HomeMy Public PortalAboutExhibit L&B 62 Rate Commission 3rd Discovery Request to MSD 081911BEFORE THE RATE COMMISSION OF THE
METROPOLITAN ST. LOUIS SEWER DISTRICT
THIRD DISCOVERY REQUEST
ISSUE: WASTEWATER RATE CHANGE PROPOSAL
WITNESS: METROPOLITAN ST. LOUIS SEWER DISTRICT
SPONSORING PARTY: RATE COMMISSION
DATE PREPARED: AUGUST 19, 2011
Lashly & Baer, P.C.
714 Locust Street
St. Louis, Missouri 63101
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BEFORE THE RATE COMMISSION
OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT
For Consideration of a Wastewater
Rate Change Proposal by the Rate
Commission of the Metropolitan
St. Louis Sewer District
THIRD DISCOVERY REQUEST
OF THE RATE COMMISSION
Pursuant to §§ 7.280 and 7.290 of the Charter Plan of the Metropolitan St. Louis Sewer
District (the "Charter Plan"), Operational Rule 3(2) and Procedural Schedule §§ 1, 14, 15 and 17
of the Rate Commission of the Metropolitan St. Louis Sewer District ("Rate Commission"), the
Rate Commission requests additional information and answers from the Metropolitan St. Louis
Sewer District ("District") regarding the Rate Change Proposal dated May 10, 2011 (the "Rate
Change Proposal").
The District is requested to amend or supplement the responses to this Discovery
Request, if the District obtains information upon the basis of which (a) the District knows that a
response was incorrect when made, or (b) the District knows that the response, though correct
when made, is no longer correct.
The following Discovery Requests are deemed continuing so as to require the District to
serve timely supplemental answers if the District obtains further information pertinent thereto
between the time the answers are served and the time of the Prehearing Conference.
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1. During the Technical Conference for District Testimony and Rate Setting
Documents, Karl Tyminski stated that a Black & Veatch Bond Feasibility Report and reports
issued by PFM and Butcher and Mark were utilized in determining the average annual interest
rate, the term and the associated issuance costs of proposed revenue bonds and State Revolving
Fund obligations to fund CIRP projects. In the Second Discovery Request of the Rate
Commission, the District was asked to provide (a) copies of each of these reports and (b) any
other memorandum, report, work paper, summary, analysis, or schedule analyzing such matters.
The District only provided in its response, Exhibit MSD 18Y, a draft of the Report on Financial
Feasibility of the Metropolitan St. Louis Sewer District Wastewater System Revenue Bonds,
Series 2011A, prepared by Black & Veatch. On page D-51 of Exhibit MSD 18Y, reference is
made to the "District Financial Advisors."
Please provide copies of any reports, memoranda, work papers, summary, analysis or
schedule prepared by PFM, Butcher and Mark, and any other financial advisor to the District
regarding the assumptions used for term, interest rate, amortization and issuance costs of any
proposed revenue bonds and state Revolving Funds obligations to fund CIRP projects.
RESPONSE:
2. On September 21, 2007, the District filed its Answer and Affirmative Defenses
including counterclaims against the State of Missouri in the matter captioned United States of
America and the State of Missouri v. Metropolitan St. Louis Sewer District alleging (i) that
pursuant to Section 309(c) of the CWA that the State of Missouri is liable for the payment of any
judgment or expenses incurred as a result of complying with any judgment entered against the
District; and (ii) that the State of Missouri has an equitable duty to indemnify the District for its
costs of defense and compliance with any judgment including the payment of fines and penalties.
See Ex. MSD 18H. On September 12, 2008, the United States District Court found that the
District's affirmative defenses and counterclaims based on the Hancock Amendment must be
dismissed. See Ex. MSD 18H7. The judgment of the District Court was affirmed on appeal by
the United States Court of Appeals for the Eighth Circuit. See Ex. MSD 18H8. On June 29,
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2011, the Board of Trustees adopted an ordinance to enter into a settlement with the United
States and the Intervenor, the Missouri Coalition for the Environment. The State of Missouri is
not a party to the Consent Decree. See Opening Statement of Susan Myers, Ex. MSD 14 and Ex.
MSD 23. The United States District Court will retain jurisdiction of the proceeding until
termination of the Consent Decree. See Art XX, P. 82 of Ex. MSD 49A. The Consent Decree
constitutes a final judgment as to the United States, the District and the Coalition for the
Environment but not to the State of Missouri. See Art. XXVI, p. 87 of Ex. MSD 49A. Susan
Myers testified that the non -Hancock related type counterclaims relate to future legislative,
Charter Plan, or bond limits changes. See 2011 Wastewater Rate Change Proceedings, June 13,
2011, Ex. MSD 17, pp. 69-70,11. 17-7.
Please (a) describe the legal basis for each pending counterclaim and (b) state whether the
District intends to pursue each such pending counterclaim.
RESPONSE:
3. Keith D. Barber testified that certain cost increases due to inflation for the
District's wastewater revenue projections are based on the following annual percentage
increases:
Group Insurance 2011-2015 10%
2016 6.0%
Supplies, including Chemicals 2011 3.5%
2012-2016 3%
Electric and Gas 2011-2012 3.5%
2013 3%
2014-2016 5.5%
Contractual Services 2011-2012 3.5%
2013 3%
2014-2016 4.5%
Bond and Liability Insurance 2011-2016 5%
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Capital Outlay
Pension
2011-2012 3.5%
2013-2016 3.0%
2011 8.4%;
2012 9.3%
2013 10.2%
2014 11.4%
2015-2016 5.0%
Mr. Barber further testified that these future inflation allowances are consistent with prior
inflation rates experienced by the District and the overall long-term Consumer Price Index for
Urban Consumers. See Direct Testimony of Keith D. Barber, Ex. MSD 9F at p. 14, 11. 20-23; p.
15, 11. 1-11.
Please provide (a) the annual percentage increase experienced by the District for each of
these items for each of the fiscal years 2006 through 2011 inclusive; and (b) the individual
components of the "overall long-term Consumer Price Index" used by the District as a basis for
the future inflation allowances.
RESPONSE:
4. Keith D. Barber testified that cost increases due to inflation for the District's
wastewater revenue projections are based on the following annual percentage increases:
• Wages, Salaries and Overtime 2011-2016
• Personnel Services and Benefits' 2011
2012-2016
3.0%
3.5%
3.0%
Please (a) provide (i) the annual percentage increase experienced by the District for each
of these items for each of the fiscal years 2006 through 2011 inclusive; (ii) the individual
components of the "overall long-term Consumer Price Index" used by the District; (b) describe
(i) the process used by the District to determine annual salary and wage adjustments for its
employees; (ii) the process for approval by the District and the Board of Trustees; (iii) how those
adjustments have been incorporated into the Rate Change Proposal; and (d) provide a summary
' Except group insurance and pension.
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of the annual salary and wage increases approved by the Board of Trustees for each of the years
FY2007 through FY2012.
RESPONSE:
5. The Charter Plan requires that in no event shall the total amount of proposed
expenditures for the budget year from any fund exceed the estimated revenues to be actually
received plus any unencumbered balance or less any deficit estimated for the beginning of the
budget year. See Charter Plan §7.130. Karl Tyminski testified that most projects are
appropriated or encumbered at the time they are approved by the Board, except large multi -year
projects where the District would sometimes use a phased appropriation over time. See Direct
Testimony of Karl Tyminski, Ex. MSD 9E at p. 134, 11. 1-22. Mr. Tyminski further testified that
with respect to the encumbrances in a larger project, it is possible to encumber on an annualized
basis to spread the expenses over time but it's much more difficult for a series of smaller projects
because of their nature and number and when such projects are initiated. See Direct Testimony
of Karl Tyminski, Ex. MSD 9E at p. 134, 11. 1-22. Brian Hoelscher testified that a project
encumbrance sufficient to start a $5 million project must have at least $5 million in the account
so the fund has sufficient dollars to be able to make that appropriation." See Direct Testimony of
Brian Hoelscher, Ex. MSD 9B at p. 103,11.5-19.
Please (a) describe any policy or procedure to determine whether an appropriation is
phased in over time and (b) identify for each project phased in over time and the annual
appropriation for such projects for each of the fiscal years 2006 through 2010 inclusive.
RESPONSE:
6. The Rate Change Proposal was developed on an appropriation basis. As such, the
contract price of a project is assumed appropriated at the time the contract is awarded. The
actual expenditure of these appropriations occurs over the life of the project. This timing
mismatch results in annual variance fluctuations over and under the proposed annual
appropriations. See Brian Hoelscher's response to Q. 13 of the Rate Commission Second
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Discovery Request. Or, as described in the Direct Testimony of Karl Tyminski, a series of
projects are constantly moving in and out of that program or forward and back in the program.
See Direct Testimony of Karl Tyminski, Ex. MSD 9E at pp. 135-6, 11. 20-22. Or, as Brian
Hoelscher testified, "economic conditions created additional funds which could be used to
complete projects beyond the original program budget." See Direct Testimony of Brian
Hoelscher, Ex. MSD 9B at p. 5, 11. 13-15.
Please state (a) annual fluctuation over and under the proposed appropriations for each of
the final years 2006 through 2010 inclusive; (b) the additional funds applied to complete projects
beyond the original program budget for each of the fiscal years 2006 through 2010 inclusive; and
(c) whether each such project was contained in the CIRP.
RESPONSE:
7. Please provide a comparison of the District's proposed FY2012 Budget presented
to the Board of Trustees on March 15, 2011, with the projected operating costs for FY2012
shown in Table 2-1 of the May 5, 2011 Rate Change Proposal, Ex. MSD 1.
RESPONSE:
8. Please (a) compare the actual expenses for the General Counsel activities to the
approved budget for fiscal years 2009, 2010, and 2011; and (b) describe (i) how the District
expects the General Counsel expenses to change over the period of FY2012 through FY2016 due
to the entry of the Consent Decree; and (ii) how any changes in the General Counsel expenses
have been factored into the Rate Change Proposal.
RESPONSE:
9. Please provide a detailed estimate of the pension costs for the District for Fiscal
Years 2012 through 2016 under the new defined contribution plan and compare the expected
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costs of the new pension plan to the District's projected costs had they continued with the
defined benefit plan.
RESPONSE:
10. The Charter Plan provides that the Board of Trustees shall, by ordinance, identify
the Rate Commission Representative Organizations, and that each Representative Organization
shall designate an individual to represent it and serve on the Rate Commission. See Charter Plan
§ 7.230. Please (a) provide copies of all ordinances identifying the current Rate Commission
Representative Organizations; and (b) provide a copy of the designation letter from each Rate
Commission Representative Organization stating the individual representing the Organization
during these proceedings.
RESPONSE:
Ml/v7-$12—
Lisa O. Stump
LASHLY & BAER, P.C.
714 Locust Street
St. Louis, Missouri 63101
Tel: (314) 621-2939
Fax: (314) 621-6844
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CERTIFICATE OF SERVICE
The undersigned certifies that on the 19th day of August, 2011:
An electronic copy of the foregoing instrument as e -mailed to the Secretary of the Rate
Commission do jfenton@stlmsd.com.
SECRETARY OF RATE COMMISSION: Ms. Nancy Bowser
Secretary of Rate Commission
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103
robowser@swbell.net
At the request of the Rate Commission Counsel, one paper original and associated Exhibits are
held at the Rate Commission office for Commissioner review.
An electronic copy of the foregoing instrument was e -mailed to:
DISTRICT LEGAL COUNSEL: Susan Myers, Esq.
General Counsel
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, Missouri 63103
smyers@stlmsd.com
RATE COMMISSION CONSULTANT: Mr. William G. Stannard
President
Raftelis Financial Consultants, Inc.
3013 Main Street
Kansas City, Missouri 64108
wstannard@raftelis.com
COVIDIEN: Mr. Randy Meyer
Utility Manager
Covidien
3600 North 2nd Street
St. Louis, MO 63147
Randy.Meyer@covidien.com
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ROBERT A. MUELLER:
BARNES JEWISH HOSPITAL:
MISSOURI INDUSTRIAL ENERGY
CONSUMERS:
AARP AND CONSUMERS COUNCIL OF
MISSOURI:
Lisa O. Stump
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Mr. Robert A. Mueller
16 Ladue Crest Lane
St. Louis, MO 63124
ramreco@sbcglobal.net
Lisa C. Langeneckert, Esq.
Sandberg, Phoenix & von Gontard, P.C.
600 Washington Avenue, 15th Floor
St. Louis, MO 63101-1313
llangeneckert@sandbergphoenix.com
John R. Kindschuh, Esq.
Bryan Cave, LLP
211 N. Broadway, Suite 3600
St. Louis, MO 63102
Telephone: 314-259-2313
john.kindschuh@bryancave.com
and
Diana M. Vuylsteke, Esq.
Bryan Cave, LLP
211 N. Broadway, Suite 3600
St. Louis, MO 63102
dmvuylsteke@bryancave.com
John B. Coffman, Esq.
John B. Coffman, LLC
871 Tuxedo Blvd.
St. Louis, MO 63119
j ohn@j ohncoffman.net