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Exhibit MSD 96 - Transcript of Prehearing Conference July 12, 2019 MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 1 1 MEETING OF THE RATE COMMISSION 2 OF THE METROPOLITAN SEWER DISTRICT 3 2019 RATE CHANGE PROCEEDING 4 5 6 7 8 PRE-HEARING CONFERENCE 9 JULY 12, 2019 10 11 12 13 14 15 16 17 ALARIS LITIGATION SERVICES 711 N. 11TH STREET 18 ST. LOUIS, MO 63101 (314) 644-2191 19 20 21 22 23 24 25 Exhibit MSD 96 MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 2 1 A P P P E A R A N C E S 2 COMMISSIONERS: 3 Leonard Toenjes Stephen Mahfood 4 Jerry Beckmann Lloyd Palans 5 Paul Brockmann Tom Ratzki (via phone) 6 Mickey Croyle Mark Schoedel 7 Brad Goss Jack Stein 8 Chan Mahanta 9 10 11 REPRESENTING METROPOLITAN SEWER DISTRICT: 12 13 Susan Myers 14 15 16 REPRESENTING THE RATE COMMISSION: 17 18 Lisa O. Stump 19 Brian J. Malone 20 Lashly & Baer, P.C. 21 714 Locust St. 22 St. Louis, MO 63101 23 314.436.8344//Lostump@lashlybaer.com 24 25 MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 3 1 A P P P E A R A N C E S 2 (continued) 3 4 REPRESENTING THE MISSOURI INDUSTRIAL ENERGY CONSUMERS 5 (MIEC): 6 Brandon W. Neuschafer 7 Bryan Cave Leighton Paisner LLP 8 One Metropolitan Square 9 211 North Broadway, Ste. 3600 10 St. Louis, MO 63102 11 314.259.2317//bwneuschafer@bclplaw.com 12 13 14 ALSO PRESENT: 15 Bret Berthold Tim Snoke 16 Marion Gee Rich Unverferth 17 Brian Hoelscher Nicole Young 18 Pam Lemone Bill Stannard/Rafteus 19 Tim Snoke (via phone) 20 21 COURT REPORTER: 22 Julie Hundelt, CCR, CSR, RPR 23 Alaris Litigation Services 24 711 North 11th Street 25 St. Louis, Missouri 63101 MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 4 1 PROCEEDINGS: 2 3 (Starting time of the Pre-Hearing Conference 9:00 a.m.) 4 5 COMMISSIONER TOENJES: My name is Leonard 6 Toenjes, and I'm chair of the Rate Commission of the 7 Metropolitan St. Louis Sewer District and will serve 8 as chair of this proceeding. 9 The Charter Plan of the District was 10 approved by the voters of St. Louis and St. Louis 11 County at a special election on February 9, 1954, and 12 amended at a general election on November 7, 2000. 13 The amendment to the Charter Plan established the Rate 14 Commission to review and make recommendations to the 15 District regarding changes in waste water rates, storm 16 water rates, and tax rates proposed by the District. 17 The Charter Plan requires the Board of 18 Trustees of the District to select organizations to 19 name delegates to the Rate Commission to ensure a fair 20 representation of all users of the District's 21 services. The Rate Commission representative 22 organizations are to represent commercial industrial 23 users, residential users, and other organizations 24 interested in the operation of the District including 25 organizations focusing on environmental issues, labor MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 5 1 issues, socioeconomic issues, community neighborhood 2 organizations, and other nonprofit organizations. 3 The Rate Commission currently consists of 4 representatives of associated general contractors of 5 Missouri, St. Louis County Municipal League, Lutheran 6 Senior Services, St. Louis Council of Construction 7 Consumers, Greater St. Louis Labor Council, Missouri 8 Botanical Garden, Mound City Bar Association, League 9 of Women Voters of Metro St. Louis, Home Builders 10 Association, North County, Incorporated, Missouri 11 Coalition for the Environment, the City of Ladue, 12 Engineers Club of St. Louis, Missouri Industrial 13 Energy Consumers, and Education Plus. 14 Upon receipt of a rate change notice from 15 the District, the Rate Commission is to recommend to 16 the Board of Trustees changes in the waste water, 17 storm water, or tax rate necessary to pay interest and 18 principal falling due on bonds issued to finance 19 assets of the District, the cost of operation and 20 maintenance, and such amounts as may be required to 21 cover emergencies and anticipated delinquencies. 22 Further, any change in a rate recommended to 23 the Board of Trustees by the Rate Commission is to be 24 accompanied by a statement that the proposed rate 25 change is consistent with constitutional, statutory, MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 6 1 or common law as amended from time to time; enhances 2 the District's ability to provide adequate sewer and 3 drainage systems and facilities or related services; 4 is consistent with and not in violation of any 5 covenant or provision relating to any outstanding 6 bonds or indebtedness of the District; does not impair 7 the ability of the District to comply with applicable 8 federal or state laws or regulations as amended from 9 time to time; and imposes a fair and reasonable burden 10 on all classes of ratepayers. 11 The Rate Commission received a rate change 12 notice from the District on March 4, 2019. Under the 13 District's Charter Plan, the Rate Commission must on 14 or before July 2, 2019, issue its report on the 15 proposed rate change notice to the Board of Trustees 16 of the District unless the Board of Trustees upon 17 application of the Rate Commission extends the period 18 of time for the issuance of the Rate Commission report 19 for an additional 45-day period. 20 At its meeting on March 14, 2019, the Board 21 of Trustees approved the Rate Commission's request for 22 an extension. The Rate Commission's report on the 23 proposed rate change must now be issued on or before 24 August 16, 2019. 25 Since March 4, 2019, the Rate Commission has MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 7 1 received testimony from District staff, the 2 intervenor, and the rate consultant. The parties have 3 also engaged in discovery requests. Technical 4 conferences were held on April 8, 2019, May 9, 2019, 5 and June 20, 2019, where the participants and the Rate 6 Commission were given an opportunity to ask questions 7 of those submitting testimony. 8 The Charter Plan of the Metropolitan 9 St. Louis Sewer District and the operational rules and 10 procedural schedule of the Rate Commission of the 11 Metropolitan St. Louis Sewer District provide for a 12 prehearing conference to identify, define, resolve or 13 settle the issues raised by the prepared testimony 14 and to ensure orderly and expeditious proceedings. 15 Each intervenor may participate in this 16 prehearing conference conducted on the record to 17 permit counsel for the District, each of the 18 intervenors, and the Rate Commission to briefly 19 describe the participant's position, if any, on each 20 of the criteria and factors identified in the Charter 21 Plan. 22 In the event participants are able to 23 revolve or settle any issues or issue raised in the 24 prepared testimony, such participants shall also 25 include as part of the prehearing conference report a MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 8 1 joint recommendation describing each such issue, the 2 recommended resolution of the issues, and the 3 rationale therefor. 4 The Rate Commission is interested in the 5 views of the participants on the extent to which the 6 District's rate change proposal or any alternative 7 proposed by the participants meets or fails to meet 8 the criteria or factors for recommendation contained 9 in the Charter Plan. 10 To that end, and without requiring any 11 participant to act in a particular manner, each 12 participant is requested to make a short oral 13 presentation of the participant's respective position. 14 The parties may also submit a short, written summary 15 of the presentation, if desired. 16 The Commission's procedural schedule 17 provides that each participant of the prehearing 18 conference shall submit on or before July 19, 2019, a 19 prehearing conference report describing the issues 20 raised by the prepared testimony together with a brief 21 description of such participant's position, if any, on 22 each issue and the rationale therefor. 23 The Rate Commission has established a public 24 hearing session for the participants to be held on 25 July 24, 2019, at 9:00 a.m. at the District offices. MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 9 1 The purpose of this public hearing session will 2 include permitting ratepayers to testify, receiving 3 into evidence any prepared testimony previously 4 submitted to the Commission subject to any valid 5 objections, together with discovery responses and 6 transcripts of the technical conferences, permitting 7 the Commission members to ask questions regarding any 8 issue addressed by the prepared testimony or any other 9 element of the proposed change and permitting closing 10 statements by the District, the intervenors, and legal 11 counsel for the Rate Commission. 12 In preparation for the July 24 hearing, the 13 District will distribute a current list of exhibits to 14 all parties by July 22, 2019. 15 Are there any procedural matters before we 16 proceed? 17 Hearing none, Ms. Myers, would you care to 18 address the Rate Commission on behalf of the District? 19 MS. MYERS: I certainly will. 20 COMMISSIONER TOENJES: Please come forward. 21 MS. MYERS: Good morning. I'm going to 22 present the District's prehearing conference summary. 23 My name is Susan Myers, and I'm the general counsel 24 for the Metropolitan St. Louis Sewer District. 25 As you all know, the District submitted a MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 10 1 waste water rate change proposal to you on March 4 of 2 2019 proposing waste water rates for Fiscal Year '21 3 through Fiscal Year '24. 4 Although the District provided information 5 that contained projected rate increases after Fiscal 6 Year '24, for long-term future planning purposes, this 7 information is preliminary and was not subjected to 8 the same level of scrutiny and analysis that was 9 conducted to calculate the rates for FY21 through FY24 10 and is also outside the scope of the current proposal 11 being considered by the Rate Commission. 12 As proposed, the District's proposal meets 13 the five criteria outlined in the MSD Charter 14 Section 7.270. Now, the task at hand for you is to 15 consider all the evidence presented and issue a rate 16 recommendation report to the Board of Trustees that 17 also meets those five criteria. 18 Based upon the evidence as presented, there 19 seems to be four topics that warrant further 20 discussion: 21 Topic No. 1 involves the schedule required 22 to design and build the fluidized bin incinerators at 23 both the Lemay and Bissell treatment plants. MSD's 24 position is that the existing incinerators will be in 25 violation of the law without maintenance. Under the MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 11 1 SSI rule, maintenance repairs are not an option and 2 the units have to be replaced. 3 MSD committed to EPA to follow the law and 4 replace the incinerators being constructed, beginning 5 construction in 2023 as a condition of a consent 6 decree amendment. The intervenor, MIEC, proposes that 7 we can request a consent decree extension from EPA at 8 any time or that MSD has discretion to move projects. 9 Your rate consultant agrees that MSD has 10 very little discretion to move projects in this rate 11 proposal including the incinerators. You all may 12 recall an inaccurate Channel 5 news report on the 13 impact of incinerators on the St. Louis area. If you 14 would like accurate information, please review the 15 entire interview on MSD's website. 16 It is MSD's position that moving the 17 incineration project construction start out past 18 Fiscal Year '23 will cause the District to not meet 19 Criteria 4 as it would impair the ability of the 20 District to comply with existing law. 21 Topic No. 2 involves how infiltration and 22 inflow should be allocated. The District testified 23 that the allocation of 40 percent to customer and 24 60 percent to volume has been in place since 2007 and 25 was found to be fair and reasonable in the 2007, 2011, MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 12 1 and 2015 waste water Rate Commission processes. 2 The primary source for this information was 3 based on an I&I allocation study done in 2005. 4 However, an explanation of how that study was used to 5 arrive at the allocation factors was provided in the 6 District's 2007 rate proposal. MSD's experts 7 testified that they have not identified any change in 8 the character of the waste water system since this 9 study that would modify the allocation either up or 10 down. 11 MSD is committed to performing a new 12 I&I allocation study prior to the next rate proposal. 13 The new report will take into account the impact of 14 the removal of 189 sanitary sewer overflows. 15 85 percent removal since the start of the consent 16 decree. The intervenor proposes an arbitrary 17 allocation of 50 percent to customer and 50 percent to 18 volume. This proposal is not based upon any 19 supporting evidence or data. 20 Your rate consultant seems to agree with the 21 District that there has not been any evidence 22 presented to prove that the allocation from the study 23 has changed. At this time an arbitrary change to 24 the allocation would be in violation of Criteria 5 by 25 not being fair and reasonable to all classes of MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 13 1 ratepayers. 2 Topic 3 involves the intervenor's proposal 3 that MSD should move $70 million from Fiscal Year '23 4 and from Fiscal Year '24 to lessen the waste water 5 rate increases projected per FY21 and FY -- for FY21 6 through FY24. 7 MSD has provided evidence, and again, your 8 rate consultant agrees, that we have very little 9 discretion to move any projects. Specifically, MSD 10 cannot delay the incineration project. District staff 11 has concluded that there is not $70 million in 12 projects that can responsibly be delayed in FY23 and 13 FY24 without a significant negative consequences. 14 Topic No. 4 involves the proposed 15 extra-strength surcharge. The extra-strength 16 surcharge proposed by MSD has been adjusted beginning 17 in Fiscal Year '21 so that the cost-to-service 18 customers subject to the surcharge are recovered, and 19 increases to the surcharge in Fiscal Year '22 through 20 Fiscal Year '24 are based on expected increases in O&M 21 expenses. 22 MSD experts acknowledge that there are other 23 methodologies that would also be considered fair and 24 reasonable. The intervenor suggests that an 25 across-the-board increase should be implemented. The MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 14 1 difference between an across-the-board increase and an 2 increase based on O&M changes is very minimal. 3 However, an across-the-board increase would 4 result in higher rates than what is requested by MSD. 5 Please remember that during the current rate cycle, 6 Fiscal Year '17 through Fiscal Year '20, the MSD 7 customers not subject to this surcharge have been 8 subsidizing those customers that are subject to the 9 surcharge. 10 This subsidy would continue if the increase 11 was phased in over two years as recommended by the 12 rate consultant. As I stated at the beginning of my 13 statement, the task at hand for you all is to issue a 14 rate recommendation report to the MSD Board of 15 Trustees that meets the five criteria outlined in the 16 Charter. 17 Upon review of the complete record of these 18 proceedings, you will be able to determine that the 19 District proposal does just that. However, the 20 proposal provided by the intervenor cannot be 21 objectively evaluated due to numerous errors in their 22 financial modeling submitted by their consultant. 23 This concludes the District's official 24 statement. A copy of our statement will be filed as 25 Exhibit MSD92. Thank you. MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 15 1 COMMISSIONER TOENJES: Thank you, Ms. Myers. 2 Do any member of the Rate Commission have 3 questions for Ms. Myers? 4 I have one, hearing none from anyone else. 5 You mentioned that you are going to perform 6 a new I&I study. Can you elaborate on the timeline 7 for that? 8 MS. MYERS: I'm going to ask -- is it Marion 9 or Brian? 10 MR. HOELSCHER: We are going to include that 11 in next year's fiscal budget and start the process as 12 quickly as we can. Compared to what we did 13 previously, there's a lot more tools available to us 14 such as more modeling tools and those types of things. 15 And so I think it's important for us to start right 16 after the start of next fiscal year which would be 17 July 1 next year. We'll budget for it in the next 18 fiscal year budget. 19 COMMISSIONER TOENJES: And how long does 20 that process take? 21 MR. HOELSCHER: So we want to start early 22 because to use the new tools, you also need 23 appropriate weather conditions to be able to make 24 those measurements. So I think it's important for us 25 to start as quickly as we can. MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 16 1 If we have the right conditions, the data 2 can be gathered in a year. Our experience with 3 hydraulic data, sometimes you need two years or 4 something more. I think the point is for us to start 5 as early as we can to make sure we have the data and 6 use that to develop a rate proposal for Fiscal 7 Years '25 through '28. 8 COMMISSIONER TOENJES: Thank you. Yes, 9 Mr. Mahfood. 10 COMMISSIONER MAHFOOD: Susan, I hate to do 11 this to you, but just to ask this question, could you 12 give me the CliffsNotes version of this Channel 5 and 13 MSD's response? 14 MS. MYERS: I'm going to turn that over to 15 Brian, also. 16 MR. HOELSCHER: Sorry. I was following up 17 on previous the one. 18 COMMISSIONER MAHFOOD: No. That's okay. 19 Talk about the -- can you do the -- kind of the 20 CliffsNotes version of this Channel 5 and whatever 21 program -- whatever their comments were about the 22 incinerators and what MSD's response was? 23 MR. HOELSCHER: Okay. I'll try and do it 24 without getting into trouble. So -- so I would point 25 to one thing. I think if you saw the report, MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 17 1 Channel 5, despite the information that was provided 2 to them, was willing to indicate that we incinerate 3 medical waste. The only medical waste we incinerate 4 is when the doctors and nurses go to the bathroom. 5 There are obviously other provisions for how 6 medical waste is disposed. There was other 7 information that we provided during the interviews, if 8 you watch the whole document, that you would see that 9 one of my staff -- yeah, I'll say. One of my staff 10 used to work for Channel 5. Said their reporting was 11 deliberately deceitful. We've had discussions with 12 Channel 5. We know that will not happen again. 13 But I think, having said that, since I was 14 asked, I think the response I gave to one of the 15 customers during one of the public presentations who 16 asked that question, I said, "Don't take my word for 17 it. Look at the full interview" because we taped the 18 entire interview as opposed to the sections they 19 showed. 20 Just that one individual who looked at it 21 said, "I apologize. You guys are right. There is no 22 issue there." 23 So I could say more than that, but I think 24 that's why we're indicating, please look at the 25 interview on our website, and you can see all the MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 18 1 information that's there that's available. 2 Does that help? 3 COMMISSIONER MAHFOOD: Very much so. And so 4 in conclusion, it was not comments made about the 5 quality of the technology as far as meeting EPA 6 requirements or state requirements, or maybe that was 7 not the crux of the -- or the current air quality 8 issues in St. Louis. More about site issues somebody 9 had come up with. 10 MR. HOELSCHER: So there is an overall -- 11 and we've dealt with other entities who have done this 12 during the permitting process. When we go to EPA or 13 MDNR and request changes, there is a group that 14 oversights changes to air permits over everybody. 15 Industrial. Us. 16 We kind of got caught up with that. And 17 quite honestly, they knew this was out there, and I 18 assume most of you probably know that report occurred 19 during sweeps week for a reason on Channel 5. So I 20 think we're squared away with Channel 5. I know we're 21 squared away with some of the other entities that 22 approached us. 23 As a matter of fact, unknowingly, they were 24 actually recommending we do exactly what we were going 25 to do. They just didn't know that when MDNR would MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 19 1 publish public comment for permits and stuff like 2 that. 3 So we had communications with Coalition for 4 the Environment, local aldermen. Everybody who was 5 involved, they understand what's going on, and they 6 don't have an issue with us proceeding forward. 7 COMMISSIONER MAHFOOD: Thank you. Thanks. 8 COMMISSIONER TOENJES: Any further questions 9 for Ms. Myers? 10 COMMISSIONER MAHFOOD: Brian, I understand 11 that MSD does not intentionally burn medical waste. 12 However, I have a question. We read that a lot of 13 people, not thinking or carelessly, flush down toxic 14 medical medicines and stuff like that, like, cancer 15 treatment medications, stuff like that. 16 When those things get burned in the 17 incinerators, is there any way to track those 18 effluents into the air? 19 MR. HOELSCHER: So I'm going to give you 20 answers around that question because I don't have a 21 direct answer to your question. I would put you, just 22 in the industry, I would suggest -- first of all, in 23 our process, we have discharge permits with all these 24 entities including hospitals, including industrial 25 producers. MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 20 1 Not only you guys are experiencing the 2 surcharge issue we had with BOD and suspended solids, 3 we also have restrictions on what they can put in the 4 sewer. Most industries have some kind of pretreatment 5 system specific to their industries where they 6 pretreat things, and we regularly monitor that they're 7 in compliance with those permits. 8 There are things occurring. There is -- 9 they're called emerging contaminants. There are 10 issues with drugs. We are currently -- if anybody 11 heard of PFAS other than Mr. Mahfood, the material 12 that keeps your -- and other people -- the material 13 that keeps your weatherproof on your -- that's causing 14 an issue. 15 A lot of those don't show up in 16 incineration. Where they show up is in landfill 17 sludge and where those are going to be getting into 18 the environment. So these new -- I don't have an 19 answer exactly for you. Do we check for those as part 20 of the incineration process? I don't know. 21 I will tell you the permit, in general, for 22 these new incinerators are ten times stricter than 23 what we have with the existing incineration. Both the 24 permit right now today -- current system is going to 25 go out very quickly. But I don't -- I don't have and MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 21 1 I don't know that we have an expert sitting here who 2 can tell you we actually monitor for household 3 pharmaceuticals that go down the sewer system showing 4 up in the incinerators. I don't have an answer for 5 that one. 6 COMMISSIONER MAHFOOD: Okay. 7 COMMISSIONER TOENJES: Any questions from 8 any of the other Rate Commissioners? 9 Hearing none. Ms. Myers, thank you. 10 MS. MYERS: Thank you. 11 COMMISSIONER TOENJES: Mr. Neuschafer, would 12 you care to address the Rate Commission on behalf of 13 Missouri Industrial Energy Consumers? 14 MR. NEUSCHAFER: I would. Thank you. 15 COMMISSIONER TOENJES: Please come forward. 16 MR. NEUSCHAFER: Thank you. As you're all 17 aware, I'm Brandon Neuschafer, and I represent the 18 Missouri Industrial Energy Consumers. I have no 19 intention of rehashing all of the arguments outlined 20 in the testimony and the prehearing conference reports 21 that'll be submitted next week. You'll see a much 22 deeper explanation of our position on these issues 23 with support from the record at that point in time. 24 But I do want to take this opportunity to 25 raise a few issues. Some of them are the same issues MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 22 1 that Ms. Myers raised, but there are a few additional 2 issues that we would like the Rate Commission to 3 carefully consider. 4 MSD's duty is to propose a program that is, 5 among other things, fair and reasonable to all classes 6 of ratepayers. And Rate Commission's role in this 7 proceeding is to hold MSD to that standard. 8 Regrettably, what the CIRP has proposed is neither 9 fair nor reasonable, and Rate Commission should make 10 recommendations to remedy that. 11 We're suggesting a few modifications to 12 MSD's rate proposal to help ensure that it is fair and 13 reasonable to all classes of ratepayers. 14 First, MIEC is proposing to shift 15 approximately $70 million worth of projects scheduled 16 for Fiscal Years '23 and '24 to Fiscal Years '25 and 17 '26. Very importantly, we are not suggesting that any 18 project should not be completed or that the consent 19 decree of regulatory obligation should be ignored. I 20 want to make clear that is not our position at all. 21 We're simply indicating that shifting 22 projects helps avoid a significant spike in revenue 23 requirements in the latter two years of the current 24 program and thus helps prevent consumer rates from 25 increasing dramatically during that same time period. MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 23 1 So it's our position that MSD has yet to 2 adequately explain why this shift in project timing 3 cannot occur beyond providing summary conclusions that 4 they don't think it's possible. 5 Sure, it may require MSD to roll up their 6 sleeves and put pen to paper and do some work to 7 adjust timelines, but we think that's work that's 8 necessary to ensure that the rates and the rate 9 increases that are imposed are done so at a measured, 10 level, fair, and reasonable manner. 11 Second, MSD must more carefully establish 12 its debt service coverage ratio. Historically, the 13 debt service coverage ratio has been set at a minimum 14 of 1.6x, and MSD now seeks to set the minimum ratio up 15 to 1.8x. MSD cites reported concerns from a rating 16 agency as the basis for this change notwithstanding 17 that earned rates of 1.7x to 1.9x should be sufficient 18 to maintain credit ratings. 19 This is important because MSD's historical 20 performance shows that they have an earned DSC several 21 tenths higher than the established minimum. By 22 significantly raising the minimum debt service 23 coverage ratio, the impact is that the earned debt 24 service coverage ratio would be much higher than 25 necessary to support credit ratings which means MSD is MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 24 1 collecting more money from consumers than needed. The 2 result is neither fair nor reasonable to any class of 3 MSD's customers. 4 Third, MSD should not so dramatically shift 5 the debt-equity mix of its funding program. MSD's 6 historical debt-equity mix has been 75 percent debt 7 and 25 percent equity or PAYGO, as we've also heard it 8 referred to. But MSD now seeks to shift to 60 percent 9 debt and 40 percent equity. 10 While MIEC recognizes that additional equity 11 funding is necessary, such a dramatic shift is 12 unnecessary and unfairly and unreasonably burdens 13 customers. As modeling of MIEC's proposal is 14 demonstrated, a 70 percent equity and 30 percent debt 15 allocation is a much more fair and reasonable 16 proposal. 17 Fourth, MSD should adjust the allocation of 18 infiltration and inflow, or I&I, from 40 percent on 19 the basis of number of customers in a class and 20 60 percent on the proportion of each class's 21 contribution to a 50/50 split. 22 MSD's allocation is based on data in a study 23 that is more than 25 years old, which the data itself 24 does not even clearly support a 40/60 split. Even 25 MSD's own consultants recognize that the data is old MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 25 1 and needs to be updated. I've heard today that MSD is 2 committing to updating that data. 3 The Rate Commission's own consultant, 4 Ms. Kumar, agrees that the allocation used by MSD 5 allocates a higher proportion of the I&I cost to 6 volume than MSD's pier systems. I&I costs are largely 7 driven by size and number of connections to the 8 system. 9 Given the geographical expansive nature of 10 the St. Louis Metropolitan Sewer District as well as 11 more recent studies indicating I&I allocations at 12 comparable sewer Districts, a 50/50 split is a fair 13 and reasonable allocation amongst all customers of the 14 cost of services associated with I&I. This split 15 provides another benefit in that it will produce a 16 more stable and predictable revenue stream for MSD, 17 and surely, we can all see the benefit in that 18 approach. 19 Finally, MSD proposes dramatically 20 increasing extra-strength surcharges in a manner that 21 is neither fair nor reasonable to subject customers. 22 Rather than a rate shocking increase in 2021 followed 23 by annual increases, MSD should either impose an 24 across-the-board increase or phase in necessary 25 extra-strength surcharges. MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 26 1 MSD attempts to justify this increase by 2 explaining that only a small percentage of customers 3 are impacted, but I remind you that rates must be fair 4 and reasonable on all classes of customers, not just 5 some classes of customers. This is yet another 6 conclusion supported by the Rate Commission's own 7 expert, Ms. Kumar. 8 A key thing throughout this proceeding is 9 that MSD dismisses every attempt to refine their 10 estimated revenue requirements, their modeling, and 11 their rate proposal. MSD appears to be in a defensive 12 mode, not a mode of accepting input from customers and 13 the Rate Commission that are designed to present more 14 accurate revenue requirements or a more fair and 15 reasonable rate structure. These are not the 16 insurmountable issues that MSD makes them out to be. 17 Sure, MSD has an obligation to comply with 18 consent to create other regulatory requirements. We 19 also appreciate MSD's interest in protecting its 20 credit rating. But MSD also has an obligation to its 21 customers -- all of its customers -- to structure a 22 program in a way that protects customers and ensures 23 that customers aren't paying higher rates than they 24 need to pay. This may mean not adding in layer after 25 layer after layer of cushion premised on the most MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 27 1 conservative judgment calls. 2 That's why the Rate Commission is so vital. 3 The Rate Commission serves as a check on MSD and needs 4 to perform the critical role of pressing MSD to ensure 5 that the rate proposal is fair and reasonable to all 6 classes of customers. This means ensuring that MSD 7 has properly calculated its revenue requirements and 8 properly structured a rate program that takes into 9 account consumer input and fairness and equity to all 10 customers. This may also means that MSD needs to do 11 additional work to make refinements -- to project 12 timing, to its rate proposal, or elsewhere -- but 13 where such adjustments result in a proposal that is 14 fair and reasonable to the customers. Such 15 adjustments must be made. 16 Despite some of the change -- the statements 17 we've heard, these proposed changes are not minor or 18 immaterial. Especially when considered together, they 19 have a real impact, a positive impact on the 20 ratepayers, and provide a fair and reasonable approach 21 for rate setting for all classes of customers while at 22 the same time allowing for MSD to meet its legal 23 obligations and maintain its credit standing. 24 We thank you for your consideration and look 25 forward to submittal of our papers next week. MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 28 1 COMMISSIONER TOENJES: Thank you, 2 Mr. Neuschafer. 3 Questions from any of the Rate Commissioners 4 for Mr. Neuschafer? 5 I hate for you not to have any questions. 6 MR. NEUSCHAFER: Fire away. 7 COMMISSIONER TOENJES: The Item 1, the 8 $70 million shift, is that based on specific projects, 9 or is that based on a dollar amount? 10 MR. NEUSCHAFER: It's both. Certainly, at 11 70 million, I think we would say that 70 million is a 12 good target. You know, recognize that it may not be 13 exactly 70 million. But I want to -- I do want to 14 make clear that this is not just about the fluidized 15 bed of the incinerators. We think there may be some 16 room for adjustment in the timelines of those 17 programs, but we think that there are other projects 18 that are being proposed by MSD during this time period 19 that can be shifted as well to -- to reach 20 approximately $70 million. 21 We'll provide more detail on that next week. 22 I don't have specific project, you know, timing and 23 numbers and identification with me right now. But we 24 will provide some of that detail next week, and it is 25 not just about the incinerators. MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 29 1 COMMISSIONER TOENJES: Thank you. 2 Mr. Mahfood. 3 COMMISSIONER MAHFOOD: Will the -- what 4 you're going to submit next week give us an idea of 5 what you're proposing as the difference in rates 6 between what MSD is -- not just the detail, but the 7 final rates? Will you address that issue at all? 8 MR. NEUSCHAFER: Yeah. We can -- we can 9 provide some of that information. Certainly, the 10 modeling as far as the revenue requirements, so how 11 much money we have to take in, when MIEC modeled that, 12 and then when MSD performed their modeling that was in 13 the recent discovery responses, those were really 14 consistent as far as the revenue requirements that 15 would be needed. 16 So we can -- we can certainly provide some 17 more information on what we see the impact on the rate 18 to be. 19 COMMISSIONER MAHFOOD: Thank you. 20 COMMISSIONER TOENJES: Mr. Goss. 21 COMMISSIONER GOSS: Mr. Neuschafer, MSD's 22 position is that your adjustment to I&I factor 50/50 23 is arbitrary and that you have no evidence to support 24 that adjustment. How do you respond to that, and how 25 do you respond to MSD's position which I think is the MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 30 1 60/40 is supported by evidence? 2 MR. NEUSCHAFER: I think there are a number 3 of responses that we make. First off, the data is 4 old. The system has changed a lot in the 5 25-plus years since that data was collected and 6 generated. I think when you look at pier systems, the 7 Indianapolis system has been mentioned. There's a 8 listing study -- in the record there are some studies 9 comparing or looking at other systems as well. 10 You'll see that, actually, MSD's 11 current allocation, while it may be consistent with 12 something like the Kansas City system, if I remember 13 correctly, there are a number of systems with which it 14 is not consistent. In fact, those systems are rated 15 much more heavily in favor of number of customers and 16 weighting the allocation to number of customers as 17 opposed to volume. 18 And so I think we have to consider the 19 nature of the data we've got, that MSD reports 20 supports a 40/60 split, which I don't think we believe 21 the support is there. They believe is there. 22 The nature of the St. Louis system, which is 23 very large -- we've heard many times it's the largest 24 in the country, one of the most, I guess, 25 geographically diffuse systems in the country -- MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 31 1 the -- what causes infiltration and inflow which is 2 the size of the system and number of connections which 3 is directly related to the number of customers, not 4 volume. 5 And when you look at pier systems and where 6 pier systems are currently at, I think you've got a 7 combination of factors that indicate that 8 MSD's allocation is -- even if it might have been 9 acceptable, you know, 10 or 15 or 20 years ago, it's 10 no longer reflective of what is fair and reasonable to 11 ratepayers. 12 COMMISSIONER GOSS: Just to follow up. If I 13 understand MSD's position, they believe the Kansas 14 City system is the most comparable of other systems to 15 compare to, in part, if I recall the testimony 16 correctly, is because it's a Missouri-located system 17 and it's large as opposed to the St. Joseph system 18 which was mentioned. 19 Do you believe -- do you agree with that, 20 that that's the most comparable system, or do you 21 think that the Indianapolis system or some other 22 system is more comparable, and why, if that's true? 23 MR. NEUSCHAFER: Yeah. I think it's 24 interesting that MSD's experts selected the St. Joseph 25 system which was one of ten mentioned in the testimony MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 32 1 to say, well, that indicates that everything else 2 isn't relevant because St. Joseph is so much different 3 than St. Louis, which I strongly -- the elimination of 4 one, if St. Joseph is not comparable to St. Louis, 5 which I understand it's a smaller -- smaller city, and 6 it's not as geographically diffuse as the St. Louis 7 system -- but eliminating that one from the analysis 8 doesn't mean all the others are irrelevant. 9 Without having the data in front of me right 10 now about size and age and number of connections on 11 the Kansas City system versus the Indianapolis system 12 versus one of the other seven or so that are 13 mentioned, I can't say that I agree with MSD that 14 Kansas City is the most relevant comparison. 15 And I think when I pushed their expert on 16 cross-examination, I found it very difficult to get 17 any clarity as to why he felt like it was most 18 comparable other than sort of high-level statements 19 about, well, it's got similar geography and climate. 20 I don't know that those are the only factors that have 21 to be taken into account. 22 Indianapolis is geographically not much 23 farther away than Kansas City. It's about the same 24 distance, the size of the system. We'll provide some 25 data on that to show, perhaps, Kansas City is not the MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 33 1 most comparable system and that there's -- that 2 Indianapolis might be more comparable than Kansas 3 City. 4 COMMISSIONER GOSS: Will you be supplying 5 data to support that the other -- assuming that you 6 drop an outlier, calling St. Joseph an outlier for the 7 sake of the conversation, that your other nine systems 8 would create a more comparable group of systems? 9 MR. NEUSCHAFER: I don't know that we'll be 10 providing data on all nine from the other systems. 11 But we will be providing some data to indicate that 12 those other systems might be just as, if not more, 13 comparable to Kansas City. 14 COMMISSIONER GOSS: Thank you. 15 MR. NEUSCHAFER: I think it's important to 16 note that they only refuted one of the remaining 17 nine systems. And I don't know -- I don't know that 18 it behooves us to get into a very detailed discussion 19 of all ten of those systems, but refuting one and 20 suggesting on your own that one other is more 21 relevant, I don't find that to be a comprehensive or 22 persuasive response. 23 COMMISSIONER GOSS: Thank you. 24 COMMISSIONER TOENJES: Thank you, Mr. Goss. 25 Mr. Palans. MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 34 1 COMMISSIONER PALANS: Thank you. 2 Mr. Neuschafer, in your response that you filed on 3 behalf of MIEC recently, that is, Exhibit 90A, it's a 4 response to the first discovery request of the Rate 5 Commission, you -- you reference the Black & Veatch 6 study. It's a Black & Veatch attachment dated 7 June 21, 2018. And in that study, you -- the study 8 indicates that Black & Veatch allocates System II to 9 customer classes using a combination number of 10 customers, connections, contributed volume. 11 And then it goes on to say in that study 12 that the II analysis incorporates several elements 13 including length of waste water system mains, diameter 14 of mains, number of connections, and contributed 15 volume. 16 What do we have in our record to cause us to 17 change our view that the District's recommendation is 18 not reasonable when we have, as I understand it, no 19 evidence in our record as to any of these other 20 factors -- length of the system mains, diameter of 21 mains, number of connections, and contributed volume? 22 Aren't we just guessing at that point? 23 MR. NEUSCHAFER: If I could, can I consult 24 with our rate consultant who is here? I think that 25 will help me get a better answer. MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 35 1 COMMISSIONER PALANS: Sure. 2 (Whereupon, a break was taken off the 3 record.) 4 MR. NEUSCHAFER: Mr. Palans, I think some of 5 that information is in the record. I don't have the 6 direction to it now. We will make sure that we 7 address this point in the papers that we file next 8 week. 9 COMMISSIONER PALANS: My point being that we 10 have a recommendation of a 60/40 split, and I would 11 like you to point to the aspects of the record that 12 would support changing that 60/40 split. We 13 understand that it is based upon a 2005 -- your 14 25-year-old study, but what is there in the record to 15 reflect that that's wrong? What evidence do we have 16 today to say that is wrong? 17 MR. NEUSCHAFER: And I'd first refer you to 18 my -- the answer that I just gave to Mr. Goss, but 19 we'll -- we'll provide more direction to -- to the 20 record. 21 COMMISSIONER PALANS: I don't want to just 22 guess. I want to understand. 23 MR. NEUSCHAFER: Yeah. 24 COMMISSIONER PALANS: The other aspect of it 25 is that the Black & Veatch study that you attached MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 36 1 indicates that the majority of the utilities that are 2 referenced -- there's nine different utilities that 3 are identified in the II, that other waste water 4 utilities allocate percentages to between volume and 5 customer. They indicate that the majority of these 6 utilities are not regulated by state public utility 7 commissions, but they are established on the basis of 8 consultant recommendations or via their own policy 9 decisions. 10 So I would like to have your consultant 11 indicate based upon data what the allocation should be 12 as opposed to what you might like it to be. 13 MR. NEUSCHAFER: Understood. 14 COMMISSIONER PALANS: Thank you. 15 COMMISSIONER TOENJES: Thank you, 16 Mr. Palans. 17 Mr. Goss. 18 COMMISSIONER GOSS: Just to follow up on 19 Mr. Palans' question, do you know or know where in the 20 record the data is on the dollars spent by MSD on 21 addressing I&I issues since the last several rate 22 increases? Have you -- are you able to find that data 23 so we have an idea of how much has been spent on 24 improvements to this system and where we stand to date 25 on actual improvements to the system? MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 37 1 I think MSD said by the next -- by the end 2 of this rate, they'll be at the 85 percent threshold. 3 Do we know in the record where we are today? And the 4 follow-up to that is, does it make a difference such 5 that the 2005 data or study would no longer be an 6 accurate reflection of I&I, thus necessitating some 7 different ratio as you suggest. 8 MR. NEUSCHAFER: I can't point to that in 9 the record right now. We'll look into that. 10 COMMISSIONER GOSS: I understand. That's 11 something that I think is factual data. I don't know 12 if it's in the record or not. It may be responsive to 13 Mr. Palans' question so that's why I'm asking the 14 follow-up. 15 COMMISSIONER TOENJES: I would also suggest 16 that we ask Ms. Lamone to -- 17 COMMISSIONER GOSS: Yeah. Absolutely. 18 COMMISSIONER TOENJES: -- perform some 19 analysis on that particular issue also. 20 COMMISSIONER GOSS: Absolutely. 21 COMMISSIONER TOENJES: Any further questions 22 for Mr. Neuschafer? 23 Mr. Neuschafer, I certainly thank you for 24 your thoroughness and professionalism. Thank you very 25 much. I appreciate it. MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 38 1 Mr. Malone, would you like to address the 2 Rate Commission as the Rate Commission's legal 3 counsel? 4 MR. MALONE: Yes, sir. 5 COMMISSIONER TOENJES: Please come forward. 6 MR. MALONE: Good morning, everyone. As the 7 Rate Commission's legal counsel, our role here is a 8 little bit different. Our primary responsibility is 9 to assist you with preparing a report on the 10 District's rate change proposal identifying whether 11 the rate change proposal complies with the 12 three Charter criteria as well as the five factors for 13 recommendation that are set forth in MSD's Charter. 14 In reviewing the record, in anticipation of 15 this meeting, we've identified approximately 16 nine issues that warrant further consideration, and 17 the fact that these factors -- a number of them have 18 already been discussed today by Ms. Myers and 19 Mr. Neuschafer, and we intend to address them in a 20 little bit greater depth in the report that we'll be 21 filing next week. 22 So the first issue we identified as the 23 affecting the Charter criterion factors is the 24 appropriateness of the ratio of cash to debt necessary 25 to finance the certain projects, and that also has MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 39 1 already been mentioned by Ms. Myers and 2 Mr. Neuschafer. 3 As you know, MSD is proposing a 40 percent 4 cash, 60 percent debt ratio, and MIEC has indicated 5 that, historically, the District has used a 25 to 6 75 percent ratio. And Mr. Neuschafer testified 7 earlier that a 30/70 ratio would be more appropriate. 8 MSD has indicated that such a ratio could 9 affect its credit rating, affect its reserves. The 10 rate consultant has put forth in testimony to this 11 mission that the 40/60 ratio would be consistent with 12 best practices and would be reasonable assuming that 13 the voters approve the appropriate amount of bonding. 14 Mr. Neuschafer also indicated that the 40/60 15 ratio is an outcome rather than an input or something 16 that was predetermined. And then the next issue 17 identified is the appropriate amount of debt service 18 coverage, the assumptions regarding interest rates 19 that the district has made. As you know, the District 20 is proposing a 1.8 ratio and 2.5 for senior lien 21 bonds. 22 MIEC has suggested that a 1.6 times ratio 23 would be more appropriate and more fair and 24 reasonable. And MIEC has also put forth some 25 testimony that the District has been overly MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 40 1 conservative in its assumptions regarding interest 2 rates. The rate consultant has testified that the 3 1.8 ratio, 2.5 for senior lien bonds is appropriate, 4 and again, that's an outcome rather than driving the 5 rate increase. 6 The third issue identified is whether 7 appropriate escalation factors and assumptions 8 regarding operations of maintenance have been utilized 9 by the District -- 10 (The court reporter asked for 11 clarification.) 12 So the third issue is whether or not the 13 District has used appropriate escalation factors and 14 assumptions regarding operations of maintenance. The 15 rate consultant has -- believes that the operations of 16 maintenance escalation factors and debt finance 17 assumptions were reasonable. 18 The next issue is whether or not the cash 19 flow and debt service coverage would permit compliance 20 with the three criteria in the Charter regarding 21 paying interest and principal and outstanding bonds, 22 providing for operations of maintenance, and providing 23 reasonable debt service coverage and reserves. The 24 rate consultant found that the cash flow and debt 25 service coverage would be sufficient to meet those MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 41 1 Charter criteria. 2 The next factor we identified is whether 3 there is appropriate gradualism in the rate increases. 4 The rate consultant believed that the potentially 5 higher anticipated increases in 2025 could cause some 6 rate shock. And that could be mitigated by more 7 gradual increases during the rate cycle. 8 As Ms. Myers testified earlier this morning, 9 she indicated that possible rates for 2025 and beyond 10 is speculative and has not been the same level of 11 rigor and analysis applied to what those rates may 12 ultimately be because they're beyond the rate cycle 13 being considered by this Commission. 14 The next issue has been discussed earlier 15 this morning is whether the I&I ratio, 40 percent 16 customer, 60 percent volume, is appropriate. MIEC has 17 suggested that a 50/50 ratio would be fair and 18 reasonable and that the 40/60 ratio is based on data 19 that's out of date, and as was discussed a few moments 20 ago, a new study will be forthcoming on that for the 21 next rate cycle. And the rate consultant did testify 22 that the 40/60 percent ratio could allocate too much 23 to volumes point of view. 24 The next topic would be whether the CIRP 25 projects are appropriate and whether the cost MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 42 1 estimations are reasonable. MIEC has proposed moving 2 roughly $70 million out of Fiscal Year '23, '24 to 3 Fiscal Year '25, '26. MSD, as you know, has stated 4 that the projects can't really be moved out of CIRP 5 without jeopardizing compliance with the consent 6 decree and other regulatory requirements. And the 7 rate consultant agreed that there is -- there is 8 little flexibility that MSD has to move projects out 9 of the current rate cycle. 10 And then Issue No. 8 is whether or not the 11 extra-strength surcharges are appropriate, whether an 12 increase across the board or spike in the first year 13 as proposed by MSD would be appropriate. The rate 14 consultant recommended considering phasing in the 15 extra-strength surcharge increases over at least 16 two years along with an across-the-board approach as 17 opposed to a significant jump in the surcharge rates. 18 And then the final issue that we've 19 identified is whether or not the rate change proposal 20 is consistent with federal, state, and common laws 21 made from time to time. That has not been a major 22 focus of the proceedings thus far. The District has 23 indicated that they've used the same methodology as 24 was -- as was found to be reasonable in the Missouri 25 Growth Association by the case in the Missouri Supreme MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 43 1 Court back in, I believe, 1997. And I don't think 2 there had been any testimony presented to the 3 Commission to the contrary. 4 So those are the main issues that we intend 5 to focus on in our prehearing conference report, and 6 again, we will flush those out in greater detail in 7 that report, and in our final report we will indicate 8 how these issues affect the Charter criteria. 9 COMMISSIONER TOENJES: Are there any 10 questions from any of the Rate Commissioners for 11 Mr. Malone? 12 I will be the lead-off hitter again on this 13 final issue about the consistency with federal, state, 14 common law. Beings as that's the first time we've 15 heard that, where does that sort of come from? 16 MR. MALONE: Well, it's just something that 17 was focused on. I believe Ms. Myers indicated in her 18 testimony that the rate change proposal uses the same 19 methodology that was used in their prior rate 20 increases. For instance, I think there was some 21 testimony about measuring water usage excluding the -- 22 based on the winter months when lawns aren't being 23 watered, and you can get an approximation of water 24 usage that is actually going into MSD's systems as 25 opposed to going into yards or any other areas and MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 44 1 indexing the rates based on that amount of water 2 usage. 3 That's something we wanted to cover just 4 because consistency with federal, state, and common 5 law is, of course, important criteria that must be 6 considered. And that was discussed in a case in the 7 Missouri Supreme Court, MSD's methodology. And the 8 Court found that to be appropriate in that case. 9 And obviously, consistency with the law, 10 also compliance with consent decree, compliance with 11 regulatory requirements is also something that is 12 driving the District's decision-making about what 13 projects needing to be included in the CIRP and when. 14 COMMISSIONER TOENJES: So that could include 15 some discussion of this incinerator issue? 16 MR. MALONE: It could. For sure. 17 COMMISSIONER TOENJES: Any further questions 18 for Mr. Malone? 19 Thank you. 20 Are there any other matters for discussion 21 this morning? 22 COMMISSIONER BROCKMANN: Are we going to 23 have similar statements from our rate consultant, or 24 did legal represent our rate consultant? 25 MS. STUMP: We represented our rate MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 45 1 consultant. Pam and Brian and I had conversations 2 before compiling that list, but certainly, if you have 3 questions for your rate consultant, you're free to ask 4 them to her directly. 5 COMMISSIONER TOENJES: Does anybody have -- 6 Yes, Mr. Goss. 7 COMMISSIONER GOSS: I do have one. The 8 spike issue. The spike of rates in 2025. And MSD's 9 position is that this is really speculative, and based 10 on this proposed rate, which is much less than what 11 was anticipated when we adopted the sewer rate 12 four years ago, because I remember what it was 13 supposed to be going to. That's not happening here, 14 which makes me somewhat sympathetic to the speculative 15 argument. 16 Can you respond to that? 17 MS. LEMONE: Certainly understand that the 18 level of scrutiny of the CIRP in particular and as 19 well as O&M and so forth. Going out farther in time, 20 it becomes more speculative and because the focus and 21 the proposal is for the years '21 through '24, I 22 understand that MSD didn't scrutinize that analysis 23 out that far in advance. 24 But I still think it warrants at least an 25 understanding and awareness that, because of the MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 46 1 nature of additional debt being taken on, the existing 2 debt service and what the revenue requirements might 3 be out in the future, there is that potential for an 4 impact in 2025 in the future. 5 I think I've stated before, perhaps, that 6 because the rates this time are significantly lower in 7 my mind, the potential flexibility to have that rate 8 in '25 be substantially lower, basically half of what 9 they're thinking it might be, perhaps could be less 10 than what it actually might be in the future. 11 Interest rates are low now, you know, all the various 12 things that are optimistic or favorable right now. So 13 it is speculative. But it's something just to keep in 14 mind. 15 COMMISSIONER GOSS: And correct me if I'm 16 wrong, if my memory of this testimony is incorrect. 17 But what I recall is that in the prior rate, the same 18 issue was present, and there was an adjustment made by 19 the Commission and the Board in the surcharge increase 20 and that that resulted in a subsidy, the way it's 21 being described, by the other ratepayers to be 22 customers who would be paying a surcharge. 23 I think -- is my memory of that right? 24 MS. LEMONE: So with regard to the 25 extra-strength surcharges? MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 47 1 COMMISSIONER GOSS: Yes. 2 MS. LEMONE: Yes. The proposed methodology 3 for increasing extra-strength surcharge rates for this 4 rate proposal is consistent with last time. In other 5 words, cost of service study is done in Year 1. Rates 6 are based on cost of service, and then in Years 2, 3, 7 and 4, rates are increased for extra-strength 8 surcharges based on the projected change in O&M costs. 9 So for this, the cycle that we're in now 10 that we're just finishing through 2020, because the 11 overall increases needed were substantially higher 12 than O&M, that's what has led to this large increase 13 in extra-strength surcharges for '21, again, to bring 14 them back to cost of service. 15 In Years '22 through '24, they're proposing 16 again to change those rates based on O&M versus an 17 across-the-board general revenue increase needs, and 18 as was stated previously, the difference between those 19 two approaches is not substantial this time compared 20 to the last rate cycle. But the across-the-board 21 increases are somewhat higher than what the O&M 22 projection is. 23 COMMISSIONER GOSS: So is it -- is it 24 reasonable to take MSD's position -- I don't want to 25 mischaracterize it. If I am, correct me -- that using MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 48 1 the across-the-board is more likely to create another 2 subsidy and that instead using their methodology is -- 3 since they're not dramatically different -- is a 4 better way to help these surcharges -- or you can 5 budget these surcharges. 6 MS. LEMONE: I think their position is that 7 going to cost of service for '21, in other words, a 8 much larger increase in extra-strength surcharges, 9 eliminates that subsidy in Year 1 whereas phasing in 10 that change over a couple of years would continue that 11 subsidy by other customers until they would get to 12 full cost of service recovery. 13 So with that for 2021, then the methodology 14 for raising rates on an across-the-board basis versus 15 O&M, it has the potential to have -- again, the 16 difference isn't as great this time. 17 The two increases are fairly close, but by 18 increasing extra-strength surcharges only based on O&M 19 and not any reflection of increases in costs for 20 capital, there is the potential in 2025, again, for 21 the cost of service analysis to show that the '25 22 rates for extra-strength surcharges could be higher 23 than the average systemwide increase. 24 COMMISSIONER GOSS: So let me make sure I 25 understood that. What I understand you to have said MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 49 1 is if we go to an across-the-board increase in the 2 surcharges as opposed to what MSD is proposing, the 3 subsidy will continue -- that's what I heard you 4 say -- for at least a year or two years. 5 MS. LEMONE: If the across-the-board 6 increase in '21 were to be in place, that is true. 7 COMMISSIONER GOSS: Right. So that means 8 the subsidy continues. Now when I hear that, that 9 sounds to me like we are not complying with the 10 criteria of fair and reasonable rates across all 11 classes of ratepayers because we're acknowledging that 12 a subsidy is occurring. And the reason that we're 13 justifying that is because of a possible spike in 2025 14 which we all, at least all the experts I've heard, 15 have said is speculative. And so I have trouble with 16 that change because of that. 17 I don't see how we are meeting our criteria 18 of fair and reasonableness, and particularly, we're 19 doing that to avoid an out-year spike that we don't 20 even know will occur. 21 MS. LEMONE: I think there are two different 22 things that we're talking about here. One is the 23 overall general systemwide increase. So not looking 24 at rates specifically for the base and volume charges 25 or the rates for the extra strength surcharge, but MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 50 1 just the system the utilities revenue needs. That's 2 the spike that we're talking about in 2025 that MSD 3 has stated is speculative at this point in time. So 4 that's -- so that's one piece of it. 5 And then when we talk about the 6 extra-strength surcharges and the different approaches 7 for setting those rates in Year '21 and then in 8 Years '22 through '24. That's a different topic. 9 MSD's proposal is to go to cost of service for 10 extra-strength surcharges in Year 1 to eliminate the 11 subsidy. 12 I had stated in my testimony that because 13 that increase is so significant that it could be 14 reasonable -- it could be reasonable to phase that in. 15 It's an accepted industry approach that in order to 16 mitigate undue burden for customer classes, utilities 17 would oftentimes phase those in. So that's a 18 consideration. 19 MSD has stated that by doing, that it 20 continues the subsidy until the point in time that 21 phase-in is complete and that is a true statement. 22 COMMISSIONER GOSS: In the record, do we 23 have data that tells us what the difference in the 24 impact on an industrial producer would be if we went 25 to an across-the-board as opposed to what MSD is MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 51 1 proposing? 2 I mean, you've said to me that the 3 difference isn't much, but I don't want -- I don't 4 want to mischaracterize what you said, but I want to 5 know what, you know, if what I meant -- what we are 6 trying to avoid just shock, if you will, to the 7 industrial producers. And so -- but I don't have any 8 sense of what that means, you know, dollars, 9 percentage dollars. I just don't have any feel for 10 that based on what I remember from -- 11 MS. LEMONE: And just to be clear on what I 12 said, there isn't much difference. I'm speaking to 13 the Years 2, 3, and 4 after the cost of service rates 14 are in place. In Years 2, 3, and 4, increasing 15 extra-strength surcharges based on O&M escalation 16 versus across-the-board is not substantially 17 different. 18 To the issue of what happens in '21, whether 19 extra-strength surcharges go to the cost of service, 20 whether they increase it on an across-the-board basis 21 or there's some sort of phase-in, that's a 22 different -- different topic than what I had spoken to 23 about not much difference. I'm not aware if those 24 analyses and calculations are on the record or not. I 25 would have to look and see. MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 52 1 I know that MIEC had provided in some of 2 their testimony their proposal which included rates. 3 I would have to look at that again. Again, it was -- 4 we might have to model that ourselves because I 5 couldn't tell how the rates that they proposed were 6 calculated, and the way they were input into the model 7 makes it a little difficult to evaluate that impact. 8 But we could -- we could definitely look at that 9 further. 10 COMMISSIONER GOSS: Because if that's 11 accurate, then to Mr. Palans' line of questioning, we 12 don't have any facts in the record to say MSD got it 13 wrong or what MSD is proposing is incorrect. Is that 14 true? 15 MS. LEMONE: That's correct. What they have 16 proposed is a fair and reasonable approach to go to 17 cost of service in Year 1 for extra-strength 18 surcharges. We have a little bit of a different -- 19 their approach in Years 2, 3, and 4 for extra-strength 20 doesn't reflect the potential change in capital costs. 21 Mr. Beckley in his surrebuttal testimony, I 22 believe, testified that by using an across-the-board 23 increase, it could overshoot the other direction. And 24 if that were the case, then in 2025, extra-strength 25 surcharges under a new cost of service study might MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 53 1 indicate a slightly lower rate increase in that year. 2 So it's a balancing act. 3 Again, you know, we're projecting what rates 4 might be in the future. So I wouldn't suggest that 5 MSD's proposal is not fair and reasonable. You know, 6 reflecting cost of service is reasonable. 7 However, I would also say -- and as I 8 indicated in my testimony -- because of the large 9 increase to the extra-strength surcharge rates, it 10 would also be fair and reasonable to phase that in 11 over a short period of time in order to mitigate 12 potential impacts because you do want to avoid rate 13 shock in order to be fair and reasonable on customers. 14 COMMISSIONER GOSS: Okay. Thank you. 15 COMMISSIONER TOENJES: Any -- 16 Yes? 17 COMMISSIONER CROYLE: I have a similar 18 question. The suggestion of decreasing the 70 million 19 projects. I would think that would cause an increase 20 of rates for the following rate cycle because they 21 still need to be paid for, and it's... 22 MS. LEMONE: That is true. So by smoothing 23 out the capital improvement program, one consideration 24 is that a large portion of that capital improvement 25 program is debt financed. So just because there is an MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 54 1 increase in spending in a particular year or two, that 2 doesn't correlate on a one-to-one basis with the 3 increase in rate. So that's one piece of it. 4 And two, to your point, by moving those 5 costs out to '25 and '26, we've heard from MSD that 6 that financial projection in those years is more 7 speculative, but nonetheless, we already are seeing a 8 potential for a rate that's twice or more than twice 9 as high as the rate in '24. Pushing more capital out 10 into that year will just further increase that. 11 COMMISSIONER TOENJES: Thank you, 12 Ms. Croyle. 13 Any other questions? Any other matters to 14 bring before the Rate Commission? 15 I have one item before we adjourn. I would 16 just like to thank Mr. Brockmann and the Public 17 Relations Committee. I think that in looking at the 18 work that has been done in public outreach during this 19 rate case as opposed to those in the past, it has 20 really been tremendous. There's been a great upgrade. 21 And thanks to you and all the members of the Public 22 Relations Committee. 23 COMMISSIONER BROCKMANN: All thanks to the 24 public relations group. They have just done an 25 outstanding job. Len has mentioned he and Brian had MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 55 1 an interview on KTVI two days ago, and we also have 2 one -- I don't know the date -- 3 MR. HOELSCHER: Tuesday morning. 4 COMMISSIONER BROCKMANN: -- Tuesday morning 5 with McGraw Milhaven on the radio. They've also -- 6 MR. HOELSCHER: A week from Tuesday. I'm 7 sorry. 8 COMMISSIONER BROCKMANN: Week from Tuesday. 9 And the consultant of -- PR committee has sent out all 10 kinds of e-mails to all the municipalities getting 11 feedback. They've posted it in their newsletters and 12 things like that. So the word is out there. It's 13 just slow to roll over and reflect in public 14 attendance at public hearings and things like that. 15 But the message is certainly out there. 16 COMMISSIONER TOENJES: Thank you very much. 17 Yes, Mr. Neuschafer. 18 MR. NEUSCHAFER: Just in line with that, 19 there's one more public hearing that we probably 20 should reiterate again which I believe is also 21 streamed. So another opportunity to get the word out. 22 COMMISSIONER BROCKMANN: July 24 here at 23 MSD. 24 COMMISSIONER TOENJES: So that being the 25 case, we will now adjourn until 9:00 a.m. on July 24, MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 56 1 2019, for the final public hearing session that will 2 be in this room and will be live-streamed for the Rate 3 Commissioners. 4 Just a final reminder that this is your 5 final opportunity on the 24th to ask questions of 6 any of the parties including the District before we 7 begin our final deliberations. 8 That being said, we will stand adjourned 9 until July 24, 2019 at 9:00 a.m. 10 (Ending time of the Pre-Hearing Conference 10:15 a.m.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 57 1 2 REPORTER CERTIFICATE 3 I, Julie Hundelt, a Registered Professional 4 Reporter, Certified Court Reporter, and Certified 5 Shorthand Reporter within and for the State of 6 Missouri, do hereby certify that this record was made 7 before me on July 12, 2019, at Metropolitan Saint 8 Louis Sewer District, 2350 Market St., Saint Louis, MO 9 63103, that said record was reported by myself, 10 translated and proofread using computer-aided 11 transcription; and the above transcript of proceedings 12 is a true and accurate transcript of my notes as taken 13 at the time of the examination of this witness. 14 I further certify that I am neither attorney 15 nor counsel for nor related nor employed by any of the 16 parties to the action in which this examination is 17 taken; further, that I am not a relative or employee of 18 any attorney or counsel employed by the parties hereto 19 or financially interested in this action. 20 21 22 23 ____________________________________ 24 Julie Hundelt, RPR, CCR, CSR 25 MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES A a.m 4:3 8:25 55:25 56:9,10 ability 6:2,7 11:19 able 7:22 14:18 15:23 36:22 Absolutely 37:17,20 acceptable 31:9 accepted 50:15 accepting 26:12 accompanied 5:24 account 12:13 27:9 32:21 accurate 11:14 26:14 37:6 52:11 57:12 acknowledge 13:22 acknowledging 49:11 across-the-bo ... 13:25 14:1,3 25:24 42:16 47:17,20 48:1 48:14 49:1,5 50:25 51:16 51:20 52:22 act 8:11 53:2 action 57:16,19 actual 36:25 adding 26:24 additional 6:19 22:1 24:10 27:11 46:1 address 9:18 21:12 29:7 35:7 38:1,19 addressed 9:8 addressing 36:21 adequate 6:2 adequately 23:2 adjourn 54:15 55:25 adjourned 56:8 adjust 23:7 24:17 adjusted 13:16 adjustment 28:16 29:22 29:24 46:18 adjustments 27:13,15 adopted 45:11 advance 45:23 affect 39:9,9 43:8 age 32:10 agency 23:16 ago 31:9 41:20 45:12 55:1 agree 12:20 31:19 32:13 agreed 42:7 agrees 11:9 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17:14,16 40:10 asking 37:13 aspect 35:24 aspects 35:11 assets 5:19 assist 38:9 associated 5:4 25:14 Association 5:8 5:10 42:25 assume 18:18 assuming 33:5 39:12 assumptions 39:18 40:1,7 40:14,17 attached 35:25 attachment 34:6 attempt 26:9 attempts 26:1 attendance 55:14 attorney 57:14 57:18 August 6:24 available 15:13 18:1 average 48:23 avoid 22:22 49:19 51:6 53:12 aware 21:17 51:23 awareness 45:25 B back 43:1 47:14 Baer 2:20 balancing 53:2 Bar 5:8 base 49:24 based 10:18 12:3,18 13:20 14:2 24:22 28:8,9 35:13 36:11 41:18 43:22 44:1 45:9 47:6,8,16 48:18 51:10,15 basically 46:8 basis 23:16 24:19 36:7 48:14 51:20 54:2 bathroom 17:4 Beckley 52:21 Beckmann 2:4 bed 28:15 beginning 11:4 13:16 14:12 behalf 9:18 21:12 34:3 behooves 33:18 Beings 43:14 believe 30:20 30:21 31:13,19 43:1,17 52:22 55:20 believed 41:4 believes 40:15 benefit 25:15,17 Berthold 3:15 best 39:12 better 34:25 48:4 beyond 23:3 41:9,12 Bill 3:18 bin 10:22 Bissell 10:23 MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES bit 38:8,20 52:18 Black 34:5,6,8 35:25 board 4:17 5:16 5:23 6:15,16 6:20 10:16 14:14 42:12 46:19 BOD 20:2 bonding 39:13 bonds 5:18 6:6 39:21 40:3,21 Botanical 5:8 Brad 2:7 Brandon 3:6 21:17 break 35:2 Bret 3:15 Brian 2:19 3:17 15:9 16:15 19:10 45:1 54:25 brief 8:20 briefly 7:18 bring 47:13 54:14 Broadway 3:9 Brockmann 2:5 44:22 54:16 54:23 55:4,8 55:22 Bryan 3:7 budget 15:11,17 15:18 48:5 build 10:22 Builders 5:9 burden 6:9 50:16 burdens 24:12 burn 19:11 burned 19:16 C C 2:1 3:1 calculate 10:9 calculated 27:7 52:6 calculations 51:24 called 20:9 calling 33:6 calls 27:1 cancer 19:14 capital 48:20 52:20 53:23 53:24 54:9 care 9:17 21:12 carefully 22:3 23:11 carelessly 19:13 case 42:25 44:6,8 52:24 54:19 55:25 cash 38:24 39:4 40:18,24 caught 18:16 cause 11:18 34:16 41:5 53:19 causes 31:1 causing 20:13 Cave 3:7 CCR 3:22 57:24 certain 38:25 certainly 9:19 28:10 29:9,16 37:23 45:2,17 55:15 CERTIFICATE 57:2 Certified 57:4,4 certify 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57:10 concerns 23:15 concluded 13:11 concludes 14:23 conclusion 18:4 26:6 conclusions 23:3 condition 11:5 conditions 15:23 16:1 conducted 7:16 10:9 conference 1:8 4:3 7:12,16,25 8:18,19 9:22 21:20 43:5 56:10 conferences 7:4 9:6 connections 25:7 31:2 32:10 34:10,14 34:21 consent 11:5,7 12:15 22:18 26:18 42:5 44:10 consequences 13:13 conservative 27:1 40:1 consider 10:15 22:3 30:18 consideration 27:24 38:16 50:18 53:23 considered 10:11 13:23 27:18 41:13 44:6 considering 42:14 consistency 43:13 44:4,9 consistent 5:25 6:4 29:14 30:11,14 39:11 42:20 47:4 consists 5:3 constitutional 5:25 constructed 11:4 construction 5:6 11:5,17 consult 34:23 consultant 7:2 11:9 12:20 13:8 14:12,22 25:3 34:24 36:8,10 39:10 40:2,15 40:24 41:4,21 42:7,14 44:23 44:24 45:1,3 55:9 consultants 24:25 consumer 22:24 27:9 consumers 3:4 5:7,13 21:13,18 24:1 contained 8:8 10:5 contaminants 20:9 continue 14:10 48:10 49:3 continued 3:2 continues 49:8 50:20 contractors 5:4 contrary 43:3 contributed 34:10,14,21 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12:6 13:22 31:24 49:14 explain 23:2 explaining 26:2 explanation 12:4 21:22 extends 6:17 extension 6:22 11:7 extent 8:5 extra 49:25 extra-strength 13:15,15 25:20 25:25 42:11,15 46:25 47:3,7 47:13 48:8,18 48:22 50:6,10 51:15,19 52:17 52:19,24 53:9 F facilities 6:3 fact 18:23 30:14 38:17 factor 29:22 41:2 factors 7:20 8:8 12:5 31:7 32:20 34:20 38:12,17,23 40:7,13,16 facts 52:12 factual 37:11 fails 8:7 fair 4:19 6:9 11:25 12:25 13:23 22:5,9 22:12 23:10 24:2,15 25:12 25:21 26:3,14 27:5,14,20 31:10 39:23 41:17 49:10,18 52:16 53:5,10 53:13 fairly 48:17 fairness 27:9 falling 5:18 far 18:5 29:10,14 42:22 45:23 farther 32:23 45:19 favor 30:15 MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES favorable 46:12 February 4:11 federal 6:8 42:20 43:13 44:4 feedback 55:11 feel 51:9 felt 32:17 file 35:7 filed 14:24 34:2 filing 38:21 final 29:7 42:18 43:7,13 56:1,4 56:5,7 Finally 25:19 finance 5:18 38:25 40:16 financed 53:25 financial 14:22 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Hundelt 3:22 57:3,24 hydraulic 16:3 I I&I 12:3,12 15:6 24:18 25:5,6 25:11,14 29:22 36:21 37:6 41:15 idea 29:4 36:23 identification 28:23 identified 7:20 12:7 36:3 38:15,22 39:17 40:6 41:2 42:19 identify 7:12 identifying 38:10 ignored 22:19 II 34:8,12 36:3 immaterial 27:18 impact 11:13 12:13 23:23 27:19,19 29:17 46:4 50:24 52:7 impacted 26:3 impacts 53:12 impair 6:6 11:19 implemented 13:25 important 15:15 15:24 23:19 33:15 44:5 importantly 22:17 impose 25:23 imposed 23:9 imposes 6:9 improvement 53:23,24 improvements 36:24,25 inaccurate 11:12 MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES incinerate 17:2 17:3 incineration 11:17 13:10 20:16,20,23 incinerator 44:15 incinerators 10:22,24 11:4 11:11,13 16:22 19:17 20:22 21:4 28:15,25 include 7:25 9:2 15:10 44:14 included 44:13 52:2 including 4:24 11:11 19:24,24 34:13 56:6 Incorporated 5:10 incorporates 34:12 incorrect 46:16 52:13 increase 13:25 14:1,2,3,10 25:22,24 26:1 40:5 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largest 30:23 Lashly 2:20 law 6:1 10:25 11:3,20 43:14 44:5,9 lawns 43:22 laws 6:8 42:20 layer 26:24,25 26:25 lead-off 43:12 League 5:5,8 led 47:12 legal 9:10 27:22 38:2,7 44:24 Leighton 3:7 Lemay 10:23 Lemone 3:18 45:17 46:24 47:2 48:6 49:5,21 51:11 52:15 53:22 Len 54:25 length 34:13,20 Leonard 2:3 4:5 lessen 13:4 level 10:8 23:10 41:10 45:18 lien 39:20 40:3 line 52:11 55:18 Lisa 2:18 list 9:13 45:2 listing 30:8 Litigation 1:17 3:23 little 11:10 13:8 MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 38:8,20 42:8 52:7,18 live-streamed 56:2 Lloyd 2:4 LLP 3:7 local 19:4 Locust 2:21 long 15:19 long-term 10:6 longer 31:10 37:5 look 17:17,24 27:24 30:6 31:5 37:9 51:25 52:3,8 looked 17:20 looking 30:9 49:23 54:17 lot 15:13 19:12 20:15 30:4 Louis 1:18 2:22 3:10,25 4:7,10 4:10 5:5,6,7,9 5:12 7:9,11 9:24 11:13 18:8 25:10 30:22 32:3,4,6 57:8 57:8 low 46:11 lower 46:6,8 53:1 Lutheran 5:5 M Mahanta 2:8 Mahfood 2:3 16:9,10,18 18:3 19:7,10 20:11 21:6 29:2,3,19 main 43:4 mains 34:13,14 34:20,21 maintain 23:18 27:23 maintenance 5:20 10:25 11:1 40:8,14,16,22 major 42:21 majority 36:1,5 Malone 2:19 38:1,4,6 43:11 43:16 44:16,18 manner 8:11 23:10 25:20 March 6:12,20 6:25 10:1 Marion 3:16 15:8 Mark 2:6 Market 57:8 material 20:11 20:12 matter 18:23 matters 9:15 44:20 54:13 McGraw 55:5 MDNR 18:13,25 mean 26:24 32:8 51:2 means 23:25 27:6,10 49:7 51:8 meant 51:5 measured 23:9 measurements 15:24 measuring 43:21 medical 17:3,3 17:6 19:11,14 medications 19:15 medicines 19:14 meet 8:7 11:18 27:22 40:25 meeting 1:1 6:20 18:5 38:15 49:17 meets 8:7 10:12 10:17 14:15 member 15:2 members 9:7 54:21 memory 46:16 46:23 mentioned 15:5 30:7 31:18,25 32:13 39:1 54:25 message 55:15 methodologies 13:23 methodology 42:23 43:19 44:7 47:2 48:2,13 Metro 5:9 Metropolitan 1:2 2:11 3:8 4:7 7:8,11 9:24 25:10 57:7 Mickey 2:6 MIEC 3:5 11:6 22:14 24:10 29:11 34:3 39:4,22,24 41:16 42:1 52:1 MIEC's 24:13 Milhaven 55:5 million 13:3,11 22:15 28:8,11 28:11,13,20 42:2 53:18 mind 46:7,14 minimal 14:2 minimum 23:13 23:14,21,22 minor 27:17 mischaracteri ... 47:25 51:4 mission 39:11 Missouri 3:4,25 5:5,7,10,12 21:13,18 42:24 42:25 44:7 57:6 Missouri-loca ... 31:16 mitigate 50:16 53:11 mitigated 41:6 mix 24:5,6 MO 1:18 2:22 3:10 57:8 mode 26:12,12 model 52:4,6 modeled 29:11 modeling 14:22 15:14 24:13 26:10 29:10,12 modifications 22:11 modify 12:9 moments 41:19 money 24:1 29:11 monitor 20:6 21:2 months 43:22 morning 9:21 38:6 41:8,15 44:21 55:3,4 Mound 5:8 move 11:8,10 13:3,9 42:8 moved 42:4 moving 11:16 42:1 54:4 MSD 10:13 11:3 11:8,9 12:11 13:3,7,9,16,22 14:4,6,14 19:11 22:7 23:1,5,11 23:14,15,25 24:4,8,17 25:1 25:4,16,19,23 26:1,9,11,16,17 26:20 27:3,4 27:6,10,22 28:18 29:6,12 30:19 32:13 36:20 37:1 39:3,8 42:3,8 42:13 45:22 49:2 50:2,19 50:25 52:12 52:13 54:5 55:23 MSD's 10:23 11:15,16 12:6 16:13,22 22:4 22:12 23:19 24:3,5,22,25 25:6 26:19 29:21,25 30:10 31:8,13 31:24 38:13 43:24 44:7 45:8 47:24 50:9 53:5 MSD92 14:25 Municipal 5:5 municipalities 55:10 Myers 2:13 9:17 9:19,21,23 15:1 15:3,8 16:14 19:9 21:9,10 22:1 38:18 39:1 41:8 43:17 N N 1:17 2:1 3:1 name 4:5,19 9:23 nature 25:9 30:19,22 46:1 necessary 5:17 23:8,25 24:11 25:24 38:24 necessitating 37:6 need 15:22 16:3 26:24 53:21 needed 24:1 29:15 47:11 needing 44:13 needs 25:1 27:3 27:10 47:17 50:1 negative 13:13 neighborhood 5:1 neither 22:8 MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 24:2 25:21 57:14 Neuschafer 3:6 21:11,14,16,17 28:2,4,6,10 29:8,21 30:2 31:23 33:9,15 34:2,23 35:4 35:17,23 36:13 37:8,22,23 38:19 39:2,6 39:14 55:17,18 new 12:11,13 15:6,22 20:18 20:22 41:20 52:25 news 11:12 newsletters 55:11 Nicole 3:17 nine 33:7,10,17 36:2 38:16 nonprofit 5:2 North 3:9,24 5:10 note 33:16 notes 57:12 notice 5:14 6:12 6:15 notwithstandi ... 23:16 November 4:12 number 24:19 25:7 30:2,13 30:15,16 31:2 31:3 32:10 34:9,14,21 38:17 numbers 28:23 numerous 14:21 nurses 17:4 O O 2:18 O&M 13:20 14:2 45:19 47:8,12 47:16,21 48:15 48:18 51:15 objections 9:5 objectively 14:21 obligation 22:19 26:17 26:20 obligations 27:23 obviously 17:5 44:9 occur 23:3 49:20 occurred 18:18 occurring 20:8 49:12 offices 8:25 official 14:23 oftentimes 50:17 okay 16:18,23 21:6 53:14 old 24:23,25 30:4 one-to-one 54:2 operation 4:24 5:19 operational 7:9 operations 40:8,14,15,22 opportunity 7:6 21:24 55:21 56:5 opposed 17:18 30:17 31:17 36:12 42:17 43:25 49:2 50:25 54:19 optimistic 46:12 option 11:1 oral 8:12 order 50:15 53:11,13 orderly 7:14 organizations 4:18,22,23,25 5:2,2 out-year 49:19 outcome 39:15 40:4 outlier 33:6,6 outlined 10:13 14:15 21:19 outreach 54:18 outside 10:10 outstanding 6:5 40:21 54:25 overall 18:10 47:11 49:23 overflows 12:14 overly 39:25 overshoot 52:23 oversights 18:14 P P 2:1,1,1 3:1,1,1 P.C 2:20 paid 53:21 Paisner 3:7 Palans 2:4 33:25 34:1 35:1,4,9,21,24 36:14,16 Palans'36:19 37:13 52:11 Pam 3:18 45:1 paper 23:6 papers 27:25 35:7 part 7:25 20:19 31:15 participant 8:11 8:12,17 participant's 7:19 8:13,21 participants 7:5 7:22,24 8:5,7 8:24 participate 7:15 particular 8:11 37:19 45:18 54:1 particularly 49:18 parties 7:2 8:14 9:14 56:6 57:16,18 Paul 2:5 pay 5:17 26:24 PAYGO 24:7 paying 26:23 40:21 46:22 pen 23:6 people 19:13 20:12 percent 11:23 11:24 12:15,17 12:17 24:6,7,8 24:9,14,14,18 24:20 37:2 39:3,4,6 41:15 41:16,22 percentage 26:2 51:9 percentages 36:4 perform 15:5 27:4 37:18 performance 23:20 performed 29:12 performing 12:11 period 6:17,19 22:25 28:18 53:11 permit 7:17 20:21,24 40:19 permits 18:14 19:1,23 20:7 permitting 9:2 9:6,9 18:12 persuasive 33:22 PFAS 20:11 pharmaceutic ... 21:3 phase 25:24 50:14,17 53:10 phase-in 50:21 51:21 phased 14:11 phasing 42:14 48:9 phone 2:5 3:19 piece 50:4 54:3 pier 25:6 30:6 31:5,6 place 11:24 49:6 51:14 Plan 4:9,13,17 6:13 7:8,21 8:9 planning 10:6 plants 10:23 please 9:20 11:14 14:5 17:24 21:15 38:5 Plus 5:13 point 16:4,24 21:23 34:22 35:7,9,11 37:8 41:23 50:3,20 54:4 policy 36:8 portion 53:24 position 7:19 8:13,21 10:24 11:16 21:22 22:20 23:1 29:22,25 31:13 45:9 47:24 48:6 positive 27:19 possible 23:4 41:9 49:13 posted 55:11 potential 46:3,7 48:15,20 52:20 53:12 54:8 potentially 41:4 PR 55:9 practices 39:12 MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Pre-Hearing 1:8 4:3 56:10 predetermined 39:16 predictable 25:16 prehearing 7:12 7:16,25 8:17 8:19 9:22 21:20 43:5 preliminary 10:7 premised 26:25 preparation 9:12 prepared 7:13 7:24 8:20 9:3 9:8 preparing 38:9 present 3:14 9:22 26:13 46:18 presentation 8:13,15 presentations 17:15 presented 10:15 10:18 12:22 43:2 pressing 27:4 pretreat 20:6 pretreatment 20:4 prevent 22:24 previous 16:17 previously 9:3 15:13 47:18 primary 12:2 38:8 principal 5:18 40:21 prior 12:12 43:19 46:17 probably 18:18 55:19 procedural 7:10 8:16 9:15 proceed 9:16 proceeding 1:3 4:8 19:6 22:7 26:8 proceedings 4:1 7:14 14:18 42:22 57:11 process 15:11 15:20 18:12 19:23 20:20 processes 12:1 produce 25:15 producer 50:24 producers 19:25 51:7 Professional 57:3 professionali ... 37:24 program 16:21 22:4,24 24:5 26:22 27:8 53:23,25 programs 28:17 project 11:17 13:10 22:18 23:2 27:11 28:22 projected 10:5 13:5 47:8 projecting 53:3 projection 47:22 54:6 projects 11:8,10 13:9,12 22:15 22:22 28:8,17 38:25 41:25 42:4,8 44:13 53:19 proofread 57:10 properly 27:7,8 proportion 24:20 25:5 proposal 8:6 10:1,10,12 11:11 12:6,12,18 13:2 14:19,20 16:6 22:12 24:13,16 26:11 27:5,12 27:13 38:10,11 42:19 43:18 45:21 47:4 50:9 52:2 53:5 propose 22:4 proposed 4:16 5:24 6:15,23 8:7 9:9 10:12 13:14,16 22:8 27:17 28:18 42:1,13 45:10 47:2 52:5,16 proposes 11:6 12:16 25:19 proposing 10:2 22:14 29:5 39:3,20 47:15 49:2 51:1 52:13 protecting 26:19 protects 26:22 prove 12:22 provide 6:2 7:11 27:20 28:21 28:24 29:9,16 32:24 35:19 provided 10:4 12:5 13:7 14:20 17:1,7 52:1 provides 8:17 25:15 providing 23:3 33:10,11 40:22 40:22 provision 6:5 provisions 17:5 public 8:23 9:1 17:15 19:1 36:6 54:16,18,21,24 55:13,14,19 56:1 publish 19:1 purpose 9:1 purposes 10:6 pushed 32:15 Pushing 54:9 put 19:21 20:3 23:6 39:10,24 Q quality 18:5,7 question 16:11 17:16 19:12,20 19:21 36:19 37:13 53:18 questioning 52:11 questions 7:6 9:7 15:3 19:8 21:7 28:3,5 37:21 43:10 44:17 45:3 54:13 56:5 quickly 15:12,25 20:25 quite 18:17 R R 2:1 3:1 radio 55:5 raise 21:25 raised 7:13,23 8:20 22:1 raising 23:22 48:14 rate 1:1,3 2:16 4:6,13,19,21 5:3,14,15,17 5:22,23,24 6:11,11,13,15,17 6:18,21,22,23 6:25 7:2,5,10 7:18 8:4,6,23 9:11,18 10:1,5,11 10:15 11:9,10 12:1,6,12,20 13:5,8 14:5,12 14:14 15:2 16:6 21:8,12 22:2,6 22:9,12 23:8 25:3,22 26:6 26:11,13,15 27:2,3,5,8,12 27:21 28:3 29:17 34:4,24 36:21 37:2 38:2,2,7,10,11 39:10 40:2,5 40:15,24 41:3 41:4,6,7,12,21 41:21 42:7,9 42:13,19 43:10 43:18,19 44:23,24,25 45:3,10,11 46:7,17 47:4 47:20 53:1,12 53:20 54:3,8 54:9,14,19 56:2 rated 30:14 ratepayers 6:10 9:2 13:1 22:6 22:13 27:20 31:11 46:21 49:11 rates 4:15,16,16 10:2,9 14:4 22:24 23:8,17 26:3,23 29:5 29:7 39:18 40:2 41:9,11 42:17 44:1 45:8 46:6,11 47:3,5,7,16 48:14,22 49:10,24,25 50:7 51:13 52:2,5 53:3,9 53:20 rating 23:15 26:20 39:9 ratings 23:18 23:25 ratio 23:12,13,14 23:23,24 37:7 MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 38:24 39:4,6 39:7,8,11,15 39:20,22 40:3 41:15,17 41:18,22 rationale 8:3,22 Ratzki 2:5 reach 28:19 read 19:12 real 27:19 really 29:13 42:4 45:9 54:20 reason 18:19 49:12 reasonable 6:9 11:25 12:25 13:24 22:5,9 22:13 23:10 24:2,15 25:13 25:21 26:4,15 27:5,14,20 31:10 34:18 39:12,24 40:17,23 41:18 42:1,24 47:24 49:10 50:14,14 52:16 53:5,6 53:10,13 reasonablene ... 49:18 recall 11:12 31:15 46:17 receipt 5:14 received 6:11 7:1 receiving 9:2 recognize 24:25 28:12 recognizes 24:10 recommend 5:15 recommenda ... 8:1,8 10:16 14:14 34:17 35:10 38:13 recommenda ... 4:14 22:10 36:8 recommended 5:22 8:2 14:11 42:14 recommending 18:24 record 7:16 14:17 21:23 30:8 34:16,19 35:3,5,11,14 35:20 36:20 37:3,9,12 38:14 50:22 51:24 52:12 57:6,9 recovered 13:18 recovery 48:12 refer 35:17 reference 34:5 referenced 36:2 referred 24:8 refine 26:9 refinements 27:11 reflect 35:15 52:20 55:13 reflecting 53:6 reflection 37:6 48:19 reflective 31:10 refuted 33:16 refuting 33:19 regard 46:24 regarding 4:15 9:7 39:18 40:1 40:8,14,20 Registered 57:3 Regrettably 22:8 regularly 20:6 regulated 36:6 regulations 6:8 regulatory 22:19 26:18 42:6 44:11 rehashing 21:19 reiterate 55:20 related 6:3 31:3 57:15 relating 6:5 relations 54:17 54:22,24 relative 57:17 relevant 32:2,14 33:21 remaining 33:16 remedy 22:10 remember 14:5 30:12 45:12 51:10 remind 26:3 reminder 56:4 removal 12:14 12:15 repairs 11:1 replace 11:4 replaced 11:2 report 6:14,18 6:22 7:25 8:19 10:16 11:12 12:13 14:14 16:25 18:18 38:9,20 43:5,7,7 reported 23:15 57:9 reporter 3:21 40:10 57:2,4,4 57:5 reporting 17:10 reports 21:20 30:19 represent 4:22 21:17 44:24 representation 4:20 representative 4:21 representativ ... 5:4 represented 44:25 REPRESENTI ... 2:11,16 3:4 request 6:21 11:7 18:13 34:4 requested 8:12 14:4 requests 7:3 require 23:5 required 5:20 10:21 requirements 18:6,6 22:23 26:10,14,18 27:7 29:10,14 42:6 44:11 46:2 requires 4:17 requiring 8:10 reserves 39:9 40:23 residential 4:23 resolution 8:2 resolve 7:12 respective 8:13 respond 29:24 29:25 45:16 response 16:13 16:22 17:14 33:22 34:2,4 responses 9:5 29:13 30:3 responsibility 38:8 responsibly 13:12 responsive 37:12 restrictions 20:3 result 14:4 24:2 27:13 resulted 46:20 revenue 22:22 25:16 26:10,14 27:7 29:10,14 46:2 47:17 50:1 review 4:14 11:14 14:17 reviewing 38:14 revolve 7:23 Rich 3:16 right 15:15 16:1 17:21 20:24 28:23 32:9 37:9 46:12,23 49:7 rigor 41:11 role 22:6 27:4 38:7 roll 23:5 55:13 room 28:16 56:2 roughly 42:2 RPR 3:22 57:24 rule 11:1 rules 7:9 S S 2:1 3:1 Saint 57:7,8 sake 33:7 sanitary 12:14 saw 16:25 schedule 7:10 8:16 10:21 scheduled 22:15 Schoedel 2:6 scope 10:10 scrutinize 45:22 scrutiny 10:8 45:18 Second 23:11 Section 10:14 sections 17:18 see 17:8,25 21:21 25:17 29:17 30:10 49:17 51:25 seeing 54:7 MISSOURI SEWER DISTRICT 7/30/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES seeks 23:14 24:8 select 4:18 selected 31:24 senior 5:6 39:20 40:3 sense 51:8 sent 55:9 serve 4:7 serves 27:3 service 23:12,13 23:22,24 39:17 40:19 40:23,25 46:2 47:5,6,14 48:7,12,21 50:9 51:13,19 52:17,25 53:6 services 1:17 3:23 4:21 5:6 6:3 25:14 session 8:24 9:1 56:1 set 23:13,14 38:13 setting 27:21 50:7 settle 7:13,23 seven 32:12 sewer 1:2 2:11 4:7 6:2 7:9,11 9:24 12:14 20:4 21:3 25:10,12 45:11 57:8 shift 22:14 23:2 24:4,8,11 28:8 shifted 28:19 shifting 22:21 shock 41:6 51:6 53:13 shocking 25:22 short 8:12,14 53:11 Shorthand 57:5 show 20:15,16 32:25 48:21 showed 17:19 showing 21:3 shows 23:20 significant 13:13 22:22 42:17 50:13 significantly 23:22 46:6 similar 32:19 44:23 53:17 simply 22:21 sir 38:4 site 18:8 sitting 21:1 size 25:7 31:2 32:10,24 sleeves 23:6 slightly 53:1 slow 55:13 sludge 20:17 small 26:2 smaller 32:5,5 smoothing 53:22 Snoke 3:15,19 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