HomeMy Public PortalAboutExhibit MSD 66A - MSD's Response to Fourth Discovery Request of the Rate CommissionI,
Exhibit MSD 66A
EFORE THE PATE COMMISSION OF THE
MET
I"
OPOLITAN ST. LOUIS SEWER DISTRICT
MSD'S RESPONSE TO FOURTH DISCOVERY REQUEST
OF T H E RATE C M M ➢S S I OIL'
The Metropolitan St. Louis Sewer District I" espouse
ISSUE: WASTEWATER RATE CHANGE PROCEEDING
WITNESS:
SEONSO I!; ING PA
DATE IP
I,,
EPAED:
ILaslnly & i::aer, P.C.
714 Locust Street
St. Louis, Missouri 63101
MET(! OIPOLITAN ST. LOUIS SEWE
TY: RATE COMMISSION
APRIL 22, 2019
DISTRICT
xnobn 6 A
BEFORE THE RATE COMMISSION
OF THE METROPOLITAN ST. LOUIIS SEWER DUST
For Consideration of a )
Wastewater Rate Change Proposal by )
The Rate Commission of The Metropolitan )
St. Louis Sewer District )
APR➢L U, 2019 FOURTH IID➢SCOVEi''V EQUEST
OF THE j''ATE COMMISSION
The Metropolitan St. Louis Sewer District
JCT
Pursuant to § 7.280 and § 7.290 of the Charter Plan of The Metropolitan St. Louis Sewer District
(the "Charter Plan"), Restated Operational Rule 3(7) and Procedural Schedule § 16 and § 17 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 11, 2019 Fourth
Discovery Request of The Rate Commission for additional information and answers regarding
the Rate Change Notice dated March 4, 2019 (the "Rate Change Notice").
1
hxhHoR MOO c 6A
EFORE THE RATE COMMISSION
OF THE METROPOLITAN ST. LOUIS SEWEI DISTRICT
For Consideration of a Wastewater
Rate Change Proposal by the Rate Commission
of the Metropolitan St. Louis Sewer District
FOURTH DISCOVERY EQUEST
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"), Restated Operational Rule § 3(7) and Procedural Schedule §§ 16
and 17 of the Rate Commission of the Metropolitan St. Louis Sewer District (the "Rate
Commission"), the Rate Commission requests additional information and answers from the
Metropolitan St. Louis Sewer District (the "District") regarding the Rate Change Proposal dated
March 4, 2019 (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.
2
Exhibit MSD 66A
FOURTH DISCOVERY REQUEST
1. Please provide a copy of the most recent official statement regarding the District's
Wastewater System Improvement and Refunding Revenue Bonds.
RESPONSE: See attached MSD Exhibit 66B.
2. Please provide a summary of all pending litigation against the District, including
estimated exposure risk to the District for each case. Please identify any lawsuit in which an
adverse ruling would impact the Rate Change Proposal.
RESPONSE: The District currently has no pending litigation in which an adverse
ruling would impact the Rate Change Proposal.
The following is a summary of all pending litigation against the District and the highest
estimated exposure risk for a single case.
# of Cases
Type of Matter
Estimated Exposure Risk
2
Breach of Contract/Mechanic's Lien
<$25,000
11
Labor & Employment
<$50,000
8
Eminent Domain
0
13
Inverse Condemnation
<$250,000
6
Personal Injury
<$50,000
3
Boring Claim
<$25,000
45
Quiet Title
0
1
Small Claims
<$5,000
3. Please provide a copy of the Rate Model, Exhibit MSD 52, with all tabs unlocked.
Note: The version previously provided by the District in response to the Rate Commission's
Discovery Request had some tabs hidden and unavailable for review and/or edits to inputs,
such as the "Rate Summary" tab, which is referenced on the Sanitary Dashboard where
projected revenue increases are indicated (lines 55 and 56).
RESPONSE: See Exhibit MSD 66C.
4. On page 4-14 of the Rate Change Proposal, Exhibit MSD 1, Table 4-6 shows a
roughly $15.7 million increase in General Fund Operating Expenses from FY 2018 to FY 2019.
Please identify all factors accounting for this increase.
RESPONSE: See Exhibit MSD 67C in MIEC 's Second Discovery Request response.
3
Exhibit MSD 66A
5. Please state whether the District anticipates increased delinquencies if voters
reject additional bond authorizations and higher rate increases are implemented as a result.
Please provide an analysis of the potential increase in delinquencies if voters do not approve the
additional bond authorizations proposed in the Rate Change Proposal and describe how such
increases were accounted for in the development of the alternative rates that will be presented to
voters for the "No Bond Authorization" option.
RESPONSE: The District does not model delinquencies. However, assuming that the
same percent of user charge revenue would become bad debt (i.e., the same bills that would be
bad debt under the proposed scenario with bonds would be bad debt under the "No Bond
Authorization" scenario), bad debt expenses are estimated to increase by approximately $2.8
million over the period of FY 22 to FY 24 (proposed rates in FY 21 are the same in both
scenarios, so there would be no change in FY 21). For purposes of the rate proposal it was
assumed that all the District's expenses would remain the same in the "No Bond Authorization"
scenario, including total amount of bad debt expense.
6. Please provide the number of basement backups reported to the District for each
year from FY 2009 — FY 2018.
RESPONSE:
Fiscal Year
Number
2009
4803
2010
971
2011
1647
2012
529
2013
774
2014
294
2015
946*
2016
2174*
2017
1428*
2018
221
* Increased number of basement backups due to record flooding events for the
Meramec River and associated rainfall.
7. Please provide the number of dry weather overflows of which the District is
aware for each year from FY 2009 — FY 2018.
4
Exhibit MSD 66A
RESPONSE:
Fiscal Year
Number
2009
299
2010
199
2011
191
2012
132
2013
122
2014
112
2015
167*
2016
162*
2017
171 *
2018
127
* Increased number of dry weather overflows due to record flooding events for the
Meramec River and associated rainfall.
8. Please state whether the failure of Proposition S (2019) will result in additional
anticipated costs being shifted from stormwater to wastewater. If the answer is "Yes", please
identify the amounts anticipated to be shifted, and state how such funds will be spent.
RESPONSE: Overhead and capitalized labor that would have been charged to the
stormwater CIRP will now be charged to other CIRP projects which are primarily wastewater
projects. These costs ranged from $1.3 million in FY 2020 to $5.9 million in FY 2024.
9. Please identify all tunnel projects planned as part of the Consent Decree. For each
project, please state the project's name, start date, completion date, length and diameter of
tunnel, approximate location, and its estimated cost. If a map of such projects is available, please
provide a copy.
RESPONSE: See attached document provided as Exhibit MSD 66D - MSD Tunnel
Projects.
10. Please provide a chart/model from PFM illustrating the historical and current
interest rate differentials between AAA, AA, A, etc.
RESPONSE: Please see attached Exhibit MSD 66E for a graph that show the 25-year
history of the AAA, AA, A, and BAA Municipal Market Data (MMD) scales. The MMD scales,
reflecting different credit rating categories, are the municipal bond industry benchmarks.
5
Exhibit MSD 66A
11. Please explain the anticipated impact on borrowing costs if the District's bond
rating is upgraded or downgraded.
RESPONSE: While PFM cannot predict how the market will react with a change to the
District's ratings, we expect there would be no material impact to borrowing costs with an
upgrade. The District currently has the highest rating from S&P and is only one notch removed
from the highest rating from Moody's and Fitch. In response to question 10 above, we have
shown the industry benchmark 20 year spot rate over the last 25 years. During this time the
average difference between a AA -rated and A -rated bond has been 30 basis points (0.30%). If we
added 30 basis points to the true interest cost of the District's $200 million new money issuance
in 2017, this would equate to an additional present value cost of $5,160,000. Furthermore, in
times of market stress and volatility, lower rated issues have the potential to realize greater
credit spreads and issuers could struggle to gain market access, as certain credits experienced
during the last financial crisis.
12. Please explain how the District establishes insurance requirements for projects.
Please provide examples of insurance requirements for CIRP projects of varying sizes.
RESPONSE: See attached document provided as Exhibit MSD 66F - MSD Summary
Insurance 2017. Insurance requirements are established by MSD's Risk Management Group,
with input from the General Counsel 's Office and Engineering Department, working with advice
from outside resources: insurance broker and legal representatives. Insurance limits are based
on an evaluation done of industry standards, sovereign immunity limits and specific project
needs.
13. In the FY 2021 - FY 2024 CIRP, $38.6 million is identified as green infrastructure
or raingardens. Will the District get credit towards the $100 million in Bissell and $20 million in
Lemay Consent Decree requirements for these projects?
RESPONSE: Yes. These projects include:
• CSO VOLUME REDUCTION GREEN INFRASTRUCTURE - $20 Million
• CSO VOLUME REDUCTION GREEN INFRASTRUCTURE - RIVER DES PERES - $4
Million
• MALINE CREEK CSO BP 051 & 052 LOCAL STORAGE FACILITY (RAIN GARDEN) -
$200,000
• HARLEM CITYSHED MITIGATION BASINS (ASHLAND AND ESSEX) - $14.4 Million
Please note that project 13231, Harlem Cityshed Mitigation Basins (Ashland and Essex),
is a Cityshed project that includes green infrastructure. Approximately $900,000 of the project
will be counted towards the green infrastructure obligation, and the balance, $13.5 Million, will
be counted towards the Cityshed obligation of $230 Million under the Consent Decree.
6
Exhibit MSD 66A
14. Please provide a copy of Table 7.8 on page 7-118 of the Rate Change Proposal,
Exhibit MSD 1, for wastewater only.
RESPONSE: See Exhibit MSD 66G.
15. Please state the total number of projects the District is required to complete for the
Consent Decree.
ESPONSE: Generally, the projects in Exhibit 56B minus those projects identified in
Exhibit 56C and 56D reflect the amount of work required by the Consent Decree in the FY21 to
FY24 period. There are a total of 278 CD projects during the FY21-24 period. The Consent
Decree is performance based, and is therefore guided by but not restricted to the specific
projects identified in the SSO Master Plan or the CSO Long Term Control Plan.
16. Please explain the impact an unanticipated revenue shortfall, due to decreasing
billable units or some other factor(s), would have on the Rate Change Proposal.
RESPONSE: As has been done in the past, MSD's management would evaluate cuts in
discretionary expenditures that might be necessary to offset the decrease in anticipated revenue.
If these cuts were not sufficient to offset the revenue shortfall and the shortfall would have an
impact on MSD's ability to fund its capital program and comply with other regulatory
requirements, staff would consider another Rate Commission proceeding to adjust rates as
necessary to make up for the shortfall.
Respectfully submitted,
san M. Myers, General Co . el
THE METROPOLITAN ST. OUIS SEWER DISTRICT
2350 Market Street
St. Louis, Missouri 63103
smyers@stlmsd.com
Tel: (314) 768-6366
Fax: (314) 768-6279
7
Exhibit MSD 66A
CERTIFICATE OF SERVICE
The undersigned certifies that a copy of the foregoing was sent by electronic transmission
to Lisa O. Stump and Brian J. Malone, Lashly & Baer, P.C., Brandon W. Neuschafer and
Kamilah Jones, Bryan Cave Leighton Paisner on this 22nd day of April 2019.
Lisa O. Stump, Esq.
Lashly & Baer, P.C.
714 Locust Street
St. Louis, MO 63101
lostump@lashlybaer.com
Brian J. Malone, Esq.
Lashly & Baer, P.C.
714 Locust Street
St. Louis, MO 63101
bmalone@lashlybaer.com
Brandon W. Neuschafer
211 N. Broadway, Suite 3600
St. Louis, Missouri 63102
bwneuschafer(i bclplaw.corn
Kamilah Jones
211 N. Broadway, Suite 3600
St. Louis, Missouri 63102
kami.jones cr,bclplaw.com
usan M. Myers, General Ccylinsel
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
2350 Market Street
St. Louis, Missouri 63103
smyers@stlmsd.com
Tel: (314) 768-6366
Fax: (314) 768-6279
8