HomeMy Public PortalAboutExhibit MSD 31A - MSD's Response to Second Discovery Request of the Rate CommissionExhibit MSD 31A
REVISED
BEFORE THE RATE COMMISSION OF THE
METROPOLITAN ST. LOUIS SEWER DISTRICT
MSD'S RESPONSE TO SECOND 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 29, 2018
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, Missouri 63103
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Exhibit MSD 31A
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 29, 2018 SECOND 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 19, 2018 Second
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 31 A
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 )
SECOND 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 31A
DISCOVERY REQUEST
1. The Capital Improvement and Replacement Funding ("CIRP") annual funding is
an input in the Rate Model in the dashboard. See MSD Exhibit 18, Storm Dashboard tab. It
appears that this is an input from another data source as there are trailing digits behind the
decimal point. Please provide the backup for the annual spending input for all 3 CIRP lines.
RESPONSE: See Exhibit MSD 31B. Please note the FY18 numbers in the rate model
will not match Exhibit MSD 31B, because the FY18 budget, not current projections, are used
throughout the model with few exceptions.
2. Per Appendix 6C of the Rate Proposal (MSD Exhibit 1, App. 6C), CIRP costs
were escalated at 3.7%, which is the Engineering News Record ("ENR") Construction Cost
Index ("CCI") for the 12 months ending April 30, 2017 for the St. Louis region. Please provide a
summary of calculated escalation factors over historical average periods. Please explain why the
most recent 12 month period is representative of all years in the projection period.
RESPONSE: The most recent 12-month period is a representative period on which the
District has relied to make reasonable projections of construction cost inflation. As it was the
most recent 12-months available at the time it was chosen, it provided the most current trend
available. In preparing a response to this question, other 12-month, 3-year, 5-year and 10-year
compounding changes were reviewed. The 12-month period ending April 2017 is the most
conservative of all the historical average periods that were looked at in the analysis. Below are
the results of that analysis.
ENR COST INDEXES IN ST LOUIS (2007-2018)
.17
201
2011. "'0 •
0
0 4
41.32
CCI
M. ril2XXX 8,379.56 8,769.25 8,989.41 9,234.67 9,5600.38 9,663.13 10,120.01 10,375.03 10,588.52 11,803.91 2 12,250.30'
Compounding Changes Ending April 2XXX
12-months
3-years
5-years
10-years
4.4% 2.7% 2.5% 3.9%
0.3%
3.2% 3.1% 2.3%
2.8%
4.3%
30%
2.8%
2.5% 2.0%
2 6% 31%
2.9% 2.8%
11.0% 3.796''
5.1% 5.7%
4.1% 4.8%
3.9%.
3. Please explain the "Stormwater Regulatory Capital Override" in the dashboard —
how is this cost determined and what does it cover? See MSD Exhibit 18, Storm Dashboard tab.
It appears that this cost is recovered from the Regulatory Fund. Please confirm the rationale for
recovering these costs from the Regulatory Fund as opposed to the Stormwater Capital Rate.
RESPONSE: See Exhibit MSD 24, page 618 of 663 for a detailed project description.
Since the costs are regulatory and primarily operating in nature, they are recovered from the
regulatory fund
T
Exhibit MSD 31A
4. The District's OMCI Fund Financial Plan in the Rate Proposal reflects negative
cost ("revenue") beginning in FY 2023 in an expense category titled "Capital." See MSD Exhibit
1, Table 4-2. Please explain what this cost is and how it was derived.
RESPONSE: See Exhibit MSD 1, Appendix C for a description of the liquidation
process the District uses which results in the "negative cost" described in this question. See
Exhibit MSD 31B provided for question 1 above which provides more detail regarding how those
numbers are derived
5. The Districtwide Stormwater Fund includes "O&M and IR Managed in Capital,"
"Capital," and "Capital Labor." See MSD Exhibit 1, Table 4-4. Please explain what each line
item is and how it was derived.
RESPONSE: See Exhibit MSD 24, page 632 of 663 for a description of the FY18 O&M
and IR Managed in Capital shown in Table 4-4. "Capital" refers to engineering and
construction work See Exhibit MSD 31B provided for question 1 above to see how the numbers
were derived. "Capital Labor" represents internal labor charged to capitalized projects.
6. In the "Revenue Requirements" tab of the Rate Model, the Districtwide
Stormwater Fund includes "Additional O&M." See MSD Exhibit 18, Rev. Req. tab. Please
provide a description of the nature of such expenses and how projections were derived.
RESPONSE: Additional O&M in the "Rev Req" tab is $0. However, additional O&M
can be found in the "O&M Summary" tab or Exhibit MSD 18. Those values were derived by
District management projections of the future incremental expenses associated with
implementation of the services to be offered should the proposed rate be implemented. These
projections include expenses related to billing and collection, impervious area delineation,
programming and other expenses. Those projections were input into tab "Budget -Input" as
either recurring or one-time future budget expense inputs at the Fund, O&M Summary Group,
Account Number and Business Line level. Eventually these numbers are part of the Engineering
expenses in Table 4-4 of Exhibit MSD 1.
7. On the Stormwater Budget -Input tab of the Rate Model (MSD Exhibit 18, SW
Budget -Input tab), several cells are highlighted in blue for lines 21, 31, 32, and 42 for FY 2018.
Please provide the basis for the factors used in the calculations in these highlighted cells. Are
these adjustments to the adopted budget? If so, please provide the original adopted budget and
reason for the adjustment.
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Exhibit MSD 31A
RESPONSE: These highlighted cells do represent adjustments to the adopted budget
related to a known change in the District's internal overhead rate used to allocate expenses from
WW to SW so that SW expenses are not recovered by the WW rate. The overhead rates used at
the time the FY18 budget was developed were 81.45% for Engineering and 108.64% for
Operations. The amounts in the FY18 Adopted Budget that correspond with the blue highlighted
numbers can be found on the FY18 Labor Transfer Summary (page 64 of 663 of the PDF file) in
Exhibit MSD 24.
8. For FY 2019 and FY 2020, several line items are inputs, while others are
calculated based on assumed escalation factors. See MSD Exhibit 18, SW Budget -Input tab.
Please provide the basis for the values input as opposed to calculated projections.
RESPONSE: See Exhibit MSD 31 C.
9. The District indicates that the CIRP costs are conceptual in nature due to lack of
detailed information/design/etc. See MSD Exhibit 1, App. 6D, p. 10. Please explain how a
"contingency" for risk of increased costs was incorporated into the annual CIRP funding
requirement.
RESPONSE: The District's conceptual project costs are generally based on very limited
information, and have a wider accuracy range to actual costs than during later stages of design.
The District uses cost curves inclusive of all cost items in calculating conceptual costs, including
contingencies.
10. The District proposes to charge two-thirds of the Proposed Rate in the first 18
months of the program, beginning January 1, 2020. See MSD Exhibit 1, Sec. 4-3. Please explain
the basis for this decision.
RESPONSE: The proposed financial plan assumes that the proposed stormwater capital
rate will be set at two-thirds of the approved level for FY 2020 and 2021. This ramp -up is based
on the lower revenue requirement of the first two years as the capital program is implemented
and necessary personnel and projects are added before the rate is charged at approved levels
beginning in FY2022.
12. Please provide the District's proposed Credit/Incentive Program Manual, if such
manual has been created. See MSD Exhibit 1, App. 6J, p. 6-27.
RESPONSE: A Credit/Incentive Program Manual for stormwater billing has not been
created The technical basis for credited stormwater volume reducing best management
practices (BMPs) has been well established in the St. Louis area for over a decade for the
existing regulatory programs.
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Exhibit MSD 31 A
13. Please provide source data for "Typical Assessed Property Value" used in
calculating the FY 2020 Residential Impact analysis in Table 5-1. See MSD Exhibit 1, Table 5-1.
Has the District calculated comparisons such as that in Table 5-1 for "typical" or "average"
assessed property value in various parts of the District? How was the "Typical Assessed Property
Value" for non-residential properties determined?
RESPONSE: The District has not performed a similar analysis for other parts of the
District. The "Typical Assessed Property Value" was based on the number submitted in the
2015 Rate Change Proposal. The number from the 2015 Rate Change Proposal was rounded to
the nearest thousand dollars.
15. Please provide an explanation, with necessary supporting analysis, describing
how the Single -Family Residential Tiers were determined. See MSD Exhibit 1, 'Table 4-5. Please
include an impervious area distribution analysis/summary and calculation of the Equivalent
Residential Unit ("ERU") rate of 2,600 square feet.
RESPONSE: The District's methodology for using and determining an Equivalent
Residential Unit (ERU) is similar to many other stormwater utilities. An ERU was selected as a
billing unit because it is one of the most widely used methods of stormwater utility funding, as
described in the 2018 Storm -water Rate Proceeding Direct Testimony by Henrietta Locklear.
MSD stormwater customers are broadly categorized as single family residential
customers, multi family residential customers, and commercial customers. The ERU is a
simplified rate structure using a unit of charge based on a typical residential impervious area.
The ERU is determined based on single family residential accounts, and represents the median
single family residential impervious area.
To calculate the ERU, MSD compiled a list of all parcels within the District and the
associated impervious area on the parcel. The parcels were identified as single family
residences by using the City and County parcel databases and selecting the taxable single family
residential land use codes. Based upon MSD's query of the GIS database, 376,206 parcels were
identified as single family residential land use. The median square footage of impervious area
within this database was 2,632 square feet. Therefore, by rounding, an ERU of 2,600 was
selected for a billing unit. Note that the first and third quartile of the data was 1,986 and 3,560
square feet, respectively. Therefore, the cutoff between Tiers was set at 2,000 and 3,600 square
feet, respectively. The cutoff between the last tier at 6,000 square feet was selected to represent
a cost of approximately twice that of the next lower tier, and billable at approximately 3 ERU. A
distribution of the data is shown below.
Tier I
1 .1 5 7 9 11 13 15 17 19
Tier 2
71 13 ; s7 31 3335 37
Tier
Parcel Count (ALL)
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Exhibit MSD 31 A
9 41 43 45 47 49 51 58 55 5 59 61 68 65 67 99 71 73 75 77 79 8< 83 •. 59 91
Y•rul 4m X 1996.q.A]
93 95 97 93
16. Please provide a detailed summary of total impervious area by land use category.
RESPONSE: A summary of total impervious area by land use category is included in
the following table. The unbilled category includes public right-of-way, public streets, highways,
public sidewalks', airport runway, and paved drainage areas.
Categories of Impervious Area
Square feet
% Area
Single Family Residential
1, 203, 379, 701
28.7%
Multi family Residential
230, 501, 702
5.5%
Commercial
1, 373, 334, 083
32.8%
Unbilled
1,382,533,692
33.0%
Total Impervious Area
4,189, 749,178
100%
17. Please provide information regarding Stormwater-Only accounts, including the
number of accounts and ERUs by customer type, and whether any Stormwater-Only customers
are projected to be eligible for Customer Assistance Program ("CAP"). See MSD Exhibit 1, App.
6F.
RESPONSE: The District used a projection of 40, 000 Stormwater-Only accounts when
developing projected expenses such as postage. However, for revenue projections, the District
has relied on Billable Units (i.e., count of stormwater parcels by tier for residential, or count of
ERUs for non-residential.) The District has not matched parcel data with wastewater accounts,
therefore the number of Stormwater-Only accounts or ERUs by customer type or by CAP
eligibility is not available.
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Exhibit MSD 31A
18. Please explain how the rate of $2.25 per ERU was calculated. Were any
alternative amounts considered and rejected? If so, why?
RESPONSE: The rate of $2.25 per ERU was calculated by taking the targeted annual
revenue of $30 million and dividing by the number of billable ERUs. The $30 million number
was chosen based on survey results and the size of the program needed to address flooding and
erosion issues throughout the District.
19. Please provide a summary of the analysis used to calculate the alternative
property tax rate of $0.0998 per $100 of assessed value discussed in Appendix 6I. See MSD
Exhibit 1, App. 6I, p. 26.
RESPONSE: The amount of tax revenue collected from District properties as shown in
Table 4-4 of Exhibit MSD I on the Stormwater Service Tax line was proportioned to the amount
of revenue needed as shown in Table 4-6 of Exhibit MSD 1, the Capital Rate Revenue less the
Bad Debt, to determine the tax rate to recover the same amount of revenue. Future changes to
assessed property valuations will impact this estimated tax rate.
20. The District states in the Rate Proposal that there is no minimum fund balance in
the Capital Rate Fund. See MSD Exhibit 1, p. 4-3. Would the absence of a minimum fund
balance be expected to delay projects? Has the District considered setting a minimum fund
balance? Please explain why or why not.
RESPONSE: The absence of a minimum fund balance is not expected to delay projects.
However, implementation of a minimum fund balance would delay projects since the minimum
amount would sit idle, and the District would need to collect the amount of the minimum fund
balance in addition to the amount of a project before the start of that project. In addition, since
the District does not intend to issue debt to fund this Stormwater program, no fund balance will
be needed to fund a targeted debt service coverage level. Therefore, the District considered the
setting of a minimum fund balance inappropriate for a capital fund
Resctfully submitted,
Susan M. Myers, General C6unse
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
2350 Market Street
St. Louis, Missouri 63103
smyers@stlmsd.com
Tel: (314) 768-6366
Fax: (314) 768-6279
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Exhibit MSD 31A
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 29th day of March, 2018.
Lisa O. Stump, Esq.
Brian J. Malone, Esq.
Lashly & Baer, P.C.
714 Locust Street
St. Louis, MO 63101
lostump cr Iashlybaer.com
Brandon W. Neuschafer
Bryan Cave, LLP
211 N. Broadway, Suite 3600
St. Louis, MO 63102
John.kindschuh@bryancave.com
S .. Myers, General Counsel
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
2350 Market Street
St. Louis, Missouri 63103
smyers@stlmsd.com
Tel: (314) 768-6366
Fax: (314) 768-6279
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