Finance Committee Page 3
March 2, 2016
rating agencies have affirmed your rating quite recently, even after they have seen this long-term perspective
balance sheet with now this net pension liability of almost $190 million. | think that sort of supports the
assertion that while it’s new to the balance sheet and never having been on this particular page of your
financial statements before, the credit rating agencies communities have always known that liability existed
and very likely have factored it into past ratings as they are incorporated into current ratings as well. That
really in the nutshell is all | wanted to speak about on the long-term perspective financial statements. I'll touch
quickly on the general fund and if the committee has questions on the NPL then between Ed and myself we
can answer them. At this | would like to turn your attention over to page 36 and this takes us from the long-
term perspective financial statement to the accrual based financial basis over to page 36 which is a more
traditional looking balance sheet for local governments in this country. Even with your MD & A and the long-
term perspective financial statements, this really is the first page that most readers are going to turn to, the
general fund balance sheet and they are going to focus on that first column of numbers, the unassigned fund
balance as of June 30, 2015, with an account balance of about $27.7 million. To put that into perspective, that
account balance is virtually unchanged from the prior year. It’s up about $400,000 but as a percentage it’s not
much of fluctuation from the prior year. Another way to look at that number is what is that unassigned fund
balance as a percentage of your operating expenditures and as disclosed in your MD & A. That $27.7 million
represents about 11% of your general fund operating expenditures for the year ending June 30, 2015. It’s
essentially unchanged from the prior year. The only other specific page I’d like to draw your attention to is
page 40 and this is a budget and actual comparative statement. The next page people will very likely turn to
are the budget and actual comparative statement. You'll see in the last column of numbers is the variance
between your actual results of operation on a budgetary basis compared to the final budget. You can see in
the last column of numbers that revenues came in greater than anticipated or greater than the budget by about
$3 million. Moving down the page the total expenditures and other uses, you can see that there were unspent
appropriations or turn backs of appropriations of about $1.7 million. Collectively the excess revenues of $3
million and the unspent appropriations of $1.7 million give you that number of just under $4.8 million from
budgetary results of operations. How does that translate into essentially your unassigned fund balance being
unchanged? One of the things that you have to factor in on this particular page in the budget versus actual
page is that one of the financing sources that the city used for its FY 2015 budget was that it used some of its
fund balance; it used about $5 million of its fund balance as an anticipated financing source. In essence you
anticipated that your outflows of dollars were going to exceed your inflows of dollars by about $5 million. When
you factor out approximately $5 million from this $4.7 million and | recognize that | am using some round
numbers but all of the detail is available in the disclosures to the financial statements but if you look at those
positive budgetary results of about $4.8 million having essentially softening those by the use of your fund
balance of about $5 million you are coming to within essentially a break-even point for the fiscal year. There is
a wealth of other disclosures in this document on the cash position of the community, the receivables, the long-
term debt and the payout of your long-term debt which | know in the past has been cited as a credit strength
because of the rapid payout of your long-term debt. Very often credit rating agencies don’t just look at the
amount of long-term debt but how much is being paid out generally speaking in the next ten years; they look
for a rapid payout of the bonds payable that exists in communities and Nashua has always showed up very
strongly in that credit classification. That is a very quick walk through of our audit and just a couple of the
highpoints in your financial statements. In summary, as | indicated our audit of your financial statements went
very well and we did not need to propose any significant journal entries as a result of the test work that we did.
The long-term perspective financial statements; the issues that you are facing are the same as every other
government in the state and essentially throughout the country with implementing statement 68 and presenting
and effectively recognizing this liability called the net pension liability. On the short-term perspective or the
general fund, in summary | think it’s a very stable balance sheet and | think that’s supported by what the credit
rating agencies have said. It being stable means it’s consistent with the prior year in that 11%, that unassigned
fund balance representing about 11% of expenditures is consistent with communities that are similarly rated to
the City of Nashua. With that | will open it up to any questions that the committee may have.
