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Exhibit MSD 95 - MSD Prehearing Conference ReportExhibit MSD 95 BEFORE THE RATE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT JULY 19, 2019 PRE -HEARING CONFERENCE REPORT OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT ISSUE: WASTEWATER RATE CHANGE PROCEEDING WITNESS: METROPOLITAN ST. LOUIS SEWER DISTRICT SPONSORING PARTY: RATE COMMISSION DATE PREPARED: JULY 19, 2019 Metropolitan St. Louis Sewer District 2350 Market Street St. Louis, Missouri 63103 Exhibit MSD 95 BEFORE THE RATE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT For Consideration of a Wastewater Rate Change Proposal by The Rate Commission of the Metropolitan St. Louis Sewer District JULY 19, 2019 PRE -HEARING CONFERENCE REPORT OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT Pursuant to §7.280 and §7.290 of the Charter Plan of the Metropolitan St. Louis Sewer District (the "Charter Plan"), The Restated Operational Rules, Regulations and Procedures of the Rate Commission of The Metropolitan St. Louis Sewer District and the Procedural Schedule of the Rate Commission of The Metropolitan St. Louis Sewer District, The Metropolitan St. Louis Sewer District ("MSD" or "District") hereby submits its Pre -hearing Conference Report regarding the Rate Change Notice dated March 4, 2019 ("Rate Change Notice"). Exhibit MSD 95 JULY 19, 2019 PRE -HEARING CONFERENCE REPORT SUBMITTED BY THE METROPOLITAN ST. LOUIS SEWER DISTRICT INTRODUCTION The Metropolitan St. Louis Sewer District ("MSD" or "District") submitted the Wastewater Rate Change Proposal notice to the Rate Commission on March 4, 2019. This is the sixth Rate Change Notice submitted by the District since the Rate Commission was formed, by voter approval on November 7, 2000, pursuant to Section 7.040 of the District's amended Charter Plan. Per the Rate Commission's Operational Rules, Regulations and Procedures, the first of four technical conferences was held on April 8, 2019 to question District staff, Raftelis Financial Consultants, Inc. ("RFC"), the District's rate consultant, and Public Financial Management, Inc. ("PFM"), the District's financial advisor, about their respective submitted direct testimony. The Missouri Industrial Energy Consumers ("MIEC") application to intervene was heard and approved by the Rate Commission at the April 8, 2019 meeting. The second technical conference was held on May 9, 2019 to allow questioning by all parties of the rebuttal testimony submitted by MIEC and the Rate Commission's consultant. The third technical conference required by the Rate Commission's Operational Rules, Regulations, and Procedures was held on June 20, 2019 to allow questioning of the surrebuttal testimony submitted by the District, MIEC and the Rate Commission's consultants. A pre -hearing conference was held on July 12, 2019 in which all parties presented a pre -hearing conference summary report. The District submitted its summary as Exhibit MSD 92. PURPOSE The purpose of this report is to identify and describe the various issues raised by the prepared and oral testimony submitted during this rate change proceeding and present the position of District staff relative to each issue. It should be noted, the positions outlined in this report represent the opinions of District staff and do not represent acceptance or approval by the District's Board of Trustees. ISSUES The Wastewater Rate Change Proposal ("Rate Proposal") submitted in support of the FY2021 — FY2024 proposed rate change addresses several issues related to wastewater funding. During the discovery process, additional information regarding these and other issues has been 3 Exhibit MSD 95 requested by the Rate Commission's consultant and intervener. During the technical conferences all parties have testified to their specific issues that directly and indirectly affect the District's proposed rate change. Based on the rate proceedings to date, the District believes that the pending issues to be considered by the Rate Commission are as follows: 1. The District's Proposed Financing Plan Is Fair & Reasonable 2. The District's Proposed CIRP Is Appropriate & Reasonable 3. The District's Proposed Infiltration and Inflow (I/I) Allocation Is Fair & Reasonable 4. The District's Proposed Extra Strength Surcharge Is Fair & Reasonable ISSUE 1: THE DISTRICT'S PROPOSED FINANCING PLAN IS FAIR & REASONABLE Marion Gee, MSD's Director of Finance, testified in Exhibit MSD 3E, page 4 lines 7-10 "the Rate Proposal attempts to balance the use of debt financing and current wastewater user charge revenue to simultaneously fund a wastewater improvement and replacement program needed to meet anticipated regulatory requirements and minimize the impact on customer monthly bills to the extent possible." The District has accomplished this with the assistance of Bethany Pugh, of PFM Financial Advisors the nation's leading municipal financial advisor, who testified at the April 8, 2019 Technical Conference, Exhibit MSD 68, page 201 lines 17-25 and page 202 lines 1-8 "So given the amount of dollars that were already on hand, we started looking at the next four years, fiscal year 21-24, for this rate proposal, kind of start with that equation. What are your capital investment needs? And what's a debt-PAYGO mix? How does that impact coverage? Are we hitting the targets that we've set for ourselves? How does it impact liquidity? So it's very much an iterative process. You don't go in necessarily saying that it'll be 60-40, and the chips fall where they may. But you kind of look at all those statistics and figure out what's the right medium in consideration of what the rate increases will have to be." The Rate Commission's consultant, Pam Lemoine, testified "the District's proposed capital financing plan, .... provides a reasonable mix of cash and debt financing." Ms. Lemoine also concurs with the District's approach "to establish a financial plan that allows for debt service coverage of 2.5 times or greater for senior lien bonds and 1.8 times or greater for total debt coverage." In addition, Ms. Lemoine agreed that the O&M escalation factors and debt financing assumptions used to project the annual O&M expenditures and debt service are reasonable. See Exhibit RC 70, page 6 lines 17-22 and page 7 lines 1-3. 4 Exhibit MSD 95 Intervener, MIEC's, theme throughout the proceedings has been they want to assure that the rate increases are fair and equitable for all classes of customers. After reviewing all the evidence on record it is obvious that their recommended changes to the proposal do not accomplish that goal. In regards to the District's proposed funding mix of 60% debt and 40% equity, MIEC's Rate Consultant Michael Gorman, stated that the District's proposed funding mix of 60% debt and 40% equity is a change to a Board or Rate Commission Policy. See Exhibit MIEC 73, page 3 lines 12-13. He has also stated it is unnecessary and should remain the same as before. In Exhibit MSD 80F, page 5 lines 9-20, Tim Snoke, MSD's Secretary - Treasurer, testified "There is no formal financial policy for debt/cash funding of the CIRP. The roughly 60/40 Debt/PAYGO funding of the CIRP in MSD's proposal is an outcome of the many factors being balanced to fully fund MSD Operations and the CIRP in a way that minimizes rate increases and adheres to MSD actual financial policies, like holding a minimum Operating Reserve of 60 days. Debt service coverage (DSC) targets, liquidity targets, and the size of the CIRP also play into the calculations that resulted in this funding mix. The mix has ranged from 80/20 some years to approximately 70/30 over the last wastewater rate process, averaging 75/25 over time, but it is not correct to say that 75/25 is a formal policy. Overall wastewater user charges for this cycle are actually projected to be lower with the 60/40 debt/PAYGO mix than they would be with the historical average of 75/25 due to the higher projected debt service, and resulting DSC ratios, associated with a 75% debt/25% PAYGO mix." When evaluating the District's proposed financial modeling, Mr. Gorman testified in Exhibit MIEC 73, page 13 lines 8-9 "he believes that MSD's projected new bond funding interest rate projections are unreasonable." He also explained that his proposal "assumes that the face value of the bonds would be equal to the bond proceeds received from the market", Exhibit MIEC 75, page 1 response to question #1. That means there should be no bond premium generated yet his model showed bond premium for the proposal period of approximately $90 million, Exhibit MIEC 75, page 3 Table 2 line 3. Based upon this analysis Mr. Gorman makes suggestions regarding the impact on MSD's revenue requirements and costs. On May 9, 2019 at the Technical Conference Hearing Mr. Gorman admitted "I did make an error in the model." In Exhibit MIEC 83, page 3 lines 15-16, Mr. Gorman withdrew his proposed adjustments to MSD's projected interest rates on new bond issues. Throughout the rate proceedings the Intervener continued to have errors in the financial modeling scenarios it produced and results inconsistent with its testimony, especially in regards to interest rates and bond premium, a critical component in the financing of the CIRP_ 5 Exhibit MSD 95 Mr. Gorman in Exhibit MIEC 73, page 3 lines 11-12 also testified that the total debt service coverage ratio should be no less than 1.6X, because that is what MSD used in the past and it should not be changed. He did not use consistent reasoning in his own models as he changed MSD's minimum senior debt service coverage from the 2.50X used in the last rate proposal to a minimum of 2.41X for his most recent model as shown in MIEC 83, page 25 Schedule MPG-SR-3. Ms. Pugh in Exhibit MSD 3G, page 5 lines 8-13 testified as to how the debt service coverage targets were developed; "Projected minimum coverage targets of 2.50X (senior lien bonds) and 1.80X (inclusive of subordinate obligations) have been identified as the optimal coverage levels needed to maintain AA level bond ratings, thereby ensuring cost effective market access for the District's large capital program. The three major rating agencies that assign ratings to government issuers have communicated expectations related specifically to MSD's future financial performance regarding debt service coverage." Ms. Lemoine in Exhibit RC 81, page 3 lines 9-13 states "I believe Mr. Gorman's position would place MSD at risk of a rating downgrade....while he has testified that MSD's policies should be adjusted to those used in prior rate proposals, his financial plan results in debt service coverage that is not materially different than MSD's proposal..." MSD's position is further supported by comments from the rating agencies. Mr. Gorman notes that "... MSD's actual earned DSC has been in the area of 1.9X..." Exhibit MIEC 83, page 3 lines 32-33. On page 1 of Exhibit MSD 39, Moody's notes "Narrowed liquidity or debt service coverage" in a short list of "Factors that Could Lead to a Downgrade". Fitch states in Exhibit MSD 40, page 2, that "Coverage margins or leverage that are weaker than forecast levels, or a decline in liquidity below historical norms, would be expected to result in negative rating action" before reiterating later on the page that "any deterioration in financial performance beyond projected levels would be expected to result in negative rating action." Mr. Snoke testified "that existing and projected total debt coverage at that time never fell below 1.8x", Exhibit MSD 80F, page 3 line 10. In summary, the Rate Commission's Consultant determined that MSD's Financial Plan is reasonable. The District's position is that our Plan is fair and reasonable to all classes of rate payers. The Intervener's position is based upon inaccurate financial modeling results and should not be considered to be valid. 6 Exhibit MSD 95 ISSUE 2: THE DISTRICT'S PROPOSED CIRP IS APPROPRIATE & REASONABLE Rich Unverferth, MSD's Director of Engineering, testified that "The wastewater CIRP provides a listing, schedule, and cost of needed repairs, additions, and improvements to the wastewater system to maintain the system in operating order and to ensure the system operates in a manner that complies with all State and Federal Regulatory requirements and the CD." Exhibit MSD 3C, page 2 lines 3-6. He also stated "The CIRP is needed to provide the project identification, planned fiscal year and anticipated annual costs associated with system improvements. This will then provide the basis for required annual revenue and resources needed to plan, design, and construct these improvements." Exhibit MSD 3C, page 2 lines 8-11. Over the course of this rate proceeding, there have been a lot of questions about MSD's ability to defer the spending of $70 M in FY23 and FY24 to FY25 and FY26. MSD has testified and the Rate Commission's Consultant has agreed that MSD has very little discretion to defer the spending of $140 M. In Exhibit MSD 80A, page 1 lines 9-11, Mr. Unverferth testified that "the District does not have that discretion. Deferring until after FY 2024 would risk non-compliance with the Consent Decree, state and federal laws and regulations, and NPDES permit compliance at treatment plants." The percentage of CIRP projects in this rate cycle that are not CD related or regulatory is less than 1% of the total CIRP spend for FY21-FY24. So to defer $140 is virtually impossible and certainly not reasonable. The MIEC's Consultant, Michael Gorman, testified in Exhibit MIEC 83, page 5 lines 3-7 that "..certain projects currently planned for FY23 and FY24 can be deferred until FY25 and FY26, and MSD will not be in conflict with its regulatory obligations. The actual selection of which projects could be deferred can be left up to MSD staff, which can be managed in a way which meets its Consent Decree obligations, other regulatory obligations, and manage impacts on wastewater rates." At the technical conference on May 9, 2019 Mr. Gorman admitted that "It was not my recommendation to defer those specific projects. Rather, it's my recommendation to levelize the annual CIRP spend. And to the extent that flexibility exists I'm encouraging you to do it." See Exhibit MSD 79, page 29 lines 1-10. During this hearing Mr. Gorman admitted several times that he was not familiar with the regulations affecting the projects in the CIRP. Regarding the regulations and subsequent operating permits for the Bissell and Lemay treatment plant incinerators, he testified "I did not review that specifically." See page 30 line 18. He also admitted to not reviewing the regulations related to the operation of the incinerators (page 30 line 24); that two projects he identified as potentially allowing MSD some flexibility on managing this annual CIRP, were actually listed in the CD (page 33 lines 2-7); that he was not 7 Exhibit MSD 95 familiar with the schedule of those projects in the CD (page 34 lines 12-14); and finally he did agree that MSD does not have complete discretion (page 34 line 4). MIEC has recommended that $70M be deferred in FY23 and FY24 to FY25 and FY26 without doing their homework. Their consultant did not review the regulations that may be violated nor consider the effect on compliance with the CD. In addition, the deferral of $70M in FY23 and FY24 to FY25 and FY26 will only cause the rate increases to be higher in FY25 and FY26. MSD has provided significant evidence, and again your Rate Consultant agrees, that we have very little discretion to move projects. District staff has concluded that there is not $70M in projects that can be responsibly delayed in FY23 and FY24, without significant, negative consequences. Specifically, MSD cannot delay the design build project scheduled for the fluidized bed incinerators at both the Lemay and Bissell treatment plants. MSD's position is that the existing incinerators will be in violation of the law without maintenance. Under the SSI Rule maintenance repairs are not an option, and the units have to be replaced. MSD committed to the EPA to follow the law and replace the incinerators beginning construction in 2023 as a condition of a CD amendment. The MIEC proposes that we can request a CD extension from EPA anytime or that MSD has discretion to move projects. Your Rate Consultant agrees that MSD has very little discretion to move projects in this rate proposal, including the incinerators. You all may recall an inaccurate Channel 5 News Report on the impact of incinerators on the St. Louis area. The report that was aired was an edited segment of a detailed interview regarding this subject. If you would like accurate information please review the entire interview on MSD's website at http://vimeo.com/336619879 In Exhibit RC 82 Rate Consultant Nicole Young testified that ".....the projects included in the FY21 through FY24 CIRP are appropriate." See page 6 lines 3-4. "Overall, the timing of projects in the CIRP for FY21 through F24 appears to be reasonable." See page 7 lines 13-14. "Yes, it is still my opinion that the cost estimates for the projects in the CIRP are reasonable." See page 7 line 19. In summary, MSD and the Rate Commission's Consultants agree that in the current rate proposal MSD has very little discretion to move projects. In addition, it is MSD's position that moving the incineration project construction start out past FY23 will cause the District to not meet Criteria 4, as it would impair the ability of the District to comply with existing law. 8 Exhibit MSD 95 ISSUE 3: THE DISTRICTS'S PROPOSED INFILTRATION AND INFLOW (I/I) ALLOCATION IS FAIR & REASONABLE The District testified that the allocation of 40% to customer and 60% to volume has been in place since 2007 and was found to be fair and reasonable in the 2007, 2011 and 2015 wastewater Rate Commission processes. The primary source for this information was based upon an III Allocation Study done in 2005, an explanation of how that study was used to arrive at the allocation factors was provided in the District's 2007 Rate Proposal in the form of a document prepared jointly by CDM and Black & Veatch. This explanation has been provided to the Rate Commission in this proceeding and is Exhibit MSD 65C. MSD's Rate Consultant, William Stannard, testified in Exhibit MSD 80C, page 1 lines 9-21 that "I believe that the allocation used remains reasonable. I believe that it is important to note that the nature of wastewater collection systems and the wide range of causes for the level of I/I do not provide a foundation for an engineering analysis of sufficient detail to support an exact determination of relative responsibility for M. As such the allocation factors used by rate consultants throughout the United States and incorporated within guidance documents are typically based on judgment more so than engineering analyses and testing. As the Rate Commission's Consultant, Prabha Kumar, stated during the Rebuttal Technical conference updating the analysis "is a costly study to do" (MSD Exhibit 79, page 111, lines 10-11) and there has not been evidence presented that proves it has changed. As shown in Table 5 on Page 26 of Exhibit MIEC 73 the allocation used in this proceeding is within the range of those used by other utilities, and notably the same as that used by the City of Kansas City, Missouri, a similar utility in terms of geographic location, topography, climate, and size of service area." In addition, MSD's experts have testified that they did not identify any changes in the character of the wastewater system since the 2005 study that would modify this allocation up or down. In fact, MSD's miles of sewer, the sewer area size, the number of customer accounts has also remained fairly consistent since 2005, changing by less than 5%. As stated during the Pre -Hearing Conference, MSD's Executive Director, Brian Hoelscher, committed MSD to performing a new III Allocation Study prior to the next Rate Proposal. That commitment includes a plan to complete data collection by the last half of calendar year 2021 and complete the analysis of the data by the summer of calendar year 2022. This information will then be available to use during the development of the Rate Proposal for years FY25-FY28, scheduled for delivery to the Rate Commission in the winter of 2023. 9 Exhibit MS© 95 The new III Allocation Study will take into account the impact of approximately 40% of the work being completed as part of the Consent Decree, including elimination of 85% of the total sanitary sewer overflows that existed at the start of the consent decree. Absent a new, updated, study in comparison with various other cities' allocations, MSD's system is most similar to Kansas City for comparative purposes. During the May 9, 2019 Technical Conference for Rebuttal Testimony, Rate Commissioner Stein asked the Rate Commission's Consultant, Ms. Kumar, about the City of St. Joseph Missouri being in the same geographical area as St. Louis and Kansas City, See Exhibit MSD 79 page 113 lines 8-20. The City of St. Joseph is a much, much smaller system, about 6% the size of MSD. Indianapolis is also not similar to MSD in that their wet weather program is almost completely done, the SSO elimination is complete, and the CSO program will be complete in 2025, over 80-90% complete at this time. Plus, the Indianapolis system's combined sewer area percentage of total system is relatively much smaller, two-thirds of MSD's percentage, and the total area only 40% of MSD's system. Furthermore, Indianapolis' recent III study was a very high level analysis focusing on an industrial customer class that represented about 1% of their customer accounts, and the Indianapolis system contains 24% more customer per mile of sewer than MSD's system. On the other hand, Kansas City is very similar to MSD in the percent of combined sewer versus separate sewer area (6% difference) and the number of customers per mile of sewer. Therefore, it makes more sense for MSD's allocation of I/I to be similar to Kansas City's allocation. Please see Appendix A for a comparison of MSD to Kansas City and to the other systems identified by the Intervener as potential comparable systems. The Ms. Kumar, states in Exhibit RC 71, page 8, lines I and 2, "that the allocation of I/I used in the Rate Proposal allocates more to volume than "in the example guidelines provided in the WEF MoP 27." Mr. Stannard, testified in Exhibit MSD, 80C page 3 lines 2-4 "I do not believe it is accurate to refer to the example in the MoP as `guidelines', it is simply an example. The example in the MoP is not intended to reflect `guidelines' as Ms. Kumar stated in her testimony." In Exhibit RC 71, page 7 line 3-6 Ms. Kumar testified that MSD's cost of service analysis was "Consistent with industry accepted practices, ... Based on this approach, the I/I volume appears to be 59% of the total plant flow volume." Intervener, MIEC, proposes an arbitrary allocation of 50% to customer and 50% to volume. This proposal is not based upon any supporting evidence or data. Mr. Gorman, testified in Exhibit MIEC 83, page 18 lines 7-13 "III is largely driven by the geographic expanse of the wastewater system, which, in turn, is driven by the number and location of customers on 10 Exhibit MSD 95 the system. Thus, it is appropriate to use an III allocation that is heavily weighted toward the number of customers in each rate class. While III allocations with customer components ranging from 50% to 75% have been utilized by other wastewater utilities, for MSD, I recommend an allocation of III that is 50% customer related, and 50% volume related." Mr. Gorman's recommendation is based upon his conclusion of a study done in Indiana (Exhibit MIEC 73 page 25 lines 5-18), no local data. The recommendation by Mr. Gorman would cause a significant impact on the average residential customer. As testified to in Exhibit MSD 80D, page 1, lines 15-19, MSD's Finance Director, Marion Gee, stated "As depicted in the table below, the rate increase for a typical residential wastewater customer in FY 2021 would be 6.7% instead of the current request of 1.9% and it would increase to 8.7% in FY 2022 thru FY 2024 instead of the current request of 3.8% for these three fiscal years." See the table in Exhibit MSD 80D and testimony in Exhibit MSD 89A, page 3 response to question #4. In addition, the table shown in Exhibit MSD 89A, page 3 response to question #4 indicates that 42% of our customers are billed for 4 ccfs or less per month. The allocation of I/I that is 50% customer related, and 50% volume, as recommended by the Intervener, would cause the base charge portion of the wastewater bill to increase, therefore significantly impacting those customers using a small volume of water. This would obviously cause the low income customer that uses a small volume of water to be significantly impacted. For example, the rate increase for low income customers using 3 and 4 ccfs of water would be an additional 9.7% and 7.6%, respectively, more than the rates being proposed by the District if the I/I allocation was changed to 50% customer and 50% volume. In summary, the allocation of III as recommended by MIEC will cause a significant rate increase for a typical residential wastewater. It will cause a significant impact to those customers using a small volume of water, including the low income customer that uses a small volume of water. The allocation of III as proposed by the District of 40% to customer and 60% to volume is supported by an III Allocation Study. During these proceedings there has not been any evidence presented to prove that the allocation from the study has changed. At this time, an arbitrary change to the allocation would be in violation of Criteria #5 by not being fair and reasonable to all classes of ratepayers. 11 Exhibit MSD 95 ISSUE 4: THE DISTRICTS'S PROPOSED EXTRA STRENGTH SURCHARGE IS FAIR & REASONABLE In Exhibit MSD 80D, page 1 lines 23-25 and page 2 lines 25-26, Mr. Gee testified that the purpose of the Extra Strength Surcharge is "The wastewater discharged from businesses often contains solids and organic matter at higher concentrations in comparison to concentrations found in residential wastewater. Wastewater is considered to be "normal strength" if it meets the wastewater quality standards established for typical residential wastewater. Extra strength surcharges recover the additional costs of treating high strength wastewater that base sewer charges don't cover." The Extra Strength Surcharge proposed by MSD has been adjusted beg'nning in FY21 so that the cost to service customers subject to the surcharge are recovered and increases to the surcharge in FY 22 thru FY 24 are based on expected increases in O&M expenses. In Exhibit MSD 80D, page 2 lines 51-55, Mr. Gee further testified "Extra Strength Surcharge revenues would increase from a projected amount of $5.9 million in FY 2020 to $7.1 million in FY 2021 thereby eliminating the current subsidy paid by customers not subject to this rate. The projected revenues are expected to increase by $100,000 in each of the remaining fiscal years in the rate cycle (FY2022 thru FY2024) reaching the maximum projected amount of $7.5 million in FY 2024." In summary, the District's experts acknowledge that there are other methodologies that would also be considered fair and reasonable. The Rate Commission Consultant, Ms. Lemoine, and the Intervener, MIEC, suggests that an across the board increase should be implemented. The difference between an across the board increase and an increase based on O&M changes is very minimal; however, an across the board increase would result in base and volume rates higher than what is requested by MSD to offset the lower surcharge rates. Please remember that during the current rate cycle (FY17-FY20) the MSD customers not subject to this surcharge have been subsidizing those customers that are subject to a surcharge. This subsidy would continue if the increase was phased in over 2 years as recommended by the Rate Commission's Consultant. CONCLUSION MSD feels it needs to respond to the claim by MIEC that MSD staff is being "defensive" regarding the Rate Commission process and is unwilling to listen to public comment. This statement is far from the truth. The rate payer is the most important consideration in MSD's day to day activities, whether it is the development of a Rate Proposal, the Rate Commission 12 Exhibit MSD 95 process, or the daily operation of our system. Many of these communications are actually mandated by regulation, such as the development of our Combined Sewer System Long Term Control Plan that is part of the Consent Decree. The District incorporates the daily input and communications we have with our rate payers in all of its activities. That input has a significant impact on the Rate Proposals we present to the Rate Commission. Throughout these proceedings, District staff has appropriately defended its positions with independent estimates, fact based evidence, expert testimony and analysis. That is not being defensive but is the required level of engagement necessary to respect this process and to stand up to the high expectations of all interested stakeholders. MSD strongly believes that the Rate Commission process is an important part of the communication and input process. Not only in the findings that are a result of this process, but also in the suggestions made by the Rate Commission that are not directly related to the review of the proposed rate or rate structure. One of two examples was a previously noted desire by the Rate Commission that MSD stop taking advantage of cost -saving initiatives to do Consent Decree projects ahead of schedule, but rather to maintain the regulatory schedules and use those savings to help reduce future rates. MSD does this. Any savings from the previous rate cycle are now used to help reduce rates for the current proposal under consideration. Second and most recent was the use of some of the ideas presented in the 2019 Stormwater Rate Proposal in working with the public to increase the current stormwater OMCI tax rate to an amount greater than the current rate of $0.00 per one hundred dollars of assessed property valuation. District staff also takes the final step in the Rate Proposal process very seriously. This is the public process that the MSD Board of Trustees goes through to review for the first time both the Rate Proposal submitted by District staff and the recommendations to that proposal that are made by the Rate Commission. Any public input during that time from public meetings or other daily communications from the public are considered in the MSD Board of Trustees final decision. District staff felt strongly enough about the accusation made that we needed to make sure that everyone understands that all public interest is important to MSD during all facets of the rate development and approval process, including the development of the Rate Proposal, the Rate Commission proceedings, the development of the Rate Commission's recommendations and the Board of Trustees review of the Rate Proposal. 13 Exhibit MSD 95 In conclusion, the District believes the issues addressed in this report reflect the most relevant and representative topics requiring consideration by the Rate Commission. The District has submitted a substantial amount of testimony and documentation to support this Rate Change Proposal. The MSD Charter standard is for MSD to implement a rate structure that is fair and reasonable on classes of ratepayers. All evidence and testimony provided by MSD, demonstrates that MSD's proposed Wastewater Rate Change Proposal is fair and reasonable. MSD believes that based upon all of the information provided during these proceedings that its Rate Change Proposal as submitted on March 4, 2019 is the most fair and reasonable proposal. Respectfully submitted, _Caai kJ/1. Susan M. Myers THE METROPOLITAN ST. LOUIS SEWER DISTRICT 2350 Market Street St. Louis, Missouri 63103 Tel: (314) 768-6366 Fax: (314) 768-6279 14 'Exhibit MSD 95 APPENDIX A Wet Weather Flow Cost Allocation Information Region: MSD-StL 2005 MSD-Sti. 2019 %Chargie Kansas City St Joseph Indianapolis Statistic Population Area (sq. nil.) Combined Sewer Area (sq. mi.) % Combined Sewer Area Separate Sewer Area (sq. mi.) % Separate Sewer Area Miles of Sewer Miles of Combined Sewer Mlles of Separate Sewer Customer Accounts Customer Accounts - Residential Customer Accounts - Non -Residential Combined Sewer Overflows Sanitary Sewer Overflows WWTP Design Capacity Cons_ig Dance Years Progress 1,300,000 520 87 17% 432 83% 6,502 1,903 4,599 429,940 404,276 25,664 200 325 1,300,000 520 87 17% 432 83% 6,711 1,822 4,889 426,608 402,312 24,296 170 90 350 MGD, 7 plants Federal; CSO and 550, $4.7 billion in 2010 28 2012, complete in 2039 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 3.2% -4.3% 6.3% -0.8% -0.5% -5.3% -15.0% -72.3% 652,000 320 58 18% 262 82% 2,810 1,060 1,750 166,000 155,176 10,824 90 1 310 MDG, 6 plants Federal; overflow control program called Smart Sewer; $4.5 billion 25 2010, complete in 2035 Sources: MSD Internal documents; Kansas City Water; date and documents at www.cl.stjoseph.mo.us; Citlaens Energy Group 76,000 50 30 60% 20 40% 430 319 111 25,941 23,641 2,300 14 0 27 MOD, 1 plant CSO abatement order on consent with State of Missouri/MDNR; $206 million 16 2019, complete in 2035 800,000 308 34 11% 274 89% 2,850 350 2850 225,262 208,194 17068 133 0 250 MDG, 2 plants Wet weather, CSO and SSD, $2.0 billion 20 2005, complete in 2025, 59 of 64 (92%) critical milestones by 2019. Moody's 75% complete by 07/2018. 7/18/2019 15 Exhibit MSD 95 CERTIFICATE OF SERVICE The undersigned certifies that a copy of the foregoing was sent by electronic transmission to Lisa O. Stump and Brian J. Malone, Lashly & Baer, P.C., and Brandon Neuschafer and Kamilah Jones, Bryan Cave, LLP on this 19th day of July, 2019. Lisa O. Stump, Esq. Lashly & Baer, P.C. 714 Locust Street St. Louis, MO 63101 lostump@lashlybaer.com Brian J. Malone, Esq. Lashly & Baer, P.C. 714 Locust Street St. Louis, MO 63101 bmalone@lashlybaer.com Brandon W. Neuschafer Bryan Cave, LLP 211 N. Broadway, Suite 3600 St. Louis, Missouri 63102 bwneuschafer@bclplaw.com Kamilah Jones, Bryan Cave, LLP 211 N. Broadway, Suite 3600 St. Louis, Missouri 63102 kami.jones@bclplaw.com Susan M. Myers, General Counsel THE METROPOLITAN ST. LOUIS SEWER DISTRICT 2350 Market Street St. Louis, Missouri 63103 smyers@stlmsd.com Tel: (314) 768-6366 Fax: (314) 768-6279 16