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
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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").
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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.
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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.
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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.
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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?
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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.
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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.
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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.
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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.
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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.
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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?
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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.
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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?
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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