"Nearly 50 years ago, New Hampshire communities agreed to sacrifice land and future property tax revenues in order to build flood control dams to help protect the people of Massachusetts. We saw during the floods of Mother's Day Weekend just how valuable those dams were in saving lives and property," Gov. Lynch said.

"Yet despite the proven value of these dams to the citizens of Massachusetts, Massachusetts is still reneging on the commitments it made when our two states established the flood control system," Gov. Lynch said. "It's time for Massachusetts to meet its obligations and pay what it owes New Hampshire, or we will take legal action."

New Hampshire and Massachusetts entered the Merrimack River Valley Flood Control Compact in 1957. Under the Compact, Massachusetts agreed to reimburse New Hampshire 70 percent of the amount of property taxes lost because of the acquisition and ownership of the dams and reservoirs comprising the Merrimack River Valley Flood Control Project.

Massachusetts made no payment to New Hampshire in 1994, only partial payments from 1995 to 2002, and has not paid anything since 2003.

According to calculations from the Department of Revenue Administration, Massachusetts currently owes New Hampshire more than $3.2 million. The State of New Hampshire has been making up the difference for local New Hampshire communities.

In addition to refusing to pay its bills, Massachusetts has also refused to designate an arbiter to the board of arbitration set up by the compact to resolve any disputes over payments. New Hampshire designated its arbiter in 1997.

"In the event that the Commonwealth of Massachusetts does not promptly commit to pay in full its 70 percent share for fiscal years 1994 to 2006, or to designate a representative from Massachusetts as a member of the board of arbitration, I intend to direct the Attorney General of New Hampshire to commence legal proceedings to enforce the compact," Gov. Lynch wrote Gov. Romney.

A copy of the letter is below.

# # #

July 5, 2006

The Honorable Mitt Romney
Governor
Commonwealth of Massachusetts
State House
Office of the Governor
Room 360
Boston, Massachusetts 02133

Re: Merrimack River Valley Flood Control Compact

Dear Governor Romney:

New Hampshire is home to a system of dams and reservoirs that -as recent events have dramatically shown-protect Massachusetts's communities in the Merrimack River Valley from devastating floods. In 1957, our two States entered into a compact that was approved by Congress and which provides for payment of compensation by Massachusetts to New Hampshire for the losses we sustain on an annual basis because we host this important flood control project.

By executing the Merrimack River Valley Flood Control Compact, Massachusetts agreed to reimburse New Hampshire seventy percent of the amount of property taxes lost because of the acquisition and ownership of the dams and reservoirs comprising the Merrimack River Valley Flood Control Project. For several years, Massachusetts has not paid its full share to New Hampshire under the Flood Control Compact. As calculated by the New Hampshire Department of Revenue Administration, New Hampshire's lost tax revenues have exceeded $500,000 each year since 1998. In 1994 Massachusetts made no payment to New Hampshire at all, and in years 1995 through 2002, only partial payments. Moreover, there have been no payments for years 2003, 2004, 2005 and 2006. According to our calculations, the total amount Massachusetts owes to New Hampshire under the Compact because of these circumstances and Massachusetts' failure to pay is currently $3,248,808.

Further, Massachusetts has not followed the dispute resolution provisions of the Compact. Under the Flood Control Compact, in the event of a dispute over the amount to be paid, each state is required to designate a person as a member of a board of arbitration. New Hampshire designated an arbitrator in 1997. Despite requests by New Hampshire in 1997 and 1998, prior Massachusetts Governors have not appointed a member to serve as arbitrator. This has prevented resolution of the issue under the Compact.

Pursuant to Article V of the Merrimack Valley Flood Control Compact, please consider this letter to be a formal demand on the Commonwealth of Massachusetts for compliance with the express terms of the Compact. In the event that the Commonwealth of Massachusetts does not promptly commit to pay in full its seventy percent share for Fiscal Years 1994-2006, or to designate a representative from Massachusetts as a member of a board of arbitration, I intend to direct the Attorney General of New Hampshire to commence legal proceedings to enforce the Compact.

Thank you for your attention to this matter.

Sincerely,

John H. Lynch
Governor

cc: Kelly A. Ayotte, Esq., Attorney General
Mr. Frederick Welch, Chairman,
Merrimack River Valley Flood Control Commission
Mr. G. Philip Blatsos, Commissioner,
Department of Revenue Administration