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HomeMy Public PortalAboutExhibit RC 43 - Rebuttal Testimony of Pamela LemoineBEFORE THE RATE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT REBUTTAL TESTIMONY ISSUE: STORMWATER RATE CHANGE PROCEEDING WITNESS: PAMELA LEMOINE SPONSORING PARTY: RATE COMMISSION DATE PREPARED: MAY 2, 2018 Lashly & Baer, P.C. 714 Locust Street St. Louis, Missouri 63101 Rebuttal Testimony Pamela R. Lemoine, P.E. Black & Veatch Corporation 16305 Swingley Ridge Road Suite 230 Chesterfield, MO 63017 2 Q1. Please state your name and business address. A. My name is Pamela Lemoine. My business address is 16305 Swingley Ridge Road, Suite 230, Chesterfield, Missouri 63017. Q2. By whom are you employed and in what capacity? A. I am a Principal Consultant with Black & Veatch Management Consulting, LLC. Q3. Please describe the firm of Black & Veatch Management Consulting, LLC. A. Black & Veatch Management Consulting, LLC (“B&V” or “Black & Veatch”) is a wholly owned subsidiary of Black & Veatch Holding Company and provides integrated strategy, process and technology solutions in the water and energy sectors, and including a broad array of strategic, regulatory, financial, and information systems consulting. In the water sector, Black & Veatch delivers a variety of services for municipalities, special districts and companies involved in the generation, treatment, and distribution drinking water, as well as the collection and treatment of wastewater and management of stormwater. Black & Veatch offers assistance in utility rate, financial planning, economic feasibility, valuation and organization-management matters to water, wastewater, stormwater, electric, gas, telecommunications, and solid waste utilities. Black & Veatch services include utility cost of service studies and rate design, property inventory, property valuation for rate base or other purposes, organization and management studies, financial feasibility studies, standardized cost studies and manuals, operating reports, market studies, depreciation expense studies, statistical analyses, bond prospectuses and expert testimony before courts and regulatory bodies. Q4. Please describe your educational background and work experience. A. I received a Bachelor of Science in General Engineering from the University of Illinois – Urbana/Champaign in 1986. I joined Black & Veatch in 1987 as a consultant in Black & Veatch’s Management Services Division in Kansas City, Missouri. During this time I conducted a variety of analyses related to water, wastewater, electric and gas cost of service and rate design studies. In 1989, I was hired by R. W. Beck and Associates in Seattle, Washington, as a project manager in R. W. Beck’s Seattle Consulting office. While in this capacity, I managed water, wastewater and solid waste strategic financial planning, cost of service, and rate design studies. In addition, I conducted valuation studies related to street light utility assets and landfill, transfer station, and material recovery facility development and acquisition studies, as well as financial analyses related to nuclear decommissioning studies and mergers/ acquisitions. In 1995, I rejoined Black & Veatch, serving as Northwest Regional Manager of the Management Consulting Division. I currently serve as a Principal Consultant, serving clients primarily in the eastern two-thirds of Rebuttal Testimony Pamela R. Lemoine, P.E. Black & Veatch Corporation 16305 Swingley Ridge Road Suite 230 Chesterfield, MO 63017 3 the United States. I serve as Project Manager or Project Director for strategic financial planning studies, cost of service and rate design studies, as well as financial capability analyses and affordability assessments associated with long term control plan development required as a result of state and/or federal consent decrees. I have assisted utilities in developing strategies to address affordability in negotiations with state and federal regulators. I have also assisted in the development of stormwater utilities, including policy development, financial planning, rate and credit program design, and implementation, providing clients with a stable source of revenue to fund necessary stormwater activities as required by NPDES permits and other wet weather- related issues. In the past decade, I have been involved in studies regarding water, wastewater and stormwater rates and related matters for clients including Washington Suburban Sanitation Commission; Sanitation District No. 1 of Northern Kentucky; Metropolitan Sewerage District of Greater Cincinnati, Ohio; Greater Cincinnati Water Works, Ohio; Cincinnati, Ohio Stormwater Management Utility; Allegheny County Sanitary Authority, Pennsylvania; Shreveport, Louisiana; Wilmington, Delaware; Jonesboro, Arkansas and Springfield, Ohio. Q5. Are you a registered Professional Engineer? A. Yes, I am a registered Professional Engineer in the state of Washington. Q6. Do you belong to any professional organizations or committees? A. Yes. I am a member of the Water Environment Federation and the American Water Works Association. I am a representative for Black & Veatch to the National Association of Clean Water Agencies, serving on the Utility & Resource Management Committee and Legal Affairs Committee. I am also currently serving on the U.S. Environmental Protection Agency’s (US EPA) Environmental Financial Advisory Board. Q7. Have you previously testified before the Rate Commission of the St. Louis Metropolitan Sewer District? A. Yes. I served as the consultant to the Rate Commission for the District’s 2015 Rate Proceeding. Q8. Please describe your role in this proceeding? A. The scope of my assignment in this proceeding includes the review of the District’s 2018 Stormwater Capital Rate Proposal, to assist the Rate Commission to gain a better understanding of the District’s proposal, to advise the Rate Commission on cost of service and rate setting practices, to assist legal counsel in the examination of witnesses, and to prepare testimony and exhibits setting forth my findings and recommendations. Rebuttal Testimony Pamela R. Lemoine, P.E. Black & Veatch Corporation 16305 Swingley Ridge Road Suite 230 Chesterfield, MO 63017 4 The District’s rate proposal is limited to costs associated with a new capital program to address flooding and erosion control problems. That said, I believe it remains my role to review the overall funding of the District’s stormwater proposal, including costs recovered by funding sources not included in this proposal, to determine the extent to which all funding sources allow for the recovery of all costs anticipated to be incurred by the District’s stormwater utility over the Stormwater Capital Rate Proposal period FY 2020 – FY 2024. The scope of my assignment is limited to relying on the record in this proceeding, statements, data, information and reports provided by the District and intervenors and their respective consultants and advisors as well as data and information available in the public domain. Q9. Please summarize your findings and recommendations to the Rate Commission in this proceeding. A. The following is a summary of my findings and recommendations in this proceeding. 1. The proposed Stormwater Capital Rate will fund capital projects that address outstanding flooding and erosion issues throughout the District. Such projects have not been possible to date due to lack of funding. Therefore, the proposed Stormwater Capital Rate, which is intended to provide dedicated funding for the capital projects, will enhance the District’s ability to fund sewer and drainage infrastructure projects and/or related capital program services including condition assessment, planning, and engineering design associated with these capital projects. 2. While the District has stated that the projects are expected to be primarily located on private property, the stormwater runoff issues that drive the need for capital projects are not only limited to the private properties but also exist in a complex network of areas beyond the properties. Therefore, the District has determined that providing solutions to these issues benefits the service area as a whole. I concur with this position, and further, agree that submitting the program and stormwater capital rate to voters for their concurrence and approval is appropriate. 3. It is my opinion that the District’s proposed Stormwater Capital Rate based on impervious area does provide a reasonable nexus between customer rates and benefits provided, as the rate structure is based on impervious area, which is an industry accepted approach for estimating a property’s stormwater runoff contribution, which causes flooding and erosion. The stormwater rate structure, which includes a tiered Residential rate structure and individually calculated Non-Residential charges, does impose a fair and reasonable burden on rate payers, and provides for equitable recovery of capital costs that this rate proposal seeks. Rebuttal Testimony Pamela R. Lemoine, P.E. Black & Veatch Corporation 16305 Swingley Ridge Road Suite 230 Chesterfield, MO 63017 5 4. Given the small monthly fee, the Residential Incentive program as currently proposed may not provide adequate incentive for customers to deploy and maintain BMPs. The Commercial Incentive Program criteria appear reasonable. However, a key criterion for approval of a renewal request must be that the BMPs must be fully functional and adequately maintained, and with the District having the rights to revoke any credits if the BMPs are found to be not functional. 5. While the Rate Proposal (MSD Ex. 1), in Section 6, Appendix J, discusses the details of the revenue and ERU reduction impacts of the credit program, it is not clear how this impact was addressed in the development of the Financial Plan. If the annual billable ERUs were reduced by the estimated reduction in ERUs due to credits, then the calculated revenue properly reflects such assumptions, and the resulting financial plan indicates that the Stormwater CIRP can be funded as planned. If the impact of the credit program was not incorporated in the calculation of projected revenues, the recurring annual loss of revenues, due to credits, may require a commensurate reduction in annual capital spending. Based on a review of the projected ERUs in the Rate Model, there appears to be no recognition of increasing credits over time, which would result in further annual revenue loss. 6. The District has accounted for very nominal adjustments due to customer appeals, as indicated in Appendix J of the Rate Proposal, and it is likely the District will see many user fee appeals in the first year of the program, which could result in adjustments to ERUs beyond what is indicated. 7. The District’s proposal will not impact current bond covenants, as the District is not planning to issue any debt for the stormwater capital program, and because the District is not utilizing any wastewater funds to support the stormwater capital program, there is no impact on wastewater bond covenants. GENERAL MATTERS Q10. What is the role of the Rate Commission in this proceeding? A. Pursuant to Section 7.040 of the Charter Plan of the District, the role of the Rate Commission is to review and make recommendations to the District’s Board of Trustees regarding the proposed changes in wastewater charges, stormwater charges or tax rates necessary to pay: (i) interest and principal due on bonds issued or to be issued to finance assets of the District; (ii) the costs of operation and maintenance; and (iii) such other amounts as may be required to Rebuttal Testimony Pamela R. Lemoine, P.E. Black & Veatch Corporation 16305 Swingley Ridge Road Suite 230 Chesterfield, MO 63017 6 cover emergencies and anticipated delinquencies. This Rate Proposal is limited to a proposed Stormwater Capital Rate. Q11. How should the Rate Commission determine whether the District’s rate proposal is necessary? A. The Rate Commission should examine the record in this proceeding, including the District’s projected revenue requirements, to determine that such revenue requirements are necessary and reasonable to meet the District’s near term financial needs, that such revenue requirements do not overstate the District’s near term financial needs, and that such revenue requirements are being recovered in a fair and equitable manner. Q12. Upon what criteria must the Rate Commission base its recommendation? A. In accordance with Section 7.270 of the Charter Plan of the District, any proposed rate change, and all portions thereof, recommended by the Rate Commission must: (1) be consistent with constitutional, statutory or common law as amended from time to time; (2) enhance the District’s ability to provide sewer and drainage systems and facilities, or related services; (3) be consistent with and not in violation of any covenant or provision relating to any outstanding bonds or indebtedness of the District; (4) 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) impose a fair and reasonable burden on all classes of ratepayers. Q13. How should the Rate Commission determine if the rate proposal is consistent with constitutional, statutory or common law as amended from time to time? A. The Rate Commission should evaluate Charter Plan authority, environmental improvement agency regulations, constitutional and statutory provisions and applicable case law. Q14. How should the Rate Commission determine whether the rate proposal enhances the District’s ability to provide sewer and drainage systems and facilities, or related services? A. The Rate Commission should consider the record in this proceeding, including the District’s submittal as well as the testimony of its staff and other intervenors, to determine if the District’s proposal enhances its ability to provide adequate sewer and drainage systems and facilities, and/or capital program related services. Rebuttal Testimony Pamela R. Lemoine, P.E. Black & Veatch Corporation 16305 Swingley Ridge Road Suite 230 Chesterfield, MO 63017 7 Q15. How should the Rate Commission determine if the rate proposal is consistent with and not in violation with any covenant or provision relating to any outstanding bonds or indebtedness of the District? A. Such a determination requires an analysis of the record in this proceeding, including the covenants or provisions contained in the resolutions or ordinances and bond documents or other documents issuing any such obligations. The Rate Commission can determine that this condition is met by examining the District’s submittal as well as the testimony of its staff. Q16. How should the Rate Commission determine whether the rate proposal impairs the ability of the District to comply with applicable Federal and State laws or regulations as amended from time to time? A. The Rate Commission should consider the record in this proceeding including the testimony provided by District staff and others, including intervenors, to determine whether the capital rate proposal impairs the ability of the District to comply with applicable Federal or State laws or regulations. This is accomplished by evaluating the proposal to determine whether the proposed capital rates provide the funding capacity needed to address issues including flooding mitigation and erosion control – which are critical to achieving compliance with applicable Federal or State laws or regulations, and to provide sufficient revenue to allow completion of capital projects necessary to meet Consent Decree obligations while maintaining current assets. Q17. How should the Commission determine if the rate proposal imposes a fair and reasonable burden on all classes of ratepayers? A. The Rate Commission should determine whether the rate proposal imposes a fair and reasonable burden on all classes of ratepayers by considering the record in this proceeding, including the District’s submittal and the testimony of its staff and intervenors. STORMWATER CAPITAL RATE PROPOSAL Q18. Is the burden imposed on each class of ratepayers by the District’s Stormwater Capital Rate Proposal “fair and reasonable?” A. Yes, I believe that the burden imposed on each class of ratepayers by the District’s Stormwater Capital Rate Proposal is “reasonable” for the following reasons:  There appears to be a “reasonable nexus” between the District’s projected costs and the amount of revenues projected to be generated as user fees based on the District’s proposed capital rate. The District’s projected costs to provide a capital program to address flooding and erosion control over the Stormwater Capital Rate Proposal period (FY 2020 – FY 2024) are based on (i) the District’s knowledge and information of known problems and needs that Rebuttal Testimony Pamela R. Lemoine, P.E. Black & Veatch Corporation 16305 Swingley Ridge Road Suite 230 Chesterfield, MO 63017 8 the District needs to address, and (ii) further vetted with customer input regarding level of service and anticipated acceptance by customers.  An Equivalent Residential Unit (ERU) cost of $2.25 per month, as a component of the total cost to customers for providing all stormwater services, is fair and reasonable as it is designed specifically for a stormwater capital program that, over time, will address major flooding and erosion issues in the District’s service area.  The proposed rate structure recognizes distinct customer classes, where the customers are grouped in to residential and non-residential classes based on similar characteristics. Furthermore, as there appears to be a fair level of diversity in the amount of impervious area among the residential properties, the District’s proposed “tiered rate” for Residential properties recognizes that diversity and provides a better mechanism to enhance equity of cost recovery as compared with a uniform Residential fee. The District’s proposal to calculate non-residential stormwater charges based on property specific impervious area is consistent with industry accepted practices, and also supports equitable cost recovery commensurate with the estimated stormwater runoff contribution. Q19. Does the District’s proposed funding of the stormwater capital program contribute to - sufficient stormwater revenues for the stormwater utility over the Rate Proposal Period? A. The District’s Rate Proposal is limited to a new Stormwater Capital Rate for funding capital projects to relieve flooding and erosion throughout the District. Based upon the Rate Proposal, it appears that the proposed funding method may generate sufficient revenue to fund the District’s projected stormwater capital costs at the level of spending indicated in its Rate Proposal. a. In MSD Ex. 31A, Question 18, the District states that the proposed Stormwater Capital Rate of $2.25/month per Equivalent Residential Unit (ERU) was derived by dividing a targeted annual revenue of $30 million by the number of billable ERUs. The District further states that “the $30 million number was chosen based on survey results and the size of the program needed to address flooding and erosion issues throughout the District.” Mr. Beckley’s testimony (MSD Ex. 3E, Q20) also states that the “revenue requirements for the Stormwater Capital Rate were divided by the billable units of service to determine the proposed Stormwater Capital Rates.” However, based upon a review of the District’s Rate Model (MSD Ex. 18), we are not able to ascertain how the proposed monthly rate of $2.25/ERU was actually derived. In the District’s Rate Model, this proposed Stormwater Capital Rate of $2.25/ERU is actually a direct input in the model, and is not a rate derived based on annual targeted revenue requirement and projected billable ERUs. b. From a proof of revenue adequacy perspective, the projected revenue calculated in the rate model based on the projected ERUs and the proposed $2.25/ERU rate is sufficient to fund Rebuttal Testimony Pamela R. Lemoine, P.E. Black & Veatch Corporation 16305 Swingley Ridge Road Suite 230 Chesterfield, MO 63017 9 the projected Stormwater CIRP, which averages approximately $30 million/year, during FY 2022 to FY 2028. c. In the Rate Model, the billable Impervious Area (IA) units for the Rate Proposal period are escalated from 2012 data. Estimated ERUs associated with potential CAP customers is subtracted from Residential Tier 2 billing units through FY18, with no further change in CAP customers in FY19 or beyond, other than the general escalation factor used for all ERUs. It is not clear whether there is an adjustment for the reduction in billable ERUs due to the proposed Commercial credit program, even though in the Rate Proposal, Appendix 6J (MSD Ex. 1), the District has provided estimates of potential impact to billable ERUs for the various types of credits. In the Rate Model, it is also not clear if and how the projected billable ERUs during the period of FY 2020 through FY 2028 are adjusted for any incremental reduction in ERUs as additional customers seek credits over those years. If such adjustments have not been made, then there could be a risk of overstatement of billable ERUs, and consequently an overstatement of projected revenues. d. From a revenue impact perspective, the District has estimated that the revenue impact of the five types of “credits” (includes credit program, Residential incentive program costs, and minor adjustments due to appeals) will be $466,857 in year 1. Based on a review of the information provided in Appendix 6J, this appears to be an annualized figure. As previously stated, there appears to be no consideration for increasing participation in credit program over time, or any meaningful adjustment for appeals. It is also not certain whether the assumptions are included in the billable ERUs used to calculate projected revenues. Therefore, it is possible that the District could expect lower revenues than that projected, and if the impact of the credit program is not incorporated into the billing units, the impact on revenues would be significant and could require a reduction in the Stormwater CIRP over time. e. The District appears to have only a modest estimate (MSD Ex. 1 Appendix 6J, page 6-29) of the impact of a “Stormwater Appeals” process. They have referred to allowed “billing adjustments” for customers with Stormwater BMPs such as green roofs and pervious pavement. The District should develop a formal Appeals Process during the implementation phase of the Stormwater Capital Rate, and such should outline the requirements for any customer to appeal if they feel their assigned ERUs are not appropriate. The District’s methodology for determining IA and billable ERUs, as discussed in the Rate Proposal, Appendix 6A (MSD Ex. 1) appears consistent with industry accepted approaches for determining IA. The District should expect appeals following implementation of the SW Capital Rate, and such appeals could further reduce the District’s projection of billable ERUs. While the existing funding sources for providing regulatory services and operation and maintenance of the Public Storm Sewer System (PSSS) are not part of this rate proposal, the Rebuttal Testimony Pamela R. Lemoine, P.E. Black & Veatch Corporation 16305 Swingley Ridge Road Suite 230 Chesterfield, MO 63017 10 District provided a summary of the projection of revenues and costs associated with providing such services, and based on a review of that separate analysis, it appears that those funding sources will provide adequate revenue to provide such services over the Rate Proposal Period. Q20. Appendix 6A of the District’s rate proposal provides a description of the Impervious Area Determination process, which provides the basis for determining billable ERUs. Do you have any concerns with the approach used in determining billable ERUs? A. Per the description provided in Appendix 6A, the District appears to have determined the impervious area strictly based on the various delineations of improvements found in a property. Based on this approach of determining impervious area, the District has only included parcels that have visible improvements (they refer to it as “classified impervious surfaces”), and excluded parcels that don’t have any structures but may have surfaces including compacted dirt, that restrict infiltration and therefore still contribute stormwater runoff. Excluding these types of improved vacant land parcels completely from stormwater billing, could potentially impact equity of cost recovery, as these types of improved vacant land also contribute some level of stormwater runoff, especially during high intensity wet weather events. Rather than completely exclude them from impervious area determination, the District could have considered estimating an effective impervious area by applying a reasonable low runoff factor to the parcel lot size. Q21. Does the District’s proposed credit program enhance equitable cost recovery by providing opportunities for a fee reduction? A. Yes. A credit program provides customers that have onsite stormwater Best Management Practices (BMPs) that mitigate stormwater runoff an opportunity for ongoing reduction to their bill. This enhances the equity of cost recovery. The maximum level of credit presented in the District’s rate proposal of 50 percent is within the range commonly used by stormwater utilities with similar programs. Q22. Does the District’s proposed credit program for non-residential ratepayers provide sufficient incentive to achieve a reduction in effective impervious area within the service area? A. Likely, no. Because the proposed Stormwater Capital Rate is so low, it is unlikely that a credit program will greatly incentivize customers to incur the up-front capital costs required to design and implement stormwater BMPs, if the properties already do not have those. It will, however, provide for reduced charges for those who already have deployed District approved BMPs and are also engaged in the operations and maintenance of those BMPs. Rebuttal Testimony Pamela R. Lemoine, P.E. Black & Veatch Corporation 16305 Swingley Ridge Road Suite 230 Chesterfield, MO 63017 11 Q23. Does the District’s proposed residential incentive program provide sufficient incentive to achieve a reduction in effective impervious area within the service area? A. Likely, no. The District has proposed an incentive program for residential customers based on an up-front payment of 50 percent of the average residential charges over a 10-year period. Based on the proposed rate of $2.25, the up-front incentive payment would be $135. The magnitude of this incentive will likely not be sufficient for a residential property owner to install stormwater BMPs. The District has stated in MSD Ex. 37A Q16 that it believes most customers would not want to wait 120 months in order to receive the full amount of their incentive, if it were provided as a monthly credit. I agree that customers, if given the choice, would choose an up- front payment versus an amortized payment; however, I do not believe an up-front payment of $135 will provide any greater incentive. While it is difficult to anticipate the level of participation in the program, the District is projecting limited participation. Q24. Do you have any concerns regarding the proposed up-front incentive payment versus any on- going fee reduction mechanisms? A. By providing an up-front payment with no provisions for repayment, the District does not maintain any incentive to help ensure that the BMPs will be maintained and operate as designed. As currently proposed, if the property owner does not properly operate and maintain the BMP, or the property is sold and a new owner removes the BMP, there appears to be no clear mechanism for the District to recover any portion of the “unearned” incentive. Instead, the District could consider an on-going small “discount” to residential properties that deploy BMPs including rain gardens, cisterns, and rain barrels to mitigate stormwater runoff. The District has indicated that this approach was not implemented due to on-going administrative costs, and while I agree that it is not practical to implement a credit program that includes active inspections of residential BMPs, the on-going nature of such credits would allow the credit to be subject to discontinuation if the District discovers that the applicable BMP has been removed or is not operating as designed. Given that the Stormwater Capital Rate is small, and an alternative credit would be even smaller, it is likely that this approach would not provide any greater incentive to maintain the BMP, but would more appropriately tie the benefit to the operation of the BMP and would provide the District with the ability to discontinue the credit if necessary. Q25. Are there other options that could provide greater incentive for residential customers to reduce effective impervious area? A. Some utilities have implemented grant programs to provide financial support for the installation of approved features, such as rain gardens, that help mitigate stormwater runoff contribution. The District actually has such a program as part of Project Clear, whereby property owners can receive up to $3,000 through the Rainscaping Small Grants Program. The District could consider Rebuttal Testimony Pamela R. Lemoine, P.E. Black & Veatch Corporation 16305 Swingley Ridge Road Suite 230 Chesterfield, MO 63017 12 a similar program, funded annually on a first come, first served basis, for properties that are located outside the Rainscaping Small Grants Program Area. This additional residential grant program could become an annual funding allowance funded by the Stormwater Capital Rate. By providing a grant that offsets a greater portion of the up-front costs associated with implementing a BMP such as a raingarden, it could provide a greater incentive to manage stormwater runoff from eligible BMPs. If such a program were implemented, it would reduce the funding available for the capital projects identified by the District in the Stormwater Rate Proposal, but would provide a similar incentive as the Rainscaping Small Grants Program throughout the service area. In addition, it would be appropriate to not provide an on-going credit for such grant subsidized BMPs. Q26. Is the District’s proposed non-residential credit program consistent with common industry practice? A. Credit programs vary greatly, as illustrated by the results of the 2016 Black & Veatch Stormwater Survey (Exhibit MSD Ex. 19). As indicated on page 28, credits range from less than 25 percent to over 75 percent, for a wide variety of BMPs. The District’s proposed credit of 50 percent for certain BMPs meeting specified technical criteria is within the range of credit seen within the industry. As with the residential incentive program, due to the low rate projected for the Stormwater Capital Rate, I do not anticipate that the credit program will provide significant incentive to mitigate stormwater runoff contribution; however, it could enhance equity by allowing those who do install approved BMPs a reduction in their monthly bill. Q27. Is the District’s Direct Drainage Credit Program similar to that implemented by other similar utilities? A. Yes, it is a fairly common practice in the industry to provide some credit to parcels that discharge directly to a major surface water body without using any part of the utility’s stormwater infrastructure. As presented in the 2016 B&V Stormwater Utility Survey (MSD Ex. 19), 25 percent of respondents indicated that they offer such credits. A key factor for qualifying for such types of direct discharge credit, however, is that the parcel discharges to the surface water body without using a municipal stormwater system. Q28. The District has stated that the non-residential credit program does not include a credit for stormwater best management practices (BMPs) that are an MS4 (Municipal Separate Storm Sewer System) regulated requirement. Should such facilities be eligible for credit? A. The types of credits offered by stormwater utilities varies widely. While some utilities do offer credits for BMPs that meet current regulatory requirements, many utilities choose to associate the credit to BMPs that “go above and beyond.” Rebuttal Testimony Pamela R. Lemoine, P.E. Black & Veatch Corporation 16305 Swingley Ridge Road Suite 230 Chesterfield, MO 63017 13 Q29. Is the District’s proposed recertification period (5 years) for the non-residential credit program appropriate? A. The recertification period of 5 years proposed by the District is within the range commonly seen within the industry (page 86, Water Environment Federation User Fee Funded Stormwater Management Program, second edition). Q30. The District has not established a minimum fund balance for the Stormwater Capital Rate Fund. Do you agree with this policy? A. While I agree that the Stormwater Capital Rate Fund is different than the other Stormwater Utility funds, in that the revenue source is a rate that will be collected monthly from most customers, versus annually as is the case with the tax-based funds. In addition, from an expense standpoint, the District has stated that it will adjust the timing of projects as necessary and therefore feels it is appropriate to not maintain a fund balance. They have further stated that contingencies are included in the planning level estimates used to project the flow of funds. As a practical matter, I believe a nominal minimum fund balance is appropriate to allow the ability to accommodate unforeseen circumstances with projects underway, without relying on borrowing from other Stormwater or Wastewater funds. In reviewing the District’s Rate Model, assuming not adjustments to the billing units for the considerations I have previously discussed, the District’s forecast shows a positive end of year balance each year, averaging $4.5 million through FY 2024, with the lowest end of year balance of $2.9 million in FY 2024, which is approximately 35 days of the average annual capital spending in years FY2025-2027. I recommend that the District continue to plan their program such that a nominal end of year balance is planned. Q31. Does this conclude your testimony? A. Yes. 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; Susan Myers, Counsel for the Metropolitan St. Louis Sewer District; and Brandon Neuschafer, Counsel for the Missouri Industrial Energy Consumers, on this 2nd day of May, 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 Counsel for the Metropolitan St. Louis Sewer District Brandon Neuschafer Bryan Cave Leighton Paisner LLP One Metropolitan Square, Suite 3600 St. Louis, MO 63102-2750 bwneuschafer@bclplaw.com Counsel for Intervenor Missouri Industrial Energy Consumers /s/ Brian J. Malone Brian J. Malone