HomeMy Public PortalAboutExhibit L&B 52A Rate Commission Response to MSD 2nd Discovery RequestBEFORE THE RATE COMMISSION OF TFIE
METROPOLITAN ST. LOUIS SEWER DISTRICT
RATE COMMISSION'S RESPONSES TO METROPOLITAN SEWER DISTRICT'S
SECOND DISCOVERY REQUEST DATED AUGUST 5, 2011
ISSUE:
WITNESS:
SPONSORING PARTY:
DATE PREPARED:
Lashly & Baer, P.C.
714 Locust Street
St. Louis, Missouri 63101
WASTEWATER RATE CHANGE PROPOSAL
RATE COMMISSION
METROPOLITAN ST. LOUIS SEWER DISTRICT
AUGUST 15, 2011
BEFORE THE RATE COMMISSION
OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT
For Consideration of a Wastewater
Rate Change Proposal by the Rate
Commission of the Metropolitan
St. Louis Sewer District
RESPONSES TO THE AUGUST 5, 2011 SECOND DISCOVERY REQUEST
OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Pursuant to §§ 7.280 and 7.290 of the Charter Plan of the Metropolitan St. Louis Sewer District (the
"Charter Plan"), Operation Rule 3(5) and Procedural Schedule §§ 17(b)(i) and (ii) of the Rate
Commission of the Metropolitan St. Louis Sewer District ("Rate Commission"), the Rate Commission
hereby files its responses to the Metropolitan St. Louis Sewer District's August 5, 2011 Second Discovery
Request.
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AUGUST 5, 2011 SECOND DISCOVERY REQUEST
OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT
1. As part of the 2007 Rate Commission proceeding, Mr. Stannard evaluated the District Rate
Change Proposal on behalf of the Rate Commission. His evaluation at the time included an
alternative rate scenario which assumed a CIRP financing program based on a blend of 50%
debt / 50% cash. Mr. Stannard assumed the use of 30 year bonds and a 5% interest rate.
la. What was the basis for Mr. Stannard's 5% interest rate assumption? Please provide all
documentation and material supporting this assumption.
RESPONSE: In his Prepared Rebuttal Testimony, dated May 2, 2007, on behalf of the Rate
Commission, Mr. Stannard stated beginning on Line 13 of page 12,
"I have performed such an analysis, it is presented in Rate Commission Exhibit No. 1F.
In performing the analysis I have included the Test Year adjustments for wastewater I
discussed previously. I have assumed that the Board will debt finance approximately
50% of its capital program, resulting in $330,000,000 of revenue bonds over the period of
FY 2008 through FY 2012. I have assumed that the District will issue revenue bonds
with an interest rate of 5% and a term of 30 years which will be repaid in equal annual
payments beginning in the year of issue."
See Ex. L&B 37-37E in that proceeding.
Questions and answers regarding the interest rate assumption used by Mr. Stannard regarding his
alternative scenario can be found in the transcript of Second Technical Conference conducted on
May 9-10, 2007.
It is Mr. Stannard's recollection that he based his testimony on interest rate assumptions used in
water and wastewater rate studies involving other clients he was serving, including Suffolk, VA,
Baltimore, MD, Northeast Ohio Regional Sewer District, Saginaw, MI, and San Antonio Water
and Sewer System. Mr. Stannrd's approach for developing interest rate assumptions for
forecasted revenue bond issues includes examination of current interest rate trends including the
Bond Buyer Revenue Bond Index, 10 year Treasury Notes, and yield curves on
contemporaneous bond issues as well as discussions with fmancial advisors serving various
clients.
lb. Is this supporting material commonly used as a basis for cost of debt?
RESPONSE: Yes, it is commonly used by Mr. Stannard and his Firm.
lc. Is this supporting material commonly used by experts in the wastewater utility rate design
field?
RESPONSE: Yes
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ld. Is this the same supporting material cited as the basis for the District's bond interest rate in
its Rate Proposal.
RESPONSE: The District indicated that it used the Bond Buyer Index as its principal basis for
its interest rate assumption.
Lis O. Stump t
LASHLY & BAER, P.C.
714 Locust Street
St. Louis, Missouri 63101
Tel: (314) 621-2939
Fax: (314) 621-6844
CERTIFICATE OF SERVICE
The undersigned certifies that on the 15`h day of August, 2011:
/ oL
An electronic copy of the foregoing instrument was emailed to jfenton@stlmsd.com and to the Secretary
of the Rate Commission:
SECRETARY OF RATE COMMISSION:
Ms. Nancy Bowser
Secretary of Rate Commission
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103
robowser@swbell.net
At the request of the Rate Commission Counsel, one paper original and associated Exhibits are held at the
Rate Commission office for Commissioner review.
An electronic copy of the foregoing instrument and associated Exhibits were emailed to:
DISTRICT LEGAL COUNSEL:
RATE COMMISSION CONSULTANT:
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Susan Myers, Esq.
General Counsel
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, Missouri 63103
smyers@stlmsd.com
Mr. William G. Stannard
Vice President & Chief Operating Officer
Raftelis Financial Consultants, Inc.
3013 Main Street
Kansas City, Missouri 64108
wstannard@raftelis.com
COVIDIEN:
Mr. Randy Meyer
Utility Manager
Covidien
3600 North 2nd Street
St. Louis, MO 63147
Email: Randy.Meyer@covidien.com
ROBERT A. MUELLER. Mr. Robert A. Mueller
16 Ladue Crest Lane
St. Louis, MO 63124
Email: ramreco@sbeglobal.net
BARNES JEWISH HOSPITAL: Lisa C. Langeneckert, Esq.
Sandberg, Phoenix & von Gontard, P.C.
600 Washington Avenue, 15th Floor
St. Louis, MO 63101-1313
Email: llangeneckert@sandbergphoenix.com
MISSOURI INDUSTRIAL ENERGY
CONSUMERS: John R. Kindschuh, Esq.
Bryan Cave, LLP
211 N. Broadway, Suite 3600
St. Louis, MO 63102
Telephone: 314-259-2313
Email: john.kindschuh@bryancave.com
AARP AND CONSUMERS COUNCIL OF
MISSOURI:
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and
Diana M. Vuylsteke, Esq.
Bryan Cave, LLP
211 N. Broadway, Suite 3600
St. Louis, MO 63102
Email: dmvuylsteke@bryancave.com
John B. Coffman, Esq.
John B. Coffman, LLC
871 Tuxedo Blvd.
St. Louis, MO 63119
Email: john@johncoffuian.net