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Tuesday, January 4, 2011

How should city pay for Pennichuck?

NASHUA – First, through a series of public meetings, the city sought to answer questions about a deal it struck to acquire a water company.

Now, residents will have a chance to weigh in on the means of paying for the company.

A public hearing will be held 7 p.m. Thursday at the aldermanic chamber of City Hall. The subject is a proposal to borrow up to $220 million to pay all costs of acquiring shares and/or assets of Pennichuck Corp.

In November, city and Pennichuck officials jointly announced an agreement for the company to buy stock in a deal approaching $200 million. The negotiated sale ended the city’s eminent domain proceedings to acquire Pennichuck Water Works and the city’s lengthy, litigious effort to acquire its water supply and protect the watershed.

Under the deal, which must be approved by state regulators and may take up to a year to be finalized, the city of Nashua would become the sole owner of all shares of Pennichuck stock.

The mayor would appoint and the Board of Aldermen would approve a board of directors to run the company.

The figure to be discussed at the public meeting includes $138 million for the cost of the shares and $60 million for the debt that the company now has, said Alderman-at-Large Brian McCarthy, the board president.

Also included is the $5 million the city has spent in its efforts to acquire Pennichuck through eminent domain, McCarthy said, though it’s uncertain whether the city would try to recoup that through the bond.

The city is formally asking the state Public Utilities Commission for the right to recoup the eminent domain costs. If the PUC approves that request, the city would later determine whether bonds or another approach would be the best way to recover the costs.

Included in the $220 million would be rate stabilization fees and bond origination fees, McCarthy said.

Rate stabilization fees cover expenses so that water rates don’t increase in the early years of city ownership, he said.

City officials have said water rates would be lower under city ownership than they would have been if Pennichuck Corp. continued to own and operate the utility. Officials expect that in particular rates would be considerably lower in future years under city ownership than they would be under Pennichuck ownership.

Origination fees pay for the costs of issuing bonds, which could amount to “a couple of million dollars” under the proposed bond, McCarthy said.

The city will bond the money to buy Pennichuck and make payments over 30 years using the money collected in water rates. The deal isn’t going to increase taxes, city officials said.

In another matter related to Pennichuck, Alderman-at-Large Barbara Pressly has formally asked Mayor Donnalee Lozeau to “immediately issue a press release inviting the public to apply for the jobs of CEO and Board of Directors of the newly formed Pennichuck Water Corp.”

Pressly’s request came in a Dec. 29 letter sent to the mayor and copied to the Board of Aldermen and local media.

Under the proposed deal, Lozeau would submit names of the directors and CEO, and her recommendations would have to be approved by a vote of the Board of Aldermen.

Pressly said Monday that she had not heard back from Lozeau on the request. Lozeau was in meetings Monday and couldn’t be reached.

At a recent meeting of the Board of Aldermen, Pressly said she was concerned that the process for appointing Pennichuck directors would be open and done in public view.

Patrick Meighan can be reached at 594-6518 or