, based on
the EPA’s 2% affordability metric. And the development of the Integrated Planning Framework, and Hazen
is also helping the City with developing a dynamic rate model that will further reduce the impacts required
for capital investments. So with that, I'll open it up to any questions that | may be able to answer for you
folks?
Vice Chairman O’Brien
Mr. Ayotte, | was going to, and thank you for reminding me | was on mute. Can you take down the
presentation screen, we can bring it back up if somebody has a question that you can refer to. That way |
can see the full room and recognize people for their questions. So at this particular time, | will open it up for
questions by members of the Board. Do | see any hands, any questions? Alderman Lu?
Alderwoman Lu
Thank you, Mr. Chairman. Mr. Ayotte, | heard a lot of data but could you just give me a sense of what’s — a
little bit of a sense of what is driving the cost increase? If you could just break it down into something a
little...
Mr. Ayotte
Sure, it’s mostly the fund — it is existing debt service and the funding of major capital improvements over
the next 5 years, $52 million in effect. And your debt service is basically like loans that you take out to fund
these projects over time, much like we all take out a car loan per se, as well as the increase in the funding
of annual operation and maintenance costs of your treatment plant and pump stations. That is really at a
modest rate of 3% per year. Nashua has done a good job with that. The major capital expenditures, some
of which are EPA mandated and some of which are just based on replacing equipment that’s at the end of
its useful life. Does that answer your question?
