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HomeMy Public PortalAboutExhibit MSD 36 - Transcript of the First Technical Conference April 4, 2018 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 1 1 MEETING OF THE RATE COMMISSION OF THE 2 METROPOLITAN ST. LOUIS SEWER DISTRICT 3 2018 STORMWATER RATE CHANGE PROCEEDING 4 5 6 7 8 TECHNICAL CONFERENCE 9 10 APRIL 4, 2018 11 12 13 14 15 16 17 18 REPORTED BY: 19 REBECCA L. TUGGLE, CCR, RPR, CSR ALARIS LITIGATION SERVICES 20 711 N. 11TH STREET 21 ST. LOUIS, MO 63101 22 (314) 644-2191 23 24 25 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 2 1 I N D E X 2 3 Opening Statement by Ms. Myers 18 4 5 DISTRICT'S EVIDENCE: 6 BRIAN L. HOELSCHER, P.E.: Questions by Mr. Neuschafer 23 7 Questions by Ms. Stump 34 Questions by Commissioner 55 8 Questions by Commissioner Schoedel 59 Questions by Commissioner Mahanta 61 9 Questions by Commissioner Bresnan 62 Questions by Commissioner Goss 64 10 Questions by Commissioner Palans 66 Questions by Commissioner Goss 73 11 Questions by Chairman Toenjes 76 12 SUSAN MYERS, GENERAL COUNSEL: 13 Questions by Mr. Neuschafer 81 Questions by Ms. Stump 83 14 Questions by Commissioner Palans 91 Questions by Commissioner Goss 92 15 RICHARD L. UNVERFERTH, P.E.: 16 Questions by Mr. Neuschafer 94 Questions by Ms. Stump 100 17 Questions by Commissioner Stein 113 Questions by Commissioner Schoedel 115 18 Questions by Commissioner Brockmann 117 Questions by Commissioner Bresnan 120 19 Questions by Commissioner Mahanta 121 Questions by Commissioner Goss 122 20 Questions by Commissioner Beckmann 142 Questions by Commissioner Schoedel 145 21 Questions by Commissioner Mahfood 148 Questions by Commissioner Palans 151 22 Questions by Chairman Toenjes 160 23 24 25 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 3 1 I N D E X C O N T I N U E D 2 MARION GEE: Questions by Mr. Neuschafer 164 3 Questions by Ms. Stump 170 Questions by Commissioner Goss 180 4 Questions by Commissioner Bresnan 185 Questions by Commissioner Palans 185 5 Questions by Chairman Toenjes 193 6 THOMAS A. BECKLEY: 7 Questions by Mr. Neuschafer 195 Questions by Mr. Malone 198 8 Questions by Commissioner Ratzki 205 Questions by Commissioner Mahfood 207 9 Questions by Chairman Toenjes 209 10 11 HENRIETTA LOCKLEAR: Questions by Mr. Neuschafer 211 12 Questions by Mr. Malone 215 Questions by Commissioner Mahfood 222 13 Questions by Commissioner Goss 227 Questions by Commissioner Ratzki 237 14 Questions by Chairman Toenjes 238 15 16 17 18 19 20 21 22 23 24 25 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 4 1 APPEARANCES: 2 Lisa Stump, Attorney At Law 3 Brian J. Malone, Attorney At Law Lashly & Baer, P.C. 4 714 Locust Street St. Louis, MO 63101 5 (314) 621-2939 lstump@lashlybaer.com 6 bmalone@lashlybaer.com FOR: The Rate Commission. 7 Brandon Neuschafer, Attorney At Law 8 Saher Valiani, Attorney At Law Bryan Cave LLP 9 One Metropolitan Square 211 North Broadway, Suite 3600 10 St. Louis, MO 63102 (314) 259-2050 11 brandon.neuschafer@bryancave.com saher.valiani@bryancave.com 12 FOR: Missouri Industrial Energy Consumers. 13 Susan M. Myers, General Counsel 14 Metropolitan St. Louis Sewer District 2350 Market Street 15 St. Louis, MO 63103 (314) 768-6209 16 smyers@stlmsd.com FOR: Metropolitan St. Louis Sewer 17 District 18 19 20 21 22 23 24 25 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 5 1 APPEARANCES CONTINUED 2 3 COMMISSIONERS PRESENT: 4 Mickey Croyle Tom Ratzki 5 John L. Stein Kennard Jones 6 Paul Brockmann Russell Hawes 7 Leonard Toenjes (Chair) Mark Schoedel 8 Don Bresnan Steve Mahfood 9 Chan Mahanta Brad Goss 10 Gerald Beckmann Lloyd Palans (via telephone) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 6 1 CHAIRMAN TOENJES: Good morning. Being 2 9:00 o'clock on April 4th, we will call the meeting of 3 the Rate Commission Metropolitan St. Louis Sewer 4 District to order to consider the 2018 stormwater rate 5 change. We will start with a roll call. Since our 6 secretary is not here, I have asked our legal counsel 7 to take roll. 8 MR. MALONE: Thank you, Mr. Chairman. 9 Commissioner Beckmann? 10 COMMISSIONER BECKMANN: Here. 11 MR. MALONE: Commissioner Brockmann? 12 COMMISSIONER BROCKMANN: Here. 13 MR. MALONE: Commissioner Bresnan? 14 COMMISSIONER BRESNAN: Here. 15 MR. MALONE: Commissioner Croyle? 16 COMMISSIONER CROYLE: Present. 17 MR. MALONE: Commissioner Goss? Goss? 18 COMMISSIONER GOSS: Here. 19 MR. MALONE: Commissioner Hawes? 20 COMMISSIONER HAWES: Here. 21 MR. MALONE: Commissioner Jones? 22 (No response.) 23 MR. MALONE: Commissioner Mahanta? 24 (No response.) 25 MR. MALONE: Commissioner Mahfood? TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 7 1 (No response.) 2 MR. MALONE: Commissioner Palans? 3 (No response.) 4 MR. MALONE: Commissioner Ratzki? 5 COMMISSIONER RATZKI: Here. 6 MR. MALONE: Commissioner Schoedel? 7 (No response.) 8 MR. MALONE: Commissioner Stein? 9 COMMISSIONER STEIN: Present. 10 MR. MALONE: And Chairman Toenjes? 11 CHAIRMAN TOENJES: Present. 12 MR. MALONE: Commissioner Ziegler? 13 (No response.) 14 MR. MALONE: We have a quorum present. 15 CHAIRMAN TOENJES: Thank you very much. 16 I have been asked by our court reporter to 17 ask the commissioners, due to the room setup, to be 18 sure to identify yourselves as we go through the 19 proceedings so that she can make sure that the court 20 records are accurate and make sure the names are 21 proper. 22 With that, Item 2 on the agenda, the 23 approval of the March 5th minutes. Chair would 24 entertain a motion on the meeting minutes. 25 COMMISSIONER BROCKMANN: So moved. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 8 1 COMMISSIONER STEIN: Second. 2 CHAIRMAN TOENJES: Motion made and seconded. 3 Discussion on the motion? 4 COMMISSIONER HAWES: Yes, I propose that in 5 Agenda Item 3(a) other business, that we amend the 6 minutes to reflect that when I seconded the motion, I 7 specifically stated in order to hear the rationale for 8 going into closed session. I would like that reflected 9 in the minutes. 10 I'm Russell Hawes. 11 CHAIRMAN TOENJES: Do the commissioners who 12 made a second in the motion approve of that change in 13 the minutes? 14 COMMISSIONER BROCKMANN: So moved. 15 COMMISSIONER STEIN: Second. 16 CHAIRMAN TOENJES: Thank you. 17 Any further discussion on the minutes of 18 March 5, 2018? 19 (No response.) 20 CHAIRMAN TOENJES: All right. All in favor 21 of the motion, signify by saying aye. 22 THE COMMISSION: (Collectively) Aye. 23 CHAIRMAN TOENJES: Opposed? 24 (No response.) 25 CHAIRMAN TOENJES: Sustained. Motion TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 9 1 carries. Thank you. 2 My name is -- 3 MS. STUMP: Mr. Chair? Can I interrupt you 4 for a second? 5 CHAIRMAN TOENJES: Yes, Ms. Stump. 6 MS. STUMP: Could you please ask -- could we 7 ask if anybody is on the phone before we proceed with 8 your -- 9 CHAIRMAN TOENJES: Yes, we may. 10 MS. STUMP: -- reading? Thank you. 11 CHAIRMAN TOENJES: Are there any rate 12 commissioners who are on the teleconference? 13 COMMISSIONER PALANS: Yes. Hello. My name 14 is Lloyd Palans and I'm participating by telephone. 15 CHAIRMAN TOENJES: Anyone else? 16 (No response.) 17 CHAIRMAN TOENJES: Thank you, Mr. Palans. I 18 appreciate that. 19 My name is Len Toenjes, and I am Chair of 20 the Rate Commission Metropolitan St. Louis Sewer 21 District and will serve as chair of this proceeding. 22 The charter plan of the district was 23 approved by the voters of St. Louis and St. Louis 24 County as special election on February 9, 1954, and 25 amended at a general election on November 7, 2000. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 10 1 The amendment to the charter plan established the rate 2 commission to review and make recommendations to the 3 district regarding changes in wastewater rates, 4 stormwater rates, and tax rates proposed by the 5 district. 6 The charter plan requires the board of 7 trustees of the district to select organizations to 8 name delegates to the rate commission to ensure a fair 9 representation of all users of the district services. 10 The rate commission representative organizations are 11 to represent commercial/industrial users, residential 12 users and other organizations interested in the 13 operation of the district, including organizations 14 focused on environmental issues, labor issues, 15 socioeconomic issues, community neighborhood 16 organizations and other nonprofit organizations. 17 The rate commission currently consists of 18 representatives of Associated General Contractors of 19 Missouri, St. Louis County Municipal League, Lutheran 20 Senior Services, St. Louis Council of Construction 21 Consumers, Greater St. Louis Labor Council, Missouri 22 Botanical Garden, League of Women Voters of Metro 23 St. Louis, Homebuilders Association, Mound City Bar 24 Association, North County Incorporated, Missouri 25 Coalition for the Environment, the City of Ladue, TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 11 1 Engineers' Club of St. Louis, Missouri Industrial 2 Energy Consumers, and Education Plus. 3 Upon receipt of a rate change notice from 4 the district, the rate commission is to recommend to 5 the board of trustees changes in a wastewater, 6 stormwater, or tax rate necessary to pay, number one, 7 interest and principle following due on bonds issued 8 to finance assets of the district; number two, the 9 cost of operation and maintenance; and number three, 10 such amounts as may be required to cover emergencies 11 and anticipated delinquencies. 12 Further, any change in a rate recommended to 13 the board of trustees by the rate commission is to be 14 accompanied by a statement that the proposed rate 15 change, number one, is consistent with constitutional 16 statutory or common law as amended from time to time; 17 number two, enhances the district's ability to provide 18 adequate sewer and drainage system in facilities or 19 related services; number three is consistent with and 20 not in violation of any covenant or provision relating 21 to any outstanding bonds or indebtedness of the 22 district; number four, does not impair the ability of 23 the district to comply with the applicable federal or 24 state laws or regulations as amended from time to 25 time; and number five, imposes a fair and reasonable TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 12 1 burden of all classes of ratepayers. 2 The rate commission received a rate change 3 notice from the district on February 26, 2018. The 4 rate commission must, on or before June 26, 2018, 5 issue its report to the proposed rate change notice to 6 the board of trustees of the district unless the board 7 of trustees upon application of the rate commission 8 extends the period of time for the issuance of the 9 rate commission report for an additional 45-day 10 period. 11 Under procedural rules adopted by the rate 12 commission on February 26, 2018, any person affected 13 by the rate change proposal had an opportunity to 14 submit an application to intervene in these 15 proceedings. An application to intervene has been 16 filed by the Missouri Industrial Energy Consumers. 17 This application has been deemed granted. 18 On February 26, 2018, the district submitted 19 to the rate commission prepared direct testimony of 20 Brian L. Hoelscher, Susan M. Myers, 21 Richard L. Unverferth, Marion M. Gee, 22 Thomas A. Beckley and Henrietta Locklear. On 23 March 12, 2018, the rate commission submitted its 24 first discovery request to the district. On 25 March 22, 2018, the district filed its responses. On TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 13 1 March 19, 2018, the rate commission submitted a second 2 discovery request to the district which the district 3 responded to on March 29, 2018. 4 This technical conference will be held on 5 the record regarding the rate-setting documents and 6 direct testimony filed with the rate commission by the 7 district. The purpose of this technical conference is 8 to provide the district with an opportunity to answer 9 questions propounded by members of the rate 10 commission, then by any intervener, and finally by 11 Lashly & Baer, legal counsel to the rate commission. 12 Following this technical conference, the 13 interveners and the rate commission consultant may, on 14 or before April 16, submit prepared rebuttal 15 testimony. A technical conference will be held on 16 April 25th through April 27, 2018, regarding the 17 rebuttal testimony. At that technical conference, 18 each person submitting rebuttal testimony shall answer 19 questions propounded by members of the rate 20 commission, the district, then the other interveners, 21 and, finally, by our legal counsel. 22 Following the technical conference, the 23 district, its consultants, the interveners, and the 24 rate commission consultant may, on or before 25 May 7, 2018, submit prepared surrebuttal testimony. A TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 14 1 technical conference will be held on the record on 2 May 16 through May 18, 2018, regarding the surrebuttal 3 testimony. At that technical conference, each person 4 submitting surrebuttal testimony shall answer 5 questions propounded by members of the rate 6 commission, then by the district, and the interveners, 7 and finally by our legal counsel. 8 Ratepayers who do not wish to intervene will 9 be permitted to participate in a series of 10 on-the-record public hearings conducted in nine 11 sessions beginning on May the 8th, 2018, and 12 concluding on June the 8th, 2018. 13 Who is here on behalf of the 14 Metropolitan St. Louis Sewer District? 15 MS. MYERS: Susan Myers. 16 CHAIRMAN TOENJES: Who is here on behalf of 17 the Missouri Industrial Energy Consumers? 18 MR. NEUSCHAFER: Brandon Neuschafer and Saher 19 Valiani. 20 CHAIRMAN TOENJES: Also present are Pamela 21 Lemoine of Black & Veatch concerning the rate 22 commission; and Lisa Stump and Brian Malone of 23 Lashly Baer, legal counsel to the rate commission. 24 Under the rate commission's operational 25 rules, no person shall be required to answer questions TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 15 1 for a total period of more than three hours, and the 2 time shall be evenly divided among all the 3 participants desiring to ask questions. 4 Following questions by members of the rate 5 commission, I will attempt to allocate the time 6 equally among the participants and our legal counsel. 7 To the extent that the district, one of the 8 interveners, or legal counsel, has not completed 9 questions at the expiration of that person's allowed 10 time, and to the extent that time remains, such 11 persons shall be permitted to propound additional 12 questions until the three hours has expired. 13 Are there any procedural matters? 14 MS. STUMP: Mr. Chair? 15 CHAIRMAN TOENJES: Yes, Ms. Stump. 16 MS. STUMP: Yes. The rules, the current 17 operational rules of the rate commission require that 18 an affidavit -- notarized affidavit be filed with the 19 testimony. However, that we -- the rate commission has 20 not recognized that in the past and we will eliminate 21 that from the future rules. But it is still in the 22 rules as of now. So I would request that the rate 23 commission consider waiving that requirement that 24 states that we'll have a notarized affidavit with all 25 testimony filed. It's under Section 38 of the TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 16 1 operational Rules. 2 CHAIRMAN TOENJES: Thank you, Ms. Stump. 3 Do any of the rate commissioners have any 4 questions regarding that? 5 (No response.) 6 CHAIRMAN TOENJES: I would assume that a 7 motion to accept your recommendation would be in order 8 at this time. 9 MS. STUMP: That would be great. 10 COMMISSIONER CROYLE: I move that we accept 11 it. 12 COMMISSIONER BROCKMANN: Second. 13 CHAIRMAN TOENJES: The motion made and 14 seconded to waive the requirement for the notarized 15 affidavit. Any discussion on the motion? 16 (No response.) 17 CHAIRMAN TOENJES: All in favor signify by 18 saying aye. 19 THE COMMISSION: (Collectively) Aye. 20 CHAIRMAN TOENJES: Any opposed? 21 (No response.) 22 CHAIRMAN TOENJES: Sustained. Motion 23 carries. 24 MS. STUMP: Thank you. 25 CHAIRMAN TOENJES: Thank you, Ms. Stump. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 17 1 I'd also like to, while we're in the 2 procedural matters, recognize that we've had a couple 3 additional rate commissioners join us since the roll 4 call. We've had Mr. Mahanta, Mr. Schoedel join us. 5 Anyone else come in on the telephone? 6 (No response.) 7 CHAIRMAN TOENJES: Thank you. 8 There will be -- I've been informed by the 9 district that we will be having lunch brought in for 10 the commissioners today so that we can continue to 11 serve the public and proceed with our hearing. 12 So with that, is there any -- are there any 13 other procedural matters? 14 (No response.) 15 CHAIRMAN TOENJES: Being no further 16 procedural matters, Ms. Myers, would you like to make 17 an opening statement? 18 MS. MYERS: I would. Thank you. 19 CHAIRMAN TOENJES: Please proceed. 20 OPENING STATEMENT BY MS. MYERS 21 MS. MYERS: Good morning. My name is Susan 22 Myers, and I am the general counsel -- 23 CHAIRMAN TOENJES: Are there any other 24 parties wishing to -- wishing to make an opening 25 statement before we proceed? TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 18 1 (No response.) 2 CHAIRMAN TOENJES: All right. With that, 3 please proceed. 4 MS. MYERS: Thank you. 5 Good morning. My name is Susan Myers, and I 6 am the general counsel for the Metropolitan St. Louis 7 Sewer District. I would like to thank all of you for 8 serving on the rate commission in this rate-setting 9 process and allowing me the opportunity to provide an 10 opening statement on behalf of the district. 11 As you heard in your orientation, MSD serves 12 about 1.3 million people with the service area of 520 13 square miles. MSD was formed pursuant to the Missouri 14 Constitution in 1954 and began operation in 1956. MSD 15 gains its power from the Missouri Constitution and the 16 MSD charter plan. 17 You are here today per Section 7.040 of the 18 MSD charter, whereby the rate commission is to review 19 and make recommendations to the board regarding all 20 proposed changes in wastewater rates, stormwater 21 rates, and tax rates, or changes in the structure of 22 the foregoing. 23 The current rate proposal before you 24 proposes a new stormwater capital rate to be used to 25 address flooding and erosion control issues. It is TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 19 1 also important to understand which MSD rates and taxes 2 are not being changed with regard to their rate or 3 their structure, and, therefore, are not part of the 4 current rate proposal. 5 There are three existing revenue sources and 6 services that are not part of this rate proposal. One 7 is the wastewater rates. MSD wastewater rates and 8 services are not being changed in any way and, 9 therefore, are not included in the current rate 10 proposal. They will be the subject of a future rate 11 proposal scheduled to be delivered in 2019. Since the 12 consent decree only involves wastewater issues and is 13 funded by wastewater rates, the consent decree 14 requirements or funding is not applicable to the 15 current rate proposal. 16 Two: Stormwater Taxes for Regulatory 17 Issues. MSD's two-cent property tax used to fund 18 stormwater regulatory services and the services 19 themselves are not being changed in any way and, 20 therefore, are not part of the current rate proposal. 21 The current funding and structure should be sufficient 22 for the foreseeable future. 23 Three: Stormwater Taxes for the Operation 24 and Maintenance of the Public Stormwater System. 25 MSD's ten-cent property tax used to fund stormwater TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 20 1 operation and maintenance services and the services 2 themselves are not being changed in any way and, 3 therefore, are not part of the current rate proposal. 4 The current funding and structure should be sufficient 5 for the foreseeable future. This is the tax recently 6 passed as Proposition S. 7 Throughout these technical conferences, 8 please keep the following three things in mind. One, 9 the current rate proposal before you proposes a new 10 stormwater capital rate to be used to address flooding 11 and erosion control issues. Two, this is the final 12 piece of the three-piece stormwater funding puzzle. 13 Remember, regulatory services and O&M services are 14 already covered by the two-cent and ten-cent property 15 taxes respectively. Three, the proposed rate is 16 currently scheduled to be presented to the voters for 17 their consideration in April of 2019. 18 It is the district's opinion that the 19 proposed stormwater rate change proposal imposes a 20 fair and reasonable burden on all classes of 21 ratepayers as the proposed rates were determined using 22 an impervious area measurement method. 23 The district's testimony today will provide 24 clarification regarding the detailed aspects of the 25 district's rate change proposal and demonstrate how TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 21 1 the proposed rates are a result of our customers' 2 needs and wants. The order of appearance of MSD's 3 witnesses will be Brian Hoelscher, MSD Executive 4 Director; myself, MSD General Counsel; 5 Rich Unverferth, MSD Director of Engineering; 6 Marion Gee, MSD Director of Finance; Tom Beckley of 7 Raftelis Financial Consultants; and Henrietta Locklear 8 of Raftelis Financial Consultants serving as the 9 district's rate consultant. 10 This concludes my opening remarks. I ask 11 that my opening remarks be received by the rate 12 commission as Exhibit MSD 33. Thank you. 13 CHAIRMAN TOENJES: Thank you, Ms. Myers. 14 No other parties wishing to make an opening 15 statement at this time? 16 Hearing none, Ms. Myers, are you ready to 17 present those persons for whom you filed district 18 testimony? 19 MS. MYERS: We are. Our first witness will 20 be Brian Hoelscher. And we'll go ahead and move up to 21 the front table. 22 CHAIRMAN TOENJES: Please proceed. 23 Good morning, Mr. Hoelscher. 24 MR. HOELSCHER: Good morning. 25 (The witness was duly sworn.) TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 22 1 CHAIRMAN TOENJES: Thank you. 2 Does any member of the rate commission have 3 questions for Mr. Hoelscher at this point? 4 COMMISSIONER BROCKMANN: Can we reserve those 5 until after he testifies? 6 CHAIRMAN TOENJES: Yes, we will -- we will -- 7 we will close with questions from the commissioners. 8 Mr. Neuschafer, do you have any questions of 9 Mr. Hoelscher on behalf of the Missouri Industrial 10 Consumers? 11 MR. NEUSCHAFER: I do. 12 CHAIRMAN TOENJES: Please come forward and 13 present your questions. 14 MS. MYERS: You might want to check 15 your-all's microphone. I don't know if they're all on. 16 CHAIRMAN TOENJES: It's not on. Now it is. 17 How about that? Nobody complained. 18 CHAIRMAN TOENJES: Please proceed, 19 Mr. Neuschafer. 20 MR. NEUSCHAFER: Thank you. 21 QUESTIONS BY MR. NEUSCHAFER: 22 Q Again, my name is Brandon Neuschafer, and 23 I'm appearing on behalf of the Missouri Industrial 24 Energy Consumers. We appreciate the opportunity to -- 25 to engage in this discussion with MSD on rate proposal TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 23 1 and the opportunity to ask some questions today on the 2 various individuals who've submitted testimony. 3 Mr. Hoelscher, my first question is, is 4 there an actual legal obligation for MSD to pursue 5 these capital improvements at this time? 6 A No, there's not. 7 Q Okay. Can you help us understand the 8 rationale behind why MSD chose now to -- to pursue 9 these capital improvements? 10 A So let's build it this way. I think it's a 11 recognized need throughout MSD's service area that the 12 flood -- flooding, localized flooding, river flooding 13 next to creeks and rivers and erosion is a problem. 14 When MSD was formed, one of the powers 15 available to MSD is to provide this kind of service 16 throughout its entire area, throughout the entire 17 service area. These problems are invariably problems 18 that are watershed-wide. It's not just next to the 19 local creeks and streams, and it's definitely not by 20 municipal boundaries. 21 MSD currently encompasses all the five major 22 watersheds within St. Louis County that go either north 23 to the Missouri River or -- or to the Meramec River or 24 to the Mississippi River except for those areas to the 25 west of 109 that flows to the west. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 24 1 If there's any entity that's in place, in 2 order to have a comprehensive program to address these 3 issues, it's MSD. I think it's fair in saying that the 4 municipalities that MSD serves are looking forward to 5 MSD giving the voters the opportunity to have MSD 6 provide these services throughout the entire district. 7 Q Thank you. 8 So I understood from Ms. Myers' opening 9 statement that next year you'll be pursuing an 10 additional wastewater rate proceeding; correct? 11 A Correct. 12 Q And then we were here three years ago about 13 the last wastewater rate case -- wastewater rate case? 14 A Correct. 15 Q Has -- there was certainly an increase in 16 the wastewater rates as a result of the proceedings 17 three years ago. Presumably, MSD will be asking for 18 an additional increase next year. Has there been any 19 consideration given to the number of rate increases 20 that have been imposed upon customers and how this 21 particular rate falls in line with those? For 22 example, are we increasing the rates too quickly and 23 too dramatically on customers and what are the results 24 of MSD's analysis of that issue, if any? 25 A I -- unless I'm mistaken, I don't believe TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 25 1 we've done an analysis as to whether the rates are 2 going up too fast or not. That kind of analysis, the 3 majority of our revenues come from the wastewater rate 4 and that will be a point of discussion with the rate 5 commission next year when we look at the next four 6 years of rates for 2021 through 2024. They are the 7 largest portion of -- they're the largest portion of 8 the revenues and the services and they have the 9 largest impact on residents. 10 This is a relatively small -- and I think it's 11 identified in our rate proposal as a relatively small 12 portion of the cost of the overall services that MSD is 13 willing to perform. And in the end, understanding these 14 are not rates. While we can do all the analysis we 15 wish, actually a determination as to whether or not this 16 is too expensive does ultimately sit with the voters in 17 the district. It is a relatively small cost compared to 18 the rest of the services MSD provides, and it's going to 19 be a judgment to decide whether or not the problem is 20 bigger than a potential impact from the individual 21 ratepayers. 22 Q Thank you. 23 In your testimony, in Question 10, there's 24 some discussion about alternative capital-related 25 plans. Did MSD consider bond financing for any of TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 26 1 this capital improvement program or a mix of bond 2 financing and, you know, additional charges to 3 customers? 4 A No, we did not. 5 Q Is there a reason that bond financing was 6 not considered? 7 A I am probably not the right person to answer 8 that. I'd suggest that Mr. Gee, I believe, would be 9 qualified to answer that when he testifies. But I 10 prefer to defer to him. 11 Q Okay. Thank you. 12 I believe, if I understand correctly, the 13 estimated capital improvement costs are about 14 $562 million? 15 A Yes. 16 Q Can you provide some background as to how 17 that number was calculated? 18 A The number was calculated from known 19 stormwater issues throughout the district. Some were 20 as large as very large erosion problems or very large 21 flooding problems, to an individual who is unhappy 22 with the amount of time stormwater sits in their 23 backyard after a storm. MSD doesn't necessarily know 24 those dots within that 562 million and made a value 25 judgment as to whether or not it's a legitimate issue, TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 27 1 it's an issue in the eyes of the individuals who made 2 the complaint to us. 3 So -- but it is probably a pretty good measure 4 as to what the size of the issue is. We thought it was 5 important to at least get a grasp of what the potential 6 size was in trying to determine the appropriate annual 7 level to address the issue. 8 So I -- the only thing I want to assure you is 9 there is not a list of $562 million worth of projects 10 that we have identified. It's a price depending at 11 various levels of detail that we've put to the various 12 issues that have been presented to us by the ratepayers 13 in the municipalities. 14 Q Okay. So the 562 million represents your 15 analysis of the costs with respect to the known issues 16 and then some amount of additional costs that would be 17 associated with, as of yet, unknown? 18 A No. It's just the cost of the known issues. 19 Q Okay. 20 A So it's taking every issue that was out 21 there and doing a very quick analysis, in some cases, 22 just kind of what would it cost me to alleviate that 23 problem. 24 Q So that -- I'd like to ask about the very 25 quick analysis. What is -- I guess, what is the level TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 28 1 of thought or analysis that went into determining the 2 cost of any particular project? 3 A Some of it could be -- and I'm giving very 4 simple examples here. Some of it could be very simple 5 as we can put an additional 100 feet of storm sewer 6 and an inlet in to get somebody's backyard flooding to 7 a storm sewer, and just a quick analysis of what it 8 costs to construct a 100 feet of sewer, to something 9 even much more detailed that may have at one time 10 under various funding scenarios even had initial 11 design started where we know what that problem is and 12 what that solution is and have some preliminary 13 estimates with some engineering in them. They vary 14 across the board. 15 Q And I believe at the opening meeting, 16 similar to what you're saying today, that the 17 estimates you described as rough and the engineering 18 spent maybe a few minutes looking at each project, I 19 get that may not be for every project. 20 A Correct. 21 Q But that's accurate? 22 A Yes. 23 Q Okay. Is that the amount of analysis that 24 MSD would normally undertake in determining the cost 25 associated with a project? TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 29 1 A In this case, it's an appropriate level of 2 analysis for the potential issues that have been 3 identified, yes. 4 Q For other capital projects MSD would 5 undertake, am I understanding that MSD would normally 6 go through a more detailed analysis, a lengthier 7 analysis? 8 A You could go through a more detailed 9 analysis. I think sticking strictly with the issues 10 we're addressing here, like I indicated, a lot of the 11 problems are issues that are presented by ratepayers, 12 and in the eyes of the ratepayers, it is a stormwater 13 problem. There's a lot of stormwater issues, but when 14 we go to address them, the new property owners or the 15 existing property owners no longer find those being 16 issues because of the cost of easements and the 17 disruption of construction, they just don't find being 18 a problem. 19 So the stormwater -- the list of stormwater 20 projects is a little different, again, as a service 21 than, for instance, going to a wastewater system and 22 identifying exact problems that are in violation of 23 legal requirements. So it is a somewhat different 24 world. 25 Q If the current numbers -- the current TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 30 1 numbers are based on the known projects, and it 2 appears that we've got about a 20-year lifespan of 3 this larger overall project, if I understand the 4 papers correctly, how is MSD intending to account for 5 new issues or new complaints that may arise over the 6 next 20 years? 7 A Well, I think this will continuously change. 8 The list of stormwater, because of the way the data 9 comes in, the list of stormwater and what that backlog 10 looks like will change. A little more -- almost 10 11 years ago, we thought we had a billion dollars for the 12 stormwater issues. As you drive deeper to getting 13 problems done, problems don't become problems anymore. 14 Other ones add. It will be a very dynamic process. 15 I don't want to put -- I believe if you look 16 at the 562 million, I think we put a squiggly line -- 17 hopefully we did by the 562 million. It is -- it is 18 a -- it's an estimate of what we think the size of the 19 issue -- what the size the public feels the issue is and 20 based on the stormwater complaints. 21 Q Okay. 22 A That number will change possibly every day, 23 depending on what kind of calls we get. 24 Q Okay. I understand -- Let me rephrase here. 25 If MSD were not to get the -- the entire TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 31 1 amount that it is seeking here -- for example, I know 2 that the current intention is to assess this charge 3 against not-for-profits, as well as for-profit 4 entities and residential consumers. If, for some 5 reason, MSD were not to get the totality of the amount 6 that it's requesting, what happens at that point in 7 time? What's the plan? 8 A Because of the lack of detail in exactly 9 what a solution would be, right now MSD would plan 10 on -- and I think we answered this in one of our 11 responses. If that were to occur, I think there's a 12 15 percent reduction in revenues, and we would simply 13 reduce the annual program by 15 percent. 14 I would want to point out another 15 consideration by MSD is, if we came out of these 16 proceedings with not billing those individuals as 17 currently planned, there would be the question in MSD's 18 mind of if they're not paying the rate, should they be 19 provided the service. And that is something else MSD 20 would have to consider if that happened. 21 Q How -- and this is related to that, but it's 22 also a separate issue. How are you prioritizing the 23 projects that would be undertaken? 24 A And if you want to go in detail, I would -- 25 I would suggest -- I can give you a high level, but TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 32 1 Rich Unverferth would be the one if you want more 2 detail than this. 3 We have a process that's been in place for 4 quite awhile. It was based on public input. We do a 5 benefit cost analysis. There's a dollar value put to 6 the benefit of a project guided by the cost of the 7 project, and that ratio then determines which projects 8 get done first. That process was used to determine 9 which $67 million worth of projects we did in passing 10 the Proposition S. 11 You will find a list of some projects in the 12 rate proposal that have been identified in order to 13 identify the first couple years. That process was used 14 to determine which projects belonged in the early part 15 of the program. And then as we move forward, we 16 continue using that process year to year as the program 17 unfolds. 18 MR. NEUSCHAFER: Okay. I think that's all 19 I've got. Thank you. 20 CHAIRMAN TOENJES: Thank you, Mr. Neuschafer. 21 Ms. Stump, do you have questions for 22 Mr. Hoelscher at this time? 23 MS. STUMP: I do. Thank you. 24 QUESTIONS BY MS. STUMP: 25 Q Good morning, Mr. Hoelscher. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 33 1 A Good morning. 2 Q So we've done this many times before. So -- 3 A Yes. 4 Q -- you know that our role as counselor to 5 the rate commission is primarily to assist the 6 commission in the drafting of their report. So the 7 questions that I'm going to ask you today are really 8 designed to try to help clarify some of your testimony 9 and provide for the guidance in drafting the report. 10 A Okay. 11 Q And if I ask you a question that should go 12 to somebody else on your staff, just let me know. 13 A I guarantee I will do that. 14 Q Do you have your testimony and -- 15 A Yes. 16 Q -- rate proposal? Great. 17 Just a general question first. Throughout 18 your testimony, you used -- and in the rate 19 proposal -- we've used the term "impervious area" - 20 A Yes. 21 Q -- repeatedly. How would you define that 22 term? 23 A As I described in the public, it is area 24 that doesn't absorb water, similar to a turf or a 25 grass area. And the examples I gave that are easily TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 34 1 understood are rooftops, non-pervious driveways, 2 concrete sidewalks, back patios, those type areas 3 where the rain hits and then runs off. 4 Q Could it be an area where, for example, 5 there was a vacant house, and then the house is no 6 longer in existence, a grassy area, but it's hard? 7 Would that still be -- 8 A So there's always things that fit in the 9 gray area. So I think what I gave you is the simple 10 starting point -- 11 Q Yeah. 12 A -- for what's there. Just like we did 10 13 years ago, I think with the impervious rate, there are 14 going to be those situations that aren't clearly 15 defined and there will have to be a judgment call. 16 And we will make -- there is an appeal process that's 17 available to folks if they want to look into those 18 issues. There will be a lot of gray areas. 19 Q Okay. Thank you. 20 Let's look at your testimony for a minute. 21 On Question 11, which is on page 4 in lines 11 and 12, 22 you state, "That impervious area has less of an impact 23 on MSD's cost to operate and maintain its public storm 24 sewer system; whereas, it is the primary driver in the 25 cost to address flooding and erosion issues." TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 35 1 Can you explain that a little bit further? 2 A Yeah. This is kind of an extension of the 3 testimony I gave during the Proposition S testimony. 4 I think I'll address it backwards. Flooding and 5 erosion is directly related to additional runoff and, 6 therefore, additional flow is going through creeks, 7 streams and filling up a lot of floodplains. So I 8 think it is no doubt the ideal measure to use to 9 determine proper revenue source for flooding and 10 erosion issues. 11 In my statement here with regard to 12 Proposition S, in my mind, as we go through these 13 processes -- and this is the way I think I testified 14 before -- if I take our existing public storm sewer 15 system and if I were to reduce by some amount the 16 impervious area of every property throughout the 17 district boundaries, our cost of stormwater O&M services 18 would not change. If people did things that -- you will 19 find that there are credits in here for reducing the 20 amounts of flows that go into the system, green 21 infrastructure and types of things, they do have an 22 impact in that they reduce flows from flooding erosion. 23 But by installing those, it would not impact the annual 24 cost for operation and maintenance of the storm sewer 25 system. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 36 1 That is -- that is the piece I think I was 2 wanting to make. The point -- the reason for putting 3 the point here was, was -- I think was really to express 4 how appropriate it is to use impervious area for 5 flooding and erosion. And then stating -- kind of 6 restating the issue I think I had with that kind of 7 methodology, funding only the operation and maintenance 8 of a public storm sewer system. One of the reasons I 9 believe I testified to that is our property tax was an 10 appropriate mechanism for Proposition S. 11 Q And let's go a little further with the -- on 12 O&M activities. Let's talk a little bit more about 13 that. So can you explain a little bit the nature of 14 the activities that are conducted under the current 15 district tax? 16 A Sure. Would be investigating storm sewers 17 on a regular basis -- whether it's teething or 18 cleaning -- teething and cleaning and repairing inlets 19 that collect stormwater; potential lining of those 20 storm sewers, if necessary, to maintain the integrity 21 of the system; to prevent items from stormwater or 22 soil from coming in through open joints that reflect 23 surface, those types of activities. And, quite 24 honestly, even during periods of draught when the 25 ground moves and the stormwater system moves, you have TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 37 1 the potential of having problems existing there that 2 hopefully an investigation would identify and identify 3 things that need to be fixed. 4 So it's -- it's -- now, I'll make it much 5 clearer. So kind of as a subset of like what we've seen 6 in the wastewater system, it is identifying the 7 condition and then fixing the public storm sewer system, 8 be it storm sewers, cleaning inlets to make sure they 9 take flows. And probably the real world thing that has 10 first come out in part of our investigation is that 11 there are existing storm sewer systems that are public 12 that are out in the annexed area out in West County, 13 that the pipe was not necessarily concrete, but it was 14 corrugated metal pipe. That metal pipe is beginning to 15 deteriorate, rust, have problems. So another part of 16 the operation and maintenance cost is to go in and 17 replace those so they continue functioning. 18 Q Will the O&M activities that you've just 19 described, will those increase at all as a result of 20 the projects that are done with the new stormwater 21 capital rate? 22 A No, they will stay the same. 23 Q Okay. 24 A Well, there is a slight chance they could 25 increase if the solution of a capital problem is the TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 38 1 installation of some more storm sewer. If we do have 2 more public facilities, if they're the solution to 3 some of these problems, they could go up a little bit. 4 But will they go up enough to have any kind of impact 5 on our service level or revenue needs, no. 6 Q Okay. I think you touched upon this, but 7 let's just kind of go over it again for the record. 8 So under the charter, you can only levy ten cents for 9 operation and maintenance. How -- can you explain how 10 this provision does or does not apply to the current 11 proposal? 12 A I think I'm going to leave that question to 13 Susan Myers as a follow-up. 14 Q Okay. 15 A Put in simple terms, it's not an operation 16 and maintenance cost. So if we do bill public 17 facilities as part of this process, the main operation 18 and maintenance of those will be funded through the 19 Proposition S ten-cent funds. There's a lot of work 20 we do that do not -- does not result in public 21 facilities, where we'll construct the project, make 22 sure it's maintained. Some erosion projects, for 23 instance. Make sure the project's maintained through 24 the warranty period and the result is not a facility 25 that's MSD-owned. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 39 1 Q And I guess that's where I'm trying to get 2 to. Is there -- is there a defining point at which 3 you separate what would be operation and maintenance 4 from what would be capital? 5 A Yeah. MSD's -- and Rich Unverferth may be 6 the one if you want to go deeper into this. MSD's 7 maintenance policy will indicate what is the public 8 infrastructure and what parts we are responsible for 9 the operation and maintenance of. And we'll continue 10 following that policy. 11 Q Do we have that maintenance policy in the 12 record? That's okay. If it's not an exhibit, I 13 mean -- 14 A If it's not, we will make it. But we 15 believe it is. Rich will -- I think he'll -- he can 16 look it up and he'll send it over today. 17 Q Okay. Thank you. 18 So if I recall correctly from some of the 19 previous proceedings, though, you are also doing some 20 capital projects with the money from the O&M tax? 21 A I think there was a commitment -- we were 22 worried about or concerned, as we ramp up or as we go 23 in, there is the potential that ten cents is somewhat 24 more than what we needed, especially early in the 25 program, in order to fund operation and maintenance TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 40 1 activities. So we may look at that, if there are 2 additional funds on an annual basis available, we 3 would use those to fund capital products. 4 We used some of that in Prop S to take care of 5 part of the list, the $67-million list that was proposed 6 with the passing of Proposition S. I believe it's about 7 $7 million of the total revenue over that four -- or 8 four-year period. 9 Right now, beyond that, the projection is that 10 all of the funds collected from Proposition S for 11 operation and maintenance of storm sewers beyond those 12 on that Prop S list will be needed for operation and 13 maintenance. And we don't plan on using in the 14 immediate future anymore of those funds for capital 15 projects. 16 Q Okay. Okay. Thank you. 17 Let's look at Question 8. In your 18 testimony, which is at the top of page 3, specifically 19 lines 3 through 5, you note that, "The primary purpose 20 of the stormwater capital rate is to provide such a 21 district-wide revenue source to make capital 22 improvements to address flooding and erosion issues 23 not involving the existing public storm sewer system." 24 I know you touched on this a little bit. 25 But can you explain that last clause a little bit, TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 41 1 which I think may involve defining a little bit of 2 what is the public storm sewer system? 3 A So public storm sewer system -- and I'm 4 summating what's in the exhibit that was referenced 5 previously -- are stormwater inlets, stormwater 6 manholes, storm sewers, and those channels that still 7 exist in the district which can't be built anymore, 8 constructing concrete channels, concrete sidewalls, 9 and concrete bases, structural components need to be 10 maintained by somebody. MSD is taking responsibility 11 for those. 12 So, therefore, some of the examples of things 13 it doesn't include is ditches, other channels that are 14 natural, seminatural, in some cases channels that have a 15 retaining wall that holds back a parking lot next to the 16 creek, those are all privately maintained and not 17 maintained by MSD. 18 An exact list and much more description is in 19 the exhibit we submitted. 20 Q So would you say that the stormwater capital 21 rate is limited to nonpublic storm sewer projects? 22 A Correct. Again, just to clarify: Although, 23 if the solution is the creation of more public storm 24 sewers, that is -- that potentially could happen and 25 then we would take possession of those storm sewer TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 42 1 built. And, therefore, the O&M of that -- the 2 operation and maintenance of those facilities would 3 then fall under Prop S revenues. 4 Q But you are -- you just testified earlier, 5 too, that that would be a small amount? 6 A Yes, it -- it is so relatively small that we 7 didn't even consider it in setting any of our rates. 8 Q Okay. Thank you. 9 All right. Let's switch a little bit. 10 Question 11, page 4, you refer -- on lines 15 and 16, 11 you refer to the "Customer assistance program in the 12 context of the stormwater capital rate imposing a fair 13 and reasonable burden." 14 How do you think this program helps make it 15 fair and reasonable? 16 A We believe MSD's -- currently has a customer 17 assistance program, its wastewater rate, and we feel 18 it's appropriate for MSD to take the position that 19 there are those individuals within our district, low 20 income, who may not have the ability to share the full 21 burden as everybody else does for -- for revenue 22 requirements. We are going to carryover the customer 23 assistance program that currently exists in the 24 wastewater rate, but also apply the stormwater rate. 25 And so those individuals who qualify for the customer TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 43 1 assistance program will pay a rate that's one-half of 2 that that would be charged to everyone else. 3 Q And the same question on line 21 where 4 you're discussing why it's fair and reasonable to 5 charge all customers, both public and private. You 6 state that, "If at some point in time after the 7 stormwater capital rate has been billed to these 8 customers, MSD is unable to continue billing them," 9 and you discussed that a little bit with 10 Mr. Neuschafer. But why do you say -- why do you say 11 this part, "If MSD is unable to continue billing 12 them"? What do you mean, and also what do you mean by 13 "these customers"? 14 A So what I wanted to convey to the rate 15 commission was our kind of policy position, in that we 16 do right now believe legally, and for policy position, 17 that all the customers that we've indicated, the rate 18 proposal should be charged for rate proposal. 19 We envisioned there's two ways that maybe that 20 would not happen. One I did discuss previously is, if 21 out of these proceedings, we decide they should not pay 22 the cost of those, MSD staff would then have the 23 question if they don't pay the rate, should they receive 24 the service. 25 The other thing that's always possible, and I TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 44 1 believe I've experienced this in the past, there could 2 be, for instance, a legal process that occurs after 3 we're done, where, in some way, those entities were 4 judged not to have to pay this rate. And what I was 5 trying to convey to the rate commission that MSD's plans 6 in that contingency, if that were to occur, is we would 7 just simply take the decrease of approximately 8 15 percent in revenues, not ask for an increase in 9 rates, and we would just move forward with a slightly 10 smaller program, 15 percent the size of what we're 11 currently proposing. 12 I think it was just recognizing that that has 13 the potential of occurring in the future and letting you 14 know that MSD has thought about that, and our opinion is 15 if that is to occur, we would not plan on coming back to 16 the rate commission to adjust the rate in order to 17 account for that. We think we could -- we could live 18 with that kind of change, if necessary. 19 Q Okay. Okay. I want to talk for a minute 20 about the memo that you submitted, Exhibit MSD 30A. 21 Do you have that? 22 A Yes. 23 Q I know there's been some confusion regarding 24 the consent decree and its applicability to this rate 25 change. And I think your memo is helpful in TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 45 1 clarifying that, but I think particularly for those 2 commissioners who haven't been involved in wastewater, 3 could you -- they might like a little more explanation 4 as to what you mean by the consent decree only 5 involving wastewater issues. 6 A Okay. 7 Q Can you just explain that a little bit more? 8 A Sure. Yeah. And this will start -- I think 9 in my original statement, I assured you you would get 10 the opportunity to look like this. And I think as we 11 stated, right now we're planning around February 2019 12 to bring the next wastewater rate proposal to you. 13 The consent decree is a judgment and agreement 14 with us and EPA, the Department of Justice, and the 15 Coalition for the Environment, to meet the clean -- the 16 requirements to Clean Water Act -- to meet it under a 17 certain schedule with certain milestones. 18 All of that work involves deficiencies in our 19 wastewater collection system. Not the plants, but in 20 the collection system. All of the work in those 21 wastewater collection systems, be they separate sanitary 22 sewers or combined sewers, are funded through wastewater 23 rate. So, therefore, by extension, it is only the 24 wastewater rate and only revenues from the wastewater 25 rate that the consent decree would have any impact -- TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 46 1 that that's the only place you would have any impact. 2 There are so -- and one of the reasons we are 3 bringing back in 2021, this -- this commission took a 4 look at our proposed rate from 2017 through 2020 5 previously for wastewater, set those rates, keeping in 6 mind what the requirements for the consent decree were, 7 those rates now expire in the summer of 2020. 8 Therefore, that's why we'll be coming back to you to 9 discuss what should be -- the rate should be 2021 10 through 2024. It is in those rates we'll be presenting 11 to you the justification for those rates. Major 12 justification is going to be requirements that are in 13 the consent decree. 14 Q Okay. The other part of your memo talks 15 about the two other parts of the stormwater revenue 16 sources, and you refer to the stormwater tax 17 regulatory issues and the stormwater tax for O&M, both 18 of which you note are not being changed in any way 19 and, therefore, are not a part of the current rate 20 proposal. 21 But you're familiar with the -- with the 22 rate commission's obligations under the charter. And 23 I guess I'd like a little explanation, if you don't 24 mind, on -- you know, like one of the things that the 25 rate commission has to consider is whether the TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 47 1 rates -- recommended changes in rates where the cost 2 of operation and maintenance or such amounts as may be 3 required to cover emergencies and anticipated 4 delinquencies. Don't you think that the rate 5 commission has to at least consider and understand the 6 other parts of the stormwater rate in order to make 7 these determinations with respect to the current 8 proposed rate change? 9 A I quite honestly don't think there's much of 10 a link. I would offer as part of the stormwater O&M 11 tax, that was -- and I think the information is 12 available -- was deliberated a couple years ago as 13 part of this rate commission, answering all those 14 questions. 15 This particular piece is a little bit 16 different. If there is information within those that 17 are pertinent to these proceedings, sure, we'll provide 18 that. I think you'll find in our rate proposal the one 19 thing that we believe is really important, and we do 20 show that it is -- when we show the impact to the 21 customer overall of what we're proposing, we do include 22 the financial burden for all the programs we have in 23 place. The wastewater, as well as the two existing 24 stormwater. 25 I guess I'd have to hear what tie somebody TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 48 1 believed there was between what we're proposing here and 2 what comes -- what services are being provided out of 3 the stormwater regulatory issue or the O&M for the 4 public stormwater system. I think the only piece we did 5 identify and we addressed is there is a potential for 6 this new rate to result in the construction of 7 facilities that might become public and that we might 8 operate and maintain. We made a statement that we don't 9 see that changing any of the burden for the operation 10 and maintenance piece. 11 So I think if it's pertinent, sure, and I 12 think we've tried to do that as part of the rate 13 proposal, especially wrapped around the financial burden 14 to the individual ratepayers. 15 Q Thank you. I just wanted to clarify -- I 16 mean, because your memo was great but very brief -- in 17 that there may be circumstances in which the rate 18 commission wants to understand all of the facets of 19 the stormwater rate in order to make its determination 20 on this. 21 A And we don't have any problem providing 22 that. 23 Q Okay. One of the things that the rate 24 commission -- and I just mentioned this -- has to 25 consider is whether the proposal provides for funds in TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 49 1 such amounts as may be required to cover emergencies 2 and anticipated delinquencies for stormwater services. 3 I'm a little concerned under -- and I guess 4 I'd just like for you to explain this -- under the 5 second discovery request, which is 31A, Question 20: 6 "The district states it will not have a minimum fund 7 balance for the capital rate fund." 8 So what will happen -- do you foresee there 9 ever being an emergency-type situation for these types 10 of projects with the flooding and erosion issues, or 11 is that something that you wouldn't anticipate there 12 being an emergency? 13 A If by "emergency," we mean is there 14 something that needs to be done quickly -- and I 15 assume that's the "emergency" you're talking about. 16 There are other options available to the district. A 17 delay for a small period in current plans for that 18 year or the next year, moving back a couple months to 19 make sure the funding is available for something that 20 becomes an emergency. 21 I know in the past, we have -- where those 22 type of issues have come up, we can internally borrow 23 from other funds knowing that we're going to pay them 24 back later through other revenues. So there are other 25 mechanisms for capital projects. And, again, I'm TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 50 1 responding only to this proposal. There is room 2 financially for us to make sure we can address 3 emergencies in other ways without changing the proposed 4 rate. 5 I think it's real important in this particular 6 program, we don't want to in any way look like we're 7 collecting more funds than needed. But I will tell you 8 we do have the mechanisms. If you have some emergency 9 comes up, there are financial mechanisms where we can 10 either move it up and delay some other projects, or even 11 doing some internal borrowing between our own funds 12 internally to make sure we can provide a service in an 13 emergency situation. 14 Q So is that your reason of why this capital 15 rate fund won't have a minimum fund balance because 16 you don't -- you answer the question. 17 A We think -- well, so, I mean, it is kind of 18 going to the risk part. We think the biggest risk in 19 the rev -- one of the biggest risks in the revenue we 20 collect is not taking in anything more than what we 21 need. And we thought it was really important to make 22 sure we only collected the revenue that we thought we 23 needed on an annual basis. 24 Q Okay. Thank you. 25 Okay. In the first discovery Exhibit 30B, TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 51 1 Question 56, on page 15, where we talk about fair and 2 reasonable, it refers back to your testimony which was 3 that the level of the -- "The level of flooding and 4 erosion services being proposed is directly impacted 5 by the increased rate and volume of stormwater runoff 6 created by impervious area on each customer's 7 property." Can you explain this further to me? 8 A Which -- we're on question -- which one? 9 Q We're on Question 56, page 15, on the 10 discovery, and it refers back to your testimony. 11 A Yeah. And I think that is somewhat similar 12 to the response that was given before is why 13 impervious rate. 14 Q Okay. 15 A And I think -- besides just my understanding 16 of the issue as an engineer, I think even past 17 testimony and evidence provided to this commission in 18 past proposals have indicated that that is simply a 19 fair and reasonable way to distribute the cost of the 20 program, is by the amount of impervious area. 21 Q And under your proposal in determining the 22 impervious area, the district is proposing the use of 23 the ERUs? 24 A Yes. 25 Q So can you explain a little bit about how TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 52 1 the ERU would bear a direct relationship to the 2 services provided? 3 A I'm going -- and I'm not sure who the 4 individual is. I think I asked that we refer that 5 to -- and we can let you know -- it's either Marion or 6 one of the technical experts. 7 Q Okay. 8 A There is a mix between -- for instance, we 9 are not measuring, somewhat similar as we did 10 years 10 ago, every square foot of impervious area, all 500,000 11 properties. There is -- there is a sweet spot where 12 you put a program in that's affordable that's also 13 applicable and fair and reasonable. I think I'd leave 14 that to those experts to explain that. 15 Q Okay. Thank you. 16 One final question. 17 A That's okay. 18 Q If the voters reject the new stormwater 19 capital rate, although you mentioned some alternatives 20 in your testimony, just to be clear, there is no 21 alternative that is formally a part of this rate 22 change proposal? Would you regroup and come back to 23 the rate commission? 24 A We would -- any future action would depend 25 on the input we get from the public. You can imagine TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 53 1 these are -- you know, this is a lot different. If 2 we -- if we go to a vote and we lose 90 percent to 10 3 percent, we might not see MSD coming to you in the 4 very near -- in the very near future. If we lose 5 50 -- if we win -- lose 50.1 to 49.9, more public 6 communications, more public input, more public 7 discussion, might lead us to bring something to the 8 rate commission. There are no plans to turn around 9 the next year and do something with this, outside of 10 the existing taxing areas in small parts of the 11 district that currently have a tax rate set at zero. 12 It's going to depend on what the results are in 13 April of 2019, and then what feedback we get from the 14 public afterwards. 15 Q So there's no alternative that's part of 16 this proposal? 17 A That's not -- no, as part of this proposal. 18 MS. STUMP: No further questions. 19 CHAIRMAN TOENJES: Thank you, Ms. Stump. 20 Now I'll ask -- I will ask if any of the 21 rate commissioners have questions for the witness, and 22 remind you to identify yourself for the court 23 reporter. 24 COMMISSIONER BROCKMANN: I do, Mr. Chairman. 25 CHAIRMAN TOENJES: Mr. Brockmann. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 54 1 QUESTIONS BY COMMISSIONER BROCKMANN: 2 Q Brian, you mentioned earlier this morning 3 that you thought the municipalities were looking 4 forward to MSD participating in your proposal 5 providing capital for erosions or flooding -- 6 A Yes. 7 Q -- throughout the City and County. I also 8 know that some municipalities have been really 9 spending a lot of money on flooding studies within 10 your municipality. Were those studies part of your 11 known assembly of all these projects? 12 A Yes, they were. And I'll expand slightly, 13 and it's been going on quite awhile. Some 14 municipalities have different mechanisms of 15 communicating with MSD on stormwater issues. Some 16 have a very formalized process, which can include 17 stormwater plans and communicating to the district, 18 those issues are put into the proposed program. 19 Others are a little simpler, in that they're just a 20 list of complaints. Say on a quarterly basis, they'll 21 report to MSD. There are some municipalities who 22 don't communicate stormwater issues to us. But any 23 source we have, be it from the public or from those 24 residents, is in that pot of $562 million of issues. 25 Q Okay. Thank you. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 55 1 You mentioned you've got an evaluation 2 process for each of these projects, but there's also 3 these things called storm events and things like that. 4 How do you take a storm event and compare that with 5 the erosion or the flooding that's going on? I mean, 6 is there some limit that you don't go above a 50-year, 7 20-year, 100-year? Or how does that play into 8 things -- 9 A So I'm going to give you a very general 10 answer. I know that the lower -- or the higher the 11 probability of recurrence results in a higher benefit 12 number. So it's a result of preventing 5-year 13 flooding has a higher benefit number than 50-year 14 flooding. Beyond that, I think if you've got any 15 questions about the detailed process, I would ask that 16 you wait till Rich Unverferth is up here to answer 17 those questions. 18 Q Okay. This rate proposal, again, asks for a 19 4 percent bad debt, or assumed 4 percent stormwater 20 bad debt. The rate commission always deals with this 21 and all the different rate proposals, whether it's 22 wastewater or stormwater. So could you -- I don't 23 expect you have this, maybe you do. So if we went to 24 the past four rate increases, what was the bad debt 25 percentage in the final budget adopted by the MSD TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 56 1 board of trustees? And then what was the actual 2 experience that you realized afterwards? 3 A So two things. One, I will give you a 4 general answer. We will try and gather that data. 5 And when Marion Gee, when he comes up here, maybe he 6 will give you a more detailed answer. 7 But of the things that has a special impact 8 here that we don't have good past data on, with this 9 rate proposal, we will be billing people for this 10 service who receive no other bill from MSD, and we will 11 be billing them at a rate of $2.25 per month. So 12 that -- that is part of a delinquency equation that 13 doesn't exist in our other revenue sources. So you'll 14 find there's other considerations that -- that we got, 15 too. And, therefore, again, that's one of the reasons I 16 think I'd like to leave you -- Marion Gee to answer that 17 question in detail as to how they built that up and how 18 they compared it against proposals. 19 Q A little further to that question. So you 20 would -- you're basically establishing your rate 21 proposal on and it's people that actually pay the rate 22 are going to be providing the coverage for those who 23 do not pay. But, yet, you're indicating that you have 24 flexibility in your program to reduce the amount of 25 services that you provide. Like, for example, you TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 57 1 mentioned the not-for-profits do not get charged this 2 rate, you would cut back on your scope. Why instead 3 of including this in your rate request, why not just 4 say, "Okay. We're going to reduce our scope and not 5 have this as part of the rate request?" 6 A I'm not sure, Paul, I understand your 7 question. I may have answered the question originally 8 incorrect. 9 Q So the bad debt means that you're charging 10 additional fee, or percentage, for the people that pay 11 the rate; correct? 12 A Correct. 13 Q To cover the people that don't pay the rate? 14 A Yes. 15 Q I'm saying instead of having this in your 16 rate model, why not eliminate it and just say, "Okay. 17 You're only going to do the scope of services for 18 which funds are received compared to you were going to 19 do the same for the not-for-profits who were not 20 charged?" 21 A So I would differentiate between those who 22 are not charged and those who are delinquent in their 23 bill and we may take delinquency-type actions. I 24 think I'd like to feel more comfortable with 25 Marion Gee could have that discussion with you as to TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 58 1 the difference between those two. 2 COMMISSIONER BROCKMANN: Okay. That's all I 3 have. 4 CHAIRMAN TOENJES: Thank you, Mr. Brockmann. 5 Are there -- yes, Mr. Schoedel. 6 COMMISSIONER SCHOEDEL: Thank you. 7 QUESTIONS BY COMMISSIONER SCHOEDEL: 8 Q It may be in the proposal, but can you 9 clarify, for the proposed capital projects, will those 10 end up being public or private maintained and owned 11 afterwards? 12 A So what we discussed, and it's in that 13 exhibit, if the solution results in facilities that 14 are mandated to become public facilities by our 15 charter and our policies, again, the most easy example 16 is to solve somebody's backyard flooding, we put in an 17 inlet and a 100 feet of storm sewer, that will become 18 a public facility. If we were to go into an area 19 where there is erosion and bio-stabilized the site 20 which doesn't result in that, or if we were to buy 21 people out of floodplains and then turn the property 22 over to the municipalities to maintain, those would 23 not result in assets that are operated and maintained 24 by the district. So it will be a mix, depending on 25 the solution. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 59 1 Q So Proposition S and the fees for O&M are 2 anticipated to take care of all these additional 3 public storms that you will be putting in over the 4 next 20 years? 5 A Yes. 6 Q Okay. 7 A Yeah. And I think, as we mentioned, 8 compared to the size of the current system and where 9 we think we'll be with the O&M of the existing public 10 storm sewer system, we don't see that any additional 11 revenues will be required to absorb those additional 12 facilities. 13 Q So that almost seems to indicate that you 14 have excess funds from Proposition S right now? 15 A I would put it to you that, remember, when 16 we started Proposition S, we also had facilities that 17 hadn't been maintained for 30 years. I think you're 18 going to find there's going to be some upfront 19 expenditures, and Mr. Sprague, in our operations 20 department, is doing now. They're requiring immediate 21 attention one -- every one, every two years that 22 eventually will go away and become more of a multiyear 23 investigation. So I anticipate those coming together. 24 Do I think we're collecting too much funding? 25 Right now, the numbers don't show that we are. Could we TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 60 1 possibly in the future? Mr. Gee has heard me say this: 2 If the operation and maintenance needs actually fall 3 below the ten-cent, we would go to our board and request 4 something on an annual basis, something less than 5 ten-cent if we didn't need the money. 6 COMMISSIONER SCHOEDEL: Thank you. 7 CHAIRMAN TOENJES: Mr. Mahanta. 8 QUESTIONS BY COMMISSIONER MAHANTA: 9 Q You might have explained it already, but 10 part of this -- this rate request, if it is approved, 11 but you collect more than you need, is there a way 12 of -- how are you going to utilize that? 13 A Well, I think the simple answer in this 14 particular rate is we have 562 -- an estimate of 15 $562 million of issues for construction. The 16 $30 million revenue will result in 18- or $20 billion 17 a year of construction dollars. So I don't know the 18 issue of having too much will be the issue. I think 19 the issue will be making sure we spend it fast enough. 20 If there is a delay in the stormwater program -- with 21 our experience, in the past, stormwater programs, 22 oftentimes it is getting agreement and the 23 communication with the individual residents who are 24 involved in this stormwater project, helping them 25 understand why we no longer build straight concrete TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 61 1 channels and giving their backyard up, the fact that 2 that's not allowed, that takes time. Easement 3 acquisition. There are things that require a lot more 4 communications in the stormwater project. 5 So I'm only indicating that that may delay 6 things, but that doesn't mean the project isn't coming 7 up and the money collected in a given year. It might 8 get billed nine months later and moved to a future year 9 but it will get -- it will get spent. 10 COMMISSIONER MAHANTA: Thank you. 11 CHAIRMAN TOENJES: Mr. Bresnan. 12 QUESTIONS BY COMMISSIONER BRESNAN: 13 Q The question I have is due to urban sprawl 14 and stuff, your sewer system, how old is it? The 15 maintenance on it, you know, is it an ongoing -- I 16 know it's an ongoing thing, but is there a greater 17 need in certain areas than others, that you have to 18 concentrate on that first? 19 A So we're talking about now the service being 20 provided by this proposed rate? 21 Q Right. 22 A It's -- if you take a look -- if you recall 23 the presentation I gave you, we kind of gave you a 24 spot map of where we've heard of issues, right. 25 You'll find it's located throughout the district. You TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 62 1 will find in areas I mentioned earlier that it had 2 localized extra taxing capacity, that there's maybe 3 what you would see a little more concentration of 4 dots. The reason being, there was funding to take 5 care of issues, that probably generates questions. 6 If you go, especially west of 270, we've had 7 an ongoing discussion with a lot of property owners, and 8 also in South County, about, yes, we know you have a 9 problem, there is no funding. That tends to lend itself 10 towards less comments. You'll also see that in the City 11 of St. Louis where -- whether it's a number of inlets, 12 some of the open channels that are available, there 13 are -- there are things in the City as well. 14 It is district-wide. I mean, it's impacting 15 everybody, this particular issue. So we're not going to 16 be concentrating on any certain area. We're going to 17 use our benefit cost analysis as the basis for 18 determining which one goes first. And based right 19 now -- and I might leave this to Rich Unverferth, but I 20 think in the proposal, we have shown in the first couple 21 years what those projects would be and where they are, 22 and I think you'll find them located throughout the 23 district. 24 COMMISSIONER BRESNAN: Thank you. 25 CHAIRMAN TOENJES: Mr. Goss. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 63 1 QUESTIONS BY COMMISSIONER GOSS: 2 Q Brian, you mentioned a cost benefit -- 3 CHAIRMAN TOENJES: I don't think that's on. 4 Q (By Commissioner Goss) Brian, you mentioned 5 a cost benefit analysis in your testimony. Could you 6 explain that in a little more detail? 7 A I'll give you the general again and then I'm 8 going to request that you ask Rich Unverferth that 9 question. And I'm sure he's back diligently preparing 10 for this. 11 But every problem has a dollar value. If your 12 fence in your backyard is going in the creek, it has a 13 lower dollar value. If your house is ready to go in the 14 creek, it has a -- not dollar value -- benefit value. 15 If your house is ready to go in the creek, it's a higher 16 benefit value. You take those benefits, add them 17 together, divide by the cost of the solution, you came 18 up with a benefit cost number, and the one with the 19 highest ratio is the one we do first. That's a very 20 general description. Anything more detailed than that, 21 I would ask you save for Rich Unverferth. 22 Q There's an Exhibit J and Exhibit K in the 23 documents that were produced, and they relate to a 24 prioritization system that MSD uses. Is that part of 25 that cost benefit analysis? TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 64 1 MR. UNVERFERTH: It is. Well, I'm holding it 2 up. 3 MR. HOELSCHER: Well, let me make sure it's 4 the right one. 5 MR. UNVERFERTH: Yeah, that -- yes, it is. 6 A So, yeah, Exhibits J and K are the details. 7 Q (By Commissioner Goss) So if I want to 8 understand Exhibit K, that's a Rich Unverferth 9 question? 10 A I would strongly suggest you ask Rich, yes. 11 Q Okay. Fair enough. And to ask questions 12 about how that system was developed, that also I 13 should direct to Rich? 14 A Rich is very knowledgeable about that. Yes. 15 Q And so this would have been -- this would 16 have been the point system that was being used to 17 determine the prioritization of projects and to help 18 arrive at this overall cost of projects or not -- 19 A Yeah. 20 Q -- it isn't related? 21 A The overall cost is just a list of the 22 issues we have. How we would go forward with the 23 prioritization process you have listed in those 24 exhibits would be used to determined who goes first. 25 COMMISSIONER GOSS: Okay. Thank you. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 65 1 CHAIRMAN TOENJES: Any questions from any of 2 the other rate commissioners? 3 Mr. Palans, anything? 4 COMMISSIONER PALANS: Yes, Mr. Chairman, if I 5 might ask, I'd like to inquire of the witness about the 6 source of funds. 7 TELEPHONIC QUESTIONS BY COMMISSIONER PALANS: 8 Q And if I understand, the budgeted projects 9 that have been identified require a $562 million 10 number for completion, with the source of funds 11 derived from OMCI funds, a regulatory fund, and then 12 O&M fund. Is that correct, Mr. Hoelscher? 13 A No, sir. It would only -- it would only be 14 paid for out of the fund that we're proposing -- the 15 proposed fund that we're proposing right now. 16 Q And no external borrowing are contemplated; 17 is that correct? 18 A Well, no external expenditures are 19 contemplated. As I explained earlier, if we do need 20 to borrow funds in an emergency, we might do that and 21 then pay back. But right now, barring any kind of 22 emergency and a temporary solution like that, any of 23 the services we're proposing would only be funded out 24 of the rate proposal that you have in front of you 25 today. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 66 1 Q And you do include incentive programs to 2 provide customers with an opportunity to reduce their 3 effective rates for use of construction features or 4 other developments like rain gardens, cisterns, or 5 things like that sort; is that correct? 6 A Yes. There are -- there are both incentive 7 and credit programs, I believe, in the proposal. 8 Q And there are no third-party fund, whether 9 through debt offerings or customer contributions, 10 contemplated to supplement the district's sources of 11 funding; is that right? 12 A I would ask to get a definitive answer from 13 Mr. Gee. But, no, I don't believe MSD has any 14 alternative sources of funding of any size to assist 15 us with the program. 16 Q And I believe you stated that the sizing of 17 the problem, the stormwater problem, is a $562 million 18 number consisting of 483 projects. As I understand 19 it, this is based on a conceptual in nature and a 20 minimal amount of detailed information. Is that your 21 understanding? 22 A Much of it, yes, that's correct. 23 Q So that -- and each of the projects is 24 prioritized based upon the severity of the problem and 25 the cost benefit analysis; is that correct? TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 67 1 A Yes. 2 Q Has the district considered implementation 3 of a program which would allow third-party sources 4 from effective customers, whether it's residential or 5 commercial property owners or municipalities who are 6 impacted by the flooding or erosion problems, to 7 contribute funds dedicated to a remediation of 8 specific CIRP projects? 9 A So -- and beyond what I'm going to give you 10 here, if you have more detail beyond that, I'd ask you 11 ask Rich Unverferth. But MSD's position on that is 12 for stormwater projects that we have a correct setup, 13 if an outside source such as -- and more traditionally 14 we see a municipality -- wishes to contribute funds to 15 speed up a project that's already programmed, we will 16 allow them to do that. Usually the mechanism it looks 17 like is a municipality in a real world instance will 18 pay for the engineering of their stormwater issue, 19 which would then sometimes include part of MSD's 20 project, and then MSD during construction would 21 reimburse them for our costs. 22 By policy and I -- right now MSD sees no 23 reason to change it -- the idea of allowing more 24 affluent residents and more affluent and economically 25 healthy communities to buy forward MSD funds, you know, TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 68 1 at the disbenefit of those communities who don't fall in 2 those categories, we don't allow outside funding to 3 change the benefit cost ratio that -- that is 4 maintained, and that's MSD's current policy. 5 Q Thank you. 6 I would like to just briefly follow up on 7 your statement that was identified in the memo that 8 you filed, which was MSD 30A. It references that the 9 consent decree only involves wastewater issues and is 10 funded by wastewater rates, and the consent decree 11 requirements is not -- is not relevant to the current 12 rate proposal. But I believe this is reiterated in 13 various responses in your testimony. 14 I pulled a copy of the consent decree, and I 15 note that I should -- Let me rephrase that. 16 I took a look at your website first, and 17 your website references, and I quote, "Throughout the 18 district service area, there are hundreds of points 19 where a combination of stormwater and wastewater 20 discharges into local waterways from the sewer systems 21 during moderate to heavy rainstorms." That's in your 22 website; correct? 23 A Correct. 24 Q And these sewer overflow points act as 25 release valves when too much stormwater enters the TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 69 1 sewer system, and without them, our community could 2 experience thousands of basement backups and/or 3 extensive street flooding." That's also on your 4 website? 5 A Correct. 6 Q I note that the consent decree on page 3 7 states that MSD's long-term control plan includes a 8 $100 million commitment to implementing green 9 infrastructure constructed projects that redirects 10 stormwater from reaching sewers by capturing and 11 diverting it to locations where it's detained, 12 infiltrated into the ground, evaporated, taken up by 13 plants, or reused. 14 So I don't think it's a fair statement to 15 say that the consent decree is irrelevant, do you? 16 A Yes, sir, I do. I think my explanation will 17 be as follows: You need to understand from -- while 18 we are describing to people what is causing an 19 overflow, I think it needs to be understood from both 20 a regulatory perspective and a funding perspective 21 that once stormwater and wastewater mix, they are a 22 wastewater. And that's how it is treated. So when 23 our combined sewer overflows activate within the city, 24 a large portion of those originally were stormwater, a 25 large portion of that flow, with much less being TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 70 1 wastewater. But it is treated as a wastewater 2 overflow. 3 Now, there -- it depends on how they're set 4 up. That -- that extra flow comes from the fact that 5 the combined systems in the city were meant to collect 6 both stormwater and wastewater in the same pipe, but 7 once those mix, they become wastewater. 8 With regard to the green infrastructure 9 program, one of the solutions to address this wastewater 10 issue of overflows or combined sewer system, one 11 strategy is to reduce the amount of stormwater that 12 enters the wastewater system and it generates more 13 wastewater. So the green infrastructure program that 14 we've put in place to address the regulatory issue of 15 sanitary, sewer, or combined sewer overflows, is a 16 regulatory issue that's paid for through wastewater 17 rates. That is a wastewater regulatory issue. 18 So any of those issues that we have mentioned 19 in the combined sewer areas specifically, since you 20 mentioned the long-term control plan where stormwater is 21 either being held up or removed from the combined sewer 22 system, is a wastewater issue that's paid for out of the 23 wastewater program. You will not find that the separate 24 sewer area -- where there's a separate combined and a 25 separate stormwater sewer, you won't find us using the TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 71 1 same green program to hold off the stormwater runoff of 2 a property because it doesn't, in and of itself, result 3 in any kind of wastewater overflow or overflow point. 4 So the systems are a little bit different. 5 So it's a fine issue, and I know it's a fine 6 line to describe, but there aren't any of the 7 projects -- could there always be side benefits? Yeah, 8 maybe. But you won't find that any of the rate that 9 we're looking for here for stormwater, for flooding and 10 erosion, will be used to address any issues or resolve 11 any commitments that are in the consent decree. 12 Q So the stormwater and wastewater issues are 13 truly related, are they not? 14 A From a regulatory and a rate perspective, 15 no. If you stood at the beginning of a pipe and saw 16 something originate as stormwater and something 17 originate as wastewater, then, yeah, I guess you could 18 say they are. But in our world, wastewater 19 problems -- any of the combined or separate sanitary 20 system, stormwater getting in, combining with those 21 flows and becoming wastewater, is a wastewater issue 22 that's covered by both our wastewater rate and, to a 23 large part, by our consent decree. 24 Q And the $100 million dollar commitment to 25 implement green infrastructure in the consent decree TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 72 1 relating to stormwater, that is something that will be 2 funded under the wastewater portion of the consent 3 decree? 4 A Yeah, it's a wastewater activity that is 5 meant to decrease overflow volumes to the combined 6 sewer system into the Mississippi River and to address 7 river quality issues in the Mississippi River, it 8 helps mitigate the overflow. There was a component 9 put in place in lieu of something close to a 10 $2 billion potential tunneling project to capture 11 flows like we're having to do in the rest of the 12 district. It was thought that by holding this back 13 and mitigating the impacts of those overflows in the 14 Mississippi River, we could approach the current water 15 quality requirements within the Mississippi River. So 16 it is being all paid for out of the wastewater drain. 17 COMMISSIONER PALANS: Thank you. I have no 18 further questions. 19 CHAIRMAN TOENJES: Thank you, Mr. Palans. 20 Any -- Mr. Goss? 21 COMMISSIONER GOSS: Yeah, Mr. Chairman. 22 QUESTIONS BY COMMISSIONER GOSS: 23 Q I wanted to follow up on the stormwater 24 credit program that's in your proposal. Is there any 25 way for homeowners associations to take advantage of TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 73 1 that credit program? 2 A So I would ask that anything on those -- 3 THE WITNESS: Give me a hand, guys. Who's 4 going to answer it? 5 A Rich Unverferth and possibly the experts 6 after Rich Unverferth. I think the details, that 7 they'd be the appropriate people to ask. 8 Q (By Commissioner Goss) So you don't know 9 whether the homeowners association -- 10 A I can give a high-level general -- I can 11 give a high-level general answer, and I don't know 12 that I -- I just want to make sure we ask the right 13 questions to the right people. They're the experts on 14 that. I prefer they answer. 15 Q Well, I understand that. The question I 16 have -- and the reason I'm asking about the homeowners 17 associations is I don't believe MSD bills them; is 18 that correct? 19 A The homeowners associations for? 20 CHAIRMAN TOENJES: Anything. 21 Q (By Commissioner Goss) A subdivision 22 association, and trust indenture where you have 23 trustees that are maintaining a detention basin, or an 24 incorporated subdivision. 25 A No, I believe we -- we bill the property TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 74 1 owners, I believe. 2 Q So the stormwater credit program then 3 wouldn't be available to trustees of the subdivision 4 who are maintaining or trying to improve a detention 5 basin? 6 A I would refer to the other individuals. 7 It's a detail of the question, and I can't give an 8 appropriate response to. 9 Q Do you have any evaluation of the 10 effectiveness of the program that, in your testimony, 11 said 200 customers took advantage of over several 12 years, whether that's an effective program when only 13 200 customers took advantage of it? 14 A Where in my testimony did I say that? 15 Q It's in appendix J of the proposal. 16 A Oh, in the rate proposal. I would have you 17 ask Rich Unverferth that question, if you would. 18 Q So he'd be the party who's evaluating the 19 effectiveness of the credit program? 20 A Whatever details we have around that program 21 would be starting with Rich Unverferth. 22 Q I really wasn't asking about the details. I 23 was asking about whether you, as the director, thought 24 it was an effective program. 25 A And that's a detail I don't have the answer TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 75 1 to. 2 COMMISSIONER GOSS: Okay. Thank you. 3 CHAIRMAN TOENJES: Any further questions from 4 any of the other rate commissioners? 5 (No response.) 6 QUESTIONS BY CHAIRMAN TOENJES: 7 Q I have a couple questions, Mr. Hoelscher. 8 In terms of Mr. Neuschafer's comments about the impact 9 of this rate case on future rate cases, and this may 10 be more of a question for what the trustee's flavor 11 is, that as we move forward into 2020 or 2021 with 12 additional leads that are going to come about because 13 of the consent decree, I would assume that in 14 communicating this rate proposal, that the voters of 15 the district would be aware that this -- that there 16 still are future -- I think it'd be important for us 17 to communicate that going forward, that there will be 18 future rate proposals dealing with wastewater? 19 A Yeah, I would -- 20 Q So that this is not a gotchya is my concern. 21 A To be honest with you, we did not make a 22 specific point on that. Now, in updates, we do 23 give -- when Lance and I give updates to the whole 24 community on the program, we do give both projects 25 clear, which is the consent decree, and we do talk TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 76 1 about what the stormwater issue will be. 2 Have we as part of those discussions right now 3 made absolutely sure that everybody would understand 4 there's future -- again, because we have done this in 5 past future wastewater rates? No, we have not. Will we 6 prior to April 2019? Yes, we will. There will be 7 informational meetings outside of the process the 8 board -- the rate commission has here. Our board of 9 trustees will have those communications. And I will 10 guarantee we make sure that people understand that that 11 is -- that is available also, or that's something to 12 occur in the future prior to a voting occurring in 13 April 2019. 14 We have not really tied the two together. 15 Based on discussions with -- for instance, with 16 municipalities and others, the response we're getting is 17 this is -- especially for the voting public -- a pretty 18 small item. And right now we haven't seen or felt that 19 there was a need in order to really present that to 20 them. We really want them to focus on the stormwater 21 piece. 22 Q I would just caution that, even though 23 they're separate in the minds of the experts, they all 24 come out of the same law at the end of the day. So I 25 would want to make sure that the voters understand. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 77 1 A Point noted, and we will make sure we take 2 that into consideration in the future. 3 Q My second question has to do with an issue 4 that Mr. Palans brought up. We do a lot of work with 5 MoDOT. And MoDOT -- in the question about the private 6 funding on contributions, I know that MoDOT has a 7 cost-sharing program for municipalities who choose to 8 enhance a bridge project or enhance something that 9 they can have an available program if the municipality 10 decides they need some sort of improvement, they'll 11 cost-share in order to stretch MoDOT's funds further 12 so that they can serve other areas that cannot 13 cost-share. And I just wonder if that discussion has 14 ever occurred at the trustee level to implement some 15 program along those lines? 16 A So the discussion -- and I view what you 17 just asked me as a little different than I think the 18 statement I made before. As a real world example, if 19 we know we have programmed into an old -- I'm using 20 old terminology -- an old taxing fund balance, a 21 project to be done in two years as part of the 22 process -- and ours is actually kind of reversed -- if 23 the city, a municipality, or another entity, has 24 something they want to do with their own funding that 25 encompasses that issue, we won't make them wait for TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 78 1 two years to pull the project up. If we know it's 2 dedicated, we know it's set aside for that, we will 3 then participate and allow them to enhance the 4 project, move it up as far as when MSD -- when they 5 build it, as long as we make sure we are not impacting 6 any other community or any other residents we made 7 commitments to. 8 I will tell you we'll go back and think about 9 it again, except that I think the statement I made is 10 that we're willing to do those things as long as, in 11 very simple terms, more affluent and communities that 12 have more dollars available to them, we don't want them 13 buying their projects ahead of less affluent entities 14 who are also paying the rate and deserve to have the 15 opportunity to have their projects done in the same 16 schedule. 17 So it's a mixed -- or the current process is 18 kind of a mix between the two. 19 Q And I guess I would suggest that if a more 20 affluent municipality is willing to pay half the cost 21 to accelerate the project, then the other half would 22 remain in MSD's bucket to use in the less affluent 23 communities? 24 A Yes, that would -- usually -- understand 25 that when we do move things forward, rarely does a TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 79 1 community offer dollars to us to decrease our cost. 2 Invariably, we have a $250,000 project, they have a 3 500,000, and we pay our 250 and then their five. So 4 it never -- in practice, never actually generates more 5 funds for MSD. 6 Q As it does for MoDOT? 7 A Apparently, it does for MoDOT. I guess 8 they -- you generate additional dollars. 9 Q I would just put that on the table. 10 A Okay. 11 CHAIRMAN TOENJES: Any other questions from 12 any of the commissioners? 13 Ms. Myers, do you have any questions for 14 Mr. Hoelscher? 15 MS. MYERS: I do not. 16 CHAIRMAN TOENJES: Mr. Hoelscher, thank you. 17 THE WITNESS: Thank you. 18 CHAIRMAN TOENJES: The rate commission will 19 take a break until 10:45. 20 (Whereupon, a brief break was taken.) 21 CHAIRMAN TOENJES: We will reconvene. 22 Ms. Myers, I assume you are ready to present 23 the next witness, which is you. 24 MS. MYERS: I am. 25 (The witness was duly sworn.) TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 80 1 CHAIRMAN TOENJES: Thank you. 2 Mr. Neuschafer, do you have questions of 3 Ms. Myers on behalf of Missouri Industrial Energy 4 Consumers? 5 MR. NEUSCHAFER: I do. 6 CHAIRMAN TOENJES: Please come forward. 7 QUESTIONS BY MR. NEUSCHAFER: 8 Q Good morning. 9 A Good morning. 10 Q I have just a few questions related to the 11 criteria that you use to assess the rate proposal in 12 Section 7.270 of the charter. And, in particular, I'd 13 like to refer you to Mr. Beckley's written testimony 14 if you have that available. 15 In Question 9, he outlines those criteria, 16 and then in Question 10 is where I have my first 17 question. Question 10 relates to whether the rate 18 proposal is consistent with constitutional statutory 19 or common law. And Mr. Beckley indicated that issues 20 concerning charter plan authority, environmental laws 21 of regulations, constitutional and statutory 22 provisions and case law should be evaluated. Has MSD 23 conducted such an evaluation? 24 A Yes, it has. 25 Q And is the totality of that evaluation TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 81 1 provided in your testimony? 2 A Yes, and supplemented with Exhibit 30Q. 3 Q Okay. Thank you. 4 Go to Question 11. There's going to be a 5 pattern here. We're going to go through a few of 6 these. 7 Question 11 refers to the criteria of 8 enhancing the district's ability to provide adequate 9 drainage systems of facilities or related services. 10 And Mr. Beckley indicates that the rate proposal 11 should be assessed as to whether it meets this 12 criteria. Has MSD conducted this analysis? 13 A That question would be better answered by 14 Rich Unverferth. 15 Q Okay. 16 A If you look at Question 16 in Exhibit MSD 17 30B, go through those criteria. 18 Q Right. I just want to make sure that 19 ultimately the recommendations made by your consultant 20 are followed up -- 21 A Okay. 22 Q -- by MSD. 23 A Okay. 24 Q Okay. So Question 12. With respect to 25 whether the rate proposal is consistent with and not TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 82 1 in violation of any covenant or provision relating to 2 any outstanding bonds or indebtedness of the district. 3 Again, Mr. Beckley suggests that this 4 determination requires an analysis of such covenants 5 or provision. Has MSD conducted that analysis? 6 A And that would be a question for Marion Gee. 7 Q Okay. Question 13. With respect to the 8 criterion of whether the rate proposal impairs the 9 ability of the district to comply with applicable 10 federal or state laws or regulations. 11 Again, Mr. Beckley suggests that this is an 12 evaluation that should be made? 13 A And that analysis was, and that is 14 summarized in MSD 30Q, Exhibit MSD 30Q. 15 Q I think the rest of my questions are going 16 to be better answered by other people; so I'm good. 17 A Okay. Thank you. 18 Q Thank you. 19 CHAIRMAN TOENJES: Thank you, Mr. Neuschafer. 20 Ms. Stump, do you have questions for 21 Ms. Myers? 22 MS. STUMP: I do. Thank you. 23 QUESTIONS BY MS. STUMP: 24 Q Hello again. 25 A Hello. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 83 1 Q Mr. Neuschafer eliminated some of mine, but 2 I do have a few more. 3 Your testimony, Question 6 on page 1, I 4 think it is. 5 A Correct. 6 Q In answering the question of whether the 7 proposed stormwater change rate -- or stormwater 8 capital rate is consistent with the constitutional 9 statutory or common law as amended from time to time, 10 you state that the rate is consistent with a 11 district's charter. And I'd just like you -- for the 12 record, is it your opinion that the stormwater capital 13 rate is consistent with all constitutional statutory 14 and common law applicable to the district? 15 A Yes. 16 Q The stormwater tax that we considered back 17 in 2015 was not levied on the governmental or tax 18 exempt properties; yet, this new stormwater capital 19 rate is. Can you explain that? 20 A This is a rate. It is not a tax and, 21 therefore, the charter gives us the ability to charge 22 that rate to all property served, either public or 23 private. That's Section 3.02016 of the charter. 24 Q So let's -- let's talk about that a little 25 bit more, calling this a rate under the charter and TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 84 1 not a tax. Is the term "rate" defined in the charter? 2 A No, I do not believe so. 3 Q Do you consider the rate to be something 4 that's more akin to a user fee charge or separate from 5 that? 6 A The -- the rate -- 7 Q Let me re -- 8 A Okay. 9 Q Do you consider that the rate is something 10 that's based on the use of MSD facilities or MSD 11 services? 12 A No, not for this particular charge. 13 Q Can you explain why? 14 A This rate, the way -- and this is probably 15 better answered by Marion Gee. 16 Q Okay. 17 A I better let him answer that. 18 Q What makes this different from the tax -- 19 from a tax? 20 A Because this rate is not associated with the 21 value of the property and taxes are based upon value 22 of property. 23 Q Okay. And I know it seems like I'm going in 24 a circle, but you know where I'm going. 25 So part of it not being a tax is that it TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 85 1 corresponds to use; correct? 2 A No. The -- I believe the rate -- the reason 3 that we are looking at this as a rate is the way that 4 we are measuring it. 5 Q Okay. And how are we measuring it? 6 A By the -- the amount of impermeable property 7 or on the property. 8 Q And the ERUs? 9 A Correct. 10 Q So can you -- and maybe -- I think Brian 11 kind of explained this, but can you add anything to 12 Brian's testimony about how the ERUs correspond to the 13 use or do you want me to ask -- 14 A That would be Marion. 15 Q Okay. Still along these lines of the rate. 16 Back in the discovery, the first discovery responses, 17 questions on MSD 30B, Question 47: "The district 18 states that the stormwater capital rate can be charged 19 to all customers whether public or private in the 20 district pursuant to the expressed terms of the 21 charter." 22 Are there any court opinions that you can 23 share with us supporting this conclusion? 24 A None other than I -- that's already been 25 provided in 30Q, which gives the authority of the TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 86 1 charter. 2 Q And has the district received a legal 3 opinion that supports the ability to charge this 4 stormwater capital rate on all customers? 5 A Yes, we have. 6 Q Would you be willing to share that with us? 7 A That legal opinion is confidential and 8 privileged, but I am willing to provide a summary that 9 would be similar to Exhibit MSD 30Q on that topic. 10 Q That would be great. Thank you. 11 A Okay. 12 Q Well, I'm going to ask you this question 13 anyway and you can defer me. And I asked 14 Mr. Hoelscher some of this, but I'd like to follow up 15 with you a little bit from a legal standpoint on this. 16 So you're familiar with, I assume, the Missouri growth 17 opinion discussing the rate under Section 3.02016 of 18 the charter -- 19 A Correct. 20 Q -- where the Court found that there's a 21 direct relationship to the services that were 22 received. And I guess I would -- I would appreciate 23 any explanation we could get as to how we get this 24 same type of direct relationship with the stormwater 25 capital rate. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 87 1 A Well, this stormwater capital rate is a 2 completely different type of rate than what was 3 evaluated under the Missouri growth case. 4 Q Right. 5 A And so this rate is just addressing flooding 6 and erosion and is not an O&M rate of any sort with 7 the stormwater facilities that exist. So I think that 8 is the biggest difference and the . . . 9 Q Is the -- is it, however, the stormwater 10 capital rate, is it related -- is there a relationship 11 with the services that MSD is providing? 12 A What do you mean by "services"? 13 Q Or the services that -- is there a 14 relationship between the services that are received by 15 the property owner and the charge that they are -- the 16 rate that they are getting imposed? 17 A Like I said before, and I -- the rate is to 18 address erosion and flooding. The customer -- our 19 customers are not paying that type of rate at this 20 time. What they are currently paying for stormwater 21 is a regulatory tax and an O&M tax. So this rate is 22 not associated with those two other stormwater 23 charges. Does that answer -- 24 Q No, but I think I need to ask 25 Mr. Unverferth. I think it's gone beyond the legal TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 88 1 into the practical. 2 Okay. You had a question referred to you 3 from Mr. -- from Brian that -- where we talked about 4 the charter and that we can only apply -- only levy 5 ten cents for operation. And my question was can you 6 explain how this provision does or does not apply to 7 the current proposal? 8 A That provision does not apply to the current 9 proposal because the current proposal is a rate and is 10 not a tax. 11 Q And it's a rate, not a tax, for the reason 12 that you just explained? 13 A Correct. 14 Q Okay. One final avenue here. On your 15 testimony in Question 8 on page 4, your testimony is 16 that Section 204.700 of the Missouri Statutes is void 17 and it's illegal for numerous reasons. And I guess if 18 this is the case, why has the district never 19 considered an O&M rate rather than a tax since 20 nonprofits use the services and use the system? 21 A Ask that -- state that again. 22 Q If Section 204.700 is void, is illegal for 23 numerous reasons, how come -- or has -- how come the 24 district has never considered an O&M? And now we're 25 taking about rates instead of taxes or other charges. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 89 1 Why has the district never considered an O&M rate 2 rather than a tax? 3 A I don't believe that the Statute 204.700 -- 4 it applies to both rate and taxes. 5 Q Okay. 6 A That -- that's not what makes it that 7 statute, in our opinion. 8 Q And has -- has the district -- if it's your 9 opinion it's illegal, has the district ever considered 10 seeking a declaratory judgment action or taken any 11 other challenges to the validity of the statute? 12 A We have not. When that statute was enacted, 13 we were in the middle of the Zweig versus MSD 14 litigation, and the outcome of the trial court in 15 Zweig was that that impervious rate was 16 unconstitutional. So we stopped charging that rate at 17 that time and so we never pursued the Statute 204.700. 18 Q Do you have an outside legal opinion stating 19 that Section 204.700 is void and illegal? 20 A Yes. 21 Q Would you be willing to -- 22 A It is also confidential, but the summary of 23 it is provided in my response to Question 8. 24 Q Okay. Thank you very much. I'll just 25 check. I think that's all the questions I have for TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 90 1 you. 2 A Okay. 3 CHAIRMAN TOENJES: Thank you, Ms. Stump. 4 Do any of the rate commissioners have 5 questions for Ms. Stump -- for Ms. Myers. I'm sorry. 6 Mr. Palans? 7 COMMISSIONER PALANS: Yes. Thank you. 8 TELEPHONIC QUESTIONS BY MR. PALANS: 9 Q Ms. Myers, I'm not asking you for a copy of 10 the opinion; instead, I'd like to ask you who issued 11 the opinion that you testified about? 12 A One of our outside law firms, Shands & 13 Gilbert. 14 Q And is that the sole opinion of counsel -- 15 outside counsel that you're relying upon? 16 A Yes. 17 Q Had you received any opinion of counsel that 18 contradicts the opinion of Shands & Gilbert? 19 A No. 20 COMMISSIONER PALANS: Thank you. I have no 21 further questions. 22 CHAIRMAN TOENJES: Thank you, Mr. Palans. 23 Any further questions for Ms. Myers? 24 Mr. Goss? 25 QUESTIONS BY COMMISSIONER GOSS: TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 91 1 Q I have one question. In Question 7, you had 2 stated that as for charging Federal Government 3 entities, there's no issue because the Federal 4 Government specifically made itself subject to payment 5 of reasonable service charges for stormwater services 6 by enacting 33USC Section 1323. What are the 7 stormwater services you're referring to in that 8 answer? 9 A I do not know all of the services, but I 10 believe it's for at least O&M and I don't know if 11 that's their completeness of their services or not. 12 Q So the stormwater services that would be 13 provided in connection with this rate, would that 14 statement also apply to those? 15 A That would be accurate. 16 Q And Mr. Palans asked you a question about 17 the opinion that was rendered by Shands & Gilbert, and 18 when he asked the question of opinion, I think there 19 were two legal opinions that you referred to earlier 20 in your testimony. One that related to Section 204 21 and then another one that related to whether this is a 22 tax or a rate. So just to clarify, did Shands & 23 Gilbert give an opinion of both of those issues? 24 A No. What I referred to was we have a legal 25 opinion on the -- the summary was provided in MSD 30Q. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 92 1 That's in response to Question 17 about whether we're 2 complying with all the constitution and all statutory 3 laws. The other legal opinion I have is on whether 4 this rate can be charged to the nonprofit 5 organizations or not, and that is the opinion that I 6 am willing to provide a summary. 7 Q And that latter opinion was provided by 8 Shands & Gilbert? 9 A Correct. 10 Q And the former opinion was provided by who? 11 A The same, Shands. 12 COMMISSIONER GOSS: Okay. That's it. 13 CHAIRMAN TOENJES: Any further questions from 14 any of the rate commissioners for Ms. Myers? 15 Seeing none, Ms. Myers, any further -- 16 MS. MYERS: Nope. Thank you. 17 CHAIRMAN TOENJES: Thank you very much. 18 Ms. Myers, are you ready to have our next witness, 19 Mr. Unverferth? 20 MS. MYERS: Yes. 21 CHAIRMAN TOENJES: We will start his 22 testimony prior to lunch, but something tells me we'll 23 be taking a break. 24 Get very comfortable, Mr. Unverferth. 25 (The witness was duly sworn.) TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 93 1 CHAIRMAN TOENJES: Thank you very much. 2 Mr. Neuschafer, do you have questions for 3 Mr. Unverferth? 4 MR. NEUSCHAFER: I do. 5 CHAIRMAN TOENJES: Please come forward. 6 QUESTIONS BY MR. NEUSCHAFER: 7 Q Good morning. 8 A Good morning. 9 Q I wanted to start by referring back to some 10 of the testimony from Mr. Hoelscher this morning about 11 the projects and the benefit cost analysis that was 12 conducted. Could you provide some detail on the 13 factors that go into that benefit cost analysis, how 14 that's conducted? 15 A One, we look at the actual problem and then 16 we look at the benefit of the solution, and that is 17 divided by the overall cost of -- the benefit cost 18 issue. And I'm being pretty general, but when we look 19 at the problem, we look at the severity of the 20 problem. We look at how often does it occur as far as 21 recurrences and does it happen every time it rains. 22 And then you get more points for more often a flooding 23 event occurs and the impact. If it's flooding a home 24 or a structure or a roadway, it would get more problem 25 points than, say, if someone's yard was -- TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 94 1 (Reporter clarification.) 2 A -- so with regard to flooding. With regard 3 to erosion, very similar, how close is the erosion to 4 some facility, whether it be a home or a roadway. And 5 that distance, the closer it is, or even if it's 6 actually taking out some facility, it would get a 7 higher point value for that. And then on the same 8 time we add to that, certain benefit points for the 9 solution. So if we develop a solution and say that 10 solution that we provide for that project enhances, in 11 other words, benefits more properties, it would get 12 more points. In other words, it was part of a 13 regional solution. 14 One of the things we took into consideration 15 is if the solution provided some environmental benefit. 16 So if there's green incorporated, it could be deemed to 17 provide some environmental benefit with regard to runoff 18 contaminants, things like that. 19 And I'm trying to remember the entire 20 prioritization sheet that the -- the actual specifics 21 are on this sheet and how we took that into 22 consideration. 23 And then what we -- and I think the question 24 was asked earlier about cost. And we kind of referred 25 to as generalized costs, but almost every issue that TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 95 1 we've identified, whether it be an issue or project, 2 it's been visited. In other words, there was a site 3 visit made because in order to determine what the 4 problem is, you have to make an assessment, whether -- 5 how close it is, you'll have to interview property 6 owners, "how often do you get flooded," if you don't 7 have any data to support that. So there is an analysis 8 or an assessment done enough to understand what the 9 problem points are. 10 And then -- and then you develop conceptually 11 what that solution might be, whether it can be fixed, 12 like Brian equated to with an inlet and 100 feet of 13 pipe, or if it takes a large erosion, and you're 14 making -- this is probably where the conceptual part 15 comes. You're -- you're trying to determine without 16 doing much engineering what the solution might look 17 like. And then we take that and we use concept cost 18 curves. And then you take where that cost might be for 19 whatever that solution is and that would give you what 20 the cost for both construction design would be. And so, 21 therefore, you use a conceptual cost curve analysis. I 22 don't believe we've provided those conceptual cost 23 curves, but we can do that, if necessary. 24 And then -- so those benefit and problem 25 points then are divided by the cost per $1,000 to TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 96 1 develop our benefit. 2 Q (By Mr. Neuschafer) Okay. Is this a 3 standard methodology used in the industry or is this 4 something MSD created? 5 A MSD created it back in 2006, but it is a 6 standard methodology for assessing a problem by 7 taking -- in fact, we've utilized it for wastewater 8 benefits as well, you know, looking at the problems 9 and base it on the solution for that type. But -- 10 Q So let me understand you then. Conducting a 11 cost benefit analysis is standard? 12 A Correct. 13 Q But how your particular cost benefit 14 analyses are conducted is a system you derived? 15 A Yeah, we derived it ourselves based on years 16 of looking at our stormwater problems. We've been 17 looking at them for 30 years. 18 Q Okay. Thank you. 19 For the projects -- for the projects that 20 have been identified and I -- the actual number is 21 around 450 projects that are known at this time, 22 what's the typical service life of a project? And I 23 know there may be a range. So a range would be 24 acceptable, but if you go out and complete a project, 25 would you expect that this is going to resolve the TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 97 1 issue for 20 years, 30 years, 40 years? 2 A If it involves a physical infrastructure 3 like pipes, inlets, some type of stormwater structure, 4 typically you're looking at 50 to 100-year life on 5 that. When you're talking about the 6 bio-stabilization, in reality, if you do a 7 bio-stabilization to adjust and allow that creek to go 8 back to what nature intended it to, you hope that you 9 never have to go back, but obviously things can occur 10 over periods of time. 11 Q If all things go well, a very long life on 12 these projects? 13 A Correct. 14 Q Okay. Have you -- I know in the -- in the 15 proposal, Section 6 contains a long list of 16 anticipated projects over the next, I believe it's 17 five years. And I understand correctly, these are the 18 universe of known projects at this point in time? 19 A This is actually the -- what we would tackle 20 in the first five years. In other words, we're 21 basically taking our universe of 480-some projects and 22 then taking what we anticipate would be the -- that 23 we -- that come to the top of the cost benefit at this 24 time. 25 Q Is there any estimate of the number of these TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 98 1 projects that have purely residential impacts versus 2 purely commercial impacts? And I'm talking about the 3 properties impacted by completing this. 4 A Yeah, I did -- I did not -- we did not do 5 that analysis. 6 Q In your experience, is it accurate to state 7 that large commercial properties are more likely to 8 address runoff issues in their, you know, engineering 9 and design and construction of the property? 10 A It's kind of -- as far as -- could you just 11 repeat the question? I think I understand it. 12 Q Yeah. In your experience, is it accurate to 13 state that a larger commercial property, for example, 14 a corporate campus is more likely to have addressed 15 stormwater runoff issues in the engineering and design 16 and build of the property such that they aren't 17 contributing as much to, you know, issues caused by 18 stormwater runoff. 19 A Yeah. There -- there has been regulations 20 put into place, obviously to mitigate the impacts from 21 new development dating back to the '80s all the way up 22 to in the early 2000s where it actually included more 23 regulation for environmental for stormwater runoff. 24 But it evolves -- through a period of time, we found a 25 lot of the regulations that were put into place in the TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 99 1 early '80s really didn't do a whole lot so the 2 regulations have become more stringent over time to 3 try to -- yes, to try to address that. 4 MR. NEUSCHAFER: Okay. That's all I have at 5 this time. Thank you. 6 CHAIRMAN TOENJES: Thank you, Mr. Neuschafer. 7 Ms. Stump, do you have questions for 8 Mr. Unverferth? 9 MS. STUMP: Yes, I do. 10 QUESTIONS BY MS. STUMP: 11 Q Good morning. 12 A Good morning. 13 Q Let's talk first for a few minutes about the 14 credit or incentive programs, which I think is 15 Question 15 of your testimony on page 4 and then also 16 Section 4.4 of the rate proposal. 17 A Question 15, correct. Okay. 18 Q Can you explain a little bit how the 19 district will determine eligibility for the 20 residential credit? 21 A All the credits would have to be -- in other 22 words, we would make those known they have to be 23 applied for. 24 Q Is the residential credit going to be 25 limited to things such as rain gardens and cisterns or TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 100 1 is it going to go beyond that? 2 A It would be -- I think we put some criteria 3 in here of what they would have to capture and provide 4 as far as -- if you're looking at the residential 5 incentive program, I think we have some specific 6 requirements as -- of the amount of capture that would 7 be required in order to receive a credit. 8 Q And then how will the district determine 9 whether rain gardens or similar things are maintained 10 such as to provide an ongoing benefit to the district? 11 A Typically when someone constructs a rain 12 garden of that type, there's a maintenance agreement 13 that the homeowner signs to ensure that it be 14 maintained over a period of time. 15 Q And that would be part of determining the 16 eligibility for the credit? 17 A Correct. 18 And I'll go back. I did say that they would 19 have to be applied for. The credit applied to homes 20 tributary to the river, we would do that. We have that 21 available from previous impervious rates. But the other 22 credits -- the other credits and incentives would have 23 to be applied for. 24 Q And like the restrictions on the rain 25 gardens for cisterns, are there going to be rules in TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 101 1 place to ensure that they have capacity to manage 2 their designated runoff? 3 A Yes. We have -- we actually have our 4 development review program in place that reviews and 5 analyzes BMP practices such as this on new development 6 as we exist today. 7 Q And then for commercial incentives, will the 8 district inspect facilities to ensure they remain in 9 good operating condition? Is there an agreement for 10 those also? 11 A Yes. We -- any facility that is built, 12 specifically for an incentive program just like it is 13 when it's built regulatorily, again, it has the 14 maintenance agreement and we have those on a three to 15 five-year schedule, based on the type of facility. 16 Q Three to five-year schedule for inspections? 17 A Yes. 18 Q Thank you. 19 And then how were the credit -- the percent 20 credits for the low-impact development and direct 21 drainage credits determined? 22 A The direct drainage credits -- and I'm 23 assuming you're talking about the ones to the river? 24 Q Correct. 25 A Approximately 30 percent of the district's TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 102 1 impervious area as a whole is not billable. And 2 basically we're talking about streets, sidewalks, 3 runways, anything that is a billable -- highways -- is 4 about 30 percent of the total of impervious area at 5 the district. So we felt like even if they were not 6 contributing to any runoff to the -- to the district, 7 such as a property located right in a river 8 floodplain, they still use the streets, they still do 9 everything. So that we determined that a -- that a 70 10 cent credit was appropriate. 11 For the -- for the runoff for the low-income 12 impact development, they are producing a runoff. But 13 with the larger parcel of property, that runoff is not 14 as impactful. In other words, a lot of it is being 15 captured on. So basically we took half of that 16 70 percent as a -- as a credit, which is how we 17 arrived -- And there's a lot more detail having to do 18 with more technical in the rate proposal. 19 Q Thank you. 20 Back to your testimony, can we look at 21 Question 16? 22 A Okay. 23 Q And I'm curious. On the sentence that 24 you -- there's a sentence, it's on page 5, that you 25 state, "It is anticipated that the use of a tiered TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 103 1 system will greatly minimize the number of issues that 2 will result in a billing change." Can you explain why 3 you anticipate that? 4 A Well, on the tiered system, it is giving you 5 a range on a specific piece of property, and over 6 50 percent of ours fall within the range to where when 7 we did the old -- when we did it back in 2008, we 8 measured down to the nearest 100 square feet. So if 9 you have a range of, say -- I don't have the ranges 10 sitting in front of me -- 1,200, you had somebody 11 specifically that could argue 12 different points, 12 depending on where they are. Now they're only going 13 to want an assessment done if they feel like they're 14 at the high end of the range or the low end of the 15 range. I hope I explained that. 16 Q I got it. Okay. Let's talk about levy 17 districts for a minute, which is Question 17. How 18 many levy districts are there within the district's 19 boundaries? 20 A I'm going to -- I can't recall. We did not 21 mention it. I think there are -- there are -- 22 Q That's okay. 23 A Is it in the proposal? I think it's six. I 24 don't want to say for certain. There's actually -- 25 Q Are they listed somewhere, I assume? TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 104 1 A That's what we're looking for. I do not 2 know if we listed them or not. 3 I believe we have the actual agreements. One, 4 two, three, four, five. So I believe there's six -- six 5 levy districts. We have agreements with five of them. 6 Q Does the district perform any operational or 7 maintenance within the levy districts for stormwater? 8 A We do not. 9 Q Does the district perform any regulatory 10 services within the levy districts? 11 A Yes, we do. We do regulatory. We still 12 perform development plan review for new development 13 within those areas and -- and have regulatory 14 requirements that we -- in the remaining portions of 15 the district. 16 Q And how are the -- how is the regulatory 17 services paid for? 18 A Through the two-cent regulatory tax. 19 Q And then will the district have any 20 obligation for capital improvements in the levy 21 districts? 22 A The levy districts have the authority to 23 perform capital improvements, and they do those now. 24 The district will not -- does not plan to do any 25 capital improvements within those areas. They have TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 105 1 that authority and they have the ability to pay for 2 those through the -- the people or the people taxed 3 within the levy districts. 4 Q So the district has no obligation? That's 5 the answer? 6 A Correct. That is correct. 7 Q And then you talk about the Missouri Bottom, 8 Hazelwood levy district in your testimony. Why is 9 that different in assessed system water? 10 A It is, I think, probably completely 11 undeveloped. In other words, there's -- there's 12 minimal development within that area. 13 Q Do you have an agreement with them like you 14 do -- 15 A We do not. 16 Q Okay. So it's also that -- I mean, it's 17 also that you have an agreement with all the other 18 levy districts but not with them? 19 A Correct. 20 Q Question 28 on page 6. Just to confirm, is 21 it your testimony that there are no grants to help 22 with the funding for erosion flooding projects? 23 A What -- 24 Q Question 28, page 6. Nope, that's not 25 right, is it? Twenty-eight -- twenty -- hold on. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 106 1 A If I remember the question -- 2 Q Twenty. 3 A Oh, 20. Could you repeat the question? 4 Q Yes, sir. Twenty. Is it your testimony 5 that there are no grants to help with the funding 6 of -- for the erosion flooding projects? 7 A Yes, we are not aware of any. We do monitor 8 their -- our -- in years past, there were funding, 9 grant funding available through Missouri State, but 10 those have not been issued any time in the year -- in 11 the recent future -- recent past. 12 Q Do you continue to monitor if there are any 13 grants available that you can use? 14 A We do. 15 Q Okay. I'm just checking my question number. 16 A All right. 17 Q Question 24 on page 7. You state that the 18 stormwater capital improvements have been delayed due 19 to lack of funding. Can you expand on that a little 20 bit? 21 A I think Brian kind of mentioned it early. 22 The district -- and I've been here 31 years. We've 23 been looking at stormwater issues throughout the 24 district for the -- the entire time that I've been 25 here, there were extensive studies. In fact, there TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 107 1 was a whole division of MSD just for stormwater back 2 in the '80s that took a look at our issues. And a lot 3 of those issues that are on that $562 million list -- 4 I've been around for 20 or 30 years; so we're looking 5 at a 20 to 30-year problem that we have not had the 6 funding to address. 7 And the funding that we have had within the 8 individual OMCI taxing districts has been able to 9 address some of those issues. But as you saw from the 10 issues map, there are issues that still exist in those 11 areas. Not to mention the areas that we have not -- had 12 not done anything in outside of 270. 13 Q Thank you. 14 Let's go to the district's response to the 15 first discovery request, which is Exhibit 30B. And 16 I'm going to ask these questions of you. If it's 17 someone else, let me know. 18 A Okay. I got both of them here. Okay. 19 Q Question 31, about the general service 20 agreement. 21 A Okay. 22 Q Are survey services, geotechnical services, 23 property appraisal and specialty engineering services 24 included in the CIRP project cost? 25 A Yes, they're in the list that we provide -- TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 108 1 one of the two lists that provide the actual funding 2 for the program in the rate proposal. 3 Q Then why are supplemental funds needed 4 through the general service agreement? 5 A You'll have to repeat -- the general service 6 agreement are agreements to provide those services. 7 Maybe I missed the question. 8 Q Where -- and maybe I should just try to -- 9 where -- then where in the program are the funds 10 deployed? 11 A During the delivery of the program. In 12 other words -- 13 Q Right. 14 A -- we -- we reach general service agreements 15 with surveyors, consulting engineers, geotechnical 16 engineers, provide those services to help us design -- 17 plan, design, and construct those services -- or the 18 projects or issues on the list. 19 Q Okay. 20 A Maybe -- maybe to simplify that, we enter a 21 general services agreement to provide these services 22 as staff extension. In other words, I have internal 23 staff that does planning, designing, construction, but 24 we also hire outside resources to help with that 25 effort. Does that -- TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 109 1 Q That helps. And then Question 32 related to 2 easement acquisitions. 3 A Okay. 4 Q The district responds -- responds to this 5 that it's an addition to the CIRP project cost? 6 A Yes. That is -- that is an additional cost. 7 Q And I think this is just clarifying, too, 8 for me, but that in Question 35, the district talks 9 about conceptual and preliminary design costs do not 10 take into consideration easement acquisition cost. So 11 I'm just trying to figure out -- 12 A No. What we do is once -- once we program a 13 project, we take a look at -- we estimate how many 14 easements we -- we may need for all the projects 15 identified throughout a current fiscal year and then 16 we identi -- and then we put a dollar amount on that 17 and put that within that -- that particular year. In 18 other words, the conceptual cost at that time do not 19 include easement acquisition cost. 20 Q Okay. Sorry, but I'm going backwards. 21 Question 8. The district states that the flyover 22 flight lines for most of the district were completed 23 during the week of March 12, 2018. And while we 24 understand that the processing of the data has not 25 been completed, but based on your understanding of the TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 110 1 quality of the current data used to develop the 2 current proposed stormwater capital rate and the 3 technology available, do you have an expectation 4 regarding whether there will be any possible change in 5 the projected ERUs based on the new data? 6 A I think we discussed this within the rate 7 proposal on our analysis of how we arrived at what we 8 feel the current impervious area is right now, are the 9 projections that we used. 10 I guess -- I guess, could you repeat the 11 question? I'm not sure I know exactly what you're 12 asking. 13 Q What I'm asking is whether you anticipate 14 there to be any sort of possible change in the 15 projected ERUs? 16 A Based on the change over the period of time 17 since 2012, I would not expect that there would be a 18 change in the ERU. 19 Q Thank you. All right. Let me just go 20 through my other ones to see what was referred back to 21 you. 22 A Okay. 23 Q Okay. I talked a little bit with 24 Mr. Hoelscher about the difference between operation 25 and maintenance and capital improvements, and I think TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 111 1 he thought that you could expand on that a little bit. 2 We did talk about the exhibit and how that was -- 3 Exhibit 23 on the maintenance policy, and that was 4 kind of the line. But we were talking about the line 5 between capital improvement and maintenance. Is there 6 anything else you want to add on that beyond what he 7 said? 8 A No. I think he actually explained it pretty 9 well. The operation and maintenance of the facilities 10 are pretty much what I refer to as the physical 11 infrastructure that exists out there. The pipes, the 12 inlets, concrete line channels that exist out there, 13 that is the physical -- those are the things that 14 we're out there on a day-to-day basis operating and 15 maintaining that are funded by the operation of 16 maintenance. 17 What this new rate will fund is, where in most 18 cases there doesn't exist some type of physical fix for 19 the flooding of the system, there doesn't exist any kind 20 of piping system to address the flooding, or there's a 21 natural channel that has begun to erode. And, 22 obviously, a natural channel is a different animal 23 because the solution used to be concrete-lined channels, 24 but it wasn't a very environmentally effective solution 25 at that time. So, obviously, regulations have changed TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 112 1 which do not allow those anymore so now you go to a more 2 natural solution. 3 But, again, if those are put into place, in 4 effect they're putting the creek back to its natural 5 state and does not necessarily require any kind of 6 structural solution that MSD would need to maintain. 7 Q Thank you. 8 Then I think I just have one final question 9 kind of based on the conversation that Mr. Hoelscher 10 and Mr. Palans had about the consent decree. 11 Mr. Hoelscher referred to the green infrastructure 12 that's being built through the consent decree. And I 13 just want to ask would that be maintained by 14 wastewater or the stormwater Prop S? 15 A The majority of the green infrastructure 16 that is constructed with the wastewater funds is 17 actually administered through a grant program from the 18 wastewater fund to private development. 19 The district doesn't own a lot of property. 20 In other words, we don't have an opportunity to 21 construct green infrastructure in the combined sewer 22 area, which as Brian put it, is there to capture 23 stormwater, detain it from entering the combined sewer 24 system, which allows the district to treat more flow at 25 its treatment plants, which is the ultimate location of TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 113 1 this flow prior to it overflowing to the river. 2 So when we grant these funds for the green 3 infrastructure to the individual property owners, they 4 then sign the maintenance agreement. In other words, we 5 are supplying the capital costs for that infrastructure 6 and then they're assuming the maintenance in perpetuity. 7 The district has constructed some green 8 infrastructure as part of the program. It was where we 9 had -- had bought out properties to reduce impervious 10 area, vacant properties, that we've -- we've developed 11 drainage areas and built green infrastructure basins. 12 Those we do maintain with our wastewater funding. 13 Q Wastewater. 14 MS. STUMP: I think that's -- I think we're 15 good. 16 CHAIRMAN TOENJES: Thank you, Ms. Stump. 17 MS. STUMP: Thank you. 18 CHAIRMAN TOENJES: We will start with a few 19 questions from the rate commission prior to breaking 20 for lunch. 21 Mr. Stein. 22 QUESTIONS BY COMMISSIONER STEIN: 23 Q Mr. Unverferth, my understanding is that the 24 district has an agreement with the City of St. Louis 25 regarding demolition of old and decrepit properties. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 114 1 Is the district using funds from the wastewater 2 program or from user fees or from this potential 3 stormwater capital fund to -- to fund that effort? 4 A That is -- that is -- funds being used for 5 the demolition project with the City of St. Louis are 6 wastewater funds. It's part of the $100 billion 7 commitment to review COSs on the Mississippi River by 8 the -- and by the removal of impervious area. In 9 other words, to allow to soak into the ground and not 10 get to the combined sewer system; thus, reduce 11 overflows to the Mississippi River. But, yes, those 12 are the funds from the wastewater program. 13 COMMISSIONER STEIN: Thank you. 14 CHAIRMAN TOENJES: Mr. Schoedel. 15 QUESTIONS BY COMMISSIONER SCHOEDEL: 16 Q You mentioned the point system you use for 17 prioritizing projects that you established back in 18 2006, and that other communities use something 19 different or similar to that and you found that very 20 successful. That's been primarily an internal 21 document? 22 A Yes. 23 Q When you start sharing that with the 24 homeowners, it's a very subjective system. What 25 happens when there's a disagreement and how do you TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 115 1 resolve that? 2 A Again, we're basing it on, again, how often 3 do you flood. In some cases, if people have never 4 called or we don't have any record, it can be -- it 5 can be subjective. They say, "Well, I flood every 6 time." And then we have records that show that we've 7 never received a call or -- and we sometimes will 8 check with a municipality, "Are you aware of flooding 9 in this area?" So there is somewhat subjectivity to 10 it. 11 Keep in mind, we have -- we're -- it's going 12 to take 30 years to get all the problems that I've 13 talked about. It's already been 30 years. So, yeah, 14 it's a very difficult situation. Explain to a homeowner 15 where you're at on this list, particularly if they -- if 16 they flood. In a lot of instances, you'll find that, 17 you know, there -- maybe they don't flood as often as 18 they realize that they do. 19 Q So they now will be charged based on 20 impervious area. What will be your method of how 21 often will you be updating that, as that will impact 22 their fee? 23 A The impervious area? 24 Q Yes. 25 A I don't recall if we've -- when we had the TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 116 1 previous impervious rate, we were updating that, we 2 were doing a new flyover every other year with the -- 3 with the implementation of a tiered rate. I don't 4 know that we've had that policy discussion on how 5 often we plan to do that because there is a cost 6 involved in that. So I would think at a minimum, it's 7 going to be every other year. I don't know that we've 8 made that decision as of yet. 9 Q You mentioned as part of the credit 10 programs, homeowners will be able to do a BMP, 11 rain gardens. They'll be responsible for maintaining 12 those, but you'll be inspecting them. So you'd have 13 the staff to take on that? 14 A Yes. Part of our regulatory staff, I mean, 15 I don't think we're -- based on the number of BMPs and 16 the facilities that are being put in based -- for new 17 development, this will be relatively minor to that. 18 So we don't anticipate a large increase in that. 19 COMMISSIONER SCHOEDEL: Thank you. 20 CHAIRMAN TOENJES: Further questions for 21 Mr. Unverferth? 22 Mr. Brockmann. 23 QUESTIONS BY COMMISSIONER BROCKMANN: 24 Q Rich, the credits, will they be available 25 for both commercial and not-for-profit? TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 117 1 A Yes. The commercial for anybody paying an 2 MSD stormwater bill, the credit would be available. 3 Q You talked about the follow-up of reviewing 4 these rain gardens or other things. A recent trade 5 journal or a stormwater trade journal had an 6 interesting article in it, and it had a 7 before-and-after picture from 17 years ago of the 8 stormwater biosoil in the parking lot. And I have to 9 tell you those two pictures told me a lot because it 10 showed 17 years ago when they built the project, it 11 looked beautiful. It's obvious it was going to be a 12 effective way to harvest stormwater off of a parking 13 lot into a biosoil, and 17 years later, the trees have 14 grown a lot bigger, all the rest of the foliage is 15 gone. It's piled full of mulch. It's no longer 16 effective. So all I'm offering is that follow-up is 17 going to be important for these to be continually 18 effective. 19 Talking about your flyovers on 8C and MSD 20 30B, you talk about you're going to do additional 21 flyovers on sunny days. I guess I'm wondering why 22 wouldn't we do all the flyovers on sunny days? Do you 23 get more accurate information? 24 A I would -- I would have to get you an answer 25 to that. I'm not -- I -- there wasn't an answer. I'd TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 118 1 have to talk with my GIS folks who take care of that, 2 but . . . 3 CHAIRMAN TOENJES: Based on this last month's 4 weather, that would be like 12 flyovers a year. 5 A Why -- I assume that's why we would -- if -- 6 if -- if it wasn't providing us accurate information, 7 that's why we would require new flyovers to ensure us. 8 Also, they handed to me, and it's in the rate 9 proposal -- I probably should have known this -- we 10 anticipate to fly over every other year and adjust our 11 data. 12 Q (By Commissioner Brockmann) Also, it says 13 that delineated impervious areas will be delivered in 14 blocks. First of all, who's delivering those, who's 15 delineated the impervious areas? You, apparently, 16 last time did this in-house? 17 A We did some of it in-house and we did -- we 18 also did it under contractual services. I would have 19 to get you the names of who's doing our flyovers. 20 Q Okay. 21 A I don't know that right off top of my head. 22 Q And will any homeowner or property owner 23 have access to this specific document related to their 24 property? 25 A Actually, what we've done is we've -- and TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 119 1 it's -- where it's a little bit of beta testing now, 2 and we're hoping to have it available by the time the 3 rate commission goes to its public hearing, but we've 4 developed an app hopefully that a homeowner or a 5 commercial property would be able to go to our 6 website, type in their address, and determine what 7 their impervious -- or what their ERU count would be. 8 We're doing some testing on it now. It 9 works -- it works. I've tried it for calling up my own 10 property to find out how many ERUs. We're doing the 11 beta testing right now for the commercial properties. 12 So a commercial property would be able to enter their 13 address and be able to see prior to the election, and 14 then obviously would be in place afterwards as well. 15 Q And all of this activity is being funded 16 through what source? 17 A Currently, it's being funded through our 18 general operating -- the departments right now. 19 COMMISSIONER BROCKMANN: Okay. That's all I 20 have. 21 CHAIRMAN TOENJES: Thank you, Mr. Brockmann. 22 Yes. Mr. Bresnan. 23 QUESTIONS BY COMMISSIONER BRESNAN: 24 Q On the ERUs, let's take the City of 25 St. Louis. When they develop or they knock down TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 120 1 buildings, how often will you -- every rate increase 2 change that? Because where you might have had, you 3 know, a sprawl of 10 buildings might go to a level 4 lot. How often will you adjust that? 5 A That will be part of the every two-year 6 flyover. In other words, it does a comparison of the 7 previous flyover to determine and then go look at that 8 property owner. So it'd be on an every-other-year 9 basis. 10 COMMISIONER BRESN: Thank you. 11 CHAIRMAN TOENJES: Mr. Mahanta. 12 QUESTIONS BY COMMISSIONER MAHANTA: 13 Q Rich, for a credit program, will the 14 individual homeowners or property owners be required 15 to apply for credit as of -- also? 16 A Yes, they will. They will need to notify us 17 that they have an intent. If it's an incentive, that 18 they have an intent to build a rain garden, a 19 non-required rain garden. Understand, there are -- in 20 some cases, somebody may be regulatory required to put 21 in a rain garden, they wouldn't necessarily see a 22 credit for that. But if someone says, "I want to put 23 in a cistern or a rain garden," to capture that 24 minimum of one ERU, then we would come out and take a 25 look at that. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 121 1 Q My question more specifically was for areas, 2 general areas that are going to get -- get, say, the 3 70 percent discount. In those areas, individual 4 property owners, would they have to apply for it also? 5 A No. I -- I just got my note to remind me 6 that I corrected myself a while ago. If -- if they 7 directly drain to a river or they've already, based on 8 our last impervious rate, been determined that they 9 were not contributing, they would not have to apply. 10 COMMISSIONER MAHANTA: Okay. That's all. 11 Thank you. 12 CHAIRMAN TOENJES: Mr. Goss. 13 QUESTIONS BY COMMISSIONER GOSS: 14 Q Yeah. I wanted to talk to you a little bit 15 about your cost benefit analysis, and I think Brian 16 had referred me to you with respect to Exhibits 30J 17 and 30K. 18 A Uh-huh. Let me get those up here. Okay. 19 Q All right. Looking at Exhibit 30K, it's 20 divided into two categories, the flooding and streams, 21 which there has to be an initial determination made as 22 to which problem you're dealing with; is that right? 23 A Yes. Yeah, you -- we -- this is set up 24 based on -- on the types of problem issues that the 25 district had identified prior to 2006 when we TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 122 1 implemented this prioritization system. 2 Q And what methodology did MSD use to come up 3 with this point system? 4 A We look at actually multiple years and 5 identification of projects from various studies. But 6 what we did was we took a look at -- in other words, 7 we wanted to look at the severity of the problem; the 8 type of the problem; whether it be flooding erosion. 9 In other words, have the ability to put a point system 10 on the actual problem issue and then -- and then add 11 to that some benefit of the solution. In other words, 12 we wanted to be able to -- it's what engineers do to 13 put some type of a monetary system to the issues that 14 existed out there. 15 Q Okay. So -- 16 A As opposed to being more subjective. 17 Q Okay. And so what made something -- for 18 example, the attached garage -- 100-point problem as 19 opposed to a miscellaneous structure being a 50-point 20 problem? Why is something worth 50 and something 21 worth a 100, why isn't it 75 and 25? How did you come 22 up with those numbers? 23 A Well, I wasn't involved in the specific 24 process, but my understanding from the staff that was 25 involved, there was an iteration. In other words, TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 123 1 there was a multitude of beta testing that was done on 2 different issues that existed at the time that came up 3 with a semblance of what they felt like provided a 4 good cost benefit or good problem point ratio of the 5 actual issue that existed. 6 That's why we take into consideration, if 7 we're talking flooding, how often does it flood? Does 8 it only flood during a 100-year event? Does it get 9 flooded every time it rains? So in other words, you'll 10 not only take the impact, but you also take the occur -- 11 reoccurrence of that impact. Is there erosion existing 12 on the property? How close is it to the property? That 13 type of thing. 14 As far as how they arrived at these -- each 15 individual number, I'm not going to be able to answer 16 that, I don't think. 17 Q What about the scale of the numbers, can you 18 answer that? 19 A I think you're going to just have to give me 20 a specific instance and I would have to -- to provide 21 you with an answer. I'm not sure. 22 Q Well, we have a scale of 10 to 300 and a 23 scale of zero to 25 in two of these different columns. 24 Why was that scale chosen? 25 A I -- I can't answer that. I wasn't -- TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 124 1 that -- again, it was done utilizing -- looking at a 2 multitude of projects at the time to develop what felt 3 like was the correct criteria. 4 Q Would you be able to supply the commission 5 with the data and the study that came up with this 6 point system? 7 A I will able to do that, yes. 8 Q Do you know if this same point system is 9 used by other sewer districts or if this is unique to 10 MSD? 11 A I would have to research that, but it was 12 developed by MSD. So we do have municipalities, I 13 think it was discussed earlier, municipalities that 14 perform their own stormwater studies that have 15 utilized our same prioritization system. 16 Q Yeah. They may have used it, but did they 17 come up with any analysis to say that it was proper 18 before they used it? 19 A I can't answer that. 20 Q Has MSD ever conducted any testing of this 21 point system to see if it's still relevant, assuming 22 it ever was? 23 A Well, understand, we haven't had an 24 extensive capital improvement program, and that's kind 25 of why we're here today. But based on the current TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 125 1 practices for -- since 2006, it's proved to be fairly 2 accurate in us addressing the problems that exist out 3 there. 4 Q How do you know it's accurate? 5 A I mean, we're -- again, we're addressing the 6 problems based on how they exist. 7 Q I understand you're addressing them in some 8 fashion, but you said this -- you know that this model 9 is accurate. And I'm asking you how you would know 10 that. Have you tested it in any way? 11 A I guess you'd have to explain what do you 12 mean by "tested it." 13 Q Well -- 14 A Compared to something else? Like, I guess, 15 I -- again, you're asking me to compare it. And by 16 comparing it, what am I comparing it to? 17 Q I'm asking you that because you're the 18 expert. You told me this is an accurate test and 19 accurate model. 20 A In other words -- Okay. I'm addressing what 21 we feel, and it's addressing what we feel are the 22 highest priority problems that we have out in the 23 system. 24 Q Okay. And, again, I'm trying to figure out 25 why something is assigned different values relative to TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 126 1 other values and how MSD came up with that matrix. 2 A I will -- I will agree to provide the report 3 that developed the prioritization system. 4 Q Okay. And you don't know if there's any 5 kind of algorithms or formulas that MSD uses with this 6 system? 7 A I will provide the report. 8 Q Now, if I understand this model correctly, 9 the MSD official is going out to the particular 10 homeowner or commercial property and looking at that 11 particular problem and applying this model; is that 12 right? 13 A Yeah. There's an assessment done of the 14 issue. 15 Q Okay. And would -- in doing that 16 assessment, would the employee look at other 17 properties around that same property to figure out if 18 there's a larger impact or a cumulative impact? 19 A Yes, we do. I mean, we have a database of 20 issues. So we don't just go out to one specific area, 21 if there's multitudes of flooding complaints in an 22 area. Obviously, we don't want to come up -- develop 23 a solution based on one piece of property, if it's a 24 larger scale solution, a larger storm system that 25 needs to be put in and such. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 127 1 Q How does this model show me that that 2 happens? Where is it in this process? 3 A Well, it actually, if -- if -- actually, if 4 you look at the solution in the benefit category, 5 if -- if there's a regional solution to multiple 6 problems, it receives additional benefit points, if 7 you look at page 3 of 3. In other words -- in other 8 words, if you're solving a number of problems in an 9 area, the project will get additional benefit points. 10 Q And so it's part of the methodology when one 11 of these reports is filled out, to go back and see if 12 there are other areas around this particular property 13 and then try and figure out whether there's a larger 14 regional issue? 15 A Yes. 16 Q And you mentioned that environmental 17 solutions are given -- I think that was your phrase, I 18 may be -- if I'm mischaracterizing what you said, I 19 apologize -- were taken into account with the solution 20 benefits. Can you -- is that Section 4 of this 21 benefits category? 22 A Yes. Yes, it is. 23 Q And, again, the same that I -- what is the 24 AC -- what do those letters mean in the per 100 -- 25 A Those are acreage. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 128 1 Q Okay. And so I see four bays and then it 2 says "acreage." Is there a number ratio with that 3 acreage or is it just -- I don't understand that. 4 A It's -- if in our solution -- and these -- 5 and these probably -- primarily come into when you're 6 doing bio-stabilization adjacent to a creek. If you 7 develop or place any of these as part of the 8 solution -- and it's primarily for contaminants in 9 stormwater versus the actual solution. In other 10 words, you're providing an additional environmental 11 benefit if, in your solution, you have the ability to 12 incorporate these types of facilities, whether it be a 13 four-bay or a bioswale, things such as that, that 14 would provide some water quality benefit in addition 15 to address flooding and erosion. 16 Q Okay. And I see on here 200 points for a 17 four bay. Do those points increase if the four bay is 18 addressing, say, one acre of ground or -- 19 A Yes, it would -- it would increase based on 20 the amount of these facilities that are put into 21 place. 22 Q So it would increase by the number of four 23 bays you install, but not by the fact that a four bay 24 is addressing 100 acres or one acre? 25 A Based on what's here, yes. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 129 1 Q Okay. And the reason I'm asking that 2 question is because above, there's a bioswale and it 3 says "per 100 lineal feet, there's ten points per 4 unit," which made me think that if I had a bioswale 5 that was, you know, longer, I got more points. Am 6 I -- is that right? 7 A That would be correct. 8 Q Okay. But that's not the same with respect 9 to wetlands, wet ponds and four bays, that if I'm 10 addressing more acreage, I'm getting more points? 11 A That is correct. 12 Q And in the problem category, there's 13 something about one lot per 250 feet. What does that 14 mean and why was that chosen? 15 A Where are -- where are you at on the form? 16 In the flooding area? 17 Q Yes. It's 2.1.2, for example, allocate one 18 lot per 250 feet of roadway, impacted in two lots per 19 intersection, impacted. I just didn't understand what 20 it meant. 21 A I think that's basically referring to 22 roadway flooding and the amount of roadway that's 23 being flooded. And the number -- I think that allows 24 you if there's additional -- if there's more lots that 25 are impacted by the flooding. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 130 1 Q So if I had two lots, then, for example, 2 that would be impacted, would I increase the emergency 3 access points from 200 to 400 in that first square -- 4 A I think I would have to -- I would have to 5 look at each specific situation to -- I think we're 6 getting somewhat hypothetical. 7 Q I'm just trying to understand the form. 8 It's MSD's form and it's the basis for this cost 9 benefit analysis that we're told MSD is using to 10 determine the prioritization of projects, and that's 11 why I'm asking the questions. 12 A I will -- I will provide the document that 13 developed the prioritization system. 14 Q I'd like to look at Exhibit J on the 15 stormwater credits. If you could -- I think it's 16 appendix J, actually. I apologize. 17 A Okay. 18 Q I want to make sure I understand how the 19 credit works. If somebody's applying for this credit 20 and it is awarded, then the amount that -- of the 21 credit is based on what the average MSD customer's 22 bill is and then they take one-half of that; is that 23 right? Or is it based on the particular customer's 24 bill? 25 A It -- which -- which credit are we referring TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 131 1 to? 2 Q The residential credit. 3 A The residential, the incentive program? 4 Q Yes. 5 A And that -- can you ask the question again? 6 Q Sure. The formula for that credit, are they 7 using the average MSD bill for residential customers 8 as the basis or are they using individual customers 9 bills for the basis? 10 A What we show here is -- is calculating based 11 on the average, the $2.25 -- the average MSD customer. 12 It would vary based on -- if it were someone that had 13 a larger impervious area and were capturing a larger 14 impervious area. In other words, it would -- it would 15 change -- you know, again, all we've done is give an 16 example of the average MSD customer. 17 Q So if I applied for a credit, you would look 18 at my bill and what I'm -- what I'm paying for my 19 property and then calculate the credit based on that? 20 A Based on the amount of ERUs, yes, that you 21 capture. 22 Q Okay. In the middle of the 500 square feet, 23 to qualify for the credit, what was the basis for 24 that? 25 A That was just -- that was a diminished value TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 132 1 that we felt like would require in order for you to 2 capture an amount to -- that would make any impact on 3 the reduction of flows. 4 Q And so if you were -- do you know how much 5 flow would be produced by -- would be abated by that? 6 A I don't know off the top of my head. 7 Q In a residential setting? 8 A No, but I can -- we can provide that. 9 Q Thank you. I would like to see that. 10 And what's the basis for a one-time credit 11 as opposed to getting a credit every year, for 12 example? 13 A Basically, it was -- it was easier to 14 implement that way with a residential customer as 15 opposed to reducing their -- their bill over a period 16 of time. Plus, there is -- there is -- there is 17 actually a capital outlay for a residential customer 18 to build one of these. So this would provide them 19 with somewhat of a capital outlay to construct it, 20 then pay it back over time with a reduction in their 21 bill. 22 Q Do you have any sense of what the average 23 cost would be for a customer to do one of these 24 projects? 25 A I don't know, but I can -- we could pull TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 133 1 something together, what we think it might cost for 2 somebody. I don't know that off the top of my head. 3 Q And the reason I'm asking is, I'm trying to 4 evaluate whether this credit program is going to 5 really incentivize anyone or not. If a rain garden 6 costs $3,000 and you're getting $125 credit, I'm not 7 sure that's going to incentivize anyone to put in a 8 rain garden. 9 A Yeah, I think we provided that to show that 10 we -- we don't really expect there will be a lot. But 11 there are folks out there that are voluntarily putting 12 these in today as an environmental measure. So it 13 gives them the opportunity to take advantage of the 14 incentive. 15 Q Yeah, I think in the appendix, you've 16 estimated that the incentive program annual cost will 17 be $6,750. Is that your testimony? 18 A Yeah. Yes, it is. We don't anticipate that 19 we're going to see widespread building of residential 20 basins, but we do expect there will be some institute 21 of that. 22 Q Do you think if you increase the amount of 23 the credit, that that might cause to induce the 24 behavior of individual projects being created to abate 25 stormwater? TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 134 1 A Understand, over 10 years you increase the 2 credit basically, then they wouldn't be paying the 3 bill. I mean, these bills aren't that large to begin 4 with, particularly for our residential customer. So 5 the larger credit you give, then basically you're not 6 charging them anything. 7 Q Well, that's a $562 million problem is what 8 I've heard, and you're thinking more again $6,750 of 9 credits annually. That doesn't seem like very much, 10 as a credit for that large of a problem. I don't 11 understand the relationship in those numbers as to 12 this being an effective program. 13 A I'm not sure. 14 Q Do you have an opinion about that? Do you 15 think that relative to the scope of this problem, that 16 that credit is meaningful? 17 A If we -- if we offer more credit, that's 18 that much less money that I have to construct 19 projects, though. 20 Q Well, if you are offering the credit, 21 presumably you're offering it because the project is 22 meaningful and helpful. So the fact that you're not 23 constructing the project, I don't know if that should 24 be determinative. 25 A I don't have an answer to that. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 135 1 Q Okay. And do you have examples of any other 2 credit programs that other sewer districts have put in 3 place? 4 A I'll defer to Henrietta Locklear, our 5 consultant, later, who has had a lot more research 6 with regard to incentive programs throughout the 7 mission. 8 Q And I'd asked earlier about homeowners 9 associations and their ability to take advantage of 10 this credit. Can you respond to that question? 11 A A homeowners association that -- obviously 12 they own property, which is generally the common 13 ground. If they have, say, a clubhouse or something 14 like that, actually they would be billed for that 15 clubhouse. But the base of that actually serves -- 16 that was constructed to serve potentially the entire 17 subdivision, obvious -- usually, in most cases, were 18 put in because of a regulatory requirement. 19 Now, were they to take that basin and want to 20 enhance it to -- and apply for one of the credits, right 21 now we do not have anything in place that would credit 22 everybody that's tributary to that, just because of the 23 implementation. In other words, you would have to 24 determine who's all tributary to that basin, who gets 25 the reduction. And it's not even owned by those TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 136 1 individual property owners. So right now we do not have 2 anything in place that would address that. 3 Q And typically with a residential 4 subdivision, you will have a detention basin. They've 5 been requiring them for a long time? 6 A Yes. 7 Q And typically that is maintained or -- by 8 the trustees of a subdivision in St. Louis, or if you 9 have any incorporated association, that would be the 10 associations and its directors. And if that's their 11 only improvement, then they wouldn't -- that 12 association or the trustees would not be receiving a 13 bill; is that right? 14 A That is correct. 15 Q So they would not be able to take advantage 16 of this system? 17 A No, there would not be credit available to 18 them. 19 Q And if I understood your testimony earlier 20 about -- you were asked a question about comparing 21 residential and commercial properties and whether 22 they've been regulated with respect to stormwater, and 23 you made a comment about in the 1980s, a lot of the 24 systems that -- the systems that were put in, you're 25 finding were not as effective as they had hoped they TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 137 1 would be. Is that -- did I hear that correctly? 2 A In other words -- yeah, I mean, detention -- 3 stormwater detention hasn't been around forever. It 4 started in the '80s. And detention basins were 5 designed for a certain level of storm and a certain 6 criteria, and that criteria has evolved. In other 7 words, the regulatory requirements have become more 8 stringent over that period of time to what they are 9 today. 10 Q Yeah. And one of those changes is water 11 quality. It's something that if you're putting -- 12 A That is correct. 13 Q -- a subdivision now, you have to take care 14 of water quality. Do you have any idea of what the 15 cost of maintaining a basin today is for a homeowners 16 association? 17 A I do not know those numbers and I don't 18 know -- as part of our inspection, I do not believe we 19 collect that information either. 20 Q Do you know if MSD has anything on its 21 website giving homeowners an idea of what that cost 22 would be? 23 A We do have a BMP toolbox. I don't -- I'm 24 not as familiar with it of whether there's cost 25 involved, but I -- there -- it possibly is. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 138 1 Q Yeah, my recollection is that there are and 2 those costs are pretty high. Which is why I'm 3 exploring the idea of how to make this credit 4 available for homeowners associations because there 5 are some surprising numbers that are in there. 6 A Well, understand that the BMPs and the 7 detention basins that are installed within a 8 subdivision are new commercial property, are 9 regulatory requirements and are not eligible for a 10 credit. 11 Q I understand that. And there are a lot of 12 subdivisions that are preexisting that don't have 13 those that are requiring enhancements. So if the cost 14 of maintaining those, if they put them in, are not in 15 any way commensurate with the credit, do you think 16 that they're going to undertake that improvement? 17 A I can't speak for individual homeowners 18 associations. 19 Q But there would be no way for them to get 20 the credit as it is now? 21 A Not as a subdivision, no. 22 Q Do you have any opinion as to whether it 23 would be useful to have these basins improved as part 24 of the MSD system? 25 A That'd be -- that'd be difficult to say. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 139 1 Each one would be different on where -- where it was 2 located and what impact it might have. 3 Q I'm not asking individually. I'm asking you 4 cumulatively is this -- would this be a good policy 5 rule for MSD? 6 A I really don't have an opinion on that. 7 Again, it -- it could vary. 8 Q Do you have an opinion about whether this 9 program that's been in place, the credit program, has 10 been effective given that there have only been 200 11 folks who have taken advantage of it over the years? 12 A I -- we don't -- what credit program are we 13 speaking of? 14 Q Well, the existing credit programs that you 15 have. I think you -- there was some data that 200 16 homeowners have taken -- or property owners have taken 17 advantage of that. 18 A No, that's data from our CSO. That's from 19 our green infrastructure program. 20 And what was the question again? 21 Q I'm asking whether you have an opinion as to 22 whether that has been an effective program, given the 23 number who have taken advantage of it? 24 A I don't know that it's been in place for 25 long enough. I mean, I -- it would -- it's only TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 140 1 been -- the green infrastructure program has only been 2 in existence for -- as far as our CSO program for a 3 couple years. I mean, there's calculations that says 4 what it's supposed to impact. 5 Q How long a period of time would it take to 6 figure out whether it was effective? 7 A I'd have -- I can't answer that. 8 Q Do you know if there were any projections as 9 to how many property owners were expected to take 10 advantage of the program? 11 A I think we probably have that information in 12 our CSO green pilot report that we submitted to EPA as 13 part of our consent decree, and I could provide that. 14 Q And I assume you don't know whether you are 15 meeting those projections or not, as you sit here 16 today? 17 A Again, the -- that program has only been in 18 place for a couple years. In other words, we're 19 required to -- that's a 23-year program. We're 20 required to make that assessment at the end of the 21 23-year program. 22 Q So there was no annual projection -- 23 A No. 24 Q -- with that in mind? 25 COMMISSIONER GOSS: I don't have any other TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 141 1 questions. Thank you. 2 CHAIRMAN TOENJES: Thank you, Mr. Goss. 3 I think we will take a lunch break and 4 finish questions from the rest of the rate 5 commissioners. We'll take a half-hour break for lunch 6 till 12:45 and ask the rate commissioners to hold the 7 remainder of their questions until we return after 8 lunch. 9 (Whereupon, a brief lunch break was taken.) 10 CHAIRMAN TOENJES: Go back in session. 11 I understand that Mr. Beckmann is on a tight 12 timeframe and has a couple of questions he would like 13 to ask. So we're going to field a few questions from 14 Mr. Beckmann and then Mr. Schoedel. 15 Mr. Beckmann, please go ahead. 16 COMMISSIONER BECKMANN: I will. Thank you. 17 QUESTIONS BY COMMISSIONER BECKMANN: 18 Q Rich, on the stormwater discussion and 19 assessments and the -- the cost benefit analyses, are 20 those performed by MSD staff or by engineering 21 consultants? 22 A They're -- I'll turn my microphone back on. 23 They're performed by -- performed by MSD staff. 24 Primarily within our operations group, there will be a 25 call that has come in and then they'll -- they'll do TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 142 1 initial assessment. And then if there's further 2 assessment, then they'll assign that -- they'll send 3 it up as an issue requiring a project, and then my 4 planning staff then will do it. 5 Now, if we're going through a big planning 6 effort where there's a large group of projects, we may 7 use a consultant. But I would say probably 90 percent 8 of the time, it's MSD doing that analysis. 9 Q Okay. Good. Because I wondered how you 10 kind of ensured some uniformity if it was done by 11 others. So I think that's positive. 12 Relative to the impervious charge, at what 13 point is MSD's measured area and the proposed charge 14 provided to property owners in the -- in the whole 15 scheme of things? 16 A Like I said we -- earlier, we've beta tested 17 now. We just need to -- we're working on a commercial 18 property right now making sure that everything is 19 there. But I would suspect that we would have that 20 ready fairly soon. It's just -- it'd probably take 21 more -- we've got it ready to go. It's getting it 22 onto our internet and onto this site that we have for 23 the rate commission. 24 Q So there will be something sent to customers 25 to say, "Go look at the website to see what your bill TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 143 1 is going to be" or -- 2 A I think probably where it's going to come 3 out would be in the publication of where we could 4 advertise it with the publication of the rate 5 commission public hearings. That would probably be 6 the ideal time to notify customers that it's out 7 there. 8 Q Okay. But there will be -- it will be 9 publicized? 10 A Yeah, as soon as we put it on there. 11 Obviously, we haven't discussed in detail how we want 12 to advertise. We wanted to get it working first. 13 Q Understood. Thank you. 14 One more question, back to the rate proposal 15 provided on February 26. In the appendices in C, it 16 cites an escalation number of 3.7 percent that is used 17 over the course of, I guess your five-year or whatever 18 multiple year term of projects. You know, I put 19 together multiple year project programs before myself, 20 and I think that's kind of a high number at first 21 glance. I'd like to know how you based that and in 22 applying it over a five-year period. I think that 23 should be reviewed. 24 A Are you looking at the 3.7 inflation? 25 Q Yes. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 144 1 A Okay. Yeah, I'll definitely defer to Marion 2 on that and our expert -- or our consultant. 3 Q Okay. I mean, yeah, if you apply that over 4 a five-year period, kind of a number that I think is 5 higher than inflationary for construction, typically 6 you're going to have a lot of -- a lot of funds. 7 Okay. 8 A All right. We will make note of that. And 9 if you can, if you don't mind, ask that question of 10 Marion or Tom. 11 Q I may not be here. I'll count on one of my 12 associates. 13 A Right. Someone else. Okay. 14 CHAIRMAN TOENJES: We'll ask Marion to 15 address that as part of his comments. 16 COMMISSIONER BECKMANN: That's all. Thank 17 you. 18 CHAIRMAN TOENJES: Thank you, Mr. Beckmann. 19 Mr. Schoedel. 20 QUESTIONS BY COMMISSIONER SCHOEDEL: 21 Q Just a follow-up to Commissioner Goss's on 22 the validity of the point system and any impact on the 23 cost benefit ratio. You testified that you would 24 provide information on how the form was established. 25 It appears that there's been some revisions, as your TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 145 1 form indicates it has been revised. You also 2 testified that you've been using it internally for 3 stormwater projects. 4 When you present how the form and process 5 was established, could you provide what was revised in 6 any anecdotal information as to the present success of 7 the form, especially with respect to any homeowner 8 input? 9 A We can provide that. 10 Q Thank you. 11 CHAIRMAN TOENJES: Any further questions, 12 Mr. Schoedel? 13 COMMISSIONER SCHOEDEL: Yes. 14 Q (By Commissioner Schoedel) On -- with regard 15 to the credits, when you're a homeowner and you've 16 gotten a credit, and then you sell your house, is that 17 maintenance agreement then transferable to the new 18 owner? Do they have a chance to -- do they say, "I no 19 longer want it," or how are you going to handle that? 20 A So since it's a voluntary basin, then if 21 they chose not to have the basin, then we would remove 22 the credit from the property. 23 Q Then it'd automatically go to the new 24 homeowner? 25 A Yeah. The credit, just like the bill, TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 146 1 belongs to the property. 2 Q Okay. And then my second question is more 3 of a hypothetical. Since you state that the BMP 4 credit for both commercial and residential is only for 5 new construction -- let's say I have a grocery store 6 with six other buildings in a small commercial 7 development they built 15 or 20 years ago that doesn't 8 have any BMPs. I built one last year that does have 9 the BMP that you require. The older one could go back 10 and get a credit since he's building the same swales 11 and detention as what's already there. Is that going 12 to -- I'm afraid that might open up a fair and 13 reasonable-type argument that "I've got the same 14 thing, but I can't get a credit just because mine is 15 not new"? 16 A Well, keep in mind, one of them was 17 regulatorily required and the other one wasn't a 18 regulatory requirement at the time. I kind of go back 19 to the discussion I had where the regulations when we 20 first started having detention basins was less and 21 they weren't as efficient as we are today with the 22 capture of runoff. Then, obviously, if there's an 23 opportunity for somebody to upgrade that would 24 cause -- would allow -- basically create a benefit, 25 then, obviously, you'd want to provide them a credit TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 147 1 to do that. 2 Q I think -- I'm drawing it mainly out so the 3 lawyers can ponder on it and make sure we aren't doing 4 anything that might cause an issue down the road from 5 a -- 6 A You know, one of the other things I wanted 7 to address, either -- you have basins out there, 8 again, that were older. If the district -- if, in our 9 search for a solution for, say, a downstream flooding 10 problem felt like an enhancement of an existing basin 11 would solve that issue for us, then we probably would 12 pay to have that basin enhanced in order to address 13 that issue, if that's the correct solution. 14 COMMISSIONER SCHOEDEL: Okay. That's all. 15 CHAIRMAN TOENJES: Thank you. 16 Yes, Commissioner Mahfood. 17 QUESTIONS BY COMMISSIONER MAHFOOD: 18 Q Rich, just going back to something that was 19 discussed before on the stormwater incentives and 20 credits. You know, as I've looked at what we're 21 proposing here and then just even anecdotally running 22 over to Ms. Locklear's answers to similar questions, 23 what I'm used to seeing are ongoing credit and 24 incentive programs, not one-time programs. Can you 25 give me an idea of how you chose the one-time program TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 148 1 that only incentivizes a one-time payment? Was that 2 for ease? Was that -- 3 A I think it was a combination. One, on the 4 residential was ease, but we also felt like, again, 5 there's a capital outlay with regard to that basin, 6 particularly for a residential customer that was 7 willing to do that and wanting to do that, provide 8 some capital initially to do that. Let's say if it 9 was $3,000 to construct, they're getting that 5,000 10 over 10 years on their bill, whatever it took to pay 11 that back. 12 Q Okay. 13 A And that was kind of the thought process as 14 opposed to a credit program. 15 Q Well, I know probably Ms. Locklear can 16 address this a little differently, but I'm looking at 17 other programs that have done similar kinds of things. 18 I don't necessarily agree with the concept that we 19 can't incorporate better incentives into this rate 20 structure so that we actually reduce the impacts, and 21 it may not directly affect what's been agreed to in 22 the consent agreement, but it could very well 23 indirectly be a help in reducing the amount of runoff. 24 And I'm -- I am concerned about -- about the incentive 25 program not being strong enough and -- and forceful TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 149 1 enough to have an impact. 2 A One thing to recall -- the one thing you 3 have to think about for the incentive program is what 4 that credit -- in other words, you do want to 5 incentivize because it does provide a benefit to have 6 this. But if you look at the cost of the incentive 7 program versus what we're actually collecting from, 8 say, a single resident, you want that to be 9 somewhat -- there needs to be a payback period that is 10 going to be beneficial to you. 11 Q I understand that. I'm just -- there's -- 12 it just -- I mean, from a philosophy standpoint, it 13 seems like -- I just feel like there may be other 14 methodologies or some other bell or whistle that could 15 be attached to this to -- to -- instead of being able 16 to project 50, maybe we would have 500 people who want 17 to participate in the -- in the program, if it -- you 18 know, if it makes sense. 19 A Yeah, I think Heather might be able to 20 answer to what she's seen out there in other areas. 21 COMMISSIONER MAHFOOD: Okay. Thank you. 22 CHAIRMAN TOENJES: Thank you, Mr. Mahfood. 23 Further questions for Mr. Unverferth? 24 COMMISSIONER PALANS: Yes. Mr. Chairman, 25 it's Lloyd Palans. If there are no other commissioners TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 150 1 that want to question before I request the opportunity, 2 I would like to ask some questions. 3 CHAIRMAN TOENJES: The floor is yours. 4 COMMISSIONER PALANS: Thank you. 5 TELEPHONIC QUESTIONS BY COMMISSIONER PALANS: 6 Q Mr. Unverferth, we're all here today because 7 we share a common goal and that is to remediate the 8 flooding and erosion problems within the district. 9 And as you so accurately described, this problem has 10 been around a long time. Many, many years. My 11 question to you is simply this: Will $562 million 12 remediate the flooding and a rise in erosion problems 13 within the 520 miles that encompass our district? 14 A It will over time. I know Mr. Hoelscher got 15 into this a little bit about, you know, issues that 16 we're not aware of now and issues within that 17 $562 million that will be further vetted as we move 18 forward into a program. 19 I've been looking at stormwater prob -- again, 20 I've been here for 31 years and I've been looking at 21 stormwater problems for a long time. I've always used 22 the 25 percent rule. Out of that 562 million, 23 25 percent of those are going to go away, either they've 24 been taken care of by some other issue, or what one 25 person deems as an issue is not what another person TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 151 1 deems as an issue. And if I get a big rain event next 2 year, I'm going to have a few more issues that pop up. 3 So it's difficult for me to say right now 4 that, yes, if we implement this program, we're going to 5 be able to address $562 million worth of problems. We 6 will. It's going to take time. 7 I think what we try to do is propose a program 8 that our customer will be willing to pay for. The thing 9 to understand is not all of our customers have an issue. 10 They're not always -- they're not all subject to 11 flooding. They're not all subject to erosion. So we 12 felt like we picked a number that was appropriate to 13 feel that people would be willing to help their friends 14 and neighbors that may be experiencing these issues. 15 Did that answer your question? 16 Q Mr. Unverferth, well, it does, but I'd like 17 to inquire a little bit further. If I understand the 18 proposal, the $562 million are, in your words, based 19 on a minimal amount of detailed information. They are 20 conceptual in nature and it has been formulated, in 21 your words, without doing much engineering. Am I 22 characterizing the sizing of this correctly? 23 A Yes. Yes, you are. And, generally, they 24 get reanalyzed as they get closer into the program. 25 Generally, you know, projects that come up on a TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 152 1 priority system within, say, the next one or two years 2 will get analyzed further into the program to refine 3 the actual scope of the work that's required. So you 4 do see some -- for lack of a better term, some scope 5 in increase, but at the same time, you've got those 6 projects that actually go away at the same time. 7 Q Well, because this is conceptual in nature, 8 based on a minimal amount of detailed information 9 without doing much engineering, are you highly 10 confident, somewhat confident, or not confident at all 11 that $562 million will remediate our problems? 12 A I would -- I would gauge it as somewhat 13 confident, just based on -- on what we know 14 historically and our ability to -- in other words, the 15 solutions that we come up with aren't always the 16 perfect solution, but for the most part, we use -- try 17 to use sound engineering judgment in the development 18 of our solutions and then -- and then the development 19 of the conceptual cost. 20 Q And you base this request on what you 21 believe your customers will pay; correct? 22 A Yes. What we did through our public 23 information, gathering what -- what our customer is 24 willing to pay to provide this service. 25 Q And you've done that in lieu of addressing a TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 153 1 more detailed study to size the scope of this problem? 2 A Yeah, we -- yes. Understand, in order to 3 take that $562 million and refine that scope takes 4 funding and -- in other words, go through that effort 5 and then not have funding to do the work, there's an 6 expenditure involved and, again, does -- in some cases 7 what I've seen over time, just like it did back in 8 2008, all of a sudden, it sets an expectation level if 9 I'm out there doing an engineering analysis on a 10 project that may never happen. 11 Q In this proposal envision, no external 12 borrowings and no third-party funding; correct? 13 A That is correct. 14 Q And this lack of funding to address the 15 stormwater remediation has been around a long time. I 16 believe you mentioned some projects have been there 17 over 30 years; right? 18 A That is correct. 19 Q And given the lack of funding to address the 20 remediation needs, do you believe it would be good 21 policy decision on the part of the district to 22 encourage third-party funds to contribute to the 23 remediation problems? 24 A I -- I don't have an opinion on that. 25 Q Well, if third-party funds were injected, TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 154 1 you could complete more projects; correct? 2 A And, again, it would be based on -- I mean, 3 that's somewhat hypothetical on where those 4 third-party funds would come from. 5 Q Well, if third-party funds were encouraged 6 to be invested in the remediation, effective projects 7 could be completed faster; correct? 8 A If those third-party funds allowed me to 9 use -- if the funds would allow me to use 10 district-wide based on our prioritization system, I'd 11 say that's -- that's accurate. 12 Q And I'm contemplating that the public funds 13 would be used consistent with your cost benefit ratio 14 in prioritizing these projects. Assuming the 15 third-party funds are contributed, with that in mind, 16 consistent with your cost benefit analysis, you would 17 be able on behalf of the district to conserve your 18 resources; correct? 19 A Again, that's somewhat -- somewhat 20 hypothetical. Depending on where those funds come 21 from, because if they're coming from, say, a specific 22 entity, they're going to have possibly different 23 priorities than I am. 24 Q Well, I'm talking about funds coming from 25 affected residential owners, commercial property TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 155 1 owners, or municipalities. You would be able with 2 these funds to complete more projects, complete more 3 projects faster, and conserve resources of the 4 district. Is that a fair statement? 5 A So you're -- you're referring to somewhat of 6 a cost-share program? Is that what you're referring 7 to? Like a 50/50 program? 8 Q Yes. Consistent with your cost benefit 9 analysis. 10 A Consistent with our cost benefit analysis, 11 yes, but we haven't seen too many people knocking on 12 our door wanting to give us 50/50 on preparing -- in 13 other words, they feel like these are MSD issues to 14 address. 15 Q But this -- but the use of third-party funds 16 would encourage public-private partnerships to 17 remediate our problems, would it not? 18 A It would, but this -- our current proposal 19 does not take that into consideration. 20 Q And I'm suggesting that the district should 21 consider creating a policy that would allow the use of 22 third-party funds consistent with your cost benefit 23 ratio to remediate the project district-wide. That's 24 just my suggestion. 25 I would like to turn to your testimony on TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 156 1 page 5, question 18, if you have that handy. 2 A I will shortly. Okay. 3 Q Question 18 poses a question "What resources 4 will the district need to successfully manage, 5 construct, and complete the expanded stormwater CIRP 6 presented in its rate proposal?" And then the last 7 sentence in that -- in your response states, "The 8 department estimates approximately 40 internal FTEs to 9 deliver the program consisting of existing staff and 10 new hires." Do you see that sentence? 11 A Yes, I do. 12 Q And FTE is a full-time employee; is that 13 correct? 14 A Yes, it is. 15 Q So you're -- are you saying that in order to 16 implement a project that will raise $30 million a year 17 devoted to these CIRP stormwater projects, you need 40 18 full-time employees? 19 A That's to deliver the entire program. Keep 20 in mind that some of those employees currently exist 21 today and are being utilized to deliver the 22 proposition at the current stormwater program, which 23 is somewhat less than this in the original OMCI areas. 24 So it's not 40 additional employees; it's a total of 25 40. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 157 1 Q And how many of the 40 are existing 2 employees and how many are new hires? 3 A Right now I can't answer that because it's 4 going to -- depending on the timing and the initiation 5 of this particular rate that -- or this funding with 6 relative to the current wastewater, because our 7 current wastewater program will be in a downturn or be 8 reducing at that time. And so I haven't -- we don't 9 have the complete analysis that would say how many new 10 employees. Because I would be able to utilize people 11 currently working on the wastewater program to be 12 utilized for the stormwater program. This is 13 particularly with regard to inspection personnel. 14 Q And the next question 19 says, "What cost 15 for the engineering department have been added to the 16 rate proposal associated with this increase in 17 stormwater CIRP?" And your answer references page 4-7 18 of the rate proposal. Do you have page 4-7 of the 19 rate proposal handy? That's MSD 1. 20 A I'm getting there. I'm sorry. I was 21 looking for table 4-7. Okay. 22 Go ahead. 23 Q Do you have it in front of you? 24 A Yes. 25 Q It says that the operating costs are TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 158 1 comprised of engineering staff that managed the 2 proposed stormwater in CIRP and costs to generate and 3 maintain the district impervious area data utilized to 4 generate the billing data. 5 When I look at table 4-6, I want you to help 6 me out on this. Where is the line item for 7 engineering and operation cost? 8 A It's under "capital labor." 9 Q So I am looking at engineering and 10 operations. When I'm looking at this table, I see no 11 expenses identified for engineering or operations. Am 12 I reading that correctly? 13 A Yes, you are. The cost -- 14 Q But you -- 15 A The cost for the internal labor that we just 16 previously discussed is actually capitalized towards 17 the project that we complete. So it's under that line 18 item "capital labor." 19 Q So you're suggesting that the $30 million of 20 capital improvements are really allocated not just for 21 capital improvements but also for labor? 22 A Yes. 23 Q And by quick count, I'm looking at roughly 24 over this period of time through 2024, approximately 25 18 to $20 million allocated to capital labor? TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 159 1 A Yes. That's the plan, design, and construct 2 the -- develop the projects in the CIRP. 3 Q And those are for internal expenses of 4 employees that you're devoting to do this; correct? 5 A Yes. 6 COMMISSIONER PALANS: Thank you. I have no 7 further questions. 8 CHAIRMAN TOENJES: Thank you, Mr. Palans. 9 Further questions for this witness? 10 (No response.) 11 CHAIRMAN TOENJES: I have a couple, 12 Mr. Unverferth. 13 QUESTIONS BY CHAIRMAN TOENJES: 14 Q In the conversation that we had earlier 15 about the chart and various hypothetical uses for the 16 point system, would it be possible for you to take 17 some representative examples from your list of 18 projects and provide us with the specific ratings that 19 would illustrate how that chart is used? 20 A We would be able to do that. 21 Q Several from various categories -- 22 A Various types of projects. 23 Q -- that would help us illustrate and 24 understand some of the issues that we've discussed 25 here before. Thank you. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 160 1 A We can provide that. 2 Q My second -- and that -- my second question 3 then would be, I think it was mentioned that district 4 staff is providing or is generating the input into 5 those charts. I would like to know what steps are 6 being taken internally to provide consistency of data 7 entry, that Inspector X may have a lot different 8 approach to that rating than Inspector Y, than 9 Inspector Z. And I have a concern that, quite 10 frankly, there's a lot -- we can make this look as 11 objective as possible, but there's still -- any steps 12 that the district is taking to minimize subjectivity 13 and increase objectivity -- 14 A To maintain consistency. 15 Q -- in this process is extremely important, I 16 think, to make. So I would hope that you would do 17 that, if that's possible. 18 A I will provide you with something. 19 Q My third question has to do with the cost 20 generation. I understand, as well as anybody, that 21 there are different levels of estimating the 22 conceptual estimate, preliminary estimate, et cetera, 23 et cetera. And I think to go to the point Mr. Palans 24 made again, any process to not get this down to every 25 nail and bolt that has to be put into it, but that TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 161 1 there is some consistency of the cost estimates and 2 something to assure the accuracy within some realistic 3 range for those cost estimates, I think is important 4 for us -- for the district to be able to illustrate. 5 If you could provide that information also. 6 A Yeah, we typically -- the district analyzes 7 its cost estimating quantities and bid items, 8 generally, on an annual basis. And if there's 9 significant movement in those, we then move that, do 10 that same movement with our conceptual cost estimate. 11 So I can provide you the last time we did that and how 12 often. 13 Q And as -- over a program of this time scope, 14 some information about how those costs -- costs would 15 be adjusted over time or the ratings would be adjusted 16 over time would be helpful. 17 My last question has to do with an issue 18 that I asked of Mr. Hoelscher about, and I'll ask you 19 about it also. It has to do with this cost-sharing, 20 the public-private partnership. 21 I would guess that if I looked at the list 22 of projects for year 1, and my project on your app 23 showed that I was in year 2, and I saw heavy rain 24 coming, I may be willing to spend some money with the 25 district to accelerate my project. And I would think TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 162 1 that some proviso for that, whether it's for a 2 commercial property or a residential property or a 3 homeowner or whoever, that some methodology to pull -- 4 address the problem more quickly and provide the 5 district with additional outside resources, I would 6 like to see you-all speak to that also, if possible. 7 A Okay. 8 CHAIRMAN TOENJES: Those are my three 9 questions. 10 Any other questions from any of the other 11 rate commissioners? 12 Ms. Myers, do you have further questions for 13 the witness? 14 MS. MYERS: I do not. 15 CHAIRMAN TOENJES: Thank you, Mr. Unverferth. 16 THE WITNESS: You're welcome. Thank you. 17 CHAIRMAN TOENJES: Ms. Myers, are you ready 18 to call your next witness? 19 MS. MYERS: Yes, sir. That would be Marion 20 Gee. 21 (The witness was duly sworn.) 22 CHAIRMAN TOENJES: Does any member of the 23 rate commission have questions for Mr. Gee at this 24 point? 25 All right. Mr. Neuschafer. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 163 1 MR. NEUSCHAFER: Yes. 2 QUESTIONS BY MR. NEUSCHAFER: 3 Q Hello, Mr. Gee. 4 A Good afternoon. 5 Q We've asked Mr. Hoelscher earlier, and then 6 Mr. -- or Commissioner Palans just raised some other 7 issues around whether MSD has considered bond funding 8 for this program. And I understand from 9 Mr. Hoelscher's testimony earlier today that bond 10 funding was not considered? 11 A Well, we -- in the proposal itself, we do 12 not anticipate issuing debt to fund this particular 13 program. There are a number of reasons for that. One 14 of the reasons is, if you look at the types of 15 projects that we're proposing, they do not generate 16 assets for MSD. For instance, erosion control. 17 That's not an asset of the district. Typically, when 18 you issue tax exempt bonds, you have to have some kind 19 of ownership interest in that particular asset. With 20 these projects, we do not; so it calls into question 21 if we would even be able to issue tax exempt bonds to 22 fund a large portion of this -- this program. 23 Another reason is, if you look at just the 24 size of the program itself, $30 million a year, if we 25 were to, let's say fund $15 million of that 30 million, TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 164 1 look at just historically what you would pay for that, 2 we would pay $30 million over a 30-year period of time 3 for a borrowing of approximately $15 million. 4 If you looked at the impact that's going to 5 have on a $2.25 rate for the majority of our residential 6 customers, you actually -- borrowing is more expensive 7 over time because then we have a number of issues that 8 we have to factor in. There could be a requirement for 9 reserves that would be placed on that borrowing, meaning 10 that you actually have to borrow more money than what 11 it's going to cost to construct those projects. 12 You also have to be concerned with 13 debt-service coverage levels, which, again, would 14 require you to fund additional monies to basically -- to 15 construct these projects. And long-term, we just don't 16 think it's going to be in the best interest of our 17 customers to do that given -- again, we're asking for 18 $2.25 a month for the majority of our residential 19 customers. 20 A couple of other considerations that we also 21 kind of looked at, in addition to just the small amount 22 that we're talking about, we're going to have to 23 continue to borrow to fund our consent decree program 24 problem on the wastewater side of the house here. 25 There's definitely a concern with the amount TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 165 1 of debt that we're going to have to issue in the future. 2 That, of course, is going to require additional rate 3 increases on the part of customers to kind of fund that 4 as well. And you start factoring in additional debt on 5 the stormwater side, that could create some issues for 6 us in terms of how MSD is rated, given the amount of 7 debt that we would be placing on our books; so that can 8 trickle over to the wastewater side. 9 Now, if the ratings per se were adjusted for 10 the district as a whole, let's say our rating's 11 downgraded, that could result in additional cost, not 12 only for stormwater customers, but for wastewater 13 customers as well. 14 So, again, given the size of the capital 15 program that we're looking at, the amount of money that 16 we're asking for from ratepayers, and the fact that some 17 of the assets that we are going to construct or work on 18 are not MSD assets, we did not think that it was 19 pertinent to issue debt for this particular program. 20 Q Okay. A few follow-up questions there. 21 Your first point was related to the need for an 22 ownership interest. If I understood correctly, I 23 don't recall who, Mr. Hoelscher or Mr. Unverferth, 24 testified that some of the assets would be acquired or 25 would be owned by MSD. This was in relation to TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 166 1 ongoing O&M costs. 2 A Some of the assets would. But, again, if 3 you look at the program as a whole, there's a large 4 portion of that program, especially those that pertain 5 to erosion control that are not owned by MSD. So we 6 have to look at this from an entire program 7 perspective. 8 Q Did you have an estimate of what would be 9 owned by MSD versus what wouldn't be owned? 10 A Well, yes, actually, I would refer you to -- 11 there's a capital project listing that is in the rate 12 change proposal itself. It identifies the types of 13 programs or the types of projects. It lists erosion 14 control, flooding. I have not gone through and looked 15 at a particular project, but I have looked at the 16 categories. 17 Q What categories would involve future MSD 18 ownership of assets? 19 A Well, I can tell you the ones that I think 20 that would not. I don't think that erosion control 21 projects would. I think some of the flood protection 22 projects that are listed would not necessarily result 23 in MSD ownership. There are projects that are listed 24 in there in which we're constructing storm sewers. 25 Those would be assets that the district more than TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 167 1 likely would own. 2 Q You talked about the relatively small size 3 of how much you would need to borrow through debt 4 financing or borrowing financing. Could MSD 5 accelerate projects to, you know, borrow more in the 6 beginning, accelerate projects instead of doing them 7 over a 20-year period, and increase the amount of debt 8 in order to accelerate the project? 9 A It's not necessarily a small amount of 10 projects per se. Even if you accelerate it, if you 11 issue more debt, again, there -- the issue that we 12 have is you're issuing debt on the wastewater side of 13 the house to fund our consent decree program; so now 14 you're adding more debt to our balance sheet. So the 15 concern would be how that would be viewed by the folks 16 that we borrow the money from. 17 More specifically, I would have concerns as to 18 how our rating agencies review that accelerated debt for 19 this type of program versus the consent decree, which we 20 are required by law to do. 21 Q Using the hypothetical of 15 million, if you 22 borrowed half, I mean, on the one hand, I'm hearing 23 you suggest that that's not a lot of money, that's not 24 enough to borrow. But on the other hand, you're -- 25 you're expressing concerns about bond ratings and debt TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 168 1 load. 2 A Well, what -- what -- 3 Q I'm not seeing -- I'm sensing some 4 inconsistency there. 5 A What I believe I said was that the 6 $15 million, if you borrowed it, would not 7 significant -- would not have a significant impact on 8 the $2.25 rate. 9 Q Like cut the rate in half potentially? 10 A I don't believe that you're going to be able 11 to cut the rate in half by necessarily borrowing half. 12 I know it sounds like if you borrowed half, you'd be 13 able to cut the rate in half, but you wouldn't be able 14 to do that. You still have $15 million that would be 15 funded through rates. You would have the debt-service 16 on that $15 million that would also be in rates. You 17 would have other requirements that we more than likely 18 would have to meet. Again, we'd probably have to have 19 some kind of cash reserve. We'd have to have an 20 amount built in for minimum debt-service coverage. 21 We'd have to have a minimum fund balance if we 22 borrowed. So all those things factored in, it's not a 23 dollar-for-dollar reduction if you borrow it. 24 Q Do you know, what is -- what is MSD's 25 current debt? TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 169 1 A I would have to look at our balance sheet to 2 be quite honest with you. I'm thinking it's in the 3 range of about 2-point-something billion, but I'd have 4 to get the correct number for you. 5 Q Okay. We'd appreciate that -- 6 A Yeah. 7 Q -- if we can see that. 8 MR. NEUSCHAFER: Thank you. That's all I've 9 got. Thank you. 10 CHAIRMAN TOENJES: Thank you, Mr. Neuschafer. 11 Ms. Stump, questions for Mr. Gee? 12 MS. STUMP: Thank you. Yes, I have a few. 13 QUESTIONS BY MS. STUMP: 14 Q Do you have your testimony in front of you? 15 A I do. 16 Q We haven't had the pleasure of doing this 17 before, have we? 18 A We have not. 19 Q How about we start with question 9 where you 20 talk about inflation allowances. And in response to 21 the question of whether the inflation allowances are 22 reasonable, you include yes, and then talk about how 23 they can be found in appendix C of the rate proposal? 24 A Correct. 25 Q Can we pull -- now that I made you look for TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 170 1 that -- can we pull out the rate proposal, appendix C, 2 and can you kind of walk through those inflation rate 3 numbers and explain to me a little bit about why you 4 believe they're reasonable. 5 A Yes, I can. First of all, I will start with 6 the inflation 3.7 percent that was used with regards 7 to the capital improvement program. We obtained that 8 number -- it's actually for the 12 months ended 9 April 30th of 2017, in the Engineering News Record. 10 We also supplied in response to, I believe it was the 11 second -- second discovery, there were additional 12 questions that were asked with respect to that. Give 13 me a moment to find it. 14 Q Sure. So 31A you think? 15 A Yes. It was actually in response to your 16 question no. 2. 17 Q Okay. 18 A In Exhibit MSD 31A. I believe the question 19 was, does MSD look at a longer time arising with 20 regards to the inflation rate that was utilized and we 21 did. If you look at, for instance, a three-year 22 inflation rate, using that calculation, was 23 5.7 percent. Five years is 4.8 percent and 10 years, 24 from that 10-year time period, it was actually 25 3.9 percent. So the rate that we actually used was TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 171 1 the most conservative rate. If we would have used any 2 of these other rates, the cost would have actually 3 been more. 4 Q Okay. Is there anything else you want to 5 say about the inflation rates and why you think 6 they're -- 7 A No. 8 Q -- reasonable? 9 A Other than we looked at, again, data that is 10 commonly used. We utilized that in our projections; 11 so in my opinion, the rates that we used are 12 reasonable. 13 Q Thank you. Now, back to your testimony, 14 question 11 on page 3 -- you don't have to find this 15 one -- but it says that you -- you stated that the 16 2019 preliminary budget would be provided to the board 17 by March 15th. I just wanted -- has it been provided? 18 A Yes, it has. It's actually available on the 19 MSD website. 20 MS. STUMP: Okay. And I would ask Ms. Myers 21 maybe if we could submit it as an exhibit? 22 MS. MYERS: Okay. 23 MS. STUMP: Thank you. 24 Q (By Ms. Stump) Okay. Question 12, page 3, 25 line 19 and 20. You estimate that the annual cost of TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 172 1 the incentive credits will be $467,000. Can you 2 explain how we got to that number -- you got to that 3 number? 4 A Yes. So we obtained a listing of the 5 potential credits and the participation in those 6 credits from our engineering division. And we went 7 through and actually costed that out and the grand 8 total came to the $467,000 that is in my testimony. 9 Q And when you say potential credits and the 10 cost -- explain to me a little bit more what you got 11 from the engineering group. 12 A Yeah. What we did was we looked at the 13 number of customers that are participating in our 14 credits programs now and how much that value would be 15 per se. And so based on that information, we 16 calculated what an estimated credit would be for that 17 number of customers. 18 Q So that's based on your other credit 19 programs? 20 A Correct. It's all of our credit programs. 21 Q Okay. Other amounts included in the rate 22 proposal include a 4 percent bad debt percentage; 23 correct? 24 A Correct. 25 Q And then there was some amount for expenses TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 173 1 to implement the new stormwater capital rate? 2 A That is correct. 3 Q With regard to that amount for expenses, 4 what is that amount and how is that computed? 5 A Well, we went through and we looked at what 6 would it cost us to -- the number varies -- the number 7 varies to actually get the program up and running. 8 For instance, in the finance department, obviously, 9 there's going to be some additional bill expenses -- 10 billing expenses, particularly for those customers 11 that we currently do not bill for wastewater. So we 12 estimated, I think, that there's roughly 40,000, what 13 I would call stormwater only customers; so we're going 14 to have to bill those individuals. 15 There are also changes to our billing system 16 that we're going to have to make to allow us to actually 17 bill for stormwater. We have to implement the tiered 18 structure if we go that route. So those costs were 19 calculated and included in the proposal. 20 In addition, as Rich testified earlier, there 21 are some expenses that -- from engineering that we had 22 to build into our projections as well, particularly 23 folks that actually work on the capital side or the 24 capital labor that Rich described earlier. 25 Q Okay. I want to talk about billing in a TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 174 1 minute, but since I mentioned the bad debt percentage, 2 I believe that Mr. Brockmann asked Mr. Hoelscher 3 earlier about past data on that? 4 A Oh, yes. I believe the question was, is how 5 MSD had our actuals compared to budget and so I'll 6 give you the last -- the figures for the last two 7 audited fiscal years. In the fiscal year '16, we 8 actually budgeted approximately $4.9 million to bad 9 debt expenses. Our actual expenses were 4.1 million. 10 On fiscal year '17, we budgeted $2.7 million 11 for bad debt expenses. Our actual expenses were 12 2.5 million. So if you look at that two-year period of 13 time, we budgeted 7.6 million. We actually incurred 14 expenses of 6.6 million. 15 Q Thank you. So back to billing, question 21 16 on page 5. You state that it will be billed monthly 17 on wastewater customer bills no matter what the ERU 18 is, and then bills will be issued to non-wastewater 19 customers with an impervious area greater than 20 20 ERUs. So what happens to the non-wastewater customers 21 with an impervious area less than that? 22 A They would actually -- non-wastewater 23 customers with an impervious surface area of -- 24 Q Area less than the 20 ERU. 25 A Well, we would bill those individuals. That TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 175 1 should say if it's less than 20, they're billed 2 quarterly. 3 Q Quarterly. Okay. 4 A Correct. If it's more than 20, we would 5 bill those monthly. 6 Q So everyone will still get a bill for the 7 new stormwater capital rate. The only difference is 8 how frequently? 9 A Correct. And the rationale behind that is 10 simply one of cost. We're certainly -- if we had a 11 residential customer and they were not an MSD sewer 12 customer, let's say that they're on a septic tank, and 13 their bill is going to be $2.25, it certainly would 14 not be economical for us to bill -- send a bill out 15 and go through the expense of generating it to get a 16 $2.25 payment from those customers. 17 Q So in your opinion, as the director of 18 finance for the district, is the stormwater capital 19 fair and reasonable? 20 A Yes, I believe it is. 21 Q Okay. A couple other things have come up. 22 There's been a lot of discussion about the 23 cost-sharing policies and the discussion Mr. Hoelscher 24 had earlier about, you know, not wanting to give 25 affluent groups the benefit of essentially kind of TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 176 1 buying their projects up in the schedule. Do you 2 recall that discussion -- 3 A I do. 4 Q -- when he talked about how the policy was? 5 Is this a written policy that the district has on 6 these types of issues or is it one more of practice? 7 And if you don't -- I'm asking you because you're the 8 last district representative. 9 A It's not a policy that I am aware of. I 10 think, to be quite honest with you, it's probably an 11 issue of one that's of fairness. If all of our 12 customers are going to pay this rate, then I think 13 they should have an opportunity to have their projects 14 constructed. 15 Q So to your knowledge -- and I can follow up 16 in writing to the district -- but to your knowledge, 17 it's not a written policy of the board of trustees? 18 A To my knowledge, I'm not aware of a policy. 19 Q Thank you. And then did you hear 20 Mr. Beckmann's question earlier? 21 A I don't recall which question. I heard 22 several questions, but I don't specifically recall the 23 one that you're referring to. Can you repeat the 24 question? 25 CHAIRMAN TOENJES: It was inflation. I think TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 177 1 it was the 3.7 percent inflation rate. 2 A Okay. Yeah. That's the question I actually 3 addressed a moment ago. I think from -- can you 4 repeat the question so I can -- 5 Q (By Ms. Stump) With that we were talking 6 about inflation. The question you addressed a moment 7 ago was about the bad debt. 8 A Actually, you had asked me about -- 9 Q Oh, maybe I asked the same question and 10 didn't -- 11 A Yes. 12 Q Okay. So if Mr. Beckmann was here, he would 13 say his question had been answered. 14 A I would hope so. 15 CHAIRMAN TOENJES: You are correct. You are 16 channeling Mr. Beckmann. 17 Q (By Ms. Stump) Okay. And then the last 18 topic I wanted to discuss with you is one that 19 Ms. Myers said that you could help me with -- 20 A Okay. 21 Q -- which has to do with -- I'm -- I'm 22 looking for information -- you know, Ms. Myers and I 23 had a discussion about the fact that this was a rate 24 and not a tax. And what I was trying to do was get an 25 explanation as to how the use of the ERUs corresponds TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 178 1 to use of the district's facilities in the system. 2 A Okay. We, like many utilities that operate 3 this type of stormwater or implement this type of 4 stormwater fee, we utilize impervious surface area 5 basins as the basis for billing. That is probably the 6 fairest way in terms of measuring a customer's cost 7 contribution that needs to be recovered. 8 Obviously, the more runoff that is generated 9 from that property, the more it's going to cost us to 10 rectify any issues associated with that. So just 11 increased flooding, erosion, that type of issue, which 12 is what this rate is -- is going to be used for. 13 So from that perspective, again, I believe 14 that this is the fairest methodology for billing this 15 rate. It's based on impervious surface area because the 16 more impervious surface area that is on a particular 17 piece of property, the more likely the more runoff we're 18 going to get that we have to deal with. 19 Q So would you say that the stormwater capital 20 rate is based on the actual amount of services that 21 are provided? 22 A I certainly think there's a strong cost 23 correlation between the impervious surface area and 24 the cost that the district is going to bear to rectify 25 any issues associated with the runoff. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 179 1 MS. STUMP: Okay. I think I'm done, but let 2 me just check. 3 I think that's it. 4 CHAIRMAN TOENJES: Thank you, Ms. Stump. 5 Questions from any of the rate commissioners? 6 Mr. Goss? 7 QUESTIONS BY COMMISSIONER GOSS: 8 Q Just a couple of questions. Did you 9 participate in the analysis to come up with the 10 $562 million of costs for the project? 11 A I did not, no. 12 Q Okay. And just to follow up a little bit on 13 the fairness question in terms of cost-sharing. Do 14 you believe that someone's project -- you have an 15 overall timeframe for this rate, as I recall. 16 Somewhere -- or we've been told that the stormwater 17 projects and the problems will be taken care of in a 18 certain period of time -- 19 A Correct. 20 Q -- correct? So if you have cost-sharing, 21 wouldn't that shorten that period of time? 22 A It could potentially shorten that period of 23 time. 24 Q And so if one of my projects was -- my 25 project was to be gotten to in the 20th year because TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 180 1 I'm a low priority, and somebody else has cost-shared 2 so that my project is accelerated and I'm now dealt 3 with in the 15th year, wouldn't that be a benefit to 4 me? 5 A It may be a benefit to you. It may not be a 6 benefit to all of our customers. And the reason I say 7 that is, it depends on the severity of the problem 8 that we're trying to address. As Rich mentioned, 9 there's a prioritization process that we utilize. If 10 I'm a customer and I'm expecting that my project is 11 going to get completed within two years because any 12 time we get a small rain event, it's flooding my home 13 or perhaps my neighbors as well, but your problem 14 could just be one in which it rains, but there's water 15 that's in your yard. So we have to look at it from 16 that perspective. It depends on the severity of the 17 issue that we're trying to address. 18 Q But you would concede that there would be 19 more money available for MSD stormwater projects if 20 there were cost-sharing. Is that true? 21 A I think it -- yes. If we were to receive 22 funding from third parties, that could potentially 23 reduce our cost; right? I'd say it probably would 24 reduce our cost. It also depends on if there are any 25 restrictions associated with that money. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 181 1 Q Would you be able to or could you consider 2 calibrating a cost-sharing program so that programs 3 that you'd consider of a less high priority, you would 4 do a lower cost-share, whereas, if it were a higher 5 priority, you'd be willing to invest more? 6 A I think that's probably a discussion that we 7 would need to have with my colleagues here. It's 8 certainly not a decision that I would make, you know, 9 formally. It's something that we would have to 10 discuss and determine if that would indeed work. 11 Q Right. But just in terms of a policy, is 12 that something -- do you have an opinion as to whether 13 that would be a method that might adjust for this 14 perceived fairness issue that you're concerned with? 15 A I'm not sure it would. I would think we 16 would need, again, to look at the circumstances that 17 are involved and kind of look to see if there is a 18 policy could be drafted that would be beneficial. 19 Q Do you see a distinction between a 20 cost-sharing program that MSD could implement and say 21 what's done with MoDOT or St. Louis County or St. 22 Charles County with respect to their projects and 23 cost-sharing with other individuals and 24 municipalities? 25 A I'm not familiar with the cost-share TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 182 1 programs that those entities that you mentioned have; 2 so without knowing the details behind if there are 3 restrictions, if they have to delay their projects in 4 order to align with whoever's giving them that 5 cost-share, it would be difficult to answer that 6 question. So I think there's a lot that goes into it. 7 In general, if we could obtain money from 8 third parties, that would allow us to reduce or costs. 9 I, again, in general, would view that as a good thing. 10 But I also think you have to -- you have to look at the 11 details that would involve the receipt of those funds. 12 Q What sort of details would you be concerned 13 about? 14 A Well, again, there could be restrictions on 15 how quickly you would have to spend that money, on 16 where you would use that money, on the particular 17 types of projects that would be willing to be funded. 18 They may want a project completed that, again, is not 19 really of highest priority for our customers. So we 20 would have to kind of look at that in totality. 21 Q I understand that concept in the context of 22 dealing with a governmental agency that's giving the 23 money and has higher authority. For example, the 24 Federal Government. They do that with projects. They 25 tell you you have to spend it in a certain period of TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 183 1 time, you have to meet certain policy benchmarks. 2 In this case, though, it's MSD that would be 3 the higher authority because you're the one setting 4 the context and the requirements and the restrictions; 5 so you'd be setting the pace. So wouldn't that 6 address that problem? 7 A Well, not necessarily. I think you're 8 assuming that MSD would be able to control how these 9 entities want their money spent. If I'm writing a 10 check to you, I'm going to have some -- some criteria 11 in which I would like you to -- to utilize when you're 12 spending my money. So we would have to work, I think, 13 very closely with those entities that you mentioned. 14 Again, I'm not opposed certainly to cost-sharing. I 15 just think it's prudent to kind of understand what 16 you're getting yourself into when you do that. It's 17 not that it's necessarily a bad thing, but you have to 18 look at how that could potentially impact your 19 programs. 20 Q So do you have any opinion about other 21 agencies that have cost-sharing programs, as to 22 whether they're being unfair to their constituents? 23 A Again, I don't know the specifics of their 24 program. I would trust that it's something that they 25 would evaluate with their stakeholders. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 184 1 COMMISSIONER GOSS: Thank you. 2 CHAIRMAN TOENJES: Thank you. Any further 3 questions for this witness? 4 Yes, Mr. Bresnan. 5 QUESTIONS BY COMMISSIONER BRESNAN: 6 Q Marion, in the event that this goes through, 7 how fast will the implementation of construction 8 start? 9 A If we get the projects, that would begin in 10 FY20. I think we're scheduled to actually begin 11 billing in FY20. With regards to when construction 12 would actually occur, I would invite you to look in 13 the rate change proposal. We actually have a schedule 14 of projects listed in there, and it breaks it out by 15 constructions and acquisitions and such. 16 COMMISSIONER BRESNAN: Thank you. 17 CHAIRMAN TOENJES: Further questions? I 18 just -- 19 COMMISSIONER PALANS: Mr. Chairman -- 20 CHAIRMAN TOENJES: Yes, Mr. Palans, please, 21 go ahead. 22 COMMISSIONER PALANS: Thank you, 23 Mr. Chairman. 24 TELEPHONIC QUESTIONS BY MR. PALANS: 25 Q Mr. Gee, I'd like to ask you to direct your TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 185 1 attention to question 14 of your testimony, which is 2 on page 4 of MSD 3D. 3 A Yes, sir, I have that. 4 Q Question 14 asks the question, "Are 5 additional (incremental) expenses included in the 6 stormwater rate proposal related to the implementation 7 of the stormwater capital rate?" And your answer is, 8 "Yes, incremental expenses relating to the new 9 stormwater program are included in the stormwater rate 10 proposal," and you reference table 3-1 of the rate 11 proposal, which is MSD 1. Do you see table 3-1? 12 A Yes, I do. 13 Q It's on page 3 -- 3-3. 14 A Yes, sir. 15 Q You see that? 16 A I'm looking at it. 17 CHAIRMAN TOENJES: Yes, Mr. Palans. 18 Q (By Commissioner Palans) Okay. Would you 19 also turn to page 4-7 of the proposal, which is 20 table -- it has table 4-6, proposed stormwater capital 21 rate fund table. Do you see that? 22 A Yes, sir, I do. 23 Q It appears that table 3-1 and 4-6 are the 24 same. Is that -- am I correct? 25 A Yes, sir. The numbers appear to be the same TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 186 1 to me. 2 Q And when I asked Mr. Unverferth questions 3 about table 4-6, it was in reference to his answer, 4 that an additional 40 full-time equivalent employees 5 are necessary to service and implement the stormwater 6 proposal and program. Do you recall that? 7 A Yes, sir, I do. 8 Q And in your table 3-1 that you referred to, 9 there is no identification of additional expenses 10 associated with engineering or operations, rather 11 there is a capital labor line item; correct? 12 A That is correct. There are capital labor 13 items listed. 14 Q Okay. So help me on this. Your -- you need 15 40 additional full-time employees to administer this 16 program, some of which are already on MSD staff and 17 are employed at MSD; correct? 18 A Yes, sir, that is what Mr. Unverferth 19 testified that he would need. 20 Q So those MSD employees that are currently on 21 site on staff are being paid by MSD; correct? 22 A Yes, sir. 23 Q And when this program is implemented, a 24 certain number of those employees are no longer going 25 to be paid or expensed by MSD general operating funds TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 187 1 today, but are going to be compensated out of the 2 proceeds of this rate proposal. Am I correct? 3 A Those employees that work on these projects 4 would be funded out of this proposed stormwater rate. 5 Q So they're going to -- they're not going to 6 be paid out of your general fund, they're going to be 7 paid out of the stormwater fund; correct? 8 A They're going to be paid out of the 9 stormwater fund. I don't think it's a fair assessment 10 that they're currently paid out of the general fund. 11 Q So they're no longer going to be paid out of 12 your general operating revenues, they're going to be 13 paid out of stormwater revenues that are created and 14 raised by this proposal; correct? 15 A We have -- we have employees now -- just -- 16 I want to be clear on my answer -- that are working on 17 stormwater projects now, and they are paid out of the 18 appropriate stormwater fund. There are also employees 19 that work on wastewater projects that are paid out of 20 the appropriate wastewater fund. 21 Q And as we sit here today, you can't tell us 22 how many new additional full-time employees are going 23 to be hired to implement and fill this 40 full-time 24 employees pool; correct? 25 A No. I believe that Rich had testified that TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 188 1 that determination would be made at a later date, 2 depending on what happens with our wastewater 3 projects. 4 Q And I'm not an accountant, but I would like 5 to ask you because you are, is it good, prudent 6 accounting practice to indicate that employees who are 7 working in engineering and administrative staff with 8 regard to a particular program be identified as 9 capital labor as opposed to being expensed in 10 operations? 11 A Actually, it's appropriate to do that. If 12 employees are working on a capital program, you should 13 charge them to that capital program because you're 14 going to -- basically, you're constructing an asset or 15 you're doing something that pertains to that 16 particular capital program. So it should be -- should 17 be charged there. It's totally appropriate to do 18 that. 19 Q Well, are your employees today who are 20 working on the wastewater program being charged to 21 capitalized accounts, capitalized labor, capitalized 22 administrative staff in the wastewater program? 23 A Yes. We do have employees that are charged 24 there. If we did not -- 25 Q I'm sorry. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 189 1 A Go ahead. I'm sorry. 2 Q We've been talking about policy decisions, 3 and the policy decisions are then focused really upon 4 third-party funding sources and whether the district, 5 as a policy matter, would consider encouraging 6 third-party funding to remediate the stormwater 7 concerns that we have. 8 Generally, I think you agree with us that 9 third-party funding sources are a good thing. They -- 10 they supplement the available resources that the 11 district has. Is that true? 12 A I would agree that they could be a good 13 thing. That is correct. 14 Q And, in fact, the district has developed its 15 analysis on prioritizing projects based upon a cost 16 benefit ratio; right? 17 A That's my understanding, yes. 18 Q And that I assume the district adopted that 19 because it believes it's fair; right? 20 A Yes, I believe that's the case. 21 Q And I would assume that it's fair, it's also 22 defensible? 23 A Yes, I would make that assumption as well. 24 Q Would you also agree that it's objective? 25 A Well, I am not familiar with the specifics TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 190 1 that our engineering group uses to prioritize those 2 projects; so that's more of a question for probably 3 Rich than myself. 4 Q Well, I think he's already testified that 5 the cost benefit ratio has been prepared with a view 6 to being fair, defensible, objective, in order to rate 7 the priority in which projects would be completed. 8 That's my understanding. Is that yours? 9 A If that's what he testified, then that is 10 what he said. 11 Q Okay. I'm going to just -- I'm going to 12 kind of throw you a curve here and I don't want you to 13 answer, but I want to make just a statement on the 14 record. 15 Your materials of your consultants identify 16 a resource called a "User-Fee-Funded Stormwater 17 program, a periodic, a book. And I'm going to quote 18 to you a provision in that book. I recognize you do 19 not have it front of you, and I recognize that you may 20 not have ever read it, but I'm going to read it 21 nonetheless. 22 Quote, "When financing a stormwater program, 23 it is important to have a mix of funding sources to 24 reduce the cost of borrowing, to reduce the burden on 25 the ratepayer, and to ensure revenue stability." TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 191 1 It goes on to say that incentives encourage 2 public-private partnerships. They focus on an 3 integrated solution to stormwater management. 4 Mr. Gee, there is a provision in the consent 5 decree on page 3 that says, "While MSD relies 6 primarily on user fees, it plans to pursue a 7 combination of additional available funding programs, 8 including but not limited to, state assistance, 9 federal assistance, bonding, and any other public and 10 private financing to assist in implementation of such 11 improvements." 12 That's something that you have already 13 agreed upon in that consent decree; correct? 14 A Yes. That relates to wastewater and we have 15 agreed to that. 16 Q And I am encouraging MSD, its staff, and its 17 officers to revisit that issue in order to create a 18 vehicle whereby additional funding sources from third 19 parties can be used consistent with existing MSD 20 protocol on cost benefit ratio to implement the 21 stormwater program and allow this program to complete 22 more projects, complete projects faster, and to 23 conserve resources for the district. 24 COMMISSIONER PALANS: Thank you. 25 Mr. Chairman, I have no further questions. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 192 1 CHAIRMAN TOENJES: Thank you, Mr. Palans. 2 Appreciate that. 3 Any other questions from any of the other 4 rate commissioners? 5 QUESTIONS BY CHAIRMAN TOENJES: 6 Q I have one very small question. 7 A Yes, sir. 8 Q Looking at the 40,000 people who are less 9 than the 20 equivalent units there, and even if I'm 10 billed quarterly at $6.75 a quarter, I kind of -- I 11 don't know what it costs you to generate a bill, mail 12 a bill, process a bill, do all the banking, do 13 everything else that's affiliated with that, and I 14 even question if quarterly is a big enough spread to 15 collect, plus the $7. 16 A That is certainly something that we looked 17 at when we were proposing in terms of the frequency 18 that we billed. Typically, billing and payment, as 19 well as we factored that in, varies depending on the 20 types of payments that we get in. For instance, if 21 somebody pays via check versus us having the ability 22 to electronically withdraw that money from their 23 account, obviously paying by check is more expensive. 24 So to answer your question, that is certainly 25 something we would look at in the future, see if we can TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 193 1 tweak that. But we've kind of felt like that on, at 2 least a quarterly basis, we should be billing customers 3 because when you try to bill semi-annually or annually, 4 we could run into some issues with that, in terms of 5 being able to collect that debt. 6 CHAIRMAN TOENJES: Thank you. Any other 7 questions? 8 Thank you, sir. 9 MR. GEE: Thank you. 10 CHAIRMAN TOENJES: Ms. Myers, do you have any 11 questions for the witness? 12 MS. MYERS: I do not. 13 CHAIRMAN TOENJES: Being the last district 14 employee witness, am I correct, we are moving to the 15 consultants next? 16 MS. MYERS: That is correct. 17 CHAIRMAN TOENJES: I'm going to suggest a 18 15-minute break and we will resume at 2:20 with the -- 19 with Mr. Beckley and Ms. Locklear, all right? 20 MS. MYERS: Very good. Thank you. 21 (Whereupon, a brief break was taken.) 22 CHAIRMAN TOENJES: All right. We will 23 reconvene. And, Ms. Stump, if you could let the rate 24 commissioners know about your next steps. 25 MS. STUMP: Yes. We will be submitting an TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 194 1 additional discovery request to the district based on 2 some additional information that either you-all or we 3 have indicated that we would like from the district. 4 Given the tight time crunch, we would like to submit it 5 on Monday. So if you all -- any commissioner has 6 additional questions that they still feel are out there 7 for the district, we'll be happy to submit those in 8 written discovery, if you get those to me before Monday 9 morning. Thank you. 10 CHAIRMAN TOENJES: Thank you, Ms. Stump. 11 Ms. Myers, are you ready to call your next 12 witness? It appears you are. 13 MS. MYERS: Yes, sir. It's Tom Beckley. 14 (The witness was duly sworn.) 15 CHAIRMAN TOENJES: Mr. Neuschafer, do you 16 have any questions for this witness? 17 MR. NEUSCHAFER: I do. 18 QUESTIONS BY MR. NEUSCHAFER: 19 Q Just have a few questions. First, do you 20 have your testimony in front of you? 21 A I do. 22 Q And I noticed as I was reading through the 23 testimony that there are some omitted question 24 numbers. The ones that I noticed were 7, 17, and 18 25 -- TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 195 1 A That was -- 2 Q -- 21, 22, and 23. 3 A That's an error on my part. I apologize. 4 Q Okay. I just wanted to make sure that what 5 was submitted in the packet and on the website is your 6 complete testimony? 7 A It is my complete testimony. 8 Q Okay. Great. Thank you. 9 If you look at question no. 15, this is near 10 the end of your discussion of the criteria that are 11 considered. You provide definitions of the terms fair 12 and reasonable, and I would like to understand the 13 source for these definitions. 14 A This is just my -- kind of my -- my 15 interpretation of it based on 17-and-a-half years of 16 providing rate setting services to municipal utilities 17 where fair and reasonable is pretty much the standard 18 burden or, you know, the setting rates for municipal 19 utilities. 20 Q Does this -- 21 A It wasn't from a book or anything per se. 22 It's, you know, in reviewing it, and this was kind of 23 the definition that, you know, I developed in 24 17-and-a-half years of doing this. 25 Q Is it based on any sort of case law TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 196 1 particularly in the State of Missouri? 2 A Certainly that has impacted that and it's -- 3 you know, I work in a lot of different states besides 4 Missouri. And Michigan, for example, has a very 5 similar rule to Missouri. But it's over -- over those 6 years, I've reviewed a lot of case law related to 7 utility rate setting and then just other kind of 8 references when it comes to utility rate setting. And 9 this is -- you know, I didn't take this from a book or 10 any -- I didn't take this from a book. It was kind of 11 my definition of what fair and reasonable means. 12 Q Okay. Thank you. Then on question 16. 13 Now, the question is, "Do you believe the rate 14 proposal meets these criteria?" And your answer is, 15 "Yes." 16 I want to understand, is this with respect 17 to the fair and reasonable criterion or is it with 18 respect to all five of the criteria? 19 A It's with respect to all five. Of course, 20 to the previous four, I have -- to some extent, I have 21 to trust the other experts that -- you know, whose -- 22 whose testimony has come before me in addressing some 23 of these. But based on, you know, my judgment and the 24 information they've provided to me throughout this -- 25 the process of developing this proposal and then TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 197 1 presented in this proposal, it is. 2 MR. NEUSCHAFER: Okay. That's all I've got. 3 Thank you. 4 CHAIRMAN TOENJES: Thank you, Mr. Neuschafer. 5 Ms. Stump, do you have questions for this 6 witness? 7 MS. STUMP: We're going to shake it up a 8 little bit and Mr. Malone is going to ask some 9 questions. 10 CHAIRMAN TOENJES: Thank you, Mr. Malone. 11 QUESTIONS BY MR. MALONE: 12 Q Good afternoon, Mr. Beckley. Do you have 13 your testimony in front of you? 14 A I do. I still do. 15 Q Great. In your capacity as rate consultant 16 to the district, you assisted the district in 17 formulating the financial plan that's table 3-1 of the 18 rate proposal; is that correct? 19 A Yes. 20 Q Can you tell the commission how the level of 21 revenue required per year, which is roughly 22 30 million, how that was determined? 23 A We worked with district staff -- 24 (Reporter clarification.) 25 MR. MAHFOOD: Mr. Chairman, restate the TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 198 1 question. 2 CHAIRMAN TOENJES: Yeah, please restate the 3 question. 4 Q (By Mr. Malone) Sure. In your capacity as 5 rate consultant to the district, you assisted the 6 district in formulating the financial plan, which 7 appears at table 3-1 of the rate proposal; is that 8 correct? 9 A Yes. 10 Q And can you tell the commission how the 11 level of required revenue per fiscal year, which is 12 roughly $30 million, how that figure was determined? 13 A We worked with district staff to identify 14 what was a -- you know, based on the total capital 15 program and then the willingness, you know, based 16 on -- I believe, Marion and Mr. Hoelscher discussed 17 kind of there was some factor of discussion of 18 willingness to pay what we felt would be a reasonable 19 level of annual revenue requirements that could be 20 recovered to address the flooding and erosion control 21 issues within the district. 22 Q Okay. And with regard to question 19 in 23 your direct testimony, you state that impervious area 24 is generally-accepted to be a fair and reasonable 25 approach to recovering stormwater-related cost because TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 199 1 impervious area directly impacts the amount of 2 stormwater runoff a customer will generate? 3 A Right. 4 Q So do you believe that the -- that the 5 stormwater capital rate based on impervious surface 6 reflects how much a particular ratepayer will use or 7 require the district services facilities? 8 A It's -- I believe it's the best estimate of 9 their impact on cost causation within the district. 10 Q Okay. So stated differently, would you say 11 it's -- the amount of impervious area would -- and the 12 rate being charged for that impervious area is 13 proportional to the district's needs for capital 14 improvements? 15 A It's not proportional to the district's need 16 for capital improvements. It's our best estimate of 17 their proportionate share of the cost that the 18 district is going to incur. 19 Q I see. Okay. 20 A I want to be careful because, you know, the 21 amount of impervious area doesn't directly impact the 22 size of the program. We're just saying given the size 23 of the program we believe the district needs, 24 that's -- that's the best estimate of each individual 25 customer's proportionate share of that program. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 200 1 Q I see. And have you used the fair and 2 reasonable criteria that you described a few moments 3 ago as you defined it in previous rate commission 4 proceedings? 5 A To -- you're saying is it fair and 6 reasonable to use impervious area, I believe? 7 Q Yes. Well, and I -- well, that's one 8 question, yes. 9 A Okay. I just want to make sure I -- yeah. 10 Q Sure. 11 A I believe that's the most fair and 12 reasonable way to recover these costs is through 13 impervious area. 14 Q Okay. And you had a discussion earlier with 15 counsel for MIEC regarding the definition of -- as to 16 fair and reasonable. Are those definitions you've 17 used in prior proceedings? 18 A This is my first time testifying in these 19 proceedings. I've been involved in the proceedings in 20 2007, 2008, 2011, and 2015. But that's certainly 21 similar to definitions that our firm has used in those 22 proceedings as well. 23 Q I see. And regarding question 20 in your 24 testimony, you indicated that you worked with the 25 district to determine the amount of impervious area TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 201 1 that would be charged to stormwater capital rate to 2 determine billable units; is that correct? 3 A Yes. 4 Q And then the revenue requirements for each 5 year were divided by the billable units to arrive at 6 the proposed rate? 7 A Correct. 8 Q Okay. Was vacant residential property, that 9 is, property that's been improved with impervious 10 area, but that's not occupied, is that included within 11 the amount of total impervious area? 12 A It is. Those would be those customers that 13 talked about that are stormwater only accounts. 14 Q Okay. So they may not see -- currently be 15 receiving a wastewater bill, but they would receive a 16 stormwater bill? 17 A Correct. 18 Q Okay. And then was unimproved property with 19 insignificant or no impervious area, but that's 20 otherwise on the tax rolls, would that be included 21 within that? 22 A I believe -- off the top of my head, I 23 believe the cutoff is 200 feet of impervious area. If 24 you have more than 200 square feet of impervious area, 25 then you're going to get charged at least one area of TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 202 1 -- 2 Q Okay. I see. 3 A But if you have -- just happen to have a 4 concrete pad that's 10 by 10, you won't get charged 5 because you have 100 square feet of impervious area, 6 then you would not fall within that. You would be 7 underneath that cutoff of 200 square feet. 8 Q I see. And you stated in your direct 9 testimony that there is no projected reserve 10 requirement in the fund; is that correct? 11 A Yes. 12 Q And is that a common practice within the 13 industry for an impervious area fee? 14 A No. But that's because this is, unlike most 15 other impervious area fees, it's only being used to 16 pay for capital projects and, in part, because of the 17 way MSD allocates funds to capital projects. 18 Basically, they cannot approve a capital project until 19 the cash is actually in the fund. And then when 20 they -- when there's enough cash in the fund, they 21 approve the capital project and then that cash becomes 22 obligated and it's removed from that fund. 23 So even if the balance in this fund were to 24 reach exactly zero, the reality is there's -- there's 25 most likely a lot of dollars sitting there that had been TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 203 1 obligated to projects, but not yet spent on those 2 projects. 3 Q I see. So in the event that the district 4 encountered unanticipated cost increase in a project 5 that's ongoing, can you explain how the district would 6 account for those costs? 7 A Well, they would have to -- I believe off 8 the top of my head -- and Marion would be able to 9 answer this -- but I believe they would have to ask 10 for an increase in the obligation and there would have 11 to be cash sitting there to do that. On average, 12 they -- we actually over-allocate because that's part 13 of the liquidations that's discussed in one of the 14 appendices. On average, we liquidate a portion of the 15 funds at the end of a project, in that, on average, we 16 over-allocate to projects. 17 Q I see. 18 A And that's, in part, because contingencies 19 are included in those projects to help cover that to 20 begin with. 21 Q I see. And I want to ask you briefly about 22 the credits and the incentives for residential and 23 commercial customers. Has the -- has the reduction in 24 revenue from these credits been factored into the 25 district's financial plan? TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 204 1 A It has. 2 Q And how is that reduction in cost of revenue 3 computed? 4 A It's that -- it's the appendices that 5 Mr. Gee or -- there was that -- it's been referred to 6 today before, and I don't know the number off the top 7 of my head, but basically there was a calculation of 8 each credit and how -- how -- the anticipated 9 participation of each credit and the impact, and I 10 believe it was $467,000, and there is a breakdown of 11 that in one of the exhibits. 12 MR. MALONE: Okay. All right. I believe 13 that's all the questions I have. Thank you. 14 CHAIRMAN TOENJES: Thank you, Mr. Malone. 15 Questions from any of the rate 16 commissioners? 17 Yes, Tom Ratzki. 18 QUESTIONS BY COMMISSIONER RATZKI: 19 Q Does your financial model predict any 20 increase or decrease in revenue from the Prop S tax in 21 the future? 22 A It does. We have projection of increase and 23 there's a projected increase in assessed value -- 24 excuse me -- over time, based on historical -- 25 basically, we looked at a historical period in the TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 205 1 past, and this is off the top of my head, but I 2 believe it's .86 percent is the increase in taxable 3 value over time in the recent past. And we apply that 4 to the Prop S fund, which is shown in the rate 5 proposal as table 4- -- 4-4; so that's where you see 6 the Prop S funding is in table 4-4. 7 Q Okay. Does it take into account any 8 delinquencies or people going out of business or 9 people -- 10 A Those -- 11 Q I don't know exactly how the tax laws work. 12 If you move from your house or you foreclose and don't 13 collect property tax on those, is that -- 14 A Those revenues are based on a historical 15 experience in collection rates. 16 Q That leads to my next question. So when you 17 put together -- I wasn't on the rate commission the 18 previous time this homeowner rate came through -- you 19 had some estimates of what the Prop S tax was going to 20 generate revenue wise. How well have those 21 predictions played out? Are they higher or lower? 22 A I'm not sure off the top of my head, but we 23 could pull that together. 24 COMMISSIONER RATZKI: That's all the 25 questions I have. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 206 1 CHAIRMAN TOENJES: Thank you, Mr. Ratzki. 2 Other questions? Mr. Mahfood. 3 QUESTIONS BY MR. MAHFOOD: 4 Q Yeah, I want to follow up -- I want to 5 follow up the previous question a little bit different 6 angle. 7 Has there been anything factored into the -- 8 into this formula that looks at a reduction in the 9 future in impervious surface? 10 A We looked at historical changes in 11 impervious surface and that's what we expect to 12 continue, is impervious surface will increase at a -- 13 at the same rate as historically increased. 14 Q Okay. 15 A And I believe that's approximately 16 .75 percent. 17 Q And in any of the other areas that you've 18 worked in, is that considered a fairly common 19 approach, to use historical to look at impervious 20 surface as opposed to . . . 21 A I would say for basically all of our 22 forecasting, that's typically what we look at is -- 23 is -- is what's happened historically in a given area 24 because we don't like to say -- we don't like to look 25 at other cities to try to determine what's going to TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 207 1 happen here in St. Louis. We think the best estimate 2 of what's going to happen here in St. Louis is what's 3 historically happened here in St. Louis. 4 Q Let me ask you, have you seen any programs, 5 in the scope of the work that you've done over all 6 these years, that have worked in this whole arena of 7 reducing impervious surface and voluntarily doing it 8 through incentives on an ongoing basis, where at least 9 you might be able to hold the line on increases? 10 A I am not aware of any. I would -- I would 11 suggest you ask Henrietta Locklear, who's going to 12 follow me, the same question. 13 Q Okay. 14 A I suppose, just to give you a little bit of 15 background just so you understand, you know, as I 16 said, I've worked for the district -- well, actually, 17 I used to be a consultant to the rate commission in 18 2007, 2008, 2011. And then 2015, we were hired as 19 consultant to the district. And so I have a lot of 20 experience in developing financial plans and 21 everything else. 22 And the reason we have Henrietta Locklear on 23 this proposal is because she has more experience than me 24 specifically in stormwater; so she can probably answer 25 that question better than I can. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 208 1 I mean, what I see is it's a challenge to get 2 impervious surface down because, I mean, you build a lot 3 of shopping centers, they build these huge parking lots, 4 and it's really -- an urban sprawl really contributes to 5 it. And there's been some focus on more low impact 6 development, but it certainly -- it hasn't really 7 impacted that growth of impervious area usually. 8 MR. MAHFOOD: Thank you. 9 CHAIRMAN TOENJES: Any further questions for 10 Mr. Beckley? 11 QUESTIONS BY CHAIRMAN TOENJES: 12 Q I'll ask you a question, Mr. Beckley. 13 You've worked with, in your testimony here, over 100 14 clients. In those 100 clients, have you come across 15 any public-private partnerships? 16 A I've certainly dealt with a few 17 public-private partnerships, not when it comes 18 specifically to stormwater. 19 Q Okay. How would you make any connection 20 between those clients and this particular proposal or 21 would you make any? 22 A So typically when we talk about 23 public-private partnerships in the municipal utility 24 industry, it's with projects that have a revenue 25 source or have an expense for the utility. For TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 209 1 instance, you'll do a public-private partnership on a 2 new treatment plant that you know you need and so you 3 can do a P3 approach where you do design, build, 4 operate, or something like that. I've worked projects 5 like that in Phoenix and Wichita and New Orleans, we 6 looked at those options. Some of them resulted in 7 projects, others decided not to move forward with them 8 after some amount of analysis. 9 Or there's where you have operations that you 10 have ongoing and you say, "Well, we can contract this 11 out to a private operator and they can do it better and 12 faster than we can." 13 So those are typically what we see when we 14 look at municipal utilities and public-private 15 partnerships. It is less common in stormwater than in 16 water -- wastewater. 17 Q Thank you. In those clients then, have you 18 ever seen anything like the evaluation chart that 19 Mr. Unverferth presented previously? 20 A I have not, but I would suggest you ask 21 Henrietta this -- that question as well because she 22 has more experience on the stormwater side than I do. 23 Q I will do so. 24 CHAIRMAN TOENJES: Any further questions? 25 Thank you very much. Appreciate it. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 210 1 Ms. Myers, do you have any questions for 2 this witness? 3 MS. MYERS: I do not. 4 CHAIRMAN TOENJES: Thank you. Ready to call 5 your next witness? 6 MS. MYERS: Yes, Henrietta Locklear. 7 (The witness was duly sworn.) 8 CHAIRMAN TOENJES: Mr. Neuschafer, do you 9 have any questions for this witness? 10 MR. NEUSCHAFER: I do. 11 CHAIRMAN TOENJES: Please. 12 QUESTIONS BY MR. NEUSCHAFER: 13 Q Good afternoon. I would like to start by 14 looking at your testimony. Do you have your testimony 15 in front of you? 16 A I do. 17 Q Question no. 6. The question is, "What is 18 the basis of the stormwater rate contained in the rate 19 proposal?" And your answer includes the statement, 20 "Impervious area is generally accepted to be a fair 21 and reasonable approach to recovering the stormwater 22 related costs." And then provides an explanation. 23 When you say it is generally accepted to be 24 a fair and reasonable approach, upon what is that 25 based? TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 211 1 A Over time through the setup of lots of 2 different utilities, this concept of impervious areas 3 has been tested. And so it's based on my knowledge 4 and experience of testing in the -- in the legal arena 5 and, you know, public sentiment. 6 Q I'd like to get into that just a little 7 more, tested in the legal arena. Okay. You indicated 8 that it's been tested in both the legal arena and in 9 public opinion, is that what you said? 10 A Mm-hmm. 11 Q So are you aware of courts that have 12 addressed the definition of what constitutes a fair 13 and reasonable approach to recovering 14 stormwater-related costs? 15 A There -- there are cases that indicate that. 16 I couldn't cite them for you just off the top of my 17 head today. 18 Q Okay. Do other stormwater utilities apply a 19 similar concept here? I guess, among other criteria 20 perhaps, the rate has to be fair and reasonable? 21 A Yes. 22 Q I'd like to look at question 7. 23 A Sorry. Go ahead. 24 Q Yeah. Question 7, you talk about impervious 25 areas being commonly used. And you reference a 2016 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 212 1 survey of stormwater and utilities? 2 A Yes. 3 Q And if I am correct, this 2016 survey is 4 contained in Exhibit MSD 19? 5 A That's correct. 6 Q That's correct. Okay. Now, you say that a 7 vast majority of stormwater utilities employ a rate 8 based upon impervious area (77 percent). That's 9 right? 10 A Yes. 11 Q Okay. If we look at page 4 of Exhibit MSD 12 19, I believe it states that a total of 74 13 participants from 24 states completed the online 14 questionnaire; is that correct? 15 A One second. 16 Q Page 4. 17 A Yes, in this particular survey. 18 Q In this particular survey. So your 19 statement that the vast majority, 77 percent, is of 20 the 74 participants who participated in this study? 21 A Yeah, that number is based on the survey. 22 Q Okay. And if I read the results of this 23 study correctly, this is essentially -- these 74 24 participants are stormwater utilities who, I guess, 25 self-selected because they decided to respond to the TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 213 1 online survey? 2 A I would probably have to defer to the -- to 3 the survey administrators for that particular answer. 4 Q Okay. 5 A I will add on to your line of questioning 6 there that the 77 percent is a specific percentage 7 from this survey, which I think is defensible. It's 8 also true from my experience that the very vast 9 majority of stormwater utilities I've worked with, for 10 example, use this methodology; so it's not the only 11 data point. 12 Q Okay. You said of the utilities that you 13 work with. How many utilities have you worked with? 14 A I've led the development of 15 stormwater 15 utilities. I've been involved in many more than that, 16 probably more than 30. 17 Q Okay. 18 A And I've also worked with a number of others 19 who are established and use that methodology or have 20 modified their rate structures to this methodology. 21 Q Okay. Included in MSD's materials at MSD 22 30 -- Exhibit MSD 30I, I believe it is. 23 A Yes. 24 Q Is a stormwater utility survey from Western 25 Kentucky University dated 2017. Are you familiar with TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 214 1 this study? 2 A Yes. 3 Q If you look at page 1 of this report -- 4 A I'll have to look at your copy. 5 Q That's fine. That's absolutely fine. 6 A Thank you. 7 Q Right here on page 1, it indicates that 8 their survey identified 1,639 stormwater utilities, 9 and the author estimated that there are between 1,800 10 and 2,000 stormwater utilities in the United States; 11 is that correct? 12 A That's what the page 1 says, yes. 13 MR. NEUSCHAFER: Okay. That is all that I 14 have right now. 15 THE WITNESS: Okay. Thank you. 16 CHAIRMAN TOENJES: Thank you, Mr. Neuschafer. 17 Ms. Stump or Mr. Malone? 18 QUESTIONS BY MR. MALONE: 19 Q Good afternoon, Ms. Locklear. 20 A Good afternoon. 21 Q I want to ask you briefly about your 22 testimony a few moments ago about court decisions 23 regarding impervious areas of fair and reasonable 24 means to determine stormwater rates. I know you don't 25 have case citations, but are you aware, are any of TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 215 1 those Missouri decisions? 2 A Not the ones I have in my mind. 3 Q Okay. 4 A But I would defer to the attorney on that. 5 Q Okay. There may be a Missouri decision out 6 there? 7 A There very well could be. 8 Q Okay. I also want to talk to you about the 9 credit incentive programs. In your direct testimony, 10 you indicated that MSD's proposed incentive programs 11 are within industry norms, and I think we've heard 12 testimony about rain gardens and cisterns. Can you 13 describe any other features that MSD is proposing in 14 the rate change proposal for which a credit would be 15 available? 16 A Yes. The -- the details, or at least an 17 overview of those incentives, is given in section 4.4 18 of the proposal; so I think that's a good reference 19 for that. Or do you have a specific question? 20 Q Okay. Well, I was going to ask you how 21 common these features are used in the other utilities 22 that charge a fee for impervious area? 23 A Oh, okay. It's pretty common to have a 24 credit and incentive program. In my experience, you 25 know, over half of utilities I've worked with have TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 216 1 such programs. And rain gardens and cisterns would be 2 a fairly common practice for which credit is 3 available. 4 Q Okay. And is there, I guess, industry 5 standard related to the size of a particular credit 6 for, for instance, a rain garden or a cistern? 7 A Utilities do tend to set a minimum 8 requirement for those things. I wouldn't say that 9 there's, you know, a widespread specific number for 10 those. It tends to be based more upon the specific 11 minimum criteria that they might have already have in 12 place related to development requirements. 13 Q Okay. And I believe there was some 14 questions earlier today about whether there would be 15 incentives available for homeowners associations or 16 subdivision trustees that are responsible for 17 maintaining impervious area. To your knowledge, with 18 regard to other stormwater utilities that assess an 19 impervious area fee, are there incentives available 20 for homeowners associations or subdivision trustees? 21 A I only know of one other program where that 22 particular configuration of credit is available. That 23 is where the -- where there's a homeowner association 24 maintained structure and the credit is given out to 25 the individual residential homeowner lots. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 217 1 The more common configuration of that credit 2 would be one that I think Rich referred to -- Mr. 3 Unverferth referred to in his testimony, where there is 4 a credit available to the specific property upon which 5 the detention basin or other structure is contained. 6 So, for example, if there were a property that 7 had some commonly-owned impervious area on it and that 8 drained to a specific structure -- stormwater structure, 9 the impervious area on that property could be, you know, 10 eligible for a credit. 11 Q I see. And do you know where the program 12 you referred to is? 13 A It's the Northeast Ohio Regional Sewer 14 District in Ohio. 15 Q All right. I'd like to talk to you a little 16 bit about how the ERU rate was determined. 17 Mr. Beckley testified earlier that the partials with 18 no or insignificant impervious area are excluded, and 19 the properties that are vacant, that is not occupied 20 but containing impervious area are included. Is that 21 common with regard to other stormwater utilities who 22 include vacant properties that aren't currently 23 occupied? 24 A Yes, that's common. 25 Q Okay. And is it common to exclude TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 218 1 properties with little or no impervious area? 2 A That is also common. 3 Q Okay. And in the jurisdictions that -- are 4 there a lot of jurisdictions that use an ERU as a 5 basis for stormwater billing? 6 A That is also very common. 7 Q Okay. And in those jurisdictions, is it 8 commonly used as a flat rate or something that would 9 vary based on rainfall per given month or per given 10 period? 11 A I'm not aware of a rate that varies based on 12 rainfall for a period. 13 Q Okay. Are all the ERU -- are the 14 jurisdictions that you're aware of that use an ERU all 15 a flat rate? 16 A So just to be clear, typically the E -- you 17 know, the ERU is a unit of charge. 18 Q Right. 19 A Typically, there's one unit of -- I mean, 20 there's one rate for that particular unit. However, 21 as in the district's proposal, at times, for a 22 residential rate structure, there may be tiers so 23 that, you know, there are portions that are charged to 24 certain customers, you know, smaller residential 25 customers, for example. Rarely. There are -- there TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 219 1 are other configurations of that, but it's -- I mean, 2 it's most common for there to be one flat rate per 3 ERU. 4 Q Okay. And public roads and rights-of-ways 5 are excluded from the total amount of ERUs; is that 6 correct? 7 A Yes. 8 Q And that would -- would private roads that 9 would be maintained by a subdivision or homeowners 10 association, would those also be considered within the 11 total ERUs in the district's service area? 12 A I believe that in this proposal, those 13 private roads have not be included. 14 Q Okay. And do you know why or why not? Why 15 they were included or why not? 16 A Not specifically, no. 17 Q Okay. Under the rate change proposal, how 18 are condominium units treated? Are those considered 19 non-residential or commercial property? 20 A I may have to get back to you on that one. 21 Q Okay. 22 A Just to make sure I'm accurately reflecting. 23 Q I appreciate that. 24 A Yeah. 25 Q And of the other jurisdictions you're aware TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 220 1 of that utilize that impervious area fee, are you 2 aware of any that utilize a cost-sharing program or a 3 third-party or public-private partnership would be 4 used to defray some of the cost to the stormwater 5 utility? 6 A Are you talking specifically about, for 7 example, contributions by municipalities within, you 8 know, a district like this or contributions from 9 customers or other sorts of -- 10 Q I suppose either. I mean, whichever -- I'm 11 interested in what the most common approach is for the 12 utility itself to bear the cost or for prioritization 13 to be made based on contributions from either 14 municipality or from a customer. 15 A So I would echo what Mr. Beckley said, that 16 I don't think public-private partnerships are 17 particularly common within the utilities that I know 18 of. I do know of a few cases where there are 19 cost-share arrangements for different reasons. 20 So one example would be, again, the Northeast 21 Ohio Regional Sewer District where municipalities 22 actually gain a share of the revenues from the district 23 and that was in alignment with some complex litigation 24 and agreements that those folks worked out. I also know 25 of maybe -- well, I know for sure of one utility that TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 221 1 provides for customers to contribute, you know, to -- to 2 a portion of rain garden installation on their own 3 properties and then another where there are other 4 cost-share arrangements for water quality projects on 5 customers' own properties. Those are the two examples, 6 I think, that are most applicable. 7 MR. MALONE: Okay. All right. I think 8 that's all the questions I have. 9 CHAIRMAN TOENJES: Thank you. 10 Rate commissioners, questions for the 11 witness? 12 Mr. Goss and then Mr. Mahfood. 13 COMMISSIONER GOSS: Let Mr. Mahfood go first. 14 CHAIRMAN TOENJES: Mr. Mahfood, you are up 15 first. 16 QUESTIONS BY COMMISSIONER MAHFOOD: 17 Q Good afternoon. Just -- I'm going to go 18 back to after -- after talking to Mr. Beckley. You 19 probably heard that conversation. I'm very interested 20 in the credit incentive program and your experience 21 and maybe start with the first question, having to do 22 with how potential for reducing impervious surface 23 might have made its way into, or not, into the 24 proposed rate plan and your experience with that. 25 A And if I understand your question correctly, TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 222 1 it's that essentially that the total of impervious 2 area for the whole -- or the whole utility would 3 decrease over time, going to impervious area removal? 4 Q Yes. If we were all doing the -- I guess in 5 the perfect world and developers and homeowners 6 decided to do the right thing, maybe because it hit 7 their pocketbook, maybe they saw something in the 8 future that they could reduce the cost to themselves, 9 that they might start doing the right thing and 10 constructing developments and parking lots and things 11 like this. So I don't know if that's happened, if 12 you've seen that in any of your work, if that's 13 happened or if there's anything that could incentivize 14 that to happen more quickly than . . . 15 A I -- well, to -- I'll answer the question I 16 thought you were asking first -- 17 Q Okay. Please. 18 A -- which is do I know of any utilities that 19 have actually experienced a decrease in impervious 20 area over time. The -- I know I keep on pulling 21 Northeast Ohio out of my hat. 22 Q I'm familiar with them also. Yes. That's 23 all right. 24 A So as you know, there's been a lot of -- 25 there's been a lot of blight removal there from vacant TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 223 1 properties, and so I do know that when they're 2 updating their impervious area from year to year, they 3 will often take properties off the roster because 4 vacant properties have been torn down. That is also 5 happening in Baltimore where there's a blight removal 6 program from vacant -- and by vacant, I mean 7 unoccupied houses. 8 Q Yeah. Yeah. 9 A However, even in Cleveland and in Baltimore, 10 there is an overall increase in impervious area over 11 time because development is happening there. However, 12 both of those programs and some other ones have 13 programs to -- to, I guess, have developers put in 14 less effective impervious area, meaning that the 15 impervious area is disconnected from the stormwater 16 system, and so there these kind of practices, I think, 17 that you're thinking about where impervious area 18 drains to green places and some of the volume is 19 reduced over time. 20 And in Baltimore, specifically, and I could 21 probably cite a few other places, you know, there's a 22 provision for the removal of impervious area from your 23 bill, owing to the fact that it's, you know, pervious 24 concrete or a green roof or that kind of thing. So 25 those kind of mechanisms do exist, and I don't know that TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 224 1 they outweigh the pace of development, but they would 2 affect specific customers' bills over time. 3 Q You may or may not know this. Do you know 4 if the -- if the rate proposal that we're looking at 5 today includes some methodology or some method of 6 removing impervious surface or an appeal or something 7 to that effect? 8 A Yes. I believe -- oh, yeah. If you look on 9 page 4-8 -- 10 Q Okay. 11 A -- under 4.4.3.1, "Constructed stormwater 12 BMPs that are designed to be pervious will be 100 13 percent excluded from the billable area." 14 Q Okay. 15 A And examples include green roof and pervious 16 pavement. 17 Q Okay. All right. Thank you. Good. 18 Just one other -- one other question. I 19 noticed in your responses in your testimony that you 20 noted that the MSD's proposed credit and incentive 21 program is within industry norms. Sorry. This is 22 under question 8. 23 A Right. 24 Q And -- but as you referred to it earlier on, 25 you said most utilities offer credits as part of their TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 225 1 rate system and these are ongoing reductions to 2 customers' rates that recognize their reduced demand 3 for stormwater service. 4 Do you -- have you seen where -- what the 5 differences may be with a one-time, upfront payment 6 versus an ongoing reduction due to doing the right 7 thing? What's your experience with that? 8 A Well, I would say that the places where I've 9 seen upfront incentives are for things like rain 10 barrels, which maybe are not as effective over time as 11 what is proposed by the district here. Fairly 12 minimal, I guess I would say, in comparison. And then 13 in response to an earlier question, one of the 14 programs I was thinking of is a jurisdiction in 15 Minnesota, which I can't think of the name of right 16 off the top of my head, that has a -- kind of almost 17 like a cost-share program for installing rain gardens 18 on residential properties. And I believe that that 19 program has had a lot of success with the installation 20 of those things. 21 I think the reasons that Mr. Unverferth gave 22 for doing an upfront incentive for residential 23 properties, in this particular case, are fairly 24 compelling. And so although I haven't seen that 25 particular thing used in, you know, tons of programs, TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 226 1 you know, there's a very wide variety of how credit 2 incentive programs are put together, based on individual 3 needs of utilities, and kind of what fits their 4 circumstances and their customer base. 5 And so, you know, it seems like a good 6 approach for this limited incentive, in this case, in my 7 opinion. 8 COMMISSIONER MAHFOOD: Okay. Thank you very 9 much. 10 CHAIRMAN TOENJES: Thank you, Mr. Mahfood. 11 Mr. Goss? 12 QUESTIONS BY COMMISSIONER GOSS: 13 Q You mentioned a couple of different programs 14 that you were familiar with that provide credits. 15 Would you be able to provide us with copies of those 16 programs, those credit programs? 17 A Yes. 18 Q So, for example, Northeast Ohio, you 19 mentioned that one? 20 A Yeah. 21 Q You mentioned the program in Minnesota -- 22 A Yeah. 23 Q -- that you said was very successful? 24 A Yeah. 25 Q And then you also mentioned there was -- you TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 227 1 didn't identify the districts, but you mentioned a 2 rain garden cost-sharing program and other water 3 quality cost-sharing program. And you didn't -- you 4 did not identify those two districts. Do you recall 5 those districts? 6 A Yep. So the rain garden program is in 7 Minnesota. 8 Q Okay. 9 A And probably out of nervousness, it's 10 escaping my memory at the moment, the name of it. But 11 the cost-sharing program for water quality is City of 12 Raleigh, North Carolina, and I think we can provide 13 the information about those three programs to you. 14 Q And then Baltimore -- it sounded like 15 Baltimore and Cleveland might have some kind of 16 cost-sharing program as well or did I misunderstand 17 that? 18 A I think I was specifically talking about 19 impervious area removal in those two cases. 20 Q Okay. So it wasn't a cost-sharing, it was 21 addressing that question? 22 A Yeah. Baltimore also has a credit program, 23 and I could provide the manual for that one, if you're 24 interested. 25 Q Yeah, very much so. Thank you. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 228 1 Now, are you familiar with trust indentures? 2 Does that mean anything to you? 3 A Is this associated with homeowners 4 association? 5 Q It's kind of like Provel cheese on a pizza, 6 it's a St. Louis thing. So you might -- you might 7 think of them as declarations of covenants or 8 restrictions in homeowners associations. Are you 9 familiar with those, homeowners associations? 10 A I'm familiar with homeowners associations. 11 Q Okay. Yeah, that's -- figured you'd 12 probably be familiar with that. 13 A Now we're on the same page. 14 Q Okay. So essentially they work the same 15 way. It's different -- slightly different legal 16 structure, but you've got an association that's taking 17 care of the common infrastructure of the subdivision. 18 So you mentioned, I think, it was Northeast 19 Ohio, they have a program that assists homeowners 20 associations; is that right? 21 A It's -- what I was talking about earlier was 22 a credit that's available -- 23 Q Okay. 24 A -- to homeowners associations. 25 Q Now, in that district, does the district TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 229 1 maintain the stormwater detention basins or does the 2 homeowners association maintain them? 3 A I'll send you the document that describes 4 the credit that's available, and in that document, the 5 example that's given, the homeowners association is 6 maintaining the structure in that particular case. 7 Q Do you know if it's typical for a homeowners 8 association to maintain detention basins as opposed to 9 the district? 10 A In the district? 11 Q Yeah. As opposed to the sewer district. 12 A I couldn't say whether one is more typical 13 than the other. 14 Q And in this region, it would be more typical 15 for the homeowners associations, although there are 16 some cities that are now doing that, for example, the 17 City of St. Peters is taking over those, but I 18 wondered if that had any influence on those credit 19 programs being available or not. That was the reason 20 I was asking the question. 21 A Oh, I see. I don't know why they made that 22 available. 23 Q And have you ever seen the MSD maintenance 24 agreement -- 25 A No. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 230 1 Q -- for BMPs? In your experience, is it 2 typical to have a maintenance agreement for BMPs that 3 are installed? 4 A Yes. 5 Q And those typically would go on in 6 perpetuity? 7 A Ideally, they would. 8 Q Okay. And -- and what -- and would the 9 agreement -- the agreement would provide for that, you 10 mean but the homeowner might not keep up with it, is 11 that what you mean by ideally? 12 A Well, ideally, there is some sort of 13 provision that -- you know, a structure would be 14 maintained in perpetuity so that it can maintain its 15 effectiveness. 16 Q Are you familiar with the district's CSO 17 rainscaping program? 18 A I'm somewhat familiar with it. 19 Q So you're aware that, according to the 20 district's appendix, over several years, they've had 21 200 customers that have installed rain gardens under 22 that program? 23 A I did read that in the district's materials, 24 yes. 25 Q And do you know what the incentive is under TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 231 1 that program for customers? 2 A I'd have to defer to the staff on that. 3 Q Okay. And do you have any sense with other 4 programs where there's some kind of incentive whether 5 this program would be considered a success? Is this a 6 typical kind of participation rate or is it low, high? 7 A I couldn't say. I'm sorry. 8 Q Okay. And the district's projecting that 9 they'll have 50 customers per year that will take 10 advantage of this credit. Do you have any opinion 11 about that number, whether that is high, low, or as 12 far as these kinds of credit programs go? 13 A It seems reasonable. 14 Q Okay. Why does that seem reasonable? 15 A Well, the -- a condition of the incentive is 16 that the facility is not a municipal separate storm 17 sewer system or MS4 permit-regulated requirement; so 18 it would be a voluntarily installed device. And so 19 because it requires some investment by the homeowner, 20 I don't think it would be expected that you would have 21 zero participation, but I'm not sure that you would, 22 you know, have an exceedingly high percentage of 23 participation. 24 Q What do you think the typical homeowner 25 investment will be for one of these types of programs? TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 232 1 A I don't know a dollar figure. 2 Q Well, you said it'd be typical because 3 they're going to make an investment; so is a rain 4 garden for a typical home, do you have any sense of 5 what that would cost? 6 A I would defer to the district staff for 7 that. 8 Q Well, in your experience in the -- just your 9 experience, generally. What is your experience? 10 A It would depend. 11 Q What would it depend on? 12 A The size, the design requirements -- 13 Q Are you familiar with MSD's design 14 requirements for rain gardens? 15 A Not in detail. 16 Q What do you know generally? 17 A I will defer to the district staff on 18 questions about the design of the rain gardens. 19 Q Well, I'm not asking you to -- about whether 20 their design is a good design, bad design. I'm just 21 asking what you're familiar with. If you're not 22 familiar with it, that's fine, too. I mean, I'm just 23 trying to figure it out. 24 A Right. 25 Q So that will be something you're not TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 233 1 familiar with? 2 A No. 3 Q Thank you. So do you have any opinion about 4 ways that the credit program could be enhanced to 5 encourage more participation? 6 A No. 7 Q In your experience with other incentive 8 programs, have you seen other incentive programs do 9 different things that have caused greater 10 participation? 11 A I guess I don't have a reason to believe 12 that these wouldn't have participation. 13 Q Well, what I'm talking about is greater 14 participation than 50 customers a year. I don't know 15 how many customers MS -- the district has, but it's 16 significantly more than 50, by a factor of many, many 17 times; so 50 seems exceedingly small to me. And I'm 18 trying to figure out how we can encourage people to -- 19 I think the phrase has been used -- do the right thing 20 and to address the stormwater problems that are in the 21 region on an individual or group basis through the 22 homeowners associations. That's what I'm kind of 23 exploring with you. 24 And so this incentive program is designed or 25 is believed will generate 50 folks a year. And what TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 234 1 I'm asking you, is there something that, in your 2 opinion, since you're familiar with other programs, is 3 there something that we could do to make it better to 4 get more participation? 5 A I think that within what the district is 6 trying to achieve, that this particular incentive 7 program is doing a good job to garner participation. 8 Q And what do you think the district's trying 9 to achieve? 10 A To inline with the CIRP and address erosion 11 and flooding. 12 Q Okay. And what does that mean? And would 13 you please address the question as opposed to your 14 counsel. 15 A Yeah. That's -- I mean, I would address it 16 the way I just addressed it. 17 Q So do you think that if the incentive 18 program were -- if more people participated, would 19 that reduce erosion in the district? 20 A It had -- has the potential to. 21 Q And would it reduce flooding? 22 A It has the potential to. 23 Q And so what do you think could be done to 24 encourage more participation in this program by 25 individuals in the district? TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 235 1 A Well, I think that the district can work to 2 advertise the program and make customers aware that 3 it's available and make it easy for them to apply; so 4 they're aware of it and they take advantage of the 5 program. 6 Q If a typical rain garden were to cost 7 $3,000, which I think is probably low for a homeowner, 8 do you think the $135 incentive is going to be 9 effective to encourage them to participate? 10 A I would hope so. 11 Q Okay. Do you have any opinion about the 12 program to cause a retrofitting of detention of basins 13 through credits or cost-sharing? Do you have opinions 14 about those kinds of programs? 15 A What sort of programs are you thinking of 16 specifically? 17 Q Well, like a cost-sharing program. Do you 18 have any opinion about those? 19 A A cost-sharing program seems good. 20 Q Okay. Are there, in the cost-sharing 21 programs that you've seen implemented, are there -- 22 have you seen different levels of cost-sharing, 23 depending on the type of project? 24 A I don't think I can recall off the top of my 25 head enough details about the cost-sharing programs TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 236 1 that I've talked about today to answer that question. 2 COMMISSIONER GOSS: Thank you. I have 3 nothing further. 4 CHAIRMAN TOENJES: Thank you, Mr. Goss. 5 Any further questions? 6 Yes, Mr. Ratzki. 7 QUESTIONS BY MR. RATZKI: 8 Q Earlier in the day, we talked a little bit 9 about the potential for future stormwater rate or rate 10 increases, and on that topic, have other stormwater 11 utilities you've worked with looked at an impervious 12 rate as a way to provide revenue to handle water 13 quality projects and water quality improvement 14 program? Is that under the definition of fair and 15 reasonable and use the impervious rate to do that? 16 A Yes, I've seen that. 17 Q So in turn, this -- if this rate was 18 implemented, it could be used in the future to help 19 the district pay for what new regulations might come 20 down the line for water quality? 21 A I would defer to the district's counsel on 22 that question. 23 Q Okay. But in other utilities and other 24 places, water quality issues can be financed by -- 25 A That is true. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 237 1 Q -- impervious rate? 2 A Yes. 3 COMMISSIONER RATZKI: Okay. Thank you. 4 CHAIRMAN TOENJES: Further questions for this 5 witness? 6 QUESTIONS BY CHAIRMAN TOENJES: 7 Q I have two questions. First being, in your 8 experience with these impervious area based rates, how 9 have non-profits been treated in those areas? 10 A Most often, non-profits are treated just 11 like other customers, in that they're charged the same 12 rate on the same basis as other customers. 13 Q My second question has to do with the 14 assessment chart or the prioritization chart that 15 Mr. Unverferth reviewed earlier. In your experience, 16 how often have you seen something similar to that or 17 analogous to that or is this a common practice, unique 18 practice? Talk about that chart a little bit. 19 A Okay. To start with, I haven't reviewed the 20 chart in detail; so I'll say that to start with. I 21 will say, though, that it is pretty common for 22 utilities to develop a prioritization of their list of 23 capital improvement projects so that they can decide, 24 you know, what money to -- you know, when to spend 25 what money on projects. And so I think that's -- TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 238 1 Q You have -- 2 A -- not at all uncommon. 3 Q You have not compared this chart to the 4 other charts that you've seen? 5 A I have not compared it to other charts, no. 6 Q Would you plan on doing that sometime in the 7 near future and giving us a feedback on that? 8 A Okay. 9 CHAIRMAN TOENJES: Further questions for this 10 witness? 11 Ms. Myers, do you have any questions? 12 MS. MYERS: I do not have any questions for 13 Henrietta. 14 CHAIRMAN TOENJES: Ms. Locklear, thank you 15 very much. 16 THE WITNESS: Thank you. 17 CHAIRMAN TOENJES: Appreciate it. It wasn't 18 that bad, was it? 19 Ms. Stump, are there any other issues you 20 would care for us to cover before we move on to 21 adjournment? 22 MS. STUMP: I do not have any other issues. 23 Would you like for me to maybe remind the commission of 24 what's coming up next? 25 MS. MYERS: I have one -- TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 239 1 CHAIRMAN TOENJES: Ms. Myers? 2 MS. MYERS: I'd like to make one 3 clarification before we move on. 4 CHAIRMAN TOENJES: Please. 5 MS. MYERS: Some earlier testimony regarding 6 the district's outstanding debt was inaccurate; so I 7 wanted to clarify that. 8 CHAIRMAN TOENJES: Thank you. 9 MS. MYERS: The district's outstanding debt 10 is currently at $1.5 billion; so that clarifies a 11 number that was given previously. That's just for 12 your-all information. 13 CHAIRMAN TOENJES: May I ask one further 14 question then? 15 MS. MYERS: As long as you don't get too far 16 into the outstanding debt. 17 CHAIRMAN TOENJES: Related to that debt, I 18 know we have had discussion in the past of where the 19 threshold is on bond rating thresholds. Do you know 20 how close that amount of debt is to impacting the bond 21 rating? 22 MS. MYERS: I will refer to Marion on that. 23 MR. GEE: If I understand your question, 24 you're asking at what point -- at what level debt would 25 MSD need to get to before there's a negative impact on TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 240 1 this bond rating. And I would say it varies. There is 2 no magical number per se. If the district is willing 3 to approve, for instance, rate increases that keeps 4 that coverage level high enough, there would not be an 5 impact. If we're able to do things to reduce expenses. 6 So the amount of debt that is on your books 7 is not the sole indicator in terms of how your bonds 8 are rated. So there is no magical number that's out 9 there. Again, there's a number of factors, what your 10 debt-service coverage is, number of days of cash that 11 you have on hand. Those are typical indicators that a 12 rating agency would look at to determine how you rate 13 it. 14 CHAIRMAN TOENJES: I would suggest any 15 information you could provide to the rate commission 16 along those lines of that balance of those calculations 17 would be appreciated. 18 MR. GEE: Yes, sir. I believe we had 19 provided as exhibits the -- or maybe we did not. If we 20 haven't, we will give you the rating agency -- the 21 latest rating agency reports. Within those reports 22 they list the strengths and weaknesses and also any 23 concerns that they have with respect to the debt of the 24 district. So if we have not provided those as 25 exhibits, we will do so. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 241 1 MS. MYERS: We have them. 2 CHAIRMAN TOENJES: Thank you. Ms. Stump? 3 Anything else, Ms. Myers? 4 MS. MYERS: No, that's it. 5 CHAIRMAN TOENJES: Ms. Stump? 6 MS. STUMP: I was just going to remind the 7 commission of the upcoming -- the next activities. 8 Again, if you have any questions to be submitted for 9 written discovery, please get those to me by Monday. 10 Then on Friday, April 16th, the rebuttal testimony will 11 be due and that will be submitted by Ms. Lemoine and 12 MIEC. And then following that, we will then have 13 another technical conference similar to this one where 14 those parties will testify and that will be starting on 15 April 25th. And I do believe in there somewhere you 16 have a meeting, Mr. Brockmann, on -- 17 COMMISSIONER BROCKMANN: April 20th. 18 MS. STUMP: -- April 20th, you have a meeting 19 for training on your public hearings. 20 CHAIRMAN TOENJES: April 20th at 9:00 a.m. is 21 the media training? 22 COMMISSIONER BROCKMANN: Yes. 23 MS. STUMP: And in the meantime, if anybody 24 has any questions, don't hesitate to e-mail me or call 25 me. TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 242 1 CHAIRMAN TOENJES: Are there any further 2 questions or comments prior to adjournment? 3 Yes, Mr. Mahfood. 4 COMMISSIONER MAHFOOD: I just wanted to 5 clarify that we should get any questions, Lisa, to you 6 for this third request? 7 MS. STUMP: Correct. By Monday morning would 8 be great. 9 COMMISSIONER MAHFOOD: Great. 10 CHAIRMAN TOENJES: Any further questions? We 11 will stand adjourned until 9:00 a.m. on April 25, 2018, 12 if there is no motion -- if there is a motion to 13 adjourn. 14 COMMISSIONER STEIN: So moved. 15 COMMISSIONER BROCKMANN: Second. 16 CHAIRMAN TOENJES: Motion made, seconded to 17 adjourn. All in favor, signify by saying "aye." 18 THE COMMISSION: (Collectively) Aye. 19 CHAIRMAN TOENJES: Opposed? 20 (No response.) 21 CHAIRMAN TOENJES: We are adjourned. 22 (Whereupon, the Meeting of the Rate 23 Commission was adjourned.) 24 25 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 243 1 REPORTER CERTIFICATE 2 3 I, REBECCA L. TUGGLE, a Registered 4 Professional Reporter, Certified Court Reporter, and 5 Certified Shorthand Reporter within and for the State 6 of Missouri, do hereby certify that the MSD hearing 7 held on April 4, 2018, commenced at Metropolitan St. 8 Louis Sewer District, 2350 Market Street, Room 109, 9 St. Louis, Missouri 63103; that said hearing was 10 reported by myself, translated and proofread using 11 computer-aided transcription; and the above transcript 12 of proceedings is a true and accurate transcript of my 13 notes as taken at the time the proceedings were had. 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 hearing was taken; 17 further, that I am not a relative or employee of any 18 attorney or counsel employed by the parties hereto or 19 financially interested in this action. 20 21 22 23 ____________________________________ 24 Rebecca L. Tuggle, RPR, CCR, CSR 25 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES A abate 133:24 abated 132:5 ability 11:17,22 42:20 81:8 82:9 83:21 86:3 105:1 122:9 128:11 135:9 152:14 192:21 able 107:8 116:10 119:5,12 119:13 122:12 123:15 124:4,7 136:15 149:15 149:19 151:5 154:17 155:1 157:10 159:20 161:4 163:21 168:10,13,13 181:1 183:8 193:5 203:8 207:9 226:15 240:5 absolutely 76:3 214:5 absorb 33:24 59:11 AC 127:24 accelerate 78:21 161:25 167:5,6,8,10 accelerated 167:18 180:2 accept 16:7,10 acceptable 96:24 accepted 210:20,23 access 118:23 130:3 accompanied 11:14 account 30:4 44:17 127:19 192:23 203:6 205:7 accountant 188:4 accounting 188:6 accounts 188:21 201:13 accuracy 161:2 accurate 7:20 28:21 91:15 98:6,12 117:23 118:6 125:2,4 125:9,18,19 154:11 243:12 accurately 150:9 219:22 achieve 234:6 234:9 acquired 165:24 acquisition 61:3 109:10,19 acquisitions 109:2 184:15 acre 128:18,24 acreage 127:25 128:2,3 129:10 acres 128:24 act 45:16 68:24 action 52:24 89:10 243:16 243:19 actions 57:23 activate 69:23 activities 36:12 36:14,23 37:18 40:1 241:7 activity 72:4 119:15 actual 23:4 56:1 93:15 94:20 96:20 104:3 108:1 122:10 123:5 128:9 152:3 174:9,11 178:20 actuals 174:5 add 30:14 63:16 85:11 94:8 111:6 122:10 213:5 added 157:15 adding 167:14 addition 109:5 128:14 164:21 173:20 additional 12:9 15:11 17:3 24:10,18 26:2 27:16 28:5 35:5,6 40:2 57:10 59:2,10 59:11 75:12 79:8 109:6 117:20 127:6,9 128:10 129:24 156:24 162:5 164:14 165:2,4 165:11 170:11 173:9 185:5 186:4,9,15 187:22 191:7 191:18 194:1,2 194:6 address 18:25 20:10 24:2 27:7 29:14 34:25 35:4 40:22 50:2 70:9,14 71:10 72:6 87:18 98:8 99:3 107:6,9 111:20 119:6,13 128:15 136:2 144:15 147:7,12 148:16 151:5 153:14,19 155:14 162:4 180:8,17 183:6 198:20 233:20 234:10,13,15 addressed 48:5 98:14 177:3,6 211:12 234:16 addressing 29:10 87:5 125:2,5,7,20 125:21 128:18 128:24 129:10 152:25 196:22 227:21 adequate 11:18 81:8 adjacent 128:6 adjourn 242:13 242:17 adjourned 242:11,21,23 adjournment 238:21 242:2 adjust 44:16 97:7 118:10 120:4 181:13 adjusted 161:15 161:15 165:9 administer 186:15 administered 112:17 administrative 188:7,22 administrators 213:3 adopted 12:11 55:25 189:18 advantage 72:25 74:11,13 133:13 135:9 136:15 139:11 139:17,23 140:10 231:10 235:4 advertise 143:4 143:12 235:2 affect 148:21 224:2 affidavit 15:18 15:18,24 16:15 affiliated 192:13 affluent 67:24 67:24 78:11,13 78:20,22 175:25 affordable 52:12 afraid 146:12 afternoon 163:4 197:12 210:13 214:19,20 221:17 agencies 167:18 183:21 agency 182:22 240:12,20,21 agenda 7:22 8:5 ago 24:12,17 30:11 34:13 47:12 52:10 117:7,10 121:6 146:7 177:3,7 200:3 214:22 agree 126:2 148:18 189:8 189:12,24 agreed 148:21 191:13,15 agreement 45:13 60:22 100:12 101:9 101:14 105:13 105:17 107:20 108:4,6,21 113:4,24 145:17 148:22 229:24 230:2 230:9,9 agreements 104:3,5 108:6 108:14 220:24 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201:9,11,19,23 201:24 202:5 202:13,15 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 206:9,11,12,19 207:7 208:2,7 210:20 211:2 211:24 212:8 214:23 215:22 216:17,19 217:7,9,18,20 218:1 220:1 221:22 222:1 222:3,19 223:2,10,14,15 223:17,22 224:6 227:19 236:11,15 237:1,8 implement 71:25 77:14 132:14 151:4 156:16 173:1,17 178:3 181:20 186:5 187:23 191:20 implementati... 67:2 116:3 135:23 184:7 185:6 191:10 implemented 122:1 186:23 235:21 236:18 implementing 69:8 important 19:1 27:5 47:19 50:5,21 75:16 117:17 160:15 161:3 190:23 imposed 24:20 87:16 imposes 11:25 20:19 imposing 42:12 improve 74:4 improved 138:23 201:9 improvement 26:1,13 77:10 111:5 124:24 136:11 138:16 170:7 236:13 237:23 improvements 23:5,9 40:22 104:20,23,25 106:18 110:25 158:20,21 191:11 199:14 199:16 inaccurate 239:6 incentive 66:1,6 99:14 100:5 101:12 120:17 131:3 133:14,16 135:6 147:24 148:24 149:3 149:6 172:1 215:9,10,24 221:20 224:20 225:22 226:2 226:6 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167:12 item 7:22 8:5 76:18 158:6,18 186:11 items 36:21 161:7 186:13 iteration 122:25 it'd 75:16 120:8 142:20 145:23 232:2 J J 4:3 63:22 64:6 74:15 130:14,16 job 234:7 John 5:5 join 17:3,4 joints 36:22 Jones 5:5 6:21 journal 117:5,5 judged 44:4 judgment 25:19 26:25 34:15 45:13 89:10 152:17 196:23 June 12:4 14:12 jurisdiction 225:14 jurisdictions 218:3,4,7,14 219:25 Justice 45:14 justification 46:11,12 K K 63:22 64:6,8 keep 20:8 115:11 146:16 156:19 222:20 230:10 keeping 46:5 keeps 240:3 Kennard 5:5 Kentucky 213:25 kind 23:15 25:2 27:22 30:23 35:2 36:5,6 37:5 38:4,7 43:15 44:18 50:17 61:23 65:21 71:3 77:22 78:18 85:11 94:24 98:10 106:21 111:4,19 112:5,9 124:24 126:5 142:10 143:20 144:4 146:18 148:13 163:18 164:21 165:3 168:19 170:2 175:25 181:17 182:20 183:15 190:12 192:10 193:1 195:14 195:22 196:7 196:10 198:17 223:16,24,25 225:16 226:3 227:15 228:5 231:4,6 233:22 kinds 148:17 231:12 235:14 knock 119:25 knocking 155:11 know 22:15 26:2,23 28:11 31:1 33:4,12 TECHNICAL CONFERENCE 4/4/2018 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164:13 235:22 levied 83:17 levy 38:8 88:4 103:16,18 104:5,7,10,20 104:22 105:3 105:8,18 lieu 72:9 152:25 life 96:22 97:4 97:11 lifespan 30:2 limit 55:6 limited 41:21 99:25 191:8 226:6 line 24:21 30:16 43:3 71:6 111:4 111:4,12 158:6 158:17 171:25 186:11 207:9 213:5 236:20 lineal 129:3 lines 34:21 40:19 42:10 77:15 85:15 109:22 240:16 lining 36:19 link 47:10 liquidate 203:14 liquidations 203:13 Lisa 4:2 14:22 242:5 list 27:9 29:19 30:8,9 32:11 40:5,5,12 41:18 54:20 64:21 97:15 107:3,25 108:18 115:15 159:17 161:21 237:22 240:22 listed 64:23 103:25 104:2 166:22,23 184:14 186:13 listing 166:11 172:4 lists 108:1 166:13 litigation 1:19 89:14 220:23 little 29:20 30:10 35:1 36:11,12,13 38:3 40:24,25 41:1 42:9 43:9 45:3,7 46:23 47:15 49:3 51:25 54:19 56:19 62:3 63:6 71:4 77:17 83:24 86:15 99:18 106:19 110:23 111:1 119:1 121:14 148:16 150:15 151:17 170:3 172:10 179:12 197:8 206:5 207:14 211:6 217:15 218:1 236:8 237:18 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 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mischaracteri ... 127:18 missed 108:7 mission 135:7 Mississippi 23:24 72:6,7 72:14,15 114:7 114:11 Missouri 4:12 10:19,21,24 11:1 12:16 14:17 18:13,15 22:9 22:23 23:23 80:3 86:16 87:3 88:16 105:7 106:9 196:1,4,5 215:1 215:5 243:6,9 mistaken 24:25 misunderstand 227:16 mitigate 72:8 98:20 mitigating 72:13 mix 26:1 52:8 58:24 69:21 70:7 78:18 190:23 mixed 78:17 Mm-hmm 211:10 MO 1:21 4:4,10 4:15 model 57:16 125:8,19 126:8 126:11 127:1 204:19 moderate 68:21 modified 213:20 MoDOT 77:5,5 77:6 79:6,7 181:21 MoDOT's 77:11 moment 170:13 177:3,6 227:10 moments 200:2 214:22 Monday 194:5,8 241:9 242:7 monetary 122:13 money 39:20 54:9 60:5 61:7 134:18 161:24 164:10 165:15 167:16 167:23 180:19 180:25 182:7 182:15,16,23 183:9,12 192:22 237:24,25 monies 164:14 monitor 106:7 106:12 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES month 56:11 164:18 218:9 monthly 174:16 175:5 months 49:18 61:8 170:8 month's 118:3 morning 6:1 17:21 18:5 21:23,24 32:25 33:1 54:2 80:8,9 93:7,8,10 99:11,12 194:9 242:7 motion 7:24 8:2 8:3,6,12,21,25 16:7,13,15,22 242:12,12,16 Mound 10:23 move 16:10 21:20 32:15 44:9 50:10 75:11 78:4,25 150:17 161:9 205:12 209:7 238:20 239:3 moved 7:25 8:14 61:8 242:14 movement 161:9,10 moves 36:25 36:25 moving 49:18 193:14 MSD 18:11,13,14 18:16,18 19:1,7 21:3,4,5,6,12 22:25 23:4,8 23:14,15,21 24:3,4,5,5,17 25:12,18,25 26:23 28:24 29:4,5 30:4 30:25 31:5,9 31:15,19 41:10 41:17 42:18 43:8,11,22 44:14,20 53:3 54:4,15,21 55:25 56:10 63:24 66:13 67:20,22,25 68:8 73:17 78:4 79:5 80:22 81:12,16 81:22 82:5,14 82:14 84:10,10 85:17 86:9 87:11 89:13 91:25 96:4,5 107:1 112:6 117:2,19 122:2 124:10,12,20 126:1,5,9 130:9,21 131:7 131:11,16 137:20 138:24 139:5 141:20 141:23 142:8 155:13 157:19 163:7,16 165:6 165:18,25 166:5,9,17,23 167:4 170:18 170:19 171:19 174:5 175:11 180:19 181:20 183:2,8 185:2 185:11 186:16 186:17,20,21 186:25 191:5 191:16,19 202:17 212:4 212:11 213:21 213:22 215:13 229:23 239:25 243:6 MSD's 19:17,25 21:2 23:11 24:24 31:17 34:23 39:5,6 42:16 44:5 67:11,19 68:4 69:7 78:22 130:8 142:13 168:24 213:21 215:10 224:20 232:13 MSD-owned 38:25 MS4 231:17 mulch 117:15 multiple 122:4 127:5 143:18 143:19 multitude 123:1 124:2 multitudes 126:21 multiyear 59:22 municipal 10:19 23:20 195:16 195:18 208:23 209:14 231:16 municipalities 24:4 27:13 54:3,8,14,21 58:22 67:5 76:16 77:7 124:12,13 155:1 181:24 220:7 220:21 municipality 54:10 67:14,17 77:9,23 78:20 115:8 220:14 Myers 2:3,12 4:13 12:20 14:15,15 17:16 17:18,20,21,22 18:4,5 21:13,16 21:19 22:14 24:8 38:13 79:13,15,22 79:24 80:3 82:21 90:5,9 90:23 92:14 92:15,16,18,20 162:12,14,17,19 171:20,22 177:19,22 193:10,12,16 193:20 194:11 194:13 210:1,3 210:6 238:11 238:12,25 239:1,2,5,9,15 239:22 241:1 241:3,4 N N 1:20 2:1 3:1,1,1 nail 160:25 name 9:2,13,19 10:8 17:21 18:5 22:22 225:15 227:10 names 7:20 118:19 natural 41:14 111:21,22 112:2 112:4 nature 36:13 66:19 97:8 151:20 152:7 near 53:4,4 195:9 238:7 nearest 103:8 necessarily 26:23 37:13 112:5 120:21 148:18 166:22 167:9 168:11 183:7,17 necessary 11:6 36:20 44:18 95:23 186:5 need 23:11 37:3 41:9 50:21 60:5,11 61:17 65:19 69:17 76:19 77:10 87:24 109:14 112:6 120:16 142:17 156:4 156:17 165:21 167:3 181:7,16 186:14,19 199:15 209:2 239:25 needed 39:24 40:12 50:7,23 108:3 needs 21:2 38:5 49:14 60:2 69:19 126:25 149:9 153:20 178:7 199:13,23 226:3 negative 239:25 neighborhood 10:15 neighbors 151:14 180:13 neither 243:14 nervousness 227:9 Neuschafer 2:6 2:13,16 3:2,7 3:11 4:7 14:18 14:18 22:8,11 22:19,20,21 22:22 32:18 32:20 43:10 80:2,5,7 82:19 83:1 93:2,4,6 96:2 99:4,6 162:25 163:1,2 169:8 169:10 194:15 194:17,18 197:2,4 210:8 210:10,12 214:13,16 Neuschafer's 75:8 never 79:4,4 88:18,24 89:1 89:17 97:9 115:3,7 153:10 new 18:24 20:9 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 29:14 30:5,5 37:20 48:6 52:18 83:18 98:21 101:5 104:12 110:5 111:17 116:2,16 118:7 138:8 145:17,23 146:5,15 156:10 157:2,9 173:1 175:7 185:8 187:22 209:2,5 236:19 News 170:9 nine 14:10 61:8 nonprofit 10:16 92:4 nonprofits 88:20 nonpublic 41:21 non-pervious 34:1 non-profits 237:9,10 non-required 120:19 non-residential 219:19 non-wastewa... 174:18,20,22 Nope 92:16 105:24 normally 28:24 29:5 norms 215:11 224:21 north 4:9 10:24 23:22 227:12 Northeast 217:13 220:20 222:21 226:18 228:18 notarized 15:18 15:24 16:14 note 40:19 46:18 68:15 69:6 121:5 144:8 noted 77:1 224:20 notes 243:13 notice 11:3 12:3 12:5 noticed 194:22 194:24 224:19 notify 120:16 143:6 not-for-profit 116:25 not-for-profits 31:3 57:1,19 November 9:25 number 11:6,8,9 11:15,17,19,22 11:25 24:19 26:17,18 30:22 55:12 55:13 62:11 63:18 65:10 66:18 96:20 97:25 103:1 106:15 116:15 123:15 127:8 128:2,22 129:23 139:23 143:16,20 144:4 151:12 163:13 164:7 169:4 170:8 172:2,3,13,17 173:6,6 186:24 204:6 212:21 213:18 216:9 231:11 239:11 240:2 240:8,9,10 numbers 29:25 30:1 59:25 122:22 123:17 134:11 137:17 138:5 170:3 185:25 194:24 numerous 88:17 88:23 O O 3:1 objective 160:11 189:24 190:6 objectivity 160:13 obligated 202:22 203:1 obligation 23:4 104:20 105:4 203:10 obligations 46:22 obtain 182:7 obtained 170:7 172:4 obvious 117:11 135:17 obviously 97:9 98:20 111:22 111:25 119:14 126:22 135:11 143:11 146:22 146:25 173:8 178:8 192:23 occupied 201:10 217:19 217:23 occur 31:11 44:6 44:15 76:12 93:20 97:9 123:10 184:12 occurred 77:14 occurring 44:13 76:12 occurs 44:2 93:23 offer 47:10 79:1 134:17 224:25 offering 117:16 134:20,21 offerings 66:9 officers 191:17 official 126:9 oftentimes 60:22 oh 74:16 106:3 174:4 177:9 215:23 224:8 229:21 Ohio 217:13,14 220:21 222:21 226:18 228:19 okay 23:7 26:11 27:14,19 28:23 30:21 30:24 32:18 33:10 34:19 37:23 38:6,14 39:12,17 40:16 40:16 42:8 44:19,19 45:6 46:14 48:23 50:24,25 51:14 52:7,15 52:17 54:25 55:18 57:4,16 58:2 59:6 64:11,25 75:2 79:10 81:3,15 81:21,23,24 82:7,17 84:8 84:16,23 85:5 85:15 86:11 88:2,14 89:5 89:24 90:2 92:12 96:2,18 97:14 99:4,17 102:22 103:16 103:22 105:16 106:15 107:18 107:18,21 108:19 109:3 109:20 110:22 110:23 118:20 119:19 121:10 121:18 122:15 122:17 125:20 125:24 126:4 126:15 128:1 128:16 129:1,8 130:17 131:22 135:1 142:9 143:8 144:1,3,7 144:13 146:2 147:14 148:12 149:21 156:2 157:21 162:7 165:20 169:5 170:17 171:4 171:20,22,24 172:21 173:25 175:3,21 177:2 177:12,17,20 178:2 179:1,12 185:18 186:14 190:11 195:4,8 196:12 197:2 198:22 199:10 199:19 200:9 200:14 201:8 201:14,18 202:2 204:12 205:7 206:14 207:13 208:19 211:7,18 212:6 212:11,22 213:4,12,17,21 214:13,15 215:3,5,8,20 215:23 216:4 216:13 217:25 218:3,7,13 219:4,14,17,21 221:7 222:17 224:10,14,17 226:8 227:8 227:20 228:11 228:14,23 230:8 231:3,8 231:14 234:12 235:11,20 236:23 237:3 237:19 238:8 old 61:14 77:19 77:20,20 103:7 113:25 older 146:9 147:8 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES OMCI 65:11 107:8 156:23 omitted 194:23 once 69:21 70:7 109:12,12 ones 30:14 101:23 110:20 166:19 194:24 215:2 223:12 one-half 43:1 130:22 one-time 132:10 147:24,25 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16:7 21:2 24:2 32:12 39:25 44:16 47:6 48:19 76:19 77:11 95:3 100:7 132:1 147:12 153:2 156:15 167:8 182:4 190:6 191:17 organizations 10:7,10,12,13 10:16,16 92:5 orientation 18:11 original 45:9 156:23 originally 57:7 69:24 originate 71:16 71:17 Orleans 209:5 outcome 89:14 outlay 132:17,19 148:5 outlines 80:15 outside 53:9 67:13 68:2 76:7 89:18 90:12,15 107:12 108:24 162:5 outstanding 11:21 82:2 239:6,9,16 outweigh 224:1 overall 25:12 30:3 47:21 64:18,21 93:17 179:15 223:10 overflow 68:24 69:19 70:2 71:3,3 72:5,8 overflowing 113:1 overflows 69:23 70:10 70:15 72:13 114:11 overview 215:17 over-allocate 203:12,16 owing 223:23 owned 58:10 135:25 165:25 166:5,9,9 owner 87:15 118:22 120:8 145:18 owners 29:14 29:15 62:7 67:5 74:1 95:6 113:3 120:14 121:4 136:1 139:16 140:9 142:14 154:25 155:1 ownership 163:19 165:22 166:18,23 O&M 20:13 35:17 36:12 37:18 39:20 42:1 46:17 47:10 48:3 59:1,9 65:12 87:6,21 88:19 88:24 89:1 91:10 166:1 o'clock 6:2 P pace 183:5 224:1 packet 195:5 pad 202:4 page 34:21 40:18 42:10 51:1,9 69:6 83:3 88:15 99:15 102:24 105:20,24 106:17 127:7 156:1 157:17,18 171:14,24 174:16 185:2 185:13,19 191:5 212:11,16 214:3 214:7,12 224:9 228:13 paid 65:14 70:16,22 72:16 104:17 186:21,25 187:6,7,8,10,11 187:13,17,19 Palans 2:10,14 2:21 3:4 5:10 7:2 9:13,14,17 65:3,4,7 72:17 72:19 77:4 90:6,7,8,20 90:22 91:16 112:10 149:24 149:25 150:4 150:5 159:6,8 160:23 163:6 184:19,20,22 184:24 185:17 185:18 191:24 192:1 Pamela 14:20 papers 30:4 parcel 102:13 parking 41:15 117:8,12 208:3 222:10 part 19:3,6,20 20:3 32:14 37:10,15 38:17 40:5 43:11 46:14,19 47:10 47:13 48:12 50:18 52:21 53:15,17 54:10 56:12 57:5 60:10 63:24 67:19 71:23 76:2 77:21 84:25 94:12 95:14 100:15 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 113:8 114:6 116:9,14 120:5 127:10 128:7 137:18 138:23 140:13 144:15 152:16 153:21 165:3 195:3 202:16 203:12 203:18 224:25 partials 217:17 participants 15:3,6 212:13 212:20,24 participate 14:9 78:3 149:17 179:9 235:9 participated 212:20 234:18 participating 9:14 54:4 172:13 participation 172:5 204:9 231:6,21,23 233:5,10,12,14 234:4,7,24 particular 24:21 28:2 47:15 50:5 60:14 62:15 80:12 84:12 96:13 109:17 126:9,11 127:12 130:23 157:5 163:12 163:19 165:19 166:15 178:16 182:16 188:8 188:16 199:6 208:20 212:17 212:18 213:3 216:5,22 218:20 225:23,25 229:6 234:6 particularly 45:1 115:15 134:4 148:6 157:13 173:10,22 196:1 220:17 parties 17:24 21:14 180:22 182:8 191:19 241:14 243:16 243:18 partnership 161:20 209:1 220:3 partnerships 155:16 191:2 208:15,17,23 209:15 220:16 parts 39:8 46:15 47:6 53:10 party 74:18 passed 20:6 passing 32:9 40:6 patios 34:2 pattern 81:5 Paul 5:6 57:6 pavement 224:16 pay 11:6 43:1,21 43:23 44:4 49:23 56:21 56:23 57:10 57:13 65:21 67:18 78:20 79:3 105:1 132:20 147:12 148:10 151:8 152:21,24 164:1,2 176:12 198:18 202:16 236:19 payback 149:9 paying 31:18 78:14 87:19 87:20 117:1 131:18 134:2 192:23 payment 91:4 148:1 175:16 192:18 225:5 payments 192:20 pays 192:21 people 18:12 35:18 56:9,21 57:10,13 58:21 69:18 73:7,13 76:10 82:16 105:2,2 115:3 149:16 151:13 155:11 157:10 192:8 205:8,9 233:18 234:18 perceived 181:14 percent 31:12,13 44:8,10 53:2,3 55:19,19 101:19,25 102:4,16 103:6 121:3 142:7 143:16 150:22 150:23 170:6 170:23,23,25 172:22 177:1 205:2 206:16 212:8,19 213:6 224:13 percentage 55:25 57:10 172:22 174:1 213:6 231:22 perfect 152:16 222:5 perform 25:13 104:6,9,12,23 124:14 performed 141:20,23,23 period 12:8,10 15:1 38:24 40:8 49:17 98:24 100:14 110:16 132:15 137:8 140:5 143:22 144:4 149:9 158:24 164:2 167:7 170:24 174:12 179:18,21,22 182:25 204:25 218:10 218:12 periodic 190:17 periods 36:24 97:10 permitted 14:9 15:11 permit-regula... 231:17 perpetuity 113:6 230:6,14 person 12:12 13:18 14:3,25 26:7 150:25 150:25 personnel 157:13 persons 15:11 21:17 person's 15:9 perspective 69:20,20 71:14 166:7 178:13 180:16 pertain 166:4 pertains 188:15 pertinent 47:17 48:11 165:19 pervious 223:23 224:12,15 Peters 229:17 philosophy 149:12 Phoenix 209:5 phone 9:7 phrase 127:17 233:19 physical 97:2 111:10,13,18 picked 151:12 picture 117:7 pictures 117:9 piece 20:12 36:1 47:15 48:4,10 76:21 103:5 126:23 178:17 piled 117:15 pilot 140:12 pipe 37:13,14,14 70:6 71:15 95:13 pipes 97:3 111:11 piping 111:20 pizza 228:5 place 24:1 32:3 46:1 47:23 70:14 72:9 98:20,25 101:1 101:4 112:3 119:14 128:7,21 135:3,21 136:2 139:9,24 140:18 216:12 placed 164:9 places 223:18 223:21 225:8 236:24 placing 165:7 plan 9:22 10:1,6 18:16 31:7,9 40:13 44:15 69:7 70:20 80:20 104:12 104:24 108:17 116:5 159:1 197:17 198:6 203:25 221:24 238:6 planned 31:17 planning 45:11 108:23 142:4 142:5 plans 25:25 44:5 49:17 53:8 54:17 191:6 207:20 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES plant 209:2 plants 45:19 69:13 112:25 play 55:7 played 205:21 please 9:6 17:19 18:3 20:8 21:22 22:12,18 80:6 93:5 141:15 184:20 198:2 210:11 222:17 234:13 239:4 241:9 pleasure 169:16 plus 11:2 132:16 192:15 pocketbook 222:7 point 22:3 25:4 31:6,14 34:10 36:2,3 39:2 43:6 64:16 71:3 75:22 77:1 94:7 97:18 114:16 122:3,9 123:4 124:6,8,21 142:13 144:22 159:16 160:23 162:24 165:21 213:11 239:24 points 68:18,24 93:22,25 94:8,12 95:9 95:25 103:11 127:6,9 128:16 128:17 129:3,5 129:10 130:3 policies 58:15 175:23 policy 39:7,10,11 43:15,16 67:22 68:4 111:3 116:4 139:4 153:21 155:21 176:4,5 176:9,17,18 181:11,18 183:1 189:2,3,5 ponder 147:3 ponds 129:9 pool 187:24 pop 151:2 portion 25:7,7 25:12 69:24 69:25 72:2 163:22 166:4 203:14 221:2 portions 104:14 218:23 poses 156:3 position 42:18 43:15,16 67:11 positive 142:11 possession 41:25 possible 43:25 110:4,14 159:16 160:11,17 162:6 possibly 30:22 60:1 73:5 137:25 154:22 pot 54:24 potential 25:20 27:5 29:2 36:19 37:1 39:23 44:13 48:5 72:10 114:2 172:5,9 221:22 234:20,22 236:9 potentially 41:24 135:16 168:9 179:22 180:22 183:18 power 18:15 powers 23:14 practical 88:1 practice 79:4 176:6 188:6 202:12 216:2 237:17,18 practices 101:5 125:1 223:16 predict 204:19 predictions 205:21 preexisting 138:12 prefer 26:10 73:14 preliminary 28:12 109:9 160:22 171:16 prepared 12:19 13:14,25 190:5 preparing 63:9 155:12 present 5:3 6:16 7:9,11,14 14:20 21:17 22:13 76:19 79:22 145:4,6 presentation 61:23 presented 20:16 27:12 29:11 156:6 197:1 209:19 presenting 46:10 presumably 24:17 134:21 pretty 27:3 76:17 93:18 111:8,10 138:2 195:17 215:23 237:21 prevent 36:21 preventing 55:12 previous 39:19 100:21 116:1 120:7 196:20 200:3 205:18 206:5 previously 41:5 43:20 46:5 158:16 209:19 239:11 price 27:10 primarily 33:5 114:20 128:5,8 141:24 191:6 primary 34:24 40:19 principle 11:7 prior 76:6,12 92:22 113:1,19 119:13 121:25 200:17 242:2 priorities 154:23 prioritization 63:24 64:17 64:23 94:20 122:1 124:15 126:3 130:10 130:13 154:10 180:9 220:12 237:14,22 prioritize 190:1 prioritized 66:24 prioritizing 31:22 114:17 154:14 189:15 priority 125:22 152:1 180:1 181:3,5 182:19 190:7 private 43:5 58:10 77:5 83:23 85:19 112:18 191:10 209:11 219:8 219:13 privately 41:16 privileged 86:8 prob 150:19 probability 55:11 probably 26:7 27:3 37:9 62:5 84:14 95:14 105:10 118:9 128:5 140:11 142:7 142:20 143:2 143:5 147:11 148:15 168:18 176:10 178:5 180:23 181:6 190:2 207:24 213:2,16 221:19 223:21 227:9 228:12 235:7 problem 23:13 25:19 27:23 28:11 29:13,18 37:25 48:21 62:9 63:11 66:17,17,24 93:15,19,20 93:24 95:4,9 95:24 96:6 107:5 121:22 121:24 122:7,8 122:10,18,20 123:4 126:11 129:12 134:7 134:10,15 147:10 150:9 153:1 162:4 164:24 180:7 180:13 183:6 problems 23:17 23:17 26:20 26:21 29:11,22 30:13,13,13 37:1,15 38:3 67:6 71:19 96:8,16 115:12 125:2,6,22 127:6,8 150:8 150:12,21 151:5 152:11 153:23 155:17 179:17 233:20 procedural 12:11 15:13 17:2,13 17:16 proceed 9:7 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 17:11,19,25 18:3 21:22 22:18 proceeding 1:3 9:21 24:10 proceedings 7:19 12:15 24:16 31:16 39:19 43:21 47:17 200:4,17 200:19,19,22 243:12,13 proceeds 187:2 process 18:9 30:14 32:3,8 32:13,16 34:16 38:17 44:2 54:16 55:2,15 64:23 76:7 77:22 78:17 122:24 127:2 145:4 148:13 160:15,24 180:9 192:12 196:25 processes 35:13 processing 109:24 produced 63:23 132:5 producing 102:12 products 40:3 Professional 243:4 program 24:2 26:1 31:13 32:15,16 39:25 42:11,14 42:17,23 43:1 44:10 50:6 51:20 52:12 54:18 56:24 60:20 66:15 67:3 70:9,13 70:23 71:1 72:24 73:1 74:2,10,12,19 74:20,24 75:24 77:7,9 77:15 100:5 101:4,12 108:2 108:9,11 109:12 112:17 113:8 114:2,12 120:13 124:24 131:3 133:4,16 134:12 139:9,9 139:12,19,22 140:1,2,10,17 140:19,21 147:25 148:14 148:25 149:3 149:7,17 150:18 151:4,7 151:24 152:2 155:6,7 156:9 156:19,22 157:7,11,12 161:13 163:8,13 163:22,24 164:23 165:15 165:19 166:3,4 166:6 167:13 167:19 170:7 173:7 181:2,20 183:24 185:9 186:6,16,23 188:8,12,13,16 188:20,22 190:17,22 191:21,21 198:15 199:22 199:23,25 215:24 216:21 217:11 220:2 221:20 223:6 224:21 225:17 225:19 226:21 227:2,3,6,11 227:16,22 228:19 230:17 230:22 231:1 231:5 233:4 233:24 234:7 234:18,24 235:2,5,12,17 235:19 236:14 programmed 67:15 77:19 programs 47:22 60:21 66:1,7 99:14 116:10 135:2,6 139:14 143:19 147:24,24 148:17 166:13 172:14,19,20 181:2 182:1 183:19,21 191:7 207:4 215:9 215:10 216:1 223:12,13 225:14,25 226:2,13,16,16 227:13 229:19 231:4,12,25 233:8,8 234:2 235:14,15,21 235:25 project 28:2,18 28:19,25 30:3 32:6,7 38:21 60:24 61:4,6 67:15,20 72:10 77:8,21 78:1,4,21 79:2 94:10 95:1 96:22,24 107:24 109:5 109:13 114:5 117:10 127:9 134:21,23 142:3 143:19 149:16 153:10 155:23 156:16 158:17 161:22 161:25 166:11 166:15 167:8 179:10,14,25 180:2,10 182:18 202:18 202:21 203:4 203:15 235:23 projected 110:5 110:15 202:9 204:23 projecting 231:8 projection 40:9 140:22 204:22 projections 110:9 140:8,15 171:10 173:22 projects 27:9 29:4,20 30:1 31:23 32:7,9 32:11,14 37:20 38:22 39:20 40:15 41:21 49:10,25 50:10 54:11 55:2 58:9 62:21 64:17,18 65:8 66:18,23 67:8,12 69:9 71:7 75:24 78:13,15 93:11 96:19,19,21 97:12,16,18,21 98:1 105:22 106:6 108:18 109:14 114:17 122:5 124:2 130:10 132:24 133:24 134:19 142:6 143:18 145:3 151:25 152:6 153:16 154:1,6,14 155:2,3 156:17 159:2,18,22 161:22 163:15 163:20 164:11 164:15 166:13 166:21,22,23 167:5,6,10 176:1,13 179:17 179:24 180:19 181:22 182:3 182:17,24 184:9,14 187:3 187:17,19 188:3 189:15 190:2,7 191:22 191:22 202:16 202:17 203:1 203:2,16,19 208:24 209:4 209:7 221:4 236:13 237:23,25 project's 38:23 proofread 243:10 Prop 40:4,12 42:3 112:14 204:20 205:4 205:6,19 proper 7:21 35:9 124:17 properties 52:11 83:18 94:11 98:3,7 113:9 113:10,25 119:11 126:17 136:21 217:19 217:22 218:1 221:3,5 223:1 223:3,4 225:18,23 property 19:17 19:25 20:14 29:14,15 35:16 36:9 51:7 58:21 62:7 67:5 71:2 73:25 83:22 84:21,22 85:6 85:7 87:15 95:5 98:9,13 98:16 102:7,13 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 103:5 107:23 112:19 113:3 118:22,24 119:5,10,12 120:8,14 121:4 123:12,12 126:10,17,23 127:12 131:19 135:12 136:1 138:8 139:16 140:9 142:14 142:18 145:22 146:1 154:25 162:2,2 178:9 178:17 201:8,9 201:18 205:13 217:4,6,9 219:19 proportional 199:13,15 proportionate 199:17,25 proposal 12:13 18:23 19:4,6 19:10,11,15,20 20:3,9,19,25 22:25 25:11 32:12 33:16,19 38:11 43:18,18 45:12 46:20 47:18 48:13 48:25 50:1 51:21 52:22 53:16,17 54:4 55:18 56:9,21 58:8 62:20 65:24 66:7 68:12 72:24 74:15,16 75:14 80:11,18 81:10 81:25 82:8 88:7,9,9 97:15 99:16 102:18 103:23 108:2 110:7 118:9 143:14 151:18 153:11 155:18 156:6 157:16 157:18,19 163:11 166:12 169:23 170:1 172:22 173:19 184:13 185:6 185:10,11,19 186:6 187:2,14 196:14,25 197:1,18 198:7 205:5 207:23 208:20 210:19 215:14 215:18 218:21 219:12,17 224:4 proposals 51:18 55:21 56:18 75:18 propose 8:4 151:7 proposed 10:4 11:14 12:5 18:20 20:15,19 20:21 21:1 40:5 46:4 47:8 50:3 51:4 54:18 58:9 61:20 65:15 83:7 110:2 142:13 158:2 185:20 187:4 201:6 215:10 221:24 224:20 225:11 proposes 18:24 20:9 proposing 44:11 47:21 48:1 51:22 65:14,15 65:23 147:21 163:15 192:17 215:13 proposition 20:6 32:10 35:3,12 36:10 38:19 40:6,10 59:1,14,16 156:22 propound 15:11 propounded 13:9,19 14:5 protection 166:21 protocol 191:20 proved 125:1 Provel 228:5 provide 11:17 13:8 18:9 20:23 23:15 24:6 26:16 33:9 40:20 47:17 50:12 56:25 66:2 81:8 86:8 92:6 93:12 94:10,17 100:3 100:10 107:25 108:1,6,16,21 123:20 126:2 126:7 128:14 130:12 132:8 132:18 140:13 144:24 145:5 145:9 146:25 148:7 149:5 152:24 159:18 160:1,6,18 161:5,11 162:4 195:11 226:14 226:15 227:12 227:23 230:9 236:12 240:15 provided 31:19 48:2 51:17 52:2 61:20 81:1 85:25 89:23 91:13 91:25 92:7,10 94:15 95:22 123:3 133:9 142:14 143:15 171:16,17 178:21 196:24 240:19,24 provides 25:18 48:25 210:22 221:1 providing 48:21 54:5 56:22 87:11 118:6 128:10 160:4 195:16 provision 11:20 38:10 82:1,5 88:6,8 190:18 191:4 223:22 230:13 provisions 80:22 proviso 162:1 prudent 183:15 188:5 public 14:10 17:11 19:24 30:19 32:4 33:23 34:23 35:14 36:8 37:7,11 38:2,16 38:20 39:7 40:23 41:2,3 41:23 43:5 48:4,7 52:25 53:5,6,6,14 54:23 58:10 58:14,18 59:3 59:9 76:17 83:22 85:19 119:3 143:5 152:22 154:12 191:9 211:5,9 219:4 241:19 publication 143:3,4 publicized 143:9 public-private 155:16 161:20 191:2 208:15 208:17,23 209:1,14 220:3,16 pull 78:1 132:25 162:3 169:25 170:1 205:23 pulled 68:14 pulling 222:20 purely 98:1,2 purpose 13:7 40:19 pursuant 18:13 85:20 pursue 23:4,8 191:6 pursued 89:17 pursuing 24:9 put 27:11 28:5 30:15,16 32:5 38:15 52:12 54:18 58:16 59:15 70:14 72:9 79:9 98:20,25 100:2 109:16 109:17 112:3 112:22 116:16 120:20,22 122:9,13 126:25 128:20 133:7 135:2,18 136:24 138:14 143:10,18 160:25 205:17 223:13 226:2 putting 36:2 59:3 112:4 133:11 137:11 puzzle 20:12 P.C 4:3 P.E 2:6,15 P3 209:3 Q qualified 26:9 qualify 42:25 131:23 quality 72:7,15 110:1 128:14 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 137:11,14 221:4 227:3,11 236:13,13,20 236:24 quantities 161:7 quarter 192:10 quarterly 54:20 175:2,3 192:10 192:14 193:2 question 23:3 25:23 31:17 33:11,17 34:21 38:12 40:17 42:10 43:3,23 49:5 50:16 51:1,8,9 52:16 56:17,19 57:7 57:7 61:13 63:9 64:9 73:15 74:7,17 75:10 77:3,5 80:15,16,17,17 81:4,7,13,16,24 82:6,7 83:3,6 85:17 86:12 88:2,5,15 89:23 91:1,1,16 91:18 92:1 94:23 98:11 99:15,17 102:21 103:17 105:20,24 106:1,3,15,17 107:19 108:7 109:1,8,21 110:11 112:8 121:1 129:2 131:5 135:10 136:20 139:20 143:14 144:9 146:2 150:1,11 151:15 156:1,3 156:3 157:14 160:2,19 161:17 163:20 169:19 169:21 170:16 170:18 171:14 171:24 174:4 174:15 176:20 176:21,24 177:2,4,6,9,13 179:13 182:6 185:1,4,4 190:2 192:6,14 192:24 194:23 195:9 196:12 196:13 198:1,3 198:22 200:8 200:23 205:16 206:5 207:12,25 208:12 209:21 210:17,17 211:22,24 215:19 221:21 221:25 222:15 224:18,22 225:13 227:21 229:20 234:13 236:1 236:22 237:13 239:14 239:23 questioning 213:5 questionnaire 212:14 questions 2:6,7 2:7,8,8,9,9,10 2:10,11,13,13,14 2:14,16,16,17 2:17,18,18,19 2:19,20,20,21 2:21,22 3:2,3 3:3,4,4,5,7,7,8 3:8,9,11,12,12 3:13,13,14 13:9 13:19 14:5,25 15:3,4,9,12 16:4 22:3,7,8 22:13,21 23:1 32:21,24 33:7 47:14 53:18,21 54:1 55:15,17 58:7 60:8 61:12 62:5 63:1 64:11 65:1 65:7 72:18,22 73:13 75:3,6,7 79:11,13 80:2 80:7,10 82:15 82:20,23 85:17 89:25 90:5,8,21,23 90:25 92:13 93:2,6 99:7,10 107:16 113:19 113:22 114:15 116:20,23 119:23 120:12 121:13 130:11 141:1,4,7,12,13 141:17 144:20 145:11 147:17 147:22 149:23 150:2,5 159:7 159:9,13 162:9 162:10,12,23 163:2 165:20 169:11,13 170:12 176:22 179:5,7,8 184:3,5,17,24 186:2 191:25 192:3,5 193:7 193:11 194:6,16 194:18,19 197:5,9,11 204:13,15,18 205:25 206:2 206:3 208:9 208:11 209:24 210:1,9,12 214:18 216:14 221:8,10,16 226:12 232:18 236:5,7 237:4 237:6,7 238:9 238:11,12 241:8,24 242:2,5,10 quick 27:21,25 28:7 158:23 quickly 24:22 49:14 162:4 182:15 222:14 quite 32:4 36:23 47:9 54:13 160:9 169:2 176:10 quorum 7:14 quote 68:17 190:17,22 R Raftelis 21:7,8 rain 34:3 66:4 99:25 100:9,11 100:24 116:11 117:4 120:18,19 120:21,23 133:5,8 151:1 161:23 180:12 215:12 216:1,6 221:2 225:9 225:17 227:2 227:6 230:21 232:3,14,18 235:6 rainfall 218:9,12 rains 93:21 123:9 180:14 rainscaping 230:17 rainstorms 68:21 raise 156:16 raised 163:6 187:14 Raleigh 227:12 ramp 39:22 range 96:23,23 103:5,6,9,14 103:15 161:3 169:3 ranges 103:9 rarely 78:25 218:25 rate 1:1,3 4:6 6:3 6:4 9:11,20 10:1,8,10,17 11:3,4,6,12,13 11:14 12:2,2,4 12:5,7,9,11,13 12:19,23 13:1,6 13:9,11,13,19 13:24 14:5,21 14:23,24 15:4 15:17,19,22 16:3 17:3 18:8 18:18,23,24 19:2,4,6,9,10 19:15,20 20:3 20:9,10,15,19 20:25 21:9,11 22:2,25 24:10 24:13,13,19,21 25:3,4,11 31:18 32:12 33:5,16 33:18 34:13 37:21 40:20 41:21 42:12,17 42:24,24 43:1 43:7,14,17,18 43:23 44:4,5 44:16,16,24 45:12,23,24 45:25 46:4,9 46:19,22,25 47:4,6,8,13,18 48:6,12,17,19 48:23 49:7 50:4,15 51:5 51:13 52:19,21 52:23 53:8,11 53:21 55:18 55:20,21,24 56:9,11,20,21 57:2,3,5,11,13 57:16 60:10,14 61:20 65:2,24 68:12 71:8,14 71:22 74:16 75:4,9,9,14,18 76:8 78:14 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 79:18 80:11,17 81:10,25 82:8 83:7,8,10,13 83:19,20,22 83:25 84:1,3,6 84:9,14,20 85:2,3,15,18 86:4,17,25 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167:18 239:19 239:21 240:1 240:12,20,21 ratings 159:18 161:15 165:9 167:25 rating's 165:10 ratio 32:7 63:19 68:3 123:4 128:2 144:23 154:13 155:23 189:16 190:5 191:20 rationale 8:7 23:8 175:9 Ratzki 3:8,13 5:4 7:4,5 204:17,18 205:24 206:1 236:6,7 237:3 reach 108:14 202:24 reaching 69:10 read 190:20,20 212:22 230:23 reading 9:10 158:12 194:22 ready 21:16 63:13,15 79:22 92:18 142:20,21 162:17 194:11 210:4 real 37:9 50:5 67:17 77:18 realistic 161:2 reality 97:6 202:24 realize 115:18 realized 56:2 really 33:7 36:3 47:19 50:21 54:8 74:22 76:14,19,20 99:1 133:5,10 139:6 158:20 182:19 189:3 208:4,4,6 reanalyzed 151:24 reason 26:5 31:5 36:2 50:14 62:4 67:23 73:16 85:2 88:11 129:1 133:3 163:23 180:6 207:22 229:19 233:11 reasonable 11:25 20:20 42:13,15 43:4 51:2,19 52:13 91:5 169:22 170:4 171:8,12 175:19 195:12 195:17 196:11 196:17 198:18 198:24 200:2 200:6,12,16 210:21,24 211:13,20 214:23 231:13 231:14 236:15 reasonable-ty ... 146:13 reasons 36:8 46:2 56:15 88:17,23 163:13,14 220:19 225:21 Rebecca 1:19 243:3,24 rebuttal 13:14,17 13:18 241:10 recall 39:18 61:22 103:20 115:25 149:2 165:23 176:2 176:21,22 179:15 186:6 227:4 235:24 receipt 11:3 182:11 receive 43:23 56:10 100:7 180:21 201:15 received 12:2 21:11 57:18 86:2,22 87:14 90:17 115:7 receives 127:6 receiving 136:12 201:15 recognize 17:2 190:18,19 225:2 recognized 15:20 23:11 recognizing 44:12 recollection 138:1 recommend 11:4 recommenda ... 16:7 recommenda ... 10:2 18:19 81:19 recommended 11:12 47:1 reconvene 79:21 193:23 record 13:5 14:1 38:7 39:12 83:12 115:4 170:9 190:14 records 7:20 115:6 recover 200:12 recovered 178:7 198:20 recovering 198:25 210:21 211:13 rectify 178:10 178:24 recurrence 55:11 recurrences 93:21 redirects 69:9 reduce 31:13 35:15,22 56:24 57:4 66:2 70:11 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 113:9 114:10 148:20 180:23 180:24 182:8 190:24,24 222:8 234:19 234:21 240:5 reduced 223:19 225:2 reducing 35:19 132:15 148:23 157:8 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104:9,11,13,16 104:18 116:14 120:20 135:18 137:7 138:9 146:18 reimburse 67:21 reiterated 68:12 reject 52:18 relate 63:23 related 11:19 31:21 35:5 64:20 71:13 80:10 81:9 87:10 91:20,21 109:1 118:23 165:21 185:6 196:6 210:22 216:5,12 239:17 243:15 relates 80:17 191:14 relating 11:20 72:1 82:1 185:8 relation 165:25 relationship 52:1 86:21,24 87:10,14 134:11 relative 125:25 134:15 142:12 157:6 243:17 relatively 25:10 25:11,17 42:6 116:17 167:2 release 68:25 relevant 68:11 124:21 relies 191:5 relying 90:15 remain 78:22 101:8 remainder 141:7 remaining 104:14 remains 15:10 remarks 21:10,11 remediate 150:7,12 152:11 155:17,23 189:6 remediation 67:7 153:15 153:20,23 154:6 remember 20:13 59:15 94:19 106:1 remind 53:22 121:5 238:23 241:6 removal 114:8 222:3,25 223:5,22 227:19 remove 145:21 removed 70:21 202:22 removing 224:6 rendered 91:17 reoccurrence 123:11 repairing 36:18 repeat 98:11 106:3 108:5 110:10 176:23 177:4 repeatedly 33:21 rephrase 30:24 68:15 replace 37:17 report 12:5,9 33:6,9 54:21 126:2,7 140:12 214:3 reported 1:18 243:10 reporter 7:16 53:23 94:1 197:24 243:1,4 243:4,5 reports 127:11 240:21,21 represent 10:11 representation 10:9 representative 10:10 159:17 176:8 representativ ... 10:18 represents 27:14 request 12:24 13:2 15:22 49:5 57:3,5 60:3,10 63:8 107:15 150:1 152:20 194:1 242:6 requesting 31:6 require 15:17 61:3 65:9 112:5 118:7 132:1 146:9 164:14 165:2 199:7 required 11:10 14:25 47:3 49:1 59:11 100:7 120:14 120:20 140:19 140:20 146:17 152:3 167:20 197:21 198:11 requirement 15:23 16:14 135:18 146:18 164:8 202:10 216:8 231:17 requirements 19:14 29:23 42:22 45:16 46:6,12 68:11 72:15 100:6 104:14 137:7 138:9 168:17 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 183:4 198:19 201:4 216:12 232:12,14 requires 10:6 82:4 231:19 requiring 59:20 136:5 138:13 142:3 research 124:11 135:5 reserve 22:4 168:19 202:9 reserves 164:9 resident 149:8 residential 10:11 31:4 67:4 98:1 99:20,24 100:4 131:2,3 131:7 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2:17 117 2:18 12 12:23 34:21 81:24 103:11 109:23 118:4 170:8 171:24 12:45 141:6 120 2:18 121 2:19 122 2:19 13 82:7 1323 91:6 14 185:1,4 142 2:20 145 2:20 148 2:21 15 31:12,13 42:10 44:8,10 51:1,9 99:15,17 146:7 167:21 195:9 213:14 15th 171:17 180:3 15-minute 193:18 151 2:21 16 13:14 14:2 42:10 81:16 102:21 174:7 196:12 16th 241:10 160 2:22 164 3:2 17 92:1 103:17 117:7,10,13 174:10 194:24 17-and-a-half 195:15,24 170 3:3 18 2:3 14:2 60:16 156:1,3 158:25 194:24 180 3:3 185 3:4,4 19 13:1 157:14 171:25 198:22 212:4,12 193 3:5 195 3:7 1954 9:24 18:14 1956 18:14 198 3:7 1980s 136:23 2 2 7:22 161:23 170:16 2,000 214:10 2-point-some ... 169:3 2.1.2 129:17 2.5 174:12 2:20 193:18 20 30:6 49:5 59:4 97:1 106:3 107:4,5 146:7 171:25 174:19,24 175:1,4 192:9 200:23 20th 179:25 241:17,18,20 20-year 30:2 55:7 167:7 200 74:11,13 128:16 130:3 139:10,15 201:23,24 202:7 230:21 2000 9:25 2000s 98:22 2006 96:5 114:18 121:25 125:1 2007 200:20 207:18 2008 103:7 153:8 200:20 207:18 2011 200:20 207:18 2012 110:17 2015 83:17 200:20 207:18 2016 211:25 212:3 2017 46:4 170:9 213:25 2018 1:3,10 6:4 8:18 12:3,4,12 12:18,23,25 13:1,3,16,25 14:2,11,12 109:23 242:11 243:7 2019 19:11 20:17 45:11 53:13 76:6,13 171:16 2020 46:4,7 75:11 2021 25:6 46:3 46:9 75:11 2024 25:6 46:10 158:24 204 91:20 204.700 88:16 88:22 89:3,17 89:19 205 3:8 207 3:8 209 3:9 21 43:3 174:15 195:2 211 3:11 4:9 215 3:12 22 12:25 195:2 222 3:12 227 3:13 23 2:6 111:3 195:2 23-year 140:19 140:21 2350 4:14 243:8 237 3:13 238 3:14 24 106:17 212:13 25 122:21 123:23 150:22 150:23 242:11 25th 13:16 241:15 250 79:3 129:13 129:18 259-2050 4:10 26 12:3,4,12,18 143:15 27 13:16 270 62:6 107:12 28 105:20,24 29 13:3 3 3 40:18,19 69:6 127:7,7 171:14 171:24 185:13 191:5 3D 185:2 3(a)8:5 3-1 185:10,11,23 186:8 197:17 198:7 3-3 185:13 3.02016 83:23 86:17 3.7 143:16,24 170:6 177:1 3.9 170:25 30 59:17 96:17 97:1 101:25 102:4 107:4 115:12,13 153:17 163:25 197:22 213:16 213:22 30A 44:20 68:8 30B 50:25 81:17 85:17 107:15 117:20 30I 213:22 30J 121:16 TECHNICAL CONFERENCE 4/4/2018 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 30K 121:17,19 30Q 81:2 82:14 82:14 85:25 86:9 91:25 30th 170:9 30-year 107:5 164:2 300 123:22 31 106:22 107:19 150:20 31A 49:5 170:14 170:18 314 1:22 4:5,10 4:15 32 109:1 33 21:12 33USC 91:6 34 2:7 35 109:8 3600 4:9 38 15:25 4 4 1:10 34:21 42:10 55:19,19 88:15 99:15 127:20 172:22 185:2 205:5 212:11,16 243:7 4th 6:2 4-4 205:5,6 4-6 158:5 185:20,23 186:3 4-7 157:17,18,21 185:19 4-8 224:9 4.1 174:9 4.4 99:16 215:17 4.4.3.1 224:11 4.8 170:23 40 97:1 156:8,17 156:24,25 157:1 186:4,15 187:23 40,000 173:12 192:8 400 130:3 45-day 12:9 450 96:21 47 85:17 480-some 97:21 483 66:18 49.9 53:5 5 5 8:18 40:19 102:24 156:1 174:16 5th 7:23 5,000 148:9 5-year 55:12 5.7 170:23 50 53:5 97:4 103:6 122:20 149:16 231:9 233:14,16,17 233:25 50-point 122:19 50-year 55:6,13 50.1 53:5 50/50 155:7,12 500 131:22 149:16 500,000 52:10 79:3 520 18:12 150:13 55 2:7 56 51:1,9 562 26:24 27:14 30:16,17 60:14 150:22 59 2:8 6 6 83:3 97:15 105:20,24 210:17 6.6 174:14 61 2:8 62 2:9 621-2939 4:5 63101 1:21 4:4 63102 4:10 63103 4:15 243:9 64 2:9 644-2191 1:22 66 2:10 7 7 9:25 13:25 91:1 106:17 194:24 211:22 211:24 7.040 18:17 7.270 80:12 7.6 174:13 70 102:9,16 121:3 711 1:20 714 4:4 73 2:10 74 212:12,20,23 75 122:21 206:16 76 2:11 768-6209 4:15 77 212:8,19 213:6 8 8 40:17 88:15 89:23 109:21 224:22 8C 117:19 8th 14:11,12 80s 98:21 99:1 107:2 137:4 81 2:13 83 2:13 86 205:2 9 9 9:24 80:15 169:19 9:00 6:2 241:20 242:11 90 53:2 142:7 91 2:14 92 2:14 94 2:16