Board Of Aldermen

2017

Note 10 — Long-Term Debt

Long-term debt as of December 31, 2018 and 2017 consisted of the following:

{in thousands)

Unsecured note payable to City of Nashua, 5.75%,
due 12/25/2041

Unsecured senior note payabJe due to an insurance company
7.40%, due March 1, 2021

The Company has accumulated New Hampshire net operating losses. The New Hampshire tax
benefit of the cumulative net operating loss is approximately $1.1 million which begins to
expire in 2022, and is included in deferred income taxes in the Consolidated Balance Sheet as
of December 31, 2018.

As of December 31, 2018 and 2017, it is estimated that approximately $476,000 and $476,000,
respectively, of cumulative federal alternative minimum tax credits may be carried forward
indefinitely as a credit against our regular tax liability.

The following is a reconciliation between the statutory federal income tax rate and the effective
income tax rate for 2018 and 2017:

2018 2017
Statutory federal rate 21.0% 34.0%
State tax rate, net of federal benefits 6.2% 6.2%
Permanent differences -75.7% -15.8%
Tax rate change 0.0% -45.8%
Amortization of investment tax credits 0.9% 0.6%
Effective tax rate -47.6% -20.8%

The temporary items that give rise to the net deferred tax liability as of December 31, 2018
and 2017 were as follows:

Note 9 — Income Taxes

For assets and liabilities measured at fair value on a recurring basis, the fair value measure-
ment by levels within the fair value hierarchy used as of December 31, 2018 and 2017 were
as follows:

December 31, 2018
(in thousands) Total Level 1 Level 2 Level 3
Liabilities:
Interest rate swap $ (263) §$ - $ (263) §$ -
December 31, 2017
(in thousands) Total Level I Level 2 Level 3
Liabilities:
Interest rate swap $ (374) $ - $ (374) $ -

Note 7 - Commitments and Contingencies

Operating Leases

The Company’s corporate office space, as well as certain office equipment, is leased under
operating lease agreements. Total rent expense was approximately $367,400 and $309,800 for
the years ended December 31, 2018 and 2017, respectively.

The remaining non-cancelable lease commitments for the corporate office space and leased
equipment as of December 31, 2018 were as follows:

(in thousands) Amount
2019 $ 356
2020 344
2021 345
2022 203
Total $ 1,248

The following table presents a period-end reconciliation of DB Plan assets measured and
recorded at fair value on a recurring basis, using significant unobservable inputs (Level 3):

(in thousands) 2018 2017
Balance, beginning of year $ 3,215 $ 2,264
Plan transfers 1,548 1,314
Contributions 219 222
Benefits paid (645) (651)
Return on plan assets (net of investment expenses) 77 66
Balance, end of year $ 4,414 $ 3,215

The fair value of DB Plan and OPEB Plan assets by levels within the fair value hierarchy used
as of December 31, 2017 was as follows:

A fair value hierarchy which prioritizes the inputs to valuation methods is used to measure fair
value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level | measurements) and the lowest priority to unobservable
inputs (Level 3 measurements).

The fair value of DB Plan and OPEB Plan assets by levels within the fair value hierarchy used
as of December 31, 2018 was as follows: