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Home My Public Portal AboutExhibit MSD 41A - MSD's Response to First Discovery Request of MIECExhibit MSD 41A BEFORE THE RATE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT MSD'S RESPONSE TO THE FIRST DISCOVERY REQUEST OF INTERVENERS MISSOURI INDUSTRIAL ENERGY CONSUMERS Metropolitan St. Louis Sewer District Response ISSUE: STORMWATER RATE CHANGE PROCEEDING WITNESS: THE METROPOLITAN ST. LOUIS SEWER DISTRICT SPONSORING PARTY: RATE COMMISSION DATE PREPARED: APRIL 27, 2018 Lashly & Baer, P.C. 714 Locust Street St. Louis, Missouri 63101 Exhibit MSD 41A 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 ) APRIL 18, 2018 FIRST DISCOVERY REQUEST OF INTERVENERS MISSOURI INDUSTRIAL ENERGY CONSUMERS Metropolitan St. Louis Sewer District Response Pursuant to § 7.280 and § 2.290 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 April 10, 2018 Third Discovery Request of The Rate Commission for additional information and answers regarding the Rate Change Notice dated February 26, 2018 (the "Rate Change Notice"). Exhibit MSD 41 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 ) FIRST DISCOVERY REQUESTS OF INTERVENOR MISSOURI INDUSTRLAL ENERGY CONSUMERS 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"), Intervenor Missouri Industrial Energy Consumers ("MIEC") 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. 3 Exhibit MSD 41 A FIRST DISCOVERY REQUEST OF M EC I. Regarding the District's response to the Rate Commission's question on the use of debt financing (Exhibit MSD BIB, Response 44), please answer the following: a. Please explain whether or not any of the proposed capital improvements will be made on private property, and if so who will own the asset. b. How will MSD sponsored capital improvements to private property impact the market value of the property? Please explain answer. c. What are the typical terms (years, repair issues, etc.) of an easement that allows the District to make capital improvements on private property? d. What is the District's justification for using ratepayer rate revenue funds, or equity, for funding assets that cannot be funded by issuing bonds? Please explain why the same restriction on use of bond funding should not also apply to ratepayer revenue funding. RESPONSE: a. Approximately 75% of capital improvements will be assets owned by MSD. Most will he in permanent easements constructed on private property while some may be located in public right-of-way or MSD owned land These projects provide stormwater solutions with storm sewer pipe or concrete channel or block or other man-made structures. Some proposed capital improvements may be made in easements on private property to solve stormwater problems. These projects can also include stormwater solutions such as biostabilization projects and swales. Other projects that would not become MSD assets include bridge/road culvert or road raising projects that once constructed would belong to a municipality or St. Louis County. Also, a portion of the proposed projects include property buyouts to purchase private property when the alternatives are more expensive or impractical to implement. b. The District believes capital improvements provide added value to the community overall. MSD sponsored improvements to private property could maintain the property's market value by preventing future stormwater damage to the property, or perhaps increase market value depending on the past severity of damage to the property and the extent of relief provided by the improvements. On the other hand improvements to private property could decrease market value by changing the visual appeal and use of the area. Projects after construction of improvements on private property could result in a wider creek and top -of -bank with flatter slopes, and the loss of old growth vegetation. This is one of the reasons projects in the program could be dropped once MSD attempts to obtain property rights to implement a proposed solution. c. MSD permanent easements are irrevocable and continue forever. These permanent easements give MSD the right to build, access, and maintain the capital improvement on private property, including additional space adjacent to the permanent easement as may be reasonable and necessary for working room during the construction, reconstruction, maintenance, or repair of the capital improvement. Temporary construction easements provide additional access and working room (outside of the permanent easement area) to enable the capital improvement to be constructed and include the right of ingress and egress; the right to remove trees, shrubs, and bushes; the right to grade, excavate, and fill as necessary to build the capital improvement; and the right to temporarily relocate utilities for the project. The Exhibit MSD 41A temporary construction easement becomes null and void upon completion of the project. Any areas disturbed within the permanent easement and/or temporary construction easement area(s) are repaired or restored d Where the District should not use bond funding the alternative is to use rate revenues. The District does not claim that assets cannot be funded by bonds, just that some projects may not be eligible to be funded with tax-exempt bonds, a generally lower cost alternative to taxable bonds, and that bond funding should be used to address affordability concerns of paying for long-term assets. Due to the relatively small size of the stormwater capital program and the extra costs, required reserves, and risks associated with managing a prudent debt program, any relief to rates in the District's Rate Proposal are limited and short- term. The compounded costs of continuous borrowing would likely drive rates higher than the proposed rates early in the program. Rate revenues are not subject to IRS provisions that regulate the tax -exemption of debt and don't have the same limitations on use. 2. Regarding Mr. Gee's testimony during the April 4, 2018 Technical Conference (starting on page 163), approximately what percent of the forecasted $562 million would result in assets owned by the District? RESPONSE: Of the forecasted $562 million capital program, approximately 75% would result in District assets. 3. Regarding Mr. (xee's testimony during the April 4, 2018 Technical Conference (starting on page 239), please provide a copy of the latest rating agency reports. RESPONSE: The most recent rating agency reports have been provided as Exhibits MSD 41B - 41D. 4. Please provide an Excel version of Exhibit MSD 31B - CIRP Support Schedule for Rate Model Storm Dashboard Tab. Also, please provide a definition for each four -digit account code in the spreadsheet. RESPONSE: Please see Exhibit MSD 41E for the requested spreadsheet. The `four - digit account" codes referenced in the request are fund numbers. The names of the fund numbers can be found on the tab labeled "Beg Fund Balance" in column A of the requested spreadsheet. 5. Please provide additional details about the historical records and engineering studies the District relied on to produce the annual stormwater capital spending forecast that appears on the Storm Dashboard tab of the District's Rate Model. 5 i Exhibit MSD 41A RESPONSE: The District previously provided the stormwater program studies and reports in response to the 3'd Discovery Request of the Rate Commission (Exhibit MSD 37F and MSD 37G). In addition, please see Exhibit MSD 41F Stormwater CIRP. This exhibit provides the additional project details relied upon to produce the stormwater capital spending. Respectfully submitted, Susan M. Myers, General Coun 1 THE METROPOLITAN ST. L UIS SEWER DISTRICT 2350 Market Street St. Louis, Missouri 63103 smyers@stlmsd.com Tel: (314) 768-6366 Fax: (314) 768-6279 6 Exhibit MSD 41A 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 27th day of April, 2018. Lisa O. Stump, Esq. Brian J. Malone, Esq. Lashly & Baer, P.C. 714 Locust Street St. Louis, MO 63101 lostump@lashlybaer.com Brandon W. Neuschafer Bryan Cave, LLP 211 N. Broadway, Suite 3600 St. Louis, MO 63102 bwneuschafer@bc1plaw. com h� Susan M. Myers, General Coinsel THE METROPOLITAN ST. LOUIS SEWER DISTRICT 2350 Market Street St. Louis, Missouri 63103 smyers@stlmsd.com Tel: (314) 768-6366 Fax: (314) 768-6279 7 i