HomeMy Public PortalAboutAugust 5, 2015 Letter to MSD Board of Trustees Delivering Final ReportTHE RATE COMMISSION OF THE
METROPOLITAN ST. LOUIS SEWER DISTRICT
August 5, 2015
Board of Trustees of the
Metropolitan St. Louis Sewer District
c/o Mr. Brian L. Hoelscher, Executive Director
2350 Market Street
St. Louis, Missouri 63103
Dear Trustees:
I have been authorized and directed by the Rate Commission of the Metropolitan St. Louis Sewer
District to deliver to you the Rate Recommendation Report regarding the Wastewater and
Stormwater Rate Change Proposal submitted to the Rate Commission on February 26, 2015.
Accompanying the Report are (a)(i) the Minority Report of Commissioners Schneider, Stein,
Toenjes, and Williams Regarding the Amount of Capital Improvement and Replacement
Program Debt Funding; (ii) the Minority Report of Commissioners Brockman, Mahfood, and
Stein Regarding Waste Hauler Permit Revenue; (iii) the Minority Report of Commissioners
Brockman, Kelling, Schneider, Stein, Tomazi, and Williams Regarding Bad Debt; (iv) the
Minority Report of Commissioners Bowser, Chodes, Kelling, Mahfood, O'Connell, and Tomazi
Regarding Late Charges; (v) the Minority Report of Commissioner Stein Regarding Metered and
Unmetered Ratepayers; (vi) the Minority Report of Commissioners Bowser, Mahfood, and
O'Connell Regarding Utility Expense Escalation; (vii) the Minority Report of Commissioners
Jones and Williams Regarding Allocation of Proceeds of the Stormwater Ad Valorem Tax
Among the Yellow, Green, and Red Zones; (viii) the Minority Report of Commissioners Bowser,
Mahfood, Schneider, Stein, Toenjes, and Tomazi Regarding Ad Valorem Funding for
Stormwater Services; and (ix) the Minority Report of Commissioners Schoedel and Tomazi
Regarding the Amount of Capital Improvement and Replacement Program Debt Funding; and
(b) the Resolution adopted by the Rate Commission on July 30, 2015.
The Proceedings of the Rate Commission at which the Rate Recommendation Report was
considered were held in accordance with all requirements of law and procedural rules of the Rate
Commission. The transcript of the Proceedings may be found at http://www.stlmsd.com/our-
organizationlorganization-overview/rate-commission-and-rate-proposal-information. The Rate
Recommendation Report was approved at a meeting on July 30, 2015, at which a quorum was
present and acted throughout. The Resolution is in full force and effect and has not been altered,
amended, or repealed.
Board of Trustees of the
Metropolitan St. Louis Sewer District
August 5, 2015
Page 2
I particularly call your attention to the Statement of Rate Commission on Rate Increase and the
Statement of Rate Commission on Funding for Stormwater Services found on pages 20-26 of our
Report.
Rate Increase. The District has acknowledged that its projections for revenue requirements and
rating agency standards to maintain a AA rating are based on conservative and optimistic
economic assumptions which may result in receipt of revenue in excess of forecasts. The
District has represented that it is in compliance with the Consent Decree. The District has
further represented to the Rate Commission that since FY2009, if actual annual spending within
a fiscal year is below the projections for revenue requirements or rating agency standards, any
remaining funds have been used to accelerate capital projects. While conservative and optimistic
economic projections for operations and maintenance expenses and to meet rating agency
requirements for a AA rating may seem prudent, and while steps to expedite performance of the
obligations of the District for the Consent Decree may seem appropriate, the appropriation of
funds in excess of operation or capital requirements and to step up capital expenditures without
regard to a significant increase in cost to ratepayers seems unwise and may jeopardize future rate
change procedures.
Stormwater Funding. The proposed levy of an valorem property tax to operate and maintain the
public stormwater system within the District does not link the cost of providing such stormwater
services to the rate structure. We believe that the most appropriate stormwater rate structure is
an impervious area calculation which links demand for service to cost causation. For the present,
to avoid a potential legal challenge based on the Missouri Supreme Court's opinion in Zweig and
because the levy of the property tax is uniform throughout the District, we have determined that
such a mechanism meets the standards of the Charter.
We appreciate all the time and effort the District staff contributed to the Rate Commission
Proceedings.
Very truly yours,
Leonard Toenjes
Enclosures
cc: (w/enc.) Office of the Secretary of the Rate Commission