HomeMy Public PortalAboutExhibit RC 30 - Rate Commission's First Discovery Request to MSD March 12, 2018BEFORE THE RATE COMMISSION OF THE
METROPOLITAN ST. LOUIS SEWER DISTRICT
FIRST DISCOVERY REQUEST
ISSUE: STORMWATER RATE CHANGE PROCEEDING
WITNESS: METROPOLITAN ST. LOUIS SEWER DISTRICT
SPONSORING PARTY: RATE COMMISSION
DATE PREPARED: MARCH 12, 2018
Lashly & Baer, P.C.
714 Locust Street
St. Louis, Missouri 63101
Exhibit RC 30
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 )
DISCOVERY REQUEST
OF THE RATE COMMISSION
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”), the
Rate Commission 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.
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DISCOVERY REQUEST
1. Brian L. Hoelscher states in Direct Testimony that the purpose of the Rate Change
Proposal is to fund an additional District-wide stormwater service in the form of capital
improvements. See MSD Ex. 3(a), p. 2. Has the District analyzed whether, once these capital
improvements have been constructed, the Rate Proposal will provide sufficient Operating and
Maintenance (“O&M”) revenue to maintain these capital improvements, in addition to the
District’s existing facilities? If such analysis has been conducted, please provide a copy of the
analysis.
RESPONSE:
2. Richard L. Unverferth states in Direct Testimony that the Stormwater Capital
Improvement and Replacement Program (“CIRP”), Appendix D to the Rate Change Proposal
(MSD Ex. 1, App. 6E), identifies the needed additions and improvements to the stormwater
sewer and drainage system. See MSD Ex. 3(c), p. 2. Mr. Unverferth further testifies that the
CIRP was compiled from historical records and engineering studies to address customer
complaints. Has the District studied whether, in lieu of addressing the sites listed in the CIRP
individually, it would be less costly and/or more equitable to address stormwater on a District-
wide or watershed level approach in lieu of responding to complaints? If such analysis has been
conducted, please provide a copy of the analysis.
RESPONSE:
3. A commissioner has requested that the District provide an analysis of how the use
of Equivalent Residential Units (“ERUs”) would impact large commercial properties, such as
shopping malls, big-box stores, strip malls, and innovation districts with large amounts of
impervious surface. Please identify several such properties within the District and present the
Commission with an analysis of such property owners’ potential liability if the Rate Change
Proposal were approved.
RESPONSE:
4. To follow up on Request No. 3, has the District analyzed whether, if the Rate
Change Proposal is approved, large commercial properties may go out of business, and thereby
cease generating revenue under the Rate Change Proposal, and the potential impact to the
District’s funding? If such analysis has been conducted, please provide a copy of the analysis.
RESPONSE:
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5. Please provide a typical bill summary for the District’s 25 largest customers in
terms of Impervious Area under the Rate Change Proposal. This should include (itemized) the
Capital Impervious Area rate, Regulatory Tax and O&M Tax.
RESPONSE:
6. Please provide information related to the nature of outreach to not only the
community as a whole (through public meetings in 2017) but specifically to property owners
with significant impervious area to provide the Rate Commission with an understanding of the
nature of and/or extent of concern regarding the Rate Change Proposal.
RESPONSE:
7. In the District’s rate model, there is an assumed 4% “stormwater bad debt
allowance.” See MSD Ex. 1, App. 6E, p. 18. How was this factor determined? Has the District
evaluated the impact of increased costs beyond this factor (e.g., increased delinquencies in
assessed tax payments)?
RESPONSE:
8. The District’s proposal includes several assumptions related to customer growth.
a. The District’s Rate Model includes an assumed change in stormwater
parcels of -0.05% per year. This indicates fewer parcels year over year.
Please explain the basis for this assumption.
b. The District’s Rate Model includes an assumed change in Impervious
Area of 0.86% per year. This factor is used to calculate Impervious Area
from 2013 forward. Please provide the basis for the calculation.
c. Appendix 6A summarizes the District’s calculation of Impervious Area,
indicating the most recent update as of 2012. See MSD Ex. 1, App. 6A, p.
2. When does the District plan to update the impervious surface data
through aerial imagery?
RESPONSE:
9. Identify other cities and/or sewer districts (collectively “Locales”) which utilize
an impervious area-based stormwater capital rate to fund capital improvements throughout their
respective service areas.
RESPONSE:
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10. Identify other Locales which utilize ERUs as a measure of the average number of
square feet of impervious surface area found at residential customers throughout such District.
RESPONSE:
11. With respect to each such Locale, what is the impervious area based stormwater
allocation rate measured for residential customers and for non-residential customers.
RESPONSE:
12. Identify the factors utilized to prioritize projects identified in the CIRP program.
RESPONSE:
13. Describe the process utilized for prioritizing projects identified in the CIRP
program.
RESPONSE:
14. For each CIRP project identified, quantify the severity of the problem and
anticipated costs of the project.
RESPONSE:
15. What is the ranking or score associated for each CIRP project identified?
RESPONSE:
16. Identify all factual indicia to support the premise that the Rate Change Proposal at
issue: (1) is consistent with constitutional, statutory or common law, as amended from time to
time; (2) enhances the District’s ability to provide adequate sewer and drainage systems and
facilities, or related services; (3) is consistent with and not in violation of any covenant or
provision relating to any outstanding bonds or indebtedness of the District; (4) does not impair
the ability of the District to comply with applicable Federal or State laws or regulations as
amended from time to time; and (5) imposes a fair and reasonable burden on all classes of tax
payers.
RESPONSE:
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17. Has the District obtained a legal opinion from counsel opining that the statements
identified in (1) through (5) inclusive of Request No. 16, are true? If so, please furnish a copy of
such opinion.
RESPONSE:
18. Provide a copy of the Water Environment Federation’s Special Publication titled
User-Fee-Funded Stormwater Programs, 2nd edition.
RESPONSE:
19. Provide a copy of the industry guidebook Water and Wastewater Finance and
Pricing: The Changing Landscape.
RESPONSE:
20. Provide a copy of a 2016 survey of stormwater utilities referenced in the proposal
materials indicating that the vast majority of stormwater utilities employ a rate based upon
impervious area.
RESPONSE:
21. Provide a copy of all rate models relied upon by Raftelis Financial Consultants,
Inc. (“RFC”) as a basis for the Rate Change Proposal submitted to the Rate Commission.
RESPONSE:
22. Identify the date, amount and purpose (use) of funds which the District has
expended to date for compliance with the Consent Decree entered into by the District in the
matter captioned United States of America v. Metropolitan St. Louis Sewer District (the
“Consent Decree”).
RESPONSE:
23. Identify the date, amount and purpose (use) of funds which the District has
expended to date for remediation of wastewater projects within the District.
RESPONSE:
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24. Identify the date, amount and purpose (use) of funds which the District has
expended to date for remediation of stormwater projects within the District.
RESPONSE:
25. Identify what portion or amount of the $4.7 billion required to be spent by the
District under the Consent Decree is budgeted or allocated for wastewater and stormwater
remediation, and indicate the time(s) such expenditure(s) will be made through 2035.
RESPONSE:
26. Please provide the basis for the O&M escalation factors used in the Rate Model.
See MSD Ex. 18.
RESPONSE:
27. Please provide the basis for the escalation rates used for miscellaneous revenue in
the Rate Model. See MSD Ex. 18.
RESPONSE:
28. Please provide the basis for the factors used in the input tab for Late Charges, and
how the factors are utilized in the Rate Model. See MSD Ex. 18.
RESPONSE:
29. Please provide the basis for the escalation of CAP Impervious Area in years
FY19-21, and that used for FY22 forward.
RESPONSE:
30. Appendix 6B indicates projected change in assessed value is 0.76%. The model
uses 0.71%. Please provide the basis for 0.71% used in the projections. See MSD Ex. 1, App.
6B, p. 4.
RESPONSE:
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31. The Rate Change Proposal does not specifically address the General Service
Agreements. How will these funds be used?
RESPONSE:
32. There is a line item for easement acquisitions. Is this in addition to the specific
CIRP projects listed? How will these funds be used?
RESPONSE:
33. Have properties been identified for the buyout program? What is the District’s
criteria for identifying properties and ensuring fair value to the District?
RESPONSE:
34. Several projects to be constructed, do not have corresponding designs (i.e.,
Dunleer Ave., Allemania, Fawndale, etc.). Have the design costs been accounted for?
RESPONSE:
35. Some of the projects listed under “design” have design costs at nearly 50% of
construction (i.e., Hallstead Storm Channel Phase IV). Does the design cost take into
consideration easement acquisition and other costs?
RESPONSE:
36. What is the purpose of the CIRP-2 subset? See MSD Ex. 17.
RESPONSE:
37. If liquidations or canceled projects are higher than expected, is there a process for
adding additional projects to the program?
RESPONSE:
38. In Richard L. Unverferth’s testimony, he states that projects are primarily
identified through customer complaints. See MSD Ex. 3(c), p. 2. How far back did the District
review customer complaints? Has there been any work done by the District to identify projects in
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areas that have not had stormwater remedy in the past and may not have active customer
complaints?
RESPONSE:
39. On the map of Unfunded Stormwater Issues, North St. Louis City appears to have
only one project shown. Has MSD considered additional efforts in this area to identify projects?
RESPONSE:
40. Has the District undertaken a District wide (or by watershed) master plan or
modeling efforts to identify total needs over the next 20-30 years?
RESPONSE:
41. How were the projects included in Prop S determined?
RESPONSE:
42. Has the District considered the development of the Capital Rate in a manner to
fully recognize stormwater costs (i.e., stormwater related portion of costs currently recovered
through wastewater charges)?
RESPONSE:
43. The CIRP is based on an assumed annual spending threshold. Please provide
information related to the District’s determination of the annual spending threshold, and any
information related to “risk” of setting the CIRP at the proposed level versus a higher level.
RESPONSE:
44. Has the District considered debt financing of a portion of the stormwater CIRP in
order to leverage available funding and complete more projects more quickly?
RESPONSE:
45. Has the District considered the feasibility of prioritizing CIRP projects in the
jurisdictions that have approved a sales tax for stormwater control pursuant to § 644.032, RSMo.
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or otherwise have provided a dedicated funding source for stormwater projects to defray some of
the costs the District would otherwise incur?
RESPONSE:
46. Brian L. Hoelscher testifies that the District “concluded that our customers should
have the opportunity to vote on whether MSD should provide” the stormwater services which the
Rate Proposal would fund. See MSD Ex. 3(a), p. 3. Susan M. Myers testifies that the Stormwater
Capital Rate would not be considered a “property tax or any other form of tax, but instead is a
charge or rate authorized by the Charter.” See MSD Ex. 3(b), p. 2. Is it the District’s position
that, under the Hancock Amendment (§§ 16 – 23) to Art. X of the Missouri Constitution, voter
approval is not legally required but that the District has decided, as a policy matter, to seek voter
approval anyway?
RESPONSE:
47. Susan M. Myers testifies that, since the Stormwater Capital Rate would not be
considered a tax, but rather a special assessment, governmental entities and non-profit entities
would be required to pay the Stormwater Capital Rate. See MSD Ex. 3(b), p. 2. Has the District
conducted an analysis of how governmental entities and non-profit entities which own properties
with large amounts of impervious surface would be impacted if the Rate Change Proposal is
approved? If such analysis has been conducted, please provide a copy of the analysis.
RESPONSE:
48. Susan M. Myers testifies that § 204.700, RSMo., enacted by House Bill 661
(2009) is unconstitutional because it violates Art. III, § 23 of the Missouri Constitution, which
requires a bill to be limited to one subject. See MSD Ex. 3(b), p. 4. Is there a court decision
supporting this conclusion? Did the District commence any legal action challenging the manner
of the enactment of § 204.700, RSMo. in the time provided by § 516.500, RSMo.
RESPONSE:
49. Susan M. Myers testifies that the Rate Change Proposal will not impair the ability
of the District to comply with applicable federal or state laws or regulations as amended from
time to time. See MSD Ex. 3(b), p. 5. Please (a) describe the analysis that was performed to
reach this conclusion; (b) provide copies of any memorandum, report, work paper, summary,
analysis, or schedule that supports this conclusion; and (c) describe the rationale for such
conclusion.
RESPONSE:
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50. Please provide copies of each contract or lease for goods or services in which the
payment obligation of the District exceeds $500,000.
RESPONSE:
51. Please provide copies of the complaint/petition for any litigation in which the
District is involved in which the prayer for damages exceeds $500,000.
RESPONSE:
52. Please describe any other facts and circumstances which demonstrate whether the
Rate Change Proposal and all portions thereof why the Rate Change Proposal is necessary, fair
and reasonable, as required by §3(2)(a) of the Operational Rules.
RESPONSE:
53. Please describe any other facts and circumstances which demonstrate whether the
Rate Change Proposal and all portions thereof why the Rate Change Proposal will enhance the
District’s ability to provide adequate sewer and drainage systems and facilities, or related
services, as required by §3(2)(b) of the Operational Rules.
RESPONSE:
54. Please describe any other facts and circumstances which demonstrate whether and
to what extent the Rate Change Proposal and all portions thereof is necessary to enable the
District to comply with any covenant or provision relating to outstanding bonds or indebtedness
of the District, together with a specific quantification of the amount of the Proposed Rate Change
is necessary for such purposes, as required by §3(2)(c) of the Operational Rules.
RESPONSE:
55. Please describe any other facts and circumstances which demonstrate that the
Rate Change Proposal and all portions thereof are necessary to enable the District to comply with
applicable federal or State laws or regulations as amended from time to time, together with a
specific quantification of the amount of the Rate Change Proposal that is necessary for such
purposes as required by § 3(2)(d) of the Operational Rules.
RESPONSE:
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56. Please describe any other facts and circumstances which demonstrate that the
Rate Change Proposal and all portions thereof imposes a fair and reasonable burden on each
class of ratepayers, including whether and how cost of service considerations have been factored
into such determination as required by §3(2)(e) of the Operational Rules.
RESPONSE:
57. Please describe any other facts and circumstances which demonstrate that the
Rate Change Proposal and all portions thereof imposes a fair and reasonable burden on each
class of ratepayers, including whether and how cost causation principles, have been factored into
such determination as required by § 3(2)(e) of the Operational Rules.
RESPONSE:
58. Please describe any other facts and circumstances which demonstrate that the
Rate Change Proposal and all portions thereof imposes a fair and reasonable burden on each
class of ratepayers, including whether and how customer impact data has been factored into such
determination as required by § 3(2)(e) of the Operational Rules.
RESPONSE:
59. Please describe any other facts and circumstances which demonstrate that the
Rate Change Proposal and all portions thereof imposes a fair and reasonable burden on each
class of ratepayers, including whether and how economic development considerations have been
factored into such determination as required by § 3(2)(e) of the Operational Rules.
RESPONSE:
60. Please describe any other facts and circumstances which demonstrate that the
Rate Change Proposal and all portions thereof imposes a fair and reasonable burden on each
class of ratepayers, including whether and how environmental effects have been factored into
such determination as required by § 3(2)(e) of the Operational Rules.
RESPONSE:
61. Please describe any other facts and circumstances which demonstrate that the
Rate Change Proposal and all portions thereof imposes a fair and reasonable burden on each
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class of ratepayers, including whether and how any other factors have been factored into such
determination as required by § 3(2)(e) of the Operational Rules.
RESPONSE:
62. Please (a) describe any other facts and circumstances which demonstrate that the
measures taken by the District to ensure that the cost of constructing and maintaining the
District’s facilities and providing related services are being incurred in a reasonable and efficient
manner; and (b) include copies of all internal or external audit reports that address such matters
as required by § 3(2)(f) of the Operational Rules.
RESPONSE:
63. Please provide testimony demonstrating how, whether and to what extent the Rate
Change Proposal and all portions thereof, will affect, impact and comply with the Consent
Decree, as required by § 3(2)(g) of the Operational Rules.
RESPONSE:
Respectfully submitted,
/s/ Brian J. Malone
Lisa O. Stump
Brian J. Malone
LASHLY & BAER, P.C.
714 Locust Street
St. Louis, Missouri 63101
Tel: (314) 621-2939
Fax: (314) 621-6844
lostump@lashlybaer.com
bmalone@lashlybaer.com
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CERTIFICATE OF SERVICE
The undersigned certifies that a copy of the foregoing was sent by electronic transmission
to Janice Fenton, Office Associate Senior, Metropolitan St. Louis Sewer District; and Susan
Myers, Counsel for the Metropolitan St. Louis Sewer District, on this 12th day of March, 2018.
Ms. Janice Fenton
Office Associate Senior
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103
JFENTON@stlmsd.com
Ms. Susan Myers
General Counsel
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103
smyers@stlmsd.com
/s/ Brian J. Malone
Brian J. Malone