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Home My Public Portal AboutExhibit MSD 16G1 2002 Wastewater Rate Change ProposalExhibit MSD 16G1 RATE RECO MENDATION REPORT OF THE RATE CO MISSION OF THE ETROPOLITAN ST. LOUIS SE ER DISTRICT TO THE BOARD OF TRUSTEES OF THE METROPOLITAN ST. LOUIS SE ER DISTRICT UPON THE WASTEWATER RATE CHANGE PROPOSAL OCTOBER 25, 2002 TABLE OF CONTENTS I. INTRODUCTION 1 II. EXECUTIVE SUMMARY 3 III. THE RATE PROPOSAL OF THE DISTRICT 9 IV. THE RATE COMMISSION WASTEWATER RATE CHANGE RECOMMENDATION 11 V. CRITERIA FOR RECOMMENDATION 12 First Criterion: Whether the Wastewater Rate Change Proposal is necessary to pay interest and principal falling due on bonds issued to finance assets of the District? 12 Second Criterion: Whether the Wastewater Rate Change Proposal is necessary to pay the costs of operation and maintenance? 20 Third Criterion: Whether the Wastewater Rate Change Proposal is in such amounts as may be required to cover emergencies and anticipated delinquencies? 22 VI. FACTORS FOR RECOMMENDATION 27 First Factor: Whether the Wastewater Rate Change Proposal "Is consistent with constitutional, statutory or common law as amended from time to time" 28 Second Factor: Whether the Wastewater Rate Change Proposal "Enhances the District's ability to provide adequate sewer and drainage systems and facilities, or related services" 40 Third Factor: Whether the Wastewater Rate Change Proposal "Is. consistent with and not in violation of any covenant or provision relating to any outstanding bonds or indebtedness of the District" 41 Fourth Factor: Whether the Wastewater Rate Change Proposal "Does not impair the ability of the District to comply with applicable Federal or State laws or regulations as amended from time to time" 42 Fifth Factor: Whether the Wastewater Rate Change Proposal "Imposes a fair and reasonable burden on all classes of ratepayers" 45 VII. MINORITY REPORTS 61 ii INTRODUCTION The Wastewater Rate Change Proposal of the Metropolitan St. Louis Sewer District was presented to the Rate Commission on May 16, 2002. The Rate Commission initiated certain proceedings in order to provide for the advance submission of written testimony, the conduct of three technical conferences, a prehearing conference, discovery procedures, a public hearing, and the filing of post - hearing briefs with procedural fairness to the parties. See Section 7.280 of the Charter Plan. Associated General Contractors, SITE Improvement Association, Missouri Industrial Energy Consumers, Missouri Energy Group, The Sierra Club, and Carleton B. Fox Co. intervened and participated in these proceedings. The record of these proceedings is contained in Volumes I through VI, delivered with this Report. All of the written testimony, exhibits, document requests and responses, transcripts of testimony, legal memoranda, and other materials contained therein have been admitted into evidence and considered by the Rate Commission Delegates for the purpose of making the findings and determinations contained in this Report. These proceedings (the "Proceedings") are incorporated herein by reference. The Rate Commission's report to the Board of Trustees of the District is due within 120 days of receipt of the Wastewater Rate Change Proposal or September 13, 2002, unless the Board of Trustees shall upon application of the Rate Commission extend the period for one additional 45 -day period. The Rate Commission submitted a request for such an extension on July 18, 2002, and on August 8, 2002, the Board of Trustees approved an extension of the period to October 28, 2002. See Charter Plan § 7.290(f). This is the Report required by the Charter Plan and has been adopted by a majority of the Rate Commission Delegates. See Charter Plan § 7.280(f). 2 EXECUTIVE SU ARY Consideration of District Proposal and Alternative The Proposal of the Metropolitan St. Louis Sewer District (the 'Wastewater Rate Change Proposal") presented to the Rate Commission on May 16, 2002, provides among other things for increases in annual operating costs and for a Capital Improvement and Replacement Program ("Capital Improvement Program") totaling $833,124,000. However, although the Wastewater Rate Change Proposal identifies a $833,124,000 Capital Improvement Program, such Program has already begun and will continue through 2003. The amount of the Capital Improvement Program attributed to the 2004-2006 period is actually $647,116,000. In order to fund this remaining Capital Improvement Program, the District proposes that bond issues aggregating $470,000,000 and a $30,000,000 loan from the Missouri Revolving Fund Program be submitted in April 2003 for approval by the voters as required by the Charter Plan. This level of capital improvement and the attendant costs of operation and maintenance would require rate increases for three consecutive years of approximately: 19% in 2003, 21% in 2004 and 16% in 2005 for the average residential metered user. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change Proposal is necessary to pay (i) interest and principal falling due on bonds issued to. finance assets of the District; (ii) the costs of operation and maintenance; and (iii) such amounts as may be required to cover emergencies and anticipated delinquencies. See Charter Plan, § 7.040. 3 The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change Proposal, and all portions thereof: (i) is consistent with constitutional, statutory or common law as amended from time to time; (ii) enhances the District's ability to provide adequate sewer and drainage systems and facilities, or related services; (iii) is consistent with and not in violation of any covenant or provision relating to any outstanding bonds or indebtedness of the District; (iv) does not impair the ability of the District to comply with applicable Federal or State laws or regulations as amended from time to time; and (v) does impose a fair and reasonable burden on all classes of ratepayers. See Charter Plan, § 7.270. The Rate Commission considered testimony that the inclusion of a 37% customer -63% volumetric cost recovery of Infiltration/Inflow; the failure to subdivide the nonresidential customer classes; cost recovery of $18,340,600 in stormwater costs in the wastewater rate; the change in excess strength Suspended Solids, additional working capital, and a new resistance factor in the Wastewater Rate Change Proposal may result in the imposition of disproportionate rates and that as a result, the rates would not be fair and reasonable to all classes of customers. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, further finds and determines that while these considerations merit study, the disproportionate rates, if any, resulting from any such factors are rationally related to a legitimate public interest. An alternative was proposed by the Metropolitan St. Louis Sewer District (the "Wastewater Rate Change Alternative") assuming that the $500,000,000 in revenue 4 bonds and loans were not approved by the voters and provides among other things for increases in annual operating costs and for a $536,655,000 Capital Improvement Program, paid for solely out of increased rate revenue, which would require annual rate increases of approximately 65% in 2003, 3% in 2004, and 3% in 2005. Although the Wastewater Rate Change Alternative identifies a $536,655,000 Capital Improvement Program, such Program has already begun and will continue through 2003. The amount of the Capital Improvement Program in the Wastewater Rate Change Alternative attributed to the 2004-2006 period is actually $350,647,000. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change Alternative is necessary to pay (i) interest and principal falling due on bonds issued to finance assets of the District; (ii) the costs of operation and maintenance; and (iii) such amounts as may be required to cover emergencies and anticipated delinquencies. See Charter Plan, § 7.040. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change Alternative, and all portions thereof: (i) is consistent with constitutional, statutory or common law as amended from time to time; (ii) enhances the District's ability to provide adequate sewer and drainage systems and facilities, or related services; (iii) is consistent with and not in violation of any covenant or provision relating to any outstanding bonds or indebtedness of the District. See Charter Plan § 7.23. However, the Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change Alternative 5 (iv) impairs the ability of the District to comply with applicable Federal or State laws or regulations as amended from time to time because the Capital Improvement Program may impair the ability of the District to meet its obligations to protect the public health and welfare by preventing or abating the pollution of water; and insure the District of adequate sanitary and stormwater drainage and of adequate sanitary disposal and treatment of the, sewage (see Charter Plan § 3.020(1)-(2)); and (v) does not impose a fair and reasonable burden on all classes of ratepayers because the proposed rate increase of 65% in 2003 is too great. See Charter Plan, § 7.270. Recommendation The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that a Capital Improvement and Replacement Program ("Capital Improvement Program") totaling $833,124,0001 is required to meet the obligations of the Metropolitan St. Louis Sewer District to protect the public health and welfare by preventing or abating the pollution of water; and insure the District of adequate sanitary and stormwater drainage and of adequate sanitary disposal and treatment of the sewage. See Charter Plan § 3.020(1)-(2). The District and the Intervenors to this Proceeding agree that the use of voter - approved revenue bonds aggregating $470,000,000 and Missouri State Revolving Fund loans in the aggregate amount of $30,000,000 to fund this Capital Improvement Program will reduce the size of the rate increase and will allocate such capital improvement costs among future ratepayers who will benefit from such capital improvements. 1 As discussed on page 3 of this Report, this Capital Improvement Program has already begun, and the amount of the Capital Program for 2004-2006 is $647,116,000. However, the Report will continue to refer to the $833,124,000 amount, since this is the amount identified in the Proposal. 6 This level of capital improvement and the attendant costs of operation and maintenance would require rate increases for three consecutive years of approximately: 19% in 2003, 21% in 2004 and 16% in 2005. The Rate Commission recommends (the "Rate Commission Wastewater Rate Change Recommendation") increases in annual operating costs and for a Capital Improvement and Replacement Program ("Capital Improvement Program") totaling $833,124,000. In order to fund the Capital Improvement Program, the Rate Commission proposes that bond issues aggregating $470,000,000 and a $30,000,000 loan from the Missouri Revolving Fund Program be submitted in April 2003 for approval by the voters as required by the Charter Plan. This level of capital improvement and the attendant costs of operation and maintenance would require rate increases for three consecutive years of approximately: 19% in 2003, 21% in 2004 and 16% in 2005. The Rate Commission Wastewater Rate Change Recommendation proposes that in the event the $500,000,000 in revenue bonds and loans are not approved by the voters in April 2003, that the Board of Trustees institute a rate increase of approximately 42.6% in July 2003, and in either August or November 2004, resubmit approval of the bond issues. If the bond issues are approved, it is expected that no additional rate increase would then be required to amortize these bonds. The District's Proposal includes the period ending July 1, 2006. The Rate Commission is mindful that its Recommendation has effects beyond 2006, and may result in less revenue than the Wastewater Rate Change Proposal or the Wastewater Rate Change Alternative in years after 2006. The effects of the Recommendation beyond July 1, 2006, however, are beyond the scope of the District's original Proposal, 7 and therefore, are not considered in the Rate Commission's Wastewater Rate Change Recommendation. 8 THE RATE PROPOSAL OF THE DISTRICT The Wastewater Rate Change Proposal The Proposal of the Metropolitan St. Louis Sewer District (the "Wastewater Rate Change Proposal") presented to the Rate Commission on May 16, 2002, provides among other things for increases in annual operating costs and for a Capital Improvement and Replacement Program ("Capital Improvement Program") totaling $833,124,000. However, although the Wastewater Rate Change Proposal identifies a $833,124,000 Capital Improvement Program, such Program has already begun and will continue through 2003. The amount of the Capital Improvement Program attributed to the 2004-2006 period is actually $647,116,000. In order to fund this remaining Capital Improvement Program, the District proposes that bond issues aggregating $470,000,000 and a $30,000,000 loan from the Missouri Revolving Fund Program be submitted in April 2003 for approval by the voters as required by the Charter Plan. This level of capital improvement and the attendant costs of operation and maintenance would require rate increases for three consecutive years of approximately: 19% in 2003, 21% in 2004 and 16% in 2005 for the average residential metered user. An alternative was proposed by the Metropolitan St. Louis Sewer District (the "Wastewater Rate Change Alternative") assuming that the $500,000,000 in revenue bonds and loans were not approved by the voters as required by the Charter Plan and provides among other things for increases in annual operating costs and for a $536,655,000 Capital Improvement Program, paid for solely out of increased rate revenue, which would require annual rate increases of approximately 65% in 2003, 3% 9 in 2004, and 3% in 2005. Although the Wastewater Rate Change Alternative identifies a $536,655,000 Capital Improvement Program, such Program has already begun and will continue through 2003. The amount of the Capital Improvement Program in the Wastewater Rate Change Alternative attributed to the 2004-2006 period is actually $350,647,000. The District prepared the following summary charts to describe each of the Capital Improvement Programs: $833,124,000 CAPITAL IMPROVE ENT PROGRA Project e. Fiscal Year Ending June 30 $000's 2002 2003 2004 t 2005 2005 Total Wastewater Replacement & Repairs Collection System $ 92,005 $ 25,484 $ 56,837 $ 42,867 $ 51,062 $ 268,255 Treatment Facilities 6,907 6,400 4,120 5,305 - 22,732 Meramec WWTP 15,200 33,387 88,372 31,426 13,922 182,307 Coldwater Creek WWTP 3,325 - 20,394 23,340 765 47,824 Missouri River WVVTp - - 2,781 16,232 13,549 32,562 Lemay WWTP - - 3,090 - 43,708 46,798 Sanitary Sewer Projects City of St. Louis - - 28,368 30,112 41,520 100,000 St. Louis County - - 36,692 38,949 53,705 129,346 General Plant 3,300 - - 3,300 Total $ 120,737 $ 65,271 $ 240,654 $ 188,231 _ $ 218,231 $ 833,124 $536,655,000 CAPITAL IMPROVE ENT PROGRA Project Fiscal Year Ending June 30 $000's 2002 2003 2004 j 2005 2006 Total Wastewater Replacement & Repairs Collection System $ 92,005 $ 25,484 $ 21,837 $ 20,867 $ 24,062 $ 184,255 Treatment Facilities 6,907 6,400 4,120 5,305 - 22,732 Meramec WWTP 15,200 33,387 54,372 52,026 14,853 169,838 Coldwater Creek WWTP 3,325 - 20,394 23,340 765 47,824 Missouri River WWTp - - 2,781 16,232 13,549 32,562 Lemay WVVTP - - 3,090 43,708 46,798 Sanitary Sewer Projects City of St. Louis - 703 361 8,936 10,000 St. Louis County - 1,357 700 17,289 19,346 General Plant 3,300 - - - - 3,300 Total $ 120,737 $ 65,271 $ 108,654 $ 118,831 $ 123,162 $ 536,655 10 RATE COMMISSION WASTE ATER RATE CHANGE RECO ENDATION The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that a Capital Improvement and Replacement Program ("Capital Improvement Program") totaling $833,124,0002 is required to meet the obligations of the Metropolitan St. Louis Sewer District to protect the public health and welfare by preventing or abating the pollution of water; and insure the District of adequate sanitary and stormwater drainage and of adequate sanitary disposal and treatment of the sewage. See Charter Plan § 3.020(1)-(2). The District and the Intervenors to this Proceeding agree that the use of voter - approved revenue bonds aggregating $470,000,000 and Missouri State Revolving Fund loans in the aggregate amount of $30,000,00 to fund this Capital Improvement Program will reduce the size of the rate increase and will allocate such capital improvement costs among future ratepayers who will benefit from such capital improvements. This level of capital improvement and the attendant costs of operation and maintenance would require rate increases for three consecutive years of approximately: 19% in 2003, 21% in 2004 and 16% in 2005. In the event the $500,000,000 in revenue bonds and loans are not approved by the voters as required by the Charter Plan, the Rate Commission recommends a rate increase of approximately 42.6% in July 2003, and the resubmittal in either August or November 2004 of approval of the bond issues. If the bond issues are approved, it is expected that no additional rate increase would then be required. 2 As discussed on page 3 of this Report, this Capital Improvement Program has already begun, and the amount of the Capital Program for 2004-2006 is $647,116,000. However, the Report and the Recommendation will continue to refer to the $833,124,000 amount, since this is the amount identified in the Proposal. 11 CRITERIA FOR RECOM ENDATION Upon receipt of a Rate Change Notice, the Rate Commission is to review and make recommendations to the Board of Trustees of the District regarding proposed changes in wastewater, stormwater or tax rates necessary to pay (i) interest and principal falling due on bonds issued to finance assets of the District; (ii) the costs of operation and maintenance, and (iii) such amounts as may be required to cover emergencies and anticipated delinquencies. See Charter Plan, § 7.040. First Criterion: Whether the Wastewater Rate Change Proposal is necessary to pay interest and principal falling due on bonds issued to finance assets of the District? The Charter Plan authorizes the following powers: To provide for the borrowing of money in anticipation of the collection of taxes and revenues for the fiscal year. The amount of such loans shall at no time exceed ninety per cent of the estimate collectible taxes and revenues for the year yet uncollected. To meet the cost of acquiring, constructing, improving, or extending all or any part of the sewer or drainage systems: (a) through the expenditure of any funds available for that purpose; (b) through the issuance of bonds for that purpose, payable from taxes to be levied and collected by the District; (c) through the issuance of bonds for that purpose, payable from special benefit assessments levied and collected by the District; (d) from the proceeds of special benefit assessments or bills evidencing such assessments; (e) from any other funds which may be obtained under any law of the state or of the United States for that purpose; (f) from the proceeds of revenue bonds, payable from the revenues to be derived from the operation of sewerage and drainage facilities and systems of the entire District . . . as may be set forth in propositions submitted at elections in the District . from time to time called and held to authorize the issuance of such revenue bonds; or (g) from any combination of any or all such methods of providing funds (emphasis added). *** 12 See Charter Plan, §§ 3.020 (14) and (15). The primary rule of statutory construction is to ascertain the intent from the language used, to give effect to that intent if possible, and to consider the words used in their plain and ordinary meaning. Hampton v. Hampton, 17 S.W.3d 599, 602 (Mo. Ct. App. 2000). Under traditional rules of statutory construction, the word's dictionary definition supplies its plain and ordinary meaning. Hoffman v. Van Pak Corp., 16 S.W.3d 684, 688 (Mo. Ct. App. 2000). The courts are without authority to read into a statute an interpretation that is contrary to the intent made evident by giving the language employed in the statute its plain and ordinary meaning. Dir, Mo. Dept. of Pub. Safety v. Murr, 11 S.W.3d 91, 96 (Mo. Ct. App. 2000). Only when the statute is ambiguous, or when it leads to an illogical result, may courts look past the plain and ordinary meaning of the statute. Id. To determine if a statute is unambiguous, "the standard is whether the statute's terms are plain and clear to one of ordinary intelligence." Wolff Shoe Co. v. Dir. Of Revenue, 762 S.W.2d 29, 31 (Mo. 1988) (en banc). All of the parties to this proceeding agree that the use of voter -approved revenue bonds and the Missouri State Revolving Fund to the maximum extent consistent with sound financial management to fund a Capital Improvement Program will reduce the size of the Wastewater Rate Change and allocate such capital improvement costs among future ratepayers who will benefit from such capital improvements. The District's authority to issue general obligation or revenue bonds is limited. Specifically, the Charter Plan provides: 13 No general obligation bonds, except bonds for refunding, advance refunding, extending, or unifying the whole or any part of valid bonded indebtedness, shall be issued without the assent of the voters of the District . . . in the number required by Article VI, § 26(b) of the Constitution of Missouri (as amended from time to time), voting at an election to be held for that purpose. No revenue bonds payable from the revenues to be derived from the operation of any or all sewer and drainage systems and facilities of the District . . . except bonds for refunding, advance refunding, extending, or unifying the whole or any part of revenue bonds, shall be issued without the assent of a simple majority of the voters of the District... voting at an election to be held for that purpose. Notwithstanding anything herein to the contrary, the District is expressly authorized to issue District -wide general obligation and revenue bonds. See Charter Plan, § 7.170. Thus, under the Charter, the District may issue general obligation bonds only upon assent of the voters described in Article VI, § 26(b) of the Missouri Constitution. The District may issue revenue bonds only upon assent of a simple majority of the voters. Subject to these restrictions, the District has the authority to incur debt. The Missouri Supreme Court has expressly recognized this authority, stating, "The other powers objected to, namely, . . . incurring debts, . . . issuance of tax anticipation warrants, . . . and issuance of bonds, . . . are essential powers of such district." Dalton, 275 S.W.2d at 231. The court continued, "[w]ithout the power to incur debts and issue bonds, adequate drains, sewers and disposal plants could not be constructed. However, in the exercise of this power, the District is subject to the financial limitations imposed by the Constitution on all government subdivisions." Id. General Obligation Bonds This court decision, as well as the provisions of § 7.170 of the Charter Plan specifically acknowledge the limitations of Article VI § 26 of the Constitution of Missouri requiring voter approval of any general obligation bond issue. The vote required by 14 Article VI § 26(b) of the Constitution of Missouri is four -sevenths at the general municipal election day, primary or general elections and two-thirds at all other elections. Further, the Charter Plan requires that: Before any general obligation bonds are issued, the Board shall by ordinance provide for the collection of an annual tax on all taxable tangible property within the District or a subdistrict, as the case may be, sufficient to pay the interest and the principal of such bonds as they fall due and to retire the same within twenty years from the date contracted . . . No general obligation bonds shall be issued in an amount which together with the existing indebtedness of the District . . . if any, exceeds in the aggregate five per cent of the value of all taxable tangible property in the District . . . as shown by the last completed assessment for state and county purposes; provided, however, that no revenue bonds issued under the provisions of this Plan shall constitute an indebtedness of the District or a subdistrict, as the case may be, within the meaning of said limitation. See Charter Plan, § 7.190. Both the Charter Plan and Article VI, Section 26(b) of the Missouri Constitution provide that the District may not issue general obligation bonds in an amount that, together with the existing indebtedness of the District, exceeds five percent of the value of taxable tangible property in the District. According to the Collector's Office of St. Louis County, the assessed valuation of taxable, tangible property in the District in St. Louis County is approximately $24.6 billion. The Deputy Assessor in St. Louis City has certified that the assessed valuation of taxable, tangible property in the City is approximately $3.2 billion. Ex. 80(b). As a result, 5% of the value of taxable, tangible property in the District is $1.385 billion. Thus, under the Charter Plan and the Missouri Constitution, the District may not issue general obligation bonds in an amount that together with the existing indebtedness of the District exceeds $1.385 billion. 15 The Missouri courts have discussed the differences between general obligation and revenue bonds on several occasions. As explained by the Missouri Supreme Court: General obligation bonds are just what the term implies: general obligations of the governmental body issuing them. They place the general credit of the sovereign behind them and are an indebtedness of that sovereign within the meaning of Mo. Const. art. VI, § 26, restricting the limits of debt which a county may incur. They require tax money to service and retire them. Revenue bonds do not have these characteristics. Their repayment is dependent upon revenue from the facility which they are issued to create. They do not rely upon the general credit or tax money of the sovereign and they are not indebtedness within the limitations of the constitution. Drey v. McNary, 529 S.W.2d 403, 408-09 (Mo. 1975) (en banc) (internal citations omitted). See also Wunderlich v. City of St. Louis, 511 S.W.2d 753, 755 (revenue bonds are not paid directly or indirectly by resort to taxation, and general obligation bonds are payable by utilization of the full taxing power of the issuing entity). Revenue Bonds As noted in Section 7.190 of the Charter Plan, the constitutional limitation on the level of general obligation bonds does not expressly apply to revenue bonds. The Missouri Supreme Court has upheld the issuance of revenue bonds for the operation and maintenance of a sewage system. See Oswald v. City of Blue Springs, 635 S.W.2d 332 (Mo. 1982) (en banc). In addition, the court specifically held that the city issuing the bonds had the authority to raise water and sewage rates, not only to pay principal and interest in revenue bonds issued for the purpose of construction of a water treatment plant and water transmission lines, but also to meet the cost of maintenance and operation of the physical plant itself. Id. at 333-34. Moreover, once the voters have approved the bonds, such increases may be made without again submitting the increase 16 to the voters. Id. at 334. As explained by the court in response to the argument that the increase violated the Hancock Amendment: . . . logic demands the conclusion that the voters, by authorizing the Mayor and Board of Aldermen to increase rates to repay principal and interest, also authorized concomitant increases to pay for the costs of maintenance and operation. It cannot be argued seriously that a majority of the voters of the City approved the issuance of 19.1 million dollars of revenue bonds and authorized the City to increase the rates charged to users to repay the principal and interest on the bonds, yet did not authorize effectively an increase in those rates to keep the physical plant maintained and in working order. The promise to repay the bonded indebtedness would be illusory without the promise to keep the facilities running. We shall not impute such a futile and deceptive meaning upon a vote of the people of Blue Springs. Id. This requirement is echoed in state statutes relating to District sewerage systems. It shall be the mandatory duty of any . . . sewer district which shall issue revenue bonds . . . to fix and maintain rates and make and collect charges for the use and services of the system for the benefit of which such revenue bonds were issued, sufficient to pay the cost of maintenance and operation thereof, to pay the principal of and the interest on all revenue bonds or other obligations issued or incurred by such . . . sewer district chargeable to the revenues of such system and to provide funds ample to meet all valid and reasonable requirements of the ordinance or resolution by which such revenue bonds have been issued. Mo. Rev. Stat. § 250.120.1 (2000). Missouri State Revolving Fund The "Missouri Clean Water Law" is designed to meet the requirements of the Federal Clean Water Act of 1987 (the "Act"), Mo. Rev. Stat. § 644.011 (2000), and establishes the Commission, Mo. Rev. Stat. § 644.021 (2000), which is required to adopt rules and regulations to enforce the powers and duties of Chapter 644 and the Act. Mo. Rev. Stat. § 644.026 (2000). The Missouri Code of Regulations sets forth the general requirements for the implementation of Title VI of the Act, which authorizes the 17 administrator of the Environmental Protection Agency (the "EPA") to make capitalization grants to states for financing State Revolving Fund Programs. 10 CSR 20-4.040. The State Resolving Fund ("SRF") is the financial assistance program authorized by Title VI of the Act. In Missouri, the SRF consists of the Water and Wastewater Loan Fund ("WWLF") and the Water and Wastewater Revolving Loan Fund ("WWRLF") and those accounts secured by funds from the WWLF and the WWRLF. 10 CSR 20-4.040(2) (P), I, (S). The SRF is subject to the requirements, restrictions, and eligibilities placed on the SRF by the Act. 10 CSR 20-4.040(2) (P). The Missouri SRF leveraged loan program is a subsidized low interest loan program. The District must issue general obligation or revenue bonds to secure the debt. These bonds are purchased by and resold nationally by the EIERA. At present the EIERA bonds are rated as AAA. Funds generated by the sale are deposited with a trustee in the applicant's name and are used for construction. As construction costs are incurred, state and federal funds are deposited into a reserve account in an amount equal to 50% or more of the construction cost. Interest earned on the reserve is credited to the interest portion of the debt service charge on the bonds thereby providing the interest subsidy to the recipient. See Department's July 23, 2002 State Revolving Fund Description. The Department may make direct loans by purchasing the general obligation bonds, revenue bonds, short-term notes or other acceptable obligations of any qualified applicant for the planning, design, and/or construction of an eligible project. 10 CSR 20- 4.041(1). Two types of loans are permitted under this regulation. 18 SRF direct loans are funded from SRF loan repayments of federal capitalization grants. The Department purchases the revenue bonds, general obligation bonds, or other acceptable debt obligations from the recipient no later than six months following the initial operation of the facilities constructed by the project or by the closing deadline contained in the construction loan agreement, whichever is earlier. In addition, the Department may require the recipient to include those assurances and clauses in the loan agreements and bond resolutions as deemed necessary to protect the interest of the state. 10 CSR 20-4.041(8). Under the leveraged loan program, the recipient must obtain construction funds and any needed financing from EIERA. The recipient will receive a loan from the WWLF or the WWRLF. The recipient will be required to place the proceeds of the WWLF or WWRLF loan in a debt service reserve fund to secure the construction loan. The interest earnings on the debt service reserve fund will provide a subsidy by paying a portion of the interest costs of the EIERA bonds or notes used to provide the construction loan. The principal amount of the WWLF or WWRLF loan, will be repaid to the WWLF or WWRLF. 10 CSR 20-4.042. Repayment of principal and interest on the EIERA bonds or notes will be paid from revenues of the user charge system or from another dedicated source of revenue as may be designated in the applicable bond resolutions or loan agreements. 10 CSR 20.4.042(11)(B). The use of indebtedness to finance major capital improvements allows the District to leverage its revenue stream from rates, and other sources and more closely match the future benefit received from improvements with the future cost recovery of 19 such improvements. In addition, under Oswald and Mo. Rev. Stat. § 250.120.1, the use of a revenue bond issue will allow the District to increase rates if needed for operation and maintenance of the facilities, as well as to pay the principal and interest on the bonds without again submitting the issue to the voters. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change Proposal includes funds sufficient to pay the principal and interest on a $500 million revenue bond issue. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Rate Commission Wastewater Rate Change Recommendation includes funds sufficient to pay the principal and interest on a $500 million revenue bond issue. Second Criterion: Whether the Wastewater Rate Change Proposal is necessary to pay the costs of operation and maintenance? The District has not raised its rates since 1997. The District has managed without such an increase by "sustained expense control" exhibited by an 11% reduction in staff since 2000, and tight management of the Capital Improvement Program. The Wastewater Rate Change Proposal, the Wastewater Rate Change Alternative, and the Rate Commission Wastewater Rate Change Recommendation include an inflation allowance of 4% for personnel related costs and 3% for all other costs used in the rate study report. Slightly more than 20% of the District's budget is 20 allocated to personnel costs. The District used 4% against personnel services because of its Memorandum of Understanding with certain of the bargaining limits for its employees, which includes stated salary increases over a three-year period. Two-thirds of the District's employees are subject to the Memorandum of Understanding. Individuals who are not members of the bargaining units are subject to the same salary schedule. A review of the U.S. Department of Labor Table on the Consumer Price Index for All Urban Consumers in St. Louis, Missouri, from 1991 through 2001 demonstrates that the consumer price index has increased 9.4% since the last rate increase. The estimate of the District of the increase of 4% for personnel costs and 3% for all other costs appears reasonable. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change Proposal provides funds sufficient to pay the costs of operation and maintenance until July 1, 2006. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change Alternative provides funds sufficient to pay the costs of operation and maintenance until July 1, 2006. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Rate Commission 21 Wastewater Rate Change Recommendation provides funds sufficient to pay the costs of operation and maintenance until July 1, 2006.3 Third Criterion: Whether the Wastewater Rate Change Proposal is in such amounts as may be required to cover emergencies and anticipated delinquencies? Under the authority of § 3.020(13) of the Charter Plan of the Metropolitan St. Louis Sewer District, the Board of Trustees has specific authority to incur debt. If the debt is short term and does not affect the rate levied, no further action is required. Specifically, § 3.020(14) of the Charter Plan provides: To provide for the borrowing of money in anticipation of the collection of taxes and revenues for the fiscal year. The amount of such loans shall at no time exceed ninety per cent of the estimate collectible taxes and revenues for the year yet uncollected. The Board shall determine by ordinance the amount and terms of such loans, and the Executive Director shall execute and issue warrants of the District for all money so borrowed to the lenders thereof as evidence of such loans and of the terms of the District's obligation to repay the same. Immediately before their delivery to such lenders, such warrants shall be registered in the office of the Director of Finance of the District and, upon delivery, shall also be registered in the office of the Secretary -Treasurer of the District. Such warrants so issued and registered in connection with such loans shall have preferences and priority in payment from the date of their registration by the Secretary -Treasurer over all warrants subsequently issued. See Charter Plan, § 3.020(14). Thus, the District has the authority to incur short term debt if necessary to cover emergencies and anticipated delinquencies. 3 The District's Proposal includes the period ending July 1, 2006. The Rate Commission is mindful that its Recommendation has effects beyond 2006, and may result in less revenue than the Wastewater Rate Change Proposal or the Wastewater Rate Change Alternative in years after 2006. The effects of the Recommendation beyond July 1, 2006, however, are beyond the scope of the District's original Proposal, and therefore, are not considered in the Rate Commission's Wastewater Rate Change Recommendation. 22 Moreover, the District as a public sewer district created and authorized pursuant to constitutional authority may discontinue service and place a lien upon a customer's property for unpaid sewer charges. This lien will have priority and be enforced in the same way as taxes are levied for state and county purposes. See Mo. Rev. Stat. § 249.255 (2001). The District may "establish by ordinance a schedule or schedule of rates, rentals, and other charges, to be collected from all the real property served by the sewer facilities of the District . . . and to collect or enforce collection of all such charges." See Charter Plan, § 3.020 (16). In 1957, the Board of Trustees of the District adopted an Ordinance providing that: Whenever a sewer service charge has been delinquent for more than sixty days the Executive Director may cause a notice of lien for non-payment thereof to be filed in the Office of the Recorder of Deeds within and for the City of St. Louis or St. Louis County, as the case may be. Such notice of lien shall state the amount of the delinquent sewer service charge, and shall properly describe the property against which such lien is asserted. Upon the filing of such notice, such sewer service charge shall be and become a lien upon the real property served to the amount of such delinquent bill, and shall have priority over all other liens except taxes, deeds of trust then of record, and prior judgments. See Ordinance 138 (June 24, 1957). The District has the authority to impose and enforce a lien upon the real property of a customer for the failure to pay sewer charges which is not extinguished by foreclosure of the property, but not the authority to give these liens priority over prerecorded deeds of trust. See St. Louis Inv. Prop., Inc. v. Metro. St. Louis Sewer Dist., 873 S.W.2d 303 (Mo. Ct. App. 1994). See also Gershman Inv. Corp. v. Duckett Creek Sewer Dist., 851 S.W.2d 765, 769 (Mo. Ct. App. 1993). 23 The Wastewater Rate Change Proposal, the Wastewater Rate Change Alternative, and the Rate Commission Wastewater Rate Change Recommendation each contain an additional increase in working capital beginning in 2004 for a total working capital balance of approximately $16 million by the end of 2006 and a new resistance factor of three percent of each increase in the rate. Additional Working Capital The Wastewater Rate Change Proposal and the Wastewater Rate Change Alternative each provide an additional expenditure of $492,700 as additional working capital during fiscal year ending June 30, 2004. This sum is based upon an allowance of 45 days of operation and maintenance expenses and expenditures for annual routine renewals and replacements. It is a shorter period of time than the 1984 Ordinance because the District is now issuing its bills on a monthly basis, whereas in 1984 the bills were issued on a semi-annual basis. The additional working capital amount would become part of a revenue fund to be available in the event of a revenue shortfall. The working capital includes a component for capital expenditures and for materials and supplies. Annual contributions from rate revenues to working capital reserve would compute to $509,800 for fiscal year ending June 30, 2005, and $527,700 for fiscal year ending June 30, 2006. Resistance Factor The Wastewater Rate Change Proposal and the Wastewater Rate Change Alternative also each include a new three percent resistance factor to cover anticipated delinquencies and any reduction in revenue caused by actions which may be undertaken by ratepayers (primarily commercial and industrial) to self -treat waste or 24 otherwise avoid certain of the District's strength charges and thereby reduce District revenues. The resistance factor in the Test Year reduces the amount of rate revenues the District expects to receive by three percent, or a sum equal to $864,200. The District is requesting a 23% rate increase over existing rate revenues in 2004. Without the resistance factor, such an increase would result in revenues of $28,805,200. The three percent resistance factor would lower such revenues by $864,200, thereby only recognizing increased revenues of $27,941,000 in the Test Year. Similarly, the resistance factor would reduce the amount of rate revenues by $970,300 in 2005, and by $894,000 in 2006. The District has never recognized a resistance factor in prior rate proceedings. The size of the resistance factor was not the result of any calculations, but is an estimate. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the additional working capital and the new resistance factor are appropriate techniques to cover emergencies and anticipated delinquencies. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change Proposal is in such amounts as may be required to cover emergencies and anticipated delinquencies through July 1, 2006. 25 The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change Alternative is in such amounts as may be required to cover emergencies and anticipated delinquencies through July 1, 2006. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Rate Commission Wastewater Rate Change Recommendation is in such amounts as may be required to cover emergencies and anticipated delinquencies through July 1, 2006. 26 FACTORS FOR RECOM ENDATION Pursuant to § 7.270 of the Charter Plan of The Metropolitan St. Louis Sewer District, five factors are to be considered governing the rate to be recommended to the Board of Trustees. Any change in a Rate recommended to the Board by the Rate Commission in the manner as described in this Article, shall be accompanied by a statement of the Rate Commission that the proposed Rate change, and all portions thereof: 1) is consistent with constitutional, statutory or common law as amended from time to time; 2) enhances the District's ability to provide adequate sewer and drainage systems and facilities, or related services; 3) is consistent with and not in violation of any covenant or provision relating to any outstanding bonds or indebtedness of the District; 4) does 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) imposes a fair and reasonable burden on all classes of ratepayers. See Charter Plan, § 7.270. Any rate recommended by the Commission must, in the statement to the Board of Trustees, address all five factors. The Charter does not define the terms or phrases utilized as the criteria governing the rate. As such, to interpret the meaning of words used in a statute, usually the words are attributed their plain and ordinary meaning. Sermchief v. Gonzales, 660 S.W.2d 683, 688 (Mo. 1983) (en banc). Similarly, an interpretation of words in their plain and ordinary meaning can be performed on the words and phrases utilized in the Charter. The commonly 27 understood meaning of words is derived from the dictionary. Buechner v. Bond, 650 S.W.2d 611, 613 (Mo. 1983) (en banc). First Factor: Whether the Wastewater Rate Change Proposal "Is consistent with constitutional, statutory or common law as amended from time to time" Article VI § 30(a) of the Missouri Constitution has authorized "The people of the city of St. Louis and the people of the county of St. Louis . . . to establish a metropolitan district or districts for the functional administration of services common to the area included therein . . . ." Mo. Const. art. VI § 30(a). At a special election on February 9, 1954, the freeholders adopted and the voters of the City of St. Louis and St. Louis County approved the Charter Plan (as amended on November 7, 2000) creating the Metropolitan St. Louis Sewer District ("District"). The Charter Plan establishing the District has been held to be constitutional. State on inf. Dalton v. Metro. St. Louis Sewer Dist., 275 S.W.2d 225 (Mo. 1955) (en banc). The District is a body corporate, a municipal corporation, and a political subdivision of the state, with power to . . . act as a public corporation within the purview of the Plan, and shall have the powers, duties, and functions as therein described. Charter Plan of the Metropolitan St. Louis Sewer District (hereinafter "Charter Plan"), art. 1 § 1.010 (2000). The Missouri Constitution provides that upon the adoption of the Charter Plan, it "shall become the organic law of the territory therein defined, and shall take the place of and supersede all laws, charter provisions and ordinances inconsistent therewith relating to said territory." Mo. Const. art. VI, § 30(b). As explained by the Missouri Supreme Court, "[t]he apparent intent is to give the freeholders, with the approval of the voters, power to do whatever the Legislature could ordinarily do with 28 respect to the creation, organization and authority of such a district." Dalton, 275 S.W.2d at 228. As such, the Charter Plan is similar to legislation, and thus, the District has only such powers as are delegated to it by the Charter Plan, or as may properly be implied from the nature of the duties imposed. State on inf. McKittrick v. Wymore, 132 S.W.2d 979, 987-88 (Mo. 1939) (en banc). To determine whether a certain action of the District is authorized by the Charter Plan, it must be construed to further the intent of the voters. Centerre Bank of Crane v. Director of Revenue, 744 S.W.2d 754, 759 (Mo. 1988) (en banc). Intent must be ascertained by examining the plain language of the Charter Plan reviewed as a whole. Staley v. Missouri Director of Revenue, 623 S.W.2d 246, 248 (Mo. 1981) (en banc). Authorization was provided to residents in St. Louis City and County to establish a metropolitan sewer district, Mo. Const. art. VI, § 30(a). Authorization was provided by the voters of St. Louis City and County to authorize the activities which carry out the intent expressed and implied from the Charter Plan, including the establishment of the Rate Commission. Notice of Rate Change On May 16, 2002, the Executive Director of the District formally presented the Rate Commission with a Proposed Wastewater Rate Change and copied the letter to the Board of Trustees. Section 7.040 of the Charter Plan states, "Upon receipt of a Rate Change Notice from the District pursuant to Section 7.280, the Rate Commission shall recommend changes in Rates to the Board . . . Section 7.280 (b) provides, "Whenever the District 29 proposes or recommends a change in Rate, it shall give written notice ("Rate Change Notice") to the Board and the Rate Commission and such change in Rate shall hereinafter be referred to as the `Proposed Rate Change." Courts will regard a statute as meaning what it says. Emery v. Wal-Mart Stores, Inc., 976 S.W.2d 439, 449 (Mo. 1998) (en banc). Courts apply plain and ordinary meaning to terms in statutes. Klemme v. Best, 941 S.W.2d 493, 497 (Mo. 1997) (en banc). The plain language of the Charter says that "the District," not "the Board," is to forward the rate change notice to the Rate Commission. Although these terms are not defined in this section, it is clear that "the District" means the management staff of the District. Under Section 1.010 of the Charter Plan, "the District" is used to refer to "the Metropolitan St. Louis Sewer District," the body corporate and political subdivision. Under Section 1.020, "the Board" refers to the Board of Trustees in whom all powers of the District are vested. Provisions of an entire legislative act must be considered together and all provisions must be harmonized if possible. Hagan v. Director of Revenue, 968 S.W.2d 704, 706 (Mo. 1998) (en banc). The meaning of a word used in a statute must depend to some extent on the context in which it appears. Butler v. Mitchell-Hugeback, Inc., 895 S.W.2d 15, 19 (Mo. 1995) (en banc). The same terms in different parts of the same statute should be interpreted alike. U.S. v. Brunett, 53 F.2d 219 (W.D. Mo. 1931). Section 7.280 itself uses both the terms "the District" and "the Board." Specifically, "Whenever the District proposes or recommends a change in Rate, it shall give written notice ("Rate Change Notice") to the Board and the Rate Commission . . . ." 30 To interpret this provision as requiring the Board to propose the rate change and give written notice would mean that the Board would have to give notice to itself. This leads to an unreasonable and absurd result. In construing statutes, it must be presumed that the legislature intended a logical and reasonable result with substantive effect. Brown Group, Inc. v. Administrative Hearing Comm'n, 649 S.W.2d 874, 878 (Mo. 1983) (en banc). The law favors the construction of a statute which avoids unjust or unreasonable results. Maryland Cas. Co. v. General Electric Co., 418 S.W.2d 115, 118 (Mo. 1967) (en banc). Moreover, this is how the District itself, including the Board, has interpreted the Charter Plan. The interpretation and construction of a statute by the agency charged with its administration is entitled to great weight. Muchisky v. Frederic Roofing Co., Inc., 838 S.W.2d 74, 76 (Mo. Ct. App. 1992). Public Service Commission The Public Service Commission's jurisdiction, supervision, powers, and duties extend to sewer systems, their operations, and to persons and corporations owning, leasing, operating, or controlling them. Mo. Rev. Stat. § 386.250(4). However, municipal corporations, such as the District, are not subject to the ratemaking process of the Public Service Commission. Instead, courts of equity have equitable jurisdiction to prevent municipal corporations from enforcing "charges that are clearly, palpably and grossly unreasonable." Shepherd v. City of Wentzville, 645 S.W.2d 130, 133 (Mo. Ct. App. 1982) (internal citation omitted). 31 Article X § 3 of the Missouri Constitution In Dalton v. Metropolitan St. Louis Sewer District, 275 S.W.2d 225 (Mo. 1955) (en banc), the court found that the original method of taxation adopted by the District was in violation of Article X, Section 3 of the Missouri Constitution, which provides that "[t]axes . . . shall be uniform upon the same class of subjects with the territorial limits of the authority levying the tax." Id. at 233. The court held that this provision prohibited taxing real estate and tangible personal property for the general purposes and general obligations of the entire District at a different rate on its valuation in various parts of the District. Id. Thus, the court found that method used to tax under this plan was unconstitutional because the property tax in the County was in excess of that in the City. The court further held that the apportionment of the amounts to be collected for the general purposes of the entire District between the City and the County without any standards whatever would be invalid against Article X, Section 3. "Sec. 3, Art. X is a recognition of the principle of equality and uniformity of taxation required by the equal protection clause of the Fourteenth Amendment of the Federal Constitution which `imposes a limitation upon all powers of the state which can touch the individual or his property, including among them that of taxation." Id. at 234 (internal citation omitted). The court found that while a classification may be made in tax legislation, it must be a reasonable classification and there can be no discrimination between taxable subjects, including property that belongs to the same class. Id. Thus, it held that the determination of property of the same value and in the same District based on whether it is located in the City or the County is not a reasonable basis for classification for taxation. Id. Finally, the court held that the District could make a valid apportionment 32 on the basis of assessed valuation which would produce a uniform tax on all tangible property in the District thus the Plan itself was not unconstitutional, just the method used under this set of facts for apportioning the tax. Id. The District subsequently corrected the matter. Article X § 22 of the Missouri Constitution (the Hancock Amendment) Article X § 22 of the Missouri Constitution (the "Hancock Amendment") prohibits any political subdivision from levying any tax, license or fee, not authorized by law, charter or self -enforcing provisions of the constitution without the approval of the required majority of qualified voters. Mo. Const. art. X, § 22. The Missouri Supreme Court has rejected the contention that all fees, whether user fees or tax -fees are subject to the Hancock Amendment. Keller v. Marion County Ambulance Dist., 820 S.W.2d 301 (Mo. 1992) (en banc). See also Mullenix St. Charles Prop., L.P. v. City of St. Charles, 983 S.W.2d 550, 561 (Mo. Ct. App. 1998) (Hancock Amendment applies only to revenue increases that are in fact tax increases, whether labeled as taxes, licenses, or fees). Revenue increases, which are in fact fees for services rendered in connection with specific services, ordinarily are not taxes unless the object of the requirement is to raise revenue to be paid into the general fund of government. Mullinex St. Charles Prop., L.P., 983 S.W.2d at 561. "Fees or charges prescribed by law to be paid by certain individuals to public officers for services rendered in connection with a specific purpose ordinarily are not taxes . . . unless the object of the requirement is to raise revenue to be paid into the general fund of the government to defray customary governmental expenditures rather than compensation of public officers for particular services rendered." Keller, 820 S.W.2d at 303-04. 33 In Keller, the court looked to the principles of statutory construction to give effect to the intent of the voters who adopted the Hancock Amendment. Id. at 302. The court determined that: If the people of Missouri intended to prohibit localities from increasing a source of revenue without voter approval, a general term like "revenue" or "revenue increase" could have been used. Instead, the people of Missouri characterized "fees" in § 22(a) as an alternative to a "tax." This characterization suggests that what is prohibited are fee increases that are taxes in everything but name. What is allowed are fee increases which are "general and special revenues" but not a "tax." Id. at 303. In addition, the court articulated a five -factor test to be applied in determining whether a revenue increase by a local government is an increase in a "tax, license or fees" that requires voter approval under the Hancock Amendment. 820 S.W.2d at 311, n.10. The court has characterized these criteria as "helpful" in "examining charges denominated as something other than a tax." Id. It has specified that "no specific criterion is independently controlling; but rather, the criteria together determine whether the charge is closer to being a 'true' user fee or a tax denominated as a fee." Id. In determining whether a fee is a user fee or a tax -fee, the court held that the language of the Amendment required the "courts to examine the substance of a charge, in accordance with this opinion, to determine if it is a tax without regard to the label of the charge." Id. at 305. "Where an application of the Keller factors creates genuine doubt as to whether the charges constitute a 'tax, license or fee' covered by the Hancock Amendment, we resolve the uncertainty in favor of requiring voter approval." Avanti Petroleum, Inc. v. St. Louis County, 974 S.W.2d 506, 511 (Mo. Ct. App. 1988). This test 34 has been consistently applied to determine whether revenue increases are subject to the Hancock Amendment. In Beatty v. Metropolitan St. Louis Sewer District, the Supreme Court found that the District's fees were taxes and thus subject to voter approval under the Hancock Amendment. 867 S.W.2d 217 (Mo. 1993) (en banc). In Beatty, the District imposed a flat fee for sewer service for residential property. The amount of the fee remained the same no matter how much waste a residential customer sent into the system. Nonresidential customers paid a base charge plus a charge measured by the volume of waste the property added to the system. Nearly all of the property owners within the District received the District sewer charges. Failure to pay a sewer charge resulted in a lien against real property by operation of law. The District issued revenue bonds and increased its sewer charges to meet debt service on the bonds and to operate and maintain the sewer system. The District imposed these increased charges without voter approval. Id. at 281. The court examined the Keller five -factor test to determine that the District charges were taxes subject to the Hancock Amendment. As a result, the court concluded that the application of the Keller test to the facts . of this case provided no clear answer as to the nature of the District charges. Therefore the court concluded that "[w]here, as here, genuine doubt exists as to the nature of the charge imposed by local governmental, we resolve our uncertainty in favor of the voter's right to exercise the guarantees they provided for themselves in the constitution." Id. Thus, the District's charges were subject to Article X, Section 22 and could not be increased without prior voter approval. 35 In Missouri Growth Association v. Metropolitan St. Louis Sewer District, the Missouri Court of Appeals analyzed a 1993 Ordinance of the District to determine whether the District's increased sewer service charge thereunder was a "user fee" and thus was not a "tax" subject to the constitutional amendment. 941 S.W.2d 615 (Mo. Ct. App. 1997). It relied on the five -point Keller test to determine that the sewer charges were not subject to the Hancock Amendment. The court concluded that since four out of five of the Keller factors weighed in favor of the District, the court determined that the sewer charges were more applicable to a user fee and not a tax subject to the Hancock Amendment. Id. In Rinq v. Metropolitan St. Louis Sewer District, the Missouri Supreme Court addressed the issue of whether a refund of monies could be made to taxpayers once an ordinance is ruled unconstitutional for violating the Hancock Amendment. 969 S.W.2d 716 (Mo. 1998) (en banc). This case was a follow-up to the court's ruling in Beatty, 914 S.W.2d 791 (Mo. 1995) (en banc). In Beatty, although the Missouri Supreme Court found that the District violated the Hancock Amendment by raising taxes without a vote of the people, it held that only persons who actually sued to recover the increase in wastewater fees could recover their overpayment. Beatty, however, left open the question of whether a class action is the proper procedure by which the District taxpayers who paid the unconstitutional wastewater fee increase could recover their overpayment. Rinq, 969 S.W.2d at 717. Although not deciding the case on the merits, the court held generally that Article X, Section 23, operated as a waiver of sovereign immunity and permitted taxpayers to 36 seek a refund of increased taxes previously collected by a political subdivision in violation of Article X, Section 22(a) Id. at 719. Any rate increase resulting from revenue bond proposals would be approved by the voters, and thus clearly in compliance with the Hancock Amendment. The Wastewater Rate Change Alternative and the Rate Commission Wastewater Rate Change Recommendation, however, each contain rate increases which may not have been approved by the voters. The Wastewater Rate Change Alternative is to be used primarily to fund a reduced Capital Improvement Program in the absence of voter approval. The Rate Commission Wastewater Rate Change Recommendation would initially fund capital improvements prior to voter approval. Under the reduced Capital Improvement Program, the District may be spending different amounts in various areas of the District under the Capital Improvement Program, thereby possibly raising an issue as to whether the fee is charged to only those who actually use the services and the amount of the fee is in fact affected by the level of services provided to the fee payer. For example, it appears that capital improvements are not taking place in certain subdistricts, yet ratepayers residing in these areas will pay the same increase as those utilizing the Meramec subdistricts, where substantial extension, repair, and improvement will occur. Issues may be raised with respect to a rate increase not approved by the voters if in fact the funds for the Capital Improvement Program are not utilized uniformly in each subdistrict of the District. This issue, however, is one of first impression and the courts have not provided any clear guidance. See, e.q., Missouri Growth, 941 S.W.2d at 623; Mullenix-St. 37 Charles Properties, 983 S.W.2d at 561. In both these cases, a similar issue was raised by those challenging the increase, yet was not discussed by the court. For example, in Mullinex-St. Charles Properties, with respect to whether the amount of the fee was affected by the level of services provided, the plaintiffs argued that the user charge included payments for future capital improvements that were not payments for goods or services provided. 983 S.W.2d at 561. The court rejected the argument in that case, however, because there was substantial evidence that the rate increase was not for capital improvements. Id. at 562-63. A case may be made that the rate increases —the Wastewater Rate Change Alternative and Rate Commission Wastewater Rate Change Recommendation —are in compliance with the Hancock Amendment. In Missouri Growth, by not addressing the plaintiff's argument that all customers were paying for the construction of the May -River Des Peres overflow regulation system, which does not serve most customers, the court impliedly rejected it. See 941 S.W.2d at 623. In addition, the District is arguably entitled to rely on the court's conclusion in Missouri Growth that the District charges are user fees. Since the court found the 1993 charge to be a user fee and not a tax, and the current rate proposals involve an increase in the same charge, the current increases likewise are increases in user fees, not taxes. Moreover, this issue does not affect all five Keller factors, and thus, even if valid, a court could find, based on other factors, the rate increases not to be a "tax; license or fee" subject to the Hancock Amendment. 38 Although the Wastewater Rate Change Alternative and the Rate Commission Recommendation include the use of revenues from a rate increase that may not have been approved by the voters and may not be utilized uniformly in all subdistricts of the District, the Rate Commission has been advised by counsel that a court would be likely to conclude that such rate increases are user fees, and not a "tax, license or fee" subject to the Hancock Amendment if these issues were properly presented. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the rate increases under the Wastewater Rate Change Proposal are consistent with constitutional, statutory, or common law as amended from time to time. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the rate increases under the Wastewater Rate Change Alternative are consistent with constitutional, statutory, or common law as amended from time to time. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the rate increases under the Rate Commission Wastewater Rate Change Recommendation are consistent with constitutional, statutory, or common law as amended from time to time. 39 Second Factor: Whether the Wastewater Rate Change Proposal "Enhances the District's ability to provide adequate sewer and drainage systems and facilities, or related services" The District has not raised its rates since 1997. The District has managed without such an increase by "sustained expense control" exhibited by an 11% reduction in staff since 2000, and tight management of the Capital Improvement Program. The Wastewater Rate Change Proposal, the Wastewater Rate Change Alternative, and the Rate Commission Wastewater Rate Change Recommendation each include an inflation allowance of 4% for personnel related costs and 3% for all other costs used in the rate study report. Slightly more than 20% of the District's budget is allocated to personnel costs. The District used 4% against personnel services because of its Memorandum of Understanding with certain of the bargaining limits for its employees, which includes stated salary increases over a three-year period. Two-thirds of the District's employees are subject to the Memorandum of Understanding. Individuals not members of the bargaining units are subject to the same salary schedule. A review of the U.S. Department of Labor Table on the Consumer Price Index for All Urban Consumers in St. Louis, Missouri, from 1991 through 2001 demonstrates that the consumer price index has increased 9.4% since the last rate increase. The estimate of the District of the increase of 4% for personnel costs and 3% for all other costs appears reasonable. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change 40 Proposal enhances the District's ability to provide adequate sewer and drainage systems and facilities, or related services until July 1, 2006. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change Alternative enhances the District's ability to provide adequate sewer and drainage systems and facilities, or related services until July 1, 2006. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Rate Commission Wastewater Rate Change Recommendation enhances the District's ability to provide adequate sewer and drainage systems and facilities, or related services until July 1, 2006. Third Factor: Whether the Wastewater Rate Change Proposal "Is consistent with and not in violation of any covenant or provision relating to any outstanding bonds or indebtedness of the District" The District currently has no outstanding bonds or indebtedness. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change Proposal is consistent with and not in violation of any covenant or provision relating to any outstanding bonds or indebtedness of the District. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change Alternative is consistent with and not in violation of any covenant or provision relating to any outstanding bonds or indebtedness of the District. 41 U.S.C.C.A.N. (92 Stat.) 2467; amended by Act of December 16, 1979, Pub. L. No. 96-148, 1979 U.S.C.C.A.N. (93 Stat.) 1088; amended by Act of October 21, 1980, Pub. L. No. 96-478, 1980 U.S.C.C.A.N. (94 Stat.) 2297; amended by Act of October 21, 1980, Pub. L. No. 96-483, 1980 U.S.C.C.A.N. (94 Stat.) 2360; amended by Act of December 11, 1980, Pub. L. No. 96-510, 1980 U.S.C.C.A.N. (94 Stat.) 2767; amended by Act of December 22, 1980, Pub. L. No. 96-561, 1980 U.S.C.C.A.N. (94 Stat.) 3275); amended by Act of August 13, 1981, Pub. L. No. 97-35, 1981 U.S.C.C.A.N. (95 Stat.) 3982; amended by Act of December 29, 1981, Pub. L. No. 97-117, 1981 U.S.C.C.A.N. (95 Stat.) 4503; amended by Act of April 2, 1982, Pub. L. No. 97-164, 1982 U.S.C.C.A.N. (96 Stat.) 25; amended by Act of January 8, 1983, Pub. L. No. 97-440, 1983 U.S.C.C.A.N. (96 Stat.) 2289; amended by Act of February 4, 1987, Pub. L. No. 100-4, 1987 U.S.C.C.A.N. (101 Stat.) 7; • Protection of Environment, 40 C.F.R. §§ 122-125; 129-131; 133; 135-136; 257; 401; 403; 405-471; 501; 503 (2002); Sanitary Sewer Overflows, 66 Fed. Reg. 61283 (Jan. 4, 2001) (to be codified at 40 C.F.R. pt. 122); ▪ Baumgartner Lagoon Settlement Agreement by and between the Metropolitan St. Louis Sewer District, Missouri Attorney General, the Missouri Department of Natural Resources, and the Missouri Clean Water Commission, July 11, 2002; • Department of Natural Resources, Mo. Code Reg. tit. 10, § 20-1.010 (2001); Id. at § 20-2.010 (1996); Id. at § § 20-3.010 4.070 (2000); Id. at § 20-5.010 (2001); Id. at § 20-6.010-6.300 (2002); Id. at § 20-7.010 - 7.031 (2000); Id. at § 20-8.010 - 8.500 (1999); Id. at § 20-9.010 -9.040 (1998); Id. at §§ 20-10.010- 13.080 (2000); Id. at § 20-14.010 -14.030 (2001); Id. at § 20-15.010 (2002); Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601-9675 (2001); and • Charter Plan of The Metro. St. Louis Sewer Dist., art. 3 §§ 3.010-3.050 (2000); and The Director of the Department of Natural Resources (the "Director") may cause investigations to be made upon the request of the Clean Water Commission (the "Commission") or upon the receipt of information concerning alleged violations of any term or condition of any permit. Mo. Rev. Stat. § 644.056.1 (2000). If, in the opinion of the Director, the investigation discloses a violation, then the Director attempts to eliminate the violation by conference, conciliation, or persuasion. Mo. Rev. Stat. § 644.056.2 (2000). 43 If the violation is not eliminated by conference, conciliation, or persuasion, or if the discharge of pollutants is causing a substantial or imminent endangerment to the health or welfare of persons, the Director may file a complaint to revoke the permit. Mo. Rev. Stat. § 644.056.3 (2000). The record in this proceeding supports the view that a substantial number of Combined Sewer Overflows and Sanitary Sewer Overflows (CSO's/SSO's) are in violation of the state and federal law. The record also indicates that the District has not yet been cited for any violations with respect to such CSO's/SSO's. The record in this proceeding supports the view that the Environmental Protection Agency (EPA) provides for implementation of a long-term CSO/SSO control plan which may be phased based on the relative importance of adverse impacts upon water quality standards and designated uses, and on a permittee's financial capability. The record in this proceeding supports the view that the Missouri Department of Natural Resources (MODNR) will require a substantial increase in funds expended in the near term to correct CSO/SSO violations. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change Proposal does not impair the ability of the District to comply with applicable Federal and State laws or regulations as amended from time to time. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change Alternative may impair the ability of the District to comply with applicable Federal and 44 State laws or regulations as amended from time to time because the Capital Improvement Program may impair the ability of the District to meet its obligations to protect the public health and welfare by preventing or abating the pollution of water and insure the District of adequate sanitary and stormwater drainage and of adequate sanitary disposal and treatment of the sewage. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Rate Commission Wastewater Rate Change Recommendation does not impair the ability of the District to comply with applicable Federal and State laws or regulations as amended from time to time. Fifth Factor: Whether the Wastewater Rate Change Proposal "Imposes a fair and reasonable burden on all classes of ratepayers" The District's rates and rate models have been exhaustively reviewed by the courts in Ring v. Metropolitan St. Louis Sewer District, 969 S.W.2d 716 (Mo. 1998) (en banc); Missouri Growth Association v. Metropolitan St. Louis Sewer District, 941 S.W.2d 615 (Mo. Ct. App. 1997); Beatty v. Metropolitan St. Louis Sewer District, 914 S.W.2d 791 (Mo. 1995) (enbanc); and Beatty v. Metropolitan St. Louis Sewer District, 867 S.W.2d 217 (Mo. 1993) (en banc). But none of the cases have considered whether the rates charged by the District are fair and reasonable. On several occasions, Missouri courts have discussed whether a rate is fair or reasonable in utility rates cases where a class of ratepayers alleged that the PSC approved unlawfully discriminatory rates. For instance, in State of Missouri at the Relation of Nancy Dyer and J. Raymond Dyer v. Public Service Commission, the PSC 45 approved a schedule of rates which allowed for higher percentage increases in electric utility rates for residential and commercial customers than for industrial customers. 341 S.W.2d 795 (Mo. 1961). In this case, the rate for residential customers was increased 8.6% while the rate for industrial customers was increased 5.5%. Id. at 799. The PSC found that the higher increase, imposed upon residential and commercial customers rather than industrial customers, was due to larger capital expenditures such as the use of air conditioning, installation for hundreds of miles of heavier wires and transformers, and higher labor costs, incurred on behalf of the residential customers. Id. As such, the court found that the rates were fair and no unlawful discrimination had occurred. Several months later, the Missouri Supreme Court heard R.P. Smith, et al. v. Public Service Commission. 351 S.W.2d 768 (Mo. 1961). In this case, the PSC approved an order which allowed electric utility rates to be increased a greater percentage for commercial than residential customers. Id. at 771. The Missouri Supreme Court affirmed the PSC's order and found that the fact that there was a larger increase applied to one class as opposed to another does not alone indicate that the rate is unfair or unreasonable. Id. Further the Court found that there is no discrimination where a reasonable classification has a direct correlation to the differences in the situation of the customers or the furnishing of the services whereby valid reasons exist to justify the imposition of varying rates. Id. Factors which supported the differential increase included the fact that the demand from commercial users is often high, the use is often occasional or inconsistent, and the use is often for only a portion of the day or a short duration during the year. Id. at 772. With this, the maintenance of the facilities to meet variable and 46 often demanding loads was unprofitable to the utility. Id. As such, the rates were increased disproportionately to the disfavor of commercial customers to account for such costs. The Court stated that because there was a larger increase applied to one class as opposed to another does not alone indicate that the rate is unfair or unreasonable or that discrimination occurred. Id. at 771. Further the Court found that there is no discrimination where a reasonable classification has a direct correlation to the differences in the situation of the customers or the furnishing of the services whereby valid reasons exist to justify the imposition of varying rates. Id. This increase, consequently, was held to be a reasonable one. However, in State of Missouri, ex rel. DePaul Hospital School of Nursing v. Public Service Commission, the Missouri Court of Appeals found the PSC's order approving a rate to be unlawfully discriminatory. 464 S.W.2d 737, 740 (Mo. Ct. App. 1971). In this case, evidence was shown which demonstrated that the respondent was charged a substantially higher rate for the operation of its nursing home than others similarly situated who received a substantially lower rate, known as the hotel -motel rate. The court followed the opinion of State ex rel. City of St. Louis v. Public Service Commission which states, "[I]t was said that arbitrary discriminations alone are unjust, but if the difference in rates be based upon a reasonable and fair difference in conditions which justify a different rate, it is not unjust discrimination." Id. at 740 (citing State ex rel. City of St. Louis v. Public Service Commission, 36 S.W.2d 947, 950 (Mo. 1931) (emphasis added)). In State of Missouri ex rel. City of Oak Grove, Missouri, et al. v. Public Service Commission, the Missouri Court of Appeals found the PSC's order, which allowed a 47 telephone company to provide extended area service in one metropolitan area when it was not provided in other suburban exchanges approximately the same distance from the central exchange, to be "lawful and reasonable". 769 S.W.2d 139, 141 (Mo. Ct. App. 1989). In this case, the court held that discrimination does not exist merely because the distance between a central exchange and service complainant's exchange is approximately the same. Id. at 143. The court reasoned that the PSC was entitled to take into account factors such as population density and gross territory area when making these determinations. Id. The PSC regulates telephone and telegraph companies (Mo. Rev. Stat. § 392.200) and gas, electric, water, heating and sewer companies (Mo. Rev. Stat. §§ 393.130 393.140). Generally, the PSC uses the standard "just and reasonable" in determining whether a proposed rate is valid. The standard of review for telephone and telegraph companies provides that "all charges made and demanded by any telecommunications company for any service rendered or to be rendered in connection therewith shall be lust and reasonable and not more than allowed by law or by order to decision of the commission." See Mo. Rev. Stat. § 392.200 (2000) (emphasis added). The standard of review for gas, electric, water and sewer corporations provides that the PSC has the power to "determine and prescribe the just and reasonable rates and charges thereafter to be in force of the service to be furnished, notwithstanding that a higher rate or charge has heretofore been authorized by statute, and the just and reasonable acts and regulations to be done and observed." See Mo. Rev. Stat. § 393.140 (2000) (emphasis added). 48 The PSC's role in the electric utility resource planning "shall be to provide the public with energy services that are safe, reliable and efficient, at lust and reasonable rates, in a manner that serves the public interest." See 4 CSR 240-22.010 (emphasis added). Whether a rate in effect at any given time is "just and reasonable" depends upon many facts and only can be determined after a rather extended investigation and study. Laclede Gas Co. v. Pub. Serv. Comm'n, 535 S.W.2d 561 (Mo. Ct. App. 1976). A reasonable rate is a question of fact, calling for the exercise of common sense and sound judgment, not bound by any hard and fast rule, nor limited to any general formula. State ex rel. Southwestern Bell Tele. Co. v. Pub. Serv. Comm'n, 233 S.W.425, 431 (Mo. 1921) (en banc) (rv'd on other grounds). No writer whose views on public utility rates command respect purports to find a single yardstick by sole reference to which rates that are reasonable or socially desirable can be distinguished from rates that are unreasonable or adverse to the public interest. A complex of tests of acceptability is required, just as would be the case with the tests of a good automobile, a good income-tax law, or a good poem. See State ex rel. City of Lake Lotawana v. Pub. Serv. Comm'n, 732 S.W.2d 191, n.1 (Mo. Ct. App. 1987). In Laclede Gas, the Missouri Court of Appeals found that whether the rates in effect are just and reasonable depends upon many facts and can only be determined after rather extended investigation and study. Id. at 570. The United States Supreme Court has analyzed the standard of "just and reasonable rates" under the Natural Gas Act in two relevant cases. Fed. Power Comm'n v. Nat. Gas Pipeline Co., 315 U.S. 575 (1942); Fed. Power Comm'n v. Hope 49 the expediency of the project, and the public necessity and wisdom of the improvement. Id. at 28. Article I, Section 2 of the Missouri Constitution, states: That all constitutional government is intended to promote the general welfare of the people; that all persons have a natural right to life, liberty, the pursuit of happiness and the enjoyment of the gains of their own industry; that all persons are created equal and are entitled to equal rights and opportunity under the law; that to give security to these things is the principal office of government, and that when government does not confer this security, it fails in its chief design. Mo. Const. art. I, § 2. The court must initially determine whether a rate classification burdens a suspect class or impinges upon a fundamental right and if neither is involved, the classification will be sustained if it is rationally related to a legitimate interest. Batek v. Curators of Univ. of Missouri, 920 S.W.2d 895, 898 (Mo. 1996) (en banc); Powell v. Am. Motors Corp., 834 S.W.2d 184, 190 (Mo. 1992) (en banc). Fundamental rights include only the basic liberties explicitly or implicitly guaranteed by the Constitution. Batek, 920 S.W.2d at 898. Suspect classes, for purposes of an equal protection challenge, include those classes based on race, national origin, or illegitimacy. Powell, 834 S.W.2d at 190. See also Mullenix — St. Charles Prop. V. City of St. Charles, 983 S.W.2d 550, 559 (Mo. Ct. App. 1999). Since customers of the District are not members of a suspect class and cannot claim that a fundamental right of basic liberties has been denied, their equal protection claims are subject to a minimum level of scrutiny. As a result, the disproportionate rates will be sustained if they are rationally related to a legitimate interest. Further, the rate increase under any of the Wastewater Rate Change Proposal, the Wastewater Rate 51 Change Alternative, or the Rate Commission Wastewater Rate Change Recommendation will be imposed uniformly upon all classes of ratepayers. Under the rational relationship analysis, a court will strike down the legislation only if the challenger shows that the classification rests on grounds wholly irrelevant to the achievement of the state's objective. Riche v. Dir. Of Rev., 987 S.W.2d 331, 337 (Mo. 1999) (en banc). Even if legislative judgment is debatable, the equal protection issue is settled on the side of validity. Mahoney v. Doerhoff Surgical Serv., Inc., 807 S.W.2d 503, 513 (Mo. 1991) (en banc). See also Mullenix, 983 S.W.2d at 559. The rational basis test does not require that the legislative objective be compelling or the dilemma grave, nor that the legislature choose the best or the wisest means to achieve its goals. Such arguments, no matter how plausible, are properly directed to the legislature, not the court. Winston v. Reorganized Sch. Dist., R-2, 636 S.W.2d 324, 328 (Mo. 1982) (en banc). Moreover, where a classification is challenged on equal protection grounds, there is a presumption that the legislature acted within its constitutional power in spite of the fact that the law might result in some inequality. Elliot v. Carnahan, 916 S.W.2d 239, 242 (Mo. Ct. App. 1995); Mahoney, 807 S.W. at 511 (statute is presumed to be constitutional unless the statute clearly contravenes some constitutional provision). The party challenging the classification bears the burden of showing it lacks a rational basis and is purely arbitrary. Nguyen v. Nguyen, 882 S.W.2d 176, 177 (Mo. Ct. App. 1994). Customers may allege that the District rates are assessed disproportionately when compared to other customers and thus, violates both the federal and state equal protection clauses. Since there is no suspect class or fundamental right involved, these 52 customers bear the heavy burden of showing that the differential rates serve no rational basis. In State of Missouri ex rel. Missouri Water Company v. Public Service Commission, the Court reversed the Public Service Commission's ("PSC") order that fixed rates below those of the utility's request because the PSC gave no consideration to the evidence presented regarding rate determination. 308 S.W.2d 704 (Mo. 1957). The Court reasoned: The reasonableness of rates charged by a public utility engaged in intrastate activities, such as the appellant water company, must be determined with due regard to the due process and equal protection clauses of both the federal and state constitutions and the statutes of the state in which the utility operates. Id. at 713-14. The Court further stated that "[i]t is the duty and the province of this court to construe its own constitution and statutes in accord with their fair intent and meaning." Id. at 716. The Court found that the PSC failed to make a fair and just rate because it did not ascertain all of the relevant factors for consideration in making its decision to impose the rate. Id. at 719. The Wastewater Rate Change Proposal, the Wastewater Rate Change Alternative, and the Rate Commission Wastewater Rate Change Recommendation each contain a 37% customer -63% volumetric cost recovery of Infiltration/Inflow; the failure to further subdivide the nonresidential customer classes; the cost recovery of $18,340,600 in stormwater costs in the wastewater rate; the change in excess strength Suspended Solids; additional working capital; and a new resistance factor, which may result in the imposition of disproportionate rates and therefore, the rates would not be fair and reasonable. 53 Infiltration/Inflow The Wastewater Rate Change Proposal incorporates an 1/1 allocation4 of 37% recovery by the system availability charge (number of customers) and 63% recovery by the volume charge. The I/I allocation stems from a decision made by the District Board of Trustees in 1993. This allocation has the affect of providing some rate relief to the largest percentage of District's customers, (i.e., residential ratepayers). Black & Veatch, the District rate consultant, usually recognizes both customer and volume in its allocation of I/I. In a 1993 Study for the District, prior to Board of Trustees decision to change it, Black & Veatch used a 50/50 allocation for the District, and would have used 50/50 absent the Board of Trustees' decision. No studies were performed in 1993 substantiating a rationale for the change from 50-50 to 37-63. "Financing and Charges for Wastewater Systems" (Second Edition) (the "Manual") was prepared in accordance with recognized engineering principles and practices in general use by wastewater utility management, municipal officials, engineers, accountants, and others concerned with financing and establishing charges for wastewater service. It is a special publication of the American Public Works Association, the American Society of Civil Engineers, and the Water Pollution Control Federation (now known as the Water Environment Federation). The Manual was published in 1984 to illustrate the various ways of allocating costs and developing rates and charges that reasonably and equitably reflect the cost of service. Charles B. 4 "Infiltration" —water other than wastewater that enters a sewer system from the ground through such means as defective pipes, pipe joints, connections, or manholes. "Inflow" —water other than wastewater that enters a sewer system from sources such as, but not limited to, roof leaders, cellar drains, yard drains, area drains, drains from springs and swampy areas, manhole covers, cross connections between storm drains and sanitary sewers, catch basins, cooling towers, stormwaters, surface runoff, street wash waters, or drainage. 54 Kaiser, Jr., the long-time general counsel of the District, and Black & Veatch, consultants to the District, each participated in the preparation of the Manual. Black & Veatch also used portions of the Manual in preparing the rate study supporting the Wastewater Rate Change Proposal. With respect to the allocation of 1/1, the Manual states: To the extent that 1/1 entry points cannot be determined, their costs are a general system problem that is probably best related to both customer class flows and to the number of customers... Additional customers increase the land area and density of the collection system, increasing the potential for l/I." With respect to allocating the I/I costs, the Manual continues by stating: In establishing 1/1 units of service by customer class, it is noted that such costs are not directly related to wastewater volumes discharged by customers. That is, the volume of contributed wastewater flow from an individual customer is not a direct measure of that customer's potential responsibility for 1/1. A more accurate theoretical measure of I/I responsibility might involve consideration of the customer's property and stormwater runoff potential, as well as sewer lateral leakage. Such parameters, however, are not readily ascertainable as a basis of billing customers for I/I costs. These considerations support allocation of I/I responsibility to customer classes based on some measure that reflects both the number and relative size of customers served. For example, the Manual notes two-thirds of the total I/I could be allocated in proportion to the number of customers, with the remaining one-third allocated on the basis of volume. Id. However, the District's rate consultant, Black & Veatch, testified that the District will eventually have the ability to allocate 1/1 costs on a customer, volume, and impervious area basis. Moreover, it is possible that when completed, an impervious area analysis may actually result in a greater cost to those volume customers with large 55 areas and thus, could result in an allocation not unlike the 37/63 ratio in effect currently and contained in the Wastewater Rate Change Proposal. Customer Classification It was proposed that the District further subdivide its nonresidential class into at least commercial and industrial classifications to reflect the differences in customer usage characteristics and services utilized. Within the industry, the nonresidential class is usually divided into a commercial class and an industrial class to better reflect diversity between the commercial (i.e., retail shops, restaurants) and industrial (i.e., manufacturing entities such as Boeing and Anheuser Busch). The Manual recognizes such further classifications identifying typical customer classifications as residential, commercial, and industrial. The District's Consultant, Black & Veatch, in 2001 performed a Florida Wastewater Rate Survey which ranked sewer and water bills on the basis of residential, commercial, and industrial customers. Among the communities involved, 112 had a residential rate, 111 a commercial rate, and 93 an industrial rate. Expanding the number of customer classes at some point would be helpful for classification and analysis of customer's billed volumes per account, which would more accurately project future billable wastewater volumes and revenues. However, the Rate Commission recognizes that such reclassification cannot occur with this Wastewater Rate Change Proposal. 56 Stormwater Cost Recovery The Wastewater Rate Change Proposal would recover a stormwater shortfall from the wastewater customers. In the Test Year, stormwater related operation and maintenance expense total $29,248,000 and identifies $10,907,400 of revenues available to offset such costs, resulting in an under recovery of stormwater related costs of $18,340,600. Specifically, the wastewater rates will recover that cost which may be partly due to the combined sewers. The District has identified $18,340,600 of stormwater related costs that are currently included as part of the wastewater system cost of service. There is no allocation in the Wastewater Rate Change Proposal or District Alternative of any treatment facilities related to capital costs to the stormwater function. However, the record indicates that the typical practice of many wastewater utilities having a combined sewer system is to recover all combined sewer costs from wastewater service charges. The District testified that it intends to soon propose a new stormwater charge based on the amount of impervious area in serving each individual property within the District. This new charge will be capable of fully supporting the stormwater program. As a result, the separate identification of stormwater support costs in this proposal would be short-lived, and cause the District to incur costs to reprogram their billing system. It may also confuse District customers. Change in Excess Strength Suspended Solids The District's Rate Change Proposal increases the unit charge for excess strength Suspended Solids and lowers the threshold limit for Suspended Solids from 350 milligrams to 300 milligrams. 57 It was proposed that the District should phase in this rate over a two or three- year period to give customers sufficient time to adjust their production processes, or alternatively, the District should notify potentially affected customers of the increases and phase in the lower strength threshold. The record indicates that the District's current level of 350 milligrams is not representative of general industry practice, and the reduction to 300 milligrams will be more in line with industry practice. Additional Working Capital The Wastewater Rate Change Proposal and Wastewater Rate Change Alternative each provide an additional expenditure of $492,700 as additional working capital during fiscal year ending June 30, 2004. This sum is based upon an allowance of 45 days of operation and maintenance expenses and expenditures for annual routine renewals and replacements. It is a shorter period of time than the 1984 Ordinance because the District is now issuing its bills on a monthly basis, whereas in 1984 the bills were issued on a semi-annual basis. The additional working capital amount would become part of a reserve fund to be available in the event of a revenue shortfall. The working capital includes a component for capital expenditures and for materials and supplies. Annual contributions from rate revenues to working capital reserve would compute to $509,800 for fiscal year ending June 30, 2005, and $527,700 for fiscal year ending June 30, 2006. Resistance Factor The Wastewater Rate Change Proposal and the Wastewater Rate Change Alternative also each include a new three percent resistance factor to cover anticipated 58 delinquencies and any reduction in revenue caused by actions which may be undertaken by ratepayers (primarily commercial and industrial) to self -treat waste or otherwise avoid certain of the District's strength charges and thereby reduce District revenues. The resistance factor in the Test Year reduces the amount of rate revenues the District expects to receive by three percent, or a sum equal to $864,200. The District is requesting a 23% rate increase over existing rate revenues in 2004. Without the resistance factor, such an increase would result in revenues of $28,805,200. The three percent resistance factor would lower such revenues by $864,200, thereby only recognizing increased revenues of $27,941,000 in the Test Year. Similarly, the resistance factor would reduce the amount of rate revenues by $970,300 in 2005, and by $894,00 in 2006. The District has never recognized a resistance factor in prior rate proceedings. The size of the resistance factor was not the result of any calculations, but is an estimate. The Rate Commission has considered whether the inclusion of a 37% customer -63% volumetric cost recovery of Infiltration/Inflow; the failure to further subdivide the nonresidential customer classes; the cost recovery of $18,340,600 in stormwater costs in the wastewater rate; the change in excess strength Suspended Solids, additional working capital and a new resistance factor may result in rates that are not fair and reasonable to all classes of customers. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, further 59 finds and determines that while these considerations merit future study, the disproportionate rates, if any, resulting from these factors are rationally related to a legitimate public interest. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Wastewater Rate Change Proposal imposes a fair and reasonable burden on all classes of ratepayers. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the P-roceedings, finds and determines that the Wastewater Rate Change Alternative does not impose a fair and reasonable burden on all classes of ratepayers because the proposed rate increase of 65% in 2003 is too great. The Rate Commission, after consideration of all of the facts and circumstances disclosed in the Proceedings, finds and determines that the Rate Commission Wastewater Rate Change Recommendation imposes a fair and reasonable burden on all classes of ratepayers. 60 INORITY REPORTS I. Rate Commission Delegate Virginia Harris submits this Minority Report. Delegate Virginia Harris wishes to clarify for the record that: A. If voters approve the bond issue proposed by the District for April 2003, the wastewater fees proposed in the third year of the last three years of the District's Wastewater Rate Change Proposal would by 67% higher than current fees, and would need to remain at that level in order to retire the proposed bonds and also make the needed capital, operating, and maintenance expenditures. B. If voters fail to approve the bond issue proposed by the District for April 2003, the wastewater fees proposed in the third year of the last three years of the District's Wastewater Rate Change Alternative back-up scenario would by 75% higher than current fees, and would need to remain at that level in order to make needed operating and maintenance expenditures plus a significantly lower level of capital expenditures, which may be insufficient to meet regulatory requirements. C. If voters fail to approve the bond issue proposed by the Rate Commission for April 2003, but do approve it in August or November of 2004, the wastewater fees proposed in all three years of the last three years of the Rate Commission's Wastewater Rate Change Recommendation would be approximately 42.5% higher than current fees, but would need to be raised in subsequent years (FY '06 and beyond) to a level approximately 67% higher than current fees in order to retire the proposed bonds and also make needed capital, operating, and maintenance expenditures. Thus, under this scenario, approximately the same amount of total revenue would be raised during the first three years of the program, but the rate shock in the first year under this scenario 61 would be higher than if voters approve the bond issue at their first opportunity (April 2003). Moreover, the rates would have to become the same 67% aggregate increase as under the District's Wastewater Rate Change Proposal in FY '07 and beyond. D. If voters fail to approve the bond issue proposed by the Rate Commission for April 2003, and also the bond issue proposed for August or November 2004, the wastewater fees proposed in the first two and a half years of the last three years of the Rate Commission's Wastewater Rate Change Recommendation would be approximately 42.5% higher than current fees, but would need to be raised in the last half year of this three-year period to over 200% higher than current fees in order to retire short-term debt and make needed capital, operating, and maintenance expenditures. During subsequent years (FY '07 and beyond) fees would have to be maintained at a level approximately 138% higher than current fees in order to make what the Rate Commission believes are subsequently necessary capital, operating, and maintenance expenditures. IL Rate Commission Delegate Michael C. Pendergast submits this Minority Report. With one exception, I concur in the majority's determinations as they relate to the Wastewater Rate Change Proposal, the Wastewater Rate Change Alternative, and the Rate Commission Wastewater Rate Change Recommendation. The one exception relates to the Rate Commission's decision to recommend at this time a rate increase of 16 percent in 2005 as contemplated by the Wastewater Rate Change Proposal. I disagree with recommending the proposed rate increase for the third year at this time for three reasons. 62 First, I am concerned that such approval will be counterproductive to the District's efforts to obtain bond financing this coming April -- financing that all parties agreed was the preferred method for generating most of the resources required to meet the District's substantial capital requirements. In effect, approval of the 16 percent increase now will require voters to assume that it is in their best interests to approve a bond issuance in April, even though the effect of doing so will be to impose a significantly larger rate increase on them over the next three years than would be the case if they voted against the issuance. While voters may find that this larger, long-term increase is counterbalanced somewhat by the temporarily lower rate increase that would be in effect during year one in the event the bond issuance was approved in accordance with the Wastewater Rate Change Proposal, the certainty of a larger increase over the long- term will clearly complicate efforts to obtain voter approval in April. Second, the 16 percent increase is predicated on a full funding of the District's Capital Improvement Program. The District's need for a significant increase in capital spending is undeniable. However, there was some uncertainty over the magnitude of that need. Both the Rate Commission's consultant and the District's own witnesses testified that something less than full funding of the Capital Improvement Program could be sufficient over the next three years to meet the District's obligations. Moreover, a number of details concerning the Capital Improvement Program were not available until after the technical proceedings in this matter had been largely completed and the opportunity for review by our consultant had ended. In view of these uncertainties, I believe recommending the first two years of the requested rate increase and deferring a recommendation on the third year increase pending the submission of additional 63 information to the Commission in the form of a subsequent Rate Change Notice would have been the preferable course of action. Third, in developing its own Wastewater Rate Change Recommendation, the Rate Commission gave some recognition to the District's ability to use short-term debt financing as a means of reducing the level of rate relief required under that Recommendation. In my view, the availability of this financing alternative, and its potential applicability in reducing the magnitude of the District's Wastewater Rate -Change Proposal, is another consideration that warrants a- deferral of action on the 16 percent rate increase proposed for year three. For all of these reasons, I believe it would have been more appropriate to defer action on the District's proposed increase for year three until after the submission of a subsequent Rate Change Notice. III. Rate Commission Delegate John L. Stein submits this Minority Report. Infiltration/Inflow The allocation of infiltration and inflow costs ("Ill") encompassed in the Wastewater Rate Change Proposal, the Wastewater Rate Change Alternative, and the Rate Commission Wastewater Rate Change Recommendation imposes an unfair and unreasonable burden on certain classes of ratepayers. The Wastewater Rate Change Proposal, the Wastewater Rate Change Alternative, and the Rate Commission Wastewater Rate Change Recommendation incorporate an I/I allocation of 37% recovery by the system availability charge (number of customers) and 63% recovery by the volume charge. 64 This I/I allocation stems from a decision made by the Board of Trustees of the Metropolitan St. Louis Sewer District in 1993. The Board of Trustees, in an arbitrary and capricious manner, changed the III allocation from 50/50 to 37/63 to help the residential customer, with no study or back up data to justify the change. This allocation was adopted for purely political purposes. Black & Veatch, the District rate consultant, testified that it usually recognizes both customer and volume in its allocation of I/I. In fact, in a 1993 Study for the District, prior to Board of Trustees decision to change it, Black & Veatch recommended a 50/50 cost allocation for the District, and testified that it would have used 50/50 in the current rate proposal absent the Board of Trustees' decision in 1993. The evidence is uncontradicted that no studies were performed in 1993 substantiating a rationale for the change from 50-50 to 37-63. The Manual is a recognized industry standard for developing cost based wastewater rates. With respect to the allocation of I/I, the Manual states: To the extent that I/I entry points cannot be determined, their costs are a general system problem that is probably best related to both customer class flows and to the number of customers.... Additional customers increase the land area and density of the collection system, increasing the potential for I/I." Clearly the experts in the field believe that residential customers, creating a larger portion of the problem, should shoulder a larger portion of the cost burden. Thus, it is my position that in the absence of data to support a lower ratio, the District should return to a 50/50 cost allocation and conduct studies to justify a different ratio if it feels this is the case. 65 Resistance Factor A resistance factor reduces the amount of revenues the District expects to receive. The premise for the resistance factor is that after rates are increased, certain ratepayers may self -treat their wastewater which in turn reduces their wastewater charges. The Wastewater Rate Change Proposal, the Wastewater Rate Change Alternative, and the Rate Commission Wastewater Rate Change Recommendation each incorporate a resistance factor equal to 3% of the requested increase in rate revenue. Even if we assume elasticity of demand, there is no accurate method to predict the impact on revenues without study. Without study, there is then no accurate method to size a resistance factor. The utilization of a resistance factor results in an unfair and unreasonable burden on the ratepayers. The use of a resistance factor is uncommon in rate proceedings of any kind. There was no evidence that it has been used in Missouri utility cases, and I am personally unaware of any such usage. The District testified that it has never recognized a resistance factor in prior rate proceedings and there is no evidence to support including it now. The 3% was not the result of any calculations, it was just an estimate. The only reason for the resistance factor asserted by the District is because of the magnitude of the increase. The use of a resistance factor sends a distorted message to those who can control usage. If it makes sense to control usage from an economic standpoint, it may also from an environmental standpoint. If there is resistance to a rate increase, it is my belief that the District should consider reducing its expenditures until the revenues and expenditures are in balance. 66 October 28, 2002 Board of Trustees of the Metropolitan St. Louis Sewer District 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 Rate Change Proposal submitted to the Rate Commission on May 16, 2002. Accompanying the Report are the Minority Reports of Delegates Virginia Harris, Michael C. Pendergast, and John L. Stein; the Proceedings; an Information Letter; and the Resolution adopted by the Rate Commission on October 25, 2002. 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 Rate Recommendation Report was approved at a special meeting on October 25, 2002, 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. Very truly yours, Andrew J. Theising, Ph Chair, The Rate Commission of the Metropolitan St. Louis Sewer District cc: Mr. Charles Etwert Mr. Randy Hayman P'OCEEDINGS =F THE RATE COMMISSION OF THE ET OPOLITAN ST. LOUIS SE ER DISTRICT REGARDING THE ASTE ATER RATE CHA GE PROPOSAL OF THE ETR POLITAN ST. LOUIS SE ER DISTRICT CT E< 2 a 2002 Appointment of the Rate Commission On January 18, 2001 the Board of Trustees of the Metropolitan St. Louis Sewer District enacted Board Ordinance No. 10901 under the authority of § 7.040 of the Charter Plan of the Metropolitan St. Louis Sewer District, and designated Associated General Contractors, Sierra Club, National Society of Black Engineers, Skinker DeBaliviere Community Council, and the Regional Chamber & Growth Association as Rate Commission Representative Organizations for two-year terms beginning February 1, 2001; Cooperating School Districts of St. Louis, St. Louis Clergy Coalition, League of Women Voters of Saint Louis, Urban League of Metropolitan St. Louis, and Washington University as Rate Commission Representative Organizations for four-year terms beginning February 1, 2001; and Building & Construction Trades Council, Home Builders Association of Greater St. Louis, FOCUS St. Louis, St. Louis County Municipal League, and Missouri Industrial Energy Consumers as Rate Commission Representative Organizations for six - year terms beginning February 1, 2001. Each of these Organizations designated an individual to serve as a Rate Commission Delegate and notified the Rate Commission. The Delegates currently comprising the Rate Commission are: DELEGATE REPRESENTING Virginia Harris Sierra Club Steven P. Hoffner Washington University Rev. Anthony Joyce St. Louis Clergy Coalition Francis S. Mack National Society of Black Engineers Mark Morley Home Builders Association of Greater St. Louis Daniel P. Murphy Building & Construction Trades Council Michael Pendergast Regional Chamber & Growth Association 2 Laure Porterfield Michael Schoedel George E. Simpson John L. Stein Everett E. Stuckey Andrew J. Theising Leonard Toenjes Nancy Ulman Skinker DeBaliviere Community Council St. Louis County Municipal League Cooperating School Districts of St. Louis Missouri Industrial Energy Consumers Urban League of Metropolitan St. Louis FOCUS St. Louis Associated General Contractors League of Women Voters of Saint Louis Operational Rules On August 16, 2001, and under the authority of §§ 7.250 and 7.280(e) of the Charter Plan, the Rate Commission adopted Operational Rules, Regulations and Procedures as amended on April 10, 2002, to govern the activities of the Rate Commission (Appendix A). Procedural Schedule On June 3, 2002, the Rate Commission, under the authority of § 7.280(e) of the Plan and pursuant to § 3(3) of the Operational Rules, adopted a Procedural Schedule for the Consideration of the Wastewater Rate Change Notice (Appendix B). 3 PROCEEDINGS Under procedural rules adopted by the Rate Commission, any person who would be affected by the Wastewater Rate Change Proposal has an opportunity to submit an application to intervene in the rate change proceedings. Applications to intervene have been granted for Associated General Contractors of St. Louis, SITE Improvement Association, Missouri Industrial Energy Consumers, Missouri Energy Group, The Sierra Club and Carleton B. Fox Co. R. W. Beck, Inc., the Rate Commission Consultant (the "Consultant"), filed a Discovery Request with the District on June 12, 2002. Advance written testimony was filed by the District on June 21, 2002 and June 24, 2002. A Technical Conference was held on the record on June 24, 2002, to provide Management of the District an opportunity to answer questions propounded by any Intervenor; by the Consultant to the Rate Commission; and by Lashly & Baer, Legal Counsel to the Rate Commission regarding the Rate Setting Documents filed with the Rate Commission by the District. The Responses of the District to the Rate Commission Consultant's Discovery Request were filed by the District on June 28, 2002 and July 3, 2002. On June 25, 2002, Intervenor Missouri Industrial Energy Consumers submitted Discovery Requests to the District. On July 3, 2002, the District filed its Responses to Missouri Industrial Energy Consumers' Discovery Requests. 4 On July 1, 2002, Intervenor Missouri Energy Group submitted Discovery Requests to the District. On July 10, 2002, the District filed its Responses to Missouri Energy Group's Discovery Requests. On July 9, 2002, Intervenor Missouri Industrial Energy Consumers submitted its Second Discovery Request to the District. On July 10, 2002, the District filed its Responses to Missouri Industrial Energy Consumers' Second Discovery Request. On July 10, 2002, Intervenor The Sierra Club submitted its Discovery Requests to the District. The District response was filed on July 20, 2002. On July 10, 2002, Intervenors Missouri Industrial Energy Consumers, Missouri Energy Group, Associated General Contractors of St. Louis, and SITE Improvement Association submitted prepared Rebuttal Testimony and schedules. A Technical Conference was held on the record on July 15 and 16, 2002, to continue considering questions regarding the Rate Setting Documents, the written testimony of the District, and the District Response to Discovery Requests. In addition, each Intervenor which submitted Rebuttal Testimony answered questions regarding their testimony propounded by the District, the Consultant, Legal Counsel, and other Intervenors. On July 18, 2002, Intervenor Missouri Energy Group submitted its Second Discovery Request to the District. On July 26, 2002, the District filed its Responses. On July 30, 2002, the Consultant submitted prepared Testimony. Intervenors Missouri Energy Group, Associated General Contractors of St. Louis and SITE Improvement Association, and Missouri Industrial Energy Consumers submitted prepared 5 Surrebuttal Testimony on July 30, 2002. On July 31, 2002 the District submitted prepared Surrebuttal Testimony. A third Technical Conference was held on the record on August 5 and 6, 2002, to consider the Testimony of the Consultant. The Consultant answered questions submitted by the District, the Intervenors, and Legal Counsel. In addition, each Intervenor submitting Surrebuttal Testimony answered questions regarding such surrebuttal submitted by the District, the Consultant, Legal Counsel, and the other Intervenors. On August 9, 2002, Intervenor Missouri Energy Group submitted its Third Discovery Request. On August 13, 2002, the District, Intervenor Missouri Industrial Energy Consumers, Intervenors Associated General Contractors of St. Louis and SITE Improvement Association, and Intervenor Missouri Energy Group submitted additional prepared Surrebuttal Testimony and schedules in connection with the Testimony and schedules submitted by the Consultant. A Prehearing Conference for the purpose of identifying any issues raised by the prepared testimony previously submitted was conducted on the record on August 19, 2002. A representative of each person submitting testimony participated in the Prehearing Conference. Testimony was not taken at the Prehearing Conference. During the Prehearing Conference, the parties and the Rate Commission considered the identification of issues raised by the prepared testimony and the possible resolution of any issue raised by the prepared testimony. 6 Each participant in the Prehearing Conference submitted a prehearing conference report describing the issues raised by the prepared testimony, together with a brief description of such participant's position, if any, on each issue and the rationale therefor. Public hearings were held on the record on September 3,°2002, at 10:00 A.M. and September 4, 2002, to hear from the District, the Consultant, the Intervenors, and Legal Counsel with respect to whether the proposed rate change (i) is consistent with constitutional, statutory or common law as amended from time to time; (ii) enhances the District's ability to provide adequate sewer and drainage systems and facilities, or related services; (iii) is consistent with an not in violation of any covenant or provision relating to any outstanding bonds or indebtedness of the District; (iv) does not impair the ability of the District to comply with applicable Federal or State laws or regulations as amended from time to time; and (v) imposes a fair and reasonable burden on all classes of ratepayers. Ratepayers who do not wish to intervene were permitted to participate in a series of on -the -record public hearings conducted in six sessions on August 29, 2002, at 7:00 P.M. at New Northside Baptist Church, 8645 Goodfellow, St. Louis, Missouri 63147; September 3, 2002, at 5:00 P.M. at the Florissant Valley Branch of the St. Louis County Library, 195 New Florissant Road South, Florissant, Missouri 63031; September 4, 2002, at 5:00 P.M. at the Thornhill Branch of the St. Louis County Library, 12863 Willowyck Drive, St. Louis, Missouri 63146; September 5, 2002, at 5:00 P.M. at the Cliff Cave Branch of the St. Louis County Library, 5430 Telegraph, St. Louis, Missouri 63129; September 9, 2002, at 5:00 P.M. at the Kirkwood Community Center, 111 S. Geyer, Kirkwood, Missouri 63122; and September 10, 2002, at 5:00 7 P.M. at the Greensfelder Recreation Complex at Queeny Park, 550 Weidman Road, Ballwin, Missouri 63011. Two additional sessions of the public hearings will be conducted on September 3, 2002, at 10:00 A.M. at the Missouri History Museum, Southwestern Bell Room, 5700 Lindell, St. Louis, Missouri 63112 and September 4, 2002, at 10:00 A.M. at the Missouri History Museum, Southwestern Bell Room, 5700 Lindell, St. Louis, Missouri 63112. Public Notices regarding these proceedings were published in the St. Louis Post - Dispatch on May 31, 2002, June 1, 2002, June 2, 2002, and on August 23, 2002, August 24, 2002, and August 25, 2002. Each Notice contained the time, dates and location of each of these conferences and hearings. 8 APPENDIX A OPE TIONAL RULES 9 OPERATIONAL RULES, REGULATIONS AND PROCEDURES OF THE RATE COMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT Section 1 - Definitions This section defines terms used in operational rules, regulations and procedures of the Rate Commission of the Metropolitan St. Louis Sewer District. (1) "Charter (Plan)" means the organizing plan and charter for the Metropolitan St. Louis Sewer District, as approved by the voters of St. Louis and St. Louis County at a special election on February 9, 1954 and amended by the voters on November 7, 2000. (2) "MSD" or "District" means the Metropolitan St Louis Sewer District as established by and described in the Charter (Plan). (3) "MSD Staff" means any and all employees and agents of the of the District, including the Executive Director, Director of Finance, Secretary -Treasurer and Internal Auditor, and any firm, person, consultant or other third party hired by the District to perform work relating to a Rate Change Notice. (4) "Commission" means the Rate Commission of the Metropolitan St. Louis Sewer District as established by Section 7.040 of the Charter (Plan). (5) "Commission member" means a Rate Commission Delegate is established and described in Section 7.230 of the Charter (Plan). (6) "Board" means the MSD Board of Trustees established pursuant to the Charter (Plan). Section 2 — Organization of the Commission This section establishes and describes the internal organization of the Commission, including its elected officers, standing committees and the duties assigned to each. (1) Officers of the Commission — At the fifth meeting of the Commission, and every January of each odd calendar year thereafter, the Commission members shall, by a majority vote, elect a Chair, Vice -Chair and Secretary from among the Commission's membership. Each officer so elected shall serve a term of two years, beginning the first day of February and ending on the 31St day of January of the second following year, and may be elected for one additional two year term by a majority vote of the Commission. In the event that a vacancy occurs in the position of Chair, Vice -Chair or Secretary prior to the expiration of the member's term of office in that position, the Commission shall elect a member to fill the unexpired term of the position at the next regularly scheduled meeting of the Commission. Officers shall serve until their successors assume office. (2) Duties of the Chair — The Chair of the Commission shall: (a) conduct all meetings of the Commission, including the setting of the agenda for such meetings in consultation with the other Officers and, upon request, other members of the Commission; (b) serve as the presiding officer at the public hearing held in connection with a Rate Change Notice; (c) coordinate the activities of the Commission's Standing Committees; and (d) establish, subject to Commission approval, interim committees or task forces to address specific matters that fall outside of the scope of the matters assigned to the Standing Committees. (e) convey to the public, in coordination with the Public Affairs Committee and its Chair, the context in which the Commission was created, its mission, style of operation, independence and other considerations that assist all parties in understanding the role of the Commission; and (f) serve as the primary point of contact for entities interacting with the Commission, unless that rote has been delegated to another Officer or member of a Standing Committee. (3) Duties of the Vice -Chair — the Vice -Chair of the Commission shall: (a) perform the duties of the Chair of the Commission in the event of the Chair's absence at any scheduled meeting or hearing; (b) assist the Chair in the performance of any of the Chair's duties that the Chair may delegate to the Vice -Chair; and (c) serve as a liaison between the Commission and other appropriate entities. (4) Duties of the Secretary - the Secretary of the Commission shall: (a) perform the duties of the Chair of the Commission in the event both the Chair and Vice -Chair are absent at any scheduled meeting or hearing; (b) keep, or supervise the keeping, of the minutes or transcripts of all scheduled meetings and hearings of tie Commission, including the recording of all votes of the Commission members; 2 (c) certify all reports, requests and other formal actions issued or taken by the Commission. (5) Standing Committees - The Commission shall have three Standing Committees, including an Audit Committee, a Public Affairs Committee, and an Administrative Affairs Committee, to assist the Commission in carrying out its assigned duties in an expeditious and efficient manner. Each Committee shall have a minimum of three Commission members and a maximum of six Commission members. Upon the first meeting of each Committee and every January of each odd calendar year thereafter, each Committee shall elect a Chair for purposes of conducting any meetings of the Committee. The Chair shall be a member other than the Chair, Vice -Chair or Secretary of the Commission. (6) Duties of Audit Committee - The Audit Committee shall: (a) develop and make recommendations to the full Commission regarding the retention and supervision of any consulting firm or other provider of professional services required to facilitate the work of that Committee; (b) develop and make recommendations to the full Commission regarding the content of discovery, information requests, or other recommended areas of investigation and inquiry that the Audit Committee determines should be pursued by the Commission or its agents in connection with a Proposed Rate Change; and (c) coordinate with appropriate entities and the Commission the implementation of any other measure reasonably required to complete a timely anti thorough review of any Proposed Rate Change. (7) Duties of Public Affairs Committee - The Public Affairs Committee shall: (a) develop and make recommendations to the full Commission regarding the publication, timing, format and location of the public hearing mandated by Section 7.280 of the Charter (Plan) and any other public hearings scheduled by the Commission; (b) develop and make recommendations to the full Commission regarding measures for informing the general public of the purpose, operations and work product of the Commission and for encouraging public awareness of, and participation in, the process for reviewing Proposed Rate Changes; (c) coordinate with appropriate entities and the Commission the implementation of any other measure reasonably required to educate consumers of the District's Services regarding Rate Change review process and the role they can play in that process; and (d) develop and make recommendations to the full Commission regarding the retention and supervision of any consulting firm or other provider of professional 3 services required to facilitate the work of that Committee. (8) Duties of Administrative Affairs Committee - The Administrative Affairs Committee shall: (a) develop and make recommendations to the full Commission regarding the amount, content and basis for the Commission's annual budget request to the Board as provided by Section 7.260 of the Charter (Plan); (b) develop and make recommendations to the full Commission regarding any supplemental funding or resource requests that may be reasonably required outside of the annual budget request to discharge the duties of the Commission and any other required authorization that must be sought from the Board pursuant to law; (c) coordinate with appropriate entities and the Commission the implementation of any other administrative measure reasonably required to assist the Commission in the discharge of its duties; (d) assist the Commission in defining the matters before the Commission most in need of legal review based en the Charter (Plan), federal, state, and local laws, and the powers of the Commission; (e) make recommendations regarding the roles of various entities in the Rate Review Process; and (f) develop and make recommendations to the full Commission regarding the retention and supervision of any consulting firm or other provider of professional services required to facilitate the work of that Committee. (9) Preservation of Decision -Making Authority and Member Participation Rights - The assignment of specific tasks to a Standing Committee, interim committee or task force shall not be construed as limiting in any manner the Commission's ultimate authority to review and decide the business matters of the Commission or matters relating to Proposed Rate Changes or any Commission member's right to fully participate in the determination of such matters. Section 3 - Review of Proposed Rate Changes This section establishes and describes the procedures, testimony requirements, discovery practices and other procedural rules and regulations that will be followed in the submission of Rate Change Notices and the review of Proposed Rate Changes by the Commission. (1) Meetings — All meetings of the Commission, its Standing Committees and any interim committees or task forces that may be established by the Commission shall be 4 open to the public and conducted in accordance with the provisions of Chapter 610 of the Revised Statutes of Missouri (2000), as amended from time to time. A quorum to conduct a meeting of the Commission, a Standing Committee or an interim committee or task force shall exist when a majority of the members of such Commission, Committee or task force are present. (2) Filing of Rate Change Notices -- Submission of Direct Testimony — Within three (3) business days of the date it submits a Rate Change Notice, the District shall also submit to each member of the Commission any and all direct testimony, accounting schedules, economic and engineering analyses, legal memoranda, reports, memoranda, contracts for services and any other information or data ("Rate Setting Documents") that may be required to fully demonstrate and explain: (a) why the Proposed Rate Change set forth in the Rate Change Notice is necessary, fair and reasonable; (b) how the Proposed Rate Change will enhance the District's ability to provide adequate sewer and drainage systems and facilities, or related services; (c) whether and to what extent the Proposed Rate Change is necessary to enable the District to comply with any covenant or provision relating to any outstanding bonds or indebtedness of the District, together with a specific quantification of the amount of the Proposed Rate Change that is necessary for such purposes; (d) whether and to what extent the Proposed Rate Change is necessary to enable the District to comply with applicable federal or State laws or regulations as amended front time to time, together with a specific quantification of the amount of the Proposed Rate Change that is necessary for such purposes; (e) why the burden imposed on each class of ratepayers by the Proposed Rate Change is fair and reasonable, including whether and how cost of service considerations, cost causation principles, customer impact data, economic development considerations, environmental effects and other factors have or have not been factored into such determination; (f) the measures taken by the District to ensure that the cost of constructing aid maintaining the District's facilities and providing related services are being incurred in a reasonable and efficient manner, including copies of' all internal or external audit reports that address such matters; (g) the name, address and telephone number of each person submitting and sponsoring such direct testimony. (h) if the Rate Setting Documents ents are voluminous in nature, such Documents may be referenced and described in the District's direct testimony, provided that copies of such Documents shall be made available to any Commission member upon request. 5 (3) Scheduling — Within twenty (20) days of the date a Rate Change Notice is filed. the Commission shall meet to establish a procedural schedule for the submission of applications to intervene, the submission of rebuttal and surrebuttal testimony, the holding of technical conferences, a prehearing conference and a public hearing or hearings. The procedural schedule established by the Commission shall be sufficient to permit the Commission to tender its Rate Commission Report within one hundred and twenty (120) days after receipt of the Rate Change Notice. At such meeting, the Commission shall also select the consulting firm or other provider of professional services that will assist it in its review of the Proposed Rate Change, unless such arrangements have already been completed, and receive from the District an oral presentation and responses to any questions by the Commission regarding the Proposed Rate Change. (4) Applications to Intervene — On or before the date established by the Commission for such purpose, any person who would be affected by the Proposed Rate Change may submit an application to intervene in the proceedings established by the Commission to consider the Proposed Rate Change. Such application to intervene shall: (a) provide the name, address, and telephone number of the person seeking to intervene and any other person on whose behalf such intervention is sought; (b) describe the person's interest in the Proposed Rate Change; (c) specify whether the person intends to submit prepared testimony; and (d) indicate the person's agreement to respond to discovery submitted in connection with such person's testimony. Neither the District nor any person or persons engaged by the Commission to review the Proposed Rate Change shall be required to seek intervention in order to participate in the proceedings established to review the Proposed Rate Change. (5) Discovery Procedures — The person or persons engaged by the Commission to review the Proposed Rate Change shall e permitted to request additional information and answers from the District regarding any element of the Proposed Rate Change. The person or persons engaged by the Commission to review the Proposed Rate Change as well as the District may also request additional information and answers from any other person who has been permitted to intervene regarding any testimony submitted by such person. All such information and answers shall be provided within ten (10) days of the date the request for such information and answers is received. All other discovery of the District and of persons permitted to intervene shall be conducted in a series of three, on -the -record technical conferences held after each round of testimony during which time each individual person submitting testimony in the immediately preceding round of testimony shall answer questions propounded by the District, the person or persons 6 engaged by the Commission to evaluate the Proposed Rate Change and any person who has been permitted to intervene. No person shall be required to answer questions for a total period of more than three hours, with the time evenly divided among all participants desiring to ask questions. A transcript of such conferences shall be made and provided to the Commission and the participants at a price equal to the cost of producing such transcripts. Any person who fails to answer relevant and otherwise proper questions regarding their testimony, to make themselves available for questioning in the technical conferences, or to provide other information properly requested pursuant to these discovery procedures shall be subject to having their testimony disregarded by the Commission. (6) Submission of Rebuttal Testimony - any interested person who is permitted to intervene and any person or persons engaged by the Commission to review the Proposed Rate Change may submit prepared rebuttal testimony and schedules in accordance with the schedule and in the manner established by the Commission. Such testimony shall include all information, analysis and other supporting data explaining why the party rejects or disagrees with any element of the Proposed Rate Change and supporting and explaining any alternative to the Proposed Rate Change that the party wishes the Commission to consider. (7) Submission of Surrebuttal Testimony - any person who is permitted to intervene, the District and any person or persons engaged by the Commission to review the Proposed Rate Change may submit prepared surrebuttal testimony and schedules in accordance with the schedule and in the manner established by the Comm4ssion. Such surrebuttal testimony shall include all information, analysis and other supporting data explaining why the party rejects or disagrees with the rebuttal testimony submitted by another person. (8) Testimony and Discovery Responses to be Presented under Oath — Any testimony or discovery response provided by any person permitted to intervene, the District, or any person or persons engaged by the Con mission to review the Proposed Rate Change shall be accompanied by a notarized affidavit stating that the matters contained therein are true, correct and complete to the best of that person's knowledge and belief and all persons answering questions or presenting testimony during any technical conference shall do so under oath. (9) Prehearing Conference — Following the submission of surrebuttal testimony, a prehearing conference shall be scheduled for the purpose of identifying any issues raised by the prepared testimony previously submitted in connection with the Proposed Rate Change. All persons submitting testimony may participate in the prehearing conference. Within five (5) business days of the conclusion of the prehearing conference, the participants shall submit to the Commission a prehearing conference report describing the issues raised by the prepared testimony, together with a brief description of each participant's position, if an',', on each issue and the r2tionale therefor. In the event, the participants are able to resolve any issue or issues raised in the prepared testimony, they shall also include as part of the prehearing conference 7 report a joint recommendation describing each such issue, their recommended resolution of the issue, and the rationale therefore. (10) Public Hearing - At a time or times designated by the Commission on -the -record public hearings shall be held. The Commission may designate for which purposes a particular public hearing is scheduled. At least one public hearing shall be held after the prehearing conference, the purpose of which shall be to: (a) permit ratepayers and taxpayers to testify regarding the Proposed Rate Change; (b) permit management of the District and/or Board to testify regarding the Proposed Rate Change; (e) receive into evidence any prepared testimony previously submitted to the Commission subject to any valid objections, together with the discovery responses and transcripts of the technical conferences; (d) permit the Commission members or those designated by the Commission to ask questions regarding any issue addressed by the prepared testimony or any other element of the Proposed Rate Change; (e) permit closing statements by the District, the person or persons engaged by the Commission to review the Proposed Rate Change and any person who has been permitted to intervene. (11) Preparation and Approval of Rate Commission Report — Upon completion of the final Public Hearing, the Commission shall, at its next regularly scheduled meeting discuss the issues presented for the Commission's resolution and, based on all of the information received into evidence and all of the relevant criteria governing its rate determinations, vote on the amount of the Proposed Rate Change that should be approved and how the Proposed Rate Change should be allocated to the District's customer classes. A Report reflecting the vote of a majority of the Commission members on each of these matters together with findings sufficient to explain why the Commission's decisions are consistent with the criteria governing rates as set forth in Section 7.270 of the Charter (Plan) shall be prepared and issued with the assistance of' the person or persons engaged by time Commission to review the Proposed Rate Change. Such person or person shall also assist in the preparation of any minority report. (12) Amendments - These rules may be amended from time to time by a vote of two thirds of the members of Commission at the next meeting following the meeting at which such amendment or amendments were submitted to the Commission. 8 Section 4 — General Provisions regarding Meetings This section establishes and describes the requirements relating to general meetings of the Commission, including when meetings may be closed and the date, times, and notice of meetings. (1) Open Meeting Policy — All meetings of the Commission and meetings of Commission Committees or any Commission task force, whether corporeal or by means of communication equipment, shall be open to the public, except closed sessions as authorized by law. All meetings shall be held at a place and time reasonably convenient and of sufficient size to accommodate the anticipated members of the public. In addition, reasonable efforts shall be made to make the meeting accessible to individuals with disabilities. (2) Closed Meetings - The Commission reserves the right to sit in closed meetings on matters which are authorized by Section 610.021, RSMo. The Commission may hold a meeting closed to the public, or close a portion of the meeting to the public, upon a majority vote of the members present, taken at a meeting open to the public for which notice has been given or as stated in the public notice. The vote of each Commission member on the question of holding a closed meeting and a reference to the specific exception which authorizes the closing of the meeting to the public shall be recorded and entered into the minutes of the meeting. Dates, Times and Notice — The Commission will conduct monthly meetings at dates and times determined by the Commission. Special meetings of the Commission may be called at any time by the Chair. Public notice of the time, date, place, and a tentative agenda advising the public of the matters to be considered for each meeting will be posted as provided in Section 610.020, RSMo. (4) Participation by Telephone — Any member or members of the Commission may participate in a meeting of the Commission or any Committee of the Commission by conference telephone or similar communication equipment by means of which all persons participating in the meeting can hear each other. Participation in such a meeting shall constitute attendance and presence in person at the meeting of the members or members so participating. (3) (5) Quorum — A quorum for a meeting of the Commission, a Committee, or task force shall exist when a majority of the members of such Commission, Committee, or task force are present. 9 (6) Meeting Conduct — Unless otherwise provided by law, the Charter, or the Operational Rules, meetings of the Commission shall be conducted in accordance with the current edition of Robert's Rules of Order. Adopted this 16th day of August, 2001. Amended this 21st day of March, 2002. 10 APPENDIX B PROCEDURAL SCHEDULE 10 PROCEDURAL SCHEDULE OF THE ' ATE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT FOR CONSIDERATION OF A WASTEWATER RATE CHANGE NOTICE Pursuant to § 7.280(e) of the Charter Plan ("Plan") of the Metropolitan St. Louis Sewer District ("District") approved by the voters of St. Louis and St. Louis County at a special election on February 9, 1954, as amended at a general election on November 7, 2000; § 3(3) of the Operational Rules, Regulations, and Procedures (the "Operational Rules") adopted by the Rate Commission of the District on August 16, 2001, as amended April 10, 2002; and a Resolution of the Rate Commission adopted on June 3, 2002, the following Procedural Schedule shall apply during the consideration of the Wastewater Rate Change Notice. Section 1. Rate Setting Documents. (a) Pursuant to § 3(2) of the Operational Rules, the Rate Commission requests that the District deliver to each member of the Rate Commission, R.W. Beck (the "Consultant"), and Lashly & Baer, P.C. ("Legal Counsel") the direct testimony, accounting schedules, economic and engineering analyses, legal memoranda, reports, memoranda, contracts for services and any other information or data ("Rate Setting Documents") that may be required to fully demonstrate and explain: (i) why the Proposed Rate Change set forth in the Rate Change Notice is necessary, fair and reasonable; (ii) how the Proposed Rate Change will enhance the District's ability to provide adequate sewer and drainage systems and facilities, or related services; (iii) whether and to what extent the Proposed Rate Change is necessary to enable the District to comply with any covenant or provision relating to any outstanding bonds or indebtedness of the District, together with a specific quantification of the amount of the Proposed Rate Change that is necessary for such purposes; (iv) whether and to what extent the Proposed Rate Change is necessary to enable the District to comply with applicable Federal or State laws or regulations as amended from time to time, together with a specific quantification of the amount of the Proposed Rate Change that is necessary for such purposes; (v) why the burden imposed on each class of ratepayers by the Proposed Rate Change is fair and reasonable, including whether and how cost of service considerations, cost causation principles, customer impact data, economic development considerations, environmental effects and other factors have or have not been factored into such determination; (vi) the measures taken by the District to ensure that the cost of constructing and maintaining the District's facilities and providing related services are being incurred in a reasonable and efficient manner, including copies of all internal or external audit reports that address such matters; and (vii) the name, address and telephone number of each person submitting and sponsoring such direct testimony. (b) If the Rate Setting Documents are voluminous in nature, such documents may be referenced and described in the District's direct testimony, provided that copies of such Documents shall be made available to any Rate Commission member upon request. Section 2. Applications to Intervene. (a) Pursuant to § 3(4) of the Operational Rules, any person who would be affected by the Proposed Rate Change may, on or before June 24, 2002, submit an application to intervene in the proceedings established by the Rate Commission to consider the Proposed Rate Change. Such application to intervene shall be filed at the principal office of the Rate Commission with copies to the District, the Consultant, and Legal Counsel, and shall: (i) provide the name, address, and telephone number of the person seeking to intervene and any other person on whose behalf such intervention is sought; (ii) describe the person's interest in the Proposed Rate Change; (iii) specify whether the person intends to submit prepared testimony; and (iv) indicate the person's agreement to respond to discovery submitted in connection with such person's testimony. (b) Neither the District, the Consultant, Legal Counsel, nor any other person engaged by the Rate Commission to review the Proposed Rate Change shall be required to seek intervention in order to participate in the proceedings established to review the Proposed Rate Change. Section 3. District Testimony and Rate Setting Document Technical Conference. Pursuant to § 3(5) of the Operational Rules, a Technical Conference shall be held on the record at 10:00 A.M. on June 25, 2002, at the Clayton Community Center, 50 Gay Drive, Clayton, Missouri 63105, regarding the District Testimony and 2 the Rate Setting Documents at which Management of the District shall answer questions propounded by the Consultant, Legal Counsel and any person permitted to intervene. Section 4. Submission of Rebuttal Testimony. (a) Pursuant to § 3(6) of the Operational Rules, any interested person who is permitted to intervene, Legal Counsel, and the Consultant may on or before July 10, 2002, submit prepared rebuttal testimony and schedules. Such testimony shall be filed at the principal office of the Rate Commission with copies to the District, the Consultant, and Legal Counsel. (b) Such testimony shall include all information, analysis and other supporting data explaining why the party rejects or disagrees with any element of the Proposed Rate Change and supporting and explaining any alternative to the Proposed Rate Change that the party wishes the Rate Commission to consider. Section 5. Rebuttal Testimony Technical Conference. Pursuant to § 3(5) of the Operational Rules, a Technical Conference shall be held on the record at 10:00 A.M. on July 15, 2002, at the Clayton Community Center, 50 Gay Drive, Clayton, Missouri 63105, regarding the Rebuttal Testimony at which each person submitting rebuttal testimony shall answer questions propounded by the District, the Consultant, Legal Counsel, and any person permitted to intervene. Section 6. Submission of Surrebuttal Testimony. (a) Pursuant to § 3(7) of the Operational Rules, any person who is permitted to intervene, the District, Legal Counsel, and Consultant, may on or before July 30, 2002, submit prepared surrebuttal testimony and schedules. Such testimony shall be filed at the principal office of the Rate Commission with copies to the District, the Consultant, and Legal Counsel. (b) Such surrebuttal testimony shall include all information, analysis and other supporting data explaining why the party rejects or disagrees with the Rebuttal Testimony submitted by another person. Section 7. Surrebuttal Testimony Technical Conference. Pursuant to § 3(5) of the Operational Rules, a Technical Conference shall be held on the record at 10:00 A.M. on August 5, 2002, at the Schlafly Branch of the St. Louis Public Library, 225 North Euclid, St. Louis, Missouri 63108, regarding the Surrebuttal Testimony at which each person submitting surrebuttal testimony shall answer questions propounded by the District, the Consultant, Legal Counsel, and any person permitted to intervene. 3 Section 8. Prehearing Conference. (a) Pursuant to § 3(9) of the Operational Rules, a prehearing conference for the purpose of identifying any issues raised by the prepared testimony previously submitted in connection with the Proposed Rate Change shall be conducted on the record at 10:00 A.M. on August 19, 2002, at the Missouri History Museum, Southwestern Bell Room, 5700 Lindell, St. Louis, Missouri 63112. All persons submitting testimony may participate in the Prehearing Conference. (b) (i) Each participant in the Prehearing Conference shall submit on or before August 23, 2002, a prehearing conference report ("Prehearing Conference Report") describing the issues raised by the prepared testimony, together with a brief description of such participant's position, if any, on each issue and the rationale therefor. (ii) In the event participants are able to resolve or settle any issue or issues raised in the prepared testimony, such participants shall also include as part of the Prehearing Conference Report a joint recommendation describing each such issue, the recommended resolution of the issue, and the rationale therefor. Section 9. Public Hearing. Pursuant to § 7.280(d) of the Plan and § 3(6) of the Operational Rules, an on -the -record public hearing shall be conducted by the Rate Commission. The Public Hearing shall: (a) permit ratepayers and taxpayers to testify regarding the Proposed Rate Change; (b) permit management of the District and the Board to testify regarding the Proposed Rate Change; (c) receive into evidence any prepared testimony previously submitted to the Rate Commission subject to any valid objections, together with the discovery responses and transcripts of the Technical Conferences; (d) permit the Rate Commission members and those designated by the Commission to ask questions regarding any issue addressed by the prepared testimony or any other element of the Proposed Rate Change; and (e) permit closing statements by the District, the Consultant and any person who has been permitted to intervene. The Public Hearing shall be conducted in several sessions as follows: August 29, 2002, at 7:00 P.M. at New Northside Baptist Church, 8645 Goodfellow, St. Louis, Missouri 63147; 4 September 3, 2002, at 10:00 A.M. at the Missouri History Museum, Southwestern Bell Room, 5700 Lindell, St. Louis, Missouri 63112; September 3, 2002, at 5:00 P.M. at the Florissant Valley Branch of the St. Louis County Library, 195 New Florissant Road South, Florissant, Missouri 63031; September 4, 2002, at 10:00 A.M. at the Missouri History Museum, Southwestern Bell Room, 5700 Lindell, St. Louis, Missouri 63112; September 4, 2002, at 5:00 P.M. at the Thornhill Branch of the St. Louis County Library, 12863 Willowyck Drive, St. Louis, Missouri 63146; September 5, 2002, at 5:00 P.M. at the Cliff Cave Branch of the St. Louis County Library, 5430 Telegraph, St. Louis, Missouri 63129; September 9, 2002, at 5:00 P.M. at the Kirkwood Community Center, 111 S. Geyer, Kirkwood, Missouri 63122; and September 10, 2002, at 5:00 P.M. at the Greensfelder Recreation Complex at Queeny Park, 550 Weidman Road, Ballwin, Missouri 63011. Section 10. Documents. (a) Pleadings, briefs, prepared testimony, exhibits, schedules and similar papers ("Documents") shall in every instance display on the cover or first page the reference: "Wastewater Rate Change Notice." In the event the title of the Document contains more than one proper name as a party, it shall be sufficient in subsequent documents filed to show only the first of these names as it appears in the first document filed, followed by an appropriate abbreviation (et al.) indicating the existence of other parties. (b) Documents shall be bound at the top or at an edge, shall be typewritten or printed upon white, eight and one-half by eleven -inch paper. Attachments shall be annexed and folded to eight and one-half by eleven -inch size whenever practicable. Printing on both sides of the page is encouraged. Lines shall be double-spaced, except that footnotes and quotations in excess of three lines may be single-spaced. Reproduction of any of these documents may be by any process provided all copies are clear and permanently legible. (c) Documents which are not in substantial compliance with this rule shall not be accepted for filing. The Secretary of the Rate Commission may return these documents with a concise explanation of the deficiencies and the reasons for not accepting them for filing. Tendered filings which have been rejected shall not be 5 entered on the Rate Commission's Record of Proceedings. (See Section 14.) The mere fact of filing shall not constitute a waiver of any noncompliance with these rules and the Rate Commission may require amendment of a document or entertain appropriate motions in connection with the document. Section 11. Filing of Documents. (a) All documents shall be filed with the Secretary of the Rate Commission at the principal office of the Rate Commission presently located at 2000 Hampton, St. Louis, Missouri 63139. All general inquiries to the Rate Commission, documents, and other communications shall be addressed to the Secretary of the Rate Commission. (b) Any person filing a document with the Secretary of the Rate Commission shall file one original and 20 copies of the document. (c) Each document must contain the legend "Wastewater Rate Change Proceeding" and may be accompanied by a cover letter which states the subject matter. This cover letter shall contain no matter for Rate Commission consideration. (d) The party filing a document shall serve each other party a copy of the Document and cover letter. Any party may contact the Secretary of the Rate Commission for the names and addresses of the parties. Section 12. Methods of Service. (a) Any person may serve a document on a represented party by: (i) delivering it to the party's attorney; (ii) leaving it at the office of the party's attorney with a secretary, clerk or attorney associated with or employed by the attorney served; (iii) mailing it to the last known address of the party's attorney; or (iv) facsimile transmission to the current facsimile machine of the party's attorney. (b) Any person may serve a document on an unrepresented party by: (i) delivering it to the party; or mailing it to the party's last known address. 6 (c) Completion of service. (i) Service by mail is complete upon mailing. (ii) Service by facsimile transmission is complete upon actual receipt. (iii) Service by electronic mail is complete upon actual receipt. (d) Unless otherwise provided by these rules, the party filing a Document shall serve every other party, the District, Legal Counsel and the Consultant, a copy of the Document and cover letter. (e) Every Document shall include a certificate of service. Such certificate of service shall be adequate proof of service. Section 13. Exhibits. (a) Exhibits shall be legible and, unless otherwise authorized by the Presiding Officer (see Section 19), shall be prepared on standard eight and one-half by eleven -inch paper. The sheets of each exhibit shall be numbered and rate comparisons and other figures shall be set forth in tabular form. (b) Exhibits shall be tendered to the reporter at the time of conference or hearing without being prenumbered, unless otherwise ordered by the Presiding Officer. (c) All exhibits shall be marked at the time of conference or hearing, using a single series of numbers, unless otherwise ordered by the Presiding Officer. (d) When exhibits are offered in evidence, the original and 20 copies shall be furnished to the reporter, and the party offering exhibits also shall be prepared to furnish a copy to each Rate Commission member, the District, Legal Counsel, and Consultant, unless the copies have previously been furnished or the Presiding Officer directs otherwise. (e) All late filed exhibits shall be submitted by simultaneously providing a copy to all parties, and by submitting an original and 20 copies to the Presiding Officer. Unless otherwise ordered, any objection to the admission of a late filed exhibit must be filed within 10 days of the date the exhibit was tendered. Section 14. Public Records. (a) In accordance with Section 3(i) of the Operational Rules, the Technical Conferences, the Prehearing Conference and the Public Hearings shall be open to the public and conducted in accordance with the provisions of Chapter 610 of the Revised Statutes of Missouri (2000), as amended from time to time. 7 (b) (i) In accordance with Section 3(i) of the Operational Rules, the record of all of the proceedings of the Rate Commission shall be available to the public in accordance with the provisions of Chapter 610 of the Revised Statutes of Missouri (2000), as amended from time to time. (ii) The Secretary of the Rate Commission is designated the custodian of Rate Commission Records for the purposes of requesting records from the Rate Commission. Section 15. Record of Proceedings. (a) The Secretary of the Rate Commission shall keep a full and true record of all the proceedings of the Rate Commission, of all Documents ordered filed by the Rate Commission, and of all resolutions adopted by the Rate Commission. These records shall be available for public inspection in the office of the Secretary of the Rate Commission, during reasonable business hours, Monday through Friday, except for legal holidays. The specific hours the records are available shall be posted at the principal office of the Rate Commission. (b) Copies of the Operational Rules and Procedural Schedule are available at no cost from the Secretary of the Rate Commission. (c) Copies of documents filed with the Rate Commission may be requested from the Secretary of the Rate Commission. Any such request shall be made in writing. Copies of documents furnished to public officers for use in their official capacity may be provided without charge. Copies shall be provided to all others as follows: (i) 1-10 copies, $0.10 per page; (ii) 11-199 copies, $0.04 per page; (iii) 200 or more copies, $0.02 per page; plus postage, if mailed. In addition, an additional service charge will be made for actual labor costs for locating and retrieving documents. (c) The date of filing shall be the date the document is stamped filed by the Secretary of the Rate Commission. Section 16. Prepared Testimony. (a) Prepared testimony shall be typed or printed in black type on white paper eight and one-half by eleven -inch; it shall be double-spaced and pages numbered consecutively at the bottom right-hand corner or bottom center beginning with the first 8 page as page 1; it shall be filed unfolded and stapled together at the top left-hand margin or bound at an edge in booklet form; and it shall be filed in sufficient number of copies as required by order of the Presiding Officer, observing the following margins: left-hand margin, one inch; top margin, one inch; right-hand margin, one inch; and bottom margin, one inch. Printing on both sides of the paper is encouraged. (b) Schedules shall bear the word "schedule" and the number of the schedule shall be typed in the lower right-hand margin of the first page of the schedule. (c) All prepared testimony and other exhibits and schedules shall contain the following information in the following format on the upper right-hand corner of a cover sheet: Exhibit No.: (to be marked by the hearing reporter) Issue: (Wastewater Rate Change Proceeding) Witness: (Full name of witness) Type of Exhibit: (Specify whether direct, rebuttal, surrebuttal or other type of exhibit) Sponsoring Party: (Full name or name of first party (et al.)) Date Testimony Prepared: ( , 2002) (d) The prepared testimony of each witness shall be filed separately and shall be accompanied by an affidavit providing the witness' oath. Prepared testimony shall be filed on line -numbered pages. Testimony which addresses more than one issue shall contain a table of contents. (e) For the purpose of filing prepared testimony, direct, rebuttal, and surrebuttal testimony are defined as follows: (i) Direct testimony shall include all testimony and exhibits asserting and explaining the Rate Setting Documents; (ii) Rebuttal testimony shall include all testimony which explains why a party rejects, disagrees or proposes an alternative to the Rate Setting Documents; and (iii) Surrebuttal testimony shall be limited to material which is responsive to matters raised in another party's rebuttal testimony. (f) No party shall be permitted to supplement prefiled prepared direct, rebuttal or surrebuttal testimony unless authorized by the Presiding Officer. (g) A party shall not be precluded from having a reasonable opportunity to address matters not previously disclosed which arise at the hearing. This provision does not forbid the filing of supplemental direct testimony for the purpose of replacing projected financial information with actual results. 9 (h) Parties may file a stipulation as to the facts, in which event the same shall be numbered as joint exhibit. This stipulation shall not preclude the offering of additional evidence by any party unless otherwise agreed in the stipulation. Section 17. Discovery Procedures. (a) (i) Legal Counsel and the Consultant shall be permitted to request additional information and answers from the District regarding any element of the Proposed Rate Change. (ii) Legal Counsel and the Consultant, as well as the District may also request additional information and answers from any other person who has been permitted to intervene regarding any testimony submitted by such person. (b) All such information and answers shall be provided within 10 days of the date the request for such information and answers is received. (c) All other discovery of the District and of persons permitted to intervene shall be conducted in a series of the three on -the -record Technical Conferences held after each round of testimony during which time each individual person submitting testimony in the immediately preceding round of testimony shall answer questions propounded by the District, Legal Counsel and the Consultant, and any person who has been permitted to intervene. (d) No person shall be required to answer questions for a total period of more than three hours, with the time evenly divided among all participants desiring to ask questions. (e) A transcript of such Technical Conferences and the Preliminary Hearing shall be made and provided to the Rate Commission and made available to the participants at a price equal to the cost of producing such transcripts. (f) As provided in § 3(5) of the Operational Rules, any person who fails to answer relevant and otherwise proper questions regarding such person's testimony, to make such person available for questioning in the Technical Conferences, or to provide other information properly requested pursuant to the Operational Rules and this Procedure Schedule shall be subject to having such person's testimony disregarded by the Rate Commission. Section 18. Testimony and Discovery Responses to be Presented Under Oath. (a) Any written testimony or discovery response provided by any person permitted to intervene, the District, or any person engaged by the Rate Commission to review the Proposed Rate Change shall be accompanied by a notarized affidavit 10 stating that the matters contained therein are true, correct and complete to the best of such person's knowledge and belief. (b) All persons answering questions or presenting testimony during any Technical Conference shall do so under oath. Section 19. Conduct of Meetings. (a) The Chair, or the member of the Rate Commission designated by the Chair, shall serve as presiding officer (the "Presiding Officer") at each of the Technical Conferences, Preliminary Hearing, and Public Hearings. (b) The Presiding Officer shall rule on the admissibility of all evidence. Evidence to which an objection is sustained, at the request of the party seeking to introduce the same or at the instance of the Presiding Officer, nevertheless may be heard and preserved in the record, together with any cross-examination with respect to the evidence and any rebuttal of the evidence, unless it is wholly irrelevant, repetitious, privileged or unduly long. When objections are made to the admission or exclusion of evidence, the grounds relied upon shall be stated briefly. (c) The Presiding Officer may limit the number of witnesses, exhibits, or the time for testimony, and make other procedural determinations, as necessary. (d) The Presiding Officer may require the production of further evidence upon any issue. The Presiding Officer may authorize the filing of specific evidence as a part of the record within a fixed time after submission, reserving exhibit numbers, and setting other conditions for such production. (e) Evidence for which a claim of confidentiality is made shall be filed in conformance with a protective order approved by the Presiding Officer. Parties shall obtain a protective order prior to filing of documentary evidence, except as permitted otherwise by the Presiding Officer. (f) All testimony shall be taken under oath. 11 THE :.TE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT Index No. APPLICATIONS TO INTERVENE 1 Application to Intervene of Associated General Contractors of St. Louis and SITE Improvement Association 2 Application to Intervene of Missouri Industrial Energy Consumers 3 Application to Intervene of Missouri Energy Group 4 Application to Intervene of The Sierra Club 5 Application to Intervene of Carleton B. Fox Co. 11 THE TE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT Index No. TRANSCRIPT OF PROCEEDING 1 Transcript of Technical Conference of June 25, 2002 2 Transcript of Technical Conference of July 15, 2002 3 Transcript of Technical Conference of July 16, 2002 4 Transcript of Technical Conference of August 5, 2002 5 Transcript of Prehearing Conference of August 19, 2002 6 Transcript of Public Hearing of August 29, 2002 7 Transcript of Public Hearing of September 3, 2002 (at Missouri History Museum) 8 Transcript of Public Hearing of September 3, 2002 (at Florissant Valley Branch of St. Louis County Library) 9 Transcript of Public Hearing of September 4, 2002 (at Missouri History Museum) 10 Transcript of Public Hearing of September 4, 2002 (at Thornhill Branch of St. Louis County Library) 11 Transcript of Public Hearing of September 5, 2002 12 Transcript of Public Hearing of September 9, 2002 13 Transcript of Public Hearing of September 10, 2002 12 THE TE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT Index No. EXHIBITS 1 Wastewater Rate Increase Proposal dated 5/16/02 2 Report on Revenue Requirements, Costs of Service, and Rates for Wastewater Service prepared by Black & Veatch dated May 2002 3 4 5 6 PowerPoint Presentation entitled "Wastewater Rate Increase Proposal" presented to the Rate Commission by Jan Zimmerman of MSD Memorandum entitled "Formal Submission of Wastewater Rate Increase Proposal" from Willie Horton of MSD dated May 16, 2002 MSD's Wastewater Rate Study Calculations MSD Wastewater Rate Study Calculations Alternative 1 — You -Go 7 MSD Wastewater Rate Study Calculations Alternative 2 — As -You -Go 8 Basic Data List for Wastewater Rate Study Calculations 9 Cell Comments Associated with the Wastewater Rate Study Calculations 10 Direct Testimony of Charles M. Etwert of MSD 100% Pay -As - Capped Pay - List of District Exhibits presented to the Wastewater Rate Change Proceeding at June 25, 2002 Technical Conference (Exhibit 10(b)) Table Summarizing CIRP proposed in MSD's Rate Study (Exhibit 10(c) 11 Direct Testimony of Randy E. Hayman of MSD 12 Direct Testimony of Don P. Moschenross of MSD 13 Direct Testimony of Janice M. Zimmerman of MSD 14 Direct Testimony of Karl J. Tyminski of MSD 15 Direct Testimony of Robert G. Butchko of MSD 13 FY 2003, 2004, 2005, 2006, 2007 Project Delays (Exhibit 15(a)) 16 Direct Testimony of Robert Benson of Black & Veatch Black & Veatch Management Consultant Division Project Experience for Water and Wastewater Chart (Exhibit 16(a)) 17 Direct Testimony of Keith D. Barber of Black & Veatch 18 Testimony of Robert Butchko of MSD in Response to R.W. Beck's First Discovery Request 19 Testimony of Jeff Theerman of MSD in Response to R.W. Beck's First Discovery Request 20 21 22 23 24 25 26 27 28 Testimony of Randy Hayman of MSD in Response to R.W. Beck's First Discovery Request Testimony of Janice Zimmerman of MSD in Response to R.W. Beck's First Discovery Request Testimony of Bernie Rains of MSD in Response to R.W. Beck's First Discovery Request Testimony of Karl Tyminski of MSD in Response to R.W. Beck's First Discovery Request Testimony of Keith D. Barber of Black & Veatch in Response to R.W Beck's First Discovery Request Testimony of Robert Butchko of MSD in Response to Mo. Industrial Energy Consumer's Discovery Request Testimony of Jeff Theerman of MSD in Response to Mo. Industrial Energy Consumer's Discovery Request Testimony of Don Moschenross of MSD in Response to Mo. Industrial Energy Consumer's Discovery Request Testimony of Janice Zimmerman of MSD in Response to Mo. Industrial Energy Consumer's Discovery Request 14 29 Testimony of Keith Barber of Black & Veatch in Response to Mo. Industrial Energy Consumer's Discovery Request 30 31 (Exhibit 30 withdrawn) Testimony of Janice Zimmerman of MSD in Response to Missouri Energy Group's Discovery Request 32 Testimony of Robert Butchko of MSD in Response to Missouri Energy Group's Discovery Request 33 Testimony of Keith Barber of Black & Veatch in Response to Missouri Energy Group's Discovery Request Table 26 — Comparison of Existing and Indicated User Charges for Alternative 2 (Exhibit 33(a)) 34 Testimony of Keith Barber of Black & Veatch in Response to Missouri Industrial Energy Consumers' Second Discovery Request Table 8 — Capital Improvement Program Financing (Exhibit 34(a)) Table 10 — Comparison of Projected Revenue Under Existing Rates with Projected Revenue Requirements (Exhibit 34(b)) Table 11 — Cost of Service Test Year 2004 (Exhibit 34(c)) Table 12 — Allocation of Estimated Plant Investment and Other Capital Costs to Functional Cost Components Test Year 2004 (Exhibit 34(d)) Table 13 — Percentage of Operation and Maintenance Expense by Functional Cost Components Test Year 2004 (Exhibit 34(e)) Table 14 — Allocation of Operation and Maintenance Expense to Functional Cost Components Test Year 2004 (Exhibit 34(f)) Table 15 — Units of Service Test Year 2004 (Exhibit 34(g)) Table 16 — Allocation of Cost of Service to Customer Classes Test Year 2004 (Exhibit 34(h)) Table 17 — Comparison of Allocated Cost of Service With Revenue Under Existing Rates Test Year 2004 (Exhibit 34(i)) 15 Table 18 — Proposed Rates (Rates effective 7/1/03) (Exhibit 34(j)) Table 23 — Typical Bill Comparison Fiscal Year 2004 (Rates Effective 7/1/03) (Exhibit 34(k)) Table 26a — Comparison of Existing and Indicated User Charges For Alternative 2a-WBU to Capacity and I/1=- 2/3 Customer (Exhibit 34(1)) 35 Transcript Corrections submitted by Randy E. Hayman of MSD re Transcript of the 6/25/02 Technical Conference 36 Rebuttal Testimony of Donald E. Johnstone submitted on behalf of Associated General Contractors of St. Louis and SITE Improvement Association 37 Rebuttal Testimony of Ernest Harwig submitted on behalf of Missouri Industrial Energy Consumers 38 Rebuttal Testimony of Billie S. LaConte submitted on behalf of Missouri Energy Group 39 40 List of Exhibits (revised 7/11/02) Testimony of Robert Butchko of MSD in Response to Sierra Club's Discovery Request 41 Testimony of Randy Hayman of MSD in Response to Sierra Club's Discovery Request 42 Testimony of Janice Zimmerman of MSD in Response to Sierra Club's Discovery Request 43 Testimony of Keith D. Barber of Black & Veatch in Response to Sierra Club's Discovery Request 44 List of Exhibit (revised 7/20/02) 45 Current District Discharge Permits requested by L&B at 7/15-16/02 Technical Conference 46 MSD Overhead Cost Study 2000-01 requested by L&B at 7/15-16/02 Technical Conference 16 47 Baumgartner Agreement requested by L&B at 7/15-16/02 Technical Conference 48 MSD 1993 Rate Study requested by L&B at 7/15-16/02 Technical Conference 49 Testimony of Robert Butchko of MSD submitted in response to Rate Commissioner V. Harris' 7/16/02 request for material 50 Testimony of Janice Zimmerman of MSD in Response to Mo. Energy Group's Second Discovery Request 51 "Financing and Charges for Wastewater Systems" Manual provided by MSD in Response to Mo. Energy Group's Second Discovery Request 52 "Report on Engineering Service Fees and System Development Fees" as referenced in MSD's Response to Sierra Club's Discovery Request 53 "Report on Sewer System Connection Fee Review" as referenced in MSD's response to Sierra Club's Discovery Request 54 Memorandum of Understanding between MSD and Wastewater Workers Local 50 and State, County and Municipal Workers Local 410 (Labor Agreements) requested by L&B at 7/15-16/02 Technical Conference (Exhibit 54(a)) Memorandum of Understanding between MSD and Operating Engineers Local 513, Bricklayers Local 1 and Electricians Local 1 (Labor Agreements) requested by L&B at 7/15-16/02 Technical Conference (Exhibit 54(b)) 55 Pending SSO/CSO Rules requested by L&B at 7/15-16/02 Technical Conference 56 Lashly & Baer, P.C. Preliminary Memorandum of Law 57 Testimony of Ted Szymankiewicz of R.W. Beck Professional Resume of Thaddeus Szymankiewicz (Exhibit 57(a)) Rate Commission's Alternative Capital Improvement & Replacement Programs and Financing Thereof (Exhibit 57(b)) 17 Rate Commission's Adjusted Cost of Service Test Year 2004 (Exhibit 57(c)) Rate Commission's Comparison of Projected Revenue Under Existing Rates with (Adjusted) Projected Revenue Requirements (Exhibit 57(d)) Selected Commission Interrogatories and District Responses (Exhibit 57(e)) Selected Excerpts from Industry Manuals, Handbooks and Publications Pertaining to Infiltration and Inflow (I&I) Causation (Exhibit 57(f)) Correspondence dated July 23, 2002 from BFA Environmental Consultants to R.W. Beck, Inc. (Exhibit 57(g)) Utility Regulatory Policy in the United States and Canada Compilation 1995-1996 of the National Association of Regulatory Utility Commissioners (Exhibit 57(h)) Sewer Rate Studies performed by Ted Szymankiewicz or under his direction, including City of Tallahassee, Florida, Vero Beach, Florida, and Fort Pierce Utilities Authority (Exhibit 57(i)) 58 MSD's Surrebuttal to Associated General Contractors of St. Louis and SITE Improvement Association 59 MSD's Surrebuttal to Missouri Energy Group 60 MSD's Surrebuttal to Missouri Industrial Energy Consumers 61 Associated General Contractors of St. Louis and SITE Improvement Association's Surrebuttal Testimony of Donald Johnstone 62 Missouri Industrial Energy Consumers' Surrebuttal Testimony of Ernest Harwig 63 Missouri Energy Group's Surrebuttal Testimony of Billie S. LaConte 64 Second Surrebuttal Testimony of Donald E. Johnstone filed on behalf of Intervenors Associated General Contractors of St. Louis and SITE Improvement Association Associated General Contractors of St. Louis Wastewater Rate Change Notice Certificate of Service (Exhibit 64(a)) 18 65 66 67 68 69 Additional Surrebuttal Testimony of Ernest Harwig filed on behalf of Intervenor Missouri Industrial Energy Consumers Second Surrebuttal Testimony of Billie S. LaConte filed on behalf of Intervenor Missouri Energy Group MSD's Surrebuttal Testimony of Karl Tyminski to R.W. Beck's Rebuttal Testimony MSD's Surrebuttal Testimony of Keith Barber of Black & Veatch to R.W. Beck's Rebuttal Testimony Testimony of Charles M. Etwert of MSD in Response to R.W. Beck's Second Discovery Request Journal of Meeting of MSD Board of Trustees 6/16/93 (Exhibit 69(a)) Ordinance No. 9029 (Exhibit 69(b)) Ordinance No. 10561 (Exhibit 69(c)) Executive Summary of MSD 1999-2000 Annual Budget (Exhibit 69(d)) Ordinance No. 10993 (Exhibit 69(e)) Ordinance No. 10177 (Exhibit 69(f)) Letters of Appointment of Commission Representative Organizations (Exhibit 69(g)) 70 Testimony of Robert Butchko of MSD in Response to R.W. Beck's Second Discovery Request Settlement Agreement between the Mo. Attorney General and MSD dated 7/29/02 (Exhibit 70(a)) Amended Consent Decree between State of Missouri and MSD dated 1/19/89 (Exhibit 70(b)) Letter from Denise Roberts of U.S. EPA to Randy Hayman of MSD re Logistics for PRP Meeting on 2/27/01 (Exhibit 70(c)) 19 Letter from Paul Stokstad of U.S. Department of Justice to Randy Hayman of MSD dated 8/7/01 re Tolling for the Great Lakes Container Corp. site (Exhibit 70(d)) MSD Proposed Capital Improvement and Replacement Projects FY 2004- 2006 (Exhibit 70(e)) Narrative of Sanitary Sewer Overflows (SSO) and Combined Sewer Overflows (CSO) (Exhibit 70(f)) CSO Regulatory and Development Timeline (Exhibit 70(g)) MSD Informational Video re Sanitary Sewer Overflows (SSO) and Combined Sewer Overflows (CSO) (Exhibit 70(h)) (available in the office of the General Counsel of the Metropolitan St. Louis Sewer District) 71 Testimony of Keith Barber of Black & Veatch in Response to R.W. Beck's Second Discovery Request Table 8 — Capital Improvement Program Financing (Exhibit 71(a)) Table 10 — Comparison of Projected Revenue Under Existing Rates with Projected Revenue Requirements (Exhibit 71(b)) Table 11 — Cost of Service Test Year 2004 (Exhibit 71(c)) Table 12 — Allocation of Estimated Plant Investment and Other Capital Costs to Functional Cost Components Test Year 2004 (Exhibit 71(d)) Table 13 — Percentage of Operation and Maintenance Expense by Functional Cost Components Test Year 2004 (Exhibit 71(e)) Table 14 — Allocation of Operation and Maintenance Expense to Functional Cost Components Test Year 2004 (Exhibit 71(f)) Table 15 — Units of Service Test Year 2004 (Exhibit 71(g)) Table 16 — Allocation of Cost of Service to Customer Classes Test Year 2004 (Exhibit 71(h)) Table 17 — Comparison of Allocated Cost of Service With Revenue Under Existing Rates Test Year 2004 (Exhibit 71(i)) 20 Table 18 — Proposed R.W. Beck Rates (Rates effective 7/1/03) (Exhibit 71(j)) Table 19 — Comparison of Existing and Proposed R.W. Beck Rates (Exhibit 71(k)) Table 1 9a — Comparison of Existing and Indicated User Charges for R.W Beck Proposed Rates (Exhibit 71(I)) Table 20 — Proposed R.W. Beck Rates by Customer Class (Rates Effective 7/1/03) (Exhibit 71(m)) Table 22 — Comparison of Allocated Cost of Service with Revenue Under R.W. Beck's Proposed Rates Test Year 2004 (Exhibit 71(n)) Table 23 — Typical Bill Comparison Fiscal Year 2004 (Rates Effective 7/1/03) (Exhibit 71(o)) Table 25 — Capital Improvement and Replacement Program for Alternative 2 (Exhibit 71(p)) 72 Testimony of Randy Hayman of MSD in response to R.W. Beck's Third Discovery Request Attorney General Opinion No. 209 (Exhibit 72(a)) State Auditor's Cover Letter dated August 2, 2002 to MSD (Exhibit 72(b)) 73 MSD's Prehearing Conference Report USA Today article dated 8/20/02 entitled "Sewage Pouring into Lakes, Streams" (Exhibit 73(a)) 74 Intervenors Associated General Contractors of St. Louis and the SITE Improvement Association's Position Statement 75 Intervenor Missouri Energy Group's Prehearing Conference Report, List of Issues, and Statements of Position 76 Missouri Industrial Energy Consumers' Prehearing Conference Report 77 Lashly & Baer and R.W. Beck's Prehearing Conference Report 78 Revised Alternative Financial Analyses 21 Table 8 — Capital Improvement Program Financing (Exhibit 78(a)) Table 10 — Comparison of Projected Revenue Under Existing Rates with Projected Revenue Requirements (Exhibit 78(b)) Table 11 — Cost of Service Test Year 2004 (Exhibit 78(c)) Table 12 — Allocation of Estimated Plant Investment and Other Capital Costs to Functional Cost Components Test Year 2004 (Exhibit 78(d)) Table 13 — Percentage of Operation and Maintenance Expense by Functional Cost Components Test Year 2004 (Exhibit 78(e)) Table 14 — Allocation of Operation and Maintenance Expense to Functional Cost Components Test Year 2004 (Exhibit 78(f)) Table 15 — Units of Service Test Year 2004 (Exhibit 78(g)) Table 16 — Allocation of Cost of Service to Customer Classes Test Year 2004 (Exhibit 78(h)) Table 17 — Comparison of Allocated Cost of Service With Revenue Under Existing Rates Test Year 2004 (Exhibit 78(i)) Table 18 — Proposed R.W. Beck Rates (Rates effective 7/1/03) (Exhibit 78(j)) Table 19 — Comparison of Existing and Proposed R.W. Beck Rates (Exhibit 78(k)) Table 19a — Comparison of Existing and Indicated User Charges for R.W. Beck Proposed Rates (Exhibit 78(1)) Table 20 — Proposed R.W. Beck Rates by Customer Class (Rates Effective 7/1/03) (Exhibit 78(m)) Table 22 — Comparison of Allocated Cost of Service with Revenue Under R.W. Beck's Proposed Rates Test Year 2004 (Exhibit 78(n)) Table 23 — Typical Bill Comparison Fiscal Year 2004 (Rates Effective 7/1/03) (Exhibit 78(o)) 22 Table 25 — Capital Improvement and Replacement Program for Alternative 2 (Exhibit 78(p)) 79 Affidavit of Carol R. Teaney 80 Affidavit of John Friganza (Exhibit 80(a)); Affidavit of Leo H. Hamm (Exhibit 80(b)) 81 Missouri Revised Statutes, Section 644.011 (Exhibit 81(a)) Missouri Revised Statutes, Section 644.016 (Exhibit 81(b)) Missouri Revised Statutes, Section 644.076 (Exhibit 81(c)) Missouri Revised Statutes, Section 644.079 (Exhibit 81(d)) 82 Handbook Sewer System Infrastructure Analysis and Rehabilitation (U.S. Environmental Protection Agency October 1991) 83 Program Planning Project Progress Update, August 29, 2002 (Sverdrup/Kwame/Metcalf & Eddy Joint Venture) 23 2 3 4 5 6 7 8 9 THE RATE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT Index No. DISCOVERY REQUESTS AND RESPONSES R.W. Beck's First Discovery Request to MSD Summary of MSD's Response to R.W. Beck's First Discovery Request Documents provided by MSD in Response to R.W. Beck's First Discovery Request not previously marked as Exhibits Intervenor Missouri Industrial Energy Consumers' First Data Request to MSD Summary of MSD's Response to Missouri Industrial Energy Consumers' First Data Request Documents provided by MSD in Response to Missouri Industrial Energy Consumers' First Data Request not previously marked as Exhibits Intervenor Missouri Energy Group's First Information Request to MSD Summary of MSD's Response to Missouri Energy Group's First Information Request Intervenor Missouri Industrial Energy Consumers' Second Data Request to MSD 10 Summary of MSD's Response to Missouri Industrial Energy Consumers' Second Data Request 11 Intervenor Missouri Energy Group's Second Information Request to MSD 12 Summary of MSD's Response to Missouri Energy Group's Second Information Request 13 Intervenor Sierra Club's First Discovery Request to MSD 14 Summary of MSD's Response to Sierra Club's First Discovery Request 15 R.W. Beck's Second Discovery Request to MSD 24 See Exhibits 69, 70 and 71 (with attachments) for MSD's Response to R.W. Beck's Second Discovery Request 16 Intervenor Missouri Energy Group's Third Information Request to MSD (Privileged and Confidential) MSD's Response to Missouri Energy Group's Third Information Request provided directly to Missouri Energy Group (Privileged and Confidential) 17 18 R.W. Beck's Third Discovery Request to MSD MSD's Response to R.W. Beck's Third Discovery Request (copy of September 12, 2002 Audit Report) 19 Intervenors Associated General Contractors' and SITE's First Data Request to Intervenor Missouri Industrial Energy Consumers 20 Intervenor Missouri Industrial Energy Consumer's Response to Associated General Contractors' and SITE's First Data Request 21 Intervenor Missouri Energy Group's Fourth Information Request to MSD (Privileged and Confidential) MSD's Response to Missouri Energy Group's Third Information Request provided directly to Missouri Energy Group (Privileged and Confidential) 22 Questions presented to R.W. Beck by Commissioner Virginia Harris 23 R.W. Beck's Responses to Questions presented by Commissioner Virginia Harris 25 THE TE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT Index No. MEMO NDUM OF LAW Memorandum of Law submitted by Intervenors Associated General Contractors and SITE 2 Post -Hearing Brief of Intervenor Missouri Industrial Energy Consumers 3 Initial Brief of Intervenor Missouri Energy Group 4 Post -Hearing Brief submitted by MSD 5 Post Hearing Brief submitted by Lashly & Baer, P.C. 6 Reply Brief submitted by Intervenors Associated General Contractors and SITE 7 8 9 Reply Brief of Intervenor Missouri Industrial Energy Consumers Reply Brief of Intervenor Missouri Energy Group Reply Brief submitted by Lashly & Baer, P.C. 26 RESOLUTION OF THE TE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT APPROVING A TE RECOMMENDATION REPORT ON THE WASTEWATER ATE CHANGE PROPOSAL; AND RELATED MATTERS WHEREAS, the Rate Commission of the Metropolitan St. Louis Sewer District (the "District") is directed by § 7.040 of the Charter Plan, as approved and amended by the voters of the City and County of St. Louis, to review and make recommendations to the Board of Trustees of the District regarding proposed changes in wastewater rates, stormwater rates and tax rates or change in the structure of any of the rates; and WHEREAS, the District, on May 16, 2002, referred proposed rate changes in the wastewater rates for review by the Rate Commission; and WHEREAS, any change in a rate recommended to the Board of Trustees by the Rate Commission is to be accompanied by a statement complying with the provisions of §§ 7.040 and 7.270 of the Charter Plan; and WHEREAS, in order to conduct its proceedings with utmost expedition consistent with procedural fairness to the parties, the Rate Commission adopted Operational Rules and a Procedural Schedule pursuant to § 7.280 of the Charter Plan; and WHEREAS, the Rate Commission has received written testimony, exhibits, conducted technical conferences and public hearings, received legal and other memoranda, and has conducted these proceedings in a manner consistent with the requirements of the Charter Plan, the Operational Rules and Procedural Schedule (the "Proceedings"); and WHEREAS, the Rate Commission has considered each of the facts and circumstances disclosed during the Proceedings; and WHEREAS, the Rate Commission has considered a statement specifically responsive to the criteria and factors set forth in §§ 7.040 and 7.270 of the Charter Plan, (the "Rate Recommendation Report") to the Board of Trustees. NOW, THEREFORE, the Delegates of the Rate Commission do hereby resolve, determine and order as follows: 1 Section 1. Findings. The Delegates of the Rate Commission hereby find and determine those matters set forth in the preambles hereof as fully and completely as if set out in full in this Section 1. Section 2. Charter Plan Requirements. The Delegates of the Rate Commission find and determine that Rate Recommendation Report in the form attached hereto as Exhibit "A" considered at this meeting satisfies the requirements of the Charter Plan; Section 3. Rate Recommendation Report. The Delegates of the Rate Commission hereby approve the Rate Recommendation Report in the form attached hereto as Exhibit "A". Section 4. Letter of October 25, 2002. The Delegates of the Rate Commission hereby approve the Letter of October 25, 2002, in the form attached hereto as Exhibit "B". Section 5. Minority Report. The Rate Commission hereby receives the Minority Reports of Delegates Virginia Harris, Michael C. Pendergast, and John L. Stein on behalf of the Rate Commission. Section 6. Actions of Officers Authorized. The officers of the Rate Commission shall be, and they hereby are, authorized and directed to deliver to the Board of Trustees of the Metropolitan St. Louis Sewer District the Rate Recommendation Report, the Minority Reports and the Letter of October 25, 2002, and to take such actions as they may deem necessary or advisable in order to carry out and perform the purposes of this Resolution and to make ministerial alterations, changes or additions in the foregoing documents herein approved, authorized and confirmed which they may approve and the execution or taking of such action shall be conclusive evidence of such necessity or advisability. Section 7. Severability. If any section or other part of this Resolution, whether large or small, shall for any reason be held invalid, the invalidity thereof shall not affect the validity of the other provisions of this Resolution. Section 8. Governing Law. This Resolution shall be governed exclusively by and construed in accordance with the applicable laws of the State of Missouri. Section 9. No Personal Liability. No Delegate of the Rate Commission, officer, or agent of the Rate Commission shall have any personal liability for acts taken in accordance with this Resolution. 2 Section 10. Expenses. The Administrative Affairs Committee is hereby authorized and directed to cause to be paid all costs, expenses and fees incurred in connection with or incidental to this Resolution. Section 11. Effective Date. This Resolution shall become immediately upon its passage. ADOPTED by the Delegates of the Rate Commission of the Metropolitan St. Louis Sewer District this 25th day of October, 2002. RATE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT s G A /9/ [SEAL] ATTEST: Its Secretary 3 T E A` L II IF THE ETA P TA T. I SE E T ` CT October 28, 2002 Board of Trustees of the Metropolitan St. Louis Sewer District Re: Comments on Rate Review Process and Report Dear Trustees: Pursuant to the provisions of the Charter Plan, the Rate Commission has delivered to you its Rate Recommendation Report, including minority reports. After completing the required rate review process, there were certain matters which, although not affecting the conclusions reached in our Report, we felt should be brought to your attention. The Report contains a summary of information presented to the Rate Commission concerning inflow and infiltration ("I/I") cost allocation, further classification of nonresidential classes, and the identification of stormwater support. The Rate Commission found and determined that these factors did not cause the proposed rate change to violate the fair and reasonable standard, because the disproportionate rates, if any, are related to a legitimate public interest. However, because of the interest in these factors, the Board of Trustees might wish to consider these factors when making future decisions regarding rates. Specifically, in 1993, the District changed its I/I allocation from a 50/50 allocation to a 37% recovery by the system availability charge (number of customers) and 63% recovery by the volume charge. There were no studies performed substantiating a rationale for the change. At the hearings, the District's rate consultant, Black & Veatch, testified that the District will eventually have the ability to allocate I/I costs on a customer, volume and impervious area basis. The Rate Commission respectfully requests that the Board of Trustees consider undertaking a study to determine the most accurate allocation of the cost recovery for I/I, and that the result of such study be implemented in future rate proposals. The Board of Trustees of the Metropolitan St. Louis Sewer District October 28, 2002 Page 2 Another issue raised in the Wastewater Rate Change Proceedings relates to the identification of stormwater support in the wastewater rates. During the proceedings, the District identified $18,340,600 of stormwater-related costs that are currently recoverable as part of the wastewater system rate. We understand that a new stormwater rate change now under consideration will be capable of fully recovering the stormwater cost program. In the event the new stormwater rate change is not implemented, or does not resolve this issue, the Rate Commission respectfully requests that the Board of Trustees consider identifying the amount of the wastewater rate attributed to stormwater cost recovery on the customers' bills. It was proposed to the Rate Commission that the District should further subdivide its nonresidential class into at least commercial and industrial classifications to reflect the difference in customer usage characteristics and services utilized. All parties recognized, however, that such reclassification could not, as a practical matter, occur during this Proceeding. The Rate Commission, however, respectfully requests that the District undertake a study regarding reclassification and determine whether such reclassification would in fact result in a more accurate reflection of cost recovery. Very truly ,•urs, Andrew J. Th..' ing, Ph.D. Chair, The Rate Commission of the Metropolitan St. Louis Sewer District cc: Mr. Charles Etwert Mr. Randy Hayman