HomeMy Public PortalAboutAugust 16, 2019 Letter to MSD Board of Trustees Delivering Final ReportTHE RATE COMMISSION OF THE
METROPOLITAN ST. LOUIS SEWER DISTRICT
August 16, 2019
Board of Trustees of the
Metropolitan St. Louis Sewer District
c/o Mr. Brian L. Hoelscher, Executive Director
2350 Market Street
St. Louis, Missouri 63103
Dear Trustees:
I have been authorized and directed by the Rate Commission of the Metropolitan St. Louis Sewer
District to deliver to you the Rate Recommendation Report regarding the Wastewater Rate
Change Proposal submitted to the Rate Commission on March 4, 2019.
Accompanying the Report are (a)(i) the Minority Report of Commissioner Palans Regarding
Amount of Bonding Proposed; (ii) the Minority Report of Commissioners Stein and Toenjes
Regarding the Appropriate Allocation of III Costs; and (iii) the Minority Report of
Commissioner Stein Regarding Deferral of Some CIRP Projects; and (b) the Resolution adopted
by the Rate Commission on August 12, 2019.
The Proceedings of the Rate Commission at which the Rate Recommendation Report was
considered were held in accordance with all requirements of law and procedural rules of the Rate
Commission. The transcript of the Proceedings may be found at https://www.stlmsd.comJour-
organizationlmsd-rate-conunissionlmeetings-and-exhibits-FY2021-2024-Rate-Corrunission. The
Rate Recommendation Report was approved at a meeting on August 12, 2019, at which a
quorum was present and acted throughout. The Resolution is in full force and effect and has not
been altered, amended, or repealed.
I particularly call your attention to the Statement of Rate Commission on Cash/Debt Ratio and
Debt Service Coverage found on pages 29-32 of our Report; and the Statement of Rate
Commission on CIRP Projects found on pages 109-112 of our Report.
Cash/Debt Ratio and Debt Service Coverage. The District has acknowledged that its proposed
rate change in necessary to balance debt financing and current wastewater user charge revenue to
simultaneously fund improvements and replacements needed to meet regulatory requirements.
The District has represented that it is currently in compliance with the Consent Decree. The
District has further represented to the Rate Commission that minimum coverage targets of 2.5x
and 1.8x will help the District maintain AA level bond ratings and ensure cost effective market
Board of Trustees of the
Metropolitan St. Louis Sewer District
August 16, 2019
Page 2
access. While conservative and optimistic economic projections for operations and maintenance
expenses to meet rating agency requirements for an AA rating may seem prudent, the cash/debt
mix may be more excessive than adequate. While we have determined that the District's
cash/debt mix and debt service coverage is both adequate and appropriate, we stress the need to
look further into the future and how the current recommendations may effect long-term debt.
CIRP Projects. The District maintains that it lacks the discretion to move projects out of the
CIRP without jeopardizing compliance with the Consent Decree and other regulations. We
believe that where appropriate the District should move projects into the CIRP due to the current
favorable financial economy. In the instance where an excess of funds are available, we
recommend the District evaluate its capacity and move projects up when feasible.
We appreciate all the time and effort the District staff contributed to the Rate Commission
Proceedings.
Very truly yours,
Leonard Toenj es
Enclosures
cc: (w/encs.) Office of the Secretary of the Rate Commission