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HomeMy Public PortalAboutExhibit MIEC 67 MIEC's Fifth Discovery Request to MSD 082411Metropolitan St. Louis Sewer District Wastewater Rate Change Proposal MIEC’s Fifth Set of Data Requests to MSD Item No. Description 3697964.1 1 The following questions relate to the surrebuttal testimony of Janice M. Zimmerman, Exhibit MSD 60B: 5-1. As highlighted on page 12, lines 16-17, of Mr. Gorman’s July 18, 2011 rebuttal testimony, please confirm that Mr. Gorman’s proposed O&M adjustment utilizes an annual aggregate O&M escalation factor of 3.20% between the calendar years 2011 through 2016. 5-2. Please provide a copy, in electronic format with all formula intact, of the workpaper used to produce the table titled “Restatement of MIEC Change in Projected O&M Expenses,” presented on page 5 of Ms. Zimmerman’s surrebuttal testimony. 5-3. Please identify the per year inflation assumptions used in the development of the “MIEC” column of the table titled “Restatement of MIEC Change in Projected O&M Expenses,” presented on page 5 of Ms. Zimmerman’s surrebuttal testimony. The following questions relate to the surrebuttal testimony of Jeanne F. Vanda, Exhibit MSD 60D: 5-4. Did Ms. Vanda work with MSD to plan for the possible revenue bond issuance planned for the rate period ending 2016? If affirmative, please answer the following: a. Please provide Ms. Vanda’s or her firm’s most recent assessment of economic activity in the Metropolitan St. Louis area economy and MSD service area. b. Please provide copies of all analyses and workpapers used to assess interest rate term structures for various revenue bond maturities proposed for the planned MSD revenue bond issuance. 5-5. For each revenue bond series, please provide an annual principal and interest schedule for MSD’s existing revenue bond series showing, at a minimum, the following on an annual basis: a. Beginning of year principal balance; b. Annual principal payments, and c. Annual interest payments. Metropolitan St. Louis Sewer District Wastewater Rate Change Proposal MIEC’s Fifth Set of Data Requests to MSD Item No. Description 3697964.1 2 5-6. Please provide the assessment that Ms. Vanda or her firm made to estimate the credit metrics needed to support an investment grade credit rating. Credit metrics should include, at a minimum, the following: a. Total debt service coverage ratio; b. Revenue bond debt service coverage ratio; c. Additional bonds test; and d. Customer rate structure affordability. 5-7. Please provide the most current study made regarding: a. MSD wastewater rate affordability; b. Competitive position of MSD sewer rates relative to other sewer providers in other metropolitan service territories; and c. Other material relating to MSD customers’ ability to afford the proposed wastewater rates. 5-8. Please provide copies of all analyses Ms. Vanda has done concerning normal spreads of Treasury securities yields to municipal revenue bond yields including issuers with credit ratings similar to that of MSD. 5-9. Please provide any commentary performed by Ms. Vanda or her firm concerning current municipal bond yields, spreads to Treasuries, and trends to same. 5-10. Concerning pages 17 and 18 of Ms. Vanda’s surrebuttal testimony, please provide all information supporting a 25-year AAA bond yield of 4.25%, and a 40 basis point credit spread to convert this yield to MSD’s credit yield. 5-11. Concerning the maturity schedule on page 16 of Ms. Vanda’s surrebuttal testimony, please provide electronic workpapers, with formulas intact, used to produce the average interest rates shown in the table for MSD’s 2004, 2006, 2008 and 2010 revenue bond series. 5-12. At page 3 of Ms. Vanda’s surrebuttal testimony, she states that she helped MSD develop an initial credit standing for the 2004 revenue bond issue. Please provide a copy of that credit rating strategy, and provide copies of any updated strategy documents performed by Ms. Vanda or her firm since 2004. Metropolitan St. Louis Sewer District Wastewater Rate Change Proposal MIEC’s Fifth Set of Data Requests to MSD Item No. Description 3697964.1 3 5-13. Referring to page 3 of Ms. Vanda’s surrebuttal testimony, she states that PFM keeps MSD informed as to current trends in the public finance marketplace. Please provide complete copies of all reports, analyses or presentations made by PFM to MSD concerning these trends. 5-14. At page 5 and continuing on page 6 of Ms. Vanda’s surrebuttal testimony, she outlines four general drivers of credit quality. She describes economic factors to highlight credit are wealth indicators, property valuations, employment and unemployment trends, and the type and diversity of employers. With respect to this testimony, please provide the following: a. A review of these economic factors made by PFM each year over the last five years. b. A projection of these factors made by PFM or another firm for consideration by PFM in planning for proposed revenue bond issuances. c. An explanation of why these economic factors are important in assigning credit quality. 5-15. At page 7 of Ms. Vanda’s surrebuttal testimony, she outlines key financial components of the rate proposal and asserts that these proposals were taken into consideration by the District. With respect to this testimony, please answer the following: a. Please explain Ms. Vanda’s participation in developing the initial rate proposal for MSD in this proceeding. b. Please identify the date when Ms. Vanda was retained in order to consult on the development of an appropriate rate filing. c. Please identify and provide complete copies of all information Ms. Vanda provided MSD Staff in support of her role of consulting on the current rate filing. d. Please identify any restrictions Ms. Vanda placed on the information she provided to MSD Staff to provide support for any recommendations or work she has done in support of the current rate filing. 5-16. Referring to pages 14 and 15 of Ms. Vanda’s surrebuttal testimony, she outlines basis point credit spreads between an “AAA” MMD and that of an “AA” MMD. Please provide actual market experience related to this credit spread in support of her assumption that the current credit spread is now 40 to 50 basis points, where it had previously been in the range of 10 to 15 basis points.