Loading...
HomeMy Public PortalAboutExhibit MSD 30B - MSD's Response to First Discovery Request of the Rate CommissionExhibit MSD 30B BEFORE THE RATE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT MSD'S RESPONSE TO FIRST DISCOVERY REQUEST OF THE RATE COMMISSION The Metropolitan St. Louis Sewer District Response ISSUE: STORMWATER RATE CHANGE PROCEEDING WITNESS: THE METROPOLITAN ST. LOUIS SEWER DISTRICT SPONSORING PARTY: RATE COMMISSION DATE PREPARED: MARCH 12, 2018 Metropolitan St. Louis Sewer District 2350 Market Street St. Louis, Missouri 63103 1 Exhibit MSD 30B BEFORE THE RATE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT For Consideration of a ) Stormwater Rate Change Proposal by ) The Rate Commission of The Metropolitan ) St. Louis Sewer District ) MARCH 12, 2018 FIRST DISCOVERY REQUEST OF THE RATE COMMISSION The Metropolitan St. Louis Sewer District Pursuant to § 7.280 and § 7.290 of the Charter Plan of The Metropolitan St. Louis Sewer District (the "Charter Plan"), Operational Rule 3(5) and Procedural Schedule § 17 and § 18 of the Rate Commission of The Metropolitan St. Louis Sewer District ("Rate Commission"), The Metropolitan St. Louis Sewer District ("District") hereby responds to the March 12, 2018 First Discovery Request of The Rate Commission for additional information and answers regarding the Rate Change Notice dated February 26, 2018 (the "Rate Change Notice"). 2 Exhibit MSD 30B BEFORE THE RATE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT For Consideration of a ) Stormwater Rate Change Proposal by ) The Rate Commission of The Metropolitan ) St. Louis Sewer District ) DISCOVERY REQUEST OF THE RATE COMMISSION Pursuant to §§ 7.280 and 7.290 of the Charter Plan of The Metropolitan St. Louis Sewer District (the "Charter Plan"), Operational Rule 3(5) and Procedural Schedule §§ 1, 17 and 18 of the Rate Commission of The Metropolitan St. Louis Sewer District ("Rate Commission"), the Rate Commission requests additional information and answers from The Metropolitan St. Louis Sewer District ("District") regarding the Rate Change Proposal dated February 26, 2018 (the "Rate Change Proposal"). The District is requested to amend or supplement the responses to this Discovery Request, if the District obtains information upon the basis of which (a) the District knows that a response was incorrect when made, or (b) the District knows that the response, though correct when made, is no longer correct. The following Discovery Requests are deemed continuing so as to require the District to serve timely supplemental answers if the District obtains further information pertinent thereto between the time the answers are served and the time of the Prehearing Conference. 1 Exhibit MSD 30B DISCOVERY REQUEST 1. Brian L. Hoelscher states in Direct Testimony that the purpose of the Rate Change Proposal is to fund an additional District -wide stormwater service in the form of capital improvements. See Exhibit MSD 3(a), p. 2. Has the District analyzed whether, once these capital improvements have been constructed, the Rate Proposal will provide sufficient Operating and Maintenance ("O&M") revenue to maintain these capital improvements, in addition to the District's existing facilities? If such analysis has been conducted, please provide a copy of the analysis. RESPONSE: The existing revenue for the Operation and Maintenance of Public Stormwater Facilities that was put in to place with the passage of Proposition S in April 2016 will provide sufficient revenues to operate and maintain any new public stormwater facilities that are built from this proposal. Because the potential size and scope of any new facilities that are constructed under this proposal will be relatively small in size when compared to the size and scope of MSD's existing facilities, no analysis was completed. 2. Richard L. Unverferth states in Direct Testimony that the Stormwater Capital Improvement and Replacement Program ("CIRP"), Appendix D to the Rate Change Proposal (Exhibit MSD 1, App. 6E), identifies the needed additions and improvements to the stormwater sewer and drainage system. See Exhibit MSD 3(c), p. 2. Mr. Unverferth further testifies that the CIRP was compiled from historical records and engineering studies to address customer complaints. Has the District studied whether, in lieu of addressing the sites listed in the CIRP individually, it would be less costly and/or more equitable to address stormwater on a District - wide or watershed level approach in lieu of responding to complaints? If such analysis has been conducted, please provide a copy of the analysis. RESPONSE: When individual issues and projects are evaluated for potential solutions, District staff performs a review of other known issues in the general vicinity. These other issues are then taken into consideration to determine the overall extent of a problem area. Other issues identified are then considered in the overall conceptual solution. This prevents the proposed solution from exacerbating other problem areas or simply shifting the problem area. This is primarily done on a sub -watershed basis. The District has performed District -wide stormwater studies to evaluate known problem areas. In 1981 the Phase I Stormwater Management Plan was prepared to identify problem areas for 14 watersheds in the original area of the District. In 1984 the Annexed Area Stormwater Study was prepared to identify problem areas in the newly annexed area. In 1989 the District conducted a District -wide study to verify problem areas from the previous studies. In 1995-2000 the Stormwater System Master Improvement Plan was prepared for 23 watersheds. Modeling was performed to establish release rates for future development and to identify problem areas. In 2006-2010 the District conducted an overall review of known problem areas to verify project viability. The aforementioned studies consist of approximately 40 volumes which are not available electronically. They are available for review in our office. 1 Exhibit MSD 30B 3. A commissioner has requested that the District provide an analysis of how the use of Equivalent Residential Units ("ERUs") would impact large commercial properties, such as shopping malls, big -box stores, strip malls, and innovation districts with large amounts of impervious surface. Please identify several such properties within the District and present the Commission with an analysis of such property owners' potential liability if the Rate Change Proposal were approved. RESPONSE: Please see Exhibit MSD 30C. 4. To follow up on Request No. 3, has the District analyzed whether, if the Rate Change Proposal is approved, large commercial properties may go out of business, and thereby cease generating revenue under the Rate Change Proposal, and the potential impact to the District's funding? If such analysis has been conducted, please provide a copy of the analysis. RESPONSE: The District is not privy to the financial information relating to these customers; however, as depicted by the anticipated charges listed in Exhibits MSD 30C and 30D, the District does not believe that the stormwater capital rate of $2.25 per ERU will place an undue hardship on any of these customers. 5. Please provide a typical bill summary for the District's 25 largest customers in terms of Impervious Area under the Rate Change Proposal. This should include (itemized) the Capital Impervious Area rate, Regulatory Tax and O&M Tax. RESPONSE: Please see Exhibit MSD 30D. 6. Please provide information related to the nature of outreach to not only the community as a whole (through public meetings in 2017) but specifically to property owners with significant impervious area to provide the Rate Commission with an understanding of the nature of and/or extent of concern regarding the Rate Change Proposal. RESPONSE: The information is laid out below in chronological order, with supporting documentation attached for each cycle of outreach. December 2016 — MSD had meetings with municipalities letting them know we would be A.) Developing the proposal; and B.) Having public meetings and doing formal surveying to solicit public feedback. MSD held 6 meetings as well as a presentation to the Municipal League in February 2017. Exhibit MSD 30E is a copy of the presentation given. March to April 2017 — MSD held public meetings to solicit feedback. MSD held 7 of these meetings. Exhibit MSD 30F is a copy of the presentation given. 2 Exhibit MSD 30B MSD conducted a survey through its contractor ETC. Exhibit MSD 30G is a copy of the survey results. From the executive summary: "More than half of the residents surveyed are willing to pay an additional monthly property tax or impervious fee to fund stormwater improvements. Twenty-nine percent (29%) are willing to pay $1 per month in additional property taxes; 18% would pay $2 per month, 9% would pay $3 to $4 per month, and 9% would pay 5% per month in additional property taxes. The remaining 35% are not willing to pay any additional property tax to fund stormwater improvements. When residents were asked if they are willing to pay a monthly impervious fee to fund stormwater improvements, 28% indicated they would pay $1 per month. Fifteen percent (15%) would be willing [to pay] $2 per month; 9% would pay $3 to $4 per month, and 8% would be willing to pay $5 per month in an impervious fee. The remaining 41% of residents are not willing to pay a monthly impervious fee to fund stormwater improvements." March 2018 — MSD began holding the first of 5 municipal meetings to share what has been submitted to the Rate Commission. Exhibit MSD 30H is a copy of the presentation which includes a Project Clear Update as well as a description of the Stormwater Rate Proposal. 7. In the District's rate model, there is an assumed 4% "stormwater bad debt allowance." See Exhibit MSD 1, App. 6E, p. 18. How was this factor determined? Has the District evaluated the impact of increased costs beyond this factor (e.g., increased delinquencies in assessed tax payments)? RESPONSE: The District used the bad debt percentage (75%) for its existing wastewater customers that will also be billed the stormwater capital rate and utilized a rate of 40%for stormwater only customers (see Table E-1 of Appendix 6E). The 40% rate was based on information received from the Northeast Ohio Regional Sewer District (Cleveland Area) and the City of Philadelphia. Using the aforementioned percentages, a weighted average bad debt percentage was computed at 4%. 8. The District's proposal includes several assumptions related to customer growth. a. The District's Rate Model includes an assumed change in stormwater parcels of -0.05% per year. This indicates fewer parcels year over year. Please explain the basis for this assumption. b. The District's Rate Model includes an assumed change in Impervious Area of 0.86% per year. This factor is used to calculate Impervious Area from 2013 forward. Please provide the basis for the calculation. c. Appendix 6A summarizes the District's calculation of Impervious Area, indicating the most recent update as of 2012. See Exhibit MSD 1, App. 6A, p. 2. When does the District plan to update the impervious surface data through aerial imagery? 3 Exhibit MSD 30B RESPONSE: 8a. The -.05% was an early estimate of the change in the number of parcels based on changes in the District's number of accounts in recent years. Although the number appears in the rate model it is not used. The financial plan and rate proposal are based only on ER U's which are escalated as described in Response 8b. 8b. The assumed change in impervious surface area of .86% represents an average annual change in impervious surface area from 2005 to 2012, based on flyovers conducted in February 2005 and February 2012. 8c. The flyover flight lines for most of the District were completed during the week of March 12, 2018. A few additional higher density lines over the Downtown and Clayton areas with taller buildings will be flown on sunny days in the next couple of weeks to eliminate tall building lean. The processing of the data from the flyovers just done will be completed and delivered as aerial photos (in digital form) referenced to our map coordinate system in August — September, 2018. The delineated impervious areas will then be delivered in blocks starting in October 2018, with the final block delivered in September 2019. We will process each block for billing within a month of receipt so the whole District will be ready for billing by January 2020. 9. Identify other cities and/or sewer districts (collectively "Locales") which utilize an impervious area -based stormwater capital rate to fund capital improvements throughout their respective service areas. RESPONSE: The District was unable to find another city or sewer districts that had enacted a rate designated solely to fund capital improvements; however, several communities charge an impervious based rate that funded both operation and maintenance of their systems and capital improvements. Please see Exhibit MSD 19 (Black & Veatch 2016 Stormwater Utility Survey) and Exhibit MSD 301 (Western Kentucky University 2017 Stormwater Survey). 10. Identify other Locales which utilize ERUs as a measure of the average number of square feet of impervious surface area found at residential customers throughout such District. RESPONSE: Please see Exhibit MSD 19 (Black & Veatch 2016 Stormwater Utility Survey) and Exhibit MSD 301 (Western Kentucky University 2017 Stormwater Survey). 11. With respect to each such Locale, what is the impervious area based stormwater allocation rate measured for residential customers and for non-residential customers. RESPONSE: Please see Exhibit MSD 19 (Black & Veatch 2016 Stormwater Utility Survey) and Exhibit MSD 301 (2017 Western Kentucky University 2017 Stormwater Survey). 12. Identify the factors utilized to prioritize projects identified in the CIRP program. 4 Exhibit MSD 30B RESPONSE: Stormwater projects are identified to address flooding and erosion issues and are prioritized based upon the severity of the flooding and erosion and the overall benefit to the property. Types of stormwater flooding problems listed in order of severity include: structure flooding, roadway flooding, and yard flooding. Types of erosion problems listed in order of severity include: stream erosion threatening a structure, stream erosion threatening a road, and yard erosion. See answer to Question #13 for further details. 13. Describe the process utilized for prioritizing projects identified in the CIRP program. RESPONSE: The identification and prioritization of projects to be included in the Capital Improvement and Replacement Program is a multi -step process, requiring monitoring and updating to ensure that the highest priority problems within the District are addressed in a timely manner, given funding available. These stages include: project identification, conceptual solution, preliminary study, final design, and construction. At each step in the process, the project scope is reevaluated to verify that it continues to meet regulatory requirements and customers' needs. The project cost is updated, and the project's priority is assessed with the goal that the highest priority projects are funded first. Stormwater projects are identified to address flooding and erosion issues and are prioritized based upon the severity of the flooding and erosion and the overall benefit to the property. Types of stormwater flooding problems listed in order of severity include: structure flooding, roadway flooding, and yard flooding. Types of erosion problems listed in order of severity include: stream erosion threatening a structure, stream erosion threatening a road, and yard erosion. Benefit points for a flooding problem are assigned based on the severity of the problem and the frequency of the flooding. For example, chronic flooding of a house would be assigned more benefit points than infrequent flooding of a yard. Benefit points for an erosion problem are assigned based on the height of the streambank and the distance to the structure. For example, a house that is 20 feet from a 10 foot high streambank would be assigned more benefit points than a structure that is 50 feet from a 5 foot high streambank. In order to maximize the benefits per dollar spent on a project, a benefit/cost ratio is calculated to determine the project priority ranking. Benefit points are totaled for the properties that benefit from the project, and the points are divided by the cost of the project in thousands to determine the project priority ranking. For example, a project with 100 benefit points divided by $100K project costs would have a priority ranking of 1.00. Prioritization Worksheet Guidelines as Exhibit MSD 30J and the Prioritization Worksheet as Exhibit MSD 30K have been provided. 14. For each CIRP project identified, quantify the severity of the problem and anticipated costs of the project. 5 Exhibit MSD 3OB RESPONSE: MSD has provided a revised CIRP-2 table with the current priority ranking of each identified project based on severity and benefit described in Questions #12 and #13 above. The anticipated construction costs were previously provided in this table. See Exhibit MSD 30L. 15. What is the ranking or score associated for each CIRP project identified? RESPONSE: See response to Question #14. 16. Identify all factual indicia to support the premise that the Rate Change Proposal at issue: (1) is consistent with constitutional, statutory or common law, as amended from time to time; (2) enhances the District's ability to provide adequate sewer and drainage systems and facilities, or related services; (3) is consistent with and not in violation of any covenant or provision relating to any outstanding bonds or indebtedness of the District; (4) does not impair the ability of the District to comply with applicable Federal or State laws or regulations as amended from time to time; and (5) imposes a fair and reasonable burden on all classes of tax payers. RESPONSE: (1). See Direct Testimony of Susan M. Myers, Exhibit MSD 3B, page 1. (2). See Direct Testimony of Richard L. Unverferth, Exhibit MSD 3C, page 7. (3). See Direct Testimony of Marion M. Gee, Exhibit MSD 3D, page 5. In addition, the Rate Change Proposal as submitted to the Rate Commission does not contemplate the issuance of debt to finance the capital program. As such, there would not be a violation of any covenant or provision relating to any outstanding bonds or indebtedness of the District. (4). See Direct Testimony of Susan M. Myers, Exhibit MSD 3B, page 5. (5). See Direct Testimony of Brian L. Hoelscher, Exhibit MSD 3A, page 4. 17. Has the District obtained a legal opinion from counsel opining that the statements identified in (1) through (5) inclusive of Request No. 16, are true? If so, please furnish a copy of such opinion. RESPONSE: Yes, the District did receive legal opinions from counsel on these issues; these legal opinions are closed records and privileged attorney -client communications. The District is providing a summary of the legal opinions given by counsel on these issues. This summary is in addition to the answer provided by Susan M. Myers in her Direct Testimony response on page 1. See Exhibit MSD 30Q 18. Provide a copy of the Water Environment Federation's Special Publication titled User -Fee -Funded Stormwater Programs, 2' ' edition. 6 Exhibit MSD 30B RESPONSE: MSD does not have a copy of this book in our custody. Through discussions with the Rate Commission's counsel, they and/or the Rate Commission rate consultant will make the book available for the commissioners to review. 19. Provide a copy of the industry guidebook Water and Wastewater Finance and Pricing: The Changing Landscape. RESPONSE: MSD does not have a copy of this book in our custody. Through discussions with the Rate Commission's counsel, they and/or the Rate Commission rate consultant will make the book available for the commissioners to review. 20. Provide a copy of a 2016 survey of stormwater utilities referenced in the proposal materials indicating that the vast majority of stormwater utilities employ a rate based upon impervious area. RESPONSE: According to the Black & Veatch 2016 Stormwater Utility Survey, 89% of the respondents have a user fee based on some form of parcel area such as gross and/or impervious area. Please see page 20 of Exhibit MSD 19 (Black & Veatch 2016 Stormwater Utility Survey) and page 2 of Exhibit MSD 30I (Western Kentucky University 2017 Stormwater Survey). 21. Provide a copy of all rate models relied upon by Raftelis Financial Consultants, Inc. ("RFC") as a basis for the Rate Change Proposal submitted to the Rate Commission. RESPONSE: The District provided the model used by Raftelis Financial Consultants, Inc. which served as the basis for the Rate Change Proposal submitted to the Rate Commission. Please see Exhibit MSD 18. 22. Identify the date, amount and purpose (use) of funds which the District has expended to date for compliance with the Consent Decree entered into by the District in the matter captioned United States of America v. Metropolitan St. Louis Sewer District (the "Consent Decree"). RESPONSE: The Consent Decree requirements or funding is not relevant to the current Rate Proposal. MSD's Consent Decree only involves wastewater issues, and is funded by wastewater rates. MSD's wastewater rates and services are not being changed in any way and therefore are not included in the current Rate Proposal. They will be the subject of a future rate proposal scheduled to be delivered in 2019. See Exhibit MSD 30A 23. Identify the date, amount and purpose (use) of funds which the District has expended to date for remediation of wastewater projects within the District. 7 Exhibit MSD 30B RESPONSE: The Consent Decree requirements or funding is not relevant to the current Rate Proposal. MSD's Consent Decree only involves wastewater issues, and is funded by wastewater rates. MSD's wastewater rates and services are not being changed in any way and therefore are not included in the current Rate Proposal. They will be the subject of a future rate proposal scheduled to be delivered in 2019. See Exhibit MSD 30A 24. Identify the date, amount and purpose (use) of funds which the District has expended to date for remediation of stormwater projects within the District. RESPONSE: Per clarification from the Rate Commission Counsel, this question also pertained to the Consent Decree. The Consent Decree requirements or funding is not relevant to the current Rate Proposal. MSD's Consent Decree only involves wastewater issues, and is funded by wastewater rates. MSD's wastewater rates and services are not being changed in any way and therefore are not included in the current Rate Proposal. They will be the subject of a future rate proposal scheduled to be delivered in 2019. See Exhibit MSD 30A 25. Identify what portion or amount of the $4.7 billion required to be spent by the District under the Consent Decree is budgeted or allocated for wastewater and stormwater remediation, and indicate the time(s) such expenditure(s) will be made through 2035. RESPONSE: The Consent Decree requirements or funding is not relevant to the current Rate Proposal. MSD's Consent Decree only involves wastewater issues, and is funded by wastewater rates. MSD's wastewater rates and services are not being changed in any way and therefore are not included in the current Rate Proposal. They will be the subject of a future rate proposal scheduled to be delivered in 2019. See Exhibit MSD 30A 26. Please provide the basis for the O&M escalation factors used in the Rate Model. See Exhibit MSD 18. RESPONSE: The basis for the O&M escalation has been provided as Exhibit MSD 30M 27. Please provide the basis for the escalation rates used for miscellaneous revenue in the Rate Model. See Exhibit MSD 18. RESPONSE: Miscellaneous revenue in the rate model is almost exclusively interest revenue. The one exception being stormwater flat fee revenue that was collected in FY17 on past due balances. Interest revenue in the model does not use escalation factors. Rather, the beginning and ending fund balance for each fiscal year is averaged. That average fund balance is then multiplied by an assumed rate of return of 0.75% to project interest revenue for the following year. 8 Exhibit MSD 30B 28. Please provide the basis for the factors used in the input tab for Late Charges, and how the factors are utilized in the Rate Model. See Exhibit MSD 18. RESPONSE: Late Charges remain in the input tab of the model, but they are not used by the model for determining stormwater revenues. All late charges are considered wastewater revenue. The SW Capital Rate would account for approximately 3.6% of a typical customer's bill (not including the taxes.) Taken against the proposed FY19 Late Charge budget of $3.9 million, 3.6% equates to approximately $140, 000. As such, the impact to the numbers would be negligible if a change in how the model treats this revenue was made. 29. Please provide the basis for the escalation of CAP Imperviious Area in years FY19-21, and that used for FY22 forward. RESPONSE: When preparing the February 26, 2015 Rate Change Proposal, the District's consultant performed a demographic analysis of the District's customers intended to guide projections of future CAP participation. Since the time of that analysis, actual CAP participation has followed very closely to those projections. As a result, the District used those projections for FY19-FY21 in this current Rate Proposal. After FY21, the end of those prior projections, the District increased CAP Impervious Area at the same rate as all other impervious area. 30. Appendix 6B indicates projected change in assessed value is 0.76%. The model uses 0.71%. Please provide the basis for 0.71% used in the projections. See Exhibit MSD 1, App. 6B, p. 4. RESPONSE: The table in Appendix 6B had a formula error. A corrected table is included with this response, and the corrected formula is visible in the corrected table. The 0.71 % used in the projections is correct. The error has no impact on what the District has proposed for two reasons. One, the correct number was used in the rate model to develop the projections. Two, tax revenues are included in the Rate Proposal only to help provide a total picture of the District's stormwater funding. The assessed values will not impact the proposed stormwater capital rate. See Exhibit MSD 30N. 31. The Rate Change Proposal does not specifically address the General Service Agreements. How will these funds be used? RESPONSE: General Service Agreements are agreements for professional services to add to or supplement District Planning and Design staff in specific areas such as survey services, geotechnical services, property appraisal and specialty engineering services. 32. There is a line item for easement acquisitions. Is this in addition to the specific CIRP projects listed? How will these funds be used? 9 Exhibit MSD 30B RESPONSE: Yes, this is in addition to the CIRP project costs. CIRP project costs are for planning, design, construction services. Easement Acquisition funds are used by District staff or its agents to acquire necessary property rights by means of donation, purchase, contract, lease, or by the exercise of the power of eminent domain in order to construct stormwater projects within the CIRP. 33. Have properties been identified for the buyout program? What is the District's criteria for identifying properties and ensuring fair value to the District? RESPONSE: The District has identified conceptual projects with a property buyout resolution in the CIRP. These projects are prioritized as `flooding" projects as described within the District prioritization process (See Question #13). If a buyout is deemed more economically viable than a structural solution, the buyout project is prioritized. The availability of the property, opportunity for purchase, future CIRP projects, partnering and coordination with the municipality, and final disposition are all taken into consideration. No formal guidance has been developed at this time. 34. Several projects to be constructed do not have corresponding designs (i.e., Dunleer Ave., Allemania, Fawndale, etc.). Have the design costs been accounted for? RESPONSE: Yes, a number of projects have been identified for design by internal staff through historical planning and design experience the District has learned that some smaller projects can be more efficiently designed by internal staff. Also anticipated is the potential for a streamlined design and construction process through the District's Small Sewer Contractor Construction Program. 35. Some of the projects listed under "design" have design costs at nearly 50% of construction (i.e., Hallstead Storm Channel Phase IV). Does the design cost take into consideration easement acquisition and other costs? RESPONSE: Conceptual and preliminary design costs do not take into consideration easement acquisition costs. Typically Design costs are estimated as approximately 30% of total conceptual construction costs. If increased design costs are identified they are generally project specific for a known factor at the time of budgeting. Those factors can include but are not limited to requirements for increased hydraulic modeling, expanded property surveys, special geotechnical considerations, floodplain study requirements, regulatory permitting, and increased public participation. The Hallstead Storm Channel Phase IV has a total conceptual cost of $7.52 M. Thirty percent (30%) of that cost is allocated for design ($2.256 M), and seventy percent (70%) is allocated for construction ($5.264 M). Actual design cost percentages for each project will vary based on the anticipated scope and scale of the project, with some larger projects having a smaller percentage based on efficiencies of scale. 10 Exhibit MSD 30B 36. What is the purpose of the CIRP-2 subset? See Exhibit MSD 17. RESPONSE: The information provided in CIRP-1 is the basis for the planned appropriations for the first five (5) fiscal years for planning, design, construction and ancillary services (easement acquisition) within the financial model. CIRP-2 provides the anticipated construction year, the project type, and planned construction cost. The anticipated construction year provides a basis for the general public to expect impact by the planned construction. 37. If liquidations or canceled projects are higher than expected, is there a process for adding additional projects to the program? RESPONSE: Yes, the Stormwater CIRP is very fluid in the sense that if projects are cancelled, delayed or additional funding is available due to liquidation or favorable costs, projects are moved forward within the CIRP based upon their priority. 38. In Richard L. Unverferth's testimony, he states that projects are primarily identified through customer complaints. See Exhibit MSD 3(c), p. 2. How far back did the District review customer complaints? Has there been any work done by the District to identify projects in areas that have not had stormwater remedy in the past and may not have active customer complaints? RESPONSE: Please refer to the answer for Question #2 for a brief history of previous studies which provide the basis for our project database. 39. On the map of Unfunded Stormwater Issues, North St. Louis City appears to have only one project shown. Has MSD considered additional efforts in this area to identify projects? RESPONSE: North St. Louis City is served by a combined sewer system (an enclosed sewer system that transports sanitary flow during normal conditions and is combined with stormwater flow during rain events). Because flooding in this area impacts both surface flooding and basement flooding from the overflowing combined sewer system, the District was required to address this flooding through the wastewater rate as part of the Consent Decree. The District's Consent Decree commitment was to invest $230 million in the combined sewer area to reduce this flooding of homes and basements. The District has undertaken extensive planning, design and construction efforts to address flooding in this area in the first five years of the program. This effort included the buyout of approximately 236 properties impacted by frequent flooding, the construction of stormwater detention and combined sewer relief Through calendar year 2016 the District had expended approximately $31 million of the $230 million. 40. Has the District undertaken a District wide (or by watershed) master plan or modeling efforts to identify total needs over the next 20-30 years? 11 Exhibit MSD 30B RESPONSE: Please refer to the answer for Question #2 for a brief history of previous studies which provide the basis for our project database. The studies consist of approximately 40 volumes which are not available electronically. They are available for review in our office. 41. How were the projects included in Prop S determined? RESPONSE: Projects were identified and prioritized as described in Question #13 above. Projects were funded based on availability of remaining fund balances within the existing OMCI Taxing Sub -Districts and other funding areas eliminated by the passing of Proposition S with supplemental funding from the new Districtwide Stormwater Tax. Generally projects with the highest priority ranking within each area were funded. 42. Has the District considered the development of the Capital Rate in a manner to fully recognize stormwater costs (i.e., stormwater related portion of costs currently recovered through wastewater charges)? RESPONSE: The Stormwater Capital Rate was calculated to fund the cost to address erosion, local flooding, and regional flooding. It is not intended to fund any other stormwater or wastewater related initiatives. 43. The CIRP is based on an assumed annual spending threshold. Please provide information related to the District's determination of the annual spending threshold, and any information related to "risk" of setting the CIRP at the proposed level versus a higher level. RESPONSE: MSD views the major risk to be that the proposal does not receive voter approval. This was the main risk consideration in setting the annual spending threshold. See information provided in answer for Question #6. 44. Has the District considered debt financing of a portion of the stormwater CIRP in order to leverage available funding and complete more projects more quickly? RESPONSE: The District will be funding projects that may not result in the District owning assets upon the completion of the projects and that will be owned and maintained by private parties. As such, the District may be precluded from issuing tax-exempt bonds to finance these projects. In addition, The District believes that the cash funding of the stormwater CIRP via the stormwater capital rate is the most appropriate financing mechanism given the proposed annual program size of $30 million and the minor impact on the proposed rate that would be derived by debt financing. Debt financing of capital projects is ultimately a more expensive cost of funding over the long-term for customers. Approximately 88% of the respondents to the Black & Veatch 2016 Stormwater Utility Survey (see Exhibit MSD 19, pages 16-17) indicated that they cash fund their annual stormwater capital improvement program budgets. 12 Exhibit MSD 30B 45. Has the District considered the feasibility of prioritizing CIRP projects in the jurisdictions that have approved a sales tax for stormwater control pursuant to § 644.032, RSMo. or otherwise have provided a dedicated funding source for stormwater projects to defray some of the costs the District would otherwise incur? RESPONSE: The District will cost share on projects that are ranked as a high priority using the District's priority ranking criteria and are currently programmed for completion. If the municipality has available funds, they may wish to participate in the process by designing the plans and administering the construction contract. With prior approval the District will reimburse the municipality for the construction costs after completion of the project. Participation in this process allows the municipality to have control of the project, defray District costs, but does not impact the Districts priority or schedule to complete the project. This process eliminates discrimination of those municipalities with limited or insufficient stormwater funding. 46. Brian L. Hoelscher testifies that the District "concluded that our customers should have the opportunity to vote on whether MSD should provide" the stormwater services which the Rate Proposal would fund. See Exhibit MSD 3(a), p. 3. Susan M. Myers testifies that the Stormwater Capital Rate would not be considered a '`property tax or any other form of tax, but instead is a charge or rate authorized by the Charter." See Exhibit MSD 3(b), p. 2. Is it the District's position that, under the Hancock Amendment (§§ 16 — 23) to Art. X of the Missouri Constitution, voter approval is not legally required but that the District has decided, as a policy matter, to seek voter approval anyway? RESPONSE: Brian Hoelscher's testimony is addressing the idea that MSD's customers should have the right to determine whether or not the customers wanted to raise revenues to fund the services described in this proposal. It was not a legal consideration. We are seeking a vote because Zweig held that a vote was required under the Hancock Amendment for our previous stormwater rate. To avoid a Hancock challenge and support what our customers wanted, we decided to take the current Stormwater Capital Rate to a vote. 47. Susan M. Myers testifies that, since the Stormwater Capital Rate would not be considered a tax, but rather a special assessment, governmental entities and non-profit entities would be required to pay the Stormwater Capital Rate. See Exhibit MSD 3(b), p. 2. Has the District conducted an analysis of how governmental entities and non-profit entities which own properties with large amounts of impervious surface would be impacted if the Rate Change Proposal is approved? If such analysis has been conducted, please provide a copy of the analysis. RESPONSE: This question mischaracterizes Susan M. Myers' testimony. Her testimony states that "The Stormwater Capital Rate is plainly a rate or charge that is authorized by the Charter and is not a special assessment or ad valorem tax. Therefore, this Stormwater Capital Rate can be charged to all customers "whether public or private" in the District pursuant to the express terms of the Charter 03.020(16). " The requested analysis is found in Exhibit MSD 30D. 13 Exhibit MSD 306 48. Susan M. Myers testifies that § 204.700, RSMo., enacted by House Bill 661 (2009) is unconstitutional because it violates Art. III, § 23 of the Missouri Constitution, which requires a bill to be limited to one subject. See Exhibit MSD 3(b), p. 4. Is there a court decision supporting this conclusion? Did the District commence any legal action challenging the manner of the enactment of § 204.700, RSMo. in the time provided by § 516.500, RSMo. RESPONSE: Hammerschmidt v. Boone County, 877 S. W.2d 98, 101-02 (Mo. Banc 1994) supports this decision. Without conceding that RSMo § 516.500 applies here, MSD has not commenced any legal action challenging the manner of the enactment of RSMo § 204. 700. 49. Susan M. Myers testifies that the Rate Change Proposal will not impair the ability of the District to comply with applicable federal or state laws or regulations as amended from time to time. See Exhibit MSD 3(b), p. 5. Please (a) describe the analysis that was performed to reach this conclusion; (b) provide copies of any memorandum, report, work paper, summary, analysis, or schedule that supports this conclusion; and (c) describe the rationale for such conclusion. RESPONSE: (a) See Direct Testimony of Susan M. Myers, Exhibit MSD 3B, page 5. (b) None (c) See Direct Testimony of Susan M. Myers, Exhibit MSD 3B, page 5. 50. Please provide copies of each contract or lease for goods or services in which the payment obligation of the District exceeds $500,000. RESPONSE: This data includes both wastewater and stormwater goods or services. Please see Exhibits MSD 300 through MSD 3004. 51. Please provide copies of the complaint/petition for any litigation in which the District is involved in which the prayer for damages exceeds $500,000. RESPONSE: Currently there are none. 52. Please describe any other facts and circumstances which demonstrate whether the Rate Change Proposal and all portions thereof why the Rate Change Proposal is necessary, fair and reasonable, as required by §3(2)(a) of the Operational Rules. RESPONSE: There are no additional facts or circumstances. 14 Exhibit MSD 306 53. Please describe any other facts and circumstances which demonstrate whether the Rate Change Proposal and all portions thereof why the Rate Change Proposal will enhance the District's ability to provide adequate sewer and drainage systems and facilities, or related services, as required by §3(2)(b) of the Operational Rules. RESPONSE: There are no additional facts or circumstances. 54. Please describe any other facts and circumstances which demonstrate whether and to what extent the Rate Change Proposal and all portions thereof is necessary to enable the District to comply with any covenant or provision relating to outstanding bonds or indebtedness of the District, together with a specific quantification of the amount of the Proposed Rate Change is necessary for such purposes, as required by §3(2)(c) of the Operational Rules. RESPONSE: There are no additional facts or circumstances. This Rate Change Proposal does not contemplate the use of debt financing. 55. Please describe any other facts and circumstances which demonstrate that the Rate Change Proposal and all portions thereof are necessary to enable the District to comply with applicable federal or State laws or regulations as amended from time to time, together with a specific quantification of the amount of the Rate Change Proposal that is necessary for such purposes as required by § 3(2)(d) of the Operational Rules. RESPONSE: There are no additional facts or circumstances. 56. Please describe any other facts and circumstances which demonstrate that the Rate Change Proposal and all portions thereof imposes a fair and reasonable burden on each class of ratepayers, including whether and how cost of service considerations have been factored into such determination as required by §3(2)(e) of the Operational Rules. RESPONSE: The District has proposed to use an impervious area measurement method to determine the rate and volume of stormwater run-off generated by each customer's property. As stated in the testimony provided by Brian Hoelscher, the level of flooding and erosion services being proposed under the Stormwater Capital Rate is directly impacted by the increased rate and volume of stormwater run-off created by impervious area on each customer's property. Thus, it is fair to determine the revenue contribution of each customer for these services through an impervious area measurement method. In addition, page 6 of Exhibit MSD 19 (Black & Veatch 2016 Stormwater Utility Survey) supports the District's assertion that this methodology provides for a more equitable recovery of costs among customers. 57. Please describe any other facts and circumstances which demonstrate that the Rate Change Proposal and all portions thereof imposes a fair and reasonable burden on each class of ratepayers, including whether and how cost causation principles, have been factored into such determination as required by § 3(2)(e) of the Operational Rules. 15 Exhibit MSD 30B RESPONSE: The District has proposed to use an impervious area measurement method to determine the rate and volume of stormwater run-off generated by each customer's property. As stated in the testimony provided by Brian Hoelscher, the level of flooding and erosion services being proposed under the Stormwater Capital Rate is directly impacted by the increased rate and volume of stormwater run-off created by impervious area on each customer 's property. Thus, it is fair to determine the revenue contribution of each customer for these services through an impervious area measurement method. In addition, page 6 of Exhibit MSD 19 (Black & Veatch 2016 Stormwater Utility Survey) supports the District's assertion that this methodology provides for a more equitable recovery of costs among customers. 58. Please describe any other facts and circumstances which demonstrate that the Rate Change Proposal and all portions thereof imposes a fair and reasonable burden on each class of ratepayers, including whether and how customer impact data has been factored into such determination as required by § 3(2)(e) of the Operational Rules. RESPONSE: The District has proposed to use an impervious area measurement method to determine the rate and volume of stormwater run-off generated by each customer's property. As stated in the testimony provided by Brian Hoelscher, the level of flooding and erosion services being proposed under the Stormwater Capital Rate is directly impacted by the increased rate and volume of stormwater run-off created by impervious area on each customer's property. Thus, it is fair to determine the revenue contribution of each customer for these services through an impervious area measurement method. In addition, page 6 of Exhibit MSD 19 (Black & Veatch 2016 Stormwater Utility Survey) supports the District's assertion that this methodology provides for a more equitable recovery of costs among customers. 59. Please describe any other facts and circumstances which demonstrate that the Rate Change Proposal and all portions thereof imposes a fair and reasonable burden on each class of ratepayers, including whether and how economic development considerations have been factored into such determination as required by § 3(2)(e) of the Operational Rules. RESPONSE: The District has proposed to use an impervious area measurement method to determine the rate and volume of stormwater run-off generated by each customer's property. As stated in the testimony provided by Brian Hoelscher, the level of flooding and erosion services being proposed under the Stormwater Capital Rate is directly impacted by the increased rate and volume of stormwater run-off created by impervious area on each customer's property. Thus, it is fair to determine the revenue contribution of each customer for these services through an impervious area measurement method. In addition, page 6 of Exhibit MSD 19 (Black & Veatch 2016 Stormwater Utility Survey) supports the District's assertion that this methodology provides for a more equitable recovery of costs among customers. The Rate Change Proposal does not consider economic development. 16 Exhibit MSD 30B 60. Please describe any other facts and circumstances which demonstrate that the Rate Change Proposal and all portions thereof imposes a fair and reasonable burden on each class of ratepayers, including whether and how environmental effects have been factored into such determination as required by § 3(2)(e) of the Operational Rules. RESPONSE: The District has proposed to use an impervious area measurement method to determine the rate and volume of stormwater run-off generated by each customer's property. As stated in the testimony provided by Brian Hoelscher, the level of flooding and erosion services being proposed under the Stormwater Capital Rate is directly impacted by the increased rate and volume of stormwater run-off created by impervious area on each customer's property. Thus, it is fair to determine the revenue contribution of each customer for these services through an impervious area measurement method. In addition, page 6 of Exhibit MSD 19 (Black & Veatch 2016 Stormwater Utility Survey) supports the District's assertion that this methodology provides for a more equitable recovery of costs among customers. Facts and circumstances are demonstrated in that all Capital Improvement Projects planned, designed and constructed with revenues from the new Capital Rate will be completed in compliance with all applicable Local, State and Federal environmental regulations. 61. Please describe any other facts and circumstances which demonstrate that the Rate Change Proposal and all portions thereof imposes a fair and reasonable burden on each class of ratepayers, including whether and how any other factors have been factored into such determination as required by § 3(2)(e) of the Operational Rules. RESPONSE: The District has proposed to use an impervious area measurement method to determine the rate and volume of stormwater run-off generated by each customer 's property. As stated in the testimony provided by Brian Hoelscher, the level of flooding and erosion services being proposed under the Stormwater Capital Rate is directly impacted by the increased rate and volume of stormwater run-off created by impervious area on each customer's property. Thus, it is fair to determine the revenue contribution of each customer for these services through an impervious area measurement method. In addition, page 6 of Exhibit MSD 19 (Black & Veatch 2016 Stormwater Utility Survey) supports the District's assertion that this methodology provides for a more equitable recovery of costs among customers. The District has no other facts and circumstances to provide. 62. Please (a) describe any other facts and circumstances which demonstrate that the measures taken by the District to ensure that the cost of constructing and maintaining the District's facilities and providing related services are being incurred in a reasonable and efficient manner; and (b) include copies of all internal or external audit reports that address such matters as required by § 3(2)(f) of the Operational Rules. RESPONSE: (a) No additional facts or circumstances. (b) The following internal audit reports have been provided as Exhibits MSD 30P through 30P12. These exhibits include internal audit reports prepared within the previous and current rate cycles. 17 Exhibit MSD 30B 63. Please provide testimony demonstrating how, whether and to what extent the Rate Change Proposal and all portions thereof, will affect, impact and comply with the Consent Decree, as required by § 3(2)(g) of the Operational Rules. RESPONSE: The Consent Decree requirements or funding is not relevant to the current Rate Proposal. MSD's Consent Decree only involves wastewater issues, and is funded by wastewater rates. MSD's wastewater rates and services are not being changed in any way and therefore are not included in the current Rate Proposal. This Rate Proposal is for a very specific set of stormwater services as described in the proposal and will not affect or impact MSD's ability to comply with the Consent Decree, since the Consent Decree involves wastewater services that are funding through a different existing revenue source, which they will be the subject of a future rate proposal scheduled to be delivered in for 2019. See Exhibit MSD 30A. Respectfully submitted, san M. Myers, General Cosel THE METROPOLITAN ST. LOUIS SEWER DISTRICT 2350 Market Street St. Louis, Missouri 63103 smyers@stlmsd.com Tel: (314) 768-6366 Fax: (314) 768-6279 18 Exhibit MSD 306 CERTIFICATE OF SERVICE The undersigned certifies that a copy of the foregoing was sent by electronic transmission to Lisa O. Stump, Lashly & Baer, P.C., Brian J. Malone, Lashly & Baer, P.C. and Brandon W. Neuschafer, Brian Cave, LLP, on this 22nd day of March, 2018. Lisa O. Stump, Esq. Brian J. Malone, Esq. Lashly & Baer, P.C. 714 Locust Street St. Louis, MO 63101 lostump(1ashlybaer.com Brandon W. Neuschafer Bryan Cave, LLP 211 N. Broadway, Suite 3600 St. Louis, MO 63102 John.kindschuh@bryancave.com usan M. Myers, General Cou!%sel THE METROPOLITAN ST. LOUIS SEWER DISTRICT 2350 Market Street St. Louis, Missouri 63103 smyers@@stlmsd.com Tel: (314) 768-6366 Fax: (314) 768-6279 19