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  • Staff Photo by Grant Morris

    Nashua resident, John Panny discusses positive reasons for the Pennichuck Waterworks acquisition by the City of Nashua, Thursday evening in the Aldermanic Chamber at Nashua City Hall.
  • Staff Photo by Grant Morris

    Aldermen listen to arguments for and against the acquisition of Pennechuck Waterworks, Thursday evening, during a public comment section of a hearing at city hall.
  • Staff Photo by Grant Morris

    Dan Richardson asks questions during a public discussion about the City of Nashua's planned acquisition of Pennichuck Waterworks, Thursday evening in the Aldermanic Chamber in Nashua City Hall.
  • Staff file photo

    James Donchess, speaks out in opposition of the City of Nashua's planned acquision of Pennechuck Waterworks during a public comment section of a hearing in the Aldermanic Chamber at Nashua City Hall. Donchess, an alderman-at-large, has proposed an ordinance would require the Finance Committee to approve any change to a contract worth $10,000 or more.
Friday, January 7, 2011

Pennichuck deal’s funding a sticking point for some

NASHUA – Acquiring a water company by buying its stock is a good idea, but the devil might be in the details of how the purchase is funded.

That theme ran through comments Thursday during a public hearing on the city’s deal to buy Pennichuck Corp. through bonds of up to $220 million.

The hearing was part of a special meeting of the Board of Aldermen and held in the Aldermanic Chamber of City Hall.

“I am testifying in favor in part of this resolution and I will be testifying against another part of the resolution,” said former Alderman-at-Large Fred Teeboom, who testified as a citizen.

“This is really two resolutions in one,” Teeboom said.

Teeboom said acquiring the company through a stock purchase is preferable to acquiring the company through eminent domain.

As part of the purchase deal, the city dropped its eminent domain case against Pennichuck.

“I’ve always argued that eminent domain is bad,” Teeboom said.

“This is, by far, a better deal,” he said.

However, Teeboom added, “I’m not in favor of the bond.”

Later in the hearing, Teeboom presented aldermen with his own analysis of the finances of the deal.

“Some people are making a killing on this thing,” Teeboom said.

The city is buying the stocks at $29 a share; that’s more than the stock is worth, he said.

Likewise, resident John Panny of 1 Aberdeen Lane said he’s in favor of the project, but he also raised questions about the bond.

The cost of buying all Pennichuck stock is $130 million, Panny said. Also, the city will spend $60 million to acquire all shares of stock plus $2 million in fees, he said.

“We want to fund $220 million. What’s the other $20 million for?” Panny said

“You’ve got a miscellaneous fund of $10 million. That’s an awful lot of miscellaneous,” he said.

Former Alderman Daniel Richardson questioned why the city would pay for the acquisition through general obligation bonds, not revenue bonds.

“Rates for general obligation bonds are lower,” said Alderman-at-Large Brian McCarthy, the board president.

Also, since the city is assuming debt, not all the bonds would be for generating revenue, McCarthy said.

Richardson called that a “disturbing development” since it could allow money to be shifted around “from one pocket to another.”

Former Nashua Mayor James Donchess spoke against acquiring Pennichuck.

The purchase would triple the city’s debt to $340 million, Donchess said.

Also, the city has abandoned its quest to lower the water rates, he said.

The city should have demanded “lower rates now, not 30 years from now, as a consultant has suggested,” Donchess said.

Consultants for the city said water rates would increase under city ownership of the company, but they would be lower than if Pennichuck had continued as a separate, publicly traded company.

Donchess questioned the city’s priorities.

“I, for one, would choose good schools and safe streets over the Pennichuck buyout,” he said.

Before the hearing, the Pennichuck Water Special Committee, a subcommittee of the Board of Aldermen, voted 4-1 to recommend to the board a finding that a stock acquisition of the company would be in the best interests of the city and public.

Aldermen approval of the finding is a requirement that state regulators have put on the sale.

Alderman-at-Large Mark Cookson voted against the finding.

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 of seven to 13 members to run the company.

During the committee meeting before the hearing, Ward 7 Alderman Dick Flynn said he was dubious about the city running a water utility.

“In the present scenario, it’s not the city running a water company. It’s a board of directors running a water company,” Flynn said.

Patrick Meighan can be reached at 594-6518 or