HomeMy Public PortalAboutExhibit L&B 86 RC 4th Discovery Request To MSD 091611BEFORE THE RATE COMMISSION OF THE
METROPOLITAN ST. LOUIS SEWER DISTRICT
FOURTH DISCOVERY REQUEST
ISSUE: WASTEWATER RATE CHANGE PROPOSAL
WITNESS: METROPOLITAN ST. LOUIS SEWER DISTRICT
SPONSORING PARTY: RATE COMMISSION
DATE PREPARED: SEPTEMBER 16, 2011
Lashly & Baer, P.C.
714 Locust Street
St. Louis, Missouri 63101
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BEFORE THE RATE COMMISSION
OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT
For Consideration of a Wastewater
Rate Change Proposal by the Rate
Commission of the Metropolitan
St. Louis Sewer District
FOURTH 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(2) and Procedural Schedule §§ 1, 14, 15 and 17
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 May 10, 2011 (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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1. Please provide a rate change scenario using the assumptions included in the
analysis presented in Exhibit MSD 1 basing the CIRP on a projected expenditure basis instead of
the appropriation basis used in the Rate Change Proposal. Please provide the following
schedules reflecting this scenario:
a. Table 3-8 Wastewater Capital Improvement and Replacement Program
b. Table 3-9 Wastewater Capital Improvement Program Financing
c. Table 3-10 Projected Wastewater Debt Service Requirements
d. Table 3-11 Comparison of Projected Wastewater Revenue Under Existing Rates
with Projected Revenue Requirements
e. Table 3-21 Comparison of Existing and Proposed Wastewater Rates.
RESPONSE:
2. District witness Jeanne F. Vanda states, "We benchmark our projects based on the
average life of the bonds to be sold. The average life calculation takes into account how
principal is paid over the entire maturity schedule. MSD has issued 30 year final maturity senior
lien bonds in the past and would like issue 30 year bonds for the bonds contemplated during this
rate period. The average life of 30 year bonds tends to be in the 18 to 25 year range depending
on the structure of the principal payments. MSD's average life tends to be longer because the
senior lien bonds are structured to take into account debt service due on the subordinate SRF
debt, which is limited to 20 years. We used a 25 year average life based on the senior lien bonds
outstanding as follows:
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Bond Series
Average Life
Average Interest Rate
Series 2004A
22.012 years
5.00%
Series 2006C
25.769 years
4.12%
Series 2008A
25.966 years
5.25%
Series 2010B (BABs)
27.529 years
Not comparable
Referring to sheet L-2 of Exhibit MSD 4A, the first principal payment on MSD's Series
2006c Revenue Bonds is scheduled to be paid on May 1, 2027, which means that these bonds
have 21 years of interest only payments. Referring to sheet L-3 of Exhibit MSD 4A, the first
principal payment on MSD's Series 2008A Revenue Bonds is scheduled to be paid on May 1,
2030, which means that these bonds have 22 years of interest only payments. Referring to sheet
L-4 of Exhibit MSD 4A, the First principal payment on MSD's Series 2010B Build America
Bonds is scheduled to be paid on May 1, 2035, which means that these bonds have 25 years of
interest only payments. See Q. 29 Response Surrebuttal Testimony of Jeanne F. Vanda
beginning at p. 15,1. 18.
Please provide a rate change scenario using the assumptions included in the analysis
presented in Exhibit MSD 1 for projected debt service for the proposed revenue bonds to be
issued during the period Fiscal years 2012 through Fiscal year 2016 using interest only payments.
Please provide the following schedules reflecting this scenario:
a. Table 3-10 Projected Wastewater Debt Service Requirements
b. Table 3-11 Comparison of Projected Wastewater Revenue Under Existing Rates
with Projected Revenue Requirements
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c. Table 3-21 Comparison of Existing and Proposed Wastewater Rates
RESPONSE:
3. The Bipartisan Tax Fairness and Simplification Act, S.727, introduced on April 5,
2011, if adopted, would end traditional tax exemption for newly issued municipal bonds and
provide that municipal bonds issued after December 31, 2011, would be taxable providing a 25%
tax credit only for non -corporate holders and would eliminate advance refunding for outstanding
tax-exempt bonds. The Tax Equity and Middle -Class Fairness Act, H.R.2495, introduced July
11, 2011, if adopted, would end traditional tax exemption after December 31, 2011, and require
all new municipal bonds to be issued as taxable direct -pay bonds with a 28% federal subsidy rate.
The Report of the National Commission on Fiscal Responsibility and Reform, dated December
2010 (Simpson -Bowles Commission), if implemented, would eliminate the exclusion for interest
on municipal bonds. The Reducing the Debt: Spending and Revenue Options, Congressional
Budget Office dated March 2011, if implemented, would replace the exclusion of interest on
state and local government bonds with a direct -subsidy payment equal to 15% of the interest paid
on the bonds.
Using the analysis presented in Exhibit MSD 1, please provide the information presented
in Table 5-6 for two alternative scenarios incorporating the following changes to the assumptions
used by MSD in its Rate Change Proposal:
a. A net revenue bond interest rate of 6.0%
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b. A net revenue bond interest rate of 6.5%
RESPONSE:
Lisa 0. Stump
LASHLY & BAER, P.C.
714 Locust Street
St. Louis, Missouri 63101
Tel: (314) 621-2939
Fax: (314) 621-6844
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CERTIFICATE OF SERVICE
The undersigned certifies that on the 16th day of September, 2011:
An electronic copy of the foregoing instrument was e -mailed to the Secretary of the Rate
Commission do jfenton@stlmsd.com.
SECRETARY OF RATE COMMISSION: Ms. Nancy Bowser
Secretary of Rate Commission
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103
robowser@swbell.net
At the request of the Rate Commission Counsel, one paper original and associated Exhibits are
held at the Rate Commission office for Commissioner review.
An electronic copy of the foregoing instrument was e -mailed to:
DISTRICT LEGAL COUNSEL: Susan Myers, Esq.
General Counsel
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, Missouri 63103
smyers@stlmsd.com
RATE COMMISSION CONSULTANT: Mr. William G. Stannard
President
Raftelis Financial Consultants, Inc.
3013 Main Street
Kansas City, Missouri 64108
wstannard@raftelis.com
COVIDIEN: Mr. Randy Meyer
Utility Manager
Covidien
3600 North 2nd Street
St. Louis, MO 63147
Randy.Meyer@covidien.com
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ROBERT A. MUELLER:
BARNES JEWISH HOSPITAL:
MISSOURI INDUSTRIAL ENERGY
CONSUMERS:
AARP AND CONSUMERS COUNCIL OF
MISSOURI:
Mr. Robert A. Mueller
16 Ladue Crest Lane
St. Louis, MO 63124
ramreco@sbcglobal.net
Lisa C. Langeneckert, Esq.
Sandberg, Phoenix & von Gontard, P.C.
600 Washington Avenue, 15th Floor
St. Louis, MO 63101-1313
llangeneckert@sandbergphoenix.com
John R. Kindschuh, Esq.
Bryan Cave, LLP
211 N. Broadway, Suite 3600
St. Louis, MO 63102
Telephone: 314-259-2313
john.kindschuh@bryancave.com
and
Diana M. Vuylsteke, Esq.
Bryan Cave, LLP
211 N. Broadway, Suite 3600
St. Louis, MO 63102
dmvuylsteke@bryancave.com
John B. Coffman, Esq.
John B. Coffman, LLC
871 Tuxedo Blvd.
St. Louis, MO 63119
j ohn@j ohncoffman.net
Lisa O. Stump
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