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Home My Public Portal AboutExhibit MSD 3D - Direct Testimony, Marion Gee, MSDMSD Exhibit No. MSD 3D 2018 Stormwater Rate Proceeding MARION M. GEE Direct Testimony Metropolitan St. Louis Sewer District February 26, 2018 Table of Contents Page Witness Background and Experience ........................................................................................... 1 Budget Development .................................................................................................................... 1 Stormwater Financing ................................................................................................................... 3 Direct Testimony of Marion M. Gee, MSD February 26, 2018 2018 Stormwater Rate Proceeding 1 MSD Exhibit No. MSD 3D Witness Background and Experience 1 Q1. Please state your name, business address, and telephone number. 2 A. Marion M. Gee, 2350 Market Street, St. Louis, Missouri 63103-2555, (314) 768-6299; 3 mgee@stlmsd.com. 4 Q2. What is your occupation? 5 A. I am the Director of Finance 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 since September 8, 2015. 8 Q4. What is your professional experience? 9 A. Prior to joining the District, I was an Assistant Director of Finance for the City of San 10 Antonio, Texas. One of my responsibilities was to review all rate proposals and debt 11 issuances of the City’s publicly owned utilities which included a water/sewer utility as 12 well as a gas/electric utility. Prior to my time in San Antonio, I was the Finance Director 13 at the Louisville & Jefferson County KY Metropolitan Sewer District for approximately 14 eleven years. I was also employed in various financial positions with the Louisville 15 Water Company for approximately 8 years. I have also been a certified public accountant 16 since 1992. 17 Q5. What is your educational background? 18 A. I hold a Bachelors in Business Administration and a Masters of Business Administration 19 from the University of Louisville. 20 Budget Development 21 Q6. How is the District’s budget developed? 22 A. The District’s budget is developed annually using a zero based budget approach. Each 23 Direct Testimony of Marion M. Gee, MSD February 26, 2018 2018 Stormwater Rate Proceeding 2 MSD Exhibit No. MSD 3D District Director develops the budget for his/her area of responsibility based on most 1 current and historical expenditure trends and knowledge of upcoming needs. Each 2 Department prepares a base budget that covers funding for its day-to-day operations and 3 an incremental budget for strategic activities tied to the District’s Strategic Operating 4 Plan to be implemented throughout the upcoming budget year. Each Director’s 5 components are compiled into a comprehensive, balanced preliminary operating budget 6 which is presented to the District’s Board by March 15th of each year as required by 7 Charter. 8 Simultaneously, the District’s Engineering Department updates and develops the 9 District’s five-year Capital Improvement and Replacement Program (CIRP) 10 Supplemental Budget document. This document, lists the various capital projects 11 anticipated over the next 5 years, is reviewed by the District’s Executive Director prior to 12 presentation to the District’s Board and modifications are made accordingly. 13 The MSD Board of Trustees (“Board”) Finance Committee meets in April to review, in 14 detail, operating expenses, the CIRP and revenues projected for the budgeted year. 15 During these meetings, District Trustees ask questions and provide direction for 16 modifications. These modifications are incorporated into the budget, which is then 17 presented at a public hearing prior to formal introduction by the Board as required by 18 Charter. This public hearing is normally held immediately following the May Board 19 meeting at which the budget’s formal introduction is held. Final adoption of the District 20 budget occurs at the June Board meeting. 21 Q7. What percentage of the total operating budget does the District actually spend? 22 A. A two year average (FY16 and FY17) of actual to budget expenditures for the total 23 Direct Testimony of Marion M. Gee, MSD February 26, 2018 2018 Stormwater Rate Proceeding 3 MSD Exhibit No. MSD 3D operating budget is a favorable variance (i.e., expenditures were less than budgeted) of 1 less than 1.5% each year. 2 Q8. When was the current fiscal year 2018 budget approved by the District Board? 3 A. The District Board adopted the current fiscal year 2018 budget on June 8, 2017 through 4 Ordinance 14683. (Exhibit MSD 24) 5 Q9. In your opinion, are the inflation allowances used in the rate proposal reasonable? 6 A. Yes. Information regarding the inflation allowances can be found in Section 6 (Appendix 7 C) of the rate proposal. 8 Q10. When will the fiscal year 2019 budget be approved by the Board and available for 9 distribution? 10 A. The fiscal year 2019 budget is expected to be approved by the District Board in June 11 2018 and be available for distribution shortly thereafter. 12 Q11. Is the 2019 preliminary budget available for review? 13 A. No, not at this time. The 2019 preliminary budget will be provided to the Board by 14 March 15, 2018 as required by Charter and be available thereafter for distribution. 15 Stormwater Financing 16 Q12. How was the impact of the proposed stormwater incentive/credit program 17 addressed in the Rate Proposal? 18 A. The District estimates that the annual cost of the incentives/credits will be approximately 19 $467,000. The revenue requirements relating to the Stormwater Capital program will be 20 adjusted as needed to reflect the actual cost of granting the credits and incentives. 21 22 Q13. What percentage of the new stormwater revenue is estimated to be charged to Bad 23 Direct Testimony of Marion M. Gee, MSD February 26, 2018 2018 Stormwater Rate Proceeding 4 MSD Exhibit No. MSD 3D Debt? 1 A. The District expects that the bad debt percentage relating to the new stormwater revenue 2 will be approximately 4%. 3 Q14. Are additional (incremental) expenses included in the stormwater rate proposal 4 related to the implementation of the stormwater capital rate? 5 A. Yes, incremental expenses relating to the new stormwater program are included in the 6 stormwater rate proposal (See Table 3-1). In order to fund the projected expenditures, the 7 District intends to charge approximately two-thirds of the voter approved rate for the first 8 18 months starting January 1, 2020 through June 30, 2021 as the District ramps up the 9 program. 10 Q15. Will this Rate Proposal result in any District charges or taxes being eliminated or 11 reduced? 12 A. No. 13 Q16. Is this proposed stormwater capital rate contingent upon voter approval? 14 A. Yes. 15 Q17. When will the voters have an opportunity to consider the stormwater capital rate? 16 A. The Rate Proposal contemplates an election in April 2019. 17 Q18. Has the District obtained voter approval for previous stormwater funding? 18 A. Yes. On April 5, 2016, an election was held in which 62% of voters in the District’s 19 service area approved Proposition S, which established the ten-cent Stormwater O&M 20 property tax. 21 Previously, on March 8, 1988, voters approved stormwater service charges which were 22 flat rate charges of 24 cents per month for residential and non-residential properties and 23 Direct Testimony of Marion M. Gee, MSD February 26, 2018 2018 Stormwater Rate Proceeding 5 MSD Exhibit No. MSD 3D 18 cents per unit for multi-residential properties. 1 Q19. Does the proposed election impact the implementation date of the proposed 2 Stormwater Capital Rate? 3 A. Yes, the District is assuming that the election will take place in April 2019. Only after a 4 favorable election result would the District make the necessary changes to its billing and 5 other systems to implement the rate. 6 Q20. When will the proposed Stormwater Capital Rate be implemented? 7 A. If the voters approve the rate structure, the Stormwater Capital Rate would be effective 8 January 1, 2020 with the first bills issued in February 2020. 9 Q21. What will be the frequency of billing for the Stormwater Capital Rate? 10 A. The stormwater capital rate would be included on the monthly bills issued to wastewater 11 customers, which includes the vast majority of the District’s customers. Monthly bills 12 will also be issued to non-wastewater customers with impervious surface area equal to or 13 greater than 20 equivalent residential units (ERU’s). In addition, non-wastewater 14 customers with impervious surface area less than 20 ERU’s will be billed on a quarterly 15 basis. The District expects to bill approximately 40,000 non-wastewater customers. 16 Q22. What is the impact of the proposed stormwater funding structure on the various 17 customer types compared to the current rates and taxes? 18 A. The monthly charge for an average single family home will be $2.25 per month. The 19 average commercial customer is expected to pay $36.00 per month. Additional 20 information regarding customer impacts can be found in Sections 3 and 5 of the Rate 21 Proposal. 22 Q23. Will this proposed stormwater capital program have any impact on the District’s 23 Direct Testimony of Marion M. Gee, MSD February 26, 2018 2018 Stormwater Rate Proceeding 6 MSD Exhibit No. MSD 3D debt? 1 A. No, the proposed program is funded without the use of debt. 2 Q24. Does this conclude your prepared direct testimony in this matter? 3 A. Yes, it does. 4 5