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Wednesday, January 12, 2011

Aldermen take 2 steps for utility

NASHUA – Aldermen approved two measures Tuesday that state regulators required as steps toward the city acquiring the local water company.

With the Board of Aldermen approving two resolutions, two other key steps must happen next before the city acquires Pennichuck Corp. through a stock purchase.

One is for the regulators – the state Public Utilities Commission – to approve the acquisition, a process likely to take months.

The second step is for two-thirds of current Pennichuck Corp. stockholders to approve the deal.

Of the resolutions that the Board of Aldermen approved Tuesday evening, one finds that the acquisition provides a more orderly transfer of the company than would acquiring a portion, the water utility, through eminent domain, and that the acquisition is in the best financial interests of the city and water customers.

The agreement between Nashua and Pennichuck Corp., which allows the city to become the sole owner of company stock, ended the eminent domain case the city had brought against the company.

The second resolution authorizes the mayor and city treasurer to issue bonds of up to $220 million to pay for the purchase.

The board voted to unanimously approve the first resolution with little discussion. The vote approving the second resolution came after more extensive questions and comments concerning the types of bonds and the cost.

The vote on the bonds was 14-1, with Ward 4 Alderman Arthur Craffey voting against it.

“Most of us spent a few hours this weekend trying to think this through” to ensure the board’s decision would be in the city’s best interest, said Ward 7 Alderman Dick Flynn.

Flynn supported acquiring the company but said he still is troubled by the idea of city running a water company.

“It’s not a city department, but it’s as close as you’re going to get to city running a water company,” Flynn said.

Other aldermen noted that the votes marked a milestone and was a huge step in a process begun in 2002, when the company was nearly bought by a Dutch company, spurring fears that Nashua would lose local control of its water supply.

Alderman-at-Large David Deane said that the watershed was abused under Pennichuck ownership.

“It’s really troubling to see what was done to our water system,” Deane said.

“Alderman (Barbara) Pressly was very diplomatic when she called it profiteering. I wouldn’t call it that,” Deane said.

Still, he added that he’s still troubled by the cost of acquiring the company.

“It’s an awful lot of money,” Deane said.

The bonds would be paid from water rates that customers pay, and not from city taxes. However, the majority of Pennichuck water customers are also Nashua taxpayers.

In remarks at the beginning of the meeting, Mayor Donnalee Lozeau emphasized the importance of the board’s votes that evening.

Lozeau cited four reasons to approve the first resolution.

One is that the city would gain control of its water supply and watershed now and long into the future, Lozeau said.

Also, the stock transfer is a better way for the city to acquire the company than through eminent domain, in which the city would only acquire the subsidiary, Pennichuck Water Works, not the entire company.

The city would also acquire other Pennichuck subsidiaries under the agreement.

“Under this deal, the city acquires more assets at a lower cost,” Lozeau said.

The transaction will allow lower rates over time than under the current ownership, she said.

That’s because stocks would be owned by a single owner, the city, rather than “hundreds of shareholders expecting high return on investments,” Lozeau said.

Under city ownership, there will be “no pressure to maximize profits,” she said.

Lastly, the settlement retains the current employees of the company, Lozeau said.

“Customers will contact the same people they always have with questions and concerns,” Lozeau said.

Plus, it’s important to preserve jobs, “and this transaction does just that,” Lozeau said.

As for the bonds, $147 million would go to purchase stocks and transaction fees. Of the remaining $73 million, $5 million would go for rate stabilization and another $5 million for the city to recover money spent in its eminent domain proceedings. The last $63 million would refinance existing debt “if we can do so at lower rates,” Lozeau said.

It will take 30 years to pay off, but during that time, the city will own and control its water supply, Lozeau said.

Patrick Meighan can be reached at 594-6518 or