Nashua Performing Arts Center - The New Markets Tax Credit Transaction that Resulted in the Misuse of Public Funds

Executive Summary

This investigative report has been written by two Nashua residents and taxpayers, Laura Colquhoun and Laurie Ortolano. Mrs. Colquhoun has 47 years in private company management, accounting, financial records, and bookkeeping. Mrs. Ortolano has and engineering degree and has successfully litigated, on a pro se basis, against the City of Nashua concerning its non-compliance with the NH State Constitution and the NH State Right to Know laws. She has defeated the City in rulings issued by the NH Superior Court South, the New Hampshire Supreme Court, and the NH Board of Tax and Land Appeals.

This Investigative Report documents, in part, information that confirms:

1. The New Market Tax Credit (NMTC) was an expensive and complex method for obtaining the shortfall of private funds that City Officials and the Performing Arts Center supporters anticipated but ultimately failed to raise. The errant application of this Financial scheme resulted in a lack of transparency, financial fraud and the misuse of public money.

2. Citizens were initially told that private money raised would not result in costs to the taxpayers. However, the private money raised through the NMTC transaction, cost the taxpayers millions. It is our goal to create a means to verify the City’s eligibility to participate in these complex transactions and create accountability of public funds if public-private partnerships are going to be used for municipal projects.

3. The transfer of the bond proceeds, the creation of interest bearing loans from the bonds (one loan that failed to be recorded on the City books), and a lease agreement for the facility was done in an elusive and deceptive manner. Based on material evidence, it appears that these actions were illegal and in violation of both State and Federal statutes and constitute the misuse of public funds and potential fraud.

4. Use of the NMTC resulted in the City creating three new corporations, but only two of them were authorized by the Board of Alderman. The two Board created corporations were to be transparent public, non-profit entities. However, the City wrote the bylaws for these two public corporations as though they were private entities, circumventing State and Federal laws. The one that was not authorized by the Board of Aldermen, (NPAC Corp.) is actually a FOR PROFIT COMPANY where the $21 million of public bond proceeds were funneled into, leaving questions to the legality of this transaction for a public municipal project.

5. City Officials execution of the NMTC scheme has created a mechanism to circumvent the NH State Constitution and the NH State Right to Know Law and Federal laws under 26 U.S Code § 45D. This transaction scheme permitted concealing cost overruns associated with the Arts Center project that would be highly visible and unflattering with respect to the City's ability to professionally execute a project of this scope.

6. The NMTC structure completely voided all assurances made by the City Officials that the public funds would be used for a public project and it would be a public facility.

7. Fundamentally, the use of a NMTC, in the context of the Nashua Performing Arts Center, is like putting a square peg in a round hole. Compliance gaps with respect to NMTC program reporting have already been identified and there are likely more; however, it may be years before these will be identified since City Officials continue to doggedly hold to its strategy of refusing and delaying responses to requests, forcing litigation for responses.

8. Also, this report is intended to provide taxpayers with an understanding of what is going on with their tax dollars. Nashua Officials are on an accelerated expansion for downtown development. This is a nonpartisan issue that requires taxpayers hold City Officials accountable for ensuring public spending is done as cost effectively as possible and in compliance with State and Federal Laws.

9. Finally, this report is being submitted to appropriate State and Federal Regulators for review and action. The use of a NMTC for a public project where the source of ALL project funds originated with a non-taxpaying entity (the City of Nashua), despite being moved through a set of public and private companies, appears contrary to concepts outlined in the US Department of Treasury’s NMTC Program’s overview:

“The NMTC Program attracts investment capital to low-income communities by permitting individual and corporate investors to receive a tax credit against their Federal income tax return in exchange for making equity investments in specialized financial institutions called Community Development Entities (CDE’s)”

The City of Nashua does not meet the eligibility criteria as an investor for a NMTC because it does not pay Federal income tax, and therefore cannot earn tax credits which then can be sold. The structure which was put in place in essence creates the illusion of a Corporate Investor contributing investment capital, but in fact, the source of funds and the ultimate guarantor of all loans and obligations is the City of Nashua and its taxpayers.

This report is based on analysis of certain documents that the City was willing to produce once litigation began, concerning the NMTC transaction and communications discussing it.

History

In 2017, the Nashua Board of Aldermen (BOA) placed a non-binding resolution on the ballot to gauge the public’s support for constructing and operating a Performing Arts Center in downtown Nashua. The referendum passed by only 50.4%. Five out of nine wards voted against it. Ward 3, the location for the Center, carried the greatest support for the project.

Bond Approval requires a 2/3 vote by the Board of Aldermen. So, ten out of the fifteen aldermen are required to approve any bonding projects.

The Board of Aldermen formed the Performing Arts Steering (PAC) Committee and began the work to find a site, select an architect, and a construction contractor. The group was most active in 2018 and 2019.

The PAC Steering Committee selected ICON Architect to design the building and Harvey Construction to build the facility. The initial plans were to renovate the Alec’s Shoe Store building but it was quickly determined that the building would be a complete teardown and this would be a ground-up new construction project.

On February 13, 2018, the Board of Aldermen approved R-18-002 to purchase Alec’s Shoe store for $2,000,000 from the bond proceeds authorized in R-18-001. In 2018, the City of Nashua began the work to create the design for the Nashua Performing Arts Center.

How did the City fund this project? – Bond Resolutions and Private Money

The PAC Steering Committee initially estimated that the Center could be constructed for $15.5 million.

On Jan 22, 2018, The Board of Alderman held a public hearing to approve a resolution R-18-001 for $15.5 Million for the funding of the Performing Arts Center. In addition to the $15.5 million bonding, this resolution included the condition that $4 million in private money would be raised within two years. The private funds were specified to be used for the Center’s operating costs, not the renovations or construction.

On November 22, 2018, the Board of Alderman held a public hearing to approve R-18-092 to amend R-18-001 to include adding $2.5 million in New Markets Tax Credit equity to the existing $1.5 million of private money (Nashua Community Arts) because the City was having difficulty in raising the $4 million locally. With this change, this resolution permitted the private money to be used for construction.

Some BOA members were concerned that City Officials did not properly explain the NMTC transaction when the BOA approved R-18-092 to add the NMTC program to the Performing Arts Center funding. On December 20, 2018, a Special Meeting of the BOA was held with City hired tax consultant Niel Cannon available to speak with the Board. The Board watched a 11 minutes YouTube video which provided an overview of the NMTC scheme.

https://www.youtube.com/watch?v=5UDH9iS4Its

This video emphasizes transparency and education and highlights the importance that all the facts and information go before the leaders to make an informed decision. This did not happen in Nashua. The video also explained 3 reasons to have legal separation; [1] Must be owned by a partnership or Corporation, [2] Control of that new company (NPAC Corp.) has to be separate from the City but can remain under control of your community leaders [3] this separate entity (NPAC Corp.) entity narrows focus of compliance responsibilities.

Who in the City of Nashua maintained control of the project and why were meetings and financial records not made public?

On February 16, 2020, the Board of Aldermen held a public hearing to approve R-20-001 for a second amendment to R-18-001 to extend the deadline, adding an additional year and a half, for raising the $4 million in private funds.

On September 28, 2020, the Board of Aldermen held a public hearing to approve R-20-071 to add an additional $5.5 million in public funds to the construction cost of the project.

By the Fall of 2020, the total bonded cost of the project was $21 Million, exceeding the original bonding cost by $5.5 Million. The total project cost was $25 million. At this point, the construction and ownership of the Nashua Performing Arts Center was a public project funded with taxpayer dollars with public accountability in place.

The plan to build the Arts Center became complicated and questionably compromised in a legal manner by the City’s acceptance of a Federal New Markets Tax Credit.

What is a Federal New Markets Tax Credit Program?

The New Markets Tax Credit Program incentivizes community development and economic growth through the use of tax credits that attract private investment to distressed communities. These tax credits are specific to private investments not public tax dollars as were used in Nashua to fund this project. After a number of reviews of this project, we could not find any information that this program could be used for a project paid for with public money or tax dollars.

In 2018, the City announced to the PAC Steering Committee that they intended to pursue a NMTC Transaction to raise money to meet the $4 million in private donations.

The NMTC program is designed for private, for profit businesses where tax credits can be applied. In general, New Hampshire does not receive many NMTC dollars. The Federal Government selects regional banks to distribute this Tax Credit Program. Mascoma Bank has an entity that serves as the Community Development Entity (CDE) to the US Treasury’s Community Development Financial Institution (CDFI) Fund where the tax credit money is located.

The City of Nashua initially indicated it would take 6 months to receive the NMTC, but it ended up taking almost 2 years. The Nashua Performing Arts Center located at 201 Main Street abuts one of the lowest income census tracts, the “tree streets neighborhood” in the State of New Hampshire.

The City ended up receiving $2.5 Million dollars in New Markets Community Development Equity from a $9.55 million loan ($7.1 Million + $2.44 Million equity) from Mascoma CDE. (In a December 20, 2018, Special Board of Aldermen Meeting, City Officials had announced that they expected to receive $6.1 million in equity and the bond amount would be reduced. Board of Aldermen Meeting, December 20, 2018 documents this discussion.) With this NMTC, and the additional $1.5 million from Nashua Community Arts, the goal of raising $4 million in private/corporate money was achieved.

Mascoma Bank became the investor and the City of Nashua became a Senior Leverage Lender for the project. A November 10, 2020 email from Mascoma Vice President Dick Jennings,, states that “today the Bank approved the NMTC investment in the NPAC Investment Fund to generate the $9,750,000 QEI.” (QEI – Qualified Equity Investment)

In order to satisfy the NMTC program’s requirement to provide tax credits to private, for-profit companies, City Officials created several shell companies. The need to form these companies remains a mystery since the City other publicly owned and operated buildings and facilities require no such entity formation.

On May 20, 2019, the Board of Aldermen held a public hearing on R-19-136 to form two public, non-profit corporations. The legislation was written by our City Attorney, Celia Leonard, and referenced State Statutes RSA 162-G and RSA 292:1 to create these Corporations. RSA 162-G is for the acquisition, development and disposal of Industrial land and facilitates. These two companies are described as “affiliates”, defined in contract documents of the City, and are using the same tax ID as the City.

In October 2020, the City registered the Corporations with the NH Secretary of State’s Office, 201 Main Street Financing Corp. and 201 Main Street Real Estate Corp., heretofore referred to as the “201 Corps”. In order to qualify for the NMTC, one corporation must serve as the financing arm (Financing Corp) and the other must serve as the Qualified Area Low Income Community Business or QALICB (Real Estate Corp).

The two shell companies are run by a 5 member Board of Directors and operate with no employees. Based on an October 6, 2020 email sent by Dir. Cummings to selected Board members, Dir. Cummings reaches out to community members selected about a year and half earlier to inform them that the City is ready for their service. No records have been found to that show the BOA approved these members.

Once the Board of Directors receive this email, on October 6, 2020, Mr. Lannan and Ms. Novotny email Dir. Cummings to participate in the weekly calls with Mascoma bank for this NMTC transaction. On October 7, 2020, Dir. Cummings emails Mr. Lannan and Ms. Novotny stating the Niel Cannon (City NMTC expert hired consultant) asked to “hold off on having you guys involved just yet in these calls, because as he put it we’d be putting the lamb in the lion’s den.” It is this yet another instance of a lack of transparency?

RSA 162-G is the same state statute that is used to create Business Industrial Development Authorities (BIDA). Nashua has a BIDA Authority that performs an essential government function in that it develops blighted industrial properties and creates new public facilities for the greater good of the community. BIDA a public business entity subject to the open records law, RSA 91-A. Citizens have a right to understand how their government is spending money and transacting business for BIDA’s.

The City Creates Private Company Bylaws for the “201 Corp.” Public Companies

It appears when the City held the public hearing under RSA 162-G, and explained that the “201 Corps” were public businesses, that finances and records transactions would be subject to RSA 91-A, just as they are for BIDA Authorities. Turned out that this was not the case and the City was not transparent about this. When the City Attorney’s and hired consultants wrote the bylaws for the 201 Corps., the bylaws were incorrectly structured as private corporations rather than the public corporations as City Officials had told the citizens in the May 20, 2019 Public Hearing.

This error resulted in secret meeting of the respective Boards operating as if they believed that they did not have to comply with public meeting statutes. In late 2021, Ortolano identified this error and informed the City that she believed that the 201 Corps bylaws were incorrect. The City and Board of Directors were unwilling to acknowledge this error and correct it. In August 2022, Ortolano filed a lawsuit that included Right-to-Know Violations on the Performing Arts Center and was challenging the fact that the bylaws were incorrect, claiming that the meetings and minutes should be open to the public and records within the Corporations must be public.

To defend Ortolano’s Right-to-Know lawsuit, the 201 Corps hired legal counsel to represent the violations claimed in the lawsuit. In a February 2023 telephone conference call, the 201 Corps Attorney’s acknowledged that the bylaws were not written correctly and corrections would be forthcoming. As of September 13, 2023, It has been over a year since filing the Petition and over 2 years since Ortolano challenged this issue yet the corrected bylaws have still not been adopted and records remain unavailable to the public. The 201 Corp. Boards and City Officials are delaying and denying records to prevent citizens from understanding how the money was spent.

Through 2019 and 2020, the City was working with ICON Architecture to design the facility. In addition, they were working with Harvey Construction to develop a construction contract with a Guaranteed Maximum Price. On November 24, 2020, at the regular BOA meeting, the Board approved R-20-093, guaranteeing the Maximum Price to construct the Performing Arts Center at $15,821,890, subject to additions and deductions through the Change Order process. Material evidence indicates the project has experienced cost overruns and that there may be a contract violations with Harvey Construction.

Where the Financing Plan Unravels– November 24, 2020

November 24, 2020, The Board of Aldermen held a special meeting, with no public comment, to adopt an Omnibus Resolution on the New Markets Tax Credit Transaction, R-20-094. It was called an Omnibus Resolution because it contained 25 sections of legislation and approvals that encompassed the necessary components to execute the New Markets Tax Credit Program.

Under the advice of the Economic Development Director, the Board of Aldermen had to approve this legislation that evening. The Board acted quickly, without public input and without thorough review. For a project of this financial impact, the Board of Aldermen moved quickly to approve this without proper discussion. If you review the minutes of this meeting (above link), you will see only one Alderwoman raised questions and ultimately did not vote for it.

The Board of Alderman’s “Agenda Packets” sent out prior to the November 24th meeting contained a NMTC deal diagram that the public had seen a number of times prior the November 24th meeting. This original diagram, dated 10/4/2020, shows two red boxes with the 201 Corps as the two public entities necessary to receive the NMTC financing. The complexity of this diagram hid the real intent.

This where is fraud, deception and misuse of public funds is identified – why the lack of transparency and accountability in the public funds.

During the 11/24/2020 BOA meeting, the City’s consultants along with the Deputy Corporation Counsel, Celia Leonard and Economic Development Director, Tim Cummings, were present to pitch the Omnibus legislation. Consulting Attorney John Kaminski represented the legal requirements and Director Cummings introduced a never before seen new NMTC Deal Diagram dated November 24, 2020 that now contained a new company, NPAC Corp. The Rules of the Aldermanic Chamber were not suspended to accept this new communication on file.

In line with deceptive business practices, Director Cummings announced Attorney Kaminski to present the legal aspects of the NMTC deal. Mr. Cummings uploads this new diagram and in an act of deception states:

Thank you. So now I’d like to pivot and ask John Kaminski who is our New Market Tax Credit Counsel to start the legal overview. And I am now sharing my screen, hopefully everyone can see it. I am going to pull up a similar type diagram that was just shown but it’s going to have a little nuance to it to make sure we are very clear on the legal aspects of this transaction. John? (page 8 of meeting minutes.)

Director Cummings misrepresents the significance of changing the QALICB from a nonprofit, public corporation to a private, for profit Corporation.

The 201 Corps were approved by the BOA in May 2019, but based on an email from Attorney Kaminski, the NPAC Corp was created around November 6, 2020. There was no Board of Aldermen approval for this Company. City Officials and experts concealed this new company from the public until three weeks before the NMTC closing. NPAC Corp. is a private, profit corporation that is now going to take over the function that 201 Main Street Real Estate Corp. was performing. Notice in this New Deal Diagram, there are three red boxes and the NPAC Corp. is added at the last minute as noted by the date on 11/24/2020 NMTC Deal Diagram.

Additionally, in the NMTC emails obtain through the RTK requests, a fully redacted November 4, 2020 email from Attorney Kaminski to Nashua Deputy Counsel, Celia Leonard and Economic Dev. Dir. Tim Cummings exists where Kaminski details a phone call to Fred Miller, Mascoma’s legal counsel. This is a strong indication that this is where the plans are laid out to form the NPAC Corp. and confirmation of City Official obstruction of RSA 91-A information. A motion has been submitted to Superior Court to perform an in camera review to determine if any of this information can be made public. NPAC Corp. was registered with the NH Secretary of State on November 9, 2020.

On November 5, 2020, Attorney Kaminski sends an email to Mascoma people, including their accountants and attorneys, along with City of Nashua project people, Attorney Leonard, Dir. Cummings, Niel Cannon and Amy DeRoche. In this email he writes:

1) On the City team, we have determined that the two nonprofit corporations previously formed should be viewed as part of the City for Federal tax purposes. The two nonprofit corporations remain important to the structure for purposes of NH municipal law. However, the Federal tax classification of 201 Main Street Real Estate Corp. (“201 RE Corp”) not able to be the QALICB. We proposed that 201 RE Corp form a wholly-owned New Hampshire business corporation that would be a C corporation for Federal tax purposes and therefore eligible to be a QALICB. Subject to input from Mascoma, Fred concurred with this approach.

This November 5th email is a good indication that the fully redacted November 4th email is about the formation of the NPAC Corp.

In the November 24, 2020 BOA Special Meeting, Attorney Kaminski explains why this new shell company is needed. Nashua officials and consultants set up shell companies and committed the taxpayer to a long term lease creating the appearance that NPAC Corp, a private corporation, is a viable long term entity. This is deceptive and defrauds the public of access to records and financial accountability.

The City will then have a 25-year lease of the facility and will have a 5-year renewal option on the facility. The purpose for this lease is to demonstrate that the NPAC Corp. has an ongoing business. The following paragraph is from Attorney Kaminski’s remarks at the November 24, 2020 BOA Special Meeting to approve the Omnibus Resolution:

“We can’t simply have a business that lasts for 7 years and qualify for the New Market Tax Credits, we have to have a business that is a long-term operational potential in front of it. So, we demonstrate that Impact Corp. has a business going on and that enables us to qualify for the New Market Tax Credits.” (the minutes misspelled NPAC Corp as Impact Corp)

This circumvents Federal Laws. Public money and records were moved into a private corporation, NPAC Corp., that became the owner of the Arts Center. Compliance with the open records laws was eliminated as was transparency. Citizens could no longer track the $21 Million project and material evidence suggests that once this occurred, the City defrauded citizens out of public records and misused public funds.

The Community Benefits Report – Requirement of the Federal Government to Qualify for the NMTC

The Federal government requires a yearly Community Benefits Report be submitted to the government to assure that the low income community is benefiting byway of improving the neighborhood economic conditions. Acceptance of the NMTC money require that a specific number of people from the low income neighborhood or surrounding low income neighborhoods are provided with jobs that pay above minimum wage. A Community Benefits Agreement was signed by NPAC with MDC Subsidiary CDE 14, LLC in order to show how the actual project was benefiting the low-income communities. This report needed to be submitted every year no later than January 31st.

In January 2019, the City submitted a Proposal to accompany an application to obtain NMTC Financing. That proposal contained estimates for the benefits the low income community would receive. The estimates were done in 2018 with a report submitted in January 2019. All the reports submitted through 2022 use the same data as 2018. NPAC Corp. is not in compliance with the requirement to submit a report that complies with the Community Benefit requirement to justify the NMTC received. As of the writing of this report, there is no material evidence that the low income community benefited from the project and the NMTC program.

Community Benefits Report 2021

Community Benefits Report 2022

Ms. Colquhoun addresses this with Mascoma Bank executives. Material evidence via a March 9, 2023 email from Michelle LeClair of Mascoma Bank to Dir. Cummings and Niel Cannon took the matter seriously. City Officials and Mascoma Management never responded to Ms. Colquhoun’s compliance concerns.

The Closing of the NMTC Deal

On December 17, 2020, the signing of all the documents to close the deal took place. The attendees are unknown. The Closing Binder to enact this transaction contained approximately 6,000 pages. Some of the documents are unsigned. All this to obtain $2.5 million in equity to add private funds to a taxpayer funded $21 million project. Was it worth it? For the following reasons, NO.

Was the $7,108,850 City Loan to 201 Main Street Financing Corp. legal?

In order to enact the NMTC transaction, the City used public bond proceeds to create a Loan contract with 1% interest only for the first 7 years out of the 30 year term conditions (Maturity Date 2050) to 201 Main Street Financing Corp (a public company, with “private” company bylaws). 201 Main Street Corp then created a loan contract with NPAC Investment Fund LLC with the same terms as the City’s Loan. NPAC Investment Fund is managed by Mascoma Bank, a private company. It appears the City finance office sent a $7.1 million tax dollars loan directly to Mascoma Bank. It appears Mascoma Bank then deposited the money to 201 Main Street Financing account. The notation on the transfer of money is unknown. It appears as though the Loan Documents may have been falsified.

The City Loan Documents consist of three parts, A Loan Agreement between the City of Nashua and 201 Main Street Financing Corp, a Promissory Note, and Loan Security Pledge Agreement. These documents were signed on December 17, 2020 by Mayor Donchess and Rich Lannan, President of the Board of Directors for all three Corporations formed to do this NMTC Transaction. The Loan Security Pledge Document is incorrect in that both the City and 201 Main Street Financing Corp. are listed as the “borrower”. Conspicuously, the Loan Agreement “terms section” is blank. The Promissory Note must be examined to obtain the terms.

201 Main Street Financing has been paying interest on this loan to the City since 2021 ($71,089) but the Loan was never recorded in Accounts Receivable on the City’s books. Ms. Colquhoun began investigating this in March 2023 and by August 2023, the Loan was backdated on the May 31, 2023 Trial Balance. Please note, on the May 31, 2023 Trial Balance, the City wrote the loan off under “Reserved for Notes Receivable”, thereby cancelling out the loan, even though the City is still collecting interest. Why was this not transparent to the Nashua taxpayers?

On December 30, 2020, City CFO John Griffin emails Attorney Leonard, Dir. Cummings, and his finance team regarding matters “after the final close”. Mr. Griffin is looking for information on what needs to be tracked on the City books in addition to the PAC bonds and related debt service payments. He poses numerous questions for discussion.

On March 8, 2021, Mr. Griffin emailed the City Administrators involved in the NMTC transaction to request all the Loan documents that were required to be recorded on the City’s books. For unexplainable reasons, this Loan did not get recorded until May 2023. The Finance Reports indicate that this may be financial fraud.

At the Mayoral Debate at NH Community College on Thursday, September 6, 2023, the Mayor told the audience that Mr. Soucy’s remarks were completely inaccurate relative to transparency on the Arts Center project. However, the Mayor signed the Loan contracts. On December 17, 2020, Mayor Donchess and Rich Lannan, President of the Board of Directors NPAC Corp, signed an Unconditional Guaranty document putting taxpayers on the hook for these loans.

On September 26, 2020, Mascoma Bank had some concerns about the City using bond proceeds to loan money to 201 Main Street Financing Corp. Mascoma Bank Vice President, Dick Jennings, emailed the City with questions about the legality of municipal finance law permitting such a transaction. Documents with any public evidence confirming the City’s explanation of the legality of the transaction have not been located. We have requested Superior Court conduct an in camera review of these emails to determine if answers exist to these questions that can be shared with the public.

City Officials should not have committed bond proceeds (citizens were told the money would be used to construct a publicly owned Arts Center) to create a loan to a private Corporation, collecting only interest for the first 7 years with the principal and interest balance for the remaining 23 years. The City is unwilling to speak to this issue with the public.

The interesting part of this email dated September 26, 2020, is that the questions raised are on a deal structure that involved only the 201 Corps at that time. These were public entities, but by November 24, 2020, the City switched the deal to a private corporation. How does this change the answers to the questions raised by Dick Jennings, Mascoma Bank in the September 26, 2020 email to the City?

What happens in Year 8 on these Three Loans:

Based on the Loan documents, the Mascoma Bank Loan A, $7,108,850 will have an interest and principal payment for YR2028 of $358,265. Mascoma Bank Loan B, $2,446,150 will have an interest and principal payment for YR2028 of $123,279. The 201 Main Street Financing Loan to NPAC will have an interest and principal payment for YR2028 of $415,939 $346,371. In YR2028, the total payment of $897,483 (827,915) must be paid by NPAC Corp.

Spectacle Live is collecting all revenues on the Ticket Sales

The City contracted the operations of the facility to an outside vendor, Spectacle Live, to schedule the performances and manage the facility. The city does not collect revenue off ticket sales to put into the City’s General Fund. The Contract with Spectacle permits the City to collect a maximum of $100,000 per year ($25K from each for food, liquor, merchandise and an agreed upon show(s) with $1 per ticket going to the City) to be placed in a capital reserve fund for maintenance and not in the City General Fund.

On August 8, 2023, The BOA approved R-23-142 establishing a capital reserve fund for the purpose of funding major repairs, replacing furniture, fixtures, and equipment, and making capital improvements to the Nashua Center for the Arts Facility. It does not appear that this type of 1% deal structure will cover long-term capital maintenance for the building.

The Master Tenant Lease Agreement between the City of Nashua and NPAC Corp.

City Officials did not disclose the terms to the public on becoming the Master Tenant for the Arts Center. The City signed a 25 year Lease Agreement to pay NPAC Corp. rent. So, the taxpayers are renting the facility constructed with their tax dollars. Review Exhibit B, page 48 for the Base Rent schedule which reveals a 25 year rate that increases from $500,000 to $620,000. The Agreement was not approved by the Board of Aldermen.

Why did the City enter into a rental agreement? Because these Corporations have no other business ventures or revenue sources other than City money and Loans from the City and Mascoma to build, own and lease our Public Arts Center. The Mascoma Bank annual fees required to be paid by NPAC Corp. which include the loan interest and the property taxes have to be either offset by taxpayers or outright paid by taxpayers through the rental agreement. In addition to this rental scheme, the city as the Master Tenant pays 100% of the property insurance as an owner rather than as a renter.

Reviewing the Omnibus resolution, R-20-094, conspicuously missing is the Lease Agreement between the City of Nashua and NPAC Corp. The only Lease Agreement in the Resolution is between the City of Nashua and 201 Main Street Real Estate Corp. for the Equipping the facility. The Equipment Lease Agreement is $165,000 annually for 25 years.

In March 2021, the City created a Flow of Funds Diagram for 2023 that shows that the City is paying $668,677 in rent and property taxes and should be receiving back a distribution of $413,803. Based on the 2021 estimates, the City will be paying approximately $276,000 in annual rent that is not coming back to the City. Across 7 years, this is almost $2,000,000 in rent and fees. At this time, documentation has not been found within the closing binder regarding distributions from NPAC Corp. to the City. The distribution does not appear as a receivable in the City financial records.

The property taxes are zeroed out. The tax money enters City’s General Fund account from NPAC Corp. and then the City pays the same amount in additional rent to cover the property taxes back to NPAC Corp. However, the City is obligated through Ordinance O-20-030, to take the differential in increased property tax money collected on the Art Center and move it to a fund specifically to spend the money in the downtown Art Center district. This diverts money from the general spending throughout the City. This can be reviewed in the School Street Tax Incremental Finance District.

The Unwinding of the NMTC Deal after 7 years

In the November 24, 2020 Special BOA meeting on the Omnibus resolution, City Officials stated that the entire NMTC deal unwinds after 7 years. Citizens do not know what “unwind” means and how it relates to the Signed Loan Documents that do not include these “unwinding” terms. The Loan documents do not state that the Loans are forgiven, however Mr. Cummings has stated that the Loans are forgiven. Documentation to confirm that all the Loan are forgiven have not been found.

Fees, Fees and more Fees….

The taxpayer trough was hit hard on this NMTC scheme. There are high entry and closing fees associated with this deal. Additionally, Mascoma Bank, as the investor, required specific environmental testing of the site along with insurances and other fees that were to be paid by the City. Documents detailing the costs of the environmental testing have not been identified.

The City never compiled the fees and disclosed this information to the public. The Board of Aldermen never reviewed the fees. In fact, at a January 20, 2022 Board of Assessors meeting where Director Cummings present the NMTC transaction, Board member Bob Earley stated in a YouTube video;

“Do you have a chart or something that showing what the bottom line cost to the City is over to start through the seven years. It seems to me it is hard to pinpoint how much this is costing the City and the Taxpayers.”

Mr. Cummings replied;

“I don’t have anything summarizing (the costs), but there are many different documents that show you the various costs.”

What Mr. Cummings is saying is that the City did not do its due diligence to manage taxpayer’s spending. The documents he is referring to are the 6000 pages of closing documents. The fees are scattered throughout these documents and when applying a search tool for the terms, it comes up over 900 times within those 6000 pages.

Based on material evidence in the closing documents, the best evidence of fees are provided in the table below. No one in the City government has been willing to speak about this, so any official public feedback would be welcomed.

Fee Compiled from Closing Documents, December 17, 2020 NMTC

City Officials did not perform a cost analysis to compare bonding the $2.5 million of additional private funds required versus entering into a complex, private NMTC Transaction with excessive fees and numerous interest bearing loans. Based on a bond calculation and a 2% interest rate in 2020, the interest on a 25 year bond would have been approximately a total of $700,000. The project would be fully public and the City would own the building. There would be no rental agreement. Clearly, this transaction was costly and non-compliant with state statutes and federal codes.

What was the Project Cost?

To date, the lack of transparency has made it impossible to know the cost. The City does not have current public records available that provide the total project cost. Mascoma Bank required NPAC Corp to pay a consulting firm, Consulting Services Commercial, LLC, to generate monthly expenditure (draw) reports, but because this is being done through a private corporation, the finances are not available to the public.

In February 2023, the NPAC Board of Director Vice President and Treasurer did provide a comprehensive December 2022 Financial Report compiled by Consulting Services Commercial, LLC. This provided a list of all the draws (1-24) since construction began. The total sum of the draws is over $30 million well above the $25 million approved by the public. It does not include the architect fees, the $2,000,000 to purchase the building, or the Furniture, Fixtures, and Equipment. The Project had approximately six more months for completion. Since the December report, the Vice President/Treasurer and Board of Directors have not been willing to provide any additional financial information in violation of RSA 91-A.

Summary

City Officials told citizens that taxpayers were funding a public project to construct an Arts Center in Downtown Nashua. Once the City elected to accept Federal Money, the project became a private project with few public records and meetings accessible.

The City formed two public, nonprofits corporations, supposedly required to accept this NMTC money, but our legal office wrote the bylaws as though both companies were private. Once Ortolano pointed the incorrect bylaws, the City and Corporation Board of Directors refused to correct the bylaws in violation of the law. By not correcting the bylaws in a timely fashion, they are concealing public money and public records.

At the “11th hour”, the City added a private company, NPAC Corp. and put all the public bond money into the private company without disclosing to the public that this was happening. The City made no provisions to comply with municipal law to allow public access to records. There was no public hearing on the formation of this private corporation. The City has not provided any financial reviews of the project in public meetings.

The City structured a $7.1 million loan to 201 Main Street Financing Corp but failed to record the Loan on City books in 2021, even though the City has been collecting interest payments since 2021 on this loan. How did the City justify writing off this loan and how did the City balance their books with a $7.1 million loan missing?

The City signed a lease agreement with the private company (NPAC Corp.) to pay the Art Center rent without disclosing to the public that this rental agreement was done. There was no legislation or hearing to permit the public to weigh in on this change as it had a significant impact on taxpayer funding and public records.

The City then guaranteed all the loans required to execute the NMTC deal and agreed to insure the Arts Center as the facility owner, not a renter. NPAC Corp. is paying annual property taxes on the Arts Center building that they own, but citizens are reimbursing the NPAC Corp. for the tax payment. In other words, the City is writing off the taxes while property tax money from NPAC Corp. is being funneled to a specific downtown fund for downtown development.

This was clearly the wrong Federal Financing program for a municipality to enter into. City Officials defrauded citizens out of records and accountability, committed financial fraud and misused public funds. New Markets Tax Credit programs should never have been used on this municipal project.

September 18, 2023

Laura Colquhoun

Laurie Ortolano

Disclaimer:

Failure on the part of the City of Nashua to provide documents in a timely fashion, some of the information we have collect, was intentional misleading and intended to confused. Therefore, our attempt to be as factual as possible was hindered by the lack of transparency from the City. This report represent a best effort to be as factual as possible given the less than transparent information received.