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HomeMy Public PortalAboutExhibit MSD 17 Transcript June 13, 2011 Technical Conference PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 1 1 2 3 MEETING OF THE RATE COMMISSION 4 5 OF THE 6 7 METROPOLITAN ST. LOUIS SEWER DISTRICT 8 9 10 11 12 13 14 15 16 17 2011 WASTEWATER RATE CHANGE PROCEEDING 18 19 20 21 June 13, 2011 22 23 24 25 (Starting time of the Meeting: 9:00 AM) PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 2 1 APPEARANCES: 2 RATE COMMISSION: 3 Leonard Toenjes - Chairman George Liyeos 4 Nancy Bowser Mike O'Connell III 5 Eric Schneider John L. Stein 6 Glenn Koenen George Tomazi 7 Paul Brockmann Brad Goss 8 Ralph Wafer 9 RAFTELIS FINANCIAL CONSULTANTS, INC.: 10 William Stannard 11 Thomas Beckley 12 LEGAL COUNSEL ON BEHALF OF THE RATE COMMISSION: 13 John Fox Arnold 14 Lisa O. Stump Lashly & Baer, PC 15 16 ON BEHALF OF METROPOLITAN ST. LOUIS SEWER DISTRICT: 17 Susan Myers, Legal Counsel 18 Jan Zimmermann - Director of Finance Keith Barber - Black & Veatch 19 20 ON BEHALF OF MISSOURI INDUSTRIAL ENERGY CONSUMERS: 21 John Kindschuh Bryan Cave, LLP 22 Michael Gorman 23 Brubaker & Associates 24 25 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 3 1 ON BEHALF OF BARNES-JEWISH HOSPITAL: 2 Lisa C. Langeneckert Sandberg, Phoenix & vonGontard, PC 3 4 ON BEHALF OF ROBERT MUELLER: 5 Robert Mueller 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Reported by: 22 Kimberly A. Ganz, CSR (IL), CCR (MO), RMR, CRR Midwest Litigation Services 23 711 North Eleventh Street St. Louis, MO 63101 24 (314) 644-2191 kganz@midwestlitigation.com 25 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 4 1 COMMISSIONER TOENJES: Good morning. 2 It's 9:00 on June 13th and we will call to 3 order the Meeting of the Rate Commission for 4 the Metropolitan St. Louis Sewer District. 5 Miss Bowser, if you will call the roll please. 6 COMMISSIONER BOWSER: Mr. Brockmann. 7 COMMISSIONER BROCKMANN: Here. 8 COMMISSIONER BOWSER: Miss Casey. 9 Mr. Goss. 10 COMMISSIONER GOSS: Here. 11 COMMISSIONER BOWSER: Mr. Koenen. 12 COMMISSIONER KOENEN: Here. 13 COMMISSIONER BOWSER: Mr. Liyeos. 14 COMMISSIONER LIYEOS: Here. 15 COMMISSIONER BOWSER: Mr. O'Connell. 16 COMMISSIONER O'CONNELL: Here. 17 COMMISSIONER BOWSER: Mr. Post. Mr. 18 Schneider. 19 COMMISSIONER SCHNEIDER: Here. 20 COMMISSIONER BOWSER: Mr. Seidel. 21 Mr. Stein. 22 COMMISSIONER STEIN: Present. 23 COMMISSIONER BOWSER: Mr. Toenjes. 24 COMMISSIONER TOENJES: Present. 25 COMMISSIONER BOWSER: Mr. Tomazi. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 5 1 COMMISSIONER TOMAZI: Here. 2 COMMISSIONER BOWSER: Mr. Wafer. 3 COMMISSIONER WAFER: Here. 4 COMMISSIONER BOWSER: We have a 5 quorum. 6 COMMISSIONER TOENJES: We have a 7 quorum, thank you, Miss Bowser. I would ask 8 everyone to put their cell phones on vibrate or 9 off. Thank you. My name is Len Toenjes. I am 10 chairman of the Rate Commission of the 11 Metropolitan St. Louis Sewer District and will 12 serve as Chair of this proceeding. Present are 13 the Rate Commissioners who identified 14 themselves in the roll call as delegates of the 15 Rate Commission. 16 The Charter Plan of the District was 17 approved by the voters of St. Louis and St. 18 Louis County in a special election on 19 February 9th, 1954, and amended at a general 20 election on November 7, 2000. The amendment to 21 the Charter Plan established the Rate 22 Commission to review and make recommendations 23 to the District regarding changes in wastewater 24 rates, stormwater rates, and rates proposed by 25 the District. Charter Plan requires the Board PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 6 1 of Trustees of the District to select 2 organizations to name delegates to the Rate 3 Commission to ensure a fair representation on 4 all users of the District's services. The Rate 5 Commission represents different organizations 6 to represent commercial industrial users, 7 residential users, and other organizations 8 interested in the operation of the District, 9 including organizations focusing on 10 environmental issues, labor issues, 11 socioeconomic issues, community neighborhood 12 organizations, and other non-profit 13 organizations. 14 The Rate Commission currently 15 consists of representatives of Associated 16 General Contractors of St. Louis, the Regional 17 Chamber and Growth Association, the Engineers 18 Club of St. Louis, the League of Women Voters, 19 Missouri Botanical Gardens, the Human 20 Development Corporation of Metropolitan St. 21 Louis, Missouri Industrial Energy Consumers, 22 Home Builders Association of Greater St. Louis, 23 the St. Louis County Municipal League, the St. 24 Louis Council of Construction Consumers, 25 cooperating school districts, the West County PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 7 1 Chamber of Commerce, St. Phillip's Lutheran 2 Church, Greater St. Louis labor Council 3 AFL-CIO, and the Missouri Coalition For the 4 Environment. 5 Upon receipt of a rate change notice 6 from the District, the Rate Commission is to 7 recommend to the Board of Trustees changes in a 8 wastewater, stormwater or tax rate necessary 9 to, No. 1, pay interest and principal due on 10 bonds issued to finance assets of the district; 11 No. 2, pay for the cost of operation and 12 maintenance; and No. 3, to pay such amount as 13 may be required to cover emergencies and 14 anticipated delinquencies. 15 Further, any changes in a rate 16 recommended to the Board of Trustees by the 17 Rate Commission is to be accompanied by a 18 statement that the proposed rate change, No. 1, 19 is consistent with constitutional statutory or 20 common law as amended from time to time; No. 2, 21 enhances the District's ability to provide 22 adequate sewer and drainage systems and 23 facilities or related services; No. 3, is 24 consistent with and not in violation of any 25 covenant or provision relating to any PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 8 1 outstanding bonds or indebtedness of the 2 District; No. 4, does not impair the ability of 3 the District to comply with applicable federal 4 or state laws or regulations as amended from 5 time to time; and No. 5, imposes a fair and 6 reasonable burden on all classes of ratepayers. 7 The Rate Commission received a rate 8 change notice from the District on May 10, 9 2011. The Rate Commission must on or before 10 September 6, 2011, issue its report on the 11 proposed rate change notice to the Board of 12 Trustees of the District unless the Board of 13 Trustees upon application of the Rate 14 Commission extends the period of time for the 15 issuance of the Rate Commission report for an 16 additional 45 day period. 17 Under procedural rules adopted by the 18 Rate Commission on May 17, 2011, any person 19 affected by the rate change proposal had an 20 opportunity to submit an application to 21 intervene in these proceedings. Applications 22 to intervene have been filed by the Missouri 23 Industrial Energy Consumers, Covidien, 24 Barnes-Jewish Hospital, and Robert Mueller. 25 These applications have been granted. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 9 1 On May 13, 2011, the District 2 submitted to the Rate Commission prepared 3 direct testimony of Jeffrey L. Theerman, Susan 4 M. Myers, Brian L. Hoelscher, Jonathan Sprague, 5 Janice M. Zimmerman, Karl J. Tyminski, and 6 Keith D. Barber. 7 On May 26, 2011, the Rate Commission 8 submitted its discovery request to the District. 9 On June 7, 2011, the District filed its 10 responses. 11 This technical conference will be 12 held on the record regarding the rate setting 13 documents and the direct testimony filed with 14 the Rate Commission by the District. The 15 purpose of this technical conference is to 16 provide the District an opportunity to answer 17 questions propounded by members of the Rate 18 Commission, then by any intervenor, and finally 19 by Lashly & Baer, legal counsel to the Rate 20 Commission. 21 Following the technical conference, 22 the intervenors and the Rate Commission 23 consultants may on or before June 22, 2011, 24 submit prepared rebuttal testimony and 25 schedules. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 10 1 A technical conference will be held 2 on July 13 through the 15, 2011, regarding the 3 rebuttal testimony. At that technical 4 conference, each person submitting rebuttal 5 testimony shall answer questions propounded by 6 members of the Rate Commission, the District, 7 then the other intervenors and finally by our 8 legal counsel. 9 Following the technical conference, 10 the District, its consultants, the intervenors, 11 and the Rate Commission consultants may on or 12 before July 22, 2011, submit prepared 13 surrebuttal testimony and schedules. 14 A technical conference will be held 15 on the record on August 8th through the 10th, 16 2011, regarding the surrebuttal testimony. At 17 that technical conference, each person 18 submitting rebuttal testimony shall answer 19 questions propounded by members of the Rate 20 Commission, then by the District, the 21 intervenors, and finally by our legal counsel. 22 Ratepayers who do not wish to 23 intervene will be permitted to participate in a 24 series of on the record public hearings 25 conducted in five sessions beginning on PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 11 1 August 16, 2011, and concluding on August 24, 2 2011. 3 Who is here on behalf of the 4 Metropolitan St. Louis Sewer District? 5 MS. MYERS: Myself, Susan Myers, 6 general counsel. At the table with me I have 7 Jan Zimmerman, the Director of Finance, and 8 Keith Barber of Black & Veatch. 9 COMMISSIONER TOENJES: Who is here on 10 behalf of the Missouri Industrial Energy 11 Consumers? 12 MR. KINDSCHUH: Good morning. My 13 name is John Kindschuh and I'm an attorney with 14 Bryan Cave here on behalf of the Missouri 15 Industrial Energy Consumers. 16 COMMISSIONER TOENJES: Who is here on 17 behalf of Covidien? Let the record show no one 18 is here on behalf of Covidien. 19 Who is here on behalf of 20 Barnes-Jewish Hospital? 21 MS. LANGENECKERT: Lisa Langeneckert 22 of the law firm of Sandberg, Phoenix, and 23 vonGontard. 24 COMMISSIONER TOENJES: Who is here on 25 behalf of Robert Mueller? PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 12 1 MR. MUELLER: I am here on behalf of 2 Robert Mueller, and I am Robert Mueller. 3 COMMISSIONER TOENJES: Also present 4 are William Stannard and Thomas Beckley of 5 Raftelis Financial Consultants, Inc., 6 consultants to the Rate Commission, and John 7 Fox Arnold and Lisa Stump of Lashly & Baer, 8 legal counsel to the Rate Commission. 9 Under the Rate Commission's 10 operational rules, no persons shall be required 11 to answer questions for a total period of more 12 than three hours and the time shall be evenly 13 divided among all of the participants desiring 14 to ask questions. Following questions by 15 members of the Rate Commission, I will attempt 16 to allocate the time equally among the 17 participants and our legal counsel. To the 18 extent that the District, one of the 19 intervenors, or legal counsel has not completed 20 the questions at the expiration of that 21 person's allotted time, and to the extent that 22 time remains, such persons will be permitted to 23 propound additional questions until the three 24 hours has expired. Are there any procedural 25 matters? Ms. Stump. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 13 1 MS. STUMP: One procedural matter 2 that has come up that I wanted to bring to your 3 attention is that the procedural schedule 4 requires the filing of 20 hard copies with all 5 filings in this case. As this process -- that 6 was done before because in previous 7 proceedings, hard copies were mailed to each 8 Rate Commissioner. The process that's been 9 done this year with the repository and with the 10 use of e-mail, it's come to our attention that 11 filing of hard copies is probably not 12 necessary. 13 So, we discussed that with the 14 chairs, the presenting officer who waived that 15 requirement for everything that's been filed so 16 far but I wanted to get that on the record that 17 that requirement of filing 20 hard copies is 18 waived and to make sure that none of the other 19 Rate Commissioners have a problem with that. 20 And if there isn't any problem, then I would 21 like the record to reflect that the requirement 22 of submitting 20 hard copies is waived. 23 COMMISSIONER TOENJES: Any comments 24 from any of the Rate Commissioners either in 25 opposition to that change in requirement? PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 14 1 Hearing none, we will allow for electronic 2 filings. Yes, Ms. Myers. 3 MS. MYERS: Could I add. It is on 4 the MSD website for all the public to see the 5 documents, all the copies of the documents. 6 COMMISSIONER TOENJES: Thank you. 7 There is a second procedural matter concerning 8 the Missouri Industrial Energy Consumers and 9 Barnes-Jewish Hospital proposal to revise the 10 procedural schedule. Mr. Kindschuh, would you 11 care to make a presentation in regard to that 12 matter? 13 MR. KINDSCHUH: Yes, thank you, 14 Mr. Toenjes, I appreciate it. My name is John 15 Kindschuh and I'm an attorney with the MIEC, 16 Missouri Industrial Energy Consumers. It's a 17 not-for-profit mutual benefit corporation that 18 represents the interest of certain corporations 19 that are large commercial users of MSD 20 services. 21 The MIEC co-authored a proposal dated 22 June 7th to revise the procedural schedule in 23 this rate case. We co-authored with 24 Barnes-Jewish Hospital, BJH, another intervenor 25 in this matter. Also as a point of note, we've PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 15 1 had a chance to speak with both Covidien and 2 Robert Mueller, they agree to the terms of the 3 proposal as well, so all the intervenors kind 4 of come to you jointly with this proposal. 5 We submitted this proposal to revise 6 the procedural schedule for three key reasons. 7 The first is to provide all parties with 8 additional time to better identify the issues 9 in this rate case and hopefully resolve some of 10 those issues; second of all is to provide all 11 parties with an opportunity for additional 12 discovery; and third, to provide the Rate 13 Commission with more opportunity to evaluate 14 the issues and draft the Rate Commission 15 report. And there are many reasons why the 16 schedule should be extended to include more 17 time for the parties to file technical 18 testimony and exchange discovery. We had 19 submitted those, and quite honestly many others 20 too, in the memo dated June 7th but let me 21 highlight a few. 22 The first is the sheer magnitude of 23 this proposal. MSD staff is proposing an 24 increase in wastewater revenues of 25 approximately $130 million to take place over PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 16 1 the course of a four year period. This is 2 approximately a 60 percent increase in 3 wastewater revenue collections. We feel that 4 all parties will want to carefully review the 5 specifics of this kind of an increase. 6 Secondly, a capital program of nearly 7 $1.3 billion is planned over the next four 8 years. In order to accomplish this program, 9 MSD is going to increase the debt service cost 10 by over $70 million per year. Once again this 11 is a sizeable number and we think all parties 12 will want to evaluate this carefully. 13 And last but certainly not least 14 involved the Consent Decrees. As we 15 understand, MSD recently agreed to the terms of 16 the consent. It's imperative that the Rate 17 Commission and all of the parties understand 18 the details of that agreement and whether or 19 not the necessary capital improvement projects 20 mandated by that agreement are in the proposed 21 rate plan. 22 So, pursuant to terms of the Charter, 23 the Rate Commission has the authority to 24 recognize that the Board of Trustees that the 25 120 day scheduling window be extended by one PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 17 1 additional 45 days. And in prior rate cases, 2 the Rate Commission has in fact recommended 3 this and the Board of Trustees has approved of 4 this. 5 I would ask if you have a copy of our 6 proposal in front of you, we put together a 7 schedule, a proposed schedule in Exhibit A and 8 I would like to walk through a few of those 9 things with you. Some of our key goals in 10 revising the schedule, first of all, we wanted 11 to provide more time before rebuttal testimony 12 and surrebuttal testimony. In particular, we 13 added additional days, 26 to be exact, bottom 14 of the page on June and the June 1st to July, 15 we added an additional 26 days there because 16 that way the Rate Commission and the 17 intervenors can be allowed additional time to 18 review and evaluate MSD's testimony and we can 19 exchange more discovery and hopefully reach 20 some resolution of the issues. 21 The second key thing that we wanted 22 to do was provide additional time for you to 23 deliberate. So, if you look at the schedule 24 again, in October, we added an additional 16 25 days at the end of the process so the Rate PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 18 1 Commission has time to digest the information, 2 discuss, and, of course, draft a rather lengthy 3 Rate Commission report. And let me emphasis 4 that this schedule is submitted in a 5 collaborative spirit. The dates and the 6 schedule are not set in stone in our minds, 7 rather we want to work with all of the parties 8 to make sure that we best utilize the 9 additional 45 days while minimizing any 10 inconveniences to folks. 11 We worked very hard in revising this 12 schedule to do that. For example, we looked at 13 the original schedule and saw the timeframes 14 between the various events, kept those same 15 time frames as we shifted things back. Another 16 thing is with respect to August, we were able 17 to keep the same dates for the technical 18 conference that was originally scheduled for 19 the rebuttal testimony, we proposed those same 20 dates in August be used for the testimony -- 21 excuse me, for the rebuttal testimony on our 22 proposal which was originally for the 23 surrebuttal testimony so hopefully those dates 24 are still convenient for you and we can still 25 have the conference then. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 19 1 With respect to the public hearings, 2 we recommend that all the public hearings that 3 have been scheduled stay. We recognize there 4 is some logistical issues with publications, 5 obviously the public would like to participate 6 and we want to hear what they have to say. We 7 recommend keeping all of those meetings. The 8 only thing is is the operational rules require 9 at least one public hearing be conducted after 10 the prehearing conference. 11 If the proposed schedule is adopted, 12 we would have to move the prehearing conference 13 date so we would have to schedule one 14 additional public hearing. We find this would 15 be beneficial for all parties since more 16 members of the public can come and provide 17 their input. 18 And most importantly, we recognize 19 that MSD's staff is preparing for a bond 20 election in April of 2012. Jan Zimmerman had 21 distributed a timeline at the beginning of the 22 year. We attached this timeline as Exhibit B 23 and perhaps some of you had a chance to look at 24 it. Honestly, Jan had the foresight to build 25 in an additional 45 days into the schedule PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 20 1 which is great. So, if adopted, our proposed 2 schedule will not interfere with MSD's bond 3 election timeline which is important for 4 everyone. 5 So, in conclusion, we are happy to 6 work with all the parties to shift any of the 7 dates as needed but we did our best to review 8 the legal and procedural requirements, looked 9 at the proposal, looked at the logistics and 10 came up with Schedule A. Please let us know if 11 you have any questions and once again, we 12 appreciate your consideration of this proposal 13 and hopefully this proposal will enable you to 14 reach a fair and reasonable determination for 15 this rate case. 16 COMMISSIONER TOENJES: I would ask 17 the Rate Commissioners to hold their questions 18 until we hear from the other intervenors from 19 the District and from our labor -- our labor 20 counsel, and hold your questions from all 21 parties. Would any of the other intervenors 22 care to make any comments on Mr. Kindschuh's 23 presentation? 24 MS. LANGENECKERT: BJC obviously 25 supports this. We join with MIEC and we think PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 21 1 it's a reasonable way to approach the case and 2 make sure that we get all the information we 3 can and everyone has their appropriate due 4 process. 5 MR. MUELLER: I'll go on record as 6 supporting the request also. 7 COMMISSIONER TOENJES: Thank you. 8 The District have any comments on this request? 9 MR. THEERMAN: Mr. Chair, we support 10 the additional time that's been recommended. 11 We built that into our original schedule and we 12 think it's appropriate given the concerns that 13 have been expressed. If the Rate Commission 14 decides to request this of our Board, we are 15 prepared to take it to our Board at a special 16 Board meeting on the 29th of this month. If 17 for some reason that Board meeting doesn't 18 occur, then the next Board meeting will be 19 July 14th. 20 The only thing I point out is while 21 the budget will support the additional 22 advertising required for this, it will eat into 23 the money we had allocated for radio 24 advertising of the public hearings in August. 25 COMMISSIONER TOENJES: Ms. Stump or PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 22 1 Mr. Arnold, comments? Ms. Stump. 2 MS. STUMP: As you all know, we 3 provided you with correspondence last week 4 which has also been made a part of the public 5 record. Whether or not to change the 6 procedural schedule is within the discretion of 7 the Rate Commission and it's your decision. We 8 gave you some issues to consider. 9 First of all is the fact that the 45 10 days does under the Charter really have to come 11 from the Board of Trustees. So, there will 12 have to be that procedural matter of actually 13 asking for the 45 days from the Board of 14 Trustees and the Board of Trustees granting the 15 45 days before it can be put into the schedule. 16 Secondly, there is the cost of 17 publication as we talked about. The Charter 18 requires that the notice of the public hearings 19 be published and we would recommend that the 20 entire schedule be republished and changes be 21 made just because the entire schedule is 22 published the first time and we think it would 23 be confusing to try to just do a shorter 24 publication if something is changed. 25 Third, the Charter only has the PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 23 1 one-45 day extension, so it's certainly up to 2 you all, assuming the Board of Trustees grants 3 it, to include it throughout the process but 4 that's it, that's one-45 days. If something 5 else comes up later on, there is no provision 6 under the Charter for any additional 7 extensions. 8 And the last thing I think that we 9 pointed out was the whole issue of education 10 for the bond issue election. Certainly the 11 sooner the Rate Commission makes its decision, 12 the more time there is to educate the public on 13 what it is that is going to be proposed. 14 So, those were the four things that 15 that we pointed out which you all get to 16 balance with the issues raised by Mr. Kindschuh 17 and the intervenors, and then should the Rate 18 Commission consider or want to consider 19 changing it, there were certain things that we 20 ask that you direct us to do beginning with 21 asking for a change, directing us to ask the 22 Board of Trustees for the extension, and then 23 secondly, we need to push back the rebuttal 24 testimony date until we actually can adopt a 25 new procedural schedule, and what we would PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 24 1 contemplate is that we would meet with the 2 intervenors and with the District and come up 3 with a new schedule probably similar to what 4 they have proposed but just to make sure that 5 everybody is on the right page, we have places 6 for all the hearings, everything is set, and 7 then we would present that to the Rate 8 Commission for approval. Probably at some date 9 there would need to be a meeting some date 10 after the Board of Trustees' meeting to approve 11 a new schedule. Questions? 12 COMMISSIONER TOENJES: Thank you. Do 13 any of the Rate Commissioners have questions 14 for the intervenors or for the District or for 15 Ms. Stump? Mr. Tomazi. 16 COMMISSIONER TOMAZI: Two quick 17 questions. We will have to republish the 18 entire public hearing schedule and all the 19 other schedules and that have already been out 20 half a dozen times in various publications? 21 MS. STUMP: We will need to 22 republish. The Charter requires that you 23 publish the notice of the actual public 24 hearings but the Rate Commission always has the 25 process of publishing everything including PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 25 1 these technical conferences. 2 So, since that was all published for 3 the first time, we feel like it would be even 4 more confusing for the voters or the patrons to 5 just publish the hearing date so, yes, 6 everything would have to be republished which 7 we, given what we spent for the last 8 publication, would probably be around $20,000. 9 COMMISSIONER TOMAZI: Second 10 question. If we put in the 45 day extension, 11 what does this do in terms of having the MSD 12 put out its public education program for the 13 bond issue election in November? Is this going 14 to be too tight? 15 MS. STUMP: I think really that's 16 probably a question -- 17 COMMISSIONER TOENJES: Jeff, Jan, 18 Susan? 19 MR. THEERMAN: We built the schedule 20 when we originally envisioned this with a 45 21 day extension, so the answer would be we don't 22 think it's too tight, we think we can do that. 23 COMMISSIONER TOENJES: Mr. Koenen. 24 COMMISSIONER KOENEN: We talked about 25 putting out information for the public PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 26 1 hearings. If we don't have to repeat all the 2 technical date and things like that and the 3 advertising just talks about the public hearing 4 that is coming up in August, can't we just make 5 the ad simpler and figure the people who need 6 to know about this will find out about this 7 through the website and other communication? 8 MS. STUMP: Well, I think you could. 9 I think my concern would be that if you 10 published, let's say, the July -- I mean, if we 11 keep some of the same dates, then it may not be 12 a problem, but if we have a different date for 13 the prehearing conference that was published, 14 what if somebody does want to come or somebody 15 shows up at the wrong date? Certainly that's 16 something for you to consider. We can consider 17 putting something like language that there have 18 been changes have been made but that's 19 really -- that's up to you all. 20 COMMISSIONER TOENJES: Eric, 21 Mr. Schneider. 22 COMMISSIONER SCHNEIDER: The question 23 of Mr. Kindschuh. On your extension that you 24 submitted, I want to understand. You are 25 proposing that the issues of the Board would be PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 27 1 October 21st, is that correct? 2 MR. KINDSCHUH: That is correct. 3 COMMISSIONER SCHNEIDER: And am I 4 interpreting, or Jan, the spreadsheet that was 5 originally presented with the 45 day extension 6 would have ended with the Board of Trustees on 7 October 13th, is that correct? 8 MR. KINDSCHUH: That is correct but 9 please note that the rate proposal to the Rate 10 Commission was actually not submitted on 11 May 2nd, which is what Jan had contemplated in 12 Exhibit B, it was actually submitted I believe 13 on May 10th. Yes, so you have to kind of 14 extend that by an extra eight days so you're 15 correct. It's the same idea, it's just shifted 16 back about eight days from what Jan had 17 originally proposed. 18 COMMISSIONER SCHNEIDER: We are 19 talking about eight days, the difference 20 between what the Board on fees would do, 21 therefore that would be impacting to what the 22 public would do -- we are only talking an eight 23 day difference overall in terms of what the 24 public campaign would be for this? 25 MR. KINDSCHUH: Yes. I think that PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 28 1 makes sense. 2 MR. THEERMAN: We can support that 3 eight day change in our bond election work if 4 that's the question. 5 COMMISSIONER TOENJES: Do you have 6 other comments? Comments from the District? 7 MR. THEERMAN: We just want to make 8 sure you understand what that eight days is. 9 Mr. Kindschuh is right. The eight days relates 10 to when we started the rate proposal. So 11 instead of May 2nd, which had a total schedule 12 including a 45 day extension ending on 13 October 13th, we submitted a rate change notice 14 to the commission on May 10th which given the 15 same set of circumstances with the 45 day 16 extension would have on -- would end on 17 October 21st. So, it's not that there is a net 18 change of eight days by this 45 day extension, 19 that change in essence occurred because we 20 submitted the rate change proposal on the 10th 21 rather than the 2nd. By approval of the 45 day 22 extension, it's a 45 day extension of the 120 23 day schedule as prescribed in the chart. 24 That's pretty long-winded. 25 COMMISSIONER TOENJES: Mr. Schneider. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 29 1 MR. SCHNEIDER: So to clarify then, 2 let's say the Board of Trustees acted within 3 this timeframe and accepts the proposal of the 4 Rate Commission. How does that impact either 5 from what he's proposing or what the current 6 schedule is, the amount of time the public 7 would have to evaluate the rate proposal? It 8 sounds like there is zero impact then. 9 MR. THEERMAN: Is your question about 10 evaluating the rate proposal or evaluating a 11 bond election? 12 MR. SCHNEIDER: Bond election, I'm 13 sorry, a bond election. 14 MR. THEERMAN: If -- with the 15 extension, the Board of Trustees will have the 16 window of time by Charter, they can't take any 17 action on the rate proposal, and that 45 day 18 period, and don't get the two confused, there 19 is two-45 day periods there, the second 45 day 20 period is a waiting period for the Board and 21 that would end on December 5th, I believe. 22 Then the Board could introduce and adopt an 23 ordinance changing the rate. The actual moving 24 forward of a bond election isn't prescriptively 25 tied to any of these dates. The Board could go PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 30 1 ahead and put something on the ballot after we 2 know what the rate reported is but before they 3 do anything with an ordinance on the rate 4 itself, and so we believe there is time to 5 educate the public on a bond election given 6 that those aren't directly tied to one another. 7 We either get it on the ballot and educate the 8 public before an election. 9 MR. SCHNEIDER: Thank you. 10 COMMISSIONER TOENJES: Any questions 11 from any other Rate Commissioners? I have one 12 question. Would it be accurate to assume that 13 this is somewhat a restructuring of our 45 day 14 extension then? Rather than asking for the 45 15 days at the end, we are sort of in essence 16 spreading out the 45 days with some of it at 17 the beginning, some in the middle, and some at 18 the end, is that an accurate -- 19 MR. KINDSCHUH: Yeah, I believe 20 that's very accurate. 21 COMMISSIONER TOENJES: I will ask the 22 pleasure of the Rate Commissioners what they 23 would care to do about this proposal. 24 COMMISSIONER LIYEOS: I would move 25 that we take steps, advice that relates to PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 31 1 this, and recommend to the Board of Directors 2 for MSD to grant the 45 day extension. 3 COMMISSIONER TOENJES: Motion by 4 Mr. Liyeos. Is there a second? 5 COMMISSIONER KOENEN: Second. 6 COMMISSIONER TOENJES: Second on that 7 motion. Any discussion on the motion? All in 8 favor signify by saying aye. Opposed? Motion 9 carries. We will move forward with accepting 10 the recommendation to the change in our 11 procedural schedule and Ms. Stump, I would ask 12 you to work with Mr. Brockmann and the 13 communications committee also concerning what 14 does or doesn't get published on that -- 15 MS. STUMP: Okay. 16 COMMISSIONER TOENJES: -- so that 17 does or doesn't move forward. 18 MS. STUMP: May I ask one other 19 thing? I would ask that the Rate Commission 20 consider having a meeting and it may be by 21 telephone, you know, for some of you that 22 cannot be here, sometime after the 29th when 23 the Board of Trustees meet at which time we 24 would present the modified schedule, and that 25 in the meantime, you authorize us to work with PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 32 1 the District and the intervenors to come up 2 with the actual new schedule, and that would be 3 approved at that meeting or considered at that 4 meeting. 5 COMMISSIONER TOENJES: That's a fair 6 request. We will move. 7 MS. STUMP: Okay. And then also 8 let's push back -- the rebuttal testimony right 9 now is due next week. So, in light of this, if 10 we could push that back to -- let's say even -- 11 I'm looking at the dates that Mr. Kindschuh 12 has. Even with the dates -- let's go ahead and 13 say the 18th but we will be -- you will be 14 meeting before then with a new schedule which 15 may or may not have the 18th but let's at least 16 say it's not due on the 22nd. We could even 17 say on the 22nd and it's pushed back, that 18 requirement has been waived, and it will be due 19 on the date that you all adopt the new -- you 20 know -- 21 COMMISSIONER TOENJES: The date to be 22 determined. 23 MS. STUMP: Yes. 24 COMMISSIONER TOENJES: Okay. So, the 25 current date for the submission of the rebuttal PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 33 1 testimony would be waived by action of the Rate 2 Commission, the motion we just adopted, and the 3 new date will be announced when we meet at our 4 next meeting after all the parties have agreed 5 to what that date should be. 6 MS. STUMP: Sounds good. 7 COMMISSIONER TOENJES: Is that 8 acceptable with everyone? Okay. Thank you for 9 your clarification, Ms. Stump. Any other 10 comments on that or questions on that 11 procedural matter before we move forward? Are 12 there any other procedural matters that we 13 should entertain at this time that anyone would 14 care to bring forward? Hearing none, Ms. 15 Myers, would you care to make an opening 16 statement on behalf of the District? 17 MS. MYERS: I would, thank you. Good 18 morning. Again, I am Susan Myers, the general 19 counsel for the Metropolitan St. Louis Sewer 20 District. I would like to thank you all for 21 the opportunity to provide an opening statement 22 on behalf of the District. For the record, I 23 would like to provide a summary of the 24 District's history. MSD is the fourth largest 25 sewer district in the country based on miles PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 34 1 per pipe, with the responsibility for over 2 6,300 miles of sanitary and combined sewers. 3 Although being the fourth largest sewer 4 district in the country, MSD's rate base is 5 approximately half the size of other comparable 6 entities. 7 MSD was formed pursuant to the 8 Missouri Constitution in 1954 and began 9 operation in 1946. Over time, MSD has absorbed 10 79 public and privately owned sewer systems 11 thereby providing consolidated regional sewer 12 treatment to the St. Louis community. Based on 13 miles per pipe, the District is over two times 14 as large as Kansas City. The large size of the 15 MSD system will require a massive multi-decade 16 reinvestment effort to maintain and improve the 17 community wastewater sewer infrastructure. 18 As most of you are aware, in June of 19 2007, the United States and the State of 20 Missouri filed a civil action against the 21 District for alleged violations of the Clean 22 Water Act. For the past four years, the 23 District has been in negotiations with the 24 plaintiffs, their attorneys, and the 25 intervenors, the Missouri Coalition For the PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 35 1 Environment. At it's June 9, 2011, meeting, 2 the MSD Board of Trustees voted unanimously to 3 introduce an ordinance that would allow the 4 District to enter into a settlement or a 5 Consent Decree with the United States and the 6 Missouri Coalition For the Environment. 7 The State of Missouri, in spite of 8 being involved in these negotiations since 9 2007, has chosen not to sign the Consent 10 Decree. This settlement will place St. Louis 11 in a position to achieve compliance with the 12 Clean Water Act through a multi-decade schedule 13 without further litigation. This is consistent 14 with agreements made in numerous other cities 15 such as Kansas City, Indianapolis, Cincinnati, 16 Baltimore, Los Angeles, Atlanta, Washington, 17 D.C., and many others. 18 At this time, the District is unable 19 to discuss all aspects of the Consent Decree. 20 Full disclosure will be available once the 21 Consent Decree is lodged with the court. The 22 aspects of the decree that the District is at 23 liberty to discuss are provided in the detail 24 sheet submitted to the MSD Board on June 9th, 25 2011. This information has been provided as PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 36 1 Exhibit MSD 11A32. The settlement resolves all 2 issues raised in the plaintiff's complaint and 3 includes a 23 year schedule which will allow 4 the time necessary to achieve compliance with 5 the Clean Water Act. 6 The District estimates the capital 7 program required to achieve compliance with 8 this agreement will cost $4.5 billion in 2011. 9 Included in this number is remaining master 10 planning work as well as design and 11 construction of remedial measures required to 12 achieve compliance. Implementation of the 13 District's CSO long-term control plan recently 14 approved by state regulators, the use of green 15 infrastructure in abating CSO discharges, and 16 capacity management operations and maintenance 17 program designed to optimally manage the 18 collection system and very extensive progress 19 reporting. 20 Also included in the decree is a 21 civil penalty of $1.2 million. $1.6 million to 22 fund supplemental environment projects related 23 to low income, lateral repair, and septic tank 24 elimination. Any settlement of the Missouri 25 Coalition For the Environment's claim for cost PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 37 1 in the amount of $116,050. 2 Throughout these technical 3 conferences, the following should be kept in 4 mind. The program outlined in the Consent 5 Decree is a continuation of MSD's current 6 capital program and has been under way for the 7 past several decades. The capital program is a 8 reinvestment in the St. Louis community to 9 maintain and improve its wastewater 10 infrastructure. MSD has spent a total of 11 $1.3 billion on the recent sanitary system 12 since 1990 while spending an additional $800 13 million on the combined sewer system. During 14 this period, the District has reduced CSO 15 volume by over 30 percent and decreased the 16 number of constructed sanitary sewer overflows 17 from over 500 to less than 200. 18 The District has not been sitting 19 idle unlike several other wastewater entities 20 prior to entering similar Consent Decrees. The 21 decree provides a schedule for MSD to 22 accomplish compliance with the Clean Water Act. 23 The rate being proposed to the Rate 24 Commission is the same wastewater rate method 25 approved by the Rate Commission in the past PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 38 1 three rate change proceedings. It is the 2 District's opinion the rate proposal imposes a 3 fair and reasonable burden on all classes of 4 ratepayers. As the proposed rates were 5 determined using an industry-accepted 6 wastewater rate design methodology, a 7 methodology that has been determined to be fair 8 and equitable by the Missouri Supreme Court in 9 1997. 10 Our testimony today will provide 11 clarification of the detailed aspects of the 12 District's rate proposal and demonstrate how 13 the proposed rates are necessary to MSD's 14 future obligations including compliance with 15 the Consent Decree. For the record, the 16 District's proposal addresses wastewater rates 17 only. Stormwater rates are not included due to 18 ongoing litigation. 19 The order of appearance of MSD's 20 witnesses today is Jeff Theerman, MSD's 21 Executive Director; myself, Susan Myers, MSD's 22 general counsel; Brian Hoelscher, MSD's 23 Director of Engineering; John Sprague, MSD's 24 Director of Operations; Karl Tyminski, MSD's 25 Secretary/Treasurer; Jan Zimmerman, MSD's PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 39 1 Director of Finance; and Keith Barber of Black 2 & Veatch as the District's rate consultant. 3 This concludes my opening remarks. I 4 ask that my opening remarks be accepted by the 5 Rate Commission as Exhibit MSD 14. Thank you. 6 COMMISSIONER TOENJES: Thank you, Ms. 7 Myers. Are there any other parties present who 8 wish to make an opening statement? 9 MR. KINDSCHUH: The MIEC requests at 10 this point we do not have an opening statement 11 prepared but if we could have the liberty to 12 have any opening comments at the rebuttal 13 testimony if needed. Thank you. 14 MS. LANGENECKERT: BJH would like 15 that as well. 16 MR. MUELLER: I have no comment. 17 COMMISSIONER TOENJES: Hearing no 18 other opening comments, Ms. Myers, are you 19 ready to present those persons for whom you 20 filed District testimony? 21 MS. MYERS: We are. 22 COMMISSIONER TOENJES: Please proceed. 23 MS. MYERS: We would like to call 24 Jeff Theerman as our first witness. 25 COMMISSIONER TOENJES: Mr. Theerman, PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 40 1 is the testimony you're about to give the 2 truth, the whole truth, and nothing but the 3 truth? 4 MR. THEERMAN: I do. 5 COMMISSIONER TOENJES: Thank you. 6 Please proceed. 7 MS. STUMP: We may want to just go 8 down the list of the intervenors and give them 9 an opportunity to ask questions first. 10 COMMISSIONER TOENJES: We will do 11 that. 12 MS. STUMP: And the Rate Commissioners 13 are free to ask questions at any time. 14 COMMISSIONER TOENJES: All right. 15 Any questions, Mr. Kindschuh? 16 MR. KINDSCHUH: Thank you. 17 18 JEFF THEERMAN, 19 of lawful age, being produced, sworn and 20 examined, and says: 21 22 EXAMINATION 23 Questions By: JOHN KINDSCHUH 24 Q. Good morning. I have a couple of 25 questions for you on behalf of the MIEC. You PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 41 1 state in your testimony that the rate change 2 notice is consistent with constitutional, 3 statutory, or common law as amended. Why is 4 this the case? 5 A. Well, we are following the procedure 6 aligned in the Charter for proposing a rate 7 change notice. The rate change notice we are 8 proposing is sufficient to satisfy the 9 requirements of a Consent Decree we are 10 planning to enter into with the federal 11 government. It should -- it's sufficient to 12 cover operating costs as well as the capital 13 improvements we need to make for regulatory 14 reasons as well as just the ongoing operations 15 of the District. 16 Q. With respect to that Consent Decree, 17 it's my understanding that agreement has been 18 reached between MSD, EPA, and Missouri 19 Coalition of the Environment, is that correct? 20 A. That's correct. 21 Q. Okay. And if so, when was that 22 agreement reached? 23 A. We've been negotiating a settlement 24 to a lawsuit for four years. Those 25 negotiations included the parties you spoke of PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 42 1 as well as the State of Missouri. We recently 2 got to the point of needing to seek approval of 3 our Board of Trustees to enter into this 4 Consent Decree. That process started last 5 Thursday with an ordinance being introduced 6 that if approved, it would allow Susan and I to 7 sign on behalf of the District for the 8 settlement. So, the exact day is officially 9 June 2nd when we posted the agenda showed that 10 potential settlement. 11 Q. Is MSD able to provide a copy of the 12 Consent Decree to the Rate Commission? 13 A. No. 14 Q. Okay. Do you have any idea when that 15 would be available? 16 A. The actual document becomes available 17 when it lies with the court is my understanding. 18 And that happens after all of the parties to 19 the Consent Decree have agreed to sign and have 20 signed. 21 Q. And it's our understanding the State 22 of Missouri has not agreed to the terms as we 23 talked about. Do you know why the State of 24 Missouri did not agree to the terms of the 25 Consent Decree? PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 43 1 A. There are things I know that I cannot 2 say because of a confidentiality agreement we 3 entered into with the mediation process, and 4 there are other aspects that I do not know. 5 Q. Are there things you're able to share 6 at this point pursuant to the confidentiality 7 agreement? 8 A. I can share with you matters of the 9 public record. When we were sued, the suit was 10 brought by the United States Government and the 11 State of Missouri. The District filed 12 counterclaims to that suit that are a matter of 13 public record, and those counterclaims were 14 heard by the court and some continue to stand 15 today, others were dismissed because they were 16 not yet ripe. And in the process of hearing 17 about those counterclaims, the court determined 18 that the State had lost its sovereign immunity 19 with respect to some of these issues. I am not 20 an attorney, I am not qualified to speak as one 21 but these are the general facts. So, there are 22 counterclaims that still exist and there are 23 counterclaims that may be raised again if they 24 become ripe. 25 Q. Thank you. So I'm correct in saying PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 44 1 that the agreement is not binding upon MSD at 2 this point? 3 A. It is not. As I mentioned earlier in 4 the proceeding on the 29th of June, we have a 5 Board of Trustees meeting where they will take 6 up the adoption of that ordinance that would 7 allow us to enter into the decree. 8 Q. Is the MSD Board of Trustees at 9 liberty at this point to change parts of that 10 agreement or have they been asked to approve 11 the agreement at this point? 12 A. They've been asked to approve what 13 has been negotiated. 14 Q. Okay. They are in the process of 15 reviewing those documents at this time? 16 A. They are. There's been a fairly 17 lengthy education process. This isn't anything 18 that's been finalized in a few days, so... 19 Q. Do you have any idea, Mr. Theerman, 20 when the Consent Decree would formally go into 21 effect? 22 A. That's a really hard date to determine. 23 Assuming our Board of Trustees approves the 24 ordinance allowing you to sign, our ordinances 25 have a 15 day waiting period, so I would sign PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 45 1 that ordinance or actually sign the CD in the 2 middle of July. I am told that the plaintiff's 3 signatures would be subsequent to that and then 4 the Consent Decree would be lodged with the 5 court, the federal consent decree have a 6 mandatory 30 day public notice period. The 7 court would have -- and at that point, all the 8 terms of the CD are public knowledge and can be 9 reviewed and commented on. Following that 10 period, the court will take whatever time it 11 needs to finalize and enter the decree. 12 Q. Thank you. How will the terms of the 13 agreement impact the rate change notice that 14 was submitted by MSD on May 10th of 2011? 15 A. Rate change notice that we submitted 16 to the Rate Commission was crafted with the 17 requirements of the Consent Decree in mind, so 18 there are no changes anticipated to the rate 19 change notice. 20 Q. Ms. Myers mentioned a list of cities 21 that have been involved in the Clean Water Act 22 enforcement actions that are similar to ours. 23 Is MSD's Consent Decree modeled after any 24 particular agreement with another city or other 25 cities in mind? PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 46 1 A. No, but all federal Consent Decrees 2 have a similar format, similar deliverables. 3 In my testimony, there was a rather long list 4 of cities that precede this and depending on 5 whether they have combined or combined and 6 separate sewer systems, they can be different. 7 Some of those decrees were crafted more than 8 ten years ago. So, there has been an evolution 9 in Consent Decrees over the last ten years. 10 Q. And you had stated in your testimony 11 that both the U.S. and the State of Missouri 12 jointly sued MSD for violations for the Clean 13 Water Act. Have any costs associated with any 14 fines or penalties been included in MSD's rate 15 change proposal that was submitted today? 16 A. I don't believe so. We have 17 encumbered the dollars associated with the 18 $1.2 million fine. The supplemental 19 environmental projects, I believe, they may be 20 included in the rate case. 21 Q. Do you know which projects those are? 22 A. That's $1.6 million of work over five 23 years on -- it's intended to benefit low income 24 customers that have lateral problems or are on 25 septic tanks be put on the public sewer. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 47 1 Q. Thank you. You also mentioned in 2 your testimony that there are numerous new 3 regulations that are being considered by 4 regulators or that will affect wastewater 5 utilities. What are these new regulations that 6 you're referring to? 7 A. I spoke about it generally in my 8 testimony. There is a myriad of regulations 9 and formation at any given time, so this is not 10 an exhaustive list but I can tell you sort of 11 what the big issues are right now that St. 12 Louis is facing that is not included in the 13 Consent Decree. 14 First is the issue of water quality 15 standards on the Mississippi River. MSD has 16 worked for the last seven years on analysis of 17 the use of the Mississippi River here in St. 18 Louis, the 28 miles in front of St. Louis, and 19 the ability for that waterway in that area to 20 be used recreationally. There is no doubt that 21 the Mississippi River is used for boating in 22 that area. 23 We have developed two different 24 scientific reports called Use Attainability 25 Analyses that are intended to show the use of PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 48 1 the river and its ability to be used for 2 certain uses. This is a procedure in the Clean 3 Water Act. The federal government has the 4 perspective that the 28 miles of the 5 Mississippi River here in St. Louis should be 6 used for swimming, should be able to be 7 attainable for swimming, and the impact of that 8 sort of a decision would be significant because 9 of combined sewer overflows that exist on the 10 Mississippi River. 11 We developed our long-term control 12 plan. A part of the plan that was not 13 recommended was the construction of combined 14 sewer storage tunnels along the Mississippi 15 River with a cost of approximately 16 $1.5 billion. Those tunnels were not included 17 in our long-term control plan report that was 18 approved by the State of Missouri. So, that 19 particular decision has a potential additional 20 $1.5 billion impact. All are or practically 21 all paid for by the ratepayers of MSD. 22 Another regulation that's just 23 currently been created deals with sewage sludge 24 incineration. The byproduct of the treatment 25 process that we have in our treatment plants PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 49 1 creates a solid that has to be appropriately 2 dealt with. Approximately 60,000 tons of bile 3 solids generated from our treatment plants is 4 incinerated every year at two of our 5 facilities. These new rules have the potential 6 to advance about a quarter billion dollar 7 investment we had planned for ten years or more 8 into the future, bringing it forward and need 9 to be expended very quickly. MSD is included 10 in a group of four utilities that practice 11 sewage sludge incineration and we are 12 challenging that new regulation. So, that is a 13 significant potential change. 14 The next big thing is nutrients. 15 Nutrient pollution deals with nitrogen and 16 phosphorus. It's the cause of environmental 17 issues like gulf hypoxia, a dead zone in the 18 gulf. You see rules being enacted in the 19 Chesapeake Bay and in Florida and in other 20 states concerning nutrient pollution. It's 21 likely that in the next ten years, MSD's 22 treatment facilities will be required to remove 23 nutrients and I don't have a cost for what it 24 takes to do that. It's hundreds of millions of 25 dollars to do that. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 50 1 And then there is a myriad of other 2 things that may or may not become regulations, 3 climate change issues, emergent contaminants, 4 security requirements. So, there is a 5 considerable environmental regulatory burden 6 that is either on the horizon or maybe to be 7 drawn. 8 Q. And you had mentioned a number of 9 things, the water quality standards, the sewage 10 sludge incineration, and nutrients. Mr. 11 Theerman, do you expect that any of these new 12 regulation issues that will impact this rate 13 proposal submitted on May 10th? 14 A. Well, it's possible. If there is a 15 swimming determination on the Mississippi 16 River, for example, then there will have to be 17 a re-evaluation of our long-term control plan. 18 If we are unsuccessful challenging the sewage 19 sludge incineration rule, we will have to dig 20 deeper if we really have to advance that 21 investment or whether we can rely on staying 22 off into the future perhaps ten years. I don't 23 -- it's really hard to handicap when nutrient 24 standard might come into play. They could. 25 MR. KINDSCHUH: Thank you. The MIEC PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 51 1 has no further questions at this time. 2 COMMISSIONER TOENJES: Thank you, 3 Mr. Kindschuh. Ms. Langeneckert, do you have 4 any questions? 5 MS. LANGENECKERT: We do not, not of 6 Mr. Theerman. 7 COMMISSIONER TOENJES: Mr. Mueller, 8 do you have any questions? 9 MR. MUELLER: Yes. 10 11 EXAMINATION 12 Questions by: ROBERT MUELLER 13 Q. In the MSD rate change notice that 14 appeared in the Post Dispatch and in the public 15 notice I think that was related to this Rate 16 Commission, I did not detect any disclosure of 17 the $4.7 billion that was mentioned by Ms. 18 Myers earlier. Are you aware of any other 19 public notice that has been published 20 disclosing that amount of money that is really 21 in question here? 22 A. Well, first of all, the reason $4.7 23 billion is not found in those notices is 24 because until June 2nd, the mediation process 25 did not allow us to make that public. The full PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 52 1 disclosure of that occurred on June 2nd. You 2 saw a front page article in the Post Dispatch 3 the very next day. So, that's the reason for 4 that not occurring earlier. 5 But the District has made no bones 6 about the fact that over the next multiple 7 decades, we have a $6 billion burden 8 regulatorally and from the infrastructure 9 respect that needs to be spent. I said that 10 repeatedly in the seven years I've been the 11 Executive Director. So, while we didn't have a 12 CD tied to a certain dollar amount, certainly 13 been very openly talked about for a number of 14 years. 15 Q. Did I just hear you mention $6 billion? 16 A. $6 billion is the number when you 17 include stormwater and other costs that are not 18 directly reflected in the requirements of the 19 Consent Decree. So, things like nutrient 20 standards that may come about, treatment plant 21 renewal and replacement, that sort of thing. 22 MR. MUELLER: I have no further 23 questions. 24 COMMISSIONER TOENJES: Thank you, 25 Mr. Mueller. Mr. Arnold or Ms. Stump, do you PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 53 1 have any questions for the witness? 2 MR. ARNOLD: I do have a couple if I 3 may. 4 5 Examination 6 Questions by: JOHN FOX ARNOLD 7 Q. My name is John Fox Arnold and you 8 are well aware that together with Ms. Stump we 9 represent the Rate Commission and our role is 10 to essentially to assist and I've got a couple 11 of questions if I may. If you don't 12 understand, please let me know and we will work 13 that out. 14 In Ms. Myers' opening statement, I 15 believe she reported that all of the information 16 which can be shared with the commission at this 17 point with respect to the consent judgment is 18 found in Exhibit 11A32, is that correct? 19 A. That's correct. 20 Q. All right. 21 A. I'll just add unless it's a matter of 22 public record, it may not be in there. I mean, 23 for example, the counterclaim issue I spoke 24 about earlier is not in that exhibit but it is 25 a matter of public record. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 54 1 Q. Okay. Now, you've jumped to my next 2 question. The nature of the counterclaims 3 relate to matters to which parties involved in 4 the litigation have not agreed? 5 A. I'm not at liberty to say at what the 6 parties are not agreeing to at this point. I'm 7 just -- earlier I just spoke about -- I was 8 asked the question is there anything else and 9 that was a matter of public record. 10 Q. Well, let me return to 11A32 and do 11 you have available the responses which the 12 Commission -- I'm sorry, the District made to 13 our discovery request? 14 A. I do. 15 Q. Thank you. The question No. 29 on 16 page 14, and if you need to read aloud the 17 question or the response, I call your attention 18 to the last paragraph of that response, at the 19 top of page 15. If I may read it. "The entire 20 rate increase is crafted to fund required 21 infrastructure investment which is detailed in 22 the list of proposed projects and activities 23 provided as Exhibit MSD 11A10." What is the 24 difference between MSD 11A10 and MSD 11A32, if 25 any, or should I ask someone else? PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 55 1 A. I don't have 11A10 or 11A32 in front 2 of me. 3 MR. ARNOLD: May I approach? 4 COMMISSIONER TOENJES: Yes. 5 A. 11A10 is a list of capital 6 improvements that we're proposing in this rate 7 case. So that would be for the fiscal year '13 8 through '16. 11A32 is a detail sheet from our 9 Board agenda of last week that details certain 10 aspects of the Consent Decree that's proposed 11 between us, the federal government, and the 12 Missouri Collision For the Environment. So, a 13 big difference between the two is that the 14 11A10 deals with a four fiscal year window and 15 the terms of the Consent Decree are dealing 16 with a bunch of longer periods of time. There 17 are others but those -- that's a significant 18 difference between the two. 19 Q. Thank you. Now, in the testimony 20 which you and your colleagues have filed, there 21 is sometimes reference to a six year test 22 period, sometimes reference to a five year 23 planning window, and sometimes a reference to 24 four fiscal years 2013 through 2016. Is it 25 fair to say that this rate increase proposal is PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 56 1 limited to the period 2013 to 2016? 2 A. Our fiscal year is 2013 to 2016, yes. 3 MR. ARNOLD: All right. Thank you, 4 Mr. Chairman. 5 COMMISSIONER TOENJES: Any members of 6 the commission have questions for this witness? 7 Mr. Stein. 8 9 EXAMINATION 10 Questions by: JOHN L. STEIN 11 Q. Mr. Theerman, I believe that both you 12 and Ms. Myers indicated that the plans for the 13 overflow plant has been approved by the State 14 of Missouri. Does the agreement once the 15 parties for the Consent Decree imply that EPA 16 also has approved the CSO plan or is that still 17 out there as a future issue? 18 A. No. With respect to the long-term 19 control plan, State approval is what's 20 required. So, there is no further approval 21 necessary. The EPA did send a letter to the 22 State -- one moment. EPA sent a letter to the 23 State recommending approval. 24 COMMISSIONER STEIN: Thank you. 25 COMMISSIONER TOENJES: Mr. Tomazi. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 57 1 EXAMINATION 2 Questions by: GEORGE TOMAZI 3 Q. Two quick questions, Mr. Theerman. 4 One, at this point, the verbally agreed upon 5 arrangement between MSD and the federal 6 government in terms of the $4.7 billion 7 settlement, more or less, to what extent is 8 that front end loaded? Number two, what 9 timeframe it has been at least at this point 10 verbally agreed upon in terms of meeting all of 11 those EPA requirements? 12 A. I'm going to direct my comments to 13 Exhibit 11A32 which is the detail sheet we 14 spoke about earlier. It's a 23 year schedule. 15 That includes in it early action projects, 50 16 or so overflow eliminations by 2012. So, those 17 are a front loaded part of the agreement. The 18 delivery of a master plan that addresses the 19 elimination of all the other constructed 20 overflows by the end of 2013, and that master 21 plan would dictate the removal schedule of all 22 the remaining constructed overflows. 23 The remedial mazes associated with a 24 long-term control plan and that schedule has 25 been made public. It includes the construction PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 58 1 of a number of treatment and storage facilities 2 in the combined sewer area and that stretches 3 through the entire 23 year period. There is a 4 requirement to remove, eliminate 85 percent -- 5 I'm sorry, I'm bouncing back and forth, but 85 6 percent of the constructed sanitary sewer 7 overflows by the end of 2023 and then the 8 remaining 15 percent by 2033. 9 So, you see a front loading as 10 constructed SSO removal just based on those 11 facts, then an ongoing program of what is 12 called CMOM, but that's in essence operation 13 and maintenance on the system to control 14 overflows, basement backups. 15 So, there is a front loading of work 16 identified in the detail sheet, some prescribed 17 in early action, some that will become more 18 concrete with the delivery of a master plan. 19 COMMISSIONER TOENJES: Mr. Brockmann. 20 21 EXAMINATION 22 Questions by: PAUL BROCKMANN 23 Q. You mentioned the State will not 24 participate in signing this Consent Decree. 25 Does that mean there is going to be ongoing PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 59 1 discussions, or discussions has stopped, there 2 is no further action, or if there is ongoing 3 discussions, is one to assume that you're still 4 negotiating, and what would you estimate would 5 be the potential cost of that setup, worst case 6 scenario? 7 A. That's going to take just a moment to 8 think about. One of the most difficult things 9 about this is I want to be forthright and I 10 can't be so please don't take this as being 11 evasive. We are always open to further 12 discussion. I think it's the best scenario in 13 any of these federal agreements if all parties 14 can enter into the agreement. We haven't been 15 able to get to that yet. I don't have a 16 timeframe for when that can happen. We don't 17 envision additional costs of settlement at this 18 point. 19 Q. Additional costs related to the 20 litigation or additional mandatory construction 21 or otherwise cost? 22 A. We don't envision additional costs of 23 construction for addressing compliance issues 24 at this point. 25 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 60 1 EXAMINATION 2 Questions by: BRAD GOSS 3 Q. I'm confused about the State not 4 signing on the Consent Decree and the effect of 5 the litigation. Could you clarify that for me 6 because what I heard was that the Consent 7 Decree would be submitted after all parties had 8 signed, and if the State of Missouri isn't 9 going to sign the Consent Decree, I don't 10 understand what is going to be submitted to the 11 court. That is my first question. 12 A. Consent Decree is a settlement 13 between the United States Government, the 14 Missouri Coalition For the Environment, and MSD. 15 Q. Would the litigation still continue 16 with respect to the stay? 17 A. That will end up being a matter for 18 the court to decide, I believe. 19 Q. Do you have ongoing litigation, do 20 you not? 21 A. Yes. 22 Q. So, is it MSD's intention to continue 23 that litigation if the matter isn't settled by 24 this Consent Decree were to stay? 25 A. We believe that the litigation -- we PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 61 1 believe it's likely the litigation will not 2 proceed further. 3 Q. Now, the litigation that is outstanding 4 with the State involves counterclaims by MSD 5 against the State, is that correct? 6 A. There are remaining counterclaims and 7 there are counterclaims that have been dismissed 8 as not being ripe. 9 Q. There are remaining counterclaims 10 that have not been dismissed, have those 11 allowed for cost recovery by MSD against the 12 State? 13 A. I am not -- I'm not able to testify. 14 Susan may be able to help with that in her 15 testimony. The remaining counterclaims, I'm 16 not sure I can elaborate on. 17 Q. Assuming those counterclaims involve 18 cost recovery against the State, would that 19 have a favorable impact on this rate proposal 20 in terms of its impact upon those who otherwise 21 will be paying for this rate proposal? 22 A. I'll answer that in a more general 23 station. Any revenues the District may be able 24 to receive could have a favorable effect on the 25 total amount needed for compliance. Timing PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 62 1 would certainly be a question. 2 Q. Could you quantify the dollar amount 3 of the claims that MSD has against the State? 4 A. No. 5 Q. Has anyone done that? 6 A. Not to my knowledge. 7 Q. So, you don't know what the possible 8 impact could be on successful recovery of those 9 costs? 10 A. No. 11 Q. Is that information which can be 12 determined within this rate proceeding? 13 A. I think that would be unlikely. 14 Q. Why is that? 15 A. It would be a matter of working its 16 way through court. I don't think it could be 17 determined at this point. 18 Q. I'm asking for your estimate of the 19 dollar value, not the court's determination of 20 the value. 21 A. We have not made an estimate of that 22 dollar value. 23 Q. And you said you can't determine that 24 dollar estimate in this rate proceeding. I 25 don't understand why. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 63 1 A. Again, we are talking about the 2 claims that remain that have not been dismissed 3 and I've suggested to you and I am not -- I'm 4 not in a position to speak knowledgeably about 5 those remaining claims. 6 Q. I understand that. My question was 7 as to the quantification of the dollar value 8 for those claims, not as to the legal status of 9 them. 10 A. Without having a complete 11 understanding of what remains, I can't give you 12 an answer, but we have not calculated a dollar 13 figure related to those claims. 14 Q. Who would be able to answer these 15 questions? Ms. Myers? 16 A. Susan will be able to tell you what 17 the remaining claims are, I believe. 18 Q. And as to the quantification of what 19 dollar value this may have? 20 A. I'm telling you we've not calculated 21 a dollar value for those claims. 22 COMMISSIONER GOSS: Thank you. 23 COMMISSIONER TOENJES: Are there any 24 other questions for this witness? Mr. Koenen. 25 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 64 1 EXAMINATION 2 Questions by: GLENN KOENEN 3 Q. Very quickly. The swimming standard 4 from the river water, that would seem to 5 include not just MSD but the East Side 6 Sanitation District and perhaps even Duck Creek 7 and other people on the Missouri watershed. 8 Because of the nature of that, that would also 9 seem to be a very expensive proposition premise 10 for everyone else. Do you perceive a 11 likelihood of anything happening on that matter 12 before the end of fiscal year '16? 13 A. It's possible. The State of Missouri 14 has presented the position that they may want 15 to change the water quality standards in this 16 area to include sort of a hybrid approach, but 17 it would include a standard that would be 18 requiring sizable investment the way I spoke 19 about earlier at the Clean Water Commission 20 this past month. So, it is possible they'll 21 make a determination that swimming needs to be 22 protected in that 28 mile stretch and if that 23 becomes the case, then the District will have 24 to decide how to deal with that. 25 COMMISSIONER TOENJES: Any other -- PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 65 1 Ms. Myers, do you have questions for this 2 witness? 3 MS. MYERS: I do. I have a few. 4 COMMISSIONER TOENJES: Please proceed. 5 6 EXAMINATION 7 Questions by: SUSAN MYERS 8 Q. Earlier you mentioned the early 9 action projects that are part of the Consent 10 Decree. Are these early action projects part 11 of this rate proposal? 12 A. No, they are not. They are already 13 funded in our current -- in the revenue stream 14 that was approved by the Rate Commission in 15 2008. 16 Q. Okay. In regard to the Consent 17 Decree and the parties during the negotiation, 18 is the Consent Decree the best option for the 19 District at this point? 20 A. Yes. The alternative would be 21 ongoing federal litigation and we believe this 22 is an appropriate settlement, albeit a hard one 23 to swallow, but one that is protective of the 24 environment, deals with the overflows, and 25 eliminates the need for further litigation. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 66 1 Q. Okay. Now to switch gears a little 2 bit here. Is MSD a member of the NACWA 3 organization? 4 A. Yes, we are. 5 Q. And can you kind of give the 6 Commission an overview of what NACWA is and 7 what kind of work they do? 8 A. It's the National Association of 9 Clean Water Agencies. It's an advocacy group 10 for large and medium size wastewater utilities 11 in the country. We advocate the utilities both 12 with Congress and with the regulators on issues 13 of interest to utilities. 14 Q. And what is your role with the NACWA? 15 A. I'm President of NACWA for about a 16 month and a half more. 17 Q. And so some of the national 18 regulatory -- future regulatory requirements 19 that you spoke of earlier, does your knowledge 20 of those and information come through your work 21 with NACWA? 22 A. Well, the national issues like 23 nutrients emergent contaminants, climate change 24 is all NACWA information that I've come to 25 understand through working there. The issue of PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 67 1 swimming on the Mississippi River, the issue of 2 sewage sludge incineration is a combination of 3 what we know here in our work at MSD and sort 4 of the national perspectives by the agencies. 5 MS. MYERS: I have nothing further. 6 COMMISSIONER TOENJES: Hearing no 7 more questions for this witness, thank you, 8 Mr. Theerman. We will take a ten minute break 9 and reconvene at 25 til 11. 10 (Break.) 11 COMMISSIONER TOENJES: Our next 12 witness is Ms. Susan Myers. Ms. Myers, is the 13 testimony you're about to give the truth, the 14 whole truth, and nothing but the truth? 15 MS. MYERS: Yes, it is. 16 COMMISSIONER TOENJES: Thank you. 17 Does any member of the Rate Commission have any 18 questions for Ms. Myers before we move forward? 19 Hearing none, Mr. Kindschuh, do you have any 20 questions for Ms. Myers on behalf of the 21 Missouri Industrial Energy Consumers? 22 MR. KINDSCHUH: Yes, we have a few. 23 COMMISSIONER TOENJES: Please proceed. 24 25 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 68 1 SUSAN MYERS 2 of lawful age, being produced, sworn and 3 examined, and says: 4 5 EXAMINATION 6 Questions By: JOHN KINDSCHUH 7 Q. Good morning. I have a couple of 8 questions regarding your testimony. You 9 indicated in your testimony that a, quote, 10 large proportion, end quote, of the proposed 11 rate change is necessary to meet legal 12 requirements in that the failure to construct 13 mandated projects or properly maintaining 14 existing lines and facilities bring them with 15 immediate and direct repercussions. What 16 constitutes as a large proportion, expressed in 17 like a percentile? 18 A. Well, I'm probably not the best 19 person to discuss that. I'll probably push 20 that off to Keith Barber with the rate proposal. 21 Q. So, we should direct that line of 22 inquiry to Mr. Barber? 23 A. Yes. 24 Q. Okay. Great. And specifically I 25 wanted to ask you what those projects were and PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 69 1 what the percentage is, I should direct that 2 all to Mr. Barber? 3 A. That would be Keith Barber and Brian 4 Hoelscher. 5 Q. Okay. Great. Thank you. And the 6 other question I had actually was inspired by 7 the Rate Commissioners. Can you please describe 8 the status of the outstanding counterclaims in 9 the present suit? 10 A. Okay. I'm going to start with all 11 the counterclaims. We, MSD, filed 12 counterclaims to the civil action and part of 13 those counterclaims that had to do with Hancock 14 were dismissed by the court, so they were 15 dismissed out of the case for not being ripe. 16 There were some counterclaims that remained in 17 the case. Those are non Hancock related type 18 counterclaims that have to do with different 19 things that may happen in the future, not 20 related to Hancock, such as maybe if there is 21 legislative changes, if there is Charter type, 22 MSD Charter changes, things could happen in the 23 future not related to Hancock. 24 Q. And can you please break those down 25 further for us and describe what those are? PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 70 1 A. The ones that still remain? 2 Q. Correct. 3 A. I don't have them in front of me 4 specifically so I'm speaking in general about 5 them. And my summation of them is the same as 6 I just gave you, they are legislative type, 7 Charter type changes, maybe a bond limits change. 8 Q. Thank you. The MIEC and other 9 parties that asked Mr. Theerman a number of 10 questions about the Consent Decree and there is 11 some confidential things in place. Is there 12 anything Mr. Theerman omitted when we were 13 asking questions about generally what was going 14 on with the Consent Decree, whether the Board 15 of Trustees would be able to approve it? Is 16 there anything else that you would like to add 17 with respect to the lines of questions that we 18 have for Mr. Theerman? 19 A. I think Jeff covered it pretty well. 20 The timeline and the process going forward is, 21 you know, we'll ask the Board to adopt the 22 ordinance to give Jeff and I the authority to 23 sign a Consent Decree on July 29th. Then it 24 will go -- there is a 15 day waiting period. 25 Once we sign the Consent Decree, then it will PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 71 1 go back to the Department of Justice and EPA 2 for their signatures. We don't really have an 3 idea of how long that will take them. Once 4 they get that done, then there will be a notice 5 to lodge it with the court. Once it's lodged, 6 that will start a 30 day public comment period, 7 and then based upon how many comments the 8 regulators get from the public will determine 9 how long they need to respond to those comments 10 and when the Consent Decree may be available 11 for entry into the court. 12 Q. And at this point, are you aware if 13 the MSD Board of Trustees would like to make 14 any recommendations to change what has been 15 agreed upon or is it too soon to say? 16 A. Could you repeat that, please? 17 Q. Sure. At this time, are you aware if 18 MSD Board of Directors would like to make any 19 changes to what has been already agreed upon 20 between EPA, the coalition, and MSD? 21 A. I'm not aware at this time. 22 MR. KINDSCHUH: Okay. Thank you. 23 The MIEC has no further questions, Chair. 24 COMMISSIONER TOENJES: Thank you, 25 Mr. Kindschuh. Ms. Langeneckert, do you have PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 72 1 any questions? 2 MS. LANGENECKERT: No questions of 3 Ms. Myers. 4 COMMISSIONER TOENJES: Mr. Mueller, 5 do you have any questions? 6 MR. MUELLER: No questions. 7 COMMISSIONER TOENJES: Mr. Arnold. 8 MR. ARNOLD: Mr. Chairman, I do have 9 two questions depending on follow-up. 10 11 EXAMINATION 12 Questions by: JOHN FOX ARNOLD 13 Q. Ms. Myers, I would like to continue 14 discussing the Consent Decree, if I may, and 15 simply to understand when, if at all, that 16 information will be available to the Rate 17 Commission, and I say if at all because if it's 18 signed on July 15th, then after the 15 day 19 waiting period, EPA and the Department of 20 Justice then have to act, and then after they 21 act, there will be a 30 day comment period and 22 EPA and Justice will have to respond to the 23 comments and then it will be lodged with the 24 court. Has the District any experience with 25 the timeliness of the lawyers and bureaucrats PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 73 1 of EPA and the Department of Justice responding 2 to this kind of a proceeding? 3 A. Well, the entire Consent Decree 4 document will become a public document once 5 it's lodged with the court. So, best case 6 scenario is MSD would get authority to sign the 7 Consent Decree June 29, 15 days from that time 8 we would sign the Consent Decree which is 9 middle of July. The document would then go to 10 the Department of Justice and EPA for their 11 signatures. I don't have a clear understanding 12 of how long their signatures would take but we 13 have been told that, you know, that they have 14 been having discussions about getting this 15 Consent Decree signed. So, once the federal 16 government signs the Consent Decree and the 17 Coalition For the Environment, at that time the 18 document would be lodged with the court and 19 that's when it would become public. 20 Q. Thank you. In your testimony, you 21 referred to the complaint in the Consent Decree 22 requesting both injunctive relief and 23 penalties. Do you have a copy of the complaint 24 handy? 25 A. I do not. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 74 1 MR. ARNOLD: May I approach? 2 COMMISSIONER TOENJES: Yes. 3 Q. Go to, if you would, please, nearly 4 the end -- I apologize. I've got a cold and 5 bear with me. If you'll go toward the end of 6 the document, page 24 -- I'm sorry, page 23, 7 and the prayer for relief. 8 A. Right. 9 Q. The EPA requests permanent injunction 10 for any and all ongoing violations of the Clean 11 Water Act. A permanent injunction prohibition 12 on unpermitted discharges under the Clean Water 13 Act. It goes on for nine such permanent 14 injunctions. May we assume that the Consent 15 Decree will deal with some, if not all of 16 these -- of this list of prayer for relief? 17 A. The Consent Decree will resolve all 18 the claims made in this complaint. 19 Q. All complaints? 20 A. Yes. 21 Q. Finally, do you have handy a copy of 22 your response to -- I'm sorry, the District's 23 response to our request for information? 24 A. Which number? Which question are 25 you -- PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 75 1 Q. Well, I managed to destroy this 2 document. This is a general, not a specific 3 question. Let's try question No. 35. And if I 4 may, I'd like to read only a part of it. We 5 refer to a statement that Mr. Theerman made and 6 identify the pages and the lines at which that 7 statement was made and then we say, "Please, A, 8 describe the analysis which supports this 9 conclusion, and B, provide a copy of any 10 memorandum, report, work papers, summary, 11 analysis, or schedule which supports this 12 conclusion." Is that accurately stated? 13 A. Yes. 14 Q. Okay. And then the response referred 15 to your direct testimony of question 7, page 2 16 to 4. I would characterize your testimony, if 17 I would, as the analysis? 18 A. Give me a moment to find my direct 19 testimony. Okay. What was your question? 20 Q. Is it fair to analyze your response 21 to which we will refer as the analysis? 22 A. Yes. 23 Q. Then I refer to -- return again to 24 sub B. Are there copies of any memoranda, 25 report, work papers, or such which support this PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 76 1 conclusion? 2 A. Well, there is definitely court cases 3 and case law that support this analysis. 4 Q. Well, my question is whether or not 5 the District has a copy of any memorandum, 6 report, work paper, or summary stating that the 7 rate change is consistent with constitutional, 8 statutory, or common law? 9 A. Well, the rate change proposal before 10 you all at this time is the same methodology 11 that we've used in the past on the wastewater 12 rate change proposals which was ruled 13 constitutional in the Missouri growth case 14 which this is referencing. 15 Q. I understand that and I understand 16 Missouri growth. My question is whether or not 17 there is any District document which could be 18 shared with the Commission which was the basis 19 for your analysis as contained in your testimony? 20 A. For this particular rate proposal? 21 Q. Yes, ma'am. 22 A. Okay. We did not do a separate 23 analysis for this rate proposal because the 24 methodology had not changed from the previous 25 rate proposal. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 77 1 Q. Thank you. Now, several times in the 2 response to our request for information we will 3 be referred to either a new document or 4 testimony or information which is the analysis. 5 Several times we were not provided with a copy 6 of any memorandum, report, work paper, summary, 7 et cetera. Is it fair to say that for the 8 purpose of that response and analysis, no such 9 documents exist? 10 A. Are you still referencing question 11 53? 12 Q. No, ma'am, there are a handful of 13 responses like this. 14 A. Without specifically knowing which 15 ones you're referring to, I cannot answer that. 16 Q. Is it then necessary for us to ask 17 for them again? 18 A. I can't answer without specificity. 19 MR. ARNOLD: Thank you. I have no 20 further questions. Thank you, Mr. Chairman. 21 COMMISSIONER TOENJES: Thank you, 22 Mr. Arnold. Questions from any Rate 23 Commissioners for Ms. Myers? Hearing none -- 24 I'm sorry, Mr. Goss. 25 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 78 1 EXAMINATION 2 Questions by: BRAD GOSS 3 Q. You had said that the MSD is not able 4 to provide the document, Consent Decree, to the 5 Commission because of the prohibition contained 6 in the mediation process, and listening, if I 7 heard you right, listening to this timeframe 8 which is dependent upon circumstances of people 9 and agencies that are out of your control, I 10 have concern that you could get to a point 11 where we don't see this Consent Decree prior to 12 us having to make some kind of decision. 13 Is it possible to go to the 14 Department of Justice, EPA, and Coalition of 15 the Environment and ask them if that document 16 could be disclosed to the Rate Commission with 17 a confidentiality provision placed upon us? 18 A. We have been working very closely 19 with the Coalition For the Environment and the 20 United States and they understand the Rate 21 Commission process that we are going through 22 and the timing and the need for specific 23 information that we can get. We have not 24 specifically asked them if we could provide you 25 a confidential copy of the agreement, but they PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 79 1 are working to get this document signed on 2 their end in an expedient manner to support our 3 Rate Commission process. 4 Q. That's not answering my question, 5 though. Is that something that you would be 6 able to ask them? 7 A. We had not asked them to date. We 8 could -- I guess we could consult with our 9 attorney helping us about the negotiations as 10 to whether we could do that. 11 Q. When would you be able to get back to 12 the Rate Commission and let us know when that 13 would be possible to do that? 14 A. I will check with our outside counsel 15 later today. 16 Q. Earlier Mr. Theerman had made a 17 statement that the court had made a ruling with 18 respect to the waiver of sovereign immunity on 19 the part of the State of Missouri. Could you 20 explain that? 21 A. When we filed our counterclaims, the 22 State then addressed the court requesting that 23 they had sovereign immunity under the U.S. 24 Constitution 11th Amendment which provides a 25 state sovereign immunity to protect itself from PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 80 1 civil actions. The Federal District Court 2 ruled and then the 8th Circuit Appellate Court 3 upheld that the State did not have sovereign 4 immunity because they brought this claim 5 against MSD as a plaintiff and, therefore, they 6 did not have sovereign immunity to protect 7 themselves because they weren't protecting 8 themselves, they were being aggressive and 9 suing us. So, that's how they lost their 10 sovereign immunity. 11 Q. I had asked Mr. Theerman a series of 12 questions about whether there was any kind of 13 quantification of the dollars associated with 14 MSD's counterclaims. Can you respond to any of 15 those questions? 16 A. Yeah. The counterclaims were -- the 17 counterclaims that were dismissed were the 18 counterclaims that had to do with the Hancock 19 provision and they were dismissed for not being 20 ripe at the time, and so we don't have a dollar 21 value on what those claims are. The 22 counterclaims that still remain in the action, 23 like I said earlier, the counterclaims would be 24 determined -- the State has to impact MSD from 25 being able to comply with the requirements of PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 81 1 the Consent Decree, so when that impact would 2 take place, that's when we would determine the 3 value of the counterclaim. 4 Q. Can you be a little more specific? 5 A. The counterclaims that still exist 6 are not Hancock. So, let's say it's a 7 legislative change, for example. That 8 legislative change would have to happen and 9 then MSD could enforce its counterclaim. So, 10 depending on what that matter -- what that is 11 that happens to not allow MSD to comply with 12 the Consent Decree would then determine the 13 value. So, you can't determine the value of 14 the impact until you know what the impact is. 15 Q. Well, were the counterclaims that you 16 raised at this point take the position that the 17 State had prevented MSD from complying with the 18 federal requirements? 19 A. Those types of counterclaims were 20 included in the counterclaims that were 21 dismissed for not being ripe. 22 Q. When would those become ripe? 23 A. Well, you need a judgment for those 24 counterclaims to become ripe. 25 Q. And so the settlement decree that you PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 82 1 entered into would mean there would be no 2 judgment rendered and, therefore, those claims 3 would go away? 4 A. Not necessarily. We feel that the 5 Consent Decree could be considered the 6 judgment. 7 Q. And does the State share that 8 consideration? 9 A. I can't speak for the State. 10 Q. So, once a Consent Decree -- I'm 11 going to go back. I had asked Mr. Theerman so 12 what does MSD plan to do as it relates to the 13 State after the entry of the Consent Decree, 14 and I think what I heard was that the 15 litigation would not be ongoing, that there is 16 no plans to continue that. So, I'm confused by 17 that response. 18 A. Well, we have not made the 19 determination at this time. I mean, what I can 20 tell you is that the counterclaims that have 21 been dismissed, they are no longer part of this 22 case. So, if we were to -- if we were to 23 refile or if we were to re-address those 24 counterclaims, it would have to be done as a 25 new suit. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 83 1 Q. I will go back to the non Hancock 2 claims because you have some existing non 3 Hancock claims that I would have thought 4 existing legislation was the basis for those. 5 Am I confused about that? 6 A. The reason for the counterclaims is 7 not based upon existing legislation. The way 8 they were written was to cover things that may 9 happen that were not Hancock related. So, they 10 were not written around things that exist now, 11 they were written around to protect us from 12 things that may happen in the future that were 13 not related to Hancock. 14 Q. Those claims sound unripe to me. I 15 think they don't -- they sound speculative so 16 I'm really confused by that. 17 A. They were left -- all I can say, the 18 Judge left those in the case. 19 Q. You mentioned that in response to 20 Mr. Arnold's question that your analysis was 21 based on the prior memorandum and analysis that 22 had been prepared in the prior rate case, and I 23 think that was in response to his question 24 about work papers or memoranda, analysis, and 25 for the request for document production No. 35. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 84 1 You said there was a prior memorandum that you 2 had used, is that right? 3 A. I didn't refer to a memorandum. What 4 I referred to was previous case law. 5 Q. Then you said you followed previous 6 case law but I thought your response to his 7 question, you answered that you did not do any 8 separate analysis because the methodology 9 hadn't changed from the prior rate case. Did 10 you produce something in the prior rate case 11 that was a memorandum or analysis at the time? 12 A. I don't recall. 13 Q. If you did, would you produce that 14 for the Commission at this time? 15 A. We can go back and check the previous 16 Rate Commission. What I was referring to was 17 that there is Supreme Court case law out there 18 that approved the method that we developed the 19 wastewater rate with previously or previous 20 Rate Commissions and we have not changed that 21 methodology; therefore, there was no need to 22 redo the analysis of whether the methodology is 23 constitutional or not. 24 Q. There has been no case law in the 25 intervening period that would have changed the PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 85 1 holding in that case, is that correct? 2 A. Correct. 3 Q. So, your answer was if there was a 4 prior analysis, you will furnish it to the 5 Commission, is that true? 6 A. We can look, yes. 7 Q. You can furnish that then? 8 A. Yes. 9 MR. GOSS: Thank you. 10 COMMISSIONER TOENJES: Thank you, Mr. 11 Goss. Any further questions for Ms. Myers? 12 Hearing none, thank you. 13 MS. MYERS: Thank you. 14 COMMISSIONER TOENJES: The next 15 witness will be Mr. Brian Hoelscher. 16 Mr. Hoelscher, is the testimony you're about to 17 give the truth, the whole truth, and nothing 18 but the truth? 19 MR. HOELSCHER: Yes, I do, sir. 20 COMMISSIONER TOENJES: Thank you. 21 Does any member of the Rate Commission have any 22 questions for Mr. Hoelscher at this time? 23 Hearing none, Mr. Kindschuh, questions for 24 Mr. Hoelscher? 25 MR. KINDSCHUH: Yes, we do. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 86 1 BRIAN HOELSCHER, 2 of lawful age, being produced, sworn and 3 examined, and says: 4 5 EXAMINATION 6 Questions by: JOHN KINDSCHUH 7 Q. Good morning, Mr. Hoelscher. 8 A. Good morning. 9 Q. A couple of questions about your 10 testimony that you had submitted. What 11 progress requirements has MSD made over the 12 past five years to timely address the changing 13 regulatory requirements that you refer to in 14 your testimony? 15 A. What requirements have we made? 16 Q. What progress adjustments has MSD 17 made over the past five years, and in 18 particular, I am looking at page 2, question 10 19 of your testimony. 20 A. Page 2, question 10. 21 Q. Correct. Your response to question 22 10 on page 2, that is correct. 23 A. The adjustments that were made to the 24 capital improvements program. 25 Q. Uh-huh, yes. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 87 1 A. Yes. Most of the adjustments were 2 made to the program were changes in regulatory 3 requirements that occurred during the last rate 4 cycle, the biggest one being requirement for 5 disinfection facilities to be installed on 6 treatment plants that was discharged to the 7 Mississippi River. One was unanticipated. 8 There were other items that also 9 moved to the forefront contrary to what was 10 originally proposed. Pilot program for a Green 11 Infrastructure Program for CSO discharges to 12 the Mississippi. Cleaning of sewers in a 13 proactive fashion. Some of the items and 14 issues that came up as part of the ongoing 15 mediation and negotiations with the regulators, 16 but, by far and large, disinfection was the 17 largest item, largest adjustment that had to be 18 made. 19 Q. Thank you. My next question, I'm 20 referring to your answer to question 12 which 21 is found at the bottom of page 3 -- excuse me, 22 bottom of page 2, top of page 3. And 23 specifically, what necessary adjustments to the 24 engineering consultant delivery model have been 25 to ensure cost effective and timely completion PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 88 1 of the CIRP? 2 A. With the past program, staff was of 3 sufficient size and the program identified to 4 the place where we actually did project by 5 project consultant selection and management of 6 projects. We had a project manager, a 7 consultant would be hired for a project and 8 complete that project. With what's coming up, 9 the ability to have resources much more 10 available in a much more timely manner was 11 needed and so we've changed our delivery model. 12 We have divided up the District kind 13 of along regulatory lines and technical 14 expertise and we will now go to actually hiring 15 consultant teams for packages of projects. 16 They will -- what this will gain us is it will 17 allow them to help us with the scheduling, 18 long-term scheduling, short-term scheduling 19 within these watersheds. The way we hire them 20 and with the resources we have available as 21 things come up in a much more timely fashion, 22 we will be able to bring resources to bear on 23 issues that were unknown whether they are 24 projects we're going after or issues that 25 weren't really identified up front. And also PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 89 1 hopefully some cost effectiveness in that while 2 we are performing certain types of activities, 3 say surveying for certain projects are 4 identified, we have adjacent areas that we know 5 are coming up in the future and actions and 6 activities that can be performed to gather that 7 data on the front end in a much more timely 8 fashion, we'll have the ability to do that with 9 the changed model. 10 Q. Thank you. I have a couple of 11 questions with respect to the Consent Decree 12 and I'll narrow it down on the projects. What 13 CIRP projects are required to be completed 14 pursuant to the terms of the agreement between 15 MSD and EPA? 16 A. All of them. 17 Q. All of the projects? 18 A. Yes. 19 Q. Okay. So, will Exhibit MSD 9B1 which 20 is the fund of 660 infrastructure projects 21 which was attached to that exhibit, will that 22 need to be revised at all because of the 23 Consent Decree? 24 A. No. 25 Q. So, all of the projects on this PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 90 1 Exhibit 9B1 are projects that are required by 2 the Consent Decree? I could give you a copy. 3 A. Yeah, I have it here. They are all 4 regulatory requirements, most of them 5 regulations that will be stated in the Consent 6 Decree. There are random items like expansion 7 of an ash lagoon so that we continue to have a 8 place to dispose of ash out of the treatment 9 plants is not specifically listed in those, the 10 items you saw in the fact sheet that was given 11 earlier, but nevertheless they are a regulatory 12 requirement. 13 Q. Okay. Are there any other examples 14 like the ash issue you just raised that you can 15 think of to share with the Rate Commission at 16 this point? 17 A. As I was flipping through the list, I 18 think that was the only one I saw. 19 Q. Okay. Thank you. What portion in 20 dollars of MSD's identified CIRP is associated 21 with the elimination of the remaining 185 22 constructed sanitary sewer overflows? 23 A. I haven't calculated those but if you 24 refer to Exhibit MSD 9B1 under the various 25 years, the items sanitary sewer overflow and PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 91 1 probably almost all cases as related to 2 constructed sanitary sewer overflows. There 3 may be random ones where we have sanitary sewer 4 overflows not through constructed, but for the 5 most part they are all addressed in constructed 6 sanitary sewer overflows. 7 Q. Okay. And will the 185 known 8 remaining constructed sanitary sewer overflows 9 need to be removed pursuant to the Consent 10 Decree? 11 A. Yes. 12 Q. Okay. And do you have any idea about 13 what date do those remaining 185 constructed 14 sanitary sewer overflows need to be eliminated? 15 A. If you look at the fact sheet that 16 Jeff Theerman referred to earlier, it's item 4, 17 remedial measures. 85 percent by 2023 and all 18 remaining by 2033. 19 Q. Thank you. What portion in dollars 20 of MSD's identified CIRP is associated with the 21 elimination of the remaining 199 combined sewer 22 overflows, CSO's? 23 A. Restate the question, I'm sorry. 24 Q. Sure. What portion in dollars of 25 MSD's identified CIRP is associated with PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 92 1 eliminating the remaining 199 CSO's? 2 A. I think to revise the question, 3 elimination of the CSO isn't what is required, 4 it's mitigating their impact, in some cases 5 that is removal, in other cases it's reducing 6 the amount of volume. That number -- just a 7 minute. I have a lot of numbers floating 8 around in my head. It's 1.9 billion. 9 Q. And will those 199 remaining 10 permitted CSO's need to be removed or abated 11 pursuant to the Consent Decree? 12 A. Yes. 13 Q. By what date does that need to occur? 14 A. They also fall under in the fact 15 sheet -- it's either one. Schedule of 23 years 16 from the date of approval by the State of 17 Missouri. 18 Q. Thank you. You indicated in your 19 testimony, Mr. Hoelscher, because of the 20 economy, MSD was receiving bids for capital 21 work that in some cases was 40 percent below 22 the traditional cost. Do you have that 23 testimony? 24 A. Yes. 25 Q. Okay. How many projects were bid out PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 93 1 at this rate that was approximately 40 percent 2 lower than expected? 3 A. That was probably the extreme example. 4 I think I was giving the bottom. They are 5 traditionally smaller open cut sewer type 6 projects where we are seeing the most benefit 7 from the economy. They would have been those 8 sewer projects are probably large in number but 9 lower in dollar value, they are lower cost 10 projects. Exactly, I can't really tell you 11 exactly how many of those that were 40 percent 12 or less but that was probably the extreme case. 13 Q. You mentioned that the extreme case 14 for 40 percent. What would be a more common 15 percentage where you were able to receive a 16 lower bid than expected? 17 A. Best I can tell from the information, 18 you probably saw in the overall program, 5 to 19 10 percent reduction from what we thought the 20 cost of projects would be at the start of the 21 last rate case. 22 Q. Okay. And can you describe generally 23 what type of projects that would entail, the 5 24 to 10 percent reduction? 25 A. Well, again, 5, 10 percent would be PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 94 1 the program overall. So, I think I had 2 mentioned the 40 percent coming in at 40 3 percent, that is very few projects at small 4 dollar amounts. The larger projects, you 5 wouldn't see that kind of reduction, you might 6 see it in the 5 approaching the 10, the piece 7 that would drive most of the programs. So, 8 probably 5 or 10 percent is probably about kind 9 of an average. 10 Q. How has this reduced cost 11 construction bidding affected the level of 12 capture expenditure cost in the rate change case? 13 A. It wasn't taken into account in 14 the -- you're talking about this rate change? 15 Q. Correct. 16 A. It was not taken into account. 17 Q. Why was it not taken into account? 18 A. What we found to be successful 19 practice after we've gone through this process 20 is to have additional work available if it 21 turns out we can get more projects done for a 22 given dollar. The main reason for that, we can 23 have the projects ready and if the economy is 24 such that we do have the extra dollars 25 available, it means we can get a good buy for PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 95 1 future work. 2 So, over the last five, six years 3 that's been the strategy we've used is to have 4 extra projects sitting in the queue waiting to 5 go, and we've gone ahead and awarded those 6 projects and bid those projects up to the 7 amount of revenues that were available. 8 Strategies worked real well. It's got a good 9 long-term benefit to it and that would be the 10 kind of strategy we would use if these economic 11 conditions will exist through '13 through '16 12 if it does turn out that way. 13 Q. If for some reasons the economic 14 conditions change, how would you revise that 15 strategy? 16 A. Change in what way? Change in '13 17 through '16? 18 Q. Correct, yes. Change through '13 19 through '16. 20 A. '13 through '16, if we get this type 21 of economic climate, we would do this in the 22 same fashion. We would try to accelerate work. 23 This kind of economy would mean we are getting 24 work done at a better price. If it went the 25 other way and the economy went where prices PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 96 1 went up, in general there is probably two 2 options. There is addressing prioritization of 3 projects with the regulators in light of the CD 4 or possibly requesting additional dollars, 5 additional revenues. 6 Q. Okay. And how will this reduced cost 7 construction bidding affect the level of 8 capital expenditure costs over the next four 9 years? 10 A. Again, if we use the strategy that I 11 had mentioned, you'll end up with kind of the 12 same result as we are at the end of this rate 13 cycle where we are able to spend all the 14 dollars that are available, and again the 15 benefit being if you do that, you spend the 16 same amount of dollars but get more work done; 17 therefore, you've lowered the overall cost of 18 the program. That is what we would do in '13 19 through '16 as well. 20 Q. And looking further out into the 21 future, I'll ask the same question with a 22 different timeline. How will the reduced cost 23 construction bidding affect the capital of 24 expenditure costs in ten years potentially? 25 A. Again, the answer is the same for PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 97 1 whatever the time period you bid. I think my 2 comments about the strategy we've used through 3 '13 through '16 is based on what we know right 4 now. Depending on what the conditions are in 5 the end of that rate cycle, you may take a 6 different strategy for the next rate cycle over 7 whatever period that is. 8 So, what we are currently doing now 9 would be something we consider but I think it 10 would really be dependent upon the situation 11 the next time we consider it coming from a rate 12 proposal. 13 Q. Okay. And my final question, and I 14 actually asked Susan Myers this question and 15 she suggested that I talk with you or 16 Mr. Barber about it but let me state it again. 17 Ms. Myers had indicated in her testimony that, 18 quote, a large proportion, end quote, of the 19 proposed rate change is necessary to meet legal 20 requirements and the failure to construct 21 mandated projects or properly maintaining 22 existing lines and facilities bring with them 23 an immediate and direct repercussion. My 24 question of Ms. Myers is what constitutes a 25 large proportion in a percentage in that setting? PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 98 1 A. And I think where we are sitting 2 today, it's all of the program is regulatory in 3 nature as opposed to almost all. 4 MR. KINDSCHUH: Okay. Thank you. I 5 appreciate your time. I have no further 6 questions. 7 COMMISSIONER TOENJES: Thank you, 8 Mr. Kindschuh. Ms. Langeneckert, questions for 9 the witness? 10 MS. LANGENECKERT: Just one, just 11 clarification. 12 13 EXAMINATION 14 Questions by: LISA C. LANGENECKERT 15 Q. On your testimony on page 2, you 16 describe at line 13 which is question 9, the 17 list of projects in your direct testimony and 18 you say 3B1. Should that be 9B1? I think 19 maybe it was numbered differently at the time. 20 A. That is correct. 21 Q. I just wanted to make sure when I 22 referenced it, I had the right one. 23 MS. LANGENECKERT: That was my only 24 question. Thank you. 25 COMMISSIONER TOENJES: Thank you. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 99 1 Mr. Mueller, any questions for the witness? 2 MR. MUELLER: Yes. 3 4 EXAMINATION 5 Questions by: ROBERT MUELLER 6 Q. Hopefully this is within your area of 7 knowledge. Can you tell me when unpermitted 8 discharges take place? 9 A. When as in under what conditions or 10 date I guess? 11 Q. What conditions. 12 A. Under what conditions. Two 13 conditions. There can be something happen in 14 the system when there is not a wet weather 15 event. Blockage is somebody washes grease down 16 our sewers during the holidays and it blocks 17 the sewer, and even without rains, the sewer 18 will back up. It will happen during dry 19 weather. If the system is functioning, we 20 don't have any dry weather overflow of the 21 system, that occurs when something is not 22 functioning properly in the system. 23 The most -- the event I think we are 24 kind of talking here is during wet weather. 25 There is something called I & I which is called PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 100 1 inflow and infiltration and that is stormwater 2 getting into the system and that stormwater, 3 when it exceeds the capacity of the system, you 4 have an overflow from the system driven by the 5 amount of stormwater that gets into the system. 6 Those are kind of the two events that -- those 7 are the two events that cause an overflow. 8 Q. So that other than an unanticipated 9 event during dry weather, the only unpermitted 10 discharges occur during stormwater events or 11 storm rain events? 12 A. I think -- I hope I'm not missing 13 some real oddball thing but I believe, yes, 14 that is correct. 15 Q. Okay. 16 A. I will give you another one. 17 Somebody apparently poked a hole in one of our 18 forced mains at one time we didn't know about. 19 I guess you would call that a failure of the 20 system. Lacking that, there are no overflows 21 during dry weather. 22 Q. Are the issues in the litigation with 23 the EPA and the Coalition For the Environment, 24 do they deal primarily with unpermitted 25 discharges resulting from stormwater events, or PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 101 1 do they also include other operational issues, 2 in other words, some of the things that you've 3 talked about? 4 A. Yes, they include -- 5 Q. So they include -- 6 A. Yeah, I would refer probably the best 7 description of that is Item 5 on the facts 8 sheet under the CMOM program. I think that 9 gives a description kind of a pretty 10 comprehensive general list of the types of 11 things that are also in this Decree besides 12 eliminating wet weather overflows. 13 MR. MUELLER: Okay. Thank you. I 14 have no further questions. 15 COMMISSIONER TOENJES: Thank you, 16 Mr. Mueller. Mr. Arnold, questions for the 17 witness? 18 MR. ARNOLD: I have a couple of 19 clarification issues if I may. 20 21 EXAMINATION 22 Questions by: JOHN FOX ARNOLD 23 Q. Good morning, Mr. Hoelscher. Would 24 you please take a look at your testimony on 25 page 2, question 11? PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 102 1 A. Yes. 2 Q. And you refer to Table 3-9 as being 3 the basis for the wastewater capital improvement 4 and replacement program. Do you have 3-9 handy? 5 A. I don't have it here. 6 MR. ARNOLD: May I approach? 7 COMMISSIONER TOENJES: Yes. 8 Q. As I read that document, that's not a 9 declaration of the projects but the nature of 10 the financing for the projects, is that fair? 11 A. Yes. 12 Q. All right. And I'm no expert but 13 could you look at 3B which I've also handed 14 you -- I'm sorry, 3-8. 15 A. Oh, Table -- I'm sorry, 3-8. 16 Q. Is it possible to use that as the 17 basis for the wastewater CIRP program? 18 A. Yes. 19 Q. Thank you, sir. In response to our 20 request for discovery, you prepared a 21 tabulation of actual CIRP expenditures and we 22 also asked you whether or not the information 23 on Table 3-8 represented annual cash 24 expenditures or encumbrances, and your response 25 on page 12 of that document, if you don't have PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 103 1 it, I -- 2 A. Page 12 of the discovery request? 3 Q. Yes, sir. 4 A. Okay. 5 Q. And your response is, those are 6 encumbrances. Mr. Hoelscher, what is the 7 difference between an expenditure and 8 encumbrance? 9 A. The encumbrance, there must be a 10 sufficient -- we want to start a $5 million 11 project. The fund that we want to fund that 12 project out of has to have at least $5 million 13 in it for us to make the appropriation. So the 14 Board will take an action, appropriate $5 15 million, and the money is not encumbered so the 16 fund has to have sufficient dollars to be able 17 to make that appropriation. The expenditures 18 would be the actual cash flow of the payments 19 as that project moves forward. 20 Q. And that's later than the encumbrance? 21 A. Yes. 22 MR. ARNOLD: Thank you. Thank you, 23 Mr. Chairman. Thank you, Mr. Hoelscher. 24 COMMISSIONER TOENJES: Thank you, 25 Mr. Arnold. Any further questions for this PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 104 1 witness from any of the Rate Commissioners? 2 Mr. Tomazi. 3 4 EXAMINATION 5 Questions by: GEORGE TOMAZI 6 Q. I have one comment. Back in June of 7 '07 when this EPA in the State of Missouri 8 filed a lawsuit, filed their lawsuit, I 9 remember at that time a rather different price 10 tag of something in the range of $20 billion 11 was thrown on the table to achieve everything 12 that was in that suit. Today we're 13 at 4.7 billion which still by any standard a 14 big number but it's a very significant change 15 from where this whole thing seemed to start 16 back in '07. So, all I can say is whatever you 17 did, you did good. 18 A. Thank you. I think I'll provide a 19 little clarification. I think the larger 20 number came from very much a worst case 21 scenario out of the long-term control plan but 22 we will take any compliment we can get. 23 COMMISSIONER TOENJES: Mr. Schneider. 24 25 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 105 1 EXAMINATION 2 Questions by: ERIC SCHNEIDER 3 Q. In the Consent Decree fact sheet 4 mentions the Green Infrastructure Program or 5 the pilot program. Does this current rate 6 proposal have any elements of it that addressed 7 the Green Infrastructure, the $100 million 8 dedicated to the Green Infrastructure Program? 9 A. The five year pilot program, out of 10 that $100 million, $3 million has already been 11 appropriated prior to this rate hearing, prior 12 to this rate proposal for the five year pilot 13 program, so that leaves the balance of the 14 program being $97 million and there are dollars 15 in this rate proposal to start addressing the 16 $100 million commitment that is identified. 17 Q. Do you have an estimate of how many 18 dollars of the 97 remaining, how many will be 19 addressed in this rate proposal? 20 A. If you want me to take the time to 21 look through the list to find that. It's not 22 locked with me. It's $20 million, $5 million a 23 year. 24 Q. And kind of a similar question 25 regarding the SSO. Remedial measures on the PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 106 1 SSO master plan, you had the removal of 85 2 percent of the constructed SSO outfalls by 3 2023. Roughly what percentage are you going to 4 get to in this rate proposal to get close to 85 5 percent? 6 A. Here is what I can give you. In 7 the -- if you look at the fact sheet on Item 2, 8 you do see 50 of the overflows being addressed 9 by 2012. Those will be funded prior to this 10 rate case. Of the ones that remain, the exact 11 schedules will come out of the SSO master plan 12 that's described under Item 3 but any 13 information about the exact details of removal 14 is unavailable. 15 MR. SCHNEIDER: Okay. Thank you. 16 COMMISSIONER TOENJES: Questions by 17 any other Rate Commissioners for Mr. Hoelscher? 18 I have a question, Mr. Hoelscher. 19 20 EXAMINATION 21 Questions by: LEONARD TOENJES 22 Q. You mentioned program adjustments in 23 disinfection. What was the cost of that 24 program adjustment? 25 A. The disinfection was in the range of PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 107 1 $75 million for disinfection. 2 Q. Okay. And that 75 million dollars 3 was not anticipated in the last rate case? 4 A. Correct. 5 Q. So, could you describe the impact on 6 the rest of the program that occurred by having 7 to meet that $75 million obligation? 8 A. Sure. Once that came up, we 9 prioritized the funding for that regulatory 10 requirement. I think I mentioned earlier there 11 was some other ones but disinfection being the 12 largest. We started the design followed by the 13 construction process, dollars were eliminated 14 to address other regulatory issues that we 15 identified during the process. Those were set 16 aside, put on the shelf. If they were in the 17 design phase and toward the end of the design 18 phase, the design phase was completed; if they 19 were in the beginning, they were simply halted. 20 Because we were tracking the actual 21 dollar cost for the disinfection versus our 22 estimates, it did become evident that there 23 were going to be some more dollars available 24 because the bidding climate we mentioned, that 25 allowed us to pull some of the program in there PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 108 1 but it was a continuous monitoring of the 2 actual cost of the disinfection to see what we 3 could bring back into the program that had been 4 originally planned. 5 Q. So, would it be accurate to say that 6 approximately $75 million of the work that was 7 considered during the prior rate case was not 8 completed? 9 A. We recovered about $40 million to $50 10 million of that -- I can't compare them because 11 they are different timings but it's something 12 less than $75 million as it became apparent of 13 the extra dollars being available, we were able 14 to pull some work up. Off the top of my head, 15 I think it was in the $20 million to $25 16 million range that we were able to put back 17 into the program. 18 Q. About $50 million, can I assume that 19 that got rolled forward into this rate case, 20 into this CIRP then? 21 A. Yes, there are projects that were 22 identified in the first rate case that appeared 23 now in this rate case. 24 Q. You know, we had some discussions 25 when that adjustment occurred and I guess a PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 109 1 concern I have is and continue to have is when 2 we are at a four year timeframe of a rate case, 3 if some of these program adjustments or 4 regulatory changes take place in year two or 5 year three, in effect you are unable to address 6 that $50 million until the wheel came around 7 again? 8 A. Correct. 9 Q. And I think that continues to be a 10 concern of mine, that inability to respond and 11 I guess I would wonder where is the threshold? 12 How bad does it have to be before you decide 13 you're going to change and come back with 14 another rate? Is it $50 million, is it $100 15 million, where is that pain threshold because 16 our guys felt it. 17 A. The threshold -- we are under a 18 different set of rules. Under the last rate 19 proposal, the regulatory requirements we are 20 talking about, and I'll use constructed SSO's 21 as an example, they were illegal. We were 22 removing those as revenues were made available, 23 but as we sit here today, they are illegal. 24 That framework changes and we had the ability, 25 we have set deadlines for disinfection, do PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 110 1 those, move some of the other regulatory issues 2 off that don't have set deadlines. 3 The Consent Decree indicates 4 schedules of removal and addressing either 5 mitigation or removal of some of these issues. 6 There will now be a measure for everything. 7 So, MSD would have much less latitude to be 8 able to make adjustments. Things are that are 9 in the program simply have to get done. So, 10 you won't see us -- we won't have the 11 ability -- nutrients happen tomorrow and we 12 have to spend 200 -- 13 Q. Or happens two days after we finish 14 setting our new rate is more the question. 15 A. Whatever the worst time. If that 16 $250 million come up, we now have set schedules 17 for everything we are proposing to you. So, 18 it's the world is different. MSD will not 19 unilaterally be able to make a decision about 20 that. It will have to involve a lot of other 21 individuals. If that helps address the 22 question. 23 Q. I'm just trying to figure out what it 24 takes to push that button. 25 A. The threshold happens almost PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 111 1 immediately this time as compared to the last 2 rate cycle. 3 COMMISSIONER TOENJES: Any further 4 questions for Mr. Hoelscher? Thank you. Ms. 5 Myers, do you have questions for Mr. Hoelscher? 6 MS. MYERS: I do have a couple. 7 8 EXAMINATION 9 Questions by: SUSAN MYERS 10 Q. The schedule for compliance of the 11 Consent Decree is outlined in the detail sheet 12 as 23 years, is that correct? 13 A. Correct. 14 Q. And the rate case that we have here 15 before us supports the start of that 23 years? 16 A. Correct. 17 Q. Okay. Do you foresee the ability to 18 get a longer schedule than the 23 years that's 19 outlined in the detail sheet? 20 A. Do I? 21 Q. Let me rephrase that. If we decided 22 we needed 25 or 29 years at this point, do you 23 foresee that we could obtain that? 24 A. I would think probably not without 25 some very, very extreme reasons to be able to PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 112 1 extend the schedule. 2 MS. MYERS: Okay, thank you. I have 3 nothing further. 4 COMMISSIONER TOENJES: Thank you, 5 Mr. Hoelscher. Your next witness in order of 6 testimony filed is Jonathan Sprague. Is 7 Mr. Sprague here? 8 MR. SPRAGUE: Yes, I am. 9 COMMISSIONER TOENJES: Thank you, 10 Mr. Sprague. Is the testimony you're about to 11 give the truth, the whole truth, and nothing 12 but the truth? 13 MR. SPRAGUE: Yes, it is. 14 COMMISSIONER TOENJES: Thank you. 15 Any of the Rate Commissioners have questions 16 for the witness? That being the case, 17 Mr. Kindschuh, would you have questions for 18 Mr. Sprague? 19 MR. KINDSCHUH: Yes, we do. Thank 20 you. 21 COMMISSIONER TOENJES: Please 22 proceed. 23 24 JONATHAN SPRAGUE, 25 Of lawful age, being produced, sworn and PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 113 1 examined, and says: 2 3 EXAMINATION 4 Questions By: JOHN KINDSCHUH 5 Q. Good morning. I have a few questions 6 regarding your testimony that you submitted and 7 in particular, if I could direct your response 8 to question 17, this is on page 5 of your 9 testimony. 10 A. All right. 11 Q. Specifically in your response to this 12 question, "What federal requirements create 13 mandatory levels of wastewater service that 14 must be met by MSD that you refer to"? 15 A. I can't speak specifically about 16 what's in the Consent Decree but there was a 17 reference in the Board paper CMOM requirements, 18 Capacity Management Operations and Maintenance 19 that it stands for, and anticipate there will 20 be operations and maintenance requirements that 21 in essence become mandates and will drive our 22 program. 23 Q. Thank you. And have copies of those 24 documents been provided? 25 A. The Consent Decree isn't available PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 114 1 for public viewing yet. 2 Q. I'm aware of that. 3 MR. KINDSCHUH: Thank you. That's 4 all the questions that we have. 5 COMMISSIONER TOENJES: Thank you. 6 Ms. Langeneckert, do you have any questions of 7 this witness? 8 MS. LANGENECKERT: Not of Mr. Sprague, 9 no. 10 COMMISSIONER TOENJES: Mr. Mueller, 11 do you have any questions? 12 MR. MUELLER: I have no questions. 13 COMMISSIONER TOENJES: Mr. Arnold? 14 MR. ARNOLD: Nor have I. 15 COMMISSIONER TOENJES: Any 16 Commissioners have any further questions for 17 this witness? Ms. Myers? 18 MS. MYERS: We have none. 19 COMMISSIONER TOENJES: Mr. Sprague, 20 thank you for this. 21 I think we will begin Mr. Tyminski's 22 testimony and the Chair will reserve the right 23 to take a lunch break if we get too far into 24 his testimony. 25 You have to tell the truth both PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 115 1 before and after lunch. The testimony you're 2 about to give the whole truth and nothing but 3 the truth? 4 MR. TYMINSKI: It is. 5 COMMISSIONER TOENJES: Thank you. 6 Does any member of Rate Commission have 7 questions for Mr. Tyminski at this time? 8 Mr. Kindschuh, do you have questions for 9 Mr. Tyminski? 10 MR. KINDSCHUH: Yes, we do. 11 COMMISSIONER TOENJES: Please 12 proceed. 13 14 KARL TYMINSKI, 15 of lawful age, being produced, sworn and 16 examined, and says: 17 18 EXAMINATION 19 Questions by: JOHN KINDSCHUH 20 Q. Mr. Tyminski, good morning. This may 21 not be as short as Mr. Sprague. 22 A. I only wish. 23 Q. You indicate in your testimony that 24 the CIRP is anticipated to be funded with a 25 combination of 85 percent senior bonds and 15 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 116 1 percent State revolving fund loans, is that 2 correct? 3 A. That is correct, plus the cash. 4 Q. Sure. What are the maximum number or 5 amount of State revolving fund loans that MSD 6 could receive per year during the plan? 7 A. I'll go over what the constraints 8 are. I'm not sure there is a hard maximum on 9 that because it's a function of a number of 10 variables that have to be taken together. 11 The program itself that the State of 12 Missouri runs and I sent you, I believe, in the 13 response or at least in the Rate Commission's 14 response, I sent a copy of the intended use 15 plan from the State of Missouri is roughly a 16 billion dollar program. In looking at that 17 program, and knowing that their terms are 18 roughly a 20 year term, that presupposes a 5 19 percent payback a year or 1/20, so from that 20 you can deduce there is a cash flow of about 21 $50 million a year going into their program. 22 On top of that, the State of Missouri 23 receives capital grants from the federal 24 government as does any other state. The 25 capital grants were a target of the PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 117 1 administration's cuts. So, the administration 2 is pushing more for this Obama bank, a larger 3 infrastructure bank, and not necessarily as 4 much targeted to the SRF type funds. But it's 5 safe to say that the State gets about $30 6 million in terms of that type of grant a year 7 so they have an inflow of about $80 million a 8 year. Of the billion dollars, roughly all 9 million dollars is spoken for. 10 The unwritten ruled had been to 11 allocate the funds in the pool in a manner 12 similar to that of the population of the state. 13 Our service area has roughly 20 percent of the 14 population so if you do the math, 20 percent of 15 a billion dollars is about $200 million. 16 Currently we have closer to $400 million 17 outstanding so we are at a maximum level, I 18 believe, with the State of Missouri right now. 19 Given where we are population-wise, our share 20 of the pool, we're the largest singular 21 borrower in the pool. With that said, I would 22 see our return or our ability to use SRF funds 23 in the future to be something in the 24 neighborhood of $25 to $35 million depending on 25 their constraints in a given year, depending on PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 118 1 the projects, depending on the priority points 2 reaching those projects. Long answer but that 3 is the best answer. 4 They are constrained by the inflows. 5 They no longer have a leverage program because 6 of the market conditions. This is a cash basis 7 program so understand that what we are doing is 8 divvying up a share of that cash and I am 9 saying to you, if you think of that cash inflow 10 at $80 million a year, 20 percent would be 16 11 million, we are looking at a rate of that 12 already. 13 Q. All right. How many applications has 14 MSD submitted for State revolving loan funds at 15 this point? 16 A. I don't have an exact count. I know 17 it's numerous. We certainly have submitted for 18 the Missouri River Treatment Plant, we've 19 submitted other loans, smaller dollars in 20 nature, so my guess, somewhere between three 21 and five. It's a year by year basis. I don't 22 have an exact. 23 Q. What are the status of these 24 applications? 25 A. Missouri River Treatment Plant has PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 119 1 been approved. That is the one that we are 2 seeking that we are seeking current funding on. 3 We've been approved for a total of $77 million 4 of that on that plant. Future ones are to be 5 determined and it will be in the cycles of a 6 few years. 7 Q. Okay. And you state in your 8 testimony that the rate proposal assumes 9 approximately $35 million of the State revolving 10 fund loans per year. 11 A. Right. 12 Q. Given all the information that you 13 know today, do you still feel that that $35 14 million is an appropriate number? 15 A. I think it's on the optimistic side 16 but, yes, it's appropriate. 17 Q. What factor or factors could enable 18 MSD to secure more than $35 million? 19 A. I have to think that one through. 20 Obviously some windfall to the State of 21 Missouri program, but there is nothing that I 22 can see in the current legislation given the 23 current structure of the federal government 24 that would raise that. 25 Q. Okay. Thank you. What is the status PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 120 1 of Congress approving the authorization for the 2 Build America bonds or other similar vehicles 3 that you referenced in your testimony? 4 A. Well, if I could answer that 5 question, I should become a Washington 6 lobbyist, but barring that, the legislation, 7 you know, guide last year did not get renewed. 8 There is talk about that but I really can't 9 answer it. It's pure speculation on my part. 10 Q. Are there any other types of 11 government bonds or funding program grants, for 12 example, that MSD has considered at this point? 13 A. At this point, no. 14 Q. Are you aware of any other wastewater 15 districts that have received government- 16 sponsored funding assistance to fund their 17 capital expenditure programs? 18 A. Various districts have received 19 funding. I'm not sure of all the specifics. I 20 know that some have, though. 21 Q. Okay. Do you know what districts 22 these are? 23 A. Again, just in general I know that 24 they exist. 25 Q. And Mr. Tyminski, are you the person PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 121 1 who speaks with the State revolving fund staff 2 about loan availability? 3 A. I am one of the people that speaks to 4 them. 5 Q. Who else on MSD's staff would also 6 speak with them? 7 A. A representative from the engineering 8 department would usually go with me. 9 Q. But you're involved in almost all of 10 those conversations? 11 A. Yes. 12 Q. Okay. What federal, state, or local 13 agencies have you and your staff contacted to 14 discuss grants and contributions at this point? 15 A. Over the last 15 years, we have 16 gotten grants from the U.S. EPA, from Homeland 17 Security, and from the Department of the Army 18 through the Corps of Engineers projects. 19 Q. And have you contacted all of those 20 agencies recently? 21 A. We have a federal lobbyist that works 22 on our behalf to try to gain funds. There 23 really are no funds available at this point in 24 time, other than with the Corps and the 25 projects that are targeted in the St. Louis PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 122 1 area. 2 Q. Are there any other funds, federal, 3 state, local agencies, you intend to contact at 4 this point but haven't done so? 5 A. We always look to various federal 6 agencies but again, the budget situation in 7 Washington is kind of strained and we do not -- 8 we will work to obtain the most possible 9 funding but it is limited given the constraints 10 in Washington. 11 Q. Thank you. You stated in your 12 testimony that a feasibility report assumes 13 that future revenue bonds will be issued in the 14 average annual interest rate of 5.50 percent 15 over the next 30 years. Do you recall that? 16 A. For a 30 year term over the next four 17 years or over the life cycle of the term of the 18 rate report, yes. 19 Q. Correct, yeah. Thank you for that 20 clarification. Where did you get this 21 information, Mr. Tyminski? 22 A. At the time we were looking at an 23 existing rate on the 30 year debt of about four 24 and a half percent. We know that there is -- 25 we looked at long-term graphs that are in the PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 123 1 public domain such as on Bloomberg and the 2 various media sources and we know that we are 3 at one of the low points of that graph, so what 4 we did is we added 100 basis points to the 5 existing rate to get the five and a half percent. 6 Q. Do you believe that the five and a 7 half percent is an appropriate figure at this 8 point? 9 A. At this point it is. I mean, if you 10 consider the past rate cycle, the high point of 11 interest rates on a coupon basis was between 12 five and a half and 6 percent which occurred in 13 the fall -- late fall of 2008. So, given where 14 the last cycle was, given that parts were below 15 and parts were above, there is some uncertainty 16 with respect to interest rates. 17 You keep hearing about how the 18 interest rates are going to have to go up at 19 some point in time. We are projecting out that 20 the earliest we could issue the debt would be 21 at sometime in 2012, so we are projecting at 22 least a year if not four or five years into the 23 future. We were looking at more normalized 24 rates so that is why the five and a half was a 25 more realistic rate. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 124 1 Q. I appreciate it. You just 2 anticipated my next question, so thank you. 3 With respect to that feasibility report, how 4 does it arrive to the conclusion that the rate 5 will be at 5.5 percent? 6 A. Based on discussion between myself, 7 our financial advisor, and Mr. Barber, who 8 you'll have to chance to talk to later. 9 MR. KINDSCHUH: Great. Thank you. 10 At this point, the MIEC has no further questions. 11 COMMISSIONER TOENJES: Thank you. 12 Ms. Langeneckert, do you have questions for 13 Mr. Tyminski? 14 MS. LANGENECKERT: I do have a few if 15 I could move on up. 16 17 EXAMINATION 18 Questions by: LISA C. LANGENECKERT 19 Q. Good morning, Mr. Tyminski. If the 20 District receives approval for $945 million 21 bond authorization and issues all of the bonds 22 in the fiscal year of 2013 -- by fiscal year of 23 2016, what will the District's debt-to-equity 24 ratio be? 25 A. It would be -- I'll double check it PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 125 1 but I believe it will be -- we would reach 67 2 percent, I believe, debt to 30 percent -- 33 3 percent equity, I believe. I'll have to double 4 check the numbers. 5 Q. And what's the District's current 6 debt-to-equity ratio? 7 A. You are talking total or by the 8 wastewater line itself? 9 Q. Give me both. 10 A. Can I defer to a little later? I 11 need to get the financial statements. I'll be 12 happy to get those for you. 13 Q. Okay. So, later -- 14 A. Because we have a break for lunch, 15 I'll have those after lunch. 16 Q. Okay. Did the District consider an 17 alternative amount of unauthorization? 18 A. The alternative is obviously cash. 19 Q. No, an alternative amount. A higher 20 amount of cash and a lower amount of bonds. 21 A. We looked at a number of different 22 amounts. What we put in the report itself are 23 what I call the two book ends. We looked at 24 zero percent bonds of 100 percent cash and we 25 looked at and what we are proposing is pretty PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 126 1 much the polar opposite of that, being 94 2 percent bonds and roughly 6 or 7 percent cash. 3 Q. And did you look in the middle? Did 4 you look at a little more cash, a little less 5 bonds, or did you just look at the two options? 6 A. We looked at the two end posts 7 basically. We focused on the higher bond number 8 gives you yield a lower rate in the current 9 cycle. It gives you a more gradual rise in 10 rate but will cost more over the long run so, 11 yes, there are an infinite number of points 12 between zero, you know, percent bonds and 100 13 percent cash and where we are, so we do not 14 look at all of them but any of those could be 15 visited by this Commission. 16 Q. But you did not look at any other 17 than the two end posts? 18 A. Right. 19 Q. You didn't look at the middle? 20 A. No. 21 Q. Did you participate in the decision 22 to seek $945 million of bond authorizations? 23 A. Yes. 24 Q. If the MSD receives voter approval 25 for the bond funding, the plan is to phase in PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 127 1 rates, is that correct? 2 A. Yes. 3 Q. And MSD would increase rates by 11 4 percent in 2013 fiscal year, 12 percent per 5 year through 2016? 6 A. I thought it was around 13 percent a 7 year but okay. 8 Q. If the MSD does not receive voter 9 approval for the bonding issuance, the plan is 10 to increase rates in fiscal year 2013 by about 11 155 percent, is that correct? 12 A. About $73, yeah. 13 Q. For the average residential customer? 14 A. Right. 15 Q. And rates would remain flat for 2014 16 to 2016? 17 A. Essential. If you take a look at it 18 from a kind of a cost standpoint, the sooner 19 you get an increase, the longer you can keep 20 that increase going, so obviously if you take a 21 big jump in year one, then you can keep that 22 for a longer period of time, you'll end up 23 paying less in the total program over time, but 24 you're paying for it by cash. The bonds serve 25 as a gradual increase or somewhat more gradual PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 128 1 increase or a series of smaller step increases 2 to some point in time and then the cost of the 3 bonding will be greater than the cost of the 4 cash program. 5 Q. So, is that why the rates are not 6 phased in under the PAYGO scenario? 7 A. If you go with the PAYGO scenario, 8 you'll have to pay for the program up front 9 right now in cash and that cash will come in on 10 a 1/12 basis. You know, a little bit each 11 month. But you're going to have to be able to 12 fund a program right now so you're going to 13 even have to do some short-term borrowing to 14 get to where you need to be in that all cash 15 scenario. 16 Q. So, all of the cash would have to be 17 received in the very beginning, you could not 18 get smaller amounts as you would under the 19 bonding? 20 A. Are you asking -- okay, you're saying 21 instead of -- you are saying in an all cash -- 22 I don't know the answer to that. I don't 23 believe so. I think you're going to have to go 24 straight up to the 73. 25 Q. And why is that? PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 129 1 A. Because you're funding a program and 2 you need the ability to say we have a balanced 3 budget clause in our Charter. To comply with 4 the balanced budget clause of the Charter, we 5 have to show the ability to pay for the 6 projects. 7 So, if the projects for the cycle, 8 some of those are multi-year projects, you'll 9 have to pay for those up front. You'll have to 10 say okay, I've got the funding basis in hand. 11 So, because of that, you're going to have to 12 raise your rates significantly in the early 13 year to fund those projects. 14 Q. So, the reason for asking the full 15 amount in the beginning is because of the 16 clause in your -- 17 A. The balanced budget clause, correct. 18 MS. LANGENECKERT: That's all I have. 19 Thank you. 20 COMMISSIONER TOENJES: Thanks, Ms. 21 Langeneckert. Mr. Mueller. 22 MR. MUELLER: I have no questions, 23 thank you. 24 COMMISSIONER TOENJES: Mr. Arnold. 25 MR. ARNOLD: I do have several PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 130 1 questions. 2 3 EXAMINATION 4 Questions by: JOHN FOX ARNOLD 5 Q. Good morning. Early on in your 6 testimony you refer to the rate covenant in the 7 master bond ordinance. How many bond issues 8 have been authorized by the Board of Trustees 9 since the master bond ordinance was adopted? 10 A. Bear with me. Two in 2004, one in 11 2005, three in 2006, none in 2007, two in 2008, 12 and two in 2010. 13 Q. During the negotiations of the 14 amendment to the master bond ordinance, have 15 the rate -- has the rate covenant ever been 16 changed? 17 A. No. Rate covenant remains in effect 18 at 125 and 150. 19 Q. Okay. On page 4 of your testimony, 20 you make reference in the answer which begins 21 on line 13 to generation of debt service 22 coverages consistent with rating agencies, 23 expectations for high AA rated large 24 metropolitan wastewater systems. Have the 25 bonds issued by the Trustees generally been PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 131 1 treated as AA? 2 A. Yes. They've been AA+ bonds throughout. 3 Q. All right. Have they been rated AA+ 4 bonds with or without a credit enhancement? 5 A. Well, in more recent days there are 6 no credit enhancements. They've been rated 7 without the credit enhancements. Only the 2004 8 A series did we use credit enhancements. 9 Q. The pattern now is that the credit 10 markets do not require credit enhancements for 11 District obligations? 12 A. The credit enhancements would be very 13 questionable in the current market, yes. 14 Q. No question because -- 15 A. Yes, I'm in agreement. 16 Q. All right. Moving on to line 17, you 17 refer to today's cash on hand estimated at 485 18 days which is modestly stronger than credit 19 agencies median for this metric. Where does 20 the metric come from? 21 A. Metric comes from Fitch. 22 Q. It is Fitch. 23 A. It is a Fitch metric, yes. And also 24 there is a comparison table that our financial 25 advisor uses, it's somewhat proprietary. I do PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 132 1 not have it in my files. 2 Q. Then that may be the answer to my 3 next question. Does the District currently 4 engage a financial advisor? 5 A. Yes, we do, we engage two. We use 6 the firm of PFM and we also use the firm of 7 ButcherMark. 8 Q. I'm sorry? 9 A. ButcherMark and PFM. 10 Q. Page 7, question 21 at line 9, you 11 talk about 20 year term, two and a half net 12 interest administration fee, issuance cost of 13 .65, and a recent feasibility study series 14 2011A. Was that feasibility study prepared by 15 PFM or ButcherMark? 16 A. No, that feasibility study was 17 prepared by Black and Veatch. 18 Q. Thank you. Do you know whether or 19 not PFM and ButcherMark agreed with the 20 feasibility study prepared by Black and Veatch? 21 A. They seen copies of the feasibility 22 study or areas of the feasibility study that 23 would impact interest rates and issuance costs, 24 so yes, they have seen it and they have 25 concurred. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 133 1 Q. So, they have not expressed any 2 reservations about the terms of the study? 3 A. As it stands, no. 4 Q. Page 8, your response beginning on 5 line 8 and here we are talking about what you 6 describe as the District's revenue bond 7 requirements. Are these bonds different than 8 the State revolving fund? 9 A. Yes, they are. 10 Q. All right? 11 A. This is our stand-alone debt. 12 Q. All right. And you refer to a 13 feasibility report which assumes -- 14 A. The same feasibility report. 15 Q. It's the same report? 16 A. The same. 17 Q. All right. I'll pretend to ask all 18 of my PFM questions and you'll pretend to 19 answer? 20 A. Okay. 21 Q. Okay. Were you present when 22 Mr. Hoelscher described the distinction between 23 encumbrance and expenditure? 24 A. I was. 25 Q. Could you describe the District's PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 134 1 policy with respect to encumbrance, the 2 requirement for an encumbrance? 3 A. The requirement for a encumbrance in 4 general is a municipal accounting period to 5 encumber your cost. In the case of the 6 District when it comes to the capital projects, 7 which is really the focus of this discussion, 8 essentially we have a balanced budget clause in 9 our Charter. Most projects are appropriated or 10 cumbered at the time they are approved by the 11 Board, with the exception of a large multi-year 12 project that would drain the dollars where we 13 will sometimes go in with phased appropriation 14 over time. So, there is a correlation between 15 them from a budget standpoint. 16 If you think in terms of 17 appropriations in a one year period of time, 18 roughly 60 percent of those are actually 19 expended in that year, 30 percent will be 20 expended in the following year, 10 percent the 21 year after that. So it's 60, 30, 10 kind of 22 flow on average. 23 Q. All right. Now, the Internal Revenue 24 Service takes the position, I hope you agree 25 with me, that if the District issues bonds, PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 135 1 that the District must generally -- there is 2 some exceptions -- expend an amount within six 3 months, an amount within 18 months, and nearly 4 all of it at three years. If we have a 5 significant bond program such as the one with 6 which we are now concerned, do you have an 7 opinion as to whether or not recommendation of 8 the staff to the District would be to 9 completely encumber these projects or partially 10 encumber these projects, and if there is a 11 recommendation for partial encumbrance, what 12 would be the threshold? 13 A. Obviously there is going to be a 14 spend on provision in the IRS code, and 60 15 percent -- what is it 45 percent in six months 16 and everything spent out in the three year 17 period of time. So, the bond issues that we 18 will go out with will be sized to meet those 19 spend-out requirements as they have in the past. 20 Now, with respect to the encumbrances 21 in a larger -- there is something that has to 22 be considered. In a larger project, you can 23 effectively encumber on an annualized basis to 24 kind of spread over time. A series of smaller 25 projects, it's much more difficult because of PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 136 1 the nature and the number of them and when they 2 actually will come out. So, we have an -- all 3 I'm saying is that there is an administrative 4 constraint to the issue. We have to a degree 5 factored in multi-year or phased-in 6 appropriations. Case in point, cold water 7 project is one of those that we used and that 8 is the $77 million project, a very large 9 project, concurrent environment that we have 10 phased in over time. We have a history with 11 other projects where they are very large single 12 dollar projects that we phase in over time so 13 it's going to become a function of the 14 composition of the projects. 15 You have a number of million dollar 16 projects, you may, as Mr. Hoelscher pointed 17 out, as dollars become available through, let's 18 say, competitive bidding, keep in mind, we have 19 a program -- we have a program going which is a 20 series of projects so you're constantly moving 21 projects in and out of that program or forward 22 and back in that program. 23 So to answer your question, yes, I 24 think we've considered to the best possible 25 case given the administrative side of how these PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 137 1 projects work. 2 Q. There's been testimony this morning 3 about front end loading. Is there a cost to 4 the ratepayers when projects are front end 5 loaded? 6 A. Well, to a degree, yes. I mean, you 7 know, just from a conceptual standpoint. The 8 earlier you spend the money, the earlier it 9 leaves the treasury, that is going to incur an 10 interest cost, so yeah, there is a time value 11 of money to it. 12 Q. Is it possible to recover any of that 13 by investing the proceeds of the bond issues 14 before the expenditure of those funding without 15 running afoul of the arbitrage's rules? 16 A. In a normal interest rate environment 17 like we are in today, I would say yes, it is. 18 It is possible to do that as long as the issue 19 is sized correctly, and the interest rate 20 structure is more competitive with respect to 21 the interest expense structure. That is not 22 the case today, though. When you're investing 23 at five basis points or ten basis points, I'm 24 more concerned about the negative arbitrage. 25 Q. Has the District issued any Build PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 138 1 America bonds? 2 A. Sure have. 3 Q. And would you describe the role of 4 the federal government in the opinion of 5 interest -- in the payments of interest on 6 these bonds? 7 A. The Build America bonds were targeted 8 for the -- targeted in the corporate bond 9 marketplace so they are issued as taxable bonds 10 and the federal government will give us a 35 11 percent return or credit in the form of cash 12 after the interest was paid. We make a filing, 13 we file every year. We get 35 percent back in 14 cash. 15 So, when you look at the net interest 16 rate to the District, I think the Build America 17 bonds were something like a 340 for us for a 30 18 year debt which we thought was quite good, 19 though in fact we probably paid closer to like 20 5 percent of the coupon, but the federal 21 government gave us money back, yes, sir. 22 Q. Have you received any indication that 23 the federal government will delay the payment 24 of these federally-supported interest payments 25 as part of the discussion on debt, deficit, and PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 139 1 budgets? 2 A. We have received no formal notice. 3 Q. Informal notice? I read the Wall 4 Street Journal too. 5 A. I read what you've read in the press. 6 I don't have -- I don't have any formal or 7 informal notice for it. 8 MR. ARNOLD: Thank you, sir. 9 COMMISSIONER TOENJES: Thank you, 10 Mr. Arnold. We will now break for lunch until 11 1:20. We will reconvene at 1:20. We will 12 resume Mr. Tyminski's testimony. 13 (Break.) 14 COMMISSIONER TOENJES: We will resume 15 with the questioning for Mr. Tyminski. We left 16 off with Mr. Arnold having completed his 17 questioning and we will ask any Rate 18 Commissioners at this point if they have any 19 questions for Mr. Tyminski. Mr. Tomazi, please 20 proceed. 21 22 EXAMINATION 23 Questions by: GEORGE TOMAZI 24 Q. Would you tell us at the present time 25 what the existing total bonded indebtedness is PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 140 1 of the District and, second, what is it, the 2 maximum that the District can do without being 3 in serious financial trouble on interest rates 4 and credit rating? 5 A. Okay. The District currently has 6 outstanding as of April 30, $613,571,000 and 7 change. Now, the maximum -- there is a maximum 8 level of debt when it comes to general 9 obligation bonds, but in revenue bonds there's 10 not. It's what the market will bear in kind of 11 how you stack up against other agencies. 12 Traditionally, that had always been roughly 13 $1,000 per capita. So, if St. Louis had a 14 population of a million four, that is what our 15 service area is, multiply it by $1,000 is a 16 billion four. 17 That standard has gone up, though, 18 because of the EPA's pressure nationwide in 19 various cities to construct programs. That's 20 gone up. 21 Now, is there a magic number? There 22 is no set number but what it is it's ten 23 criteria that you're judged under depending on 24 how you fall on those ten, one of which would 25 be your coverage ratio, your interest rate PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 141 1 coverage ratio. In this proposal you targeted 2 two and a quarter times, 2.25 times coverage. 3 In this proposal, another one is the amount of 4 cash you have on the end, the number of days 5 cash you have on end and I'll answer that in 6 your bottom line question in a second. What 7 has happened with the Districts, we've seen our 8 cash eroded. When Mr. Hoelscher was up here 9 earlier, he talked about the projects that were 10 not included in the rate cycle, the 11 disinfection projects. Those disinfection 12 projects were paid for on a cash savings. The 13 District drew down cash, so that cash number is 14 a little lower today than it had been in the 15 past which impacts the amount of bonding we can 16 take on in the future without a decrease. 17 The third thing they look at is 18 something called operating margin. It's how 19 much extra we have after our operations, you 20 know, to sum total. Somebody like Northeast 21 Sewer District would -- out of the Cleveland 22 area -- would be about 60 percent. Our numbers 23 show more like 30 percent. So, if you take a 24 look at all of these metrics or measures, we 25 come off somewhere in the billion seven to PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 142 1 $2 billion area before we run into a credible 2 problem. 3 But, again, that's a judgment call. 4 Everybody is going to look at these differently. 5 The rating agencies have been under a lot of 6 pressure since 2008. They can get scared very 7 fast. It's not a quantitative judgment, it's a 8 qualitative. It's just a judgment call. 9 Q. Second part of that question is, as I 10 recall, there was -- there is a limit also 11 based on the median family income of how much 12 the monthly bill could be or annual bill and 13 there might have even been different rates for 14 the St. Louis City and St. Louis County. Do 15 you have those handy? 16 A. There is -- there is a percentage of 17 median household income to determine burden on 18 the ratepayer themselves. I'm probably not the 19 best person to ask that question to. I'm going 20 to defer either to Jan or to Keith coming after 21 me for that answer but there is -- you are 22 correct. 23 COMMISSIONER TOENJES: Further 24 questions? Yes, Mr. Koenen. 25 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 143 1 EXAMINATION 2 Questions by: GLENN KOENEN 3 Q. Compared to other sewer districts 4 around the country, $945 million in new bonds, 5 where would that put St. Louis, say, compared 6 to Cleveland or other areas that have gone into 7 debt with bonds? 8 A. Pretty much in the middle of the 9 pack. It will fall right in the medians across 10 the board. If you currently have $600 million 11 outstanding, you add 945 to that and subtract 12 out maybe $70 million in payments, you're going 13 to be kind of right at that number. You're not 14 going to be above it. Your days of cash on 15 hand will be decent but not 600 or 700 days of 16 cash on hand, more like four. 17 The operating margins, as I said, is 18 already running a little bit below where others 19 are. So, looking at the variables, they'll put 20 us at the median, not above. 21 Q. Which would imply a pretty decent 22 bond rating because you're not on the outside? 23 A. No, we're above. Right now we are 24 AA+ in two of the categories and AAA with 25 Fitch. It means that our metrics are above PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 144 1 normal. It will put us more in line with 2 normal. It's slightly below where we are or 3 show right now. 4 MR. KOENEN: Thank you. 5 COMMISSIONER TOENJES: Any further 6 questions for Mr. Tyminski from the Rate 7 Commission? Yes, Eric. 8 9 EXAMINATION 10 Questions by: ERIC SCHNEIDER 11 Q. Karl, in your testimony on Question 12 6, you talked about the projected debt 13 coverage, kind of go in some calculations about 14 the senior debt service coverage and percentage 15 of and your final sentence says, "While the 16 projected debt coverage exceeds master bond 17 ordinance" -- I'm on page 2. 18 A. I see it. Lines 20 through 23. 19 Q. "Projected cover rates are only in 20 line with median metrics used by the credit 21 rating." Can you expand on that? You said 22 only in line with median metrics. What are the 23 median metrics and exactly where? 24 A. The median metrics, the best place to 25 find them would be in the Fitch 2011 Median PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 145 1 Metrics or Metrics for Organizations of various 2 size or various size and credit ratings. 3 We are carrying a better than average 4 credit rating and what I'm saying to you is 5 that the metrics that we are seeing are more in 6 line -- this program will be a large burden for 7 the population. I mean, there is two things 8 you have to consider. When this program comes 9 to us, you have to consider first the number of 10 miles of sewers that we have. That was 11 mentioned in the opening comments but I would 12 like to hone in on that a little bit. 13 We have 10,000 miles of sewers, much 14 greater than anybody else. So, you got a large 15 number of sewers concentrated on a smaller 16 population base than other cities, which is 17 going to require a program size which is larger 18 than some that we've seen. I mean, if you take 19 a look at the program size to the average 20 population, it's like $13,000 a person. There 21 are some larger than ours but it is on the 22 larger size, so this is a large program for 23 this area. We are also seeing an area that is 24 not an area that's of great growth. Anything, 25 we've seen a slight negative growth. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 146 1 So, what I'm saying is that what we 2 are seeing is median metrics, we carry a better 3 than median credit rating now. There is some 4 pressure on that credit rating is what I'm 5 saying. That is exactly what I was trying to 6 get at. 7 Q. And then it's hard to predict for the 8 next rate cycle but if we were to continue 9 bonding, that puts continued pressure on the 10 rate. If we were to do the same type of 11 percentage bonding for the next rate proposal, 12 that would put considerable more pressure on 13 the bond ratings or does -- 14 A. As you go through with a large use of 15 debt, it is going to put considerably more 16 pressure on bond ratings because you'll have -- 17 it comes down -- think of in terms like your 18 household and how much you have in the bank as 19 far as savings and how much you have cushion 20 each paycheck, and the more savings you have 21 and the more cushion you have, the stronger 22 credit rating you have. 23 In the case where we go through a 24 large program when you start drawing down that 25 cash and the amount of PAYGO cash relative to PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 147 1 debt cash is smaller means that you're not as 2 able to meet an unexpected event as you are 3 with higher cash. 4 MR. LIYEOS: Mr. Chairman. 5 COMMISSIONER TOENJES: Mr. Liyeos. 6 7 EXAMINATION 8 Questions by: GEORGE LIYEOS 9 Q. The bonding capacity that you have is 10 based upon assessed valuation? 11 A. No. That is a general obligation 12 bond rating -- remember, the two types, the GO 13 bonds which are based on assessed valuation and 14 then there is revenue bonds which are based on 15 the metrics I was talking about. 16 Q. Okay. In terms of the cycle that 17 you've experienced over the last several years, 18 has there been a downturn in terms of that 19 revenue stream? 20 A. Yes. As a matter of fact, I'll defer 21 to Ms. Zimmerman. They'll talk about that but, 22 you know, you have a number of major players 23 that are not here today that were here then. 24 Q. Does that represent, again, to Eric's 25 point as it relates to the timing of this, if PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 148 1 you go forward with that, that may continue to 2 decrease in terms of that revenue stream? 3 A. That's correct. There is going to be 4 pressure on our credit rating as we go through 5 this program. The goal is that we maintain 6 that credit rating as long as possible at the 7 current level. 8 Q. And more than likely, a AAA bond 9 rating is not in the cards? 10 A. Over the long-term, I would doubt it. 11 There is no other place to go but down. 12 COMMISSIONER TOENJES: Thank you, 13 Mr. Tyminski. Further questions by any Rate 14 Commissioners? 15 16 EXAMINATION 17 Questions by: LEONARD TOENJES 18 Q. As the bond rating drops, which I 19 think you suggested it may. 20 A. It could. 21 Q. What is the dollar value of that for 22 each drop in rating percentage-wise? 23 A. It depends. A drop from, let's say, 24 a AAA to a AA+ probably could be absorbed in 25 the numbers that we are looking at right now. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 149 1 If it drops more than a couple notches, like if 2 you have a AAA, then you have a AA, then you 3 have an A, if you go from a AAA -- or a AA to 4 an A, let's take that hit, that could easily be 5 75 basis points or three-quarters of a percent 6 on the amount that you're paying over a third 7 of your life. You can have significant 8 numbers. On this proposal I looked at if we 9 went from a AA to an A, you could be talking at 10 least $25, $30 million more. So, the credit 11 rating does matter. 12 Q. And your suggestion is that this 67 13 percent that the equity where you'd be in 2016 14 would be in the middle of the pack? 15 A. It would be in the middle of the 16 pack, yes. It would be in the middle of the 17 pack. It puts us in the middle. What does 18 that mean to the credit rating agencies? I'm 19 not sure. Does that mean it's a AAA? Probably 20 not. Does it mean it's a AA? I don't know, 21 it's only speculative. Does it mean it's a 22 AA-? I don't know. I'm hoping that we stay in 23 that area. We are working to that stay in that 24 area. 25 Q. I think you would be, from what I'm PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 150 1 hearing, you would be safe to assume by the 2 conclusion, if the bonding proposal you have 3 before us was accepted by the Rate Commission, 4 that you would see a reduction in the bond 5 rating for the District? 6 A. I don't know if I would say would. 7 You could. You could. There are other factors 8 that come into play and that's how -- we have a 9 number of factors going forth to keep in mind 10 that the credit rating, like the management, 11 like the proactive stance we've taken and like 12 our strategic planning, they feel the community 13 has responded well, so there is some pluses 14 there. I can't speak for them. I would say 15 that there is that possibility, could be a 16 strong possibility, but I wouldn't say it 17 would. Okay. 18 Q. I have one other question. You 19 mentioned that you had developed book ends that 20 you had before us but didn't develop any 21 scenarios along the rest of the continuum? 22 A. That is correct. And maybe you want 23 to defer to Mr. Barber to see if he has any 24 extra set of scenarios but I did not use any 25 other scenarios, I looked at the two book ends. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 151 1 COMMISSIONER TOENJES: Any other 2 questions by any Rate Commissioners? Ms. 3 Myers, do you have questions for Mr. Tyminski? 4 MS. LANGENECKERT: Could I inquire 5 before she does? Mr. Tyminski was able to get 6 the answer during the lunch break? 7 A. Yes, I was. Right as of April 30th, 8 our total net assets are $2.2 billion. As of 9 April 30th, as I just testified, we have $613 10 million of debt. On a total basis that 11 calculates out to be 27 percent. On the 12 wastewater operation alone, our assets are a 13 billion, 698 net, of which $613 million is the 14 debt. That comes out to be 36 percent. 15 MS. LANGENECKERT: Thank you. 16 COMMISSIONER TOENJES: Ms. Myers. 17 MS. MYERS: I just have one. 18 19 EXAMINATION 20 Questions by: SUSAN MYERS 21 Q. For clarification purposes, the Fitch 22 metrics that you were referencing in your 23 discussion, are those shown in MSD Exhibit 11C? 24 A. That is correct. 25 MS. MYERS: Thank you. That's it. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 152 1 COMMISSIONER TOENJES: Thank you, 2 Mr. Tyminski. Our next witness by order of 3 testimony filed is Janice Zimmerman. Janice, 4 is the testimony you're about to give the 5 truth, the whole truth, and nothing but the 6 truth? 7 MS. ZIMMERMAN: Yes. 8 COMMISSIONER TOENJES: Thank you. 9 Does any member of the Rate Commission have 10 questions for the witness at this time? Seeing 11 none, Mr. Kindschuh, do you have any questions 12 for Ms. Zimmerman? 13 MR. KINDSCHUH: Yes, we do. 14 COMMISSIONER TOENJES: Please proceed. 15 16 JANICE ZIMMERMAN, 17 of lawful age, being produced, sworn and 18 examined, and says: 19 20 EXAMINATION 21 Questions by: JOHN KINDSCHUH 22 Q. You state in your testimony that the 23 proposed wastewater increase is fair and 24 reasonable and that it proportionately 25 distributes the District's projected costs over PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 153 1 all classes of ratepayers using a user charge 2 method tied to customer water usage. Why is 3 this the case? 4 A. Primarily because this is a rate 5 design method that is -- has been accepted and 6 used across the country and has been upheld by 7 the Missouri courts. So, based on that 8 methodology, we consider the rate to be fair 9 and equitable. 10 Q. Thank you. Why did MSD get rid of 11 the Uniform Compliance Charge? 12 A. The Uniform Compliant Charge, if you 13 remember from the last proceeding, ended up 14 being about $30 per commercial entity 15 regardless of the size, and that was one of the 16 components where we did have some members of 17 the public appear and basically express their 18 dissatisfaction with that. 19 The individuals, if I remember 20 correctly, who appeared were of smaller 21 commercial entities and the example that we use 22 when we explain this is sort of like an H & R 23 Block, they have a bathroom, maybe they have a 24 little kitchenette and a sink, and so they 25 don't require as much monitoring for PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 154 1 environmental reasons of their wastewater flow, 2 and they were still bearing the $30 a month 3 charge versus an Anheuser-Busch. So, this 4 proposal restructures that compliance charge to 5 what we think makes it more fair and equitable. 6 So, there are tiers so that if a 7 customer is an H & R Block, which is 94 percent 8 of our commercial customers, they will pay less 9 and it ramps down from the $30 a month which 10 they'll be paying for one more year to just 11 over $2 a month by fiscal '12. Conversely, the 12 larger commercial customers will then pay more 13 relative to the amount of monitoring that's 14 required for clean water. 15 Q. How did MSD develop this five tier 16 structure? 17 A. We looked at the cost. We do have a 18 component of the District that does nothing but 19 monitor these types of environmental components 20 in the wastewater flow. We looked at their 21 costs and we determined through their costs on 22 an inspection and sample basis how much was 23 associated to varying levels of commercial 24 customers. Usually the larger the customers, 25 the more the number of inspections they need PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 155 1 and the number of samplings. Not always the 2 case. You can have a restaurant, small, but 3 they have grease going into their drains so 4 that may require more of a sample, more 5 sampling. 6 So, we looked at their costs and we 7 were able to discern what levels of monitoring 8 apply to different sizes of commercial 9 customers, and on that we were able to use that 10 as the basis to charge back, if you will, the 11 cost of that compliance based on commercial 12 charges. 13 Q. Okay. Why did MSD define the level 14 of effort by the number of inspections and 15 samples needed to assess the compliance of each 16 residential customer? 17 A. Primarily because that's the cost 18 driver, and MSD, since we are not a profit- 19 oriented company, we have to recover our costs, 20 so it's tied as closely as we could to the 21 cost. 22 Q. Are there any other cost drivers 23 besides the inspections of the sampling? 24 A. No. I mean, there is a level of 25 regulatory monitoring that occurs across the PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 156 1 District, so part of that compliance charge was 2 to shift that to basically everybody. So, 3 everybody shares the cost of that more generic 4 kind of monitoring but it's all tied to one 5 monitoring cost. 6 Q. What are MSD's anticipated environmental 7 compliance costs for non residential customers 8 for this year? 9 A. I don't have that handy. I don't 10 have it handy right now. I would have to look 11 that up. 12 Q. Is that something you prepared and 13 have available or is that something that you 14 haven't -- 15 A. No, we can make it available. 16 Q. Okay, great. And then what portion 17 of MSD's costs are recovered from each customer 18 tier level, you know, 1 through 5, for each 19 year? 20 A. I don't know on a percentage basis 21 the total cost. As I said, we tried to 22 structure the rate so it recovered the costs 23 associated with each of those types of tiers 24 but I don't have the exact percentage 25 proportion right now. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 157 1 Q. So, the goal would be to recover as 2 close to 100 percent of those costs as possible? 3 A. Definitely. That's how the entire 4 rate proposal is designed. We have to recover 5 our costs. 6 Q. Okay. Are there any customers that 7 do not fall into one of the five tiers for any 8 reason? 9 A. Residential. It only applies to 10 commercial customers. And multi-family, it 11 doesn't apply to multi-family. 12 Q. Are there any exemptions or 13 opportunities for non residential customers to 14 move down in a classification? For example, 15 originally identified as a Tier 5 then would be 16 reclassified as a Tier 4? 17 A. I suppose that's a possibility. We 18 didn't really factor that kind of movement into 19 the proposal. 20 Q. Okay. With respect to the budget, 21 what are the inflation allowances used in the 22 rate study report and how are these derived? 23 A. There were -- I can talk generally to 24 it since I don't have it in front of me, and I 25 think the more specific information would come PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 158 1 from Mr. Barber, but for the most part, we used 2 inflationary types of percentages but then 3 there are key components of our budget that do 4 not bear on inflation. As we all know health 5 benefit costs are very high, our pension plan 6 growth is based on investments and how much we 7 have to contribute. Those are two big 8 categories that are out of, say, whack and 9 there are some others, but for the most part, 10 we try to gauge it off of inflation. 11 Q. Okay. And how do these inflation 12 allowances compare with previous budgets for 13 MSD? For example, are they higher, are they 14 lower, are they the same? 15 A. They are slightly lower. We don't 16 tag them to what inflation is right now, 17 recognizing that we are kind of in an 18 extraordinary situation right now in the 19 economy, so we try to do the best we can and 20 say what was the historical average, yet we 21 know the historical average was probably too 22 high to take going forward. So we try to do 23 kind of a best estimate as we plan the worst 24 case scenario with the best case scenario. 25 Q. How do these inflation allowances PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 159 1 compare with other budgets for other sewer 2 districts across the country? 3 A. I can't tell you that. I don't know. 4 Q. That's something you haven't studied? 5 A. No. 6 Q. Do you know if there is anyone on 7 MSD's staff who has studied that? 8 A. Not to my knowledge, no. 9 Q. Do you anticipate that there will be 10 any deficiencies or challenges with the budget 11 that's currently being reviewed by the Board of 12 Trustees? 13 A. No, I don't. We historically come 14 under budget every year and we do have to 15 present a balanced budget, and given that we 16 tightly budget and we tightly manage to that 17 budget, I don't foresee any problems. That's 18 the general operating budget I'm referring to. 19 Q. Thank you. And shifting topics a 20 little bit to the taxing subdistricts. What 21 portion of the SEP is associated with MSD's two 22 taxing subdistricts, the Lower Meramec River 23 Basin and the Missouri River Bottom? 24 A. I can't answer how those projects 25 fall into those two subdistricts. That would PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 160 1 be a question for Brian Hoelscher. 2 Q. Mr. Hoelscher? 3 A. Yes. 4 Q. And what was the amount of the ad 5 valorem tax revenue collected in these 6 subdistricts prior to 2008? 7 A. In those particular two? 8 Q. Correct? 9 A. I would have to check and get that to 10 you. I don't have it in front of me. 11 Q. But that's information that you would 12 have available? 13 A. Yes, it is. 14 Q. Okay. Thank you. And my final 15 question, why have ad valorem taxes not been 16 levied in either subdistricts since 2008? 17 A. Those are wastewater only 18 subdistricts. All the other subdistricts we 19 have are stormwater. When the stormwater 20 litigation came on in and that rate was 21 determined to be unconstitutional, we put those 22 taxes back in place; however, those two 23 subdistricts are wastewater only and so we 24 don't run wastewater with taxes, so there are 25 no taxes in those two. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 161 1 MR. KINDSCHUH: Okay. Thank you for 2 your time. The MIEC has no further questions. 3 COMMISSIONER TOENJES: Thank you, 4 Mr. Kindschuh. Ms. Langeneckert, do you have 5 any questions? 6 MS. LANGENECKERT: I do. 7 8 EXAMINATION 9 Questions by: LISA C. LANGENECKERT 10 Q. I'm referencing your testimony, 11 Exhibit 90, on page 2, and lines 5 through 7. 12 A. Am I looking at direct testimony 13 or -- 14 Q. Yes, your direct testimony. 15 A. Okay. 16 Q. And you state that the rate proposal 17 is necessary to avoid jeopardizing the 18 District's compliance with anticipated 19 regulatory requirements. 20 A. Yes. 21 Q. Does the District now know what those 22 regulatory requirements are going to be for 23 compliance? 24 A. What that refers to is the Consent 25 Decree and the entire CIRP is structured to PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 162 1 comply with that CD, so that is limited to the 2 CD. 3 Q. So, you learned of that before any of 4 the rate increase was put together? 5 A. Excuse me? 6 Q. You knew what the amount would be and 7 what your requirements would be for compliance 8 before the actual rate case was developed? 9 A. No, no, that is not what I said. 10 Brian Hoelscher in engineering developed a CIRP 11 to meet, what my understanding is, what he 12 knows of the CD. I wasn't privy to those 13 conversations as part of the mediation, and so 14 it's basically engineering presented what that 15 program needs to be and we structured a rate to 16 make sure that it could be funded. 17 Q. Okay. So, at the time the case was 18 designed, someone was aware of what the 19 requirements would be so that it could meet 20 those requirements? 21 A. I really can't -- I don't know. I 22 don't know what engineering knows and what they 23 were basing it on. I just know that the 24 premise of this was to parallel and be in 25 compliance with the Consent Decree. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 163 1 Q. Mr. Hoelscher? 2 A. Yes. The projects and CIRP would be 3 Mr. Hoelscher. 4 Q. Did you participate in the decision 5 to seek the $945 million in bond authorization 6 to help the MSD's CIRP program? 7 A. I was involved with that discussion 8 to the extent that it would affect the cash 9 debt relationship and the rate proposal and 10 what that would do with rates. 11 Q. If MSD receives voter approval for 12 the bond funding, the plan is to phase in rate 13 increases, is that correct? 14 A. Yes. 15 Q. And in some of the materials, the 16 numbers showed 11 to 12 percent and others it 17 showed 13 percent. So, what is your 18 understanding of how the rates would increase 19 over that four year period? 20 A. 13 percent a year. 21 Q. These are the same questions I asked 22 Mr. Tyminski so you probably know what is 23 coming. If MSD doesn't receive the voter 24 approval for the bond issue, the plan is to 25 increase the rates by 155 percent and the rates PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 164 1 would remain flat for the remaining years, is 2 that correct? 3 A. Right. In the rate proposal, the 4 rates hit about $47 a month by fiscal '16 and 5 ramps up to that point from fiscal '13. If we 6 didn't get the bond authorization, those rates 7 would have to go up to about $73 a month right 8 away and then they would level out which was, 9 if you remember the last Rate Commission, there 10 was the concept of, you would use PAYGO, 11 meaning 100 percent cash, to a certain point, 12 you would use bonds to a certain point, and 13 eventually they would cross and you would be in 14 100 percent PAYGO situation. 15 In the last proceedings, that is what 16 we proposed is that we use PAYGO longer before 17 we tapped into debt. And then at the point 18 that it would go to 100 percent debt, it levels 19 out basically at rate of inflation. 20 Well, given the need for bonds now 21 and if we don't get that authorization, we 22 would be basically crossing into that 100 23 percent PAYGO right away and the same premise, 24 it then would stay at about inflationary rate 25 going forward. That is why you see the drop PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 165 1 and then it stays flat. Not that you can see 2 my hands moving on the record. 3 Q. And that's why there is no phase-in 4 of PAYGO? 5 A. In the second alternative? 6 Q. Yes. 7 A. Yes. 8 Q. Well, not alternative, but yeah. 9 A. Yes. 10 Q. The default program. 11 A. Right. It assumes that since we 12 don't have bonds to fund what is the 13 significant portion of that CIRP, we have to 14 get the money somewhere, we would have to get 15 it out of PAYGO. 16 Q. You would have to get it all up front? 17 A. Right. 18 Q. Is that because all of the projects 19 that you have to develop would be paid for in 20 the very beginning? 21 A. Well, the projects still have to be 22 paid for and right now the projects are for 23 each of those components paid for with a piece 24 of cash and a piece of debt. When you remove 25 that debt, you still have to pay for that total PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 166 1 CIRP and the only place you can make it up is 2 in the cash, okay. And then that gets you the 3 rate that you need to sustain what is pretty 4 much an equal CIRP every year. It's about 250 5 to 270 in terms of a million. 6 So you get up to cover your first 7 $250 million chunk what you need through cash 8 and then every year you are doing about 250, so 9 that same rate can be sustained and funded the 10 same every year. 11 Q. Has the District considered an 12 alternative CIRP project schedule if the voters 13 reject the bond issuance? 14 A. No, not to my knowledge. The CIRP is 15 what we need to comply with the Consent Decree. 16 Q. So, it's because of the Consent 17 Decree, then, it is that amount and you 18 couldn't change it even if you wanted to? 19 A. That's my understanding. 20 Q. Now, you reference Mr. Hoelscher's 21 direct testimony -- I already asked him this. 22 In Mr. Barber's testimony, he was asked the 23 question and maybe that you will prefer that I 24 ask him this but I wanted to get your opinion. 25 He states that his testimony, and I can give PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 167 1 you the page reference if you have it, page 16, 2 line 3. He states, "That although anticipated 3 expenditure levels are presented as fixed, the 4 District has scheduling flexibility of the 5 projects within each major category." If the 6 District has scheduling flexibility, was this 7 considered in determining the PAYGO alternative 8 or is your answer still the same as previously? 9 A. I would rather leave that to 10 Mr. Barber. By major category, I think you can 11 look at page 3.6 in the rate report and that 12 will give you the CIRP broken down by the 13 types, CSO, SSO, et cetera. My understanding, 14 I'm not sure, you would have to defer to 15 Mr. Hoelscher, if we have any flexibility to 16 move them between those major categories, but 17 that's what Mr. Barber is referring to is those 18 major categories, not deferring or changing 19 projects. 20 Q. Okay. I'll check with Mr. Barber. 21 Did the District consider an alternate amount 22 of bond authorization? I know Mr. Tyminski 23 said no but I didn't know if perhaps you had or 24 other divisions in the District have? 25 A. I can't remember the exact dollars. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 168 1 It might have changed from $900 million to 945. 2 It was always very close to the 945. 3 Q. So, the percentage was generally the 4 same? 5 A. Right. Right. 6 Q. And do you know if there is a reason 7 why that was not considered other alternatives 8 other than the end posts as Mr. Tyminski 9 described? 10 A. We were trying to take an approach of 11 being -- as having a practical balance as we 12 can between bonds and cash to still provide as 13 much mitigation of rate increases as we could. 14 So that was still our philosophy to try to use 15 the bonds to keep the rates what we think is as 16 low as practical given the CDs. 17 Q. And a little bit earlier after lunch 18 Mr. Tyminski had said what he thought that the 19 debt-to-cash ratio was for the company. Are 20 those numbers that you also agreed to? 21 A. Agreed to -- 22 Q. Do you agree with the numbers, the 23 percentages he gave? 24 A. Yes. 25 MS. LANGENECKERT: That's all I have. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 169 1 Thank you. 2 COMMISSIONER TOENJES: Thank you, Ms. 3 Langeneckert. Mr. Mueller. 4 MR. MUELLER: I have no questions. 5 Thank you. 6 COMMISSIONER TOENJES: Mr. Arnold. 7 MR. ARNOLD: Thank you, Mr. Chairman. 8 I do have at least one area I would like to 9 explore a little bit. 10 11 EXAMINATION 12 Questions by: JOHN FOX ARNOLD 13 Q. Good afternoon, Ms. Zimmerman. 14 A. Good afternoon. 15 Q. Do you have handy MSD 11B -- 16 A. Yes. 17 Q. -- which represents the responses to 18 our discovery request? 19 A. Yes. 20 Q. Could you turn to page 25. In 21 response to our request, you provided a 22 schedule of the bad debt expense and write-offs 23 for the years 2006 through 2010 and also part 24 of 2011. If I read this schedule correctly, 25 the bad debt in fiscal year 2006, now, is this PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 170 1 at the end of the fiscal year? 2 A. End of the fiscal year. 3 Q. Okay. Was $3,160,972? 4 A. Yes. 5 Q. All right. And at the end of 2010, 6 it was $10,187,508? 7 A. Correct. 8 Q. I won't mess with the partial year 9 for '11. What is the policy of the District 10 with respect to writing off bad debt? 11 A. Bad debt is written off per our 12 financial statements after 12 months. So, if 13 the debt is older than a year, it is written 14 off for financial statement purposes. There is 15 a percentage, though, that the debt is looked 16 at in total and then there is a probability 17 applied. So, if something is 90 days 18 delinquent, what is the probability you would 19 collect it. Probably close to 100 percent. As 20 the accounts get older, your probability of 21 collection goes down. So, those write-offs are 22 a combination of the probabilities of what we 23 would collect of things that are 12 months or 24 less in length. Did that answer your question? 25 Q. Yes, ma'am. Does the staff of the PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 171 1 District have any opinion as to why the bad 2 debt rose, I guess, a little more than three 3 fold over the four year period? 4 A. There is two things that probably 5 impacted that the most. The rate increases 6 were happening through there. So, someone who 7 might be delinquent on a current bill, then 8 their delinquency grows because the bill itself 9 has gone up. In addition, we are also starting 10 to see the impact of the economy. Delinquencies 11 have increased since the economy has gotten 12 worse and people didn't have the ability to 13 pay, so it's a combination of those two things. 14 Q. Now, at our request you provided a 15 description of the District's process for 16 payment of receivables from delinquent accounts? 17 A. Correct. 18 Q. What I'd like to do, if I may, is go 19 through each of these areas and have you 20 describe it for us. 21 A. Fine. 22 Q. How about pre collect? 23 A. Pre collect is the initial portion of 24 our collection process. It's pretty much an 25 automatic call on your phone, I'm sure PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 172 1 everybody has gotten them. They are referred 2 to as robocalls. If someone is 30 days 3 delinquent, they'll get an automated call just 4 kind of reminding them hey, and we do that for 5 the first 90 days. So, that's pre collect. 6 Q. Now, you started this program in 7 January of this year? 8 A. Yes. As a pilot, like a beta 9 program. We are about to implement it 10 permanently but we did have considerable 11 success on a beta basis. 12 Q. And why did you pick 120 days as the 13 delinquency period? 14 A. 120 days is pretty much a standard. 15 When you look at collection operation, 120 day 16 delinquencies is the first threshold that you 17 then take it to another level in the collection 18 process. 19 Q. All right. Let's go to collection 20 agencies where you're talking about 90 to 120 21 days. It seems to be the same metric, if you 22 will, for the pre collect? 23 A. Correct. I mean, we hit accounts at 24 120 days and we move them to collection 25 agencies. Robo Cops -- Robo Cops, I have a PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 173 1 22-year-old who is a film major so I've got 2 movies on my mind. Anyway, 120 days, we don't 3 necessarily stop these calls when they move to 4 a collection agency, we will continue them for 5 some time after that to still give someone an 6 opportunity to bring their account current. 7 But it does at 120 days, our system does 8 transfer those accounts that have hit 120 days 9 delinquent to one of our four collection agencies. 10 Q. All right. How are the collection 11 agencies compensated? 12 A. They are on a commission basis. 13 They, whatever they collect, they get 15 percent, 14 which the average in the industry is about 18. 15 So, we are able to pay. But you have to 16 understand, where we pay 15 percent, they bring 17 in about $21 million of bad debt a year. So, 18 it's a pretty good return on investment. 19 Q. Now, I'm having a little trouble 20 understanding the material at the page -- at 21 the top of page 26 because I'm not sure that I 22 understand the time period to which you refer 23 when you talk about 15,268 accounts at $11 24 million. 25 A. When we -- we have revamped our PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 174 1 collection operation over the last year. We 2 are not completely finished implementing the 3 entire plan but what we have is implemented 4 what we call the algorithm. In the past, 5 collection agencies were basically allowed to 6 keep a delinquent account until they told us 7 that they couldn't get anything out of it. And 8 what we saw through looking at those numbers is 9 they weren't necessarily going after the longer 10 term delinquencies, they were going after low 11 hanging fruit so they could get their 15 12 percent, and they would hold the account for a 13 significant amount of time. 14 We put this algorithm in place 15 basically telling them you have six months and 16 you have to not only collect a piece of a 17 delinquency but you have to get them to pay -- 18 keep the current charges going, so then we 19 continue to make headway, and that algorithm is 20 in place and if after six months they have 21 three months of which they did not meet the 22 algorithm, we pull the account away from them 23 and we take it to the next step. 24 When we initially put this in place, 25 we looked at their accounts and found thousands PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 175 1 of accounts that they didn't meet the 2 algorithm. So, we pulled all of those accounts 3 and we shifted them partially to a second 4 placement but mostly to the litigation phase of 5 our process and that's what that represents. 6 Q. All right. Thank you. Now, the last 7 sentence of that first paragraph you refer to 8 15,768 accounts valued at $26 million. Are 9 these in the first collection agency payment 10 process or in the second? 11 A. That's in the first. 12 Q. All right. So, you've identified $37 13 million, something north of 30,000 accounts 14 that are in the first phase of this collection 15 program? 16 A. By first phase -- 17 Q. I'm sorry, the first collection 18 agency phase? 19 A. Yes, yes. We were able to determine 20 basically what they hadn't been touching for 21 quite a long time and we yanked all of those 22 and put them into our legal status. 23 Q. All right. Then please describe for 24 me the activities of the second placement 25 collection agency? PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 176 1 A. The second placement agency is the 2 same as the first. The only difference is 3 customers hear a different name and they see a 4 different letterhead and it's been proven that 5 that produces a little bit more result. People 6 tend to think it's been ratcheted up and in 7 reality it's the same thing as the first 8 collection agency was doing. 9 Q. All right. And then describe for me 10 the activity of the law firms. 11 A. The point that an account has gotten 12 either too old or the collection agency hasn't 13 made any progress, we place a lien on that 14 property, we prepare packets of information 15 that are required to take it to a law firm, and 16 then they can start legal proceedings to try to 17 collect the money. We have three law firms 18 that are now helping us with that. 19 So, what this has resulted in is a 20 much faster collection path than we had in the 21 past but that's what the law firm portion 22 applies to. 23 Q. All right. Now, how are the law 24 firms compensated? 25 A. They are on a percentage basis also. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 177 1 Q. Do you happen to know what the 2 percentage is? 3 A. I'm not -- I don't think they get the 4 same as the collection agencies. I think it's 5 slightly less but I would have to check. I 6 don't have it in front of me. It's a 7 percentage commission, though. 8 Q. Would you be in a position to provide 9 that information? 10 A. Yes. 11 Q. Thank you. Ms. Zimmerman, with 12 respect to the low income program, you indicate 13 that the program will discount the bill for an 14 individual who qualifies for low income by 50 15 percent upon their payment of the other 50 16 percent, and that there are approximately 1,900 17 customers in the program. What percentage, if 18 you know, of the low income program qualifiers 19 are also delinquent? 20 A. That's approximately 20 percent. 21 Q. Now, in response to our request, you 22 prepared and filed Exhibit MSD 11A33? 23 A. Yes. 24 Q. Age receivables. If I read this 25 correctly, from 2006, the number of accounts PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 178 1 has grown from 71,791 to 177,293. Now, these 2 accounts vary in delinquency from 15 years to 3 three months, and the dollars have grown from 4 $42,444,213 to $75,223,520. Has any of this 5 been written off? 6 A. Anything greater than one year is 7 written off. 8 Q. All right. So that reading down 9 from -- let's take -- 10 A. If I could clarify. It's written off 11 for financial statement purposes. 12 Q. I understand. 13 A. But it's still money that we go after 14 to collect. 15 MR. ARNOLD: All right. So that -- 16 you just answered my next two questions. I 17 think I'm going to let you go. Wait a minute, 18 with your permission, Mr. Stannard. 19 COMMISSIONER TOENJES: Yes. 20 21 EXAMINATION 22 Questions by: BILL STANNARD 23 Q. Thank you. I just had a few more 24 questions on the delinquent account and bad 25 debt area just to make sure I understand the PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 179 1 information that has been provided. I'm 2 going -- I'll go back to Exhibit MSD B, the 3 responses to the first discovery request, 4 question 51 on page 25, just to make sure I'm 5 understanding what is being presented in the 6 response. 7 For those historic years 2006 through 8 2010 and the partial year 2011, there was a 9 table that presents three columns. One, the 10 actual bad debt which was determined as being 11 at some level of delinquency during the year to 12 determine those would be bad debts, and then 13 the actual write-off balance, and then a column 14 called year end bad debt balance. So that the 15 bad debt balance is not what is in your reserve 16 or bad debts on your balance sheet but is the 17 total of all of the accounts whether or not 18 they've been written off that you determined to 19 be doubtful at this point. Is my understanding 20 correct? 21 A. Yes. That year end debt balance is 22 pretty much the dollar amount that is still out 23 there to try to collect. 24 Q. In total? 25 A. In total, yes. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 180 1 Q. So that when I -- I don't have -- I 2 don't believe the 2010 financial statements are 3 an exhibit but I'm looking at your June 30, 4 2010, balance sheet and there is a receivable 5 less allowances in 2010 of $4,055,258 and 6 that's what's on the balance sheet as an 7 allowance for doubtful accounts. 8 A. The receivable? Are you talking 9 about the receivable? 10 Q. The financial statements says the 11 sewer service charges receivable less allowance 12 of $4,055,258. So, that was the, again, for 13 the financial statement purposes, the allowance 14 for doubtful accounts at that point. That's 15 not in -- because then on the other -- back on 16 question 51, for 2010, we had a bad debt 17 balance of $51,858,057. So, the difference is 18 that of that $58 million, all but a lot of that 19 has been written off already for financial 20 statement purposes, not for collection purposes? 21 A. Correct. Yes. 22 MR. STANNARD: That's all I have. 23 COMMISSIONER TOENJES: Thank you. 24 Any further questions, Mr. Arnold? 25 MR. ARNOLD: No, sir. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 181 1 COMMISSIONER TOENJES: Any Rate 2 Commission members have any questions for this 3 witness? Yes, Mr. Koenen. 4 5 EXAMINATION 6 Questions by: GLENN KOENEN 7 Q. Very quickly. It appears the number 8 of past due accounts is still rising, is that 9 true? 10 A. Yes, but the collection plan is just 11 now starting to bear fruit so you're not seeing 12 it in the numbers there, but in fact in the 13 last several months, we've seen a substantial 14 increase in the collection of those bad debts. 15 We are anticipating over the next year or two 16 as that collection plan really starts to make 17 an impact, that we will start to see that 18 number either stabilize or even get better. 19 So, we are hoping this plan will help deal with 20 that. We still won't have any control over the 21 economy, so I don't know what real impact that 22 will continue to have. 23 Q. You mentioned that part of the reason 24 for the increase in the bad debt seemed to be 25 the last rate increase. Would you expect a new PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 182 1 rate increase to budge that number upward again? 2 A. Yes. There is something that happens 3 obviously if the rate goes up, more and more 4 people have a hard time paying that, 5 particularly compounded by the economy. People 6 resist paying that. There is a resistance. 7 So, we would expect to see those delinquencies 8 be impacted by that. That has been factored in 9 somewhat to the rate report but not a lot. The 10 last go around with the Rate Commission, it was 11 decided that resistance should not be factored 12 into the rate. 13 COMMISSIONER TOENJES: Yes, all the 14 way at the end. Ralph and then Mr. Tomazi. 15 16 EXAMINATION 17 Questions by: RALPH WAFER 18 Q. What percentage of delinquencies are 19 residential accounts versus commercial accounts? 20 A. We have about 420,000 total accounts, 21 30,000 of that are commercial. I don't have 22 the percentage exactly but just by the nature 23 of how many more residential and multi-family 24 accounts that we have, the largest portion of 25 those delinquencies fall within residential and PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 183 1 multi-family. 2 Q. In managing the data when a house or 3 building becomes unoccupied, how long does it 4 take for MSD to learn that and realize its 5 effect -- in other words, it's no longer 6 producing wastewater? 7 A. We generate our bills based on water 8 usage. That comes from primarily American 9 Water. Most of our customers, a lot of our 10 customers are in the county. We get water 11 usage from them, we get water usage data from 12 the city, and from Kirkwood. Those are 13 automatic fees into our system. As long as we 14 are getting water usage readings, we continue 15 to bill. 16 If it's an empty building and the 17 owner has gone through the process of having 18 the water officially shut off, that will come 19 through in those readings and then we stop 20 billing that account. 21 Q. So, you feel that's as effective a 22 method you have of knowing that the debts that 23 are out there, they are not false debts, they 24 are not -- there is not money there that you're 25 trying to collect because -- I'm thinking in PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 184 1 the city how many are on -- are not metered 2 that you don't have any way of knowing unless 3 the water division communicates with you 4 clearly or you communicate with them. 5 A. There are -- and we do. They are 6 part of that data feed but let me just make the 7 distinction. In the county -- and you'll see 8 that in our rate structure. In the county, 9 most people have meters, overwhelming people 10 have meters, so we get a meter reading. In the 11 city, that's not the case. The majority do not 12 have meters. So, there is an equivalent 13 component charged to the city and it's based on 14 what we call attributes, number of rooms, 15 number of bathrooms, showers, et cetera. The 16 city does give us that information, okay, and 17 then we apply those same calculations to that. 18 When a house is vacant, that's one of 19 the detriments to the people in the city. They 20 have less ability to control their usage, if 21 you will, because it's not based on meters. 22 You can't exactly shut off a room. So, that is 23 one of the disadvantages to city residents not 24 having meters, but we do get data from the city 25 that we use to chart their bills. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 185 1 Q. Do you get data from -- when 2 buildings are renovated and swimming pools are 3 constructed that would obviously affect your 4 rating, it would affect the water division 5 rating too, do you get that data on a 6 continuous basis? Are you confident in what 7 you get? 8 A. Residential customers, we go through 9 what is called an annual rate or usage 10 adjustment. We only take readings during what 11 we call the winter period so it doesn't take 12 into account the building of swimming pools, 13 washing people's cars, running a sprinkler. We 14 only grab the usage period that we think is a 15 pure measurement of what actually goes into the 16 system and then we take that usage once a year, 17 we then calculate residential usage, and it 18 stays constant then all year until we go 19 through it again in July. So, we are trying to 20 isolate what we call pure -- goes into the 21 system pure. 22 Q. That makes sense and I knew that. I 23 shouldn't have added swimming pool to my 24 question. That was more of a City Hall question. 25 A. Maybe I misunderstood. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 186 1 Q. No, you didn't. It was right there. 2 But in a flat rate account when renovation is 3 done and bathrooms are added, which is frequent, 4 are you confident in the information you get 5 that that is reflected in your knowledge? I 6 know you get information from the city water on 7 a metered account. Other than that, you're 8 just dependent upon what city water tells you 9 is at that house or that building? 10 A. That's correct. 11 Q. And there is no auditing process or 12 any investigation you make to ensure that -- 13 A. No. No, there isn't. 14 Q. Well -- 15 A. We haven't done any audits. 16 MR. WAFER: Done. 17 COMMISSIONER TOENJES: Thank you. 18 Mr. Tomazi. 19 20 EXAMINATION 21 Questions by: GEORGE TOMAZI 22 Q. One quick question, Ms. Zimmerman. 23 The number of people that qualify for the low 24 income assistance program, is that set by a 25 fixed budget or a certain percentage or all of PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 187 1 the above? 2 A. It's based on a combination of 3 household income, assets, those are the two 4 primary components, but in assets, the 5 residence is not included, so if you have a 6 home, that's not included. 7 Last time we came to the Rate 8 Commission, that program was only offered to 9 residential customers. We've now expanded that 10 so it includes multi-family. We've known for 11 some time that tenants are in need more times 12 than not of this type of assistance. So, we 13 have revamped that program so it's on a voucher 14 basis. So multi-family or tenants when they 15 meet the requirements get these vouchers and 16 they are able to pay -- they get the 50 percent 17 discount and as long as they are able to show a 18 voucher which is barcoded, they get advantage 19 of the 50 percent, and that was our way to get 20 the relief to the tenant rather than to the 21 property owner because then we couldn't 22 guarantee that the tenants themselves were 23 getting 50 percent, the property owner was 24 taking it all. So, we've expanded that help 25 but the requirements are basically the same. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 188 1 Q. In the proposed rate increase, 2 normally what percentage or what dollar amount 3 has been factored into the next four years? 4 A. I would have to check on the rate. I 5 don't have it off the top of my head but right 6 now we are at 1,900 low income customers. We 7 don't anticipate that going through the roof. 8 We expect some steady increases because of the 9 voucher program, but that's only been in place 10 for a short time. 11 COMMISSIONER TOENJES: Any other 12 questions, Mr. Tomazi? 13 A. That question, Mr. Tomazi, about the 14 dollar amount, Mr. Barber will be able to 15 address that. 16 COMMISSIONER TOENJES: Mr. Goss. 17 18 EXAMINATION 19 Questions by: BRAD GOSS 20 Q. How does the delinquency rate in the 21 District compare to those of other districts? 22 A. I haven't really done that much 23 comparison to other districts. 24 Q. Did I understand you correctly that 25 delinquency rate isn't being factored into the PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 189 1 current rate proposal? 2 A. It's being factored into the extent 3 that we are seeing usage go down and number of 4 accounts decrease but there hasn't been a 5 resistance factor greatly factored into that. 6 Q. No kind of bad debt set aside or 7 anything like that? 8 A. No. There is reserve set aside, so 9 bad debt is taken into consideration. The 10 resistance factor, what I meant is the 11 incremental change as rates go up. 12 Q. So, the fact that you, if I heard 13 your numbers right, you had like a 200 percent 14 increase in the amount of delinquent accounts 15 over the last rate period, is that right? Go 16 from $3 million to $10 million? 17 A. It's kind of a little bit of an 18 anomaly. When the stormwater rate was found to 19 be unconstitutional, we had to stop billing 20 those stormwater accounts, right? So, we had 21 to put those into our bad debt and that was 22 40,000 accounts that paid stormwater only. So, 23 you're seeing kind of an artificial increase 24 built in there. So, we could include those in 25 our calculations. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 190 1 Q. Have you supplied the unadulterated 2 unofficial amount to anyone so we could true 3 the numbers up? 4 A. No, we don't have it but we can get 5 that for you. 6 Q. And could you explain to me what the 7 priority of MSD's lien is when the non payment 8 occurs? 9 A. All I can say is I know it's near the 10 top. It's either the second or the third from 11 taxes or whatever, but I don't know off the top 12 of my head. I just know it's a fairly strong 13 lien. 14 Q. That was my understanding as well. 15 It has priority over the loan of a first deed 16 of trust, for example, is that your understanding? 17 A. Yes. 18 Q. The collection policy seems to be one 19 that has a fairly lengthy period of time in 20 this collection effort. Is there a reason for 21 that? 22 A. To the point we get to a lien or -- 23 Q. To the point you get to a lien. If I 24 was hearing you right. 25 A. We could place a lien on an account PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 191 1 that was delinquent immediately. It's purely 2 an aspect of manpower. 3 Q. Does that notice go to the lenders, 4 go to the holders of the deed of trust on those 5 properties? 6 A. I don't know the details of actually 7 filing each lien. So, I'm not sure. 8 Q. Is there any settlement policy the 9 District has with respect to settling these 10 disputes, any guidelines? 11 A. There aren't necessarily -- the only 12 guideline is really we do not settle on actual 13 sewer charges. When an account is delinquent 14 and it gets to a point where someone is either 15 wanting to make a settlement, we will make 16 settlements more times than not, writing off 17 late charges, but we never go beyond settling 18 and giving up any actual sewer charges. 19 Now, we do routinely make payment 20 plans. I wouldn't consider those settlements 21 but people will call and we will work out a 22 payment plan between two and three years 23 interest free and they are able to pay down 24 their account. 25 Q. In the city, the account continues to PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 192 1 remain open unless somebody is to shut off the 2 water, do I hear you correctly? You're not 3 actually meter reading the majority of the 4 homes in the city? 5 A. Right, we are not metering them. 6 Q. If someone leaves a building and the 7 building becomes vacant but they don't go to 8 the trouble of notifying the water department, 9 they just continue to generate bills, MSD will 10 continue to show that as a live account, is 11 that right? 12 A. Yes, until we have indication from 13 the water usage providers that either there 14 isn't any water usage or for some reason there 15 isn't a basis to bill, we continue to bill. We 16 will bill at a minimum amount which is like 3 17 CCF, 2 CCF, but we continue to bill. We have 18 to have basic -- we have to have some type of 19 information to justify to stop billing. 20 MR. GOSS: Thank you. 21 COMMISSIONER TOENJES: Mr. Schneider. 22 23 EXAMINATION 24 Questions by: ERIC SCHNEIDER 25 Q. In your testimony, Ms. Zimmerman, on PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 193 1 page 5 here, you talk about the question was 2 what was the percentage of total operating 3 budget the District actually spends. You said 4 the three year average is a favorable variance 5 of less than 2 percent. Do I understand that 6 correctly it means that for three years you 7 average being under budget by 2 percent? 8 A. I've been here ten years and we've 9 always been under budget. Last couple of years 10 we've been under 2 percent, and that's not 11 indicative of us spending every little penny in 12 the budget, we've just gotten better and better 13 at budgeting. They are very tight budgets now 14 and so that is correct. The last couple of 15 years it's been 2 percent. 16 Q. Where does the variance go, the 17 positive variance go? Does it go to the 18 capital plan or does it go to the operating 19 reserve? 20 A. That is our first choice is to shift 21 that variance, positive variance, to the CIRP 22 to escalate houses, to do more projects as 23 Brian indicated. There are projects in the 24 queue where we can put more money there to 25 bring those projects on-line. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 194 1 Q. You annually switch it over to the 2 CIRP or do you do it in larger increments like 3 over two or three years? 4 A. It's usually annually at the end of 5 the year. 6 Q. So, roughly how much money is that in 7 that 2 percent? What dollar amount is that 8 roughly? 9 A. It's about $2 million or so. 10 Q. Then on the same page, actually, you 11 talk about you said that the inflation 12 allowance used in the rate study are 13 reasonable, you answered yes to that question. 14 Can you give some of the inflation allowances, 15 percentages that you used in the major 16 categories, what allowances you used to create 17 this budget? 18 A. Mr. Barber can give you the actual 19 details but it's around 3 percent on an -- just 20 a basic inflationary kind of factor, if I 21 remember. Keith will be able to verify that. 22 It's double digits on benefits and pension and 23 things like that. 24 MR. SCHNEIDER: Okay. 25 COMMISSIONER TOENJES: Any other PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 195 1 questions? I have one question or a couple of 2 questions. 3 4 EXAMINATION 5 Questions by: LEONARD TOENJES 6 Q. I'll shift away from the debt 7 discussion here. Just to sort of set the 8 stage, I guess I live in a construction world 9 where we've had -- we negotiate a labor 10 agreement, we negotiate overall rates for 11 trade, per trade, so much per hour and out of 12 that negotiated rate comes pension, wages, and 13 medical, all out of there. So, when I looked 14 at the, you know, I know some of the trades 15 have had freezes, some have had rollbacks, and 16 I look at page 2.3 when I see 3 percent per 17 year for wages, I see 10 percent for group 18 insurance from 2011 to 2015, and 6 percent in 19 2016, then I see pension increases of 8.4, 9.3, 20 10.2, 11.4 and 5 -- 21 A. Which page? 22 Q. Page 2.3. 23 A. Of the rate proposal. 24 Q. Of the rate proposal, yes. 25 A. I see where you are. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 196 1 Q. I guess when I start thinking about 2 some math here and start talking about the 3 tight budgeting and economy and resistance 4 factor, I've had several people raise this 5 issue to me that if you add up the salary plus 6 the insurance, plus the pension, what is 7 that -- my question is what does that total up 8 in an annual increase in personnel costs 9 because it's not 3 percent, it's probably more 10 like 4 or 5, 6 percent annually by the time you 11 go all in. In the world I'm living in, we go 12 all in. Here is what my total package went up 13 this year. 14 Now, what is the total package? I 15 guess I probably don't have it which I 16 understand but I'd like to have some 17 information of what the total package is when 18 you're looking at all in wages, medical, 19 pension, what does that really mean for what it 20 costs the District per employee to employ that 21 person? It's not 3 percent. 22 A. No. This might give you a little bit 23 of a benchmark but I can get those numbers for 24 you and calculate in that detail. But someone 25 is hired in at a salary, obviously, and then PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 197 1 when we want to do all in, we usually add 41 2 percent. That then puts that all in, the 3 benefits, the pension, FICA, all the other 4 costs associated with the salary. 5 Q. I guess what -- taxes are taxes but -- 6 A. Right. 7 Q. We live in a world where people 8 haven't had a cost of living adjustment in two 9 years and I guess what I'd like to see is 10 what -- all I'm looking at is wages, pension, 11 and medical. 12 A. In terms of the percentage increase? 13 Q. In terms of the percentage increase 14 per year over the length of this rate proposal. 15 A. I see what you're looking for. 16 Q. Looking forward to what you have 17 here, if you could combine the 3 percent, the 18 10 percent, and the 8.4 percent, what does that 19 really mean in terms of -- 20 A. In dollars? 21 Q. Yeah. In terms of overall increase. 22 That would help considerably, I think. 23 A. I can get you that. 24 COMMISSIONER KOENEN: I have a 25 follow-up question. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 198 1 EXAMINATION 2 Questions by: GLENN KOENEN 3 Q. Is your pension plan defined benefit 4 or defined contribution? 5 A. We just switched to defined 6 contribution is what we just switched to. 7 Q. Are the payments to the fund 8 automatic or are they calculated each year to 9 get to your target level based on investment 10 income and things like that? 11 A. Each year based on an actuary report. 12 COMMISSIONER TOENJES: I'm assuming 13 that these are determinations that are made by 14 the Trustees, not by the State? 15 A. Which determinations? 16 COMMISSIONER TOENJES: The wages, 17 salaries, overtime, group insurance, and 18 pension, those are numbers that are determined 19 by the Trustees? 20 A. Well, we factor those into our budget 21 but the Board approves the budget and they are 22 encompassed in there. 23 COMMISSIONER TOENJES: Okay. 24 25 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 199 1 EXAMINATION 2 Questions by: JOHN L. STEIN 3 Q. What percentage of your employees are 4 bargaining unit employees for whom wages and 5 benefits are negotiated? 6 A. I would say two-thirds or so. 60 7 percent. 8 COMMISSIONER TOENJES: I just have 9 some sensitivity to that issue. Any other 10 questions by any of the Rate Commissioners? 11 Ms. Myers. 12 MS. MYERS: I do have one. 13 14 EXAMINATION 15 Questions by: SUSAN MYERS 16 Q. Jan, in reference to the bad debt 17 collection, does MSD have shutoff capability? 18 A. Technically we can shut off a sewer 19 is my understanding, I'm not an engineer, but 20 obviously we don't do that. It's not a pretty 21 picture if we were to do that. So, we don't 22 really have a shutoff. We do selectively on 23 commercial accounts, we don't do that that 24 often. It's one of the detriments to us 25 collecting bad debt. We are not like the water PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 200 1 company and we are not like the cable company. 2 If you don't pay, they shut off the water, they 3 shut off the cable, whatever, and that tends to 4 get people to pay pretty quickly. We don't 5 shut off their ability to use their sewer. So, 6 we don't have what I call the big hammer to get 7 people to pay. 8 MS. MYERS: I have nothing further. 9 10 EXAMINATION 11 Questions by: GEORGE LIYEOS 12 Q. As it relates to delinquency for 13 other cities who have gone through this process 14 in terms of a rate increase, what kind of 15 increase are we looking at in terms of 16 delinquency rates? 17 A. Compared to other utilities? 18 Q. No. Compared to other sewer 19 districts in other parts of the country who 20 have gone through this. 21 A. I haven't done that kind of comparison, 22 comparing us to other sewer entities. 23 Q. Would somebody else know? 24 A. We -- I can get that information. I 25 just don't -- we haven't done it to this point. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 201 1 Q. Okay. Very good. I'd like to see 2 that. I don't know if the rest of the Rate 3 Commission would be interested in that number 4 but I think it's important to note going 5 forward. I let the Chair decide on that. 6 COMMISSIONER TOENJES: Good point. 7 Anything else as far as the witness? All 8 right. Let us thank you, Ms. Zimmerman, for 9 your testimony and let us take a break until 10 2:45. 11 (Break.) 12 COMMISSIONER TOENJES: It's 2:45. 13 Let us reconvene the Rate Commission of the 14 Metropolitan Sewer District and call our next 15 witness in order of testimony which is 16 Mr. Keith Barber. Mr. Barber, is the testimony 17 you're about to give the truth, the whole 18 truth, and nothing but the truth? 19 MR. BARBER: Yes, it is. 20 COMMISSIONER TOENJES: Thank you. 21 Does any member of the Rate Commission have a 22 question for Mr. Barber? Hearing none at this 23 time, Mr. Kindschuh, do you have a question of 24 Mr. Barber? 25 MR. KINDSCHUH: Yes, Mr. Chairman. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 202 1 COMMISSIONER TOENJES: Please 2 proceed. 3 MR. KINDSCHUH: Thank you. The MIEC 4 would like to introduce at this time Michael 5 Gorman of Brubaker & Associates. Mr. Gorman is 6 our consultant in this matter. And with your 7 permission, Mr. Chair, I would like to ask 8 Mr. Gorman to ask questions on behalf of the 9 MIEC. 10 COMMISSIONER TOENJES: Please 11 proceed, Mr. Gorman. 12 MR. KINDSCHUH: Thank you. 13 14 KEITH BARBER, 15 of lawful age, being produced, sworn and 16 examined, and says: 17 18 EXAMINATION 19 Questions By: MICHAEL GORMAN 20 Q. Good afternoon, Mr. Barber. 21 A. Good afternoon. 22 Q. I would like to refer you to your 23 rate study page 3.18, Table 3-11. Am I 24 accurate, Mr. Barber, that that table represent 25 the summary of your projected increase in PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 203 1 revenues and cost of service -- 2 A. Yes. 3 Q. -- during this time period? So, I'd 4 like to walk through this a little bit to get a 5 better understanding of all the elements that 6 have gone into determining the amount of the 7 needed rate increase during that time period. 8 Is line 1 on that, does that represent the 9 amount of revenues the District would produce 10 under current rates? 11 A. Yes. 12 Q. Okay. And now under that, you're 13 showing a decrease in revenues under current 14 rate, is that correct? 15 A. Yes. 16 Q. And that is produced because you're 17 projecting client and volumetric sales for 18 metered building units? 19 A. I didn't hear the last name. 20 Q. For metered building units. 21 A. It's declining in part due to a 22 continuation of customer growth decline, and in 23 part due to decline in billable sales, yes. 24 Q. Okay. And this is produced through 25 your electronic version of this cost-to-service PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 204 1 model, is that correct? 2 A. Yes, it is. 3 Q. In that electronic version of 4 cost-to-service model, would there be some 5 historical data showing the annual levels of 6 revenue produced under existing rates? 7 A. Yes, there is. 8 Q. There is. And how does calendar year 9 2011 sales compare to the sales in the last 10 several years in terms of billing units and 11 rate revenue? 12 A. Those summaries are presented in the 13 front end of the report. Table 3-1 on page 3.2 14 shows the projection of customer accounts as 15 well as historical information that you 16 requested. Table 3-2 shows the historical 17 information for wastewater volume. Those 18 projected accounts and volumes are applied to 19 Table 3-3 for the current year which is the 20 last column of Table 3-3. And that produces 21 the number on Table 3-5 on page 3.9 and the 22 bottom total there on line 12 will match up 23 with line 1 of Table 3-11. 24 Q. Thank you. Then on page 3.2 under 25 Table 3-1, that shows the decline in volumetric PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 205 1 billing units for all the rate classes in the 2 District as a whole, is that correct? 3 A. Table 3-2? 4 Q. Yes. 5 A. Yes. 6 Q. So, the projects for calendar year 7 2011 represent a decrease in volumetric billing 8 units relative to the period 2008 through 2010, 9 is that correct? 10 A. Yes. This is a continuation of the 11 decline in billable units as you notice at the 12 bottom on line 12, that the decline in 2010 was 13 4 percent and before that in 2009 it was 5.3 14 percent. 15 Q. If you go back from '06 to '08, there 16 is a slight increase to a level, volumetric 17 sales level for the District during that time 18 period, is that correct? 19 A. Yes. 20 Q. And then around 2009 through 2011, 21 there is -- that's the period of declining sales? 22 A. We've had a constant decline since 23 2007. 24 Q. Now, within that time, you agree that 25 the Metropolitan Sewer District territory and PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 206 1 the U.S. economy as a whole has experienced one 2 of the worst recessions we've had in 100 years? 3 A. Part of the decline is likely due to 4 the economy. 5 Q. Okay. And your projections would 6 suggest that the sales levels that were lost 7 due to economic activity during that time 8 period will not come back in the forecasted 9 period? 10 A. We are forecasting that the decline 11 will taper off and be much lower than it has 12 been in the past and then level off by 2016. 13 Q. Is that based on your projection of 14 economic activity in the MSD service territory? 15 A. No. There has not been a projection 16 of the economic activity as part of this study. 17 Q. Okay. Did you review any state, 18 local, or federal government projection of 19 economic activity in the counties? 20 A. No. 21 Q. So, how exactly did you derive the -- 22 your projection used in the forecast? 23 A. Projection was based on the analysis 24 of historical accounts and how those would 25 likely be projected out in the future, and we PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 207 1 also looked at the relationship of historic 2 volume to accounts to see how the billed volume 3 per account was going and that was showing a 4 slight decline. And so we estimated what we 5 expected to be the billed volume in the future 6 and apply that to the projected accounts and 7 that is how we got to the billed volume 8 projection. 9 Q. Okay. But if any of that lost volume 10 was a result of lost sales due to depressed 11 economic conditions, that was not captured in 12 your study? 13 A. No, like I said before, there was no 14 attempt to do any kind of economic study. 15 Q. Referring back to page 3.18 and Table 16 3-11, again, back to line 1 of that, the effect 17 of the decline in sales resulted in loss of 18 approximately three and a half million dollars 19 on an annual basis between 2016 and 2011, is 20 that pretty accurate? 21 A. Yes. The revenue introduced rates 22 shown in line 1 of Table 3-11 is projected to 23 decline by $3 million in that six year period, 24 which out of $210 million I suspect represents 25 maybe less than a 2 percent decrease. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 208 1 Q. But it is a decrease? 2 A. Yes, it is a decrease. 3 Q. And if the sales were to stay flat 4 like they were during the '06 to '08 period, 5 then revenue production during that period of 6 current rates would be higher than reflected in 7 your study? 8 A. I'm sorry, can you repeat the question? 9 Q. If your sales level stayed relatively 10 flat between 2010 and 2016, similar to the 11 pattern sales from 2006 through 2008, then the 12 amount of revenue produced at current rates as 13 shown on line 1 would be higher? 14 A. Yes. 15 Q. Thank you. I'd like to briefly go 16 through the other revenue items and ask whether 17 or not they are also impacted by the projection 18 for declining sales levels. On line 9, you 19 have other operating revenue. Is that impacted 20 by the decline in projected volumetric sales 21 units? 22 A. No. 23 Q. Line 10, connection fee? 24 A. No. 25 Q. Would that be impacted if you were PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 209 1 projecting lower numbers of new customers on 2 the system? 3 A. If they were new customers, yes, it 4 would be impacted. 5 Q. Okay. So it might not be directly 6 related to volume but part of the same 7 assumption, projection of decline in the number 8 of customers on the system? 9 A. Yes. 10 Q. Skip over the interest income, those 11 are not affected by sales levels, is that 12 correct? 13 A. That's correct. 14 Q. Now, down to lines 16 and 17, that 15 reflects the increase in operation of 16 maintenance expense during forecast period, 17 correct? 18 A. Yes. 19 Q. Line 17, there are new O and M 20 activities projected starting in calendar year 21 2013, footnote B indicates that they are 22 anticipated regulatory projects, is that 23 correct? 24 A. That is correct. They are the new 25 regulatory projects that will be built during PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 210 1 the study period. 2 Q. Okay. So, if you look at the total 3 increase in O and M included in the study per 4 calendar year 2016, it would be the sum of 5 $162.1 million and $7.9 million of the O and M 6 related to the new projects? 7 A. Yes. 8 Q. Roughly $171 million. So, over the 9 time period, it would be roughly a $36 million 10 increase in O and M? 11 A. Yes. 12 Q. Relative to 2011, O and M expense 13 level of $134.4 million. So, it's a very 14 significant increase in O and M, is that correct? 15 A. Yes, it is an increase in O and M. 16 Q. Okay. What is the historical 17 operation and maintenance expense level for the 18 District? 19 A. That is shown on Table 3-7 on page 20 3.12 -- I'm sorry, you have to go back to 21 Section 2. In Section 2 we have it in total 22 historically from 2006 it went from $116 23 million in 2010 to $149 million, an increase of 24 about $33 million in five years. 25 Q. I'm sorry, Table 2-1, are you PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 211 1 referring to line 21? 2 A. Yes, line 21. 3 Q. Well, how do we get a direct 4 comparison of the 2011 O and M shown on Table 5 3-11 that shows $134.4 million, roughly on line 6 16? Where does that number appear in Table 7 2-1? 8 A. Table 2-1 is combined utility and 9 Table 3-11 is wastewater only. 10 Q. Have you separated Table 2-1 for 11 wastewater and sewer? 12 A. Not on the historic basis. 13 Q. Okay. Would that information be 14 included in the electronic version of your 15 cost-to-service model? 16 A. No. 17 Q. Is that information available? 18 A. Only reason we have separated in 2011 19 and forward is for rate design purposes. The 20 District budgets by department, and within 21 those departments, they either provide direct 22 support for wastewater and stormwater 23 operations or indirect support, and the only 24 way at this current time to determine how much 25 is wastewater and how much is stormwater is to PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 212 1 apply the factors shown in Section 2. Now, the 2 District has recently gone to segmented 3 financial statements but those are on a 4 different basis than the budget. 5 Q. Do you have a budget through 2016 6 that would correspond with the information you 7 have on Table 3-11 for total system, or is that 8 what is shown on Table 2-1? 9 A. The District doesn't have a 2016 10 budget at this time. 11 Q. On Table 2-1 you do have projected 12 out to 2016. How much of that includes 13 approved budgets for the District, or proposed 14 budget? 15 A. Well, at the time of this report, the 16 2011 was the budget values. 17 Q. Okay. So, past 2011 it's a 18 projection and not yet an official bucket? 19 A. Yes. 20 Q. Okay. I think you've -- Ms. Zimmerman 21 has already commented on some of the escalation 22 projections including the O and M numbers and I 23 believe she was going to provide me all the 24 escalation and labor costs. Some of the larger 25 escalation items identified in your report PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 213 1 relate to healthcare benefits and pension 2 benefits. Now, did I understand correctly or 3 do you know that MSD has recently changed its 4 pension plan from defined benefit to defined 5 contribution? 6 A. That was testified to earlier, yes, 7 I'm aware of that. 8 Q. Are you familiar with that? 9 A. No, I'm not familiar with the details 10 beyond what I heard today. 11 Q. So, the pension numbers included in 12 your study were provided to you from staff? 13 A. The pension numbers were provided 14 from staff, that is correct. 15 Q. Did you do some work with staff or 16 participate with staff in doing any stress test 17 like evaluations of the projections to make 18 assessments whether or not they can be reduced 19 or managed in some other way? 20 A. No, that was not part of my 21 responsibility during this study. 22 Q. Okay. Do you know -- did anybody 23 else perform that study that you're aware of? 24 A. That would be a better question for 25 the District staff to answer. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 214 1 Q. Thank you. Did you perform a rate 2 comparability study for the District staff as 3 included in your cost to service file? 4 A. We compared the District's rates with 5 the survey that Black and Veatch does 6 periodically on the largest 50 states. 7 Q. Okay. Now, do those rate comparisons 8 also consider the projected increase in 9 wastewater rates for other sewer districts? 10 A. Yes, they include the largest 50 11 sewer districts by population. 12 Q. Would those rate projections, then, 13 include details underlying those projected 14 increase or change in rates for those 15 districts? 16 A. Well, page 5.6 of our report does 17 show a NACWA survey. On that graph is a red 18 line, the blue bars are the projected rates for 19 the District, and as you can see, what NOCWA is 20 projecting is pretty close to what the District 21 is projecting. 22 Q. But other than the actual change 23 in -- these are residential bills, correct? 24 A. Residential bill with 10-100 cubic 25 feet per month. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 215 1 Q. If you look at the website identified 2 on this page, would I see some details backing 3 up why they are projecting these rates to 4 increase at the level they are? 5 A. You're referring to the NOCWA survey? 6 Q. Whatever survey you've identified on 7 this page. 8 A. You would see a number of tables with 9 different classes and how the water and 10 wastewater rates for those various cities 11 compare with each other by different categories 12 like small residential, medium residential, 13 large residential, commercial, and industrial. 14 Q. And do you know what the source 15 documents are for those projections in that 16 report? 17 A. Those were internal calculations 18 developed by Black and Veatch based on a survey 19 of rates from the various cities contacted. 20 Q. But it's projected rates. What -- 21 A. Those are historic rates. 22 Q. All right. For the projection, what 23 information was provided to Black and Veatch to 24 support the forecast? 25 A. You're talking about the NACWA PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 216 1 projection? 2 Q. Whatever information was used to 3 project what wastewater rates would be at other 4 wastewater systems. 5 A. NOCWA surveys their member agencies 6 and then they provide that projection themselves. 7 I'm not aware of how they go about doing it. 8 Q. They don't provide any detail 9 underlying that projection? 10 A. No, no, but you can get this 11 information from the NACWA site and it will 12 show you -- it's called the Service Charge 13 Index and they'll show the projection but I 14 don't recall it explaining how it projects. 15 Q. Okay. For example, they wouldn't 16 provide operating statements out through a 17 forecast period that shows suspected change in 18 revenues and operating costs, debt-to-service 19 costs, and capital improvements? 20 A. No, I don't believe so. They do 21 provide details financial information. They 22 have a survey questionnaire helping filled out 23 by their members to provide detailed 24 information early next year, and they do have a 25 historic one out now that was based on 2008 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 217 1 data. 2 Q. Okay. So, that might be one source 3 of getting a sense of just how other wastewater 4 systems are attempting to manage these cost 5 escalators that you've included in your cost 6 per service projection. 7 A. The information they collect is very 8 detailed and very informative. It's well worth 9 getting a copy of it. 10 Q. So, have you done any review of that 11 information other than the projections and 12 residential bills as shown at page 5.6? 13 A. No. 14 Q. Was Black and Veatch retained to 15 review the proposed capital budget of the 16 District? 17 A. No. 18 Q. Have you done any benchmarking to 19 determine whether or not the projected capital 20 expenditures are consistent with good industry 21 practice to meet the requirements of BPU's 22 infrastructure expansion and enhancement? 23 A. I'm not sure -- are you talking about 24 the BPU? 25 Q. Pardon me, the MSD. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 218 1 A. Okay. I'm somewhat aware of the BPU 2 but I was surprised it came up here. No, we 3 didn't do any benchmarking. A lot of that is 4 going to be based on the negotiations the 5 District had with the EPA, so, and those 6 negotiations are unique to each individual 7 utility. So, you can't really benchmark them 8 because each utility has a different situation. 9 Q. Right. But if there is capital 10 replacements of existing sewer lines in that, 11 is there a standard practice for reviewing what 12 the cost might be to accomplish stated 13 infrastructure activities MSD has identified as 14 necessary over the next four years? 15 A. Well, again, that's going to be 16 unique to each utility. It depends on how long 17 they've been making improvements. Some 18 utilities defer capital improvements due to 19 pressures on rates. Some, you know, especially 20 the ones with PAYGO, are able to keep up with 21 them. A lot of times utilities defer that and 22 then they are operating from a catch-up 23 position and so it's going to be different. I 24 don't think you can categorize utilities by 25 benchmarking on how much they are spending on PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 219 1 improvements unless you know the point where 2 they started from. 3 Q. You're reviewing their annual capital 4 budget for accomplishing specific capital 5 expenditure projects. Is there a way of 6 comparing the MSD's estimated cost of 7 accomplishing those objectives relative to what 8 other sewer district utilities might be 9 projecting for similar type activities? 10 A. You can get a utility's budget, I 11 suppose, and look at what they are spending, 12 but I'm not sure they are really comparable. I 13 mean, there are several factors involved. Age 14 of the system, for example. Whether you have 15 separate sewers only or you have a system of 16 separate sewers and combined sewers. How many 17 storm sewers you have. There is just really 18 too many variables to say you can compare 19 utility A with utility B and if utility B has 20 an answer you like, then utility A is wrong. 21 There is no right and wrong in their capital 22 improvement programs. It's what they happen to 23 need at that particular time. 24 Q. All right. Thank you. The funding 25 projections included for meeting the necessary PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 220 1 financing programs, were you simply using MSD 2 staff's projected interest rates for revenue 3 bonds and State revolving loan costs? 4 A. I initially came up with those rates 5 and those rates were discussed with the 6 financial advisors and deemed to be reasonable. 7 Q. How was -- what sort of information 8 was used to deem them to be reasonable? 9 Specifically with respect to revenue bond. 10 A. Well, basically looking at the market 11 to see what interest rates you expect. I mean, 12 the District has been issuing bonds on a 30 13 year basis, so the term was fixed at that. The 14 percent increase I think Mr. Tyminski has 15 already testified to is basically based on an 16 estimate of what you might expect in the future 17 especially if your bond rating is starting to 18 slip due to the magnitude of the bonds that 19 will be coming out. So, we are looking at 20 reasonable estimates is about all we can do. 21 Q. Historically do you know whether or 22 not tax exempt municipal utility bonds have had 23 an interest rate that is lower than taxable 24 corporate utility bonds? 25 A. I have not compared corporate to PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 221 1 municipal. 2 Q. Okay. Is that something the 3 financial advisor might have provided you to 4 help deem that the 5.5 percent is reasonable? 5 A. I'm not sure what information the 6 financial advisors maintain, but that might be 7 a question better addressed to Mr. Tyminski. 8 MR. GORMAN: Thank you very much. 9 That's all the questions I have. 10 COMMISSIONER TOENJES: Thank you. 11 Ms. Langeneckert, do you have any questions for 12 the witness? 13 MS. LANGENECKERT: I do. 14 15 EXAMINATION 16 Questions by: LISA C. LANGENECKERT 17 Q. Good afternoon, Mr. Barber. 18 A. Good afternoon. 19 Q. I'm rarely accused of not talking 20 loud enough so I better grab this just in case. 21 Your testimony on page 3, lines 6 through 8, 22 you state that "The proposed rate change will 23 increase the District's wastewater revenues to 24 provide funds for essential repairs, 25 replacements, and improvements," and Ms. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 222 1 Zimmerman stated that the funds were needed for 2 anticipated regulatory requirements. Are the 3 essential repairs, replacements, and 4 improvements you referenced the same as those? 5 A. Yes, these are all regulatory 6 requirements. 7 Q. If the estimated regulatory 8 requirements are less in terms of actual 9 projects and/or costs than those that were 10 anticipated, would that change your opinion of 11 what is essential? 12 A. What do you mean by if they are less? 13 Q. If it turns out that they are less 14 than what has been previously thought. 15 A. Well, if there is some reason that 16 the District did not need to build some of the 17 projects currently on the schedule, then yes, I 18 would agree with that. 19 Q. Okay. Now, referencing your 20 testimony on page 7, lines 16 through 21, you 21 discuss modest adjustments being made to 22 projected annual billed volume per customer 23 account to reflect a decreasing trend 24 historically experienced by the District. What 25 is the dollar amount of the increase of the PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 223 1 CIRP balance? 2 A. That comes from Table 3-9. You can 3 see on page 3.15, Table 3-9, we take the lowest 4 point of the study period is in 2012. As our 5 existing bond authority is exhausted, we drop 6 to a $4 billion level, but through the 7 increased rates beginning in 2013 through 2016, 8 we are able to build that up in fiscal years 9 '13, '14 and '15 to the level specified by the 10 financial advisors in order to provide 11 liquidity for the utilities and enhance the 12 bond rating possibly. 13 Q. Okay. Then it goes in 2015 it goes 14 from $52 million to $37.9 in 2016? 15 A. Yes. 16 Q. What would be the effect on the 17 District's bond rating if some of the extra 18 liquidity in the CIRP balance was used to make 19 up potential revenue shortfalls? 20 A. I think that's a better question for 21 the District's financial advisor. 22 Q. On page 12 of your testimony, lines 23 15 through 17, you indicate that "Revenues were 24 allocated to the respective wastewater and 25 stormwater operations based on staff input and PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 224 1 the District's method to segment its financial 2 statements as accepted by external auditors." 3 What allocation of revenues between wastewater 4 and stormwater remain the same if the stormwater 5 impervious charge were still in place? 6 A. I think those didn't remain the same. 7 Are you saying they did? 8 Q. I'm asking, would they if the 9 stormwater impervious charge was still in place? 10 A. If we still had the same revenue 11 levels as we did when we were implementing the 12 impervious charge, yes, then they would have no 13 reason for them to be changed. 14 Q. In your testimony on page 13, lines 15 21 through 23, you indicate that "The proposed 16 wastewater capital financing plan anticipates 17 17.5 percent as the major capital improvement 18 cost for the six year study period will be met 19 from annual wastewater revenues on a PAYGO 20 basis." Does that 17.5 percent equal the 21 historical amount of PAYGO funding? 22 A. I'm sorry, what page are you on? 23 Q. I am on page 13, lines 21 through 23. 24 A. I'm sorry, I'm not clear. That is 25 not what -- PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 225 1 Q. Yes, 15. Thank you. 2 A. Can you restate the question? 3 Q. I think. Does 17.5 percent equal the 4 historical amount of PAYGO funding? 5 A. No. 6 Q. Okay. And why not? 7 A. In the past, the District had the 8 availability of more PAYGO, so the percentage 9 of PAYGO was much higher than that. It wasn't 10 until the prior rate proceedings where we were 11 more or less limited to the increases that made 12 a shift more towards debt, and as you shift 13 more towards debt, at that point then you're 14 going to get a higher percentage of debt than 15 you had before and, therefore, a lesser percent 16 of PAYGO. That's within this period. It 17 doesn't mean the cumulative level that was 18 discussed earlier. 19 Q. All right. I had a question for Ms. 20 Zimmerman and she said that I should ask you, 21 so here we are. On page 16, line 6-3, you 22 indicate that "Although anticipated expenditure 23 levels are represented as fixed, the District 24 has scheduling flexibility of the projects 25 within each major category." If the District PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 226 1 had scheduling flexibility, was this considered 2 when determining the PAYGO alternative? 3 A. No. 4 Q. Why not? 5 A. What I mean by scheduling flexibility 6 is that the District will spend perhaps a fixed 7 amount of money within a specific period but 8 not necessarily in the categories presented in 9 Table 3-9. As I understand it, there are 10 milestones that need to be met and there is 11 flexibility in those milestones but that's all 12 I know. 13 So, what we know for sure is that the 14 total number was $4.7 million and there are 15 projects that are currently allocated different 16 shares but that is over a 23 year period. It 17 doesn't matter if in my opinion if you do one 18 more than the other but at the end of the 19 period, you have to spend those amounts in that 20 Decree to get that 4.7. 21 So, what I'm thinking there is 22 flexibility in not only between categories but 23 perhaps in scheduling but really all the EPA is 24 concerned with is whether or not milestones are 25 set as part of that Consent Decree, those are PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 227 1 met at those times. 2 Q. Those times being the end of the full 3 period? 4 A. Those times being whatever was set by 5 EPA which I have no knowledge of. 6 Q. Okay. Do you know who the $4.7 7 million, is that a number that MSD came up with 8 or a number that is part of the Consent Decree 9 or do you know and can you say? 10 A. I only know what was in the fact 11 sheet presented to the June 9th Board, and in 12 that fact sheet it said $4.7 million was the 13 negotiated amount. 14 Q. Okay. So that was the negotiated -- 15 that was a dollar number, not certain set items 16 that had to be done? 17 A. It was a dollar number. 18 Q. In 2011. 19 A. That's what I understand. 20 Q. Okay. Now, I've gone through the 21 proposed rate structure and I'm sure I have 22 made this too simplistic but I hope that you 23 might be able to help me out and figure out 24 what -- where I'm missing the numbers. This is 25 Exhibit MSD 3 but it's also part of the numbers PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 228 1 that are under 3-17, I believe. 3-21 on 2 page 3.36 of the plan has the comparison 3 existing and proposed wastewater rates. And 4 I'm looking at the compliance charge for the 5 different tiers and then I'm multiplying that 6 by the number of customers in each of the five 7 tiers, and the numbers are coming out very 8 differently so I'm trying to understand why 9 there is such a large difference between the 10 two. 11 If I multiply out Tier 1 in July of 12 2015 or fiscal year 2016, if I multiply all the 13 numbers in that row, I only come out with 14 $171,000 under compliance charges. But it 15 appears currently there is $804,000 when you 16 take the total number of people paying the 17 compliance charge by the 3195 uniform number. 18 A. These are monthly charges. 19 Q. Right. You multiply it by 12 if you 20 want or 1/12. 21 A. Well, for the 2012 you should get 22 something around $8 million. 23 Q. Well, I'm just doing it for one 24 month. If I multiply one month of the number 25 of customers times 3195, I come up with PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 229 1 $804,000. 2 A. Okay. 3 Q. But if I do the same for fiscal year 4 '16 for all those same customers under the new 5 rates, I only come up with $171,000. So I'm 6 trying to figure out where the $630,000 is and 7 I know there is some shift from residential, 8 but -- 9 A. There is significant shift of cost 10 from non residential to all customers such that 11 where you might have, say, $8 million in 2012, 12 by 2016 you'll only be looking at around $2 13 million. 14 Q. So, you're shifting it to residential? 15 A. We are shifting it out of the non 16 residential customer class to other cost 17 components which affect all customer classes. 18 Q. Okay. Is there a schedule that shows 19 that? 20 A. If the schedule -- I'm sorry, other 21 than 3-21? 22 Q. Well, I see the numbers there but I'm 23 trying to see the shift where the shift 24 actually occurred. I see the dollars there 25 but -- PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 230 1 A. The discovery request out now that 2 asks that question on 123. I have an answer 3 for it. 4 Q. Okay. That would be the discovery 5 request from the Rate Commission? 6 A. It's from MIEC. 7 Q. The answer has not been provided yet, 8 has it? 9 A. We are still formulating our responses. 10 Q. Okay. So, I should wait for that? 11 A. Yeah. 12 MS. LANGENECKERT: Okay. That's all 13 my questions. 14 COMMISSIONER TOENJES: Thank you, Ms. 15 Langeneckert. Mr. Mueller, do you have 16 questions for the witness? 17 MR. MUELLER: I have no questions. 18 COMMISSIONER TOENJES: Mr. Arnold. 19 MR. ARNOLD: Mr. Chairman, may I 20 yield my time to Mr. Stannard? 21 COMMISSIONER TOENJES: Yes. Mr. 22 Stannard. 23 24 EXAMINATION 25 Questions by: BILL STANNARD PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 231 1 Q. Thank you, Mr. Arnold. Mr. Barber, I 2 have a couple of questions with regard back on 3 the operation and maintenance expense and I'm 4 going to refer you to Exhibit MSD 4A which is 5 the detailed printout from the electronic model 6 that you've developed and used for this 7 analysis. And I would like to start with 8 Schedule D7 that is the summary of the historic 9 operation and maintenance expense, and at the 10 bottom of that page it totals it for the system 11 which is both stormwater and wastewater for 12 these historic years as fiscal years 2006 13 through 2010 and it also has a budget for 2011 14 and then at far right is the wastewater budget 15 for 2011 which I presume was calculated based 16 on the allocation factors that you discussed in 17 your testimony? 18 A. Yes. 19 Q. What, on line 4-66 which is pension 20 contributions, in 2006 that number was 21 $216,243. If we move over to actual 2010, that 22 was just shy of $8.3 million. The budget for 23 2011 was $9.3 million -- $9.4 million and the 24 wastewater share of that is $7,892,000. Am I 25 correct that the forecast for the rate proposal PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 232 1 starts with the 2011 budget for wastewater as 2 the base year and then applies the escalation 3 rates that are presented in the report to 4 each -- to that 2011 going forward? 5 A. Yes. 6 Q. If based on the -- in this analysis, 7 you've not made any adjustment for any changes 8 to the pension program that might impact that 9 base level of $7,892,000. That's based on the 10 actual or the budget for 2011 which pretty much 11 tied with the actual 2010. So, do you know if 12 the budget reflects some of the changes to the 13 pension program that was described earlier by 14 Ms. Zimmerman? 15 A. I don't know if it does or not. That 16 number was from the budget looking forward from 17 page D1 that is an expense that has increases 18 factored in which are different for each year 19 which was provided by Mr. Tyminski. So, if 20 that was known at that time, then perhaps those 21 adjustments are built into those inflation 22 factors. 23 Q. For the inflation factors that are 24 incorporated in the -- in your forecast? 25 A. Yes. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 233 1 Q. Would it be -- if I looked at those 2 historic years by major categories which 3 included personal services, which includes 4 wages and salaries, insurance, which I presume 5 is health insurance and insurance related to 6 employees and it's provided to employees, 7 pension contributions, then supplies, 8 utilities, contractual services and so forth, 9 if I look over that historic period of 2006 10 through 2010, that would give me a sense of 11 what MSD's actual experience has been in 12 escalation of cost during that period? 13 A. It may, but during this time, there 14 is also shifts in personnel reductions, 15 increases. So, it would be difficult just to 16 relate it just on price and inflation. 17 Q. So, for employees, the employee count 18 has changed over this period? 19 A. It changes and shifts and sometimes 20 the organization is restructured. So, I mean, 21 it would be pretty difficult, I think, to just 22 look at these raw numbers and see what the 23 overall inflation is at any one point in time. 24 Q. Do you know if MSD's total head count 25 over the last several years has changed? Did PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 234 1 you look at that as you were analyzing the 2 operating costs? 3 A. The head count has increased over 4 time. 5 Q. Okay. I just wanted to find another 6 of my dog-eared page. Go to Schedule G16 which 7 presents the wastewater fund balance summary 8 table. 9 A. Yes. 10 Q. Okay. In this table, you present a 11 beginning balance as of beginning of fiscal 12 year 2011. Would the beginning balance number 13 tie to MSD's balance sheet in its consolidated 14 annual financial report? 15 A. It should tie to end the year 2010. 16 Q. But in the end of 2010 which is the 17 beginning of 2011? 18 A. Yes, I mean, this is on a cash basis 19 so it may not exactly tie to the financial 20 statement but it would tie to the detail that I 21 was provided. 22 Q. Okay. The balance sheet probably? 23 A. Probably pretty close. 24 Q. One of the questions I have is at the 25 bottom is the reserve for capital improvement PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 235 1 encumbrances. Earlier Mr. Hoelscher explained 2 and in response to our data request with regard 3 to the CIRP that it's based on encumbrances, 4 does that $178,998 shown for 2011, that 5 reflects the amount of money that's been 6 previously raised either through bonds or other 7 borrowings plus cash that has been essentially 8 encumbered by all the existing CIRP projects 9 not included in the new CIRP? 10 A. Yes. 11 Q. Can you explain the process that you 12 used to project how those funds were used over 13 the rate period? 14 A. I believe they are drawn down. I 15 can't recall the assumptions right now but the 16 purpose of this line is more or less to make 17 sure we capture income. So, I'd have to check 18 my notes and see what that is. 19 Q. Possibly you did get some information 20 with regard to expected cash draw schedules on 21 the existing construction projects? 22 A. I don't recall. 23 Q. But I notice that as to $50 million 24 in 2015 but then stays at $50 million thereafter. 25 A. Right. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 236 1 Q. Is that the anticipation that there 2 will be $50 million that will be left over? 3 A. It's anticipation that at any one 4 point in time there will be about $50 million 5 available of earned interest income due to cash 6 in and cash out. 7 Q. Okay. The other fund balances that 8 are shown above, some of which are described in 9 the rate proposal in your report, others are 10 not, but I think this is a very helpful 11 presentation understanding what the makeup of 12 the MSD's cash fund balance is in terms of the 13 operating fund, the bond reserve fund which is, 14 of course, required by the bond adventures and 15 one year principal and interest payments on the 16 outstanding bonds, the capital fund and the 17 emergency fund plus the operating reserve which 18 is I understand is one of the objectives of the 19 fiscal policies of the Board of Trustees to 20 maintain an operating reserve of 60 days of 21 operation and that is reflected in that 22 operating reserve? 23 A. 60 days of operating and maintenance 24 expense plus capital outlay. 25 Q. Plus the capital outlay. And then as PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 237 1 you've forecasted, interest income in your 2 forecast to recognize interest income, these 3 fund balances are what is part of the analysis 4 that you do in your algorithms to estimate what 5 future interest income will be even at the 6 miserably low interest rates that Karl is able 7 to earn on investments? 8 A. Yes. These are factored in the 9 interest calculations. 10 Q. If interest rates that we can earn on 11 investments go up, that will be a positive 12 impact on the interest earnings of MSD? 13 A. Yes, it would. 14 Q. Going back to Exhibit MSD 1, I'll 15 refer to Table 3-6 on page 3.10, and if we can 16 kind of review the components of this table 17 which relates to other operating revenue that 18 MSD earns and generates on an annual basis and 19 what you're forecasting for the period 2011 20 through 2016. The first is a category called 21 billing adjustments and I think the footnote 22 explains that very clearly, so you don't need 23 to get into that. The second is the bad debt 24 provision which starts at $10.9 million, then 25 drops to a minus $6.8 million, and then starts PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 238 1 growing annually a bit up to in 2016 to $12.6 2 million. I believe this ties generally with 3 what shows again with the consolidated annual 4 financial reports and the income statements as 5 far as revenues that essentially the bad debt 6 expense for recent years had climbed to about 7 $10 million, so it appears that your 8 forecasting continuation of that in 2011 of 9 about $10.9 million, that would be considered 10 bad debt expense and it would be recognized by 11 the District, either then confirmed by the 12 auditor? 13 A. Yes. 14 Q. Then it does decrease to $6.8 million 15 as an expense, a reduction -- it's an expense, 16 you're showing it as a reduction in -- 17 A. Operating revenue. 18 Q. You have that going down. What 19 causes that to go down? 20 A. I believe it's noted in here that 21 during this two year period, the District has 22 implemented enhanced collection efforts and a 23 lot of that collection will be for older debt, 24 and the consideration here is that the various 25 collection firms and the legal firms that have PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 239 1 been contracted by the District will be 2 successful enough to collect that. There will 3 be a point in time when you can't get any more 4 and at that point in time, then the bad debt 5 will more or less increase basically at prior 6 levels and then in relationship to the 7 percentage of increase of the sewer service 8 returns. 9 Q. I believe and I apologize, I don't 10 have the page in Exhibit M4A directly, but my 11 recollection was that I saw about a four and a 12 half million dollar recognition in 2012 that 13 the collection -- increased collection efforts 14 would generate an additional four and a half 15 million dollars and then that dropped to two 16 and a half million in the subsequent years? 17 A. Right. That's based on those 18 enhanced collection efforts. 19 Q. But that -- so that as Ms. Zimmerman 20 explained in the presentation of the response 21 to our initial data request, there was at the 22 end of the fiscal year 2010, our total 23 receivables that were, I believe, older than 24 one year stood at about $58 million which is 25 what the enhanced collection coverage will be PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 240 1 focused on initially, but then will be -- 2 you're expecting to continue to increase that 3 by these bad debt expense amounts each year but 4 that as the enhanced collection -- until they 5 actually go into place and we start seeing 6 results, we don't really know what is going to 7 happen? 8 A. That's correct. 9 Q. So, it might be possible that instead 10 of just four and a half million next fiscal 11 year and followed by two and a half million in 12 the subsequent years, they may be more 13 successful than that? 14 A. That's a possibility. It's also a 15 possibility they could be less successful. 16 Q. But until we get some experience, we 17 won't know? 18 A. That's correct. 19 Q. This was your best estimate of what 20 you, in consultation with MSD staff, what you 21 believe would be a reasonable recognition of 22 those results that may happen? 23 A. Yes. 24 MR. STANNARD: Okay. 25 MR. ARNOLD: Thank you, Mr. Chair. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 241 1 COMMISSIONER TOENJES: Thank, 2 Mr. Arnold, thank you, Mr. Stannard. Does any 3 of the Commission have questions for -- yes, 4 Mr. Tomazi. 5 6 EXAMINATION 7 Questions by: GEORGE TOMAZI 8 Q. Two questions that Ms. Zimmerman 9 thought Mr. Barber might best answer and one of 10 them has to do with the question about what is 11 the maximum annual bill that could be assessed 12 against a customer of the District? I 13 understand based on median income in the St. 14 Louis City and median income in the St. Louis 15 County. What are those out of curiosity? 16 A. Page 5.11 of our report. 17 Q. Page what? 18 A. 5.11. I think that addresses your 19 question. And basically I think what you've 20 been referring to -- 21 Q. Paragraph now? 22 A. Pardon? The whole Section 5.6. 23 Q. Okay. That's about the 30 -- okay. 24 It looks to me like at the current proposed 25 rate out in 2015, that we are going to be PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 242 1 pushing those limits, is that right? Did I 2 read that correctly? 3 A. That what is presented in this 4 section is affordability analysis as of 2009 5 which is -- 6 Q. Pardon? 7 A. The mean household incomes in this 8 Section 5.6 is based on 2009 projections. At 9 the writing of this report, the 2010 data has 10 not been compiled but I don't expect it to be 11 that much different, and at this time, I think 12 we made a reference to $389 per year as being 13 the upper limit, which if you divide that by 14 12, I suppose you get around $135 per inside 15 city. 16 Q. Okay. The other question I have is, 17 how much is in the proposed rate increase for 18 low income families? How is that sorted out? 19 Is it in dollars or is it a fixed amount or how 20 did that come up with that? 21 A. Whatever increase residential 22 customers have are also the increases for low 23 income customers except they pay half the 24 amount. So, if we are increasing inside the 25 city by 13 percent, then low income also gets PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 243 1 increased by 13 percent but instead of paying 2 the full bill, they are paying half the bill 3 but the increase is still 13 percent. 4 Q. Okay. But is that in your forecast, 5 pick a year, 2013, does that come out to $5 6 million or $55 million? 7 A. As far as low income credits? 8 Q. Right. 9 A. I believe we are talking around 10 $800,000 a year. 11 Q. Where? 12 A. $800,000. 13 Q. $800,000, okay. 14 A. I can get you that. 15 MR. TOMAZI: That's all I have. 16 COMMISSIONER TOENJES: Thank you, 17 Mr. Tomazi. Yes, Mr. Koenen. 18 19 EXAMINATION 20 Questions by: GLENN KOENEN 21 Q. Back in the summer of 2006 we've been 22 trying to project what is going to be happening 23 in the summer of 2011. Anybody who has it 24 right would be driving a Bentley right now. 25 Looking now at 2011 to 2016, how wide do you PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 244 1 think is the cone of probability where these 2 numbers are going to fall? Do you think 3 they're in the middle, do you think they're on 4 the conservative end, or do you think you're 5 reaching for the fences? 6 A. It's really hard to say. I mean, if 7 you look back at five years before that, it was 8 a much greater drop than what we are looking at 9 now. Personally I think we might be a little 10 optimistic. I know we have nearly a 2 percent 11 decrease in revenues under the existing rates. 12 To me that could be right. I mean, but I think 13 it's in the range of reasonableness and I think 14 what's important and may not have been brought 15 forth so far in these proceedings, we are 16 dealing with a municipal utility, not an 17 investor-owned utility. You can do all kinds 18 of analysis and try to narrow this down to $1 19 if you want, but in the end, really all the 20 money that comes into the utility stays in the 21 utility. 22 So, if for whatever reason we end up 23 with more revenue than we projected at the end 24 of 2013, all that really means is that we are 25 going to have more money to cash finance PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 245 1 improvements in 2014 and less debt. If it goes 2 the other way and we underproject revenue, that 3 means we have less cash and we will have to 4 bond finance more. 5 So, right now we are still going to 6 pay all the O and M costs and everything else 7 that we have to. We are going to maintain debt 8 service but really the variable is how much of 9 our CIRP is cash finance versus debt finance. 10 MR. KOENEN: Thank you. 11 12 EXAMINATION 13 Questions by: GEORGE LIYEOS 14 Q. Let's just take your hypothetical for 15 a moment and step further as it relates to 16 projection that is made in terms of the revenue 17 stream. There is a gap. How would that gap be 18 made up? 19 A. You mean the shortfall? 20 Q. Yes. 21 A. We do have money, I think we 22 mentioned before, that is used for liquidity 23 purposes and that would probably be the first 24 call. Other than that, the only other thing we 25 can do if we have adequate bond authority would PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 246 1 be to leverage more with debt on a short-term 2 basis. 3 So, I mean, I guess the safety net 4 there, instead of asking for exactly $945 5 million, you might want to ask for $1 billion 6 just to have that little cushion, but in the 7 end, the District is going to use that and 8 likely more since they are facing 4.7 CIRP in 9 the next 23 years. 10 Q. Let's say the number you say is $1 11 billion and I think 9475 is what you were at? 12 A. $945 million, yes. 13 Q. $945 million, okay. Does it make 14 sense to ask for a billion if that can't be 15 supported? 16 A. That's a policy decision. I mean, 17 yeah, if you want to go exactly for 945, I 18 mean, that's up to the District. In the past 19 it was $500 million and 275, so there has been 20 a semblance of rounding, I think, at least in 21 my mind. 22 Q. And I understand that but based upon 23 what we are experiencing, it seems we are in 24 unique circumstances, if not unchartered 25 waters, and I just fear if there is a gap PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 247 1 there, then some of the revenue stream may have 2 to be tapped into to get additional funds for 3 the work that you want to do, and we are 4 drawing down upon reserves or something, some 5 other revenue stream to do that. 6 Now, again, I agree with you, it's a 7 policy decision but it's a difficult decision 8 to make when we have numbers that seem to be a 9 moving target. 10 A. Well, in addition, you have to 11 realize that the 945 is only through 2016. 12 After that, there is going to be more bond 13 authority needed. 14 MR. LIYEOS: Okay. 15 COMMISSIONER TOENJES: Mr. O'Connell. 16 17 EXAMINATION 18 Questions by: MIKE O'CONNELL 19 Q. The question 336 and 338 in your 20 exhibit talking about the compliance charges 21 and the different tiers. That is what my 22 questions are about. You mentioned how -- can 23 you go over a little bit of how they are 24 calculated? I'm looking specifically at 25 Table 3.2, it talks about the monthly unit cost PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 248 1 per tiers, Tier 1 through Tier 5, and I'm 2 comparing that to the actual charges that would 3 be incurred -- I know there is a year 4 difference but looking at 2013 versus 2000, and 5 then looking at the unit cost. If I'm reading 6 this correctly, I'll give you an example, and 7 tell me if I'm reading correctly here, your 8 monthly units cost for Tier 5 is $145 per 9 month. In 2013 you're going to charge at Tier 10 5, $165.50. Is it fair to say you're charging 11 more for the actual unit cost for that tier in 12 terms of what it costs to comply with the 13 services? 14 A. I'm not following your numbers. 15 Q. I'm on Table 3.22, the reading column 16 for Tier 5, monthly unit cost? 17 A. Okay. Tier 5. 18 Q. My question is if my definition is 19 right. If I -- do I understand it correctly 20 that your definition of monthly unit cost is 21 the cost it takes to comply with the 22 environmental -- the testing and the 23 environmental regulations, the cost for Tier 5 24 users is $145. Am I correct on that? 25 A. For 2010, that is correct. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 249 1 Q. And by 2013 you're going to charge 2 this tier $165, is that correct? 3 A. Yes. 4 Q. So, there is a little bit of 5 inflation factor for the three year difference 6 but -- 7 A. Yes. 8 Q. It's fair to say that -- is it fair 9 to say that Tier 5 users, I'm comparing Tier 5 10 and Tier 1 tiers. It looks like Tier 5 is the 11 only tier that pays more in than receives back 12 in terms of the cost of service, is that a fair 13 assessment? 14 A. Tiers 2 through 5 go directly from 15 the uniform compliance charge to cost of 16 service charges. So, what you see on 17 Table 3-21 is not only the charge but the cost 18 of service that is charged. Tier 1 doesn't get 19 to their cost of service charge until 2016. 20 Q. Right. But the other tiers, the 21 other tiers already get to that point, right? 22 A. Yes. They go to that point 23 immediately in 2013. 24 Q. Is that what you were saying -- when 25 you were asked in your testimony if it was the PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 250 1 rate -- let's see here. You were asked -- 2 excuse me here. You were asked in the 3 testimony, I can't find the exact page, I 4 apologize, but you were asked is this a fair 5 and equitable and you said yes because of the 6 transition time. Is that what you mean by that? 7 A. Yes. 8 Q. Okay. My other question concerned 9 going back to the allocation of residential 10 usage. You said you basically use historical 11 averages from the past. You're using 2006 kind 12 of deal, 2006 data. I want to make sure I'm 13 clear. You do not account for any economic 14 factors, you do not account for any demographic 15 factors, you do not -- is that correct? 16 A. Not separately. Any economic -- any 17 change in usage due to economic conditions are 18 already factored into the unit usage changes 19 over that historic period. 20 Q. Over that historic period. So the 21 past is prologued is kind of what you're 22 saying? 23 A. Yes. 24 Q. Then my other final question, you 25 compare residential rates under the NACWA PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 251 1 survey. You compare them to residential rates. 2 I think you said residential rates were ranked 3 32 among the top 50 cities. Where under non 4 residential usage is the NACWA survey to non 5 residential usage, and where does St. Louis MSD 6 rank for non residential usage in terms of 7 rates? 8 A. I'm not sure NACWA does a non 9 residential rate. 10 Q. Does Black and Veatch do a non 11 residential rate? 12 A. Yes, Black and Veatch does. That 13 information is not available in our rate report 14 but it is available in the bond feasibility 15 report which is in draft form but I can tell 16 you something about that. It's very 17 interesting how this works. 18 In the Black and Veatch survey, we 19 delve in five different classes. Small 20 residential is users with 3.75 thousand 21 gallons, mean residential is seven and a half 22 thousand gallons which is essentially 10 CCF, 23 large residential is 15,000 gallons, commercial 24 is 100,000 gallons, and industrial is 25 considered to be 10,000 gallons per month. In PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 252 1 the small residential category, MSD -- keep in 2 mind this is back in 2009 -- MSD ranked No. 32 3 lowest, where 1 is the lowest and 50 is the 4 highest rate. When that moves to medium 5 residential, MSD moves up to No. 27. When that 6 moves into large residential, MSD moves up to 7 22. When it goes into commercial, MSD moves up 8 to 18. When it goes into industrial, MSD 9 ranked as No. 14, the lowest in those 50 cities 10 which implies that the other 50 cities have 11 higher volume charges than MSD and that is why 12 MSD is improving in their ranks as it moves 13 forward. 14 COMMISSIONER TOENJES: Anything else 15 from the Commissioners? I have one question in 16 the tiers question that Eric asked just a 17 minute ago. 18 19 EXAMINATION 20 Questions by: LEONARD TOENJES 21 Q. Is it accurate to say Tiers 2 through 22 4 are basically supporting Tier 1 until 2016 23 when the rates are all -- 24 A. No, it's actually the opposite. Tier 25 1 has been supporting Tiers 2 through 5 for PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 253 1 decades, ever since the charge was imposed, 2 because their service requirements were so much 3 lower than the ones that had more sample points 4 and more monitoring, so Tier 1 are the 5 customers that are more or less still carrying 6 the load more or less and helping to moderate 7 residential rates and keeping them at the 13 8 percent level that is just fixed. But as of 9 2013, Tiers 2 through 5 are no longer supported 10 by Tier 1 as they have in the past. 11 Q. One other question. You're looking 12 at, you know, $1.6 billion program and $945 13 million of bonding, so you're basically bonding 14 94 percent of the overall program. How does 15 that compare with other districts? 16 A. I would say that's probably on the 17 high side but that's just an opinion, but 18 really -- 19 Q. Do you have comparative data? 20 A. No. I mean, at this point, because 21 of the lower increases in the past and moving 22 from a PAYGO in 2007 to more or less minor 23 increases and more debt in 2008, you got to the 24 point where you really don't have a choice. 25 Once you raise rates as much as you think it PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 254 1 could be accepted by the public, which is the 2 13 percent level, the rest has to be debt, and 3 that's basically what you have once if the 4 capital improvement program is fixed by the 5 Consent Decree. 6 7 EXAMINATION 8 Questions by: ERIC SCHNEIDER 9 Q. Can you just expand on that 13 10 percent number? You said in your testimony 11 that you kind of -- your proposed schedule can 12 only -- holding future rate increases to 13 residential customers at approximately 13 14 percent per year. Why is 13 percent the magic 15 number, not 15 or 10? 16 A. That was a decision by the senior 17 management of the District to hold it at 13 18 percent. 19 Q. What were some of the factors to get 20 to that 13 percent? The median household 21 income or -- 22 A. I would defer that question to 23 District staff. 24 COMMISSIONER TOENJES: Further 25 questions from any Rate Commissioners? Ms. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 255 1 Myers, do you have questions for the witness? 2 MS. MYERS: I just have a couple. 3 4 EXAMINATION 5 Questions by: SUSAN MYERS 6 Q. In regard to the Consent Decree, do 7 you have any firsthand knowledge regarding the 8 flexibility of the schedule which was 9 negotiated in the Consent Decree? 10 A. I have no firsthand knowledge of what 11 flexibility there actually is other than 12 knowledge that they may be able to shift some 13 cost and that is all I know. I have no 14 knowledge of any order of magnitude. 15 Q. Okay. And in regard to the Black and 16 Veatch survey data that you were just speaking 17 to, do all the surveyed communities provide 18 retail service to the customers? 19 A. Yes. 20 Q. Okay. So, some of those entities 21 that were surveyed don't have other charges 22 that are associated with the service charge? 23 A. They likely have charges but the 24 survey was only based on the wastewater service 25 charges, not other charges. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 256 1 Q. Okay. So, is it fair to say that 2 MSD's charges are all in? 3 A. As far as wastewater, I would say 4 yes. 5 MS. MYERS: Okay. Thank you. That's 6 all I have. 7 COMMISSIONER TOENJES: Thank you, Ms. 8 Myers. Thank you, Mr. Barber. Are there any 9 other matters for the Rate Commission prior to 10 our adjournment? 11 MS. STUMP: May I just remind the 12 Rate Commission that since we will be changing 13 the schedule, that you will need to set a new 14 meeting after the 29th, so I assume Pam will 15 try to get -- it will have to come pretty 16 quickly after the 29th in order to get the new 17 notice out and proceed with the new schedule. 18 And the other thing I would like to 19 remind you all is that in listening to the 20 testimony and the questions, when the Rate 21 Commission issues its report, it will make a 22 decision on the rate that's proposed and what 23 that will be, but the Rate Commission also has 24 the authority in its report to make 25 recommendations on different issues. So, you PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 257 1 may end up approving a rate but you still may 2 want to comment on something and that you will 3 have the authority to make recommendations and 4 that regarding the report. So, just keep that 5 in mind as you're looking at the materials. 6 COMMISSIONER TOENJES: I think this 7 will conclude our technical conference. There 8 will be -- our next meeting will be on-call 9 based on what happens on the 29th at the 10 Trustees meeting if the Trustees grant our 11 request for 45 additional days at either prior 12 to or at that point, the intervenors and our 13 counsel and District staff will meet to 14 finalize the new schedule and it will be 15 incumbent upon the Rate Commission to meet and 16 approve and adopt that schedule as soon as 17 possible after those two steps occur. So, 18 right now there is no further meeting of the 19 Commission scheduled until at least after the 20 29th. 21 COMMISSIONER KOENEN: Move to adjourn. 22 COMMISSIONER TOENJES: All in favor, 23 signify by saying aye. Thank you to all the 24 Rate Commissioners and intervenors and 25 District. PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 258 1 (WHEREIN, the technical conference 2 was concluded at 4:04 PM.) 3 4 * * * * * * 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 259 1 CERTIFICATE OF REPORTER 2 STATE OF MISSOURI ) ss: COUNTY OF ST. LOUIS) 3 4 I, KIMBERLY A. GANZ, a Certified 5 Court Reporter in and for the State of 6 Missouri, qualified and authorized to certify 7 to this Meeting of the Rate Commission of the 8 Metropolitan St. Louis Sewer District, and the 9 officer before whom the foregoing Meeting was 10 taken, do hereby certify that the foregoing was 11 taken by me to the best of my ability and 12 thereafter reduced to typewriting under my 13 direction; that I am neither counsel for, 14 related to, nor employed by any of the parties 15 to the action in which this was taken, and 16 further that I am not a relative or employee of 17 any attorney or counsel employed by the parties 18 thereto, nor financially or otherwise 19 interested in the outcome of the action. 20 21 _________________________ 22 Certified Court Reporter 23 24 25 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 260 A AA 130:23 131:1,2 131:3 143:24 148:24 149:2,3,9 149:20,22 AAA 143:24 148:8 148:24 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252:17 agree 15:2 42:24 134:24 168:22 205:24 222:18 247:6 agreed 16:15 33:4 42:19,22 54:4 57:4,10 71:15,19 132:19 168:20,21 agreeing 54:6 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 261 agreement 16:18,20 36:8 41:17,22 43:2,7 44:1,10,11 45:13,24 56:14 57:17 59:14 78:25 89:14 131:15 195:10 agreements 35:14 59:13 ahead 30:1 32:12 95:5 albeit 65:22 algorithm 174:4,14 174:19,22 175:2 algorithms 237:4 aligned 41:6 alleged 34:21 allocate 12:16 117:11 allocated 21:23 223:24 226:15 allocation 224:3 231:16 250:9 allotted 12:21 allow 14:1 35:3 36:3 42:6 44:7 51:25 81:11 88:17 allowance 180:7,11 180:13 194:12 allowances 157:21 158:12,25 180:5 194:14,16 allowed 17:17 61:11 107:25 174:5 allowing 44:24 almost 91:1 98:3 110:25 121:9 alone 151:12 along 48:14 88:13 150:21 aloud 54:16 already 24:19 65:12 71:19 105:10 118:12 143:18 166:21 180:19 212:21 220:15 249:21 250:18 alternate 167:21 alternative 65:20 125:17,18,19 165:5,8 166:12 167:7 226:2 alternatives 168:7 although 34:3 167:2 225:22 always 24:24 59:11 122:5 140:12 155:1 168:2 193:9 amended 5:19 7:20 8:4 41:3 amendment 5:20 79:24 130:14 America 120:2 138:1,7,16 American 183:8 among 12:13,16 251:3 amount 7:12 29:6 37:1 51:20 52:12 61:25 62:2 92:6 95:7 96:16 100:5 116:5 125:17,19 125:20,20 129:15 135:2,3 141:3,15 146:25 149:6 154:13 160:4 162:6 166:17 167:21 174:13 179:22 188:2,14 189:14 190:2 192:16 194:7 203:6,9 208:12 222:25 224:21 225:4 226:7 227:13 235:5 242:19,24 amounts 94:4 125:22 128:18 226:19 240:3 Analyses 47:25 analysis 47:16 75:8 75:11,17,21 76:3 76:19,23 77:4,8 83:20,21,24 84:8 84:11,22 85:4 206:23 231:7 232:6 237:3 242:4 244:18 analyze 75:20 analyzing 234:1 and/or 222:9 Angeles 35:16 Anheuser-Busch 154:3 announced 33:3 annual 102:23 122:14 142:12 185:9 196:8 204:5 207:19 219:3 222:22 224:19 234:14 237:18 238:3 241:11 annualized 135:23 annually 194:1,4 196:10 238:1 anomaly 189:18 another 14:24 18:15 30:6 45:24 48:22 100:16 109:14 141:3 172:17 234:5 answer 9:16 10:5,18 12:11 25:21 61:22 63:12,14 77:15,18 85:3 87:20 96:25 118:2,3 120:4,9 128:22 130:20 132:2 133:19 136:23 141:5 142:21 151:6 159:24 167:8 170:24 213:25 219:20 230:2,7 241:9 answered 84:7 178:16 194:13 answering 79:4 anticipate 113:19 159:9 188:7 anticipated 7:14 45:18 107:3 115:24 124:2 156:6 161:18 167:2 209:22 222:2,10 225:22 anticipates 224:16 anticipating 181:15 anticipation 236:1,3 anybody 145:14 213:22 243:23 anyone 33:13 62:5 159:6 190:2 anything 30:3 44:17 54:8 64:11 70:12 70:16 145:24 174:7 178:6 189:7 201:7 252:14 Anyway 173:2 apologize 74:4 239:9 250:4 apparent 108:12 apparently 100:17 appear 153:17 211:6 appearance 38:19 APPEARANCES 2:1 appeared 51:14 108:22 153:20 appears 181:7 228:15 238:7 Appellate 80:2 applicable 8:3 application 8:13,20 applications 8:21 8:25 118:13,24 applied 170:17 204:18 applies 157:9 176:22 232:2 apply 155:8 157:11 184:17 207:6 212:1 appreciate 14:14 20:12 98:5 124:1 approach 21:1 55:3 64:16 74:1 102:6 168:10 approaching 94:6 appropriate 21:3,12 65:22 103:14 119:14,16 123:7 appropriated 105:11 134:9 appropriately 49:1 appropriation 103:13,17 134:13 appropriations 134:17 136:6 approval 24:8 28:21 42:2 56:19,20,23 92:16 124:20 126:24 127:9 163:11,24 approve 24:10 44:10,12 70:15 257:16 approved 5:17 17:3 32:3 36:14 37:25 42:6 48:18 56:13 56:16 65:14 84:18 119:1,3 134:10 212:13 approves 44:23 198:21 approving 120:1 257:1 approximately 15:25 16:2 34:5 48:15 49:2 93:1 108:6 119:9 177:16,20 207:18 254:13 April 19:20 140:6 151:7,9 arbitrage 137:24 arbitrage's 137:15 area 47:19,22 58:2 64:16 99:6 117:13 122:1 140:15 141:22 142:1 145:23,23,24 149:23,24 169:8 178:25 areas 89:4 132:22 143:6 171:19 Army 121:17 Arnold 2:13 12:7 22:1 52:25 53:2,6 53:7 55:3 56:3 72:7,8,12 74:1 77:19,22 101:16 101:18,22 102:6 103:22,25 114:13 114:14 129:24,25 130:4 139:8,10,16 169:6,7,12 178:15 180:24,25 230:18 230:19 231:1 240:25 241:2 Arnold's 83:20 around 25:8 83:10 83:11 92:8 109:6 127:6 143:4 182:10 194:19 205:20 228:22 229:12 242:14 243:9 arrangement 57:5 arrive 124:4 article 52:2 artificial 189:23 ash 90:7,8,14 aside 107:16 189:6 189:8 asked 44:10,12 54:8 70:9 78:24 79:7 80:11 82:11 97:14 102:22 163:21 166:21,22 249:25 250:1,2,4 252:16 asking 22:13 23:21 30:14 62:18 70:13 128:20 129:14 224:8 246:4 asks 230:2 aspect 191:2 aspects 35:19,22 38:11 43:4 55:10 assess 155:15 assessed 147:10,13 241:11 assessment 249:13 assessments 213:18 assets 7:10 151:8,12 187:3,4 assist 53:10 assistance 120:16 186:24 187:12 associated 6:15 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 262 46:13,17 57:23 80:13 90:20 91:20 91:25 154:23 156:23 159:21 197:4 255:22 Associates 2:23 202:5 Association 6:17,22 66:8 assume 30:12 59:3 74:14 108:18 150:1 256:14 assumes 119:8 122:12 133:13 165:11 assuming 23:2 44:23 61:17 198:12 assumption 209:7 assumptions 235:15 Atlanta 35:16 attached 19:22 89:21 Attainability 47:24 attainable 48:7 attempt 12:15 207:14 attempting 217:4 attention 13:3,10 54:17 attorney 11:13 14:15 43:20 79:9 259:17 attorneys 34:24 attributes 184:14 auditing 186:11 auditor 238:12 auditors 224:2 audits 186:15 August 10:15 11:1,1 18:16,20 21:24 26:4 authority 16:23 70:22 73:6 223:5 245:25 247:13 256:24 257:3 authorization 120:1 124:21 163:5 164:6,21 167:22 authorizations 126:22 authorize 31:25 authorized 130:8 259:6 automated 172:3 automatic 171:25 183:13 198:8 availability 121:2 225:8 available 35:20 42:15,16 54:11 71:10 72:16 88:10 88:20 94:20,25 95:7 96:14 107:23 108:13 109:22 113:25 121:23 136:17 156:13,15 160:12 211:17 236:5 251:13,14 average 94:9 122:14 127:13 134:22 145:3,19 158:20 158:21 173:14 193:4,7 averages 250:11 avoid 161:17 awarded 95:5 aware 34:18 51:18 53:8 71:12,17,21 114:2 120:14 162:18 213:7,23 216:7 218:1 away 82:3 164:8,23 174:22 195:6 aye 31:8 257:23 B B 19:22 27:12 75:9 75:24 179:2 209:21 219:19,19 back 18:15 23:23 27:16 32:8,10,17 58:5 71:1 79:11 82:11 83:1 84:15 99:18 104:6,16 108:3,16 109:13 136:22 138:13,21 155:10 160:22 179:2 180:15 205:15 206:8 207:15,16 210:20 231:2 237:14 243:21 244:7 249:11 250:9 252:2 backing 215:2 backups 58:14 bad 109:12 169:22 169:25 170:10,11 171:1 173:17 178:24 179:10,12 179:14,15,16 180:16 181:14,24 189:6,9,21 199:16 199:25 237:23 238:5,10 239:4 240:3 Baer 2:14 9:19 12:7 balance 23:16 105:13 168:11 179:13,14,15,16 179:21 180:4,6,17 223:1,18 234:7,11 234:12,13,22 236:12 balanced 129:2,4,17 134:8 159:15 balances 236:7 237:3 ballot 30:1,7 Baltimore 35:16 bank 117:2,3 146:18 Barber 2:18 9:6 11:8 39:1 68:20 68:22 69:2,3 97:16 124:7 150:23 158:1 167:10,17,20 188:14 194:18 201:16,16,19,22 201:24 202:14,20 202:24 221:17 231:1 241:9 256:8 Barber's 166:22 barcoded 187:18 bargaining 199:4 Barnes-Jewish 3:1 8:24 11:20 14:9 14:24 barring 120:6 bars 214:18 base 34:4 145:16 232:2,9 based 33:25 34:12 58:10 71:7 83:7 83:21 97:3 124:6 142:11 147:10,13 147:14 153:7 155:11 158:6 183:7 184:13,21 187:2 198:9,11 206:13,23 215:18 216:25 218:4 220:15 223:25 231:15 232:6,9 235:3 239:17 241:13 242:8 246:22 255:24 257:9 basement 58:14 basic 192:18 194:20 basically 126:7 153:17 156:2 162:14 164:19,22 174:5,15 175:20 187:25 220:10,15 239:5 241:19 250:10 252:22 253:13 254:3 Basin 159:23 basing 162:23 basis 76:18 83:4 102:3,17 118:6,21 123:4,11 128:10 129:10 135:23 137:23,23 149:5 151:10 154:22 155:10 156:20 172:11 173:12 176:25 185:6 187:14 192:15 207:19 211:12 212:4 220:13 224:20 234:18 237:18 246:2 bathroom 153:23 bathrooms 184:15 186:3 Bay 49:19 bear 74:5 88:22 130:10 140:10 158:4 181:11 bearing 154:2 became 108:12 Beckley 2:11 12:4 become 43:24 50:2 58:17 73:4,19 81:22,24 107:22 113:21 120:5 136:13,17 becomes 42:16 64:23 183:3 192:7 before 8:9 9:23 10:12 13:6 17:11 22:15 30:2,8 32:14 33:11 64:12 67:18 76:9 109:12 111:15 115:1 137:14 142:1 150:3,20 151:5 162:3,8 164:16 205:13 207:13 225:15 244:7 245:22 259:9 began 34:8 begin 114:21 beginning 10:25 19:21 23:20 30:17 107:19 128:17 129:15 133:4 165:20 223:7 234:11,11,12,17 begins 130:20 behalf 2:12,16,20 3:1,4 11:3,10,14 11:17,18,19,25 12:1 33:16,22 40:25 42:7 67:20 121:22 202:8 being 34:3 35:8 37:23 40:19 42:5 47:3 49:18 59:10 60:17 61:8 68:2 69:15 80:8,19,25 81:21 86:2 87:4 96:15 102:2 105:14 106:8 107:11 108:13 112:16,25 115:15 126:1 140:2 152:17 153:14 159:11 168:11 179:5,10 188:25 189:2 193:7 202:15 222:21 227:2,4 242:12 believe 27:12 29:21 30:4,19 46:16,19 53:15 56:11 60:18 60:25 61:1 63:17 65:21 100:13 116:12 117:18 123:6 125:1,2,3 128:23 180:2 212:23 216:20 228:1 235:14 238:2,20 239:9,23 240:21 243:9 below 92:21 123:14 143:18 144:2 benchmark 196:23 218:7 benchmarking 217:18 218:3,25 beneficial 19:15 benefit 14:17 46:23 93:6 95:9 96:15 158:5 198:3 213:4 benefits 194:22 197:3 199:5 213:1 213:2 Bentley 243:24 besides 101:11 155:23 best 18:8 20:7 59:12 65:18 68:18 73:5 93:17 101:6 118:3 136:24 142:19 144:24 158:19,23 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 263 158:24 240:19 241:9 259:11 beta 172:8,11 better 15:8 95:24 145:3 146:2 181:18 193:12,12 203:5 213:24 221:7,20 223:20 between 18:14 27:20 41:18 54:24 55:11,13,18 57:5 60:13 71:20 89:14 103:7 118:20 123:11 124:6 126:12 133:22 134:14 167:16 168:12 191:22 207:19 208:10 224:3 226:22 228:9 beyond 191:17 213:10 bid 92:25 93:16 95:6 97:1 bidding 94:11 96:7 96:23 107:24 136:18 bids 92:20 big 47:11 49:14 55:13 104:14 127:21 158:7 200:6 biggest 87:4 bile 49:2 bill 142:12,12 171:7 171:8 177:13 178:22 183:15 192:15,15,16,17 214:24 230:25 241:11 243:2,2 billable 203:23 205:11 billed 207:2,5,7 222:22 billing 183:20 189:19 192:19 204:10 205:1,7 237:21 billion 16:7 36:8 37:11 48:16,20 49:6 51:17,23 52:7,15,16 57:6 92:8 104:10,13 116:16 117:8,15 140:16 141:25 142:1 151:8,13 223:6 246:5,11,14 253:12 bills 183:7 184:25 192:9 214:23 217:12 binding 44:1 bit 66:2 128:10 143:18 145:12 159:20 168:17 169:9 176:5 189:17 196:22 203:4 238:1 247:23 249:4 BJC 20:24 BJH 14:24 39:14 Black 2:18 11:8 39:1 132:17,20 214:5 215:18,23 217:14 251:10,12 251:18 255:15 Block 153:23 154:7 Blockage 99:15 blocks 99:16 Bloomberg 123:1 blue 214:18 board 5:25 7:7,16 8:11,12 16:24 17:3 21:14,15,16 21:17,18 22:11,13 22:14 23:2,22 24:10 26:25 27:6 27:20 29:2,15,20 29:22,25 31:1,23 35:2,24 42:3 44:5 44:8,23 55:9 70:14,21 71:13,18 103:14 113:17 130:8 134:11 143:10 159:11 198:21 227:11 236:19 boating 47:21 bond 19:19 20:2 23:10 25:13 28:3 29:11,12,13,24 30:5 70:7 124:21 126:7,22,25 130:7 130:7,9,14 133:6 135:5,17 137:13 138:8 143:22 144:16 146:13,16 147:12 148:8,18 150:4 163:5,12,24 164:6 166:13 167:22 220:9,17 223:5,12,17 236:13,14 245:4 245:25 247:12 251:14 bonded 139:25 bonding 127:9 128:3,19 141:15 146:9,11 147:9 150:2 253:13,13 bonds 7:10 8:1 115:25 120:2,11 122:13 124:21 125:20,24 126:2,5 126:12 127:24 130:25 131:2,4 133:7 134:25 138:1,6,7,9,17 140:9,9 143:4,7 147:13,14 164:12 164:20 165:12 168:12,15 220:3 220:12,18,22,24 235:6 236:16 bones 52:5 book 125:23 150:19 150:25 borrower 117:21 borrowing 128:13 borrowings 235:7 Botanical 6:19 both 15:1 46:11 56:11 66:11 73:22 114:25 125:9 231:11 bottom 17:13 87:21 87:22 93:4 141:6 159:23 204:22 205:12 231:10 234:25 bouncing 58:5 Bowser 2:4 4:5,6,8 4:11,13,15,17,20 4:23,25 5:2,4,7 BPU 217:24 218:1 BPU's 217:21 Brad 2:7 60:2 78:2 188:19 break 67:8,10 69:24 114:23 125:14 139:10,13 151:6 201:9,11 Brian 9:4 38:22 69:3 85:15 86:1 160:1 162:10 193:23 briefly 208:15 bring 13:2 33:14 68:14 88:22 97:22 108:3 173:6,16 193:25 bringing 49:8 Brockmann 2:7 4:6 4:7 31:12 58:19 58:22 broken 167:12 brought 43:10 80:4 244:14 Brubaker 2:23 202:5 Bryan 2:21 11:14 bucket 212:18 budge 182:1 budget 21:21 122:6 129:3,4,17 134:8 134:15 157:20 158:3 159:10,14 159:15,16,17,18 186:25 193:3,7,9 193:12 194:17 198:20,21 212:4,5 212:10,14,16 217:15 219:4,10 231:13,14,22 232:1,10,12,16 budgeting 193:13 196:3 budgets 139:1 158:12 159:1 193:13 211:20 212:13 build 19:24 120:2 137:25 138:7,16 222:16 223:8 Builders 6:22 building 183:3,16 185:12 186:9 192:6,7 203:18,20 buildings 185:2 built 21:11 25:19 189:24 209:25 232:21 bunch 55:16 burden 8:6 38:3 50:5 52:7 142:17 145:6 bureaucrats 72:25 ButcherMark 132:7,9,15,19 button 110:24 buy 94:25 byproduct 48:24 C C 3:2 98:14 124:18 161:9 221:16 cable 200:1,3 calculate 185:17 196:24 calculated 63:12,20 90:23 198:8 231:15 247:24 calculates 151:11 calculations 144:13 184:17 189:25 215:17 237:9 calendar 204:8 205:6 209:20 210:4 call 4:2,5 5:14 39:23 54:17 100:19 125:23 142:3,8 171:25 172:3 174:4 184:14 185:11,20 191:21 200:6 201:14 245:24 called 47:24 58:12 99:25,25 141:18 179:14 185:9 216:12 237:20 calls 173:3 came 20:10 87:14 104:20 107:8 109:6 160:20 187:7 218:2 220:4 227:7 campaign 27:24 capability 199:17 capacity 36:16 100:3 113:18 147:9 capita 140:13 capital 16:6,19 36:6 37:6,7 41:12 55:5 86:24 92:20 96:8 96:23 102:3 116:23,25 120:17 134:6 193:18 216:19 217:15,19 218:9,18 219:3,4 219:21 224:16,17 234:25 236:16,24 236:25 254:4 capture 94:12 235:17 captured 207:11 cards 148:9 care 14:11 20:22 30:23 33:14,15 carefully 16:4,12 carries 31:9 carry 146:2 carrying 145:3 253:5 cars 185:13 case 13:5 14:23 15:9 20:15 21:1 41:4 46:20 55:7 59:5 64:23 69:15,17 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 264 73:5 76:3,13 82:22 83:18,22 84:4,6,9,10,17,24 85:1 93:12,13,21 94:12 104:20 106:10 107:3 108:7,19,22,23 109:2 111:14 112:16 134:5 136:6,25 137:22 146:23 153:3 155:2 158:24,24 162:8,17 184:11 221:20 cases 17:1 76:2 91:1 92:4,5,21 Casey 4:8 cash 102:23 103:18 116:3,20 118:6,8 118:9 125:18,20 125:24 126:2,4,13 127:24 128:4,9,9 128:14,16,21 131:17 138:11,14 141:4,5,8,12,13 141:13 143:14,16 146:25,25 147:1,3 163:8 164:11 165:24 166:2,7 168:12 234:18 235:7,20 236:5,6 236:12 244:25 245:3,9 catch-up 218:22 categories 143:24 158:8 167:16,18 194:16 215:11 226:8,22 233:2 categorize 218:24 category 167:5,10 225:25 237:20 252:1 cause 49:16 100:7 causes 238:19 Cave 2:21 11:14 CCF 192:17,17 251:22 CCR 3:22 CD 45:1,8 52:12 96:3 162:1,2,12 CDs 168:16 cell 5:8 certain 14:18 23:19 48:2 52:12 55:9 89:2,3 164:11,12 186:25 227:15 certainly 16:13 23:1 23:10 26:15 52:12 62:1 118:17 CERTIFICATE 259:1 Certified 259:4,22 certify 259:6,10 cetera 77:7 167:13 184:15 Chair 5:12 21:9 71:23 114:22 201:5 202:7 240:25 chairman 2:3 5:10 56:4 72:8 77:20 103:23 147:4 169:7 201:25 230:19 chairs 13:14 challenges 159:10 challenging 49:12 50:18 Chamber 6:17 7:1 chance 15:1 19:23 124:8 change 1:17 7:5,18 8:8,11,19 13:25 22:5 23:21 28:3 28:13,18,19,20 31:10 38:1 41:1,7 41:7 44:9 45:13 45:15,19 46:15 49:13 50:3 51:13 64:15 66:23 68:11 70:7 71:14 76:7,9 76:12 81:7,8 94:12,14 95:14,16 95:16,18 97:19 104:14 109:13 140:7 166:18 189:11 214:14,22 216:17 221:22 222:10 250:17 changed 22:24 76:24 84:9,20,25 88:11 89:9 130:16 168:1 213:3 224:13 233:18,25 changes 5:23 7:7,15 22:20 26:18 45:18 69:21,22 70:7 71:19 87:2 109:4 109:24 232:7,12 233:19 250:18 changing 23:19 29:23 86:12 167:18 256:12 characterize 75:16 charge 153:1,11,12 154:3,4 155:10 156:1 216:12 224:5,9,12 228:4 228:17 248:9 249:1,15,17,19 253:1 255:22 charged 184:13 249:18 charges 155:12 174:18 180:11 191:13,17,18 228:14,18 247:20 248:2 249:16 252:11 255:21,23 255:25,25 256:2 charging 248:10 chart 28:23 184:25 Charter 5:16,21,25 16:22 22:10,17,25 23:6 24:22 29:16 41:6 69:21,22 70:7 129:3,4 134:9 check 79:14 84:15 124:25 125:4 160:9 167:20 177:5 188:4 235:17 Chesapeake 49:19 choice 193:20 253:24 chosen 35:9 chunk 166:7 Church 7:2 Cincinnati 35:15 Circuit 80:2 circumstances 28:15 78:8 246:24 CIRP 88:1 89:13 90:20 91:20,25 102:17,21 108:20 115:24 161:25 162:10 163:2,6 165:13 166:1,4,12 166:14 167:12 193:21 194:2 223:1,18 235:3,8 235:9 245:9 246:8 cities 35:14 45:20 45:25 46:4 140:19 145:16 200:13 215:10,19 251:3 252:9,10 city 34:14 35:15 45:24 142:14 183:12 184:1,11 184:13,16,19,23 184:24 185:24 186:6,8 191:25 192:4 241:14 242:15,25 civil 34:20 36:21 69:12 80:1 claim 36:25 80:4 claims 62:3 63:2,5,8 63:13,17,21 74:18 80:21 82:2 83:2,3 83:14 clarification 33:9 38:11 98:11 101:19 104:19 122:20 151:21 clarify 29:1 60:5 178:10 class 229:16 classes 8:6 38:3 153:1 205:1 215:9 229:17 251:19 classification 157:14 clause 129:3,4,16,17 134:8 clean 34:21 35:12 36:5 37:22 45:21 46:12 48:2 64:19 66:9 74:10,12 154:14 Cleaning 87:12 clear 73:11 224:24 250:13 clearly 184:4 237:22 Cleveland 141:21 143:6 client 203:17 climate 50:3 66:23 95:21 107:24 climbed 238:6 close 106:4 157:2 168:2 170:19 214:20 234:23 closely 78:18 155:20 closer 117:16 138:19 Club 6:18 CMOM 58:12 101:8 113:17 coalition 7:3 34:25 35:6 36:25 41:19 60:14 71:20 73:17 78:14,19 100:23 code 135:14 cold 74:4 136:6 collaborative 18:5 colleagues 55:20 collect 170:19,23 171:22,23 172:5 172:22 173:13 174:16 176:17 178:14 179:23 183:25 217:7 239:2 collected 160:5 collecting 199:25 collection 36:18 170:21 171:24 172:15,17,19,24 173:4,9,10 174:1 174:5 175:9,14,17 175:25 176:8,12 176:20 177:4 180:20 181:10,14 181:16 190:18,20 199:17 238:22,23 238:25 239:13,13 239:18,25 240:4 collections 16:3 Collision 55:12 column 179:13 204:20 248:15 columns 179:9 combination 67:2 115:25 170:22 171:13 187:2 combine 197:17 combined 34:2 37:13 46:5,5 48:9 48:13 58:2 91:21 211:8 219:16 come 13:2,10 15:4 19:16 22:10 24:2 26:14 32:1 50:24 52:20 66:20,24 88:21 106:11 109:13 110:16 128:9 131:20 136:2 141:25 150:8 157:25 159:13 183:18 206:8 228:13,25 229:5 242:20 243:5 256:15 comes 23:5 131:21 134:6 140:8 145:8 146:17 151:14 183:8 195:12 223:2 244:20 coming 26:4 88:8 89:5 94:2 97:11 142:20 163:23 220:19 228:7 comment 39:16 71:6 72:21 104:6 257:2 commented 45:9 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 265 212:21 comments 13:23 20:22 21:8 22:1 28:6,6 33:10 39:12,18 57:12 71:7,9 72:23 97:2 145:11 Commerce 7:1 commercial 6:6 14:19 153:14,21 154:8,12,23 155:8 155:11 157:10 182:19,21 199:23 215:13 251:23 252:7 commission 1:3 2:2 2:12 4:3 5:10,15 5:22 6:3,5,14 7:6 7:17 8:7,9,14,15 8:18 9:2,7,14,18 9:20,22 10:6,11 10:20 12:6,8,15 15:13,14 16:17,23 17:2,16 18:1,3 21:13 22:7 23:11 23:18 24:8,24 27:10 28:14 29:4 31:19 33:2 37:24 37:25 39:5 42:12 45:16 51:16 53:9 53:16 54:12 56:6 64:19 65:14 66:6 67:17 72:17 76:18 78:5,16,21 79:3 79:12 84:14,16 85:5,21 90:15 115:6 126:15 144:7 150:3 152:9 164:9 173:12 177:7 181:2 182:10 187:8 201:3,13,21 230:5 241:3 256:9,12,21 256:23 257:15,19 259:7 Commissioner 4:1 4:6,7,8,10,11,12 4:13,14,15,16,17 4:19,20,22,23,24 4:25 5:1,2,3,4,6 11:9,16,24 12:3 13:8,23 14:6 20:16 21:7,25 24:12,16 25:9,17 25:23,24 26:20,22 27:3,18 28:5,25 30:10,21,24 31:3 31:5,6,16 32:5,21 32:24 33:7 39:6 39:17,22,25 40:5 40:10,14 51:2,7 52:24 55:4 56:5 56:24,25 58:19 63:22,23 64:25 65:4 67:6,11,16 67:23 71:24 72:4 72:7 74:2 77:21 85:10,14,20 98:7 98:25 101:15 102:7 103:24 104:23 106:16 111:3 112:4,9,14 112:21 114:5,10 114:13,15,19 115:5,11 124:11 129:20,24 139:9 139:14 142:23 144:5 147:5 148:12 151:1,16 152:1,8,14 161:3 169:2,6 178:19 180:23 181:1 182:13 186:17 188:11,16 192:21 194:25 197:24 198:12,16,23 199:8 201:6,12,20 202:1,10 221:10 230:14,18,21 241:1 243:16 247:15 252:14 254:24 256:7 257:6,21,22 Commissioners 5:13 13:19,24 20:17 24:13 30:11 30:22 40:12 69:7 77:23 104:1 106:17 112:15 114:16 139:18 148:14 151:2 199:10 252:15 254:25 257:24 Commissions 84:20 Commission's 12:9 116:13 commitment 105:16 committee 31:13 common 7:20 41:3 76:8 93:14 communicate 184:4 communicates 184:3 communication 26:7 communications 31:13 communities 255:17 community 6:11 34:12,17 37:8 150:12 company 155:19 168:19 200:1,1 comparability 214:2 comparable 34:5 219:12 comparative 253:19 compare 108:10 158:12 159:1 188:21 204:9 215:11 219:18 250:25 251:1 253:15 compared 111:1 143:3,5 200:17,18 214:4 220:25 comparing 200:22 219:6 248:2 249:9 comparison 131:24 188:23 200:21 211:4 228:2 comparisons 214:7 compensated 173:11 176:24 competitive 136:18 137:20 compiled 242:10 complaint 36:2 73:21,23 74:18 complaints 74:19 complete 63:10 88:8 completed 12:19 89:13 107:18 108:8 139:16 completely 135:9 174:2 completion 87:25 compliance 35:11 36:4,7,12 37:22 38:14 59:23 61:25 111:10 153:11 154:4 155:11,15 156:1,7 161:18,23 162:7,25 228:4,14 228:17 247:20 249:15 Compliant 153:12 compliment 104:22 comply 8:3 80:25 81:11 129:3 162:1 166:15 248:12,21 complying 81:17 component 154:18 184:13 components 153:16 154:19 158:3 165:23 187:4 229:17 237:16 composition 136:14 compounded 182:5 comprehensive 101:10 concentrated 145:15 concept 164:10 conceptual 137:7 concern 26:9 78:10 109:1,10 concerned 135:6 137:24 226:24 250:8 concerning 14:7 31:13 49:20 concerns 21:12 conclude 257:7 concluded 258:2 concludes 39:3 concluding 11:1 conclusion 20:5 75:9,12 76:1 124:4 150:2 concrete 58:18 concurred 132:25 concurrent 136:9 conditions 95:11,14 97:4 99:9,11,12 99:13 118:6 207:11 250:17 conducted 10:25 19:9 cone 244:1 conference 9:11,15 9:21 10:1,4,9,14 10:17 18:18,25 19:10,12 26:13 257:7 258:1 conferences 25:1 37:3 confident 185:6 186:4 confidential 70:11 78:25 confidentiality 43:2 43:6 78:17 confirmed 238:11 confused 29:18 60:3 82:16 83:5,16 confusing 22:23 25:4 Congress 66:12 120:1 connection 208:23 consent 16:14,16 35:5,9,19,21 37:4 37:20 38:15 41:9 41:16 42:4,12,19 42:25 44:20 45:4 45:5,17,23 46:1,9 47:13 52:19 53:17 55:10,15 56:15 58:24 60:4,6,9,12 60:24 65:9,16,18 70:10,14,23,25 71:10 72:14 73:3 73:7,8,15,16,21 74:14,17 78:4,11 81:1,12 82:5,10 82:13 89:11,23 90:2,5 91:9 92:11 105:3 110:3 111:11 113:16,25 161:24 162:25 166:15,16 226:25 227:8 254:5 255:6 255:9 conservative 244:4 consider 22:8 23:18 23:18 26:16,16 31:20 97:9,11 123:10 125:16 145:8,9 153:8 167:21 191:20 214:8 considerable 50:5 146:12 172:10 considerably 146:15 197:22 consideration 20:12 82:8 189:9 238:24 considered 32:3 47:3 82:5 108:7 120:12 135:22 136:24 166:11 167:7 168:7 226:1 238:9 251:25 consistent 7:19,24 35:13 41:2 76:7 130:22 217:20 consists 6:15 consolidated 34:11 234:13 238:3 constant 185:18 205:22 constantly 136:20 constitutes 68:16 97:24 Constitution 34:8 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 266 79:24 constitutional 7:19 41:2 76:7,13 84:23 constrained 118:4 constraint 136:4 constraints 116:7 117:25 122:9 construct 68:12 97:20 140:19 constructed 37:16 57:19,22 58:6,10 90:22 91:2,4,5,8 91:13 106:2 109:20 185:3 construction 6:24 36:11 48:13 57:25 59:20,23 94:11 96:7,23 107:13 195:8 235:21 consult 79:8 consultant 39:2 87:24 88:5,7,15 202:6 consultants 2:9 9:23 10:10,11 12:5,6 consultation 240:20 Consumers 2:20 6:21,24 8:23 11:11,15 14:8,16 67:21 contact 122:3 contacted 121:13,19 215:19 contained 76:19 78:5 contaminants 50:3 66:23 contemplate 24:1 contemplated 27:11 continuation 37:5 203:22 205:10 238:8 continue 43:14 60:15,22 72:13 82:16 90:7 109:1 146:8 148:1 173:4 174:19 181:22 183:14 192:9,10 192:15,17 240:2 continued 146:9 continues 109:9 191:25 continuous 108:1 185:6 continuum 150:21 contracted 239:1 Contractors 6:16 contractual 233:8 contrary 87:9 contribute 158:7 contribution 198:4 198:6 213:5 contributions 121:14 231:20 233:7 control 36:13 48:11 48:17 50:17 56:19 57:24 58:13 78:9 104:21 181:20 184:20 convenient 18:24 conversations 121:10 162:13 Conversely 154:11 cooperating 6:25 copies 13:4,7,11,17 13:22 14:5 75:24 113:23 132:21 Cops 172:25,25 copy 17:5 42:11 73:23 74:21 75:9 76:5 77:5 78:25 90:2 116:14 217:9 corporate 138:8 220:24,25 corporation 6:20 14:17 corporations 14:18 Corps 121:18,24 correct 27:1,2,7,8 27:15 41:19,20 43:25 53:18,19 61:5 70:2 85:1,2 86:21,22 94:15 95:18 98:20 100:14 107:4 109:8 111:12,13 111:16 116:2,3 122:19 127:1,11 129:17 142:22 148:3 150:22 151:24 160:8 163:13 164:2 170:7 171:17 172:23 179:20 180:21 186:10 193:14 203:14 204:1 205:2,9,18 209:12,13,17,23 209:24 210:14 213:14 214:23 231:25 240:8,18 248:24,25 249:2 250:15 correctly 137:19 153:20 169:24 177:25 188:24 192:2 193:6 213:2 242:2 248:6,7,19 correlation 134:14 correspond 212:6 correspondence 22:3 cost 7:11 16:9 22:16 36:8,25 48:15 49:23 59:5,21 61:11,18 87:25 89:1 92:22 93:9 93:20 94:10,12 96:6,17,22 106:23 107:21 108:2 126:10 127:18 128:2,3 132:12 134:5 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62:16 69:14 71:5,11 72:24 73:5,18 76:2 79:17,22 80:1,2 84:17 259:5,22 courts 153:7 court's 62:19 covenant 7:25 130:6 130:15,17 cover 7:13 41:12 83:8 144:19 166:6 coverage 140:25 141:1,2 144:13,14 144:16 239:25 coverages 130:22 covered 70:19 Covidien 8:23 11:17 11:18 15:1 co-authored 14:21 14:23 crafted 45:16 46:7 54:20 create 113:12 194:16 created 48:23 creates 49:1 credible 142:1 credit 131:4,6,7,8,9 131:10,12,18 138:11 140:4 144:20 145:2,4 146:3,4,22 148:4 148:6 149:10,18 150:10 credits 243:7 Creek 64:6 criteria 140:23 cross 164:13 crossing 164:22 CRR 3:22 CSO 36:13,15 37:14 56:16 87:11 92:3 167:13 CSO's 91:22 92:1 92:10 CSR 3:22 cubic 214:24 cumbered 134:10 cumulative 225:17 curiosity 241:15 current 29:5 32:25 37:5 65:13 105:5 119:2,22,23 125:5 126:8 131:13 148:7 171:7 173:6 174:18 189:1 203:10,13 204:19 208:6,12 211:24 241:24 currently 6:14 48:23 97:8 117:16 132:3 140:5 143:10 159:11 222:17 226:15 228:15 cushion 146:19,21 246:6 customer 127:13 153:2 154:7 155:16 156:17 203:22 204:14 222:22 229:16,17 241:12 customers 46:24 154:8,12,24,24 155:9 156:7 157:6 157:10,13 176:3 177:17 183:9,10 185:8 187:9 188:6 209:1,3,8 228:6 228:25 229:4,10 242:22,23 253:5 254:13 255:18 cut 93:5 cuts 117:1 cycle 87:4 96:13 97:5,6 111:2 122:17 123:10,14 126:9 129:7 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 267 141:10 146:8 147:16 cycles 119:5 D D 9:6 data 89:7 183:2,11 184:6,24 185:1,5 204:5 217:1 235:2 239:21 242:9 250:12 253:19 255:16 date 19:13 23:24 24:8,9 25:5 26:2 26:12,15 32:19,21 32:25 33:3,5 44:22 79:7 91:13 92:13,16 99:10 dated 14:21 15:20 dates 18:5,17,20,23 20:7 26:11 29:25 32:11,12 day 8:16 16:25 23:1 25:10,21 27:5,23 28:3,12,15,18,21 28:22,23 29:17,19 29:19 30:13 31:2 42:8 44:25 45:6 52:3 70:24 71:6 72:18,21 172:15 days 17:1,13,15,25 18:9 19:25 22:10 22:13,15 23:4 27:14,16,19 28:8 28:9,18 30:15,16 44:18 73:7 110:13 131:5,18 141:4 143:14,15 170:17 172:2,5,12,14,21 172:24 173:2,7,8 236:20,23 257:11 dead 49:17 deadlines 109:25 110:2 deal 64:24 74:15 100:24 181:19 250:12 dealing 55:15 244:16 deals 48:23 49:15 55:14 65:24 dealt 49:2 debt 16:9 122:23 123:20 125:2 130:21 133:11 138:18,25 140:8 143:7 144:12,14 144:16 146:15 147:1 151:10,14 163:9 164:17,18 165:24,25 169:22 169:25 170:10,11 170:13,15 171:2 173:17 178:25 179:10,14,15,21 180:16 181:24 189:6,9,21 195:6 199:16,25 225:12 225:13,14 237:23 238:5,10,23 239:4 240:3 245:1,7,9 246:1 253:23 254:2 debts 179:12,16 181:14 183:22,23 debt-to-cash 168:19 debt-to-equity 124:23 125:6 debt-to-service 216:18 decades 37:7 52:7 253:1 December 29:21 decent 143:15,21 decide 60:18 64:24 109:12 201:5 decided 111:21 182:11 decides 21:14 decision 22:7 23:11 48:8,19 78:12 110:19 126:21 163:4 246:16 247:7,7 254:16 256:22 declaration 102:9 decline 203:22,23 204:25 205:11,12 205:22 206:3,10 207:4,17,23 208:20 209:7 declining 203:21 205:21 208:18 decrease 141:16 148:2 189:4 203:13 205:7 207:25 208:1,2 238:14 244:11 decreased 37:15 decreasing 222:23 decree 35:5,10,19 35:21,22 36:20 37:5,21 38:15 41:9,16 42:4,12 42:19,25 44:7,20 45:4,5,11,17,23 47:13 52:19 55:10 55:15 56:15 58:24 60:4,7,9,12,24 65:10,17,18 70:10 70:14,23,25 71:10 72:14 73:3,7,8,15 73:16,21 74:15,17 78:4,11 81:1,12 81:25 82:5,10,13 89:11,23 90:2,6 91:10 92:11 101:11 105:3 110:3 111:11 113:16,25 161:25 162:25 166:15,17 226:20,25 227:8 254:5 255:6,9 decrees 16:14 37:20 46:1,7,9 dedicated 105:8 deduce 116:20 deed 190:15 191:4 deem 220:8 221:4 deemed 220:6 deeper 50:20 default 165:10 defer 125:10 142:20 147:20 150:23 167:14 218:18,21 254:22 deferring 167:18 deficiencies 159:10 deficit 138:25 define 155:13 defined 198:3,4,5 213:4,4 definitely 76:2 157:3 definition 248:18,20 degree 136:4 137:6 delay 138:23 delegates 5:14 6:2 deliberate 17:23 delinquencies 7:14 171:10 172:16 174:10 182:7,18 182:25 delinquency 171:8 172:13 174:17 178:2 179:11 188:20,25 200:12 200:16 delinquent 170:18 171:7,16 172:3 173:9 174:6 177:19 178:24 189:14 191:1,13 deliverables 46:2 delivery 57:18 58:18 87:24 88:11 delve 251:19 demographic 250:14 demonstrate 38:12 department 71:1 72:19 73:1,10 78:14 121:8,17 192:8 211:20 departments 211:21 dependent 78:8 97:10 186:8 depending 46:4 72:9 81:10 97:4 117:24,25 118:1 140:23 depends 148:23 218:16 depressed 207:10 derive 206:21 derived 157:22 describe 69:7,25 75:8 93:22 98:16 107:5 133:6,25 138:3 171:20 175:23 176:9 described 106:12 133:22 168:9 232:13 236:8 description 101:7,9 171:15 design 36:10 38:6 107:12,17,17,18 153:5 211:19 designed 36:17 157:4 162:18 desiring 12:13 destroy 75:1 detail 35:23 55:8 57:13 58:16 111:11,19 196:24 216:8 234:20 detailed 38:11 54:21 216:23 217:8 231:5 details 16:18 55:9 106:13 191:6 194:19 213:9 214:13 215:2 216:21 detect 51:16 determination 20:14 50:15 62:19 64:21 82:19 determinations 198:13,15 determine 44:22 62:23 71:8 81:2 81:12,13 142:17 175:19 179:12 211:24 217:19 determined 32:22 38:5,7 43:17 62:12,17 80:24 119:5 154:21 160:21 179:10,18 198:18 determining 167:7 203:6 226:2 detriments 184:19 199:24 develop 150:20 154:15 165:19 developed 47:23 48:11 84:18 150:19 162:8,10 215:18 231:6 Development 6:20 dictate 57:21 difference 27:19,23 54:24 55:13,18 103:7 176:2 180:17 228:9 248:4 249:5 different 6:5 26:12 46:6 47:23 69:18 96:22 97:6 104:9 108:11 109:18 110:18 125:21 133:7 142:13 155:8 176:3,4 212:4 215:9,11 218:8,23 226:15 228:5 232:18 242:11 247:21 251:19 256:25 differently 98:19 142:4 228:8 difficult 59:8 135:25 233:15,21 247:7 dig 50:19 digest 18:1 digits 194:22 direct 9:3,13 23:20 57:12 68:15,21 69:1 75:15,18 97:23 98:17 113:7 161:12,14 166:21 211:3,21 directing 23:21 direction 259:13 directly 30:6 52:18 209:5 239:10 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 268 249:14 Director 2:18 11:7 38:21,23,24 39:1 52:11 Directors 31:1 71:18 disadvantages 184:23 discern 155:7 discharged 87:6 discharges 36:15 74:12 87:11 99:8 100:10,25 disclosed 78:16 disclosing 51:20 disclosure 35:20 51:16 52:1 discount 177:13 187:17 discovery 9:8 15:12 15:18 17:19 54:13 102:20 103:2 169:18 179:3 230:1,4 discretion 22:6 discuss 18:2 35:19 35:23 68:19 121:14 222:21 discussed 13:13 220:5 225:18 231:16 discussing 72:14 discussion 31:7 59:12 124:6 134:7 138:25 151:23 163:7 195:7 discussions 59:1,1,3 73:14 108:24 disinfection 87:5,16 106:23,25 107:1 107:11,21 108:2 109:25 141:11,11 dismissed 43:15 61:7,10 63:2 69:14,15 80:17,19 81:21 82:21 Dispatch 51:14 52:2 dispose 90:8 disputes 191:10 dissatisfaction 153:18 distinction 133:22 184:7 distributed 19:21 distributes 152:25 district 1:7 2:16 4:4 5:11,16,23,25 6:1 6:8 7:6,10 8:2,3,8 8:12 9:1,8,9,14,16 10:6,10,20 11:4 12:18 20:19 21:8 24:2,14 28:6 32:1 33:16,20,22,25 34:4,13,21,23 35:4,18,22 36:6 37:14,18 39:20 41:15 42:7 43:11 52:5 54:12 61:23 64:6,23 65:19 72:24 76:5,17 80:1 88:12 124:20 125:16 131:11 132:3 134:6,25 135:1,8 137:25 138:16 140:1,2,5 141:13,21 150:5 154:18 156:1 161:21 166:11 167:4,6,21,24 170:9 171:1 188:21 191:9 193:3 196:20 201:14 203:9 205:2,17,25 210:18 211:20 212:2,9,13 213:25 214:2,19,20 217:16 218:5 219:8 220:12 222:16,24 225:7 225:23,25 226:6 238:11,21 239:1 241:12 246:7,18 254:17,23 257:13 257:25 259:8 districts 6:25 120:15,18,21 141:7 143:3 159:2 188:21,23 200:19 214:9,11,15 253:15 District's 6:4 7:21 33:24 36:13 38:2 38:12,16 39:2 74:22 124:23 125:5 133:6,25 152:25 161:18 171:15 214:4 221:23 223:17,21 224:1 divide 242:13 divided 12:13 88:12 division 184:3 185:4 divisions 167:24 divvying 118:8 document 42:16 73:4,4,9,18 74:6 75:2 76:17 77:3 78:4,15 79:1 83:25 102:8,25 documents 9:13 14:5,5 44:15 77:9 113:24 215:15 dog-eared 234:6 doing 97:8 118:7 166:8 176:8 213:16 216:7 228:23 dollar 49:6 52:12 62:2,19,22,24 63:7,12,19,21 80:20 93:9 94:4 94:22 107:21 116:16 136:12,15 148:21 179:22 188:2,14 194:7 222:25 227:15,17 239:12 dollars 46:17 49:25 80:13 90:20 91:19 91:24 94:24 96:4 96:14,16 103:16 105:14,18 107:2 107:13,23 108:13 117:8,9,15 118:19 134:12 136:17 167:25 178:3 197:20 207:18 229:24 239:15 242:19 domain 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165:23 167:5 171:19 191:7 198:8,11 215:11 218:6,8,16 225:25 228:6 232:4,18 240:3 earlier 44:3 51:18 52:4 53:24 54:7 57:14 64:19 65:8 66:19 79:16 80:23 90:11 91:16 107:10 137:8,8 141:9 168:17 213:6 225:18 232:13 235:1 earliest 123:20 early 57:15 58:17 65:8,10 129:12 130:5 216:24 earn 237:7,10 earned 236:5 earnings 237:12 earns 237:18 easily 149:4 East 64:5 eat 21:22 economic 95:10,13 95:21 206:7,14,16 206:19 207:11,14 250:13,16,17 economy 92:20 93:7 94:23 95:23,25 158:19 171:10,11 181:21 182:5 196:3 206:1,4 educate 23:12 30:5 30:7 education 23:9 25:12 44:17 effect 44:21 60:4 61:24 109:5 130:17 183:5 207:16 223:16 effective 87:25 183:21 effectively 135:23 effectiveness 89:1 effort 34:16 155:14 190:20 efforts 238:22 239:13,18 eight 27:14,16,19,22 28:3,8,9,18 either 13:24 29:4 30:7 50:6 77:3 92:15 110:4 142:20 160:16 176:12 181:18 190:10 191:14 192:13 211:21 235:6 238:11 257:11 elaborate 61:16 election 5:18,20 19:20 20:3 23:10 25:13 28:3 29:11 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 269 29:12,13,24 30:5 30:8 electronic 14:1 203:25 204:3 211:14 231:5 elements 105:6 203:5 Eleventh 3:23 eliminate 58:4 eliminated 91:14 107:13 eliminates 65:25 eliminating 92:1 101:12 elimination 36:24 57:19 90:21 91:21 92:3 eliminations 57:16 emergencies 7:13 emergency 236:17 emergent 50:3 66:23 emphasis 18:3 employ 196:20 employed 259:14,17 employee 196:20 233:17 259:16 employees 199:3,4 233:6,6,17 empty 183:16 enable 20:13 119:17 enacted 49:18 encompassed 198:22 encumber 134:5 135:9,10,23 encumbered 46:17 103:15 235:8 encumbrance 103:8 103:9,20 133:23 134:1,2,3 135:11 encumbrances 102:24 103:6 135:20 235:1,3 end 17:25 28:16 29:21 30:15,18 57:8,20 58:7 60:17 64:12 68:10 74:4,5 79:2 89:7 96:11,12 97:5,18 107:17 126:6,17 127:22 137:3,4 141:4,5 168:8 170:1,2,5 179:14 179:21 182:14 194:4 204:13 226:18 227:2 234:15,16 239:22 244:4,19,22,23 246:7 257:1 ended 27:6 153:13 ending 28:12 ends 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83:2 83:4,7 97:22 122:23 123:5 139:25 204:6 218:10 223:5 228:3 235:8,21 244:11 expand 144:21 254:9 expanded 187:9,24 expansion 90:6 217:22 expect 50:11 181:25 182:7 188:8 220:11,16 242:10 expectations 130:23 expected 93:2,16 207:5 235:20 expecting 240:2 expedient 79:2 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 270 expend 135:2 expended 49:9 134:19,20 expenditure 94:12 96:8,24 103:7 120:17 133:23 137:14 167:3 219:5 225:22 expenditures 102:21,24 103:17 217:20 expense 137:21 169:22 209:16 210:12,17 231:3,9 232:17 236:24 238:6,10,15,15 240:3 expensive 64:9 experience 72:24 233:11 240:16 experienced 147:17 206:1 222:24 experiencing 246:23 expert 102:12 expertise 88:14 expiration 12:20 expired 12:24 explain 79:20 153:22 190:6 235:11 explained 235:1 239:20 explaining 216:14 explains 237:22 explore 169:9 express 153:17 expressed 21:13 68:16 133:1 extend 27:14 112:1 extended 15:16 16:25 extends 8:14 extension 23:1,22 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240:1 focusing 6:9 fold 171:3 folks 18:10 followed 84:5 107:12 240:11 following 9:21 10:9 12:14 37:3 41:5 45:9 134:20 248:14 follow-up 72:9 197:25 footnote 209:21 237:21 forced 100:18 forecast 206:22 209:16 215:24 216:17 231:25 232:24 237:2 243:4 forecasted 206:8 237:1 forecasting 206:10 237:19 238:8 forefront 87:9 foregoing 259:9,10 foresee 111:17,23 159:17 foresight 19:24 form 138:11 251:15 formal 139:2,6 formally 44:20 format 46:2 formation 47:9 formed 34:7 formulating 230:9 forth 58:5 150:9 233:8 244:15 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 271 forthright 59:9 forward 29:24 31:9 31:17 33:11,14 49:8 67:18 70:20 103:19 108:19 136:21 148:1 158:22 164:25 197:16 201:5 211:19 232:4,16 252:13 found 51:23 53:18 87:21 94:18 174:25 189:18 four 16:1,7 23:14 34:22 41:24 49:10 55:14,24 96:8 109:2 122:16,23 123:22 140:14,16 143:16 163:19 171:3 173:9 188:3 218:14 239:11,14 240:10 fourth 33:24 34:3 Fox 2:13 12:7 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234:7 236:7,12,13 236:13,16,17 237:3 funded 65:13 106:9 115:24 162:16 166:9 funding 107:9 119:2 120:11,16,19 122:9 126:25 129:1,10 137:14 163:12 219:24 224:21 225:4 funds 117:4,11,22 118:14 121:22,23 122:2 221:24 222:1 235:12 247:2 furnish 85:4,7 further 7:15 35:13 51:1 52:22 56:20 59:2,11 61:2 65:25 67:5 69:25 71:23 77:20 85:11 96:20 98:5 101:14 103:25 111:3 112:3 114:16 124:10 142:23 144:5 148:13 161:2 180:24 200:8 245:15 254:24 257:18 259:16 future 38:14 49:8 50:22 56:17 66:18 69:19,23 83:12 89:5 95:1 96:21 117:23 119:4 122:13 123:23 141:16 206:25 207:5 220:16 237:5 254:12 G gain 88:16 121:22 gallons 251:21,22 251:23,24,25 Ganz 3:22 259:4 gap 245:17,17 246:25 Gardens 6:19 gather 89:6 gauge 158:10 gave 22:8 70:6 138:21 168:23 gears 66:1 general 5:19 6:16 11:6 33:18 38:22 43:21 61:22 70:4 75:2 96:1 101:10 120:23 134:4 140:8 147:11 159:18 generally 47:7 70:13 93:22 130:25 135:1 157:23 168:3 238:2 generate 183:7 192:9 239:14 generated 49:3 generates 237:18 generation 130:21 generic 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60:9,10 69:10 70:13,20 78:21 82:11 88:24 106:3 107:23 109:13 116:21 123:18 127:20 128:11,12,23 129:11 135:13 136:13,19 137:9 142:4,19 143:12 143:14 145:17 146:15 148:3 150:9 155:3 158:22 161:22 164:25 174:9,10 174:18 178:17 179:2 188:7 201:4 207:3 212:23 218:4,15,23 225:14 231:4 232:4 237:14 238:18 240:6 241:25 243:22 244:2,25 245:5,7 246:7 247:12 248:9 249:1 250:9 gone 94:19 95:5 140:17,20 143:6 171:9 183:17 200:13,20 203:6 212:2 227:20 good 4:1 11:12 33:6 33:17 40:24 68:7 86:7,8 94:25 95:8 101:23 104:17 113:5 115:20 124:19 130:5 138:18 169:13,14 173:18 201:1,6 202:20,21 217:20 221:17,18 Gorman 2:22 202:5 202:5,8,11,19 221:8 Goss 2:7 4:9,10 60:2 63:22 77:24 78:2 85:9,11 188:16,19 192:20 gotten 121:16 171:11 172:1 176:11 193:12 government 41:11 43:10 48:3 55:11 57:6 60:13 73:16 116:24 119:23 120:11,15 138:4 138:10,21,23 206:18 grab 185:14 221:20 gradual 126:9 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 272 127:25,25 grant 31:2 117:6 257:10 granted 8:25 granting 22:14 grants 23:2 116:23 116:25 120:11 121:14,16 graph 123:3 214:17 graphs 122:25 grease 99:15 155:3 great 20:1 68:24 69:5 124:9 145:24 156:16 greater 6:22 7:2 128:3 145:14 178:6 244:8 greatly 189:5 green 36:14 87:10 105:4,7,8 group 49:10 66:9 195:17 198:17 growing 238:1 grown 178:1,3 grows 171:8 growth 6:17 76:13 76:16 145:24,25 158:6 203:22 guarantee 187:22 guess 79:8 99:10 100:19 108:25 109:11 118:20 171:2 195:8 196:1 196:15 197:5,9 246:3 guide 120:7 guideline 191:12 guidelines 191:10 gulf 49:17,18 guys 109:16 G16 234:6 H H 153:22 154:7 half 24:20 34:5 66:16 122:24 123:5,7,12,24 132:11 207:18 239:12,14,16 240:10,11 242:23 243:2 251:21 Hall 185:24 halted 107:19 hammer 200:6 Hancock 69:13,17 69:20,23 80:18 81:6 83:1,3,9,13 hand 129:10 131:17 143:15,16 handed 102:13 handful 77:12 handicap 50:23 hands 165:2 handy 73:24 74:21 102:4 142:15 156:9,10 169:15 hanging 174:11 happen 59:16 69:19 69:22 81:8 83:9 83:12 99:13,18 110:11 177:1 219:22 240:7,22 happened 141:7 happening 64:11 171:6 243:22 happens 42:18 81:11 110:13,25 182:2 257:9 happy 20:5 125:12 hard 13:4,7,11,17 13:22 18:11 44:22 50:23 65:22 116:8 146:7 182:4 244:6 having 25:11 31:20 63:10 73:14 78:12 107:6 139:16 168:11 173:19 183:17 184:24 head 92:8 108:14 188:5 190:12 233:24 234:3 headway 174:19 health 158:4 233:5 healthcare 213:1 hear 19:6 20:18 52:15 176:3 192:2 203:19 heard 43:14 60:6 78:7 82:14 189:12 213:10 hearing 14:1 19:9 19:14 24:18 25:5 26:3 33:14 39:17 43:16 67:6,19 77:23 85:12,23 105:11 123:17 150:1 190:24 201:22 hearings 10:24 19:1 19:2 21:24 22:18 24:6,24 26:1 held 9:12 10:1,14 help 61:14 88:17 163:6 181:19 187:24 197:22 221:4 227:23 helpful 236:10 helping 79:9 176:18 216:22 253:6 helps 110:21 her 61:14 97:17 hey 172:4 high 123:10 130:23 158:5,22 253:17 higher 125:19 126:7 147:3 158:13 208:6,13 225:9,14 252:11 highest 252:4 highlight 15:21 him 166:21,24 hire 88:19 hired 88:7 196:25 hiring 88:14 historic 179:7 207:1 211:12 215:21 216:25 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214:3 217:5 219:25 233:3 235:9 includes 36:3 57:15 57:25 187:10 212:12 233:3 including 6:9 24:25 28:12 38:14 212:22 income 36:23 46:23 142:11,17 177:12 177:14,18 186:24 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 273 187:3 188:6 198:10 209:10 235:17 236:5 237:1,2,5 238:4 241:13,14 242:18 242:23,25 243:7 254:21 incomes 242:7 inconveniences 18:10 incorporated 232:24 increase 15:24 16:2 16:5,9 54:20 55:25 127:3,10,19 127:20,25 128:1 152:23 162:4 163:18,25 181:14 181:24,25 182:1 188:1 189:14,23 196:8 197:12,13 197:21 200:14,15 202:25 203:7 205:16 209:15 210:3,10,14,15,23 214:8,14 215:4 220:14 221:23 222:25 239:5,7 240:2 242:17,21 243:3 increased 171:11 223:7 234:3 239:13 243:1 increases 128:1 163:13 168:13 171:5 188:8 195:19 225:11 232:17 233:15 242:22 253:21,23 254:12 increasing 242:24 incremental 189:11 increments 194:2 incumbent 257:15 incur 137:9 incurred 248:3 indebtedness 8:1 139:25 Index 216:13 Indianapolis 35:15 indicate 115:23 177:12 223:23 224:15 225:22 indicated 56:12 68:9 92:18 97:17 193:23 indicates 110:3 209:21 indication 138:22 192:12 indicative 193:11 indirect 211:23 individual 177:14 218:6 individuals 110:21 153:19 industrial 2:20 6:6 6:21 8:23 11:10 11:15 14:8,16 67:21 215:13 251:24 252:8 industry 173:14 217:20 industry-accepted 38:5 infiltration 100:1 infinite 126:11 inflation 157:21 158:4,10,11,16,25 164:19 194:11,14 232:21,23 233:16 233:23 249:5 inflationary 158:2 164:24 194:20 inflow 100:1 117:7 118:9 inflows 118:4 informal 139:3,7 information 18:1 21:2 25:25 35:25 53:15 62:11 66:20 66:24 72:16 74:23 77:2,4 78:23 93:17 102:22 106:13 119:12 122:21 157:25 160:11 176:14 177:9 179:1 184:16 186:4,6 192:19 196:17 200:24 204:15,17 211:13,17 212:6 215:23 216:2,11 216:21,24 217:7 217:11 220:7 221:5 235:19 251:13 informative 217:8 infrastructure 34:17 36:15 37:10 52:8 54:21 87:11 89:20 105:4,7,8 117:3 217:22 218:13 initial 171:23 239:21 initially 174:24 220:4 240:1 injunction 74:9,11 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70:23 72:18 73:9 185:19 228:11 jump 127:21 jumped 54:1 June 1:21 4:2 9:9,23 14:22 15:20 17:14 17:14 34:18 35:1 35:24 42:9 44:4 51:24 52:1 73:7 104:6 180:3 227:11 just 22:21,23 24:4 25:5 26:3,4 27:15 28:7 33:2 40:7 41:14 48:22 52:15 53:21 54:7,7 58:10 59:7 64:5 70:6 90:14 92:6 98:10,10,21 110:23 120:23 124:1 126:5 137:7 142:8 151:9,17 154:10 162:23 172:3 178:16,23 178:25 179:4 181:10 182:22 184:6 186:8 190:12 192:9 193:12 194:19 195:7 198:5,6 199:8 200:25 217:3 219:17 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 274 221:20 228:23 231:22 233:15,16 233:21 234:5 240:10 245:14 246:6,25 252:16 253:8,17 254:9 255:2,16 256:11 257:4 Justice 71:1 72:20 72:22 73:1,10 78:14 justify 192:19 K Kansas 34:14 35:15 Karl 9:5 38:24 115:14 144:11 237:6 keep 18:17 26:11 123:17 127:19,21 136:18 150:9 168:15 174:6,18 218:20 252:1 257:4 keeping 19:7 253:7 Keith 2:18 9:6 11:8 39:1 68:20 69:3 142:20 194:21 201:16 202:14 kept 18:14 37:3 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215:14 218:19 219:1 220:21 226:12,13 227:6,9,10 229:7 232:11,15 233:24 240:6,17 244:10 248:3 253:12 255:13 knowing 77:14 116:17 183:22 184:2 knowledge 45:8 62:6 66:19 99:7 159:8 166:14 186:5 227:5 255:7 255:10,12,14 knowledgeably 63:4 known 91:7 187:10 232:20 knows 162:12,22 Koenen 2:6 4:11,12 25:23,24 31:5 63:24 64:2 142:24 143:2 144:4 181:3 181:6 197:24 198:2 243:17,20 245:10 257:21 L L 2:5 9:3,4 56:10 199:2 labor 6:10 7:2 20:19 20:19 195:9 212:24 Lacking 100:20 lagoon 90:7 Langeneckert 3:2 11:21,21 20:24 39:14 51:3,5 71:25 72:2 98:8 98:10,14,23 114:6 114:8 124:12,14 124:18 129:18,21 151:4,15 161:4,6 161:9 168:25 169:3 221:11,13 221:16 230:12,15 language 26:17 large 14:19 34:14 34:14 66:10 68:10 68:16 87:16 93:8 97:18,25 130:23 134:11 136:8,11 145:6,14,22 146:14,24 215:13 228:9 251:23 252:6 larger 94:4 104:19 117:2 135:21,22 145:17,21,22 154:12,24 194:2 212:24 largest 33:24 34:3 87:17,17 107:12 117:20 182:24 214:6,10 Lashly 2:14 9:19 12:7 last 16:13 22:3 23:8 25:7 42:4 46:9 47:16 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245:1,3 253:5,6 253:22 lesser 225:15 let 11:17 15:20 18:3 20:10 53:12 54:10 79:12 97:16 111:21 178:17 184:6 201:5,8,9 201:13 letter 56:21,22 letterhead 176:4 let's 26:10 29:2 32:8 32:10,12,15 75:3 81:6 136:17 148:23 149:4 172:19 178:9 245:14 246:10 250:1 level 94:11 96:7 117:17 140:8 148:7 155:13,24 156:18 164:8 172:17 179:11 198:9 205:16,17 206:12 208:9 210:13,17 215:4 223:6,9 225:17 232:9 253:8 254:2 levels 113:13 154:23 155:7 164:18 167:3 204:5 206:6 208:18 209:11 224:11 225:23 239:6 leverage 118:5 246:1 levied 160:16 liberty 35:23 39:11 44:9 54:5 lien 176:13 190:7,13 190:22,23,25 191:7 lies 42:17 life 122:17 149:7 light 32:9 96:3 like 13:21 17:8 19:5 25:3 26:2,17 29:8 33:20,23 39:14,23 49:17 52:19 66:22 68:17 70:16 71:13 71:18 72:13 75:4 77:13 80:23 90:6 90:14 137:17 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 275 138:17,19 141:20 141:23 143:16 145:12,20 146:17 149:1 150:10,11 150:11 153:22 169:8 171:18 172:8 189:7,13 192:16 194:2,23 196:10,16 197:9 198:10 199:25 200:1 201:1 202:4 202:7,22 203:4 207:13 208:4,15 213:17 215:12 219:20 231:7 241:24 249:10 256:18 likelihood 64:11 likely 49:21 61:1 148:8 206:3,25 246:8 255:23 limit 142:10 242:13 limited 56:1 122:9 162:1 225:11 limits 70:7 242:1 line 68:21 98:16 125:8 130:21 131:16 132:10 133:5 141:6 144:1 144:20,22 145:6 167:2 203:8 204:22,23 205:12 207:16,22 208:13 208:18,23 209:19 211:1,2,5 214:18 225:21 231:19 235:16 lines 68:14 70:17 75:6 88:13 97:22 144:18 161:11 209:14 218:10 221:21 222:20 223:22 224:14,23 liquidity 223:11,18 245:22 Lisa 2:14 3:2 11:21 12:7 98:14 124:18 161:9 221:16 list 40:8 45:20 46:3 47:10 54:22 55:5 74:16 90:17 98:17 101:10 105:21 listed 90:9 listening 78:6,7 256:19 litigation 3:22 35:13 38:18 54:4 59:20 60:5,15,19,23,25 61:1,3 65:21,25 82:15 100:22 160:20 175:4 little 66:1 81:4 104:19 125:10 126:4,4 128:10 141:14 143:18 145:12 153:24 159:20 168:17 169:9 171:2 173:19 176:5 189:17 193:11 196:22 203:4 244:9 246:6 247:23 249:4 live 192:10 195:8 197:7 living 196:11 197:8 Liyeos 2:3 4:13,14 30:24 31:4 147:4 147:5,8 200:11 245:13 247:14 LLP 2:21 load 253:6 loaded 57:8,17 137:5 loading 58:9,15 137:3 loan 118:14 121:2 190:15 220:3 loans 116:1,5 118:19 119:10 lobbyist 120:6 121:21 local 121:12 122:3 206:18 locked 105:22 lodge 71:5 lodged 35:21 45:4 71:5 72:23 73:5 73:18 logistical 19:4 logistics 20:9 long 46:3 71:3,9 73:12 118:2 126:10 137:18 148:6 175:21 183:3,13 187:17 218:16 longer 55:16 82:21 111:18 118:5 127:19,22 164:16 174:9 183:5 253:9 long-term 36:13 48:11,17 50:17 56:18 57:24 88:18 95:9 104:21 122:25 148:10 long-winded 28:24 look 17:23 19:23 85:6 91:15 101:24 102:13 105:21 106:7 122:5 126:3 126:4,5,14,16,19 127:17 138:15 141:17,24 142:4 145:19 156:10 167:11 172:15 195:16 210:2 215:1 219:11 233:9,22 234:1 244:7 looked 18:12 20:8,9 122:25 125:21,23 125:25 126:6 149:8 150:25 154:17,20 155:6 170:15 174:25 195:13 207:1 233:1 looking 32:11 86:18 96:20 116:16 118:11 122:22 123:23 143:19 148:25 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94:22 mains 100:18 maintain 34:16 37:9 148:5 221:6 236:20 245:7 maintaining 68:13 97:21 maintenance 7:12 36:16 58:13 113:18,20 209:16 210:17 231:3,9 236:23 major 147:22 167:5 167:10,16,18 173:1 194:15 224:17 225:25 233:2 majority 184:11 192:3 make 5:22 13:18 14:11 18:8 20:22 21:2 24:4 26:4 28:7 33:15 39:8 41:13 51:25 64:21 71:13,18 78:12 98:21 103:13,17 110:8,19 130:20 138:12 156:15 162:16 166:1 174:19 178:25 179:4 181:16 184:6 186:12 191:15,15,19 213:17 223:18 235:16 246:13 247:8 250:12 256:21,24 257:3 makes 23:11 28:1 154:5 185:22 makeup 236:11 making 218:17 manage 36:17 159:16 217:4 managed 75:1 213:19 management 36:16 88:5 113:18 150:10 254:17 manager 88:6 managing 183:2 mandated 16:20 68:13 97:21 mandates 113:21 mandatory 45:6 59:20 113:13 manner 79:2 88:10 117:11 manpower 191:2 many 15:15,19 35:17 71:7 92:25 93:11 105:17,18 118:13 130:7 182:23 184:1 219:16,18 margin 141:18 margins 143:17 market 118:6 131:13 140:10 220:10 marketplace 138:9 markets 131:10 massive 34:15 master 36:9 57:18 57:20 58:18 106:1 106:11 130:7,9,14 144:16 match 204:22 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 276 material 173:20 materials 163:15 257:5 math 117:14 196:2 matter 13:1 14:7,12 14:25 22:12 33:11 43:12 53:21,25 54:9 60:17,23 62:15 64:11 81:10 147:20 149:11 202:6 226:17 matters 12:25 33:12 43:8 54:3 256:9 maximum 116:4,8 117:17 140:2,7,7 241:11 may 7:13 8:8,18 9:1 9:7,23 10:11 26:11 27:11,13 28:11,14 31:18,20 32:15,15 40:7 43:23 45:14 46:19 50:2,2,13 52:20 53:3,11,22 54:19 55:3 61:14,23 63:19 64:14 69:19 71:10 72:14 74:1 74:14 75:4 83:8 83:12 91:3 97:5 101:19 102:6 115:20 132:2 136:16 148:1,19 155:4 171:18 230:19 233:13 234:19 240:12,22 244:14 247:1 255:12 256:11 257:1,1 maybe 50:6 69:20 70:7 98:19 143:12 150:22 153:23 166:23 185:25 207:25 mazes 57:23 ma'am 76:21 77:12 170:25 mean 26:10 53:22 58:25 82:1,19 95:23 123:9 137:6 145:7,18 149:18 149:19,20,21 155:24 172:23 196:19 197:19 219:13 220:11 222:12 225:17 226:5 233:20 234:18 242:7 244:6,12 245:19 246:3,16,18 250:6 251:21 253:20 meaning 164:11 means 94:25 143:25 147:1 193:6 244:24 245:3 meant 189:10 measure 110:6 measurement 185:15 measures 36:11 91:17 105:25 141:24 media 123:2 median 131:19 142:11,17 143:20 144:20,22,23,24 144:25 146:2,3 241:13,14 254:20 medians 143:9 mediation 43:3 51:24 78:6 87:15 162:13 medical 195:13 196:18 197:11 medium 66:10 215:12 252:4 meet 24:1 31:23 33:3 68:11 97:19 107:7 135:18 147:2 162:11,19 174:21 175:1 187:15 217:21 257:13,15 meeting 1:3,25 4:3 21:16,17,18 24:9 24:10 31:20 32:3 32:4,14 33:4 35:1 44:5 57:10 219:25 256:14 257:8,10 257:18 259:7,9 meetings 19:7 member 66:2 67:17 85:21 115:6 152:9 201:21 216:5 members 9:17 10:6 10:19 12:15 19:16 56:5 153:16 181:2 216:23 memo 15:20 memoranda 75:24 83:24 memorandum 75:10 76:5 77:6 83:21 84:1,3,11 mention 52:15 mentioned 44:3 45:20 47:1 50:8 51:17 58:23 65:8 83:19 93:13 94:2 96:11 106:22 107:10,24 145:11 150:19 181:23 245:22 247:22 mentions 105:4 Meramec 159:22 mess 170:8 met 113:14 224:18 226:10 227:1 meter 184:10 192:3 metered 184:1 186:7 203:18,20 metering 192:5 meters 184:9,10,12 184:21,24 method 37:24 84:18 153:2,5 183:22 224:1 methodology 38:6,7 76:10,24 84:8,21 84:22 153:8 metric 131:19,20,21 131:23 172:21 metrics 141:24 143:25 144:20,22 144:23,24 145:1,1 145:5 146:2 147:15 151:22 metropolitan 1:7 2:16 4:4 5:11 6:20 11:4 33:19 130:24 201:14 205:25 259:8 Michael 2:22 202:4 202:19 middle 30:17 45:2 73:9 126:3,19 143:8 149:14,15 149:16,17 244:3 Midwest 3:22 MIEC 14:15,21 20:25 39:9 40:25 50:25 70:8 71:23 124:10 161:2 202:3,9 230:6 might 50:24 94:5 142:13 168:1 171:7 196:22 209:5 217:2 218:12 219:8 220:16 221:3,6 227:23 229:11 232:8 240:9 241:9 244:9 246:5 Mike 2:4 247:18 mile 64:22 miles 33:25 34:2,13 47:18 48:4 145:10 145:13 milestones 226:10 226:11,24 million 15:25 16:10 36:21,21 37:13 46:18,22 103:10 103:12,15 105:7 105:10,10,14,16 105:22,22 107:1,2 107:7 108:6,9,10 108:12,15,16,18 109:6,14,15 110:16 116:21 117:6,7,9,15,16 117:24 118:10,11 119:3,9,14,18 124:20 126:22 136:8,15 140:14 143:4,10,12 149:10 151:10,13 163:5 166:5,7 168:1 173:17,24 175:8,13 180:18 189:16,16 194:9 207:18,23,24 210:5,5,8,9,13,23 210:23,24 211:5 223:14 226:14 227:7,12 228:22 229:11,13 231:22 231:23,23 235:23 235:24 236:2,4 237:24,25 238:2,7 238:9,14 239:12 239:15,16,24 240:10,11 243:6,6 246:5,12,13,19 253:13 millions 49:24 mind 37:4 45:17,25 136:18 150:9 173:2 246:21 252:2 257:5 minds 18:6 mine 109:10 minimizing 18:9 minimum 192:16 minor 253:22 minus 237:25 minute 67:8 92:7 178:17 252:17 miserably 237:6 Miss 4:5,8 5:7 missing 100:12 227:24 Mississippi 47:15 47:17,21 48:5,10 48:14 50:15 67:1 87:7,12 Missouri 2:20 6:19 6:21 7:3 8:22 11:10,14 14:8,16 34:8,20,25 35:6,7 36:24 38:8 41:18 42:1,22,24 43:11 46:11 48:18 55:12 56:14 60:8,14 64:7,13 67:21 76:13,16 79:19 92:17 104:7 116:12,15,22 117:18 118:18,25 119:21 153:7 159:23 259:2,6 misunderstood 185:25 mitigating 92:4 mitigation 110:5 168:13 MO 3:22,23 model 87:24 88:11 89:9 204:1,4 211:15 231:5 modeled 45:23 moderate 253:6 modest 222:21 modestly 131:18 modified 31:24 moment 56:22 59:7 75:18 245:15 money 21:23 51:20 103:15 137:8,11 138:21 165:14 176:17 178:13 183:24 193:24 194:6 226:7 235:5 244:20,25 245:21 monitor 154:19 monitoring 108:1 153:25 154:13 155:7,25 156:4,5 253:4 month 21:16 64:20 66:16 128:11 154:2,9,11 164:4 164:7 214:25 228:24,24 248:9 251:25 monthly 142:12 228:18 247:25 248:8,16,20 months 135:3,3,15 170:12,23 174:15 174:20,21 178:3 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 277 181:13 more 12:11 15:13 15:16 17:11,19 19:15 23:12 25:4 46:7 49:7 57:7 58:17 61:22 66:16 67:7 81:4 88:9,10 88:21 89:7 93:14 94:21 96:16 107:23 110:14 117:2 119:18 123:23,25 126:4,9 126:10 127:25 131:5 135:25 137:20,24 141:23 143:16 144:1 145:5 146:12,15 146:20,21 148:8 149:1,10 154:5,10 154:12,25 155:4,4 156:3 157:25 171:2 176:5 178:23 182:3,3,23 185:24 187:11 191:16 193:22,24 196:9 225:8,11,12 225:13 226:18 235:16 239:3,5 240:12 244:23,25 245:4 246:1,8 247:12 248:11 249:11 253:3,4,5 253:6,22,23 morning 4:1 11:12 33:18 40:24 68:7 86:7,8 101:23 113:5 115:20 124:19 130:5 137:2 most 19:18 34:18 59:8 87:1 90:4 91:5 93:6 94:7 99:23 122:8 134:9 158:1,9 171:5 183:9 184:9 mostly 175:4 motion 31:3,7,7,8 33:2 move 19:12 30:24 31:9,17 32:6 33:11 67:18 110:1 124:15 157:14 167:16 172:24 173:3 231:21 257:21 moved 87:9 movement 157:18 moves 103:19 252:4 252:5,6,6,7,12 movies 173:2 moving 29:23 131:16 136:20 165:2 247:9 253:21 MSD 14:4,19 15:23 16:9,15 25:11 31:2 33:24 34:7,9 34:15 35:2,24 36:1 37:10,21 39:5 41:18 42:11 44:1,8 45:14 46:12 47:15 48:21 49:9 51:13 54:23 54:24,24 57:5 60:14 61:4,11 62:3 64:5 66:2 67:3 69:11,22 71:13,18,20 73:6 78:3 80:5,24 81:9 81:11,17 82:12 86:11,16 89:15,19 90:24 92:20 110:7 110:18 113:14 116:5 118:14 119:18 120:12 126:24 127:3,8 151:23 153:10 154:15 155:13,18 158:13 163:11,23 169:15 177:22 179:2 183:4 192:9 199:17 206:14 213:3 217:25 218:13 220:1 227:7,25 231:4 237:12,14,18 240:20 251:5 252:1,2,5,6,7,8,11 252:12 MSD's 17:18 19:19 20:2 34:4 37:5 38:13,19,20,21,22 38:23,24,25 45:23 46:14 49:21 60:22 80:14 90:20 91:20 91:25 121:5 156:6 156:17 159:7,21 163:6 190:7 219:6 233:11,24 234:13 236:12 256:2 much 88:9,10,21 89:7 104:20 110:7 117:4 126:1 135:25 141:19 142:11 143:8 145:13 146:18,19 153:25 154:22 158:6 166:4 168:13 171:24 172:14 176:20 179:22 188:22 194:6 195:11 206:11 211:24,25 212:12 218:25 221:8 225:9 232:10 242:11,17 244:8 245:8 253:2 253:25 Mueller 3:4,5 8:24 11:25 12:1,2,2 15:2 21:5 39:16 51:7,9,12 52:22 52:25 72:4,6 99:1 99:2,5 101:13,16 114:10,12 129:21 129:22 169:3,4 230:15,17 multiple 52:6 multiply 140:15 228:11,12,19,24 multiplying 228:5 multi-decade 34:15 35:12 multi-family 157:10 157:11 182:23 183:1 187:10,14 multi-year 129:8 134:11 136:5 municipal 6:23 134:4 220:22 221:1 244:16 must 8:9 103:9 113:14 135:1 mutual 14:17 Myers 2:17 9:4 11:5 11:5 14:2,3 33:15 33:17,18 38:21 39:7,18,21,23 45:20 51:18 53:14 56:12 63:15 65:1 65:3,7 67:5,12,12 67:15,18,20 68:1 72:3,13 77:23 85:11,13 97:14,17 97:24 111:5,6,9 112:2 114:17,18 151:3,16,17,20,25 199:11,12,15 200:8 255:1,2,5 256:5,8 myriad 47:8 50:1 myself 11:5 38:21 124:6 M4A 239:10 N NACWA 66:2,6,14 66:15,21,24 214:17 215:25 216:11 250:25 251:4,8 name 5:9 6:2 11:13 14:14 53:7 176:3 203:19 Nancy 2:4 narrow 89:12 244:18 national 66:8,17,22 67:4 nationwide 140:18 nature 54:2 64:8 98:3 102:9 118:20 136:1 182:22 near 190:9 nearly 16:6 74:3 135:3 244:10 necessarily 82:4 117:3 173:3 174:9 191:11 226:8 necessary 7:8 13:12 16:19 36:4 38:13 56:21 68:11 77:16 87:23 97:19 161:17 218:14 219:25 need 23:23 24:9,21 26:5 41:13 49:8 54:16 65:25 71:9 78:22 81:23 84:21 89:22 91:9,14 92:10,13 125:11 128:14 129:2 154:25 164:20 166:3,7,15 187:11 219:23 222:16 226:10 237:22 256:13 needed 20:7 39:13 61:25 88:11 111:22 155:15 203:7 222:1 247:13 needing 42:2 needs 45:11 52:9 64:21 162:15 negative 137:24 145:25 negotiate 195:9,10 negotiated 44:13 195:12 199:5 227:13,14 255:9 negotiating 41:23 59:4 negotiation 65:17 negotiations 34:23 35:8 41:25 79:9 87:15 130:13 218:4,6 neighborhood 6:11 117:24 neither 259:13 net 28:17 132:11 138:15 151:8,13 246:3 never 191:17 nevertheless 90:11 new 23:25 24:3,11 32:2,14,19 33:3 47:2,5 49:5,12 50:11 77:3 82:25 110:14 143:4 181:25 209:1,3,19 209:24 210:6 229:4 235:9 256:13,16,17 257:14 next 16:7 21:18 32:9 33:4 49:14 49:21 52:3,6 54:1 67:11 85:14 87:19 96:8 97:6,11 112:5 122:15,16 124:2 132:3 146:8 146:11 152:2 174:23 178:16 181:15 188:3 201:14 216:24 218:14 240:10 246:9 257:8 nine 74:13 nitrogen 49:15 NOCWA 214:19 215:5 216:5 non 69:17 83:1,2 156:7 157:13 190:7 229:10,15 251:3,4,6,8,10 none 13:18 14:1 33:14 67:19 77:23 85:12,23 114:18 130:11 152:11 201:22 non-profit 6:12 normal 137:16 144:1,2 normalized 123:23 normally 188:2 north 3:23 175:13 Northeast 141:20 notches 149:1 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 278 note 14:25 27:9 201:4 noted 238:20 notes 235:18 nothing 40:2 67:5 67:14 85:17 112:3 112:11 115:2 119:21 152:5 154:18 200:8 201:18 notice 7:5 8:8,11 22:18 24:23 28:13 41:2,7,7 45:6,13 45:15,19 51:13,15 51:19 71:4 139:2 139:3,7 191:3 205:11 235:23 256:17 notices 51:23 notifying 192:8 not-for-profit 14:17 November 5:20 25:13 number 16:11 36:9 37:16 50:8 52:13 52:16 57:8 58:1 70:9 74:24 92:6 93:8 104:14,20 116:4,9 119:14 125:21 126:7,11 136:1,15 140:21 140:22 141:4,13 143:13 145:9,15 147:22 150:9 154:25 155:1,14 177:25 181:7,18 182:1 184:14,15 186:23 189:3 201:3 204:21 209:7 211:6 215:8 226:14 227:7,8,15 227:17 228:6,16 228:17,24 231:20 232:16 234:12 246:10 254:10,15 numbered 98:19 numbers 92:7 125:4 141:22 148:25 149:8 163:16 168:20,22 174:8 181:12 189:13 190:3 196:23 198:18 209:1 212:22 213:11,13 227:24,25 228:7 228:13 229:22 233:22 244:2 247:8 248:14 numerous 35:14 47:2 118:17 nutrient 49:15,20 50:23 52:19 nutrients 49:14,23 50:10 66:23 110:11 O O 2:14 209:19 210:3 210:5,10,12,14,15 211:4 212:22 245:6 Obama 117:2 objectives 219:7 236:18 obligation 107:7 140:9 147:11 obligations 38:14 131:11 obtain 111:23 122:8 obviously 19:5 20:24 119:20 125:18 127:20 135:13 182:3 185:3 196:25 199:20 occur 21:18 92:13 100:10 257:17 occurred 28:19 52:1 87:3 107:6 108:25 123:12 229:24 occurring 52:4 occurs 99:21 155:25 190:8 October 17:24 27:1 27:7 28:13,17 oddball 100:13 off 5:9 50:22 68:20 108:14 110:2 139:16 141:25 158:10 170:10,11 170:14 178:5,7,10 179:18 180:19 183:18 184:22 188:5 190:11 191:16 192:1 199:18 200:2,3,5 206:11,12 offered 187:8 officer 13:14 259:9 official 212:18 officially 42:8 183:18 often 199:24 Oh 102:15 okay 31:15 32:7,24 33:8 41:21 42:14 44:14 54:1 65:16 66:1 68:24 69:5 69:10 71:22 75:14 75:19 76:22 89:19 90:13,19 91:7,12 92:25 93:22 96:6 97:13 98:4 100:15 101:13 103:4 106:15 107:2 111:17 112:2 119:7,25 120:21 121:12 125:13,16 127:7 128:20 129:10 130:19 133:20,21 140:5 147:16 150:17 155:13 156:16 157:6,20 158:11 160:14 161:1,15 162:17 166:2 167:20 170:3 184:16 194:24 198:23 201:1 203:12,24 206:5 206:17 207:9 209:5 210:2,16 211:13 212:17,20 213:22 214:7 216:15 217:2 218:1 221:2 222:19 223:13 225:6 227:6,14,20 229:2,18 230:4,10 230:12 234:5,10 234:22 236:7 240:24 241:23,23 242:16 243:4,13 246:13 247:14 248:17 250:8 255:15,20 256:1,5 old 176:12 older 170:13,20 238:23 239:23 omitted 70:12 once 16:10 20:11 35:20 56:14 70:25 71:3,5 73:4,15 82:10 107:8 185:16 253:25 254:3 one 11:17 12:18 13:1 16:25 19:9 19:13 30:6,11 31:18 43:20 56:22 57:4 59:3,8 65:22 65:23 87:4,7 90:18 92:15 98:10 98:22 100:16,17 100:18 104:6 119:1,19 121:3 123:3 127:21 130:10 134:17 135:5 136:7 140:24 141:3 150:18 151:17 153:15 154:10 156:4 157:7 169:8 173:9 178:6 179:9 184:18,23 186:22 190:18 195:1 199:12,24 206:1 216:25 217:2 226:17 228:23,24 233:23 234:24 236:3,15,18 239:24 241:9 252:15 253:11 ones 70:1 77:15 91:3 106:10 107:11 119:4 218:20 253:3 one-45 23:1,4 ongoing 38:18 41:14 58:11,25 59:2 60:19 65:21 74:10 82:15 87:14 only 19:8 21:20 22:25 27:22 38:17 75:4 90:18 98:23 100:9 115:22 131:7 144:19,22 149:21 157:9 160:17,23 166:1 174:16 176:2 185:10,14 187:8 188:9 189:22 191:11 211:9,18 211:23 219:15 226:22 227:10 228:13 229:5,12 245:24 247:11 249:11,17 254:12 255:24 on-call 257:8 on-line 193:25 open 59:11 93:5 192:1 opening 33:15,21 39:3,4,8,10,12,18 53:14 145:11 openly 52:13 operating 41:12 141:18 143:17 159:18 193:2,18 208:19 216:16,18 218:22 234:2 236:13,17,20,22 236:23 237:17 238:17 operation 6:8 7:11 34:9 58:12 151:12 172:15 174:1 209:15 210:17 231:3,9 236:21 operational 12:10 19:8 101:1 operations 36:16 38:24 41:14 113:18,20 141:19 211:23 223:25 opinion 38:2 135:7 138:4 166:24 171:1 222:10 226:17 253:17 opportunities 157:13 opportunity 8:20 9:16 15:11,13 33:21 40:9 173:6 opposed 31:8 98:3 opposite 126:1 252:24 opposition 13:25 optimally 36:17 optimistic 119:15 244:10 option 65:18 options 96:2 126:5 order 4:3 16:8 38:19 112:5 152:2 201:15 223:10 255:14 256:16 ordinance 29:23 30:3 35:3 42:5 44:6,24 45:1 70:22 130:7,9,14 144:17 ordinances 44:24 organization 66:3 233:20 organizations 6:2,5 6:7,9,12,13 145:1 oriented 155:19 original 18:13 21:11 originally 18:18,22 25:20 27:5,17 87:10 108:4 157:15 other 6:7,12 10:7 13:18 20:18,21 24:19 26:7 28:6 30:11 31:18 33:9 33:12 34:5 35:14 37:19 39:7,18 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 279 43:4 45:24 49:19 50:1 51:18 52:17 57:19 63:24 64:7 64:25 69:6 70:8 87:8 90:13 92:5 95:25 100:8 101:1 101:2 106:17 107:11,14 110:1 110:20 116:24 118:19 120:2,10 120:14 121:24 122:2 126:16 136:11 140:11 143:3,6 145:16 148:11 150:7,18 150:25 151:1 155:22 159:1,1 160:18 167:24 168:7,8 177:15 180:15 183:5 186:7 188:11,21 188:23 194:25 197:3 199:9 200:13,17,18,19 200:22 208:16,19 213:19 214:9,22 215:11 216:3 217:3,11 219:8 226:18 229:16,20 235:6 236:7 237:17 242:16 245:2,24,24 247:5 249:20,21 250:8 250:24 252:10 253:11,15 255:11 255:21,25 256:9 256:18 others 15:19 35:17 43:15 55:17 143:18 158:9 163:16 236:9 otherwise 59:21 61:20 259:18 out 21:20 23:9,15 24:19 25:12,25 26:6 30:16 53:13 56:17 69:15 78:9 84:17 90:8 92:25 94:21 95:12 96:20 103:12 104:21 105:9 106:11 110:23 123:19 135:16,18 136:2 136:17,21 141:21 143:12 151:11,14 158:8 164:8,19 165:15 174:7 179:22 183:23 191:21 195:11,13 206:25 207:24 212:12 216:16,22 216:25 220:19 222:13 227:23,23 228:7,11,13 229:6 229:15 230:1 236:6 241:15,25 242:18 243:5 256:17 outcome 259:19 outfalls 106:2 outlay 236:24,25 outlined 37:4 111:11,19 outside 79:14 143:22 outstanding 8:1 61:3 69:8 117:17 140:6 143:11 236:16 over 15:25 16:7,10 34:1,9,13 37:15 37:17 46:9,22 52:6 86:11,17 95:2 96:8 97:6 116:7 121:15 122:15,16,17 126:10 127:23 134:14 135:24 136:10,12 147:17 148:10 149:6 152:25 154:11 163:19 171:3 174:1 181:15,20 189:15 190:15 194:1,3 197:14 209:10 210:8 218:14 226:16 231:21 233:9,18 233:25 234:3 235:12 236:2 247:23 250:19,20 overall 27:23 93:18 94:1 96:17 195:10 197:21 233:23 253:14 overflow 56:13 57:16 90:25 99:20 100:4,7 overflows 37:16 48:9 57:20,22 58:7,14 65:24 90:22 91:2,4,6,8 91:14,22 100:20 101:12 106:8 overtime 198:17 overview 66:6 overwhelming 184:9 owned 34:10 owner 183:17 187:21,23 O'Connell 2:4 4:15 4:16 247:15,18 P pack 143:9 149:14 149:16,17 package 196:12,14 196:17 packages 88:15 packets 176:14 page 17:14 24:5 52:2 54:16,19 74:6,6 75:15 86:18,20,22 87:21 87:22,22 98:15 101:25 102:25 103:2 113:8 130:19 132:10 133:4 144:17 161:11 167:1,1,11 169:20 173:20,21 179:4 193:1 194:10 195:16,21 195:22 202:23 204:13,21,24 207:15 210:19 214:16 215:2,7 217:12 221:21 222:20 223:3,22 224:14,22,23 225:21 228:2 231:10 232:17 234:6 237:15 239:10 241:16,17 250:3 pages 75:6 paid 48:21 138:12 138:19 141:12 165:19,22,23 189:22 pain 109:15 Pam 256:14 paper 76:6 77:6 113:17 papers 75:10,25 83:24 paragraph 54:18 175:7 241:21 parallel 162:24 Pardon 217:25 241:22 242:6 part 22:4 48:12 57:17 65:9,10 69:12 75:4 79:19 82:21 87:14 91:5 120:9 138:25 142:9 156:1 158:1 158:9 162:13 169:23 181:23 184:6 203:21,23 206:3,16 209:6 213:20 226:25 227:8,25 237:3 partial 135:11 170:8 179:8 partially 135:9 175:3 participants 12:13 12:17 participate 10:23 19:5 58:24 126:21 163:4 213:16 particular 17:12 45:24 48:19 76:20 86:18 113:7 160:7 219:23 particularly 182:5 parties 15:7,11,17 16:4,11,17 18:7 19:15 20:6,21 33:4 39:7 41:25 42:18 54:3,6 56:15 59:13 60:7 65:17 70:9 259:14 259:17 parts 44:9 123:14 123:15 200:19 past 34:22 37:7,25 64:20 76:11 86:12 86:17 88:2 123:10 135:19 141:15 174:4 176:21 181:8 206:12 212:17 225:7 246:18 250:11,21 253:10,21 path 176:20 patrons 25:4 pattern 131:9 208:11 Paul 2:7 58:22 pay 7:9,11,12 128:8 129:5,9 154:8,12 165:25 171:13 173:15,16 174:17 187:16 191:23 200:2,4,7 242:23 245:6 payback 116:19 paycheck 146:20 PAYGO 128:6,7 146:25 164:10,14 164:16,23 165:4 165:15 167:7 218:20 224:19,21 225:4,8,9,16 226:2 253:22 paying 61:21 127:23,24 149:6 154:10 182:4,6 228:16 243:1,2 payment 138:23 171:16 175:9 177:15 190:7 191:19,22 payments 103:18 138:5,24 143:12 198:7 236:15 pays 249:11 PC 2:14 3:2 penalties 46:14 73:23 penalty 36:21 penny 193:11 pension 158:5 194:22 195:12,19 196:6,19 197:3,10 198:3,18 213:1,4 213:11,13 231:19 232:8,13 233:7 people 26:5 64:7 78:8 121:3 171:12 176:5 182:4,5 184:9,9,19 186:23 191:21 196:4 197:7 200:4,7 228:16 people's 185:13 per 16:10 34:1,13 116:6 119:10 127:4 140:13 153:14 170:11 195:11,11,16 196:20 197:14 207:3 210:3 214:25 217:6 222:22 242:12,14 248:1,8 251:25 254:14 perceive 64:10 percent 16:2 37:15 58:4,6,8 91:17 92:21 93:1,11,14 93:19,24,25 94:2 94:3,8 106:2,5 115:25 116:1,19 117:13,14 118:10 122:14,24 123:5,7 123:12 124:5 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 280 125:2,2,3,24,24 126:2,2,12,13 127:4,4,6,11 134:18,19,20 135:15,15 138:11 138:13,20 141:22 141:23 149:5,13 151:11,14 154:7 157:2 163:16,17 163:20,25 164:11 164:14,18,23 170:19 173:13,16 174:12 177:15,16 177:20 187:16,19 187:23 189:13 193:5,7,10,15 194:7,19 195:16 195:17,18 196:9 196:10,21 197:2 197:17,18,18 199:7 205:13,14 207:25 220:14 221:4 224:17,20 225:3,15 242:25 243:1,3 244:10 253:8,14 254:2,10 254:14,14,18,20 percentage 69:1 93:15 97:25 106:3 142:16 144:14 146:11 156:20,24 168:3 170:15 176:25 177:2,7,17 182:18,22 186:25 188:2 193:2 197:12,13 199:3 225:8,14 239:7 percentages 158:2 168:23 194:15 percentage-wise 148:22 percentile 68:17 perform 213:23 214:1 performed 89:6 performing 89:2 perhaps 19:23 50:22 64:6 167:23 226:6,23 232:20 period 8:14,16 12:11 16:1 29:18 29:20,20 37:14 44:25 45:6,10 55:22 56:1 58:3 70:24 71:6 72:19 72:21 84:25 97:1 97:7 127:22 134:4 134:17 135:17 163:19 171:3 172:13 173:22 185:11,14 189:15 190:19 203:3,7 205:8,18,21 206:8 206:9 207:23 208:4,5 209:16 210:1,9 216:17 223:4 224:18 225:16 226:7,16 226:19 227:3 233:9,12,18 235:13 237:19 238:21 250:19,20 periodically 214:6 periods 29:19 55:16 permanent 74:9,11 74:13 permanently 172:10 permission 178:18 202:7 permitted 10:23 12:22 92:10 person 8:18 10:4,17 68:19 120:25 142:19 145:20 196:21 personal 233:3 Personally 244:9 personnel 196:8 233:14 persons 12:10,22 39:19 person's 12:21 perspective 48:4 perspectives 67:4 PFM 132:6,9,15,19 133:18 phase 107:17,18,18 126:25 136:12 163:12 175:4,14 175:16,18 phased 128:6 134:13 136:10 phased-in 136:5 phase-in 165:3 Phillip's 7:1 philosophy 168:14 Phoenix 3:2 11:22 phone 171:25 phones 5:8 phosphorus 49:16 pick 172:12 243:5 picture 199:21 piece 94:6 165:23 165:24 174:16 pilot 87:10 105:5,9 105:12 172:8 pipe 34:1,13 place 15:25 35:10 70:11 81:2 88:4 90:8 99:8 109:4 144:24 148:11 160:22 166:1 174:14,20,24 176:13 188:9 190:25 224:5,9 240:5 placed 78:17 placement 175:4,24 176:1 places 24:5 plaintiff 80:5 plaintiffs 34:24 plaintiff's 36:2 45:2 plan 5:16,21,25 16:21 36:13 48:12 48:12,17 50:17 56:16,19 57:18,21 57:24 58:18 82:12 104:21 106:1,11 116:6,15 126:25 127:9 158:5,23 163:12,24 174:3 181:10,16,19 191:22 193:18 198:3 213:4 224:16 228:2 planned 16:7 49:7 108:4 planning 36:10 41:10 55:23 150:12 plans 56:12 82:16 191:20 plant 52:20 56:13 118:18,25 119:4 plants 48:25 49:3 87:6 90:9 play 50:24 150:8 players 147:22 please 4:5 20:10 27:9 39:22 40:6 53:12 59:10 65:4 67:23 69:7,24 71:16 74:3 75:7 101:24 112:21 115:11 139:19 152:14 175:23 202:1,10 pleasure 30:22 plus 116:3 196:5,6 235:7 236:17,24 236:25 pluses 150:13 PM 258:2 point 14:25 21:20 39:10 42:2 43:6 44:2,9,11 45:7 53:17 54:6 57:4,9 59:18,24 62:17 65:19 71:12 78:10 81:16 90:16 111:22 118:15 120:12,13 121:14 121:23 122:4 123:8,9,10,19 124:10 128:2 136:6 139:18 147:25 164:5,11 164:12,17 176:11 179:19 180:14 190:22,23 191:14 200:25 201:6 219:1 223:4 225:13 233:23 236:4 239:3,4 249:21,22 253:20 253:24 257:12 pointed 23:9,15 136:16 points 118:1 123:3 123:4 126:11 137:23,23 149:5 253:3 poked 100:17 polar 126:1 policies 236:19 policy 134:1 170:9 190:18 191:8 246:16 247:7 pollution 49:15,20 pool 117:11,20,21 185:23 pools 185:2,12 population 117:12 117:14 140:14 145:7,16,20 214:11 population-wise 117:19 portion 90:19 91:19 91:24 156:16 159:21 165:13 171:23 176:21 182:24 position 35:11 63:4 64:14 81:16 134:24 177:8 218:23 positive 193:17,21 237:11 possibility 150:15 150:16 157:17 240:14,15 possible 50:14 62:7 64:13,20 78:13 79:13 102:16 122:8 136:24 137:12,18 148:6 157:2 240:9 257:17 possibly 96:4 223:12 235:19 Post 4:17 51:14 52:2 posted 42:9 posts 126:6,17 168:8 potential 42:10 48:19 49:5,13 59:5 223:19 potentially 96:24 practical 168:11,16 practically 48:20 practice 49:10 94:19 217:21 218:11 prayer 74:7,16 pre 171:22,23 172:5 172:22 precede 46:4 predict 146:7 prefer 166:23 prehearing 19:10 19:12 26:13 premise 64:9 162:24 164:23 prepare 176:14 prepared 9:2,24 10:12 21:15 39:11 83:22 102:20 132:14,17,20 156:12 177:22 preparing 19:19 prescribed 28:23 58:16 prescriptively 29:24 present 4:22,24 5:12 12:3 24:7 31:24 39:7,19 69:9 133:21 139:24 159:15 234:10 presentation 14:11 20:23 236:11 239:20 presented 27:5 64:14 162:14 167:3 179:5 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 281 204:12 226:8 227:11 232:3 242:3 presenting 13:14 presents 179:9 234:7 President 66:15 press 139:5 pressure 140:18 142:6 146:4,9,12 146:16 148:4 pressures 218:19 presume 231:15 233:4 presupposes 116:18 pretend 133:17,18 pretty 28:24 70:19 101:9 125:25 143:8,21 166:3 171:24 172:14 173:18 179:22 199:20 200:4 207:20 214:20 232:10 233:21 234:23 256:15 prevented 81:17 previous 13:6 76:24 84:4,5,15,19 158:12 previously 84:19 167:8 222:14 235:6 price 95:24 104:9 233:16 prices 95:25 primarily 100:24 153:4 155:17 183:8 primary 187:4 principal 7:9 236:15 printout 231:5 prior 17:1 37:20 78:11 83:21,22 84:1,9,10 85:4 105:11,11 106:9 108:7 160:6 225:10 239:5 256:9 257:11 prioritization 96:2 prioritized 107:9 priority 118:1 190:7 190:15 privately 34:10 privy 162:12 proactive 87:13 150:11 probabilities 170:22 probability 170:16 170:18,20 244:1 probably 13:11 24:3,8 25:8,16 68:18,19 91:1 93:3,8,12,18 94:8 94:8 96:1 101:6 111:24 138:19 142:18 148:24 149:19 158:21 163:22 170:19 171:4 196:9,15 234:22,23 245:23 253:16 problem 13:19,20 26:12 142:2 problems 46:24 159:17 procedural 8:17 12:24 13:1,3 14:7 14:10,22 15:6 20:8 22:6,12 23:25 31:11 33:11 33:12 procedure 41:5 48:2 proceed 39:22 40:6 61:2 65:4 67:23 112:22 115:12 139:20 152:14 202:2,11 256:17 proceeding 1:17 5:12 44:4 62:12 62:24 73:2 153:13 proceedings 8:21 13:7 38:1 164:15 176:16 225:10 244:15 proceeds 137:13 process 13:5,8 17:25 21:4 23:3 24:25 42:4 43:3 43:16 44:14,17 48:25 51:24 70:20 78:6,21 79:3 94:19 107:13,15 171:15,24 172:18 175:5,10 183:17 186:11 200:13 235:11 produce 84:10,13 203:9 produced 40:19 68:2 86:2 112:25 115:15 152:17 202:15 203:16,24 204:6 208:12 produces 176:5 204:20 producing 183:6 production 83:25 208:5 profit 155:18 program 16:6,8 25:12 36:7,17 37:4,6,7 58:11 86:24 87:2,10,11 88:2,3 93:18 94:1 96:18 98:2 101:8 102:4,17 105:4,5 105:8,9,13,14 106:22,24 107:6 107:25 108:3,17 109:3 110:9 113:22 116:11,16 116:17,21 118:5,7 119:21 120:11 127:23 128:4,8,12 129:1 135:5 136:19,19,21,22 145:6,8,17,19,22 146:24 148:5 162:15 163:6 165:10 172:6,9 175:15 177:12,13 177:17,18 186:24 187:8,13 188:9 232:8,13 253:12 253:14 254:4 programs 94:7 120:17 140:19 219:22 220:1 progress 36:18 86:11,16 176:13 prohibition 74:11 78:5 project 88:4,5,6,7,8 103:11,12,19 134:12 135:22 136:7,8,9 166:12 216:3 235:12 243:22 projected 144:12,16 144:19 152:25 202:25 204:18 206:25 207:6,22 208:20 209:20 212:11 214:8,13 214:18 215:20 217:19 220:2 222:22 244:23 projecting 123:19 123:21 203:17 209:1 214:20,21 215:3 219:9 projection 204:14 206:13,15,18,22 206:23 207:8 208:17 209:7 212:18 215:22 216:1,6,9,13 217:6 245:16 projections 206:5 212:22 213:17 214:12 215:15 217:11 219:25 242:8 projects 16:19 36:22 46:19,21 54:22 57:15 65:9 65:10 68:13,25 88:6,15,24 89:3 89:12,13,17,20,25 90:1 92:25 93:6,8 93:10,20,23 94:3 94:4,21,23 95:4,6 95:6 96:3 97:21 98:17 102:9,10 108:21 118:1,2 121:18,25 129:6,7 129:8,13 134:6,9 135:9,10,25 136:11,12,14,16 136:20,21 137:1,4 141:9,11,12 159:24 163:2 165:18,21,22 167:5,19 193:22 193:23,25 205:6 209:22,25 210:6 216:14 219:5 222:9,17 225:24 226:15 235:8,21 prologued 250:21 properly 68:13 97:21 99:22 properties 191:5 property 176:14 187:21,23 proportion 68:10 68:16 97:18,25 156:25 proportionately 152:24 proposal 8:19 14:9 14:21 15:3,4,5,23 17:6 18:22 20:9 20:12,13 27:9 28:10,20 29:3,7 29:10,17 30:23 38:2,12,16 46:15 50:13 55:25 61:19 61:21 65:11 68:20 76:9,20,23,25 97:12 105:6,12,15 105:19 106:4 109:19 119:8 141:1,3 146:11 149:8 150:2 154:4 157:4,19 161:16 163:9 164:3 189:1 195:23,24 197:14 231:25 236:9 proposals 76:12 proposed 5:24 7:18 8:11 16:20 17:7 18:19 19:11 20:1 23:13 24:4 27:17 37:23 38:4,13 54:22 55:10 68:10 87:10 97:19 152:23 164:16 188:1 212:13 217:15 221:22 224:15 227:21 228:3 241:24 242:17 254:11 256:22 proposing 15:23 26:25 29:5 41:6,8 55:6 110:17 125:25 proposition 64:9 propound 12:23 propounded 9:17 10:5,19 proprietary 131:25 protect 79:25 80:6 83:11 protected 64:22 protecting 80:7 protective 65:23 proven 176:4 provide 7:21 9:16 15:7,10,12 17:11 17:22 19:16 33:21 33:23 38:10 42:11 75:9 78:4,24 104:18 168:12 177:8 211:21 212:23 216:6,8,16 216:21,23 221:24 223:10 255:17 provided 22:3 35:23 35:25 54:23 77:5 113:24 169:21 171:14 179:1 213:12,13 215:23 221:3 230:7 232:19 233:6 234:21 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 282 providers 192:13 provides 37:21 79:24 providing 34:11 provision 7:25 23:5 78:17 80:19 135:14 237:24 public 10:24 14:4 19:1,2,5,9,14,16 21:24 22:4,18 23:12 24:18,23 25:12,25 26:3 27:22,24 29:6 30:5,8 34:10 43:9 43:13 45:6,8 46:25 51:14,19,25 53:22,25 54:9 57:25 71:6,8 73:4 73:19 114:1 123:1 153:17 254:1 publication 22:17 22:24 25:8 publications 19:4 24:20 publish 24:23 25:5 published 22:19,22 25:2 26:10,13 31:14 51:19 publishing 24:25 pull 107:25 108:14 174:22 pulled 175:2 pure 120:9 185:15 185:20,21 purely 191:1 purpose 9:15 77:8 235:16 purposes 151:21 170:14 178:11 180:13,20,20 211:19 245:23 pursuant 16:22 34:7 43:6 89:14 91:9 92:11 push 23:23 32:8,10 68:19 110:24 pushed 32:17 pushing 117:2 242:1 put 5:8 17:6 22:15 25:10,12 30:1 46:25 107:16 108:16 125:22 143:5,19 144:1 146:12,15 160:21 162:4 174:14,24 175:22 189:21 193:24 puts 146:9 149:17 197:2 putting 25:25 26:17 Q qualified 43:20 259:6 qualifiers 177:18 qualifies 177:14 qualify 186:23 qualitative 142:8 quality 47:14 50:9 64:15 quantification 63:7 63:18 80:13 quantify 62:2 quantitative 142:7 quarter 49:6 141:2 question 25:10,16 26:22 28:4 29:9 30:12 51:21 54:2 54:8,15,17 60:11 62:1 63:6 69:6 74:24 75:3,3,15 75:19 76:4,16 77:10 79:4 83:20 83:23 84:7 86:18 86:20,21 87:19,20 91:23 92:2 96:21 97:13,14,24 98:16 98:24 101:25 105:24 106:18 110:14,22 113:8 113:12 120:5 124:2 131:14 132:3,10 136:23 141:6 142:9,19 144:11 150:18 160:1,15 166:23 170:24 179:4 180:16 185:24,24 186:22 188:13 193:1 194:13 195:1 196:7 197:25 201:22,23 208:8 213:24 221:7 223:20 225:2,19 230:2 241:10,19 242:16 247:19 248:18 250:8,24 252:15 252:16 253:11 254:22 questionable 131:13 questioning 139:15 139:17 questionnaire 216:22 questions 9:17 10:5 10:19 12:11,14,14 12:20,23 20:11,17 20:20 24:11,13,17 30:10 33:10 40:9 40:13,15,23,25 51:1,4,8,12 52:23 53:1,6,11 56:6,10 57:2,3 58:22 60:2 63:15,24 64:2 65:1,7 67:7,18,20 68:6,8 70:10,13 70:17 71:23 72:1 72:2,5,6,9,12 77:20,22 78:2 80:12,15 85:11,22 85:23 86:6,9 89:11 98:6,8,14 99:1,5 101:14,16 101:22 103:25 104:5 105:2 106:16,21 111:4,5 111:9 112:15,17 113:4,5 114:4,6 114:11,12,16 115:7,8,19 124:10 124:12,18 129:22 130:1,4 133:18 139:19,23 142:24 143:2 144:6,10 147:8 148:13,17 151:2,3,20 152:10 152:11,21 161:2,5 161:9 163:21 169:4,12 178:16 178:22,24 180:24 181:2,6 182:17 186:21 188:12,19 192:24 195:1,2,5 198:2 199:2,10,15 200:11 202:8,19 221:9,11,16 230:13,16,17,25 231:2 234:24 241:3,7,8 243:20 245:13 247:18,22 252:20 254:8,25 255:1,5 256:20 queue 95:4 193:24 quick 24:16 57:3 186:22 quickly 49:9 64:3 181:7 200:4 256:16 quite 15:19 138:18 175:21 quorum 5:5,7 quote 68:9,10 97:18 97:18 R R 153:22 154:7 radio 21:23 Raftelis 2:9 12:5 rain 100:11 rains 99:17 raise 119:24 129:12 196:4 253:25 raised 23:16 36:2 43:23 81:16 90:14 235:6 Ralph 2:8 182:14 182:17 ramps 154:9 164:5 random 90:6 91:3 range 104:10 106:25 108:16 244:13 rank 251:6 ranked 251:2 252:2 252:9 ranks 252:12 rarely 221:19 ratcheted 176:6 rate 1:3,17 2:2,12 4:3 5:10,13,15,21 6:2,4,14 7:5,6,8 7:15,17,18 8:7,7,9 8:11,13,15,18,19 9:2,7,12,14,17,19 9:22 10:6,11,19 12:6,8,9,15 13:8 13:19,24 14:23 15:9,12,14 16:16 16:21,23 17:1,2 17:16,25 18:3 20:15,17 21:13 22:7 23:11,17 24:7,13,24 27:9,9 28:10,13,20 29:4 29:7,10,17,23 30:2,3,11,22 31:19 33:1 34:4 37:23,23,24,25 38:1,2,6,12 39:2,5 40:12 41:1,6,7 42:12 45:13,15,16 45:18 46:14,20 50:12 51:13,15 53:9 54:20 55:6 55:25 61:19,21 62:12,24 65:11,14 67:17 68:11,20 69:7 72:16 76:7,9 76:12,20,23,25 77:22 78:16,20 79:3,12 83:22 84:9,10,16,19,20 85:21 87:3 90:15 93:1,21 94:12,14 96:12 97:5,6,11 97:19 104:1 105:5 105:11,12,15,19 106:4,10,17 107:3 108:7,19,22,23 109:2,14,18 110:14 111:2,14 112:15 115:6 116:13 118:11 119:8 122:14,18 122:23 123:5,10 123:25 124:4 126:8,10 130:6,15 130:15,17 137:16 137:19 138:16 139:17 140:25 141:10 144:6 146:8,10,11 148:13 150:3 151:2 152:9 153:4 153:8 156:22 157:4,22 160:20 161:16 162:4,8,15 163:9,12 164:3,9 164:19,24 166:3,9 167:11 168:13 171:5 181:1,25 182:1,3,9,10,12 184:8 185:9 186:2 187:7 188:1,4,20 188:25 189:1,15 189:18 194:12 195:12,23,24 197:14 199:10 200:14 201:2,13 201:21 202:23 203:7,14 204:11 205:1 211:19 214:1,7,12 220:23 221:22 225:10 227:21 230:5 231:25 235:13 236:9 241:25 242:17 250:1 251:9,11,13 252:4 254:12,25 256:9 256:12,20,22,23 257:1,15,24 259:7 rated 130:23 131:3 131:6 ratepayer 142:18 ratepayers 8:6 10:22 38:4 48:21 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 283 137:4 153:1 rates 5:24,24,24 38:4,13,16,17 123:11,16,18,24 127:1,3,10,15 128:5 129:12 132:23 140:3 142:13 144:19 163:10,18,25,25 164:4,6 168:15 189:11 195:10 200:16 203:10 204:6 207:21 208:6,12 214:4,9 214:14,18 215:3 215:10,19,20,21 216:3 218:19 220:2,4,5,11 223:7 228:3 229:5 232:3 237:6,10 244:11 250:25 251:1,2,7 252:23 253:7,25 rather 18:2,7 28:21 30:14 46:3 104:9 167:9 187:20 rating 130:22 140:4 142:5 143:22 144:21 145:4 146:3,4,22 147:12 148:4,6,9,18,22 149:11,18 150:5 150:10 185:4,5 220:17 223:12,17 ratings 145:2 146:13,16 ratio 124:24 125:6 140:25 141:1 168:19 raw 233:22 reach 17:19 20:14 125:1 reached 41:18,22 reaching 118:2 244:5 read 54:16,19 75:4 102:8 139:3,5,5 169:24 177:24 242:2 reading 178:8 184:10 192:3 248:5,7,15 readings 183:14,19 185:10 ready 39:19 94:23 real 95:8 100:13 181:21 realistic 123:25 reality 176:7 realize 183:4 247:11 really 22:10 25:15 26:19 44:22 50:20 50:23 51:20 71:2 83:16 88:25 93:10 97:10 120:8 121:23 134:7 157:18 162:21 181:16 188:22 191:12 196:19 197:19 199:22 218:7 219:12,17 226:23 240:6 244:6,19,24 245:8 253:18,24 reason 21:17 51:22 52:3 83:6 94:22 129:14 157:8 168:6 181:23 190:20 192:14 211:18 222:15 224:13 244:22 reasonable 8:6 20:14 21:1 38:3 152:24 194:13 220:6,8,20 221:4 240:21 reasonableness 244:13 reasons 15:6,15 41:14 95:13 111:25 154:1 rebuttal 9:24 10:3,4 10:18 17:11 18:19 18:21 23:23 32:8 32:25 39:12 recall 84:12 122:15 142:10 216:14 235:15,22 receipt 7:5 receivable 180:4,8,9 180:11 receivables 171:16 177:24 239:23 receive 61:24 93:15 116:6 127:8 163:23 received 8:7 120:15 120:18 128:17 138:22 139:2 receives 116:23 124:20 126:24 163:11 249:11 receiving 92:20 recent 37:11 131:5 132:13 238:6 recently 16:15 36:13 42:1 121:20 212:2 213:3 recessions 206:2 reclassified 157:16 recognition 239:12 240:21 recognize 16:24 19:3,18 237:2 recognized 238:10 recognizing 158:17 recollection 239:11 recommend 7:7 19:2,7 22:19 31:1 recommendation 31:10 135:7,11 recommendations 5:22 71:14 256:25 257:3 recommended 7:16 17:2 21:10 48:13 recommending 56:23 reconvene 67:9 139:11 201:13 record 9:12 10:15 10:24 11:17 13:16 13:21 21:5 22:5 33:22 38:15 43:9 43:13 53:22,25 54:9 165:2 recover 137:12 155:19 157:1,4 recovered 108:9 156:17,22 recovery 61:11,18 62:8 recreationally 47:20 red 214:17 redo 84:22 reduced 37:14 94:10 96:6,22 213:18 259:12 reducing 92:5 reduction 93:19,24 94:5 150:4 238:15 238:16 reductions 233:14 refer 75:5,21,23 84:3 86:13 90:24 101:6 102:2 113:14 130:6 131:17 133:12 173:22 175:7 202:22 231:4 237:15 reference 55:21,22 55:23 113:17 130:20 166:20 167:1 199:16 242:12 referenced 98:22 120:3 222:4 referencing 76:14 77:10 151:22 161:10 222:19 referred 73:21 75:14 77:3 84:4 91:16 172:1 referring 47:6 77:15 84:16 87:20 159:18 167:17 207:15 211:1 215:5 241:20 refers 161:24 refile 82:23 reflect 13:21 222:23 reflected 52:18 186:5 208:6 236:21 reflects 209:15 232:12 235:5 regard 14:11 65:16 231:2 235:2,20 255:6,15 regarding 5:23 9:12 10:2,16 68:8 105:25 113:6 255:7 257:4 regardless 153:15 regional 6:16 34:11 regulation 48:22 49:12 50:12 regulations 8:4 47:3 47:5,8 50:2 90:5 248:23 regulatorally 52:8 regulators 36:14 47:4 66:12 71:8 87:15 96:3 regulatory 41:13 50:5 66:18,18 86:13 87:2 88:13 90:4,11 98:2 107:9,14 109:4,19 110:1 155:25 161:19,22 209:22 209:25 222:2,5,7 reinvestment 34:16 37:8 reject 166:13 relate 54:3 213:1 233:16 related 7:23 36:22 51:15 59:19 63:13 69:17,20,23 83:9 83:13 91:1 209:6 210:6 233:5 259:14 relates 28:9 30:25 82:12 147:25 200:12 237:17 245:15 relating 7:25 relationship 163:9 207:1 239:6 relative 146:25 154:13 205:8 210:12 219:7 259:16 relatively 208:9 relief 73:22 74:7,16 187:20 rely 50:21 remain 63:2 70:1 80:22 106:10 127:15 164:1 192:1 224:4,6 remained 69:16 remaining 36:9 57:22 58:8 61:6,9 61:15 63:5,17 90:21 91:8,13,18 91:21 92:1,9 105:18 164:1 remains 12:22 63:11 130:17 remarks 39:3,4 remedial 36:11 57:23 91:17 105:25 remember 104:9 147:12 153:13,19 164:9 167:25 194:21 remind 256:11,19 reminding 172:4 removal 57:21 58:10 92:5 106:1 106:13 110:4,5 remove 49:22 58:4 165:24 removed 91:9 92:10 removing 109:22 rendered 82:2 renewal 52:21 renewed 120:7 renovated 185:2 renovation 186:2 repair 36:23 repairs 221:24 222:3 repeat 26:1 71:16 208:8 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 284 repeatedly 52:10 repercussion 97:23 repercussions 68:15 rephrase 111:21 replacement 52:21 102:4 replacements 218:10 221:25 222:3 report 8:10,15 15:15 18:3 48:17 75:10,25 76:6 77:6 122:12,18 124:3 125:22 133:13,14,15 157:22 167:11 182:9 198:11 204:13 212:15,25 214:16 215:16 232:3 234:14 236:9 241:16 242:9 251:13,15 256:21,24 257:4 reported 3:21 30:2 53:15 Reporter 259:1,5 259:22 reporting 36:19 reports 47:24 238:4 repository 13:9 represent 6:6 53:9 147:24 202:24 203:8 205:7 representation 6:3 representative 121:7 representatives 6:15 represented 102:23 225:23 represents 6:5 14:18 169:17 175:5 207:24 republish 24:17,22 republished 22:20 25:6 request 9:8 21:6,8 21:14 32:6 54:13 74:23 77:2 83:25 102:20 103:2 169:18,21 171:14 177:21 179:3 230:1,5 235:2 239:21 257:11 requested 204:16 requesting 73:22 79:22 96:4 requests 39:9 74:9 require 19:8 34:15 131:10 145:17 153:25 155:4 required 7:13 12:10 21:22 36:7,11 49:22 54:20 56:20 89:13 90:1 92:3 154:14 176:15 236:14 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50:19 ruled 76:12 80:2 117:10 rules 8:17 12:10 19:8 49:5,18 109:18 137:15 ruling 79:17 run 126:10 142:1 160:24 running 137:15 143:18 185:13 runs 116:12 S safe 117:5 150:1 safety 246:3 salaries 198:17 233:4 salary 196:5,25 197:4 sales 203:17,23 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 285 204:9,9 205:17,21 206:6 207:10,17 208:3,9,11,18,20 209:11 same 18:14,17,19 26:11 27:15 28:15 37:24 70:5 76:10 95:22 96:12,16,21 96:25 133:14,15 133:16 146:10 158:14 163:21 164:23 166:9,10 167:8 168:4 172:21 176:2,7 177:4 184:17 187:25 194:10 209:6 222:4 224:4 224:6,10 229:3,4 sample 154:22 155:4 253:3 samples 155:15 sampling 155:5,23 samplings 155:1 Sandberg 3:2 11:22 sanitary 34:2 37:11 37:16 58:6 90:22 90:25 91:2,3,6,8 91:14 Sanitation 64:6 satisfy 41:8 savings 141:12 146:19,20 saw 18:13 52:2 90:10,18 93:18 174:8 239:11 saying 31:8 43:25 118:9 128:20,21 136:3 145:4 146:1 146:5 224:7 249:24 250:22 257:23 says 40:20 68:3 86:3 113:1 115:16 144:15 152:18 180:10 202:16 scared 142:6 scenario 59:6,12 73:6 104:21 128:6 128:7,15 158:24 158:24 scenarios 150:21,24 150:25 schedule 13:3 14:10 14:22 15:6,16 17:7,7,10,23 18:4 18:6,12,13 19:11 19:13,25 20:2,10 21:11 22:6,15,20 22:21 23:25 24:3 24:11,18 25:19 28:11,23 29:6 31:11,24 32:2,14 35:12 36:3 37:21 57:14,21,24 75:11 92:15 111:10,18 112:1 166:12 169:22,24 222:17 229:18,20 231:8 234:6 254:11 255:8 256:13,17 257:14,16 scheduled 18:18 19:3 257:19 schedules 9:25 10:13 24:19 106:11 110:4,16 235:20 scheduling 16:25 88:17,18,18 167:4 167:6 225:24 226:1,5,23 Schneider 2:5 4:18 4:19 26:21,22 27:3,18 28:25 29:1,12 30:9 104:23 105:2 106:15 144:10 192:21,24 194:24 254:8 school 6:25 scientific 47:24 second 14:7 15:10 17:21 25:9 29:19 31:4,5,6 140:1 141:6 142:9 165:5 175:3,10,24 176:1 190:10 237:23 secondly 16:6 22:16 23:23 Secretary/Treasu... 38:25 section 210:21,21 212:1 241:22 242:4,8 secure 119:18 security 50:4 121:17 see 14:4 49:18 58:9 78:11 94:5,6 106:8 108:2 110:10 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6:4 7:23 14:20 233:3 233:8 248:13 sessions 10:25 set 18:6 24:6 28:15 107:15 109:18,25 110:2,16 140:22 150:24 186:24 189:6,8 195:7 226:25 227:4,15 256:13 setting 9:12 97:25 110:14 settle 191:12 settled 60:23 settlement 35:4,10 36:1,24 41:23 42:8,10 57:7 59:17 60:12 65:22 81:25 191:8,15 settlements 191:16 191:20 settling 191:9,17 setup 59:5 seven 47:16 52:10 141:25 251:21 several 37:7,19 77:1 77:5 129:25 147:17 181:13 196:4 204:10 219:13 233:25 sewage 48:23 49:11 50:9,18 67:2 sewer 1:7 2:16 4:4 5:11 7:22 11:4 33:19,25 34:3,10 34:11,17 37:13,16 46:6,25 48:9,14 58:2,6 90:22,25 91:2,3,6,8,14,21 93:5,8 99:17,17 141:21 143:3 159:1 180:11 191:13,18 199:18 200:5,18,22 201:14 205:25 211:11 214:9,11 218:10 219:8 239:7 259:8 sewers 34:2 87:12 99:16 145:10,13 145:15 219:15,16 219:16,17 share 43:5,8 82:7 90:15 117:19 118:8 231:24 shared 53:16 76:18 shares 156:3 226:16 sheer 15:22 sheet 35:24 55:8 57:13 58:16 90:10 91:15 92:15 101:8 105:3 106:7 111:11,19 179:16 180:4,6 227:11,12 234:13,22 shelf 107:16 shift 20:6 156:2 193:20 195:6 225:12,12 229:7,9 229:23,23 255:12 shifted 18:15 27:15 175:3 shifting 159:19 229:14,15 shifts 233:14,19 short 115:21 188:10 shorter 22:23 shortfall 245:19 shortfalls 223:19 short-term 88:18 128:13 246:1 show 11:17 47:25 129:5 141:23 144:3 187:17 192:10 214:17 216:12,13 showed 42:9 163:16 163:17 showers 184:15 showing 203:13 204:5 207:3 238:16 shown 151:23 207:22 208:13 210:19 211:4 212:1,8 217:12 235:4 236:8 shows 26:15 204:14 204:16,25 211:5 216:17 229:18 238:3 shut 183:18 184:22 192:1 199:18 200:2,3,5 shutoff 199:17,22 shy 231:22 side 64:5 119:15 136:25 253:17 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 286 sign 35:9 42:7,19 44:24,25 45:1 60:9 70:23,25 73:6,8 signatures 45:3 71:2 73:11,12 signed 42:20 60:8 72:18 73:15 79:1 significant 48:8 49:13 55:17 104:14 135:5 149:7 165:13 174:13 210:14 229:9 significantly 129:12 signify 31:8 257:23 signing 58:24 60:4 signs 73:16 similar 24:3 37:20 45:22 46:2,2 105:24 117:12 120:2 208:10 219:9 simpler 26:5 simplistic 227:22 simply 72:15 107:19 110:9 220:1 since 19:15 25:2 35:8 37:12 130:9 142:6 155:18 157:24 160:16 165:11 171:11 205:22 246:8 253:1 256:12 single 136:11 singular 117:20 sink 153:24 sir 85:19 102:19 103:3 138:21 139:8 180:25 sit 109:23 site 216:11 sitting 37:18 95:4 98:1 situation 97:10 122:6 158:18 164:14 218:8 six 55:21 95:2 135:2 135:15 174:15,20 207:23 224:18 sizable 64:18 size 34:5,14 66:10 88:3 145:2,2,17 145:19,22 153:15 sizeable 16:11 sized 135:18 137:19 sizes 155:8 Skip 209:10 slight 145:25 205:16 207:4 slightly 144:2 158:15 177:5 slip 220:18 sludge 48:23 49:11 50:10,19 67:2 small 94:3 155:2 215:12 251:19 252:1 smaller 93:5 118:19 128:1,18 135:24 145:15 147:1 153:20 socioeconomic 6:11 solid 49:1 solids 49:3 some 15:9 17:9,20 19:4,23 21:17 22:8 24:8,9 26:11 30:16,17,17 31:21 43:14,19 46:7 58:16,17 66:17 69:16 70:11 74:15 78:12 83:2 87:13 89:1 92:4,21 95:13 100:13 101:2 107:11,23 107:25 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staff 15:23 19:19 88:2 121:1,5,13 135:8 159:7 170:25 213:12,14 213:15,16,25 214:2 223:25 240:20 254:23 257:13 staff's 220:2 stage 195:8 stance 150:11 stand 43:14 standard 50:24 64:3 64:17 104:13 140:17 172:14 218:11 standards 47:15 50:9 52:20 64:15 standpoint 127:18 134:15 137:7 stands 113:19 133:3 stand-alone 133:11 Stannard 2:10 12:4 178:18,22 180:22 230:20,22,25 240:24 241:2 start 69:10 71:6 93:20 103:10 104:15 105:15 111:15 146:24 176:16 181:17 196:1,2 231:7 240:5 started 28:10 42:4 107:12 172:6 219:2 starting 1:25 171:9 181:11 209:20 220:17 starts 181:16 232:1 237:24,25 state 8:4 34:19 35:7 36:14 41:1 42:1 42:21,23 43:11,18 46:11 48:18 56:13 56:19,22,23 58:23 60:3,8 61:4,5,12 61:18 62:3 64:13 79:19,22,25 80:3 80:24 81:17 82:7 82:9,13 92:16 97:16 104:7 116:1 116:5,11,15,22,24 117:5,12,18 118:14 119:7,9,20 121:1,12 122:3 133:8 152:22 161:16 198:14 206:17 220:3 221:22 259:2,5 stated 46:10 75:12 90:5 122:11 218:12 222:1 statement 7:18 33:16,21 39:8,10 53:14 75:5,7 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 287 79:17 170:14 178:11 180:13,20 234:20 statements 125:11 170:12 180:2,10 212:3 216:16 224:2 238:4 states 34:19 35:5 43:10 49:20 60:13 78:20 166:25 167:2 214:6 stating 76:6 station 61:23 status 63:8 69:8 118:23 119:25 175:22 statutory 7:19 41:3 76:8 stay 19:3 60:16,24 149:22,23 164:24 208:3 stayed 208:9 staying 50:21 stays 165:1 185:18 235:24 244:20 steady 188:8 Stein 2:5 4:21,22 56:7,10,24 199:2 step 128:1 174:23 245:15 steps 30:25 257:17 still 18:24,24 43:22 56:16 59:3 60:15 70:1 77:10 80:22 81:5 104:13 119:13 154:2 165:21,25 167:8 168:12,14 173:5 178:13 179:22 181:8,20 224:5,9 224:10 230:9 243:3 245:5 253:5 257:1 stone 18:6 stood 239:24 stop 173:3 183:19 189:19 192:19 stopped 59:1 storage 48:14 58:1 storm 100:11 219:17 stormwater 5:24 7:8 38:17 52:17 100:1,2,5,10,25 160:19,19 189:18 189:20,22 211:22 211:25 223:25 224:4,4,9 231:11 straight 128:24 strained 122:7 strategic 150:12 Strategies 95:8 strategy 95:3,10,15 96:10 97:2,6 stream 65:13 147:19 148:2 245:17 247:1,5 Street 3:23 139:4 stress 213:16 stretch 64:22 stretches 58:2 strong 150:16 190:12 stronger 131:18 146:21 structure 119:23 137:20,21 154:16 156:22 184:8 227:21 structured 161:25 162:15 studied 159:4,7 study 132:13,14,16 132:20,22,22 133:2 157:22 194:12 202:23 206:16 207:12,14 208:7 210:1,3 213:12,21,23 214:2 223:4 224:18 Stump 2:14 12:7,25 13:1 21:25 22:1,2 24:15,21 25:15 26:8 31:11,15,18 32:7,23 33:6,9 40:7,12 52:25 53:8 256:11 sub 75:24 subdistricts 159:20 159:22,25 160:6 160:16,18,18,23 submission 32:25 submit 8:20 9:24 10:12 submitted 9:2,8 15:5,19 18:4 26:24 27:10,12 28:13,20 35:24 45:14,15 46:15 50:13 60:7,10 86:10 113:6 118:14,17,19 submitting 10:4,18 13:22 subsequent 45:3 239:16 240:12 substantial 181:13 subtract 143:11 success 172:11 successful 62:8 94:18 239:2 240:13,15 sued 43:9 46:12 sufficient 41:8,11 88:3 103:10,16 suggest 206:6 suggested 63:3 97:15 148:19 suggestion 149:12 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switched 198:5,6 sworn 40:19 68:2 86:2 112:25 115:15 152:17 202:15 system 34:15 36:18 37:11,13 58:13 99:14,19,21,22 100:2,3,4,5,20 173:7 183:13 185:16,21 209:2,8 212:7 219:14,15 231:10 systems 7:22 34:10 46:6 130:24 216:4 217:4 T table 11:6 102:2,15 102:23 104:11 131:24 179:9 202:23,24 204:13 204:16,19,20,21 204:23,25 205:3 207:15,22 210:19 210:25 211:4,6,8 211:9,10 212:7,8 212:11 223:2,3 226:9 234:8,10 237:15,16 247:25 248:15 249:17 tables 215:8 tabulation 102:21 tag 104:10 158:16 take 15:25 21:15 29:16 30:25 44:5 45:10 59:7,10 67:8 71:3 73:12 81:2,16 97:5 99:8 101:24 103:14 104:22 105:20 109:4 114:23 127:17,20 141:16 141:23 145:18 149:4 158:22 168:10 172:17 174:23 176:15 178:9 183:4 185:10,11,16 201:9 223:3 228:16 245:14 taken 94:13,16,17 116:10 150:11 189:9 259:10,11 259:15 takes 49:24 110:24 134:24 248:21 taking 187:24 talk 97:15 120:8 124:8 132:11 147:21 157:23 173:23 193:1 194:11 talked 22:17 25:24 42:23 52:13 101:3 141:9 144:12 talking 27:19,22 63:1 94:14 99:24 109:20 125:7 133:5 147:15 149:9 172:20 180:8 196:2 215:25 217:23 221:19 243:9 247:20 talks 26:3 247:25 tank 36:23 tanks 46:25 taper 206:11 tapped 164:17 247:2 target 116:25 198:9 247:9 targeted 117:4 121:25 138:7,8 141:1 tax 7:8 160:5 220:22 taxable 138:9 220:23 taxes 160:15,22,24 160:25 190:11 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 288 197:5,5 taxing 159:20,22 teams 88:15 technical 9:11,15,21 10:1,3,9,14,17 15:17 18:17 25:1 26:2 37:2 88:13 257:7 258:1 Technically 199:18 telephone 31:21 tell 47:10 63:16 82:20 93:10,17 99:7 114:25 139:24 159:3 248:7 251:15 telling 63:20 174:15 tells 186:8 ten 46:8,9 49:7,21 50:22 67:8 96:24 137:23 140:22,24 193:8 tenant 187:20 tenants 187:11,14 187:22 tend 176:6 tends 200:3 term 116:18 122:16 122:17 132:11 174:10 220:13 terms 15:2 16:15,22 25:11 27:23 42:22 42:24 45:8,12 55:15 57:6,10 61:20 89:14 116:17 117:6 133:2 134:16 146:17 147:16,18 148:2 166:5 197:12,13,19,21 200:14,15 204:10 222:8 236:12 245:16 248:12 249:12 251:6 territory 205:25 206:14 test 55:21 213:16 testified 151:9 213:6 220:15 testify 61:13 testimony 9:3,13,24 10:3,5,13,16,18 15:18 17:11,12,18 18:19,20,21,23 23:24 32:8 33:1 38:10 39:13,20 40:1 41:1 46:3,10 47:2,8 55:19 61:15 67:13 68:8 68:9 73:20 75:15 75:16,19 76:19 77:4 85:16 86:10 86:14,19 92:19,23 97:17 98:15,17 101:24 112:6,10 113:6,9 114:22,24 115:1,23 119:8 120:3 122:12 130:6,19 137:2 139:12 144:11 152:3,4,22 161:10 161:12,14 166:21 166:22,25 192:25 201:9,15,16 221:21 222:20 223:22 224:14 231:17 249:25 250:3 254:10 256:20 testing 248:22 thank 5:7,9 14:6,13 21:7 24:12 30:9 33:8,17,20 39:5,6 39:13 40:5,16 43:25 45:12 47:1 50:25 51:2 52:24 54:15 55:19 56:3 56:24 63:22 67:7 67:16 69:5 70:8 71:22,24 73:20 77:1,19,20,21 85:9,10,12,13,20 87:19 89:10 90:19 91:19 92:18 98:4 98:7,24,25 101:13 101:15 102:19 103:22,22,23,24 104:18 106:15 111:4 112:2,4,9 112:14,19 113:23 114:3,5,20 115:5 119:25 122:11,19 124:2,9,11 129:19 129:23 132:18 139:8,9 144:4 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166:7 169:23 171:6,19 174:8 179:7 183:17,19 185:8,19 188:7 200:13,20 203:4 203:24 205:8,20 208:11,16 212:5 216:16 221:21 222:20 223:6,7,23 224:15,23 227:20 231:13 233:10 235:6 237:20 247:11 248:1 249:14 252:21,25 253:9 throughout 23:3 37:2 131:2 thrown 104:11 Thursday 42:5 tie 234:13,15,19,20 tied 29:25 30:6 52:12 153:2 155:20 156:4 232:11 tier 154:15 156:18 157:15,16 228:11 248:1,1,8,9,11,16 248:17,23 249:2,9 249:9,10,10,11,18 252:22,24 253:4 253:10 tiers 154:6 156:23 157:7 228:5,7 247:21 248:1 249:10,14,20,21 252:16,21,25 253:9 ties 238:2 tight 25:14,22 193:13 196:3 tightly 159:16,16 time 1:25 7:20,20 8:5,5,14 12:12,16 12:21,22 15:8,17 17:11,17,22 18:1 18:15 21:10 22:22 23:12 25:3 29:6 29:16 30:4 31:23 33:13 34:9 35:18 36:4 40:13 44:15 45:10 47:9 51:1 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 289 55:16 71:17,21 73:7,17 76:10 80:20 82:19 84:11 84:14 85:22 97:1 97:11 98:5,19 100:18 104:9 105:20 110:15 111:1 115:7 121:24 122:22 123:19 127:22,23 128:2 134:10,14 134:17 135:17,24 136:10,12 137:10 139:24 152:10 161:2 162:17 173:5,22 174:13 175:21 182:4 187:7,11 188:10 190:19 196:10 201:23 202:4 203:3,7 205:17,24 206:7 210:9 211:24 212:10,15 219:23 230:20 232:20 233:13,23 234:4 236:4 239:3 239:4 242:11 250:6 timeframe 29:3 57:9 59:16 78:7 109:2 timeframes 18:13 timeline 19:21,22 20:3 70:20 96:22 timeliness 72:25 timely 86:12 87:25 88:10,21 89:7 times 24:20 34:13 77:1,5 141:2,2 187:11 191:16 218:21 227:1,2,4 228:25 timing 61:25 78:22 147:25 timings 108:11 today 38:10,20 43:15 46:15 79:15 98:2 104:12 109:23 119:13 137:17,22 141:14 147:23 213:10 today's 131:17 Toenjes 2:3 4:1,23 4:24 5:6,9 11:9,16 11:24 12:3 13:23 14:6,14 20:16 21:7,25 24:12 25:17,23 26:20 28:5,25 30:10,21 31:3,6,16 32:5,21 32:24 33:7 39:6 39:17,22,25 40:5 40:10,14 51:2,7 52:24 55:4 56:5 56:25 58:19 63:23 64:25 65:4 67:6 67:11,16,23 71:24 72:4,7 74:2 77:21 85:10,14,20 98:7 98:25 101:15 102:7 103:24 104:23 106:16,21 111:3 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236:11 unexpected 147:2 uniform 153:11,12 228:17 249:15 unilaterally 110:19 unique 218:6,16 246:24 unit 199:4 247:25 248:5,11,16,20 250:18 United 34:19 35:5 43:10 60:13 78:20 units 203:18,20 204:10 205:1,8,11 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 290 208:21 248:8 unknown 88:23 unless 8:12 53:21 184:2 192:1 219:1 unlike 37:19 unlikely 62:13 unoccupied 183:3 unofficial 190:2 unpermitted 74:12 99:7 100:9,24 unripe 83:14 unsuccessful 50:18 until 12:23 20:18 23:24 51:24 81:14 109:6 139:10 174:6 185:18 192:12 201:9 225:10 240:4,16 249:19 252:22 257:19 unwritten 117:10 upheld 80:3 153:6 upper 242:13 upward 182:1 usage 153:2 183:8 183:11,11,14 184:20 185:9,14 185:16,17 189:3 192:13,14 250:10 250:17,18 251:4,5 251:6 use 13:10 36:14 47:17,24,25 95:10 96:10 102:16 109:20 116:14 117:22 131:8 132:5,6 146:14 150:24 153:21 155:9 164:10,12 164:16 168:14 184:25 200:5 246:7 250:10 used 18:20 47:20,21 48:1,6 76:11 84:2 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229:22 247:10 went 95:24,25 96:1 149:9 196:12 210:22 were 13:7 18:16 23:14,19 38:4 43:9,13,15,15 46:7 48:16 60:24 68:25 69:14,14,16 70:12 77:5 80:8 80:16,17,17,19 81:15,19,20 82:22 82:22,23 83:8,9 83:10,11,12,17 86:23 87:1,2,8 88:23 92:25 93:11 93:15 95:7 107:13 107:15,16,19,19 107:20,23 108:13 108:16,21 109:21 109:21,22 116:25 122:22 123:14,15 123:23 133:21 138:7,17 141:9,12 146:8,10 147:23 151:22 153:20 154:2 155:7,9 157:23 162:23 168:10 171:6 174:5,10 175:19 187:22 199:21 206:6 208:3,4,25 209:3 213:12,13 215:17 220:1,5 222:1,9 223:23 224:5,11 225:10 234:1 235:12 239:23 246:11 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 291 249:24,25 250:1,2 250:4 251:2 253:2 254:19 255:16,21 weren't 80:7 88:25 174:9 West 6:25 wet 99:14,24 101:12 we'll 70:21 89:8 we're 55:6 88:24 104:12 117:20 143:23 we've 14:25 41:23 63:20 76:11 88:11 94:19 95:3,5 97:2 118:18 119:3 136:24 141:7 145:18,25 150:11 181:13 187:9,10 187:24 193:8,10 193:12 195:9 205:22 206:2 243:21 whack 158:8 wheel 109:6 while 18:9 21:20 37:12 52:11 89:1 144:15 whole 23:9 40:2 67:14 85:17 104:15 112:11 115:2 152:5 201:17 205:2 206:1 241:22 wide 243:25 William 2:10 12:4 windfall 119:20 window 16:25 29:16 55:14,23 winter 185:11 wish 10:22 39:8 115:22 witness 39:24 53:1 56:6 63:24 65:2 67:7,12 85:15 98:9 99:1 101:17 104:1 112:5,16 114:7,17 152:2,10 181:3 201:7,15 221:12 230:16 255:1 witnesses 38:20 Women 6:18 wonder 109:11 words 101:2 183:5 work 18:7 20:6 28:3 31:12,25 36:10 46:22 53:12 58:15 66:7,20 67:3 75:10,25 76:6 77:6 83:24 92:21 94:20 95:1,22,24 96:16 108:6,14 122:8 137:1 191:21 213:15 247:3 worked 18:11 47:16 95:8 working 62:15 66:25 78:18 79:1 149:23 works 121:21 251:17 world 110:18 195:8 196:11 197:7 worse 171:12 worst 59:5 104:20 110:15 158:23 206:2 worth 217:8 wouldn't 94:5 150:16 191:20 216:15 write-off 179:13 write-offs 169:22 170:21 writing 170:10 191:16 242:9 written 83:8,10,11 170:11,13 178:5,7 178:10 179:18 180:19 wrong 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240:12 244:7 246:9 yield 126:8 230:20 Z zero 29:8 125:24 126:12 Zimmerman 9:5 11:7 19:20 38:25 147:21 152:3,7,12 152:16 169:13 177:11 186:22 192:25 201:8 212:20 222:1 225:20 232:14 239:19 241:8 Zimmermann 2:18 zone 49:17 $ $1 244:18 246:5,10 $1,000 140:13,15 $1.2 36:21 46:18 $1.3 16:7 37:11 $1.5 48:16,20 $1.6 36:21 46:22 253:12 $10 189:16 238:7 $10,187,508 170:6 $10.9 237:24 238:9 $100 105:7,10,16 109:14 $11 173:23 $116 210:22 $116,050 37:1 $12.6 238:1 $13,000 145:20 $130 15:25 $134.4 210:13 211:5 $135 242:14 $145 248:8,24 $149 210:23 $162.1 210:5 $165 249:2 $165.50 248:10 $171 210:8 $171,000 228:14 229:5 $178,998 235:4 $2 142:1 154:11 194:9 229:12 $2.2 151:8 $20 104:10 105:22 108:15 $20,000 25:8 $200 117:15 $21 173:17 $210 207:24 $216,243 231:21 $25 108:15 117:24 149:10 $250 110:16 166:7 $26 175:8 $3 105:10 189:16 207:23 $3,160,972 170:3 $30 117:5 149:10 153:14 154:2,9 $33 210:24 $35 117:24 119:9,13 119:18 $36 210:9 $37 175:12 $37.9 223:14 $389 242:12 $4 223:6 $4,055,258 180:5,12 $4.5 36:8 $4.7 51:17,22 57:6 226:14 227:6,12 $40 108:9 $400 117:16 $42,444,213 178:4 $47 164:4 $5 103:10,12,14 105:22 243:5 $50 108:9,18 109:6 109:14 116:21 235:23,24 236:2,4 $500 246:19 $51,858,057 180:17 $52 223:14 $55 243:6 $58 180:18 239:24 $6 52:7,15,16 $6.8 237:25 238:14 $600 143:10 $613 151:9,13 $613,571,000 140:6 $630,000 229:6 $7,892,000 231:24 232:9 $7.9 210:5 $70 16:10 143:12 $73 127:12 164:7 $75 107:1,7 108:6 108:12 $75,223,520 178:4 $77 119:3 136:8 $8 228:22 229:11 $8.3 231:22 $80 117:7 118:10 $800 37:12 $800,000 243:10,12 243:13 $804,000 228:15 229:1 $9.3 231:23 $9.4 231:23 $900 168:1 $945 124:20 126:22 143:4 163:5 246:4 246:12,13 253:12 $97 105:14 0 06 205:15 208:4 07 104:7,16 08 205:15 208:4 1 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 292 1 7:9,18 156:18 203:8 204:23 207:16,22 208:13 228:11 237:14 248:1 249:10,18 252:3,22,25 253:4 253:10 1st 17:14 1,900 177:16 188:6 1.9 92:8 1/12 128:10 228:20 1/20 116:19 1:20 139:11,11 10 8:8 86:18,20,22 93:19,24,25 94:6 94:8 134:20,21 195:17 197:18 208:23 251:22 254:15 10th 10:15 27:13 28:14,20 45:14 50:13 10,000 145:13 251:25 10-100 214:24 10.2 195:20 100 123:4 125:24 126:12 157:2 164:11,14,18,22 170:19 206:2 100,000 251:24 11 67:9 101:25 127:3 163:16 170:9 11A10 54:23,24 55:1,5,14 11A32 36:1 53:18 54:10,24 55:1,8 57:13 11A33 177:22 11B 169:15 11C 151:23 11th 79:24 11.4 195:20 12 87:20 102:25 103:2 127:4 154:11 163:16 170:12,23 204:22 205:12 223:22 228:19 242:14 120 16:25 28:22 172:12,14,15,20 172:24 173:2,7,8 123 230:2 125 130:18 13 1:21 9:1 10:2 55:7 95:11,16,18 95:20 96:18 97:3 98:16 127:6 130:21 163:17,20 164:5 223:9 224:14,23 242:25 243:1,3 253:7 254:2,9,13,14,17 254:20 13th 4:2 27:7 28:13 14 39:5 54:16 223:9 252:9 14th 21:19 15 10:2 44:25 54:19 58:8 70:24 72:18 73:7 115:25 121:15 173:13,16 174:11 178:2 223:9,23 225:1 254:15 15th 72:18 15,000 251:23 15,268 173:23 15,768 175:8 150 130:18 155 127:11 163:25 16 11:1 17:24 55:8 64:12 95:11,17,19 95:20 96:19 97:3 118:10 164:4 167:1 209:14 211:6 222:20 225:21 229:4 17 8:18 113:8 131:16 209:14,19 223:23 17.5 224:17,20 225:3 177,293 178:1 18 135:3 173:14 252:8 18th 32:13,15 185 90:21 91:7,13 1946 34:9 1954 5:19 34:8 199 91:21 92:1,9 1990 37:12 1997 38:9 2 2 7:11,20 75:15 86:18,20,22 87:22 98:15 101:25 106:7 144:17 161:11 192:17 193:5,7,10,15 194:7 207:25 210:21,21 212:1 244:10 249:14 252:21,25 253:9 2nd 27:11 28:11,21 42:9 51:24 52:1 2-1 210:25 211:7,8 211:10 212:8,11 2.25 141:2 2.3 195:16,22 2:45 201:10,12 20 13:4,17,22 116:18 117:13,14 118:10 132:11 144:18 177:20 200 37:17 110:12 189:13 2000 5:20 248:4 2004 130:10 131:7 2005 130:11 2006 130:11 169:23 169:25 177:25 179:7 208:11 210:22 231:12,20 233:9 243:21 250:11,12 2007 34:19 35:9 130:11 205:23 253:22 2008 65:15 123:13 130:11 142:6 160:6,16 205:8 208:11 216:25 253:23 2009 205:13,20 242:4,8 252:2 2010 130:12 169:23 170:5 179:8 180:2 180:4,5,16 205:8 205:12 208:10 210:23 231:13,21 232:11 233:10 234:15,16 239:22 242:9 248:25 2011 1:17,21 8:9,10 8:18 9:1,7,9,23 10:2,12,16 11:1,2 35:1,25 36:8 45:14 144:25 169:24 179:8 195:18 204:9 205:7,20 207:19 210:12 211:4,18 212:16,17 227:18 231:13,15,23 232:1,4,10 234:12 234:17 235:4 237:19 238:8 243:23,25 2011A 132:14 2012 19:20 57:16 106:9 123:21 223:4 228:21 229:11 239:12 2013 55:24 56:1,2 57:20 124:22 127:4,10 209:21 223:7 243:5 244:24 248:4,9 249:1,23 253:9 2014 127:15 245:1 2015 195:18 223:13 228:12 235:24 241:25 2016 55:24 56:1,2 124:23 127:5,16 149:13 195:19 206:12 207:19 208:10 210:4 212:5,9,12 223:7 223:14 228:12 229:12 237:20 238:1 243:25 247:11 249:19 252:22 2023 58:7 91:17 106:3 2033 58:8 91:18 21 132:10 211:1,2 222:20 224:15,23 21st 27:1 28:17 22 9:23 10:12 252:7 22nd 32:16,17 22-year-old 173:1 23 36:3 57:14 58:3 74:6 92:15 111:12 111:15,18 144:18 224:15,23 226:16 246:9 24 11:1 74:6 25 67:9 111:22 169:20 179:4 250 166:4,8 26 9:7 17:13,15 173:21 27 151:11 252:5 270 166:5 275 246:19 28 47:18 48:4 64:22 29 54:15 73:7 111:22 29th 21:16 31:22 44:4 70:23 256:14 256:16 257:9,20 3 3 7:12,23 87:21,22 106:12 167:2 192:16 194:19 195:16 196:9,21 197:17 221:21 227:25 3B 102:13 3B1 98:18 3-1 204:13,25 3-11 202:23 204:23 207:16,22 211:5,9 212:7 3-17 228:1 3-2 204:16 205:3 3-21 228:1 229:21 249:17 3-3 204:19,20 3-5 204:21 3-6 237:15 3-7 210:19 3-8 102:14,15,23 3-9 102:2,4 223:2,3 226:9 3.10 237:15 3.12 210:20 3.15 223:3 3.18 202:23 207:15 3.2 204:13,24 247:25 3.22 248:15 3.36 228:2 3.6 167:11 3.75 251:20 3.9 204:21 30 37:15 45:6 71:6 72:21 122:15,16 122:23 125:2 134:19,21 138:17 140:6 141:23 172:2 180:3 220:12 241:23 30th 151:7,9 30,000 175:13 182:21 314 3:24 3195 228:17,25 32 251:3 252:2 33 125:2 336 247:19 338 247:19 340 138:17 35 75:3 83:25 138:10,13 36 151:14 4 4 8:2 75:16 91:16 130:19 157:16 196:10 205:13 252:22 4A 231:4 4-66 231:19 PROCEEDINGS 6/13/2011 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 293 4.7 104:13 226:20 246:8 4:04 258:2 40 92:21 93:1,11,14 94:2,2 40,000 189:22 41 197:1 420,000 182:20 45 8:16 17:1 18:9 19:25 22:9,13,15 25:10,20 27:5 28:12,15,18,21,22 29:17,19 30:13,14 30:16 31:2 135:15 257:11 485 131:17 5 5 8:5 93:18,23,25 94:6,8 101:7 113:8 116:18 138:20 156:18 157:15 161:11 193:1 195:20 196:10 248:1,8,10 248:16,17,23 249:9,9,10,14 252:25 253:9 5th 29:21 5.11 241:16,18 5.3 205:13 5.5 124:5 221:4 5.50 122:14 5.6 214:16 217:12 241:22 242:8 50 57:15 106:8 177:14,15 187:16 187:19,23 214:6 214:10 251:3 252:3,9,10 500 37:17 51 179:4 180:16 53 77:11 6 6 8:10 123:12 126:2 144:12 195:18 196:10 221:21 6,300 34:2 6-3 225:21 60 16:2 134:18,21 135:14 141:22 199:6 236:20,23 60,000 49:2 600 143:15 63101 3:23 644-2191 3:24 65 132:13 660 89:20 67 125:1 149:12 698 151:13 7 7 5:20 9:9 75:15 126:2 132:10 161:11 222:20 7th 14:22 15:20 700 143:15 71,791 178:1 711 3:23 73 128:24 75 107:2 149:5 79 34:10 8 8 133:4,5 221:21 8th 10:15 80:2 8.4 195:19 197:18 85 58:4,5 91:17 106:1,4 115:25 9 9 35:1 98:16 132:10 208:18 9B1 89:19 90:1,24 98:18 9th 5:19 35:24 227:11 9.3 195:19 9:00 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