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Exhibit MSD 93 - Transcript of Public Hearing June 27, 2019 PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 1 1 2 3 4 5 6 METROPOLITAN ST. LOUIS SEWER DISTRICT 7 MARYLAND HEIGHTS COMMUNITY CENTER 8 2300 McKELVEY ROAD 9 MARYLAND HEIGHTS, MISSOURI 63043 10 11 12 13 14 PUBLIC HEARING 15 JUNE 27, 2019 16 17 18 19 20 21 22 23 24 25 Exhibit MSD 93 PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 2 1 APPEARANCES 2 BRIAN L. HOELSCHER, P.E. 3 Executive Director Metropolitan St. Louis Sewer District 4 The Commissioners: 5 Lloyd Palans Brad Goss 6 Chan Mahanta Steve Mahfood 7 Brandy Bowdry Paul Brockmann 8 The Court Reporter: 9 MS. AMANDA N. FARRAR, CCR Alaris Litigation Services 10 711 North Eleventh Street St. Louis, Missouri 63101 11 (314)644-2191 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 3 1 P R O C E E D I N G S 2 (The public hearing commenced at 3 6:01 p.m.) 4 MR. PALANS: Good evening, ladies and 5 gentlemen. I'm Lloyd Palans, a member of the 6 Metropolitan Sewer District Rate Commission and I 7 will be presiding this evening over our public 8 hearing. 9 With me tonight are the following MSD 10 rate commission members. Starting to my immediate 11 right, Mr. Brad Goss. To his left, Mr. Chan 12 Mahanta. To his left, Mr. Steve Mahfood. To my 13 right, Ms. Brandy Bowdry. And to my left, Mr. Paul 14 Brockmann. 15 I'm going to read a statement for the 16 record before we begin with the presentation. 17 The charter plan of our district was 18 amended at a general election on November 7th, 2000, 19 and established the rate commission to review and 20 make recommendations to the district regarding 21 changes in wastewater rates, stormwater rates and 22 tax rates proposed by the district. The charter 23 plan requires the MSD board of trustees to select 24 organizations to ensure a fair representation of all 25 users of the district's services on the rate PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 4 1 commission. The rate commission representative 2 organizations are to represent commercial/industrial 3 users, residential users, and other organizations 4 interested in the operation of our district 5 including organizations focusing on environmental 6 issues, labor issues, socioeconomic issues, 7 community neighborhood organizations and other 8 nonprofit organizations. The MSD rate commission 9 currently consists of 15 members from organizations 10 and institutions throughout St. Louis City and 11 St. Louis County. 12 The rate commission received a rate 13 change notice from the district on March 4, 2019. 14 Under the district's charter plan, the rate 15 commission must on or before July 2nd, 2019, issue 16 its report on the proposed rate change notice to the 17 board of trustees of the district, unless the board 18 of trustees, upon application of the rate 19 commission, extends the period of time for the 20 issuance for the rate commission report for an 21 additional 45-day period. 22 At its meeting on March 14, 2019, the 23 board of trustees approved the rate commission's 24 request for an extension. The rate commission's 25 report on the rate change proposal must now be PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 5 1 issued on or before August 16, 2019. 2 The MSD rate commission has engaged 3 legal counsel and a rate consultant which are 4 independent of those used by the MSD staff. 5 Under procedural rules adopted by the 6 rate commission as amended, any person affected by 7 the rate change proposal has an opportunity to 8 submit an application to intervene in these 9 proceedings. An application to intervene has, in 10 fact, been filed by Missouri Industrial Energy 11 Consumers and this application was granted. 12 Since March 4 -- since March 4, 2019, 13 the rate commission has received testimony from MSD 14 staff, the rate consultant and intervenors. The 15 parties have also engaged in discovery requests. 16 A prehearing conference for the purpose 17 of identifying any issues raised by the rate-setting 18 documents and the prepared testimony previously 19 submitted will be conducted on the record. All 20 persons submitting testimony may participate in the 21 prehearing conference, and each participant in the 22 prehearing conference shall submit a prehearing 23 conference report describing the issues raised by 24 the rate-setting documents and the proposed -- and 25 the prepared testimony together with a brief PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 6 1 description of such participant's position, if any, 2 on each issue and the rationale therefore. 3 Ratepayers who do not wish to intervene 4 are permitted to participate in these on-the-record 5 public hearings conducted in six sessions beginning 6 on May 14 of this year. The rate commission 7 published a public notice regarding these 8 proceedings in the St. Louis Post Dispatch and the 9 St. Louis American. These notices contain the time, 10 dates and location of each of the conferences and 11 hearings. 12 The public hearing session tonight is 13 for the purpose of permitting the district to 14 present its wastewater rate change proposal and to 15 permit any ratepayer an opportunity to comment. We 16 will begin the presentation this evening by the 17 district followed by a public comment period. The 18 district will be presenting a lot of information. 19 So I would ask that you hold your questions until 20 the comment period as perhaps many of your initial 21 questions will be answered by the end of their 22 presentation. 23 Those wishing to speak should sign a 24 sheet provided to my right on the table which is 25 being held up, and the -- and the order of the PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 7 1 questions will be as called in the order of names 2 listed on that sheet. Each ratepayer should 3 identify themselves and any organizations 4 represented by that ratepayer. If you wish to 5 present testimony or expect that you may have 6 questions or comments or during the course of this 7 hearing if you decide you want to ask a question, 8 please proceed to the clipboard, indicate your name 9 and any organization which you may represent. 10 Speakers, again, will be recognized in 11 the order in which they sign up. Each ratepayer may 12 have a maximum of ten minutes to speak regarding the 13 proposed rate change. As the presiding officer, I 14 can limit or expand that time should I deem it 15 necessary. 16 If you have not already done so, please 17 silence your cell phones. 18 Exits from this room are located to my 19 right and to your left. The restrooms are located 20 through that door and to the left. 21 Are there any questions regarding our 22 procedure this evening? 23 Do the rate commissioners have any 24 questions or comments? 25 Seeing none. I thank you all for your PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 8 1 participation this evening. For your information, 2 our next public hearing will be conducted on 3 July 10, 2019 at 6 p.m. at the UMSL Wellness and 4 Recreation Center. I will again remind everybody at 5 the end of our next public hearing in case you 6 missed that. 7 Having said that, I would like to hand 8 the baton to Brian Hoelscher and allow the 9 presentation to go forward from the district. 10 MR. HOELSCHER: Thank you, Mr. Chairman. 11 My name's Brian Hoelscher. I'm the 12 executive director and CEO at MSD. We're going to 13 go over the proposed rate proposal for fiscal 2021 14 through fiscal 2024. 15 The first slide is going to be just a 16 little history and information about MSD and then 17 I'll dive down into the details. 18 Some information about MSD. MSD is a 19 municipal cooperation created pursuant to a 20 provision of the Missouri State Constitution. We're 21 a municipal cooperation. We are not a private 22 company. We have a voter-approved charter that 23 governs how we operate our district. It is our 24 organic law. We use it in cooperation as long as 25 there's no conflict with state law in order to run PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 9 1 the district. 2 We have a six-member board of trustees 3 that I and one other gentleman report to. These are 4 voluntary positions. Three of those positions are 5 appointed by the mayor of the City of St. Louis and 6 three by the county executor, and that is per our 7 charter. 8 One thing I want to stress before we 9 start, MSD is two utilities. We're going to talk 10 today about wastewater and wastewater rates. We're 11 also a stormwater utility. We recently had a vote 12 on a stormwater proposition offering a new service 13 that we had heard folks potentially wanted us to 14 provide. So I am not going to talk about stormwater 15 tonight. I'm only going to talk about wastewater. 16 They are two separate functions. We don't mix 17 revenues. We don't mix resources. They're actually 18 two separate pieces. 19 As I go through this, if you do have 20 stormwater questions, if you have questions about 21 the wastewater system that aren't addressed here, we 22 have got district staff in either blue shirts, raise 23 your hands, or non-blue shirts, got jackets on, 24 that's close enough. We can answer questions 25 afterwards if you've got questions other than what's PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 10 1 on this proposal. 2 A little bit about MSD. We have a 520 3 square mile service area, City of St. Louis and 4 about 90 percent of the county. We go out to about 5 109 in Wildwood. We don't have the area west of 6 that. 1.3 million customers, 88 municipalities are 7 within our service boundaries. We have about 8 10,000 miles of sewers that makes St. Louis MSD the 9 fourth largest wastewater and stormwater utility in 10 the country, right behind New York, Chicago and Los 11 Angeles. 12 So talk about the wastewater proposal. 13 As we do every four years, the major component has 14 to do with the capital program. And this is just a 15 description of some of the things we're proposing to 16 do over those next four years. 17 1: It does fund $1.6 billion in capital 18 work. There's over 300 projects that make up that 19 program. The program is almost exclusively, except 20 for a very small piece, meant to meet regulatory 21 requirements that MSD is under with regard to its 22 wastewater system. The proposal we're putting in 23 front of you depends on whether or not the citizens 24 request -- allow us to have an additional 25 $500 million worth of bonding. That's a vote that PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 11 1 will occur and you'll see this every four years. 2 Before we get into talking about that, 3 so you know, you won't be voting on whether or not 4 we do the program. That's a regulatory mandate. 5 You will have a say on how we pay for it and I'll go 6 over the details of what that looks like. 7 Little more detail on the wastewater 8 benefits. Fifty wastewater overflows, this is where 9 stormwater gets into our wastewater pipes. When it 10 rains, gets in there and it discharges to people's 11 basements and it discharges to local creeks and 12 streams. Those are illegal. We're eliminating 13 those. 14 There are 60 miles of new wastewater 15 sewers that we need to build in order to prevent 16 those kind of overflows. We regularly inspect the 17 system. Within those four years we'll inspect 18 64,000 different manholes. 19 Part of the program is to replace the 20 incinerators at our Bissell and Lemay treatment 21 plant. We incinerate sludge. For the St. Louis 22 area it is the economically best alternative. It is 23 the only sustainable alternative for an entity like 24 us that submits as much biosolids as we do, it's 25 most cost effective and it's actually the safest for PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 12 1 the environment. 2 And also we will build a tunnel from the 3 Fenton treatment plant to the lower Meramec 4 treatment plant. We have a small regional plant in 5 Fenton. We'll build a tunnel to take it offline. 6 Couple -- the main reason for that is it's needed in 7 order for us to facilitate the moving the overflows 8 in that area. We can't just bring the flows to the 9 Fenton treatment plant. We need to get them down to 10 our regional Meramec plant that's located where the 11 Meramec River goes into the Mississippi River. 12 So what I've given you here, the rate 13 proposal we're proposing, the revenues, over half of 14 them, over 50 percent go towards this program. 15 Where do the balance of the dollars go? 20 percent 16 of the program goes to debt service. Both previous 17 bonds that were sold as well as the bonding that's 18 being proposed as part of this rate proposal. 25 to 19 30 percent of the funding goes towards MSD's daily 20 operations to operate the infrastructure that I 21 described earlier. 22 Key issues. There are five factors that 23 MSD staff considered in putting our proposal 24 together. These are the same five factors that our 25 rate commission will be evaluating our proposal on. PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 13 1 They're the same five factors that our board of 2 trustees will be evaluating when they see the 3 recommendations of the rate commission. So those 4 five are -- one is the proposal consistent with 5 constitutional or common law as they exist. That's 6 a pretty obvious one. Does enhance our ability to 7 provide services. It's an obvious reason why we're 8 proposing this. Need to make sure it's consistent 9 with and not in violation of any bond requirements, 10 either past or future bonding. Make sure we have 11 sufficient money to support those bonds. It 12 can't -- the resulting recommendations can't impair 13 our ability to meet federal and state environmental 14 regulations. That's what drives MSD. That's why 15 our program is around. And the final one that MSD, 16 our experience with rate commission and our board of 17 trustees will consider, the last one is whether or 18 not it's a fair and reasonable burden on all class 19 of ratepayers. You'll find that that's where most 20 of the discussion happens on this topic. 21 Again, you'll see I'm going to describe 22 the impact of two proposals. MSD will propose a way 23 to fund this in the most cost effective way with 24 borrowing, which would mean additional bonds. 25 You'll also see we'll provide a provision, though, PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 14 1 without bonding. If the populace decides not to 2 give us additional bonding authority, there's a 3 different set of rates that go in place. I'll 4 describe what both of those are. 5 Checking affordability. A lot of this 6 is driven by an agreement with the federal 7 government. As part of that agreement, we made sure 8 long term that whatever we were going to do met some 9 affordability requirements, how things compare to 10 income. We roll in our customer assistance program 11 with that for low-income individuals to try and take 12 care of those who are on the lower end of the income 13 side when we do our calculation. So that, that's 14 affordability. 15 Equitability. Are we charging everybody 16 for what it is we are -- the service we're 17 providing. 18 And there's some underlying rate 19 assumptions that go into our rate proposal. We're 20 looking one to five years out from today. We make 21 estimates on customer growth. We make estimates on 22 what happens with water usage. If water usage goes 23 down, our revenues go down, we may not collect 24 enough revenues to do business. Water usage goes 25 up, we make too much money, we'll see what that PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 15 1 looks like. We make guesses on inflation. We do 2 have to have consent decree compliance. Again, that 3 consent decree is our agreement with the federal 4 government on how fast we have to make improvements 5 to our wastewater system. And, again, I mentioned 6 the customer assistance program, trying the best we 7 can to provide access and communicate the program so 8 we can get as many people who are eligible to the 9 program, allow them to benefit from the program. 10 Here's the guts of the presentation. So 11 what you see in two columns, you see one that says 12 2019 bonds and one says 2019 pay-go. This is what's 13 going to happen to the monthly bill for a typical 14 customer over the next four years. 15 Now, before I start this, this very 16 possibly is not what you pay per month. This is for 17 a typical customer. The way MSD bills for 18 wastewater for residents is we take your water 19 usage, your portable water usage during the winter 20 months in the November through January or December 21 through February, we assume that will be your indoor 22 usage for the entire year. If we actually measured 23 your usage during, say, the summer, we would catch 24 swimming pools, we would catch watering the garden, 25 we would catch washing the car, water that don't go PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 16 1 down the sewer. So kind of an industry standard 2 method is to use the winter water usage, and we will 3 be measuring that this coming winter. We'll measure 4 that, we'll see what it is and that will then 5 rely -- that will then -- that will be the basis for 6 us to charge in the future. 7 So while these numbers aren't exact, the 8 percentages are. So there's one increase. And if 9 you want to compare these percentages, look at the 10 bill that you're going to get in August 2019, that's 11 our starting point, and you will see each one of 12 these increases is what you'll see over the next 13 four years. 14 MR. O'LEARY: I'm sorry. I have to ask. 15 What is pay-go? Because these -- 16 MR. HOELSCHER: So pay-go is without 17 bonding. 18 MR. O'LEARY: What does it mean? 19 MR. HOELSCHER: It means you're paying 20 for this with cash without MSD borrowing any money. 21 So it's as though you bought a car. What's the cost 22 if I just paid cash for the car versus what's the 23 cost if I take out a loan on a regular basis to buy 24 a car. So those are the two options. Again, we 25 have to offer both options because it's not up to us PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 17 1 as to whether or not we get additional bonding 2 authority. That's up to the voters. 3 MR. O'LEARY: Do you look at your 4 reserves when you come up with the pay-go? 5 MR. HOELSCHER: Absolutely. 6 MR. O'LEARY: And your reserves are what 7 right now? 8 MR. HOELSCHER: So I will answer 9 questions -- 10 MR. O'LEARY: Let me get my answer. 11 We're on a chart right now. It's a lot harder to go 12 backwards into a PowerPoint. 13 MR. HOELSCHER: Okay. So I'm going to 14 go through those right now, if I can. 15 MR. PALANS: Sir, if you could just 16 state for the reporter your name so it's on the 17 record. 18 MR. O'LEARY: My name is Tim O'Leary. 19 MR. PALANS: Thank you. 20 MR. O'LEARY: I'm sorry. I didn't mean 21 to interrupt. Just I don't know what pay-go means. 22 MR. HOELSCHER: So pay-go is if the -- 23 if the residents decide we don't want you to borrow 24 any more money, we want you to pay for the program 25 for the next four years solely on the rates the PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 18 1 residents pay us. And just like if you bought a car 2 or a house, we make a decision do I pay cash, you 3 make a decision do I borrow money. As you'll see, 4 if you allow us to borrow money, the rates are 5 lower, the increases are lower than if you decided 6 to pay cash at least in the first four years, at 7 least four years. 8 So, again, we do rate proposals on a 9 four-year basis. That's why you see four years 10 here. So under where it says 2019 bonds in fiscal 11 2021, the typical customer, again this won't be 12 necessarily your bill, would be paying $56.63 per 13 month for wastewater. That would be a 1.9 percent 14 increase over what you paid the previous year 15 starting this August. Fiscal 2022, a 3.8 percent 16 increase in the average monthly payment. That would 17 be, if you're a typical customer, a little over $2 18 more a month in order to pay for the program. 19 Fiscal 2023, again, a 3.8 percent increase and in 20 fiscal 2024 a 3.8 percent increase. So we're 21 looking at the first year after the rate it would go 22 from $56.63 to $63.36 at those rates per year. 23 So move down. We have good discussion 24 about pay-go. You see where it says 2019 pay-go. 25 The chart above is if the population, if our PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 19 1 customers decide to allow us more authority to 2 borrow money. If they don't, the program has to be 3 paid solely out of the revenues we collect from you 4 on a monthly basis and if so, here's the impact on 5 the rates. The first year there's a 1.9 percent 6 increase. We always set the first year of either 7 scenario at exactly the same increase because we 8 want the ability to determine when are we going to 9 actually have the vote and, therefore, we want to 10 make sure we do those the same. That's the same 11 $56.63. The first year going to our fiscal year 12 2022 would be a 15.1 percent increase in the average 13 monthly charge for the typical customer. Fiscal 14 year 2023 a 17.1 percent increase and in fiscal year 15 2024 a 13.1 percent increase. 16 So those are the two provisions that 17 we'll make sure everybody understands when time 18 comes to vote, assuming this essentially goes 19 through the review process. The citizens will have 20 a chance to look at this and we won't provide just 21 the information for these four years. We'll provide 22 the information going out. We've had folks rightly 23 ask, well, that just means I have to pay off 24 interest on this and you're absolutely right. So 25 when it comes time to voting, we'll make sure people PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 20 1 understand what kind of the long-term outlook is to 2 make a decision as to what you think is the best 3 plan moving forward. 4 Cost savings and benefits. So I'm going 5 to give you some numbers that come from the previous 6 four years, what happened to our predictions as to 7 what our cost would be. In the previous four years, 8 2017 to 2020 our operation and maintenance expense 9 were $43 million below budget for those four years. 10 A lot of that savings had to do with technology. 11 Biggest one I point is we had a technology that we 12 put in place that made it much cheaper to do the 13 mandated inspection and cleaning of our sewers on a 14 regular basis. That's a real important one because 15 those type of technologies are sustainable. They're 16 regular savings. The savings we saw in those 17 previous four years, they get reflected in what 18 we're proposing the expected revenue needs to be for 19 the next four years. 20 Cost of the capital program, it came in 21 over the last four years $110 million under budget 22 or about 7 percent below what we had anticipated. 23 Then the financing. So what is the cost 24 of the debt that we have to take up. The two 25 gentleman here in the jackets happen to be our PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 21 1 secretary treasurer and our director of finance. 2 They're watching our dollars all the time. What 3 they'll do is they'll take existing debt and they'll 4 find opportunities for low-cost borrowing such as 5 through a state SRF fund which gives us a 6 70 percent, 70 percent reduction in the interest 7 cost. If you've heard of WIFIA, there was a federal 8 program we got to borrow directly from the U.S. 9 Treasury, we took advantage of that in the 10 neighborhood of a couple tens of millions of 11 dollars, just reducing those costs. So in that one 12 we saved $27 million in expense from what we 13 anticipated the previous four years. Now, that is 14 not something you could necessarily put into a model 15 and expect it to be available every year. That's an 16 example of a type of opportunity that we'll keep 17 looking for even over the next four years. 18 The thing I want to leave you with here, 19 those moneys, you may ask where do those moneys go 20 when we came in under the previous four years. We 21 don't have stockholders. It doesn't go to our 22 stockholders. We're a municipal entity. We don't 23 get bonuses. That money goes into this four years. 24 It's the first pot of money that we use to try and 25 keep rates as low as we possibly can. The money PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 22 1 sits there and that's our starting point for this 2 proposal. 3 Through the timeline, and I know I'm 4 repeating some of the things that the chairman did, 5 but MSD submitted this rate proposal to our rate 6 commission on March 4th, 2019. The rate commission 7 does have to have their recommendation completed by 8 August 16th -- 16th? I think the 19 is wrong here. 9 I think it's the 16th, 2019. They will turn that 10 over to our board. Our board will review the rate 11 commission's recommendations the same way the rate 12 commission is reviewing MSD staff's review. They'll 13 take -- they'll take the last part of calendar 2019 14 doing that and they'll decide how to move forward. 15 Any changes we put in place will become effective 16 July 1, 2020, which means you'd see these increases 17 in August 2020. That's the way our billing cycle 18 works. We start our fiscal years in July. So we'll 19 take the July usage and bill you in August. That's 20 when you'll see these increases. 21 I talked about when we would have votes. 22 Again, that varies. We want to make sure we have 23 the opportunity to communicate everybody so 24 everybody understands what they're voting on. 25 Sometimes certain election dates aren't as good as PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 23 1 others. So we will have an election on whether or 2 not our customers want to use bonding to finance 3 this program. Somewhere between spring 2020 and 4 spring 2021 you'll see a vote come up asking people 5 this question. MSD will provide a lot of 6 information prior to that vote. We won't advocate 7 one or the other. It's not up to us as to how we 8 pay for it, but we'll provide a lot of information 9 to you not only in the financial particulars of 10 these four years, but of the years going out so you 11 can decide whether or not bonding is a good option 12 for this particular four years. 13 These are the public meetings. This 14 isn't the only public outreach we've had. There's a 15 lot of other pieces, but these are the public 16 outreach meetings specific to the rate commission. 17 We happen to be on the fourth dot and I think as the 18 chairman indicated we have two more meetings that 19 are still occurring. They'll be public meetings 20 like this and I think one of them's still scheduled 21 to be streamed, if I'm not mistaken. Correct? 22 Yes. So we're on the fourth dot. This 23 is Thursday, June 27th, 6 p.m. 24 Before I turn the floor back over to the 25 chairman, this is the website where all of the PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 24 1 information on the proceedings from the rate 2 commission are on our website. You have access to 3 everything, meeting minutes, submissions, testimony, 4 discovery requests. It's all located at this site. 5 The one thing before I hand it over, I 6 would ask you again remember, we're here and the 7 rate commission's here to answer questions on what I 8 brought you. However, if you've got other questions 9 of MSD, we have other staff here. We will stay 10 until the last person leaves, and we'll also be 11 available after this to answer any other questions 12 you may have about MSD's services. 13 Mr. Chairman, my presentation is 14 completed. 15 MR. PALANS: Thank you, Mr. Hoelscher. 16 May I have the clipboard, please? 17 Thank you. As I indicated when we 18 began, under our general housekeeping rules, if you 19 wish to present testimony or if you have any 20 questions or comments or during the course of our 21 evening, you may have questions, please let us know, 22 raise your hand, we'll pass the clipboard to you, 23 you can sign your name and, and we can go from 24 there. 25 I would ask in making your questions or PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 25 1 comments that you keep your voices audible so that 2 our reporter can transcribe the comments or 3 questions for the record adequately. 4 As I indicated, speakers will be 5 recognized in the order in which they sign up and, 6 Mr. O'Leary, you're the sole signer-upper. So I 7 don't even have to go down to number two unless 8 there are other questions you may think of. 9 Mr. O'Leary, the floor is yours. 10 MR. O'LEARY: Okay. Great. Not like 11 the tax meeting we were at two days ago. It was 12 horrible. It was a nightmare. 13 I'm retired and I live on Social 14 Security and so I have lots of time to look at, 15 like, Google and research stuff and not the least of 16 which are reports to the Department of Energy 17 regarding rate-setting policies. Several of these 18 surveys I'd like to mention, and you're probably 19 familiar with them. You've probably read them 20 yourself. You know them as much as I do, but the 21 first one was to the Department of Energy, it was 22 the office of energy efficiency and renewable 23 energy. It was the water and wastewater annual 24 price escalation rates for selected cities across 25 the United States. It was published in September of PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 26 1 2017. This was made to the -- to the federal energy 2 management program basically to inform decisions 3 using life cycle cost analysis on water efficiency 4 projects. The studies were -- the studies were 5 conducted by the Pacific Northwest National 6 Laboratory in Seattle. Are you familiar with this 7 report? 8 MR. PALANS: I'll ask the district if 9 they have any familiarity. 10 MR. HOELSCHER: So we have them writing 11 it down. I don't know if that's specifically one we 12 referenced, but we do reference industry-specific 13 nationwide studies both that are in -- that are in 14 the proposal that's on the website. So I can't 15 answer right now whether or not that's specifically 16 one that we looked at. 17 Does it sound familiar to you guys? No. 18 MR. O'LEARY: There's only two. So if 19 you haven't got one or the other of these, then I 20 would suspect that you're not doing enough homework 21 on what the rates are across the country. 22 MR. HOELSCHER: So I would ask that you 23 look at our rate proposal and find there are more 24 than two sources. I'll even show you the rate 25 proposal afterwards. We are comparing against PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 27 1 what's going on throughout the rest of the country. 2 MR. O'LEARY: This is a 60 water 3 districts and utilities and 40 cities with 4 wastewater surveys. These surveys typically go out 5 every year. They are voluntarily submitted by sewer 6 districts and because these 40 cities that I found 7 that were sewer related, the closest one to us was 8 Olathe, which is Kansas City. Kansas City, like 9 St. Louis, has very high sewer rates, very high 10 water rates. They use target affordability 11 benchmarks as specified by the, the federal 12 government, the U.S. EPA affordability ratings. 13 Kansas City is a mess. It's an absolute 14 nightmare. They have a target date of -- a target 15 amount of $80 a month for affordability. They are 16 currently at $110 a month. You should know this. I 17 mean, they are our neighbors and they are in hot 18 water because of all the cities, the Midwest stands 19 out, in all the regions across the entire United 20 States, the Midwest, which includes St. Louis, are 21 the highest increases in the entire United States 22 over the past five years, six years. Okay? 23 Census data is changing. We have a new 24 census coming out next year -- or no, September I 25 think, if I'm not mistaken, and the census data will PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 28 1 help drive median household incomes, what they 2 really are. Those numbers fluctuate wildly. The 3 EPA has dictated that the affordability guidelines 4 should be 2 percent of median household income, but 5 if you look at the median household income of the 6 county versus the city, if you're looking at rates 7 for cities across the United States, then you're 8 saying, okay, if Olathe was 5.3 percent increase per 9 year and we are 10.6, we know that we are twice as 10 expensive as Kansas City. 11 So these reports are really important. 12 I'd be happy to leave you with websites that I have 13 on my phone that you can read these reports for 14 yourself and print them out. 15 Anyway, 50 largest cities. We are the 16 21st largest city in the country. We've lost to 17 Baltimore. Baltimore just moved up with the census 18 report data. If we're going to be talking about 19 cities, then we need to be in these surveys. So 20 this information, we need to submit this information 21 to these surveys so that we can benchmark meetings 22 such as these to know whether we are on track or way 23 over the dot. 24 In the past when these meetings have 25 come up, everybody has said Missouri's sewer rates PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 29 1 are not too bad. They're, you know, they're kind of 2 averaging out below what other cities are paying. 3 This is simply not true anymore. 4 Since -- this is very startling when you start 5 looking at your bills and you start -- I was happy 6 that the website for the sewer district does have 7 rates going back to 2012, at least you can look at 8 the base charge and the volumetric charges and you 9 can say how much we've spent. The striking fact is 10 that from 2012 to now our rates have increased 11 224.2 percent. This rate includes the next one 12 starting July 1st, which is the last of the months 13 being 10.6 percent increase per month. 224.2 14 percent is not going to put us anywhere close to the 15 median for what the average rates are being charged 16 across the country. If we're competing with cities 17 like Seattle and San Francisco and Austin, Texas, 18 cities that have much higher median household 19 incomes, yeah, maybe that will make sense, but it 20 doesn't. We have much less median household incomes 21 than those types of cities. 22 If we're talking about cities that have 23 substantial growth and populations and need 24 additional infrastructure, we're not one of those. 25 We don't deal with drought. We don't have to deal PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 30 1 with those costs. So why is our infrastructure out 2 of line with all these other regions, the south, the 3 west where markets are -- the prices of delivering 4 water and the prices of treating water are going way 5 up? Why are we -- why are we so high? 6 MR. HOELSCHER: Okay. So I'm going to 7 provide contradictory information to what you 8 provided. So I will let -- I serve on the board of 9 an organization called the National Association of 10 Clean Water Agencies. It's every large wastewater 11 utility located throughout the country. They've 12 done studies. We know we are slightly -- right now 13 slightly above the median cost for wastewater per 14 customer throughout the country. We don't pay $120 15 a month like Atlanta. We don't pay in the nineties 16 like New York. Kansas City is a little bit 17 different, but what really drives the immediate need 18 has to do when these entities were enforced upon. 19 There are 208 entities throughout the United States 20 who did not meet the Clean Water Act. We were all 21 moving towards that. We were all spending money, 22 and in St. Louis it meant $11 a month. That's all 23 we wanted to spend. I would guarantee you $11 a 24 month would not allow us to meet this. 25 When we signed this consent decree, we PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 31 1 were one of 208 entities throughout the United 2 States the Department of Justice decided we are 3 going to make sure we set a schedule based on you 4 meeting the Clean Water Act considering 5 affordability and we're going to push you to 6 affordability. That's what that agreement we had 7 with the Department of Justice was. 8 One of the reasons our rate increases 9 were so great early back from $12 a month is because 10 we were doing nothing. We were not raising enough 11 funds to get anything done. We were given 23 years 12 to solve what now is $6 billion worth of issues 13 throughout our district to meet the Clean Water Act. 14 The evaluation found that that would keep us just 15 under the affordability number. We're fully aware 16 that the affordability of median household income 17 number is different throughout our area. Typically 18 whatever you have in the county, whatever you have 19 in the city, the median household income -- let's 20 see, how do we do? Whatever you have in the county, 21 the median household income in the city is one-third 22 of that. That's the way the calculation works. If 23 our rate was a 1.5 median household income, that 24 means 1.3 percent was the county and 2 percent was 25 where the city stood. We understood that. We knew PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 32 1 that was in the negotiations. We had to use that 2 information, from a lot of others. We also have 3 consultants provide the same data who compares us to 4 everybody else. That was considered in this 5 evaluation. 6 We recently got a five-year extension on 7 our consent decree. There was some regulatory 8 changes that changed our program. We brought 9 affordability to the Department of Justice. They 10 extended our program from 23 years to 28 years. 11 That has a great increase. It's one of the reasons 12 we're actually early in coming to the -- to the 13 ratepayers with a relatively small increase compared 14 to what we've had in previous years. 15 We could have a long, long discussion, 16 but since you've presented to these folks, I would 17 suggest after this both the information is in our 18 rate proposal, the information that we've referenced 19 in the rate proposal, we can go over where all of 20 the sources of our data are that led us to the 21 conclusion we're being cost effective. We're 22 slightly over median cost per month. We know that. 23 It has to do with where we're at in our consent 24 decree. I will tell you St. Louis was one of the 25 last cities to be enforced against. We don't have PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 33 1 beaches. We have very, very, very large rivers 2 which, unfortunately, have a lot of water right now. 3 We're just downstream of the Mississippi, Illinois 4 and Missouri River. That makes our impact on the 5 environment less. We happen to be towards the 6 tail-end of who the Department of Justice has 7 decided to go over to have them fix these things. 8 Quite honestly, it probably took that 9 for the St. Louis community to decide to have the 10 will to actually pay to meet the Clean Water Act. 11 We are paying for a lot of, of -- a lot of costs 12 associated with having ignored the system for 13 decades. That is where we stand. 14 MR. O'LEARY: Well, I mean, the rates 15 were -- my rates were $16 in 2012, $16 a month. 16 MR. HOELSCHER: So if they were that, 17 then they would -- 18 MR. O'LEARY: Now 35. 19 MR. HOELSCHER: What's your cost right 20 now? 21 MR. O'LEARY: My cost right now is 32.65 22 a month. 23 MR. HOELSCHER: Okay. So that 32.65 24 will go up 1.9 percent -- 25 MR. O'LEARY: 10.6. PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 34 1 MR. HOELSCHER: 10.6 percent, right, to 2 get us to August 2020. Right, that's the current. 3 That's the current last increase that goes in with 4 the rate proposal -- 5 MR. O'LEARY: That's the four-year plan. 6 MR. HOELSCHER: Right. So what you see 7 is the next four years. We thought we were going to 8 be in the 10 percent number the next four years. 9 We've done some things to be able to provide 10 affordability, and that's where the 1.9 and the 3.8 11 and the 3.8. 12 MR. O'LEARY: But this 10.6 percent has 13 been going on for a long time. It's been going on 14 since 2012. 15 MR. HOELSCHER: Since 2002 or '03 is 16 when we actually had to start raising rates. 17 MR. O'LEARY: MSD was 10.6 percent in 18 2012. 19 MR. HOELSCHER: Right. Way below any 20 possibility of maintaining the system to meet water 21 quality. We were ignoring federal regulations 22 because of the funding. We were doing everything we 23 could with the funds we had. Eventually we were 24 enforced to do this by the Department of Justice, 25 and we had to get the program done within the time PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 35 1 frame that we negotiated with the Department of 2 Justice. When we agreed to them how fast we're 3 going to do this, at this time we had the longest 4 consent decree that the Department of Justice had 5 ever said we could have, 23 years, and we've now 6 gotten that extended another five years to 2039 to 7 get this whole program done. 8 So we can sit and talk about the 9 particulars. I will tell you every issue you 10 brought up has been considered since MSD was made 11 aware in 2001 that the federal government was 12 considering suing us over this issue. 13 MR. O'LEARY: I only bring it up because 14 we don't have links like this to inform ourselves 15 until we go onto the line and find a report like 16 this. This is not -- this is all valid information. 17 It's a true report. 18 MR. HOELSCHER: So we can take it with 19 all the other reports that show exactly -- and 20 matter of fact, some of them may have -- may be 21 source data with what you've got. We also have 22 reports that show -- we compare ourselves to the 50 23 largest -- 24 MR. O'LEARY: You're using Raftelis 25 Financial Consulting. PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 36 1 MR. HOELSCHER: That one. There's also 2 something from AWWA. 3 MR. O'LEARY: AWWA is what I just quoted 4 to you. That was the survey that was done. 5 MR. HOELSCHER: And we knew that one 6 existed. 7 MR. O'LEARY: That was done with 8 Raftelis and AWWA -- 9 MR. HOELSCHER: And that's part of what 10 we had. 11 MR. O'LEARY: And the other one is Black 12 & Veatch. And these are two very big reports. 13 Black & Veatch, I'll just mention this because I 14 want to be brief, but Black & Veatch is the 50 15 largest cities water and wastewater rate survey, and 16 that was actually the one that really spelled out 17 what was a problem with Kansas City. And when I 18 think about what's happening there and what's 19 happening here, they are very similar. So I'm 20 imagining they're trying to get from behind the 21 eight ball, too, but their rates are only 5.3 22 percent. Ours is 10.6. 23 MR. HOELSCHER: Well, you're talking 24 about -- now, it depends on where you're at. Kansas 25 City is nowhere near as far along as we are in PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 37 1 completing all the environmental requirements. 2 They've got issues coming down the road. You have 3 to look at the particulars. I happen to know this 4 one. I know Terry Leeds who runs the wastewater 5 utility in Kansas City. I know everyone who runs 6 wastewater utilities throughout the country. 7 Depends on where you're at. We have the City of San 8 Francisco. Their consent decree is done. The EPA 9 is ready to enforce to get them for a different set 10 of environmental regulations. It depends on where 11 you're at in the cycle. 12 We're comparing ourselves to what -- to 13 the numbers we've got, we're comparing ourselves to 14 meeting household incomes with St. Louis based on 15 the time frame when we were forced by the federal 16 government to finally fully meet all the wastewater 17 requirements over a certain period of time. 18 So I will completely stand by the 19 analysis we've done to try to both make it 20 affordable and meet the numbers. We are doing way 21 better than an awful -- again, I don't want to be in 22 Atlanta paying $120 a month. You mentioned the west 23 is doing good. They changed their accounting. You 24 won't find it to be $120 in this report. They 25 changed their accounting system. PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 38 1 MR. O'LEARY: Well, the accounting is -- 2 I can -- the accounting actually bases everything 3 on -- they have to go with the standard and they 4 work out a water rate per kilogallons. I've worked 5 those out. We are not San Francisco, we are not 6 Boston, but these are expensive markets. We are not 7 any of those type of markets. And if you look at 8 the spread of the dots for affordability index 9 target, it's somewhere between 80 and $100 a month. 10 Most of -- that's just as an average, 80 to $100 a 11 month, but right now there are six cities that are 12 more than us and all the rest of them are less than 13 us. We're talking out of 40 cities. The closest 14 one to our city for rates and for target 15 affordability is Indianapolis. 16 MR. HOELSCHER: So two things I would 17 press. Indianapolis is almost exactly the same 18 place as we are in their consent decree. Mr. Tom -- 19 darn, I can't believe I can't remember the gentleman 20 who's in charge over there, but they're almost 21 exactly the same place as we are. We work with them 22 all the time. I would put to you, you got to 23 consider where you're at in the program. And we've 24 looked at exactly those numbers, exactly the ones 25 you're expressing. I would put to you, you can read PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 39 1 those, also consider, and this is an impact that 2 won't show up in those numbers, MSD's costs. Our 3 revenue source is only what I'm presenting to you 4 here. What you don't see in those numbers and you 5 don't know where they're at, there's also -- a lot 6 of those entities are actually city-run 7 organizations. Revenues come from other hidden 8 sources that aren't included in that billing. We 9 know that from having know how the data is put 10 together and knowing how they report. So it's 11 really, really important we really concentrate on 12 the affordability here, what our costs are. We know 13 you'll find in the study we do a cost per unit 14 survey analysis based on surveys throughout the 15 country. You will find we are in the top quartile 16 of affordability for just about every service we 17 provide, how we maintain the system, the cost for 18 being treated, you'll find that is the case. But I 19 will give you, you're right. You hit on a big 20 point. Fourth largest sewer system in the country, 21 that's where the problems come from, and the 21st 22 largest municipal area. There's a disconnect there. 23 I think we've done a real good job in trying to make 24 this as cost effective and as affordable as we can 25 while still satisfying the requirements of the Clean PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 40 1 Water Act. 2 MR. O'LEARY: Well, there was one other 3 thing I wanted to mention, and this is also 4 available in these two reports, and we are one of 5 three cities that has the slowest growth of revenue 6 in the United States. Do you know what those cities 7 are? 8 MR. HOELSCHER: No, but we do know that 9 we on an annual basis check the growth specifically 10 to St. Louis and how it compares to our rates. So 11 that's something we're tracking all the time. Do 12 I -- do I believe it's something different? I have 13 no doubt it is. 14 MR. O'LEARY: Well, it's L.A., St. Louis 15 and Pittsburgh. 16 MR. HOELSCHER: Okay. 17 MR. O'LEARY: And those are somewhere 18 between 1.6 percent growth, that's all in L.A. 1.8 19 percent for us and Pittsburgh. So you're looking at 20 markets that with lower median household incomes, 21 you're looking at markets that don't have a lot of 22 revenue to put into capital expansion projects like 23 this without somebody paying more money, you know, a 24 lot more which, unfortunately, happens to be seniors 25 also, and that's what I -- I'm a senior. I'm here PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 41 1 to kind of say -- also you'll probably see my 2 application for a customer assistance program. 3 MR. HOELSCHER: I hope so. 4 MR. O'LEARY: I think that's a very good 5 plan. I think it's a very good thing that you're 6 offering, what we're not seeing from county taxes or 7 anything like that for seniors. 8 MR. HOELSCHER: So let me -- since you 9 compared to Kansas City, one of the advantages we 10 have of being the type of entity we are, we can 11 offer for those for low-income and retired folks, 12 depending if you meet thresholds, we'll charge 13 everybody one-half of their rates per month for 14 wastewater services. 15 MR. O'LEARY: For two years. 16 MR. HOELSCHER: Well, sometimes it can 17 be for more than two years. 18 MR. O'LEARY: You can get extended. 19 MR. HOELSCHER: Yeah, you can get an 20 extension. 21 I will let you know Kansas City, as a 22 municipal entity, their legal opinion is because 23 they are a municipal entity created under the state 24 statutes and state of Missouri, they can't, in their 25 opinion, offer a customer assistance program. MSD PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 42 1 can. 2 MR. O'LEARY: Well, it's a worthwhile -- 3 it's going to help me. 4 MR. HOELSCHER: So it's a thing I will 5 let you know that -- 6 MR. O'LEARY: I shouldn't really be here 7 complaining about the rates -- 8 MR. HOELSCHER: Well, that's fine. 9 MR. O'LEARY: -- when it's going to 10 affect me half as much. 11 MR. HOELSCHER: But I want to distribute 12 information. 13 I will let you know working nationally, 14 what MSD does, this the national organization, I've 15 met with the Department of Justice, I've testified 16 in front of Congress, we have met with 17 representatives and senators, we have this issue. 18 One of the biggest things we have is a federal 19 program that addresses affordability issues. This 20 is what's on the plate. It's not going to make this 21 fiscal year. Over the next fiscal year we're 22 fighting for something similar to LIHEAP where 23 there's federal low-income dollars for other 24 utilities. MSD is not just looking after itself, 25 every place we can to try and be as fair with our PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 43 1 customers as we can. 2 MR. O'LEARY: Your application actually 3 asks if you were currently on a LIHEAP program. 4 MR. HOELSCHER: So, and I'll give 5 Mr. Gee credit for this. Prior to him becoming our 6 director of finance, LIHEAP was out there working. 7 We now cooperate with them. If they get an 8 applicant, they're immediately checked and asked if 9 they want to also apply for our program. 10 MR. O'LEARY: Great. That's great. 11 Thank you. Thank you. 12 MR. PALANS: Mr. O'Leary, did you have 13 any other question or comment? 14 MR. O'LEARY: Well, I'm, I'm just -- you 15 know, I've got a lot of numbers. I don't -- I don't 16 want to bury anybody with numbers. So I'm trying to 17 get the top line ones to get what I think really is 18 the story here. 19 If you look at an interesting graph in 20 one of these things, they talk about where your 21 sewer and water used to be relative to where your 22 cable and your electric and your gas and some of 23 your other monthly expenditures were. And for the 24 first time now that this 10.6 is kicking in in July, 25 I'm finally paying as much to flush my toilet as I PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 44 1 am to get onto the internet. My internet is $40 a 2 month. Now my sewer is 40. And by the time you add 3 inflated water charges, water and sewer are now 4 equal to my telephone and my cable and my -- and 5 my -- that's insane. Okay? Because I started -- I 6 said, okay, I'm going to get really cozy with my 7 water meter and I'm going to look at all these 8 numbers. I'm going to figure out just if I don't 9 take a shower, if I don't use my dishwasher, if I 10 don't use a washing machine, how much water I use in 11 24 hours. And I figured it out and it works out to 12 about two units, 1,600 gallons a month which is 13 about 55 gallons a day. So when you start getting 14 down to the granular data of how much it costs me to 15 flush a toilet, there's a problem. You know, 16 there's, there's a problem because I'm like I don't 17 like to think about my phone and my internet prices, 18 but I really don't like to think about how much it 19 costs to flush a toilet, and that's basically most 20 of the water I'm using except for maybe washing a 21 dish or two. I live by myself. I'm a senior who 22 goes to the bathroom a lot. I go a lot and I'm 23 flushing toilets probably -- I was going to put that 24 on the calendar. I was going to make a little 25 hashmark for which one, because I have a low volume PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 45 1 toilet upstairs and I have a regular toilet 2 downstairs, and a toilet's about 5 gallons of water. 3 13 of those a day. 4 So, anyway, that's where I start with 5 this stuff and I don't want to hog the floor, but I 6 do have one other issue I want to bring up. 7 MR. HOELSCHER: So let me respond. This 8 is very short. This is a simple thing, before you 9 do that. You've hit on a point that I think is 10 probably true. There is an urban legend that's true 11 that somebody in the EPA in the 90s said, oh, my 12 gosh, people are paying more for cable TV than they 13 are to meet the Clean Water Act. That's what 14 started this process. That's what led to over 200 15 communities being sued to meet the Clean Water Act 16 on a given schedule. And so I just wanted to relay 17 that to you since you brought it up. I hadn't got 18 to tell that story in a long time. 19 MR. O'LEARY: I actually have rabbit 20 ears. So that's -- I live on a budget, but I do 21 really well until the county raises my taxes because 22 somebody next door has just flipped a house for 23 $200,000. I'm behind the eight ball on that. 24 Anyway, but that brings me to a very sad 25 issue, and we have the sewer people out with their PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 46 1 spray paint and they were marking stuff and I said 2 what's going on, and previously they had a really 3 high-tech instrument that -- I have a manhole right 4 outside my driveway and they had the manhole open 5 and they were down in the hole and they had this, 6 like, really cool device that was making some kind 7 of tone and it was going under. 8 MR. HOELSCHER: It was some of the 9 technology I mentioned earlier. 10 MR. O'LEARY: Yeah. And so I said what 11 you got there? They said we're looking for, you 12 know, low spots, root intrusion, collapsed sewers. 13 I thought, well, that's interesting, but now I'm 14 talking to the sewer guys because whenever I see a 15 hard hat and a fluorescent vest, I go bend over 16 because you're not going to like what you're going 17 to hear. And this guy said to me, he said we're 18 going to cut all the trees down on this street. And 19 this cul-de-sac that I lived in this house for 21 20 years in Mystery Hills, it's 144 homes, charming 21 little homes, very close together, very close 22 together, zero lot line planning back in 1973. He 23 says we're taking out all this growth in the 24 cul-de-sac. And I said you're going to take that 25 whole bush? Yeah, that one and that one and we're PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 47 1 taking all the trees out along this street, these 2 mature trees. 3 MR. HOELSCHER: So I can only offer you 4 to replace the deepest underground infrastructure 5 that exists under your streets, sometimes we do have 6 to do things that we wish we didn't have to. We try 7 to avoid them, but I'm going to give you the 8 opportunity. 9 Brad, raise your hand. You knew this 10 was coming. 11 You see that gentleman? He's our 12 assistant director in charge of design. Let him 13 know where you're at. If nothing else, Brad can go 14 back and he can shed what possible provisions we do 15 to see if we could have possibly avoided that. We 16 don't do it because it's easiest. We try to avoid 17 it, if we can. And I would ask you talk to Brad 18 afterwards and he can get back to what are the 19 particulars of that particular project, why it's 20 having to be done that way. Now, I will also say, 21 if it's actually being done that way. 22 MR. O'LEARY: Well, I called my trustee. 23 After I talked to this gentleman, I called my 24 trustee. I got right on the phone, and George said 25 to me two days -- yesterday I talked to him. He PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 48 1 said I called MSD, I had to call three people. He 2 goes it is correct, they're taking out all the 3 trees. 4 MR. HOELSCHER: Okay. Well, Brad can 5 give you -- again, Brad's got well over 100 6 projects -- 7 MR. O'LEARY: It will definitely impact 8 this neighborhood. It's a small neighborhood. The 9 houses are extremely close together, and to take all 10 those trees out. First of all, the county came out 11 last year because of the Emerald deal, whatever 12 the -- the ash borer, and took out all the mature 13 ashes and that was big damage. You know, these 14 trees were however -- 15 MR. NEVOIS: We can talk after. 16 MR. O'LEARY: Okay. 17 MR. PALANS: Mr. O'Leary, if I could ask 18 you if you'd meet with Brad afterwards. 19 MR. O'LEARY: I will. Thank you. 20 That's all my -- that's it for me. 21 MR. HOELSCHER: Enjoyed the 22 conversation, I really did. 23 MR. PALANS: We do have several other 24 participants that have asked to ask questions. I'm 25 going to -- PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 49 1 MR. O'LEARY: I'm sorry. Went way over 2 my ten minutes. 3 MR. PALANS: Before we do, I do want to 4 mention just a couple of points. You referenced two 5 consulting professionals that are recognized 6 industry-wide for this particular industry, 7 wastewater. One is Raftelis. The other is Black & 8 Veatch. Raftelis is the industry-wide consultant 9 that the district has used and has consulted with in 10 formulating their proposal. Black & Veatch is the 11 consulting professionals firm that we have engaged 12 for our rate commission. 13 We are independent of the district. The 14 district has proposed a rate. It is vetted before 15 our commission. I think that you understand from 16 your own research that the Raftelis consultants and 17 the Black & Veatch consultants are recognized as 18 leaders in their field. So we are not getting bad 19 advice. 20 Also, I would suggest that if you 21 haven't already, go to the MSD website and look at 22 the record of these proceedings. You will find it 23 replete with written information, studies, surveys, 24 Raftelis surveys, Black & Veatch surveys that I 25 think will go along with and answer many of the PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 50 1 points that you raised. Thank you. 2 MR. O'LEARY: Thank you. 3 MR. PALANS: Our next question is from 4 Diane Shenker. Yes, Ms. Shenker. 5 MS. SHENKER: Well, I was just curious. 6 When this was handed out, I was looking at this and 7 I was wondering this form showing what the final, 8 will these be handed out or sent to people's bills 9 or where will these be sent out? The average person 10 will see this? 11 MR. HOELSCHER: So that information is 12 going out in presentations like this as well as 13 we've used social media, that information has gone 14 on social media, it's gone out on live streaming, 15 it's gone on radio, TV, newspaper, internet site, 16 mailers. We've done everything we can in support of 17 the process that our rate commission is going 18 through. 19 The other time you'll see this when this 20 information goes out, MSD can't advocate what to do. 21 You'll find a pretty massive process that MSD will 22 use as we get near election date providing all the 23 information everybody needs so they understand if I 24 vote yes this is what happens, if I vote no this is 25 what happens. And so there's another major process, PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 51 1 and in between that our board of trustees will spend 2 a couple of months in public hearings as well as 3 part of their process to review the recommendation 4 that comes from our rate commission. 5 MS. SHENKER: Well, at first when I 6 looked at it, psychologically right away you say, 7 oh, my God, I better vote for it because if not, the 8 percentage of change is enormous, but also according 9 to this gentleman in front of me, he mentioned he 10 was paying $12 and then he was paying 32. If you 11 take 10 percent times that, it doesn't come to 55. 12 MR. O'LEARY: No. I paid 16. I started 13 at 16 and now I'm 32 and now it will be 36, so... 14 MR. HOELSCHER: That would be your 15 starting point. 16 MR. O'LEARY: That's only two units a 17 month. I've learned this stuff. 18 MR. PALANS: Ms. Shenker, did you have 19 another question? 20 MS. SHENKER: No. I was really just 21 kind of curious as to this information, the way it 22 is presented and if anybody would look at it, if it 23 was being mailed with your bill or something, you'd 24 say, well, I better vote for it, it's written out 25 psychologically. I personally from what I'm paying, PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 52 1 to change for 10.6 percent, it would have to be a 2 lot higher for me to justify 56. 3 MR. HOELSCHER: And, again, that's a 4 typical customer. Every one of you may not pay that 5 number. That's for a typical customer at MSD. 6 MS. SHENKER: What is considered 7 typical? 8 MR. HOELSCHER: Six CCF or according to 9 the calculation it was 7,500 gallons of water -- 10 MR. O'LEARY: No. 7,500 gallons is ten 11 units. 12 MR. HOELSCHER: Did I just do it 13 backwards? 14 MR. O'LEARY: Yep. The reason I'm 15 saying that is because -- 16 MR. HOELSCHER: No, no. It may well be. 17 MR. O'LEARY: -- the U.S. Geological 18 Survey Department -- 19 MR. HOELSCHER: 4,500 gallons. I'm 20 sorry. So the typical customer is 4,500 gallons, 21 and that's based on actual measurements from the 22 water usage of our customers. 23 MR. O'LEARY: Could you change that 24 graphic to be consistent with the U.S. Geological 25 Survey which says everybody uses 89 gallons a month? PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 53 1 MR. HOELSCHER: Ours is based on the 2 actual utilization within the St. Louis area. We 3 think that's more accurate for this particular. 4 Now, when we compare to other cities, we normalize 5 those rates using the same rates you just said. 6 MR. O'LEARY: Because, I mean, it looks 7 pretty light, you know, compared to ten units. Six 8 units looks pretty light. 9 MR. HOELSCHER: I will tell you in 10 St. Louis people do not -- the typical customer does 11 not use ten CCF. 12 MR. O'LEARY: That's 100 gallons a day. 13 MR. HOELSCHER: We are traditionally 14 seeing usage, water usage go down in St. Louis both 15 because of conservation as well as just think of the 16 types of facilities they put in new homes, water 17 saving devices. We're seeing in the rate commission 18 those we've seen actual usage go down. And so we're 19 using actual historical data from MSD measurements. 20 I'm sorry, Mr. Chairman. 21 MR. PALANS: Ms. Shenker, have you 22 concluded your questions or comments? 23 MS. SHENKER: I am. Thank you. 24 MR. PALANS: I'm going to move on to our 25 last question or comment. If any others would like PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 54 1 to sign up. The last question or comment at the 2 moment is Mr. and Mrs. Mehta. 3 MR. MEHTA: Thank you. 4 Tim, thank you for the tremendous 5 amounts of research that you've done. We really 6 appreciate that. 7 MS. SHENKER: Yes. Very good. 8 MR. MEHTA: Now, I do have some 9 questions about water usage and that, that relates 10 to two bills that I had. One is up to August 2018 11 which showed I was using four CCFs and the rate at 12 that time was $3.97 cents for four CCFs. This year 13 it changed to six. My usage frankly jumped up to 14 six CCFs. Now, it's just the two of us. We don't 15 have any hidden kids or anything like that, no pets, 16 and I'm wondering what caused that to jump up. 17 MR. HOELSCHER: I'm glad you asked that 18 question. So understand MSD does not measure the 19 wastewater coming out of your home. As I said 20 earlier, it will be based on the potable water 21 usage, your drinking water, for the three winter 22 months. So if you think there's something wrong in 23 the amount of usage, that's reflective of the 24 information we're getting from the water company. 25 Your water bill has gone up by exactly the same PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 55 1 amount. So what I'd suggest, if you feel there's an 2 error or mistake, you can contact us, we'll 3 immediately say you ought to contact your water 4 provider because we do run into occasions with their 5 mistake, the meter doesn't read properly, there's a 6 leak, there's a break. So as far as the number of 7 units used, MSD is not generating that data on 8 itself ever. It's just getting it directly from the 9 water provider. 10 MR. MEHTA: So American Water I'm 11 assuming? 12 MR. HOELSCHER: Probably, assuming 13 you're not in the city or in Kirkwood. 14 MR. MEHTA: Creve Coeur. 15 MR. HOELSCHER: Creve Coeur. It would 16 be Missouri American Water. And if you've got a 17 question about that and what they do is if you 18 find -- so in this way you also may even get a 19 correction off the water bill you've received 20 previously. Whenever they make those adjustments, 21 they notify Marion Gee's office and we make 22 adjustments to your wastewater bill including 23 historically. 24 MR. GEE: Brian, he needs to look at his 25 winter quarter billing, not the bill in the summer. PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 56 1 You need to look at -- if you call 2 Missouri American, the bills you really should look 3 at are the ones that cover, like, from December 4 through April. 5 MR. HOELSCHER: So are you talking about 6 the utilization we show on your wastewater bill? 7 MR. MEHTA: Well, I get one bill from 8 MSD per month. 9 MR. HOELSCHER: Per month, right. And 10 that number of usage has jumped from last year? 11 MR. MEHTA: Correct. 12 MR. HOELSCHER: Okay. So that would be 13 the winter billing. That's the only place you get 14 the data. 15 MR. GEE: Correct. 16 MR. HOELSCHER: So if you had a jump of 17 50 percent increase, there's a chance we have an 18 issue and you have an issue with the information 19 that's being provided by the water provider. So I 20 would ask them the question, hey, you show my usage 21 went up 50 percent, something's not right, and that 22 will kick off the process of them doing the review. 23 And, again, anything they find that there should 24 actually be a change, they'll communicate to us and 25 we'll credit you back the appropriate utilization. PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 57 1 MR. GEE: Let me talk to you afterward 2 about that process. 3 MR. HOELSCHER: Yes. That would be a 4 good way to do it, yeah. 5 MR. O'LEARY: I would urge people to 6 check their toilets first, and I'm a classic example 7 of this because I moved to Idaho for five months and 8 I was getting these huge sewer and water bills and I 9 couldn't figure out why, and when I came back from 10 Idaho, I checked this toilet and it had the high 11 water mark was just seeping over the top of the 12 tube, the drain tube, and that turned out to be the 13 reason my water bill and my sewer bills were 14 300 percent more than normal. You don't think 15 that's much water, but -- 16 MR. MEHTA: No, no. You're right. 17 MR. O'LEARY: -- toilets are evil. You 18 got to have them, but they're evil. 19 MR. HOELSCHER: In some ways I agree 20 with you. 21 MR. O'LEARY: They're not advanced. For 22 all the technology you have, you know, with checking 23 the sewers and everything, we need better toilets, 24 you know. 25 MR. MEHTA: The second question, if I PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 58 1 could -- 2 MR. PALANS: Ma'am, please, I'd like 3 Mr. Mehta to have the opportunity. 4 MR. MEHTA: The rate jumped up from 5 $3.97 to $4.40 which is 10 percent. Is that -- is 6 that what you expect? 7 MR. O'LEARY: Well, for the next bill. 8 MR. MEHTA: No. It's already happened. 9 I'm just saying. 10 MR. HOELSCHER: So what you will see in 11 your August bill, you will see from whatever bill 12 you got last time, the cost per unit will go up 13 another 10 percent based on the previous rate case, 14 the last one before this kicks in. So in 15 August 2019 you'll see about a 10 percent increase 16 in your cost per volume usage. That's our starting 17 point. That was the last thing that we went through 18 and approved. 19 We're showing this 1.9 percent increase 20 will be compare your August 2020 bill to your 21 August 2021 bill and the rate -- the rate will go up 22 1.9 percent approximately. 23 MR. MEHTA: The last one I'm looking at 24 is the September of 2018. 25 MR. HOELSCHER: Which should be the same PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 59 1 as August 2018 and October of 2018 and November 2 2018. Should be the same money. 3 MR. MEHTA: So that's already the higher 4 rate? 5 MR. HOELSCHER: No. It will go up again 6 in August of this summer. It will go up -- the 7 volume rate will go up -- the rate will go up about 8 10 percent. 9 MR. MEHTA: Wow. 10 MR. HOELSCHER: Effective July 1, but it 11 will be reflected in the bill you get in August. 12 MR. MEHTA: So that's not shown in your 13 chart already? 14 MR. HOELSCHER: So what we've done is 15 we've already gone through this same process and 16 gotten to what that increase is. This will be the 17 increase that you will see starting with your 18 August 2020 bill. 19 MR. MEHTA: 110 percent you got to keep 20 on -- I've seen your numbers. 21 Second question I have is the 22 $500 million, the bond, what rate are you getting 23 and what's the maturity of that? 24 MR. HOELSCHER: So they depend. As I 25 mentioned before, our finance folks, they try and PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 60 1 find the best deal they can. There is something 2 called state revolving fund. This is a federal 3 program that we would borrow money from the state. 4 They discounted 70 percent of the interest cost. We 5 tell the state we want all the money they have. 6 They won't give it to us when there's other people. 7 When those people don't use it, we'll grab that as 8 well. Those are 20-year bonds at 70 percent of the 9 going interest rate. It's a really good program. 10 MR. MEHTA: So it's a 20-year bond? 11 MR. SNOKE: So we borrow from multiple 12 sources. We don't know what the rate is going to be 13 until we borrow the money and borrowed money will be 14 borrowed over time, but when we borrow from the 15 state revolving funds, we get rates that are a 16 70 percent subsidy. So right now if we borrow under 17 that plan today, it would be under 2 percent. 18 MR. MEHTA: So what was used in this 19 assumption? 20 MR. HOELSCHER: This was used an 21 estimated -- we are estimating kind of a profile of 22 how much state SRF money we think the state will 23 give us. That's the real good rate Tim explained. 24 Whether or not we can get anything else like a WIFIA 25 loan or something. That's kind of hit and miss. PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 61 1 The balance of it, most of it has to do with when we 2 go out to the market ourselves what is the market 3 rate, what is the amount of interest that they'll 4 charge us when we go out to the market. And I'm not 5 exact number. They're 20 to 30 year. 6 MR. SNOKE: 30 years when they go out to 7 the market. The average rates used in this analysis 8 are in the 4 to 5 percent range. 9 MR. MEHTA: And it's a long-term bond, 10 you know, right? 11 MR. SNOKE: Yes, correct. 12 MR. MEHTA: So how's that going to be 13 reflected in years beyond what you've shown here? 14 MR. HOELSCHER: So that question's come 15 up in the last two meetings. So what we're giving 16 you just right now I admit for this rate proposal, 17 the rate commission has a projection we gave them 18 for the next four years. That's not the totality. 19 This goes well beyond that. Based on what we've 20 heard at these meetings, before everybody goes to 21 vote, in the informational process MSD sends out 22 we're going to give a multiyear, 16 years, 20 year 23 outlook if you go one way or the other what do the 24 rates look like. As you expect, what will happen is 25 you'll see with bonding you'll see the rates staying PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 62 1 kind of down. You'll see with cash you pay a lot 2 more now and then all the sudden those lines will 3 cross at some point. We're going to provide that 4 data, that information to everybody. We have been 5 starting to hear those kind of comments over the 6 four years -- well, actually starting eight years 7 ago, but four years ago. The question is long-term 8 what's really most cost effective for us and what do 9 we think is -- I think we've heard the term am I 10 mortgaging my children's future, that type of thing. 11 So we're going to provide that information at the 12 time of the election. 13 The rate commission, we gave them our 14 analysis. They're doing their own analysis with 15 some of their experts as well to see what is the 16 most likely. 17 What we've given is the most cost 18 effective bonding scenario that we could come up 19 with as far as percentage of bonds versus percentage 20 of pay-go and versus percentage of rate and we've 21 provided that for an analysis by the rate 22 commission. 23 MR. MEHTA: And the new rates, 24 obviously, reflect the servicing of the older bonds, 25 correct? PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 63 1 MR. HOELSCHER: Yes. 2 MR. PALANS: That's correct. 3 MR. HOELSCHER: One year. Plus the 4 rates we're proposing are also the service costs for 5 the borrowing we suspect we may have -- that we're 6 proposing to use over the next four years. That's 7 also in that. 8 MR. MEHTA: But is that the only time we 9 borrow? 10 MR. HOELSCHER: The voters have voted to 11 bond this program since 2003. They voted the bond 12 option every time, 2003 to '07, 2008 to '12, 2013 to 13 '16, 2017 to '20. We've gone to the public every 14 time we had one of -- one of those. The voters have 15 always decided that they wanted the bonding option. 16 MR. MEHTA: Are those bonds also 17 refinancing the old bonds or are we paying them off? 18 MR. SNOKE: Both. So as interest rates 19 have been low, we have refinanced where we could for 20 savings. So we've done two refinancings in the last 21 three years to lower the interest rate on the bonds 22 outstanding. And then these 30-year bonds, they're 23 not -- the principal is not all due in 30 years. 24 There's a little bit of principal due almost every 25 year throughout the life of the bond. So every year PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 64 1 we're paying off some past bonds. 2 MR. MEHTA: Last question I have is 3 other than this charge that we get every month, 4 there is -- on a real estate tax bill there's 5 something called sewer lateral, it's a 28-dollar 6 charge. I know it's a one year -- don't get 7 monthly, but what is that? 8 MR. HOELSCHER: So there is -- I'll add 9 that to the other ones for full disclosure. So on 10 your property tax bill you'll see that MSD is 11 charging everyone 2 cents per year per thousand 12 dollar -- per hundred-dollar valuation of your home 13 in a property tax and that has to do with the 14 environmental aspect of stormwater. If you looked 15 on your property tax bill, it would be the cheapest 16 one at the very bottom of the line. 17 There's also another charge that was 18 passed, the voters voted in in April 2016 that that 19 property tax be used to operate and maintain the 20 public storm sewer system district wide. That's 21 also on that bill. 22 The one you're mentioning, the sewer 23 lateral program is for the private lateral owned and 24 maintained by the property owners. Those programs, 25 depending on where you live, are either administered PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 65 1 and collected by the county or by the municipality 2 you live in. MSD doesn't have anything to do with 3 that particular program. 4 MR. MEHTA: But it shows up on the MSD 5 bill? 6 MR. O'LEARY: No. It shows up on your 7 taxes. 8 MR. HOELSCHER: It shows up on your 9 property taxes. 10 MR. O'LEARY: It's basically insurance. 11 MR. HOELSCHER: It is insurance. If you 12 want to look at the status of that, it's the 13 provider of that service, usually municipalities. 14 If you contact them, they give you the particulars 15 of that program. 16 MR. O'LEARY: You made me bring up one 17 more question, which is really important, and this 18 is to the committee, the commission. And it was the 19 Black & Veatch report that was talking about and 20 you're doing some experimentation in Mexico, 21 Missouri and stuff. I pay something like $11 per 22 kilogram, but someone who has 15,000 gallons of 23 water a month pays six. And so my thought is 24 shouldn't the people that are using the most water 25 be paying higher rates? Do we have a conservation PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 66 1 signal in our billing that basically says you've 2 gone to 15,000 gallons, you're using well over 3 200 gallons per person or whatever, and you're 4 saying 100 gallons is too much. But my point is 5 that are people that are single households, we're 6 paying a lot more per thousand gallons for water 7 than someone who's using a lot more water. Well, 8 it's called -- 9 MR. HOELSCHER: There is a -- 10 MR. O'LEARY: It's called an increased 11 block rate structure. 12 MR. HOELSCHER: There is a volume charge 13 in our rate that if you use more water than you pay 14 for than somebody who uses less water, that's the 15 way our rate is set up. 16 MR. O'LEARY: That's a uniform charge? 17 MR. HOELSCHER: Yes. 18 MR. O'LEARY: That's a uniform charge. 19 That is not an increased block rate structure. So 20 when you're looking at pay-go, you might consider a 21 new rate price structure that will make the richer 22 people pay more for the more water they're using 23 than, than seniors, because basically if you take 24 the base charge, that's where the amount is set 25 whether you're spending 15,000 gallons or whether PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 67 1 you're spending in my case probably close to 2 3,400 gallons. 15,000 gallons a month is using 3 wastewater. It has to be treated. It has to be -- 4 you know, that raises your costs, too. I mean, 5 so -- 6 MR. HOELSCHER: And that cost is 7 captured in the volume portion of the bill they get 8 for being billed more for using more water. 9 MR. O'LEARY: That is captured? 10 MR. HOELSCHER: That is -- 11 MR. O'LEARY: Why is the national trend 12 going to increased rate block structure while 13 uniformity is, is actually going down? 14 MR. HOELSCHER: I don't know that that's 15 true and I don't know that we've reviewed that. 16 MR. O'LEARY: It's in the Black & Veatch 17 report. 18 MR. PALANS: Mr. Mehta, did you have any 19 other question? 20 MR. MEHTA: No. 21 MR. PALANS: We have one more question 22 that is on our list. Mr. Coleman, you have a 23 question? 24 MR. COLEMAN: Yes. I just want to find 25 out if -- this question is regarding the winter PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 68 1 billing system, the water usage and the sewer rates. 2 In the event that a customer has an exception 3 situation during the winter cycle where there is 4 water usage that is not going into the sewer, for 5 example if someone has their lawn seeded in the fall 6 and the watering then is taking place in the month 7 of November which is captured in that winter block 8 elevating that winter bill up over the normal 9 billing for other seasons throughout the year, when 10 that situation happens, is there a process where a 11 customer can go to MSD directly with that bill 12 comparison and have that adjustment happen at MSD 13 rather than happen at Missouri American Water? 14 Because when it comes to Missouri American, there 15 seemed to be a lot of confusion on how they would 16 actually update and send the revised figures over to 17 MSD to get to make that correction. So, and they've 18 said they would try to do it. I'm not confident 19 that's going to happen. So, I wonder if that fails, 20 is there a way I can work that out with MSD? 21 MR. HOELSCHER: So what I'm going to 22 recommend is our director of finance happens to be 23 here, I think start the conversation with him. 24 You're talking about a very unusual one-off type of 25 circumstance, and I think just talking with our PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 69 1 director of finance directly and see if there's 2 something we could do, that would be the best way to 3 start it. 4 MR. COLEMAN: Okay. Great. 5 MR. PALANS: Mr. Coleman, any other 6 questions? 7 MR. COLEMAN: No. 8 MR. PALANS: Any other questions or 9 comments from those in attendance? 10 Do any of the commissioners have any 11 questions or comments this evening? 12 Seeing none. I'd like to thank 13 everybody for participating with us this evening, 14 and just a reminder that our next public hearing is 15 scheduled for July 10th at 6 p.m. at UMSL Wellness 16 and Recreation Center and there is the final public 17 hearing that would conclude on July 24th at MSD 18 headquarters. 19 Thank you all very much. 20 (The public hearing concluded at 21 7:19 p.m.) 22 23 24 25 PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 70 1 CERTIFICATE OF REPORTER 2 3 I, Amanda N. Farrar, a Certified Court 4 Reporter for the State of Missouri, do hereby 5 certify that the foregoing hearing was taken by me 6 to the best of my ability and thereafter reduced to 7 typewriting by me; that I am neither counsel for, 8 related to, nor employed by any of the parties to 9 the action in which this hearing was taken, and 10 further that I am not a relative or employee of any 11 attorney or counsel employed by the parties thereto, 12 nor financially or otherwise interested in the 13 outcome of the action. 14 15 16 17 ________________________ 18 Certified Court Reporter 19 20 21 22 23 24 25 PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES A ability 13:6,13 19:8 70:6 able 34:9 absolute 27:13 absolutely 17:5 19:24 access 15:7 24:2 accounting 37:23,25 38:1 38:2 accurate 53:3 Act 30:20 31:4 31:13 33:10 40:1 45:13,15 action 70:9,13 actual 52:21 53:2,18,19 add 44:2 64:8 additional 4:21 10:24 13:24 14:2 17:1 29:24 addressed 9:21 addresses 42:19 adequately 25:3 adjustment 68:12 adjustments 55:20,22 administered 64:25 admit 61:16 adopted 5:5 advanced 57:21 advantage 21:9 advantages 41:9 advice 49:19 advocate 23:6 50:20 affect 42:10 affordability 14:5,9,14 27:10,12,15 28:3 31:5,6,15 31:16 32:9 34:10 38:8,15 39:12,16 42:19 affordable 37:20 39:24 afterward 57:1 Agencies 30:10 ago 25:11 62:7,7 agree 57:19 agreed 35:2 agreement 14:6 14:7 15:3 31:6 Alaris 2:9 allow 8:8 10:24 15:9 18:4 19:1 30:24 alternative 11:22,23 Amanda 2:9 70:3 amended 3:18 5:6 American 6:9 55:10,16 56:2 68:13,14 amount 27:15 54:23 55:1 61:3 66:24 amounts 54:5 analysis 26:3 37:19 39:14 61:7 62:14,14 62:21 Angeles 10:11 annual 25:23 40:9 answer 9:24 17:8,10 24:7,11 26:15 49:25 answered 6:21 anticipated 20:22 21:13 anybody 43:16 51:22 anymore 29:3 anyway 28:15 45:4,24 APPEARANC ... 2:1 applicant 43:8 application 4:18 5:8,9,11 41:2 43:2 apply 43:9 appointed 9:5 appreciate 54:6 appropriate 56:25 approved 4:23 58:18 approximately 58:22 April 56:4 64:18 area 10:3,5 11:22 12:8 31:17 39:22 53:2 ash 48:12 ashes 48:13 asked 43:8 48:24 54:17 asking 23:4 asks 43:3 aspect 64:14 assistance 14:10 15:6 41:2 41:25 assistant 47:12 associated 33:12 Association 30:9 assume 15:21 assuming 19:18 55:11,12 assumption 60:19 assumptions 14:19 Atlanta 30:15 37:22 attendance 69:9 attorney 70:11 audible 25:1 August 5:1 16:10 18:15 22:8,17 22:19 34:2 54:10 58:11,15 58:20,21 59:1 59:6,11,18 Austin 29:17 authority 14:2 17:2 19:1 available 21:15 24:11 40:4 average 18:16 19:12 29:15 38:10 50:9 61:7 averaging 29:2 avoid 47:7,16 avoided 47:15 aware 31:15 35:11 awful 37:21 AWWA 36:2,3,8 B back 23:24 29:7 31:9 46:22 47:14 47:18 56:25 57:9 backwards 17:12 52:13 bad 29:1 49:18 balance 12:15 61:1 ball 36:21 45:23 Baltimore 28:17 28:17 base 29:8 66:24 based 31:3 37:14 39:14 52:21 53:1 54:20 58:13 61:19 basements 11:11 bases 38:2 basically 26:2 44:19 65:10 66:1,23 basis 16:5,23 18:9 19:4 20:14 40:9 bathroom 44:22 baton 8:8 beaches 33:1 becoming 43:5 began 24:18 beginning 6:5 believe 38:19 40:12 benchmark 28:21 benchmarks 27:11 bend 46:15 benefit 15:9 benefits 11:8 20:4 best 11:22 15:6 20:2 60:1 69:2 70:6 better 37:21 51:7,24 57:23 beyond 61:13,19 big 36:12 39:19 48:13 biggest 20:11 42:18 bill 15:13 16:10 18:12 22:19 51:23 54:25 55:19,22,25 56:6,7 57:13 58:7,11,11,20 58:21 59:11,18 64:4,10,15,21 65:5 67:7 68:8,11 PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES billed 67:8 billing 22:17 39:8 55:25 56:13 66:1 68:1,9 billion 10:17 31:12 bills 15:17 29:5 50:8 54:10 56:2 57:8,13 biosolids 11:24 Bissell 11:20 bit 10:2 30:16 63:24 Black 36:11,13 36:14 49:7,10 49:17,24 65:19 67:16 block 66:11,19 67:12 68:7 blue 9:22 board 3:23 4:17 4:17,23 9:2 13:1,16 22:10 22:10 30:8 51:1 bond 13:9 59:22 60:10 61:9 63:11,11 63:25 bonding 10:25 12:17 13:10 14:1 14:2 16:17 17:1 23:2,11 61:25 62:18 63:15 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Department 25:16,21 31:2 31:7 32:9 33:6 34:24 35:1,4 PUBLIC HEARING 6/27/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 42:15 52:18 depend 59:24 depending 41:12 64:25 depends 10:23 36:24 37:7,10 describe 13:21 14:4 described 12:21 describing 5:23 description 6:1 10:15 design 47:12 detail 11:7 details 8:17 11:6 determine 19:8 device 46:6 devices 53:17 Diane 50:4 dictated 28:3 different 11:18 14:3 30:17 31:17 37:9 40:12 directly 21:8 55:8 68:11 69:1 director 2:3 8:12 21:1 43:6 47:12 68:22 69:1 discharges 11:10,11 disclosure 64:9 disconnect 39:22 discounted 60:4 discovery 5:15 24:4 discussion 13:20 18:23 32:15 dish 44:21 dishwasher 44:9 Dispatch 6:8 distribute 42:11 district 1:6 2:3 3:6,17,20,22 4:4,13,17 6:13 6:17,18 8:9,23 9:1,22 26:8 29:6 31:13 49:9,13,14 64:20 district's 3:25 4:14 districts 27:3,6 dive 8:17 documents 5:18 5:24 doing 22:14 26:20 31:10 34:22 37:20 37:23 56:22 62:14 65:20 dollar 64:12 dollars 12:15 21:2,11 42:23 door 7:20 45:22 dot 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