HomeMy Public PortalAboutExhibit MSD 77 Transcript August 18, 2011 Public HearingExhibit MSD 77
96605 msd hearing 08 18 11
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9 METROPOLITAN ST. LOUIS
10 SEWER DISTRICT
11 RATE COMMISSION PUBLIC HEARING
12 WASTEWATER RATE PROPOSAL SUMMARY
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14 THURSDAY, AUGUST 18, 2011
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1 APPEARANCES
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3 METROPOLITAN ST. LOUIS SEWER DISTRICT
4 MEMBERS:
5 MR. JOHN L. STEIN;
6 MR. GLENN KOENEN;
7 MR. MIKE SEIDEL;
8 MS. NANCY BOWERS:
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10 REPORTER:
11 MS. HOLLY A. SCHMID
12 Midwest Litigation Services
13 711 North 11th Street
14 st. Louis, MO 63101
15 (314) 644-2191
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1 (Hearing began at 6 p.m.)
2 MR. STEIN: I will be presiding
3 over the public hearing this evening. with
4 me tonight are the following MSD Rate
5 Commission members: Ms. Nancy Bowers;
6 Mr. Glen Koenen, and Mr. Mike Seidel.
7 The charter plan of the District
8 was amended at the general election on
9 November 7, 2000, and established the Rate
10 Commission to review and make recommendations
11 to the District regarding changes in
12 wastewater rates, storm water rates, and tax
13 rates proposed by the District.
14 The charter plan requires the MSD
15 Board of Trustees to select organizations to
16 ensure a fair representation of all users of
17 the District's services on the Rate
18 Commission. The Rate Commission
19 representative organizations are to represent
20 commercial, industrial users, residential
21 users, and other organizations interested in
22 the operation of the District, including
23 organizations focusing on environmental
24 issues, labor issues, socioeconomic issues,
25 community neighborhood organizations and
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1 other non-profit organizations.
2 The MSD Rate Commission currently
3 consists of 14 members from organizations and
4 institutions throughout St. Louis city and
5 county. on May 10, 2011, the Rate Commission
6 received a rate change notice proposing
7 changes in the district's wastewater rates.
8 The Rate Commission adopted operational rules
9 and a procedure schedule to govern the
10 proceedings on May 17, 2011, and amended its
11 procedural schedule on July 8, 2011.
12 under the procedural schedule
13 adopted by the Rate Commission, as amended,
14 the MSD Rate Commission has until October 21,
15 2011, to review and make a recommendation to
16 the MSD Board of Trustees as to whether the
17 proposed rates should be approved, not
18 approved, or modified with suggested changes
19 and then approved. The MSD Rate Commission
20 has engaged legal counsel and a rate
21 consultant independent of those used by the
22 MSD staff. Under procedural rules adopted by
23 the Rate Commission as amended, any person
24 affected by the rate change proposal had an
25 opportunity to submit an application to
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1 intervene in these proceedings.
2 Applications to intervene have
3 been filed by the Barnes -Jewish Hospital,
4 Covidien, Missouri Industrial Energy
5 consumers, Robert A. Miller, AARP, and the
6 Consumers Council of Missouri. These
7 applications have all been granted.
8 Since May 10, 2011, the MSD Rate
9 Commission has received testimony from MSD
10 staff, the interveners and the rate
11 consultant. The parties have also engaged in
12 discovery requests. Technical conferences
13 were held on June 13, 2011, and August 8,
14 2011, and are planned for September 6, 2011,
15 where the participants and the Rate
16 Commission are given an opportunity to ask
17 questions of those submitting testimony. A
18 pre -hearing conference for the purpose of
19 identifying any issues raised by the
20 rate -setting documents and the prepared
21 testimony previously submitted will be
22 conducted on the record on September 15,
23 2011.
24 All persons submitting testimony
25 may participate in the pre -hearing conference
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1 and each participant in the pre -hearing
2 conference shall submit, on or before,
3 September 22, 2011, a pre -hearing conference
4 report describing the issues raised by the
5 rate -setting documents and to prepare
6 testimony, together with a brief description
7 of such participant's position, if any, on
8 each issue and the rationale therefore.
9 Rate payors who do not wish to
10 intervene are permitted to participate in
11 these on -the -record public hearings conducted
12 in six sessions beginning on August 16, 2011,
13 and concluding on September 26, 2011.
14 The Rate Commission published a
15 public notice regarding these proceedings in
16 the St. Louis Post Dispatch on May 20, 23rd
17 and 24th of 2011, and July 20, 21, and 22,
18 2011, and in the St. Louis American on May
19 26, 2011, and July 21, 2011. These notices
20 contain the time, dates and location of each
21 of these conferences and hearings.
22 The public hearing session tonight
23 is for the purpose of permitting the District
24 to present its wastewater rate change
25 proposal and to permit any rate payor an
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1 opportunity to comment.
2 we will begin with a presentation
3 by the District followed by a public comment
4 period. Those wishing to speak should sign
5 in on the sheet provided -- blue card --
6 thank you, and will be called on in the order
7 of the names listed thereon. Each rate payor
8 should identify himself or herself and any
9 organizations represented by such rate payor.
10 A few housekeeping rules before we
11 begin. If you wish to present testimony,
12 please sign in at the entry door. Speakers
13 will be recognized in the order in which they
14 sign up. Each rate payor may have a maximum
15 of 10 minutes to speak regarding the proposed
16 rate change. As the presiding officer, I can
17 limit or expand the time, should I deem it
18 necessary. The restrooms are located right
19 across the hall, if you need those. And at
20 this time, are there any questions regarding
21 the procedure this evening?
22 Hearing none, Mr. Theerman, is the
23 District ready to proceed?
24 MR. THEERMAN: Yes.
25 MR. STEIN: Please step forward.
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1 MR. THEERMAN: Thank you,
2 Mr. Stein. My name is Jeff Theerman. I'm
3 the executive director of MSD. what I'm
4 going to do is give a brief presentation
5 about what we have proposed to the Rate
6 commission. so we will walk through that,
7 and I will be available to answer any
8 questions that the audience may have.
9 First of all, a little bit about
10 MSD. We are two utilities in one. We are
11 responsible for storm water management and
12 wastewater management and treatment in all of
13 st. Louis city and eight -tenths of St. Louis
14 County out to, roughly, Highway 109.
15 we serve, approximately, 1.4
16 million customers, and we have 428,000
17 customer accounts. we are the assembly of 79
18 different sewer systems. MSD was created in
19 the Fifties, and at that time sewer systems
20 and sewage treatment plants were either owned
21 by private sewer companies or by
22 municipalities, so when the district was
23 formed, we first served an area of about 200
24 square miles out to, roughly, Lindberg, and
25 then, in the 1970's, we annexed the west
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1 County area after a vote of the public to
2 make the total area, roughly, 525 square
3 miles.
4 we are the fourth largest sewer
5 system in the nation, which is sort of a
6 surprise to people because we're not the
7 fourth largest metropolitan area. Our sewer
8 system in terms of miles of pipe is right
9 behind L.A., with New York and Chicago being
10 in front of them. That presents a problem for
11 us because, all though we are the fourth
12 largest sewer system, we don't have the
13 population of L.A. to support that, that
14 infrastructure.
15 our sewer system's size is almost
16 6,700 miles. That breaks down into 1,900
17 miles of combined sewer system. That is the
18 way sewers were built in the 18OO's.
19 storm water and wastewater flows
20 together in one pipe system and because
21 the -- when it rains, you have a lot of
22 excess water. Not all of that can be taken
23 to treatment plants for complete treatment,
24 and we have what's called combined sewer
25 overflows, which z will talk more about in a
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1 minute.
2 There's also 4,700 miles of
3 separate sanitary sewer. That's the more
4 contemporary design of sewers where there's a
5 wastewater system and storm water system in
6 one area, and wastewater is to flow in one
7 set of pipes and storm water in the other.
8 We operate seven treatment plants treating an
9 average of 370 million gallons a day and that
10 is -- that's a little hard to visualize, but
11 if you think about a box the size of a
12 football field, and the height of the arch,
13 that's about the volume of wastewater it
14 takes that flows through our treatment plants
15 each and every day.
16 We also operate almost 3,000 miles
17 of storm sewers, and that's not part of the
18 wastewater system at all. We will talk a
19 little bit more about that in just a second.
20 We presented, in May, a wastewater
21 rate change proposal that covers wastewater
22 rates only. We are not including in that
23 proposal anything about the storm water
24 rates. We instituted an impervious charge in
25 2008, which was struck down by court, and now
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1 it is in litigation on appeal, so, because of
2 that pending litigation, our rate proposal
3 doesn't deal with storm water at all, that
4 storm water rate at all. we presented a
5 four-year rate plan that would involve a rate
6 increase on July 1 of 2012, and every year
7 after that through July 1 of 2015, with no
8 additional increases projected until after
9 that June of 2016 date, so an annual increase
10 over four years.
11 In the current average, the single
12 family rate is $28.73. I would point out
13 that everybody's bill is individually
14 calculated. what determines your wastewater
15 bill is your winter quarter water
16 consumption. we get water data from all the
17 water providers in St. Louis city and county,
18 and we calculate wastewater bills based on
19 the water use in the winter quarter. The
20 reason we use winter quarter water
21 consumption is we don't want to be billing
22 for watering lawns and washing cars and
23 things, so winter quarter is judged to be the
24 most accurate reflection of what's actually
25 going to the sewers.
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1 There are a number of drivers for
2 this rate change proposal, and I'm going to
3 elaborate on some of them and just touch on a
4 few others.
5 First, regulatory requirements.
6 I'm going to talk a lot about that. There's
7 an increased use of debt financing. we are
8 proposing the use of revenue bond financing
9 in this proposal to try to mitigate the rapid
10 increase of sewer rates, and of course, with
11 that debt financing, comes interest payments
12 that become necessary. There's a small loss
13 of customer base in
14 st. Louis city and county. There is
15 declining water usage, primarily
16 conservation, and then there are also
17 economic conditions that are present today
18 that haven't existed before.
19 The rate change proposal is for
20 our fiscal year is 2013 through 2016 and
21 would include a little over a billion dollars
22 in capital improvements, to be funded with
23 $945 million dollars of bond financing. All
24 bond proceeds would be used for capital
25 improvements. we would not use debt
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1 financing for day-to-day operations.
2 During that same period of time,
3 we are estimating an operations and
4 maintenance expenditure of $634 million
5 dollars and $359 million dollars of debt
6 service. That includes debt service on
7 previously -issued revenue bonds, as well as
8 the bonds we are projecting.
9 I want to spend a little time
10 about the regulatory requirements because
11 that is really the driver of this rate
12 increase. MSD was sued by the federal
13 government and the state of Missouri for
14 alleged violations of the Clean water Act in
15 2007. For the last four years, we have
16 mediated a settlement agreement to that
17 lawsuit, and that settlement agreement is now
18 published in the form of a document called
19 the Consent Decree.
20 Some major features of this
21 settlement agreement include a 23 -year
22 compliance schedule, an estimated cost of
23 $4.7 billion dollars, and that is in today's
24 dollars. A sanitary sewer overflow
25 elimination program, a combined sewer
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1 overflow abatement program, and I'm going to
2 talk more about both of those here in a
3 minute. Additional sewer system maintenance
4 and repair to try and alleviate basement
5 backups and separate sewer overflows and
6 asset management, or asset reinvestment. If
7 we don't continue to invest in the assets
8 that are buried in the ground, at the end of
9 23 years, and we spend this money, we will
10 find ourselves back this the very same boat
11 because the sewer system continues to age and
12 continues to require investment.
13 so let me back up a little bit to
14 these first two -- or the sanitary sewer
15 overflow elimination and combined sewer
16 overflow abatement. I think the next slide
17 will help me. Let met just point out that,
18 if you want to comment on the Consent Decree,
19 you can view the Consent Decree on the
20 Department of Justice website, and there's a
21 link to that site that's shown on this slide,
22 www.stlmsd.com. when you get to our website,
23 it's very straightforward to get to theirs,
24 and you can view the Consent Decree, and you
25 can see how to comment on that Consent
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1 Decree.
2 By commenting tonight, you will be
3 providing valuable information for the Rate
4 Commission, but that does not automatically
5 become a comment to the Justice Department if
6 you want to comment on the Consent Decree,
7 itself, and they have very specific
8 procedures for that commenting. You have
9 until September 9 to comment on the consent
10 Decree on that website.
11 This is not meant to be an eye
12 test. You should have a handout that was
13 available when you came in. I'm going to try
14 and walk you through this a little bit and
15 explain what separate sanitary sewer
16 overflows are and combined sewer overflows.
17 So this is a map of our service
18 area. The green -shaded area is the combined
19 sewer system. That's all of the city of
20 St. Louis and 22 neighboring municipalities,
21 including Clayton, Maplewood, and a number of
22 other near communities. That combined sewer
23 system is one of the larger ones in the
24 country, and again, storm water and
25 wastewater flow in one set of pipes.
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1 on that map, there's little green
2 dots along the river Des Peres and along the
3 Mississippi River, right in here and along
4 here. There's 199 little green dots that
5 represent combined sewer overflows.
6 when it rains hard, the capacity
7 of the sewer system is overwhelmed, and there
8 are 199 locations where a mixture of storm
9 water and wastewater discharge to those water
10 bodies. The clean water Act says you don't
11 have to eliminate those overflows, but you do
12 have to abate them, so we have been
13 developing a program called a Long -Term
14 Control Plan that is now part of the Consent
15 Decree to eliminate or reduce the effects of
16 the combined sewer overflows. That program
17 has an estimated cost of $2 billion dollars
18 and for the overflows on the river Des Peres,
19 Million creek and the tributaries of those
20 waters will go from, approximately, 50 events
21 a year where it rains that causes overflows,
22 down to about four.
23 The overflows on the Mississippi
24 River are being addressed through the use of
25 green infrastructure. That is a somewhat
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1 newer technique where you're eliminating
2 impervious areas that causes runoff,
3 constructing vegetated areas to help hold
4 water, and the whole idea of a green
5 infrastructure is to hold water back from the
6 sewer system, so it doesn't rapidly rush to
7 the system and then cause overflows, so rain
8 barrels, rain gardens, which is a garden
9 designed to hold water, vegetated swell
10 areas, porous pavement that is designed to
11 hold water and not just let it just run off
12 rapidly are all examples of green
13 infrastructure, and in our consent Decree, we
14 have a $100 million dollar earmark for green
15 infrastructure work in the north side of the
16 city to try and get at overflows in that
17 fashion.
18 outside of that green shaded area
19 is the separate sewer area. Separate sewers
20 are the designs that occurred predominantly
21 after world war II. This is a separate
22 wastewater system, and it is not designed to
23 carry a lot of storm water, but what happens
24 over time with separate sewers is they
25 develop imperfections that allow rain water
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1 and ground water to enter the sewer, take up
2 capacity. There's also the problem of homes
3 being inappropriately connected to that
4 sanitary sewer system with storm water,
5 downspout connections, foundation drains,
6 window wells, and basements that get
7 connected inappropriately. All those
8 features introduce storm water to a system
9 that's not designed to carry storm water, and
10 that creates basement backups and sanitary
11 sewer overflows, so all those red dots you
12 see on that map, totaling a little over 200,
13 are sanitary sewer overflows, and they are
14 all illegal by the clean water Act, and they
15 have to be eliminated.
16 what's not shown on these maps are
17 basement backups, and we have chronic
18 basement backups in some areas that really
19 are caused by what z have been talking about,
20 too much rain water being in a system and
21 causing backups, so all of those -- all of
22 those issues, overflows into streams from the
23 combined system, overflows into creeks and
24 the separate system basement backups are
25 meant to be addressed by the Consent Decree.
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1 we are proposing capital
2 improvements in a schedule that's shown here,
3 an average of about $250 million dollars a
4 year in capital improvements. I want to
5 point out that this is a summary of the
6 annual expenditure, but there's a lot of
7 detail that's been provided to the Rate
8 commission about what is behind these
9 numbers, and it's certainly detailed and
10 that's available to the public, so there's a
11 long list of construction projects, both
12 design and construction, that flow into these
13 numbers.
14 These are not generalities that
15 we're asking the Rate Commission to look at.
16 There's specific projects with cost estimates
17 behind them. There's also operating costs
18 that play a role in our rates. our operating
19 costs are relatively stable, starting out at
20 about $134 million dollars of this past year
21 and escalating at a four- to five percent
22 inflation rate. Those numbers with the
23 asterisk are years where you have higher than
24 normal escalation of operating costs, and
25 those are related to wastewater maintenance
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1 activities and other projects that are sort
2 of transient in nature that wouldn't reoccur.
3 A little bit about wastewater
4 rates around the country. The blue bars show
5 the MSD average residential bill, and then
6 the red line is the National association of
7 Clean Water agency's average of a survey they
8 perform routinely on sewer rates, and you can
9 see that, nationally, a very similar thing is
10 happening. A lot of regulatory requirements
11 forcing rise in capital improvements, system
12 reinvestment, and subsequently, rates going
13 up. Our proposal raises the average
14 residential bill from $28.73 over these four
15 years up to $47.05, and that is a really
16 steep increase. We know that, and you can
17 see the dollar amounts associated each year
18 with those increases. But this is what is
19 necessary to get at what we're being required
20 to do.
21 I want to show you sort of some
22 bookends. On the left side is the proposal
23 we have made to the Rate Commission, and it
24 is the combination of a cash and debt
25 financed capital program that is weighted
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1 heavily to borrowed money and a billion
2 dollars of capital improvements shows the
3 average residential sewer bills that I have
4 already spoken about.
5 on the right side is sort of the
6 opposite view where you cash finance the
7 capital program, don't use any debt, and
8 these are meant to sort of bracket the
9 extremes. There's an infinite number of
10 potential places to be in the middle of these
11 two ideas. A cash finance approach would
12 have no bonds, still have a billion dollars
13 of capital improvement, and the rate impact
14 is dramatic. we go from $28.73 to $73.35 all
15 at once to cash finance or about a quarter
16 billion dollars of improvements each and
17 every year.
18 The right side is not our
19 proposal, but it is meant to show the effect
20 of using debt -to -finance capital
21 improvements. After that initial rate shock,
22 you have a much smaller rise in rates.
23 That's really an inflationary rise, but we
24 believe that the increase of this nature all
25 at once is more than customers can tolerate.
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1 The right side does have the advantage of
2 being the lowest cost overall because you
3 don't pay interest, but the left side
4 recognizes the fact that we're building
5 assets with long lives and paying those over
6 longer period of time, so you have a 30 -year
7 bond, which makes more sense for that kind of
8 an investment, than a cash finance approach.
9 I will wrap up by talking about
10 what our next steps are. Our Rate commission
11 will make a recommendation to the Board of
12 Trustees in October of this year. The board
13 has the charge, then, of reviewing the rate
14 report, and they can't do anything with it
15 for a 45 -day waiting period, and ultimately,
16 has to review the rate report from the Rate
17 Commission in the context of requirements in
18 our charter. There are five tests that have
19 to be satisfied. If those tests are
20 satisfied, then the charter requires our
21 board to implement the recommended rate. The
22 board could -- the earliest it could do that
23 is in December of '11. we would anticipate,
24 if the use of debt is involved, and we
25 believe it would be, that there would be a
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1 voter referendum on the use of debt in the
2 spring.
3 In Missouri, the use of debt
4 financing by municipal government requires
5 voter approval. After that election, the
6 board would then adopt a final rate based on
7 the outcome of the election, and the first
8 water rate change under our proposed plan
9 would be July 1 of 2012. Again, it remains
10 to be seen what the Rate Commission provides
11 in its rate report. Everything I have talked
12 about tonight is just the report we have
13 presented initially as a rate proposal.
14 I'm available to answer questions
15 at the discretion of the chair. I would say
16 that we have a number of staff here tonight.
17 You may be here for something in addition to
18 rates, and if there are questions that we can
19 help you with, be it service or billing or
20 some other matter, we are here to do that as
21 well.
22 MR. STEIN: Thank you,
23 Mr. Theerman. we are now going to entertain
24 comments from the audience, and I will call
25 upon those who have signed up to comment in
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1 the order in which they signed up.
2 I think Lance LeComb is going to
3 bring the microphone to you, so that you can
4 speak from your place. The first person I
5 have is Jane Fagas. Is that correct?
6 MS. FAGAS: Yes. Thank you very
7 much. While the residential people are going
8 to pay, I would like to know if corporations
9 are being asked to contribute, also, to this
10 increase. Since they do -- some of them
11 put their chemicals in our water, in our
12 treatment plants. Thank you.
13 MR. THEERMAN: I'm going to try to
14 answer questions kind of as we go. Yeah.
15 The rate proposal would affect all the
16 customers, commercial, industrial and
17 residential. We do a lot of work at MSD,
18 just for your information, on industrial
19 pretreatment and monitoring industries, so if
20 you're aware of something you have seen, we
21 would like to know about it. For the most
22 part, commercial, industrial customers are
23 good actors, and they follow the rules, but
24 we are always willing to investigate
25 something that you may be aware of.
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1 MR. STEIN: Any other comments
2 from Ms. Fagas? Thank you very much. We
3 appreciate your participation.
4 The next one I have is Joann
5 Klevorn (phonetic), if I've got that right.
6 MS. KLEVORN: That's right.
7 MR. STEIN: Thank you.
8 MS. KLEVORN: well, what I would
9 like to say is everything is just going up
10 right now, you know, and like us people, some
11 of us here that, you know, we are retired,
12 and we are on a fixed income, and we just
13 think about because I've got -- phones are
14 going to go up on me, and the electric is
15 going up, and the gas is going up.
16 Everything is going up, except my Social
17 Security, and I was just wondering what they
18 think about that, you know. I mean, I live
19 in just a regular home, and luckily, I have
20 never had my basement flood, but I know
21 there's parts of St. Ann that did have their
22 floods back there because you are building
23 some kind of plant there now. I think it's
24 towards up near Highway 70, something to do
25 with the wastewater.
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1 MR. THEERMAN: We are building a
2 large storage tank to hold water and keep
3 overflows from happening. That's going on in
4 St. Ann right now.
5 MS. KLEVORN: So I'm thankful my
6 basement has never been flooded, but I'm just
7 wondering about people trying to keep up with
8 all these bills and everything, and you know,
9 maybe if it's going to be even a big increase
10 of $20 more a month than everybody, that's
11 kind of a -- especially if everything else is
12 going up. I know it's not just your fault,
13 but I just think, if you take that into
14 consideration, so. . . Thank you.
15 MR. THEERMAN: One thing I really
16 should have mentioned is there is a low
17 income and a fixed income assistance program
18 in our rates. For those that qualify, the
19 rates can be reduced for customers that have
20 constraints like that. If you would like
21 more information on that before you leave, we
22 can make sure you get that.
23 MR. STEIN: Thank you very much.
24 The next card I have is from L. Sheridan
25 Clark.
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1 MR. CLARK: Thanks for the
2 opportunity. Most of my questions have
3 already been answered by our opening speaker.
4 My question has to do with the dual mandate
5 that you covered on the abatement portion of
6 your presentation. In your advertised letter
7 concerning these meetings, there is a
8 sentence in the second paragraph which says
9 that the proposal for the wastewater -- this
10 proposal is for wastewater only.
11 MR. THEERMAN: Yes, sir.
12 MR. CLARK: And then there's a
13 separate part of the question that says a
14 court ruling last July compelled Metropolitan
15 Sewer District to return to an inequitable
16 system of taxes for storm funding, so
17 therefore, it's not included, but your
18 presentation said that a good number of
19 projects concerning the dual capacity of the
20 storm and the sewer will be fixed at the same
21 time. Am I correct in that?
22 MR. THEERMAN: Yeah, and I think I
23 understand your question. The -- in our
24 business, it's sometimes pretty difficult to
25 separate or define where wastewater ends and
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storm water starts in our combined sewer
2 system because storm water is mixed with
3 wastewater. we
4 so this program
5 improvements is
6 some exemptions
7 the streets and
of improvements
water rate, but
treat it all as wastewater,
of combined sewer
a wastewater program with
, like where inlets occur on
connect to that. Those kinds
are managed through the storm
the major pipes, themselves,
and certainly, the sewage overflows that
occur are treated as a wastewater problem and
dealt with in the wastewater rate. In the
county where you have two systems that storm
water system that exists separate from the
wastewater system is entirely funded by the
storm water rate, and that's not part of this
proposal.
MR. CLARK:
of my question, then,
Commission, will they
okay. The second part
is this Rate
come back to the
property owners and stakeholders with another
request for storm sewer rate increases that
will come back to us, whether a municipal
charge or city tax or a property tax
25 increase? In other words, if you're fixing
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1 one part of the problem, you can't very well
2 not fix the other part of the problem, so if
3 you're going to correct and take care of this
4 large area, you're going to have to have
5 programs that take care of the storm sewer
6 program, so do we foresee an increase in
7 property taxes to take care of that portion
8 of it?
9 MR. THEERMAN: The storm water
10 rate was changed to an impervious charge in
11 2008. That charge was struck down by a court
12 last summer and is in appeal. It's possible
13 that we would -- MSS would present to the
14 Rate Commission an alternative rate at some
15 point in the future, but we don't believe we
16 will, until we exhaust our appeal
17 opportunities, so at present, storm water is
18 being funded through a series of taxes that
19 have existed for years. we had eliminated
20 those taxes that we voluntarily rolled them
21 back when we implemented the other approach.
22 when the other approach was judged
23 inappropriate, we then reinstituted those
24 taxes as a temporary measure, so the answer
25 to your question is maybe. It could be that
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1 appeal goes our way, and then the impervious
2 charge is reimposed. It could be that the
3 appeal doesn't, and we are going to need to
4 go back to our Rate Commission and seek a
5 different funding mechanism for storm water.
6 MR. CLARK: I did take a look at
7 some of the numbers that are in the budget
8 for the next couple of years, and there is
9 money in the storm sewer numbers, but it
10 doesn't look like it's going to be adequate,
11 so z foresee an increase, and it would be
12 helpful to all concerned if there is a
13 potential per rate increase on the storm
14 sewer side that we have an idea, so my
15 question is can you folks come up with any
16 forecast for the real cost of fixing the
17 storm sewer at the same time we are fixing
18 the waste issue?
19 MR. THEERMAN: We think that the
20 rate we had in place, the impervious charge,
21 if it's reimposed, will be adequate. You can
22 go back on your bills. The average customer
23 during the period where we had that
24 impervious charge was paying three or four
25 dollars a month in storm water charges,
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1 depending on how much impervious area they
2 had on their property. If, instead, we can't
3 use that approach because we are not
4 successful on appeal, we are going to have to
5 craft a new rate and have to go back through
6 our Rate Commission to get it approved, so it
7 would be very similar to this situation. We
8 would be doing public hearings on storm water
9 and try to arrive at a new rate.
10 MR. CLARK: I think you covered
11 that one. I do have a second question, and
12 this has to do with the forecast and the
13 accumulation of numbers that you have
14 submitted to the Rate commission. we all
15 know what's happening in the economy, the
16 prospect of inflation, all these sort of
17 things manifest themselves into increased
18 costs. If I were to go back 10 or 15 years,
19 I would say that the projects in the metro
20 St. Louis area have not done well when it
21 comes to the public. I can cite the Eagleton
22 Courthouse, that was kind of a disaster. I
23 can cite the county jail. That was a real
24 mess engineering wise. We can look at the
25 Bi-State Metro System, which is totally --
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1 was way over budget. My point is how
2 confident can the Rate commission be with the
3 numbers you provided them? Have they been
4 audited by outside firms not related to the
5 district? Have they been looked at by
6 engineers that are not in a bid? That's my
7 question. How confident can they be?
8 MR. THEERMAN: Do you want me to
9 answer that or do you want to take that?
10 MR. STEIN: I will let you go
11 first.
12 MR. THEERMAN: The Rate Commission
13 process includes the Rate Commission having
14 its own rate consultant, so they have their
15 own consultant, not someone that works
16 directly with the district, to look at our
17 rate proposal and test it. we also provide a
18 lot of information about our performance, and
19 all of that is being vetted and discussed in
20 these Rate Commission technical sessions. I
21 can tell you that, over the last eight years,
22 MSD has done a billion dollars in
23 improvements, and during that time -- our
24 actual delivered cost of construction is less
25 than our appropriations. we are actually
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1 getting projects done on time and a little
2 under budget, about three or four percent
3 under budget. so we are willing to prove it
4 up based on our performance. The Rate
5 Commission has, at its disposal, consultants
6 to help with that.
7 MR. STEIN: I would just add to
8 that, from the perspective of the Rate
9 Commission, that you should all be aware that
10 we are not the exact equivalent of the State
11 Public service Commission. we do not have a
12 large, full-time staff of engineers,
13 accountants and attorneys that can delve into
14 the rate increases that you see from Ameren
15 and Mcclay Gas, etc. we are constrained in
16 terms of the time we have to look at these
17 proposals, and much of the work we do is to
18 determine if the allocation of costs is
19 accurate in terms of, you know, which user
20 classes should pay which percentage of the
21 proposed cost. we do not have the resources
22 at the Rate Commission level to delve deeply
23 into the capital costs projections by the
24 district and to make judgments as to whether
25 those estimates are accurate. That is the
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1 responsibility that largely falls on the
2 staff and the Board of Trustees. Thank you,
3 sir.
4 The next person I have is Marion
5 Howells.
6 MS. HOWELLS: Thank you. This is
7 not a question about rates, just there is a
8 project planned for runoff water erosion
9 behind my house on Appalachian Trail, and I
10 just wondered if you had any information on
11 when that might occur? It's been
12 propositioned for, at least, a year, so.
13 MR. THEERMAN: I can't answer your
14 question, but this gentleman over here with
15 his hand up is our director of engineering,
16 and I guarantee you, if he can't answer your
17 question, we will get back to you on an
18 answer to your question.
19 MS. HOWELLS: Thank you.
20 MR. STEIN: The next card I have
21 is from Gene Konerman? Did I get that right?
22 MR. KONERMAN: Hello. This is
23 only about the rate or the whole thing about
24 the company? We can talk about some
25 different issues or just the rate?
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1 MR. STEIN: This is a hearing,
2 specifically, to get your comments about the
3 rate change proposal that was given to the
4 Rate Commission earlier this spring.
5 MR. KONERMAN: I live in Jetson
6 Manor in Chesterfield. Last year the energy
7 company did some work on my neighbor's
8 property. They came with big trucks and a
9 small truck. As they dug over, they did
10 something with the soil. I don't know what
11 they did, probably the pipe was broke, and
12 that was, like, November. It was a little
13 bit cool weather already, and I came back
14 from my work. I saw everything was done.
15 They left the equipment. They left. The
16 next morning I wake up. I saw the crew over
17 there. They are sitting in a big truck. The
18 truck was running and -- I come back at three
19 o'clock. They are still running the truck
20 and sitting there. Then around five o'clock
21 some guy came over because they left. So are
22 we talking about -- talking about increasing
23 rate on a lot of stuff, but whose job -- who
24 supervises them to do this kind of work? I
25 do have commercial property in St. Louis
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1 county. I called because the water was
2 draining crooked on one side of the storm.
3 called, like, five months ago and explained
4 it to the representative what needs to be
5 done. After two months, it is still the
6 same. where is the service? I can't do
7 nothing because your pipe is down. I don't
8 want to mess with that pipe. So you have to
9 provide -- where is the service? You are
10 talking increasing, increasing, increasing.
11 where is the service? I just gave you two
12 examples that I know.
13 MR. THEERMAN: A couple things.
14 our Director of operations, John Sprague, is
15 here, and he can get some information from
16 you about what you experienced because it's
17 his staff that is doing maintenance on the
18 system, and he will want to know about that.
19 if you're calling about a storm water issue,.
20 we have had to trim back our storm water
21 service while this lawsuit is progressing
22 because we are falling back on taxes that are
23 inadequate, so part of what you're
24 experiencing is that I believe, but without
25 us talking about your specific case and
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1 getting your address, that's about the best I
2 can do up here.
3 MR. STEIN: Thank you. Are there
4 any other individuals who somewhere indicated
5 an interest in commenting tonight?
6 PUBLIC MEMBER: I don't need a
7 microphone. what is the MSD credit rating,
8 and what is the expected bond interest rate
9 that you anticipate?
10 MR. THEERMAN: Current bond rating
11 is Triple A or Double A Plus, depending on
12 the rating company. So we get excellent
13 rates. we use a combination of our own
14 issued revenue bonds and what's called State
15 Revolving Fund, which is a heavily subsidized
16 wastewater program from EPA that provides
17 very low interest rates, so our current
18 revenue bonds have sold in the neighborhood
19 of four to five percent, and our SRF-funded
20 bonds are three and a half, something like
21 that. Those SRF bonds are somewhat limited,
22 so you have more of the higher interest than
23 the SRF.
24 PUBLIC MEMBER: One last question,
25 if I may. what are the legal consequences if
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1 the bond issues are not voted on?
2 MR. THEERMAN: Well, MSD is -- the
3 legal consequences of MSD about not doing the
4 program is enforcement by the Department of
5 Justice, so you know, it's in the region's
6 interest to try to find a way to get this
7 done. of course, that's what we're trying to
8 do the best job of. I guess I would add that
9 we are not the only city in this boat. This
10 is a nationwide issue with most major
11 metropolitan areas coming under enforcement
12 action. Afterwards, if you would like to
13 talk some more about it, I would be glad to.
14 MS. SMITH: What is the State
15 Revolving Fund?
16 MR. STEIN: Would you please
17 identify yourself for the --
18 MS. SMITH: I'm Kathleen
19 Logan -Smith, Executive Director of the
20 Coalition for the Environment. Is the SRF
21 part of the clean Water Act?
22 MR. THEERMAN: Well, it's part of
23 the EPA budget. I'm not remembering if it
24 is. I don't know.
25 CARL: Let me help you out on
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1 that. The SRF came about in the mid 1980's.
2 Prior to that, the Clean Water Act was passed
3 in 1972. '72 to about '86 we worked under a
4 grant funding program for quite a number of
5 years. When the federal government
6 experienced the budget programs, their budget
7 problems in the 60's and 80's, we had new
8 federalism, and they started a series of
9 state -revolving loan funds. The earlier
10 programs were subsidized with grants, but
11 those grants ran out somewhere around '90,
12 '92, and so the allotment each year is part
13 of the budget for EPA, and it's about $50
14 billion nationally. That trickles to about
15 $30 million statewide of new money each year.
16 The rest is repaid money for the whole state
17 of Missouri, of which we get about 300.
18 MR. THEERMAN: Can you keep in
19 mind he's talking about a pool of loans that
20 are revolving, so that billion dollars, for
21 the post part, is tied up in loans and is
22 being paid back over time by sewer districts,
23 like MSD, so there's a billion dollar pool,
24 but most of it is spoken for. It's already
25 loaned out.
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1 MR. STEIN: This is your last
2 opportunity to ask any questions. Ma'am?
3 MS. WHITNEY: I'm Gene Whitney,
4 Chesterfield resident, and I wanted to ask --
5 I read on-line that you have to charge more
6 now because people are using less water, and
7 so, because you charge by how much people
8 use, you're getting less money, so it's good
9 to conserve water. Do you plan to come up
10 with, like, a different way to charge people
11 eventually? Because, I mean, it doesn't
12 really fit with where we are headed. I just
13 wanted to ask that. It's kind of
14 philosophical, but I don't think it's dollars
15 and cents, apparently.
16 MR. THEERMAN: when people useless
17 water, it affects their personal sewer bill
18 and water bill, for that matter. It reduces
19 that bill, but you start looking at the
20 aggregate, the whole region. As people
21 reduce water, it lowers costs of utilities
22 that are variable costs, like pumping costs,
23 but there's a lot of costs that aren't
24 variable, that don't change, and therefore,
25 as people use less water, the rates have to
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1 go up to recover the revenue that gets lost,
2 and that is a dilemma, you're right. There
3 was an account recently very similar to that
4 in another state where they were talking
5 about that as well. You might -- while water
6 use has declined, the amount of water we are
7 treating is actually more variable than that
8 because so much of what we treat is impacted
9 by rain events, so again, the water that's
10 leaking into our system, the water that's
11 dealt with in a combined system are somewhat
12 rain dependent, and so users conserve, and
13 they help their individual bill, but in the
14 aggregate, it's a little different, a little
15 harder to get at.
16 PUBLIC MEMBER: A quick follow-up.
17 Is there any -- I mean, I guess this is
18 probably a dumb question, but is there any
19 way to cut costs, you know?
20 MR. THEERMAN: well, there is, and
21 MSD, like a lot of utilities around the
22 country, has done just that. We are -- we
23 instituted programs where we have cut staff,
24 trained people on multiple functions,
25 implemented new technology. In the old days,
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1 in our sewerage treatment plants, we used to
2 staff for the energy, not the norm. We
3 trimmed -- over 10 years ago, we trimmed our
4 staffs.
5 we have some of the most efficient
6 treatment wastewater plants in the country.
7 we are implementing work in the collections
8 system that we used to outsource, but we have
9 determined that we can do it cheaper than
10 outsourced companies. We brought it
11 in-house, and it brought savings. we
12 implemented new business technology in-house
13 to try and be more efficient and do things
14 with fewer people, and we are doing all the
15 same things that private sector companies do
16 to try and trim their bills we have
17 modified our pension, which is fairly unusual
18 for a public entity, so new employees at MSD
19 have a 401-K style pension, rather than a
20 fixed, defined benefit pension, so all those
21 things have happened.
22 MR. STEIN: Okay. Anyone else? If
23 not, I would ask if any of the rate
24 commissioners have any questions or comments
25 this evening.
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1 seeing none, I would like to thank
2 everyone for their participation this
3 evening. The next public hearing will be
4 conducted this saturday, August 20 at 9 a.m.
5 at the Cliff Cave Branch Library, so if you
6 have any other questions that have come up
7 after you leave here tonight, you can come
8 back Saturday.
9 Thank you all very much. This
10 hearing is concluded.
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1 STATE OF ILLINOIS)
2 COUNTY OF MCLEAN )sS
3
4 I, Holly A. Schmid, a Notary
5 Public in and for the county of McLean, DO
6 HEREBY CERTIFY that pursuant to agreement
7 between counsel there appeared before me on
8 August 18, 2011, at the office of city Hall
9 in chesterfield, Missouri, this public
10 hearing touching upon the matter in
11 controversy was taken by me in shorthand and
12 afterwards transcribed upon the typewriter
13 and said hearing is herewith returned.
14
15
16
17 HOLLY A. SCHMID
18 Notary Public -- CSR
19 084-98-254587
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