HomeMy Public PortalAboutExhibit MSD 3E - Direct Testimony, Tom Beckley, RFCMSD Exhibit No. MSD 3E
2018 Stormwater Rate Proceeding
THOMAS A. BECKLEY
Direct Testimony
Metropolitan St. Louis Sewer District
February 26, 2018
Table of Contents
Page
Witness Background and Experience ........................................................................................... 1
General Matters ............................................................................................................................. 2
Stormwater Rate Proposal............................................................................................................. 5
Stormwater Revenue Requirements .............................................................................................. 6
Stormwater Financial Plan ............................................................................................................ 7
Rate Model .................................................................................................................................... 7
Direct Testimony of Thomas A. Beckley, Raftelis February 26, 2018
2018 Stormwater Rate Proceeding 1 MSD Exhibit No. MSD 3E
Witness Background and Experience 1
Q1 Please state your name and business address. 2
A. My name is Thomas A. Beckley and my business address is, 3013 Main Street, Kansas 3
City, Missouri, 64108, tbeckley@raftelis.com 4
Q2. By whom are you employed and in what capacity. 5
A. I am a Senior Manager with Raftelis Financial Consultants, Inc. (RFC). RFC provides 6
financial and management consulting services to municipally owned utilities throughout 7
the United States and Canada. RFC was established in 1993 in Charlotte, North Carolina 8
to provide environmental and management consulting services to public and private 9
sector clients. RFC is a national leader in the development of water, wastewater, and 10
stormwater rates and employs 70 consultants providing financial and management 11
consulting services to municipal utilities throughout the United States and Canada. As 12
Senior Manager at RFC I am the Office Lead of our Kansas City, Missouri office and 13
serve as project manager on engagements for clients throughout the Midwest region of 14
the United States. 15
Q3. Please describe your educational background and work experience. 16
A. I obtained a Bachelor of Science in Naval Architecture and Marine Engineering from 17
Webb Institute in 1995; a Master of Business Administration from the A.B. Freeman 18
School of Business in 2000; and a Master in Public Administration from the University of 19
Kansas in 2008. I joined RFC in 2000 and since that time have served over 100 clients 20
on a variety of financial and management consulting engagements for municipal water, 21
wastewater, and stormwater utilities throughout the United States. 22
Q4. Do you belong to any professional organizations or committees? 23
A. Yes. I am a member of the American Water Works Association and the Water 24
Direct Testimony of Thomas A. Beckley, Raftelis February 26, 2018
2018 Stormwater Rate Proceeding 2 MSD Exhibit No. MSD 3E
Environment Federation. 1
Q5. Have you previously participated in Rate Commission Proceedings of the St. Louis 2
Metropolitan Sewer District? 3
A. RFC served as Consultant to the Rate Commission in the 2007, 2008, and 2011 Rate 4
Change Proceedings and Consultant to the District in the 2015 Rate Change Proceedings, 5
and I was the Lead Consultant for RFC in 2007, 2008, and 2011 and Project Manager for 6
RFC for the 2015 Rate Commission Proceedings. 7
Q6. Please describe your role in this proceeding? 8
A. The scope of my assignment in this proceeding is as Project Manager for RFC’s 9
assistance to the District in preparing the Rate Proposal which recommends 10
implementation of a Stormwater Capital Rate as a means of financing capital 11
improvements for fiscal years ending June 30, 2020 (FY20) through June 30, 2024 12
(FY24). As Project Manager I provide leadership and direction to our team of 13
consultants engaged in this work for the District, as well as technical advice during the 14
conduct of our work. 15
16
General Matters 17
Q8. How is it determined whether the District’s Rate Proposal is necessary? 18
A. This determination begins with the development of the District’s Comprehensive 19
Financial Plan which is a major component of the Rate Proposal. As the rate Consultant 20
to the District, our work included the development of this Financial Plan in collaboration 21
with District Staff. The forecasts set forth in the Rate Proposal form the foundation of 22
the level of revenues needed to achieve the District’s operational and capital investment 23
objectives. The Rate Commission will examine the District’s projected revenue 24
Direct Testimony of Thomas A. Beckley, Raftelis February 26, 2018
2018 Stormwater Rate Proceeding 3 MSD Exhibit No. MSD 3E
requirements to insure that such revenue requirements are necessary and reasonable to 1
meet the District’s near term financial needs, that such revenue requirements do not 2
overstate the District’s near term financial needs, and that such revenue requirements are 3
being recovered in a fair and equitable manner. 4
Q9. What criteria are used to assess the Rate Proposal? 5
A. In accordance with Section 7.270 of the Charter Plan of the District, the Rate Proposal, 6
and all portions thereof, must: 7
(1) be consistent with constitutional, statutory or common law as amended from time to time; 8
(2) enhance the District’s ability to provide sewer and drainage systems and facilities, or 9
related services; 10
(3) be consistent with and not in violation of any covenant or provision relating to any 11
outstanding bonds or indebtedness of the District; 12
(4) not impair the ability of the District to comply with applicable Federal or State laws or 13
regulations as amended from time to time; and 14
(5) impose a fair and reasonable burden on all classes of ratepayers. 15
Q10. How should it be determined if the Rate Proposal is consistent with constitutional, 16
statutory or common law as amended from time to time? 17
A. Issues concerning Charter Plan authority, environmental laws and regulations, 18
constitutional and statutory provisions and case law should be evaluated. The testimony 19
of Susan Myers contains additional information on this subject. 20
Q11. How should it be determined whether the Rate Proposal enhances the District’s 21
ability to provide adequate drainage systems and facilities, or related services? 22
A. The Rate Proposal should be assessed as to whether it enhances the District’s ability to 23
provide adequate sewer and drainage systems and facilities, or related services. This can 24
Direct Testimony of Thomas A. Beckley, Raftelis February 26, 2018
2018 Stormwater Rate Proceeding 4 MSD Exhibit No. MSD 3E
be done by examining the District’s submittal as well as the testimony filed in support of 1
the Rate Proposal by the District, the Rate Commission's Rate Consultant testimony and 2
advice, as well as the testimony provided by interveners. 3
Q12. How should it be determined if the Rate Proposal is consistent with and not in 4
violation of any covenant or provision relating to any outstanding bonds or 5
indebtedness of the District? 6
A. Such a determination requires an analysis of covenants or provisions contained in the 7
resolutions or ordinances issuing any such outstanding bonds or indebtedness. It may be 8
determined that this condition is met by examining the District’s submittal as well as the 9
testimony filed in support of the Rate Proposal by the District. This Rate Proposal will 10
not have any impact on District’s outstanding debt because stormwater revenue is not 11
pledged for repayment of the District’s outstanding debt. 12
Q13. How should it be determined whether the Rate Proposal impairs the ability of the 13
District to comply with applicable Federal or State laws or regulations as amended 14
from time to time? 15
A. It may be evaluated whether the Rate Proposal impairs the ability of the District to 16
comply with applicable Federal or State laws or regulations on the basis of testimony 17
provided by District staff and by others, including interveners. 18
Q14. How should it be determined if the Rate Proposal imposes a fair and reasonable 19
burden on all classes of ratepayers? 20
A. Whether the rate change imposes a fair and reasonable burden on all classes of ratepayers 21
may be determined by examining the Rate Proposal and the testimony filed in support of 22
the District's Rate Proposal as well as information provided by the Commission's Rate 23
Consultant, and other parties, including the interveners. 24
Direct Testimony of Thomas A. Beckley, Raftelis February 26, 2018
2018 Stormwater Rate Proceeding 5 MSD Exhibit No. MSD 3E
Q15. In the context of utility rate setting, what do the words “fair and reasonable” mean? 1
A. In the context of utility rate setting, the word “fair” means that rates recover revenues 2
from customer classes in relation to the costs incurred in providing utility services to 3
those customer classes and be free from self-interest, prejudice or favoritism. In the 4
context of utility rate setting, the word “reasonable” means that the revenue requirements 5
upon which the rates are based reflect an appropriate level of funding to enable the utility 6
to provide adequate and sustainable service and support the financial health of the utility. 7
Q16. Do you believe the Rate Proposal meets these criteria? 8
A. Yes. 9
10
Stormwater Rate Proposal 11
Q19. What is basis of the stormwater capital rate contained in the Rate Proposal? 12
A. The Rate Proposal proposes a Stormwater Capital Rate that will be charged based on 13
impervious area. Impervious area is generally accepted to be a fair and reasonable 14
approach to recovering stormwater related costs because impervious area directly impacts 15
the amount of stormwater runoff a customer will generate. 16
Q20. How was revenue from the Stormwater Capital Rate determined? 17
A. We worked with District Staff to determine the properties and amount of impervious area 18
within the District’s boundaries that would be charged the Stormwater Capital Rate and 19
the billable units of service that results. The revenue requirements for the Stormwater 20
Capital Rate were divided by the billable units of service to determine the proposed 21
Stormwater Capital Rates. 22
23
24
Direct Testimony of Thomas A. Beckley, Raftelis February 26, 2018
2018 Stormwater Rate Proceeding 6 MSD Exhibit No. MSD 3E
Stormwater Revenue Requirements 1
Q24. What are the components of the District’s Stormwater Capital Rate revenue 2
requirements? 3
A. The revenue requirement for the Stormwater Capital Rate is comprised of capital 4
expenditures to address the impacts of flooding and erosion on the District’s customers. 5
Q25. How are the District’s stormwater CIRP requirements projected over the period of 6
the Rate Proposal? 7
A. The District provided stormwater capital improvement and replacement program (CIRP) 8
requirements to be included in the financial planning and rate model. The figures 9
provided by the District include adjustments for the timing of the actual cash needs as 10
discussed in Appendix C of the Rate Proposal. The amount of the CIRP is inflated in 11
FY20 through FY24 based on an analysis of regional Engineering News Record 12
construction cost index data. 13
Q26. How does the District propose to fund the CIRP in the Stormwater Capital Fund 14
(Fund 5140) over the period of the Rate Proposal? 15
A. The District will fund the CIRP in the Stormwater Capital Fund using revenues from the 16
Stormwater Capital Rate. The District does not anticipate using revenue bonds for capital 17
improvements in this fund. 18
Q27. What are the District’s proposed reserve requirements for the Stormwater Capital 19
Fund in the Rate Proposal? 20
A. Because this fund will be used for funding the CIRP and the District obligates the entire 21
project cost of CIRP projects when they are approved, there is no projected reserve 22
requirement in this fund, the obligation process should provide sufficient working capital 23
for approved projects while new projects would not be approved until sufficient fund 24
Direct Testimony of Thomas A. Beckley, Raftelis February 26, 2018
2018 Stormwater Rate Proceeding 7 MSD Exhibit No. MSD 3E
balance exists to fully fund the project. 1
2
Stormwater Financial Plan 3
Q28. Does the proposed Stormwater Capital Rate provide sufficient funding for the 4
Stormwater Capital Rate Fund? 5
A. Based on the projected revenues and expenses, the proposed Stormwater Capital Rate 6
fully funds the projected revenue requirements for the Stormwater Capital Rate Fund. 7
8
Rate Model 9
Q29. Have you developed a rate model as the basis of the analysis you have described in 10
this testimony? 11
A. We have worked with MSD Finance Staff to develop a comprehensive financial 12
planning, cost of service and rate model that underpins the analyses described in my 13
testimony as well as throughout the Rate Proposal. 14
Q30. Are the Rate Model’s tables and calculations available for review? 15
A. The District is the owner of that model and will be providing electronic versions of the 16
model to the Rate Commission as well as any intervener who requests it. 17
Q31. Does this conclude your direct testimony in this matter? 18
A. Yes 19