FACTORING IN THE WIND CHILL
As if last week’s temperatures were not frigid enough, news accounts of the city of Nashua’s financial distress were absolutely chilling.
According to The Telegraph and The Union Leader (Jan. 13, 2004), Nashua’s anticipated budget deficit of nearly $15 million may lead to a double-digit increase in the tax rate, employee layoffs, cutbacks in services, postponement of needed capital projects, and sales of city assets.
This is not the kind of news one expects to see when just two months ago the city, amidst much fanfare at a City Hall press conference, proposed spending $121 million in the largest financial commitment in its history.
Yet the news reports went on to say that despite the looming financial problems, the city “would continue to pursue the acquisition” of Pennichuck Corporation, and that water ratepayers, not taxpayers, “will eventually pick up . . . research and legal bills associated with the attempted takeover.”
In our opinion, that statement is presumptuous, financially naive and unrealistic. Here’s why:
It presumes the city will prevail in convincing a court that taking Pennichuck’s assets by eminent domain is both legal and in the “public good” (see our recent ad #4, “Nashua’s Condemnation . . . Uncertain” at www.pennichuck.com). If the city does not prevail, or if the city ultimately decides not to proceed because the cost of acquisition is too high, then taxpayers, not ratepayers, would have to pay the legal and consulting expenses, which could reach $1 million or more.
It presumes that ratepayers and taxpayers are different people, a distinction that is lost on most citizens since they will end up paying whether the cost is on their city tax bill or their city water bill.
It presumes the city can make unilateral decisions now about costs that affect water rates in the future. The citizens of Nashua and the surrounding towns who have been working diligently to form a regional water authority may have something of their own to say about these matters when they ultimately have a chance.
It fails to recognize that if the city takes Pennichuck’s assets by eminent domain, then the city will lose forever more than $1 million in annual tax revenues. And, one can only speculate what removing one of the largest private taxpayers from the city’s tax roles will mean for the state school aid formula. Nashua taxpayers already know what it can mean for them – more taxes and fewer services.
It implies that the city is serious about pursuing the eminent domain process, is actively working on the acquisition of Pennichuck, and actually has a plan for funding the effort and the ultimate acquisition. From Pennichuck’s perspective, nothing could be farther from reality. To date, Pennichuck has not attended a single meeting where it has seen evidence that the city has even considered engaging the professional advisors it will need to accomplish such a transaction. Moreover, the city has repeatedly refused even to consider the national trend of outsourcing, including model public-private partnerships and contract operations, as a way of cutting municipal costs and assuring technical capabilities. In view of its financial problems, one would think the city would be eager to discover how the rest of the country is dealing with fiscal and operational issues.
“Frozen” is how we would characterize the city’s inactivity when it comes to discussions with Pennichuck about the future of water service. To its own detriment, the city’s stalling tactics are actually inviting additional financial liabilities.
It’s as clear as a cold winter’s day that the city of Nashua is ill-prepared to acquire Pennichuck now. Neither can it afford to keep the water ownership issue in perpetual limbo. Either way will expose the city to even greater financial peril. Unfortunately, there’s no shelter to be found in doing nothing.
Pennichuck Corporation
January 22, 2004
