If city buys water utility, Pennichuck would still retain about 450 acres

In the six years it has fought to take over the private local water company by eminent domain, the city of Nashua has said it wants to put a stop to development near the ponds that supply drinking water.

But 450 acres of that land – more space than exists in all of Mine Falls Park – won’t belong to the city, even if Pennichuck Water Works loses its appeal and Nashua buys the utility. That’s because the land is owned by the water company’s sister business, real-estate firm Southwood Corp.

The land is developable, and a fraction of the acreage is already for sale. Some city supporters say blocking future development is critical to preserving the quality of drinking water, but the city won’t have that kind of authority unless it finds a way to take ownership of the 450 acres, a good part of which is actually in Merrimack.

“Yes, we understand that,” Nashua Alderman Brian McCarthy said in a recent interview. “We would like to negotiate a way to purchase that part of the land. It’s clearly something we think is important.”

Pennichuck Water Works also owns about 500 acres, mostly unbuildable wetlands, which would belong to the city if a sale by eminent domain goes through. In late July, the state Public Utilities Commission ruled a taking was in the public interest and set the total cost at $243 million, which includes a $40 million payment to Pennichuck to mitigate the impact of the takeover on its other water subsidiaries.

Pennichuck has filed a request for rehearing with the PUC, and if that fails, it will appeal to the New Hampshire Supreme Court.

Pennichuck Corp., the parent company of Pennichuck Water Works and Southwood, believes the 450 acres owned by Southwood isn’t essential to the watershed. That opinion wasto the watershed. That opinion was supported by the PUC in a 1980s decision that allowed the creation of Southwood. Back then, Pennichuck Corp. sought to open the land to development after it built a water treatment plant, arguing before the PUC that because of the plant, much of the company’s land holdings were no longer critical to protecting the water supply.

The decision was controversial. It isn’t often that water companies spin off into the real-estate business, and the move allowed 1,500 acres of Pennichuck land to be transferred to Southwood for potential sale. Nashua’s opposition to the creation of Southwood is the root of one of many rifts the city has had with Pennichuck over the years.

About 1,000 of those acres have been developed or sold for development in the past three decades, but Pennichuck Chief Executive Officer Duane Montopoli said the company has remained an excellent steward of the water supply and would handle any future development responsibly.

At this point, Montopoli isn’t ruling out the possibility that Nashua is a potential buyer for the rest of the land, which consists of one small parcel in the city and six in neighboring Merrimack.

“The city can always attempt to buy land that’s held by another entity,” Montopoli said. “They’re an eligible buyer today, so they would be an eligible buyer in the future, as well.”

However, with only one of seven parcels on the market right now, it’s tough to predict the cost – or prudence – of such a purchase. The assessed value of the Merrimack land, located between Continental Boulevard and Pennichuck Brook, is just over $700,000, but in no way does that reflect market value. The land is assessed at that amount for its current use – it isn’t being used – and the assessed value would skyrocket if it was developed.

Alan Fuller, a well-known supporter of the city takeover and conservationist, unequivocally believes Nashua should go after that 450 acres in a new, separate eminent domain case.

“It’s only logical,” Fuller said. “The idea of ‘buffer land’ is to protect the drinking water supply. . . . The cost is big today, but eventually, it won’t be, and people will say, ‘How smart were those people?’ ”

Fuller said the water quality is good now, but he thinks the impact of development will eventually degrade that. He argues Pennichuck has threatened the water supply in the name of bigger profits for its investors. Per state regulations, the company makes a profit anytime it has to make infrastructure improvements – such as the ongoing plant upgrade – to protect the water quality, Fuller said.

Montopoli, who took the top job at Pennichuck in 2006, in the midst of the eminent domain fight, calls that “baloney.”

The purpose of the multimillion-dollar plant upgrade, he said, is to comply with federal water standards, and the company doesn’t plan on needing to do further upgrades for a long time.

“Some people develop stories to match what they want to believe,” Montopoli said.

Fuller’s criticisms of Pennichuck are on the strong side, comparatively. They’re stronger than those of most current city leaders, and much stronger than those expressed by the mayor, Donnalee Lozeau, who took office in January.

It was her predecessor, Bernie Streeter, who fought hard for a takeover and celebrated in the July victory for the city.

Lozeau, who has hedged on whether she supports a city takeover at all, said the city is to blame for some of the development in or near the watershed. Southwood never owned much of the watershed land that has been developed on Amherst Street near the Nashua/Merrimack line, and the city approved all of those project plans, she said.

“So, it’s a little hard for the city to take too much of a moral high ground,” Lozeau said.

Of the 1,500 acres Pennichuck Water Works was allowed to take off the water utility books and into the new real-estate company, about 1,000 have been sold and/or developed.

Much of that development has been in northwest Nashua along the F.E. Everett Turnpike. Projects include the Marriott and Extended Stay hotels, housing developments such as Bower’s Landing and Brinton’s Landing, and offices such as Sun Microsystems and Cornerstone Software.

With the case pending, Lozeau said it’s premature to talk about Nashua buying Southwood’s 450 acres.

“Most people would understand that in a perfect world we’d be able to protect all of the watershed,” Lozeau said. “What we really need to count on are the rules and regulations that relate to development.”