HomeMy Public PortalAboutExhibit MSD 64 - Prehearing Conference Summary Statement of MSDTHE DISTRICT'S
PREHEARING CONFERENCE SUMMARY
June 21, 2018
Good Morning, my name is Susan Myers and I am the General Counsel for the
Metropolitan St. Louis Sewer District. As you all know the District submitted a Stormwater
Rate Change Proposal to you on February 26, 2018 to mitigate flooding and erosion within our
district. This proposal was based upon the wants and the needs of MSD's customers as
articulated to Brian Hoelscher and Lance LeComb. Brian & Lance spent many months out
talking to the community about what additional stormwater services they wanted and how much
they were willing to pay for such services. The accumulation of what Brian & Lance learned and
previous requests from customers was the basis for this proposal. In addition, as committed by
Brian Hoelscher during surrebuttal testimony, MSD staff will continue to listen to the input of its
rate payers to see if any change in scope or size of the program should, in the future, be brought
to the Rate Commission for consideration.
This proposal is about setting a Stormwater Capital Rate that is fair and equitable to all
classes of rate payers. Upon acceptance by the MSD Board of Trustees, the Stormwater Capital
Rate will be taken to the public for a vote. The public will decide if they want MSD to have a
revenue source to fund additional District -wide stormwater services in the form of capital
improvements to mitigate the impacts of flooding and erosion. You have heard a lot of
testimony and received a lot of evidence that supports the District's proposal.
You have also heard a lot of thoughts and comments about the methodology used by the
District to determine the project list. This includes the methodology MSD uses to prioritize
projects, how MSD utilizes cost sharing, and how the projects are programmed into the overall
Capital Improvement and Replacement Program (CIRP). With these in mind, the task at hand is
for the Rate Commission to issue its Rate recommendation to the Board of Trustees that meets
the five criteria outlined in the MSD Charter Section 7.270.
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Criteria 1 of the Charter requires that the proposed rate change "is consistent with
constitutional, statutory, or common law as amended from time to time." The proposed
Stormwater Capital Rate complies with this criterion and will be taken to the public to be voted
on in FY2019.
Criteria 2 requires that the proposed rate change "enhances the District's ability to
provide adequate sewer and drainage systems and facilities, or related services." As shown by
the District's written evidence and witness testimony, the Stormwater Capital Rate complies with
this criterion because the main driver for the proposed rate is to provide a funding source, via an
impervious rate, primarily to mitigate flooding and erosion.
Criteria 3 requires that the proposed rate change "is consistent with and not in violation
of any covenant or provision relating to any outstanding bonds or indebtedness of the District."
The District has satisfied this requirement because it is not proposing the use of bonds or other
indebtedness and, therefore, the proposed Stormwater Capital Rate will not violate any covenants
or provisions of outstanding bonds or indebtedness.
Criteria 4 requires that the proposed rate change "does not impair the ability of the
District to comply with applicable Federal or State laws or regulations as amended from time to
time." The proposed Stormwater Capital Rate does not address any particular federal or state
law or regulation. The Stormwater Capital Rate is being proposed based upon the MSD rate
payer's needs and wants to address flooding and erosion in our region.
Criteria 5 requires that the proposed rate change "imposes a fair and reasonable burden
on all classes of ratepayers." The Stormwater Capital Rate, as evidenced through District
testimony and also by your own technical consultants, clearly imposes a fair and reasonable
burden on all classes of ratepayers.
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The District has also identified three topics for further discussion.
ISSUE 1 — MSD's Prioritization System
You have heard a lot of testimony by both the District and the Rate Commission's
technical consultant that MSD's Stormwater Projects Prioritization System is an acceptable and
appropriate way to develop a Capital Improvement and Replacement Program (CIRP). The
identification and prioritization of projects to be included in the CIRP is a multi -step process,
requiring monitoring and updating to ensure that the highest priority problems within the District
are addressed in a timely manner, given available funding. The Stormwater projects are
identified to address flooding and erosion issues and are prioritized based upon the severity of
the flooding and erosion and the overall benefit provided by the project. In order to maximize
the benefits per dollar spent on a project, a benefit/cost ratio is calculated to determine the
project priority ranking. Your technical consultant agreed that this type of scoring system is
commonly used in infrastructure projects to provide quantification to project prioritization.
1.A. Cost Sharing
Cost sharing has been a discussion point during the discussion about prioritizing
projects. It is the District's goal that the projects with the highest priority are funded first.
With that being the case, MSD has always been receptive to partnering with other entities
for them to provide full or partial funding contributions to stormwater capital projects.
MSD plans to continue with this policy so long as the use of MSD funding does not delay
the execution of other scheduled projects that have a higher priority. As has previously
been testified to, the potential use of outside funding will have no effect in the priority
calculation for each project. In calculating the cost of a project in determining the benefit -
cost ratio, cost shall always be the cost to complete the project, regardless of the source of
funding. This process insures that the value of the stormwater capital dollars from all rate
payers will be weighed equally and not be influenced by the ability of a third party source
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to provide additional funding to the process. This helps ensure that the prioritization
process is fair and reasonable to all classes of rate payers.
ISSUE 2 - Capital Improvement and Replacement Program includes Projects and
Programing
Development of the CIRP Stormwater program includes the process for prioritization of
projects and also programing those projects. There have been many questions around how
projects are prioritized and then how they get programed. Previously I discussed the
prioritization process and how it is fair and reasonable to all classes of rate payers. You also
heard testimony from your technical consultant validating that the projects currently in the CIRP
program are appropriate. In addition, you heard that the prioritization process in place allows the
District to have flexibility to include new projects or projects with increasing severity in the
program. These statements are all true and support the process that has been place for many
years and allows the CIRP program to be fair and reasonable to all classes of rate payers.
The process for scheduling or programming within the annual CIRP is an iterative
process impacted by a number of factors. Projects are generally placed in the annual CIRP
according to the benefit/cost ratio, scheduling higher priority projects sooner in the program. The
annual CIRP typically includes a five year rolling block of projects potentially being impacted by
a number of factors. These factors and this programming process can require the movement of
projects both higher in priority to be delayed or projects of lesser priority to be expedited in the
program. However, as stated earlier, it is always the intent to address the highest priority issues
sooner in the program.
Mr. Unverferth testified that the cost estimates were based on historical District bid prices
using conceptual design information, technical expertise of consulting engineers, and past data
on similar District projects. Your technical consultant is in agreement and testified that the
District's cost estimates were completed in accordance with common practice for this phase of
the program.
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ISSUE 3 — Incentives and Credits
The Rate Commission's technical expert and MSD are in agreement regarding the
incentive/credit program being proposed. Ms. Young testified that we should focus on how
effective the incentive/credit program is to reducing impervious area — not whether the
incentive/credit is large enough. Ms. Young further testified that "Best Management Practices
(BMPs) are beneficial to the overall system if they are maintained over the long term. However,
it is unlikely that BMPs will have a significant effect in reducing the civil infrastructure
investments necessary in the program. While it is beneficial to install BMPs, MSD needs to
collect the funds in order to build the stormwater infrastructure or undertake buyouts included in
the CIRP. Increasing incentives or credits may increase BMPs, without actually achieving a
reduction in effective impervious area where needed." MSD testified that "similar to other
stormwater programs across the country the District has developed a proposed Storm Water
Incentive Program that provides customer incentives for reducing their effective impervious area
through the use of constructed features or low impact development and the proposed program is
within industry norms for such programs with respect to its major features." Your technical
consultant testified that the incentive and credit program will provide some nominal benefit to
property owners to provide BMPs without compromising the CIRP. Thus, the District's program
is a reasonable approach to providing some benefit to BMPs while still maintaining the integrity
of accomplishing the CIRP.
As I stated at the beginning of my statement, the task at hand is for the Rate Commission
to issue its Rate recommendation to the Board of Trustees that meets the five criteria outlined in
the MSD Charter Section 7.270. Upon review of the complete record of these proceedings you
will be able to determine that the District's proposal does just that.
This concludes the District's official summary statement. A copy of our statement will be
filed as Exhibit MSD 64. Thank You
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