OFFICIAL STATEMENT DATED FEBRUARY 11, 2016 Ratings: See “Ratings” herein. Fitch: AAA Standard & Poor’s Rating Group: AA+ New Issue

In the opinion of Locke Lord LLP, Bond Counsel, based upon an analysis of existing law and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”). Interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Under existing law, interest on the Bonds is exempt from the New Hampshire personal income tax on interest and dividends. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. The Bonds will not be designated as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Code. See “Tax Exemption” herein. CITY OF NASHUA, NEW HAMPSHIRE

$16,920,000 GENERAL OBLIGATION BONDS

DATED DUE Date of Delivery October 1 (as shown below) The Bonds are issuable only in fully registered form without coupons and, when issued, will be registered in the name of Cede & Co., as Bondholder and nominee for The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form, in the denomination of $5,000 or any integral multiple thereof. See “Book- Entry-Transfer System” herein. Principal of the Bonds will be paid on October 1 of the years in which the Bonds mature. Interest on the Bonds will be payable semiannually on April 1 and October 1, commencing October 1, 2016. So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to DTC. Disbursement of such payments to the DTC Participants is the responsibility of DTC. Disbursement of such payments to the Beneficial Owners is the responsibility of the DTC Participants and the Indirect Participants as more fully described herein. An opinion of Bond Counsel will accompany the Bonds to the effect that the Bonds are valid general obligations of the City of Nashua, New Hampshire and that all taxable property in the City is subject to taxation without limitation as to rate or amount to pay the Bonds and the interest thereon; provided that, to the extent the City has established any development districts pursuant to Chapter 162-K of the New Hampshire Revised Statutes Annotated, taxes levied on certain taxable property located within any such district may be restricted and unavailable to pay the principal of and interest on the Bonds. The Bonds are subject to redemption prior to their stated maturity dates as described herein. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ______MATURITIES, AMOUNTS, RATES, YIELDS AND CUSIPS

Due Principal Interest Cusip Due Principal Interest Cusip October 1 Amount Rate Yield 631298 October 1 Amount Rate Yield 631298 2016$ 735,000 5.00 % 0.40 % AA4 2026 $ 860,000 5.00 % 1.65 %AL0 2017 1,010,000 5.00 0.50 AB2 2027 875,000 2.00 2.00 AM8 2018 1,010,000 5.00 0.67 AC0 2028 860,000 2.125 2.20 AN6 2019 1,005,000 5.00 0.77 AD8 2029 860,000 2.25 2.35 AP1 2020 280,000 5.00 0.76 AE6 2030 860,000 2.50 2.50 AQ9 2021 890,000 5.00 0.87 AF3 2031 830,000 2.50 2.60 AR7 2022 885,000 5.00 1.05 AG1 2032 830,000 2.75 2.70 AS5 2023 885,000 5.00 1.25 AH9 2033 830,000 3.00 2.75 AT3 2024 880,000 5.00 1.40 AJ5 2034 830,000 3.00 2.80 AU0 2025 875,000 5.00 1.55 AK2 2035 830,000 3.00 2.85 AV8 ______

The Bonds will be certified as to genuineness by U. S. Bank National Association, Boston, Massachusetts and are offered subject to the final approving opinion of Locke Lord LLP, Boston, Massachusetts, Bond Counsel, as aforesaid, and to certain other conditions referred to herein and in the Notice of Sale. FirstSouthwest, a Division of Hilltop Securities Inc., Boston, Massachusetts has acted as Financial Advisor to the City of Nashua, New Hampshire, with respect to the Bonds. The Bonds in definitive form will be delivered to DTC, or its custodial agent, on or about February 23, 2016.

Roosevelt & Cross, Inc & Associates TABLE OF CONTENTS

Page Page

SUMMARY STATEMENT 3 Tax Collections 31 NOTICE OF SALE 4 Largest Taxpayers 32 OFFICIAL STATEMENT 7 State Equalized Valuations and Estimated INTRODUCTION 7 Full Value Tax Rates 32 THE BONDS: Tax Increment Financing for Development Description of the Bonds 7 Districts 32 Redemption Provisions 7 Budget Process 33 Record Date 8 Budget Control Charter Amendment 33 Book-Entry-Transfer System 8 Budget Trends 34 Authorization of the Bonds and FY2013 Budget 34 Use of Proceeds 9 FY2014 Budget 34 Plan of Refunding 9 FY2015 Budget 35 Sources and Uses of Bond Proceeds 10 FY2016 Budget 36 Tax Exemption 10 Budget Summary for the Fiscal Year Ending Continuing Disclosure 11 June 30, 2012 thru 2016 37 Financial Advisory Services of FirstSouthwest, Accounting Methods 37 a Division of Hilltop Securities Inc. 11 Investment of City Funds 37 Ratings 12 Financial Statements 38 Other Legal Matters 12 Governmental Funds Balance Sheet June 30, 2015 39 THE CITY OF NASHUA, NEW HAMPSHIRE: June 30, 2014 40 General 13 June 30, 2013 41 History 13 Statement of Revenues, Expenditures Form of Government 13 and Changes In Fund Balances Principal Executive Officers 13 June 30, 2015 42 Municipal Services 14 June 30, 2014 43 Acquisition of Pennichuck Water Utilities 14 June 30, 2013 44 Operation of Pennichuck and its Businesses June 30, 2012 45 After the Merger 15 June 30, 2011 46 Economy 15 Location of Industry 15 INDEBTEDNESS: Housing Development 17 Authorization Procedure and Limitations 47 Infrastructure Investment 18 Trend in Tax Anticipation Note Borrowings 47 Economic Development Strategic Plan 19 Debt Ratios 47 Large-Scale Residential Developments 21 Direct Debt Summary 48 Large-Scale Commercial Developments 22 Principal Payments by Purpose 48 Major Industries Located at Industrial Park 24 Debt Service Requirements 49 Industry and Commerce 25 Authorized Unissued Debt and Prospective Largest Employers 26 Financing 49 Retail Sales 26 Capital Equipment Reserve Fund 49 Unemployment 27 Wastewater Enterprise Capital Reserve Fund 50 Unemployment Rates 27 Solid Waste Capital Reserve Fund 50 Building Permits 27 RETIREMENT SYSTEM 50 Education 27 New Hampshire Retirement System 50 Public School Enrollment 27 Board of Public Works Employee Retirement System51 Transportation and Utilities 28 Other Post-Employment Benefits 51 Income Levels and Educational Attainment 29 EMPLOYEE RELATIONS 53 Population Trends 29 LITIGATION 54 APPENDIX A – June 30, 2015 City Audit CITY FINANCES: APPENDIX B – Proposed Form of Legal Opinion of Major Sources of Revenues 30 Bond Counsel Assessed Valuations 30 APPENDIX C – Proposed Form of Continuing Tax Rates and Tax Levies 30 Disclosure Certificate Tax Levies Calculations 31 ______

The information set forth herein has been obtained from the City and from other sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness. Any statements made in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended merely as opinion and not as representations of fact. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale of the Bonds described herein shall, under any circumstances, create any implication that there has been no change in the affairs of the City of Nashua since the date hereof. SUMMARY STATEMENT

The information set forth below is qualified in its entirety by the information and financial statements appearing elsewhere in the Official Statement.

Date and Time of Sale: Thursday, February 11, 2016 at 12:00 Noon, Eastern Time.

Location of Sale: FirstSouthwest, a Division of Hilltop Securities Inc., 54 Canal Street, Boston, Massachusetts.

Issuer: City of Nashua, New Hampshire.

Issue: $16,920,000 General Obligation Bonds, referred to as “the Bonds”.

P. O. S. Dated: February 11, 2016.

Dated Date of the Bonds: As of their date of delivery.

Principal Due: October 1, 2016 through October 1, 2035, as detailed herein.

Interest Due: Semi-Annually on April 1 and October 1, commencing October 1, 2016.

Purpose and Authority: Bond proceeds will be used to (i) refund certain outstanding bonds of the City and (ii) finance a variety of capital improvements of the City as authorized by the Board of Aldermen under provisions of Chapter 33 of the New Hampshire Revised Statutes Annotated.

Redemption: The Bonds are subject to redemption prior to their stated maturity dates as described herein.

Security: The Bonds will be valid general obligations of the City of Nashua, New Hampshire, and the principal of and interest on the Bonds are payable from taxes which may be levied upon all taxable property in the City without limitation as to rate or amount; provided that, to the extent the City has established any development districts pursuant to Chapter 162-K of the New Hampshire Revised Statutes Annotated, taxes levied on certain taxable property located within any such district may be restricted and unavailable to pay the principal of and interest on the Bonds.

Credit Ratings: Fitch Ratings and Standard & Poor’s have assigned ratings of AAA and AA+ to the Bonds.

Bond Insurance: The City has not contracted for the issuance of any policy of municipal bond insurance or any other credit enhancement facility.

Basis of Award: Lowest True Interest Cost (TIC), as of the dated date. BIDS MUST INCLUDE A PREMIUM OF AT LEAST $1,500,000.

Tax Exemption: Refer to "Tax Exemption" herein and Appendix B, “Proposed Form of Legal Opinion".

Continuing Disclosure: Refer to Appendix C.

Bank Qualification: The Bonds WILL NOT be designated by the City as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. Paying Agent/ Escrow Agent: U. S. Bank National Association, Boston, Massachusetts.

Verification Agent: Grant Thornton LLP, Minneapolis, Minnesota.

Legal Opinion: Locke Lord LLP, Boston, Massachusetts.

Delivery and Payment: It is expected that delivery of the Bonds in book-entry only form will be made to The Depository Trust Company, or its custodial agent, on or about February 23, 2016.

City Official: Questions concerning the Official Statement should be addressed to: Mr. David G. Fredette, Treasurer, City of Nashua, New Hampshire, Tel: (603) 589-3185 or Cynthia McNerney, Managing Director, FirstSouthwest, a Division of Hilltop Securities Inc., Boston, Massachusetts, Tel: (617) 619-4408.

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NOTICE OF SALE CITY OF NASHUA, NEW HAMPSHIRE

$16,990,000* GENERAL OBLIGATION BONDS

The City of Nashua, New Hampshire (the “City”), will receive sealed and electronic (as described herein) proposals until 12:00 Noon Eastern Time, Thursday, February 11, 2016 for the purchase of the following described general obligation bonds (the "Bonds") of the City:

$16,990,000* General Obligation Bonds payable October 1 of the years and in the amounts as follows:

Due Principal Due Principal October 1 Amount* October 1 Amount* 2016 $ 780,000 2026 **$ 880,000 2017 1,030,000 2027 ** 875,000 2018 1,015,000 2028 ** 875,000 2019 1,000,000 2029 ** 860,000 2020 280,000 2030 ** 855,000 2021 885,000 2031 ** 825,000 2022 885,000 2032 ** 825,000 2023 885,000 2033 ** 825,000 2024 880,000 2034 ** 825,000 2025 880,000 2035 ** 825,000

______*Preliminary, subject to change. **Callable maturities. May be combined into one, two or three Term Bonds as set forth below. The Bonds will be dated their date of delivery. Principal of the Bonds will be payable on October 1 of the years in which the Bonds mature. The City reserves the right to increase or decrease such principal amounts shown for the Bonds for any year as described below. Interest will be payable semiannually on April 1 and October 1, commencing October 1, 2016. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued in fully registered form by means of a book-entry system with no physical distribution of the Bonds made to the public. One certificate for each maturity of the Bonds will be issued to DTC and immobilized in its custody. Ownership of the Bonds in principal amounts of $5,000 or integral multiples thereof, will be evidenced by the book-entry system, with transfers of ownership affected on the records of DTC and its participants pursuant to rules and procedures established by DTC and its participants. The winning bidder, as a condition to delivery of the Bonds, shall be required to deposit the Bonds with DTC, registered in the name of Cede & Co. Interest and principal on the Bonds will be payable to DTC or its nominee as registered owner of the Bonds. Transfer of principal and interest payments to DTC participants will be the responsibility of DTC, and disbursements of such payments to beneficial owners will be the responsibility of such participants and indirect participants as more fully described herein. The City will not be responsible or liable for maintaining, supervising or reviewing the records maintained by DTC, its participants or persons acting through such participants. The Bonds maturing in the years 2016 through 2025, inclusive, will not be subject to redemption prior to maturity. The Bonds maturing on and after October 1, 2026 shall be subject to redemption prior to maturity, at the option of the City, on or after October 1, 2025, either in whole or in part on any date, and if in part, by lot within a maturity, at the par amount of the Bonds to be redeemed, plus accrued interest to the date set for redemption. Bidders shall state the rate or rates of interest per annum which the Bonds are to bear in a multiple of 1/20th or 1/8th of 1% but shall not state (a) more than one interest rate for any Bonds having a like maturity, (b) any interest rate which exceeds the interest rate stated for any other Bonds by more than 3%, or (c) any interest rate greater than 5%. BIDS MUST INCLUDE A PREMIUM OF AT LEAST $1,500,000. For Bonds maturing on October 1, 2026, and thereafter, bidders may specify that all of the principal amount of such Bonds in any two or more consecutive years may, in lieu of maturing in each such year, be combined to comprise one maturity of Term Bonds scheduled to mature in the latest of the combined years, and shall be subject to mandatory redemptions prior to maturity at par as described above, in each of the years and in the principal amounts specified in the foregoing maturity schedule. Bidders may specify no more than three Term Bonds.

4

As between proposals which comply with this Notice of Sale, the award of the Bonds will be to the bidder who offers to purchase all of the Bonds at the lowest net effective interest rate to the City. Such interest rate shall be determined on a true interest cost (TIC) basis, which shall mean that rate which, as of delivery of the Bonds, discounts semiannually all future payments of principal and interest to the price bid, not including interest accrued to the date of delivery, which accrued interest shall be paid by the successful bidder. In the event there is more than one proposal specifying the lowest such rate, the Bonds will be awarded to the bidder whose proposal is selected by the City Treasurer from among all such proposals.

The City reserves the right to change the aggregate principal amount of the Bonds and the maturity schedule after the determination of the winning bid by increasing or decreasing the aggregate principal amount and increasing or decreasing the principal amount of each maturity by such amounts as may be necessary to a) produce sufficient funds for the purposes for which the Bonds are being issued after taking into account the premium to be received by the City, (b) produce sufficient funds to effect the refunding for which a portion of the Bonds is being issued after taking into account the premium to be received by the City and the actual investment yield at which that portion of the proceeds of the Bonds are to be invested, and (c) to account for any changes in the bonds to be refunded with a portion of the proceeds of the Bonds based on the actual debt service savings to be realized by the City. The dollar amount bid for the Bonds by the winning bidder will be adjusted, if applicable, to reflect changes in the dollar amount of the amortization schedule. Any price that is adjusted will reflect changes in the dollar amount of the underwriter’s discount and original issue premium, if any, but will not change the per bond underwriter’s discount (net of insurance premium, if any) provided in such bid. Nor will it change the interest rate specified for each maturity. Any such adjustments will be communicated to the winning bidder by 4:00 P.M. on the day of the sale.

Bids must be submitted either:

(a) In a sealed envelope marked “Proposal for Bonds” and addressed to Mr. David G. Fredette, Treasurer, City of Nashua, New Hampshire c/o FirstSouthwest, a Division of Hilltop Securities Inc. 54 Canal Street, 3rd Floor, Boston, Massachusetts 02114. Proposals by telegram delivered as specified above will be accepted. Signed blank bid forms may be faxed to (617) 619-4411 prior to submitting bids, and actual bids may be telephoned to FirstSouthwest, a Division of Hilltop Securities Inc., telephone (617) 619- 4400, at least one-half hour prior to the 12:00 Noon sale and after receipt of the faxed bid form by FirstSouthwest, a Division of Hilltop Securities Inc.. Any bidder who submits a winning bid by telephone in accordance with this Notice of Sale shall be required to provide written confirmation of the terms of the bid by faxing or e-mailing a completed, signed bid form to FirstSouthwest, a Division of Hilltop Securities Inc. by not later than 1:00 P.M. on the date of sale.

(b) Electronically via PARITY in accordance with this Notice of Sale. To the extent any instructions or directions set forth in PARITY conflict with this Notice of Sale, the terms of this Notice of Sale shall control. For further information about PARITY, potential bidders may contact the financial advisor to the City or Dalcomp at 1359 Broadway, 2nd Floor, New York, New York 10018, telephone (212) 849-5021. An electronic bid made in accordance with this Notice of Sale shall be deemed an offer to purchase the Bonds in accordance with the terms provided in this Notice of Sale and shall be binding upon the bidder as if made by a signed and sealed written bid delivered to the City.

The right is reserved to reject all bids and to reject any bid not complying with this Notice of Sale and, so far as permitted by law, to waive any irregularity with respect to any proposal.

The award of the Bonds to the winning bidder will not be effective until the bid has been approved by the Treasurer and the Mayor.

The City of Nashua has not contracted for the issuance of any policy of municipal bond insurance for the Bonds. If the Bonds qualify for issuance of any such policy or commitment therefor, any purchase of such insurance or commitment shall be at the sole option and expense of the bidder. Proposals shall not be conditioned upon the issuance of any such policy or commitment. Any failure of the Bonds to be so insured or of any such policy or commitment to be issued shall not in any way relieve the purchaser of its contractual obligations arising from the acceptance of its proposal for the purchase of the Bonds. Should the bidder purchase municipal bond insurance, all expenses associated with such policy or commitment will be borne by the bidder, except for the fees paid to Fitch Ratings and Standard & Poor’s Rating Group for the ratings of the Bonds. Any such fees paid to Fitch Ratings and Standard & Poor’s Rating Group would be borne by the City.

5

On or prior to the date of delivery of the Bonds, the successful bidder shall furnish to the City a certificate acceptable to Bond Counsel generally to the effect that (i) as of February 11, 2016 (the “Sale Date”), the purchaser had offered or reasonably expected to offer all of the Bonds to the general public (excluding bond houses, brokers, or similar persons acting in the capacity of underwriters or wholesalers) in a bona fide public offering at the prices set forth in such certificate, plus accrued interest, if any, (ii) such prices represent fair market prices of the Bonds as of the Sale Date, and (iii) as of the date of such certificate, all of the Bonds have been offered to the general public in a bona fide offering at the prices set forth in such certificate, and at least 10% of each maturity of the Bonds actually has been sold to the general public at such prices. To the extent the certifications described in the preceding sentence are not factually accurate with respect to the reoffering of the Bonds, Bond Counsel should be consulted by the bidder as to alternative certifications that will be suitable to establish the “issue price” of the Bonds for federal tax law purposes. If a municipal bond insurance policy or similar credit enhancement is obtained with respect to the Bonds by the successful bidder, such bidder will also be required to certify as to the net present value savings on the Bonds resulting from payment of insurance premiums or other credit enhancement fees.

It shall be a condition to the obligation of the successful bidder to accept delivery of and pay for the Bonds that it shall be furnished, without cost, with (a) the approving opinion of the firm of Locke Lord LLP, Boston, Massachusetts, Bond Counsel, substantially in the form presented in Appendix B to the Preliminary Official Statement dated February 4, 2016, (b) a certificate in form satisfactory to Bond Counsel dated as of the date of delivery of the Bonds and receipt of payment therefor to the effect that there is no litigation pending or, to the knowledge of the signers thereof, threatened affecting the validity of the Bonds or the power of the City to levy and collect taxes to pay them, (c) a certificate of the City Treasurer to the effect that, to the best of his knowledge and belief, as of the date of sale the Preliminary Official Statement did not, and as of the date of delivery of the Bonds the Final Official Statement does not contain any untrue statement of a material fact and does not omit to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading and (d) a Continuing Disclosure Certificate in the form presented in Appendix C of the Preliminary Official Statement.

The City will not designate the Bonds as "qualified tax-exempt obligations" for purposes of Section 265 (b) (3) of the Internal Revenue Code of 1986, as amended.

Additional information concerning the City of Nashua and the Bonds is contained in the Preliminary Official Statement dated February 4, 2016 to which prospective bidders are directed. The Preliminary Official Statement is provided for informational purposes only and is not a part of this Notice of Sale. Such Preliminary Official Statement is deemed final by the City except for the omission of the reoffering price(s), interest rate(s), delivery date, any other terms of the Bonds depending on such matters, and the identity of the underwriter(s), but is subject to change without notice and to completion or amendment in a Final Official Statement. Copies of the Preliminary Official Statement may be obtained from Mr. David G. Fredette, Treasurer, City of Nashua, 229 Main Street, Nashua, New Hampshire, 03060 (Telephone: 603 589-3185) or from FirstSouthwest, a Division of Hilltop Securities Inc., 54 Canal Street, Boston, Massachusetts 02114 (Telephone: 617-619-4400). Following the award of the Bonds in accordance herewith, 25 copies of the Final Official Statement will be available from FirstSouthwest, a Division of Hilltop Securities Inc. to the successful bidder for use in reoffering the Bonds. Upon request, additional copies will be provided at the expense of the successful bidder.

In order to assist bidders in complying with Rule 15c2-12(b) (5) promulgated by the Securities and Exchange Commission, the City will undertake to provide annual reports and notices of certain significant events. A description of this undertaking is set forth in the Preliminary Official Statement.

It is anticipated that CUSIP identification numbers will be printed on the Bonds, but neither the failure to print such numbers on any Bond nor any error with respect thereto shall constitute cause for a failure or refusal by the purchaser thereof to accept delivery of and pay for the Bonds. The City assumes no responsibility for any CUSIP Service Bureau or other charge that may be imposed for the assignment of such numbers.

The Bonds in definitive form will be delivered to The Depository Trust Company, or its custodial agent, on or about February 23, 2016 against payment in Federal Reserve Funds. ______

CITY OF NASHUA, NEW HAMPSHIRE /s/ David G. Fredette, Treasurer

6

OFFICIAL STATEMENT

CITY OF NASHUA, NEW HAMPSHIRE

$16,920,000 GENERAL OBLIGATION BONDS

INTRODUCTION

This Official Statement is provided for the purpose of presenting certain information relating to the City of Nashua, New Hampshire (the "City") in connection with the sale of $16,920,000 aggregate principal amount of its General Obligation Bonds hereinafter referred to as the "Bonds". The information contained herein has been furnished by the City, except information attributed to another governmental agency or official as the source.

THE BONDS Description of the Bonds

The Bonds will be dated as of their date of delivery and will bear interest payable semiannually on April 1 and October 1 of each year until maturity, commencing October 1, 2016. The Bonds shall mature on October 1 of the years and in the principal amounts as set forth on the first page of this Official Statement.

Bonds are issuable only as fully registered Bonds without coupons, and, when issued will be registered in the name of Cede & Co., as Bondowner and nominee for The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form, in the denomination of $5,000 or any integral multiple thereof, and purchasers will not receive certificates representing their interest in Bonds purchased. So long as Cede & Co. is the Bondowner, as nominee of DTC, references herein to the Bondowners or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners (as defined herein) of the Bonds. (See "Book-Entry Transfer System" herein.)

Principal and semiannual interest on the Bonds will be paid by U. S. Bank National Association, Boston, Massachusetts, as Paying Agent. So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to such Bondowner. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of the DTC Participants and the Indirect Participants, as more fully described herein.

Redemption Provisions

Optional Redemption

The Bonds maturing in the years 2016 through 2025 will not be subject to redemption prior to maturity. The Bonds maturing on and after October 1, 2026 shall be subject to redemption prior to maturity, at the option of the City, on or after October 1, 2025, either in whole or in part on any date, and if in part, by lot within a maturity, at the par amount of the Bonds to be redeemed, plus accrued interest to the date set for redemption.

Notice of Redemption

So long as DTC is the registered owner of the Bonds, notice of any redemption of Bonds prior to their maturities, specifying the Bonds (or the portion thereof) to be redeemed shall be mailed by registered mail to DTC not more than 60 days nor less than 30 days prior to the redemption date. Any failure on the part of DTC to notify the DTC Participants of the redemption or failure on the part of the DTC Participants, Indirect Participants, or of a nominee of a Beneficial Owner (having received notice from DTC Participant or otherwise) to notify the Beneficial Owner shall not affect the validity of the redemption.

7

Record Date

The record date for each payment of interest is the fifteenth day of the month preceding the interest payment date, and if such date is not a business day, the record date shall be the next succeeding business day; provided that, with respect to overdue interest, the Paying Agent may establish a special record date. The special record date may not be more than twenty (20) days before the date set for payment. The Paying Agent will mail notice of a special record date to the Bondowners at least ten (10) days before the special record date.

Book-Entry Transfer System

The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued in fully-registered form registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One-fully registered certificate will be issued for each maturity of each series of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of the Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of securities deposited with DTC must be made by or through Direct Participants, which will receive a credit for such securities on DTC's records. The ownership interest of each actual purchaser of each security deposited with DTC ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in securities deposited with DTC are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in securities deposited with DTC, except in the event that use of the book-entry system for such securities is discontinued.

To facilitate subsequent transfers, all securities deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of securities with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the securities deposited with it, DTC's records reflect only the identity of the Direct Participants to whose accounts such securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by

8 arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to securities deposited with it unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer of such securities or its paying agent as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts such securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal and interest payments on securities deposited with DTC will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the issuer of such securities or its paying agent, on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC (nor its nominee), the issuer of such securities or its paying agent, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the issuer of such securities or its paying agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to securities held by it at any time by giving reasonable notice to the issuer of such securities or its paying agent. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered to Beneficial Owners.

The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, physical certificates will be printed and delivered to Beneficial Owners.

The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof.

Authorization of the Bonds and Use of Proceeds

This Date of Loan Order Purpose Issue Authorization Numbers School Roofs $ 1,363,000 11/14/2014 14-082 11/14/2014, 3/9/2015 & 14-081, 15-012, Sunset Heights School 9,399,900 7/15/2015 15-154 Amherst Street/Charon Avenue 500,100 5/28/2015 15-140 Burke Street Property 2,282,900 9/22/2015 15-173 Fire Pumper Truck 464,600 12/8/2015 15-190 Refunding 2,909,500 Total $ 16,920,000

A portion of Bond proceeds will be used to current refund a portion of the City’s $8,485,000 General Obligation Refunding Bonds dated March 15, 2005, maturing in the years 2016 through 2019, in the aggregate principal amount of $3,120,000 (the “Refunded Bonds”), and to pay costs of issuing the Bonds.

Plan of Refunding

Upon delivery of the Bonds, the City will enter into a Refunding Escrow Agreement (the “Refunding Escrow Agreement”) with U.S. Bank National Association, as Escrow Agent, to provide for the refunding of the Refunded Bonds. Upon receipt of the portion of the proceeds of the Bonds necessary to refund the Refunded Bonds, the Escrow Agent will deposit in the Refunding Escrow Fund established under the Refunding Escrow Agreement an amount which will be held in cash to pay when due, interest on, and upon redemption, the outstanding principal of

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and redemption premium on, the Refunded Bonds. The Refunding Escrow Fund will be pledged for the benefit of the holders of the Refunded Bonds.

Sources and Uses of Bond Proceeds

Proceeds of the Bonds will be applied as follows:

Sources: Par Amount of the Bonds$ 16,920,000.00 Premium 1,870,286.06 Total Sources$ 18,790,286.06 Uses: Deposit to Refunding Escrow Fund$ 3,120,000.00 Deposit to Capital Project Fund 15,380,223.00 Underwriter's Discount 158,959.68 Costs of Issuance 131,103.38 Total Uses$ 18,790,286.06

Tax Exemption

In the opinion of Locke Lord LLP, Bond Counsel to the City (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings, and court decisions, and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”). Bond Counsel is of the further opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other federal tax consequences arising with respect to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. The Bonds will not be designated as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Code.

The Code imposes various requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. Failure to comply with these requirements may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Bonds. The City has covenanted to comply with such requirements to ensure that interest on the Bonds will not be included in federal gross income. The opinion of Bond Counsel assumes compliance with these requirements.

Bond Counsel is also of the opinion that, under existing law, interest on the Bonds is exempt from the New Hampshire personal income tax on interest and dividends. Bond Counsel expresses no opinion on any other New Hampshire tax consequences arising with respect to the Bonds. Bond Counsel has not opined as to the taxability of the Bonds or the income therefrom under the laws of any state other than New Hampshire. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix B hereto.

To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes and is exempt from the New Hampshire personal income tax on interest and dividends. For this purpose, the issue price of a particular maturity of the Bonds is the first price at which a substantial amount of such maturity of the Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Bondholders should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public. 10

Bonds purchased, whether at original issuance or otherwise, for an amount greater than the stated principal amount to be paid at maturity of such Bonds, or, in some cases, at the earlier redemption date of such Bonds (“Premium Bonds”), will be treated as having amortizable bond premium for federal income tax purposes and for purposes of the New Hampshire personal income tax on interest and dividends. No deduction is allowable for the amortizable bond premium in the case of obligations, such as the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, a Bondholder’s basis in a Premium Bond will be reduced by the amount of amortizable bond premium properly allocable to such Bondholder. Holders of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.

Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds.

Prospective Bondholders should be aware that from time to time legislation is or may be proposed which, if enacted into law, could result in interest on the Bonds being subject directly or indirectly to federal income taxation, or otherwise prevent Bondholders from realizing the full benefit provided under current federal tax law of the exclusion of interest on the Bonds from gross income. To date, no such legislation has been enacted into law. However, it is not possible to predict whether any such legislation will be enacted into law. Further, no assurance can be given that any pending or future legislation, including amendments to the Code, if enacted into law, or any proposed legislation, including amendments to the Code, or any future judicial, regulatory or administrative interpretation or development with respect to existing law, will not adversely affect the market value and marketability of, or the tax status of interest on, the Bonds. Prospective Bondholders are urged to consult their own tax advisors with respect to any such legislation, interpretation or development.

Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from the New Hampshire personal income tax on interest and dividends, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a Bondholder’s federal or state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Bondholder or the Bondholder’s other items of income, deduction, or exclusion. Bond Counsel expresses no opinion regarding any such other tax consequences, and Bondholders should consult with their own tax advisors with respect to such consequences.

Continuing Disclosure

In order to assist the successful bidder in complying with Rule 15c2-12(b) (5) promulgated by the Securities and Exchange Commission (the “Rule”), the City will covenant for the benefit of owners of the Bonds to provide certain financial information and operating data relating to the City by not later than 270 days after the end of each fiscal year (the "Annual Report"), and to provide notices of the occurrence of certain enumerated events and to provide notice of failure to provide the Annual Report. The covenants will be contained in a Continuing Disclosure Certificate, the proposed form of which is provided in Appendix C. The Certificate will be executed by the signers of the Bonds, and incorporated by reference in the Bonds.

In the past five years, the City believes it has not failed to comply, in any material respect, with any previous undertaking to provide annual reports or notices of significant events in accordance with the Rule.

Financial Advisory Services of FirstSouthwest, a Division of Hilltop Securities Inc.

FirstSouthwest, a Division of Hilltop Securities Inc., Boston, Massachusetts, serves as financial advisor to the City of Nashua, New Hampshire.

First Southwest Company, LLC (“FirstSouthwest”) merged with its common control affiliate, Hilltop Securities Inc. (“HilltopSecurities”). The merger was completed at the close of business on January 22, 2016, at which time HilltopSecurities, as the surviving entity, automatically assumed all rights and obligations of FirstSouthwest. The firm’s municipal advisory business will continue to operate as FirstSouthwest, a Division of Hilltop Securities Inc.

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Ratings

Fitch Ratings and Standard & Poor’s have assigned ratings of AAA and AA+ to the Bonds. Said ratings reflect only the respective rating agency’s views and are subject to revision or withdrawal, which could affect the market price of the Bonds.

Other Legal Matters

All legal matters incidental to the authorization and issue of the Bonds are subject to approval of the firm of Locke Lord LLP, Boston, Massachusetts as Bond Counsel. A proposed form of the legal opinion of Bond Counsel is included herein as Appendix B.

Other than as to matters expressly set forth herein as the opinion of Bond Counsel, Bond Counsel are not passing upon and do not assume any responsibility for the accuracy or adequacy of the statements made in this Official Statement and make no representation that they have independently verified the same.

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CITY OF NASHUA, NEW HAMPSHIRE

General

The City of Nashua is located in Hillsborough County along the Merrimack River in southern New Hampshire, approximately 34 miles northwest of Boston, Massachusetts and 18 miles south of Manchester, New Hampshire. The City encompasses an area of 32 square miles. Settled early in the seventeenth century by inhabitants of the Boston area, Nashua was first a part of Massachusetts and called Dunstable. Later, as a part of New Hampshire, it was incorporated as a City in 1853. The City is governed by its charter (adopted in 1913 and amended from time to time) and an elected Mayor and fifteen member Board of Aldermen. According to the 2010 census, the City has a population of 86,494.

History

Early settlers of land known today as the City of Nashua, (then known as Dunstable) in the 1600s originated from England and Massachusetts as pioneers and homesteaders to settle on grants of land. The economy of the community at that time could be characterized as farming and mercantile/commercial trade. The 1700s continued the settlement period as the sawmills and gristmills were established to harness the many streams and brooks throughout the town. The late 1700s was a significant period for the region due to construction of the 27.75 mile long Middlesex Canal System linking the Merrimack River to Charlestown-Boston. Direct water access to Boston markets immensely increased trade opportunities.

During the 1800s two giant mills were established by harnessing waterpower via the canal systems. Metal manufacturing, iron industries and other heavy industries were established often as ancillary and support businesses to the large mills. Railroads built throughout the region in the mid-1800s dramatically reduced the general expense of travel and transportation of goods. The year 1853 marked the official establishment of the City of Nashua.

Form of Government

The City is governed by its charter which was adopted in 1913 and which has been amended from time to time. The Mayor and the fifteen member Board of Aldermen are the chief executive and legislative officers of the City, and are generally responsible for the administration of the fiscal, prudential, municipal, and other affairs of the City.

The City also is responsible for providing education, under requirements established by the State of New Hampshire. An elected 9 member School Board manages academic and most business affairs with fiscal autonomy on certain matters such as personnel salaries. However, the School Board does not represent an autonomous governmental unit, independent from the City of Nashua. Financial management and reporting, as well as the issuance of debt obligations, are the City's responsibility.

Principal Executive Officers

Name Office Length of Term Term Expires

James W. Donchess Mayor Four-Year Elected Term December, 2019 John Griffin Chief Financial Officer Appointed by Mayor Indefinite David G. Fredette Treasurer/Tax Collector Appointed by the Mayor/ Confirmed by the Board of Aldermen Indefinite Sarah Marchant Director of Community Appointed by the Mayor/ Development Confirmed by the Board of Aldermen Indefinite Patricia D. Piecuch City Clerk Appointed by the Mayor/ Confirmed by the Board of Aldermen Indefinite Stephen Bennett Corporation Counsel Appointed by the Mayor/ Confirmed by the Board of Aldermen Indefinite

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Municipal Services

The City provides general governmental services for the territory within its boundaries, including police and fire protection, refuse disposal, sewer services, highways, and street and sidewalk maintenance. Public education is provided for grades kindergarten through twelve, providing a comprehensive program of preparatory courses, general education and business courses. In addition, the City maintains 965 acres of park sites and includes the Holman Stadium, a 4,500 seat outdoor stadium. The stadium is used for sporting events including minor league professional baseball, football and City events. In addition, there are 49 athletic fields for baseball, football and soccer, 7 ice skating rinks, 3 outdoor swimming pool complexes, and 22 tennis courts. The Nashua Airport Authority provides air service out of the Boire Airport in Nashua.

Water service in the City is provided by the Pennichuck Corporation, a private corporation of which the City is the sole shareholder (“Pennichuck”). See “Acquisition of Pennichuck Water Utilities” below. Water is obtained from the Pennichuck Brook Watershed and one gravel-packed well, the watershed having a drainage area of approximately 27 square miles. Pumping capacity is 32 million gallons per day with a maximum treatment capacity of 35 million gallons per day. Pennichuck bills customers and collects payments directly. Water rates are based on a flat monthly fee which is dependent on the size of the customer meter plus a consumption charge. The fee for an average single family home consuming 7.9 ccf per month is $46.73 per month.

Wastewater services for the City of Nashua, the Town of Hudson and a portion of the Towns of Merrimack, New Hampshire and Tyngsboro, Massachusetts, are provided by the City of Nashua Wastewater System, which is a municipal enterprise. The wastewater collection system is comprised of 330 miles of lateral, trunk, and interceptor sewers. The Nashua Wastewater Treatment Facility (“NWTF”) employs both primary and secondary treatment processes. The design flow of the NWTF is 16.0 million gallons per day (MGD). The average daily flow is 10.9 MGD. In fiscal 2015 the NWTF treated 3.99 billion gallons of wastewater. The total budget for the NWTF in fiscal 2016 is $20 million which includes both operational expenditures of $13.0 million (consisting of operations, collection system maintenance, billing services, debt service, storm water control, and the equipment replacement fund) and $7.0 million of combined sewer overflow (CSO) abatement and other capital projects. Revenues for the system for fiscal 2016 are estimated at $20 million which includes $6.4 million of accumulated earnings. Unrestricted net assets of the wastewater system were $14.4 million (as of June 30, 2015). The average cost to a residence is approximately $295 per year. The City anticipates sufficient capacity for at least the next ten years.

The City’s combined sewer overflow (“CSO”) program, mandated by the EPA, completed its last major project in December 2014 for a total program cost of $65 million in an effort to control the discharge of combined sewage to the waterways. The City has entered into a Consent Decree with the EPA implementing a long term CSO plan, which now requires the implementation of a post-construction monitoring program to determine the impact of the CSO projects. The City has budgeted approximately $125,000 annually to address these operational projects.

The City of Nashua provides solid waste and recyclables collection and disposal service for approximately 23,000 residential dwellings. Commercial haulers service in excess of 14,501 dwellings in condominium and large apartment complexes and mobile home parks. In fiscal year 2015, a total of approximately 26,986 tons of residential solid waste were disposed of at the Four Hills Landfill. In this same period commercial and private haulers disposed of approximately 28,755 tons of solid waste. Of this total, 10,914 tons were categorized as residential waste generated through the residential credit program. In addition, 6,032 tons of construction and demolition debris and 406 tons of asbestos were disposed of during fiscal year 2015. The total permitted capacity of Phase I, Phase II and Phase III stands at just less than 4.0 million cubic yards.

Acquisition of Pennichuck Water Utilities

On January 25, 2012, the City acquired 100% of the outstanding shares of Pennichuck, the private utility providing water services to the City and to a number of other communities. The City’s objectives in acquiring Pennichuck were to secure and protect its critical water resources, and provide water service at reduced rates. To acquire the Pennichuck stock and pay related costs of the transaction, the City issued $150,570,000 General Obligation Pennichuck Corporation Acquisition Bonds (Federally Taxable) (the “Pennichuck Bonds”), dated January 25, 2012.

While the City believed that the revenues reasonably expected to be realized through its ownership of Pennichuck, together with operational savings reasonably projected to result from the acquisition, would be

14 sufficient to conduct the businesses operated by Pennichuck and its subsidiaries, fund necessary capital improvements and/or fund debt service on future bonds issued by Pennichuck to fund capital improvements, and provide cash flow to offset the City’s payment of debt service on the Pennichuck Bonds, the Pennichuck Bonds were issued as general obligations of the City payable as to principal and interest from ad valorem taxes, which may be levied without limitation as to rate or amount on all taxable property of the City. Therefore, payment of the Pennichuck Bonds is not dependent upon receipt of any amounts from Pennichuck. The Pennichuck Bonds are not secured by any pledge of revenues, or any other assets of the City, Pennichuck, or its subsidiaries.

Operation of Pennichuck and its Businesses After the Merger

Pennichuck’s businesses and operations have continued with little or no changes following the City’s acquisition of Pennichuck. The business and affairs of Pennichuck are managed and overseen by a corporate board of directors, whose members were nominated by the Pennichuck board and subject to election by the City, in its capacity as sole shareholder. Pennichuck and its subsidiaries are operated and managed by staff in its employ at the time of the City’s acquisition of Pennichuck, at the operational and customer support level, although certain management positions which mainly supported Pennichuck’s publicly-traded status were eliminated shortly after the acquisition of Pennichuck.

Economy

Known as the Gateway City for its strategic location just over the Massachusetts border, Nashua is the State’s key center for business and government. With an abundance of opportunities for business and living alike, the City of Nashua is the second largest city in the State of New Hampshire. It has twice been named the “Best Place to Live in America” by Money magazine – the only city in the country to be so honored twice.

The City continues to grow, reinvent and reinvigorate itself in response to ever changing economic trends and challenges, much as it has always done since its establishment some 350 years ago. Once a leader in textile manufacturing, the local economy has transformed into one that emphasized the development of electrical equipment, computer and machinery manufacturing. In more recent years, software development, defense- related research and development, telecommunications, robotics and medical devices have blossomed into key industries. The City also maintains its position as the dominant regional retail hub and is increasingly emerging as a regional center for healthcare services. With less than 300 acres of undeveloped commercial/industrial land and vacant residentially zoned land becoming scarce, Nashua is largely built-out. As a result, focus has shifted primarily toward redevelopment and rehabilitation to keep Nashua on the forefront of economic, technological and social change.

The City strives to build and maintain strong, dynamic relationships with its business community and fosters opportunities for existing business development and expansion, continued tax base improvements, new business recruitment programs and efforts to maintain the integrity and desirability of all existing neighborhoods. The area is home to a broad base of leading international corporations including, Oracle, BAE Systems, Dell, Fidelity Investments and many others. Since 1960, Nashua’s population has nearly doubled--a tribute to the area’s high quality of life and industrial success.

Location of Industry

While industrial and commercial uses are found throughout Nashua, they are concentrated along its commercial corridors, and in particular in areas that have easy access to and from the FE Everett Turnpike. Notable concentrations exist in the southerly portion of Nashua along the Daniel Webster (“DW”) Highway (accessed via Exits 36, Exit 1, Exit 2 and Exit 3 on the FE Everett Turnpike), in the north along Amherst Street (via Exits 7 and 8), and in the center of the City along West Hollis Street, Simon Street and Northeastern Boulevard (via Exits 5 and 4). More established commercial areas can be found in the core of Nashua and include Downtown Nashua, the Nashua Millyard and areas along Bridge Street and East Hollis Street. Many of these established areas have hosted industry for more than 150 years.

The City’s largest commercial center is the DW Highway commercial corridor in south Nashua, which extends to the New Hampshire/Massachusetts state line. Nearly the entire two miles of commercially zoned land along the DW Highway has been developed for retail and commercial uses, making it the second largest concentration of retail space in New England. Here, area residents, including a substantial population from Northern

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Massachusetts, take advantage of sales tax-free New Hampshire shopping at its best. Pheasant Lane Mall anchors the corridor. The Simon Properties-owned super-regional mall boasts over 1 million square feet of retail space. It includes major tenants such as Sears, J.C. Penney, Macy’s, and Target. The mall recently welcomed a Dick’s Sporting Goods (the largest in New England) as well as two new restaurants. The mall recently completed a $10 million facelift that includes redesigned entrances, a renovated food court and new surface treatments in all common areas. The DW Highway commercial corridor attracts over 10 million shoppers annually.

In addition to the Pheasant Lane Mall, furniture stores include Jordan’s, Bernie & Phil’s, and Bob’s Discount Furniture, auto dealerships include Volvo, BMW, Jeep, Toyota, Buick, Toyota, Chrysler, Dodge, Jeep, Hyundai, Infiniti, and Chevrolet, along with other nationally recognized chains such as Barnes & Noble, Modell’s, Home Depot, Best Buy, and Old Navy have all located along this corridor. The location is in such great demand that redevelopment of older commercial properties is a continual process, allowing the area to remain on top of current retail trends. The 45-acre former DOW Chemical site on East Spitbrook Road (about ½ mile north of Pheasant Lane Mall), for example, is envisioned as a 600,000 square foot “lifestyle” retail center. The total real estate valuation in the DW Highway area continues to be significant not only to the City of Nashua but to the entire State of New Hampshire.

In February of 2014, Surfs Up opened next door to the Sky Venture indoor skydiving facility. Surfs Up houses the nation’s largest standing wave stream machine, which can produce a 5-foot wave with a 32-foot face to carve and even get barreled.

A dramatic turnaround has occurred along Spit Brook Road, just west of the Exit 1 along the FE Everett Turnpike. In December of 2007, the same month that the National Bureau of Economic Research determined that the Great Recession started, Hewlett Packard announced that it was leaving the former Digital Equipment Corporation facility off of Spit Brook Road. For over a quarter of a century, that facility had been the heart of the burgeoning technology industry in southern New Hampshire. In 2007, the John J. Flatley Company acquired the property and began an aggressive program of improvement and investment in the facility to reconfigure it from a single user facility into a multi-tenant property. The John J. Flatley Company put in new elevators, reconstructed entrances, landscaped and remade the façade. They aggressively marketed the site as the premiere location for technology companies in southern New Hampshire and have consistently and successfully attracted major tenants to the facility including Amphenol, Skillsoft, Benchmark Electronics, Dell – Equallogics, VGo and Plexxi. The facility has regained its place as the center of the southern New Hampshire technology cluster. Thousands of people are at work at the facility creating some of the most innovative products in the world.

The City worked closely with the John J. Flatley Company to plan for future growth. The 400-acre property was rezoned and Dozer Road partially abandoned in order to facilitate the logical and continued growth of the park. In 2015 the company completed the construction and lease up of 530 units of luxury apartments. Tara Commons, a 24,000 square foot retail and medical office complex has opened along Spit Brook Road and is 90% leased. A new, 120-unit Hilton Homewood Suites just opened in the fall of 2015. A 240,000 square foot office/R&D building is also planned. All of these efforts will help to transform Gateway Hills into a thriving mixed-use community. These amenities are designed to allow the site to continue to attract the best and brightest employees and companies.

In the northwest quadrant of Nashua, the Amherst Street commercial area (Route 101A), represents a growing, diversified district, boasting a strong concentration of retail, along with significant office, research, industrial and educational uses. Beyond providing an excellent array of shops and services for the local consumer, it also attracts patrons from other New England states and Canada. On any given Saturday parking lots are filled with cars bearing out of state license plates from as far away as New York, Connecticut, Rhode Island, Maine, Vermont, and Canada, as well as a substantial number from Massachusetts. The three-mile corridor contains six different commercial “strip centers”, each of which ranges from 50,000 to 100,000 square feet. Unlike the Daniel Webster Highway area, however, Amherst Street has a large office component. Within the immediate vicinity are buildings housing nearly one-half million square feet of prime, class-A office space. Nashua Community College, Granite State College, Southern New Hampshire University-Nashua, and the Crowne Plaza Hotel, numerous restaurants and banks are but a few of the larger tenants in this area. Growth and development continues with the recently opened Target, T J Maxx, Texas Road House Restaurant and Panera Bread Restaurant. A 4-story, 104-room Hampton Inn opened in 2009 on the former Ground Round Restaurant site at the corner of Somerset Parkway and Amherst Street.

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New activity is emerging along the busy Amherst Street corridor. Market Basket consolidated two grocery stores along Amherst Street into a single, modern 84,000 square foot store at Somerset Plaza. Whole Foods Market opened its first New Hampshire store at Turnpike Plaza in August of 2014. A 20,000 square foot retail plaza, anchored by Aldi Supermarket is under construction at the former Nashua Motor Freight site at 270 Amherst Street.

Located steps from Amherst Street and accessed immediately from Exit 8 is the WE/SC LLC Corporate Park, comprised of 1.1 million square feet on a site of approximately 100 acres. Currently, this research and development park contains a 250-room Marriott Hotel, a regional cancer center, a public storage facility, an extended stay motel, and two office buildings totaling 110,000 square feet. Viega, a German based leader in the production of innovative plumbing and heating systems, opened its first North American training center in 2006 on one of the two remaining undeveloped lots in the park. Dartmouth-Hitchcock Medical Center opened a 180,000 square foot in-patient medical facility in 2012. Expansion potential exists on a site next door. Steps away, a new Marriot Residence Inn opened in November of 2014.

Westwood Industrial Park, 105-acres in the northwest corner of the City off of Amherst Street, is the City’s newest industrial park. Delta Education, a producer of educational products, was the first tenant in the park. Bellevance Beverage (a 78,920 square foot distribution facility) and ITT Corporation (55,765 square feet of research and development and office space) are two of the businesses located in Westwood Park. Two C Pack Systems, a premium packaging company headquartered in Italy, purchased the Lowell Paper Box Company in 2007 and the former Corning building (330,000 square feet) in February 2008. They moved into the renovated space in December of 2008.

Though the City’s newer office/industrial parks are prominent, much of the City’s technological innovation and entrepreneurial activity is currently taking place in one of the City’s oldest industrial areas: the historic Millyard District near Downtown Nashua. Here, numerous small businesses are taking advantage of the City’s highly skilled and educated labor force to develop new cutting edge products and technologies. This entrepreneurial spirit is found in Downtown Nashua as well, which boasts unique retailers and award winning restaurants in a classic and historic New England main street shopping district. Both of these areas are poised to grow due to the opening of the Broad Street Parkway in December of 2015.

Manufacturers are reporting a rebound from the effects of the recession. Electronics and systems manufacturers, including those involved in the manufacture of medical devices, are expanding in Nashua. Resonetics, a 30 year old laser machining and laser systems manufacturer, has opened a new facility at 44 Simon Street, expanding to 50,000 square feet with a plan to double its workforce of 125 within 2 years. FLIR Commercial Systems recently purchased a 90,000 square foot building at 8 Townsend West and is in the midst of a $10 million building renovation, which will allow it to consolidate three business units from Massachusetts and Southern New Hampshire and expand its workforce in Nashua substantially. The Rapid Group, a Nashua-based project and parts prototyping company, has grown exponentially over the past five years to over 300 employees.

Housing Development

New housing developments have been developed or are under construction for families and individuals of all types, sizes and income levels throughout the City. In 2008, as part of the City’s Brownfields initiative, the City worked with a local developer to build a 41-unit townhome project called Prescott Square which provides workforce housing. Nearby on Temple Street, Neighborhood Housing Services of Greater Nashua recently completed Casimir Place, another workforce housing development. This innovative project provides 28 units of affordable rental housing for working families, including 6 townhouse units constructed within the former St. Casimir Church. Assistance was also provided by the City through its Urban Programs Department and through the New Hampshire Housing Finance Authority. Also on Temple Street, the City teamed with Southern NH Services and the Nashua Association for the Elderly to build a new 24,000 square foot senior center and 43 units of affordable elderly housing.

Located in a downtown neighborhood a few blocks from Main Street, Palm Square was completed in 2009. The project is major rehabilitation of the almost 200,000 square foot historic Batesville Casket Company manufacturing building into 140 senior apartments for active adults aged 55 and over, as well as retail space and the successful New World Chinese Restaurant. The complex is 100% occupied and boasts a growing waiting list. The groundbreaking of 23 senior cottages took place in 2008 in South Nashua to complement The Huntington, a 17

full service life care retirement community which provides 125 one and two-bedroom apartments situated in a beautiful rural setting across from Sky Meadows. Traditional single-family homes continue to be developed in various areas of the City. Small in-fill developments have also occurred in many neighborhoods.

The City of Nashua, through the Nashua Business and Industrial Development Authority, has partnered with Long Island-based developer Renaissance Downtowns to plan for the redevelopment of 26 acres of underutilized industrial land. The site is located at the confluence of the Nashua and Merrimack Rivers, and sits adjacent to the Taylor Falls Bridge on the way to Hudson, NH. The City signed a preferred developer agreement with Renaissance in 2009, which allows Renaissance to develop a concept plan for the site. A concept plan refined in 2012 shows a mixed-use development with up to 700 units of housing situated in a village concept. The project will include supporting commercial and retail space.

The Nashua Planning Board recently approved a site plan for over 225 units. Groundbreaking is expected in 2016.

The City is also working closely with the State of NH DOT and NRPC to plan for an innovative traffic circle at the foot of the Taylor Falls Bridge. The traffic circle would help to improve traffic flow at this notorious traffic bottleneck. The project would also provide better access to the first phase of the Renaissance project and provide a unique opportunity to incorporate sustainable design as part of this traffic improvement. Preliminary engineering has begun on the $3.5 million project, which is fully funded by State and Federal highway funds.

The long anticipated Apartments at Cotton Mill project opened in 2014 and leased up in less than 9 months. This ambitious historic rehabilitation of the 19th century Cotton Storage Building into 109-units of mixed income housing promises to transform the Front and Franklin Mill District. Conceived and developed by The Stabile Companies, this project has brought more vitality to Downtown Nashua and opened up access to the Nashua River for all residents to enjoy (expansion of the Riverwalk). The project is an important project that has required close collaboration among the developer, the City, the State of NH and the Federal Government to make happen.

Already, the success of the Apartments at Cotton Mill has prompted additional activity nearby. Brady Sullivan Properties recently acquired the 300,000 sq. ft. mill building at 34 Franklin Street. The firm received site plan approval from the Nashua Planning Board in November of 2015 to convert the property into 170 units of market rate residential apartments. The firm is poised to break ground in January to transform this eyesore into a thriving, residential community within 12 months. This will continue the series of exciting redevelopment activity adjacent to Downtown Nashua.

Infrastructure Investment

The City in conjunction with the State of New Hampshire has invested in road improvements in support of new development and has provided a coherent planning framework. Both are leading efforts to restore passenger rail service between Boston and New Hampshire through an extension of the existing MBTA line that now terminates just 12 miles away in Lowell. In 2008, the City of Nashua authorized the construction of the Broad Street Parkway, a $74 million roadway that now links Downtown Nashua, the Millyard, and other key redevelopment sites with Broad Street (near the Exit 6 Interchange) and the Everett Turnpike. Completed in December of 2015, the roadway also provides a second bridge crossing the Nashua River. Commuter bus service between Nashua and Boston began in 2007, with stops at South Station and Logan Airport. It has become an overwhelming success.

Downtown Nashua continues to serve as a vibrant center for Nashua and the surrounding region. New restaurants and retailers are locating alongside established favorites, adding to the ever-expanding diversity of the City’s historic core. The Apartments at Cotton Mill were completed in April of 2014, providing the first new market- rate housing in downtown in decades. In nine months, all 109 units within the historic mill complex were fully leased, bringing over 250 new residents to the historic core of Nashua.

A key aspect of the Apartments at Cotton Mill project was a major flood control improvement to the City-owned Jackson Falls Dam. The $850,000 improvement included the installation of an adjustable crest gate on the top of the dam. This allows the City to lower the gate when flood conditions are present. The City has experienced so- called 100-year floods with greater frequency in recent years. The crest gate improvements will help to minimize the effect that flood events will have on downtown Nashua properties upstream of the dam (both publicly and

18 privately owned), without increasing the impact on properties below the dam. The dam improvement was completed in the fall of 2013.

Economic Development Strategic Plan

Throughout fiscal 2005, the City worked with a private consulting firm, Mt. Auburn Associates, to prepare an Economic Development Strategic Plan for the City. This same firm completed a similar plan in 1992, the well- received Nashua at the Crossroads. The overall goals of the plan, officially adopted by the City in December of 2005, are to:

 improve the economic well-being of all residents of the City,  improve the competitiveness of the City and address needs of the business community, and  ensure a stable fiscal environment.

The planning process included three key phases: an Economic and Resource Base Analysis, Strategies to Build a Competitive City, and an Implementation Plan that included a separate Marketing Plan. Throughout the fall of 2004 and winter of 2005, Mt. Auburn Associates held multiple meetings with various City officials and the Board of Aldermen’s Planning & Economic Development Committee which provided oversight for the project. In addition, interviews were held with over fifty individual business and community leaders. Along with interviews, site visits and public meetings, the study included a comprehensive review and analysis of data from a wide range of sources and an analysis of how Nashua compares to other cities of similar size, composition and location.

In April of 2005, an Economic Summit was held to present the principal findings and recommendations of the plan to the public. Among its major findings is that Nashua is a relatively prosperous city with increasingly strong links to Greater Boston. The City benefits from a young and highly skilled talent base with very high concentrations in disciplines such as engineering and software. Nashua also has a good entrepreneurial environment and benefits greatly from strategic investments that have been made in its schools, transportation system and downtown. The City, however, also faces challenges due to a lack of support for research and development in the State, limited links to university based research facilities, a lack of vacant developable land, and relatively high unemployment and high housing costs. To build upon the City’s assets and address its challenges, the plan sets out five key strategy areas outlined below.

1. Investing in the Future - The Role of the City of Nashua in Sustaining its Quality of Life: a. Continue to invest and support excellence in the public schools b. Support commuter rail and transit-oriented development c. Continue to invest and improve Downtown d. Promote investments that secure the City’s role as a retail Mecca

2. Managing for Success - Advancing a Collaborative Private-Public Sector Culture: a. Create a more customer-oriented, integrated management team b. Streamline the City’s permitting processes c. Build new opportunities for business-city dialogue d. Develop a marketing effort to promote the Team Nashua approach

3. Accelerating Enterprise Development - Stimulating Innovation and Entrepreneurship: a. Create a Center for Innovation Acceleration b. Support immigrant entrepreneurs c. Focus Nashua’s RLF on innovation acceleration and immigrant enterprise development

4. Promoting the City - Marketing its Economic Development Product: a. Inside marketing: keep the existing business base strong through retention and expansion efforts b. Outside marketing: strategic business recruitment c. Academic marketing: attract a satellite campus

5. Addressing Regional Housing and Workforce Challenges - Leading and Convening Regional Stakeholders: a. Work with the Nashua Regional Planning Commission to make affordable housing a more regional issue b. Help convene regional stakeholders to build career ladders for low and moderate-income residents 19

The City and the Greater Nashua Chamber of Commerce have partnered on an ambitious effort to re-brand Nashua. Both the City and the Chamber of Commerce recognized the need to develop a consistent and powerful brand for Nashua. The branding platform helps to consolidate the multiple messages that tell the story about Nashua into one, consistent message about the positive momentum in Nashua. The City launched its new branding platform with the tagline “Nashua, Dare to Begin” in the fall of 2013. This platform, which celebrates Nashua heritage as a center for innovation and entrepreneurship, was launched with a new marketing website, www.nashuadares.com, as well as the associated social media tools.

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The following pages provide a summary of the history of large scale residential, commercial and industrial development within the City. LARGE-SCALE RESIDENTIAL DEVELOPMENTS 1990-2015 # of # of Dwelling Dwelling Units Units 1990 2004-06/2005 South Main Street 23 Jackson Falls-Riverfront Pine Brook 57 Condominiums 22 1991 Temple St. Realty 11 Heidi Lane 12 Wild Rose Estates 26 Edmatteric 12 Salmon Brook Flats - Elderly 22 Lansing Drive 18 Nashua Assoc. - Elderly 43 St. Casimir 26 1993 Mine Falls Estates 40 Gilson Road Subdivision 18 Greenleaf of Nashua 36 Skymeadows – Birches 15 Courtney Estates 13 Cobblehill Road 15 Maplewood Phase 6 37 Ridge Road 24 Hollis East 80 Longview Meadows 16 Mile High R.E. 10 1994 Groton Woods 122 Hadley Woods 36 7/05 – 12/2011 1995 Northfield Estates 5 Freshwater Court 11 Lowther Place 6 Granite Hill 34 Streeter Landing Elderly Housing 43 1996 Harbor Homes Veterans' Housing 20 Village at Bowers Pond 49 Huntington CCRC assisted du’s 12 1997 Dalton Village 7 Brox Development 226 Southline Woods 36 Gagnon 8 Cotton Mill Square 109 Castleton Estates 13 AHEPA Retirement Home 38 Howard 12 Prescott Square 41 Colliston Yard Elderly Condos 75 1998 Palm View Crossing senior apts 140 Georgetowne 69 Kempton Heights 20 Hadley Woods – II 7 22 Marshall St Apartments 112 Sanderson Farms 39 Kincaid Lane 7 Lojko Drive 13 7 Coliseum Av Senior Apts Nine smaller subdivisions 72 Addition 40 1999-2003 Hayden Green 85 Southern NH Services 82 Stinson Park 17 Maplewood - Elderly 14 Wellman Terrace 6 Manchester Street 9 2012 Tinker Estates 17 91 Farley Rd Single Family 31 Maplewood - Carriage House Brook Village North Apts 26 Common Phase 1-5 212 Tara Ridge Apts 180 Tanglewood 50 65 Pine Hill Senior Housing 17 Longview Meadows 52 The Huntington Retirement 2013 Community 266 Renaissance Apts 228 Sky Country 24 Nashua Crossing Memory Dunlogin Road 21 Care Units 22 Gagnon Farms (Rosewood) 82 Tara Ridge Apts 384 Majestic Heights 73 2014 Walden Woods – Elderly Memory Care 575 Amherst 48 Housing 118 105 Split Brook Apartments 18 J M R Construction, INC 7 75 Deerwood Town Homes 13 Meridian Place Elderly 2015 Housing 47 34 Franklin St. Apartments 168 Webster Lawn Elderly 76 Kirkpatrick 16 Monis Farm Phase II 6 Salmon Brook Estates (Elderly) 31 21

LARGE-SCALE COMMERCIAL DEVELOPMENTS

2000-2015

Square Square Year Name of Development Feet Year Name of Development Feet

2000 Public Storage 98,952 2003 Citizens Bank 9,072 Worthen 9,600 Crisco Inc. Addition 8,000 Delta Education Phase 2 87,664 Bugaboo Creek Steak House 6,800 Tara Properties 70,000 Applebee’s Restaurant 6,550 Gurney’s Automotive 6,900 Pizzeria Uno 6,000 Bishop Guertin 53,554 Community Bank 5,500 Second Generation Properties 50,000 Merrimack County Savings Bank 5,000 Longhorn Steakhouse 5,072 Nashua Ice Arena (800 seats) 37,000 Second Generation Properties 5,000 Small World addition 3,970 Corning Lasertron 389,408 Burger King 3,582 Cumberland Farms 3,600 Wendy’s Restaurant 3,148 Wendy’s Restaurant 3,200 Bank of New Hampshire Branch 2,750 Toyota of Nashua 3,200 BAE Systems addition 2,100 Rivier College Dorm 29,650 Dunkin Donuts 2,020 Saint Joseph Parish 27,500 Nashua Mall retail addition 17,000 Peter’s Honda 27,000 Custom Manufacturing Services 14,432 Old Navy 25,093 BAE, Chemical Storage 2,800 2004 Patriot Supply 8,400 Dunkin Donuts 2,250 St. Joseph Hospital 68,000 Shell Oil 2,010 Town Fair Tire 6,950 Teradyne 187,000 Pilgrim Church 5,170 Delta Education 12,160 Conway Office Products 43,200 Flagler Properties 10,920 SNH Medical Center 39,440 Bickford Restaurant 1,431 White Family Ven 3,600 Ligkos Rev. Trust 3,592 Rochette Funeral Home 2,166 2001 Whitney Screw Redevelopment 9,000 Viega 15,088 Bernie and Phyl’s 86,520 Allen Mello Car Dealership 14,370 Khol’s Department Store 8,600 DWH, LLC 10,800 Main Street Marketplace 64,500 Skyventure 10,000 Extended Stay America 44,000 1400 Motors, Inc. 4,800 2005 267 Main Street 8,400 Nashua Mall- Christmas Tree 36,000 Regency Center 48,300 Shop Cumberland Farms 4,620 Furniture World 34,800 East Hollis St. Fire Station 20,124 Value Homes Inc. 2,754 Kentucky Fried Chicken 2,827 Nashua Cancer Center 2,519 Walgreens 14,425 Charron Realty 17,700 Leda Lanes 12,250 Target Shopping Center 168,800 Pennichuck Water 12,100 MacThompson Realty 1,800 Custom Mfg 1,726 2006 Bellweather Credit Union 9,000 DEA 1,350 Nashua Senior Center 23,750 BAE Systems 1,000 Veterinary (Cat) Office 2,360 City Transit Garage 18,000 2002 Windmill Development Corp 7,880 Panera Bread 1,000 Nashua Airport Authority 3,400 Maccor Medical Office 12,600 Office Building –NE Blvd. 28,000 Lowe’s 172,000 Law Realty Warehouse 20,000 Amherst Pizza 17,000

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LARGE-SCALE COMMERCIAL DEVELOPMENTS 2000-2015 (continued)

Square Square Year Name of Development Feet Year Name of Development Feet 2011 Portland Pie Downtown 5,235 2007 Pleasant Lane Mall 99,752 Sky Venture 9,974 Nashua Landing Lifestyle 600,000 Toyota of Nashua 65,580 Center 17 Riverside Realty 10,000 PK’s Retail Building 6,000 Red Falls LLC 21,941 Land Air Design Airport 13,500 John Flatley 29,880 Hangar Lodi Trust 558 Medical center office building 37,785 Oanh & Long Nguyen 400 Generator building for Hospital 2,578 Trinity Baptist Church 4,150 Rivier College Library addition 11,801 World Academy 25,798 Grace Fellowship Church 105,188 Mason St. LLC 2,400 R&D Office Building 85 NW 8,000 O’Donnell 660 BV Walgreen’s Pharmacy & Store 15,617 2012 Advance Auto Parts Amherst 7,700 Aspen Technology 38,000 2008 Burger King Amherst Street 2,580 Trader Joe’s- 274 DW Hwy 13,800 Carwash 607 Amherst Street 5,834 TJMaxx- 274 DW Hwy 25,200 Hampton Inn 103 rooms 4 15,689 Ulta Beauty- 274 DW Hwy 9,500 story AutoZone Amherst St. 6,815 Two C Pack Systems 302,000 Market Basket expansion 83,521 Burger King (Amherst St) 2,580 McKenzie’s Restaurant 2,150 Taco Bell Restaurant 2,800 NH Technical College addition 17,000 Huntington CCRC addition 16,843 Charter School- 486 Amherst 52,218 Retail Building 323 DW Hwy 6,000 St Nashua Regional Cancer Ctr 3,303 Palm View Crossings 15,000 2013 World Academy 28,000 Cotton Mill Square office bldg.. 10,000 Sky Ventures Wave Pool 9,974 Axsys Tech. (44 Simon St) 80,000 Micro Desk 8,100 Wizard Cycle 4,300 2009 Nature of Things School Barn 2,160 Dunkin Donuts 3,804 Retail/Restaurant (5 Guys) 9,830 Residence Inn & Restaurant 118 rooms Amherst St Tara Commons Retail Center 34,745 Creative Years School addition 3,150 Linear Retail Center 11,625 Retail to Medical Office exit 5 2,870 Retail to Fitness Club 24,000 2014 Homewood Suites Hotel 105 rooms (Coliseum) Whole Foods 32,500 Nashua Baptist Church 3,137 Saxon Retail Center (Exit 7) 40,045 (addition) Not Your Average Joes Restaurant 7,100 2010 Family Dollar and retail space 13,000 Starbucks – Dwy Highway 1,908 MacMulkin Chevrolet addition 14,600 Office Building – 190 Broad St. 10,388 Camray Automotive 9,600 Peter’s Bump Clinic Addition 5,980 NH Liquor Store new 19,810 Oil Lube/Car Wash Amherst NH Technical College addition 48,176 St. 6,696 Daniel Webster Col – 18,132 Mac Thompson Auto 140 Dwt 16,184 Dormitory Rivier College Gym addition 7,796 2015 Prudential Overall Supply 131,371 YMCA new facility 46,464 270 Amherst Retail Center 40,045 Mary Hitchcock Hospital – new 149,000 CVS Pharmacy 242 Main 13,045 Pheasant Lane Mall 120,285 Nature of Things School Expansion 32,000 565 Amherst Office/Retail 12,400 Jordan’s - 323 DW Highway 23,000

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MAJOR INDUSTRIES LOCATED AT INDUSTRIAL PARK AREAS

SIMON STREET AIRPORT EXIT 1/SPITBROOK RD. Apex Telecomunications Affordable Solutions, Inc. BAE Systems ARC Technology Solutions AD Automated Data Benchmark Bronze Craft Capital Transportation Datagravity Macsteel Logistics Dell Ferotec Conway Office Products Microdesk GEAC Computers Gate City Air Mitre Corporation General Dynamics GFW Aeroservices Oracle GSSI OIA Aircorp Plexxi Kloeckner Metals Quality Design Pools Skillsoft Corp. Resonetics Rapid Sheet Metal Highland Tool Co. Robinson Labs AMHERST STREET Rapid Finishing S3 Development Corp. Amazon Mass Design Scientific Solutions, Inc. Amcor United Parcel Service Techparts, Inc. Amphenol Backplane Systems TST Equipment ARC Energy NORTHEASTERN BLVD. Advanced Circuit Technology SOUTHWOOD PARK Ascendantone, Inc. Altaworks Courtyard by Marriot Aspen Research Group Amphenol Crown Plaza Hotel ATC Power Bosch Articulating Papers Dartmouth Hitchcock Bigraphics, Inc. CCS Presentation Sun Microsystems Circuit Connect Centorr Vacuum Industries Public Storage Dharma Systems Fab-Braze Corp. Regional Cancer Center DTC Communications Federal Aviation Waveguide Fiber Optics First Virtual Communications Administration Viega Flextec Harcros Harvey Building Products CROWN/FRENCH HILL HelloDirect Holden Health Career Apex Plastics IKE Inc. Holiday Inn Area Agency of Greater Hope Industries Lexington, Inc. Nashua Modular Casework Systems Motel 6 B A E Systems McLaughlin Transportation Owens Brockway Danfor Pragmatech The PLUS Co. Inc. Duncan Phyfe Furniture Skillsoft Pfeifer Vacuum Gatecity Industrial Supply PMPC/USPS Spray-Tek Corp. Greenard Press & Machinery Streetwize Technologies Inc. Randstad Harry M. Wells Plumbing/Heating Siemens Transparent Language Henry Hangar Unifirst Corp. S.P. Richards CO. Intracity P.C. Sienna Technologies Winco Identification Corp. Laconia Earth Anchors, Inc. X-L Corp. Stabile Companies Machine Solutions Technical Graphics MILLYARD MAKEIT Labs The Tamposi Company Apex Business Forms Nashua Circuits, Inc. GL & V Critical Process Filtration Nashua Foundries, Inc. The Rapid Group Crown Linen Norfold Factory Direct Comcast Jumpstart Manufacturing, LLC Public Service Co. of NH Just Lights Reclaim Technology Surplus Office Equipment Task Force Syam Software United Supply Company Visible Edge Yourparty.com Ultima-Nimco BURKE STREET W.H. Bagshaw Co. First Student

NORTHWEST BOULEVARD Hershey Ice Cream Bellavance Beverage Lewis & Clarke, Inc. Lightblocks Delta Education ITT - Excelis SNHRMC West (Hospital) Two C Pack Systems 24

Industry and Commerce

Nashua has a diversified economic base with some 50,841 people employed in Nashua in 2014, with an estimated payroll of approximately $3 billion. The following table lists the major categories of income and employment in Nashua for 2014.

Employment and Payrolls

2014 Average NAICS Average Weekly Estimated Total Industry Units Quarterly Code Wage Payroll Employment Total, Private plus Government 2,731 50,841$ 1,135.19 $ 3,001,138,129

Total Private 2,688 46,173$ 1,130.12 $ 2,713,413,600 101 Goods-Producing Industries 260 7,712 1,744.21 699,470,071 11 Agriculture/Forestry/Fishing - - - - 21 Mining - - - - 23 Construction 139 1,124 1,058.21 61,850,258 31 Manufacturing 121 6,588 1,861.22 637,609,303 102 Service-Providing Industries 2,428 38,461$ 1,006.99 $ 2,013,951,804 22 Utilities N/A N/A N/A 42 Wholesale Trade 223 2,347 1,954.80 238,571,611 44 Retail Trade 447 9,875 558.20 286,635,700 48 Transportation and Warehousing 43 986 814.03 41,736,946 51 Information 45 1,373 4,052.12 289,305,160 52 Finance and Insurance 116 821 1,351.69 57,706,349 53 Real Estate and Rental and Leasing 118 559 906.49 26,349,851 54 Professional and Technical Service 381 2,887 1,781.71 267,477,432 55 Management of Companies/Enterprises 36 580 1,500.19 45,245,730 56 Administrative and Waste Services 177 3,196 831.57 138,200,281 61 Educational Services 35 756 761.08 29,919,577 62 Health Care and Social Assistance 341 8,047 1,016.68 425,423,646 71 Arts, Entertainment, and Recreation 38 619 357.55 11,508,819 72 Accommodation and Food Services 222 4,330 368.66 83,007,486 81 Other Services Except Public Admin 198 1,958 615.87 62,705,420 99 Unclassified Establishments N/A N/A N/A Total Government 43 4,668$ 1,185.30 $ 287,714,981 Federal Government 10 1,161 1,914.66 115,591,854 State Government 27 560 659.13 19,193,866 Local Government 7 2,947 997.78 152,903,798

______Source: New Hampshire Employment Security, Economic and Labor Market Information Bureau: Quarterly Census of Employment and Wages

Note: Estimated Total Payroll equals Average Quarterly Employment multiplied by Average Weekly Wage multiplied by 52 weeks.

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The following table lists the largest employers of the City as of January 1, 2016, including the City which employs 2,487 persons as of that date.

Largest Employers

Number of Firm Product Employees BAE Systems Aerospace/ Electronics 3,100 Southern New Hampshire Medical Center Hospital 2,217 Nashua School District Schools 1,679 St. Joseph Hospital and Trauma Center Hospital 1,675 City of Nashua City Government (excludes school employees shown above) 808 Oracle Corporation Software 620 Federal Aviation Administration Air Traffic Control 490 Amphenol Backplane Connection Systems 439 US Post Office Postal Service 458 Benchmark Electronics Inc. Electronics/Mfg. 400

Retail Sales

Retail trade has been an increasingly important industry in Nashua. Highway accessibility, its location on the Massachusetts border, and the differing sales tax rates between New Hampshire (0%) and Massachusetts (6.25%) has resulted in tremendous retail trade growth in Nashua. Nashua has the largest concentration of retail square footage in New Hampshire. The following table compares retail trade data for the City of Nashua, Hillsborough County and for the State as a whole. This information is provided by the United States Census of Retail Trade every five years. Retail Sales 1992 – 2012

Year Nashua Hillsborough County New Hampshire # of Establishments (with payroll) 2012 (NAICS) 455 1,584 6,127 2007 (NAICS) 492 1,657 6,603 2002 (NAICS) 501 1,703 6,702 Sales (000) 2012 (NAICS) $2,375,426 $7,724,727 $26,018,201 2007 (NAICS) 2,925,213 7,647,259 25,353,874 2002 (NAICS) 2,335,877 6,182,948 20,830,057 Per Capita Sales 2012 (NAICS) $31,505 $19,258 $19,748 2007 (NAICS) 33,832 19,067 19,268 2002 (NAICS) - 15,761 16,330

______SOURCE: 1992-2012 U.S. Census of Retail Trade.

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Unemployment

The following table sets forth the trend in the City’s average labor force and unemployment rates and the unemployment rates for the State of New Hampshire, and the United States as a whole for the same period.

Unemployment Rates

City of Nashua Unemployment Rates Unemployment Year Labor Force Rate New Hampshire United States 2014 48,820 5.1% 4.3% 6.2% 2013 50,140 5.9 5.3 6.7 2012 49,770 6.2 5.5 8.1 2011 49,480 6.0 5.4 8.9 2010 49,494 6.7 6.1 9.6

______SOURCE: NH Division of Employment Security and US Bureau of Labor Statistics. Data based on place of residence, not place of employment.

Building Permits

The following table sets forth the trend in the number of building permits issued and the taxable dollar value of new construction and alterations for private as well as public construction projects.

New Construction Additions and Total Fiscal Residential Non-Residential Alterations Other Permits Total Valuation Year No. Value ($) No. Value ($) No. Value ($) No. Value ($) Issued ($) 2015 71 $27,351,936 7 $33,164,182 591 $42,061,102 2,332 $13,574,576 3,001 $116,151,796 2014 79 30,828,011 9 21,151,060 512 46,916,350 1,916 10,855,976 2,516 109,751,397 2013 87 45,651,461 89 3,820,283 472 43,794,329 1,723 5,360,000 2,371 98,626,073 2012 28 4,168,658 106 11,990,460 461 44,213,505 1,757 5,553,378 2,352 65,926,001 2011 56 11,858,590 91 6,696,561 526 77,106,431 1,431 5,669,415 2,104 101,330,997 ______Source: City of Nashua, Department of Building Safety.

Education

The Nashua School system includes 12 elementary schools, 3 middle schools, and 2 senior high schools. The system provides a comprehensive program of advanced placement courses, general education courses, and career and technical education courses. October 2015 enrollment totaled 11,377. In the past decade, the City issued $135 million school construction bonds for construction of a new high school, and renovation/expansion of the existing high school. Construction began in May 2000, with the new high school opening in September 2002 and the fully renovated high school opening in September 2004. Currently the City has a multi-year Elementary and Middle School renovation project with a projected plan of $45 million to bond over several years.

Public School Enrollment – October 1, Actual Projected 11-12 12-13 13-14 14-15 15-16 16-17 Elementary (K-5) 5,587 5,621 5,635 5,501 5,405 5,459 Middle School (6-8) 2,557 2,494 2,512 2,414 2,425 2,410 Senior High (9-12) 3,752 3,780 3,522 3,573 3,547 3,545 11,896 11,895 11,669 11,488 11,377 11,414

______Source: City of Nashua school department.

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Transportation and Utilities

The City of Nashua is served by a network of interstate highways, including the F.E. Everett Turnpike and US Route 3. The City also has easy access to Interstates 93 and 95, which are both major north-south connectors. The F.E. Everett Turnpike widening/construction was completed by the State in July 2000 at a total cost of $200 million. This road serves as one of the primary gateways to New Hampshire and Nashua from the south. The Commonwealth of Massachusetts recently completed the expansion of US Route 3 to the New Hampshire border, which has improved access to and from the Boston metropolitan area.

The State of New Hampshire Executive Council approved the acceptance of funds and the contract on February 6, 2013 to determine the feasibility of restoring passenger rail to the State of New Hampshire. The study will determine the physical and economic feasibility of extending passenger rail from Lowell, MA through Nashua, Manchester and on to Concord, including a stop that connects to the Manchester-Boston Regional Airport. The study is paid for with both Federal Railroad Administration and Federal Transit Administration funds, the first project to ever be funded with both funding sources. The match of toll credits was supported by the State Capital Budget Overview Committee 4 to 1. A 2011 survey completed by the University of New Hampshire Survey Center indicated broad support for restoration of passenger rail. Of those indicating an opinion, over 90% supported restoration of rail to New Hampshire. The 2011 survey was consistent with a similar survey in 2007.

The cities of Nashua and Manchester, the two largest cities in New Hampshire, are actively pursuing the extension of commuter rail service to New Hampshire. Extension of service from Lowell, Massachusetts through Nashua to Manchester and Manchester Boston Regional Airport will provide direct commuter service to and from Boston. Both New Hampshire and Massachusetts officials are supporting the effort. Funding includes $22 million committed to the Nashua rail project; $7 million committed to the Manchester multimodal terminal; $2 million committed by Manchester Airport to the airport station; and $1 million committed to Nashua and Manchester’s stations. In 2007 the State of New Hampshire formed the New Hampshire Rail Transit Authority for the express purpose of advancing commuter and passenger rail in the State of New Hampshire.

The City has access to three airports, the Nashua Municipal Airport, the Manchester-Boston Regional Airport in Manchester, New Hampshire, and Logan International Airport, in Boston, Massachusetts. Nashua Airport provides air service for small planes and local flights. The Manchester Boston Regional Airport is the largest in the State and provides non-stop service to Chicago, New York City, Orlando, Washington DC, Minneapolis, Philadelphia, Pittsburgh, Cincinnati, Las Vegas, Los Angeles, Houston, and other major cities in the United States. The Manchester Boston Regional Airport is serviced by US Airways, Continental and Continental Express, Southwest, United and Northwest Airlines. Logan International Airport is 34 miles south of Nashua and provides services for all local, domestic and international flights.

Gas, electric, telephone, and cable services are provided by established private utilities. Water service is provided by a privately-owned water system, the Pennichuck Water Works, of which the City is the sole shareholder, and sewer services are provided by the City. See “The City of Nashua, New Hampshire – Acquisition of Pennichuck Water Utilities” above.

The Nashua Transit System, a City operation, provides bus service throughout the City as well as special pick-up service for the handicapped. The system continues to grow in ridership, frequency of service and geographic area.

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Income Levels and Educational Attainment (1)

The following table compares 2009-2013 and 2005-2007 census figures to 2000 and 1990 figures for Nashua, the State and the country.

Year Nashua New Hampshire United States Median Age 2009-2013 38.2 41.5 37.2 2005-2007 39.5 39.6 36.4 2000 35.8 37.1 35.4 1990 32.0 32.8 Not available

Median Family Income 2009-2013 $81,607 $79,886 $53,046 2005-2007 76,117 73,246 50,000 2000 61,102 49,509 41,343 1990 46,614 41,628 Not available

Per Capita Income 2009-2013 $32,874 $33,134 $28,155 2005-2007 30,566 29,672 26,178 2000 25,209 24,273 21,684 1990 18,101 15,959 Not available

Educational Attainment: % of Population 25 years old with High School Graduate or Higher

2009-2013 88.5% 91.8% 86.0% 2005-2007 90.9% 89.9% 84.1% 2000 86.6 87.4 81.6 1990 82.7 82.2 Not available

Educational Attainment: % of Population 25 years old Bachelor’s Degree or Higher

2009-2013 34.5% 33.7% 28.8% 2005-2007 35.0% 31.9.9% 27.0%

______(1) In 1990 and subsequently the Median Level of Education was measured in percentages of the population attaining level of higher education. The 2005-2007 data is from the U. S Census American Factfinder, American Community Survey, Summary Indicators Educational Attainment (S1501), percent high school graduate or higher and percent bachelors degree or higher of the population 25 years and over. The median age 2005-2007 data is from the U.S Census American Factfinder, American Community Survey (2005-2007 three year average), Summary Indicators Median Age (years).

Population Trends

Based on the 2010 federal census, the population density of the City of Nashua is 2,703 persons per square mile. The following table shows the City’s population over the past several decades.

Year Population 2010 86,494 2000 86,605 1990 79,662 1980 67,865 1970 55,820 ______SOURCE: US Census; New Hampshire Office of Energy and Planning.

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CITY FINANCES

Major Sources of Revenues

Local Property Taxes

The principal tax of the City is the tax on real and personal property. There is no limit as to rate or amount. The State of New Hampshire’s “assessment year” for taxing purposes runs from April 1 to March 31 of the following year. The City operates on a June 30 fiscal year basis. Property taxes in Nashua are collected each year in two installments, on July 1 at the beginning of the fiscal year for the period July through December, and December 15, midway through the fiscal year for the period January through June. Interest accrues on delinquent taxes at the rate of 12% to the date of payment. On January 1, 1988 the City of Nashua opted to abandon the “tax sale” procedure and adopt the optional tax lien process pursuant to RSA 80:58-86 in accordance with RSA 80:87. The City places a lien on the delinquent property prior to September 1 of the following year. From the date of the tax lien, a two year period of redemption is allowed the owner, during which time, payment of taxes, interest and costs will be accepted and the lien released. 18% interest is charged during the two year redemption period. Beyond the two year period of redemption, properties may be deeded to the City by the tax collector. Except for any paramount federal lien and subject to bankruptcy and insolvency laws, tax liens take precedence over all other liens. The tax collector’s deeds are free and clear of all encumbrances. All interest rates are on a per annum basis. The amount to be levied in each year is the amount appropriated or required by law to be raised for municipal expenditures less estimated receipts from other sources and less appropriations voted from available funds.

Assessed Valuations Local Fiscal Real Statutory Net Assessed Tax Rate Gross Tax Year Property Exemptions(2) Valuations (Per $1,000) Levy (2)

2016$ 8,213,629,475 $ 126,697,477 $ 8,086,931,998 24.53$ $ 196,127,537 2015 8,148,914,763 129,096,800 8,019,817,963 24.05 190,612,284 2014 (1) 8,122,693,478 133,592,750 7,989,100,728 23.50 185,559,749 2013 8,644,335,771 146,459,050 8,497,876,721 21.49 180,280,805 2012 8,636,646,561 138,958,000 8,497,688,561 20.97 175,904,288

______(1) Property revaluation year. (2) Gross Tax Levy source – Department of Revenue Administration. Tax Rate calculation sheet.

Tax Rates and Tax Levies

Fiscal Local Tax Rate (Per $1,000 Gross Tax Levy Year Assessed Valuation) (1) Tax Levy Per Capita (2) 2016 $ 24.53 $ 196,127,537 $ 2,268 2015 24.05 190,612,284 2,204 2014 23.50 185,559,749 2,145 2013 21.49 180,280,805 2,084 2012 20.97 175,904,288 2,034

______(1) City-wide revaluations were completed for use in 2006, 2008, 2010 and 2014. The City decided no revaluation or update was needed in 2012 due to valuation percentage statistics as they relate to the average sale ratios were still close to 100% and therefore there was no need for an update in fiscal 2012. (2) Levy per capita is based on 2010 federal census data, City population of 86,494.

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Tax Levy Calculations

Fiscal Year 2012 2013 2014 2015 2016 Requirements: Appropriations (1) $ 230,756,222 $ 234,370,387 $ 239,543,871 $ 244,487,961 $ 248,715,682 County Tax 9,569,306 9,420,187 9,763,895 10,383,051 11,020,217 Statutory Credits 1,703,000 1,690,000 1,645,500 1,600,500 1,543,000 Overlay 1,817,020 1,839,946 2,034,533 1,968,000 2,037,226 Total Requirements $ 243,845,548 $ 247,320,520 $ 252,987,799 $ 258,439,512 $ 263,316,125 Less Receipts and Available Funds: Receipts (1)(2) $ 61,938,260 $ 61,031,719 $ 61,616,530 $ 61,126,728 $ 60,545,588 Business Profits - - - - - Transfer from Surplus 4,300,000 4,300,000 4,300,000 5,100,000 5,100,000 Total Receipts and Available Funds: $ 66,238,260 $ 65,331,719 $ 65,916,530 $ 66,226,728 $ 65,645,588

Gross Property Tax Levy $ 177,607,288 $ 181,988,801 $ 187,071,269 $ 192,212,784 $ 197,670,537 Less Statutory Credits (1,703,000) (1,690,000) (1,645,500) (1,600,500) (1,543,000)

Net Property Tax Levy (3)$ 175,904,288 $ 180,298,801 $ 185,425,769 $ 190,612,284 $ 196,127,537

______(1) Amounts exclude enterprise and special revenue funds. (2) Includes State Education Adequacy Grant. (3) Amounts do not include supplemental changes made during the year.

Tax Collections

Collected within the Lien Amount Property TaxFiscal Year of the Levy Balance at Subsequent Balance at End Total Collections Fiscal Levied for Dollar % of Fiscal Year End Tax Lien of Current Through 6/30/15 Number of Parcels Year(1) Fiscal Year (2) Amount Levy of Levy Year Collections Fiscal Year Amount % of Levy In Levy Liened % Liened 2015$ 191,893,860 $ 189,619,825 98.8 %$ 2,274,035 $ 461,585 $ 1,812,450 $ 190,081,410 99.1 % 28,173 632 2.2 % 2014 185,563,420 183,499,092 98.9 2,064,328 312,751 1,751,577 183,811,843 99.1 28,082 640 2.3 2013 181,191,086 178,655,327 98.6 2,535,759 350,811 2,184,948 179,006,138 98.8 28,072 601 2.1 2012 180,052,101 177,497,774 98.6 2,554,327 376,603 2,177,724 177,874,377 98.8 28,010 685 2.4 2011 170,706,403 168,303,403 98.6 2,403,272 539,882 1,863,350 168,843,413 98.9 27,992 671 2.4 2010 165,010,958 162,496,172 98.5 2,514,786 359,829 2,154,957 162,856,001 98.7 27,983 741 2.6 ______(1) Fiscal year relates to prior tax year. (2) Includes supplemental taxes.

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The following is a list of the largest taxpayers in the City based upon assessed valuations for fiscal 2015.

Largest Taxpayers Fiscal 2015 Assessed Name Nature of Business Valuations Pheasant Lane Realty Shopping Mall$ 142,785,496 Pennichuck Water Works (1) Water Distribution 104,161,500 Public Service Co. of New Hampshire Utility 97,147,800 Aimco Royal Crest-Nashua LLC Apartment Complex 83,203,000 Flately, John J Company Office/Land/Apts/Retail 64,156,800 St. Joseph Hospital and Trauma Center Hospital 58,564,900 Energy North Natural Gas Utility 56,281,400 Southern New Hampshire Hospital Hospital 55,988,100 BAE Systems Electronics Manufacturer 43,151,200 Nashua Oxford-Bay Assoc. LIM PT Real Estate 38,807,800 Total $ 744,247,996

______(1) Prior to its acquisition by the City, Pennichuck Water Works paid a little over $1.8 million in property taxes to the City of Nashua. Now that the City acquired Pennichuck, property taxes continue to be assessed and billed to the acquired company. See “Acquisition of Pennichuck Water Utilities” herein.

Equalized Assessed Valuations and Estimated Full Value Tax Rates

The following table sets forth the trend in local assessed and state equalized valuations for the City of Nashua and the estimated full value tax rates for the City. Ratio of Total Tax Rate State EqualizedAssessed Valuation (Per $1,000 Estimated Fiscal Net Assessed Assessedto Equalized of Assessed Full value Year Valuation Valuation(1)Valuation Valuation) Tax Rate 2015$ 8,019,817,963 $ 8,684,907,808 92.3 %$ 24.05 $ 22.13 2014 (2) 7,989,100,728 8,386,760,928 95.3 23.50 22.31 2013 8,497,876,721 7,949,863,821 106.9 21.49 22.89 2012 8,497,688,561 8,248,187,902 103.0 20.97 21.53 2011 8,442,082,529 8,519,356,326 99.1 20.40 20.15 ______(1) Full value as determined annually by the State Department of Revenue Administration. (2) Revaluation year.

Tax Increment Financing For Development Districts

Cities and towns in New Hampshire are authorized to establish development districts to encourage increased development. All or a portion of the taxes on growth in assessed value in such districts may be pledged and used solely to finance capital and administrative costs incurred by the city or town in developing the district in accordance with its development program and tax increment financing plan for the district. This may include pledging such “tax increments” for the payment of bonds issued by the city or town to finance development projects. As a result of any such pledge, property taxes raised on the increased assessed value in development districts are not available for other municipal purposes.

The City established its first development district in 2006, known as the Riverfront Promenade Tax Increment Financing District. Pursuant to the development program and tax increment financing plan for the district, bonds of the City dated December 15, 2006 included $1,124,650 to finance construction of a public riverwalk and related improvements within the District to encourage private development. The “tax increment” resulting from the private development has been pledged to the payment of the portion of the bonds issued for this purpose.

On April 27, 2011 the City of Nashua accepted NH RSA 79E, known as the Community Revitalization Tax Relief Incentive. This program encourages investment in downtowns and village centers with a new local property tax

32 incentive. Its goals are to encourage the rehabilitation and active use of under-utilized buildings in downtown Nashua and the surrounding neighborhoods.

Property owners who intend to substantially rehabilitate a building located downtown may apply to the City of Nashua for a period of temporary tax relief. The temporary tax relief, if granted, would consist of a finite period of time during which the property tax on the structure would not increase as a result of its substantial rehabilitation (between 5 and 13 years). In exchange for the relief, the property owner grants a covenant ensuring there is a public benefit to the rehabilitation. Following expiration of the finite tax relief period, the structure would be taxed at its full market value taking into account the rehabilitation.

The City is currently working with a local developer on plans for a downtown project.

Budget Process

During January of each year, the Mayor provides budget guidance to the division directors in crafting their respective proposed budgets for the next fiscal year which begins on July 1st. The proposed budgets are submitted for review by the Mayor during March. All increased appropriation requests are reviewed during scheduled division budget reviews with the Mayor and Chief Financial Officer. The proposed budget is then submitted to the Board of Aldermen for their review and approval. The Board of Aldermen may add to the Mayor’s budget by a two-thirds vote or reduce the budget by a majority vote.

Included in this process is a public hearing as set by the Board to review with the general public the proposed budget. After due consideration, including public input, the Board makes a final decision. A resolution is required for acceptance of the final budget by a majority vote. The resolution lists each department’s total appropriations, total revenues, and the amount to be raised by taxation. Should the Mayor decide to veto the Board’s final budget, a two-thirds vote would be required to override the veto.

The final budget resolution is then presented to the Department of Revenue Administration for its review and issuance of the tax rate. Certain limitations are set by state statute which must be subscribed to before the rate is established.

Budget Control Charter Amendment

On November 2, 1993, the voters adopted an amendment to the City Charter, proposed by an initiative petition, which limits annual budget increases. The amendment provides in part as follows in paragraph 56-c:

In establishing a combined annual municipal budget, the Mayor and the Board of Aldermen shall assume an increase in the current budget only in an amount equal to the current fiscal year budget, increased by a factor equal to the average of the changes in the Consumer Price Index-Urban (CPIU) of the three (3) calendar years immediately preceding budget adoption, as published by the U.S. Bureau of Labor Statistics.

Effective with the FY2016 Budget, in establishing a combined annual municipal budget, the Mayor and the Board of Aldermen shall assume an increase in the current budget only in an amount equal to the current fiscal year budget, increased by a factor equal to the average of the changes in the Gross Domestic Product Implicit Price Deflator for State and Local Governments (S&L IPD) of the three (3) calendar years immediately preceding budget adoption, as published by the U.S. Bureau of Economic Analysis.

The amendment further provides in paragraph 56-d in part as follows with respect to debt service:

The total or any part of principal and interest payments of any municipal bond, whether established for school or municipal purposes, may be exempted from the limitation defined in Paragraph 56-c upon an affirmative vote of two-thirds of the members of the Board of Aldermen. This decision shall be made annually.

In the opinion of Bond Counsel, these charter provisions do not affect the validity or enforceability of the Bonds, or the ability of the City to levy taxes without limit as to rate or amount to pay the Bonds and other general obligation indebtedness of the City. Paragraph 56-c expressly provides that it does not limit the Mayor and Board of Aldermen “from appropriately funding any programs or accounts mandated to be paid from municipal funds by State and

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Federal law”. Moreover, Part 1, Article 39 of the state Constitution permits only charters and charter amendments “not in conflict with general law”, and Section 2 of Chapter 33 of the New Hampshire Revised Statutes Annotated (RSA 33, known as the Municipal Finance Act) states, “The amount of each payment of principal and interest on all loans shall, without vote of the municipality, be annually assessed and collected” (emphasis added). Thus, even in the absence of an appropriation of debt service by the City, State law requires assessment and collection of taxes as necessary to pay debt service on the City’s general obligation bonds and notes.

The provisions of paragraph 56-d do require a determination on an annual basis of whether the City will limit its other appropriations either to a larger amount that provides for debt service as an additional appropriation or to a smaller amount that results from subtracting debt service from the total allowable appropriation. In the opinion of Bond Counsel these provisions do not limit in any way the City’s obligations to pay debt service in accordance with the Municipal Finance Act.

Budget Trends

The following information summarizes budget trends in recent years.

The fiscal 2011 and 2012 budgets were under the spending cap of 2.2% and 2.0% respectively. The fiscal 2011 budget was under the spending cap by $1,284,455 and the fiscal 2012 was under by $978,669.

FY2013 Budget

The development of the fiscal 2013 budget was challenging given the economic climate. With the exception of schools and police, the Mayor requested that each division limit its proposed operating budget increase to no more than 1%, a challenge given that with the exception of schools and information technology, the divisions’ had reductions of 3% in their respective fiscal 2012 operating budgets.

With the cooperation of the division directors and successful union negotiations, the City was able to minimize the overall spending increase and planned for a reasonable tax increase of approximately 2.5%. The overall increase in general fund expenses (those that directly impact property taxes) was 1.5% (down 0.2% from fiscal 2012). The Board of Aldermen increased the overall operating budget by $77,200 through a combination of spending cuts and increases. This budget was below the combined municipal budget spending cap of 1.7% by $476,984.

The fiscal 2013 budget continued to fund investments like capital equipment replacement, capital improvements for buildings and related infrastructure and the operating costs associated with the implementation of the new financial software system. This budget also provided funding to achieve the priorities necessary to promote strong fiscal management and encourage economic growth.

Through a long range planning process which included a fleet assessment, the City continues to appropriately fund the timely replacement of the fleet through the Capital Equipment Replacement Fund (CERF). During fiscal 2012 the City opened its new Compressed Natural Gas (CNG) filling station. This station is a result of a public/private partnership. Exclusive of minimal costs for site preparation done with City labor, the station was built and paid for by the company which won the bid for providing the fuel, AVSG. The City has used the station to fuel its new solid waste refuse vehicles and other vehicles that are capable of using CNG as a cost-effective alternate fuel. The City aggressively pursued and succeeded in getting grant funds to pay for the initial cost differential between CNG and diesel powered refuse trucks. The price of fuel was locked in for three years at $2.30 per gallon (gas equivalent). An additional benefit of this initiative is a 25% increase in longevity to the vehicle engine along with benefits to the environment. This initiative is expected to serve the City well into the future.

The fiscal 2013 budget also incorporated an investment in the downtown infrastructure. Sidewalks, drainage, lights, and furniture are all being repaired and replaced in a major multi-year initiative.

FY2014 Budget

All City divisions were able to develop their proposed budgets at or below the 1% increase target with the exception of the Fire, Police and School Departments which exceeded the target due to monies planned for salary negotiations. The Board of Aldermen decreased the proposed operating budget by $38,556 resulting in an Adopted FY2014 Operating Budget of $236,009,508. This approved budget is below the combined municipal budget spending cap by $381,670. The overall increase in general fund expenses (those that directly impact property taxes) is 2.3%. 34

In planning for the FY2014 Budget, the City was also preparing for and executing the revaluation of the residential and commercial properties in the City. Revaluation of properties is required from time to time as market conditions change and properties are bought and sold. Revaluation is important to realign the City’s tax base to more accurately reflect what property values are worth in the current market. The Assessing Department completed the revaluation and the results indicate that approximately 53% of the residential homeowners can expect to pay the same amount or less in property taxes for the coming year.

As for the revenue side of the adopted budget, State revenues for the City continue to be flat or reduced. With regard to local revenues, the City continues to see positive increases in motor vehicle registrations. Other local revenues, such as interest income on deposits, continue to be impacted by historically low interest rates. The City’s strategy to budget revenues conservatively continues to serve it well.

The most significant challenge for FY2014 was funding for pension costs which cannot be controlled – specifically amounts expected to be paid to the New Hampshire Retirement System (‘NHRS’). As the NHRS employer rates per dollar of payroll are set on a bi-annual basis, this budget included an increased appropriation of approximately $3.5 million to fund pension costs paid to NHRS. This amount represents 65% of the 2.3% increase in the operating budget.

During the past several years, the City has explored different strategies to mitigate cost increases in employee benefits costs. The City introduced consumer driven choices through healthcare plan design changes by increasing co-pays and adding deductibles. Dating back to October 1, 2011 the majority of City employees have agreed to increase their share of the monthly cost of their healthcare plan. Over 90% of the City’s union employees have agreed to these proposed changes, four of the five Police Department unions being the exception. As part of the FY2014 medical plan offerings, the City introduced a high deductible plan combined with a health savings account.

As in past years, the FY2014 budget continued the funding of other investments, such as capital equipment replacement, capital improvements for buildings and City related infrastructure. Once again, funding was provided to achieve what the City believes are the priorities necessary to promote strong fiscal management and encourage economic growth over the long-term. Through a long-range planning process, the City continues to fund the timely replacement of its fleet through the Capital Equipment Reserve Fund. The City continued to invest in the downtown sidewalks and related infrastructure, which is a major multi-year initiative.

FY2015 Budget

In preparing the FY2015 budget, the Mayor requested that each division limit its proposed operating budget increase to no more than 2%. All divisions were able to develop their proposed budgets at or below the 2% request with the exception of the Police and School Departments. The Adopted FY2015 Operating Budget is $240,756,942 reflecting a 2.0% increase in general fund expenses. This approved budget is below the combined municipal budget spending cap by $760,945.

The most significant challenge for FY2015 was the need for increased funding for salary and pension costs. Although the percentage increase in wage appropriations for the period FY2012 to FY2014 was modest and less than previous years, the approved budget includes a $3.5 million (2.8%) increase in salary costs and a $1.1 million (4.2%) increase in pension costs above the FY2014 Budget.

The City has been successful in mitigating the escalating costs of healthcare benefits over the past several years. The appropriations for benefits have been relatively flat since FY2009. It has accomplished this by implementing different strategies, including introducing consumer driven choices, through healthcare plan design changes by increasing co-pays, and adding deductibles. All employees have agreed to increase their share of the monthly cost of the healthcare plan of their choosing. In addition, over 100 employees have selected a high deductible plan with a companion Health Savings Account (HSA). HSAs allow employees to manage their healthcare costs with the potential to save for future healthcare expenses. HSAs are portable and can be used after the employee retires or separates from City of Nashua employment.

As in past years, the FY2015 budget continues the funding of other investments such as capital equipment replacement, capital improvements for buildings and City infrastructure. Once again, funding is provided to achieve what the City believes are the priorities necessary to promote strong fiscal management and encourage economic growth over the long-term. Through a long-range planning process, the City continues to fund the timely replacement of its fleet through the Capital Equipment Reserve Fund. The City continues to invest in its downtown sidewalks and related infrastructure which is a major multi-year initiative. 35

As part of the FY2015 budget, a creative and sustainable way to put additional funds into paving the City’s streets without impacting the spending cap or other City divisions was introduced and approved. A Special Revenue Fund was established that uses the City’s share of the annual state highway block grant ($1,347,000) and a portion of the motor vehicle registration fees ($700,000) for a total of $2,047,000, for this purpose.

With the exception of positive revenue from motor vehicle registrations and municipal Medicaid reimbursements, State and other local revenues continue to be flat. The City continues to budget revenues conservatively.

This year’s tax rate increase is 2.34%. The City’s tax rate management plan has provided rate stability to its residents and businesses.

FY2016 Budget

In preparing the FY2016 budget, the Mayor requested that the School, Police, and Fire departments limit their respective proposed operating budget increase by no more than 1.5% and all other divisions limit their proposed operating budget increase to 1%. All divisions were able to develop their proposed budgets at or below the request with the exception of the School and Fire Departments. The Adopted FY2016 Operating Budget is $244,825,057 reflecting a 1.7% increase in general fund expenses. This approved budget is below the combined municipal budget spending cap by $50,276.

The most significant challenges for FY2016 was the need for increased funding for both salary and pension costs. Although the percentage increase in wage appropriations for the period FY2012 to FY2015 was modest and less than previous years, the approved budget includes a $2.8 million (2.2%) increase in salary costs and a $2.2 million (8.1%) increase in pension costs above the FY2015 Budget.

The City has been successful in mitigating the escalating costs of healthcare benefits over the past several years. The appropriations for benefits have been relatively flat since FY2009. It has accomplished this by implementing different strategies, including introducing consumer driven choices through healthcare plan design changes by increasing co-pays and adding deductibles. All employees have agreed to increase their share of the monthly cost of the healthcare plan of their choosing. In addition, over 100 employees have selected a high deductible plan with a companion Health Savings Account (HSA). HSAs allow employees to manage their healthcare costs with the potential to save for future healthcare expenses. HSAs are portable and can be used after the employee retires or separates from City of Nashua employment.

As in past years, the FY2016 budget continues the funding of other important investments such as capital equipment replacement, capital improvements for buildings and City related infrastructure. Once again, funding is provided to achieve what the City believes are the priorities necessary to promote strong fiscal management and encourage economic growth over the long-term. Through a long-range planning process, the City continues to appropriately fund the timely replacement of its fleet through the Capital Equipment Reserve Fund. This year the City wrapped up its investment in its downtown sidewalks and related infrastructure. Simultaneously, the Broad Street Parkway – a key project for economic growth and traffic mitigation – came to a close.

With the exception of positive revenue from motor vehicle registrations and municipal Medicaid reimbursements, state and other local revenues continue to be flat. The City continues to budget revenues conservatively.

Since FY2008, the annual tax rate increases have been managed quite effectively with reasonable increases and minimal volatility. This year’s tax rate increase is 2%. The City’s tax rate management plan has provided rate stability to its residents and businesses, while continuing the high level of services the citizens have come to rely on from the taxes they pay.

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Budget Summary for the Fiscal Year Ending June 30,

2012 2013 2014 (4) 2015 (4) 2016 (4) General Government $ 60,248,829 $ 60,383,418 $ 13,051,053 (4) $13,086,617 (4) $13,335,518 (4) Protection of Persons and Property: Police 17,157,163 17,670,299 25,575,724 26,635,973 27,734,035 Fire 13,966,096 14,135,096 20,598,539 21,182,299 21,850,669 Other 3,793,945 3,718,046 3,735,135 3,748,713 3,845,693 Community Development 1,932,560 1,945,408 2,515,555 2,531,474 2,721,123 Community Services 2,461,014 2,113,616 2,416,098 2,441,011 2,429,192 Public Works (1) 9,467,857 9,659,402 11,323,028 10,999,504 11,178,133 Libraries 2,259,487 2,310,552 3,040,564 3,112,422 3,132,828 Public Services (2) 467,267 496,993 661,617 691,655 698,773 Education 93,386,383 95,628,047 129,203,710 133,298,556 136,090,723 Debt Service (3) 17,533,396 17,814,045 17,867,652 18,072,688 18,138,725 Contingency 1,513,974 1,284,608 1,903,335 1,658,618 793,033 Transfers to Capital Equipment Reserve 1,525,000 1,675,000 2,290,000 2,622,412 2,254,112 Capital Improvements 1,500,000 1,850,000 1,827,500 675,000 622,500 Total Appropriations $ 227,212,971 $ 230,684,530 $ 236,009,510 $ 240,756,942 $ 244,825,057

______(1) Excludes wastewater treatment plant and solid waste disposal costs. These costs are accounted for in the enterprise fund and operations for these services are reported on an enterprise fund basis. (2) Includes cemetery and aeronautical operations. (3) Excludes debt service costs associated with sewer and solid waste disposal. These costs are accounted for in the enterprise funds. (4) Beginning in fiscal 2014, fringe benefits (i.e. insurance, pensions, FICO, etc. were charged directly to the operating division departments rather than General Government).

Accounting Methods

See Appendix A.

Investment of City Funds

Under RSA 48:16, the treasurer of a New Hampshire city may deposit its funds in the New Hampshire Public Deposit Investment Pool (the "NHPDIP") or in solvent banks in the State, and also in banks outside the State if the deposits are fully secured by collateral in the form of obligations of the United States, U.S. agencies or the State. The treasurer may also invest any excess funds, not immediately needed for expenditure, in the NHPDIP, U.S. obligations, savings bank deposits in New Hampshire savings banks, or certificates of deposit and repurchase agreements of New Hampshire banks or banks recognized by the State Treasurer.

Overnight deposits held at the City's major financial institutions are collateralized with securities held in a Federal Reserve Bank of Boston Joint Custody Account. A security transfer requires agreement by both parties. Current collateral is U.S. government securities.

According to the NHPDIP Program Administrator, MBIA Municipal Investors Service Corporation, NHPDIP invests only in high grade short term federal securities, variable rate obligations backed by federal agencies having monthly or quarterly resets based on indexes like the prime rate, LIBOR, or a combination of the two, the highest grade short term commercial paper instruments, and very short-term (usually overnight) repurchase agreements secured by high quality collateral which is valued daily and fully delivered to the program's custodial bank to be held for the benefit of the pools participants. In addition, MBIA Inc., corporate parent of the Program Administrator, has agreed that it will guarantee, so long as its subsidiary serves as Program Administrator, that no pool participant will be exposed to loss of funds upon account liquidation. See "Investment Policy" above.

The City of Nashua had $199,264,627 in cash and investments as of June 30, 2015 in its General Fund. The City's investments are divided in U.S. Government instruments and in overnight Repurchase Agreements and Certificates of Deposit. Said Repurchase Agreements are fully collateralized by U.S. Treasuries held in joint custody at the Federal Reserve Bank in Boston.

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Financial Statements

Audit reports of the City’s financial statements are conducted annually, the most recent of which was performed by Melanson, Heath and Company, Certified Public Accountants, for the 2015 fiscal year and which is attached hereto as Appendix A. Extracts from the City’s annual audits are presented on the following pages, including Governmental Funds Balance Sheets for the fiscal years ended June 30, 2015, June 30, 2014, June 30, 2013 and June 20, 2012 and Statements of Revenues, Expenditures and Changes in Fund Balance for the fiscal years ended June 30, 2015, June 30, 2014, June 30, 2013, June 30, 2012, June 30, 2011 and June 30, 2010.

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CITY OF NASHUA, NEW HAMPSHIRE

GOVERNMENTAL FUNDS

BALANCE SHEET

JUNE 30, 2015 (1)

Nonmajor Total Debt Service Governmental Governmental General Fund Funds Funds ASSETS

Cash and short-term investments $ 157,194,811 $ - $ 2,939,356 $ 160,134,167 Investments 42,069,816 - 22,943,921 65,013,737 Receivables, net of allowance for uncollectibles: Property taxes 18,457,771 - - 18,457,771 Departmental and other 132,368 - 169,040 301,408 Intergovernmental 3,500 - 9,605,793 9,609,293 Loans - - 625,073 625,073 Due from other funds 20,762,034 4,312,424 21,749,114 46,823,572 TOTAL ASSETS $ 238,620,300 $ 4,312,424 $ 58,032,29 7 $ 300,965,021

LIABILITIES AND FUND BALANCES

Liabilities: Accounts payable $ 17,620,636 $ - $ 990 $ 17,621,626 Accrued liabilities 7,863,284 - 413,893 8,277,177 Due to other funds 66,949,240 - 3,701,624 70,650,864 Other liabilities 229,854 - - 229,854

TOTAL LIABILITIES $ 92,663,014 $ - $ 4,116,507 $ 96,779,521

DEFERRED INFLOWS OF RESOURCES $ 99,306,735 $ - $ 271,579 $ 99,578,314

Fund Balances: Nonspendable $ 191,877 -$ $ 20,304,610 $ 20,496,487 Restricted - 4,312,424 21,729,261 26,041,685 Committed 9,051,500 - 12,915,004 21,966,504 Assigned 9,677,264 - - 9,677,264 Unassigned 27,729,910 - (1,304,664) 26,425,246

TOTAL FUND BALANCES 46,650,551 4,312,424 53,644,211 104,607,186

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 238,620,300 $ 4,312,424 $ 58,032,29 7 $ 300,965,021 ______(1) Extracted from audited financial statements.

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CITY OF NASHUA, NEW HAMPSHIRE

GOVERNMENTAL FUNDS

BALANCE SHEET

JUNE 30, 2014 (1)

Nonmajor Total Debt Service Governmental Governmental General Fund Funds Funds ASSETS

Cash and short-term investments $ 171,344,602 -$ $ 3,377,810 $ 174,722,412 Investments 22,060,383 - 22,960,492 45,020,875 Receivables, net of allowance for uncollectibles: Property taxes 17,590,541 - - 17,590,541 Departmental and other 82,932 - 196,088 279,020 Intergovernmental 42,041 - 8,207,818 8,249,859 Loans - - 3,272,092 3,272,092 Due from other funds 16,768,312 4,312,424 13,143,877 34,224,613 Other assets 544,836 - 134,062 678,898

TOTAL ASSETS $ 228,433,647 $ 4,312,424 $ 51,292,239 $ 284,038,310

LIABILITIES AND FUND BALANCES

Liabilities: Accounts payable$ 19,375,342 $ - $ 112 $ 19,375,454 Accrued liabilities 7,231,074 - 496,663 7,727,737 Due to other funds 54,311,255 - 3,702,425 58,013,680 Due to other governments - - 2,500,000 2,500,000 Other liabilities 198,334 - - 198,334

TOTAL LIABILITIES $ 81,116,005 -$ $ 6,699,200 $ 87,815,205

DEFERRED INFLOWS OF RESOURCES $ 96,400,458 -$ $ 452,185 $ 96,852,643

Fund Balances: Nonspendable $ 214,361 $ - $ 18,477,710 $ 18,692,071 Restricted - 4,312,424 16,321,330 20,633,754 Committed 12,342,869 - 10,193,612 22,536,481 Assigned 11,009,824 - - 11,009,824 Unassigned 27,350,130 - (851,798) 26,498,332

TOTAL FUND BALANCES 50,917,184 4,312,424 44,140,854 99,370,462

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES$ 228,433,647 $ 4,312,424 $ 51,292,239 $ 284,038,310 ______(1) Extracted from audited financial statements.

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CITY OF NASHUA, NEW HAMPSHIRE

GOVERNMENTAL FUNDS

BALANCE SHEET

JUNE 30, 2013 (1)

Nonmajor Total Debt Service Governmental Governmental General Fund Funds Funds ASSETS

Cash and short-term investments $ 160,671,543 $ - $ 3,248,756 $ 163,920,299 Investments 20,230,046 - 20,314,358 40,544,404 Receivables, net of allowance for uncollectibles: Property taxes 18,761,869 - - 18,761,869 Departmental and other 78,098 - 128,942 207,040 Intergovernmental 27,473 - 3,699,930 3,727,403 Loans - - 653,910 653,910 Due from other funds 9,020,543 4,313,266 9,574,139 22,907,948 Other assets 8,066 - - 8,066

TOTAL ASSETS $ 208,797,638 $ 4,313,266 $ 37,620,035 $ 250,730,939

LIABILITIES AND FUND BALANCES

Liabilities: Accounts payable $ 12,243,464 $ - $ 128,899 $ 12,372,363 Accrued liabilities 6,386,244 - 38,270 6,424,514 Due to other funds 48,087,495 - 2,322,362 50,409,857 Other liabilities 83,984 - - 83,984

TOTAL LIABILITIES $ 66,801,187 $ - $ 2,489,531 $ 69,290,718

DEFERRED INFLOWS OF RESOURCES $ 94,470,218 $ - $ 203,528 $ 94,673,746

Fund Balances: Nonspendable $ 214,361 -$ $ 16,751,522 $ 16,965,883 Restricted - 4,313,266 8,014,685 12,327,951 Committed 11,834,058 - 10,160,993 21,995,051 Assigned 8,907,711 - - 8,907,711 Unassigned 26,570,103 - (224) 26,569,879

TOTAL FUND BALANCES 47,526,233 4,313,266 34,926,976 86,766,475

TOTAL LIABILITIES AND FUND BALANCES$ 208,797,638 $ 4,313,266 $ 37,620,035 $ 250,730,939 ______(1) Extracted from audited financial statements.

41

CITY OF NASHUA, NEW HAMPSHIRE

GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

FISCAL YEAR ENDED JUNE 30, 2015(1)

Nonmajor Total Debt Service Governmental Governmental General Fund Funds Funds Revenues: Property taxes $ 189,042,677 $ - $ 327,334 $ 189,370,011 Auto permits 12,457,966 - 700,000 13,157,966 Penalties, interest and other taxes 1,100,240 - 366,494 1,466,734 Charges for services 1,087,212 - 4,784,906 5,872,118 Intergovernmental 45,176,606 - 33,519,082 78,695,688 Licenses and permits 1,380,174 - - 1,380,174 Interest earnings (loss) 472,974 - (218,290) 254,684 Miscellaneous 2,373,632 - 996,973 3,370,605 Contributions - 8,763,122 708,629 9,471,751 Total Revenues 253,091,481 8,763,122 41,185,128 303,039,731 Expenditures: Current: General government 13,435,903 - 889,955 14,325,858 Police 29,200,580 - 1,805,788 31,006,368 Fire 21,920,727 - 2,486,022 24,406,749 Water fire protection services 2,607,342 - - 2,607,342 Education 133,194,372 - 22,198,898 155,393,270 Public works 12,210,895 - 19,792,010 32,002,905 Health and human services 2,192,487 - 1,108,127 3,300,614 Culture and recreation 6,596,462 - 368,807 6,965,269 Community development 2,116,217 - 4,860,347 6,976,564 Communications 299,615 - 3,381,160 3,680,775 Debt service Principal 13,025,778 3,280,000 60,000 16,365,778 Interest and issuance cost 4,938,213 5,483,122 28,854 10,450,189 Intergovernmental 10,383,051 - - 10,383,051 Total Expenditures 252,121,642 8,763,122 56,979,968 317,864,732 Excess (deficiency) of revenues over expenditures 969,839 - (15,794,840) (14,825,001) Other Financing Sources (Uses): Issuance of Bonds - - 21,888,749 21,888,749 Issuance of refunding bonds 4,760,000 - - 4,760,000 Bond premiums - - 2,488,519 2,488,519 Bond premiums on refunding bonds 610,993 - - 610,993 Payment to refunded escorw agent (5,386,403) - - (5,386,403) Transfers in 655,147 - 1,601,408 2,256,555 Transfers out (5,876,209) - (680,479) (6,556,688) Total Other Financing Sources (Uses) (5,236,472) - 25,298,197 20,061,725

Change in fund balance (4,266,633) - 9,503,357 5,236,724 Fund Balance, July 1, 2013 50,917,184 4,312,424 44,140,854 99,370,462 Fund Balance, June 30, 2014 $ 46,650,551 $ 4,312,424 $ 53,644,211 $ 104,607,186 ______(1) Extracted from audited financial statements. 42

CITY OF NASHUA, NEW HAMPSHIRE

GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

FISCAL YEAR ENDED JUNE 30, 2014(1)

Nonmajor Total Debt Service Governmental Governmental General Fund Funds Funds Revenues: Property taxes$ 183,735,667 $ - $ 53,121 $ 183,788,788 Auto permits 12,352,468 - - 12,352,468 Penalties, interest and other taxes 1,148,670 - 407,285 1,555,955 Charges for services 1,079,751 - 4,942,937 6,022,688 Intergovernmental 47,038,932 - 26,334,156 73,373,088 Licenses and permits 1,515,231 - - 1,515,231 Interest earnings (loss) 893,965 - 3,298,081 4,192,046 Miscellaneous 1,666,045 - 833,518 2,499,563 Contributions 300.00 8,762,310 601,526 9,364,136 Total Revenues 249,431,029 8,762,310 36,470,624 294,663,963 Expenditures: Current: General government 13,217,724 - 1,226,331 14,444,055 Police 26,394,497 - 1,945,074 28,339,571 Fire 20,534,919 - 45,713 20,580,632 Water fire protection services 2,576,767 - - 2,576,767 Education 130,325,123 - 19,680,533 150,005,656 Public works 10,426,586 - 13,785,736 24,212,322 Health and human services 2,178,171 - 1,013,035 3,191,206 Culture and recreation 6,332,706 - 420,634 6,753,340 Community development 1,993,206 - 9,436,370 11,429,576 Communications 302,102 - 1,152,049 1,454,151 Debt service Principal 13,186,389 3,250,000 60,000 16,496,389 Interest and issuance cost 4,664,660 5,513,151 31,554 10,209,365 Intergovernmental 9,763,895 - - 9,763,895 Total Expenditures 241,896,745 8,763,151 48,797,029 299,456,925 Excess (deficiency) of revenues over expenditures 7,534,284 (841) (12,326,405) (4,792,962) Other Financing Sources (Uses): Issuance of Bonds - - 19,480,000 19,480,000 Bond Premiums 139,111 - 1,928,900 2,068,011 Transfers in 402,738 - 638,265 1,041,003 Transfers out (4,685,182) - (506,883) (5,192,065) Total Other Financing Sources (Uses) (4,143,333) - 21,540,282 17,396,949

Change in fund balance 3,390,951 (841) 9,213,877 12,603,987 Fund Balance, July 1, 2013 47,526,233 4,313,265 34,926,977 86,766,475 Fund Balance, June 30, 2014 $ 50,917,184 $ 4,312,424 $ 44,140,854 $ 99,370,462 ______(1) Extracted from audited financial statements.

43

CITY OF NASHUA, NEW HAMPSHIRE

GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

FISCAL YEAR ENDED JUNE 30, 2013(1)

Nonmajor Total Debt Service Governmental Governmental General Fund Funds Funds Revenues: Property taxes$ 179,316,327 $ - $ 499,342 $ 179,815,669 Auto permits 11,422,224 - - 11,422,224 Penalties, interest and other taxes 1,265,981 - 394,925 1,660,906 Charges for services 1,066,266 - 4,907,031 5,973,297 Intergovernmental 45,965,204 - 21,765,256 67,730,460 Licenses and permits 1,372,314 - - 1,372,314 Interest earnings (loss) 312,035 - 2,457,550 2,769,585 Miscellaneous 1,805,181 - 638,159 2,443,340 Contributions - 8,766,487 556,532 9,323,019 Total Revenues 242,525,532 8,766,487 31,218,795 282,510,814 Expenditures: Current: General government 59,553,651 - 3,286,704 62,840,355 Police 17,954,600 - 1,164,451 19,119,051 Fire 14,312,925 - 810,040 15,122,965 Water fire protection services 2,591,814 - - 2,591,814 Education 95,691,904 - 19,164,058 114,855,962 Public works 10,403,801 - 5,403,792 15,807,593 Health and human services 1,755,105 - 846,012 2,601,117 Culture and recreation 5,058,769 - 341,810 5,400,579 Community development 1,416,357 - 6,194,481 7,610,838 Communications 425,232 - 1,555,591 1,980,823 Debt service Principal 12,914,611 3,390,000 60,000 16,364,611 Interest and issuance cost 4,897,909 5,376,487 34,254 10,308,650 Intergovernmental 9,420,187 - - 9,420,187 Total Expenditures 236,396,865 8,766,487 38,861,193 284,024,545 Excess (deficiency) of revenues over expenditures 6,128,667 - (7,642,398) (1,513,731) Other Financing Sources (Uses): Issuance of Bonds - - 7,136,000 7,136,000 Bond Premiums 110,848 - 944,000 1,054,848 Capital leases - - Transfers in 424,911 - 3,663,044 4,087,955 Transfers out (8,396,682) - (1,141,813) (9,538,495) Total Other Financing Sources (Uses) (7,860,923) - 10,601,231 2,740,308

Change in fund balance (1,732,256) - 2,958,833 1,226,577 Fund Balance, July 1, 2012 49,258,489 4,313,266 31,968,143 85,539,898 Fund Balance, June 30, 2013 $ 47,526,233 $ 4,313,266 $ 34,926,976 $ 86,766,475 ______(1) Extracted from audited financial statements.

44

CITY OF NASHUA, NEW HAMPSHIRE

GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

FISCAL YEAR ENDED JUNE 30, 2012(1)

Nonmajor Total Pennichuck Debt Service Governmental Governmental General Acquisition Fund Funds Funds Revenues: Pr oper ty taxes$ 174,263,969 $ - $ - $ 111,588 $ 174,375,557 Auto permits 11,077,345 - - - 11,077,345 Penalties, interest and other taxes 971,916 - - 453,846 1,425,762 Charges for ser vi ces 2,113,695 - - 5,699,965 7,813,660 Intergovernmental 46,452,864 - - 19,786,143 66,239,007 Li censes and permits 728,360 - - - 728,360 Interest earnings (loss) 938,791 - - 873,841 1,812,632 Miscellaneous 1,348,906 - - 787,610 2,136,516 Contributions - 2,561,897 4,313,266 193,690 7,068,853 Total Revenues 237,895,846 2,561,897 4,313,266 27,906,683 272,677,692 Expenditures: Current: General gover nment 58,422,354 1,131,722 - 3,561,018 63,115,094 Police 17,753,964 - - 1,213,535 18,967,499 Fire 14,148,513 - - 1,358,721 15,507,234 Water fire protection services 2,611,535 - - - 2,611,535 Education 93,475,960 - - 24,758,710 118,234,670 Publ ic work s 9,231,944 - - 2,590,889 11,822,833 Health and human services 1,673,764 - - 922,133 2,595,897 Culture and recreation 5,087,541 - - 494,152 5,581,693 Community development 1,545,459 - - 5,061,609 6,607,068 Communications 280,075 - - 84,224 364,299 Debt service Principal 12,163,180 - - 60,000 12,223,180 Inter est and issuance cost 5,237,490 - - 36,654 5,274,144 Intergovernmental 9,569,306 - - - 9,569,306 Total Expenditur es 231,201,085 1,131,722 - 40,141,645 272,474,452 Excess (deficiency) of revenues over expenditures 6,694,761 1,430,175 4,313,266 (12,234,962) 203,240 Other Financing Sources (Uses): Issuance of Bonds - - - 13,460,000 13,460,000 Transfers in 1,227,619 - - 1,422,174 2,649,793 Transfers out (4,231,574) (1,028,000) - (933,470) (6,193,044) Total Other Financing Sour ces (Uses) (3,003,955) (1,028,000) - 13,948,704 9,916,749

Extraordinary Items: Issuance of Acquisition Bonds - 150,570,000 - - 150,570,000 Pennichuck Acquisition - (150,011,079) - - (150,011,079) Acquisition Bonds Interest and Issuance Cost - (558,921) - - (558,921) Change from extraordinary items - - - - -

Change in fund balance 3,690,806 402,175 4,313,266 1,713,742 10,119,989 Fund Balance, July 1, 2011 45,567,683 (400,909) - 30,253,135 75,419,909 Fund Balance, June 30, 2012 $ 49,258,489 $ 1,266 $ 4,313,266 $ 31,966,877 $ 85,539,898 ______(1) Extracted from audited financial statements. 45

CITY OF NASHUA, NEW HAMPSHIRE

GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

FISCAL YEAR ENDED JUNE 30, 2011(1)

Nonmajor Total Governm ental G overnmental General Funds Funds Revenues: Property taxes $ 168,867,223 $ 238,701 $ 169,105,924 Auto permits 10,411,574 - 10,411,574 Penalties, interest and other taxes 961,391 510,395 1,471,786 Charges for services 1,832,280 6,055,940 7,888,220 Intergovernmental 48,875,423 22,290,694 71,166,117 Licenses and permits 788,464 - 788,464 Interest earnings (loss) 446,572 3,721,608 4,168,180 Miscellaneous 1,040,677 558,692 1,599,369 Contributions - 460,903 460,903 Total Revenues 233,223,604 33,836,933 267,060,537 Expenditures: Current: General government 56,897,557 3,886,512 60,784,069 Police 19,165,600 1,610,358 20,775,958 Fire 16,203,772 113,681 16,317,453 Water fi re protec tion services 2,471,096 - 2,471,096 Education 93,588,224 20,345,041 113,933,265 Public works 9,371,404 728,773 10,100,177 Health and human services 1,894,004 1,247,986 3,141,990 Culture and recreation 5,310,816 414,275 5,725,091 Community development 1,445,969 6,496,240 7,942,209 Communications 289,648 - 289,648 Debt service Principal 11,864,348 60,000 11,924,348 Interest and issuance cost 5,416,517 38,904 5,455,421 Intergovernmental 9,416,623 - 9,416,623 Total Expenditures 233,335,578 34,941,770 268,277,348 Excess (deficiency) of revenues over expenditures (111,974) (1,104,837) (1,216,811) Other Financing Sources (Uses): Issuance of Bonds - 6,000,000 6,000,000 Transfers in 2,001,108 1,906,625 3,907,733 Transfers out (6,301,394) (2,283,675) (8,585,069) Total Other Financing Sources (Uses) (4,300,286) 5,622,950 1,322,664 Change in fund balance (4,412,260) 4,518,113 105,853 Fund Balance, July 1, 2010 49,979,943 25,334,113 75,314,056 Fund Balance, June 30, 2011 $ 45,567,683 $ 29,852,226 $ 75,419,909 ______(1) Extracted from audited financial statements.

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INDEBTEDNESS

Authorization Procedure and Limitations

Bonds are generally authorized on behalf of the City by a two-thirds vote of the fifteen Aldermen who, with the Mayor, constitute the Board of Mayor and Aldermen. The Mayor has veto power over loan authorizations.

Under a special act applicable to the City, the general debt limit of the City is 2.00% of its base valuation as last determined by the State Board of Taxation. Debt for school purposes is excluded from the general debt limit. Under a special act applicable to the City, school debt is subject to a limit of not more than 6% of the above described base valuation. Debt for certain purposes, including overlapping debt, temporary loans, debt for urban redevelopment and housing purposes, certain sewer debt, and, subject to a special 10% limit, water debt are exempt from the general debt limit. Borrowings authorized by special legislative acts, rather than the general municipal finance statutes, are sometimes excluded from the City's debt limit (which is the case for the Bonds pursuant to Section 118 of Chapter 1 of the Special Session of the Acts of 2010). The debt limits generally apply both at the time of authorization and at the time of issuance of debt. State-prescribed statutory debt limits under RSA 33:4-a are higher than those allowed under the special act applicable to the City.

Trend in Tax Anticipation Note Borrowings

Since 1972 when the City introduced a July 1 - June 30 fiscal period and implemented a semiannual property tax collection system, the City has not borrowed seasonally to finance any of its outstanding taxes. Each year ample cash has been available on a daily basis to meet current obligations. Property tax bills are due and payable to the City on July 1 and on December 1. It is expected that future cash operations will continue to be favorable and that the City will not need to borrow on a short-term basis.

Debt Ratios

The following table sets forth the ratio of bonded debt to equalized assessed valuation and per capita net debt ratios for the end of the five most recent fiscal years. The table does not deduct anticipated State grant payments applicable to the principal amount of outstanding bonds or debt that may be supported in part (i.e., school and sewer) by non-tax revenues. The table reflects the net effect of bonds refunded. (See "Debt Summary.")

Bonded Equalized Bonded Ratio Bonded Fiscal Debt Assessed Debt Debt to Equalized Year Outstanding (3) Population(1) Valuation(2) Per Capita Assessed Valuation

2015 $ 325,691,881 86,494$ 8,684,907,808 $ 3,765 3.75 % 2014 319,677,940 86,494 8,386,760,928 3,696 3.81 2013 306,405,011 86,494 7,949,863,821 3,543 3.85 2012 306,781,368 (3) 86,494 8,248,187,902 3,547 3.72 2011 159,951,683 86,494 8,519,356,326 1,849 1.88 ______(1) Based on 2010 federal census. (2) Full value including utilities and railroad as determined annually by the State Department of Revenue Administration. (3) The increase beginning in fiscal 2012 reflects the issue of $150,570,000 self-supporting water bonds issued in fiscal 2012 for the City’s purchase that same year of the private Water Company serving the City and surrounding communities. See “Acquisition of Pennichuck Water Utilities” herein.

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Direct Debt Summary

The following table sets forth the debt of the City of Nashua incurred for capital purposes outstanding as of June 30, 2015. The table does not reflect this issue of Bonds but does reflect the net effect of all issues of refunding bonds.

Direct Debt Summary As of June 30, 2015

Long-Term Debt Outstanding (1) School (2) $ 70,948,144 Sewer(3) 42,925,415 Pennichuck Corporation Acquisition (4) 140,650,000 Landfill (5) 13,892,716 Stadium 2,157,500 Other (6) 55,118,106 Total Direct Debt $ 325,691,881

(1) All outstanding debt, other than school, sewer and Pennichuck Corporation Acquisition debt, is subject to the City’s general debt limit. School debt is subject to the City’s special school debt limit as described above. (2) Subject to appropriation by the State legislature, the City expects to receive state school grant reimbursements equal to 30% of the principal of outstanding school bonds, payable in annual installments over the life of the bonds. (3) Self-supporting. Subject to appropriation by the State legislature, the City expects to receive $1,150,261 in debt service reimbursements for outstanding sewer debt, payable in annual installments over the life of the issues outstanding. (4) Self-supporting. (5) Subject to appropriation by the State legislature, the City expects to receive $2,095,838 in debt service reimbursements for outstanding landfill debt, payable in annual installments over the life of the issues outstanding. (6) Includes garage construction, city hall renovations and police station planning, land, arts & science center, library west wing addition, a communications system, athletic fields and fire station addition.

Principal Payments by Purpose

The following table sets forth the principal payments by purpose on outstanding bonds of the City of Nashua as of June 30, 2015. Pennichuck Fiscal Corporation Year School (1) Sewer (2) Acquisition (2) Landfill Stadium Other (3) TOTAL

2016$ 8,907,380 $ 2,928,480 $ 3,320,000 $ 1,798,909 $ 270,000 $ 4,056,370 $ 21,281,140 2017 8,373,339 2,928,480 3,370,000 1,802,659 285,000 3,566,661 20,326,140 2018 8,140,400 2,928,480 3,430,000 1,802,659 295,000 3,094,600 19,691,140 2019 8,010,125 2,928,480 3,505,000 1,618,704 307,500 2,607,375 18,977,185 2020 8,017,900 2,928,480 3,590,000 1,543,704 320,000 2,312,100 18,712,185 2021 7,779,000 2,928,480 3,690,000 1,543,704 330,000 2,086,000 18,357,185 2022 5,115,000 2,467,210 3,795,000 1,112,564 350,000 3,855,000 16,694,774 2023 3,635,000 2,442,394 3,910,000 1,107,564 - 4,420,000 15,514,957 2024 3,665,000 2,442,394 4,035,000 993,624 - 4,300,000 15,436,018 2025 995,000 2,437,394 4,170,000 568,624 - 4,125,000 12,296,018 2026 995,000 2,437,394 4,315,000 - - 2,815,000 10,562,394 2027 995,000 2,437,394 4,475,000 - - 2,625,000 10,532,394 2028 995,000 2,437,394 4,640,000 - - 2,345,000 10,417,394 2029 920,000 2,437,394 4,840,000 - - 2,245,000 10,442,394 2030 915,000 2,437,394 5,045,000 - - 2,235,000 10,632,394 2031 915,000 958,157 5,255,000 - - 2,235,000 9,363,157 2032 915,000 925,004 5,480,000 - - 2,060,000 9,380,004 2033 610,000 925,004 5,710,000 - - 1,855,000 9,100,004 2034 525,000 340,004 5,960,000 - - 1,715,000 8,540,004 2035 525,000 230,004 6,220,000 - - 565,000 7,540,004 2036 - - 6,495,000 - - - 6,495,000 2037 - - 6,780,000 - - - 6,780,000 2038 - - 7,075,000 - - - 7,075,000 2039 - - 7,385,000 - - - 7,385,000 2040 - - 7,710,000 - - - 7,710,000 2041 - - 8,050,000 - - - 8,050,000 2042 - - 8,400,000 - - - 8,400,000 Total$ 70,948,144 $ 42,925,415 $ 140,650,000 $ 13,892,716 $ 2,157,500 $ 55,118,106 $ 325,691,881

(1) School debt is offset by state grant payments equal to 30% of annual principal payable over the life of school bonds. (2) Self-supporting. (3) Includes garage construction, city hall renovations and police station planning, land, arts & science center, library west wing addition, a communications system, athletic fields, fire station addition and highway and sidewalk construction. 48

Debt Service Requirements

The following table sets forth the required principal and interest payments on outstanding bonds of the City of Nashua as of June 30, 2015.

As of June 30, 2015 (1) Estimated State Net Fiscal Year Principal Interest School Grants Debt Service (1)

2016$ 21,281,140 $ 11,815,997 $ (2,471,664) $ 30,625,473 2017 20,326,140 11,404,711 (2,453,502) 29,277,349 2018 19,691,140 10,734,728 (2,395,620) 28,030,247 2019 18,977,185 10,088,723 (2,376,038) 26,689,869 2020 18,712,185 9,440,209 (2,393,370) 25,759,023 2021 18,357,185 8,783,219 (2,332,200) 24,808,203 2022 16,694,774 8,164,957 (1,553,000) 23,306,731 2023 15,514,957 7,550,646 (931,500) 22,134,104 2024 15,436,018 6,956,379 (942,000) 21,450,397 2025 12,296,018 6,367,318 (141,000) 18,522,336 2026 10,562,394 5,976,579 (141,000) 16,397,972 2027 10,532,394 5,614,141 (141,000) 16,005,534 2028 10,417,394 5,237,317 (141,000) 15,513,711 2029 10,442,394 4,837,842 (118,500) 15,161,736 2030 10,632,394 4,444,844 (117,000) 14,960,238 2031 9,363,157 4,043,054 (117,000) 13,289,211 2032 9,380,004 3,673,379 (117,000) 12,936,383 2033 9,100,004 3,307,554 (25,500) 12,382,057 2034 8,540,004 2,932,797 - 11,472,800 2035 7,540,004 2,571,500 - 10,111,504 2036 6,495,000 2,270,925 - 8,765,925 2037 6,780,000 1,986,704 - 8,766,704 2038 7,075,000 1,690,011 - 8,765,011 2039 7,385,000 1,380,409 - 8,765,409 2040 7,710,000 1,057,242 - 8,767,242 2041 8,050,000 719,852 - 8,769,852 2042 8,400,000 367,584 - 8,767,584

Total$ 325,691,881 $ 143,418,619 $ (18,907,894) $ 450,202,606

______(1) Reflects mostly self-supporting debt, including $140,650,000 self-supporting water bonds.

Authorized Unissued Debt and Prospective Financing

The City has approximately $116.2 million authorized unissued debt, excluding the unissued balance of refunding bonds authorized and including $69.4 million of bonds authorized for the purpose of acquiring Pennichuck Water Corporation which are expected to be rescinded.

Capital Equipment Reserve Fund (CERF)

In 1973 the City created a capital equipment reserve fund for the purpose of funding depreciation. As of June 30, 2013 the audited balance was $2,829,736. As of June 30, 2014 the audited balance was $2,719,807. As of June 30, 2015 the audited balance was $1,126,756. The City revised its CERF plan to include full funding of capital equipment from the CERF account directly instead of a combination of funding from both departmental operating budgets and CERF. Effective in Fiscal Year 2011, the City intends to fund all capital equipment through the CERF account only, including capital equipment needs for the Solid Waste Department. One element of the plan is to gradually increase the City’s contribution to the CERF account annually.

49

Wastewater Enterprise Capital Reserve Fund

The City’s Wastewater Enterprise Fund has a Capital Equipment Reserve Fund with an audited fund balance of $10,552,681 at June 30, 2015.

Solid Waste Capital Reserve Fund

This is now being funded through the Capital Equipment Reserve Fund (see above).

RETIREMENT SYSTEMS

The City participates in the New Hampshire Retirement System, which is a multi-employer defined benefit pension plan. The system covers substantially all full-time permanent employees, except for the Board of Public Works employees. See Appendix A, Note 18, “Retirement System" for additional information regarding the City’s annual contributions.

New Hampshire Retirement System

The City participates in the New Hampshire Retirement System (the “System”), which is a multi-employer defined benefit pension plan. The System covers substantially all full-time permanent employees, except for the Board of Public Works employees. See Appendix A, Note 18, “Retirement System" for additional information regarding the City’s annual contributions.

Prior to 1967 four separate retirement systems were operated by the State involving State employees and State and local teachers, police officers and firefighters. Effective July 1, 1967, these four systems were combined under a common board of trustees in the System to include all employees hired subsequent to such time and to also include all members of the prior systems who elected to transfer to the new system. At June 30, 2012, there were approximately 48,625 active and inactive members and 28,454 retired members of the System. The System provides service, disability, death and vested retirement benefits to its members and their beneficiaries. It also provides a health insurance subsidy to qualified members and their beneficiaries, though that benefit has been discontinued for new members.

The financing of the System as well as its predecessor programs is provided through both employee contributions and political subdivision and State employer contributions.

The State has previously funded 100% of the employer cost for all State employees and 35% of the employer cost for teachers, firefighters and police officers employed by political subdivisions. Legislation was enacted in the 2009 legislative sessions that reduced the State's share of the employers' cost for teachers, firefighters and police officers to 30% for fiscal 2010, 25% for fiscal 2011, and 0% for fiscal 2012, 2013 and 2014.

Beginning in fiscal 2012, the State’s share of the employer’s cost for teachers, firefighters and police officers was reduced to 0%, thereby eliminating the State’s sharing arrangement with political subdivisions. Listed below are the amounts of the City’s contributions to the System for the past five fiscal years.

Fiscal Year Ending June 30, Contributory 2016 (budgeted) $21,315,621 2015 19,432,673 2014 18,450,237 2013 14,571,561 2012 14,759,025 2011 11,840,910 2010 10,703,914

As of June 30, 2014, the net assets available to pay pension benefits of the combined retirement and health insurance subsidy programs, at fair value, were reported by the System to be $6.700 billion. The total pension liability at June 30, 2014 was $11.045 billion, resulting in an unfunded pension liability at June 30, 2014 of $4.344 billion, a funded ratio of 60.7%.

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Information regarding the System, including financial statements and actuarial valuations may be obtained from the System by requesting them in writing at 54 Regional Drive, Concord, NH 03301-8507 or from the System’s website, www.nhrs.org.

Additional information concerning the System is also available under the heading “STATE RETIREMENT SYSTEM” in the State Annual Report for the fiscal year ended June 30, 2014 which was filed with the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access system by March 27, 2015, which may be accessed at www.msrb.org. The information pertaining to the System is current only as of the date of such filing. Neither the City nor the State represent that there has been no change in such information since such date and both disclaim any liability for changes in such information since such date. ______SOURCE: Board of Trustees, New Hampshire Retirement System.

Board of Public Works Employee's Retirement System

The Board of Public Works Employees Retirement is a contributory plan with the city matching employee contributions to the plan. The plan is administered by a Board of Trustees, which include five members. The City’s share of the plan amounted to $772,343 for the year ended June 30, 2015. The plan has a full actuarial valuation on the even years and full GASB 67 & 68 Disclosure on the odd years. Net pension liability (assets) was $6,881,217 as of June 30, 2015. The plan fiduciary net position as percentage total pension liability was 84.5% as of June 30, 2015. The fund value as of June 30, 2015 is $37,512,143.

Other Post-Employment Benefits

GASB Statement 45, Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions, requires governments to account for other post-employment benefits (OPEB), primarily healthcare, on an accrual basis rather than on a pay-as-you-go basis. The effect is the recognition of an actuarially required contribution as an expense on the Statement of Activities when a future retiree earns their post-employment benefits, rather than when they use their post-employment benefit. To the extent that an entity does not fund their actuarially required contribution, a post-employment benefit liability is recognized on the Statement of Net Position over time.

The $22,982,340 OPEB liability, as calculated below, represents the implementation of Governmental Accounting Standards Board (GASB) Statement No. 45. The purpose of the statement is to reflect the liability of healthcare or other post-employment benefits provided to separated or retired employees. With the exception of one group of retirees described below, the City of Nashua does not pay a direct subsidy towards their retiree's health insurance premiums. In accordance with RSA 100-A:50, retired employees shall be deemed to be part of the same group as active employees for health insurance premium purposes, thereby resulting in a so-called "blended rate". The blended rate decreases the cost of insurance premiums for retirees and increases the cost for active employees, thereby resulting in the City paying an Implicit Subsidy.

The City's Explicit Subsidy pertains to only one group of retirees. Teachers who have retired after June 30, 1991 who have at least 20 years of service with the Nashua School District and who are actually receiving retirements benefits under the New Hampshire Retirement System, will have a portion of their health insurance premiums paid according to a set schedule based on the years of service at retirement. The subsidy ranges from 20% for a teacher retiree with 20 years of service at retirement to 50% for a teacher with 30+ years of service at retirement. The City's Explicit Subsidy associated with each eligible teacher retiree ends when the retiree is eligible for Medicare.

The City's most recent GASB Valuation was for the fiscal year ending June 30, 2014. The valuation calculated the City's total OPEB liability of approximately $39.4 million. The liability was further broken down for current and future retirees.

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The table below shows the Explicit and Implicit liability amounts: Explicit Implicit Totals

Current Retirees$ 0.4 million 10.0$ 10.4 Future Retirees$ 2.8 million 26.2$ 29.0 Totals $ 3.2 million 36.2$ 39.4

The Explicit Subsidy of $3.2 million shown above represents only 8.1% of the total OPEB liability of $39.4 million.

Plan Description

In addition to providing the pension benefits described, the City provides post-employment health care and life insurance benefits for retired employees through the City’s plan. The benefits, benefit levels, employee contribution and employer contributions are governed by RSA 100-A:50. As of July 1, 2013, the actuarial valuation date, approximately 1,076 retirees and 2,631 active employees met the eligibility requirements. The Single Employer plan does not issue a separate financial report.

Benefits Provided

The City provides medical insurance to retirees and their covered dependents. All active employees who retire from the City and meet the eligibility criteria will receive these benefits.

Funding Policy

In general, retirees and their spouses pay 100% of coverage.

Annual OPEB Costs and Net OPEB Obligation

The City's fiscal 2015 annual OPEB expense is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost per year and amortize the unfunded actuarial liability over a period of thirty years. The following table shows the components of the City's annual OPEB cost for the year ending June 30, 2015, the amount actually contributed to the plan, and the change in the City’s net OPEB obligation based on an actuarial valuation as of July 1, 2013.

Annual Required Contribution (ARC) $ 4,510,124 Interest on net OPEB obligation 1,034,567 NOO amortization adjustment to the ARC (1,346,001) Annual OPEB Cost 4,198,690 Contributions made (1,907,690) Increase in net OPEB obligation 2,291,000 Net OPEB obligation - beginning of year 20,691,340 Net OPEB obligation - end of year $ 22,982,340

The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation were as follows

Annual Percentage OPEBof OPEB Net OPEB Fiscal Year Ended CostCost Contributed Obligation 2015$ 4,198,690 45.4 %$ 22,982,340 2014$ 4,355,261 40.2 %$ 20,691,340 2013$ 5,032,829 44.8 %$ 18,086,253 2012$ 5,078,422 40.4 %$ 15,307,591 2011$ 5,631,575 40.7 %$ 12,278,412

The City’s net OPEB obligation as of June 30, 2014 is recorded as net OPEB obligations line on the Statement of Net Assets. 52

Funded Status and Funding Progress

The funded status of the plan as of July 1, 2013, the date of the most recent actuarial valuation was as follows:

Actuarial accred liability (AAL) $ 39,415,168 Actuarial value of plan assets - Unfunded actuarial accrued liability (UAAL) $ 39,415,168 Funded ratio (actuarial value of plan assets/AAL 0% Covered payroll (active plan members) $ 123,880,502 UAAL as a percentage of covered payroll 31.8%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amount and assumptions about the probability of occurrence of events far into the future. Examples included assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the Notes to the Financial Statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the plan as understood by the City and the plan members and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the City and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

In the July 1, 2013 actuarial valuation the Entry Age Normal method was used. The actuarial value of assets was not determined as the City has not advance funded its obligation. The actuarial assumptions included a 3.00% inflation rate, 5.00% investment rate of return, and an initial annual healthcare cost trend rate of 9.00% which decreases to a 5.00% long-term rate for all healthcare benefits in 2023. The amortization costs for the initial UAAL is a level dollar method for a period of 30 years, on an open group. This has been calculated assuming the amortization payment increases at a rate of 3.00%.

EMPLOYEE RELATIONS

The City of Nashua currently employs 2,685 regular full time and part time employees of which 1,905 are Nashua School District, Board of Education employees. A breakdown of the number of employees in the other City divisions is as follows: General Government Division, which includes the Office of the Mayor, the Legal Department, Legislative Assistants, Office of the City Clerk, Human Resources Department, Emergency Management Director and the Office of Economic Development, 26. The Financial Services Division, which includes Financial Services (CFO, Treasurer/Tax Collections/Motor Vehicle Registration, and Accounting/Compliance), the Risk Management Department, which includes Building Maintenance, the Purchasing Department, the Assessing Department, which includes GIS, and the Hunt Building, 51; the Information Technology Division, 14; the Police Department, 234; the Fire Department, 174; the Division of Public Health and Community Services, which includes the Community Health Department, the Environmental Health Department, and the Welfare Department, 25; Division of Public Works, Board of Public Works, which includes Engineering and Administration, the Parks/Recreation Department, the Street Department, the Wastewater Department, the Traffic Department, and the Solid Waste Department, 159; City Cemeteries which includes Edgewood, Woodlawn, and the Suburban Cemeteries, 8; the Community Development Division, which includes the Planning Department, the Urban Programs Department, the Department of Building Safety, the Code Enforcement Department, and the Transportation Department, which includes Parking Lots, 40; and the Nashua Public Library, 49.

Pursuant to NH RSA 273-A, all municipal employees of the City of Nashua, with the exception of the appointed and confidentiality employees may collectively bargain through Public Employees Labor Relations Board (PELRB) certified collective bargaining units (unions) on issues regarding wages, hours, and other terms/conditions of employment. Currently, all but approximately 133 City of Nashua employees are represented by one of the 10 collective bargaining units. Of the 16 total collective bargaining units, six units represent Nashua School 53

Department employees. Three of the 16 contracts will expire on June 30, 2016, and one contract will expire on August 31, 2016. A total of 5 expired contracts are currently in negotiations.

Labor/Management collective bargaining agreements must be ratified by the City of Nashua and authorized representatives of the respective collective bargaining unit and the cost items of a ratified collective bargaining agreement must be approved by the Mayor and the Board of Aldermen.

LITIGATION

In the opinion of the City’s Corporation Counsel, there is no pending litigation likely to result, either individually or in the aggregate, in final judgment against the City that would materially affect its financial position.

______

City of Nashua, New Hampshire /s/ David G. Fredette, City Treasurer February 11, 2016

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APPENDIX A

COMPREHENSIVE ANNUAL FINANCIAL REPORT For The Fiscal Year Ended June 30, 2015

New four-faced clock on Main Street, Downtown Nashua Photo Credit: Paul Shea, Great American Downtown

CITY OF NASHUA, NEW HAMPSHIRE (This page intentionally left blank.) CITY OF NASHUA NEW HAMPSHIRE Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2015

Prepared by: The Financial Services Division

John L. Griffin CFO/Comptroller (This page intentionally left blank.) City of Nashua, New Hampshire Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2015

TABLE OF CONTENTS

Page INTRODUCTORY SECTION:

Transmittal Letter A-1 Organizational Chart A-9 Principal Officials A-10 Division and Department Heads A-11 Geographic Location A-13 Certificate of Achievement A-14 FINANCIAL SECTION:

Independent Auditors’ Report A-15 Management’s Discussion and Analysis A-18 Basic Financial Statements: Government-wide Financial Statements:

Statement of Net Position A-33 Statement of Activities A-34 Fund Financial Statements: Governmental Funds:

Balance Sheet A-36 Reconciliation of Total Governmental Fund Balances to Net Position of Governmental Activities in the Statement of Net Position A-37 Statement of Revenues, Expenditures, and Changes in Fund Balances A-38 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities A-39 Statement of Revenues and Other Sources, and Expenditures and Other Uses - Budget and Actual - General Fund A-40 Page Proprietary Funds:

Statement of Net Position A-41 Statement of Revenues, Expenses, and Changes in Fund Net Position A-42 Statement of Cash Flows A-43 Fiduciary Funds:

Statement of Fiduciary Net Position A-44

Statement of Changes in Fiduciary Net Position A-45 Component Units:

Combining Statement of Net Position A-46 Combining Statement of Revenues, Expenses and Changes to Net Position A-47 Notes to Financial Statements A-48 Pennichuck Corporation and Subsidiaries Notes A-91 Nashua Airport Authority Notes A-121 REQUIRED SUPPLEMENTARY INFORMATION:

Schedule of Funding Progress A-132 Schedule of Proportionate Share of the Net Pension Liability A-133 Schedule of Contributions A-134 Schedule of Changes in the Net Pension Liability A-135 Schedules of Net Pension Liability, Contributions, and Investment Returns A-136 SUPPLEMENTARY STATEMENTS AND SCHEDULES: Governmental Funds: Combining Financial Statements:

Combining Balance Sheet - Nonmajor Governmental Funds A-140 Combining Statement of Revenues, Expenditures, and Changes in Fund Equity - Nonmajor Governmental Funds A-146 Page Detail and Combining Budget and Actual Statements: Detail Schedule of Revenues and Other Financing Sources - Budget and Actual - General Fund A-153 Detail Schedule of Expenditures and Other Financing Uses - Budget and Actual - General Fund A-154 Internal Service Funds:

Combining Statement of Net Position A-156 Combining Statement of Revenues, Expenses and Changes in Fund Net Position A-157 Combining Statement of Cash Flows A-158 Fiduciary Funds: Combining Statement of Changes in Assets and Liabilities - Agency Fund A-160 STATISTICAL SECTION: Financial Trends

Net Position by Component - Last Ten Fiscal Years A-162 Changes in Net Position - Last Ten Fiscal Years A-163 Fund Balances, Governmental Funds - Last Ten Fiscal Years A-164 Changes in Fund Balances, Governmental Funds - Last Ten Fiscal Years A-165 Expenditures and Other Financing Uses by Department and Budget Category, General Fund - Last Ten Fiscal Years A-166 Combined Enterprise Funds Revenue, Expenditures, Other Financing Sources and Uses and Change in Total Net Position - Last Ten Fiscal Years A-167

Revenue Capacity General Government Tax Revenues by Source - Last Ten Fiscal Years A-168 Property Tax Levies and Collections - Last Ten Fiscal Years A-169 Assessed and Estimated Full Value of Real Property - Last Ten Fiscal Years A-170 Page Principal Taxpayers - Current Year and Nine Years Ago A-171 Property Tax Rates per $1,000 of Assessed Value - Direct and Overlapping Governments - Last Ten Fiscal Years A-172 Nashua’s Share of the Hillsborough County Tax Apportionment - Last Ten Fiscal Years A-173 Debt Capacity Ratios of Long Term Debt Outstanding and Legal Debt Limits - Last Ten Fiscal Years A-174 Ratios of Outstanding Debt by Debt Type - Last Ten Fiscal Years A-175 Computation of Overlapping Debt - Hillsborough County Long Term Debt - Last Ten Fiscal Years A-176 Demographic and Economic Information

Demographic Statistics - Last Ten Fiscal Years A-177 Principal Employers - Current Year and Nine Years Ago A-178 Operating Information

Operating Indicators by Function - Last Ten Fiscal Years A-179 Capital Asset Statistics by Function - Last Ten Fiscal Years A-180 City Government Employees by Division - Full Time Equivalents - Last Ten Fiscal Years A-181 Student/Teacher Statistical Information - Last Ten Fiscal Years A-182 School Department Operating Statistics - Last Ten Fiscal Years A-183 City of Nashua Office of the Chief Financial Officer (603) 589-3171 229 Main Street - Nashua, NH 03060 Fax (603) 589-3168

December 30, 2015

To the Citizens of the City of Nashua and the Board of Aldermen:

It is our pleasure to present the Comprehensive Annual Financial Report (CAFR) for the City of Nashua, New Hampshire, for the fiscal year ended June 30, 2015. Responsibility for the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with management. To the best of our knowledge and belief, the report accurately presents the City’s financial position and the results of operations in all material respects in accordance with the most current generally accepted accounting principles (GAAP). All disclosures necessary to enable the reader to gain an accurate understanding of the City’s financial activities have been included. This letter of transmittal is intended to complement and should be read in conjunction with Management’s Discussion and Analysis (MD&A).

This CAFR presents the City’s financial statements as required by the Governmental Accounting Standards Board (GASB) Statement No. 34, which established a new financial reporting model for state and local governments. It also complies with GASB Statement No. 44, which “identified the specific information required by the statistical section standards and set forth the overarching objectives of statistical section information. The statistical section provides crucial data to many different kinds of consumers of governmental financial information, ranging from municipal credit analysts to state legislators, municipal governing bodies, oversight bodies, and citizen and taxpayer organizations.” (www.gasb.org/news) The CAFR covers all funds that, by law or other fiduciary obligation, the City administers. These include, but are not limited to, funds for the City of Nashua, the Nashua School District, and the component units, Pennichuck Corporation and Nashua Airport Authority.

History and Government The City of Nashua encompasses an area of thirty-two square miles in Hillsborough County along the Merrimack River in Southern New Hampshire. It is approximately thirty-four miles northwest of Boston, Massachusetts, and eighteen miles south of Manchester, New Hampshire. Nashua was part of the settlement of Dunstable, Massachusetts, until the division line between Massachusetts and New Hampshire was settled in 1741. It was then known as Dunstable, New Hampshire, until its name was changed to Nashua in 1836.

Originating from England, the pioneers of Dunstable arrived in the 1600s to settle on grants of land. The livelihood of the community at that time was farming and mercantile/com- mercial trade. The settlement period continued into the 1700s as sawmills and gristmills were established to harness the many streams and brooks throughout the town. The late-1700s

A-1 were a significant period for the region due to construction of the 27.75 mile-long Middlesex Canal System linking the Merrimack River to Charlestown-Boston. Direct water access to Boston markets immensely increased trade opportunities.

During the 1800s, two massive cotton textile mills were established by harnessing water- power with canal systems. Metal manufacturing, iron industries and other heavy industries were established as ancillary and support businesses to the mills. Railroads built throughout the region in the mid-1800s dramatically reduced the general expense of travel and transportation of goods, allowing Nashua's manufacturing and retail sectors, along with its population, to grow and diversify.

The City Charter was issued by the State of New Hampshire and signed by Governor Noah Martin on June 28, 1853. It was not until a new charter was written in 1913 that the current form of government was adopted. (The Nashua History Committee 1978: The Nashua Experience. Canaan, New Hampshire: Phoenix Publishing.) The Mayor and fifteen-member Board of Aldermen, as the chief executive and legislative officers of the City, are responsible for the prudent administration of the City’s affairs in accordance with laws set forth in the City Charter.

Municipal Services The City provides services such as police and fire protection; refuse disposal; sewer services and highway, street, and sidewalk maintenance. It maintains forty-nine athletic fields, four ice skating rinks, three outdoor swimming pool complexes, and twenty-two tennis courts. The City also preserves 965 acres of park sites including Holman Stadium, a 4,500-seat open-air stadium. The stadium is used for sports, concerts, recreational activities and other City sponsored events.

Nashua is fortunate to have a municipal airport, Boire Field. It is located in the northwest corner of the city on 396 acres of land that the Nashua Airport Authority leases from the City. The Authority was created by State Statute in 1961 and is “tasked with setting policy and procedures to operate the airport for the City of Nashua in conjunction with the rules and regulations of the Federal Aviation Administration (FAA) and New Hampshire Department of Transportation, Division of Aeronautics.” (www.nashuaairport.com)

The City is responsible for providing education to its citizens in compliance with require- ments established by the State of New Hampshire. Public education is offered for grades kindergarten through twelve, providing a comprehensive program of general education, business, and college preparatory courses. An elected nine-member School Board manages the school district’s affairs with fiscal autonomy on certain matters; however, the School Board does not represent an autonomous governmental unit independent from the City of Nashua. Financial management and reporting, as well as the issuance of debt obligations, are the City’s responsibility.

Financial Structure and Management In accordance with the City Charter and Code of Ordinances, the Financial Services Division is responsible for establishing an accounting and internal control structure designed to ensure that the City’s assets are protected from loss, theft, and misuse, and to ensure that adequate accounting information is maintained and reported in conformity with GAAP. The internal

A-2 control structure is designed to provide reasonable, but not absolute, assurances that these objectives are attained. In providing these reasonable assurances, it is recognized that the expenses related to the cost of control should not exceed the benefits and the valuation of costs and benefits requires management’s judgment.

Budget Control Charter Amendment The City’s budget must adhere to the Budget Control Charter Amendment passed by voters in 1993 that limits the budget to an increase of no more than the average annual consumer price index (CPI-U) over the past three years. It allows exemptions voted upon annually by the Board of Aldermen. In fiscal year 2008, the Board of Aldermen approved changing the CPI measurement from the national average to the Northeast region average. The fiscal year 2015 budget was under the spending cap of 2.1% by approximately $761,000.

Beginning in fiscal year 2016, the index was changed by the voters to the three year average of the Implicit Price Deflator for State and Local Governments (S&L IPD). The fiscal year 2016 budget adopted in June 2015 also came in under the spending cap of 1.5% by approxi- mately $50,000.

The Board of Aldermen is the Appropriating Authority for the City of Nashua. From a budg- etary control perspective, management cannot overspend its approved and authorized budget without gaining approval from the Board of Aldermen. In addition, the Board of Aldermen must approve all interdepartmental transfers as well as the transfer of appropriated funds within departments from non-salary accounts to salary accounts. The City also maintains a system of encumbrance accounting to further control budgetary expenses.

Minimum Unassigned Fund Balance The City has an ordinance stating that it’s policy to maintain a minimum unassigned general fund balance of 10% of the fiscal year appropriations. If a portion of unassigned general fund balance is used to offset property taxes in any given fiscal year, it is the policy of the Board to replenish it to the 10% level within a three-year period.

Single Audit As a recipient of federal and state funds, the City is required to undergo a yearly single audit in conformance with the provisions of the Single Audit Act Amendments of 1996 and U.S. Government Office of Management and Budget’s Circular A-133, Audits of States and Local Governments and Non-Profit Organizations. The City is also responsible for implementing an adequate internal control structure to ensure compliance with the rules and regulations of these funds. This internal control structure is subject to ongoing and/or periodic evaluation by management and the external audit firm retained by the City for this purpose. Information related to this single audit including a Schedule of Expenditures of Federal Awards; findings and recommendations; and auditor’s reports on the internal control structure and compliance with applicable laws and regulations is available in a separately issued single audit report. The single audit for the fiscal year ended June 30, 2015 is in progress and management does not anticipate that there will be any instances of material weakness in the City’s internal control structure.

Enterprise Operations The City’s enterprise operations are comprised of both a Wastewater Fund and a Solid Waste Fund. Wastewater is fully self-supported by user fees. Combined Sewer Overflow (CSO)

A-3 Consent Decree projects and mandated operational costs are expected to be approximately $70 million with approximately $68.65 million of the total spent by the end of fiscal year 2015. Certain components of the CSO projects have been eligible for a New Hampshire Department of Environmental Services (NHDES) 20% grant, however, due to state budget reductions in fiscal year 2009, grant payments for certain projects included in the Wastewater budget have been deferred until further notice. The City updates the wastewater rate study on an annual basis. The most recent rate study was presented to the Board of Aldermen in November 2013 and a 15% increase in the wastewater user fee rates effective January 1, 2014 was approved.

During fiscal year 2015, the Solid Waste Fund received a transfer of approximately $3.7 million from the general fund to cover a portion of the cost of residential solid waste collection and disposal. This transfer is funded by property taxes and supplements the cost of collection and disposal of residential solid waste.

Long Term Financial Planning The City uses a multi-year model to plan for future budget periods. This exercise is designed to provide the city’s financial planners the ability to project the magnitude and timing of certain fiscal decisions as they relate to programs and services. The City also manages its capital budget process looking out over a six-year time horizon. The capital budget sub- mittals are updated annually. As part of this planning process, the participating departments project their respective capital expenditure needs over the next six-year period and submit the necessary documentation for review by the members of the Capital Improvements Committee (CIC). The CIC reviews the requests and ranks them based on several factors including the scope of the proposed project, service, facility or equipment; the needs criteria such as a legal mandate, scheduled replacement, improved working environment, increased public health and safety improved coordination and/or more cost effective; conformance with the City’s Master Plan; and other factors such as anticipated future revenues and expenses. The City has also developed and implemented a capital equipment replacement program, which has been designed to replace equipment on an established schedule. This ten-year plan allows for the timely replacement of the equipment at a time when the useful life of the equipment has expired and the associated cost of maintenance and repair is not exorbitant relative to the remaining value. The capital equipment replacement program has been designed to be financed with a combination of internal cash and the issuance of debt.

Debt Administration The City has $152.6 million of authorized unissued debt. This amount includes $69.4 million related to the City’s acquisition of Pennichuck Corporation in 2012, $20.0 million of refunding bonds, and $63.2 million in other capital project related bond authorizations. There is approximately $70.9 million of general obligation debt outstanding for the school district and $57.3 million for the City, and $140.7 million for the acquisition of Pennichuck Corporation. The school bonds are eligible for grant reimbursement payments equal to 30% of project costs, payable annually over the life of bonds issued for this purpose. In addition, there is $56.8 million in debt outstanding for the City's enterprise funds.

$27.2 million in new debt was issued in fiscal year 2015 for Citywide Capital improvements and Wastewater projects. Debt limitations are discussed in MD&A and in the statistical section.

A-4 Credit Rating During FY2015, the City’s credit rating was reaffirmed at AAA by Fitch Ratings and AA+ (Positive Outlook) by Standard & Poor’s Rating Services in connection with the issuance of general obligation bonds for the purposes noted above.

In reaffirming its AAA rating, Fitch cited the City’s: Strong financial management Diverse and expanding economic base Above average socioeconomic factors Low debt levels Manageable future retiree costs

In reaffirming its AA+ (Positive Outlook) rating, Standard & Poor’s noted the City’s: Strong economy Very strong budgetary flexibility Strong budgetary performance Very strong liquidity Very strong management Strong debt and contingent liability profile

Cash Management General fund and enterprise fund cash is invested at several New Hampshire banking institu- tions and the New Hampshire Deposit Investment Pool in accordance with the directives set forth in the City’s adopted investment policy. This policy is reviewed and approved by the Board of Aldermen. The policy has several objectives which include, but are not limited to, risk, liquidity, income, maturity and diversification. The City requires collateral on all invest- ments in the form of U.S. government obligations at no less than 102% in excess of the face value of the investment unless funds are marked to market. Commercial insurance coverage for amounts in excess of FDIC limits in the form of surety bonds issued by approved insurance corporations may be considered. The average yield for general fund investments during fiscal year 2015 was 0.40%, compared to 0.53% earned in the prior fiscal year.

The City’s trust funds must be invested pursuant to the provisions in the State of New Hampshire’s Revised Statutes Annotated Section 31:25. The objective of the investment policy is to receive a return that is sufficient to meet the obligations of the fund while remaining within those guidelines.

Benefits Cost Planning and Management The City has been successful in mitigating the escalating costs of healthcare benefits over the past several years. The appropriations for benefits costs have been relatively flat since FY2009, averaging approximately $26 million per year. This has been accomplished by increasing the percentage share that each employee subscriber contributes toward the cost of healthcare as well as introducing consumer driven strategies such as increasing co-pays and adding deduct- ibles. In addition, many employees have selected a high deductible plan with a companion Health Savings Account (HSA). HSAs are a great way for the employee subscriber to manage their healthcare costs with the potential to save for future healthcare expenses.

A-5 Summary of Financial Position and Operations-General Fund The City’s most significant sources of revenue continue to be property taxes, followed by the State Adequate Education Grant and motor vehicle revenues. Property tax collections remain strong overall; however investment income continues to experience declines due to the historically low interest rates. Tax collections stated as a percent of the current levy were 99.1%, consistent with the prior fiscal year. The City continues to negotiate payment plans for taxpayers unable to meet their property tax obligations, believing that, particularly in more challenging economic times, this strategy will benefit both the City and taxpayers. A ten-year comparison of property tax collection data is available in the statistical section.

During FY2015, the City received funding of $35.9 million in State Adequate Education Grant Funds. Motor vehicle revenue received during fiscal year 2015 came in at $13.2 million, an increase of $800,000 over the prior fiscal year. This particular revenue source has rebounded from the downward trend that began in early 2008 and continues to get stronger.

In 2005, the City of Nashua challenged the state formula for distributing education funding to schools from the statewide education tax (NH Laws 2005, Chapter 257). The Superior Court found in favor of Nashua in March 2006 and the State of New Hampshire appealed to the New Hampshire Supreme Court, which consolidated the case with similar claims filed by a coalition of 21 school districts. The Supreme Court stayed all cases pending legislative action and also remanded the Nashua case to the Superior Court for factual findings regarding damages. In 2007 and 2008 the legislature adopted a number of laws addressing the concerns raised before the Supreme Court. (See, NH Laws 2007, Chapter 262; NH Laws 2007, Chapter 263:35; NH Laws 2008, Chapter 173; and NH Laws 2008, Chapter 173.) The remanded Nashua case was settled by agreement of the parties on August 14, 2008 for a pay- ment of $125,000.

The City’s unassigned general fund balance position at the end of fiscal year 2015 was $27.7 million, an increase of $400,000 from the prior fiscal year.

Major Initiatives

Nashua Government Innovation (NGIN) Project In 2010, the City launched a $7.5 million multi-year modernization project to update many of the internal systems and provide a unified set of technologies, business processes and man- agement. This project was identified as the Nashua Government Innovation (NGIN) project.

To date, the City has implemented phase one of the initiative which includes the replacement of the core financial applications, the purchasing module, payroll processing which includes electronic time recording, and the Human Resource system. Currently underway are projects to replace the City’s property tax system and the implementation of an electronic document management system.

The NGIN project has and will continue to incorporate business process improvement and best practices for each phase of the project. These systems will promote and support elec- tronic sharing of information and government transparency.

A-6 Broad Street Parkway Project In 2009, the City authorized $37.6 million of debt issuance towards its portion of the construction of the Broad Street Parkway, with the balance of $30.5 million funded by the Federal Department of Transportation. The total budget for the project is $68.1 million. The 1.8 mile parkway provides a second bridge crossing over the Nashua River and will connect downtown Nashua, the Millyard, and other key redevelopment sites with Broad Street (near the exit 6 interchange). The Broad Street Parkway officially opened with a dedication on Saturday, December 19, 2015.

Local Economy The City of Nashua, ranked among the top twenty best affordable suburbs in the Northeast by Business Week magazine, continues to grow, reinvent and reinvigorate itself in response to changing economic trends and challenges. Nashua remains a regional retail hub—the second largest concentration of retail space in New England. In addition, Nashua is a regional center for healthcare services. Nashua maintains growing clusters within the high tech manufac- turing, software development, optics, radar systems, electronics, telecommunications, robotics and medical device manufacturing.

The City adopted its most recent City-wide Master Plan in 2001 and has a current Downtown Master Plan, East Hollis Street Master Plan, Economic Development Strategic Plan and a Consolidated Plan. These and other plans form the basis for public and private development decisions, budgetary decisions and future investment.

There is little land available in the City for new development; therefore, redevelopment and rehabilitation of existing sites has become and the focus, keeping Nashua on the forefront of economic, technological and social change. The City is undertaking ambitious redevelopment strategies for long-dormant Brownfields sites near the center of Nashua. The recently opened Broad Street Parkway is already stimulating redevelopment of the Nashua Millyard and downtown Nashua as these areas now have superior access to the F.E. Everett Turnpike. The recent occupancy of 109 units of mixed income housing at The Apartments at Cotton Mill was fully leased just 9 months after its opening in 2013. Another mill conversion project, Lofts 34 will bring another 168 units on line in 2016 and will continue the reemergence of downtown Nashua. On the eastern edge of the downtown, the East Hollis Street Gateway Project has begun. This project features the Bridge Street Waterfront Redevelopment Project, which has an approved plan for up to 228 units of housing within the first phase. Across the street, the City of Nashua was awarded $3.505 million from NH Department of Transportation to construct major traffic improvements which will improve circulation and provide critical access to the Bridge Street site. All of these development initiatives will reinvigorate downtown Nashua with people-intensive uses.

In South Nashua, a key redevelopment site is Gateway Hills, a 400-acre mixed-use devel- opment that will provide crucial expansion capacity for Nashua’s high tech cluster. An existing 750,000 sq. ft. high tech campus has been joined by 540 units of new construction, 40,000 sq. ft. of retail space and a newly opened 120 room hotel. Nearby, along Daniel Webster Highway, the Pheasant Lane Mall recently underwent the $20 million renovation project.

A-7 The City actively pursues all available funding opportunities and has been a successful recipient of federal funding from EPA Brownfield awards, Federal Transportation and Administration Grants, and Community Development Block Grants.

Transportation is essential to the viability of a community and the quality of life of its citizens. The City continues to make significant investments and plays an active role in supporting infrastructure improvements, extensions, expansions and transit. The transit system has been a proven success for over 25 years and continues to expand its service routes. An extension of the MBTA commuter line from the Lowell/Boston area to Nashua and potentially further north to Manchester and Concord, remains under consideration at Federal, State, and local levels. Commuter bus service between Nashua and Boston began in February 2007 and has developed a steady local ridership base which has exceeded projec- tions. During 2013, the City acquired a site for a future Park & Ride facility and a potential downtown rail station.

All of the aforementioned factors have contributed to a solid, strong, and diverse fiscal and economic atmosphere for the City and its citizens.

Financial Reporting Awards The City of Nashua has received a Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association of the United States and Canada (GFOA) for its CAFR for the last ten fiscal years. In order to receive this prestigious award the report must be easily readable and efficiently organized, the contents must conform to program standards, and it must satisfy both generally accepted accounting princi- ples and applicable legal requirements. The award is presented to government units and public employee retirement systems whose CAFRs achieve the highest standards in govern- ment accounting and financial reporting.

The Certificate of Achievement is valid for a period of one year only. We believe that this CAFR conforms to the standards required for the certificate and will be submitting it to the GFOA for review.

Acknowledgements The preparation and publication of this CAFR would not have been possible without the dedication and hard work of members of the Financial Services Division team. This accom- plishment also required contributions and cooperation from many departments throughout the City and we appreciate their efforts as well. We would also like to thank the Board of Aldermen for their continued support of the highest standards of professionalism in the management of the City’s finances.

Respectfully submitted,

Donnalee Lozeau John L. Griffin Mayor Chief Financial Officer

A-8 A-9 CITY OF NASHUA, NEW HAMPSHIRE LIST OF PRINCIPAL OFFICIALS FISCAL YEAR 2015

MAYOR

Donnalee Lozeau

ALDERMEN AT LARGE

David W. Deane, President Brian S. McCarthy, Vice President Jim Donchess Daniel T. Moriarty Mark S. Cookson Lori Wilshire

WARD ALDERMEN

Sean M. McGuinness ...... Ward 1 Richard A. Dowd ...... Ward 2 David Schoneman ...... Ward 3 Pamela T. Brown ...... Ward 4 Michael Soucy ...... Ward 5 Paul M. Chasse, Jr...... Ward 6 June M. Caron ...... Ward 7 Mary Ann Melizzi-Golja ...... Ward 8 Kenneth Siegel ...... Ward 9

A-10 CITY OF NASHUA, NEW HAMPSHIRE DIVISION AND DEPARTMENT HEADS FISCAL YEAR 2015

LEGAL Corporation Counsel Stephen Bennett, Esquire Deputy Corporation Counsel Dorothy Clarke, Esquire

BOARD OF ALDERMEN Aldermanic Legislative Manager Susan Lovering

OFFICE OF THE CITY CLERK City Clerk Paul R. Bergeron

HUMAN RESOURCES Human Resources Director Larry Budreau

OFFICE OF ECONOMIC DEVELOPMENT Economic Development Director Thomas Galligani, Jr.

INFORMATION TECHNOLOGY Chief Information Officer/IT Division Director Bruce Codagnone

FINANCIAL SERVICES DIVISION Chief Financial Officer/Comptroller John L. Griffin Treasurer/Tax Collector David G. Fredette Deputy Treasurer/Deputy Tax Collector Ruth Raswyck Accounting/Compliance Manager Rosemarie Evans Compensation Manager Doreen Beaulieu Purchasing Manager Daniel Kooken Risk Manager Jennifer Deshaies Chief Assessor/GIS Manager Angelo Marino

POLICE DEPARTMENT Chief Andrew Lavoie Deputy Chief Michael Carignan Deputy Chief Denis Linehan

A-11 FIRE DEPARTMENT Chief Steven Galipeau Assistant Fire Chief Brian Rhodes

DIVISION OF PUBLIC HEALTH AND COMMUNITY SERVICES Director Kerran Vigroux Manager, Community Health Jacqueline Aguilar Manager, Environmental Health Heidi Peek Welfare Officer Robert Mack

PUBLIC WORKS DIVISION Director Lisa Fauteux City Engineer Stephen Dookran Superintendent, Parks/Recreation Nicholas Caggiano Superintendent, Streets Eric Ryder Superintendent, Solid Waste Jeffrey Lafleur Superintendent, Wastewater Treatment David Simmons

COMMUNITY DEVELOPMENT DIVISION Director Sarah Marchant Manager, Planning Department Roger Houston Manager, Urban Programs Carrie Johnson Schena Building Department Manager William McKinney Code Enforcement Department Manager Nelson Ortega Transportation Department Manager Christopher Clow

PUBLIC LIBRARIES Director Jennifer McCormack Assistant Director, Library Jennifer Hosking

SCHOOL DEPARTMENT Superintendent Mark Conrad Chief Operating Officer Daniel Donovan

CEMETERIES Superintendent – Edgewood and Suburban Jeffrey Snow Superintendent – Woodlawn and Pinewood Paul (Len) Fornier, Jr.

A-12 A-13 A-14 INDEPENDENT AUDITORS’ REPORT 102 Perimeter Road Nashua, NH 03063 (603)882-1111 To the Honorable Mayor and Board of Aldermen melansonheath.com City of Nashua, New Hampshire Additional Offices: Andover, MA Report on the Financial Statements Greenfield, MA Manchester, NH We have audited the accompanying financial statements of the governmental activities,Ellsworth, the ME business-type activities, the aggregate discretely presented component units (except Nashua Airport Authority), each major fund, and the aggregate remaining fund information of the City of Nashua, New Hampshire, as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the Table of Contents.

Management’s Responsibility for the Financial Statements

The City’s management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of Nashua Airport Authority, which represents 8.1 percent, 52.7 percent, and 1.3 percent, respectively, of the assets, net position and revenues of the aggregate discretely presented component units. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for Nashua Airport Authority is based solely on the report of other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial

A-15 statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circum- stances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions

In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Nashua, New Hampshire, as of June 30, 2015, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the general fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that Management’s Discussion and Analysis, the Schedule of Funding Progress, the Schedule of Proportionate Share of Net Pension Liability, the Schedule of Contributions, the Schedule of Changes in Net Pension Liability, and the Schedules of Net Pension Liability, Contributions, and Investment Returns be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of finan- cial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with evidence sufficient to express an opinion or provide any assurance.

A-16 Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying supplemen- tary information appearing on pages 140 through 160 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The Introductory and the Statisti- cal Sections are presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has not been subjected to the auditing proce- dures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated December 30, 2015 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accord- ance with Government Auditing Standards in considering City’s internal control over finan- cial reporting and compliance.

December 30, 2015

A-17 MANAGEMENT’S DISCUSSION AND ANALYSIS

As management of the City of Nashua, we offer readers of the City of Nashua’s financial statements this narrative overview and analysis of the financial activities of the City of Nashua for the fiscal year ended June 30, 2015. All amounts, unless otherwise indicated, are expressed in thousands of dollars.

OVERVIEW OF THE FINANCIAL STATEMENTS

This discussion and analysis is intended to serve as an explanation of the basic financial state- ments. The basic financial statements are comprised of three components: (1) government- wide financial statements, (2) fund financial statements, and (3) notes to financial state- ments. This report also contains supplementary information in addition to the basic finan- cial statements.

Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City of Nashua’s finances in a manner similar to a private-sector business.

The Statement of Net Position presents information on all the City of Nashua's assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating.

The Statement of Activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

Both government-wide financial statements distinguish functions of the City of Nashua that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Nashua include general government, public safety, public works, education, health and human services, culture and recreation, community development and communications. The business-type activities of the City of Nashua include Waste- water and Solid Waste activities.

The government-wide financial statements include not only the City of Nashua itself (known as the primary government), but also legally separate entities for which the primary government is financially accountable (known as component units). Pennichuck Corporation and the Nashua Airport Authority are reported as a discretely presented governmental component units. Financial information for Pennichuck Corporation and the Nashua Airport Authority are reported separately from the financial information presented for the primary government.

A-18 Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objec- tives. The City of Nashua, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City of Nashua can be divided into three categories: governmental funds, proprietary funds and fiduciary funds.

Governmental funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as balances of spend- able resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government- wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City of Nashua maintains 26 individual governmental fund types. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the general fund. Data from all the other governmental funds are combined into a single aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report.

The City of Nashua adopts an annual appropriated budget for its general fund. A budg- etary comparison statement has been provided for the general fund to demonstrate compliance with this budget.

Proprietary funds The City of Nashua maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City of Nashua uses enterprise funds to account for its Wastewater and Solid Waste operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City of Nashua's various functions. The City of Nashua uses an internal service fund to account for its self-insured programs. Because this service predominantly benefits governmental rather than business-type functions, it has been included within governmental activities in the government-wide financial statements.

Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide sepa-

A-19 rate information for the Wastewater and Solid Waste operations, both of which are considered to be major funds of the City of Nashua.

Fiduciary funds Fiduciary funds are used to account for resources held for the benefit of parties outside the government (i.e., Public Works Pension Funds, Scholarship Funds, etc.). Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds.

Notes to financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.

Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City of Nashua’s progress in funding its obligation to provide pension benefits to its employees.

FINANCIAL HIGHLIGHTS

During the fiscal year, the City implemented the requirements of Governmental Accounting Standard Board (GASB) Statement No. 68 – Accounting and Financial Reporting for Pensions. Compliance with GASB68 requires that the City’s net pension liability be recorded on the Statement of Net Position, which reduces unrestricted net position, and, in the City’s case, creates a negative unrestricted net position. The City’s net pension liability as of June 30, 2015 is $191.8 million, of which, $184.9 million represents the City’s proportionate share of the New Hampshire Retirement System, and $6.9 million represents the City’s full share of the Public Works Employees’ Retirement System. The assets of the City of Nashua exceeded its liabilities at the close of the most recent fiscal year by $141,153 (net position), The City’s total net position increased by $22,210 in comparison to the prior year. This change is comprised of increases of $21,997 and $213 in Governmental and Business-Type Activities, respectively. As of the close of the current fiscal year, the City of Nashua's governmental funds reported combined ending fund balances of $104,607, an increase of $5,237 over the prior year. Approximately 25.3% or $26,425 constitutes unassigned fund balance which is available for spending at the City’s discretion. (This increase is discussed in Financial Analysis of the Government’s Funds). The City issued $27.2 million of new general obligation debt.

A-20 GOVERNMENT-WIDE FINANCIAL ANALYSIS

The following is a summary of condensed government-wide financial data for the current and prior fiscal year. All amounts are presented in thousands.

NET POSITION AT JUNE 30, 2015 AND 2014

Governmental Business-Type Activities Activities Total 2015(1) 2014 2015 2014 2015 2014 Current assets $256,744 $ 253,961 $ 25,854 $ 28,246 282,598 $ 282,207 Capital assets 284,975 258,448 158,667 153,827 443,642 412,275 Noncurrent assets 140,650 143,930 - - 140,650 143,930 Deferred outflows of resources 24,274 1,169 575 - 24,849 1,169 Total assets 706,643 657,508 185,096 182,073 $ 891,739 839,581 Current liabilities 58,108 62,303 20,017 18,815 78,125 81,118 Noncurrent liabilities 487,807 290,334 62,858 58,828 550,665 349,162 Deferred inflows of resources 121,334 93,223 462 - 121,796 93,223 Total liabilities 667,249 445,860 83,337 77,643 750,586 523,503 Net position: Invested in capital assets, net 158,393 139,619 94,937 93,304 253,330 232,923 Restricted 35,755 43,985 4,474 4,473 40,229 48,458 Unrestricted (154,754) 28,044 2,348 6,653 (152,406) 34,697 Total net position $39,394 $ 211,648 $ 101,759 $ 104,430 $ 141,153 $ 316,078

In FY2015, the City implemented the requirements of Governmental Accounting Standards Board (GASB) Statement 68, (1) Accounting and Financial Reporting for Pensions.

As depicted in the table above, the largest portion of the City of Nashua's net position, $253,330, reflects its investment in capital assets (e.g., land, buildings, machinery and equipment), less any related outstanding debt used to acquire those assets. The City of Nashua uses its capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

An additional portion of the City of Nashua's net position, $40,229, represents resources that are subject to external restrictions on how they may be used (i.e., grants, capital pro- jects, contributions, etc.). The remaining balance of net position ($152,406) is considered unrestricted and represents the government's ongoing obligations to citizens and creditors.

At the end of the current fiscal year, while the City’s unrestricted net position reflects a negative balance due to the impact of GASB68, the City is able to report a positive net position for the government as a whole, as well as for its separate Wastewater activities. The same situation held true for the prior fiscal year.

The restricted portion of net position $4,474 reported within the City of Nashua's business-type activities primarily represent the regulatory funds set-aside for the closure of the Nashua Four Hills Lined Landfill.

A-21 The following table indicates the changes in net position for governmental and business- type activities:

CHANGES IN NET POSITION

Governmental Business-Type Activities Activities Total 2015(1) 2014 2015 2014 2015 2014 Revenues: Program revenues: Charges for services $ 7,652 $ 10,642 $ 14,605 $ 13,482 $ 22,257 $ 24,124 Operating grants and contributions 64,217 63,496 - - 64,217 63,496 Capital grants and contributions 19,443 15,562 460 526 19,903 16,088 General revenues: Property taxes 189,295 183,227 - - 189,295 183,227 Motor vehicle 13,158 12,352 - - 13,158 12,352 Investment income 178 1,356 5 15 183 1,371 Penalties and interest on taxes 1,467 1,556 - - 1,467 1,556 Grants and contributions not restricted to specific programs 5,957 4,891 540 582 6,497 5,473 Other 3,098 2,233 - - 3,098 2,233 Total revenues 304,465 295,315 15,610 14,605 320,075 309,920

Expenses: General government 25,054 24,633 - - 25,054 24,633 Police 30,449 28,778 - - 30,449 28,778 Fire 22,657 21,098 - - 22,657 21,098 Water fire protection services 2,607 2,577 - - 2,607 2,577 Education 153,500 153,294 - - 153,500 153,294 Public works 11,816 11,331 - - 11,816 11,331 Health and human services 3,272 3,235 - - 3,272 3,235 Culture and recreation 7,123 7,166 - - 7,123 7,166 Community development 7,581 10,180 - - 7,581 10,180 Communications 526 630 - - 526 630 Interest and costs 13,651 13,233 - - 13,651 13,233 Wastewater services - - 12,931 11,548 12,931 11,548 Solid waste services - - 6,766 6,024 6,766 6,024 Total expenses 278,236 276,155 19,697 17,572 297,933 293,727 Increase\(decrease) in net position before transfers and permanent fund contributions 26,229 19,160 (4,087) (2,967) 22,142 16,193 Amortization of investment ------Transfers (4,300) (4,149) 4,300 4,149 - - Permanent fund contributions 68 71 - - 68 71 Increase in net position 21,997 15,082 213 1,182 22,210 16,264

Net position - beginning of year 17,398 196,566 101,545 103,248 118,943 299,814 Net position - end of year $ 39,395 $ 211,648 $ 101,758 $ 104,430 $ 141,153 $ 316,078

In FY2015, the City implemented the requirements of Governmental Accounting Standards Board (GASB) Statement 68, Accounting and (1) Financial Reporting for Pensions.

A-22 Governmental activities. Governmental activities for the year resulted in an increase in net position of $ 21,997 or 8.2%. Key elements of this change are as follows:

General fund excess of revenues over expenditures $ 970 General fund transfers to Solid Waste fund (4,355) Capital assets from current revenue 22,624 Increase in net OPEB obligation (2,224) Decrease in net pension liability, net of deferrals 3,911 Decrease in compensated absences 602 Other 469 Total $21,997

The chart below identifies revenues by source for governmental activities.

GOVERNMENTAL ACTIVITIES - REVENUES BY SOURCE Fiscal Year Ended June 30, 2015

Non Program Grants & Investment Penalties & Interest on Contributions Income Taxes 2.0% 0.1% Program Revenues - 0.5% Other Income Charges for Services 1.0% 2.5% Program Revenues - Motor Vehicle Permits Operating Grants & 4.3% Contributions 21.1%

Program Revenues - Property Taxes Capital Grants & 62.2% Contributions 6.4%

As reflected in the above chart, the City’s largest sources of revenue are from property taxes (62.2%) and operating grants and contributions (21.1%). The cost of all govern- mental activities this year was $278,237. This reflects a $2.1 million increase over the fiscal year 2014 total of $276,155. However, as shown in the Statement of Activities on page 35, the amount that our taxpayers ultimately financed for these activities through City property taxes was $189,295 because some of the cost was paid by those who directly benefited from the programs through charges for services or by other govern- ments and organizations that subsidized certain programs with capital and operating grants and contributions. The City supports the remaining portion of the governmental

A-23 activities with other general revenues such as motor vehicle registrations, investment income, unrestricted grants and contributions, and miscellaneous other revenues.

The table below presents the cost of each of the City’s programs as well as each pro- gram’s net cost (total cost less revenues generated by the activities). The net cost shows the amount that must be supported by property taxes and other general revenues.

Governmental Activities (In Millions)

Total Cost of Services Net Cost of Services 2015 2014 2015 2014 General Government $34,133 $ 33,571 $24,498 $ 21,339 Police 30,562 28,915 29,132 27,426 Fire 22,823 21,297 21,499 21,116 Water Fire Protection Services 2,607 2,577 2,607 2,577 Education 156,427 156,439 100,732 100,498 Public Works 12,711 11,665 (3,610) 3,701 Health and Human Services 3,272 3,235 2,043 2,086 Culture and Recreation 7,226 7,281 6,710 6,426 Community Development 7,736 10,369 2,573 584 Communications 740 806 740 702 $ 278,237 $ 276,155 $186,924 $ 186,455

Business-type activities. Overall, business-type activities increased the City’s net posi- tion by $213.

Key elements of this change are as follows:

The Wastewater Fund’s total net position decreased by $386. This decrease is predominantly due to increased operating and interest costs. The City continues to annually update its wastewater rate study model in order to ensure that rates are sufficient to cover the operating and capital costs of the wastewater system. A user fee rate increase of 15% was put into effect in January of 2014 with another increase planned for early calendar year 2016. The Solid Waste Disposal Fund increased its total net position by $599. This increase is largely due to an inter-fund transfer from the General Fund Capital Equipment Reserve Fund for capital equipment purchases. Solid waste operating activities continue to operate at a deficit with the City continuing to supplement the Solid Waste operations through property taxation for the residential costs of collection and disposal. There is currently no separate fee charged to the City’s residential population. The Solid Waste Disposal Fund negative net position of ($1,606) is primarily due to the fund’s high percentage of non-capital (landfill closure costs) related debt, as well as the GAAP (generally accepted accounting principles) requirement to

A-24 record closure and post closure care liability (the amount the City would be required to spend should the landfill cease operations).

The following charts depict revenues and expenses for business type activities:

A-25 FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS

As noted earlier, the City of Nashua uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental funds. The focus of the City of Nashua’s governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.

As of the end of the current fiscal year, the City of Nashua’s governmental funds reported combined ending fund balances of $104,607 an increase of $5,237 over the prior year and can be summarized as follows:

General fund excess of revenues over expenditures $ 970 General fund transfers to Solid Waste fund (4,355) Special Revenue Funds revenues exceeding expenditures 1,689 Capital Project Funds revenues and other financing sources exceeding expenditures (excluding transfers) 7,183 Permanent Fund expenditures exceeding revenues (289) Other 39 Total $5,237

$26,425, approximately 25.3%, of the total combined ending fund balances constitutes unassigned fund balance. The remaining components of fund balance, $78,182, are not available for new spending and are classified into the following categories:

Nonspendable $20,496 Restricted 26,042 Committed 21,967 Assigned 9,677 Total: $78,182

A-26 GOVERNMENTAL FUNDS FUND BALANCES Fiscal Year Ended June 30, 2015

Unassigned 25.3% Nonspendable 19.6%

Assigned 9.3% Restricted 24.9%

Committed 21.0%

The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unassigned fund balance of the general fund was $27,730 compared to $27,350 last year, while total general fund balance was $46,651 compared to $50,917 last year. As a measure of the general fund’s change in financial position, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures over time. Unassigned fund balance, represents 11% of total general fund expenditures compared to 11.3% with the prior year, while total fund balance represents 18.5% compared to 21% last year.

Proprietary funds. The City of Nashua’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unlike governmental funds, proprietary funds utilize the accrual basis of accounting. Therefore, no reconciliation is needed between the government-wide financial statements and the proprietary fund financial statements.

Factors concerning the finances of these two funds have already been addressed in the discussion of the City’s business-type activities.

GENERAL FUND BUDGETARY HIGHLIGHTS

The following reconciles the City’s adopted budget with the “original budget” columns of the Budget and Actual Financial Statements on page 40 and the Budget and Actual Detail Schedule on pages 153 - 154.

A-27 Total Adopted Budget $ 240,757 Plus: Hillsborough County appropriation 10,383 Plus: Appropriation to Solid Waste Fund 3,731 Plus: Supplemental Appropriation for Police Equipment 440 Plus: Supplemental Appropriation to the Jackson Mills Dam ETF 240 Total Original Budget, per Financial Statements/Schedules $ 255,551

The difference between the original and final amended budget resulted in an overall increase in appropriations of $1,115 and is summarized as follows:

Total Original Budget, per budgetary financial $ 255,551 statements/schedules Plus: Transfers in from Retirement Trust and Reserve Funds 1,115 Total Final Budget, per Financial Statements/Schedules $ 256,666

The combined difference between the final amended budget and actual results reflects an overall surplus of $4,779.

Actual revenues, transfers and other financing sources on a budgetary basis were $259,708 which represents a $3,042 surplus over the final revenue budget. Significant revenue surpluses are summarized as follows:

$1,551 in Motor Vehicle Registrations. $ 222 in Intergovernmental Medicaid reimbursements. $ 135 in Building Permits. $ 127 in Cable TV Franchise Fees. $ 165 in Bond Premiums $ 179 in Sale of Property and Equipment.

Actual expenditures, transfers and other financing uses on a budgetary basis were $254,929 resulting in a $1,737 surplus below the final expenditure budget. Highlights in expenditure variances include the following:

$1,005 in City-wide pension costs. $ 732 across all other Departments primarily due to salary attrition and savings realized through effective budget maintenance.

CAPITAL ASSET AND DEBT ADMINISTRATION

Capital assets. The City’s investment in capital assets for its governmental and business- type activities as of June 30, 2015 amounted to $443,642, net of accumulated depre- ciation, an increase of $31,367 over the prior fiscal year. This investment in capital assets includes land, buildings, vehicles, equipment, and infrastructure.

A-28 CAPITAL ASSETS AS OF JUNE 30, 2015 AND 2014 (net of accumulated depreciation)

Governmental Business-Type Activities Activities Total 2015 2014 2015 2014 2015 2014 Land and improvements $ 29,141 $ 29,121 $ 9,969 $ 10,512 $ 39,110 $ 39,633 Buildings and systems 149,685 155,485 40,658 42,065 190,343 197,550 Machinery and equipment 27,947 25,908 23,095 17,289 51,042 43,197 Infrastructure 27,833 23,370 80,454 64,274 108,287 87,644 Construction in progress 50,369 24,564 4,491 19,687 54,860 44,251 Total $ 284,975 $ 258,448 $ 158,667 $153,827$ 443,642 $ 412,275

Major capital asset additions during the current fiscal year included the following:

Governmental Activities

Broad Street Parkway Construction $ 16,986 Broad Street Elementary School Improvements 8,404 Citywide Communication Upgrades 3,347 Loop Traffic Signal Construction 2,307 Manchester Street Bridge Reconstruction 2,252 School Technology-Software & Hardware Upgrades 1,291 Citywide Street Paving Improvements 1,266

Pierce Arrow Fire Truck 1,087 Sunset Heights Elementary School HVAC Improvements 820 Fire-Mobile Training Simulator 499 Dr. Crisp Elementary School Roof Replacement 479 Self-Contained Breathing Apparatus Equipment 398

Business-type Activities

Wastewater Screening and Disinfection Facility Improvements $ 3,911 Sewer Infrastructure Improvements 1,399 Wastewater Secondary Clarifier Rehabilitation 982 Landfill Caterpillar Compactor 802 Landfill Caterpillar Dozer 355

Additional information concerning the City of Nashua’s capital assets can be found in Note 7 on pages 62 - 63.

Long-term debt. At the end of the current fiscal year, the City of Nashua had total debt outstanding of $325,692 compared to $319,678 in the prior year. Of this amount, $325,692 represents general obligation debt, which is backed by the full faith and credit of the government.

A-29 OUTSTANDING DEBT AS OF JUNE 30, 2015 AND 2014

Governmental Business-Type Activities Activities Total 2015 2014 2015 2014 2015 2014 Bonds and notes $268,874 $ 263,666 $ 56,818 $ 56,012 $ 325,692 $ 319,678 Capital leases ------Total $268,874 $ 263,666 $ 56,818 $ 56,012 $ 325,692 $ 319,678

During the fiscal year, the City issued $27,165 of new debt and retired $21,151 of outstanding debt through scheduled principal payments. New debt was issued for the following capital improvements:

Governmental Activities: Broad Street School Improvements $ 7,989 Broad Street Parkway Construction 7,278 Radio Communications Upgrade 5,196 Fire Aerial Tower Truck 976 Enterprise Resource Planning (ERP) System 450

Business Type Activities: Harbor Avenue Sewer Separation Project $ 4,600 Landfill Compactor 676

State statutes limit the amount of general obligation debt a governmental entity may issue to 3% of its total assessed valuation for the City or 7% of its total assessed valuation for the School. The City of Nashua has imposed more restrictive limits for City and School respectively of 2% for and 6% of total assessed valuation. The current debt limitation for the City and School combined is $694,042, which is significantly in excess of the current outstanding general obligation debt of $268,874. Additionally, principal outstanding on qualified school debt receives a 30% state building aid reimbursement. Wastewater and Solid Waste debt of $56,818 is not subject to these limitations.

During FY2015, the City’s credit rating was reaffirmed at AAA by Fitch Ratings and AA+ by Standard & Poor’s Rating Services in connection with the $22.6 million issuance of general obligation bonds for capital equipment and improvements.

Additional information on the City of Nashua's long-term debt can be found in Note 11 on pages 65 - 71.

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES

The City continues to see signs of local revenue growth, specifically in motor vehicle registration fees and building permit fees. As the national, state, and local economies continue to strengthen, Nashua has experienced increased development activity through- out the City’s commercial and residential zones. Likewise, the City continues to invest in capital equipment replacement, capital improvements for buildings and city-related infra-

A-30 structure, traffic mitigation, and other initiatives that promote economic growth and vibrancy. As noted by Fitch Ratings, the City has strong financial management, a diverse and expanding economic base, above-average socioeconomic factors, and a manageable debt burden.

Similar to many communities throughout the United States, Nashua continues to face significant cost pressures with regards to state pension costs and healthcare costs. In fiscal year 2016, employer pension rates increased as a result of the most recent actuarial valuation. The City has proactively set aside funds that can be used to smooth any future increases in employer rates. Additionally, during the past several years, the City has effectively implemented different strategies in an effort to mitigate rising health care costs. The City raised the employee contribution from 10% to 20% of the monthly premium, and introduced plan design changes to include higher co-payments and deductibles.

All of these factors were considered in preparing the City of Nashua’s budget for fiscal year 2016.

The City adopted a fiscal year 2016 General Fund operating budget of $259,736 (inclusive of the transfer to solid waste and Hillsborough County appropriation), com- pared to an adopted budget of $255,551 for fiscal year 2015. The budget reflects an overall increase of 1.7% over the prior year and did not require any service level reductions.

$5.1 million of assigned fund balance is planned to be used as a funding source towards the fiscal year 2016 tax rate.

REQUESTS FOR INFORMATION

This financial report is designed to provide a general overview of the City of Nashua’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to:

Financial Reporting City of Nashua 229 Main Street Nashua, New Hampshire 03061

A-31 (This page intentionally left blank.)

A-32 CITY OF NASHUA, NEW HAMPSHIRE

STATEMENT OF NET POSITION

JUNE 30, 2015 (Except for Pennichuck Corporation Component Unit, which is as of December 31, 2014)

Primary Government Business- Government Governmental Type Wide Component Activities Activities Total Units ASSETS Current: Cash and short-term investments $ 160,134,167 $ 23,250,138 $ 183,384,305 $ 3,057,784 Investments 65,013,737 - 65,013,737 67,914 Restricted cash and investments - - - 45,836,000 Receivables, net of allowance for uncollectibles: Property taxes 18,457,771 - 18,457,771 - User fees - 3,452,149 3,452,149 4,647,218 Departmental and other 301,408 - 301,408 - Intergovernmental 9,609,293 700,551 10,309,844 509,452 Loans 625,073 - 625,073 - Internal balances 1,548,427 (1,548,427) - - Due from external parties - fiduciary funds 336,292 - 336,292 - Other assets 717,508 - 717,508 2,390,000 Total current assets 256,743,676 25,854,411 282,598,087 56,508,368 Noncurrent: Capital assets being depreciated, net of accumulated depreciation 205,464,673 153,944,338 359,409,011 196,121,058 Capital assets not being depreciated 79,510,262 4,722,737 84,232,999 4,637,632 Acquisition premium - - - 78,885,000 Equity interest in Pennichuck 140,650,000 - 140,650,000 - Other assets - - - 13,446,000 Total non-current assets 425,624,935 158,667,075 584,292,010 293,089,690 DEFERRED OUTFLOWS OF RESOURCES 24,274,232 574,448 24,848,680 2,368,394 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES 706,642,843 185,095,934 891,738,777 351,966,452

LIABILITIES Current: Accounts payable 17,620,636 104 17,620,740 2,338,069 Retainage payable 1,228,943 - 1,228,943 221,000 Accrued liabilities 19,204,294 1,208,008 20,412,302 682,000 Notes payable - 13,913,542 13,913,542 - Other 980,029 - 980,029 - Current portion of long-term liabilities: Bonds and notes payable 14,040,107 4,838,165 18,878,272 26,275,000 Acquisition bonds payable 3,320,000 - 3,320,000 - Compensated absences 1,713,587 57,569 1,771,156 - Total current liabilities 58,107,596 20,017,388 78,124,984 29,516,069 Noncurrent: Bonds and notes payable 121,904,771 53,385,975 175,290,746 200,363,000 Acquisition bonds payable 137,330,000 - 137,330,000 - Compensated absences 17,326,270 582,084 17,908,354 13,200 Net OPEB obligation 22,458,215 524,125 22,982,340 2,016,000 Net pension liability - State of NH 184,879,108 - 184,879,108 269,731 Net pension liability - Board of Public Works 3,908,531 2,972,686 6,881,217 Other - 5,392,950 5,392,950 46,678,000 Total non-current liabilities 487,806,895 62,857,820 550,664,715 249,339,931 DEFERRED INFLOWS OF RESOURCES 121,333,636 462,169 121,795,805 21,159,381 TOTAL LIABILITIES AND DEFERRED INFLOWS OF RESOURCES 667,248,127 83,337,377 750,585,504 300,015,381

NET POSITION Net investment of capital assets 158,392,742 94,936,719 253,329,461 28,612,690 Restricted for: Pennichuck corporation - - - 23,369,000 Grants and other statutory restrictions 6,982,277 - 6,982,277 - Capital projects 7,233,862 4,473,789 11,707,651 - Permanent funds: Expendable 1,235,658 - 1,235,658 - Nonexpendable 20,304,609 - 20,304,609 - Unrestricted (154,754,432) 2,348,049 (152,406,383) (30,619) TOTAL NET POSITION $39,394,716 $ 101,758,557 $ 141,153,273 $ 51,951,071

The accompanying notes are an integral part of these financial statements.

A-33 CITY OF NASHUA, NEW HAMPSHIRE

STATEMENT OF ACTIVITIES

FOR FISCAL YEAR ENDED JUNE 30, 2015 (Except for Pennichuck Corporation Component Unit, which is as of December 31, 2014)

Program Revenues Operating Capital Indirect Cost Charges for Grants and Grants and Net (Expenses) Expenses Allocation Services Contributions Contributions Revenue

Primary Government Governmental Activities: General government $ 25,054,260 $ 9,078,835 $ 685,849 $ 8,949,241 $ - $ (24,498,005) Police 30,448,888 111,849 1,026,770 401,854 - (29,132,113) Fire 22,657,301 166,098 105,110 1,219,531 - (21,498,758) Water fire protection services 2,607,342 - - - - (2,607,342) Education 153,499,901 2 ,926,716 3,180,186 52,514,324 - (100,732,107) Public works 11,816,177 895,363 480,655 36,111 15,805,146 3,610,372 Health and human services 3,271,988 - 161,729 1,066,868 - (2,043,391) Culture and recreation 7,123,288 102,477 486,871 29,204 - (6,709,690) Community development 7,580,687 155,221 1,525,076 - 3,638,052 (2,572,780) Communications 526,204 214,124 - - - (740,328) Interest and costs 13,650,683 (13,650,683) - - - -

Total Governmental Activities 278,236,719 - 7,652,246 64,217,133 19,443,198 (186,924,142)

Business-Type Activities: Wastewater services 12,931,195 - 11,804,073 - 460,422 (666,700) Solid waste services 6,766,342 - 2,800,729 - - (3,965,613)

Total Business-Type Activities 19,697,537 - 14,604,802 - 460,422 (4,632,313) Total primary government $ 297,934,256 $- $ 22,257,048 $6 4,217,133$19,903,620 $ (191,556,455)

Component units: Pennichuck Corporation $ 40,039,000 $ - $ 38,815,000 $- $ - $ (1,224,000) Nashua Airport Authority 1,964,170 - 524,673 - 1,056,339 (383,158) Total component units $ 42,003,170 $ - $ 39,339,673 $- $ 1,056,339 $ (1,607,158)

The accompanying notes are an integral part of these financial statements. (continued)

A-34 CITY OF NASHUA, NEW HAMPSHIRE

STATEMENT OF ACTIVITIES

FOR FISCAL YEAR ENDED JUNE 30, 2015 (Except for Pennichuck Corporation Component Unit, which is as of December 31, 2014)

(continued)

Business- Governmental Type Component Activities Activities Total Units

Change in Net Position: Net (Expenses) Revenue from previous page $ (186,924,142) $ (4,632,313)$ (191,556,455) $ (1,607,158)

General Revenues, permanent fund contributions and transfers: Property taxes 189,294,796 - 189,294,796 - Auto permits 13,157,966 - 13,157,966 - Penalties, interest and other taxes 1,466,734 - 1,466,734 - Grants and contributions not restricted - to specific programs 5,957,113 540,023 6,497,136 - Investment income 177,712 5,349 183,061 1,861 Miscellaneous 3,098,340 - 3,098,340 - Permanent fund contributions 68,585 - 68,585 - Transfers in (out) (4,300,133) 4,300,133 - - Other Pennichuck adjustments - - - (946,000)

Total general revenues, contributions and transfers 208,921,113 4,845,505 213,766,618 (944,139)

Change in Net Position 21,996,971 213,192 22,210,163 (2,551,297)

Net Position: Beginning of year, as restated 17,397,745 101,545,365 118,943,110 54,502,368 End of year $ 39,394,716 $ 101,758,557 $ 141,153,273$ 51,951,071

A-35 CITY OF NASHUA, NEW HAMPSHIRE

GOVERNMENTAL FUNDS

BALANCE SHEET

JUNE 30, 2015

Debt Nonmajor Total Service Governmental Governmental General Fund Funds Funds ASSETS Cash and short-term investments $ 157,194,811 $- $ 2,939,356 $ 160,134,167 Investments 42,069,816 - 22,943,921 65,013,737 Receivables, net of allowance for uncollectibles: Property taxes 18,457,771 - - 18,457,771 Departmental and other 132,368 - 169,040 301,408 Intergovernmental 3,500 - 9,605,793 9,609,293 Loans - - 625,073 625,073 Due from other funds 20,762,034 4,312,424 21,749,114 46,823,572

TOTAL ASSETS $ 238,620,300 $ 4,312,424$ 58,032,297 $ 300,965,021

LIABILITIES Accounts payable $ 17,620,636 $ - $ 990 $ 17,621,626 Accrued liabilities 7,863,284 - 413,893 8,277,177 Due to other funds 66,949,240 - 3,701,624 70,650,864 Other liabilities 229,854 - - 229,854

TOTAL LIABILITIES 92,663,014 - 4,116,507 96,779,521

DEFERRED INFLOWS OF RESOURCES 99,306,735 - 271,579 99,578,314

FUND BALANCES Nonspendable 191,877 - 20,304,610 20,496,487 Restricted - 4,312,424 21,729,261 26,041,685 Committed 9,051,500 - 12,915,004 21,966,504 Assigned 9,677,264 - - 9,677,264 Unassigned 27,729,910 - (1,304,664) 26,425,246

TOTAL FUND BALANCES 46,650,551 4,312,424 53,644,211 104,607,186

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $238,620,300 $ 4,312,424$ 58,032,297 $ 300,965,021

The accompanying notes are an integral part of these financial statements.

A-36 CITY OF NASHUA, NEW HAMPSHIRE

RECONCILIATION OF TOTAL GOVERNMENTAL FUND BALANCES TO NET ASSETS OF GOVERNMENTAL ACTIVITIES IN THE STATEMENT OF NET POSITION

JUNE 30, 2015

Total governmental fund balances $104,607,186

Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 284,974,935

Revenues are reported on the accrual basis of accounting and are not deferred until collection. 3,373,755

To record investment in Pennichuck Waterworks. 140,650,000

Deferred outflows of resources related to losses on prior year bond refundings. 1,011,914

Deferred outflows of resources related to pensions resulting from: Differences between expected and actual experience 41,440 Net difference between projected and actual investment earnings 713,852 Changes in proportion and differences between contributions and proportionate share of contributions 3,074,353 Contributions subsequent to the measurement date 19,432,673

Deferred inflows of resources related to gains on current year bond refundings. (315,000)

Deferred inflows of resources related to pensions resulting from: Net difference between projected and actual investment earnings (23,655,436) Changes in assumptions (607,667) Changes in proportion and differences between contributions and proportionate share of contributions (550,974)

Internal service funds are used by management to account for health insurance and workers' compensation activities. The assets and liabilities of the internal service funds are included in the governmental activities in the Statement of Net Position. 17,638,072

In the Statement of Activities, interest is accrued on outstanding long-term debt, whereas in governmental funds interest is not reported until due. (4,113,798)

Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the governmental funds: Bonds payable (135,944,878) Acquisition bonds payable (140,650,000) Compensated absences (19,039,857) Net OPEB obligation (22,458,215) Net pension liability - State of NH (184,879,108) Net pension liability - Board of Public Works (3,908,531)

Net position of governmental activities $39,394,716

The accompanying notes are an integral part of these financial statements.

A-37 CITY OF NASHUA, NEW HAMPSHIRE

GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

FOR FISCAL YEAR ENDED JUNE 30, 2015

Debt Nonmajor Total Service Governmental Governmental General Fund Funds Funds Revenues: Property taxes $ 189,042,677 $- $ 327,334 $ 189,370,011 Auto permits 12,457,966 - 700,000 13,157,966 Penalties, interest and other taxes 1,100,240 - 366,494 1,466,734 Charges for services 1,087,212 - 4,784,906 5,872,118 Intergovernmental 45,176,606 - 33,519,082 78,695,688 Licenses and permits 1,380,174 - - 1,380,174 Interest earnings 472,974 - (218,290) 254,684 Miscellaneous 2,373,632 - 996,973 3,370,605 Contributions - 8,763,122 708,629 9,471,751 Total Revenues 253,091,481 8,763,122 41,185,128303,039,731

Expenditures: Current: General government 13,435,903 - 889,955 14,325,858 Police 29,200,580 - 1,805,788 31,006,368 Fire 21,920,727 - 2,486,022 24,406,749 Water fire protection services 2,607,342 - - 2,607,342 Education 133,194,372 - 22,198,898 155,393,270 Public works 12,210,895 - 19,792,010 32,002,905 Health and human services 2,192,487 - 1,108,127 3,300,614 Culture and recreation 6,596,462 - 368,807 6,965,269 Community development 2,116,217 - 4,860,347 6,976,564 Communications 299,615 - 3,381,160 3,680,775 Debt service Principal 13,025,778 3,280,000 60,000 16,365,778 Interest and issuance cost 4,938,213 5,483,122 28,854 10,450,189 Intergovernmental 10,383,051 - - 10,383,051 Total Expenditures 252,121,642 8,763,122 56,979,968 317,864,732 Excess (deficiency) of revenues over expenditures 969,839 - (15,794,840) ( 14,825,001) Other Financing Sources (Uses): Issuance of bonds - - 21,888,749 21,888,749 Issuance of refunding bonds 4,760,000 - - 4,760,000 Bond premiums - - 2,488,519 2,488,519 Bond premiums on refunding bonds 610,993 - - 610,993 Payment to refunded escrow agent (5,386,403) - - (5,386,403) Transfers in 655,147 - 1,601,408 2,256,555 Transfers out (5,876,209) - (680,479) (6,556,688) Total Other Financing Sources (Uses) (5,236,472) - 25,298,197 20,061,725 Change in fund balance (4,266,633) - 9,503,357 5,236,724 Fund Balance, July 1, 2014 50,917,184 4,312,424 44,140,854 99,370,462 Fund Balance, June 30, 2015 $46,650,551 $4,312,424 $ 53,644,211$104,607,186

The accompanying notes are an integral part of these financial statements.

A-38 CITY OF NASHUA, NEW HAMPSHIRE

RECONCILIATION OF THE STATEMENT OF REVENUES EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED JUNE 30, 2015

Net changes in fund balances - Total governmental funds $5,236,724

Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense: Capital outlay purchases, net of disposals 40,073,184 Depreciation (13,294,477) Loss on disposal of capital assets (252,330) Revenues in the Statement of Activities that do not provide current financial resources are fully deferred in the Statement of Revenues, Expenditures and Changes in Fund Balances. Therefore, the recognition of revenue for various types of accounts receivable (i.e., real estate and personal property, motor vehicle excise, etc.) differ between the two statements. This amount represents the net change in deferred revenue. (255,821) The issuance of long-term debt (e.g., bonds and leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the financial resources of governmental funds. Neither transaction, however, has any effect on net position: Issuance of general obligation bonds (21,888,749) Issuance of refunding bonds (4,760,000) Repayments of debt 16,365,781 Refunded debt 5,075,000 Bond premiums (2,307,771) Gain on refunding bonds (315,000) To record amortization of Equity Interest in Pennichuck. (3,280,000) In the Statement of Activities, interest is accrued on outstanding long-term debt, whereas in governmental funds interest is not reported until due. 71,498 Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore, are not reported as expenditures in the governmental funds: Decrease in compensated absences liability 601,643 Increase in net OPEB obligation (2,223,575) Decrease in net pension liability, and related deferred inflows and outflows 3,910,915 Other (157,333) Internal service funds are used by management to account for health insurance and workers' compensation activities. The net activity of internal service funds is reported with Governmental Activities. (602,718) Change in net position of governmental activities $21,996,971

The accompanying notes are an integral part of these financial statements.

A-39 CITY OF NASHUA, NEW HAMPSHIRE

GENERAL FUND

STATEMENT OF REVENUES AND OTHER SOURCES, AND EXPENDITURES AND OTHER USES - BUDGET AND ACTUAL

FISCAL YEAR ENDED JUNE 30, 2015

Budgeted Amounts Variance with Final Budget Original Final Actual Positive Budget Budget Amounts (Negative) Revenues and Other Sources: Taxes $ 188,644,284 $ 188,644,284 $ 188,644,284$- Auto permits 10,907,000 10,907,000 12,457,967 1,550,967 Penalties, interest and other taxes 1,058,000 1,058,000 1,100,240 42,240 Charges for services 1,017,034 1,017,034 1,235,108 218,074 Intergovernmental 44,880,559 44,880,559 45,119,462 238,903 Licenses and permits 1,162,050 1,162,050 1,382,224 220,174 Interest earnings 400,000 400,000 446,507 46,507 Miscellaneous 1,522,498 1,522,498 2,098,495 575,997 Transfers in 619,587 1,734,911 1,718,362 (16,549) Other sources 5,340,000 5,340,000 5,505,585 165,585 Total Revenues and Other Sources 255,551,012 256,666,336 259,708,234 3,041,898

Expenditures and Other Uses: General government 14,471,080 15,485,036 14,180,161 1,304,875 Police 27,752,915 28,497,744 28,328,074 169,670 Fire 21,336,559 21,573,001 21,564,983 8,018 Water fire protection services 2,634,760 2,634,760 2,632,342 2,418 Education 133,799,926 132,765,375 132,730,608 34,767 Public works 9,108,980 9,318,861 9,305,305 13,556 Health and human services 2,441,011 2,422,709 2,336,760 85,949 Culture and recreation 6,157,594 6,153,085 6,081,581 71,504 Community development 2,464,864 2,433,135 2,414,031 19,104 Communications 334,153 333,460 309,587 23,873 Debt service 18,072,688 18,072,688 18,068,991 3,697 Intergovernmental 10,383,051 10,383,051 10,383,051 - Transfers out 6,593,431 6,593,431 6,593,431 - Total Expenditures and Other Uses 255,551,012 256,666,336 254,928,905 1,737,431 Excess of revenues and other sources over expenditures and other uses $ - $ - $ 4,779,329 $4,779,329

The accompanying notes are an integral part of these financial statements.

A-40 CITY OF NASHUA, NEW HAMPSHIRE

PROPRIETARY FUNDS

STATEMENT OF NET POSITION

JUNE 30, 2015

Business-Type Activities Governmental Enterprise Funds Activities Waste Solid Internal Water Waste Service Fund Fund Total Funds ASSETS Current: Cash and short-term investments $ 18,669,156 $ 4,580,982 $ 23,250,138 $ - User fees, net of allowance for uncollectibles 3,179,698 272,451 3,452,149 - Intergovernmental receivable 700,551 - 700,551 - Due from other funds - 85,402 85,402 25,712,011 Other assets - - - 717,508 Total current assets 22,549,405 4,938,835 27,488,240 26,429,519 Noncurrent: Capital assets being depreciated, net 139,209,539 14,734,799 153,944,338 - Capital assets not being depreciated 4,491,032 231,705 4,722,737 - Total noncurrent assets 143,700,571 14,966,504 158,667,075 - DEFERRED OUTFLOWS OF RESOURCES 323,127 251,321 574,448 - TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES 166,573,103 20,156,660 186,729,763 26,429,519

LIABILITIES Current: Accounts payable - 104 104 - Due to other funds 1,633,829 - 1,633,829 - Accrued liabilities 949,502 258,506 1,208,008 8,041,272 Notes payable 13,913,542 - 13,913,542 - Other liabilities - - - 750,175 Current portion of long-term liabilities: Bonds and notes payable 3,022,541 1,815,624 4,838,165 - Compensated absences 28,843 28,726 57,569 - Total current liabilities 19,548,257 2,102,960 21,651,217 8,791,447 Noncurrent: Bonds and notes payable 41,167,518 12,218,457 53,385,975 - Compensated absences 291,637 290,447 582,084 - Net OPEB obligations 268,515 255,610 524,125 - Net pension liability - Board of Public Works 1,672,136 1,300,550 2,972,686 - Landfill closure and post closure - 5,392,950 5,392,950 - Total noncurrent liabilities 43,399,806 19,458,014 62,857,820 - DEFERRED INFLOWS OF RESOURCES 259,970 202,199 462,169 - TOTAL LIABILITIES AND DEFERRED INFLOWS OF RESOURCES 63,208,033 21,763,173 84,971,206 8,791,447

NET POSITION

Net investment in capital assets 88,956,896 5,979,823 94,936,719 - Restricted for capital projects - 4,473,789 4,473,789 - Unrestricted 14,408,174 (12,060,125) 2,348,049 17,638,072 TOTAL NET POSITION $103,365,070 $ (1,606,513)$ 101,758,557 $ 17,638,072

The accompanying notes are an integral part of these financial statements.

A-41 CITY OF NASHUA, NEW HAMPSHIRE

PROPRIETARY FUNDS

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION

FOR FISCAL YEAR ENDED JUNE 30, 2015

Business-Type Activities Governmental Enterprise Funds Activities Waste Solid Internal Water Waste Service Fund Fund Total Fund

Operating Revenues: Charges for services $ 11,727,364 $ 2,557,071 $ 14,284,435 $ - Employer contributions - - - 28,573,972 Employee and retiree contributions - - - 10,884,670 Other 76,709 243,658 320,367 1,743,873 Total Operating Revenues 11,804,073 2,800,729 14,604,802 41,202,515

Operating Expenses: Personnel expenses 3,531,514 2,680,642 6,212,156 - Non-personnel expenses 3,170,060 1,774,267 4,944,327 41,811,273 Depreciation 4,993,740 1,714,096 6,707,836 - Total Operating Expenses 11,695,314 6,169,005 17,864,319 41,811,273 Operating Income (Loss) 108,759 (3,368,276) (3,259,517) (608,758)

Nonoperating Revenues (Expenses): Intergovernmental 331,785 208,238 540,023 - Investment income 4,134 1,215 5,349 6,040 Loss on disposal of capital assets - (239,703) (239,703) - Interest expense (1,235,881) (357,634) (1,593,515) - Total Nonoperating Revenues (Expenses), Net (899,962) (387,884) (1,287,846) 6,040 Income (Loss) Before Transfers and Contributions (791,203) (3,756,160) (4,547,363) (602,718) Capital contributions 460,422 - 460,422 - Transfers in - 4,355,133 4,355,133 - Transfers out (55,000) - (55,000) - Change in Net Position (385,781) 598,973 213,192 (602,718) Net Position at Beginning of Year 103,750,851 (2,205,486) 1 01,545,365 18,240,790 Net Position at End of Year $ 103,365,070 $ (1,606,513)$ 1 01,758,557$ 17,638,072

The accompanying notes are an integral part of these financial statements.

A-42 CITY OF NASHUA, NEW HAMPSHIRE

PROPRIETARY FUNDS

STATEMENT OF CASH FLOWS

FOR FISCAL YEAR ENDED JUNE 30, 2015

Business-Type Activities Governmental Enterprise Funds Activities Waste Solid Internal `WaterWasteService Fund Fund Total Fund Cash Flows From Operating Activities: Receipts from customers and users $ 11,636,706 $ 2,656,165$ 14,292,871 $ 12,628,543 Receipts from interfund services provided - - - 28,573,972 Payments to vendors (3,524,217) (1,277,053) (4,801,270) (42,711,722) Payments to employees (3,136,419) (2,674,788) (5,811,207) - Net Cash Provided By (Used for) Operating Activities 4,976,070 (1,295,676) 3,680,394 (1,509,207)

Cash Flows From Noncapital Financing Activities: Proceeds from interfund loan agreements - 54,948 54,948 - Payments under interfund loan agreements (1,561,259) - (1,561,259) 1,503,167 Transfers (55,000) 4,355,133 4,300,133 - Intergovernmental subsidy 331,785 208,238 540,023 - Net Cash Provided By (Used for) Noncapital Financing Activities (1,284,474) 4,618,319 3,333,845 1,503,167

Cash Flows From Capital and Related Financing Activities: Acquisition and construction of capital assets (9,815,887) (1,971,964) (11,787,851) - Contributions 245,411 - 245,411 - Proceeds from bonds and notes 17,796,388 747,000 18,543,388 - Principal payments on bonds and leases (7,313,220) (1,757,215) (9,070,435) - Interest expense (976,675) (387,759) (1,364,434) - Net Cash Provided By (Used For) Capital and Related Financing Activities (63,983) (3,369,938) (3,433,921) -

Cash Flows From Investing Activities: Investment income 4,134 1,215 5,349 6,040 Net Change in Cash and Short-Term Investments 3,631,747 (46,080) 3,585,667 - Cash and Short-Term Investments, Beginning of Year 15,037,409 4,627,062 19,664,471 - Cash and Short-Term Investments, End of Year $ 18,669,156 $ 4,580,982$ 23,250,138 $ -

Reconciliation of Operating Income to Net Cash Provided by (Used For) Operating Activities: Operating income (loss) $ 108,759 $ (3,368,276) $ (3,259,517) $ (608,758) Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities: Depreciation 4,993,740 1,714,096 6,707,836 - Changes in assets and liabilities: User fees (170,934) (140,264) (311,198) - Deferred outflows of resources (323,127) (251,321) (574,448) - Other assets - - - 3,174 Accounts payable - (1,345) (1,345) - Accrued liabilities 21,384 7,822 29,206 (922,600) Net OPEB obligation 36,847 30,578 67,425 - Net pension liability 49,431 38,446 87,877 - Landfill closure and postclosure - 472,389 472,389 - Other liabilities - - - 18,977 Deferred inflows of resources 259,970 202,199 462,169 - Net Cash Provided By (Used for) Operating Activities $ 4,976,070 $ (1,295,676) $3 ,680,394$ (1,509,207)

The accompanying notes are an integral part of these financial statements.

A-43 CITY OF NASHUA, NEW HAMPSHIRE

FIDUCIARY FUNDS

STATEMENT OF FIDUCIARY NET POSITION

JUNE 30, 2015

Private Purpose Pension Trust Agency Trust Funds Funds ASSETS

Cash and short-term investments $426,621 $245,945 $260,290 Investments Fixed income securities 7,536,599 1,802,246 - Equities 23,333,267 3,179,129 - Mutual funds 6,465,030 370,307 - Total Investments 37,334,896 5,351,682 - Total Assets $37,761,517 $5,597,627 $260,290

LIABILITIES

Accrued liabilities $ 44,734 $ - $ - Other liabilities - - 259,990 Due to external parties - governmental funds 204,640 131,352 300 Total Liabilities 249,374 131,352 260,290

NET POSITION

Total net position restricted for pensions and other purposes 37,512,143 5,466,275 - Total Liabilities and Net Position $37,761,517 $5,597,627 $260,290

The accompanying notes are an integral part of these financial statements.

A-44 CITY OF NASHUA, NEW HAMPSHIRE

FIDUCIARY FUNDS

STATEMENT OF CHANGES IN FIDUCIARY NET POSITION

FOR FISCAL YEAR ENDED JUNE 30, 2015

Private Purpose Pension Trust Trust Fund Funds Additions: Contributions: Employers $ 772,343 $ - Plan members 772,343 - Other 2,226 8,552 Total contributions 1,546,912 8,552

Investment Income: Dividend, interest and investment income 1,308,368 252,734 Less: management fees (186,901) -

Total Investment income 1,121,467 252,734

Total additions 2,668,379 261,286

Deductions: Benefit payments to plan members and beneficiaries 2,526,991 134,220 Administrative expenses 20,360 39,475

Total deductions 2,547,351 173,695

Net increase 121,028 87,591

Net position held in trust: Beginning of year 37,391,115 5,378,684

End of year $ 37,512,143 $ 5,466,275

The accompanying notes are an integral part of these financial statements.

A-45 CITY OF NASHUA, NEW HAMPSHIRE Statement of Net Position Component Units June 30, 2015 (Except for Pennichuck Corporation Component Unit, which is as of December 31, 2014)

Nashua Pennichuck Airport Corporation Authority Total ASSETS Current assets: Cash and cash equivalents $2,987,000 $70,784 $3,057,784 Investments - 67,914 67,914 Restricted cash and investments 45,836,000 - 45,836,000 Receivables, net of allowance for uncollectibles: User fees 4,631,000 16,218 4,647,218 Intergovernmental - 509,452 509,452 Inventory 802,000 - 802,000 Prepaid expenses 1,588,000 - 1,588,000 Total current assets 55,844,000 664,368 56,508,368 Noncurrent assets: Non-depreciable capital assets - 4,637,632 4,637,632 Depreciable capital assets, net 173,287,000 22,834,058 196,121,058 Other noncurrent assets 13,342,000 - 13,342,000 Acquisition premium 78,885,000 - 78,885,000 Investment in real estate partnership 104,000 - 104,000 Total noncurrent assets 265,618,000 27,471,690 293,089,690 DEFERRED OUTFLOWS OF RESOURCES 2,345,000 23,394 2,368,394 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES 323,807,000 28,159,452 351,966,452

LIABILITIES Current liabilities: Accounts payable and other liabilities 1,980,000 358,069 2,338,069 Accrued payroll 221,000 - 221,000 Accrued interest payable 682,000 - 682,000 Current portion of long-term liabilities: Bonds, notes payable and other obligations 26,275,000 - 26,275,000 Total current liabilities 29,158,000 358,069 29,516,069 Noncurrent liabilities: Regulatory liability 803,000 - 803,000 Bonds, notes payable and other obligations 200,363,000 - 200,363,000 Compensated absences - 13,200 13,200 Post-employment benefits obligations 2,016,000 - 2,016,000 Accrued pension liability 8,017,000 - 8,017,000 Net pension liability - 269,731 269,731 Liability for derivative instruments 583,000 - 583,000 Contributions in aid of construction 36,532,000 - 36,532,000 Other noncurrent liabilities 743,000 - 743,000 Total noncurrent liabilities 249,057,000 282,931 249,339,931 DEFERRED INFLOWS OF RESOURCES 21,002,000 157,381 21,159,381 TOTAL LIABILITIES AND DEFERRED INFLOWS OF RESOURCES 299,217,000 798,381 300,015,381

NET POSITION Net investment in capital assets 1,221,000 27,391,690 28,612,690 Restricted for: Pennichuck corporation 23,369,000 - 23,369,000 Unrestricted - (30,619) (30,619) Total net position $24,590,000 $27,361,071 $51,951,071

The notes to the financial statements are an integral part of this statement.

A-46 CITY OF NASHUA, NEW HAMPSHIRE Statement of Revenues, Expenses and Changes in Net Position Component Units Fiscal Year Ending June 30, 2015 (Except for Pennichuck Corporation Component Unit, which is as of December 31, 2014)

Nashua Pennichuck Airport Corporation Authority Total Operating Revenues: Charges for services $ 38,815,000 $ 475,137 $ 39,290,137 Other - 49,536 49,536 Total Operating Revenues 38,815,000 524,673 39,339,673

Operating Expenses: Cost of services 18,221,000 514,329 18,735,329 Taxes other than income taxes 5,541,000 - 5,541,000 Depreciation 6,148,000 1,324,496 7,472,496 Total Operating Expenses 29,910,000 1,838,825 31,748,825 Operating Income (Loss) 8,905,000 (1,314,152) 7,590,848

Nonoperating Revenues (Expenses): Interest income - 1,861 1,861 Interest expense (10,156,000) (2,963) (10,158,963) Other nonoperating revenues (expenses) 27,000 (122,382) (95,382) Nonoperating Revenues (Expenses), Net (10,129,000) (123,484) (10,252,484) Income (Loss) Before Contributions (1,224,000) (1,437,636) (2,661,636)

Capital contributions - 1,056,339 1,056,339 (Provision for) Benefit from income taxes (551,000) - (551,000) Other (395,000) - (395,000) Change in net position (2,170,000) (381,297) (2,551,297) Stockholders' equity/Net position, beginning, as restated 26,760,000 27,742,368 54,502,368 Stockholders' equity/Net position, ending $ 24,590,000 $ 27,361,071 $ 51,951,071

The notes to the financial statements are an integral part of this statement.

A-47 CITY OF NASHUA, NEW HAMPSHIRE

Notes to Financial Statements

1. Summary of Significant Accounting Policies

The accounting policies of the City of Nashua (the City) conform to generally accepted accounting principles (GAAP) as applicable to governmental units. The following is a summary of the more significant policies:

A. Reporting Entity

The City is a municipal corporation governed by an elected Mayor and Board of Aldermen. As required by generally accepted accounting principles, these finan- cial statements present the government and applicable component units for which the government is considered to be financially accountable.

Blended Component Unit The Board of Public Works Retirement System (the System) was established to provide retirement benefits exclusive to regular employees of the Board of Public Works (the Board). The System is governed by a board of five trustees, comprised of one member of the Board of Public Works, two representatives of the public works employees, one member of the Board of Aldermen, and one member appointed by the Mayor. The System is presented using the accrual basis of accounting and is reported as a pension trust fund in the fiduciary fund financial statements. The System met the required GASB 14 (as amended) criteria of a blended component unit as the benefits provided are exclusively or almost exclusively to the City or its employees.

Discretely Presented Component Units In fiscal year 2015, it was determined that the Pennichuck Corporation and Nashua Airport Authority met the required GASB 14 (as amended) criteria of dis- cretely presented component units.

Pennichuck Corporation (Pennichuck) is a holding company headquartered in Merrimack, New Hampshire with five wholly owned operating subsidiaries. Pennichuck Water Works, Inc., Pennichuck East Utility, Inc., and Pittsfield Aqueduct Company, Inc. are involved in regulated water supply and distribution to customers in New Hampshire. Pennichuck Water Service Corporation conducts non-regulated water-related services, while the Southwood Corporation owns several parcels of undeveloped land. On January 25, 2012, the City purchased all of the outstanding shares acquiring control of Pennichuck’s assets, liabilities, and businesses. Pennichuck remains an independent corporation with the City as its sole shareholder. Pennichuck meets the criteria as a discretely presented compo- nent unit as the City owns a majority of the equity interest in Pennichuck, and the intent of the acquisition was to enhance the control of water resources and watershed, along with providing stability in water rates.

A-48 The Nashua Airport Authority (the Authority) was established on August 27, 1961 by legislative act as a separate legal entity. The Authority is located at Boire Field in Nashua, New Hampshire and provides general airport operations as well as airplane tie-down rentals. The Authority is governed by a five member board, to be appointed by the Mayor and confirmed by the Board of Aldermen. The Authority meets the criteria as a discretely presented component unit as the City can appoint a voting majority of the Authority’s governing board and can impose a financial burden as the City can guarantee the principal and interest of any bonds issued by the Authority.

B. Government-wide and Fund Financial Statements

Government-wide Financial Statements The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the nonfiduciary activities of the primary government. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable.

The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.

Fund Financial Statements Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation

Government-Wide Financial Statements The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund (other than Agency funds which have no measurement focus) financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are

A-49 levied. Grants and similar items are recognized as revenue as soon as all eligi- bility requirements imposed by the provider have been met. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements.

Amounts reported as program revenues include (1) charges to customers or applicants for goods, services, or privileges provided, (2) operating grants and contributions, and (3) capital grants and contributions, including special assess- ments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.

Fund Financial Statements Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers property tax and intergovernmental revenues to be available if they are collected within 60 days of the end of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the City. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expend- itures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.

The government reports the following major governmental funds:

The General Fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Debt Service Fund is used to account for resources and debt service payments associated with the bond issuance for the acquisition of Pennichuck Corporation.

Proprietary funds (which include both enterprise and internal service funds) distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the enterprise fund are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non- operating revenues and expenses.

The government reports the following major proprietary funds:

Wastewater enterprise fund that accounts for the resources and cost associated with the City’s wastewater treatment.

A-50 Solid Waste enterprise fund that accounts for the resources and costs associated with the City’s landfills.

The City’s self-insured programs are reported as an internal service fund in the accompanying financial statements.

The Pension Trust fund accounts for the activities of the Board of Public Works Employees Contributory Retirement System, which accumulates resources for pension benefit payments to qualified employees. No separate issue financial statement is available.

The Private-Purpose Trust fund is used to account for trust arrangements, other than those properly reported in the pension trust fund or permanent fund, under which principal and investment income exclusively benefit individuals, private organizations, or other governments.

The Agency funds include escrow deposits and performance bonds. These funds are custodial in nature and do not involve measurement of results of operations.

D. Cash and Short-Term Investments

Cash balances from all funds, except those required to be segregated by law, are combined to form a consolidation of cash. Cash balances are invested to the extent available, with the exception of such cash necessary to maintain adequate liquidity, and interest earnings are recognized in the General Fund. Certain special revenue, proprietary, and fiduciary funds segregate cash, and investment earnings become a part of those funds.

Deposits with financial institutions consist primarily of demand deposits, certifi- cates of deposits, and savings accounts. A cash and investment pool is maintained that is available for use by all funds. Each fund’s portion of this pool is reflected on the combined financial statements under the caption “cash and short-term investments”. The interest earnings attributable to each fund type are included under investment income.

For purpose of the statement of cash flows, the proprietary funds consider invest- ments with original maturities of three months or less to be short-term investments.

E. Investments

State and local statutes, as well as the City’s investment policy, place certain limitations on the nature of deposits and investments available. Deposits in any financial institution may not exceed certain levels within the financial institution. Non-fiduciary fund investments can be made in securities issued by or uncondi- tionally guaranteed by the U.S. Government or agencies that have a maturity of one year or less from the date of purchase and repurchase agreements guaranteed by such securities with maturity dates of no more than 90 days from the date of purchase.

A-51 Investments for the Trust Funds consist of marketable securities, bonds and short- term money market investments. Investments are carried at fair value.

F. Interfund Receivables and Payables

Transactions between funds that are representative of lending/borrowing arrange- ments outstanding at the end of the fiscal year are referred to as either “due from/to other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans).

Advances between funds are offset by a fund balance reserve account in applica- ble governmental funds to indicate the portion not available for appropriation and not available as expendable financial resources.

Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances”.

The government-wide Statement of Activities eliminates transfers as reported within the segregated governmental and business-type activities columns. Only transfers between these two columns appear in this statement.

G. Loans

The Economic Development Office administers loan programs that provides for working capital and capital asset financing for start-up and existing businesses in the Nashua area. The City records a receivable for the principal amount of the loan issued.

H. Inventories

Inventories are valued at cost using the first-in/first-out (FIFO) method. The costs of governmental fund-type inventories are recorded as expenditures when pur- chased rather than when consumed. No significant inventory balances were on hand in governmental funds.

I. Capital Assets

Capital assets, which include property, plant, equipment and infrastructure assets, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial individual cost of more than $15,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized.

A-52 Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed.

Property, plant and equipment are depreciated using the straight-line method over the following estimated useful lives:

Assets Years Buildings 40 Building improvements 20 - 40 Infrastructure 7 - 60 Vehicles 3 - 8 Machinery and equipment 5 - 20 Computer equipment 3 - 5

J. Equity Interest in Pennichuck

The City’s equity interest in Pennichuck Corporation represents, through the acquisition of all outstanding shares, the control of all of Pennichuck’s assets, liabilities and businesses, including land comprising the watershed of the Pennichuck Brook and the three regulated water utilities owned by Pennichuck. Taking into account all of the assumed liabilities of the company and its busi- nesses, the acquisition was valued at approximately $200 million. Pennichuck remains an independent corporation with an independent Board of Directors with the City of Nashua as its sole shareholder.

The City accounts for this asset in accordance with GASB Statement 61 – The Financial Reporting Entity: Omnibus, an amendment of GASB Statements No. 14 and No. 34. The equity interest represents an asset to offset the related acquisition bonds in the governmental funds, and is adjusted accordingly by the related debt service.

K. Compensated Absences

It is the City’s policy to permit employees to accumulate earned but unused vacation and sick pay benefits. All vested sick and vacation pay is accrued when incurred in the government-wide, proprietary, and fiduciary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements.

L. Long-Term Obligations

In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt, and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type Statement of Net Position.

A-53 M. Fund Equity

Fund equity at the governmental fund financial reporting level is classified as “fund balance”. Fund equity for all other reporting is classified as “Net Position”.

Fund Balance - Generally, fund balance represents the difference between the current assets and current liabilities. The City reserves those portions of fund balance that are legally segregated for a specific future use or which do not represent available, spendable resources and therefore, are not available for appropriation or expenditure. Unassigned fund balance indicates that portion of fund balance that is available for appropriation in future periods.

The City’s fund balance classification policies and procedures are as follows:

1) Nonspendable funds are either unspendable in the current form (i.e., inventory or prepaid items) or can never be spent (i.e., perpetual care). 2) Restricted funds are used solely for the purpose in which the fund was established. In the case of special revenue funds, these funds are created by statute or otherwise have external constraints on how the funds can be expended. 3) Committed funds are reported as a result of resolutions passed by the highest decision making authority in the City, the Board of Aldermen. The same action is required to modify or rescind the commitment. 4) Assigned funds are used for specific purposes as established by manage- ment. These funds have been assigned for specific goods and services ordered but not yet paid for. This account also includes fund balance voted to be used in the subsequent fiscal year. The City’s Revised Ordinances (NRO) permits the Chief Financial Officer and Controller to make assignments. 5) Unassigned funds are available to be spent in future periods.

When an expenditure is incurred that would qualify for payment from multiple fund balance types, the City uses the following order to liquidate liabilities: restricted, committed, assigned and unassigned.

Net Position - Net position represents the difference between assets/deferred outflows and liabilities/deferred inflows. Net position invested in capital assets, net of related debt, consist of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvement of those assets. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the City or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. All other net position is reported as unrestricted.

A-54 N. Use of Estimates

The preparation of basic financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures for contingent assets and liabilities at the date of the basic financial statements, and the reported amounts of the revenues and expenditures/expenses during the fiscal year. Actual results could vary from estimates that were used.

2. Stewardship, Compliance, and Accountability

A. Budgetary Information

The Mayor presents an operating and capital budget for the proposed expenditures of the fiscal year commencing the following July 1. The budget, as enacted by the Board of Aldermen, establishes the legal level of control and projects the particu- lar revenues that will fund certain appropriations. The original budget may be amended, by supplemental appropriations or transfers, during the fiscal year at Board of Aldermen meetings as required by changing conditions. The Financial Services Department may transfer appropriations between operating categories within departmental budgets at the request of department heads, but expenditures may not legally exceed budgeted appropriations in total.

Formal budgetary integration is employed as a management control device during the year for the General Fund and Proprietary Funds. Effective budgetary control is achieved for all other funds through provisions of the New Hampshire statutes.

At year-end, appropriation balances lapse, except for multi-year grants, certain unexpended capital items, and encumbrances which will be honored during the subsequent year.

B. Budgetary Basis

The General Fund final appropriation appearing on the “Budget and Actual” page of the fund financial statements represents the final amended budget after all reserve fund transfers and supplemental appropriations.

C. Budget/GAAP Reconciliation

The budgetary data for the general and proprietary funds is based upon accounting principles that differ from generally accepted accounting principles (GAAP). Therefore, in addition to the GAAP basis financial statements, the results of operations of the general fund are presented in accordance with budgetary accounting principles to provide a meaningful comparison to budgetary data.

The following is a summary of adjustments made to the actual revenues and other sources, and expenditures and other uses, to conform to the budgetary basis of accounting.

A-55 Revenues Expenditures and Other and Other General Fund Financing Sources Financing Uses Revenues/Expenditures (GAAP Basis) $253,091,481 $ 252,121,642 Other financing sources/uses (GAAP Basis) 6,026,140 11,262,612 Subtotal (GAAP Basis) 259,117,621 263,384,254 Adjust tax revenue to accrual basis (398,393) - Reverse effect of activity appropriated in prior year - (1,358,993) Add end-of-year appropriation carryforwards from expenditures - 1,643,507 Add use of fund balance 5,340,000 - Reverse non-budgeted refunding activity (5,386,403) (5,386,403) Reverse non-budgeted revenues and expenditures 1,035,409 (3,353,460) Budgetary Basis $ 259,708,234 $ 254,928,905

In addition, adjustments were made to the enterprise funds to conform to the budgetary basis, primarily for the omission of depreciation expense which is not budgeted, and the inclusion of principal debt service and capital expenses which are budgeted expenses.

D. Deficit Fund Equity

The following funds had a total fund balance/net position deficit at June 30, 2015:

Nonmajor Governmental Funds: Public Works Projects $ (33,220) School Department Projects (1,271,444) Proprietary Funds: Solid Waste (1,606,513) $(2,911,177)

The City will be funding the deficits in the Nonmajor governmental funds with future grant revenues or bond proceeds.

The Proprietary Fund deficit is primarily due to the Solid Waste fund’s high percentage of non-capital related debt for landfill closure costs.

A-56 3. Cash and Investments

A. Custodial Credit Risk

Custodial credit risk for deposits is the risk that in the event of a bank failure, the deposits may not be returned. The custodial credit risk for investments is the risk that, in the event of a failure of the counterparty (e.g., broker-dealer) to a trans- action, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party.

Custodial Credit Risk - Deposits. Custodial credit risk is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. RSA 48:16 states that “deposits in any one bank shall not at any time exceed the sum of its paid-up capital and surplus, except that a City with a population in excess of 50,000 is authorized to deposit funds in a solvent bank in excess of the paid-up capital sur- plus of said bank.” The City does not have policies for custodial credit risk. The City’s deposit policy for custodial credit risk is to be fully insured.

As of June 30, 2015, the City’s entire bank balance was fully insured and collateralized.

Custodial Credit Risk - Investments. Custodial credit risk for investments is the risk that in the event of a failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of the investment or collateral securities that are in the possession of another party. The City limits its exposure to custodial credit risk by requiring that all security transactions entered into by the City be conducted on a delivery-versus-payment basis. Securities are held by a third-party custodian.

The City’s investments are exposed to custodial risk. The City manages this risk with the Securities Investor Protection Corporation, Excess Securities Investor Protection Corporation and by holding the assets in separately identifiable trust accounts.

Investments at June 30, 2015 included the following (in thousands):

U.S. Treasury Obligations $ 8,768 U.S. Government Agencies 17,514 Corporate Bonds 6,190 Common Equities 44,326 Mutual Funds 8,586 Long-term Certificates of Deposit 22,316 Total $ 107,700

A-57 B. Credit Risk

Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. State law employs the prudent person rule whereby investments are made as a prudent person would be expected to act, with discretion and intelligence, to seek reasonable income, preserve capital, and, in general, avoid speculative investments. The City’s Investment Policy is to minimize credit risk by limiting investments to the safest types of securities, pre- qualifying institutions and diversifying the portfolio.

C. Concentration of Credit Risk

The City places no limit on the amount the City may invest in any one issuer. The City does not have an investment in one issuer, other than U.S. Treasury bonds and notes, greater than 5% of total investments.

D. Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The City’s current investment policy does not limit investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

Information regarding the quality and maturity dates of fixed income securities is as follows (in thousands): Average Average Total Duration Rating Corporate Bonds $ 6,190 5.08 A2

E. Foreign Currency Risk

Foreign currency risk is the risk that changes in foreign exchange rates will adversely affect the fair value of an investment. The City’s current investment policy does not address foreign currency risk.

4. Taxes Receivable

The City bills property taxes semi-annually, in May and November. Property tax revenues are recognized in the fiscal year for which taxes have been levied to the extent that they become available, i.e., due or receivable within the current fiscal year and collected within the current period or within 60 days of year-end.

A-58 Property taxes billed and collected in advance of the year for which they are levied, and are recorded as a prepaid tax liability.

Property taxes are due in July and December. Taxes paid after the due, date accrue interest at 12% per annum. In April of the following calendar year, the Tax Collector executes tax liens on properties that have unpaid taxes. The lien is recorded on the delinquent taxpayer’s property at the Registry of Deeds. The tax liens accrue interest at 18% per annum. If the lien is not redeemed within a two-year redemption period, the property may be conveyed to the City by deed.

Taxes receivable at June 30, 2015 consist of the following (in thousands):

Allowance Gross for Net Unredeemed Taxes: Amount Doubtful Amount Levy of 2015 $ 14,890 $ - $ 14,890 Prior levies 16 - 16 Tax liens 5,859 (2,499) 3,360 Tax deeded property 192 - 192 Total $ 20,957 $ (2,499) $ 18,458

5. Intergovernmental Receivables

This balance represents reimbursements requested from Federal, State, and Local agencies for expenditures incurred in fiscal 2015.

6. Interfund Fund Receivables/Payables and Transfers In/Out

Although self-balancing funds are maintained, most transactions flow through the general fund. In order to obtain accountability for each fund, interfund receivable and payable accounts must be utilized. All remaining balances resulted from the time lag between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made.

The following is an analysis of the June 30, 2015 balances in interfund receivable and payable accounts:

A-59 Due From Due To Funds: Other Funds Other Funds General Fund $ 20,762,034 $ 66,949,240 Debt Service Fund 4,312,424 - Nonmajor Governmental Funds: Police grants - 38,202 Fire grants - 20,510 Community health and services grants - 275,489 Parks and recreation grants 1,871 - Transit grants - 185,076 Community Development Block grants/Home grants - 259,412 Community Development division grants - 160,307 Homeland security grants - 146,120 Other city grants 6,562 - Food services 339,400 - School grants - 2,407,916 City revolving funds6 ,136,519 - School revolving funds1 ,079,162 - Other trust funds1 36,622 - Fire projects 7,828 - Public works projects 9,328,152 - School department projects 826,875 - Technology projects 1,116,029 - City building projects 69,268 - City-wide communications projects 2,700,826 - Cemetery permanent funds- 188,722 Library permanent funds- 17,819 Other permanent funds- 2,051 Enterprise funds: Waste Water - 1,633,829 Solid Waste 85,402 - Internal service fund: Employee benefits fund 20,317,384 - Property and casualty fund 5,394,627 - Fiduciary fund types: Pension trust - 204,640 Private purpose - 131,352 Agency - 300 Total $ 72,620,985 $ 72,620,985

The City reports interfund transfers between many of its funds. The City’s routine transfers include transfers made to move (1) unrestricted revenues or balances that have been collected or accumulated in the general fund to other funds based on budg- etary authorization, and (2) revenues from a fund that by statute or budgetary author- ity must collect them to funds that are required by statute or budgetary authority to

A-60 expend them. The sum of all transfers presented in the table agrees with the sum of interfund transfers presented in the governmental fund financial statements.

The following is an analysis of interfund transfers made in fiscal year 2015.

Funds: Transfers In Transfers Out General Fund $ 655,147 $ 5,876,209 Nonmajor Governmental Funds: Police grants 51,622 20,243 Fire grants 96,487 - Transit grants 415,460 - Other city grants - 13,296 City revolving funds 8,205 63,743 Other trust funds 20,332 200,250 Fire projects 110,139 - Public works projects 155,000 788 School department projects 650,000 53,445 City building projects 94,163 - Cemetery permanent funds - 326,663 Other permanent funds - 2,051 Enterprise funds: Waste water - 55,000 Solid waste - operations 3,731,019 - Solid waste - capital 624,114 - Total $6,611,688 $6,611,688

The following is a detailed analysis of general fund transfers made in fiscal year 2015:

General Fund Transfers In: Income Transfer from Cemetery Trust funds $308,384 Transfer from School Impact Fees Fund 200,000 Surplus Transfer from Police Outside Detail Fund 56,350 Transfer of Unspent funds from School Capital Project Funds 53,445 Transfer of Unspent Matching Funds from Police Grants Fund 20,243 Public Works Grants Fund 13,296 Surplus Transfer from Engineering Services Fund 2,393 Engineering Capital Project Fund 788 Transfer from Expendable Trust Funds 248 $655,147

A-61 General Fund Transfers Out: Solid Waste Operating Subsidy $ 3,731,019 School Gym Floor Replacements Capital Project Fund 650,000 Solid Waste Vehicle Purchases 624,114 Nashua Transit Grants - Matching Funds 410,460 Fire Stations Lighting Upgrades Capital Project Fund 110,139 Fire Capital Grants - Matching Funds 96,487 Parking Garage Upgrades Capital Project Fund 94,164 Yudicky Farm Access Road Improvements Capital Project Fund 60,000 Police Grant - Matching Funds 51,622 East Hollis Street Gateway Improvements Capital Project Fund 40,000 Retirement Trust Fund Transfer to Parking Violation Fund 8,204 $5,876,209

7. Capital Assets

Capital asset activity for the year ended June 30, 2015 was as follows (in thousands):

Beginning Ending Balance Increases Decreases Balance Governmental Activities: Capital assets, being depreciated: Buildings and improvements $ 255,065 $ 605 $ - $ 255,670 Infrastructure 58,124 6,579 - 64,703 Machinery and equipment 55,594 6,839 (1,389) 61,044 Total capital assets, being depreciated 368,783 14,023 (1,389) 381,417 Less accumulated depreciation for: Buildings and improvements (99,580) (6,405) - (105,985) Infrastructure (34,754) (2,116) - (36,870) Machinery and equipment (29,686) (4,773) 1,362 (33,097) Total accumulated depreciation (164,020) (13,294) 1,362 (175,952) Total capital assets, being depreciated, net 204,763 729 (27) 205,465 Capital assets, not being depreciated: Land 29,121 246 (226) 29,141 Construction in progress 24,564 30,390 (4,585) 50,369 Total capital assets, not being depreciated 53,685 30,636 (4,811) 79,510 Governmental activities capital assets, net $ 258,448 $ 31,365 $ (4,838) $ 284,975

A-62 Beginning Ending Balance Increases Decreases Balance Business-Type Activities: Capital assets, being depreciated: Buildings $ 79,875 $ 124 $ - $ 79,999 Land improvements 17,853 359 - 18,212 Infrastructure 102,619 18,441 - 121,060 Machinery and equipment 38,808 8,060 (1,278) 45,590 Total capital assets, being depreciated 239,155 26,984 (1,278) 264,861 Less accumulated depreciation for: Buildings (37,810) (1,531) - (39,341) Land improvements (7,573) (902) - (8,475) Infrastructure (38,345) (2,261) - (40,606) Machinery and equipment (21,519) (2,014) 1,038 (22,495) Total accumulated depreciation (105,247) (6,708) 1,038 (110,917) Total capital assets, being depreciated, net 133,908 20,276 (240) 153,944 Capital assets, not being depreciated: Land 232 - - 232 Construction in progress 19,687 8,519 (23,715) 4,491 Total capital assets, not being depreciated 19,919 8,519 (23,715) 4,723 Business-type activities capital assets, net $ 153,827 $ 28,795 $ (23,955) $ 158,667

Depreciation expense was charged to functions of the City as follows (in thousands):

Governmental Activities: General government $1,143 Police 689 Fire 870 Education 6,261 Public works 2,506 Culture and recreation 660 Heath and human services 6 Community development 885 Communications 274 Total depreciation expense - governmental activities $ 13,294

Business-Type Activities: Waste water $ 4,994 Solid waste 1,714 Total depreciation expense - business-type activities $ 6,708

A-63 8. Deferred Outflows of Resources

Deferred outflows of resources represent the consumption of net assets by the City that is applicable to future reporting periods. Deferred outflows of resources have a positive effect on net position, similar to assets.

The following is a summary of deferred outflow of resources balances as of June 30, 2015 (in thousands): Entity-wide Basis Fund Basis Governmental Business-type Proprietary Funds Activities Activities Wastewater Solid Waste Loss on refunding $ 1,012 $ - $ - $ - Differences between expected and actual pension experience 41 31 18 13 Net difference between projected and actual pension investment earnings 714 543 305 238 Changes in proportion and differences between contributions and proportionate share of pension contributions 3,074 - - - Pension contributions subsequent to the measurement date 19,433 - - - Total $24,274 $ 574$3 23 $ 251

9. Accounts Payable

Accounts payable represent 2015 expenditures paid after June 30, 2015.

10. Anticipation Notes Payable

The City had the following notes outstanding at June 30, 2015:

Interest Issue Balance Rate Date Maturity 6/30/15 Screening and Disinfection upon completed Facility SRF Loan 1.0% 07/11/12 construction $13,913,542

The following summarizes activity in notes payable during fiscal year 2015:

Balance Balance Beginning New End of of Year Issues Maturities Year Harbor Avenue Sewer Separation Project SRF Loan $4,394,700 $ 205,377 $ (4,600,077) $- Screening and Disinfection Facility SRF Loan 8,932,906 4,980,636 - 13,913,542 Total $ 13,327,606 $5 ,186,013$(4,600,077) $1 3,913,542

A-64 11. Long-Term Debt

A. General Obligation Bonds

The City issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds have been issued for both governmental and business-type activities. General obligation bonds and notes currently outstanding are as follows: Amount Serial Outstanding Maturities Interest as of Governmental Activities: Through Rate(s) % 6/30/15 Refunding for Dr. Crisp School & Bicentennial School 11/16 2.0 - 4.0% $ 1,206,120 Refunding for Fairgrounds Middle School 11/16 2.0 - 4.0% 1,795,500 Refunding for New Searles School 11/16 2.0 - 4.0% 256,780 Refunding for Fairgrounds Middle School 11/16 2.0 - 4.0% 666,600 Refunding for Ridge Road Bridge 11/16 2.0 - 4.0% 640,038 Refunding for Amherst Street School 11/16 2.0 - 4.0% 10,001 Refunding for School Land Acquisition 11/16 2.0 - 4.0% 10,001 Refunding for Athletic Field at Yudicky Farm 11/16 2.0 - 4.0% 614,959 Refunding for Southwest Quadrant Land Acquisition 11/16 2.0 - 4.0% 10,001 Refunding for Lake Street Fire Station 7/18 3.72% 1,200,000 Refunding for Citywide Communication System 7/18 3.72% 14,676,525 Refunding for Citywide Communication Towers 7/20 3.78% 507,500 Refunding for Library Automation 7/20 3.78% 13,852,500 Refunding for Police Headquarters Additions and Renovations 7/20 3.78% 610,600 Refunding for Police Computer Aided Dispatch (CAD) System 7/20 3.78% 590,600 Refunding for Highway and Sidewalk Construction 7/20 3.78% 1,515,000 Refunding for Holman Stadium Series A 7/21 3.97% 152,000 Refunding for High School Athletic Field 7/20 3.78% 1,215,000 Refunding for High School Construction 7/20 3.78% 760,000 Refunding for High School Planning 7/20 3.78% 327,775 Refunding for High School Construction Series A 7/21 3.86% 2,157,500 Nashua Senior Center Renovation & Expansion 7/26 3.95% 250,000 Police HVAC System Replacement 7/26 3.93% 30,000 Police HVAC System Replacement 7/26 3.96% 60,000 Land Acquisition for East Hollis Street Fire Station 7/26 3.95% 50,000 East Hollis Street Fire Station Construction 7/26 3.98% 370,000 Nashua Riverwalk Construction 7/26 3.95% 120,000 Nashua Bus Garage Construction 7/26 3.98% 200,000 Nashua Enterprise Resource Planning (ERP) System 8/16 1.39% 830,000 Broad Street Parkway Construction 7/31 3.00% 1,760,000 Elm Street Garage Renovation 7/31 3.00% 435,000 High Street Garage Renovation 7/31 3.00% 575,000 Broad Street Parkway Construction 10/31 3.04% 2,125,000 Nashua Enterprise Resource Planning (ERP) System 10/17 3.04% 1,245,000 Hunt Memorial Building Renovation 10/31 3.04% 850,000

(continued)

A-65 (continued) Amount Serial Outstanding Maturities Interest as of Governmental Activities: Through Rate(s) % 6/30/15 Nashua City Hall Renovation 10/31 3.04% 425,000 Refunding for High School Construction 3/24 2.04% 19,065,000 Ledge Street School HVAC System Replacement 10/31 3.04% 3,570,000 Fairgrounds School HVAC System Replacement 10/31 3.04% 1,310,000 Elm Street Middle School Roof Replacement 10/31 3.04% 340,000 Elm Street Middle School Capital Equipment 10/21 2.06% 245,000 Elm Street Middle School Fire Alarm 10/21 2.06% 315,000 Pennichuck Corporation Acquisition Bonds 1/42 4.09% 140,650,000 Broad Street Parkway Construction 4/33 2.79% 1,463,500 Nashua Enterprise Resource Planning (ERP) System 4/19 0.88% 590,000 City Buildings Renovation 4/33 2.79% 430,000 Charlotte Avenue School HVAC System Replacement 4/33 2.79% 1,761,500 Fire Ladder Truck 4/33 2.79% 735,000 Fire Pumper Truck 4/28 2.20% 370,000 Citywide Communication System Upgrade 4/23 1.54% 790,000 Broad Street Parkway Construction 5/34 3.29% 15,075,000 Nashua Enterprise Resource Planning (ERP) System 5/20 1.26% 800,000 Nashua School Access Control System 5/24 2.34% 1,840,000 Public Safety Portable Radios 5/24 2.30% 775,000 Refunding for Senior Center 7/25 1.80% 1,049,200 Refunding for Police Remodeling 1 7/25 1.78% 124,000 Refunding for Land Acquisition 7/26 1.92% 184,600 Refunding for Riverwalk 7/25 1.79% 493,000 Refunding for Fire Station 7/26 1.96% 1,732,200 Refunding for Police Remodeling 2 7/25 1.78% 254,000 Refunding for Land Acquisition & Redevelopment 7/26 1.96% 923,000 Broad Street Parkway Construction 7/34 3.07% 7,278,500 Nashua Enterprise Resource Planning (ERP) System 7/34 3.03% 449,500 Aerial Tower Truck 7/34 3.07% 976,500 Radio Communications Upgrade 7/34 1.91% 5,195,750 Broad Street School Improvements 7/34 3.07% 7,988,500 Total Governmental Activities: $268,873,750

A-66 Amount Serial Outstanding Maturities Interest as of Business-Type Activities:ThroughRate(s) % 6/30/15 Solid Waste Disposal Fund: Lined Landfill Expansion II 4/24 2.89% $ 3,853,000 Landfill Compactor 4/19 2.20% 322,000 Landfill Compactor 7/24 1.65% 676,250 Landfill Expansion and Closure 8/17 0.85% 536,865 Landfill Expansion and Closure 8/20 1.19% 2,556,843 Multisite Landfill - Old Nashua 8/22 1.53% 185,950 Multisite Landfill - Atherton Park 8/22 1.53% 35,379 Multisite Landfill - Roussel/Gardner 8/22 1.53% 599,250 Multisite Landfill - Shady Lane 8/22 1.53% 90,935 Multisite - Lincoln Park 8/24 1.87% 776,010 Multisite - Engineering 8/24 1.87% 516,751 Landfill Closure 8/24 1.87% 3,743,482 Total Solid Waste Disposal Fund 13,892,715 Waste Water Treatment Fund: Nashua Storage Tank Facility 4/33 2.63% 4,644,915 Dewatering Equipment Replacement 4/33 2.63% 2,577,530 Aeration Blower Upgrade 4/33 2.63% 3,352,555 Dewatering Equipment Replacement 5/34 3.04% 2,090,000 Sludge Digester 8/20 1.19% 2,767,623 Haines Street Sewer Project 3/31 2.62% 530,450 Net Metering Project 12/21 1.36% 173,714 Wet Weather SRF Loan 11/29 2.58% 22,188,550 Harbor Avenue SRF Loan 8/34 2.86% 4,600,077 Total Waste Water Treatment Fund 42,925,414 Total Enterprise Fund Bonds and Notes Payable $ 56,818,129

B. Future Debt Service

The annual payments to retire all general obligation long-term debt outstanding as of June 30, 2015 are as follows:

City and School Principal Interest Total 2016 $ 13,233,750 $ 4,816,128 $ 18,049,878 2017 12,225,000 4,553,558 16,778,558 2018 11,530,000 4,062,681 15,592,681 2019 10,925,000 3,609,790 14,534,790 2020 10,650,000 3,164,852 13,814,852 2021 - 2025 40,655,000 9,812,796 50,467,796 2026 - 2030 17,085,000 4,036,959 21,121,959 2031 - 2035 11,920,000 1,085,650 13,005,650 City and School Total $ 128,223,750 $ 35,142,414$ 163,366,164

A-67 Pennichuck Principal Interest Total 2016 $ 3,320,000 $ 5,445,729 $ 8,765,729 2017 3,370,000 5,395,863 8,765,863 2018 3,430,000 5,335,809 8,765,809 2019 3,505,000 5,261,756 8,766,756 2020 3,590,000 5,175,568 8,765,568 2021 - 2025 19,600,000 24,226,355 43,826,355 2026 - 2030 23,315,000 20,505,062 43,820,062 2031 - 2035 28,625,000 15,193,655 43,818,655 Thereafter 51,895,000 9,472,727 61,367,727 Pennichuck Total $ 140,650,000 $ 96,012,524$ 236,662,524

Total Governmental Principal Interest Total 2016 $ 16,553,750 $ 10,261,857 $ 26,815,607 2017 15,595,000 9,949,421 25,544,421 2018 14,960,000 9,398,490 24,358,490 2019 14,430,000 8,871,546 23,301,546 2020 14,240,000 8,340,420 22,580,420 2021 - 2025 60,255,000 34,039,151 94,294,151 2026 - 2030 40,400,000 24,542,021 64,942,021 2031 - 2035 40,545,000 16,279,305 56,824,305 Thereafter 51,895,000 9,472,727 61,367,727 Combined Total $ 268,873,750 $ 131,154,938$ 400,028,688

Business-Type Principal Interest Total 2016 $ 4,727,390 $ 1,554,139 $ 6,281,529 2017 4,731,139 1,455,293 6,186,432 2018 4,731,141 1,336,234 6,067,375 2019 4,547,184 1,217,175 5,764,359 2020 4,472,186 1,099,790 5,571,976 2021 - 2025 18,043,960 3,783,372 21,827,332 2026 - 2030 12,186,970 1,568,703 13,755,673 2031 - 2035 3,378,159 248,981 3,627,140 Total $ 56,818,129 $ 12,263,687 $ 69,081,816

A-68 C. Bond Authorizations

Long-term debt authorizations which have not been issued or rescinded as of June 30, 2015 are as follows:

Purpose Amount Pennichuck Corporation Stock and Asset Acquisition $69,430,000 Wastewater Wet Weather Facility and Disinfection Facility 20,024,923 Refunding of Prior Year Capital Improvement Bonds 18,695,000 Sunset Heights Elementary School HVAC Improvements 9,000,000 Broad Street Parkway Project 8,588,100 Pump Stations Upgrade Project 8,500,000 * Refunding of Solid Waste and Wastewater State Revolving Loan Funds 4,077,060 Headworks Upgrade Project 3,800,000 * Storage Tank Facility, Aeration Blower, and Sludge Dewatering Upgrade 1,538,453 School Roof Replacements 1,500,000 Sunset Heights Elementary School Roof 1,300,000 * City Building Improvements 1,253,000 Radio Communications Upgrade 1,009,250 Haines Street Sewer Separation Project 873,975 Broad Street Elementary School HVAC and Building Improvements 801,750 Amherst Street Road and Traffic Improvements 550,000 School Access Control System 323,900 Net Metering Project at Wastewater Treatment Facility 250,000 Fire Trucks 230,800 Charlotte Avenue Elementary School HVAC Improvements 228,300 Aerial Tower Truck 223,500 Enterprise Resource Planning Modernization 198,300 Public Safety Portable Radios 127,500 Caterpillar Landfill Compactor 70,750 Total $ 152,594,561 * Authorized subsequent to June 30, 2015

A-69 D. Changes in General Long-Term Liabilities

During the year ended June 30, 2015, the following changes occurred in long- term liabilities (in thousands): Equals Total Total Less Long-Term Balance Balance Current Portion 7/1/14 Additions Reductions 6/30/15 Portion 6/30/15 Governmental Activities Bonds and notes payable $ 119,736 $21,889 $(13,401) $128,224 $(13,234) $114,990 Unamortized bond premiums 5,413 3,099 (791) 7,721 (806) 6,915 Acquisition bonds payable 143,930 - (3,280) 140,650 (3,320) 137,330 Total bonds and notes payable 269,079 24,988(17,472) 276,595(17,360) 259,235

Compensated absences(1) 19,641 1,167 (1,768) 19,040 (1,714) 17,326 Net OPEB obligation(1) 20,235 4,075 (1,852) 22,458 - 22,458 Net pension liability(1) 212,701 - (23,913) 188,788 - 188,788 Totals $ 521,656 $30,230 $(45,005) $506,881 $(19,074) $487,807 (1)The City typically uses the General Fund to liquidate governmental activities liabilities.

Equals Total Total Less Long-Term Balance Balance Current Portion 7/1/14 Additions Reductions 6/30/15 Portion 6/30/15 Business-Type Activities Bonds and notes payable $ 56,012 $ 5,276 $ (4,470) $ 56,818 $ (4,727) $ 52,091 Unamortized bond premiums 1,446 71 (111) 1,406 (111) 1,295 Total bonds and notes payable 57,458 5,347 (4,581) 58,224 (4,838) 53,386

Compensated absences(2) 623 73 (56) 640 (58) 582 Net OPEB obligation(2) 457 123 (56) 524 - 524 Net pension liability(2) 2,885 88 - 2,973 - 2,973 Other: Landfill closure and post- closure 4,920 473 - 5,393 - 5,393 Totals $ 66,343 $ 6,104 $ (4,693) $ 67,754 $ (4,896) $ 62,858 (2)The City typically uses the Wastewater and Solid Waste funds to liquidate their respective business-type liabilities.

E. Advance Refundings

On April 23, 2015, the City issued general obligation bonds in the amount of $27,325,000 with 4% coupons for a TIC of 2.53%. $4,760,000 of the $27,325,000 issued was used to advance refund $5,075,000 of bonds originally issued on December 15, 2006. The average coupon of the refunded bonds was 4.12%. The general obligation refunding bonds had a TIC of 1.74% and after paying issuance costs of $45,202, the net proceeds were $5,370,993. The net proceeds from the issuance of the general obligation refunding bonds were used to purchase U.S. government securities and those securities were deposited in an irrevocable trust with an escrow agent to provide debt service payments until the bonds are called

A-70 on July 15, 2016. The advance refunding met the requirements of an in-substance debt defeasance and the bonds were removed from the City’s financial statements.

As a result of the advance refunding, the City reduced its total debt service cash flow requirements by $512,219, which resulted in an economic gain (difference between the present value of the debt service payments on the old and new debt) of $439,118.

Defeased debt still outstanding at June 30, 2015 is $5,075,000.

12. Landfill Closure and Postclosure Care Costs

State and Federal laws and regulations require the City to place a final cover on its landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site for thirty years after closure. Although closure and postclosure care costs will be paid only near or after the date that the landfill stops accepting waste, the City reports a portion of these closure and postclosure care costs as a liability in the financial statements in each period based on landfill capacity used as of each balance sheet date.

The $5,392,950 reported as landfill closure and postclosure care liability at June 30, 2015 is comprised of $1,107,700 of post closure care cost for the Nashua Four Hills unlined landfill, and $4,285,250 in closure, and post closure costs for the Nashua Four Hills Phase I and Phase II lined expansion landfills. The recognition of these costs is based on annual statutorily required engineering estimates. Waste filling operations in the Phase II lined expansion landfill began in November 2009. The combined landfills are conservatively estimated to have an operational life of twelve years and remaining capacity is estimated to be 39%. The City will recognize the remaining estimated cost of closure and post closure care of the lined landfill as the remaining capacity is filled. The actual life of the landfill may be longer due to recy- cling efforts and actual costs may be higher due to inflation, changes in technology or changes in landfill laws and regulations.

The City is required by State and Federal laws and regulations to make annual contri- butions to an account held by the City to finance closure and post closure costs of the municipal solid waste landfill. As of June 30, 2015, the City has cash on deposit with a balance of $4,473,789 restricted for closure and post closure costs.

13. Deferred Inflows of Resources

Deferred inflows of resources are the acquisition of net assets by the City that are applicable to future reporting periods. Deferred inflows of resources have a negative effect on net position, similar to liabilities.

A-71 The following is a summary of deferred inflow of resources balances as of June 30, 2015 (in thousands): Entity-wide Basis Fund Basis Governmental Business-type Governmental Funds Proprietary Funds Activities Activities General Fund Nonmajor Wastewater Solid Waste Unavailable revenues $ - $ - $ 3,102 $ 272 $ - $ - Taxes levied in advance 96,205 - 96,205 - - - Gain on refunding 315 - - - - - Net difference between projected and actual pension investment earnings 23,655 - - - - - Changes in pension assumptions 608 462 - - 260 202 Changes in proportion and differences between contributions and proportionate share of pension contributions 551 - - - - - Total $ 121,334 $ 462 $ 99,307 $2 72 $ 260 $ 202

14. Restricted Net Position

The accompanying entity-wide financial statements report restricted net position when external constraints from grantors or contributors are placed on net position.

Permanent fund restricted net position are segregated between nonexpendable and expendable. The nonexpendable portion represents the original restricted principal contribution, and the expendable represents accumulated earnings which are available to be spent based on donor restrictions.

15. Governmental Funds – Fund Balances

Fund balances are segregated to account for resources that are either not available for expenditure in the future or are legally set aside for a specific future use.

The City implemented GASB Statement No. 54 (GASB 54), Fund Balance Reporting and Governmental Fund Type Definitions, which enhances the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying existing governmental fund type defini- tions. The following types of fund balances are reported at June 30, 2015:

Nonspendable - Represents amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. This fund balance classification includes general fund reserves for prepaid expenditures and nonmajor governmental fund reserves for the principal portion of permanent trust funds. Restricted - Represents amounts that are restricted to specific purposes by constraints imposed by creditors, grantors, contributors, or laws or regulations of other govern- ments, or constraints imposed by law through constitutional provisions or enabling legislation. This fund balance classification includes general fund encumbrances

A-72 funded by bond issuances, various special revenue funds, and the income portion of permanent trust funds. Committed - Represents amounts that can only be used for specific purposes pursuant to constraints imposed by resolution of the City’s Board of Aldermen. The City Charter designated the Board of Aldermen as its appropriating authority. This fund balance classification includes general fund escrows for non-lapsing, special article appropriations approved by the Board of Alderman, capital reserve funds set aside by the Board of Alderman vote for future capital acquisitions and improvements (now reported as part of the general fund per GASB 54), and various special revenue funds. A similar action is needed to modify or rescind a commitment. Assigned - Represents amounts that are constrained by the City’s intent to use these resources for a specific purpose. In addition, this fund balance classification includes general fund encumbrances that have been established by various City departments for the expenditure of current year budgetary financial resources upon vendor performance in the subsequent budgetary period. The City’s Revised Ordinances (NRO) permits the Chief Financial Officer and Controller to make assignments. Unassigned - Represents amounts that are available to be spent in future periods.

Following is a breakdown of the City’s fund balances at June 30, 2015:

Debt Nonmajor Total General Service Governmental Governmental Fund Fund Funds Funds Nonspendable Reserved for tax deeds $ 191,877 $ - $ - $ 191,877 Nonexpendable cemetery permanent funds - - 16,050,672 16,050,672 Nonexpendable library permanent funds - - 4,094,256 4,094,256 Nonexpendable other permanent funds - - 159,682 159,682 Total Nonspendable 191,877 - 20,304,610 20,496,487 Restricted For future debt service - 4,312,424 - 4,312,424 Police grants - - 29,534 29,534 Fire grants - - 4,112 4,112 Community health & services grants - - 3,452 3,452 Parks & recreation grants - - 1,871 1,871 Transit grants - - 92,785 92,785 Community Development division grants - - 38,486 38,486 Homeland security grants - - 5,778 5,778 Other City grants - - 6,562 6,562 Food services - - 549,743 549,743 School grants - - 565 565 Fire projects - - 4,427 4,427 Public works projects - - 14,484,613 14,484,613 School department projects - - 1,448,169 1,448,169 Technology projects - - 1,116,029 1,116,029 City building projects - - 6,652 6,652 City-wide communications projects - - 2,700,826 2,700,826 Cemetery expendable permanent funds - - 656,793 656,793 Library expendable permanent funds - - 569,579 569,579 Other expendable permanent funds - - 9,285 9,285 Total Restricted - 4,312,424 21,729,261 26,041,685 (continued)

A-73 (continued) Debt Nonmajor Total General Service Governmental Governmental Fund Fund Funds Funds Committed For continuing appropriations 2,365,688 - - 2,365,688 School capital funds 2,389,363 - - 2,389,363 City capital funds 4,296,449 - - 4,296,449 City revolving funds - - 6,828,680 6,828,680 School revolving funds - - 1,026,544 1,026,544 Other trust funds - - 4,268,828 4,268,828 Fire projects - - 3,401 3,401 Public works projects - - 74,935 74,935 School department projects - - 650,000 650,000 City building projects - - 62,616 62,616 Total Committed 9,051,500 - 12,915,004 21,966,504 Assigned For next year's tax rate 5,100,000 - - 5,100,000 For encumbrances 847,264 - - 847,264 For overlay contingency 1,500,000 - - 1,500,000 For unfunded liabilities 2,230,000 - - 2,230,000 Total Assigned 9,677,264 - - 9,677,264 Unassigned 27,729,910 - (1,304,664) 26,425,246 Total Fund Balance $ 46,650,551 $ 4,312,424$ 53,644,211 $ 104,607,186

16. Commitments and Contingencies

Outstanding Legal Issues - There are several pending legal issues in which the City is involved. The City’s management is of the opinion that the potential future settlement of such claims would not materially affect its financial statements taken as a whole.

Abatements - There are several cases pending before the Board of Tax and Land Appeals and Superior Court in regard to alleged discrepancies in property assessments. According to the City’s counsel, the probable outcome of these cases at the present time is indeterminable.

Grants - Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disal- lowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time, although the City expects such amounts, if any, to be immaterial.

17. Post-Employment Healthcare Benefits

GASB Statement 45, Accounting and Financial Reporting by Employers for Post- Employment Benefits Other Than Pensions, requires governments to account for other post-employment benefits (OPEB), primarily healthcare, on an accrual basis rather

A-74 than on a pay-as-you-go basis. The effect is the recognition of an actuarially required contribution as an expense on the Statement of Activities when a future retiree earns their post-employment benefits, rather than when they use their post-employment benefit. To the extent that an entity does not fund their actuarially required contribu- tion, a post-employment benefit liability is recognized on the Statement of Net Position over time.

The $22,982,340 OPEB liability, as calculated below, represents the implementation of Governmental Accounting Standards Board (GASB) Statement No. 45. The pur- pose of the statement is to reflect the liability of healthcare or other post-employment benefits provided to separated or retired employees. With the exception of one group of retirees described below, the City of Nashua does not pay a direct subsidy towards their retiree’s health insurance premiums. In accordance with RSA 100-A:50, retired employees shall be deemed to be part of the same group as active employees for health insurance premium purposes, thereby resulting in a so-called “blended rate”. The blended rate decreases the cost of insurance premiums for retirees and increases the cost for active employees, thereby resulting in the City paying an Implicit Subsidy.

The City’s Explicit Subsidy pertains to only one group of retirees. Teachers who have retired after June 30, 1991 who have at least 20 years of service with the Nashua School District and who are actually receiving retirements benefits under the New Hampshire Retirement System, will have a portion of their health insurance premiums paid according to a set schedule based on the years of service at retirement. The subsidy ranges from 20% for a teacher retiree with 20 years of service at retirement to 50% for a teacher with 30+ years of service at retirement. The City’s Explicit Subsidy associated with each eligible teacher retiree ends when the retiree is eligible for Medicare.

The City’s most recent GASB Valuation was for the fiscal year ending June 30, 2014. The valuation calculated the City’s total OPEB liability of approximately $39.4 million. The liability was further broken down for current and future retirees.

The table below shows the Explicit and Implicit liability amounts:

Explicit Implicit Totals Current Retirees $ 0.4 million$10.0 million $ 10.4 million Future Retirees 2.8 million26.2 million 29.0 million Totals $ 3.2 million $ 36.2 million $ 39.4 million

The Explicit Subsidy of $3.2 million shown above represents only 8.1% of the total OPEB liability of $39.4 million.

A-75 A. Plan Description

In addition to providing the pension benefits described, the City provides post- employment healthcare and life insurance benefits for retired employees through the City’s plan. The benefits, benefit levels, employee contributions and employer contributions are governed by RSA 100-A:50. As of July 1, 2013, the actuarial valuation date, approximately 1,076 retirees and 2,631 active employees meet the eligibility requirements. The Single Employer plan does not issue a separate financial report.

B. Benefits Provided

The City provides medical insurance to retirees and their covered dependents. All active employees who retire from the City and meet the eligibility criteria will receive these benefits.

C. Funding Policy

In general, retirees and their spouses pay 100% of coverage.

D. Annual OPEB Costs and Net OPEB Obligation

The City’s fiscal 2015 annual OPEB expense is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the nor- mal cost per year and amortize the unfunded actuarial liability over a period of thirty years. The following table shows the components of the City’s annual OPEB cost for the year ending June 30, 2015, the amount actually contributed to the plan, and the change in the City’s net OPEB obligation based on an actuarial valuation as of July 1, 2013.

Annual Required Contribution (ARC) $ 4,510,124 Interest on net OPEB obligation 1,034,567 NOO amortization adjustment to the ARC (1,346,001) Annual OPEB cost 4,198,690 Contributions made (1,907,690) Increase in net OPEB obligation 2,291,000 Net OPEB obligation - beginning of year 20,691,340 Net OPEB obligation - end of year $ 22,982,340

A-76 The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation were as follows:

Percentage of Annual OPEB OPEB Net OPEB Fiscal Year Ended Cost Cost Contributed Obligation 2015 $ 4,198,690 45.4%$ 22,982,340 2014 $ 4,355,261 44.8%$ 20,691,340 2013 $ 5,032,829 44.8%$ 18,086,253 2012 $ 5,078,422 40.4%$ 15,307,591 2011 $ 5,631,575 40.7%$ 12,278,412 2010 $ 5,038,535 41.3% $ 8,937,822 2009 $ 4,597,000 37.6% $ 5,982,000 2008 $ 4,597,000 32.2% $ 3,115,000

E. Funded Status and Funding Progress

The funded status of the plan as of July 1, 2013, the date of the most recent actuarial valuation was as follows:

Actuarial accrued liability (AAL) $ 39,415,168 Actuarial value of plan assets - Unfunded actuarial accrued liability (UAAL) $ 39,415,168 Funded ratio (actuarial value of plan assets/AAL) 0% Covered payroll (active plan members) $ 123,880,502 UAAL as a percentage of covered payroll 31.8%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amount and assumptions about the probability of occurrence of events far into the future. Examples included assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to contin- ual revision as actual results are compared with past expectations and new esti- mates are made about the future. The schedule of funding progress, presented as required supplementary information following the Notes to the Financial State- ments, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

F. Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the plan as understood by the City and the plan members and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the City and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce

A-77 short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

In the July 1, 2013 actuarial valuation the Entry Age Normal method was used. The actuarial value of assets was not determined as the City has not advance funded its obligation. The actuarial assumptions included a 3.00% inflation rate, 5.00% investment rate of return, and an initial annual healthcare cost trend rate of 9.00% which decreases to a 5.00% long-term rate for all healthcare benefits in 2023. The amortization costs for the initial UAAL is a level dollar method for a period of 30 years, on an open group. This has been calculated assuming the amortization payment increases at a rate of 3.00%.

18. Retirement System

New Hampshire Retirement System

The City follows the provisions of GASB Statement No. 68, Accounting and Finan- cial Reporting for Pensions – an amendment of GASB Statement No. 27, with respect to the State of New Hampshire Retirement System (NHRS).

A. Plan Description

Full-time employees participate in the New Hampshire Retirement System (NHRS), a cost sharing, multiple-employer defined benefit contributory pension plan and trust established in 1967 by RSA 100-A:2 and qualified as a tax-exempt organization under Sections 401(a) and 501(a) of the Internal Revenue Code. The plan is a contributory, defined benefit plan providing service, disability, death, and vested retirement benefits to members and their beneficiaries. Substantially all full-time state employees, public school teachers and administrators, per- manent firefighters, and permanent police officers within the State of New Hampshire are eligible and required to participate in the system. Full-time employees of political subdivisions, including counties, municipalities, and school districts, are also eligible to participate as a group if the governing body of the political subdivision has elected participation.

The New Hampshire Retirement System, a Public Employees Retirement System (PERS), is divided into two membership groups. State or local employees and teachers belong to Group I. Police officers and firefighters belong to Group II. All assets are held in a single trust and are available to each group. Additional information is disclosed in the NHRS annual report publicly available from the New Hampshire Retirement System located at 54 Regional Drive, Concord, New Hampshire 03301-8507.

B. Benefits Provided

Group I members at age 60 or 65 (for members who commence service after July 1, 2011) qualify for a normal service retirement allowance based on years of creditable service and average final salary for the highest of either three or five

A-78 years, depending on when their service commenced. The yearly pension amount is 1/60 or 1.667% of average final compensation (AFC), multiplied by years of creditable service. At age 65, the yearly pension amount is recalculated at 1/66 or 1.515% of AFC multiplied by years of creditable service.

Group II members who are age 60, or members who are at least age 45 with at least 20 years of creditable service, can receive a retirement allowance at a rate of 2.5% of AFC for each year of creditable service, not to exceed 40 years. Members commencing service on or after July 1, 2011 or members who have a non-vested status as of January 1, 2012 can receive a retirement allowance at age 52.5 with 25 years of service or age 60. The benefit shall be equal to 2% of AFC times creditable service up to 42.5 years. However, a member who commenced service on or after July 1, 2011 shall not receive a retirement allowance until attaining the age of 52.5, but may receive a reduced allowance after age 50 if the member has at least 25 years of creditable service where the allowance shall be reduced, for each month by which the benefit commencement date precedes the month after which the member attains 52.5 years of age by ¼ of 1% or age 60.

Members of both groups may qualify for vested deferred allowances, disability allowances and death benefit allowances subject to meeting various eligibility requirements. Benefits are based on AFC or earned compensation and/or service.

C. Contributions

Plan members are required to contribute a percentage of their gross earnings to the pension plan, which the contribution rates are 7% for employees and teachers 11.55% for police and 11.80% for fire. The City makes annual contributions to the pension plan equal to the amount required by Revised Statutes Annotated 100-A:16, and range from 10.77% to 27.74% of covered compensation. The City’s contributions to NHRS for the year ended June 30, 2015 was $19,432,673, which was equal to its annual required contribution.

D. Summary of Significant Accounting Policies

For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the NHRS and additions to/deductions from NHRS’ fiduciary net position have been determined on the same basis as they are reported by NHRS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value.

E. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

At June 30, 2015, the City reported a liability of $184,879,108 for its proportion- ate share of the net pension liability. The net pension liability was measured as of June 30, 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2013. The City’s

A-79 proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. At June 30, 2013, the City’s proportion was 4.8540%. At the most recent measurement date of June 30, 2014, the City’s proportion was 4.9254%, which was an increase of 0.0714% from the previous year.

For the year ended June 30, 2015, the City recognized pension expense of $13,082,742. In addition, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources

Net difference between projected and actual earnings on pension plan investments $ - $ 23,655,436 Changes in proportion and differences between contributions and proportionate share of contributions 3,074,353 550,974 Contributions subsequent to the measurement date 19,432,673 - Total $ 22,507,026 $ 24,206,410

Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Deferred Deferred Outflows of Inflows of Year ended June 30: Resources Resources 2016 $ 20,201,262 $ 6,051,602 2017 768,588 6,051,602 2018 768,588 6,051,602 2019 768,588 6,051,604 Total $ 22,507,026 $ 24,206,410

Actuarial assumptions: The total pension liability in the June 30, 2014 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Valuation Date July 1, 2013 rolled forward to July 1, 2014 Actuarial cost method Entry-Age Normal Inflation 3.00% Projected salary increases 3.75 - 5.80% average, including inflation Investment rate of return 7.75 %, net of pension plan investment expense, including inflation

A-80 Mortality rates were based on the RP-2000 mortality table, projected to 2020 with Scale AA. The table includes a margin of 15% for men and 17% for woman for mortality improvements.

The actuarial assumptions used in the June 30, 2013 valuation were based on the results of the most recent actuarial experience study, which was for the period July 1, 2005 – June 30, 2010.

The long-term expected rate of return on pension plan investments was selected from a best estimate range determined using the building block approach. Under this method, an expected future real return range is calculated separately for each asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return net of investment expenses by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major class are summarized in the following table:

Weighted Average Average Long- Target Term Expected Allocation Real Rate of Asset Class Percentage Return Large Cap Equities 22.50 % 3.25% Small/Mid Cap Equities 7.50 3.25% Total domestic equities 30.00

Int'l Equities (unhedged) 13.00 4.25% Emerging Int'l Equities 7.00 6.50% Total international equities 20.00

Core Bonds 18.00 -0.47% High-Yield Bonds 1.50 1.50% Global Bonds (unhedged) 5.00 -1.75% Emerging Market Debt (external) 0.50 2.00% Total fixed income 25.00

Private equity 5.00 5.75% Private debt 5.00 5.00% Real estate 10.00 3.25% Opportunistic 5.00 2.50% Total alternative investments 25.00 Total 100.00 %

A-81 Discount rate: The discount rate used to measure the total pension liability was 7.75%. The projection of cash flows used to determine the discount rate assumed that the plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. For purposes of the projection, member contributions and employer service cost contributions are projected based on the expected payroll of current members only. Employer contributions are determined based on the pension plan’s actuarial funding policy and as required by RSA 100-A:16. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments to current plan members. Therefore, the long- term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the proportionate share of the net pension liability to changes in the discount rate: The following presents the City’s proportionate share of the net pension liability calculated using the discount rate of 7.75%, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.75%) or 1 percentage-point higher (8.75%) than the current rate:

Current 1% Decrease Discount Rate 1% Increase Fiscal Year Ended (6.75%) (7.75%) (8.75%) June 30, 2014 $ 243,515,864 $ 184,879,108 $ 135,410,221

Pension plan fiduciary net position: Detailed information about the pension plan’s fiduciary net position is available in the separately issued NHRS financial report.

Public Works Employees’ Retirement System

The City follows the provisions of GASB Statement No. 67 Financial Reporting for Pension Plans – an amendment of GASB Statement No. 25 and GASB Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27, with respect to the employees’ retirement funds.

A. Plan Description

All Public Works employees of the City are members of the Public Works Employees’ Retirement System (the System), a single employer-defined benefit PERS. Eligible employees must participate in the System. The pension plan pro- vides pension benefits and death and disability benefits to employees reaching age 60, provided they have accumulated 10 years of service. A City ordinance passed in 1947 established the System which is administered by a five-member Board of Trustees. Amendments to benefit provisions are made by the Board of Trustees with the concurrence of the Board of Aldermen. The Public Works

A-82 Employees’ Retirement System does not issue independent financial statements. Administrative costs are financed by Trust earnings.

Membership of each plan consisted of the following at July 1, 2014, the date of the latest actuarial valuation:

Inactive plan members or beneficiaries receiving benefits 95 Inactive plan members entitled to but not yet receiving benefits 1 Active plan members 160 Total 256

B. Benefits Provided

The System provides for retirement and death benefits. The retirement allowance benefit is up to a maximum 65% of final compensation reduced proportionately for creditable services less than 25 years (30 if hired after July 1, 2010). Benefit payments are based upon a member’s age and length of creditable service. Members become fully vested after 10 years of creditable service. A retirement allowance may be received upon reaching ago 60 with 10 years of credited service or upon attaining 25 years (30 years if hired after July 1, 2010) of continuous service with the Board of Public Works. The plan also provides for early retirement for 65% of final compensation reduced by 0.555% for each month between age 60 and the member’s early retirement date. In addition, the System provides for disability retirement allowance if age 60 or older with a minimum of 10 years of creditable service, 65% (60% if under age 60) of final compensation reduced proportionately for creditable service less than 25 years (30 years if hired after July 1, 2010).

The death allowance benefits are based upon creditable service and classification. Members become vested after 10 years of creditable service. Employee contribu- tions must be left in the plan for the deferred vested benefit to be payable. Pre- retirement spouse benefits are paid at 50% of the benefit to which the member would have been entitled had the member retired on the date of death, when accidental death benefits are not payable, and if the member has 10 or more years of service.

Post-Retirement benefits of $3,000 are paid to beneficiaries of retired members upon the death of the retired member. Accidental death benefits are 65% of final compensation to spouse until death or remarriage, or dependent child to age 18, or dependent parent for life.

C. Contributions

The City employees each contribute 9.15% of their base salary, as specified by ordinance. The City’s contribution is determined by the actuarial valuation. The

A-83 City’s contribution to the System for the year ended June 30, 2015 was $772,343, which was equal to its annual required contribution.

D. Summary of Significant Accounting Policies

The accounting policies of the System as reflected in the accompanying financial statements for the year ended June 30, 2015 conform to generally accepted accounting principles for public employee retirement systems (PERS). The more significant accounting policies of the System are summarized below:

Basis of accounting: Contributory retirement system financial statements are prepared using the accrual basis of accounting. Plan member contributions are recognized as revenue in the period in which the members provide services to the employer. Employer contributions are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan.

Investment policy: Investments are reported at fair value in accordance with requirements. System assets are managed on a total return basis with a long-term objective of achieving and maintaining a fully funded status for the benefits provided through the pension plan.

Rate of return: For the year ended June 30, 2015, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expenses, was 2.9888%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

Net pension liability: For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the System and additions to/deductions from System’s fiduciary net position have been determined on the same basis as they are reported by System. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value.

E. Net Pension Liability of Participating Employers

The components of the net pension liability of the participating employers at June 30, 2015 were as follows (in thousands):

Total pension liability $ 44,393 Plan fiduciary net position (37,512) Employers' net pension liability $ 6,881 Plan fiduciary net postion as a percentage of total pension liability 84.50%

A-84 Actuarial assumptions: A summary of the actuarial assumptions as of the latest actuarial valuation is shown below:

Valuation Date July 1, 2014 rolled forward to July 1, 2015 Actuarial cost method Entry-Age Actuarial Cost Inflation rate 3.00% Projected salary increases Inflation of 3.00%, plus merit increases ranging from 2.00% to 0.05%, based on age Investment rate of return 7.25%, net of investment-related and administrative expenses

Actuarial valuation of the ongoing System involves estimates of the reported amounts and assumptions about probability of occurrence of events far into the future. Examples include assumptions about future employment mortality and future salary increases. Amounts determined regarding the net pension liability are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The actuarial assumptions used in the June 30, 2014 valuation were based on the results of the most recent actuarial experience study, which was for the period July 1, 2005 – June 30, 2014.

Mortality rates in the June 30, 2014 valuation for non-disabled individuals reflects the RP-2014 Mortality Table, with blue collar adjustment, projected to the valuation date with Scale MP-2014. This changed from the June 30, 2013 valuation, which reflected the RP-2000 Blue Collar Mortality Table with separate male and female rates projected to the valuation date with Scale AA.

Mortality rates in the June 30, 2014 valuation for disabled individuals reflects the RP-2014 Mortality Table, with blue collar adjustment, projected to the valuation date with Scale MP-2014, setback 10 years. This changed from the June 30, 2013 valuation, which reflected the RP-2000 Disabled Life Mortality Tables, with separate male and female tables.

Mortality improvement rates in the June 30, 2014 valuation for disabled and non- disabled individuals are based on projections to the date of decrement using Scale MP-2014 (generational mortality). This changed from the June 30, 2013 valuation, which projected rates for non-disabled individuals using Scale AA for 10 years after the valuation date, and no projections were made for disabled individuals.

The long-term expected rate of return on pension plan investments was selected from a best estimate range determined using the building block approach. Under this method, an expected future real return range (expected returns, net of pension plan investment expense and inflation) is calculated separately for each asset

A-85 class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return net of investment expenses by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major class are summarized in the following table: Real Long-term Target Return Expected Asset Arithmetic Real Rate Asset Class Allocation Basis of Return Intermediate Bond 40.00% 2.00% 0.80% US Large Cap Equity 30.00% 6.50% 1.95% US Small Cap Equity 10.00% 8.00% 0.80% International Equity 20.00% 6.20% 1.24% Total 100.00% 4.79% Inflation 3.00% Expected arithmetic nominal return 7.79%

Discount rate: The discount rate used to measure the total pension liability was 7.25%. The projection of cash flows used to determine the discount rate assumed that the plan member contributions will be made at the current contribution rate and that employer contributions will be made at contractually required rates, actuarially determined. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments to current active and inactive plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the the net pension liability to changes in the discount rate: The following presents the City’s proportionate share of the net pension liability calculated using the discount rate of 7.25%, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.25%) or 1 percentage- point higher (8.25%) than the current rate:

Current Discount 1% 1% Decrease Rate Increase Fiscal Year Ended (6.25%) (7.25%) (8.25%) June 30, 2015 $ 11,850,571 $ 6,881,217 $ 2,651,766

A-86 F. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

At June 30, 2015, the City reported a liability of $6,881,217 for its net pension liability. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2014. The City’s net pension liability was based on a projection of the City’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined.

For the year ended June 30, 2015, the City recognized pension expense of $715,859. In addition, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ 72,958 $ - Changes of assumptions - 1,069,837 Net difference between projected and actual earnings on pension plan investments 1,256,781 -

Total $ 1,329,739 $ 1,069,837

Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Deferred Deferred Outflows of Inflows of Year ended June 30: Resources Resources 2016 $ 325,249 $ 162,097 2017 325,249 162,097 2018 325,249 162,097 2019 325,250 162,097 2020 11,054 162,097 Thereafter 17,688 259,352 Total $ 1,329,739 $ 1,069,837

A-87 19. Self-Insurance

The City self-insures against claims for workers compensation, general liability, property, long-term disability, and employee health coverage. Annual estimated requirements for claims are provided in the City’s annual operating budget.

Health Insurance

The City contracts with insurance carriers for claims processing. Under the terms of the insurance coverage, the employee is only liable for the cost sharing premiums and co-pays. The City retains the risk to $250,000 and maintains excess insurance for claims that exceed $250,000. The claims liability represents an estimate of claims incurred but unpaid at year-end, based on past historical costs and claims paid subse- quent to year-end.

General Liability/Workers’ Compensation

The City is self-administered for claims processing of the City’s workers’ compensa- tion, property, and casualty programs. The workers’ compensation, property, and casualty liabilities represent an estimate of future costs based on historical analysis of similar claims.

Changes in the aggregate liability for claims for the year ended June 30, 2015 are as follows: Year Ended Year Ended June 30, 2015 June 30, 2014 Claims liability, beginning of year $ 8,963,872 $ 9,553,764 Claims incurred/recognized 41,811,273 40,023,611 Claims paid (42,733,873) (40,613,503) Claims liability, end of year $ 8,041,272 * $ 8,963,872 * * This liability is considered to be all current.

The $8,041,272 estimated liability for claims incurred, but not reported, includes only an estimate for known loss events expected to later be presented as claims. The City is unable to estimate the amount of unknown loss events expected to become claims and expected future developments on claims already reported.

20. Risk Management

The government is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the government carries commercial insurance. There were no significant reductions in insurance coverage from the previous year and have been no material settlements in excess of coverage in any of the past three fiscal years.

A-88 21. Beginning Net Position Restatement

In fiscal year 2015, the City’s beginning net position as of July 1, 2014 was restated for the implementation of the new standard – Governmental Accounting Standards Board (GASB) Statement 68, Accounting and Financial Reporting for Pensions, as amended by GASB Statement 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. Accordingly, the following reconciliation is provided: Business-Type Activities Government- Wide Financial Statements Fund Basis Financial Statements Governmental Waste Water Solid Waste Business-Type Activities Fund Fund Total

As previously reported $ 211,648,058 $ 105,373,556 $ (943,382) $ 104,430,174 GASB 68 implementation for net pension liability (194,250,313) (1,622,705) (1,262,104) (2,884,809) As restated $ 17,397,745 $ 103,750,851 $ (2,205,486) $ 101,545,365

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A-90 Pennichuck Corporation and Subsidiaries Notes to Financial Statements

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A-92 PENNICHUCK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Description of Business and Summary of Significant Accounting Policies

Description of Business:

Pennichuck Corporation (our “Company,” “we,” or “our”) is a holding company headquartered in Merrimack, New Hampshire with five wholly owned operating subsidiaries: Pennichuck Water Works, Inc., (“Pennichuck Water”) Pennichuck East Utility, Inc., (“Pennichuck East”) and Pittsfield Aqueduct Company, Inc. (“PAC”) (collectively referred to as our Company’s “utility subsidiaries”), which are involved in regulated water supply and distribution to customers in New Hampshire; Pennichuck Water Service Corporation (“Service Corporation”) which conducts non-regulated water-related services; and The Southwood Corporation (“Southwood”) which owns several parcels of undeveloped land.

Our Company’s utility subsidiaries are engaged principally in the collection, storage, treat- ment and distribution of potable water to approximately 35,400 customers throughout the State of New Hampshire. The utility subsidiaries, which are regulated by the New Hampshire Public Utilities Commission (the “NHPUC”), are subject to the provisions of Accounting Standards Codification (“ASC”) Topic 980 “Regulated Operations.”

Summary of Significant Accounting Policies:

Basis of Presentation

The accompanying consolidated financial statements include the accounts of our Company and its wholly owned subsidiaries. All significant intercompany transactions have been elimi- nated in consolidation.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Property, Plant and Equipment

Property, plant and equipment, which includes principally the water utility assets of our Company’s utility subsidiaries, is recorded at cost plus an allowance for funds used during construction on major, long-term projects and includes property funded with contributions in aid of construction.

A-93 Maintenance, repairs and minor improvements are charged to expense as incurred. Improve- ments which significantly increase the value of property, plant and equipment are capitalized.

Cash and Cash Equivalents

Cash and cash equivalents generally consist of cash, money market funds and other short- term liquid investments with original maturities of three months or less.

Restricted Cash - RSF

This restricted cash balance consists of funds maintained for the Rate Stabilization Fund (“RSF”), which was established in conformity with the requirements of New Hampshire Public Utilities Commission (“NHPUC”) Order 25,292, as explained more fully in Note 11 of these financial statements. The RSF is an imprest fund of $5,000,000, which is subject to funding above or below the imprest fund balance, reflecting actual revenue performance as it relates to prescribed revenue levels supported by the RSF. Of the approximately $5.3 million in restricted cash as of December 31, 2014 and in compliance with the rules governing the use of the RSF, approximately $263,000 is reserved as a potential return to rate payers as a component of the new water rates set as a result of the next promulgated rate case before the NHPUC, for which that timing and occurrence is yet to be determined.

Restricted Cash – 2014 Bond Project Fund

This restricted cash balance consists of funds that resulted from the issuance of the Series 2014A tax-exempt bonds in December of 2014, as notated and fully described in Note 9 of these audited financial statements. The new money proceeds, as described in Note 9, from that bond issuance are maintained in a separate restricted cash account, and are subject to withdrawal as a reimbursement of eligible capital project expenditures for the years 2014 through 2016, as defined by the indenture and issuance documents associated with the offering. This fund was initially funded at a level of $19.5 million, at the time the bonds were issued. In December of 2014, the first reimbursement withdrawal was processed from this fund, in the amount of approximately $2.7 million, as a reimbursement of qualifying capital projects completed and “used and useful” during 2014, resulting in the December 31, 2014 balance in the fund of approximately $16.8 million.

Restricted Cash – Bond Refund Escrow

This restricted cash balance also consists of funds that resulted from the issuance of the Series 2014A tax-exempt bonds in December of 2014, as notated and fully described in Note 9 of these audited financial statements. The refinance money proceeds, as described in Note 9, from that bond issuance are maintained in a separate restricted cash account, pending the completion of the refinance of existing tax-exempt bonds on January 20, 2015, the date at which the required 30-day notice period to bondholders has expired from the date of notification after the close of the December 15, 2014 bond closing. As of January 20, 2015, the entire balance in this account, which included $23,350,000 of principal due on the bonds being refunded, as well as approximately $375,000 of accrued interest due on these bonds, was paid out to the holders of those debt instruments.

A-94 Concentration of Credit Risks

Financial instruments that subject our Company to credit risk consist primarily of cash and accounts receivable. Our cash balances are invested in a financial institution insured to statutory limit by the Federal Deposit Insurance Corporation (“FDIC”). Our accounts receivable balances primarily represent amounts due from the residential, commercial and industrial customers of our regulated water utility operations as well as receivables from our Service Corporation customers.

Accounts Receivable - Billed

Accounts receivable are recorded at the invoiced amounts. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable, and is determined based on historical write-off experience and the aging of account balances. We review the allowance for doubtful accounts quarterly. Account bal- ances are written off against the allowance when it is probable the receivable will not be recovered.

Accounts Receivable - Unbilled

We read our customer meters on a monthly basis and record revenues based on meter reading results. Information from the last meter reading date is used to estimate the value of unbilled revenues through the end of the accounting period. Estimates of water utility revenues for water delivered to customers but not yet billed are accrued at the end of each accounting period. Actual results could differ from those estimates.

Inventory

Inventory is stated at the lower of cost, using the average cost method, or market.

Deferred Land Costs

Included in deferred land costs is our Company’s original basis in its undeveloped land- holdings and any land improvement costs, which are stated at the lower of cost or market. All costs associated with real estate and land projects are capitalized and allocated to the project to which the costs relate. Administrative labor and the related fringe benefit costs attributable to the acquisition, active development and construction of land parcels are capitalized as deferred land costs. No labor and benefits were capitalized for the years ended December 31, 2014 and 2013.

Deferred Charges and Other Assets

Deferred charges include certain regulatory assets and costs of obtaining debt financing. Regulatory assets are amortized over the periods they are recovered through NHPUC- authorized water rates. Deferred financing costs are amortized over the term of the related bonds and notes. Our Company’s utility subsidiaries have recorded certain regulatory assets in cases where the NHPUC has permitted, or is expected to permit, recovery of these costs

A-95 over future periods. Currently, the regulatory assets are being amortized over periods ranging from 3 to 25 years.

Contributions in Aid of Construction (“CIAC”)

Under construction contracts with real estate developers and others, our Company’s utility subsidiaries may receive non-refundable advances for the cost of installing new water mains. These advances are recorded as CIAC. The utility subsidiaries also record to plant and CIAC the fair market value of developer installed mains and any excess of fair market value over the cost of community water systems purchased from developers. CIAC are amortized over the life of the property.

Revenues

Standard charges for water utility services to customers are recorded as revenue, based upon meter readings and contract service, as services are provided. The majority of our Company’s water revenues are based on rates approved by the NHPUC. Estimates of unbilled service revenues are recorded in the period the services are provided. Provision is made in the financial statements for estimated uncollectible accounts.

Non-regulated water management services include contract operations and maintenance, and water testing and billing services to municipalities and small, privately owned community water systems. Contract revenues are billed and recognized on a monthly recurring basis in accordance with agreed-upon contract rates. Revenues from unplanned additional work are based upon time and materials incurred in connection with activities not specifically identi- fied in the contract, or for which work levels exceed contracted amounts.

Revenues from real estate operations, other than undistributed earnings or losses from equity method joint ventures, are recorded upon completion of a sale of real property. Our Company’s real estate holdings outside of our regulated utilities are comprised primarily of undeveloped land.

Investment in Joint Venture

Southwood uses the equity method of accounting for its investment in a joint venture in which it does not have a controlling interest. Under this method, Southwood records its proportionate share of losses under “Other, net” in the accompanying Consolidated State- ments of Income with a corresponding decrease in the carrying value of the investment.

Income Taxes

Income taxes are recorded using the accrual method and the provision for federal and state income taxes is based on income reported in the consolidated financial statements, adjusted for items not recognized for income tax purposes. Provisions for deferred income taxes are recognized for accelerated depreciation and other temporary differences. A valuation allowance is provided to offset any net deferred tax assets if, based upon available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

A-96 Investment tax credits previously realized for income tax purposes are amortized for financial statement purposes over the life of the property, giving rise to the credit.

Recently Issued Accounting Standards

We do not expect the adoption of any recently issued accounting pronouncements to have a material impact on our financial condition or results of operations.

Note 2 – Property, Plant and Equipment

The components of property, plant and equipment as of December 31, 2014 and 2013 were as follows: Useful Lives (in thousands) 2014 2013 (in years) Utility Property: Land and land rights $ 2,939 $ 2,927 - Source of supply 51,489 50,399 3 - 75 Pumping and purification 30,115 29,775 14 - 64 Transmission and distribution, including 130,983 124,024 services, meters and hydrants 15 - 91 General and other equipment 11,358 10,142 7 - 75 Intangible plant 770 768 20 Construction work in progress 2,677 2,524 Total utility property 230,331 220,559 Total non-utility property 5 5 5 - 10 Total property, plant and equipment 230,336 220,564 Less accumulated depreciation (57,049) (52,853) Property, plant and equipment, net $ 173,287 $ 167,711

The provision for depreciation is computed on the straight-line method over the estimated useful lives of the assets which range from 3 to 91 years. The weighted average composite depreciation rate was 2.54% and 2.45% in 2014 and 2013, respectively.

A-97 Note 3 – Accounts Receivable

Accounts receivable consisted of the following at December 31, 2014 and 2013:

(in thousands) 2014 2013 Accounts receivable - billed $ 2,240 $ 2,345 Less allowance for doubtful accounts (51) (44) Accounts Receivable - billed, net $ 2,189 $2,301

Accounts receivable - unbilled $ 2,399 $ 2,102 Less allowance for doubtful accounts - - Accounts Receivable - unbilled, net $ 2,399 $2,102

Note 4 – Deferred Charges and Other Assets

Deferred charges and other assets as of December 31, 2014 and 2013 consisted of the following: Recovery Period (in thousands) 2014 2013 (in years) Regulatory assets: Source development charges $ 708 $ 764 5 - 25 Miscellaneous studies 1,080 852 3 - 25 Unrecovered pension and post-retirement benefits expense 6,483 3,342 (1) Total regulatory assets 8,271 4,958 Supplemental executive retirement plan asset 649 625 Subtotal 8,920 5,583 Debt issuance expenses 4,422 3,406 (1) Total deferred charges and other assets $ 13,342 $8,989

(1) We expect to recover these amounts consistent with the anticipated expense recognition of these assets.

Note 5 – Post-retirement Benefit Plans

Pension Plan and Other Post-retirement Benefits

We have a non-contributory, defined benefit pension plan (the “DB Plan”) that covers sub- stantially all employees. The benefits are based on years of service and participant compensa- tion levels. Our funding policy is to contribute annual amounts that meet the requirements for

A-98 funding under the U.S. Department of Labor’s Pension Protection Act. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future.

We provide post-retirement medical benefits for eligible retired employees through one of two plans (collectively referred to as our “OPEB Plans”). For employees who retire on or after the normal retirement age of 65, benefits are provided through a post-retirement plan (the “Post-65 Plan”). For eligible non-union employees who retire prior to their normal retirement age and who have met certain age and service requirements, benefits are provided through a post-employment medical plan (the “Post-employment Plan”). Future benefits under the Post-65 Plan increase annually based on the actual percentage of wage and salary increases earned from the plan inception date to the normal retirement date. The benefits under the Post-employment Plan allow for the continuity of medical benefits coverage at group rates from the employee’s retirement date until the employee becomes eligible for Medicare. The OPEB Plans are funded from the general assets of our Company.

Upon retirement, if a qualifying employee elects to receive medical benefits under one of our OPEB Plans, we pay up to a maximum monthly benefit of $322 based on years of service.

The following table sets forth information regarding our DB Plan and our OPEB Plans as of December 31, 2014 and for the year then ended:

(in thousands) DB Plan OPEB Plans Projected benefit obligations $ 21,512 $ 3,000 Employer contribution 986 - Benefits paid, excluding expenses (429) (34) Fair value of plan assets 13,495 962 Accumulated benefit obligation 19,374 - Funded status (8,017) (2,038) Net periodic benefit cost 893 130 Amount of the funded status recognized in the Consolidated Balance Sheet consisted of: Current liability $ - $ (22) Non-current liability (8,017) (2,016) Total $(8,017) $ (2,038)

A-99 The following table sets forth information regarding our DB Plan and our OPEB Plans as of December 31, 2013 for the year then ended:

(in thousands) DB Plan OPEB Plans Projected benefit obligations $ 17,501 $ 2,809 Employer contribution 911 22 Benefits paid, excluding expenses (410) (36) Fair value of plan assets 12,244 944 Accumulated benefit obligation 15,665 - Funded status (5,257) (1,879) Net periodic benefit cost 1,372 204

Amount of the funded status recognized in the Consolidated Balance Sheet consisted of: Current liability $ - $ (21) Non-current liability (5,257) (1,858) Total $ (5,257) $ (1,879)

Changes in plan assets and benefit obligations recognized in regulatory assets, for the year ended December 31, 2014, were as follows:

(in thousands) DB Plan OPEB Plans Regulatory asset balance, beginning of period $ 3,815 $ (473) Net actuarial loss incurred during the period 2,986 299 Prior service cost incurred during the period - (51) Recognized net actuarial (gain)/loss (133) 40 Regulatory asset balance, end of period $ 6,668 $ (185)

Changes in plan assets and benefit obligations recognized in regulatory assets, for the year ended December 31, 2013, were as follows:

(in thousands) DB Plan OPEB Plans Regulatory asset balance, beginning of period $ 7,874 $ 222 Net actuarial gain incurred during the period (3,641) (699) Recognized net actuarial (gain)/loss (418) 4 Regulatory asset balance, end of period $ 3,815 $ (473)

A-100 Amounts recognized in regulatory assets for the DB and OPEB Plans that have not yet been recognized as components of net periodic benefit cost of the following as of December 31, 2014:

(in thousands) DB Plan OPEB Plans Net actuarial (gain)/loss $ 6,668 $ 28 Prior service cost - (213) Regulatory asset $ 6,668 $ (185)

Amounts recognized in regulatory assets for the DB and OPEB Plans that have not yet been recognized as components of net periodic benefit cost of the following as of December 31, 2013:

(in thousands) DB Plan OPEB Plans Net actuarial (gain)/loss $ 3,815 $ (311) Prior service cost - (162) Regulatory asset $ 3,815 $ (473)

The key assumptions used to value benefit obligations and calculate net periodic benefit cost for our DB and OPEB Plans include the following: 2014 2013 Discount rate for net periodic benefit cost, beginning of year 4.84% 4.00% Discount rate for benefit obligations, end of year (a) 3.85% 4.84% Expected return on plan assets for the period (net of investment expenses) 7.50% 7.50% Rate of compensation increase, beginning of year 2.75% 2.75% Healthcare cost trend rate (applicable only to OPEB Plans) 9.00% 9.50% (a) An increase or decrease in the discount rate of 0.5% would result in a change in the funded status as of December 31, 2014, for the DB Plan and the OPEB Plans of approximately $1.59 million and $242 thousand, respectively.

The estimated net actuarial loss for our DB Plan that will be amortized in 2015 from the regulatory assets into net periodic benefit costs is $332,000. The estimated net actuarial gain and prior service cost for our OPEB Plans that will be amortized in 2015 from the regulatory assets into net periodic benefit costs are $(2,000), and $(87,000), respectively.

In establishing its investment policy, our Company has considered the fact that the DB Plan is a major retirement vehicle for its employees and the basic goal underlying the establish- ment of the policy is to provide that the assets of the Plan are invested in accordance with the asset allocation range targets to achieve our expected return on Plan assets. Our Company’s investment strategy applies to its OPEB Plans as well as the DB Plan. Our expected long- term rate of return on DB Plan and OPEB Plan assets is based on the Plans’ expected asset allocation, expected returns on various classes of Plan assets as well as historical returns.

A-101 The assets of our Post-65 Plan are held in two separate Voluntary Employee Beneficiary Association (“VEBA”) trusts. We maintain our VEBA plan assets in directed trust accounts at a commercial bank.

The investment strategy for our DB Plan and our OPEB Plans utilizes several different asset classes with varying risk/return characteristics. The following table indicates the asset allocation percentages of the fair value of the DB Plan and OPEB Plans’ assets for each major type of plan asset as of December 31, 2014, as well as the targeted allocation range:

DB Plan OPEB Plans Asset Asset Allocation Allocation Range Range Equities 61% 30% - 100% 71% 30% - 100% Fixed income 39% 20% - 70% 28% 0% - 50% Cash and cash equivalents 0% 0% - 15% 1% 0% - 15% Total 100% 100%

The following table indicates the asset allocation percentages of the fair value of the DB Plan and OPEB Plans’ assets for each major type of plan asset as of December 31, 2013, as well as the targeted allocation range:

DB Plan OPEB Plans Asset Asset Allocation Allocation Range Range Equities 64% 30% - 100% 70% 30% - 100% Fixed income 36% 20% - 70% 28% 0% - 50% Cash and cash equivalents 0% 0% - 15% 2% 0% - 15% Total 100% 100%

Management uses its best judgment in estimating the fair value of its financial instruments. However, there are inherent weaknesses in any estimation technique. Therefore, for substan- tially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts that we could have realized in a sales transaction for these instruments. The estimated fair value amounts have been measured as of year-end and have not been reevaluated or updated for purposes of these financial statements subsequent to those respective dates.

Investments in mutual funds are stated at fair value by reference to quoted market prices. Money market funds are valued utilizing the Net Asset Value per unit based on the fair value of the underlying assets as determined by the directed trustee.

A-102 The DB Plan also holds assets under an immediate participation guarantee group annuity contract with a life insurance company. The assets under the contract are invested in pooled separate accounts and in a general investment account. The pooled separate accounts are valued based on net asset value per unit of participation in the fund and have no unfunded commitments or significant redemption restrictions at year-end. The value of these units is determined by the trustee based on the current market values of the underlying assets of the pooled separate accounts. Therefore, the value of the pooled separate accounts is deemed to be at estimated fair value.

The general investment account is not actively traded and significant other observable inputs are not available. The fair value of the general investment account is calculated by discounting the related cash flows based on current yields of similar instruments with comparable durations.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plans' management believes the valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain investments could result in a different fair value measurement at the reporting date.

We use a fair value hierarchy which prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 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, 2014 was as follows:

(in thousands) Totals Level 1 Level 2 Level 3 DB Plan: Equities: Pooled separate accounts $ 8,204 $ - $ 8,204 $ - Fixed Income: General investment account 2,625 - - 2,625 Pooled separate accounts 2,666 - 2,666 - Total Pension Plan $ 13,495 $- $ 10,870 $ 2,625

A-103 (in thousands) Totals Level 1 Level 2 Level 3 OPEB Plans: Mutual funds: Balanced/hybrid funds $ 173 $ 173 $ - $ - U.S. equity securities funds 447 447 - - International equity funds 66 66 - - Fixed income funds 269 269 - - Cash and cash equivalents: Money market funds 7 - 7 - Total Post-retirement Plans $ 962 $ 955 $ 7 $ - Totals $ 14,457 $955 $ 10,877 $ 2,625

The fair value of DB Plan and OPEB Plan assets by levels within the fair value hierarchy used as of December 31, 2013 was as follows:

(in thousands) Totals Level 1 Level 2 Level 3 DB Plan: Equities: Pooled separate accounts $ 7,895 $ - $ 7,895 $ - Fixed Income: General investment account 2,940 - - 2,940 Pooled separate accounts 1,409 - 1,409 - Total Pension Plan $ 12,244 $- $ 9,304 $ 2,940

OPEB Plans: Mutual funds: Balanced/hybrid funds $ 168 $ 168 $ - $ - U.S. equity securities funds 416 416 - - International equity funds 76 76 - - Fixed income funds 261 261 - - Cash and cash equivalents: Money market funds 23 - 23 - Total Post-retirement Plans $ 944 $ 921 $ 23 $ - Totals $ 13,188 $ 921 $ 9,327 $ 2,940

Level 1: Based on quoted prices in active markets for identical assets. Level 2: Based on significant observable inputs. Level 3: Based on significant unobservable inputs.

A-104 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) 2014 2013 Balance, beginning of year $ 2,940 $1,704 Plan transfers (494) 864 Contributions 537 729 Benefits paid (438) (410) Return on plan assets (net of investment expenses) 80 53 Balance, end of year $ 2,625 $2,940

In order to satisfy the minimum funding requirements of the Employee Retirement Income Security Act of 1974, applicable to defined benefit pension plans, we anticipate that we will contribute approximately $1.2 million to the DB Plan in 2015. The following maximum benefit payments, which reflect expected future service, as appro- priate, are expected to be paid in the years indicated:

(in thousands) DB Plan OPEB Plans 2015 $ 586 $ 64 2016 686 70 2017 743 75 2018 829 91 2019 962 116 2020 - 2024 5,965 645 Total $ 9,771 $ 1,061

Because we are subject to regulation in the state in which we operate, we are required to maintain our accounts in accordance with the regulatory authority’s rules and regulations. In those instances, we follow the guidance of ASC 980 (“Regulated Operations”). Based on prior regulatory practice, we recorded underfunded DB Plan and OPEB Plan obligations as a regulatory asset and we expect to recover those costs in rates charged to customers.

Defined Contribution Plan

In addition to the defined benefit plan, we have a defined contribution plan covering substantially all employees. Under this plan, our Company matches 100% of the first 3% of each participating employee’s salary contributed to the plan. The matching employer’s con- tributions, recorded as operating expenses, were approximately $207,000 and $197,000 for the years ended December 31, 2014 and 2013, respectively.

A-105 Note 6 - Commitments and Contingencies

Operating Leases

We lease our corporate office space as well as certain office equipment under operating lease agreements. Total rent expense was approximately $315,000 and $305,000 for the years ended December 31, 2014 and 2013, respectively.

Our remaining non-cancelable lease commitments for our corporate office space and leased equipment as of December 31, 2014 were as follows:

(in thousands) Amount 2015 $ 277 2016 271 2017 159 2018 2 Total $709

Note 7 – Financial Measurement and Fair Value of Financial Instruments

Management uses its best judgment in estimating the fair value of its financial instruments. However, there are inherent weaknesses in any estimation technique. Therefore, for substan- tially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts that we could have realized in a sales transaction for these instruments. The estimated fair value amounts have been measured as of the period end and have not been reevaluated or updated for purposes of these financial statements subsequent to those respective dates.

We use a fair value hierarchy which prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are as follows:

Level 1: Based on quoted prices in active markets for identical assets. Level 2: Based on significant observable inputs. Level 3: Based on significant unobservable inputs.

An asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

A-106 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, 2014 and 2013 were as follows: December 31, 2014 (in thousands) Total Level 1 Level 2 Level 3 Interest rate swap $ (583) $- $(583) $-

December 31, 2013 (in thousands) Total Level 1 Level 2 Level 3 Interest rate swap $ (386) $- $(386) $-

The carrying value of certain financial instruments included in the accompanying Consoli- dated Balance Sheets, along with the related fair value, as of December 31, 2014 and 2013 was as follows: 2014 2013 Carrying Fair Carrying Fair (in thousands) Value Value Value Value Liabilities: Long-term debt $ (224,307) $( 270,191)$( 177,396)$( 197,797) Interest rate swap liability (583) (583) (386) (386)

The fair value of long-term debt has been determined by discounting the future cash flows using current market interest rates for similar financial instruments of the same duration. The fair value for long-term debt shown above does not purport to represent the amounts at which those debt obligations would be settled. The fair market value of our interest rate swap represents the estimated cost to terminate this agreement as of December 31, 2014 and 2013 based upon the then-current interest rates and the related credit risk.

The carrying values of our Cash and Cash Equivalents, Accounts Receivable and Accounts Payable approximate their fair values because of their short maturity dates. The carrying value of our CIAC approximates its fair value because it is expected that this is the amount that will be recovered in future rates.

A-107 Note 8 – Income Taxes

The components of the federal and state income tax provision (benefit) as of December 31, 2014 and 2013 were as follows: (in thousands) 2014 2013 Federal $ 343 $ (623) State 241 (192) Amortization of investment tax credits (33) (33) Total $ 551 $ (848)

Current $ (33) $ - Deferred 584 (848) Total $ 551 $ (848)

The following is a reconciliation between the statutory federal income tax rate and the effective income tax rate for 2014 and 2013: 2014 2013 Statutory federal rate 34.0% 34.0% State tax rate, net of federal benefits 5.6% 5.6% Permanent differences -87.3% 5.6% Amortization of investment tax credits 2.7% 1.8% Effective tax rate -45.0% 47.0%

The temporary items that give rise to the net deferred tax liability as of December 31, 2014 and 2013 were as follows: (in thousands) 2014 2013 Liabilities: Property-related, net $ 25,626 $ 24,735 Pension deferred asset 2,641 1,511 Other 1,061 705 Total liabilities 29,328 26,951

Assets: Pension accrued liability 3,176 2,082 Net operating loss carryforward 2,399 2,053 Alternative minimum tax credit 476 384 NH Business Enterprise Tax credits 369 250 Other 2,574 2,375 Total assets 8,994 7,144 Net non-current deferred income tax liability $ 20,334 $ 19,807

A-108 We had a federal net operating loss in 2014 and 2013 in the amounts of approximately $1.8 million and $319,000, respectively. The federal tax benefit of the cumulative net operating loss is approximately $2.1 million which begins to expire in 2032, and is included in deferred income taxes in the consolidated balance sheet as of December 31, 2014.

As of December 31, 2014 and 2013, we estimated approximately $476,000 and $384,000 of cumulative federal alternative minimum tax credits that may be carried forward indefinitely as a credit against our regular tax liability.

As of December 31, 2014 and 2013, we had New Hampshire Business Enterprise Tax (“NHBET”) credits of approximately $369,000 and $250,000, respectively. NHBET credits begin to expire in 2017. We anticipate that we will fully utilize these NHBET credits before they expire; therefore we have not recorded a valuation allowance related to these credits.

Investment tax credits resulting from utility plant additions are deferred and amortized. The unamortized investment tax credits are being amortized through the year 2033.

We had a regulatory liability related to income taxes of approximately $803,000 and $825,000 as of December 31, 2014 and 2013, respectively. This represents the estimated future reduction in revenues associated with deferred taxes which were collected at rates higher than the currently enacted rates and the amortization of deferred investment tax credits.

We made a review of our portfolio of uncertain tax positions. In this regard, an uncertain tax position represents our expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. As a result of this review, we determined that we had no material uncertain tax positions. We will use tax planning strategies, if required, and when possible, to avoid the expiration of any future net operating loss and/or tax credits.

We file income tax returns in the U.S. federal jurisdiction, the State of New Hampshire and the Commonwealth of Massachusetts. Our 2010 through 2013 tax years remain subject to examination by the Internal Revenue Service. Our tax year 2009 was audited by the Internal Revenue Service and the year was closed with no changes. Our 2008 through 2013 tax years remain subject to examination by one or more state jurisdictions.

Our practice is to recognize interest and/or penalties related to income tax matters in “Other, Net” in the Consolidated Statements of Income. We incurred no interest or penalties during the years ended December 31, 2014 and 2013.

A-109 Note 9 – Debt

Long-term debt as of December 31, 2014 and 2013 consisted of the following: (in thousands) 2014 2013 Unsecured note payable to City of Nashua, 5.75%, due 12/25/2041 $ 114,651 $ 116,336 Unsecured senior note payable due to an insurance company 7.40%, due March 1, 2021 4,800 5,200 Unsecured Business Finance Authority: Revenue Bonds (Series 2014A), interest rates from 3.00% to 4.125%, due January 1, 2016 through January 1, 2045 41,885 - Revenue Bonds (Series 2014B), 4.50%, due January 1, 2045 5,300 - Revenue Bond (2005 Series BC-4), 5.375%, due October 1, 2035 12,125 12,125 Revenue Bond (2005 Series BC-3), 5.00%, due April 1, 2018 7,475 7,475 Revenue Bond (2005 Series A), 4.70%, due October 1, 2035 12,100 12,125 Revenue Bond (Series 2005A), 4.70%, due January 1, 2035 1,765 1,785 Revenue Bond (Series 2005B), 4.60%, due January 1, 2030 2,310 2,320 Revenue Bond (Series 2005C), 4.50%, due January 1, 2025 1,175 1,175 Revenue Bond, 1997, 6.30%, due May 1, 2022 2,600 2,800 Unsecured notes payable to bank, floating-rate, due March 1, 2030 3,708 3,886 Unsecured notes payable to bank, 3.62%, due June 20, 2023 1,633 1,694 Unsecured notes payable to bank, 4.25%, due June 20, 2033 880 910 Unsecured New Hampshire State Revolving Fund (“SRF”) notes (1) 12,152 9,829 Total long-term debt 224,559 177,660 Less current portion (26,275) (2,965) Less original issue discount (252) (264) Total long-term debt, net of current portion $ 198,032 $ 174,431

(1) SRF notes are due through 2035 at interest rates ranging from 1% to 4.488%. These notes are payable in 120 to 240 consecutive monthly installments of principal and interest. The 1% rate applies to construction projects still in process until the earlier of (i) the date of substantial completion of the improvements, or (ii) various dates specified in the note (such earlier date being the interest rate change date). Commencing on the interest rate change date, the interest rate changes to the lower of (i) the rate as stated in the note or (ii) 80% of the established 11 General Obligations Bond Index published during the specified time period before the interest rate change date.

The aggregate principal payment requirements subsequent to December 31, 2014 are as follows: (in thousands) Amount 2015 $ 26,275 2016 4,116 2017 4,313 2018 4,504 2019 4,714 2020 and thereafter 180,637 Total $ 224,559

A-110 Several of Pennichuck Water’s loan agreements contain a covenant that prevents Pennichuck Water from declaring dividends if Pennichuck Water does not maintain a minimum net worth of $4.5 million. As of December 31, 2014 and 2013, Pennichuck Water’s net worth was $127.8 and $125.6 million, respectively. Pennichuck Water Works also has debt issuance covenants whereby they must also maintain a maximum total debt to capital ratio of 65%, a maximum funded debt to net property, plant and equipment ratio of 60%, and an interest coverage ratio of at least 1.5; at December 31, 2014 and 2013 the total debt to capital ratio was 37% and 29%, respectively, the funded debt to net property, plant and equipment ratio was 55% and 38%, respectively, and the interest coverage ratio was 2.81 and 2.62, respectively.

On December 15, 2014, Pennichuck Water issued tax-exempt Series 2014A (AMT) bonds and taxable Series 2014B bonds, in the amounts of $41,885,000 and $5,300,000, respectively. The Series 2014A bonds, which were issued at a premium of approximately $1.9 million, include money raised to finance capital projects for the years 2014 through 2016 in the amount of $19.5 million, the refinance and refunding of the Series 2005C, Series BC-3, Series BC-4 and 1997 bonds (collectively the “refinanced bonds”) included in the table above in the amount of $23.375 million, and the cost of issuance associated with this new series of debt obligations. The refinanced bonds are offset in total by the amount of cash held in the Restricted Cash – Bond Refund Escrow account, as fully described in Note 1 to these financial statements. The associated bond premium for the Series 2014A bonds is being amortized over the lives of the underlying bond obligations. The Series 2014 bonds, which were issued at par, includes $5.1 million to reimburse Pennichuck Water for capital projects completed in calendar year 2013 and January 2014, and originally funded from working capital or line of credit borrowings from the Company’s bank, as well as the associated cost of issuance for this series of bonds. The cost of issuance associated with both the Series 2014A and Series 2014B bonds is being amortized over the 30-year life of the debt obligations.

These bonds were issued under a new bond indenture and loan and trust agreement, which contains certain covenant obligations upon Pennichuck Water, which are as follows:

Debt to Capital Covenant - Pennichuck Water cannot create, issue, incur, assume or guarantee any short-term debt if (1) the sum of the short-term debt plus its funded debt (“Debt”) shall exceed 85% of the sum of its short-term debt, funded debt and capital stock plus surplus accounts (“Capital”), unless the short-term debt issued in excess of the 85% is subordinated to the Series 2014 bonds. Thereby, the ratio of Debt to Capital must be equal to or less than 1.0. As of December 31, 2014, Pennichuck Water Works has a Debt to Capital Coverage ratio of 0.4.

All Bonds Test - Additionally, Pennichuck Water cannot create, issue, incur, assume or guarantee any new funded debt, if the total outstanding funded debt (“Total Funded Debt”) will exceed the sum of MARA (as defined in Note 11 of these audited financial statements) and 85% of its Net Capital Properties (“MARA and Capital Properties”), and unless net revenues or EBITDA (earnings before interest, taxes, depreciation and amortization) shall equal or exceed for at least 12 consecutive months out of the 15 months preceding the issuance of the new funded debt by 1.1 times the maximum amount for which Pennichuck Water will be obligated to pay

A-111 in any future year (“Max Amount Due”), as a result of the new funded debt being incurred. Thereby, the ratio of Total Funded Debt to MARA and Capital Properties must be equal to or less than 1.0; as of December 31, 2014, this coverage ratio was 0.5. Also the ratio of EBITDA to the Max Amount Due must be equal to or greater than 1.1; as of December 31, 2014, this ratio was 4.0.

Rate Covenant Test - If during any fiscal year, the EBITDA of Pennichuck Water shall not equal at least 1.1 times all amounts paid or required to be paid during that year (“Amounts Paid”), then the Company shall undertake reasonable efforts to initiate a rate-making proceeding with the NH Public Utilities Commission, to rectify this coverage requirement in the succeeding fiscal years. Thereby, the ratio of EBITA to Amounts Paid must be equal to or greater than 1.1; as of December 31, 2014, the Rate Covenant coverage ratio was 3.52.

Pennichuck East’s loan agreement for its unsecured notes payable to a bank of $3.7 million and $3.9 million at December 31, 2014 and 2013, respectively, contains a minimum debt service coverage ratio requirement of 1.25. At December 31, 2014 and 2013 this ratio was 1.83 and 1.42, respectively. Also, Pennichuck East is required to maintain a maximum ratio of total debt to total capitalization of 65%; at December 31, 2014 and 2013 this ratio was 44% and 41%, respectively.

The Company’s revolving credit loan facility with TD Bank contains a covenant that requires the Company to maintain a minimum fixed charge coverage ratio of at least 1.0; at December 31, 2014 and 2013 the fixed charge coverage ratio was 1.12 and 1.08, respectively. The Company is also required to maintain an equity capitalization ratio of not less than 35%; at December 31, 2014 and 2013, the equity capitalization ratio was 41% and 50%, respectively. Under this agreement the Company is also precluded from declaring or paying dividends, or making any other payment or distribution of its equity without the bank’s prior written consent, except for: (1) its obligations under Rate Order No. 25,292 as it pertains to the Company’s specific obligations under the City Bond Fixed Revenue Requirement (“CBFRR”) which provides for payments of approximately $707,000 per month of the note payable to the City of Nashua (the “City”), and quarterly dividends to the City for the remainder of this annual obligation, as defined by the order; and (2) a specific allowance, under Rate Order No. 25,292, whereby the Company is allowed to make distributions to the City from current earnings and profits in excess of the CBFRR, to provide funds to allow the City to reimburse itself for the costs incurred by the City relating to its efforts in pursuing the eminent domain proceedings from January 2002 through August 2009, provided however that such amount shall not exceed $500,000 in any fiscal year, or $5,000,000 in the aggregate, of all such distributions. During the year ended December 31, 2013, a special dividend of $500,000 was approved and paid relating to this. No special dividend was declared or paid in 2014.

A-112 Our short-term borrowing activity under this revolving credit loan facility for the years ended December 31, 2014 and 2013 was:

(in thousands) 2014 2013 Established line as of December 31, $ 10,000 $10,000 Maximum amount outstanding during period 5,446 1,966 Average amount outstanding during period 2,833 137 Amount outstanding as of December 31, - 1,966 Weighted average interest rate during period 0.10% 1.06% Interest rate as of December 31, 1.981% 2.665%

As of December 31, 2014 and 2013, we had a $3.7 million and $3.9 million, respectively, interest rate swap which qualifies as a derivative. This financial derivative is designated as a cash flow hedge. This financial instrument is used to mitigate interest rate risk associated with our outstanding $3.7 million loan which has a floating interest rate based on the three- month London Interbank Offered Rate (“LIBOR”) plus 1.75% as of December 31, 2014. The combined effect of the LIBOR-based borrowing formula and the swap produces an “all-in fixed borrowing cost” equal to 5.95%. The fair value of the financial derivative, as of December 31, 2014 and 2013, included in our Consolidated Balance Sheets under “Deferred credits and other reserves” as “Other liabilities” was $583,000 and $386,000, respectively. Changes in the fair value of this derivative were deferred in accumulated other comprehensive income (loss).

Swap settlements are recorded in the statement of income with the hedged item as interest expense. During the years ended December 31, 2014 and 2013 $152,000 and $156,000 was reclassified pre-tax from accumulated other comprehensive income (loss) to interest expense as a result of swap settlements. We expect to reclassify approximately $143,000, pre-tax, from accumulated other comprehensive income (loss) to interest expense as a result of swap settlements, over the next twelve months.

A-113 Note 10 – Accumulated Other Comprehensive Income

The following table presents changes in accumulated other comprehensive income by component for the year ended December 31, 2014: Interest Rate Contract Beginning balance $ 298 Other comprehensive income before reclassifications (209) Amounts reclassified from accumulated other comprehensive income 91 Net current period other comprehensive income (118) Ending balance $ 180

The following table presents reclassifications out of accumulated other comprehensive income for the year ended December 31, 2014:

Amount Reclassified Affected Line Item in Details about Accumulated Other from Accumulated Other the Statement Where Comprehensive Income Components Comprehensive Income Net Income is Presented Gain (loss) on cash flow hedges Interest rate contracts $ 152 Interest expense (61) Tax expense Amounts reclassified from accumulated other comprehensive income $ 91 Net of tax

Note 11 – Transaction with the City of Nashua

On January 25, 2012, in full settlement of an ongoing Eminent Domain lawsuit filed by the City of Nashua (“City”) and with the approval of the New Hampshire Public Utilities Commission (“NHPUC”), the City acquired all of the outstanding shares of Pennichuck Corporation (“Pennichuck”) and, thereby, indirect acquisition of its regulated subsidiaries. The total amount of the acquisition was $150.6 million (“Acquisition Price”) of which $138.4 million was for the purchase of the outstanding shares, $5.0 million for the establishment of a Rate Stabilization Fund, $2.6 million for legal and due diligence costs, $2.3 million for severance costs, $1.3 million for underwriting fees, and $1.0 million for bond discount and issue costs. The entire purchase of $150.6 million was funded by General Obligation Bonds (“Bonds”) issued by the City of Nashua. Pennichuck is not a party to the

A-114 Bonds and has not guaranteed nor is obligated in any manner for the repayment of the Bonds. Pennichuck remains an independent corporation with an independent Board of Directors with the City of Nashua as its sole shareholder.

Pennichuck Water Works, Inc. (“PWW”), Pennichuck East Utility, Inc. (“PEU”), Pittsfield Aqueduct Company, Inc. (“PAC”), Pennichuck Water Service Corporation, and The Southwood Corporation will continue as subsidiaries of Pennichuck Corporation and PWW, PEU and PAC will continue as regulated companies under the jurisdiction of the New Hampshire Public Utilities Commission. The terms of the merger and the requisite accounting and rate-setting mechanisms were agreed to in the NHPUC Order 25,292 (“PUC Order”) dated November 23, 2011.

Transactions with Related Party – City of Nashua Pennichuck issued a promissory note to the City of Nashua in the amount of approximately $120 million to be repaid over a thirty (30) year period with monthly payments of approximately $707,000, including interest at 5.75%. Pennichuck recorded an additional amount of approximately $30.6 million as contributed capital. The remaining outstanding balance of the note payable to the City at December 31, 2014 and December 31, 2013 was approximately $114.7 million and $116.3 million, respectively, as disclosed in Note 9 to these consolidated financial statements. During 2014 and 2013, dividends of approximately $277,000 and $777,000, respectively, were declared and paid to the City. The dividends paid to the City during 2014 comprised approximately $277,000 of regular quarterly dividends declared and paid; and no special dividend was declared or paid in 2014. The dividends paid to the City during 2013 comprised approximately $277,000 of regular quarterly dividends declared and paid, and a special dividend of $500,000 declared and paid in October 2013, as resolved and authorized by the Board of Directors in their August 23, 2013 meeting.

Additional ongoing transactions occur in the normal course of business, between the Company and the City, related to municipal water usage, fire protection and sewer billing support services, and property taxes related to real property owned by the Company within the City of Nashua. For the years ended December 31, 2014 and 2013, respectively, approximately $3.3 million and $3.1 million were paid to the Company by the City for municipal water consumption, fire protection charges, and sewer billing support services. Conversely, the Company paid property taxes to the City of Nashua of approximately $2.5 million for the year ended December 31, 2014, and approximately $2.4 million for the year ended December 31, 2013.

Rate Stabilization Fund – Restricted Cash As a part of the acquisition, Pennichuck agreed to contribute $5,000,000 of the proceeds from the settlement transaction to PWW, which was used to establish a Rate Stabilization Fund (“RSF”), allowing for the maintenance of stable water utility rates and providing a mechanism to ensure the Company’s continued ability to meet its obligations under the promissory note to the City, in the event of adverse revenue developments. Restricted cash consists of amounts set aside in the RSF account, and is adjusted monthly as required in the PUC Order, as discussed in Note 1 of these financial statements.

A-115 Municipal Acquisition Regulatory Asset (“MARA”) Pursuant to the PUC Order, Pennichuck established a new Regulatory asset (MARA) which represents the amount that the Acquisition Price exceeded the net book assets of Pennichuck’s regulated subsidiaries (PWW, PEU, and PAC) at December 31, 2011. The initial amount of the MARA was approximately $89 million for the regulated companies, offset by a non-regulated amount of approximately $4.8 million. The MARA is to be amortized over a thirty (30) year period in the same manner as the repayment of debt service for the City’s acquisition bonds. The balance in the MARA at December 31, 2014 was approximately $83.5 million, reduced by the non-regulated credit of approximately $4.6 million.

Aggregate amortization expense for the years ended December 31, 2014 and 2013, totaled approximately $1,835,000 and $2,542,000, respectively. During the year ended December 31, 2012, the amortization of the MARA was calculated based upon the amortization of principal for the Company’s unsecured note payable to the City of Nashua (see Note 9). However, during 2013 the Company realized that the amortization of the MARA, as authorized by NHPUC Order 25,292, dated November 23, 2011, was supposed to be calculated based upon the principal repayment schedule of the bonds issued by the City, in support of their acquisition of the Company in January 2012. As such, the Company made a one-time adjustment to “true up” the amortization of the MARA during 2013, and as such, approximately $716,000 of the amortization expense recorded in 2013 relates to amounts that would have been booked in 2012, had the correct basis been applied initially. The amortization amount for 2013 would have been approximately $1,826,000 after giving consideration for this one-time correction.

The following table represents the total estimated amortization of MARA for the five succeeding years: Estimated Amortization (in thousands) Expense 2015 $ (1,857) 2016 (1,884) 2017 (1,917) 2018 (1,958) 2019 (2,006)

Note 12 – Sale of Conservation Easement

In July 2013, the Company completed the sale of a conservation easement to the Society for the Protection of New Hampshire Forests, with respect to a portion of its non-regulated land holdings in Merrimack, New Hampshire, as approved by the Board of Directors in their April 26, 2013 meeting. The transaction included gross proceeds for the value of the easement of approximately $991,000, netted by approximately $100,000 of legal, surveying, and professional fees. The net proceeds of approximately $891,000 from this transaction are included in “Other, Net” on the Consolidated Statements of Income herein.

A-116 Note 13 – Segment Reporting

The Company is comprised of Pennichuck Corporation and its five wholly-owned subsidiaries, as described in Note 1 to these audited financial statements. For the years ended December 31, 2014 and 2013, and as of those dates, the following financial results were generated by the segments of the Company:

2014 2013 Operating Revenues: Pennichuck Water Works, Inc. $ 28,193 $ 27,755 Pennichuck East Utility, Inc. 6,992 6,354 Pittsfield Aqueduct Company, Inc. 766 690 Subtotal Regulated Segment 35,951 34,799 Water Management Services 2,854 2,885 Other 10 10 Total Operating Revenues$ 38,815 $ 37,694

Depreciation and Amortization Expense: Pennichuck Water Works, Inc. $ 5,210 $ 5,687 Pennichuck East Utility, Inc. 928 994 Pittsfield Aqueduct Company, Inc. 117 130 Subtotal Regulated Segment 6,255 6,811 Water Management Services - - Other (107) (150) Total Depreciation and Amortization Expense$ 6,148 $ 6,661

Operating Income: Pennichuck Water Works, Inc. $ 7,410 $ 6,837 Pennichuck East Utility, Inc. 1,081 438 Pittsfield Aqueduct Company, Inc. 178 16 Subtotal Regulated Segment 8,669 7,291 Water Management Services 189 55 Other 47 92 Total Operating Income$ 8,905 $ 7,438

A-117 2014 2013 Interest Expense: Pennichuck Water Works, Inc. $ 2,814 $ 2,775 Pennichuck East Utility, Inc. 502 503 Pittsfield Aqueduct Company, Inc. 57 56 Subtotal Regulated Segment 3,373 3,334 Water Management Services - - Other 6,783 6,794 Total Interest Expense$ 10,156 $ 10,128

Income Taxes Provision (Benefit): Pennichuck Water Works, Inc. $ 2,474 $ 2,513 Pennichuck East Utility, Inc. 309 87 Pittsfield Aqueduct Company, Inc. 60 1 Subtotal Regulated Segment 2,843 2,601 Water Management Services 79 21 Other (2,371) (3,470) Total Income Taxes Provision (Benefit)$ 551 $ (848)

Net Income (Loss): Pennichuck Water Works, Inc. $ 2,139 $ 1,535 Pennichuck East Utility, Inc. 277 (138) Pittsfield Aqueduct Company, Inc. 60 (42) Subtotal Regulated Segment 2,476 1,355 Water Management Services 119 33 Other (4,370) (2,344) Total Net Income (Loss)$ (1,775) $ (956)

Total Assets: Pennichuck Water Works, Inc. $ 288,349 $ 231,121 Pennichuck East Utility, Inc. 42,521 41,377 Pittsfield Aqueduct Company, Inc. 4,418 4,526 Subtotal Regulated Segment 335,288 277,024 Water Management Services 286 201 Other (11,767) (4,025) Total Net Assets$ 323,807 $ 273,200

A-118 2014 2013 Total Liabilities: Pennichuck Water Works, Inc. $ 160,535 $ 105,485 Pennichuck East Utility, Inc. 28,391 26,594 Pittsfield Aqueduct Company, Inc. 2,107 2,130 Subtotal Regulated Segment 191,033 134,209 Water Management Services 56 58 Other 108,128 112,173 Total Liabilities$ 299,217 $ 246,440

Total Long-Term Debt (including current portion): Pennichuck Water Works, Inc. $ 97,895 $ 50,312 Pennichuck East Utility, Inc. 11,761 10,748 Pittsfield Aqueduct Company, Inc. - - Subtotal Regulated Segment 109,656 61,060 Water Management Services - - Other 114,651 116,336 Total Long-Term Debt$ 224,307 $ 177,396

Note 14 – Subsequent Events

The Company has evaluated the events and transactions that have occurred through March 18, 2015, the date that these financial statements were available for issuance.

On March 4, 2015, Pennichuck East completed a financing transaction with CoBank in the amount of $625,000, for a term of 25 years at an interest rate of 4.9%. This debt is repayable in monthly installments of $3,647, for principal and interest. This financing was completed as a reimbursement for working capital funds used during 2014 for the completion or initiation of capital projects during that year.

Additionally, on March 16, 2015, Pennichuck East completed a financing transaction with the NHDES, under their State Revolving Fund program, in the amount of $510,000. This financing was completed for a specified capital project to be completed in 2015. This obligation will accrue interest at 1% during the construction phase of the project, and then be subject to repayment over a 20-year term, with a rate of interest of 2.72%, with monthly principal and interest payments.

Also, as referenced in Notes 1 and 9 of these audited financial statements, as of January 20, 2015, the entire balance in “Restricted Cash – Bond Refund Escrow” account, which included $23,350,000 of principal due of the “refinanced bonds”, as well as approximately $375,000 of accrued interest due on these bonds, was paid out to the holders of those debt instruments.

No other items requiring an adjustment to the financial statement or additional disclosure were noted.

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A-120 NASHUA AIRPORT AUTHORITY NOTES

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A-122 NASHUA AIRPORT AUTHORITY

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies of the Nashua Airport Authority (“the Authority”) conform to accounting principles generally accepted in the United States of America for local govern- mental units, except as indicated hereinafter. The following is a summary of significant accounting policies.

Financial Reporting Entity

The Authority was established on August 27, 1961 by legislative act as a separate legal entity. The Authority is located at Boire Field in Nashua, New Hampshire and provides general airport operations as well as airplane tie-down rentals. The Authority meets the criteria as a component unit of the City of Nashua, New Hampshire (“the City”). Such criteria includes appointment of the board of directors by the Mayor of the City, debt service guarantees by the City, inclusion of the Authority’s employees in the City’s retirement system (New Hampshire Retirement System) and budgetary appropriations from the City.

Basis of Accounting

The financial statements are presented on the accrual basis of accounting, wherein revenues are recognized when earned and expenses are recognized when incurred.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from those estimates. Significant estimates include depreciation expense.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from those estimates. Significant estimates include depreciation expense.

Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position

Cash and Cash Equivalents – For the purpose of the Statements of Cash Flows, cash and cash equivalents are comprised of demand deposits and cash on hand.

A-123 Investments - Investments are recorded at their fair value. Certificates of deposit with a maturity of greater than ninety days from the date of issuance are included in investments.

Accounts Receivable - At June 30, 2015, accounts receivable includes unpaid tie-down fees and land lease rental fees. An allowance for estimated uncollected receivables is not deemed necessary as of June 30, 2015.

Capital Assets – Capital assets are recorded at cost and updated for additions and retirements during the year. Donated capital assets are recorded at their estimated fair values as of the date received. Improvements are capitalized; costs of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset’s life are not. Interest incurred during the construction phase of capital assets is also capitalized. All reported capital assets except for land and construction in progress are depreciated. Depreciation is recorded using the straight-line method over the estimated useful lives of the related assets. Estimate useful lives are as follows: Years Land improvements 5-25 Buildings and improvements 10-39 Equipment 3-30

Compensated Absences - Employees earn vacation and sick leave as they provide services. Employees earn 1.25 sick days per month. Employees hired prior to July 1, 1995, may accumulate up to a maximum of 90 days of sick leave and upon retirement will be paid out 100% of unused sick time at current rates of pay. Employees hired after July 1, 1995, may accumulate an unlimited number of sick days and upon retirement will be paid out 20% of unused sick time at current rates of pay. Vacation amounts accrue according to length of employment. Employees may carry forward vacation days into the next year up to two times their annual accrual rate.

Other Post-employment Benefits - Other post-employment benefit liabilities that are required to be reported by Governmental Accounting Standard Board (GASB) Statement 45 are not material to these financial statements.

Pensions – During the year ended June 30, 2015, the Authority adopted Governmental Accounting Standards Board (GASB) Statement No. 68 – Accounting and Financial Reporting for Pensions. For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the New Hampshire Retirement System (NHRS) and additions to/deductions from NHRS’ fiduciary net position have been determined on the same basis as they are reported by NHRS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms.

Net Position - Net position represents the difference between assets, deferred outflows of resources, liabilities and deferred inflows of resources. The net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by any outstanding

A-124 balances of bonds, notes or other borrowings used for the acquisition, construction or improvement of those assets. Net Position is reported as restricted when there are limitations imposed on their use either through enabling legislation adopted by the Authority or through external restrictions imposed by creditors, grantors or laws or regulations of other govern- ments. Unrestricted net position is the net amount of the assets, deferred outflows of resources, liabilities and deferred inflows of resources that are not included in the determi- nation of net investment in capital assets or the restricted components of net position.

The Authority’s policy is to first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position is available.

Revenues and Expenses

Operating Revenues and Expenses - Operating revenues and expenses for the Authority are those that result from providing services and producing and delivering goods in connection with its principal ongoing operations. Operating expenses, which include depreciation on capital assets, are necessary costs incurred to provide the services that are the primary activities of the Authority. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

Capital Contributions - Funds received from other governments for the purpose of construct- ing assets are recorded as capital contributions.

NOTE 2 - DEPOSITS AND INVESTMENTS

Deposits and investments as of June 30, 2015 are classified in the accompanying financial statements as follows: 2015 Statement of Net Position: Cash and cash equivalents $ 70,784 Investments 67,914 Total deposits and investments $ 138,698

Deposits and investments at June 30, 2015 consist of the following:

2015 Cash on hand $ 1,266 Deposits with financial institutions 137,432 Total deposits and investments $ 138,698

The Authority’s investment policy requires that deposits and investments be made in New Hampshire based financial institutions that are participants in one of the federal depository insurance programs. The Authority limits its investments to demand deposits, money market accounts, and certificates of deposit.

A-125 Custodial Credit Risk

Custodial credit risk for deposits is the risk that in the event of a bank failure, the Authority’s deposits may not be returned to it. The Authority does not have a formal investment policy for assurance against custodial credit risk; however, the Authority has an agreement with its primary bank to collateralize deposits in excess of the FDIC insurance limits.

NOTE 3 - DUE FROM OTHER GOVERNMENTS

Receivables from other governments consist of balances due from federal and state funding for the various airport improvement projects. All receivables are considered collectible in full and will be received within one year. A summary of the principal items of intergovernmental receivables as of June 30, 2015 is as follows:

State and Federal share of Federal Aviation Grants - AIP Project SBG#-12-04-2010 $ 30,355 AIP Project SBG#-12-06-2010 21,368 AIP Project SBG#-12-12-2014 35,923 AIP Project SBG#-12-13-2014 26,154 AIP Project SBG#-12-14-2014 94,424 AIP Project SBG#-12-15-2015 301,228 $509,452

NOTE 4 - CAPITAL ASSETS

The following is a summary of changes in capital assets during the years ended June 30, 2015:

Balance Balance 7/1/14 Additions Reductions 6/30/15 Capital assets not being depreciated: Land $ 3,227,508 $ - $ - $ 3,227,508 Construction in progress 447,750 1,084,756 (122,382) 1,410,124 Total capital assets not being depreciated 3,675,258 1,084,756 (122,382) 4,637,632 Other capital assets: Land improvements 27,903,490 - - 27,903,490 Buildings and improvements 1,525,306 - - 1,525,306 Equipment 2,023,409 - - 2,023,409 Total other capital assets at historical cost 31,452,205 - - 31,452,205 Less accumulated depreciation for: Land improvements (5,680,492) (1,205,502) - (6,885,994) Buildings and improvements (848,149) (42,285) - (890,434) Equipment (765,010) (76,709) - (841,719) Total accumulated depreciation (7,293,651) (1,324,496) - (8,618,147) Total other capital assets, net 24,158,554 (1,324,496) - 22,834,058 Total capital assets, net $27,833,812 $( 239,740) $ (122,382) $ 27,471,690

A-126 NOTE 5 - PENSION PLAN

Plan Description

The Authority contributes to the New Hampshire Retirement System (NHRS), a public employee retirement system that administers a single cost-sharing, multiple-employer defined benefit pension plan as defined in Governmental Accounting Standards Board (GASB) Statement No. 67, Financial Reporting for Pension Plans – an amendment of GASB Statement No. 25. The plan is a contributory, defined benefit plan providing service, disability, death and vested retirement benefits to plan members and beneficiaries. Substan- tially all full-time state employees, public school teachers and administrators, permanent firefighters and permanent police officers within the State of New Hampshire are eligible and required to participate in the Pension Plan.

The NHRS issues a publicly available financial report that includes financial statements and required supplementary information for NHRS. That report may be obtained by writing to New Hampshire Retirement System, 54 Regional Drive, Concord, New Hampshire 03301.

Benefits Provided

Benefit provisions are established and may be amended by the New Hampshire State legislature. The Pension Plan is divided into two membership groups. State and local employees and teachers belong to Group 1. Permanent police and firefighters belong to Group II.

Group I members at age 60 or 65 (for members who commence service after July 1, 2011) qualify for a normal service retirement allowance based on years of creditable service and average final salary for the highest of either three or five years, depending on when their service commenced. The yearly pension amount is 1/60 or 1.667% of average final compensation (AFC), multiplied by years of creditable service. At age 65, the yearly pension amount is recalculated at 1/66 or 1.525% of AFC multiplied by years of creditable service.

Group II members who are age 60, or members who are at least age 45 with at least 20 years of creditable service, can receive a retirement allowance at a rate of 2.5% of AFC for each year of creditable service, not to exceed 40 years. Members commencing service on or after July 1, 2011 or members who have a nonvested status as of January 1, 2012 can receive a retirement allowance at age 52.5 with 25 years of service or ago 60. The benefit shall be equal to 2% of AFC times creditable service up to 42.5 years. However, a member who commenced service on or after July 1, 2011 shall not receive a retirement allowance until attaining the age of 52.5, but may receive a reduced allowance after age 50 if the member has at least 25 years of creditable service where the allowance shall be reduced, for each month by which the benefit commencement date precedes the month after which the member attains 52.5 years of age by ¼ of 1% or age 60.

Members of both groups may qualify for vested deferred allowances, disability allowances and death benefit allowances subject to meeting various eligibility requirements. Benefits are based on AFC or earnable compensation and/or service.

A-127 Funding Policy

Plan members are required to contribute 7.0% of their covered salary and the Authority is required to contribute at an actuarially determined rate. Per RSA-100:16, plan member contribution rates are established and may be amended by the New Hampshire State legislature, and employer contribution rates are determined by the NHRS Board of Trustees based on an actuarial valuation. The Authority’s contribution rates for the year ended June 30, 2015 was 10.77%. The Authority contributes 100% of the employer cost for its employees. The Authority’s contributions to the pension plan for the year ended June 30, 2015 were $24,507.

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2013. The roll-forward of the net pension liability from June 30, 2013 to June 30, 2014 reflects expected service cost and interest reduced by actual benefit payments, refunds, and administrative expenses for the plan year. At June 30, 2015, the Authority reported a liability of $269,731 for its proportionate share of the net pension liability. The Authority’s proportion was approximately 0.00719% at June 30, 2015, which was a decrease of 0.0034% from its proportion measured as of June 30, 2013. The Authority’s proportion of the net pension liability was based on actual contributions by the Authority relative to the actual contributions of all participating plan members, excluding contributions to separate finance- specific liabilities of individual employers or the NHRS.

For the year ended June 30, 2015, the Authority recognized pension revenue of $7,704. At June 30, 2015, the Authority reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources Net difference between projected and actual earnings on pension plan investments $ - $ 34,512 Changes in proportion and differences between Authority contributions and proportionate share of contributions - 119,761 Authority contributions subsequent to the measurement date 23,394 - Total $ 23,394 $ 154,273

The net amount of deferred outflows of resources and deferred inflows of resources related to pensions is reflected as a decrease to unrestricted net position in the amount of $130,879. The Authority reported $23,394 as deferred outflows of resources related to pensions resulting from the Authority’s contributions subsequent to the measurement date that will be recog- nized as a reduction of the net pension liability in the year ending June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

A-128 Year ended June 30: 2015 $ (34,620) 2016 (34,620) 2017 (34,620) 2018 (34,620) 2019 (15,793) Total $ (154,273)

Actuarial Assumptions

The total pension liability in the June 30, 2013 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:

Inflation 3.0 percent Wage inflation 3.75 percent Salary increases 5.8 percent, average, including inflation Investment rate of return 7.75 percent, net of pension plan investment expense, including inflation

Mortality rates were based on the RP-2000 mortality table projected to 2020 with Scale AA. The table includes a margin of 15% for men and 17% for women for mortality improvements.

The actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period July 1, 2005 – June 30, 2010.

The long-term expected rate of return on pension plan investments was selected from a best- estimate range determined using a building-block approach. Under this method, an expected future real return range is calculated separately for each asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return net of investment expenses by the target asset allocation percentage and by adding expected inflation. The following table presents target allocations and weighted average long-term expected real rates of return for each major class of asset:

Target Asset Weighted Average Long-term Asset Class Allocation Expected Real Rate of Return Fixed income 25% (1.75) - 2.00% Domestic equity 30% 3.25% International equity 20% 4.25 - 6.5% Real estate 10% 3.25% Private equity 5% 5.75% Private debt 5% 5.00% Opportunistic 5% 2.50% Total 100%

A-129 Discount Rate

The discount rate used to measure the collective pension liability was 7.75%. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. For purposes of the projection, member contributions and employer service cost contri- butions are projected based on the expected payroll of current members only. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the collective pension liability.

Sensitivity of the Authority’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

The following presents the Authority’s proportionate share of the net pension liability calcu- lated using the discount rate of 7.75%, as well as what the Authority’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one- percentage-point greater or one-percentage-point lower than the current single discount rate:

NOTE 6 – LONG-TERM OBLIGATIONS

Changes in Long-Term Obligations

The changes in the Authority’s long-term obligations for the year ended June 30, 2015 are as follows: Amounts Balance Balance Due Within Type 7/1/14 Additions Reductions 6/30/15 One Year Compensated absences $ 49,339 $ 1,600 $ 37,739 $ 13,200 $ -

NOTE 7 – SHORT-TERM OBLIGATIONS

During September 2014, the Authority secured a loan with a local bank in the amount of $200,000 with a maturity date of March 2015. The purpose of the loan was for the acquisi- tion of property around the airport runway approaches. Interest on the loan is calculated at the Wall Street Journal Prime Rate plus 0.75 percentage points, 4.0% at June 30, 2015.

Repayment of the note payable is funded through federal reimbursement grants. The Authority renegotiated repayment terms with the local bank to include interest only for an unspecified period of time, with the principal portion to be repaid upon receipt of grant reimbursement. During the year ended June 30, 2015, the Authority made principal payments of $120,000 toward the note payable. At June 30, 2015 the note has a balance of $80,000 and is expected to be repaid within the next fiscal year.

A-130 NOTE 8 - OPERATING LEASE

The Authority leases land from the City of Nashua, New Hampshire under a master lease commencing October 8, 1974. The lease expires December 31, 2047. The rent for the term of the lease is $1.

The Authority subleases a portion of this land pursuant to twenty year operating leases. The base rent is adjusted biannually by the consumer price index. For the year ended June 30, 2015, yearly lease income was $310,362.

The Authority also leases the control tower under terms of a lease, which expires August 13, 2020. The rent for the term of the lease is $1.

NOTE 9 - CONTINGENCIES

Litigation

There may be various claims and suits pending against the Authority, which arise in the normal course of the Authority’s activities. In the opinion of Authority management, the potential claims against the Authority, which are not covered by insurance, are immaterial and would not affect the financial position of the Authority.

Federal Grants

The Authority participates in a number of federally assisted grant programs. These programs are subject to financial and compliance audits by the grantors or their representatives. The amounts, if any, of expenses which may be disallowed by the granting agency cannot be determined at this time, although the Authority expects such amounts, if any, to be immaterial.

NOTE 10 – RESTATEMENT OF NET POSITION

During the year ended June 30, 2015, the Authority adopted Governmental Accounting Standards Board (GASB) Statement No. 68 – Accounting and Financial Reporting for Pensions. This new standard requires employers participating in a pension plan provided to employees of state and local governmental employers that are administered through a trust to recognize their proportionate share of the collective net pension liability, deferred outflows of resources, deferred inflows of resources and pension expense. The impact of the restatement on beginning net position is as follows:

Net Position - June 30, 2015 (as previously reported) $ 28,174,076 Amount of restatement due to: Net Pension Liability (NPL) as of June 30, 2013 (455,021) Recognition of deferred outflow of resources for contributions subsequent to NPL measurement date 23,313 Net Position - June 30, 2014, as restated $ 27,742,368

A-131 CITY OF NASHUA, NEW HAMSPHIRE SCHEDULE OF FUNDING PROGRESS REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 (Unaudited)

Other Post-Employment Benefits Actuarial UAAL as Accrued a Percent- Actuarial Liability Unfunded age of Actuarial Value of (AAL) - AAL Funded Covered Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) [(b-a)/c] 07/01/13 -$ $ 39,415,168 $ 39,415,168 0.0%$ 123,880,502 31.8% 07/01/11 -$ $ 43,075,476 $ 43,075,476 0.0%$ 120,292,886 35.8% 07/01/09 -$ $ 42,017,700 $ 42,017,700 0.0%$ 118,962,778 35.3% 07/01/08 -$ $ 42,699,000 $ 42,699,000 0.0%$ 102,640,996 41.6% 07/01/07 -$ $ 42,699,000 $ 42,699,000 0.0%$ 102,640,996 41.6%

A-132 CITY OF NASHUA, NEW HAMPSHIRE SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2015 (Unaudited)

New Hampshire Retirement System: 2015

Proportion of the net pension liability for the most recent measurement date 4.925% Proportionate share of the net pension liability for the most recent measurement date $ 184,879,108 Covered-employee payroll for the most recent measurement date $ 102,555,267 Proportionate share of the net pension liability (asset) as a percentage of its covered-employee payroll 180.27% Plan fiduciary net position as a percentage of the total pension liability 66.32%

Schedules are intended to show information for 10 years. Additional years will be displayed as they become available

See Independent Auditors' Report.

A-133 CITY OF NASHUA, NEW HAMPSHIRE SCHEDULE OF CONTRIBUTIONS REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2015 (Unaudited)

New Hampshire Retirement System: 2015

Contractually required contribution for the current fiscal year $ 19,432,673

Contributions in relation to the contractually required contribution (19,432,673) Contribution deficiency (excess) $ - Covered-employee payroll for the current fiscal year 102,555,267 Contributions as a percentage of covered-employee payroll 18.95%

Schedules are intended to show information for 10 years. Additional years will be displayed as they become available

See Independent Auditors' Report.

A-134 CITY OF NASHUA, NEW HAMPSHIRE BOARD OF PUBLIC WORKS' RETIREMENT SYSTEM Schedule of Changes in the Net Pension Liability (Unaudited)

2015 Total pension liability Service cost $ 833,083 Interest on unfunded liability - time value of $ 3,165,454 Changes of benefit terms - Differences between expected and actual experience 84,012 Changes of assumptions (1,231,934) Benefit payments, including refunds of member contributions (2,526,991) Net change in total pension liability 323,624 Total pension liability - beginning 44,069,736 Total pension liability - ending (a) $44,393,360

Plan fiduciary net position Contributions - employer $ 772,343 Contributions - member 772,343 Net investment income 1,104,870 Benefit payments, including refunds of member contributions (2,526,991) Administrative expense (2,359) Net change in plan fiduciary net position 120,206 Plan fiduciary net position - beginning 37,391,937 Plan fiduciary net position - ending (b) $37,512,143

Net pension liability (asset) - ending (a-b) $6,881,217

Schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

See notes to the City's financial statements for summary of significant actuarial methods and assumptions.

See Independent Auditors' Report.

A-135 CITY OF NASHUA, NEW HAMPSHIRE BOARD OF PUBLIC WORKS' RETIREMENT SYSTEM

Schedules of Net Pension Liability, Contributions, and Investment Returns (Unaudited)

Schedule of Net Pension Liability 2015 Total pension liability $ 44,393,360 Plan fiduciary net position 37,512,143 Net pension liability (asset) $ 6,881,217

Plan fiduciary net position as a percentage of the total pension liability 84.50%

Covered employee payroll $ 8,448,146 Participating employer net pension liability (asset) as a percentage of covered employee payroll 81.45%

Schedule of Contributions 2015 Actuarially determined contribution $ 772,343 Contributions in relation to the actuarially determined contribution 772,343 Contribution deficiency (excess) $ -

Covered employee payroll $ 8,448,146

Contributions as a percentage of covered employee payroll 9.14%

Schedule of Investment Returns Year Ended June 30 2015 Annual money weighted rate of return, net of investment expense 2.9888%

Schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

See Independent Auditors' Report.

A-136 Combining Financial Statements

A-137 NON-MAJOR GOVERNMENTAL FUNDS

SPECIAL REVENUE FUNDS

Special Revenue Funds are established to account for resources obtained and expended for specified purposes and restricted by law or local action.

Special Revenue Funds are established for the following purposes:

Police Grants: to account for federal and State grants for the Police Department.

Fire Grants: to account for federal and State grants for the Fire Department.

Community Health and Services Grants: to account for federal and State health and human services grants.

Parks and Recreation Grants: to account for federal and State parks and recreation grants.

Transit Grants: to account for federal and State transportation grants.

CDBG/Home Grants: to account for the Community Development Block and HOME grants.

Community Development Division Grants: to account for the federal and State grants for the Community Development Department.

Other Public Safety Grants: to account for federal and state public safety grants.

Other City Grants: to account for all other City grants.

Food Services: to account for the School Department’s Food Service Program.

School Grants: to account for the School Department’s federal, State and local grants.

City Revolving Funds: to account for the City’s revolving funds.

School Revolving Funds: to account for the School Department’s revolving funds, other than Food Service.

Other Trust Funds: to account for other City’s Trust Funds.

A-138 CAPITAL PROJECT FUNDS

Capital Project Funds are established to account for resources obtained and expended for the acquisition of major capital facilities or equipment other than those employed in the delivery of services accounted for in Enterprise Funds.

The current funds were established for the following purposes:

Fire Projects: to account for Fire Department Capital Projects.

Public Works Projects: to account for Public Works Department Capital Projects.

Community Development Projects: to account for Community Development Department Capital Projects.

School Department Projects: to account for School Department Capital Projects.

Technology Projects: to account for Technology projects.

City Building Projects: to account for capital projects related to City facilities.

City-wide Communication Projects: to account for capital projects related to city-wide communication issues.

PERMANENT FUNDS

Permanent Funds are established to account for certain assets held by the City in a fiduciary capacity as trustee. The following is a description of City Permanent Funds:

Cemetery Permanent Funds: to account for the City’s Cemetery Funds.

Library Permanent Funds: to account for the City’s Library Funds.

Other Permanent Funds: to account for Other Nonexpendable Funds.

A-139 CITY OF NASHUA, NEW HAMPSHIRE

Combining Balance Sheet

Nonmajor Governmental Funds

June 30, 2015

Special Revenue Funds

Community Parks & Police Fire Health & Services Recreation Grants Grants Grants Grants ASSETS Cash and short term investments $- $ - $ - $ - Investments - - - - Departmental and other receivables - - - - Intergovernmental receivables 71,447 2 4,622 2 83,579 - Loans receivable - - - - Due from other funds - - - 1,871 Total Assets $71,447 $24,622 $283,579 $1,871

LIABILITIES Accounts payable $- $ - $ - $ - Accrued liabilities 3,711 - 4,638 - Due to other funds 38,202 2 0,510 2 75,489 - Total Liabilities 41,913 20,510 280,127 -

DEFERRED INFLOWS OF RESOURCES - - - -

FUND BALANCES Nonspendable - - - - Restricted 29,534 4 ,112 3,452 1,871 Committed - - - - Unassigned - - - - Total Fund Balance 29,534 4 ,112 3,452 1,871 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCE $71,447 $24,622 $283,579 $1,871

A-140 Special Revenue Funds

Community Other Transit CDBG/Home Development Public Safety Other Grants Grants Division Grants Grants City Grants

$- $ - $ - $ - $ ------288,855 267,642198,873 1 62,505 ------6,562 $288,855 $2 67,642$ 198,873 $1 62,505$6 ,562

$- $ 990 $ - $ - $ - 10,994 7,240 80 10,607 - 185,076 259,412160,307 1 46,120 - 196,070 267,642 160,387 156,727 -

- - - - -

- - - - - 92,785 - 38,486 5,778 6,562 ------92,785 - 38,486 5,778 6,562

$288,855 $2 67,642$ 198,873 $1 62,505$6 ,562

(continued)

A-141 (continued)

Special Revenue Funds

City School Food School Revolving Revolving Services Grants Funds Funds ASSETS Cash and cash equivalents $- $ - $ - $ - Investments - - - - Departmental and other receivables - - 152,965 16,075 Intergovernmental receivables 213,629 2,894,633 - 1,832 Loans receivable - - 625,073 - Due from other funds 339,400 - 6,136,519 1,079,162 Total Assets $553,029 $2 ,894,633$6,914,557 $1,097,069

Liabilities: Accounts payable $- $ - $ - $ - Accrued liabilities 3,286 322,497 45,308 3,170 Due to other funds - 2,407,916 - - Total Liabilities 3,286 2,730,413 45,308 3,170

DEFERRED INFLOWS OF RESOURCES - 163,655 40,569 67,355

FUND BALANCES Nonspendable - - - - Restricted 549,743 565 - - Committed - - 6,828,680 1,026,544 Unassigned - - - - Total Fund Balance 549,743 565 6,828,680 1,026,544 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCE $ 553,029 $2 ,894,633$6,914,557 $1,097,069

A-142 Special Revenue Funds Capital Project Funds

Public Community Other Fire Works Development Trust Funds Subtotal Projects Projects Projects

$1,867,354 $ 1,867,354 $ - $ - $ - 2,267,064 2,267,064 - - - - 169,040 - - - - 4,407,617 - 5,198,176 - - 625,073 - - - 136,622 7,700,136 7,828 9,328,152 - $4,271,040 $ 17,036,284 $7 ,828 $ 14,526,328 $-

$- $ 990 $ - $ - $ - 2,212 413,743 - - - - 3,493,032 - - - 2,212 3,907,765 - - -

- 271,579 - - -

------732,888 4,427 14,484,613 - 4,268,828 12,124,052 3 ,401 74,935 - - - - (33,220) - 4,268,828 12,856,940 7 ,828 14,526,328 -

$4,271,040 $ 17,036,284 $7 ,828 $ 14,526,328 $-

(continued)

A-143 (continued)

Capital Project Funds

School City City-wide Department Technology Building Communications Projects Projects Projects Projects Subtotal ASSETS Cash and cash equivalents $- $ - $ - $ - $ - Investments - - - - - Departmental and other receivables - - - - - Intergovernmental receivables - - - - 5,198,176 Loans receivable - - - - - Due from other funds 826,875 1,116,029 69,268 2,700,826 14,048,978 Total Assets $826,875 $ 1,116,029 $ 69,268 $ 2,700,826 $ 19,247,154

Liabilities: Accounts payable $- $ - $ - $ - $ - Accrued liabilities 150 - - - 150 Due to other funds - - - - - Total Liabilities 150 - - - 150

DEFERRED INFLOWS OF RESOURCES - - - - -

FUND BALANCES Nonspendable - - - - - Restricted 1,448,169 1,116,029 6,652 2,700,826 19,760,716 Committed 650,000 - 62,616 - 790,952 Unassigned (1,271,444) - - - (1,304,664) Total Fund Balance 826,725 1,116,029 69,268 2,700,826 19,247,004 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCE $826,875 $ 1,116,029 $ 69,268 $ 2,700,826 $ 19,247,154

A-144 Permanent Funds Total Cemetery Library Other Nonmajor Permanent Permanent Permanent Governmental Funds Funds Funds Subtotal Funds

$797,403 $ 261,497 $ 13,102 $ 1,072,002 $ 2,939,356 16,098,784 4,420,157 157,916 20,676,857 22,943,921 - - - - 169,040 - - - - 9,605,793 - - - - 625,073 - - - - 21,749,114 $16,896,187 $ 4,681,654 $ 171,018 $2 1,748,859$ 58,032,297

$- $ - $ - $ - $ 990 - - - - 413,893 188,722 17,819 2,051 208,592 3,701,624 188,722 17,819 2,051 208,592 4,116,507

- - - - 271,579

16,050,672 4,094,256 159,682 20,304,610 20,304,610 656,793 569,579 9,285 1,235,657 21,729,261 - - - - 12,915,004 - - - - (1,304,664) 16,707,465 4,663,835 168,967 2 1,540,267 53,644,211

$16,896,187 $ 4,681,654 $ 171,018 $2 1,748,859$ 58,032,297

A-145 CITY OF NASHUA, NEW HAMPSHIRE

Combining Statement of Revenues, Expenditures, and Changes in Fund Equity

Nonmajor Governmental Funds

For Fiscal Year Ended June 30, 2015

Special Revenue Funds

Community Parks & Police Fire Health & Services Recreation Grants Grants Grants Grants

Revenues: Property taxes $ - $ - $ - $ - Auto permits - - - - Penalties, interest and other taxes - - - - Charges for services - - - - Intergovernmental 234,117 1,001,103 1,070,776 - Investment income - - - - Miscellaneous - - 24,000 - Contributions 69,346 - (3,909) 2,000 Total Revenues 303,463 1,001,103 1,090,867 2,000

Expenditures: Current: General government - - - - Police 347,125 - - - Fire - 1,093,478 - - Education - - - - Public works - - - - Health and human services - - 1,103,858 - Culture and recreation - - - 259 Community development - - - - Communications - - - - Debt service Principal - - - - Interest - - - - Total Expenditures 347,125 1,093,478 1,103,858 259 Excess (deficiency) of revenues over expenditures (43,662) (92,375) (12,991) 1,741

Other Financing Sources (Uses): Issuance of bonds - - - - Bond premiums - - - - Transfers in 51,622 96,487 - - Transfers out (20,243) - - - Total Other Financing Sources (Uses) 31,379 96,487 - - Net change in fund balance (12,283) 4,112 (12,991) 1,741 Fund Balance, beginning of year 41,817 - 16,443 130 Fund Balance, end of year $29,534 $ 4,112 $ 3,452 $ 1,871

A- Special Revenue Funds

Community Other Transit CDBG/Home Development Public Safety Other Grants Grants Division Grants Grants City Grants

$- $ - $ - $ - $ ------617,114 - - - - 1,551,132 1,742,172 344,748 175,323 890 - - - - - 125,480 ------6,000 495 2,293,726 1,742,172 344,748 181,323 1,385

- - - - 515 ------178,249 ------2,431 ------3,323 2,654,769 1,742,172 411,238 ------

------2,654,769 1,742,172 411,238 178,249 6,269

(361,043) - (66,490) 3,074 (4,884)

------415,460 ------(13,296) 415,460 - - - (13,296) 54,417 - (66,490) 3,074 (18,180) 38,368 - 104,976 2,704 24,742 $92,785 $ - $ 38,486 $ 5,778 $ 6,562

(continued)

A-147 (continued)

Special Revenue Funds

City School Food School Revolving Revolving Services Grants Funds Funds

Revenues: Property taxes $ - $ -$327,334 $- Auto permits - - 700,000 - Penalties, interest and other taxes - - 366,494 - Charges for services 1,939,414 - 1,226,967 942,043 Intergovernmental 3,039,442 8,196,171 1,475,435 33,174 Investment income 55 - 23,033 - Miscellaneous - - 576,517 8,633 Contributions - - 34,591 - Total Revenues 4,978,911 8,196,171 4,730,371 983,850

Expenditures: Current: General government - - 339,185 - Police - - 1,457,185 - Fire - - 13,955 - Education 4,876,212 8,199,497 - 1,345,301 Public works - - 257,854 - Health and human services - - 3,562 - Culture and recreation - - 219,478 - Community development - - 52,168 - Communications - - - - Debt services Principal - - 60,000 - Interest - - 28,854 - Total Expenditures 4,876,212 8,199,497 2,432,241 1,345,301 Excess (deficiency) of revenues over expenditures 102,699 (3,326) 2,298,130 (361,451)

Other Financing Sources (Uses): Issuance of bonds - - - - Bond premiums - - - - Transfers in - - 8,205 - Transfers out - - (63,743) - Total Other Financing Sources (Uses) - - (55,538) - Net change in fund balance 102,699 (3,326) 2,242,592 (361,451) Fund Balance, beginning of year 447,044 3,891 4,586,088 1,387,995 Fund Balance, end of year $549,743 $565 $ 6,828,680 $1,026,544

A- Special Revenue Funds Capital Project Funds

Public Community Other Fire Works Development Trust Funds Subtotal Projects Projects Projects

$- $327,334 $- $ - $- - 700,000 - - - - 366,494 - - - 59,368 4,784,906 - - - - 18,864,483 - 14,654,599 - (52,191) (29,103) - - - 7,200 741,830 - 255,135 - 525,433 633,956 - - - 539,810 26,389,900 - 14,909,734 -

149,627 489,327 - - - 1,478 1,805,788 - - - 6,583 1,292,265 1,193,757 - - 69,606 14,490,616 - - - 40,820 301,105 - 19,324,391 - 450 1,107,870 - - - 42,029 265,089 - 2,850 - - 4,860,347 ------

- - 60,000 - - - - 28,854 - - - 310,593 24,701,261 1,193,757 19,327,241 -

229,217 1,688,639 (1,193,757) (4,417,507) -

- - 976,500 7,278,499 - - - 110,519 721,500 - 20,332 592,106 110,139 155,000 - (200,250) (297,532) - (788) - (179,918) 294,574 1,197,158 8,154,211 - 49,299 1,983,213 3,401 3,736,704 - 4,219,529 10,873,727 4,427 10,789,624 - $4,268,828 $12,856,940 $7,828 $ 14,526,328 $-

(continued)

A-1 (continued)

Capital Project Funds

School City City-wide Department Technology Building Communications Projects Projects Projects Projects Subtotal

Revenues: Property taxes $ - $ - $ - $ - $ - Auto permits - - - - - Penalties, interest and other taxes - - - - - Charges for services - - - - - Intergovernmental - - - - 14,654,599 Investment income - - - - - Miscellaneous - - - - 255,135 Contributions - - - - - Total Revenues - - - - 14,909,734

Expenditures: Current: General government - 292,141 34,921 - 327,062 Police - - - - - Fire - - - - 1,193,757 Education 7,708,282 - - - 7,708,282 Public works - - 166,514 - 19,490,905 Health and human services - - - - - Culture and recreation - - - - 2,850 Community development - - - - - Communications - - - 3,381,160 3,381,160 Debt services Principal - - - - - Interest - - - - - Total Expenditures 7,708,282 292,141 201,435 3,381,160 32,104,016 Excess (deficiency) of revenues over expenditures (7,708,282) (292,141) (201,435) (3,381,160) (17,194,282)

Other Financing Sources (Uses): Issuance of bonds 7,988,500 449,500 - 5,195,750 21,888,749 Bond premiums 801,750 50,500 - 804,250 2,488,519 Transfers in 650,000 - 94,163 - 1,009,302 Transfers out (53,445) - - - (54,233) Total Other Financing Sources (Uses) 9,386,805 500,000 94,163 6,000,000 25,332,337 Net change in fund balance 1,678,523 207,859 (107,272) 2,618,840 8,138,055 Fund Equity, beginning (851,798) 908,170 176,540 81,986 11,108,949 Fund Equity, ending $ 826,725 $ 1,116,029 $ 69,268 $ 2,700,826 $ 19,247,004

A-150 Permanent Funds Total Cemetery Library Other Nonmajor Permanent Permanent Permanent Governmental Funds Funds Funds Subtotal Funds

$- $ - $ - $ - $ 327,334 - - - - 700,000 - - - - 366,494 - - - - 4,784,906 - - - - 33,519,082 (361,484) 164,436 7,861 (189,187) (218,290) - 3 5 8 996,973 74,673 - - 74,673 708,629 (286,811) 164,439 7,866 (114,506) 41,185,128

72,731 - 835 73,566 889,955 - - - - 1,805,788 - - - - 2,486,022 - - - - 22,198,898 - - - - 19,792,010 - - 257 257 1,108,127 - 100,868 - 100,868 368,807 - - - - 4,860,347 - - - - 3,381,160

- - - - 60,000 - - - - 28,854 72,731 100,868 1,092 174,691 56,979,968

(359,542) 63,571 6,774 (289,197) (15,794,840)

- - - - 21,888,749 - - - - 2,488,519 - - - - 1,601,408 (326,663) - (2,051) (328,714) (680,479) (326,663) - (2,051) (328,714) 25,298,197 (686,205) 63,571 4,723 (617,911) 9,503,357 17,393,670 4,600,264 164,244 22,158,178 44,140,854 $16,707,465 $ 4,663,835 $ 168,967 $ 21,540,267 $ 53,644,211

A-151 Detail and Combining Budget and Actual Schedules

A-152 CITY OF NASHUA, NEW HAMPSHIRE

Detail Schedule of Revenues and Other Financing Sources - Budget and Actual - General Fund

For the Year Ended June 30, 2015

Variance Original Final Adjusted With Budget Budget Actual Final Budget

Property Tax $ 188,644,284 $ 188,644,284 $ 188,644,284 $ -

Auto permits 10,907,000 10,907,000 12,457,967 1,550,967

Penalties, interest and other taxes: Interest and cost on redemption 385,000 385,000 452,997 67,997 Payments in lieu of taxes 320,000 320,000 325,289 5,289 Interest on taxes 350,000 350,000 321,954 (28,046) Other 3,000 3,000 - (3,000) Total Penalties, interest and other taxes 1,058,000 1,058,000 1,100,240 42,240

Charges for services: Income from departments 1,017,034 1,017,034 1,235,108 218,074 Total Charges for services 1,017,034 1,017,034 1,235,108 218,074

Intergovernmental: State catastrophic aid 395,116 395,116 390,159 (4,957) State adequacy grant 35,944,077 35,944,077 35,943,297 (780) State aid - buildings 2,557,795 2,557,795 2,557,795 - Vocational education 150,000 150,000.00 171,755.00 21,755 Medicaid 1,600,000 1,600,000 1,822,206 222,206 Meals and room tax 4,183,061 4,183,061 4,183,061 - Other 50,510 50,510 51,189 679 Total Intergovernmental 44,880,559 44,880,559 45,119,462 238,903 Licenses and permits: Building permits 430,500 430,500 565,039 134,539 Business licenses and permits 151,600 151,600 173,644 22,044 Other licenses and permits 579,950 579,950 643,541 63,591 Total Licenses and permits 1,162,050 1,162,050 1,382,224 220,174 Interest and dividends 400,000 400,000 446,507 46,507 Miscellaneous: Cable TV franchise 850,000 850,000 977,091 127,091 Fines and forfeits 25,000 25,000 22,994 (2,006) Sale of property 1,000 1,000 180,027 179,027 Rental of property 607,362 607,362 766,985 159,623 Reimbursements and other 39,136 39,136 151,398 112,262 Total Miscellaneous 1,522,498 1,522,498 2,098,495 575,997 Transfers In: Transfers from other funds 619,587 1,734,911 1,718,362 (16,549) Total Transfers In 619,587 1,734,911 1,718,362 (16,549) Other Financing Sources: Bond premiums - - 165,585 165,585 Use of fund balance 5,340,000 5,340,000 5,340,000 - Total Other Financing Sources 5,340,000 5,340,000 5,505,585 165,585 Total $ 255,551,012 $ 256,666,336 $ 259,708,234 $ 3,041,898

A-153 CITY OF NASHUA, NEW HAMPSHIRE

Detail Schedule of Expenditures and Other Financing Uses Budget and Actual - General Fund

For the Year Ended June 30, 2015

Variance Original Final Adjusted With Budget Budget Actual Final Budget General Government: Mayor $ 414,879 $ 411,848 $ 402,214 $ 9,634 Board of Aldermen 220,803 217,809 217,650 159 Legal 546,613 543,383 534,352 9,031 City Clerk 531,845 548,276 546,479 1,797 Civic and Comm. activities 936,060 971,060 962,648 8,412 Human resources 290,555 310,646 291,601 19,045 Insurance - Benefits 150,000 150,000 121,615 28,385 Pensions 1,000 1,005,645 600 1,005,045 Telecommunications 156,000 156,000 135,666 20,334 Information technology 2,380,645 2,394,853 2,343,089 51,764 Financial services 2,177,649 2,201,547 2,141,018 60,529 Risk Management 3,271,735 3,271,735 3,271,735 - Building maintenance 413,597 413,543 413,506 37 Purchasing 412,891 376,134 345,965 30,169 Hunt building 20,877 20,493 17,150 3,343 Assessors 736,402 735,517 735,445 72 GIS 139,886 139,524 133,083 6,441 Cemeteries 691,655 689,035 653,414 35,621 Contingencies 302,988 252,988 237,931 15,057 Capital 675,000 675,000 675,000 - Total General Government 14,471,080 15,485,036 14,180,161 1,304,875 Police 27,752,915 28,497,744 28,328,074 169,670 Fire 21,336,559 21,573,001 21,564,983 8,018 Water fire protection 2,634,760 2,634,760 2,632,342 2,418 Education 133,799,926 132,765,375132,730,6083 4,767 Public Works: PW Division and Engineering 1,264,732 1,261,364 1,260,602 762 Street department 6,792,968 6,984,307 6,983,571 736 Street lighting 779,800 779,800 771,862 7,938 Parking lots 271,480 293,390 289,270 4,120 Total Public Works 9,108,980 9,318,861 9,305,305 13,556 Health and Human Services: Community services 336,903 330,978 296,579 34,399 Community health 490,558 485,345 453,781 31,564 Environmental health 460,809 457,409 449,461 7,948 Welfare administration 492,741 488,977 479,045 9,932 Welfare costs 660,000 660,000 657,894 2,106 Total Heath and Human Services 2,441,011 2,422,709 2,336,760 85,949 Culture and recreation: Parks and recreation 3,045,172 3,072,458 3,063,749 8,709 Public libraries 3,112,422 3,080,627 3,017,832 62,795 Total Culture and Recreation 6,157,594 6,153,085 6,081,581 71,504 Community Development 2,464,864 2,433,135 2,414,031 19,104 Communications 334,153 333,460 309,587 23,873 Debt Service: Principal 12,944,680 13,029,680 13,025,778 3,902 Interest and cost 5,128,008 5,043,008 5,043,213 (205) Total Debt Service 18,072,688 18,072,688 18,068,991 3,697 Intergovernmental 10,383,051 10,383,051 10,383,051 - Interfund Transfers: Transfer to Solid Waste Fund 3,731,019 3,731,019 3,731,019 - Transfers to Other Funds 2,862,412 2,862,412 2,862,412 - 6,593,431 6,593,431 6,593,431 - Total $ 255,551,012 $2 56,666,336$ 254,928,905$ 1,737,431

A-154 Proprietary Fund Types

Internal Service Funds

Internal Service Funds are proprietary fund types established for the City’s self-insurance programs.

The City of Nashua has the following Internal Service Funds:

Employee Benefits Fund: To account for the operation of the City’s self-insurance program for employees’ healthcare.

Property and Casualty Fund: To account for the operation of the City’s self-insurance program for general property and casualty insurance.

A-155 CITY OF NASHUA, NEW HAMPSHIRE

INTERNAL SERVICE FUND

COMBINING STATEMENT OF NET POSITION

JUNE 30, 2015

Governmental Activities Internal Service Fund Employee Property Benefits & Casualty Fund Fund Total ASSETS Current: Due from other funds $ 20,317,384 $ 5,394,627 $ 25,712,011 Other assets 717,508 - 717,508 TOTAL ASSETS 21,034,892 5,394,627 26,429,519

LIABILITIES Current: Accrued liabilities 3,601,487 4,439,785 8,041,272 Other liabilities 750,175 - 750,175 TOTAL LIABILITIES 4,351,662 4,439,785 8,791,447

NET POSITION Unrestricted 16,683,230 954,842 17,638,072 TOTAL NET POSITION $16,683,230 $ 954,842 $ 17,638,072

See notes to financial statements.

A-156 CITY OF NASHUA, NEW HAMPSHIRE

INTERNAL SERVICE FUND

COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION

FOR FISCAL YEAR ENDED JUNE 30, 2015

Governmental Activities Internal Service Fund Employee Property Benefits & Casualty Fund Fund Total

Operating Revenues: Employer contributions $ 25,302,237 $ 3,271,735$ 28,573,972 Employee and retiree contributions 10,884,670 - 10,884,670 Other 1,429,540 314,333 1,743,873 Total Operating Revenues 37,616,447 3,586,068 41,202,515

Operating Expenses: Non-personnel expenses 38,365,298 3,445,975 41,811,273 Total Operating Expenses 38,365,298 3,445,975 41,811,273 Operating Income (Loss) (748,851) 140,093 (608,758)

Nonoperating Revenues: Investment income 4,769 1,271 6,040 Total Nonoperating Revenues, Net 4,769 1,271 6,040 Change in Net Position (744,082) 141,364 (602,718) Net Position at Beginning of Year 17,427,312 813,478 18,240,790 Net Position at End of Year $16,683,230 $9 54,842$ 17,638,072

See notes to financial statements.

A-157 CITY OF NASHUA, NEW HAMPSHIRE

INTERNAL SERVICE FUND

COMBINING STATEMENT OF CASH FLOWS

FOR FISCAL YEAR ENDED JUNE 30, 2015

Governmental Activities Internal Service Fund Employee Property Benefits & Casualty Fund Fund Total

Cash Flows From Operating Activities: Receipts from customers and users $ 12,314,210 $ 314,333 $ 12,628,543 Receipts from interfund services provided 25,302,237 3,271,735 28,573,972 Payments to vendors (39,009,277) (3,702,445) (42,711,722) Net Cash (Used for) Operating Activities (1,392,830) (116,377) (1,509,207)

Cash Flows From Noncapital Financing Activities: Payments from interfund loan agreements 1,388,061 115,106 1,503,167 Net Cash Provided By Noncapital Financing Activities 1,388,061 115,106 1,503,167

Cash Flows From Investing Activities: Investment income 4,769 1,271 6,040 Net Change in Cash and Short-Term Investments - - - Cash and Short-Term Investments, Beginning of Year - - - Cash and Short-Term Investments, End of Year $- $ - $ -

Reconciliation of Operating Income to Net Cash Provided by (Used For) Operating Activities: Operating income (loss) $ (748,851) $ 140,093 $ (608,758) Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities: Changes in assets and liabilities: Other assets 1,800 1,374 3,174 Accrued liabilities (664,756) (257,844) (922,600) Other liabilities 18,977 - 18,977 Net Cash (Used for) Operating Activities$ ( 1,392,830)$ (116,377) $ (1,509,207)

See notes to financial statements.

A-158 FIDUCIARY FUNDS

AGENCY FUND

Agency Funds are established to account for fiduciary assets held by the City in a custodial capacity as an agent on behalf of others.

Agency Funds represent monies held in escrow from developers in the City.

A-1 CITY OF NASHUA, NEW HAMPSHIRE

Combining Statement of Changes in Assets and Liabilities

Agency Fund

For the Year Ended June 30, 2015

Balance Balance July 1, June 30, 2014 Additions Deductions 2015 Developer Escrows

Assets - cash and short-term investments $ 313,953 $ 2,827 $ (56,490) $ 260,290 Assets - due from external parties - - - - Total Assets $ 313,953 $ 2,827 $ (56,490) $ 260,290

Liabilities - other liabilities $ 306,956 $ 89,811 $ (136,777) $ 259,990 Liabilities - due to external parties 6,997 143,849 (150,546) 300 Total Liabilities $ 313,953 $ 233,660 $( 287,323)$ 260,290

A-160 CITY OF NASHUA, NEW HAMPSHIRE

STATISTICAL SECTION

The City of Nashua comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government’s overall financial health.

Page Financial Trends These schedules contain trend information to help the reader understand how the government’s financial performance and well- being have changed over time. 162

Revenue Capacity These schedules contain information to help the reader assess the government’s most significant local revenue source, the property tax. 168

Debt Capacity These schedules present information to help the reader assess the affordability of the government’s current levels of outstanding debt and the government’s ability to issue additional debt in the future. 174

Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the government’s financial activities take place. 177

Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the government’s financial report relates to the service the government provides and the activities it performs. 179

A-161 City of Nashua, New Hampshire

Net Position by Component Last Ten Fiscal Years(1) (accrual basis of accounting)

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015(2)

Governmental Activities Net investment in capital assets $ 71,330,362 $ 75,371,785 $ 82,615,430 $ 91,043,817 $ 103,436,163 $ 111,077,357 $ 119,796,245 $ 133,385,506 $ 139,619,179 $ 158,392,742 Restricted 30,981,554 33,679,170 29,126,492 21,686,588 21,611,710 24,687,379 24,925,380 32,456,683 43,985,208 35,756,406 Unrestricted 34,217,644 46,055,519 55,983,443 48,672,885 43,639,686 35,368,271 41,041,536 30,724,278 28,043,671 (154,754,432) Total governmental activities net position 136,529,560 155,106,474 167,725,365 161,403,290 168,687,559 171,133,007 185,763,161 196,566,467 211,648,058 39,394,716

Business-type activities Net investment in capital assets 81,467,773 94,270,446 109,669,910 115,532,890 99,864,775 102,157,830 105,608,828 105,525,905 93,304,028 94,936,719 Restricted 1,732,999 2,336,365 2,913,041 3,612,918 3,773,376 3,972,974 3,863,829 4,270,548 4,472,662 4,473,789 Unrestricted 11,181,863 40,245 (13,599,364) (21,136,265) (5,306,300) (6,555,882) (8,272,538) (6,549,015) 6,653,484 2,348,049 Total business-type activities net position 94,382,635 96,647,056 98,983,587 98,009,543 98,331,851 99,574,922 101,200,119 103,247,438 104,430,174 101,758,557

Primary government Net investment in capital assets 152,798,135 169,642,231 192,285,340 206,576,707 203,300,938 213,235,187 225,405,073 238,911,411 232,923,207 253,329,461 Restricted 32,714,553 36,015,535 32,039,533 25,299,506 25,385,086 28,660,353 28,789,209 36,727,231 48,457,870 40,230,195 Unrestricted 45,399,507 46,095,764 42,384,079 27,536,620 38,333,386 28,812,389 32,768,998 24,175,263 34,697,155 (152,406,383) Total primary government net position $ 230,912,195 $ 251,753,530 $ 266,708,952 $ 259,412,833 $ 267,019,410 $ 270,707,929 $ 286,963,280 $ 299,813,905 $ 316,078,232 $ 141,153,273

Data Source: Audited Financial Statements

Notes: (1) Roads and sidewalks retroactive to 1980 were reported in FY2006 (compliant with GASB 34 requirements). (2) In FY2015, the City's beginning net position as of July 1, 2014 was restated for the implementation of Governmental Accounting Standards Board (GASB) Statement 68, Accounting and Financial Reporting for Pensions.

A-162 City of Nashua, New Hampshire Change in Net Position Last Ten Fiscal Years (accrual basis of accounting)

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Expenses Governmental activities: General government(2) $ 11,147,538 $ 10,634,275 $ 24,124,526 $ 20,301,156 $ 20,288,378 $ 22,129,077 $ 22,497,654 $ 22,777,079 $ 24,632,593 $ 25,054,260 Police 23,070,949 22,210,688 24,713,982 26,257,722 27,426,675 28,223,669 27,563,038 27,321,535 28,778,248 30,448,888 Fire 19,193,738 17,918,642 17,965,927 21,093,703 21,026,095 22,111,191 21,696,948 21,094,654 21,098,266 22,657,301 Water Fire Protection Services 1,634,047 1,781,355 2,205,303 2,234,921 2,152,983 2,471,096 2,611,535 2,591,814 2,576,767 2,607,342 Education 127,629,646 125,136,253 132,479,339 140,999,742 143,489,872 150,017,895 146,755,939 149,765,273 153,294,183 153,499,901 Public Works 10,893,022 9,968,194 11,408,120 11,542,212 10,030,585 10,792,781 11,378,882 10,644,976 11,330,904 11,816,177 Health and Human Services 3,454,063 3,959,298 4,217,761 4,340,447 4,065,289 3,964,857 3,217,342 3,137,470 3,235,196 3,271,988 Culture and Recreation 7,605,481 6,671,417 6,972,660 7,918,634 7,929,703 8,156,558 7,593,302 7,181,489 7,166,496 7,123,288 Community Development 5,935,757 6,316,105 6,798,877 7,287,986 9,156,255 7,375,291 7,165,410 9,266,113 10,179,583 7,580,687 Communications 1,003,608 1,031,116 1,037,747 - 1,114,063 1,152,961 1,170,742 515,783 630,134 526,204 Interest, costs and amortization (6) 7,702,676 6,611,817 6,651,921 6,096,780 5,612,006 5,220,526 5,279,022 13,927,637 13,232,729 13,650,683 Intergovernmental(3) 9,233,128 9,241,763 ------Total governmental activities expenses 228,503,653 221,480,923 238,576,163 248,073,303 252,291,904 261,615,902 256,929,814 268,223,823 276,155,099 278,236,719 Business-type activities: Wastewater services 10,776,209 9,431,492 9,563,755 10,396,778 10,770,142 11,082,780 10,840,594 10,897,541 11,548,040 12,931,195 Solid waste services 5,836,163 5,444,335 6,383,897 5,950,822 6,177,791 5,277,700 5,554,950 6,730,422 6,023,797 6,766,342 Total business-type activities expenses 16,612,372 14,875,827 15,947,652 16,347,600 16,947,933 16,360,480 16,395,544 17,627,963 17,571,837 19,697,537 Total primary government expenses $ 245,116,025 $ 236,356,750 $ 254,523,815 $ 264,420,903 $ 269,239,837 $ 277,976,382 $ 273,325,358 $ 285,851,786 $ 293,726,936 $ 297,934,256 Program Revenues Governmental activities: Charges for services(1) General government(4) $ 1,021,847 $ 904,182 $ 754,146 $ (6,297) $ 3,153,839 $ 5,585,985 $ 1,822,436 $ 2,478,975 $ 3,112,192 $ 685,849 Police 2,675,975 1,417,615 1,153,325 824,514 1,096,769 1,399,425 931,703 747,150 1,050,173 1,026,770 Fire 806,487 41,571 168,004 94,589 85,145 98,393 95,041 131,744 114,823 105,110 Education 7,912,683 3,982,594 5,048,693 4,151,332 3,962,169 4,277,635 3,860,116 3,529,902 3,206,524 3,180,186 Public Works 1,173,293 853,065 866,151 763,471 797,022 732,071 841,118 527,491 499,116 480,655 Health and Human Services 437,627 257,735 236,922 211,484 189,391 186,295 188,493 165,273 170,721 161,729 Culture and Recreation(5) 955,609 608,880 601,723 80,052 632,545 904,781 580,426 685,656 783,194 486,871 Community Development 1,342,026 1,225,355 1,250,864 1,155,276 1,068,159 1,118,703 1,389,901 1,467,693 1,705,084 1,525,076

Total charges for services 16,325,547 9,290,997 10,079,828 7,274,421 10,985,039 14,303,288 9,709,234 9,733,884 10,641,827 7,652,246 Operating grants and contributions 45,251,496 46,220,633 52,854,392 48,769,370 65,039,056 63,121,867 61,098,263 63,830,475 63,496,397 64,217,133 Capital grants and contributions 7,105,541 8,486,039 6,067,839 4,775,411 5,823,681 4,278,212 8,473,140 9,255,920 15,561,488 19,443,198 Total governmental activities program revenues 68,682,584 63,997,669 69,002,059 60,819,202 81,847,776 81,703,367 79,280,637 82,820,279 89,699,712 91,312,577 Business-type activities: Wastewater services 8,696,732 8,355,360 8,449,653 8,251,735 8,969,303 8,762,187 10,182,311 10,208,509 10,849,984 11,804,073 Solid Waste services 4,463,357 3,540,753 3,422,189 2,782,627 2,588,522 2,640,001 2,393,635 2,744,245 2,632,259 2,800,729

Total charges for services 13,160,089 11,896,113 11,871,842 11,034,362 11,557,825 11,402,188 12,575,946 12,952,754 13,482,243 14,604,802 Operating grants and contributions ------Capital grants and contributions (2) 3,189,482 848,793 2,263,301 814,289 1,458,288 776,358 1,255,104 696,256 526,173 460,422 Total business-type activities program revenues 16,349,571 12,744,906 14,135,143 11,848,651 13,016,113 12,178,546 13,831,050 13,649,010 14,008,416 15,065,224 Total primary government program revenues $ 85,032,155 $ 76,742,575 $ 83,137,202 $ 72,667,853 $ 94,863,889 $ 93,881,913 $ 93,111,687 $ 96,469,289 $ 103,708,128 $ 106,377,801 Net (Expenses)Revenue Governmental activities $ (159,821,069) $ (157,483,254) $ (169,574,104) $ (188,381,457) $ (170,444,128) $ (179,912,535) $ (177,649,177) $ (185,403,544) $ (186,455,387) $ (186,924,142) Business-type activities (262,801) (2,130,921) (1,812,509) (4,498,949) (3,931,820) (4,181,934) (2,564,494) (3,978,953) (3,563,421) (4,632,313) Total Primary government net expense $ (160,083,870) $ (159,614,175) $ (171,386,613) $ (192,880,406) $ (174,375,948) $ (184,094,469) $ (180,213,671) $ (189,382,497) $ (190,018,808) $ (191,556,455) General Revenues and Other Changes in Net Position Governmental activities: Property tax $ 146,928,299 $ 154,449,099 $ 158,896,532 $ 161,979,688 $ 163,353,082 $ 169,333,116 $ 174,911,173 $ 179,660,929 $ 183,226,901 $ 189,294,796 Auto Permits 12,078,138 11,642,585 11,528,023 10,836,895 10,427,551 10,347,555 11,077,345 11,422,224 12,352,468 13,157,966 Penalties, interest and other taxes 1,032,775 865,462 1,594,935 1,418,455 1,512,934 1,535,805 1,425,762 1,660,906 1,555,955 1,466,734 Grants and contributions not restricted to specific programs 5,696,471 6,173,967 6,297,569 6,237,452 3,971,032 4,720,761 5,599,971 5,453,477 4,890,823 5,957,113 Investment income 5,093,220 4,335,585 5,600,182 2,935,434 1,262,208 422,349 1,297,950 1,042,839 1,356,452 177,712 Miscellaneous 1,393,811 995,117 950,109 1,232,553 1,067,955 1,023,290 1,410,241 2,273,681 2,233,187 3,098,340 Transfers, net (1,388,652) (2,500,000) (2,697,663) (2,690,322) (3,975,592) (5,177,336) (3,543,251) (5,385,555) (4,149,363) (4,300,133) Permanent fund contributions 6,825 98,353 23,308 109,227 109,227 152,443 100,140 78,349 70,555 68,585 Total governmental activities 170,840,887 176,060,168 182,192,995 182,059,382 177,728,397 182,357,983 192,279,331 196,206,850 201,536,978 208,921,113 Business-type activities: Grants and contributions not restricted to specific programs(4) - 784,155 1,059,579 826,769 230,507 214,895 610,336 618,567 581,824 540,023 Investment income 1,134,149 1,111,187 391,798 7,814 48,029 32,774 36,104 22,150 14,970 5,349 Transfers, net 1,388,652 2,500,000 2,697,663 2,690,322 3,975,592 5,177,336 3,543,251 5,385,555 4,149,363 4,300,133 Total business-type activities 2,522,801 4,395,342 4,149,040 3,524,905 4,254,128 5,425,005 4,189,691 6,026,272 4,746,157 4,845,505 Total primary government $ 173,363,688 $ 180,455,510 $ 186,342,035 $ 185,584,287 $ 181,982,525 $ 187,782,988 $ 196,469,022 $ 202,233,122 $ 206,283,135 $ 213,766,618

Change in Net Position Governmental activities $ 11,019,818 $ 18,576,914 $ 12,618,891 $ (6,322,075) $ 7,284,269 $ 2,445,448 $ 14,630,154 $ 10,803,306 $ 15,081,591 $ 21,996,971 Business-type activities 2,260,000 2,264,421 2,336,531 (974,044) 322,308 1,243,071 1,625,197 2,047,319 1,182,736 213,192 Total primary government $ 13,279,818 $ 20,841,335 $ 14,955,422 $ (7,296,119) $ 7,606,577 $ 3,688,519 $ 16,255,351 $ 12,850,625 $ 16,264,327 $ 22,210,163

Data Source: Audited Financial Statements

Notes: (1) In FY05 and FY06, "Charges for Services" includes employee benefit witholdings. Beginning in FY07, employee benefit witholdings are netted against the appropriate function's expenses rather than included with "Charges for Services". (2) Beginning in FY07, State Aid Grants were reclassified from Program Revenues to General Revenues, per GFOA recommendation. (3) Beginning in FY08, Intergovernmental expenses were reclassified to General Government expenses, per GFOA recommendation. (4) Negative charges for services in FY09 is due to the loss in the market value of investments of the cemetery permanent funds. (5) Decrease in charges for services in FY09 is due to the loss in the market value of investments of the library permanent funds. (6) Beginning in FY13, Interest, costs and amortization includes the amortization of the investment in Pennichuck Corporation.

A-163 City of Nashua, New Hampshire

Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting)

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 General Fund Reserved(1) $ 4,526,670 $ 6,808,655 $ 5,040,391 $ 5,163,134 $ - $ - $ - $ - $ - $ - Unreserved(2) 27,241,589 28,037,193 33,293,567 33,249,976 ------Nonspendable(4) - - - - 184,062 225,671 226,123 214,361 214,361 191,877 Committed(4) - - - - 16,685,057 13,851,725 13,352,749 11,834,058 12,342,869 9,051,500 Assigned(4) - - - - 6,550,000 5,950,000 9,738,926 8,907,711 11,009,824 9,677,264 Unassigned(4) - - - - 26,560,824 25,540,287 25,940,691 26,570,103 27,350,130 27,729,910 Total General Fund $ 31,768,259 $ 34,845,848 $ 38,333,958 $ 38,413,110 $ 49,979,943 $ 45,567,683 $ 49,258,489 $ 47,526,233 $ 50,917,184 $ 46,650,551

Other Governmental Funds Reserved(3) $ 21,388,586 $ 18,311,928 $ 17,162,438 $ 15,639,501 -$ -$ -$ -$ -$ -$ Unreserved: Special Revenue Funds 23,410,292 24,692,996 25,947,458 19,994,384 ------Capital Project Funds (12,114,644) 3,134,217 3,161,390 2,558,311 ------Permanent Funds 590,337 710,518 903,422 960,742 ------Nonspendable(4) - - - - 14,429,616 17,497,014 16,380,114 16,751,522 18,477,710 20,304,610 Restricted(4) - - - - 3,899,609 5,106,464 11,785,274 12,327,951 20,633,754 26,041,685 Committed(4) - - - - 8,733,406 7,740,332 9,063,280 10,160,993 10,193,612 12,915,004 Unassigned(4) - - - - (1,728,518) (491,584) (947,259) (224) (851,798) (1,304,664) Total Other Governmental Funds $ 33,274,571 $ 46,849,659 $ 47,174,708 $ 39,152,938 $ 25,334,113 $ 29,852,226 $ 36,281,409 $ 39,240,242 $ 48,453,278 $ 57,956,635

Data Source: Audited Financial Statements

Notes: (1) FY2005 - $8 million is reserved for School Capital Reserve Fund. (2) FY2005 - $11 million is designated for FY06 tax rate; $4 million for FY07/08 School bonded debt . (3) FY2006 - Reclassified $7,821,553 in School Capital Reserve Funds from Reserved Fund Balance into Unreserved Fund Balance, Special Revenue Funds. (4) FY2010 - Fund balances reflect implementation of GASB 54

A-164 City of Nashua, New Hampshire

Change in Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting)

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Revenues

Taxes $ 146,864,377 $ 154,488,154 $ 158,353,188 $ 160,881,410 $ 162,964,723 $ 169,105,924 $ 174,375,557 $ 179,815,669 $ 183,788,788 $ 189,370,011 Licenses and Permits(1) 13,234,555 12,846,500 12,311,950 11,558,473 11,311,752 11,200,038 11,805,705 12,794,538 13,867,699 14,538,140 Penalties, interest and other taxes 1,357,033 1,250,253 1,594,935 1,418,455 1,447,191 1,471,786 1,425,762 1,660,906 1,555,955 1,466,734 Charges for services 6,846,669 6,914,168 7,024,328 7,289,468 7,324,028 7,888,220 7,813,660 5,973,297 6,022,688 5,872,118 Intergovernmental 54,956,875 57,917,495 64,085,098 66,192,430 74,194,941 71,166,117 66,239,007 67,730,460 73,373,088 78,695,688 Interest earnings 4,153,022 7,745,663 4,793,461 (303,680) 2,833,498 4,168,180 1,812,632 2,769,585 4,192,046 254,684 Miscellaneous 1,282,935 1,173,971 1,921,409 1,882,909 1,500,780 1,599,369 2,136,516 2,443,340 2,499,563 3,370,605 Contributions 1,149,442 539,057 96,002 354,065 510,942 460,903 7,068,853 9,323,019 9,364,136 9,471,751

Total revenues 229,844,908 242,875,261 250,180,371 249,273,530 262,087,855 267,060,537 272,677,692 282,510,814 294,663,963 303,039,731

Expenditures by Function

General Government (2) 47,642,841 51,202,587 54,841,257 53,859,718 55,969,477 60,784,069 63,115,094 62,840,355 14,444,055 14,325,858 Public safety 37,722,214 30,897,525 32,191,601 35,887,184 35,144,492 37,093,411 34,474,733 34,242,016 48,920,203 55,413,117 Water supply/hydrants 1,634,047 1,781,355 2,205,303 2,234,921 2,152,983 2,471,096 2,611,535 2,591,814 2,576,767 2,607,342 Education 98,086,304 96,233,019 100,296,133 110,099,584 110,680,934 113,933,265 118,234,670 114,855,962 150,005,656 155,393,270 Public Works 9,536,606 8,689,653 9,540,761 10,452,441 11,766,925 10,100,177 11,822,833 15,807,593 24,212,322 32,002,905 Health and human services 2,687,438 3,373,460 3,516,881 3,693,028 3,328,537 3,141,990 2,595,897 2,601,117 3,191,206 3,300,614 Culture and recreation 5,436,393 5,121,466 5,898,670 5,923,548 5,357,914 5,725,091 5,581,693 5,400,579 6,753,340 6,965,269 Community development 11,396,347 9,168,047 6,396,239 6,004,281 9,495,558 7,942,209 6,607,068 7,610,838 11,429,576 6,976,564 Communications 246,026 228,044 237,896 280,361 285,390 289,648 364,299 1,980,823 1,454,151 3,680,775 Debt service Principal 12,073,570 12,118,441 12,111,061 12,300,467 12,221,828 11,924,348 12,259,833 16,364,611 16,496,389 16,365,778 Interest 7,779,830 6,222,224 7,052,893 6,243,971 5,892,249 5,455,421 5,796,412 10,308,650 10,209,365 10,450,189 Intergovernmental 9,233,129 9,241,763 9,489,137 9,546,322 9,367,968 9,416,623 9,569,306 9,420,187 9,763,895 10,383,051 Total expenditures 243,474,745 234,277,584 243,777,832 256,525,826 261,664,255 268,277,348 273,033,373 284,024,545 299,456,925 317,864,732

Excess of revenues Over (under) expenditures (13,629,837) 8,597,677 6,402,539 (7,252,296) 423,600 (1,216,811) (355,681) (1,513,731) (4,792,962) (14,825,001)

Other Financing Sources (Uses) Issuance of bonds - 10,555,000 - - - 6,000,000 164,030,000 7,136,000 19,480,000 21,888,749 Issuance of refunding bonds ------4,760,000 Pennichuck acquisition ------(150,011,079) - - - Bond premiums ------1,054,848 2,068,011 2,488,519 Bond premiums on refunding bonds ------610,993 Payment to refunded escrow agent ------(5,386,403) Capital lease proceeds - - 108,285 ------Transfers in 15,512,898 4,482,821 7,454,175 10,584,784 6,045,974 3,907,733 2,649,793 4,087,955 1,041,003 2,256,555 Transfers out (16,901,550) (6,982,821) (10,151,838) (11,275,106) (8,721,566) (8,585,069) (6,193,044) (9,538,495) (5,192,065) (6,556,688) Total other financing sources (uses) (1,388,652) 8,055,000 (2,589,378) (690,322) (2,675,592) 1,322,664 10,475,670 2,740,308 17,396,949 20,061,725

Net Change in fund balances $ (15,018,489) $ 16,652,677 $ 3,813,161 $ (7,942,618) $ (2,251,992) $ 105,853 $ 10,119,989 $ 1,226,577 $ 12,603,987 $ 5,236,724

Debt Service as a percentage of non-capital outlay expenditures 8.84% 8.13% 8.09% 7.45% 7.24% 6.80% 7.12% 10.07% 9.83% 9.65%

Data Source: Audited Financial Statements

Notes: (1) Includes Auto Permits. (2) Includes City-wide employee health and pension benefits through FY13. Beginning in FY14 employee health and pension benefits are allocated from General Government to applicable departments/divisions.

A-165 City of Nashua, New Hampshire

Expenditures and Other Financing Uses by Department and Budget Category, General Fund Last Ten Fiscal Years (modified accrual basis of accounting)

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Expenditures and Other Financing Uses by Department Financial Services $ 1,322,705 $ 1,236,659 $ 1,469,502 $ 2,727,354 $ 2,878,399 $ 3,771,283 $ 2,785,087 $ 2,767,961 $ 3,622,100 $ 3,891,072 Administrative Services(1) 2,788,574 1,991,401 2,131,361 ------Information Technology(2) - 784,969 1,102,648 1,237,701 1,230,025 1,459,019 1,534,232 2,031,718 2,334,058 2,441,848 General Government(3) 43,233,659 47,080,238 49,114,240 48,839,886 49,966,148 51,667,255 54,103,026 54,753,971 7,261,566 7,102,983 Police 15,062,015 14,920,270 16,918,427 18,551,324 18,343,212 19,165,600 17,753,964 17,954,600 26,394,497 29,200,580 Fire 13,876,296 13,068,849 13,122,412 15,670,602 15,211,313 16,203,772 14,148,512 14,312,925 20,534,919 21,920,727 Water Supply/Hydrants 1,634,047 1,781,355 2,205,303 2,234,921 2,152,983 2,471,096 2,611,535 2,591,814 2,576,767 2,607,342 Community Health and Welfare 2,301,368 2,149,131 2,188,388 2,437,681 1,966,721 1,894,004 1,673,763 1,755,105 2,178,171 2,192,487 Street Department 5,156,101 4,923,751 6,051,230 6,736,230 7,278,181 6,856,012 6,891,075 8,556,496 8,262,774 9,985,150 Parks and Recreation 2,672,691 2,539,850 2,545,439 2,944,658 2,741,007 3,015,085 2,767,434 2,862,915 3,373,369 3,681,695 Other Public Works 3,140,497 3,203,179 2,413,679 2,410,901 2,406,616 2,515,392 2,340,871 1,847,306 2,163,812 2,225,745 Community Development Division 1,432,102 1,322,027 1,327,753 1,416,773 1,461,688 1,445,969 1,545,458 1,416,358 1,993,206 2,116,217 Public Libraries 2,249,446 2,040,754 2,225,556 2,439,439 2,293,340 2,295,731 2,320,114 2,195,853 2,959,337 2,914,767 Communications 246,026 228,044 237,896 280,361 285,390 289,648 280,075 425,232 302,102 299,615 Transfers Out 11,696,153 4,337,325 6,028,358 4,185,445 5,916,468 6,301,394 4,231,574 6,450,979 4,685,182 5,226,209 Total City Departments 106,811,680 101,607,803 109,082,192 112,113,276 114,131,491 119,351,260 114,986,720 119,923,233 88,641,860 95,806,437

Education (includes transfers out) 82,965,529 81,504,499 85,575,583 94,120,678 92,619,046 93,588,224 93,475,962 97,637,607 130,325,123 133,844,372

Debt service Principal 12,073,570 12,118,441 12,051,061 12,240,467 12,161,828 11,864,348 12,199,833 12,914,611 13,186,389 13,025,778 Interest 7,779,830 6,222,224 7,003,835 6,200,867 5,851,245 5,416,517 5,200,837 4,897,909 4,664,660 4,938,213 Total Debt Service 19,853,400 18,340,665 19,054,896 18,441,334 18,013,073 17,280,865 17,400,670 17,812,520 17,851,049 17,963,991

Intergovernmental 9,233,129 9,241,763 9,489,137 9,546,322 9,367,968 9,416,623 9,569,306 9,420,187 9,763,895 10,383,051

Total expenditures (includes transfers out) $ 218,863,738 $ 210,694,730 $ 223,201,808 $ 234,221,610 $ 234,131,578 $ 239,636,972 $ 235,432,659 $ 244,793,547 $ 246,581,927 $ 257,997,851

Expenditures as a percentage of total City Departments 48.8% 48.2% 48.9% 47.9% 48.7% 49.8% 48.8% 49.0% 35.9% 37.1% Education 37.9% 38.7% 38.3% 40.2% 39.6% 39.1% 39.7% 39.9% 52.9% 51.9% Debt service 9.1% 8.7% 8.5% 7.9% 7.7% 7.2% 7.4% 7.3% 7.2% 7.0% Intergovernmental 4.2% 4.4% 4.3% 4.1% 4.0% 3.9% 4.1% 3.8% 4.0% 4.0% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Expenditure Percentage Change City Departments 15.5% -4.9% 7.4% 10.3% 4.6% 6.5% 0.7% 0.5% -22.9% -20.1% Education 1.0% -1.8% 5.0% 15.5% 8.2% -0.6% 0.9% 4.3% 39.4% 37.1% Debt service 1.9% -7.6% 3.9% 0.5% -5.5% -6.3% -3.4% 3.1% 2.6% 0.9% Intergovernmental 0.6% 0.1% 2.7% 3.3% -1.3% -1.4% 2.1% 0.0% 2.0% 10.2% Total 7.7% -3.7% 5.9% 11.2% 4.9% 2.3% 0.6% 2.2% 4.7% 5.4%

Data Source: Audited internal City of Nashua Financial Statements and Audited Financial Statements

Notes:

(1) FY09 - Departments within the Administrative Services Division were reassigned to the Financial Services Division and Miscellaneous General Government functions. (2) Information Technology separated from Administative Services division in FY07. (3) Includes City-wide employee health and pension benefits through FY13. Beginning in FY14 employee health and pension benefits are allocated from General Government to applicable departments/divisions.

A-166 City of Nashua, New Hampshire

Combined Enterprise Funds Revenue, Expenditures, Other Financing Sources and Uses and Change in Total Net Position Last Ten Fiscal Years Increase Revenue and Other Financing Sources Expenses & Other Financing Uses (Decrease) Fiscal Intergovern- Charges for Transfers Operations & Interest Transfers Total Net Contributed Total Net Year mental Services Other In Total Maintenance Depreciation Expense Out Total Position(3) Capital Position

2015$ 540,023 $ 14,284,435 $ 325,716 $ 4,355,133 $ 19,505,307 $ 11,396,186 $ 6,707,836 $ 1,593,515 -$ $ 19,752,537 $ (3,132,039) $ 460,422 $ 101,758,557 2014 581,824 13,246,142 251,071 4,149,363 18,228,400 10,243,280 6,211,677 1,116,880 - 17,571,837 656,563 526,173 104,430,174 2013 618,567 12,732,254 242,650 5,385,555 18,979,026 10,134,405 6,258,987 1,234,571 - 17,627,963 1,351,063 696,256 103,247,438 2012 809,505 12,343,860 268,190 3,543,251 16,964,806 9,112,439 5,846,516 1,436,589 - 16,395,544 569,262 1,055,935 101,200,119 2011 764,434 11,031,678 403,284 5,177,336 17,376,732 9,043,390 5,677,492 1,639,598 - 16,360,480 1,016,252 226,819 99,574,922 2010 1,394,420 11,310,759 295,095 3,985,092 16,985,366 9,902,650 5,874,516 1,170,767 - 16,957,433 27,933 294,375 98,331,851 2009 826,769 10,800,223 241,953 2,690,322 14,559,267 9,899,937 5,363,027 1,084,636 - 16,347,600 (1,788,333) 814,289 98,009,543 2008 1,059,579 11,642,137 621,503 2,697,663 16,020,882 10,187,447 4,631,222 1,128,983 - 15,947,652 73,230 2,263,301 98,983,587 2007 784,155 11,748,817 2,107,276 2,500,000 17,140,248 9,188,126 4,429,469 1,258,232 - 14,875,827 2,264,421 - 96,647,056 2006 2,813,045 13,050,184 1,620,491 1,400,652 18,884,372 10,609,849 4,607,965 1,394,558 - 16,612,372 2,260,000 - 94,382,635

Includes Wastewater and Solid Waste funds

Wastewater Fund Revenue, Expenditures, Other Financing Sources and Uses and Change in Fund Equity Last Ten Fiscal Years Increase Revenue and Other Financing Sources Expenses & Other Financing Uses (Decrease) Fiscal Intergovern- Charges for Transfers Operations & Interest Transfers Total Net Contributed Total Net Year mental Services Other In Total Maintenance Depreciation Expense Out Total Position(3) Capital Position

2015$ 331,785 $ 11,727,364 $ 80,843 $ - $ 12,139,992 $ 6,701,574 $ 4,993,740 $ 1,235,881 55,000$ $ 12,986,195 $ (2,468,908) $ 460,422 $ 103,365,070 2014 373,201 10,849,064 4,112 - 11,226,377 6,300,878 4,468,223 778,939 - 11,548,040 (321,663) 526,173 105,373,556 2013 190,843 10,197,610 14,089 - 10,402,542 5,734,690 4,562,988 599,863 - 10,897,541 (494,999) 677,133 105,169,046 2012 199,169 10,161,716 31,258 - 10,392,143 5,697,549 4,401,079 741,966 - 10,840,594 (448,451) 930,935 104,986,912 2011 549,539 8,762,187 12,170 10,550 9,334,446 5,881,704 4,319,104 881,972 - 11,082,780 (1,748,334) 226,819 104,504,428 2010 1,163,913 8,969,303 18,992 10,152,208 5,987,223 4,438,309 344,610 9,500 10,779,642 (627,434) 294,375 106,025,943 2009 595,705 8,251,735 (10,990) - 8,836,450 5,920,909 4,111,586 364,283 - 10,396,778 (1,560,328) 814,289 106,359,002 2008 540,960 8,449,653 292,271 - 9,282,884 5,558,151 3,592,752 412,852 - 9,563,755 (280,871) 2,263,301 107,105,041 2007 611,891 8,354,834 1,785,550 - 10,752,275 5,561,226 3,409,069 461,197 - 9,431,492 1,320,783 - 105,122,611 2006 (1) 2,756,730 8,650,837 1,352,495 - 12,760,062 6,661,219 3,605,550 509,440 6,000 10,782,209 1,977,853 - 103,801,828

Solid Waste Fund Revenue, Expenditures, Other Financing Sources and Uses and Change in Fund Equity Last Ten Fiscal Years Increase Revenue and Other Financing Sources Expenses & Other Financing Uses (Decrease) Fiscal Intergovern- Charges for Transfers Operations & Interest Transfers Total Net Contributed Total Net Year mental Services Other In Total Maintenance Depreciation Expense Out Total Position(3) Capital Position

2015$ 208,238 $ 2,557,071 $ 244,873 $ 4,355,133 $ 7,365,315 $ 4,694,612 $ 1,714,096 $ 357,634 -$ $ 6,766,342 $ (663,131) $ - $ (1,606,513) 2014 208,623 2,397,078 246,959 4,149,363 7,002,023 3,942,402 1,743,454 337,941 - 6,023,797 978,226 - (943,382) 2013 427,724 2,534,644 228,561 5,385,555 8,576,484 4,399,715 1,695,999 634,708 - 6,730,422 1,846,062 19,123 (1,921,608) 2012 610,336 2,182,144 236,932 3,543,251 6,572,663 3,414,890 1,445,437 694,623 - 5,554,950 1,017,713 125,000 (3,786,793) 2011 214,895 2,269,491 391,114 5,166,786 8,042,286 3,161,686 1,358,388 757,626 - 5,277,700 2,764,586 - (4,929,506) 2010 230,507 2,341,456 276,103 3,985,092 6,833,158 3,915,427 1,436,207 826,157 - 6,177,791 655,367 - (7,694,092) 2009 231,064 2,548,488 252,943 2,690,322 5,722,817 3,979,028 1,251,441 720,353 - 5,950,822 (228,005) - (8,349,459) 2008 (2) 518,619 3,192,484 329,232 2,697,663 6,737,998 4,629,296 1,038,470 716,131 - 6,383,897 354,101 - (8,121,454) 2007 172,264 3,393,983 321,726 2,500,000 6,387,973 3,626,900 1,020,400 797,035 - 5,444,335 943,638 - (8,475,555) 2006 56,315 4,399,347 267,996 1,400,652 6,124,310 3,948,630 1,002,415 885,118 6,000 5,842,163 282,147 - (9,419,193)

Data Source: Audited Financial Statements

Notes:

(1) Operations & Maintenance expenses include a one-time charge of $1,017,225 for asbestos contaminated soil removal. (2) Operations & Maintenance expenses include $1.2 million in current year and prior year (previously understated) landfill closure costs. (3) Due to the implementation of GASB 68, the restatement of Net Position is not applied to FY2014, but rather to the Total Net Position Increase/(Decrease) in FY2015.

A-167 City of Nashua, New Hampshire

General Government Tax Revenues by Source Last Ten Fiscal Years

Fiscal Property Current Use Railroad Boat Yield Payment in Excavation Tax Interest Year Taxes Penalties Tax Tax Tax Lieu of Tax Tax & Penalties Total

2015$ 189,118,341 $ 251,000 $ 3,500 $- $ 670 $ 325,289 $- $ 774,951 $ 190,473,751 2014 183,735,667 48,000 6,409 - 5,121 234,523 - 914,147 184,943,867 2013 179,452,907 372,500 407 - 2,032 429,355 - 836,626 181,093,827 2012 174,426,233 770 4,096 - 4,651 119,273 389 843,508 175,398,919 2011 169,572,998 92,890 7,172 - 2,654 130,243 1,041 787,463 170,594,460 2010 163,664,814 45,000 12,175 - 2,052 111,386 115 771,023 164,606,565 2009 161,465,821 73,130 2,389 - 1,257 118,117 139 731,810 162,392,663 2008 158,565,422 762,870 - - 5,571 138,605 203 624,141 160,096,812 2007 155,452,947 238,430 7,731 - 13,535 116,182 1,037 488,548 156,318,410 2006 147,765,609 417,880 7,786 - 11,506 121,350 - 416,798 148,740,929

Data Source: Audited Internal Financial Statements

A-168 City of Nashua, New Hampshire

Property Tax Levies and Collections Last Ten Fiscal Years

Lien Amount Property Tax Collected within the Balance at Subsequent Balance at end Fiscal Levied for Fiscal Year of the Levy Fiscal Year End Tax lien of Current Total Collections to Date Number of Parcels Year Fiscal Year Amount % of Levy of Levy Year Collections Fiscal year Amount % of Levy in Levy Liened % Liened

2015$ 191,893,860 $ 189,619,825 98.8 %$ 2,274,035 $ 461,585 $ 1,812,450 $ 190,081,410 99.1 % 28,173 632 2.2 % 2014 185,563,420 183,499,092 98.9 2,064,328 312,751 1,751,577 183,811,843 99.1 28,082 640 2.3 2013 181,191,086 178,655,327 98.6 2,535,759 350,811 2,184,948 179,006,138 98.8 28,072 601 2.1 2012 180,052,101 177,497,774 98.6 2,554,327 376,603 2,177,724 177,874,377 98.8 28,010 685 2.4 2011 170,706,403 168,303,403 98.6 2,403,272 539,882 1,863,350 168,843,413 98.9 27,992 671 2.4 2010 165,010,958 162,496,172 98.5 2,514,786 359,829 2,154,957 162,856,001 98.7 27,983 741 2.6 2009 162,492,774 160,152,238 98.6 2,340,536 337,289 2,003,247 160,489,527 98.8 28,004 738 2.6 2008 160,045,795 157,811,037 98.6 2,234,758 289,153 1,945,605 158,100,190 98.8 27,954 707 2.5 2007 156,687,784 154,976,500 98.9 1,711,284 236,234 1,475,050 155,212,734 99.1 27,446 539 2.0 2006 148,834,769 147,558,424 99.1 1,276,345 754,988 521,357 148,313,412 99.6 27,000 460 1.7

Data Source: Audited Internal Financial Statements, Property Tax Warrants and Reports of Tax Lien Executions

Notes: Once a lien is executed a taxpayer has 2 years and 1 day to redeem the taxes before a deed may be executed.

A-169 City of Nashua, New Hampshire

Assessed and Estimated Full Value of Real Property Last Ten Fiscal Years

Ratio of Total Less Total Direct Assessed Local Assessed Value(1) Exemptions Total Taxable Tax Rate per Value to Fiscal Commercial/ Total Assessed to Assessed Assessed $1,000 of Estimated Total Estimated Year Residential Industrial Utilities Value Value(1) Value(1) Assessed Value Full Value(2) Full Value

2015 $ 5,232,018,998 $ 2,650,084,562 $ 267,676,980 $ 8,149,780,540 $ 129,962,577 $ 8,019,817,963 $ 22.76 $ 8,684,907,808 93.8 % 2014 5,203,931,164 2,655,590,811 263,764,280 8,123,286,255 134,185,527 7,989,100,728 22.28 8,386,760,928 96.9 2013 5,737,764,215 2,647,698,426 259,493,680 8,644,956,321 147,079,600 8,497,876,721 20.38 7,949,863,821 108.7 2012 5,724,498,363 2,665,435,268 247,580,080 8,637,513,711 139,825,150 8,497,688,561 19.84 8,248,187,902 104.7 2011 5,716,945,366 2,637,335,441 233,956,480 8,588,237,287 146,159,148 8,442,078,139 19.28 8,519,356,326 100.8 2010 5,696,232,358 2,626,290,983 214,500,880 8,537,024,221 147,658,598 8,389,365,623 18.70 8,575,136,081 99.6 2009 6,578,232,904 2,727,069,006 205,170,480 9,510,472,390 157,178,400 9,353,293,990 16.54 9,018,506,088 105.5 2008 6,553,746,660 2,715,276,344 182,868,180 9,451,891,184 170,666,650 9,281,224,534 16.39 9,358,505,782 101.0 2007 6,520,190,304 2,651,715,145 174,690,180 9,346,595,629 175,974,650 9,170,620,979 16.21 9,714,255,257 96.2 2006 6,472,850,667 2,666,131,229 173,339,680 9,312,321,576 158,734,700 9,153,586,876 15.33 9,297,862,943 100.2

Data Sources: (1) State MS-1 Report of Assessed Values, and NHDRA website to conform with final residential values. (2) NH Department of Revenue Administration's annual Equalization Survey including utilities and railroad.

Notes: Residential values include value of land in current use.

A-170 City of Nashua, New Hampshire

Principal Taxpayers Current Year and Ten Years Ago

Fiscal Year 2015 Percentage of Fiscal Year 2006 Percentage of Assessed Total Assessed Assessed Total Assessed Taxpayer Type of Business Value Rank Value Value Rank Value Pheasant Lane Realty Trust Shopping Mall $ 142,785,496 1 1.78 %$ 145,731,096 1 1.59 % Pennichuck Water Works Inc Water Distributor 104,161,500 2 1.30 65,920,986 4 0.72 Public Service Co of NH Utility 97,147,800 3 1.21 69,499,000 3 0.76 Aimco Royal Crest-Nashua LLC Apartment Complex 83,203,000 4 1.04 79,587,500 2 0.87 Flatley, John J Company Office/Land/Apts/Retail 64,156,800 5 0.80 39,221,300 7 0.43 St. Joseph Hospital and Trauma Center Hospital 58,564,900 6 0.73 - - Energy North Natural Gas d/b/a Liberty Utilities Utility 56,281,400 7 0.70 38,047,700 8 0.42 Southern New Hampshire Hospital Hospital 55,988,100 8 0.70 37,822,100 10 0.41 BAE Systems Info & Elec System Electronics Manufacturer 43,151,200 9 0.54 45,943,100 6 0.50 Nashua Oxford-Bay Associates Real Estate 38,807,800.00 10 0.48 37,854,800 9 0.41 Compaq Computer Corporation(1) Computer Hardware - - 49,914,500 5 0.55

Total Principal Taxpayers 744,247,996 9.28 % 609,542,082 6.66 %

Total Net Assessed Taxable Value $ 8,019,817,963 $ 9,153,586,876

Data Source: City of Nashua Assessing Records and State MS-1 Report

Notes: (1)Previously identified as Digital Equipment Corp.

A-171 City of Nashua, New Hampshire

Property Tax Rates per $ 1,000 of Assessed Value Direct and Overlapping Governments Last Ten Fiscal Years

Overlapping City Direct Rates Rate

Estimated Fiscal Local State Total Total Full Value Year City School School School Direct County Total Rate

2015 9.28$ $ 11.00 2.48$ 13.48$ 22.76$ $ 1.29 24.05$ 22.13$ 2014 9.01 10.72 2.55 13.27 22.28 1.22 23.50 22.31 2013 8.56 9.39 2.43 11.82 20.38 1.11 21.49 22.89 2012 8.30 9.16 2.38 11.54 19.84 1.13 20.97 21.53 2011 7.87 9.03 2.38 11.41 19.28 1.12 20.40 20.15 2010 7.91 8.37 2.42 10.79 18.70 1.12 19.82 19.33 2009 6.50 7.79 2.25 10.04 16.54 1.01 17.55 18.15 2008 6.73 7.39 2.27 9.66 16.39 1.01 17.40 17.21 2007 6.17 7.70 2.34 10.04 16.21 0.99 17.20 16.20 2006 5.06 7.77 2.50 10.27 15.33 0.99 16.32 16.02

Data Source: NH State Department of Revenue Administration FY2015 Tax Rate Allocation:

Local School 46%

Statewide School 10%

City 39% County 5%

A-172 City of Nashua, New Hampshire

Nashua's Share of the Hillsborough County Tax Apportionment Last Ten Fiscal Years (based on percentage of equalized value)

Total Equalized Values Apportionment of County Tax Levy Fiscal Fiscal County Nashua's Nashua's Nashua's Share Nashua's Share Year Nashua County Nashua's % Year Tax Levy Share % Share $ $ Change % Change

2015$ 8,684,907,808 $ 40,242,829,534 21.581 % 2015$ 48,074,150 21.598%$ 10,383,051 $ 619,156 0.06 % 2014 8,386,760,928 38,831,207,211 21.598 2014 46,213,110 21.128% 9,763,895 343,708 0.04 2013 7,949,863,821 37,627,191,420 21.128 2013 44,109,420 21.356% 9,420,187 (149,119) (0.02) 2012 8,248,187,902 38,621,608,517 21.356 2012 44,109,421 21.694% 9,569,306 152,683 0.02 2011 8,519,356,326 39,269,708,789 21.694 2011 44,109,838 21.348% 9,416,623 48,655 0.01 2010 8,575,136,081 40,168,096,310 21.348 2010 44,720,387 20.948% 9,367,968 (178,354) (0.02) 2009 9,018,506,088 43,052,141,297 20.948 2009 45,633,047 20.920% 9,546,322 57,185 0.01 2008 9,358,505,782 44,735,255,285 20.920 2008 44,400,065 21.372% 9,489,137 247,374 0.03 2007 9,714,255,257 45,453,407,212 21.372 2007 43,779,760 21.110% 9,241,763 8,635 0.00 2006 9,297,862,943 44,045,516,136 21.110 2006 43,487,679 21.232% 9,233,128 55,681 0.01

Data Source: NH Department of Revenue Administration

A-173 City of Nashua, New Hampshire

Ratios of Long Term Debt Outstanding and Legal Debt Limits Last Ten Fiscal Years

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Debt at June 30 General Obligation Debt City Depts. (includes unamortized bond premium) $ 24,334,746 $ 33,897,537 $ 31,361,558 $ 28,811,689 $ 26,300,733 $ 30,123,644 $ 33,709,247 $ 35,856,708 $ 50,161,880 $ 60,724,460 School Dept. (includes unamortized bond premium) 140,641,187 133,514,959 123,391,873 113,176,096 103,171,230 93,590,969 88,662,534 81,345,462 74,986,901 75,220,291 Pennichuck Acquisition ------150,570,000 147,180,000 143,930,000 140,650,000 Total Governmental Activities 164,975,933 167,412,496 154,753,431 141,987,785 129,471,963 123,714,613 272,941,781 264,382,170 269,078,781 276,594,751

Solid Waste Fund General Obligation Debt (includes unamortized bond premium) 205,391 177,336 149,818 7,523,890 6,977,332 6,431,222 5,885,555 5,341,304 4,796,886 4,992,616 State Revolving Loan Funds 20,400,320 19,154,055 17,907,784 16,661,514 15,415,257 14,168,989 12,922,713 11,676,455 10,264,126 9,041,467 Wastewater Fund General Obligation Debt (includes unamortized bond premium) 3,167,677 2,584,171 2,007,752 1,445,326 883,710 514,167 144,667 13,068,529 14,738,336 13,929,634 State Revolving Loan Funds 6,919,056 6,457,788 5,996,515 5,535,245 19,773,978 18,577,707 18,023,657 17,018,570 27,658,815 30,260,415 Total Business-Type Activities 30,692,444 28,373,350 26,061,869 31,165,975 43,050,277 39,692,085 36,976,592 47,104,858 57,458,163 58,224,132

Total Debt at June 30 $ 195,668,377 $ 195,785,846 $ 180,815,300 $ 173,153,760 $ 172,522,240 $ 163,406,698 $ 309,918,373 $ 311,487,028 $ 326,536,944 $ 334,818,883

Base Value for Debt Limits $ 9,438,642,749 $ 9,861,998,165 $ 9,497,984,632 $ 9,150,834,250 $ 8,574,513,075 $ 8,519,004,742 $ 8,247,999,918 $ 7,947,891,505 $ 8,377,389,979 $ 8,675,523,269

Legal Debt Limits (% of Base Value) City - 2%(1) 188,772,855 197,239,963 189,959,693 183,016,685 171,490,262 170,380,095 164,959,998 158,957,830 167,547,800 173,510,465 School - 6%(1) 566,318,565 591,719,890 569,879,078 549,050,055 514,470,785 511,140,285 494,879,995 476,873,490 502,643,399 520,531,396

Debt Against Legal Debt Limits City Depts. 24,334,746 33,897,537 31,361,558 28,811,689 26,300,733 30,123,644 33,709,247 35,856,708 50,161,880 60,724,460 School Dept. 140,641,187 133,514,959 123,391,873 113,176,096 103,171,230 93,590,969 88,662,534 81,345,462 74,986,901 75,220,291

Exempt from Legal Debt Limits 30,692,444 28,373,350 26,061,869 31,165,975 43,050,277 39,692,085 187,546,592 194,284,858 201,388,163 198,874,132

Total Debt at June 30 $ 195,668,377 $ 195,785,846 $ 180,815,300 $ 173,153,760 $ 172,522,240 $ 163,406,698 $ 309,918,373 $ 311,487,028 $ 326,536,944 $ 334,818,883

Unused Capacity of Legal Debt Limits City Depts. $ 164,438,109 $ 163,342,426 $ 158,598,134 $ 154,204,996 $ 145,189,528 $ 140,256,451 $ 131,250,751 $ 123,101,122 $ 117,385,920 $ 112,786,006 School Dept. 425,677,378 458,204,931 446,487,205 435,873,959 411,299,555 417,549,316 406,217,461 395,528,028 427,656,497 445,311,105

% of Legal Debt Limits Used City Depts. 12.9% 17.2% 16.5% 15.7% 15.3% 17.7% 20.4% 22.6% 29.9% 35.0% School Dept. 24.8% 22.6% 21.7% 20.6% 20.1% 18.3% 17.9% 17.1% 14.9% 14.5%

Data Source: Audited Financial Statements N.H. Department of Revenue Administration

Notes: (1) City has imposed more restrictive limits (2% City; 6% School) than state statute allows (3% City; 7% School).

A-174 Ratios of Outstanding Debt by Debt Type Last Ten Fiscal Years

Governmental Activities - General Obligation Debt % of Net Debt Fiscal City Pennichuck School Less Est. State Tax Supported to Assessed Tax Supported Year Departments Acquisition Department Total School Aid Debt Value Debt per capita

2015$ 57,275,606 $ 140,650,000 $ 70,948,145 $ 268,873,751 $ 21,284,444 $ 247,589,308 3.1 % $ 2,845 2014 50,161,880 143,930,000 74,986,901 269,078,781 22,496,070 246,582,711 3.1 2,842 2013 35,856,708 147,180,000 81,345,462 264,382,170 24,403,639 239,978,531 2.8 2,784 2012 32,874,310 150,570,000 86,466,471 269,910,781 25,939,941 243,970,840 2.9 2,825 2011 29,310,621 - 91,064,992 120,375,613 27,319,498 93,056,115 1.1 1,075 2010 25,644,190 - 100,595,773 126,239,963 30,178,732 96,061,231 1.1 1,097 2009 28,096,205 - 110,365,580 138,461,785 33,109,674 105,352,111 1.1 1,209 2008 30,544,656 - 120,177,775 150,722,431 36,053,333 114,669,099 1.2 1,316 2007 32,970,385 - 129,863,111 162,833,496 38,958,933 123,874,563 1.4 1,414 2006 23,901,230 - 138,135,705 162,036,935 41,440,712 120,596,224 1.3 1,371

Business-Type Activities - General Obligation Debt and State Revolving Loan Funds Fiscal Solid Waste Wastewater Less Est. Net Net debt % of Personal Year Fund Fund Total State Aid (1) Debt per capita Income

2015$ 13,892,717 $ 42,925,415 $ 56,818,132 $ - $ 56,818,132 $ 653 1.9 % 2014 15,061,012 42,397,151 57,458,163 - 57,458,163 662 2.2 2013 17,017,759 30,087,099 47,104,858 2,873,041 44,231,817 513 1.6 2012 18,702,268 18,168,324 36,870,592 3,246,099 33,624,493 389 1.3 2011 20,484,211 19,091,874 39,576,085 3,644,814 35,931,271 415 1.2 2010 22,266,589 20,657,688 42,924,277 4,057,901 38,866,376 444 1.4 2009 24,049,404 6,980,571 31,029,975 4,849,748 26,180,227 301 0.9 2008 18,057,602 8,004,267 26,061,869 5,676,163 20,385,706 234 0.8 2007 19,331,391 9,041,959 28,373,350 6,488,707 21,884,643 250 0.8 2006 20,605,711 10,086,733 30,692,444 7,314,277 23,378,167 266 0.9

Total % of Net Debt Fiscal Primary Less to Assessed Net Debt % of Personal Year Government State Aid Net Debt Value per capita Income

2015$ 325,691,883 $ 21,284,444 $ 304,407,440 3.8 % $ 3,498 10.2 % 2014 326,536,944 22,496,070 304,040,874 3.8 3,504 11.5 2013 311,487,028 27,276,680 284,210,348 3.3 3,297 10.2 2012 306,781,373 29,186,040 277,595,333 3.3 3,214 10.4 2011 159,951,698 30,964,312 128,987,386 1.5 1,490 4.3 2010 169,164,240 34,236,633 134,927,607 1.6 1,541 4.8 2009 169,491,760 37,959,422 131,532,338 1.4 1,510 4.6 2008 176,784,300 41,729,496 135,054,805 1.5 1,550 5.0 2007 191,206,846 45,447,640 145,759,206 1.6 1,664 5.5 2006 192,729,379 48,754,989 143,974,391 1.6 1,636 5.0

Data Source: Audited Financial Statements U.S. Census Bureau Assessors Department MS-1 Report

Notes: (1) The State of NH has suspended the State Aid Grant (SAG) program relating to debt issued after 7/1/2008 for business type activities

A-175 City of Nashua, New Hampshire

Computation of Overlapping Debt Hillsborough County Long Term Debt Last Ten Fiscal Years

Net General Obligation Percentage Amount End of Debt Applicable to Applicable to Fiscal Year Outstanding(1) Government(2) Government

2015 - 21.598% - 2014 - 21.128% - 2013 - 21.356% - 2012 - 21.694% - 2011 - 21.348% - 2010 - 20.948% - 2009 - 20.920% - 2008 - 21.372% - 2007 - 21.110% - 2006 - 21.232% -

Data Sources: (1) Hillsborough County Audited Financial Statements at fiscal year end including interest, does not include leases. (2) NH Department of Revenue Administration.

A-176 City of Nashua, New Hampshire

Demographic Statistics Last Ten Fiscal Years

City(3) Unemployment Rates Fiscal Median Family Personal Per Capita Labor State Year Population(1) Income(2) Income Income(2) Unemployed Force City(3) of NH(3) US(3)

2015 87,029 $ 77,923 $ 2,981,613,540 $ 34,260 2,470 48,850 5.1 % 4.3 % 6.2 % 2014 86,766 77,441 2,639,074,656 30,416 2,950 50,140 5.9 5.3 7.4 2013 86,211 81,905 2,794,184,721 32,411 3,030 50,030 6.1 5.5 8.1 2012 86,366 76,612 2,671,904,942 30,937 3,040 49,370 6.1 5.5 8.9 2011 86,543 75,999 2,993,262,741 34,587 3,340 49,750 6.7 6.2 9.6 2010 87,566 74,807 2,789,940,326 31,861 3,430 49,380 7.0 6.2 9.3 2009 87,111 82,489 2,870,133,228 32,948 2,020 49,310 4.1 3.9 5.8 2008 87,150 75,413 2,702,608,650 31,011 1,870 49,500 3.8 3.5 4.6 2007 87,605 76,345 2,628,588,025 30,005 1,990 49,390 4.0 3.5 4.6 2006 87,986 70,419 2,531,269,234 28,769 2,010 49,280 4.1 3.6 5.1

Data Sources: (1) Population Estimates - New Hampshire Office of Energy and Planning (2004-2014 calendar year data), http://www.nh.gov/oep/data-center/population-estimates.htm (2) U.S. Census Bureau, American Community Survey (2005-2014 calendar year data), DP03, 1-year estimates, http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t (3) New Hampshire Employment Security, Economic & Labor Market Information Bureau (2004-2014 calendar year data), www.nhes.nh.gov/elmi/statistics/laus-arch.htm

A-177 City of Nashua, New Hampshire

Principal Employers Current Year and Ten Years Ago

2015 2006 Percentage of Percentage of Total City Total City Employer Type of Business Employee Rank Employment Employee Rank Employment BAE Systems(1) Aerospace/Electronics 3,100 1 6.35 % 2,850 1 5.78 % Southern New Hampshire Medical Center Hospital 2,217 2 4.54 1,921 3 3.90 Nashua School District Schools 1,679 3 3.44 2,001 2 4.06 St. Joseph Hospital and Trauma Center Hospital 1,675 4 3.43 1,893 4 3.84 City of Nashua City Government 808 5 1.65 794 6 1.61 Oracle Corporation Software 620 6 1.27 418 10 0.85 Federal Aviation Administration Air Traffic Control 490 7 1.00 500 8 1.01 Amphenol(2) Backplane Connection Systems 439 8 0.90 580 7 1.18 Benchmark Electronics Hi-tech manufacturing 400 9 0.82 - - - US Post Office Postal Service 385 10 0.79 486 9 0.99 Hewlett Packard(3) Computer Software/Hardware - - - 1,500 5 3.04

Total Principal Employers 11,813 24.18 % 12,943 26.26 %

Total City Employment 48,850 49,280

Data Source: Various Human Resources Departments; NHES Top Employer List

Notes: (1) Previously identified as Sanders, a Lockeed Martin Company. (2) Previously identified as Teradyne Connection Systems Inc. (TER). (3) Previously identified as Digital Equipment Corporation; Compaq Computer Corporation.

A-178 City of Nashua, New Hampshire

Operating Indicators by Function Last Ten Fiscal Years

Function 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Finance Taxable property parcels assessed 27,151 27,446 27,094 27,968 27,983 27,992 28,010 28,072 28,082 28,173 Property transfers processed(1) 2,200 2,379 1,918 2,087 2,351 1,946 1,943 2,192 2,310 2,288 Motor vehicles registered 90,503 87,985 87,999 82,324 85,379 83,606 87,575 87,932 89,364 90,924 Planning - Inspection Division Building inspections 8,405 7837 6,475 6,057 5,300 6,571 6,329 6,442 7,571 8,362 Estimated construction value in millions 125 164 84 54.7 123 101 61 98 112 88 Police(2) Physical arrests 4,519 4,111 4,411 4,157 4,335 4,731 4,616 4,511 4,473 3,247 Traffic violations 23,473 18,391 31,727 32,275 32,786 35,518 31,596 31,616 28,430 19,244 Parking violations 34,257 28,170 25,509 24,612 24,217 22,528 21,799 20,899 22,205 18,565 Fire and Rescue(3) Calls answered 7,801 7,691 7,744 8,312 9,318 9,847 10,662 10,724 10,855 30,061 Emergency responses 3,777 3,940 4,019 4,053 4,503 5,678 5,914 6,052 5,985 8,927 Fires extinguished 300 317 370 450 540 648 778 934 1,121 1,983 Number of inspections conducted 66 104 149 519 1,612 1,634 1,848 2,050 2,103 1,556 Emergency medical responses 2,875 3,025 3,086 3,974 4,503 4,781 5,100 5,079 5,338 4,186 Public Works Refuse collected (tons)(4) 54,475 59,325 58,315 57,111 53,762 50,534 50,456 52,440 52,098 51,230 Recycling (tons)(5) 11,200 9,106 12,301 17,884 17,490 11,451 12,578 12,122 12,103 12,375 Streets resurfaced (miles) 7.9 10.2 4.2 3.3 5.9 5.0 9.9 7.7 4.5 7.8 Potholes repaired 717 1,024 1,178 1,077 1,385 1,412 853 945 1,310 1,151 Wastewater System Daily average treatment (millions of gallons) 14.2 12.1 11.7 12.2 11.9 10.3 11.2 10.8 10.5 10.9 Public Library Items in collection 243,724 240,496 263,974 269,427 262,929 263,462 254,104 243,281 230,321 201,678 Items circulated 692,939 731,274 798,704 810,573 817,953 769,606 709,322 640,353 599,881 519,346 Public Health-Environmental Health Food service establishment inspections * * 1,506 1,357 1,619 1,565 1,395 1,732 1,692 1,145 Residential inspections * * 117 26 31 17 248 115 390 363 Pools/spas sampled * * 254 114 147 141 81 108 84 46 Public Health-Welfare/Assistance General assistance 1,281,992 1,044,358 1,281,992 1,192,483 857,843 693,291 602,989 620,190 605,677 559,665 Number of contacts 12,066 11,268 11,410 13,257 11,440 11,373 10,146 9,181 8,490 8,115 Applicants 5,206 2,232 2,137 1,329 2,160 2,084 1,857 1,695 1,540 1,371 Interviews 5,206 5,182 4,336 4,839 3,906 3,572 3,111 2,888 2,673 2,362 Assisted cases 3,693 3,427 2,937 3,371 2,600 2,260 1,996 1,868 1,641 1,385 Public Health-Community Health/Clinic Services Childhood immunizations * * 499 418 1,401 507 1,971 2,116 1,741 1,900 Adult influenza vaccinations * * 1,365 1,770 1,917 1,407 768 1,370 1,523 978 Outreach clients * * 326 523 503 502 133 182 182 262 Clinic counseling and testing * * 1,091 1,045 910 922 101 58 112 312

Data Source: Various city departments

Notes: (1) Based on an estimate per the City of Nashua, Assessing Department. (2) Police data is based on a calendar year. The current year's data is for January through September 22, 2015. (3) In FY2015, Nashua Fire Rescue began counting all calls for service, prior year numbers counted only "red light" incidents. (4) Refuse consists of residential, commercial, and industrial municipal solid waste (MSW) by calendar year; 2005 data is year-to-date through October. (5) Recycling consists of mixed paper, mixed containers, scrap metal, soft yard waste, auto tires and batteries by calendar year; 2005 data is year-to-date through October. * Data unavailable for these years.

A-179 City of Nashua, New Hampshire

Capital Asset Statistics by Function Last Ten Fiscal Years

Function 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Police Number of stations 1111111111 Number of patrol units(1) 23 23 23 23 25 25 25 25 25 25 Fire and Rescue Number of stations 7777777777 Number of ladder trucks 4444444444 Number of pumpers 8888888888 Number of support vehicles 25 25 25 25 25 25 25 25 25 25 Public Works Miles of streets 322 322 323 343 344 344 344 344 344 344 Miles of storm drains 130.8 131.0 131.1 133.0 133.6 133.9 135.41 135.41 135.00 135.00 Number of traffic lights 84 85 87 92 92 92 92 92 91 94 Number of bridges 19 19 19 19 19 19 19 19 19 19 Culture and Recreation Number of Parks 49 49 50 51 52 52 53 53 53 53 Park acreage 632 632 688 930 931 931 932 932 932 1,200 Playgrounds 24 24 24 24 24 24 25 25 25 25 Baseball fields 27 27 27 27 27 27 27 27 27 27 Softball fields 12 12 12 12 12 12 12 12 12 12 Football fields 3333333112 Soccer fields 14 14 14 14 14 14 14 14 14 14 Swimming pools 3333333333 Tennis courts 17 17 17 17 17 17 17 17 17 15 Sewage System Miles of sanitary sewers 285.3 285.7 285.7 285.7 285.7 285.7 285.7 285.7 285.7 285.7 Number of treatment plants 1111111111 Number of service connections 22,408 22,669 22,782 22,955 22,993 23,074 23,107 23,117 23,246 23,311 Average Daily Flow (MGD) 14.2 12.1 11.7 12.2 11.9 10.3 11.2 10.8 10.5 10.9 Maximum daily capacity of treatment (MGD) dry weather 16.0 16.0 16.0 16.0 16.0 16.0 16.0 16.0 16.0 16.0 Maximum daily capacity of treatment (MGD) wet weather 50.0 50.0 50.0 110.0 110.0 110.0 110.0 110.0 110.0 110.0 Education Elementary School Buildings 12 12 12 12 12 12 12 12 12 12 Middle School Buildings 4444433333 High School Buildings 2222222222

Data Source: Various city departments

Notes: -1 Updated FY2006-FY2015 based on description of "Patrol" as sourced from: Gauthier, Stephen J. "Appendix E, Illustrative Accounts, Classifications, and Descriptions." Governmental Accounting, Auditing, and Financial Reporting. Chicago, IL: Government Finance Officers Association, 2005. 657. Print.

A-180 City of Nashua, New Hampshire

City Government Employees by Division - Full Time Equivalents Last Ten Fiscal Years

Division 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

General Government Division Mayor's Office 5.0 5.0 5.0 4.0 6.0 6.0 6.0 6.0 5.8 5.0 Legal 4.9 4.9 4.9 5.0 4.9 5.0 5.0 5.0 5.0 5.0 Board of Aldermen 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.7 Citistat(1) - - - 2.0 2.0 2.0 2.0 2.0 2.0 - Employee Benefits - - - 1.8 2.8 3.2 3.2 3.2 3.2 3.2 Office of the City Clerk 7.0 7.0 7.0 7.0 7.0 6.0 6.0 6.0 6.0 6.0 Human Resources 3.9 3.9 3.9 4.1 4.1 3.7 3.7 3.4 3.5 3.4 Government & Education Access Channels(2) - 1.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Total General Government 22.6 23.6 24.6 27.6 30.6 29.6 29.6 29.3 29.2 26.2

Financial Services Division Finance 30.6 31.4 31.4 31.3 31.0 32.0 32.0 30.4 30.5 32.7 Risk Management 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 Purchasing 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 Building Maintenance 5.6 5.6 4.6 4.6 4.6 4.6 4.6 4.6 4.6 4.6 Hunt Building - - - 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Assessing 11.0 11.0 10.0 10.0 10.0 10.0 9.0 10.0 10.0 10.0 Total Financial Services 56.2 57.0 55.0 55.4 55.1 56.1 55.1 54.5 54.7 56.8

Administrative Services Division(3) 1.9 1.9 1.9 ------

Information Technology Division(4) 9.0 13.0 12.0 13.0 12.0 13.0 13.0 13.0 13.0 13.0

Public Safety Division Police 244.0 252.0 252.1 252.6 240.9 245.9 245.9 245.9 247.7 247.7 Fire 176.0 174.0 176.0 176.0 175.0 175.0 175.0 175.0 176.0 176.0 Emergency Management ------1.0 1.0 1.0 1.0 Communications - - - 1.8 1.8 1.8 1.8 1.8 1.8 1.8 Total Public Safety 420.0 426.0 428.1 430.4 417.7 422.7 423.7 423.7 426.5 426.5

Public Health & Community Services Division Community Services 7.8 7.8 8.0 8.3 6.9 6.1 6.1 7.2 7.2 7.4 Community Health 8.6 10.4 10.3 10.3 9.7 8.9 8.9 8.3 8.3 8.0 Environmental Health 6.0 7.0 7.0 7.0 6.0 6.0 6.0 6.0 6.0 6.0 Welfare 6.9 7.9 7.9 7.4 7.4 7.0 7.0 7.0 7.0 7.0 Total Health & Comm. Services 29.3 33.1 33.2 32.9 29.9 28.0 28.0 28.5 28.5 28.4

Public Works Division Admin/Engineering 16.0 17.0 14.0 14.0 14.0 14.0 14.0 15.3 13.6 13.6 Parks & Recreation 29.0 27.0 28.0 36.0 28.0 27.0 27.0 27.0 25.0 25.0 Streets 56.0 59.5 58.0 57.5 56.5 55.5 55.5 59.8 60.8 60.7 Traffic(5) 10.0 10.0 10.0 10.0 9.5 9.5 9.5 - - - Parking 1.0 1.0 1.0 1.0 2.5 3.1 3.1 3.1 3.1 3.1 Wastewater 35.0 31.0 35.0 35.0 35.0 35.0 35.0 37.0 40.5 40.3 Solid Waste 33.0 31.5 31.5 31.5 30.5 30.0 30.0 30.0 32.3 33.5 Total Public Works 180.0 177.0 177.5 185.0 176.0 174.1 174.1 172.1 175.2 176.2

Community Development Division Community Development 2.3 2.3 2.0 2.0 2.0 2.2 2.2 2.2 2.5 2.5 Planning 7.6 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 Office of Economic Development 1.4 1.4 1.4 1.5 1.5 1.5 1.5 2.0 2.0 2.0 Urban Programs 6.0 7.0 11.0 11.0 10.0 3.5 3.5 6.0 6.8 6.9 Building 10.0 10.0 10.0 9.3 9.3 8.2 8.2 8.2 7.8 7.8 Code Enforcement 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 Total Community Development 30.3 31.7 35.4 34.8 33.8 26.4 26.4 29.4 30.0 30.2

Public Services Edgewood Cemetery 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 Woodlawn Cemetery 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 Total Public Services 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0

Library Department 45.8 45.8 45.8 45.2 44.5 41.5 41.5 43.0 43.0 42.9

School Department Teachers 821.0 824.0 830.0 834.0 800.0 793.0 798.0 797.3 801.7 803.9 Other staff 856.0 850.0 862.0 817.2 811.0 903.6 864.2 865.7 870.3 875.4 Total School Department 1,693.0 1,674.0 1,692.0 1,651.2 1,611.0 1,696.6 1,662.2 1,663.0 1,672.0 1,679.3

Total All Functions 2,496.1 2,491.1 2,513.5 2,483.5 2,418.5 2,495.9 2,461.5 2,464.4 2,480.0 2,487.4

Percent of Total General Government Division 0.9% 0.9% 1.0% 1.1% 1.3% 1.2% 1.2% 1.2% 1.2% 1.1% Financial Services Division 2.3% 2.3% 2.2% 2.2% 2.3% 2.2% 2.2% 2.2% 2.2% 2.3% Administrative Services Division 0.1% 0.1% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Information Technology Division 0.4% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% Public Safety Division 16.8% 17.1% 17.0% 17.3% 17.3% 16.9% 17.2% 17.2% 17.2% 17.1% Public Health & Community Services Division 1.2% 1.3% 1.3% 1.3% 1.2% 1.1% 1.1% 1.2% 1.1% 1.1% Public Works Division 7.2% 7.1% 7.1% 7.4% 7.3% 7.0% 7.1% 7.0% 7.1% 7.1% Community Development Division 1.2% 1.3% 1.4% 1.4% 1.4% 1.1% 1.1% 1.2% 1.2% 1.2% Public Services Division 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% Library Department 1.8% 1.8% 1.8% 1.8% 1.8% 1.7% 1.7% 1.7% 1.7% 1.7% School Department 67.8% 67.2% 67.3% 66.5% 66.6% 68.0% 67.5% 67.5% 67.4% 67.5% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Data Source City of Nashua Budget. Full time equivalent based on 40 hours per week.

Notes: (1) CitiStat was dissolved in FY2015 with departmental functions reassigned to the Financial Services Division. (2) New addition to FY2015 CAFR. (3) The Administrative Services Division was dissolved in FY2009 with departmental functions reassigned to the Financial Services and General Government Divisions. (4) Information Technology was established as a new Division during FY2007. (5) Traffic Department was merged with the Street Department in FY2013.

A-181 City of Nashua, New Hampshire

Student/Teacher Statistical Information Last Ten Fiscal Years

Fiscal Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Student Enrollment:

Elementary 5,469 5,378 5,486 5,592 5,632 5,633 5,587 5,644 5,433 5,335 Middle School 3,240 3,076 2,768 2,632 2,575 2,646 2,557 2,508 2,425 2,435 High School 4,274 4,258 4,261 4,122 4,178 3,887 3,752 3,750 3,642 3,598 Total 12,983 12,712 12,515 12,346 12,385 12,166 11,896 11,902 11,500 11,368

Teacher FTEs:(1)

Elementary 339 340 345 331 317 317 327 326 329 344 Middle School 214 214 213 212 200 193 193 193 194 193 High School 230 230 232 259 250 250 243 243 244 215 District-wide 38 40 40 32 33 33 35 35 35 51 Total 821 824 830 834 800 793 798 797 802 803

Data Source: Nashua School District

Notes: (1) The distribution among teachers by grade level is an estimate.

A-182 City of Nashua, New Hampshire

School Department Operating Statistics Last Ten Fiscal Years

Pupil/ Fiscal Operating Debt Total Cost per Percentage Teaching Teacher Year Budget(1) Service Budget Enrollment Pupil Change Staff Ratio

20152 $ 132,760,058 $ 11,776,596 $ 144,536,654 11,368 12,714$ 2.9 % 804 14.1 2014(2) 129,733,916 12,401,961 142,135,877 11,500 12,360 35.3 802 14.3 20132 95,871,330 13,090,777 108,718,824 11,902 9,135 1.0 797 14.9 20122 94,478,076 13,274,475 107,752,551 11,896 9,041 2.6 798 14.9 20112 93,425,591 13,729,516 107,155,107 12,166 8,808 6.9 793 15.3 20102 87,630,820 14,384,073 102,014,893 12,385 8,237 0.8 800 15.5 20092 86,025,543 14,818,757 100,844,300 12,346 8,168 3.4 834 14.8 20082 83,554,436 15,273,288 98,827,724 12,515 7,897 3.3 830 15.1 20072 80,791,428 16,377,196 97,168,624 12,712 7,644 -0.6 824 15.4 20062 83,101,595 16,776,199 99,877,794 12,983 7,693 4.3 821 15.8

Data Source: Budget information from City Adopted Budget and enrollment/teaching staff information provided by the School Department.

Notes: (1) Budget is for the General Fund only and excludes special revenue funds and grants (2) Beginning in FY2014, employee health and pension costs previously budgeted in General Government are allocated to the School operating budget.

A-183 ALLY LE PROPOSED FORM OF LEGAL OPINION APPENDIX B

(Date of Delivery)

David G. Fredette, Treasurer City of Nashua Nashua, New Hampshire

$16,920,000 City of Nashua, New Hampshire General Obligation Bonds Dated February 23, 2016

We have acted as bond counsel to the City of Nashua, New Hampshire (the “City”) in connection with the issuance by the City of the above-referenced bonds (the “Bonds”). In such capacity, we have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion.

As to questions of fact material to our opinion we have relied upon representations and covenants of the City contained in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation.

Based on our examination, we are of the opinion, under existing law, as follows:

1. The Bonds are valid and binding general obligations of the City and, except to the extent they are paid from other sources, the principal of and interest on the Bonds are payable from taxes which may be levied upon all taxable property in the City without limitation as to rate or amount; provided that, to the extent the City has established any development districts pursuant to Chapter 162-K of the New Hampshire Revised Statutes Annotated, taxes levied on certain taxable property located within any such district may be restricted and unavailable to pay the principal of and interest on the Bonds.

2. Interest on the Bonds is excluded from the gross income of the owners of the Bonds for federal income tax purposes. In addition, interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes. However, such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. In rendering the opinions set forth in this paragraph, we have assumed compliance by the City with all requirements of the Internal Revenue Code of 1986 that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, and continue to be, excluded from gross income for federal income tax purposes. The City has covenanted to comply with all such requirements. Failure by the City to comply with certain

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of such requirements may cause interest on the Bonds to become included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. We express no opinion regarding any other federal tax consequences arising with respect to the Bonds.

3. The interest on the Bonds is exempt from the New Hampshire personal income tax on interest and dividends. We express no opinion regarding any other New Hampshire tax consequences arising with respect to the Bonds or any tax consequences arising with respect to the Bonds under the laws of any state other than New Hampshire.

This opinion is expressed as of the date hereof, and we neither assume nor undertake any obligation to update, revise, supplement or restate this opinion to reflect any action taken or omitted, or any facts or circumstances or changes in law or in the interpretation thereof, that may hereafter arise or occur, or for any other reason.

The rights of the holders of the Bonds and the enforceability of the Bonds may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted to the extent constitutionally applicable, and their enforcement may also be subject to the exercise of judicial discretion in appropriate cases.

LOCKE LORD LLP

AM 57015847.1

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APPENDIX C

PROPOSED FORM OF CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the City of Nashua, New Hampshire (the “Issuer”) in connection with the issuance of its $16,920,000 General Obligation Bonds dated February 23, 2016 (the “Bonds”). The Issuer covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the Owners of the Bonds and in order to assist the Participating Underwriters in complying with the Rule.

SECTION 2. Definitions. For purposes of this Disclosure Certificate the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.

“MSRB” shall mean the Municipal Securities Rulemaking Board as established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934, or any successor thereto or to the functions of the MSRB contemplated by this Disclosure Certificate. Filing information relating to the MSRB is set forth in Exhibit A attached hereto.

“Obligated Person” shall mean the Issuer.

“Owners of the Bonds” shall mean the registered owners, including beneficial owners, of the Bonds.

“Participating Underwriter” shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds.

“Rule” shall mean Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

SECTION 3. Provision of Annual Reports.

(a) The Issuer shall, not later than 270 days after the end of each fiscal year, provide to the MSRB an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the Issuer may be submitted when available separately from the balance of the Annual Report.

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(b) If the Issuer is unable to provide to the MSRB an Annual Report by the date required in subsection (a), the Issuer shall send a notice to the MSRB, in substantially the form attached as Exhibit B.

SECTION 4. Content of Annual Reports. The Issuer's Annual Report shall contain or incorporate by reference the following:

(a) quantitative information for the preceding fiscal year of the type presented in the Issuer's Official Statement dated February 11, 2016 relating to the Bonds regarding (i) the revenues and expenditures of the Issuer relating to its operating budget, (ii) capital expenditures, (iii) fund balances, (iv) property tax information, (v) outstanding indebtedness and overlapping debt of the Issuer, (vi) pension obligations of the Issuer, and (vii) other post-employment benefits liability of the Issuer, and

(b) the most recently available audited financial statements of the Issuer, prepared in accordance with generally accepted accounting principles (except for the omission, if any, of a statement of fixed assets). If audited financial statements for the preceding fiscal year are not available when the Annual Report is submitted, the Annual Report will include unaudited financial statements for the preceding fiscal year and audited financial statements for such fiscal year shall be submitted when available.

Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the Issuer or related public entities, which (i) are available to the public on the MSRB internet website or (ii) have been filed with the Securities and Exchange Commission. The Issuer shall clearly identify each such other document so incorporated by reference.

SECTION 5. Reporting of Significant Events.

(a) The Issuer shall give notice, in accordance with the provisions of this Section 5, of the occurrence of any of the following events with respect to the Bonds:

1. Principal and interest payment delinquencies.

2. Non-payment related defaults, if material.

3. Unscheduled draws on debt service reserves reflecting financial difficulties.

4. Unscheduled draws on credit enhancements reflecting financial difficulties.

5. Substitution of credit or liquidity providers, or their failure to perform.

6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds.

7. Modifications to rights of the Owners of the Bonds, if material.

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8. Bond calls, if material, and tender offers.

9. Defeasances.

10. Release, substitution or sale of property securing repayment of the Bonds, if material.

11. Rating changes.

12. Bankruptcy, insolvency, receivership or similar event of the Obligated Person.*

13. The consummation of a merger, consolidation, or acquisition involving an Obligated Person or the sale of all or substantially all of the assets of the Obligated Person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material.

14. Appointment of a successor or additional trustee or the change of name of a trustee, if material.

(b) Upon the occurrence of a Listed Event, the Issuer shall, in a timely manner not in excess of ten (10) business days after the occurrence of the event, file a notice of such occurrence with the MSRB.

SECTION 6. Transmission of Information and Notices. Unless otherwise required by law, all notices, documents and information provided to the MSRB shall be provided in electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.

SECTION 7. Termination of Reporting Obligation. The Issuer's obligations under this Disclosure Certificate shall terminate upon the prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5(b).

SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Issuer may amend this Disclosure Certificate and any provision of this Disclosure Certificate may be waived if such amendment or waiver is permitted by the Rule, as evidenced by an opinion of counsel expert in federal securities law (which may include bond counsel to the Issuer), to the effect that such amendment or waiver would not cause the

* As noted in the Rule, this event is considered to occur when any of the following occur: (i) the appointment of a receiver, fiscal agent or similar officer for the Obligated Person in a proceeding under the U.S. Bankruptcy Code or in any proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Obligated Person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or (ii) the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Obligated Person.

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Disclosure Certificate to violate the Rule. The first Annual Report filed after enactment of any amendment to or waiver of this Disclosure Certificate shall explain, in narrative form, the reasons for the amendment or waiver and the impact of the change in the type of information being provided in the Annual Report.

If the amendment provides for a change in the accounting principles to be followed in preparing financial statements, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information in order to provide information to investors to enable them to evaluate the ability of the Issuer to meet its obligations. To the extent reasonably feasible, the comparison shall also be quantitative. A notice of the change in the accounting principles shall be sent to the MSRB.

SECTION 9. Default. In the event of a failure of the Issuer to comply with any provision of this Disclosure Certificate any Owner of the Bonds may seek a court order for specific performance by the Issuer of its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not constitute a default with respect to the Bonds, and the sole remedy under this Disclosure Certificate in the event of any failure of the Issuer to comply with this Disclosure Certificate shall be an action for specific performance of the Issuer's obligations hereunder and not for money damages in any amount.

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SECTION 10. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Owners of the Bonds from time to time, and shall create no rights in any other person or entity.

Date: February 23, 2016 CITY OF NASHUA, NEW HAMPSHIRE

By______Treasurer

______Mayor

[EXHIBIT A: Filing Information for the MSRB] [EXHIBIT B: Form of Notice of Failure to File Annual Report]

AM 57015894.1

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