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HomeMy Public PortalAboutExhibit MSD 3A - Direct Testimony, Brian Hoelscher, MSDMSD Exhibit No. MSD 3A 2018 Stormwater Rate Proceeding BRIAN L. HOELSCHER Direct Testimony Metropolitan St. Louis Sewer District February 26, 2018 Table of Contents Page Witness Background and Experience ........................................................................................... 1 Composition of Rate Change Notice ............................................................................................ 2 Stormwater Financing …………………………………………………………………………...3 Criteria Governing the Stormwater Capital Rate .......................................................................... 4 Direct Testimony of Brian L. Hoelscher, MSD February 26, 2018 2018 Stormwater Rate Proceeding 1 MSD Exhibit No. MSD 3A Witness Background and Experience 1 Q1. Please state your name, business address, and telephone number. 2 A. Brian L. Hoelscher, 2350 Market Street, St. Louis, MO 63101-2555, (314) 768-6245, 3 blhoel@stlmsd.com 4 Q2. What is your occupation? 5 A. I am the Executive Director for the Metropolitan St. Louis Sewer District (District). 6 Q3. How long have you been associated with the District? 7 A. I have been with the District continuously since 1995. 8 Q4. What is your professional experience? 9 A. During my tenure with the District, I have held various senior management level 10 positions related to the execution of the District’s Capital program and overall operation 11 of the District, including Manager and Assistant Director of the Construction 12 Management Department, Assistant Director and Director of the Engineering 13 Department, and, since March 2013, Executive Director. Prior to joining the District, I 14 was the St. Louis Office Manager for the consulting engineering company of Consoer, 15 Townsend, Envirodyne (CTE, now AECOM). 16 Q5. What is your educational background? 17 A. I am a graduate of Washington University in St. Louis with an undergraduate degree in 18 Civil Engineering. 19 Q6. Are you registered as a Professional Engineer? 20 A. Yes, I am a registered Professional Engineer in the States of Missouri and Illinois. 21 22 23 Direct Testimony of Brian L. Hoelscher, MSD February 26, 2018 2018 Stormwater Rate Proceeding 2 MSD Exhibit No. MSD 3A Composition of the Rate Change Notice 1 Q7. What is the focus of the Rate Proposal? 2 A. The focus of the Rate Proposal is to provide a revenue source for MSD to fund an 3 additional District-wide stormwater service in the form of capital improvements. In 4 general, these capital improvements are intended to mitigate the impacts of flooding and 5 erosion on MSD customers. 6 Q8. How is this Stormwater Capital Rate proposal different from what was approved by 7 voters in April 2016 under Proposition S? 8 A. The primary purpose of Proposition S was to provide a consistent District-wide revenue 9 source for the operation and maintenance of the Public Storm Sewer System for which 10 MSD is responsible. Prior to Proposition S, there was a seven-cent tax for O&M in the 11 original boundaries of the District, but there were no revenues for MSD to operate and 12 maintain the Public Storm Sewer System in that part of the District annexed in 1977. 13 Now there is a ten-cent property tax throughout the entire District that is sufficient to 14 fund the operation and maintenance of the entire Public Storm Sewer System. As 15 committed by MSD, any funds collected beyond those required to operate and maintain 16 the Public Storm Sewer System will be used for District-wide capital projects to address 17 flooding and erosion. For the next several years, these funds are being used as part of the 18 funding for the $67 million in capital projects identified for Proposition S. Once these 19 projects have been completed, it is projected that little if any funds from Proposition S 20 will be available to fund further capital projects due to inflation and ramping up of 21 operation and maintenance activities on the existing Public Storm Sewer System. This 22 Direct Testimony of Brian L. Hoelscher, MSD February 26, 2018 2018 Stormwater Rate Proceeding 3 MSD Exhibit No. MSD 3A results in no future District-wide revenue source to make capital improvements to address 1 flooding and erosion issues not involving the existing Public Storm Sewer System. 2 The primary purpose of this Stormwater Capital Rate proposal is to provide such a 3 District-wide revenue source to make capital improvements to address flooding and 4 erosion issues not involving the existing Public Storm Sewer System. 5 Q9. Is the current stormwater funding adequate in relation to the District’s Charter 6 provisions? 7 A. No. MSD currently has sufficient revenue sources to provide only Stormwater 8 Regulatory Services and Stormwater O&M Services throughout the entire District. 9 However, under the District’s Charter, MSD is empowered also to provide the flooding 10 and erosion type of services being proposed. As a result of public requests regarding 11 flooding and erosion issues as well as other public input, we have concluded that our 12 customers should have the opportunity to vote on whether MSD should provide this 13 additional service. 14 Stormwater Financing 15 Q10. Does the District have alternative capital-related plans should the voters reject the 16 proposal for a new Stormwater Capital Rate? 17 A. Yes, the District’s future plans consist of two parts. First, if the new stormwater rate does 18 not pass, MSD will regularly survey its customers and other stakeholders to determine 19 whether they would like another opportunity to vote on a proposition like the proposed 20 Stormwater Capital Rate. Second, regardless of the outcome of this new Stormwater 21 Capital Rate, MSD will engage the communities located within the OMCI Districts to 22 help determine the fate of these Districts. Options include charging some level of taxes to 23 Direct Testimony of Brian L. Hoelscher, MSD February 26, 2018 2018 Stormwater Rate Proceeding 4 MSD Exhibit No. MSD 3A provide additional stormwater services, leaving the OMCI taxes at 0 cents for future 1 evaluation, or recommending to the MSD Board of Trustees that the OMCI Districts 2 should be eliminated. 3 Criteria Governing The Stormwater Capital Rate 4 Q11. In your opinion, does the proposed Stormwater Capital Rate impose a fair and 5 reasonable burden on all classes of ratepayers? 6 A. Yes. The level of flooding and erosion services being proposed under the Stormwater 7 Capital Rate is directly impacted by the increased rate and volume of stormwater run-off 8 created by impervious area on each customer’s property. Thus, it is fair to determine the 9 revenue contribution of each customer for these services through an impervious area 10 measurement method. This differs from the ad valorem property tax method used to 11 collect revenues for the recently approved Proposition S in that impervious area has less 12 of an impact on MSD’s cost to operate and maintain its Public Storm Sewer System, 13 whereas it is the primary driver in the cost to address flooding and erosion issues. MSD’s 14 low income Customer Assistance Program (CAP) will also be used to provide some relief 15 to the burden on our low income customers. 16 Moreover, consistent with the Charter and previous Rate Commission Recommendations, 17 the Rate Proposal provides that all customers, public and private, governmental and non-18 profit customers, will be charged the Stormwater Capital Rate. Thus, MSD is including 19 the impervious area from these customers’ properties in calculating the proposed rate. 20 The appropriate position from both a legal and a public policy standpoint is to bill these 21 customers and provide them service. If, at some point in time after the Stormwater 22 Capital Rate has been billed to these customers, MSD is unable to continue billing them, 23 Direct Testimony of Brian L. Hoelscher, MSD February 26, 2018 2018 Stormwater Rate Proceeding 5 MSD Exhibit No. MSD 3A then MSD would reduce the program size by approximately 15% to account for the loss 1 in revenue, and continue to provide the service contemplated in the new Stormwater 2 Capital Rate to these customers. 3 In sum, if the proposed Stormwater Capital Rate passes, MSD for the first time will be 4 able to provide Stormwater Regulatory Services, Public Storm Sewer System operation 5 and maintenance, and a capital program to address erosion and flooding issues 6 throughout its entire service area. 7 Q12. Does that conclude your proposed direct testimony in this matter? 8 A. Yes it does. 9 10