HomeMy Public PortalAboutExhibit MSD 120 Transcript October 6, 2011 Public Hearing and ConferenceExhibit MSD 120
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8 PUBLIC HEARING AND MEETING OF THE RATE COMMISSION
9 OF THE
10 METROPOLITAN ST. LOUIS SEWER DISTRICT
11 OCTOBER 6, 2011
12 (Hearing start time, 9:00 a.m.)
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1 INDEX
2 PAGE
3 Introduction by Mr. Chairman 6
4 Presentation by Mr. Theerman 10
5 Public Comments 16
6 Procedural Matters 62
7 Evidence 68
8 Closing statement by ms. Myers 70
9 Closing Statement by Mr. Kindschuh 76
10 Closing Statement by ms. Langeneckert 83
11 Closing Statement by Mr. Mueller 84
12 Closing Statement by Mr. Coffman 87
13 Closing Statement by Ms. stump 97
14 Conclusion 101
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17 (No Exhibits Marked)
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1 MEETING OF THE RATE COMMISSION OF THE METROPOLITAN
2 ST. LOUIS SEWER DISTRICT, produced and examined on
3 October 6, 2011, between the hours of 9:00 in the
4 forenoon and 11:35 in the forenoon of that day, at the
5 Metropolitan St. Louis Sewer District, 2350 Market
6 Street, Room 109, St. Louis, Missouri 63103, before
7 Suzanne Zes, Certified Court Reporter.
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1 APPEARANCES
2 FOR THE MSD RATE COMMISSION:
3 Glenn Koenen
West County Chamber of Commerce
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Mike Seidel
5 St. Louis Council of Construction Consumers
6 Mike O'Connell
Greater St. Louis Labor Council
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Paul Brockmann
8 Missouri Botanical Garden
9 George D. Tomazi
The Engineers' Club of St. Louis
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Ralph wafer
11 Missouri Coalition for the Environment
12 Leonard Toenjes
Associated General Contractors
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John Stein
14 Missouri Industrial Energy Consumers
15 George Liyeos
St. Louis County Municipal League
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Nancy Bowser
17 League of women voters of St. Louis
18 Eric Schneider
Regional Chamber & Growth Association
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Brad Goss
20 Home Builders Association of Greater
St. Louis
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ON BEHALF OF THE RATE COMMISSION:
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Lisa 0. Stump
24 Lashley & Baer, PC
25 John Fox Arnold
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1 William Stannard
Raftelis Financial Consultants, Inc.
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3 ON BEHALF OF METROPOLITAN ST. LOUIS SEWER DISTRICT:
4 Susan Myers, Legal Counsel
5 Kristol Whatley, Legal Counsel
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ON BEHALF OF MISSOURI INDUSTRIAL ENERGY CONSUMERS:
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John Kindschuh
8 Bryan Cave, LLP
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ON BEHALF OF BARNES -JEWISH HOSPITAL:
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Lisa C. Langeneckert
11 Sandberg, Phonenix & Von Gontard, PC
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ON BEHALF OF ROBERT MUELLER:
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Robert Mueller
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15 ON BEHALF OF AARP AND CONSUMERS COUNCIL OF MISSOURI:
16 John B. Coffman
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19 The Court Reporter:
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Suzanne Zes
21 Midwest Litigation Services
711 North Eleventh Street
22 St. Louis, MO 63101
314.644.2191
23 314.644.1334 Fax
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1 MR. CHAIRMAN: Good morning. It's nine
2 o'clock on October the 6th, 2011. I would like to
3 call a meeting of the Rate Commission of St. Louis
4 Metropolitan sewer District to order for our public
5 hearing. My name is Len Toenjes, I am chairman of the
6 Rate Commission of the Metropolitan St. Louis sewer
7 District. I'll ask ms. Bowser to take the roll.
8 COMMISSIONER BOWSER: Mr. Brockmann?
9 MR. BROCKMANN: Here.
10 COMMISSIONER BOWSER: Ms. Casey; Mr. Goss?
11 COMMISSIONER GOSS: Here.
12 COMMISSIONER BOWSER: Mr. Koenen?
13 COMMISSIONER KOENEN: Here.
14 COMMISSIONER BOWSER: Mr Liyeos;
15 Mr. O'Connell?
16 COMMISSIONER O'CONNELL: Here.
17 COMMISSIONER BOWSER: Mr. Post;
18 Mr. Schneider; Mr. Seidel?
19 COMMISSIONER SEIDEL: Here.
20 COMMISSIONER BOWSER: Mr. Stein?
21 COMMISSIONER STEIN: Present.
22 COMMISSIONER BOWSER: Mr. Toenjes?
23 MR. CHAIRMAN: Present.
24 COMMISSIONER BOWSER: Mr. Tomazi; Mr. wafer?
25 we have a quorum.
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1 MR. CHAIRMAN: we have a quorum. Thank you,
2 Ms. Bowser. The Charter Plan of the District was
3 approved by the voters of St. Louis and St. Louis
4 County at a special election on February 9th, 1954 and
5 amended at a general election on November 7th, 2000.
6 The amendment to the Charter Plan established the Rate
7 Commission to review and make recommendations to the
8 District regarding changes in wastewater rates,
9 stormwater rates and tax rates proposed by the
10 District. On May 10th, 2011, the Rate Commission
11 received a rate change notice proposing changes in the
12 District's wastewater rates. The Rate Commission
13 adopted operational rules and a procedural schedule to
14 govern the proceedings on May 17th, 2011 and amended
15 its procedural schedule on July 8th, 2011. Additional
16 addendum to the schedule were approved on August 2nd
17 2011 and September 6th, 2011. Under the procedural
18 schedule adopted by the Rate Commission as amended,
19 the MSD Rate Commission has until October 21st, 2011,
20 to review and make a recommendation to the MSD Board
21 of Trustees as to whether the proposed rate should be
22 approved, not approved or modified with suggested
23 changes and then approved. Under procedural rules
24 adopted by the Rate Commission as amended, any person
25 affected by the rate change proposal had an
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1 opportunity to submit an application to intervene in
2 these proceedings. Applications to intervene have
3 been filed by the Barnes -Jewish Hospital, Covidien,
4 Missouri Industrial Energy Consumers, Robert A.
5 Mueller, AARP, and consumers council of Missouri.
6 These applications have been granted. A prehearing
7 conference for the purpose of identifying any issues
8 raised by the rate setting documents and prepared
9 testimony previously submitted was conducted on the
10 record on September 28th, 2011. Each participant in
11 the prehearing conference submitted on or before
12 October 5th, 2011, a prehearing conference report
13 describing the issues raised by the rate setting
14 documents and the prepared testimony, together with a
15 brief description of each such participant's position,
16 if any, on each issue and the rationale therefore.
17 Ratepayers who do not wish to intervene are permitted
18 to participate in on the record public hearings
19 conducted in several sessions beginning on
20 August 16th, 2011 and concluding today on October 6th,
21 2011. The Rate Commission's operational rules provide
22 that this public hearing session will be held on the
23 record. Number one, to permit ratepayers and
24 taxpayers to testify regarding the proposed rate
25 change. Number two, to receive into evidence any
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1 prepared testimony previously submitted to the
2 Commission subject to any valid objections, together
3 with discovery responses and transcripts of the
4 technical conferences. Number three, to permit
5 Commission members to ask questions regarding any
6 issue addressed by the prepared testimony or any other
7 element of the proposed rate change. And number four,
8 to permit closing statements by the District, the
9 interveners and legal counsel for the Rate commission.
10 Before proceeding to the other aspects of this public
11 hearing, we will begin with a public comment period.
12 Those wishing to speak should sign in on the sheet
13 provided, fill out a blue card that is available
14 outside in the hallway and will be called on in the
15 order of the names presented. Each ratepayer should
16 identify themselves and any organization represented
17 by such ratepayer. Are there any members that are
18 present here who wish to comment? I have two cards,
19 are there any other folks here? I have Paul Kjorlie,
20 or close there?
21 MR. KJORLIE: Yes.
22 MR. CHAIRMAN: Not right now but I just want
23 to make sure you are here and Tim Fischesser. Anybody
24 else who I did not have a card for please --
25 MR. BLACK: She has got my card.
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1 MR. CHAIRMAN: She has your card, okay,
2 thank you. In that instance then, we will call on
3 Mr. Theerman to briefly summarize the rate change
4 proposal.
5 MR. THEERMAN: Thank you, Mr. Toenjes. I
6 have done this at six other public hearings, so I am
7 going to move right along and try and cover the
8 material as quickly as possible. MSD is a utility
9 with two missions, stormwater and wastewater
10 management. we cover 525 square miles, that is all
11 the City of St. Louis and eight -tenths of St. Louis
12 County, serving approximately 1.4 million residents
13 and 428,000 wastewater service accounts. we are the
14 assembly of 79 different sewer systems. There you see
15 the ranking of St. Louis with respect to other major
16 metropolitan areas. we have about the same amount of
17 infrastructure as L.A. with about a third of the
18 number of customers to pay for it. we have 6700 miles
19 of sewers that serve our wastewater system, 1900 miles
20 of combined sewer system and 4700 miles of sanitary
21 sewer system, seven treatment plants and about 3,000
22 miles of stormwater sewers that are not a part of the
23 wastewater system and not part of this rate proposal.
24 The rate change proposal covers only wastewater
25 services. our stormwater rates are presently in
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1 litigation and are not included. we are not proposing
2 any changes at present to the stormwater rates and the
3 rate plan we are proposing is from July 1st of 2012,
4 through June 30th of 2016. There would be four
5 successive rate increases. The current rate stands at
6 $28.73.
7 The drivers for our rate change proposal are shown
8 here and by far the largest is regulatory
9 requirements. Increased use of debt comes along with
10 trying to use debt to build the improvements that are
11 necessary. There has been slight changes in customer
12 base, declining water usage and everyone is familiar
13 with economic conditions in the region.
14 MSD is proposing a $1 billion capital investment
15 over those four years funded by $945 million of
16 revenue bonds. All the bond proceeds will be used to
17 finance the capital program. we will not use bonds
18 for operation and maintenance of the District. Here
19 in that same period we are estimating $634 million of
20 operation and maintenance expense and $359 million of
21 debt service, including both proposed debt and
22 previously issued debt.
23 The regulatory requirements that really are
24 driving this rate change in large part, are due to an
25 EPA settlement. EPA sued MSD in 2007 for alleged
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1 violations of the clean water Act. we have reached a
2 settlement agreement on that lawsuit after four years
3 of mediation. That settlement includes a 23 -year
4 compliance schedule, an estimated cost of $4.7 billion
5 in current dollars, it will address sanitary sewer
6 overflows, combined sewer overflows, sewer system
7 maintenance repair to reduce basement backups and
8 additional asset investment to solve problems of the
9 future to prevent the infrastructure from declining
10 further in the future. That $4.7 billion figure is
11 about 80 percent currently estimated. It is comprised
12 of a long-term control plan with the cost of
13 approximately $2 billion and an SSO removal program
14 that is the balance of those dollars. It includes
15 green infrastructure investment in the city of St.
16 Louis to reduce the amount of stormwater getting into
17 the combined system and causing overflows and
18 additional investment in the combined system related
19 to surcharging combined systems. In addition to the
20 EPA settlement, there is also increased treatment
21 requirements coming to us from EPA in our treatment
22 plants and the cost of starting up those new
23 facilities is included in the rate case. If anyone
24 wants to see the Consent Decree, that is the
25 settlement, it is provided -- the link is provided on
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1 the District's website.
2 This shows the magnitude of the problem. The
3 green area is the combined sewer area, that is all the
4 City of St. Louis and 20 neighboring municipalities.
5 199 different combined sewer overflows discharge a
6 combination of stormwater and wastewater to the
7 region's waters where those combined sewer overflows
8 exist. Again, a $2 billion program is envisioned to
9 abate the impacts of those combined sewer overflows.
10 The red dots are shown in the separate sewer area,
11 those are all sanitary sewer overflows They are
12 illegal by the clean water Act and have to be
13 eliminated. So the balance of the program is to
14 eliminate those separate sewer overflows by barging
15 sewers, by reducing the amount of stormwater that is
16 reaching the system inappropriately, by expansion of
17 treatment plants, storage if necessary, which
18 comprises the balance of the program. All of these
19 dots, green and red, would have to be addressed in the
20 23 -year period per our settlement.
21 These are the proposed capital investment numbers
22 for the program that we presented in our rate case. A
23 little over $1 billion of investment over four years,
24 an average of about $250 million a year of capital
25 improvement. There is a lot of detail behind these
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1 numbers. These numbers are summaries but there is a
2 project list associated with these numbers that
3 describes the projects and what part of the system
4 they'll improve, along with cost estimates. The
5 projects associated with these numbers are already
6 fully defined to the extent they can be. They are now
7 in the position of needing additional engineering for
8 final design and or construction. They do not rely
9 upon additional work that can be performed prior to
10 being funded as proposed in the rate case or in some
11 other manner.
12 we have stable operating costs. These show our
13 projected operating costs over the coming years during
14 the rate case. You see slightly higher changes in
15 years '13, '14, '15, that are related to one-time
16 projects the District anticipates and also operation
17 and maintenance requirements of the Consent Decree or
18 the additional treatment requirements I have
19 mentioned. This shows the historic -- history of MSD
20 bills in blue and the national average according to
21 the National Association of clean water Agency on the
22 red line. You see St. Louis' sewer bills are trending
23 along with the national average because most
24 metropolitan areas are having to go through the very
25 same programs to try and stop overflows and combine
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1 sanitary and combined sewer overflows.
2 These are the proposed rate increases associated
3 with our proposal for each year of the proposal.
4 These would be occurring in July of 2012, '13, '14 and
5 '15. our fiscal years actually start six months
6 earlier than the calendar year.
7 MSD proposed the use of a substantial amount of
8 debt financing to curb the impacts of the rate
9 changes. so on the left side of the slide you see
10 what I have already been talking about, a billion
11 dollar program with $945 million bonds. The average
12 single family bill is escalating from $28.73, that
13 currently exists for residential, up to $47.05. These
14 are average residential costs per month. on the right
15 side, sort of the opposite end of the spectrum, you
16 can fund the program entirely by cash. There is no
17 change in the program itself but there is no use of
18 debt and in this example, the average single family
19 wastewater bill would jump from $28.73 to $73.35 and
20 then rise relatively modestly after that point and
21 sort of the rate of inflation as we move on. That $73
22 is enough to generate about $250 million a year in
23 cash and fund the capital program that way. There are
24 an infinite number of possible solutions in between
25 these two bookends, either using more cash, less debt.
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1 MSD chose to use the far left side in its proposal to
2 mitigate the rate increases to the customer.
3 Next steps, the commission will need to make a
4 recommendation to our Board of Trustees. our Board
5 will review that recommendation in November. we can't
6 take any action at the lower level until after 45 days
7 from the delivery of a rate recommendation by the Rate
8 Commission. The earliest the Board can introduce a
9 rate plan is in December. If the use of debt is
10 included then we will have to go to the electorate for
11 the authorization for the use of debt. we tend to
12 only schedule a bond election in the spring or winter,
13 winter or spring of 2012. The outcome of that
14 election would then dictate how we further implement
15 the rate change but the first rate change proposed to
16 be effective July 1st, 2012. And I think I probably
17 made the record of giving that presentation, so thank
18 you.
19 MR. CHAIRMAN: Practice makes perfect. I
20 would now like to invite the members of the public to
21 comment. If anyone arrived following the beginning of
22 Mr. Theerman's presentation that has not filled out a
23 card, please do so. Paul, if you are ready, please
24 come forward here.
25 MR. KJORLIE: Right here?
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1 MR. CHAIRMAN: Yes, sir.
2 MR. KJORLIE: I didn't have any plans to
3 come down here a week ago until I heard Mr. O'Connell
4 tell Robin Smith on channel 4 that you have heard
5 everything there is to hear about this issue. well,
6 you didn't hear from me. First of all, I am not here
7 to talk about just about my bill. I am here to talk
8 about apparently you have a procedure here that needs
9 correction. I think I got behind on my bill. Part of
10 that was due to my self-employment years or as I often
11 call it, my self -unemployment years. But it is easy
12 to do, you know, you have a sewer pipe that still
13 works whether you pay your bill or not. of course, I
14 worried about you guys plugging it up with concrete
15 one of those days but you never did. Anyway, the
16 course of my bill you have charged my penalty amounts
17 for late charges, ranging from 76 percent, 104
18 percent, 108 percent, even to a whopping 115 percent.
19 Now, if you were the mafia or a loan shark, you would
20 probably get in trouble with the law but apparently
21 you can get away with that. Back in 2009 -- I want to
22 get this resolved because it really bothers me, this
23 bill. Back when it was around $3,000, I wrote a
24 letter to you people in 2008, asking please explain
25 some of these late charges. You never responded. In
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1 February 2009, I wrote a second letter to Mr. Theerman
2 and I didn't get any response. So finally, you know,
3 I took early social security this year just -- this
4 bill was one of the main reasons. so I took that in
5 February at a loss of a couple of hundred dollars
6 because I'm 62 and I didn't wait until I was 65. I
7 had been getting by on some part-time jobs, so without
8 getting too much into my embarrassing finances, if I
9 had enough money this year it was up to $5700. Isn't
10 that embarrassing? So I sent MSD a check for $1,000
11 with a little note saying surprise and I hope to send
12 two more of these in 2011 and I am going to finish off
13 the balance early next year, 2012. And I thought, you
14 know, you would be pretty happy with that and 30 days
15 later I get a letter from Mr. Heimos, your attorney,
16 demanding the rest of the balance, $4700 within 30
17 days or he was going to take me to court. I wrote him
18 back in a letter, I explained the social security and
19 the only response I got from his was an itemized bill.
20 it was a lot clearer than the one I got several years
21 ago, which was a computer printout. This one is a lot
22 clearer to read. So I went through it and I was just
23 amazed by these interest rates, how you people can do
24 that. So if you are going to do that with these new
25 rates, I suggest you do some`PSAs on TV warning
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1 people, do not fall two weeks behind on your bill, you
2 may get slapped with a charge like that. so I figure
3 if the worst case scenario is $74, if you don't get
4 the bond issue passed, you will be hitting people two
5 weeks later with $159.95 charge. I think you need to
6 review your procedures because right now I am -- you
7 know, I was resigned to pay that and just get it over
8 with but the more I looked into it I said no and I
9 told Mr. Heimos, I said bring it on, if you want to
10 take me to court I am sure I am going to find a
11 fair-minded judge that will see the outrageousness of
12 115 percent interest. I talked to the woman from
13 Barnes, i was surprised there was no government, there
14 was no state agency that oversees you, so you can do
15 whatever you want. So apparently my only recourse is
16 court. Mr. LeComb, I will wait in the hallway if you
17 want to get your attorneys to hit me with a summons,
18 let's get it over with. I will go down to court and
19 we will have a judge here this. I don't know if you
20 people realize it, are you aware of 115 percent
21 interest rates, late charges?
22 MR. CHAIRMAN: No.
23 MR. KJORLIE: You need to look into more of
24 the, you know, operation that you are overseeing, so
25 that is my comment. You know, it's kind of ironic, I
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consider myself an environmentalist. I have always
thought you people do great work. But it is kind of
ironic, to get political here, the people pushing
this, the environmentalist and the EPA, I guess are
mostly democrats who are in favor of the poor but you
come up with some of these charges and there is going
to be a lot of fixed income people, you know, they may
lose their house over utility costs. we already have
sewer and water charge that went up to a hundred
bucks, you know, every three months, but that is not
your concern. Anyway, I hope you will look into these
late charges and probably, I think, you should
eliminate them, so that is my comment.
MR. CHAIRMAN: Do any of the Rate
Commissioners have any questions?
COMMISSIONER LIYEOS: I do, Mr. Toenjes.
MR. CHAIRMAN: Yeah, go ahead.
COMMISSIONER LIYEOS: How many years were
your in arrears?
MR. KJORLIE: Oh, gosh, let me look at that,
it's embarrassing. You know when you're self-employed
and you pay $50 a month for a phone, you kind of
overlook MSD. Let's see this goes back to July 2007
and I did the math, it's about $800 in late payment
charges. The first couple of years you didn't charge
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1 any late payment charges but, you know, the last
2 couple, two or three years, you have. So -- but it is
3 really, it is really outrageous. You know, you'll go
4 a long way in creating public trust if you eliminate
5 those charges and I talked to Robin smith and she is
6 interested in the issue and who knows what will happen
7 with that.
8 COMMISSIONER LIYEOS: If you eliminated the
9 interest, how much would the bill be?
10 MR. KJORLIE: I wrote Mr. Heimos a letter
11 two weeks ago and I haven't heard back from him. I
12 offered him a settlement. Let's see, $898 in late
13 payments, the principal only would be $3,316 versus
14 4700, so that is a pretty big amount. Thank you.
15 Keep up the good work, keep our sewers working. But
16 these late payment charges you got do something about
17 it and please have your staff respond to letters, that
18 would be nice. Thank you.
19 MR. CHAIRMAN: Thank you, Paul. Mr.
20 Theerman or ms. Zimmerman, any comments on these
21 comments?
22 MR. THEERMAN: The interest charges he is
23 speaking of are not what MSS charges. If there is a
24 mistake we would be glad to look at that and try to
25 resolve it. I certainly apologize if you wrote me a
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1 letter and if I didn't respond, I am embarrassed about
2 that but MSD reduced its late fees about 18 months ago
3 from 18 percent per year down to 9 percent per year.
4 So we have a relatively low late charge for
5 non-payment of sewer bills and we do our best to try
6 and resolve those with payment plans and what have
7 you. we will work with people on late charges if they
8 are willing to enter into a payment plan to get
9 current. You know, the kind of delinquency we are
10 talking about is a fairly large one if he is a
11 residential one. I'm not confident what kind of
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we are talking about.
MR. KJORLIE: This is an MSD Sewer District
account detail, does this look familiar to you?
MR. THEERMAN: I can't tell from this
16 distance, sir, I'm sorry. I would be glad to talk
17 with you about your particular account and try to
18 resolve it.
19 MR. KJORLIE: I want to talk about it in
20 public. I was warned you may put me up and take me
21 down the hallway and talk to me individually. But you
22 do the math here, here is the 76 percent one, sewer
23 service charge $29.92, late charge 22.86, charge
24 $31.05, late charge $20.58. where is that 115
25 percent, it is in here somewhere, anyway --
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1 MR. THEERMAN: Keep in mind the late charges
2 you're talking about are on the entire delinquency
3 behind that charge. It is not just for that one
4 month.
5 MR. KJORLIE: It says -- it has a date on
6 there, two weeks late.
7 MR. THEERMAN: Again, now is not the time
8 for debate with it, I would be glad to try to adjust
9 it --
10 MR. KJORLIE: Well, if you would have wrote
11 a letter to me explaining that, I wouldn't be here.
12 so please read your mail. Thank you.
13 MR. CHAIRMAN: One last question, is there
14 anything in the rate proposal, in the new rate
15 proposal, the 9 percent late fee is part of the
16 calculations or is that just so -- such a small
17 portion of the revenue that it is not included?
18 MR. THEERMAN: It is included. I mean, our
19 present late fee is included in the rate proposal.
20 There are no changes, if that is your question.
21 MR. CHAIRMAN: Yes, that is my question.
22 Thank you, Paul. Tim Fischesser?
23 MR. FISCHESSER: Thanks again for the
24 opportunity to address you. I was here at the last
25 meeting and then did some additional research. My
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1 name is Tim Fischesser, I am director of the st. Louis
2 County Municipal League, virtually all the cities in
3 st. Louis county are members, as is st. Louis County
4 and the city of st. Louis. our concern had been
5 initially the size of the potential rate increases and
6 what that impact would be on ratepayers. we run into
7 the same thing a little bit I guess if we charge
8 somebody a trash fee in municipalities but I would
9 guess most of our mayors are thankful that we don't
10 have water and sewer services that we have to govern.
11 The reason we don't is it makes sense that sewer
12 service be done on a broader regional basis obviously,
13 as many cities used to be in the sewer business. In
14 our efforts over recent years to interact with
15 Mr. Theerman, which have been very open and frank on
16 both stormwater and wastewater, endorse the new
17 impervious charge that was recommended by MSD and
18 recently thrown out in court, we joined with the State
19 Municipal League in challenging that case, in other
20 words, we are with MSD. we think stormwater charges
21 should be based more on the size of the property and
22 the amount of rainwater contributed to the system for
23 example. I was one of the people in the early '90s
24 with the confluence study that recommended a Rate
25 Commission like this to try to let citizens know that
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1 we have other citizens examining the rates because
2 obviously MSD is not subject to PSC and we felt that
3 if there was a blue ribbon organization like yours to
4 try to listen to all the facts on it, that ratepayers
5 would be more likely to support necessary rate
6 increases, whether they could be imposed by the
7 District without a vote or whether they had to go to a
8 vote of the people, usually more related to bond
9 issues. so the League is not opposed to the efforts
10 of us having a robust and vibrant treatment for sewage
11 and for stormwater. In fact, if MSD doesn't handle
12 stormwater it falls to cities and many cities do have
13 a special tax just for stormwater in St. Louis county.
14 They coordinate their plans with MSD so that the
15 system will work together. But we recognize the
16 financial limitations MSD has, particularly on the
17 stormwater side. when I was involved in the early
18 studies with the confluence group, it became apparent
19 to us pretty quickly that unfortunately we had under
20 charged ourselves. Our rates were probably 5 or $10 a
21 month to low for 20 or 30 years and put us in a
22 situation where it was very difficult to necessarily
23 fund the sanitary sewer system in a manner that was
24 necessary. we then looked closely at privatizing,
25 actually selling MSD to a private company, just about
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1 the time that Missouri supreme court ruled that the
2 user charges could be raised without a vote. But with
3 that new court ruling and the ability of MSD to raise
4 necessary funds, the drumbeat to privatize MSD went
5 away and we are now in our current situation with the
6 -- with your panel trying to intervene on behalf of
7 ratepayers to make sure that we get this right, that
8 we have a system that is reasonable and our rates are
9 reasonable.
10 since the last meeting I consulted more with the
11 League Board of Directors whose initial reaction was
12 that the fee increase, just the $4.7 billion, was too
13 much and the 23 years was too short. It was just
14 simply too much rate shock. Part of the reason is
15 because it's not just with MSD, we are feeling this
16 with metro, we are feeling it with the zoo/Museum
17 District. our combined city and county population has
18 declined over the last 30 years. we have roughly
19 about 1.3 million people and even in the reports that
20 the staff has given me we have seen that there are
21 fewer schools using the services. we have had some --
22 obviously because of the restriction in the economy,
23 we don't have a Chrysler plant for example anymore, a
24 Ford plant, a whole lot of smaller businesses that are
25 not paying. So that means kind of a last man standing
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1 has to pay the bills for MSD. So urban sprawl has
2 really hurt us in St. Louis City and County,
3 particularly our city and county organizations have
4 had significant increases in metro that voters did
5 approve because -- in part, because we have fewer
6 people paying taxes when you go from 1.6 million
7 people to 1.3 million people, it is tough to make ends
8 meet. So we are not in a very good environment to
9 raise any rates but we have to in part, if we want to
10 try to keep our systems just at our current levels.
11 My board did ask me what would be the kind of cost and
12 benefit, what would we give up if we didn't raise the
13 rates as much as proposed and stretched it out longer?
14 Now, there is a number of ways you can evaluate any
15 type of government program but we wanted to take a
16 look at the impact on clean water and so I asked the
17 staff if they could provide me with a little more
18 guidance on just what the improvements would be in
19 terms of outcomes, not how much we would spend on
20 pipes and so forth, but what would our clean water
21 improvements be as one measure of the benefits. And
22 they referred me to a 800 -page -- 805 -page document on
23 Friday, so I spent several hours over the weekend
24 trying to read through that and honed in on some
25 charts which I thought maybe I wasn't understanding
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1 very well. It gets into some chemistry but also on my
2 computer screen things were a little blurry. so I did
3 meet with staff here yesterday to try to better
4 understand the charts because I didn't believe I was
5 interpreting them correctly. when you get into this
6 document, here is one chart and it shows the
7 improvements before and after we eliminate the
8 combined sewer overflows and it talks about River Des
9 Peres and some other creeks, there is virtually no
10 improvement. The before line lays almost exactly on
11 the after line. I didn't think I was reading that
12 correctly. This happens to be lower River Des Peres
13 for something called dissolved oxygen. so I asked the
14 staff what about the next chart where the lines seem
15 to lay on top of each other. The before line doesn't
16 show any improvement when you get to the after line.
17 They looked at two different levels of oxygen in River
18 Des Peres. How about E. coli? The top line you see
19 is the standard, we are well below that standard for
20 boating and wading. I think you heard a little bit
21 about the standards that EPA and DNR try to impose on
22 our streams. This is lower River Des Peres E. coli,
23 it doesn't change after we make the improvements and
24 it is below the boating and wading standard already.
25 so we went on through some additional charts and chart
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1 after chart showed no improvement in the combined
2 sewer overflow after we spend the $2 billion. so I
3 asked well, what about when you get out toward
4 Lindbergh and beyond and you get in the separate sewer
5 system and they said well, we didn't model that like
6 this because we don't have a choice. EPA just says
7 the clean water Act says we have to eliminate the
8 overflows and I said well, how many pipes are there
9 that have these overflows and about 200 and you may
10 know that the Feds made MSD put a sign up at every one
11 of those warning people about those potential
12 overflows. I said, okay, so we have 200 pipes but how
13 many incidents do we really have? How often do they
14 let things that we wouldn't want them to let into the
15 creeks or the streams? But because of the
16 confidential negotiations they were not able to give
17 me that answer and I understand that, I have been in
18 that situation before. so it doesn't take my board of
19 directors very long to realize that this clean water
20 Act is -- I don't want to call it a sham, but
21 environmentalists and ratepayers ought to be appalled
22 that the EPA would suggest that we spend $4 billion
23 plus in today's dollars, maybe $6 billion by the time
24 we get done with interest and inflation, when the
25 charts show, the documents that they all sign off on,
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1 show no improvement. But we remain in support of
2 spent raising rates to target the worst parts of our
3 sewer infrastructure. we are not anxious to see MSD
4 spend a million dollars a year in legal fees to
5 continue to debate with the EPA or to sign off on
6 whatever other metropolitan areas have signed off on.
7 Maybe they are getting clean water benefits, maybe
8 they have more overflows or what have you.
9 I also asked staff how many complaints do they get
10 about overflows? Do people call about the odors? Do
11 we know of anybody who has gotten sick? Are kids
12 playing in the sewage in some of these creeks? They
13 tell me they haven't gotten a single call. So it
14 doesn't take us very long to conclude this is some
15 sort of top -down thing that's not making a whole lot
16 of rational sense. Now, if we had a lot of money, if
17 our rates were way too low and we had to bring them up
18 to some sort of average but as you know, we are
19 already at the average and that average is increasing
20 because these other metropolitan areas have signed off
21 on these types of consent decrees.
22 Jeff did mention there is a link in there to the
23 Consent Decree and I don't know how many of you have
24 read that, but that is the most heavy-handed document
25 that puts MSD under the microscope of the federal
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1 government for years to come. So many people are
2 appalled at these consent decrees that a bill has been
3 introduced in Washington. H.R.3041 that would limit
4 consent decrees like this to four years and then at
5 which time the burden of proof would be on the EPA and
6 not on the local District, like MSD, to prove that
7 there is a problem. We think that makes a lot more
8 sense knowing what we have learned in the last month
9 or so since we have come to the time period when we
10 have to send our comments into the Department of
11 Justice about the Consent Decree. We almost have two
12 lousy choices, kind of continue to spend some money on
13 legal fees until we can get this resolved with the EPA
14 in a more practical sense, so that if we are going to
15 ask our shrinking base to support improvements we can
16 aim them at our most serious infrastructure within the
17 District and not waste our money on either classified
18 cleanup of overflows, you might say in the combined
19 system, kind of the Lindbergh out area or on the
20 separate system out there or in the combined system,
21 kind of inside Lindbergh, when the scientists say and
22 apparently EPA is in agreement, that we won't get any
23 improvement. It seems like in many things we try to
24 do in life, that we can do an 80 percent job or a 90
25 percent job for a reasonable amount of money but if
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1 you try to cure the last 10 percent of cancers or if
2 you try to get the last 10 percent of sewage out of
3 something, it costs almost as much or maybe more than.
4 I guess I think the program that has been proposed
5 about doubles Ms 's annual income. Bond issues are a
6 little tricky obviously, because some years you have
7 income from them and some years you don't but to
double the income of MSS not making the most severe
infrastructure the target and chasing some sort of
clean water that won't clean the water type of
program, just doesn't make sense to us. we are not
talking about a 10 percent increase or a 15 percent
increase as you know, we are talking about a very,
very significant increase that with inflation, will
put our bills probably in the neighborhood of $100 a
month from roughly the $30 now.
so it is difficult.
I appreciate all the time all of you volunteer.
when we first had this
in the '90s we thought
idea of a Rate Commission back
it would be more like a casual
public hearing process, not rebuttal and surrebuttal
and all the legalistic things. It wouldn't take
anywhere near the amount of time, that you would just
kind of be able to evaluate things as we are
evaluating them now from the League point of view
25 saying, you know, are there significant problems that
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1 we need a rate increase and, if so, you would explain
2 why to the citizens and hope that they would support
3 the MSD commissioners as they were in a situation to
4 raise rates. It has gotten fairly complicated. I
5 don't know to the extent you get down in the weeds
6 like we have as you try to develop a kind of
7 resolution that our membership might adopt to send to
8 the Department of Justice, which is now just a few
9 days away. Eventually, you know, we will continue to
10 send our comments to all of you and to the MSD Board
11 of Trustees but something seems seriously wrong if
12 this size of a rate increase proposal -- certainly not
13 at the staff or the MSD level, something is seriously
14 wrong with the federal law where it would suggest that
15 St. Louisans and metropolitan ratepayers across the
16 country -- maybe they had some benefits in the other
17 areas but to spend this kind of money when the data
18 shows no improvement in water quality should just be
19 appalling. It should be appalling to the
20 environmental community. I am surprised they are
21 signing off on this and it is certainly appalling to
22 mayors in the League who feel like, you know, why in
23 the world would we spend that kind of money without
24 having more documented benefits.
25 There are some other benefits. we know when you
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1 redo some of these sewer issues you are addressing
2 some of the infrastructure problems but these huge
3 underground storage tanks don't seem, to us, to
4 provide much benefit. Store the mixed water until it
5 can more slowly be sent to the treatment plants for
6 treatment when it doesn't improve the quality of
7 water, those are the types of things we think that
8 money would be, to some extent, better left in
9 ratepayers' pockets and, to some extent, left on the
10 real infrastructure problems we believe exist in our
11 crumbling older parts of the Sewer District. So I
12 won't -- I think you get the point we are trying to
13 make. Originally we were just concerned with slowing
14 the program down but now we have real questions on
15 whether much of the money would benefit the region.
16 MR. CHAIRMAN: Thank you, Mr. Fischesser.
17 Questions? Mr. Liyeos?
18 COMMISSIONER LIYEOS: Since I represent the
19 Municipal League, Tim, has there been any discussion
20 about the Municipal League entering into an amicus
21 brief if a lawsuit is initiated?
22 MR. FISCHESSER: You're not switching back
23 to the stormwater one or are you talking about the
24 Consent Decree?
25 COMMISSIONER LIYEOS: Both.
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1 MR. FISCHESSER: We are a party to the
2 amicus brief with the State Municipal League on the
3 stormwater. I think that has just been filed in the
4 last few days. On this Consent Decree with the
5 Justice Department, frankly, we don't even know where
6 to begin legally on that. so I would say that we're
7 probably in the early stages of exploring the
8 practical ramifications. You know, the mayor just
9 said if we go along with this and support this big
10 increase, what would be the benefits to the ratepayers
11 in our communities? And, you know, they start out
12 from the point of view, well, nobody wants raw sewage
13 near their home and, you know, we would like to get
14 rid of the complaints of the foul odors and we
15 certainly don't want kids getting sick playing in the
16 creeks, so how much of this water is going to get
17 cleaner? we find out very little. It was, frankly,
18 an amazing surprise to us. we thought we were just
19 going to suggest a little bit more moderate increase
20 and stretch the thing out, you know, work hard with
21 EPA to try to stretch the improvements out over more
22 years, maybe go ahead with the billion dollar bond
23 issue or a sizeable one to address the worst of the
24 worst and then eventually get to the rest of it. But
25 certainly the education we received in the last week
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1 and the staff to the -- except for the things they
2 couldn't tell us because of the confidential
3 negotiations, the staff has bent over backwards in
4 very short notice to try to either answer my questions
5 the same day or set up a meeting so I could meet with
6 more of the technical staff to better understand these
7 charts. But we were just -- i consulted with our
8 president yesterday and he again said well, are you
9 sure? we all hear horror stories about the EPA but it
10 can't be that bad. In this case we think maybe it is.
11 so we are very -- obviously very concerned. we
12 appreciate these public hearings and the opportunity
13 to work with a panel of citizens who get to weigh a
14 lot of pros and cons and obviously dedicate a lot of
15 your time to try to get this right but we want to
16 express our concerns that we don't think this comes
17 anywhere near getting it right and certainly isn't
18 worth our shrinking base of payers having these types
19 of increases.
20 MR. CHAIRMAN: Mr. Schneider, question?
21 COMMISSIONER SCHNEIDER: Mr. Fischesser,
22 what is actually the title and source of this report
23 that you refer to?
24 MR. FISCHESSER: I happened to print the
25 cover page out in anticipation of that question. And
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1 it is called a combined -- this is the combined sewers
2 inside of Lindbergh, Combined Sewer Overflow Long-term
3 Control Plan Update Report. Like I said, when I asked
4 about this and outside of Lindbergh, there isn't one
5 because EPA doesn't give you any discretion. You just
6 have to end the overflows even if there is no benefit.
7 I didn't realize that, so I asked where is the
8 companion report for the separate systems, well, there
9 isn't one. we don't have all these charts with the
10 red lines for the separate system because EPA doesn't
11 care. I mean, that is my words, not the staff's words
12 but the law just in separate systems says it has to
13 be.
14 MR. CHAIRMAN: Mr. Koenen -- go ahead,
15 Mr. Schneider, go ahead, do you have another question?
16 COMMISSIONER SCHNEIDER: No, that's okay.
17 COMMISSIONER KOENEN: One quick question.
18 When I was doing some research the Post Dispatch had
19 articles on the sewer overflows going back to the
20 1990s. I think that is as far back as their archives
21 go. At that time, in those articles, they mentioned
22 concerns by many municipalities in the Lindbergh area,
23 especially I think Ladue was mentioned. How come the
24 Municipal League hasn't had a policy, how come they
25 weren't pushing MSD to eliminate those overflows if
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1 this was known 20 years ago?
2 MR. FISCHESSER: Well, MSD has eliminated I
3 think around 200. And I am not sure what the basis of
4 choosing those were and we are not opposed to that
5 continuing, I mean, that was not through an EPA
6 consent, that was our local people making local
7 decisions on what they could do. And we certainly
8 support, you know, where there are odor problems or
9 something near a school or whatever, you know, kind of
10 a grass -roots -up -type of approach that MSD has been
11 using. I mean, we are strong partners with MSD, not
12 in any way concerned specifically with MSD's decision
13 making. our focus is on what seems to be an
14 artificial mandate from the federal government,
15 obviously unfunded, that would require a shrinking
16 group of people to absorb a very huge federal mandate
17 when we now think -- I am repeating myself but we do
18 support what MSD has been doing to eliminate the
19 overflows, particularly where cities see that there is
20 a problem.
21 COMMISSIONER KOENEN: My feelings would be
22 that mayors and councilmen would be the first ones,
23 that as soon as people got done on the phone with MSD,
24 they would be calling their mayor and their councilman
25 saying what are you doing about this? Especially when
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1 there is prominent Post Dispatch articles and other
2 things about these overflows, why didn't the Municipal
3 League come forward, say back in the '90s or '80s
4 whenever this first came up and start pushing for a
5 plan? That would seem to be, if nothing else, a good
6 way for a councilman to say look what I am doing for
7 my neighborhood.
8 MR. FISCHESSER: Well, in our meetings with
9 MSD we felt there was a plan and we did support that.
10 we actually -- in terms of mayors getting calls,
11 they're almost all about stormwater by the way, and
12 that's, you know, why the mayor is so supportive of a
13 stormwater improvement program and at many times
14 funded with municipal money in conjunction with
15 planning with MSD. But on the stormwater side, I mean
16 -- excuse me -- on the wastewater overflow side, the
17 mayors aren't reporting that they are getting calls
18 and that's why I asked MSD staff are you getting calls
19 and they said no. I assumed there was more of a
20 problem, that EPA was working on a problem and it
21 seems like EPA is motivated by their law, which I
22 sometimes understand but we also know a lot of
23 agencies can ignore impractical laws and concentrate
24 on where they get a bang for the buck. But in this
25 case, EPA working with all the metropolitan areas
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1 across the country, somewhat of a -- I guess more of a
2 blanket policy feel. st. Louis maybe is no different
3 than anybody else and needs to enter into this Consent
4 Decree. I did have one mayor by the way, talk about
5 whether I guess there was some understanding of the
6 EPA about the Mississippi River having beaches on it
7 and used for a lot of recreation and things like that.
8 Now, there is that above the Alton Damn but the one
9 mayor said well, let's bring the EPA down for a swim
10 in the Mississippi River and see if they really want
11 to make it swimmable but at any rate, so we do have a
12 little bit of a sense of humor at times in dealing
13 with the federal government but this -- this has
14 become very frustrating and very confusing to us in
15 recent weeks and we wanted to share our concerns with
16 you and hopefully we can figure out a way to skin this
17 cat that is a little more practical than the Consent
18 Decree. Even if you don't read the whole Consent
19 Decree, if you have an opportunity to just look at
20 some of the provisions of the consent Decree it is --
21 we would never have a state law that would regulate a
22 local government the way this EPA Consent Decree does.
23 I mean, you shall do this, you shall do that, if you
24 want an exception you shall do this. I mean, it is --
25 it is extremely one-sided and if there is any chance
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1 at all we could even delay this long enough in hopes
2 that maybe a federal law is implemented to handle
3 these Consent Decrees in a more practical matter and I
4 don't know what the chances of this federal law are
5 passing and this does have bipartisan support but it
6 would seem like it's just -- it's just not the right
7 time to pursue this specific path. The consent Decree
8 doesn't do much, there could be a chance we could get
9 a better Consent Decree. I know we don't want to
10 spend millions in legal fees but if there is some way
11 to ask the EPA, even the administrator of the EPA, to
12 give us more time to try to get this right.
13 I have seen a recent piece that the federal
14 highway department mandated all cities change their
15 street signs to bigger lettering with reflective tape
16 and st. Louis county alone, for the county and cities
17 to do that, it is in the neighborhood of $30 million.
18 some have gone ahead with it but after protest the
19 secretary of transportation removed the mandate and
20 said, you know, essentially do it as you replace
21 street signs, do it at your pace, as you reconstruct
22 roads, do it at your pace. They are not going to
23 mandate that we change all the street signs by the end
24 of the year. so maybe there is some common sense in
25 some places in Washington that will allow us a little
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1 more time to try to get this right. At this point,
2 without being experts in this, that would be our
3 recommendation. we will continue to explore it and we
4 appreciate any dialogue we can have with you. Maybe
5 we can find out some more specific options but it is,
6 you know, like some things in life, you just find
7 yourself in a very frustrated position because we
8 thought there would be real benefits from most of the
9 4.7 billion in today's dollars and now we are finding
10 that if most of the money is spent on the overflows
11 that we won't get much benefit.
12 MR. CHAIRMAN: Mr. Schneider, do you have a
13 follow-up question?
14 COMMISSIONER SCHNEIDER: Actually I do. Mr.
15 Fischesser, I have one more question. I want to make
16 sure I understand your comments here. Essentially
17 you're saying that because the Consent Decree is not
18 going to improve public -- you have made two comments
19 I picked up on. One is the Consent Decree is not
20 really going to improve water quality in our region
21 substantially and two, because of kind of this bill
22 that has been introduced and maybe some other
23 uncertainty here, are you recommending, is it the
24 Municipal League's position that we should not
25 implement the rate proposal because of its uncertainty
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1 and just kind of see where the federal government is
2 headed with the consent Decree?
3 MR. FISCHESSER: Because we do support the
4 type of work that MSD has been doing to target some
5 overflows where there may be particular problems and
6 we know that MSD infrastructure does not help, it's
7 just very old and subject to a lot of collapses and
8 other problems. we do think -- it is my understanding
9 that the last two bond issues got $750 million have
10 been spent and we are paying for those. But if we
11 want to keep up that rate of improvement MSD needs
12 another bond issue and certainly we would think the
13 rates would have to go up at least with the rate of
14 inflation. So I guess we're saying is there a way we
15 can continue to make progress, similar to what we have
16 done in the last ten years, and then put off the
17 Consent Decree until there is someone in the major and
18 even higher increases, until everybody has a chance to
19 come up with a more practical approach to this, where
20 if you spend a billion dollars by gosh, you get a
21 billion dollars worth of benefit. And our concern is
22 instead of spending this money on the infrastructure
23 that needs attention, we'll be chasing these overflows
24 that don't give us a benefit. so it just doesn't seem
25 to be, particularly given our District contraction and
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1 the pressure on our ratepayers already, seems like the
2 opposite way we would want to go. Just at the time
3 when we have to stretch every dollar for a positive
4 benefit, the EPA is suggesting we waste dollars for
5 non -benefits. And that is our view from 30,000 feet.
6 COMMISSIONER SCHNEIDER: Thank you.
7 MR. CHAIRMAN: Mr. Brockmann?
8 COMMISSIONER BROCKMANN: Tim, you mentioned
9 that some of the municipalities have the right to
10 charge a voter approval of stormwater tax, is that not
11 a combined stormwater and park tax together?
12 MR. FISCHESSER: It's a sales tax, it's not
13 a
14 COMMISSIONER BROCKMANN: It's a sales tax?
15 MR. FISCHESSER: It goes on the ballot --
16 MR. BROCKMANN: But by state law it's a
17 combined stormwater and park tax, correct?
18 MR. FISCHESSER: In the cities -- usually in
19 the city it is put on a ballot if they want to do both
20 or if they want to do one. In some cases they only
21 use it for parks if they don't have a stormwater
22 problem. But if they have a stormwater issue,
23 obviously they put on a ballot that some or all the
24 money will be used for stormwater and then they work
25 --
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1 MR. BROCKMANN: So you're saying the voters
2 in the municipalities can differentiate when they
3 approve that tax, that it either goes to stormwater or
4 parks, it is not combined?
5 MR. FISCHESSER: Or both. It's a local
6 option, it's a local decision.
7 MR. BROCKMANN: I am just trying to clarify,
8 doesn't state law read it is stormwater and parks
9 together and then it's up to the municipality to
10 decide how they differentiate those funds,
11 spending -wise?
12 MR. FISCHESSER: Some have put on a ballot
13 to use it for just one purpose because they wanted to
14 clarify to citizens, don't expect us to spend this on
15 parks because we are committing this to, you know, a
16 project with MSD for the next 10 or 15 years.
17 COMMISSIONER BROCKMANN: And what's the
18 annual dollar amount for St. Louis County for the
19 stormwater portion of that, do you know?
20 MR. FISCHESSER: I would have that at the
21 office but I don't have it memorized.
22 MR. BROCKMANN: Do you think there is any
23 chance that the consumer customers can get that
24 confused with MSD rates or things like that?
25 COMMISSIONER LIYEOS: I would say in Rock
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1 Hill, no.
2 MR. FISCHESSER: I don't think they do. I
3 think because the municipality is pretty
4 compartmentalized compared to MSD, so there maybe some
5 people who -- I don't know if MSD gets any calls and
6 MSD refers them back to the city, if they keep track
7 of which cities have the stormwater, you know, kind of
8 from a public relations point of view. I know at the
9 engineering level we do, our engineers work with MSD
10 engineers on the stormwater front.
11 MR. BROCKMANN: okay. Thank you.
12 MR. CHAIRMAN: Any further questions by the
13 Rate commissioners?
14 MR. FISCHESSER: Thanks for all your time
15 both this morning and your dedication to try to get
16 this right. You wonder when we create things whether
17 they are really going to work the way they should but
18 in this case I still support the concept we originally
19 came up with back in the '90s, to have good, decent
20 community citizens try to see what we could do about
21 getting the rates and the performance right.
22 MR. CHAIRMAN: Thanks for your comments and
23 thanks for your research. Yes, Mr. Goss?
24 COMMISSIONER GOSS: Are you going to ask MSD
25 to respond to that? I would like to hear a response
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1 as to the benefit, given the comments that
2 Mr. Fischesser is saying, that there is no benefit,
3 whether MSD agrees with that?
4 MR. CHAIRMAN: Mr. Theerman?
5 MR. THEERMAN: well, let me first say --
6 MR. CHAIRMAN: Is that the sum of your
7 comments?
8 MR. THEERMAN: I'm trying to decide how far
9 to go. well, what Tim has described is accurate with
10 respect to water quality. The combined sewer policy,
11 the EPA has created and administers, requires
12 communities to put together long-term control plans to
13 bring combined sewer overflows under abatement, not
14 total elimination, with the goal of achieving water
15 quality standards. The problem that he is talking
16 about is that you don't necessarily get to water
17 quality standards even if you do the long-term control
18 plan because there is other impacts, stormwater in
19 urban area has impacts. And so -- and because we are
20 talking about all of these overflows being transient
21 things that only happen when there are rain events,
22 when you look at the big picture you may have brief
23 impacts as the overflows are occurring but they are
24 diluted impacts because there is lot of other things
25 going on in the streams when the rains are happening.
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1 And then you don't have overflows during dry weather
2 periods that are not impacting the streams. So we
3 were faced with EPA's perspective on two different
4 things. Their perspective on combined sewer overflows
5 is you have to do a long-term control plan and it
6 needs to address what they call a presumptive
7 approach, which is reduce the number of overflows
8 events substantially down to something in the order of
9 four to six overflows a year. we argue that we can't
10 afford that and that if we are going to do combined
11 sewer overflow abatement, we want to do it on the
12 urban streams because everything will ultimately help
13 the Mississippi River. So, yes, you don't see
14 dramatic increases in water quality, you don't see
15 even substantial increases in water quality as you
16 reduce the number of overflows from the combined sewer
17 system but it was our view that if we are going to
18 spend money on combined sewers, you ought to do it
19 where people recreate, live and that is the urban
20 streams, that is u. city, that's Deer creek, that's
21 portions of the River Des Peres, that is Maylene creek
22 and not the Mississippi. The public saw it that way
23 too when we did public outreach on this issue. These
24 charts that Tim has looked at are in an 800 -page
25 document but they were also publically discussed in
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1 the long-term control plan public outreach that we
2 did. And so that is one piece of the puzzle and
3 that's why you don't see a 2 billion -- a $20 billion
4 combined sewer program, you see a $2 billion combined
5 sewer program. Now, we can argue that it should be
6 less but MSD submitted a much abbreviated long-term
7 control plan in 1999 and got it rejected. And it's a
8 very, very long story, you don't want to hear but we
9 got to the long-term control plan we have today.
10 on the SSO side, Tim is also right. we haven't
11 done a lot of water quality modeling because the
12 streams where a lot of these exist are intermittent
13 streams, they don't have water in them all the time.
14 And for that reason you don't do water quality
15 sampling very easily but there is an absolute
16 prohibition from sanitary sewer overflows. The Clean
17 water Act is clear, it is illegal to discharge without
18 a permit and a permit requires secondary treatment and
19 therefore, unless we stick secondary treatment plants
20 in all these overflows, they will not be permitted and
21 they are illegal. So MSD had to operate under the
22 presumption that you got to take them out and we
23 didn't do this in a vacuum. For four years we
24 negotiated this CD but z have been involved in consent
25 Decree discussions with other cities since wet weather
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1 issues became a priority of EPA'S enforcement division
2 which has been about 10 years. I followed along with
3 Atlanta, Cincinnati and Baltimore and all the others
4 to see exactly where it goes. And I agree, Tim
5 doesn't like our agreement because it is really
6 arduous but it was the best agreement that four years
7 of hard negotiating could obtain and we were
8 ultimately faced with a decision. we could settle a
9 lawsuit to the best of our ability and continue to
10 work in washington to maybe try and bring clarity to
11 the clean water Act and that has been our approach.
12 The alternative approach could have been go to war,
13 litigate the issue to finality and I personally did
14 not believe, and our Board of Trustees did not
15 believe, that was an approach that was going to yield
16 good result because at the end of the day we are
17 talking about a precedent -setting lawsuit that EPA has
18 strong beliefs about and a federal government that has
19 an unlimited supply of legal dollars to spend and a
20 law that is constructed without a cost benefit
21 analysis to it. So we elected to settle the suit and
22 continue to try and talk sense to the federal
23 government. Tim mentioned one piece of legislation,
24 there are lots and many are aimed at trying to bring a
25 better rationale for cost benefit or priority setting
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1 on water quality improvements.
2 So now one final comment, I don't want to get
3 really long-winded but there are benefits. and, you
4 know, we talk about health problems and streams and
5 are people getting sick and we certainly don't get
6 much in the way of any kind of anecdotal information
7 about people getting sick but let me tell you, putting
8 sewage in people's basement is a lot larger health
9 hazard than overflows in the streams and our
10 infrastructure went basically unfunded, in any
11 meaningful way, for a couple of decades. So investing
12 in the infrastructure, I would rather do it over 40
13 years and I would rather do it, you know, maybe in a
14 little different manner than what we are being
15 dictated to do. But we do need -- the infrastructure
16 will crumble around us, it will disappear on us if we
17 don't invest in it. And we are playing catch-up and
18 when you play catch-up on infrastructure you pay
19 extra. So I don't really disagree with Tim but I
20 guess I have testified previously in front of the Rate
21 Commission and provided testimony about there is lot
22 of different ways to look at this, you know, and the
23 pragmatic view is it is awful hard to fight and win
24 against the federal government and we do need to make
25 this investment in some manner anyway.
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1 MR. CHAIRMAN: Thank you, Mr. Theerman. Mr.
2 Goss, does that answer your question?
3 COMMISSIONER GOSS: well, sort of, I mean,
4 it was actually about the last three sentence that
5 were interesting to me and that was the benefit's
6 portion of this. And I get it that, you know, nobody
7 likes the Decree and I get that we are more or less
8 stuck with it but you talk more about what the
9 benefits are, I'm gathering that the 4.7 billion you
10 see as an investment in infrastructure needs to happen
11 over time from the MSD system and that is a positive
12 thing. You might structure it differently between the
13 timing or where you put the money in first or last,
14 those priorities have been somewhat dictated by the
15 Consent Decree, is that a fair statement?
16 MR. THEERMAN: I think that is a fair
17 statement. Let's talk about what the components look
18 like. okay, to get rid of sanitary sewer overflows
19 you need to build pipes bigger or get water out that
20 is getting in there that shouldn't. That leads to
21 overflows and basement backups and a lot of that has
22 to do with imperfections in the system that is
23 deteriorating. So rehabilitating sewers is part of
24 the way to get there and that rehabilitation needs to
25 happen whether there is a clean water Act or not.
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1 Getting water out of sewers is a good strategy for the
2 lowest cost renovation of the system. It prevents you
3 from having to build bigger pipes all the way to the
4 treatment plant. Rehabilitating trunk sewers that
5 have went in the ground 30 or 40 years ago have
6 reached their lives or reached their capacity and need
7 to be expanded. These are all parts of the equation.
8 So that SS0 part of Consent Decree, that 2.7 billion
9 of the 4.7, renews an infrastructure. It gets rid of
10 overflows but it also gets you the benefits of fewer
11 basement backups and repairing a system that has been
12 around a long time. The $2 billion that we refer to
13 in the long-term control plan, a lot of that goes into
14 storage tunnels. And it can be argued that we
15 shouldn't do doing anything about the CS0s, just let
16 them discharge. That is a lot less tangible
17 infrastructure value, it's a large storage or
18 treatment system. So I think what I am trying to say
19 about value is, it is hard to look at the numbers of
20 water quality when you get there. I think you have to
21 consider basement backups, customer issues like that,
22 and get people to consider we have to renew the
23 infrastructure. I mean, I think that's -- and I guess
24 the companion of this is, we can't solve the urban
25 water quality issue with just CSo or SS0 treatment,
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1 elimination, abatement but we can't solve it without
2 doing it either. we do need to do stormwater, urban
3 stormwater work in companion with some of this if we
4 really want to try and get the streams going. I mean,
5 I have a -- I share Tim's viewpoint a lot on this.
6 MR. CHAIRMAN: Mr. Goss?
7 COMMISSIONER GOSS: That's fine, thank you.
8 MR. CHAIRMAN: Mr. Arnold?
9 MR. ARNOLD: Thank you, Mr. Chairman. May I
10 inquire of ms. Myers before possibly making a request?
11 MR. CHAIRMAN: Yes.
12 MR. ARNOLD: Ms. Myers, is the update to the
13 long-term control plan an exhibit in this proceeding?
14 we have scanned the list and we can't find it.
15 ms. MYERS: The long-term control plan is in
16 our discovery response and is available on the website
17 because of its size.
18 MR. ARNOLD: I am inquiring about the
19 update.
20 MR. THEERMAN: The update --
21 MS. MYERS: It's the same, that's the same
22 document.
23 MR. THEERMAN: Just so we are clear, the
24 original long-term control plan was 800 -some pages
25 long. we updated it to get it approved, that is what
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1 presently is on the website, it's the same size
2 document.
3 MR. ARNOLD: Chairman, may I request that
4 the pages to which the witness testified be made part
5 of the transcript for this public hearing?
6 MR. CHAIRMAN: Yes, I think that would be
7 appropriate.
8 MR. ARNOLD: Thank you.
9 MR. FISCHESSER: Essentially that Chapter 6
10 I think.
11 MR. CHAIRMAN: Mr. Arnold, if you would work
12 with the witness to obtain that --
13 MR. ARNOLD: He just gave me the answer,
14 sir. Thank you.
15 MR. CHAIRMAN: Thank you. Any further
16 questions from any of the Rate Commissioners for
17 Mr. Fischesser?
18 MR. FISCHESSER: Thanks again.
19 MR. CHAIRMAN: Thank you. Our next member
20 of the public to speak is Mr. L.B. Black, Jr.
21 MR. BLACK: Good morning to everyone.
22 MR. CHAIRMAN: Good morning.
23 MR. BLACK: Just a concerned citizen
24 concerned about the rate increase. Okay, from the
25 time about the rate increases -- this is all about the
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1 rate increase -- from the time I was paying every
2 three months and then we went from every month and I
3 just want to know what kind of improvement have we had
4 since that change to the change now and you are going
5 to make another change. And the reason I am asking
6 this is because from union to Natural Bridge to Grand,
7 it don't have to be a storm but just a little rain and
8 the streets get covered across, you know, all the way
9 across the street, the rain, all the way across the
10 street, not a storm, just a shower. so I am saying
11 from that time, all this time, what improvements have
12 been done? Just the least -- I say at least 10 years
13 there is no -- I haven't seen no change. when there
14 is a storm that rain goes across Kingshighway and
15 Natural Bridge water goes across the street. This is
16 not just a storm, this is a little rain. when you get
17 a storm it is all the way across the street. At least
18 -- I know at least five to seven years and ten because
19 we get rate increases and I haven't seen a change yet
20 there to improve that area, you know, about the water
21 flow or what is going on. And I know most times I
22 know most sewers like in alleys or most of my sewers
23 are in the front of my house but when it rains and we
24 get a storm, when it rains so hard, the rain -- there
25 is no sewer in the back and just water, there's just
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1 too much water going in the ground where it don't
2 absorb and it just stays up. My sidewalk, I have to
3 -- you have to walk on water because the water --
4 there is too much water because the sewer is in front,
5 not in the back. what kind of implement could you all
6 do to maybe put a sewer or something going to the back
7 where the water can, when it rain like that, can
8 absorb that water? Because every time it rain it is
9 like this, you got to walk in water from my house to
10 my garage because there is no sewer in the back and
11 it's just water buildup. And that has been like that
12 for at least 20 years, since I have been there it has
13 been 20 years. Then the incident that just passed on
14 70 and Newstead down there, that incident that
15 happened and when the sewer, like you were saying, the
16 sewer backed -up into people's homes it took a minute,
17 it took a while before MSD came on site I guess
18 because after they introduced it to the media, I guess
19 they responded more quicker. But what are you doing
20 so this incident does not happen again, like how we
21 said on Newstead right there and what kind of
22 improvement with this rate increase would make a
23 change? This is what I am saying because I want to
24 know what changes are happening because we are getting
25 rate increases but we haven't seen any changes. I
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1 still see water going across the street and when you
2 get that back-up that happened on 70 and Newstead
3 right in that area -- what kind of changes are we
4 going to get with this rate increase each time we get
5 a rate increase, what is going on, what are you doing
6 to fix or implement the situation? That is my
7 question.
8 MR. CHAIRMAN: well, I will ask either
9 Mr. Theerman or Mr. Hoelscher to comment on specific
10 work that has been done in that part of the city as a
11 result of our last rate case.
12 MR. THEERMAN: I can't answer about a
13 specific project we may have done since the last rate
14 case. The Consent Decree we are talking about
15 includes in it the expenditure of 230 -- at least
16 $230 million on flooding issues related to the
17 combined sewer system surcharge. And the city of st.
18 Louis, your county, is served by the combined system
19 and certainly the area you are speaking of is served
20 by the combined system. The problem in the city, in
21 your county, with the combined system, is that
22 virtually all the creeks that existed once upon a time
23 are now pipes and it is difficult to get drainage to
24 work well when it is limited by the size of the pipes
25 that are in the ground. so you see our long-term
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1 control plan dealing with issues to try and hold water
2 back, keep it from becoming a street issue or a home
3 issue, keep it back from the combined sewer system, so
4 there is a $100 million green involved and what have
5 you. We are building projects to try and resolve
6 flooding but it is particularly challenging in these
7 areas that have sort of a limited capacity to get
8 water out to a river because of the pipes that exist
9 in the ground. The example he is giving about inlets
10 being on street but not in the alley or behind the
11 home, sometimes we are able to put in storm sewers and
12 get the water away from that alley but often times the
13 addition of storm sewers doesn't help because the
14 trunk sewers that are taking that water from the new
15 storm sewer are already full or already at capacity
16 during rain events. So we are having to be more
17 creative about stormwater in this combined area. we
18 are building projects in an effort to hold water back.
19 Recently we are in the middle of a project, it's at
20 the area of Clara and Goodfellow, where we bought out
21 about 60 homes and we are putting in large stormwater
22 retention to hold water back to try and keep the water
23 there instead of down flooding the system and causing
24 problems downstream. And certainly the use of the
25 230 million we are talking about will be able to be
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1 used in ways that help.
2 In the combined system, just so everyone
3 understands, there is sort of a dividing line between
4 what we use wastewater money for and what we use
5 stormwater money for. So street inlets, the pipes
6 that take flow from those inlets to our main sewers,
7 we pay for out of stormwater revenue and that revenue
8 is curtailed because of the lawsuit right now. on the
9 wastewater side, what you see in the long-term control
10 plan, the large trunks, once that stormwater is mixed
11 with wastewater it becomes a wastewater issue and we
12 deal with that with a wastewater program. So there is
13 sort of a combination of revenue sources and different
14 things that he is referring to. we intend to do a lot
15 more. The combination of stormwater lawsuit and the
16 sheer amount of work to be done in the combined system
17 is going to mean that takes quite a while.
18 MR. CHAIRMAN: Mr. Black?
19 MR. BLACK: So in the future there is going
20 to be a change? Like I'm saying, this is major
21 highway across Natural Bridge and Kingshighway, that
22 is a major highway. And there is always water going
23 all the way across like that, so in the future you're
24 saying that will be corrected?
25 MR. THEERMAN: I am saying we are going to
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1 do our best to correct those problems where they are
2 the worst and to the extent that we got the funding,
3 you know, there is a lot more problems than there is
4 funding but that is always the case and we are trying
5 to make the best decisions to keep those kinds of
6 flooding issues on major streets from being a problem
7 at intersections. Certainly the problem that occurred
8 with 1-70 this summer with the big rains are the kind
9 of things we don't want to see happening again. we
10 try to do right by the people in that area and it may
11 not have been reflected well in the media but we
12 didn't wait for the media to get there, we were out
13 there first, the media came second. we have been
14 involved every step of the way. Those homes that were
15 so severely flooded and damaged, the last one, we
16 turned the keys back over to the customer just this
17 last week. so we are doing the best we can.
18 MR. BLACK: Like I said, I'm just a
19 concerned citizen. I can see these rates increases
20 each time and I just haven't seen, like I said, for
21 the years I haven't seen any improvement, like I said,
22 about the storm damages, I haven't seen any
23 improvement and I would like to see some changes
24 because every time I drive down Natural Bridge down
25 there you have to go -- it is a safety concern, you
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1 can have an accident because you are trying to avoid
2 water and there are cars behind you, you're trying to
3 swerve over this way because the puddle of water is
4 about that high and you can't go through it because it
5 will flood your car out and you have got to try to
6 avoid that but then you might hit someone, so it is a
7 safety thing too. But I just would like to see a
8 change and that has been like that for a while. And
9 definitely in the -- something to be done with the
10 alleys where a drain could be put from the front to
11 the back because water just fill up and you just have
12 to walk on water on the sidewalk to get to your garage
13 and, you know, I would just like to see a change. We
14 get rate increases and I would like to see the change
15 in my neighborhood. I don't know about the other
16 neighborhoods but I would like to see one in mine.
17 MR. CHAIRMAN: Any questions from any of the
18 Rate Commissioners for Mr. Black? Mr. Black, thank
19 you for bringing the issue to our attention,
20 appreciate you spending your time here this morning to
21 raise that. Thank you very much.
22 MR. BLACK: Thank you.
23 MR. CHAIRMAN: Before we proceed to the
24 procedural and evidentiary aspects of the public
25 hearing, we will take a 12 -minute break and reconvene
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1 at 10:35.
2 (Recess taken.)
3 MR. CHAIRMAN: Good morning. Reminder to
4 all the Rate Commissioners or folks who comment to be
5 sure to use the microphones whenever possible for
6 all's sake, all of the time. Now we will proceed to
7 the procedural and evidentiary aspects of this public
8 session. who is here on behalf of metropolitan st.
9 Louis sewer District?
10 MS. MYERS: Susan Myers.
11 MR. CHAIRMAN: Who is here on behalf of
12 intervener, Missouri Industrial Energy consumers?
13 MR. KINDSCHUH: John Kindschuh with the Law
14 Firm of Bryan Cave.
15 MR. CHAIRMAN: who is here on behalf of
16 intervener, Barnes -Jewish Hospital?
17 MS. LANGENECKERT: Lisa Langeneckert from
18 the law firm of Sandberg, Phoenix and von Gontard
19 MR. CHAIRMAN: who is here on behalf of
20 intervener, Robert E. Mueller?
21 MR. MUELLER: I am Robert Mueller.
22 MR. CHAIRMAN: who is here on behalf of
23 interveners, AARP and Consumer Council of Missouri?
24 MR. COFFMAN: John B. Coffman.
25 MR. CHAIRMAN: Also present are John Fox
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1 Arnold and Lisa 0. stump of Lashley and Baer, legal
2 counsel for the Rate Commission. Are there any
3 procedural matters for us to take-up at this time?
4 ms. LANGENECKERT: I would like to bring up
5 a couple of matters, if I may.
6 MR. CHAIRMAN: Please proceed, ms.
7 Langeneckert.
8 ms. LANGENECKERT: well, I have a change to
9 my prehearing conference report but my second concern
10 in procedural matters is I don't believe you have seen
11 it. The repository has been a real sticking point
12 with many of us at this time. It appears that
13 sometimes it's a day or two before things appear on
14 there. Things don't appear on there in the time in
15 which they are received. My prehearing conference
16 report, ms. Stump's and Mr. Kindschuh's were all time
17 stamped before MSD sent out the repository note to all
18 of you saying that their prehearing conference report
19 was in there but you didn't get any of ours and that
20 notice didn't come until 9:50 this morning. It is
21 difficult for us to go into the repository, just like
22 I am sure it is for you, to find things. And despite
23 the fact that all of the documents that we receive say
24 that we have been emailed copies and properly served,
25 we never receive proper service. we're always just
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1 told here is the repository go get it. That is akin,
2 in my opinion, to my saying I prepared a document, it
3 is sitting in our receptionist's desk, come pick it
4 up. So, while all the parties email their documents
5 to all the other parties, that was not the case with
6 MSD. They would just say here is the repository
7 information go and find the document yourself. so
8 that is a sticking point for me and I believe some
9 others also had some issues with it. so I am hoping
10 that in future cases there can be something a little
11 more workable and that proper service can be had by
12 all parties. The change to my prehearing conference
13 report, I can file a corrected first page or I can
14 just -- there is only two words that need to be added
15 but they are pretty important words. I said an
16 increase of over $1 billion for the rate case but it
17 is really an increase in funding, it's not an actual
18 rate increase of a billion dollars.
19 MR. CHAIRMAN: I would suggest you file a
20 change. Ms. Myers, would you care to comment on that?
21 MS. MYERS: Yes. As the exhibits are
22 submitted to us the time is five o'clock in the
23 afternoon that the exhibits have to be submitted.
24 These exhibits are then put out on the repository the
25 next day. staff is gone after five o'clock, so when
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1 they are submitted they are then -- so
2 Ms. Langeneckert's concern with them getting out on
3 the repository, they are put there as soon as we get
4 them the next business day. So the other concern that
5 Ms. Langeneckert has as far as access to the exhibits,
6 it is my understanding that is why the repository was
7 set up, so everybody would have equal access to these
8 documents. So we are doing our best to get the
9 documents out there and make them available to
10 everybody.
11 MS. LANGENECKERT: I would like to respond.
12 MR. CHAIRMAN: Please.
13 MS. LANGENECKERT: Ms. Stump's prehearing
14 conference report was sent at 4:46 yesterday
15 afternoon, mine was sent at 5:01, I believe Mr.
16 Kindschuh's was 5:05 and the document from MSD came at
17 5:07. So theirs was not filed by five, ours is all
18 indicated on the exhibit list as being filed a day
19 late, October 6, whereas theirs is shown as being
20 filed on October 5. In addition, going on the
21 repository is not proper service. The service list
22 says that we are being emailed copies of the
23 documents. We are not being emailed copies of the
24 documents. we are being emailed the repository
25 information, which is very different. And if this
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1 were to go to a court I believe the court would not
2 consider it proper service. But, you know, it is a
3 minor issue but it is frustrating and that is why I am
4 bringing it up in procedural matters as opposed to in
5 my closing argument.
6 MR. CHAIRMAN: Ms. Stump, Mr. Arnold, any
7 comments?
8 COMMISSIONER KOENEN: May I ask one quick
9 question?
10 MR. CHAIRMAN: Yes, Mr. Koenen.
11 COMMISSIONER KOENEN: This maybe for your IT
12 department but why were the repository items listed
13 alphabetically rather than by date filed? That made
14 it hard for some of us to go through the whole list
15 looking for the newest items. Is there a way that
16 that can be set up so that we can sort them by date
17 rather than by alphabetical?
18 MS. ZIMMERMAN: If I could respond, your
19 comment came up earlier in the proceedings and so we
20 -- and not at that point, but prior, we also placed
21 all the documents on the website and we suggested that
22 everyone look at the website. And I think
23 Mr. Schneider voiced his observation that it was much
24 easier to get the information off the website, so we
25 have been putting them on both and we do post those
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1 things as soon as we receive them. But, however, if
2 they do come in after five or right at five, sometimes
3 we miss that. The date in terms of the 6th, Lisa, I
4 think that was just purely a typo and we will correct
5 that on the exhibit list.
6 MS. LANGENECKERT: Thank you.
7 MR. CHAIRMAN: Ms. Stump?
8 MS. STUMP: Thank you, Mr. Toenjes. I would
9 like to make a comment about the service issue. I
10 think ms. Langeneckert does have a legitimate point,
11 in that your rules require that all the parties
12 actually receive service. In many cases maybe when
13 the District puts it up on the repository it has the
14 same effect but when we get into tight time crunches
15 and certainly to verify, I think for next time it
16 would be helpful if they actually email the documents
17 to the parties and provide service, in addition to
18 putting them on the repository.
19 MS. MYERS: That is acceptable.
20 MR. CHAIRMAN: Thank you. Any further
21 procedural matters to discuss at this point? Hearing
22 none, on October 4th, 2011, the District transmitted a
23 proposed list of exhibits to the participants. Is the
24 District prepared to present that list to the members
25 of the Rate Commission?
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1 MS. MYERS: Yes. On October 4th, Exhibit
2 MSD 109 was filed. That transcript -- or that exhibit
3 list, was current as of that date. The exhibit list
4 now includes some additional documents including the
5 prehearing conference reports that were filed
6 yesterday, along with the chapter 6 pages of the
7 long-term control plan that Mr. Fischesser referred to
8 this morning and also we need to put on this list the
9 transcript from the September 26th hearing. so what I
10 am proposing is that the exhibit list that was
11 provided on October 4th be updated to include the
12 documents that I just spoke to and we will refile the
13 complete exhibit list later today. I have provided a
14 copy of the exhibit list that was filed on October 4th
15 to the parties here today, the interveners and the
16 Rate commission's attorneys for them to look at to
17 make sure that there are any changes necessary.
18 MR. CHAIRMAN: Mr. Arnold?
19 MR. ARNOLD: I'm sorry, I may have missed it
20 but will the exhibit list include the transcript for
21 this proceeding?
22 ms. MYERS: Yes. The updated exhibit list
23 will include the transcript from today, the pages
24 referenced by Mr. Fischesser and also the September
25 26th transcript.
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1 MR. ARNOLD: Thank you.
2 MR. CHAIRMAN: Can it also include the
3 updates from ms. Langeneckert, will those be a part of
4 that also?
5 MS. LANGENECKERT: Just the change in the
6 date from when we all filed our prehearing conference
7 report.
8 ms. MYERS: what about your first page?
9 MS. LANGENECKERT: Oh, yes, that is correct.
10 MS. MYERS: You will refile that?
11 MS. LANGENECKERT: Yes.
12 MS. MYERS: It will include that also. Now
13 the transcript from today won't by available today but
14 we will reference it on there so we have a placeholder
15 for it.
16 MR. CHAIRMAN: So that will encompass all
17 the exhibits and the interveners and everybody is
18 satisfied with that? okay. All the documents that
19 have been identified on the exhibit list and those
20 that we have just discussed are admitted into evidence
21 in the rate change proceeding. The District, each
22 intervener, and legal counsel to the Rate Commission
23 shall each present closing statements. After each
24 closing statement members of the Rate Commission will
25 have the opportunity to ask questions. Is the
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1 District ready to present its closing statement?
2 MS. MYERS: We are.
3 MR. CHAIRMAN: Please proceed.
4 MS. MYERS: Good morning, Commission. My
5 name is a Susan Myers and I am the general counsel for
6 MSD. On behalf of the District I would like to thank
7 each and every one of you for participating in this
8 rate setting process and for performing your due
9 diligence in the development of a rate proposal that
10 satisfies the five criteria outlined in the MSD
11 Charter. As you know, and you heard from the public
12 this morning, the Rate Commission is an important
13 factor of the MSD Charter which was approved by the
14 voters in 2000 and requires you to submit a rate
15 recommendation report to the MSD Board of Trustees.
16 With that being said, as you heard during the last
17 week -- last week's hearing, all of the parties in
18 this rate case are in agreement that the rate, the
19 District's rate proposal, submitted on May 10, 2011,
20 complies with Section 7.270, paragraphs 1 through 4 of
21 the MSD Charter. The task at hand, as directed by
22 your counsel, is to determine if MSD's rate proposal
23 complies with paragraph 5 of Section 7.270 of the
24 Charter, by being very fair and reasonable on all
25 classes of ratepayers. MSD's rate proposal, as
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1 submitted, is fair and reasonable on all classes of
2 ratepayers. This fact has been substantiated by staff
3 and expert testimony throughout these rate
4 proceedings. MSD's rate proposal has been designed
5 around providing MSD with the funds necessary to
6 operate a program that will provide MSD the ability to
7 comply with the federal Consent Decree.
8 You heard a lot of testimony about clarity of the
9 CIRP and the need for the CIRP. MSD has been building
10 projects for a long time, that is part of our
11 business, part of what we do. The CIRP program being
12 built to comply with the Consent Decree is just a
13 continuation of that program but now under a
14 compliance schedule. The compliance schedule is you
15 either comply with the Consent Decree or you get
16 penalized in the form of stipulated penalties. The
17 projects listed in MSD Exhibit 50-A and proposed to be
18 funded by this rate case, have been carefully
19 developed and our ready for design and or construction
20 at this time. This is the first major step in
21 complying with the consent Decree.
22 Many of the interveners have proposed a less than
23 a four-year rate cycle. That is problematic for you,
24 the Rate Commission, and also for MSD. A less than
25 four-year rate change cycle may possibly hinder the
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1 Rate Commission's ability to comply with Section
2 7.270, paragraphs, 2, 3 and 4 of the Charter. For MSD
3 a less than four-year rate change cycle is a huge
4 problem because, for one reason as I previously
5 discussed, MSD must comply with the Consent Decree by
6 building the projects listed in Exhibit 50-A. These
7 projects are ready for design and or construction and
8 continue the removal of constructed sanitary sewer
9 overflows that are the focus of the early years of the
10 Consent Decree. At the end of this four-year rate
11 cycle MSD should have approval of the Sanitary Sewer
12 Overflow Master Plan, which will provide a road map
13 and a schedule for the sanitary projects that need to
14 be built beyond fiscal year '16, to continue removing
15 constructed sanitary sewer overflows. Remember,
16 constructed sanitary sewer overflows are not allowed
17 by the clean water Act and must be removed. For
18 another reason, the four-year rate cycle is necessary
19 to facilitate the ability to project compliance with
20 the 2004 Master Bond ordinance Additional Bonds Test
21 and forecast adequate debt coverage for outstanding
22 and planned bonds. It also demonstrates sound
23 security and a positive credit consideration for our
24 bond investors. Intervener, MIEC, maintains that a
25 minimal, acceptable investment grade rating would be
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1 adequate for the District to issue bonds and fund the
2 CIRP. You heard testimony from the District's
3 financial adviser that it is in best interest of the
4 District's ratepayers to maintain a target of a double
5 A credit rating. A downgrade in a credit rating is
6 not something that an entity recovers from quickly or
7 easily and could result in immediate increases in the
8 rates. Your rate consultant has recommended that MSD
9 examine their capital funding policies and procedures
10 and implement project funding annually for the
11 expected expenses. The District is capable of
12 evaluating this but would like to remind the
13 Commission that this is a one-time shift in cost
14 between the proposed rate cycle and a future rate
15 cycle.
16 You have also heard a lot of testimony about
17 assumptions regarding future economic conditions and
18 markets used in our rate proposal. without getting
19 into the weeds, the District's assumptions are
20 substantiated and serve as the foundation of the
21 proposal. The assumptions advanced, thus far, by many
22 of the interveners, failed to take into account the
23 risk associated with the present state of the economy
24 and the volatility of financial markets. If the wrong
25 assumptions are adopted, this could lead to
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1 underfunding the CIRP for the next four years
2 resulting in non-compliance of the Consent Decree
3 leading to penalties and an increase cost of debt
4 services. The District's rate proposal requests that
5 the Rate Commission recommend an alternative set of
6 rate increases to be enacted should voter
7 authorization of bonds fail. voter authorization is
8 needed in order for the District to issue the $945
9 million in revenue bonds to continue -- contained in
10 the rate proposal to fund the next four years of the
11 CIRP.
12 Your legal counsel has cautioned you about a
13 potential Hancock Amendment issue if the wastewater
14 rate increase were deemed so unreasonable as to be
15 excessive. This should not be a concern in this rate
16 setting process. Here you, the Rate Commission,
17 determine what rate is fair and reasonable. In short,
18 because through this process, you, the Rate
19 Commission, will determine what is a fair and
20 reasonable rate, therefore, the rate could not be
21 deemed excessive as was the issue in the recent Arbor
22 case.
23 In closing, I would like to thank you once again
24 for your time and effort put forth in this rate
25 setting process. The District believes we have fully
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1 substantiated our rate proposal with sound factual
2 evidence and testimony. This rate proposal is sound
3 in its rate design which includes a four-year rate
4 cycle to fund projects which are designed and or ready
5 for construction, supports a positive credit
6 consideration and maintains our credit rating. These
7 are necessary to allow the Rate Commission to comply
8 with paragraph 5 of Section 7.270 and represents the
9 appropriate funding approach to comply with the
10 Consent Decree. Our prehearing conference report
11 submitted yesterday, provides much detail on the
12 elements I have just highlighted. MSD staff and our
13 experts are also present today to answer any questions
14 you may have at this time. Thank you.
15 MR. CHAIRMAN: Thank you, Ms Myers. We
16 will take any questions that are from the Rate
17 Commissioners for the District at this time. Hearing
18 none, thank you.
19 MS. MYERS: Thank you.
20 MR. CHAIRMAN: Is Missouri Industrial Energy
21 Consumers ready to present its closing statement?
22 MR. KINDSCHUH: Yes, Mr. Chairman, we are.
23 Good morning, Mr. Chairman and members of the
24 Commission. I want to take this opportunity to thank
25 you on behalf of both the Missouri Energy Consumers
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1 and also on behalf of myself for your service to the
2 St. Louis community. You are, in essence, serving as
3 regulators in this case. You will determine if MSD's
4 proposed wastewater rate increase imposes a fair and
5 reasonable burden on all classes of ratepayers. As
6 everyone in this room can attest, this is a tall
7 order. There is a lot of testimony to review and a
8 lot of documents to read. Thank you for your time in
9 reviewing these documents and attending the hearings.
10 Thank you for asking all your of thought provoking
11 questions and thank you for helping all the parties to
12 clarify our positions throughout this summer. The
13 MIEC appreciates your commitment to upholding the
14 obligations under the charter.
15 I appreciated the opportunity to discuss the
16 MIEC's position during the prehearing conference last
17 week. The MIEC's position remains the same. since
18 MSD's proposed rate increase imposes an unfair and an
19 unreasonable burden on ratepayers, the MIEC recommends
20 that the commission should award a one-year or
21 two-year at most, revenue rate increase of no more
22 than 9.6 percent in this proceeding. Considering the
23 economic conditions, there are unknown cost factors
24 present including interest rates on new bond
25 issuances, the amount of bad debt expense and the
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1 customer sales during the forecast period. Moreover,
2 the consent Decree is not yet final and the sso Master
3 Plan has yet to be drafted. These factors and others,
4 persuasively demonstrate that a shorter rate plan than
5 four years is in order. If the commission chooses to
6 consider a four-year rate plan despite the objections
7 of the interveners, then MSD's cost of service
8 projection should be modified to reflect independent
9 economic projections rather than MSD's assumptions.
10 As the MIEC's evidence shows, using these independent
11 projections would reduce the proposed rate increase to
12 49 percent or $105.6 million for the next four years,
13 rather than 60 percent or $128.8 million proposed by
14 MSD. In other words, the MIEC recommends that the
15 proposed adjustments result in a series of revenue
16 increases of no more than 9.6 percent in each of the
17 next four years instead of the 11 or 12 percent
18 proposed by MSD.
19 The prehearing conference reports that were filed
20 yesterday, further discuss the MIEC's position and we
21 provide many citations to the evidence in the record
22 that supports our assertions. Instead of repeating
23 our arguments again, I would like to emphasize three
24 global, kind of keys points in this proceeding, that
25 MSD encourages you to consider during your
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1 deliberations. First, MSD's economic consumptions are
2 conservative and as a result, will require the
3 ratepayer to pay more revenue than what is necessary.
4 Admittedly, as stated in MSD's testimony and their
5 prehearing conference reports, MSD believes that the
6 ratepayer is better served if the CIRP can be
7 expedited with the use of overfunding as opposed to
8 underfunding. MSD's assumptions with respect to the
9 decrease of MSD's customer base, an inflated revenue
10 bond increase interest rate, an overstated bad debt
11 expense and an inflated o&M expense, all drive up the
12 rate unnecessarily. As discussed before, the MIEC's
13 five adjustments, which are supported by independent
14 economic projections, help to scale MSD's assumptions
15 back to a point where the rate increase becomes fair
16 and reasonable for all ratepayers. The evidence
17 speaks for itself. The MIEC encourages, you, as the
18 decision -makers, to weigh the testimony and evaluate
19 the independent sources that have supported the MIEC's
20 adjustments. By including overstated cost estimates
21 in its rate proposal, MSD will have reduced an
22 incentive to manage their cost. This is unacceptable,
23 especially considering that businesses and residential
24 customers alike, should not be responsible for paying
25 MSD'S managerial oversight. If sewer rates spike
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1 dramatically, especially during this economic climate,
2 businesses could reevaluate their decision to maintain
3 offices and plants in our region. The Commission
4 should be very sensitive to the fact that increasing
5 MSD's rates to generate unnecessary revenue could be
6 disastrous for the sustainability of commerce in our
7 city.
8 The second point, the recommendations from the
9 interveners and the Rate Commission's consultant add
10 up. Importantly, if you adopt the MIEC's adjustments
11 to MSD's proposed rate increase, the revenue rate
12 increase will be no more than 9.6 for each year.
13 However, the other interveners, not to mention the
14 Rate Commission's consultant, have recommended
15 additional adjustments beyond those articulated by the
16 MIEC. As the Rate Commission's attorney aptly stated
17 in the position statement, the testimony from the rate
18 consultant and the interveners, raises the issue of
19 whether, when all of these issues are considered
20 together, MSD is being overly conservative which
21 together leads to a larger rate change proposal than
22 is necessary. It is imperative to emphasize that each
23 adjustment makes a difference in this proceeding. It
24 may feel that we have been down in the weeds during
25 the proceedings this summer, analyzing individual,
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1 small and seemingly maybe minute details, however,
2 these details add up very quickly. This rate
3 proposal, as a whole, is inflated. All of these
4 adjustments in the aggregate help to bring the
5 inflated proposal down to a level that is fair and
6 reasonable for the ratepayers. The MIEC encourages
7 you to look at each individual adjustment and think of
8 them in the aggregate.
9 My third point, full and complete transparency is
10 vital to MSD's rate case. As the commission is aware,
11 the MIEC and other interveners were frustrated with
12 MSD's unwillingness to provide the commission and
13 interveners will full access to the electronic model.
14 The interveners were unable to evaluate the validity
15 of the data without analyzing the formulas and
16 calculations in the model at the beginning of this
17 rate proceeding. And importantly, since no member of
18 the MSD staff requested to see the electronic model in
19 these proceedings, it was imperative that someone
20 confirm the accuracy of Black and veatch's model.
21 Accountability is critical. Thankfully, the
22 Commission recognized the importance of this issue and
23 granted the interveners' motion to compel in August.
24 During the review of the electronic model, the
25 consultants not only identified a concern with one of
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1 the issues in the proceeding but also determined that
2 important information in the electronic model was not
3 included in MSD Exhibits 4-A and 5. MSD's failure to
4 disclose the details underlining the electronic model
5 raises questions with regard to the accuracy of this
6 filing. Based upon these transparency issues alone,
7 the commission could recommend a one-year increase or
8 in the alternative, the commission could urge MSD to
9 hire consultants in future rate proceedings that are
10 committed to providing a level of transparency that is
11 consistent with other utilities submitting filings in
12 Missouri. Perhaps the commission could request that
13 MSD commit to using consultants that will cooperate
14 and provide, among other things, full access to the
15 electronic models and industry standard
16 confidentiality agreements at the beginning of all
17 future rate proceedings. Transparency is a key
18 consideration for all of us. Hopefully we can use
19 this proceeding as an opportunity to further commit to
20 full and complete transparency in future proceedings.
21 So in conclusion, MSD'S proposed rate increase
22 does not impose a fair and reasonable burden on all
23 classes of ratepayers because the increase is
24 excessive. Accordingly, the MIEC respectfully
25 requests that the commission recommend a one-year or
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1 two years at most, revenue rate increase of no more
2 than 9.6 percent. The proposal takes into account
3 numerous and significant adjustments that the MIEC has
4 proven to be necessary to make this proposal
5 reasonable. It has been a pleasure working with all
6 of you this summer. Thank you again for your service,
7 appreciate your time.
8 MR. CHAIRMAN: Thank you, Mr. Kindschuh.
9 MR. KINDSCHUH: Thank you, Mr. Chairman.
10 MR. CHAIRMAN: Questions by any of the Rate
11 Commissioners for Mr. Kindschuh at this point?
12 Hearing none, thank you.
13 MR. KINDSCHUH: Thank you.
14 MR. CHAIRMAN: Is Barnes -Jewish Hospital
15 ready to present its closing statement?
16 MS. LANGENECKERT: Yes, we are, thank you.
17 There is no argument that MSD has a big job ahead to
18 comply with the Consent Decree and they need
19 significant funds to do that. The question is, how
20 much have they proven that they need? You have spent
21 considerable time listening to all of the parties in
22 this case, MSD telling you why you should grant the
23 rate increase as requested and the Rate Commission's
24 attorneys and consultants and the interveners, plus
25 the public, explain why you should make alterations to
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1 MSD's proposal. You have read thousands of pages of
2 documents and either listened to or read the
3 transcript of many hours of public hearings. I
4 imagine at this point you all wish you were either
5 paid by the page or paid by the hour or period, paid.
6 The parties here, the public and the Board of
7 Trustees, are all looking to the Rate Commission for
8 its analysis of all of this information. No other
9 party knows these issues as well as you, at least no
10 other party that is objective. As you have heard, MSD
11 has the burden of proof to show that it needs all the
12 funding it has requested in this case. All of the
13 other parties in this case have presented evidence
14 that in order for the increase to be fair and
15 reasonable the amount needs be reduced for a variety
16 of reasons. And all the interveners have presented
17 evidence that supports a lower rate increase over a
18 shorter period of time. BJH has, I am sure you are
19 aware of from all the documents, said an 8.5 increase
20 per year is appropriate. The Board of Trustees won't
21 have time to review the evidence like you have done
22 and it will look to you for direction. I thank you
23 for your service to the Metropolitan St. Louis area.
24 This Rate Commission is the most engaged of any that I
25 have seen in the process since the Rate commission
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1 started and I thank you very much for that.
2 MR. CHAIRMAN: Thank you, Ms. Langeneckert.
3 Questions from any of the Rate Commissioners for
4 Ms. Langeneckert? Thank you very much. Mr. Mueller,
5 are you ready to present your closing statement?
6 MR. MUELLER: Yes, I am. The following is
7 the closing statement of Robert Mueller. Mr.
8 Chairman, members of the Commission, for the past six
9 months we have participated in a process designed to
10 ensure the continued good operation of a major utility
11 in our community. We listen to how MSD plans to
12 respond to a Consent Decree negotiated with the U.S.
13 Environmental Protection Agency, the EPA, and the U.S.
14 District Court, the Justice Department. In the early
15 part of August for the first time we were afforded an
16 opportunity to read and learn about the details of
17 this agreement. Frankly, I was overwhelmed at the
18 crushing detail of responsibility reporting an EPA
19 approvals imposed upon our community at the cost of
20 $4.7 billion over the next 23 years in order to comply
21 with this Consent Decree. After spending $2 billion
22 over the past 20 years building numerous treatment
23 plants providing primary, secondary and tertiary
24 treatment and now being forced to disinfect the
25 treated water before release into the Missouri and
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1 Mississippi Rivers, the Consent Decree reads like an
2 indictment for failure. MSD has not failed. It
3 imposes, not just on MSD, but upon our community at
4 large, a fine of 1.2 million for failing to comply
5 with detailed permit aspects of the 1972 Clean water
6 Act.
7 In 2009, in the midst of negotiating the terms and
8 conditions of the Consent Decree, the EPA undertook an
9 effort to change the parameters for the Mississippi
10 and the Missouri Rivers from water acceptable for
11 boating to acceptable for swimming. This effort is
12 ongoing and if successful, will escalate and expand
13 the requirements that will be forced upon MSD to spend
14 even more billions of dollars to comply. In reality
15 there are no significant sources of federal or state
16 funds available to pay for these requirements. what
17 we have here is a massive unfunded government mandate.
18 It is one of the largest public work projects our
19 community has ever experienced and it falls squarely
20 on MSD and its ratepayers' shoulders to pay for the
21 consequences of this Consent Decree. Therefore, MSD
22 has requested approval for a substantial rate increase
23 that by mandate of its charter, must impose a fair and
24 reasonable burden on all classes of ratepayers. It is
25 incumbent upon MSD management and staff to accomplish
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1 this task in the most financially responsible and
2 efficient manner. The new rate must be an amount
3 which is bearable in this economy and by all classes
4 in our community. There is no room for excessive
5 expenditures or budgeted surpluses that in the end
6 impose a hardship on the ratepayers. The increase
7 which you recommend, must be substantiated with costs
8 related to specific project designs and criteria.
9 The Rate Commission has conducted meetings,
10 received testimony and held public hearings regarding
11 the proposed rate increase. Interveners have been
12 afforded the opportunity to participate, provide
13 additional expert testimony and submit final
14 prehearing conference reports. It is now up to you to
15 confer, deliberate and exercise your best judgment
16 regarding all aspects of this matter. You must now
17 reach a decision and make a final recommendation. In
18 doing so, consider all of the consequences of the rate
19 you set forth on the community at large and especially
20 those that will be challenged to meet the higher fees.
21 Thank you for including me in this process. Thank you
22 for your time and your service. This concludes my
23 closing statement, thank you.
24 MR. CHAIRMAN: Thank you, Mr. Mueller. Any
25 of the Rate Commissioners have questions for
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1 Mr. Mueller at this time? Hearing none, thank you,
2 Mr. Mueller.
3 MR. MUELLER: Thank you.
4 MR. CHAIRMAN: Are AARP and the Consumers
5 Council of Missouri ready to present their closing
6 statements?
7 MR. COFFMAN: Yes, sir. Good morning, I
8 am here today to represent AARP and the Consumers
9 Council of Missouri, two organizations that take very
10 seriously advocacy on behalf of residential consumers
11 including the thousands of consumers of wastewater
12 service for MSD who struggle each month trying to pay
13 all the bills. And I want to thank each of you here
14 for the time that you put in and the earnestness which
15 I can tell I have seen as to attention to this
16 particular case. And I thank you for the opportunity
17 for multiple public hearings to give the public -- no
18 doubt the public had ample opportunity at different
19 places and different times to come and have their say
20 and that is very much appreciated. And I hope that
21 those of you that were not able to attend the public
22 hearings around the area that you can take a look at
23 the transcript and listen to those who give personal
24 voice to the hardship that folks face with ever
25 increasing utility bills. I also want to make it
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1 clear that my clients do not take a position at this
2 time on the reasonableness of the proposed Consent
3 Decree but are pleased that there are efforts towards
4 increasing compliance with the clean water Act and
5 into paying attention to the sanity -- rather the
6 sanitation and environmental concerns that are here in
7 our community. That being said, the proposed rate
8 increase in this four-year plan before you does not,
9 in our opinion, represent a fair burden upon the
10 residential class. And I would urge you to ensure
11 that whatever increase is made in the annual revenues,
12 take out any excessive assumptions and that are -- to
13 ensure that the revenue is no higher than it needs to
14 be, that it expresses a least cost approach.
15 And secondly, that you not approve a four-year
16 rate plan. The length of the plan is as important, if
17 not more important, than the first issue to my
18 particular clients. we think that the five -- the
19 five-year, four or five-year cycle that has gone
20 before may have been appropriate to the size of the
21 investments in the past. Looking at an investment of
22 a billion dollars, we do not think is appropriate for
23 a four-year plan. The amount of increase for the last
24 plan would be roughly 10 percent, the last time you
25 convened and considered such matters. That size of a
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1 percentage increase would be roughly what we are
2 talking about for the first year of this plan. we
3 believe that the evidence supports a one-year plan and
4 we think that there will be more certainty after that
5 point. we are willing, in recognition of concerns
6 raised by MSD staff and others, to recommend perhaps a
7 two-year plan. And I know in making that
8 recommendation I am suggesting you go through this
9 arduous process again, sooner than you would probably
10 like to but the consumers need your steady hand and we
11 need your attention to this and we hope that after you
12 go through the difficult process of putting a report
13 together here you don't go home and not look at this
14 again for four years.
15 we think that a shorter term rate plan would lead
16 to greater accountability, greater accuracy, greater
17 transparency. I think that most of the parties
18 realize the rates would be more accurate going forward
19 and that there would be a closer relationship to the
20 cost and the rates if rates were reviewed on a more
21 frequent basis. The arguments that have been made
22 against a shorter term include the fact that there has
23 been a four or five-year plan in the past and concern
24 about what rating agencies might think if it was a
25 shorter plan. I don't particularly buy that and I
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1 don't think the evidence submitted to you quantifies
2 that particular concern. our suggestion in a shorter
3 term plan is not in any way a rate freeze or
4 suggestion that projected projects be slowed down,
5 merely that there be a review as we go forward and
6 that would not be a suggestion in the way there would
7 be a delay of needed improvements. And I think that
8 moving to a two-year rate cycle would send the signal,
9 not that there would be any financial insecurity or
10 threat to the financial security of MSD, rather that
11 there would be more attention paid and that the
12 likelihood of cost overruns would be less because
13 there would be more constant scrutiny. And I think
14 those cost overruns are probably the greatest risk
15 that we feel that ratepayers have going forward. So
16 we urge you for that reason to take a look at this.
17 Not only did you hear multiple times from members of
18 the public at your public hearings that they did not
19 want you to approve a multiyear rate increase, there
20 were comments also made to that degree from
21 individuals who were begging for specific improvements
22 in their neighborhood or in their area. There was a
23 general sentiment that the public wants to know, with
24 more specificity, what projects are being approved.
25 if their rates are being increased by double digits
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1 each year they want to know more specifically which
2 projects on which streets and what neighborhoods are
3 going to be addressed. And I think that can be done
4 better on a shorter term plan.
5 The sanitary overflow Master Plan is apparently
6 not going to be made public in time for you to make a
7 decision, apparently not going to be made public until
8 2013. There is also some uncertainty about what would
9 happen if you look at the proposed Consent Decree
10 beyond say the next 18 months. There is a lot
11 specificity about what projects must be done if that
12 agreement is approved early on but much of what is
13 required and I agree there is a lot of processing and
14 requirement in there, would need to be approved by
15 EPA. By the end of four years from now we don't
16 necessarily know who is going to be the President of
17 the united States. we don't know who is going to be
18 the head of the EPA. we don't know what legislation
19 might be proposed and consumers have in other areas
20 faced often situations where they are caught in
21 between environmental regulation and economic
22 regulation. There will be utility rates improved
23 based on assumptions about environmental regulation,
24 which are then delayed, waved or changed and we worry
25 about that. A shorter term rate cycle would ensure
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1 that rates are more closely tied to what regulatory
2 requirements that are out there and for that reason we
3 support no greater than a two-year rate plan.
4 And finally we support no greater than a two-year
5 rate plan because of the rate shock. The longer the
6 time period that will be included in a rate plan, I
7 believe, the more difficult it might be to convince
8 voters to approve a bond issuance in the upcoming
9 April election. There is just simply so much you can
10 ask consumers to bite off at one time. Obviously
11 there will be those that don't understand exactly what
12 a bond election is about and I think that, in fact,
13 the pain threshold that consumer -- that you might
14 hear from the public is going to be higher if you
15 approve things one or two years at a time. A plan
16 that raises rates 60 percent even if it's over a
17 four-year plan, is going to be shocking. And so
18 again, I urge you to take a look at whether a shorter
19 term plan could not be put together in a manner that
20 you believe is reasonable with the understanding that
21 you would be right back here again looking at it and
22 potentially approving what you think looks reasonable
23 for the next two years. But I think that would give
24 the public a lot more assurance that you're paying
25 attention to what is going on and cost overruns will
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1 be less likely. Again, I thank you for your hard work
2 and unfortunately I am asking you to do this again
3 sooner. So that is my closing argument and I thank
4 you for the opportunity to be here.
5 COMMISSIONER STEIN: Thank you, Mr. Coffman.
6 Do the Rate Commissioners have any questions for
7 Mr. Coffman? Mr. Tomazi?
8 COMMISSIONER TOMAZI: I have been sitting
9 here quietly listening to Ms. Langeneckert, Mr.
10 Kindschuh and Mr. Coffman and I guess all three ask
11 for a one or two-year rate increase period. On
12 September the 28th, Ms. Myers testified that the cost
13 of a rate case in out-of-pocket costs for the District
14 is approximately $800,000. So the question that I
15 pose to you three, with a simple yes or no answer will
16 be fine, would you be willing to spring for two-thirds
17 of a rate increase, a rate proposal hearing, if we cut
18 this down to a two-year period, yes or no? Lisa?
19 MS. LANGENECKERT: As long as I got a
20 percentage of the amount that was saved by the
21 remaining customers, yes.
22 COMMISSIONER TOMAZI: Is that a yes or a no?
23 MS. LANGENECKERT: With qualification, yes.
24 MR. COFFMAN: I'm not sure I understand the
25 question, two-thirds of what?
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1 COMMISSIONER TOMAZI: Okay. I will repeat
2 it. The -- we previously heard that the cost of a
3 rate proposal process is approximately $800,000. This
4 is an out-of-pocket cost for the District and if you
5 are willing to still push for a one or two-year rate
6 increase period, would you be willing to spring, you
7 or the organizations you represent, be willing to
8 spend about two-thirds of the cost of that rate
9 hearing?
10 MR. COFFMAN: I can't commit to that and I
11 doubt that the organizations i represent would have
12 that money but we believe that the $800,000 for a rate
13 case would be far offset by the potential savings in
14 cost overruns that would be prevented. we have
15 certainly taken that into consideration. I think that
16 the cost savings that occur when MSD is being
17 scrutinized far outweigh that cost.
18 COMMISSIONER TOMAZI: so do I take that as a
19 yes?
20 MR. COFFMAN: No, I said no.
21 COMMISSIONER TOMAZI: Mr. Kindschuh?
22 MR. KINDSCHUH: Commissioner, I think it is
23 important to point out here and this may be obvious
24 for everybody, the ratepayers pay for this anyway.
25 The $800,000 or whatever the figure is, is already
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1 borne by the st. Louis ratepayers. so the answer to
2 your question is, yes, my clients have and will
3 continue to pay for rate processes.
4 COMMISSIONER TOMAZI: That is ducking the
5 question that I asked.
6 MR. KINDSCHUH: I am not intending to duck,
7 but I think it is important that everyone know that
8 the ratepayers are paying for these and my clients are
9 recommending a one or two-year rate increase, so of
10 course we are willing to say, yeah, we are willing to
11 pay for the next round like everyone else.
12 MR. COFFMAN: This is a constant issue in
13 other utility proceedings. Often for-profit utilities
14 suggest that rate reviews could be streamlined or
15 shortened and cut down, that is going to help save
16 ratepayers money because rate case expense will be
17 lower but it never works out, in my experience, to
18 save ratepayers money at all. It is the audit and the
19 scrutiny that occurs on a more frequent basis that
20 winds up saving ratepayers money and far outweighing
21 the rate case expense.
22 COMMISSIONER TOMAZI: So we will put your
23 organization down for approximately two-thirds of
24 $800,000.
25 MR. COFFMAN: well, I mean, the individuals
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1 that we are advocating for, we understand would be
2 paying for it, that rate case expense through the
3 rates.
4 COMMISSIONER TOMAZI: This becomes an
5 out-of-pocket thing, not a part of the rate proposal
6 itself, that would be before the commission. That is
7 all I have.
8 COMMISSIONER STEIN: Any of the other
9 commissioners have questions? Thank you, Mr. Coffman.
10 Is legal counsel for the Rate Commission ready to
11 present its closing statement?
12 ms. STUMP: We are, thank you. Thank you,
13 Mr. stein, commissioners. As we discussed last week,
14 you all are going to have to go through the various
15 factors and criteria required under the charter. All
16 the interveners and the District argue there is one
17 criteria at issue in this case. Does the proposed
18 rate change impose a fair and reasonable burden on all
19 classes of ratepayers? You have heard from the
20 District and all interveners through detailed
21 testimony, arguments and summaries about the various
22 issues effecting your fair and reasonableness
23 determination and I want to continue to focus on fair
24 and reasonable, although, as we discussed last week,
25 your report actually will address eight different
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1 factors and criteria and some of these issues may have
2 to be addressed in your report in the context of other
3 factors and criteria also.
4 so, is the proposed rate change fair and
5 reasonable to all classes of ratepayers? You have
6 heard the closing arguments of all the parties and we
7 address each party's position on each issue in our
8 prehearing conference report that we filed yesterday.
9 I know that you will have to go into the repository
10 and get those and I urge you to look at, not only at
11 our prehearing conference report, but make sure that
12 you read all of them as you get into the deliberation
13 process.
14 I would like to focus now on the findings of the
15 rate consultant. The rate consultant really has four
16 recommendations. The first one is that the rate
17 change proposal should be computed on a cash flow
18 rather than an appropriation basis. As we talked a
19 little bit about last week, in an appropriation basis
20 the contact price of the project is assumed
21 appropriated at the time the contract is awarded and
22 the actual expenditure occurs over the life of the
23 project. A comparison of the cash flow basis, rather
24 than the current appropriation basis, shows that the
25 District will appropriate over fiscal year 2013
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1 through fiscal year 2016 an access of 44 million.
2 over 44 million could possibly then be carried into
3 the next rate period and I think that one of the
4 things we mentioned in the prehearing conference
5 report is whether that is an over -issuance problem
6 under the IRS guidelines.
7 Also in the prehearing conference report now for
8 you, is actual numbers from the rate consultant
9 associated with this recommendation. These were
10 originally from MSD Exhibit 86-B and as you will note
11 in the report the Rate Commissioner -- the rate
12 consultant, with this recommendation, the rate would
13 be an increase of 8.9 percent in fiscal year 2013,
14 12.6 percent in fiscal year 2014, 11.7 in '15 and 13.2
15 in '16.
16 The second recommendation of the rate consultant
17 is a restructuring of the debt so there is interest
18 only in certain years. This is consistent with the
19 testimony of the District's financial adviser. Right
20 now the proposal has equal payments of principal and
21 interest. under the rate consultant's recommendation
22 the new debt will have interest only payments and
23 again, in the prehearing conference report we have
24 submitted, the rate consultant has assigned numbers
25 that arise out of Exhibit 86-c and these are, there
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1 would be an increase of 8.5 percent in 2013, 11.5
2 percent in '14, 11.3 percent in '15 and 11.6 percent
3 in '16. So you'll see that that would result in a
4 significant increase in at least the first year by
5 restructuring the debt.
6 The third recommendation of the rate consultant
7 was just that the District look closer at the
8 interests rates used in the O&M cost, providing more
9 transparency and maybe they could show it better and
10 more evidence to support them.
11 And finally the fourth recommendation related to
12 the District's pension plan cost. As you have heard
13 testimony, the District changed from a defined benefit
14 to a defined contribution plan. This was not,
15 however, considered in the rate change proposal and
16 ms. Zimmerman did testify that one of the reasons the
17 change was made was because it reduced the cost. so
18 the final recommendation is that this also be
19 considered in the rate change proposal.
20 So this is a summary of the recommendations of the
21 rate consultant and I am happy to answer any questions
22 and Mr. Stannard is here also if you have any specific
23 questions.
24 COMMISSIONER STEIN: Do any of the
25 Commissioners have questions for ms. stump or Mr.
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1 Stannard? Not seeing any, upon the conclusion of this
2 public hearing session this wastewater rate change
3 proceeding will be closed and the Rate Commission will
4 begin its deliberations. This is the final
5 opportunity for Rate Commissioners to ask questions.
6 Do any Rate commissioners have final questions for any
7 of the various parties regarding any issue or element
8 of the proposed rate change? Mr. Schneider?
9 COMMISSIONER SCHNEIDER: I have a question
10 for Mr. Coffman. In your testimony you said that you
11 felt that if I heard it correctly, you felt that
12 the current rate proposal was unreasonable to
13 residential consumers, are you saying it is
14 unreasonable relative to commercial payers, relative
15 to residential? I want to get clarification, I know
16 you represent residential but were you saying it was
17 fair for commercial or unfair for residential because
18 it was fair for commercial?
19 MR. COFFMAN: we take no issue with rate
20 design between classes. I was referring just to the
21 overall revenue impact. of course, representing
22 residential consumers, I think it is probably likely
23 unreasonable for all classes.
24 COMMISSIONER SCHNEIDER: okay. Thank you.
25 COMMISSIONER STEIN: Other questions? I
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1 would just like as a side to throw in my personal
2 thanks to the interveners, to all of the witnesses
3 that have appeared at various public hearings and if
4 you have, you have helped us greatly by giving us
5 additional information, additional points to consider
6 and we are grateful for the time that you have spent
7 during that. z would also like to thank MSD staff for
8 their efforts to provide us with information that we
9 need and to help keep the wheels turning in this very
10 important process. with that, we will adjourn this
11 public hearing and convene the meeting of the Rate
12 commission to begin deliberations in approximately
13 five minutes. Thank you.
14
15 (Hearing concluded at 11:35 a.m.)
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1 CERTIFICATE OF REPORTER
2 I, Suzanne M. Zes, Certified Court Reporter,
3 within and for the State of Missouri, do hereby
4 certify that the witness whose testimony appears in
5 the foregoing deposition was duly sworn by me; the
6 testimony of said witness was taken by me to the best
7 of my ability and thereafter reduced to typewriting
8 under my direction; that I am neither counsel for,
9 related to, nor employed by any of the parties to the
10 action in which this deposition was taken, and further
11 that I am not a relative or employee of any attorney
12 or counsel employed by the parties thereto, nor
13 financially or otherwise interested in the outcome of
14 the action.
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17 Certified Court Reporter
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