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HomeMy Public PortalAboutExhibit MSD 92 Transcript August 22, 2011 Public Hearing 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 METROPOLITAN ST. LOUIS SEWER DISTRICT PUBLIC HEARING AUGUST 22, 2011 (Hearing start time, 6:01 p.m.) 2 INDEX 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PAGE Introduction by Mr. Koenen 5 Presentation by Mr. Theerman 9 Public Hearing Session 22 Conclusion 95 (No Exhibits Marked) 3 PUBLIC HEARING FOR METROPOLITAN ST. LOUIS SEWER 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 DISTRICT, produced and examined on AUGUST 22, 2011, between the hours of 6:01 in the evening and 8:09 in the evening of that day, at the Florissant Valley Branch Library, 195 South New Florissant Road, St. Louis, Missouri 63031, before Suzanne Zes, Certified Court Reporter. 4 APPEARANCES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 For the MSD Rate Commission: Glenn Koenen West County Chamber of Commerce Mike O'Connell Greater St. Louis Labor Council George D. Tomazi The Engineers' Club of St. Louis Brad Goss Home Builders Association of Greater St. Louis Ida Casey St. Philip's Lutheran Church Also present: Jeff Theerman Jan Zimmerman Pam Bells Lance LeComb Brian Hoelscher Jonathon Sprague The Court Reporter: Suzanne Zes Midwest Litigation Services 711 North Eleventh Street St. Louis, MO 63101 314.644.2191 314.644.1334 Fax 5 MR. KOENEN: Good evening. Welcome to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 tonight's hearing of the MSD Rate Commission. I want to thank you for coming. If you would like to speak tonight, please make sure you get and complete one of the blue cards they have outside. We will be taking speakers in the order in which we get the cards. Now I wasn't supposed to be the lead for this meeting but I think I have been drafted. My name is Glenn Koenen, I am one of the Rate Commissioners. With us here tonight are George Tomazi, another Rate Commissioner, Brad Goss, another Rate Commissioner and Michael O'Connell, another one of our Rate Commissioners. We are expecting a few more to walk in, in the next few minutes. The charter plan of the Metropolitan Sewer District was amended in a general election on November 7th, 2000 and established the Rate Commission to review and make recommendations to the District regarding changes in wastewater rates and tax rates proposed by the District. The charter plan requires an MSD Board of Trustees to select organizations to ensure a fair reputation of all users of the District services on the Rate Commission. The Rate Commission representative organizations are to represent commercial industrial users, residency users and other organizations interested in the operation of the 6 District including organizations focusing on 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 environmental issues, labor issues, socioeconomic issues, community neighborhood organizations and other nonprofit organizations. The MSD Rate Commission currently consists of 14 members from organizations and institutions throughout St. Louis City and St. Louis County. Page 2. On May 10, 2011, the Rate Commission received a rate change notice for the proposing changes in the District's wastewater rates. The Rate Commission adopted operational rules and a procedural schedule to govern the proceedings on May 17th, 2011 and amended its procedural schedule on July 8th, 2011. Under the procedural schedule adopted by the Rate Commission, as amended, the MSD Rate Commission has until October 21, 2011, to review and make a recommendation to the MSD Board of Trustees as to whether the proposed rate should be approved, not approved or modified with suggested changes and then approved. The MSD Rate Commission has engaged legal counsel and a rate consultant independent of those used by the MSD staff. Under procedural rules adopted by the Rate Commission, as amended, any person affected by the rate change proposal have an opportunity to submit an application to intervene in those proceedings. Applications to intervene have 7 been filed by the Barnes Jewish Hospital, Covidien, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Missouri Industrial Energy Consumers, Mr. Robert A. Mueller, AARP, and Consumers Council of Missouri. These applications have been granted. Since May 10th, 2011, the MSD Rate Commission has received testimony from MSD staff, the intervenors and the rate consultant. The parties have also engaged in discovery requests. Technical conferences were held on June 13th, 2011 and August 8th, 2011 and another is planned for September 6th, 2011, where the participants and the Rate Commission are given an opportunity to ask questions of those submitting testimony. A prehearing conference for the purpose of identifying any issues raised by the rate setting documents and prepared testimony previously submitted, will be conducted on the record on September 15th, 2011. All persons submitting testimony may participate in the prehearing conference and each participant in the prehearing conference shall submit on or before September 22nd, 2011, a prehearing conference report describing the issues raised by the rate setting document and the prepared testimony together, with a brief description of such participant's position, if any, on each issue and the rational thereof. Rate payers who do not wish to 8 intervene are permitted to participate in these on the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 record public hearings conducted in six sessions beginning on August 16th, 2011 and concluding on September 26th, 2011. The Rate Commission published a public notice regarding these proceedings in the St. Louis Post Dispatch on May 20th, 2011, May 23rd, 2011 and May 24th, 2011 and July 20th, 2011, July 21st, 2011 and July 22nd, 2011. And in the St. Louis American on May 26th, 2011 and July 21st, 2011. These notices contain the time, date and location of each of these conferences and hearings. The public hearing tonight is for the purpose of permitting the District to present its wastewater rate change proposal and to permit any rate payer an opportunity to comment. We will begin with a presentation by the District, followed by a public comment period. Those wishing to speak should sign in on the sheet provided and the blue cards and will be called on in the order the names are listed. Each rate payer should -- each rate payer should identify themselves and any organizations they are representing. A few housekeeping things, please, again, if you wish to speak, please fill out a blue card. If we have too many people and normally we will only permit a speaker to go on for ten minutes, it is my discretion, the chair's discretion, to 9 shorten that time because we do have a time limit to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 get out of the building. That has not been an issue at the previous meetings but please we may ask you to hurry up. We have restrooms outside the hallway. We will go without a break. So are there any questions before we proceed? Hearing none, we will ask Mr. Jeff Theerman, executive director of MSD, to give us a presentation. MR. THEERMAN: I am going to try and do this, so I am not blocking you. I am going to move this microphone a little out of the way here. Okay. What I am going do is go through the rate proposal that we presented to the Rate Commission in May and kind of cover that and that will allow everyone to sort of get up to speed on what has been proposed for the rate change. First of all, a little bit about MSD. We are two utilities in one, a stormwater and a wastewater utility. We serve 525 square miles, that is all of the City of St. Louis and about 80 percent of St. Louis County. We were created in 1954 and at that time we served St. Louis out to roughly Lindbergh Boulevard and then in 1977 voters of St. Louis County, outside of the district elected to have the District annexed another 200 square mile area or so. We are 10 now 525 square miles. We serve about 1.4 million 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 customers, about 428,000 wastewater accounts. So we are a large utility. We are the combination of 79 different sewer systems. Prior to there being an MSD, there were 79 different private and publicly operated sewer systems and treatment plants that served the region. A lot of the region had no treatment at all and since the '50s MSD has assembled those into a single large system. While St. Louis is certainly not one of the biggest cities in the country, we have the fourth largest sewer infrastructure in terms of miles of pipe in the ground. We are behind New York, Chicago and L.A. And roughly we are the same as L.A. in terms of miles of sewers buried in the ground. And that is a problem for us because we are not nearly that size, that scale. So where L.A. has about five, a little more than 5 million people they save to cover those costs, St. Louis with 1.4 million customers has a disproportionately large sewer system to maintain. About 6,700 miles of the pipe in the ground is wastewater system. This is separated into two different kinds of systems. There is a combined sewer system, that is the way sewers were built in 1800s, stormwater and wastewater flow together in one pipe system. This is what exists in the City of St. Louis 11 and in 22 neighboring municipalities. And then there 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 is 4,700 miles of sanitary sewer system. This is the more contemporary design, where you have wastewater flowing in one pipe system and stormwater flows in a separated system, a different set of pipes. MSD operates seven treatment plants and we treat about 370 million gallons of wastewater a day. To give you an idea of what that means, consider a box whose base is a football field, to fill it up with 370 million gallons of water would make that box taller than the Gateway Arch. So we are treating a lot of sewage each and everyday in our seven treatment plants. We also operate about 3,000 miles of stormwater system. This is in the area where the sewers have been separated. Those stormwater pipes take drainage away from the area and into neighboring creeks and rivers. The wastewater -- the rate change proposal we have given to our Rate Commission is a wastewater rate change only. So we are going to be dealing with the combined sewer system and the wastewater part of the separated sewer system. There is no change in the stormwater rates in this proposal because our stormwater rates are presently in litigation and it didn't make any sense to do anything with those while this litigation continues until it gets resolved. So the wastewater 12 -- the change we are making, we are proposing, is only 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 about the wastewater charges. It is a four year rate plan that goes from July 1st, 2012 through June 30th of 2016. There would be a rate increase in 2012 on July 1st and every July 1st after that through July of 2015 with no additional increases proposed during the year after July of 2015 through June 30th of 2016. Currently the average single family bill is $28.73 and everyone's bill is different. It is based on your winter quarter water consumption. We do that in order to try and eliminate lawn watering or car washing that will make your water bill higher but doesn't really mean the amount of water that gets in your sewer system. Your winter quarter water use, that data is provided to us by Missouri American Water, City of St. Louis and the City of Kirkwood and we use that to generate wastewater bills for our residential customers. Commercial customers pay by volume as well, they pay on a monthly basis, a very similar rate design as the residential. There are five drivers that are really the reason for this rate change proposal and the largest one is right on top. Our regulatory requirements and I am going to discuss that quite a bit in a minute are our driving cost for capital improvements that are 13 necessary in the MSD system. There is also the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 increase use of debt financing. We are proposing to use debt financing for these capital improvements to try and keep wastewater more manageable. There are still steep increases that are proposed but the debt helps keep those more manageable. We have lost some customer base. As time goes on St. Louis City and County's number of customers is declining at a 1 percent rate. There is declining water usage primarily because of water conservation and then, of course, everyone understands the economic conditions we live in. The rate proposal would be for a four year period, 2013 through '16 and we are talking about our fiscal year '13 through '15 that starts July of '12 and so forth. A billion dollars, a little over a billion dollars of capital improvements on the combined and separate wastewater sewer systems. We are proposing using $949 million of debt financing in terms of using revenue bonds. And all proceeds of that debt financing would be used for capital improvements. We are not proposing to use any debt for day-to-day operations of MSD. Also during that four year period, we have an estimated $364 million of operations and maintenance cost. And $359 million of debt service. That is debt service not only to cover 14 interest and principle payments on the debt we are 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 proposing to use, but also on the debt we already have. We have about $630 million of bonds currently outstanding right now. Okay. So regulatory requirements. Four years ago in June of 2007, the Environmental Protection Agency and the State of Missouri sued MSD for alleged water violations of the Clean Water Act and those manifest themselves into really two things. Combined sewer overflows and separate sewer overflows. Over that four year period we have negotiated a settlement agreement and that settlement agreement includes a 23 year schedule for compliance, an estimated $4.7 billion of required capital improvements, the elimination of sanitary sewer overflows, the abatement of combined sewer overflows, and I am going to get to more of that in a minute, that will take an explanation. Additional sewer system maintenance and repair, reductions in basement backups and continued investment in the infrastructure. And that's important because if we don't reinvest in this infrastructure, it's like any other infrastructure, like roads and bridges and other forms of infrastructure, if we don't reinvest it will fall apart and will lead us right back into the situation 15 we are in right now. There is also regulatory 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 requirements that are not related to the settlement agreement and those take the form of additional treatment at our treatment plants that is required by the regulators. We are having to add disinfection at our treatment plants and those bring with them additional operating costs. I want to point out that this settlement agreement is not final yet. It is in a period of a 30 day public notice period and you can weigh in with comments about the settlement agreement, the Consent Decree is what it is called, on the Department of Justice website, it is a federal settlement. And what I have shown you there on the bottom of this slide is our website, if you go to www.stlmsd.com, you can get to a link to their website, it is a little easier address than the Justice Department website. You can look at the Consent Decree itself, the settlement and also learn how to comment on it if you like. Tonight is really important for our Rate Commission process and for the Rate Commissioners to know how you feel about things but commenting tonight does not mean you're commenting to the Department of Justice about the settlement agreement, that has to be done through their process. Okay, a little bit about the overflows. And this 16 is not intended to be any eye test for you. This is a 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 map of St. Louis City and County and the green shaded area is the city and near county and that is a combined sewer system, that system again, is a series of pipes that are designed to carry stormwater and sewage in one pipe. During dry weather flow all the flows in that area go to a treatment plant and get treated completely. But in wet weather, the amount of rain that comes into the system overwhelms the capacity of the system and there is 199 different locations where sewage overflows from that sewer system. It overflows into the Maylene Creek, into the River Des Peres and into the Mississippi River. And you have that presentation with you at your seat. You'll see, if you look closely, a 199 green dots. Those are all combined sewer overflows. They are permitted under the Clean Water Act but they have to be abated and that means you don't have to go and separate the whole system out because that is prohibitively expensive but instead you have to construct measures that will reduce the amount of sewage that is overflowing into those water bodies. And so our proposal has about a $2 billion program for dealing with combined sewer overflows and that takes the form largely of storage tunnels that will capture 17 the water so it doesn't overflow into rivers and then 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 when the rains are over we will pump it out of the tunnel and take it to treatment plants and completely treat the sewage. That program will reduce the number of overflows from those 199 locations from about 50 times a year, down to about four, for all the receiving streams except the Mississippi River. The Mississippi River we are trying to tackle with green infrastructure improvements in the city and that is a different approach. Trying to the reduce amount of impervious area and trying to build features that will hold water back from the sewer system and keep it from rapidly getting into sewers and causing overflows. And there is a lot happening with green infrastructure. We can talk about that if you would like more on it. It is sort of taking advantage of the vegetation and green approaches and porous pavement to try and hold water back in the system. Okay, outside that green area, you see a whole lot of red dots and this is now the separated area, there is a wastewater system and a stormwater system. During dry weather all the wastewater in that unshaded area is going to complete treatment at our treatment plants. But when it rains, imperfections in our sewer system and inappropriate connections in the private 18 side, the laterals and connections to our sewer 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 system, allow additional rainwater to get into that system and it is not designed to carry a lot of stormwater. What ends up happening, we have large rains and water is getting in there and the capacity is taken up and you have overflows. So on that map you see about 200 little red dots. And the Clean Water Act says all of those have to eliminated, they are illegal and they have to come out. So that is in essence the other half of the program. And so this is sort of like a shotgun. We have problems everywhere, not just in the city, it exists throughout the area. And you either have a combined system that needs be abated or a separate sewer overflow problem that has to be stopped, eliminated. This is a shot of sort of a general table of our capital improvements over those four years that we are proposing and it's roughly a quarter billion dollars of capital improvements each year on average. There is a lot behind this slide, all of the projects have been identified, all of the projects have been estimated and scheduled. And that has been provided to the Rate Commission as material to this rate case and you're certainly entitled to see any of that. This was done just to sort of streamline the presentation because there is a lot of detail 19 behind this. There is also operating costs. These 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 are our operating costs for each year, that fiscal '11 is the year we just finished. It costs about $134 million to run the day-to-day operations of MSD and we are trying to keep those costs as stable as possible. We have increases in our costs, primarily with the asterisk years, those increases are occurring because of additional requirements from a regulatory perspective that are influencing what we do as a utility. We do some of this work ourselves, with our in-house staff and also some one time projects that are included in those estimated budgets. This gives you an idea of what is happening with wastewater bills, the blue bar chart is MSD's historic bills and those are monthly costs in dollars per month. And again, the current average residential customer is paying $28.73 a month. The red line is the National Association of Clean Water Agency's survey of major utilities in the country and what they pay on a monthly basis. And you can see the same dynamic happening throughout the country, additional investment is needed in infrastructure, utilities are raising rates and you see that curve start climbing more and more rapidly to cover those costs. This is the proposed residential bill and there is companion 20 material in the rate proposal about commercial. So I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 don't want anybody to walk out of here thinking commercial is not included, all of our customers will pay any increase that gets imposed. For the average residential customer you see how these rates go up each successive year. This is on the commercial side, not only do they pay a volumetric rate, similar to what residential pays, but if they are discharging a higher strength wastewater there is a surcharge because their wastewater is more difficult to treat and there are additional charges to commercial and industrial customers because we regulate them. We are a regulator to those customers and so we have costs that we pass along strictly to the commercial and industrial customers and that is included in the rate proposal. Okay, this slide is intended to give you sort of the two ends of the spectrum in terms of how to fund this program. On the left side, actually your left, is the proposal I have already talked about. So a billion dollars of capital improvements, using $945 million of debt financing and well, you see what happens with the average residential bills, what I already showed you earlier. And that is what we proposed, using debt financing helps mitigate the 21 rapid rise in rates. I know from where you sit it 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 doesn't look like it is mitigating much but let me show you the right side. You can also fund this program strictly with cash. We are not recommending that. A cash finance approach would immediately raise rates to $73 month and then after that rates would tick up sort of in an inflationary pace. And that is the difference between using debt to finance these improvements and not. Now, the right side in the long run, in pure dollars, is cheaper, you don't pay interest. But the left side is really, in our minds, manageable or at least more manageable than what you see on the right. And there are an infinite number of possibilities in between, you are just changing the mix of how much you borrow and how much you pay in cash. Okay, real quick next steps. Our Rate Commission will be presenting a rate report to our Board of Trustees in late October, so this process isn't done, there is a lot of deliberation that still remains. The Board of Trustees, when they get that rate report, is not able to take any action at all for 45 days. And that is intended to allow them to deliberate on the report, its contents and review the report in context of some requirements that our required in our 22 charter. There are five tests that have to be 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 satisfied by the rate report. After that, if those five tests are met, and these are things like, is the rate sufficient to cover bond covenants, is the rate sufficient to deal with regulatory requirements, is it fair and equitable, those kind of things. If those five tests are passed, then the board is obligated to implement the rate that has been recommended by the Rate Commission. And they could take that measure, that tentative authorization in December at the earliest. In Missouri, in order for a municipality to issue debt, you have to go to a vote, a debt authorization vote. If we were to move forward with what we have recommended with 945 million, we would be coming to the voters, asking permission to use that much debt. And depending on the outcome of that election, then you would see the board making decisions about which way to go. The debt is authorized, you can use the rate structure that is appropriate for that debt authorization. And the first rate increase would occur in July 2012. This is based upon what we propose, certainly the outcome of the Rate Commission process is undetermined, so some of this could change. Now with that, I am done. And I am available to answer questions if you like. 23 MR. KOENEN: Let me point out that all of 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the testimony, all the things we hear tonight, are being recorded and they will be transcribed. And I also apologize there is a very good chance I will mispronounce your name when I say it. When I say your name if you could please stand up and we will bring a microphone to you. That will make it easier for everyone else to hear and for the young lady doing the transcription. Mr. Charles Meador? MR. CHARLES MEADOR: Yes, sir. MR. KOENEN: If you could stand and we will bring a microphone to you. MR. CHARLES MEADOR: Thank you very much. I have several questions but some of them have been answered already in your presentation. I guess the other questions I have are this -- you want to use profits to pay for the new infrastructure? MR. THEERMAN: MSD is not a profit-making enterprise. We're a government created special district. We are chartered under the Missouri constitution, so there is no profit, there is no -- nothing that you would see in an investor or utility like Ameren or Laclede Gas. We are a government entity and we operate on a balanced budget. MR. CHARLES MEADOR: So there is no -- 24 MR. THEERMAN: There is no profit margin to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 work within. MR. CHARLES MEADOR: No bonuses paid to the executives, any of that? MR. THEERMAN: No. MR. CHARLES MEADOR: At the end of the five year term or four year term, will this increase be eliminated? MR. THEERMAN: The sad answer to that is no. In fact, we would anticipate by the end of the decade wastewater rates would be in today's dollars somewhere in the $80 a month range because there is again, $4.7 billion of improvements to make on the system, so rates will have to continue to rise to pay for these capital improvements. MR. CHARLES MEADOR: So isn't this limit sort of a false leader? MR. THEERMAN: No, it's a four year window but understand, for us to predict what rates should be for a longer period involves lots of assumptions that may or may not prove to be true. So about a four year body of time for rate cases is appropriate in our minds. MR. CHARLES MEADOR: So it will never drop again? 25 MR. THEERMAN: Well, I won't -- I guess 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 never is a long time but there hasn't been a period in my career where the number of requirements have declined, so I think it is reasonable to assume over time you will see more environmental regulation and not less. MR. CHARLES MEADOR: All right, thank you. MR. LANCE LECOMB: Hi folks, I am with MSD. I apologize, we ran out of copies and we went upstairs to make some more copies of the presentation and we have had issue with the copier there, so if you did not get a copy of the presentation and you would like one as soon as possible, either see more or someone at the table before you leave and we will get that to you either through email or the postal service or if you wish, as well there is a copy of the presentation on our website, www.stlmsd.com. And they have some notes that Jeff was speaking from on there as well. So I just wanted to clear that up first and for most and we apologize for not having enough. MR. KOENEN: We also apologize for the lack of chairs, we have more people at this meeting than at the first three combined. Mr. John Turner? MR. JOHN TURNER: Yes. Good evening. I guess my concern is that I'm not sure that MSD is 26 doing an adequate job with the resources they have 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 now, let alone entrusting them with a bunch of more money. As an example, I am a resident of Fox Lake subdivision. 35 years ago it was built and the sewers all go into the, quote, lake, which is made out of concrete. It is roughly -- well, bigger than a baseball field, smaller than a football field. Anyway, I went to the association meeting last fall because I looked at the lake and where the water enters it's about 6 inches deep. On the other end it is like 12 feet deep and if the lake gets up high enough the water overflows in the Cold Water Creek. I asked them about that and they said, you know, the dues that everybody is paying, $125 a lot of them can't afford that being senior citizens. We asked them, MSD about it, even though we gave them a stormwater treatment plant they refuse to maintain it and their answer at least was hearsay to me, was because it is your lake, so you maintain it. As far as stormwater, not stormwater, wastewater, they have been out to my house in 35 years one and a half times to empty out the -- I guess what is the polite word, I don't know but two guys brought out the honey wagon one day and then there was another guy who came out there trying to find where the sewer accesses were 27 because it was all overgrown with grass and everything 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 else. Well, I planted a Scotch pine there so instead of having to dig the sod up, you can just move the needles. The next day there was an X on it, that was the last I saw it, but a street of flooding homes I think they might have gotten two or three. But basically, I mean, I am wondering if we owe them anything. They are doing no service. They are not even maintaining, you know, a stormwater overflow that we gave them for free. My proposal is if they want to refund the 35 years that the homeowners and I have paid them every month and through taxes, we would be happy to take over it ourselves, if you don't care to do anything about it or if you tend to leave it for what, you said you got stuff, you know, well, another 35 years, another 125 years then have a bond issue and do something about it when it is beyond repair. That is my statement. I think basically, I mean, they haven't exhibited, at least in North County, that they are doing the job adequately, we don't even have -- necessarily want to trust that management group with a billion dollars. Thank you. MR. THEERMAN: I guess I will just point out, again, there are wastewater and stormwater rates. And the stormwater rate structure right now is what it 28 has been in the past. We attempted to impose a new 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 rate structure that has been struck down by the courts and it is presently in litigation. So it is important not to mix the two. You pay relatively little for stormwater, 24 cents a month on your bill for stormwater and you pay some taxes. And we have pared down our stormwater efforts to fit with what the revenue stream is. With respect to detention basins in subdivisions, I don't know about your particular case but in general, they were always deeded to the subdivisions for maintenance and we can certainly talk about your particular situation before we leave and see what we have there. And just for clarity, the wastewater and stormwater funding is separated. MR. KOENEN: Next, Patty DeGonia? MS. PATTY DEGONIA: Right here. Can everyone hear me? I usually talk so loudly. Anyhow, I just have a little story to tell you. I was about 5 year old, I am walking with my mom and she has my hand and we are going to a building and inside, the outside of this building there is a man and he is standing there with a brown suit and a brown brimmed hat and he is smoking a cigar and right beside him is a tall, thin man. As we entered the entrance of the door, the man had a big piece, a big ball of dollar bills in his 29 hand and he took one off and he handed it to me. And 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the man in the brown suit said a dollar for your vote and my mom said, she took the bill from my hand and she gave it to the man and she said you don't have enough money for my vote. So this will come up a little bit later in the story, into my speech but I have gone to many of these meetings, I have met this gentlemen, I met this gentlemen, I have talked to a number of them. And this is window dressing folks, nothing is going to happen, it doesn't matter what kind of impact we have. No matter what we say, we were at the water runoff thing, we had lawyers there, we had people there, we had poor people there, we had rich people there, it didn't matter, it went through and we had nothing to say about it. So this is just window dressing for us. And such is the case and you'll probably say why is she talking about this but I will bring it up at the end, we just did this for Ameren UE. We went to all the meetings, they showed all the programs, all of what they were going to do, the repairs they were going to make. And unanimously, by Public Service Commission, they got their $8.00 a month increase. This is where your $8.00 is going. Now we are in a public library, everybody can trot upstairs and find this on the internet, it is under a 30 number of different places but I will get right 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 straight to it. If you pull up the St. Louis Post Dispatch on August 5th, then you put in groups potential influence on bills is scrutinized. Under that, this is just the end of it, Americans -- excuse me -- Ameren's contribution to the American Legislation Exchange Council, the right wing group that crafts free market legislation and republic control states, this is where your money is going, to the man in the brown suit. This money isn't going for repairs, I haven't seen any repairs around my house. I haven't seen any repairs when I drive down the street but you can bet that these people have certainly seen our $8. Now, you'll hear them say that there is a special fund that this money comes from and I have never seen an Ameren UE pickwick or a (inaudible) so the special funds is coming from the rate payers, me and you. It is time we start paying attention folks. Ameristar, Ameren UE, pays their taxes in protest, which means that it goes into escrow at the end of the year and they negotiate how much tax they pay. I don't know if that goes for MSD, I haven't found that out, apparently this is coming in. Maybe I will find this out at the end of the year. Small companies are paying more and you and I are 31 paying more than some of these big companies. It is 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 time we start acting as smart as we think we are and paying attention to what is going on around us. Only our arrogance will let us think that the world of greed in the business world has changed. It is time we start paying attention as the outcry is getting stronger. Everyday, if you listen, you will hear we have had enough of the greed. Are we smart enough to see the signs and make changes before the disaster happens, I don't think so. Thank you. MR. KOENEN: Let me make three quick points. One, MSD is essentially a unit of government. The MSD Board of Trustees are appointed by the county executive and the Mayor of St. Louis. You are all stockholders in MSD, just like you're all stockholders in the community college and other area wide organizations. The Rate Commissioners, we are not part of MSD, we get sewer bills too. We are representing different groups in the community. I represent the West St. Louis County Chamber of Commerce. We have people from the League of Women Voters, we have people from the Associated General Contractors, RCGA, and other groups in the community. And it is our job to weigh all the information we get and make our best recommendation as to what is fair 32 and reasonable to MSD, that is what we will be doing. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Thank you. Mr. Johnnie Greenlaw? MS. JOHNNIE GREENLAW: It's a Miss. MR. KOENEN: I'm sorry, Ms. Johnnie Greenlaw, my mistake. MS. JOHNNIE GREENLAW: Good evening. Two points that came up when you were speaking is, that if you're a government agency, than do we need to streamline your organization to make it more effective like society is doing our regular jobs and laying off people claiming they are streamlinin, making it more leaner and meaner but that is just on the side, I thought you would appreciate that. Right. Well, what they use -- my former job they said they were empowering the people and that usually means more work and less money. But what I have a complaint about, I have been in my house for over 20 years, I was not having any sewage backup in the basement, they are doing so much construction in North County and hooking up to the old systems like you said and now I start having backup, sewage backup, not storm drain. Okay. And that is not fun. What I am wondering is, to help the financial situation since each subdivision is supposed to take care of themselves, you got this agreement, we supposed to do so much, but why can't 33 these new builders, these contractors, when they build 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 these new subdivisions, crowding out an area that was once a wooded area that could soak up a lot of stuff, why aren't they given the costs to improve the hook up, so that it can handle the volume, you know, you have a suggestion? MR. THEERMAN: I would love to respond, I don't want to step on you, so go ahead. MS. JOHNNIE GREENLAW: No, you can go ahead and respond. MR. THEERMAN: Okay. New development within this region is permitted by MSD. And new development has stringent stormwater requirements, so to the extent something new is going in, in your area, there is a whole lot more required of those new developments than there used to be in the past. And that is not only for stormwater quality -- or quantity but quality. If you're having basement backups of sewage, you're not responsible in your subdivision to do the maintenance of that, you own the lateral from your home to our pipe. And then after that it is MSD, so we want to know about those problems and try to address them. This program is designed to address those kinds of problems but there also maybe something that has happened recently that is causing you to have 34 backups that we need to investigate. So again, there 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 is a difference between stormwater and wastewater. A wastewater system is not your responsibility, other than your home lateral, we have the rest of the system start to finish. On the stormwater side there are differences in who is supposed to maintain what and depends on the area of concern. MS. JOHNNIE GREENLAW: Well, three times this spring I have had the plumber out and he did that, what you call the snake thing, all the way to the street. He said he went all the way, it was supposed to have been clear. The next time it rained, backup again. MR. THEERMAN: Maybe before you leave we can talk with you before you leave and get your address and look into that. MS. JOHNNIE GREENLAW: Okay. Now, I am in that section that is right here, the river and 270, Riverview over there where that water plane is but a little north of that, are we a part of that city one, where it is combined or are we in the section where we are separate? I am right at Lindbergh and 367, right over there. MR. THEERMAN: That should be separate, should be a storm system separate from the wastewater 35 system over there. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MS. JOHNNIE GREENLAW: Okay. MR. THEERMAN: You're north of 270? MS. JOHNNIE GREENLAW: Mm-hmm. MR. THEERMAN: Yeah, it's a separate system. MS. JOHNNIE GREENLAW: So our subdivision is supposed to maintain that pipe up underground, if I understand you, correct? MR. THEERMAN: On the stormwater side, the gentlemen here was talking about a lake, a basin for the subdivision -- MS. JOHNNIE GREENLAW: Well, we got creeks all around there supposed to be getting those overflows. MR. THEERMAN: Typically those detention basins are maintained by the subdivisions. The stormwater pipes, the inlets in the street, those are MSD's to maintain typically. MS. JOHNNIE GREENLAW: Okay. Thank you. MR. KOENEN: And folks we have a few seats on the far side of the room if you would like to sit down. Mr. Richard Dorsey? MR. RICHARD DORSEY: Thank you. My name is Richard Dorsey, I'm an attorney. And one of the things I want to know is, before the Rate Commission 36 looks at the MSD proposal to raise rates, would you 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 please make them more effectively collect the delinquent accounts. Every Wednesday I sit in court next to the lawyer for MSD, one of the lawyers, because there are several who represent them both in the county and in the city. This Wednesday there are 46 delinquent account cases on that docket. In talking to the gentlemen, he says that MSD handcuffs him in his ability to collect the debt. First of all, when an account is placed with him, he is only entitled to collect the amount that is placed, if the case goes on two, three, four months and there are more delinquencies, he is not allowed to collect those additional delinquencies. He is only allowed to collect the amount placed. Further, when he gets a judgment, if he cannot collect that from the people voluntarily or through a wager bank account garnishment, he is not allowed to execute on the property and have the property sold to pay the bill. Now, those judgments are good for ten years, yes and that lien is good for ten years but he is not allowed to revive those judgments either. So if the property is not sold or refinanced during that ten year period, that judgment goes away. MSD, on its own website, has over $35 million in delinquent accounts as of 37 June 30th, 2010. Also, they have a reserve for 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 provision for doubtful sewer service charge accounts of $10 million, as of that date. If MSD would just more effectively collect the amounts that are due to them, they would not have to raise the rates as much to those of us who do pay our sewer bills. And that is my comment and I think they have to more effectively collect their delinquencies before they come to those of us who do pay their sewer bills and ask us for more. MR. KOENEN: Joe Blasingame? (several people from the audience asking for a response) MR. THEERMAN: If you want me to comment I will. Well, the gentlemen makes a good point, we do have difficulty collecting sewer bills. And the difference, of course, is the nature of the utility. If you don't pay your water bill, your gas bill, you get the service turned off. MR. RICHARD DORSEY: You have that right under state statute. MR. THEERMAN: Let me finish. Logistically, it is very difficult to turn off wastewater service. It involves blocking a sewer and then having to reestablish it as soon as it gets paid. So we use other methods, we employee collection agencies, we 38 employee attorneys, we use liens. Those are 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 admittedly not a very effective means of getting some of this paid. So we are continuing to try and improve the process of getting bills paid. The issues you have raised with the attorneys you have spoken to, I don't know that I can address those offhand at this time but we are trying are level best and it has been raised in the Rate Commission process that more effective means of collecting past due sewer bills is in order. MR. RICHARD DORSEY: You have statutory authority to shut off the water to the property by state statute to collect your unpaid sewer bills, so you don't have to go out and dig them up then. You also have a statutory authority that makes your lien the equivalent of a tax lien on the property, which puts you in a priority situation over the mortgage. And if you started the execution process and notified the mortgage holder, chances are the mortgage holder would, in fact, pay that bill, so that they didn't lose their lien on the property. You have the statutory authority. Now, one statutory you had, you lost. Your lobbyist slept at the switch and that is that apartment owners and owners of rental property are no longer responsible for the entire bill, they're 39 only responsible for 90 days of the bill. Whereas 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 they used to be responsible for the entire bill of the property. A state representative from St. Charles, who owned rental property, snuck that through two years ago and was able to get it through. But MSD could go back to the legislature and get that statute repealed. You have authority, it is the question of whether you have the backbone to use the authority or not. MR. KOENEN: The Rate Commission is looking at that but also remember there is a public health issue, if you start turning off water and sewer system in too many homes, that's creating a health hazard not just for the family in that home but for neighbors. That is something we are very aware of. Mr. Joe Blasingame? MR. JOE BLASINGAME: Yes. My name is Joseph Blasingame and if the Commission doesn't mind I would rather sit to read this here. I call it a battle of fairness and who should pick up the pieces. The following several paragraphs are all taken from local media entities and sources. Tying them together will help give an overview for the Commission to consider. Because the Metropolitan Sewer District failed to upgrade its system for decades, it has been 40 forced by the U.S. Environmental Protection Agency to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 spend more than $4 billion in the next couple of decades doing what it should have done all along. Between 1999 and 2008, the median household income in Missouri dropped by 14.6 percent, the steepest drop amongst all 50 states. The national drop in median household income was 2.5 percent. Missouri dropped nearly six times faster. The median household income figures were compiled from Census Bureau data by the Robert Wood Johnson Foundation as part of the report barely hanging on middle class and underinsured. That is the end of the direct verbiage of others. It's easy to see who dropped the ball. With at least 7,000 occurrences between 2001 and 2005 of the overflow of raw sewage in homes, yards, streets, parks and even playgrounds, the EPA had to get involved. I fully realize that St. Louis MSD has the fourth largest sewer system in the United States. I fully realize they have an area of 525 square miles to contend with. I know their executive director last year received a salary of over a $193,000. I fully realize too, they are leeched to every homeowner and are guaranteed that never ending flow of cash. As a small business operator I envy that position. But what I don't understand is, why didn't they budget into their 41 accounting practices the concept of continual upgrade? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Did they not realize that funding infrastructure would just continue to erode, to decay without reinvestment and to their own arteries would have a cost at the end? If this was a small community sewer district that provided for but a smattering of people, then I would be more forgiving but this is a major company in the St. Louis area and they should show they have community responsibility to not only their shareholders, which is us, but all of us customers. So now they want to give us a 64 percent increase over the course of 4 years, who dropped the ball, they did. These increases they are wanting just seem to be over the top at this time in our economy. I don't begrudge any individual or company for making a fair profit and that's a driving force in our country but I do challenge those that overstep their bounds and are willing to reach too deep in the pockets of others, especially when the pockets they desire to rob, have little left to give. Thank you. MR. THEERMAN: I am in complete agreement that our sewer rates should have risen in the past and they should have risen significantly. In the 1970s, in the 1980s sewer bills were single digits per month, $3, $4 a month and that shouldn't have happened, those 42 rates should have gone up to fund infrastructure 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 improvements all along the way. We litigated our rates through the late '80s all the way up to '99. Our wastewater rate was in litigation for over ten years and we were unable to effectively raise rates during that period. Since that time, we changed our charter, we created a Rate Commission, we have the ability to issue district wide revenue bonds and that all occurred in 2000, those charter changes, and since that time you have seen the District do over a billion dollars of improvements in the system itself. You have seen the District issue over $600 million of revenue bonds in order to pay for the those improvements. So I don't disagree with what you're saying with respect to that, to the past, there is a lot of reasons why rates didn't rise the way they should have in the past. Since 2000, after the rate issue had been resolved, we steadily tried to get caught up on the infrastructure. And I might add, this is not unique to St. Louis. These infrastructure issues that exist with overflows and sewer system required investment, is a national problem. MR. KOENEN: Mr. Steve Fink? MR. STEVE FINK: Oh, I would like to waive my concerns because they have already been addressed. 43 Thank you. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. KOENEN: Okay. Sharon Wells? MS. SHARON WELLS: Good evening, I am Sharon Wells and I am an AARP congressional district coordinator for congressional districts one and three which would be Congressman Clay and Congressman Carnahan. I am here tonight representing approximately 746,000 Missouri residents who are members of AARP. AARP believes that this proposed 60 percent rate increase could result in a significantly negative impact on residential customers. Many of whom are over the age of 50 and on fixed incomes. This proposed rate increase will add to their already financially strained situation. Far too many are already having to choose between taking necessary prescribed medications and purchasing groceries. And that is not taking into account the overall costs of rising gas prices, as well as the cost of living cap on their social security benefits. The rate sewer proposal assumes, includes assumptions that the St. Louis economy is going to get worse. These assumptions shield MSD from another economic downturn. At the expense of making the rate increases even higher. Struggling households would face a double whammy. The recently signed consent agreement with 44 the EPA would require several specific projects to be 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 completed over the next year or two. But after that period, the regulatory mandates are subject to feasibility studies and plans that are still to be developed and refined before submittal to the EPA. Thus, MSD sewer rates should only be raised in recognition of specific projects that the public can be assured will be completed in the next year. When rates could be raised so dramatically, transparency, and accountability, require tying the increases closer to the actual completion of the specific projects. A five year rate plan stretches the assumptions too far in the future. AARP is interested in working together with MSD and other intervenors to help fashion a compromise in this matter that will be more acceptable to the public. Thank you. MR. THEERMAN: She is behind the column. Just make a couple of comments. One of the things that -- those issues have been raised to the Rate Commission, I know that is part of the consideration and there are early action projects that if you go to the Justice Department website and look at that the Consent Decree, you'll see there is early action projects that are included and those early action projects that are already funded in a prior rate 45 increase. So those projects are already defined and 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 funded. The reason we are coming forward with a rate proposal that is four years in length is because we are not going to deliver a -- per the Consent Decree, we are not going to deliver a series of projects to eliminate all of those constructed sewer overflows until the end of 2013. And then EPA will have to approve it. And so delaying starting all of these numbers that we have shown you have real projects with estimates and schedules behind him. So those already exist and those are already identified and we know with certainly they have to be built to get rid of the overflows. By delaying, we have the prospect of stacking work on top of each other and increasing the risk of either we don't get things done in time or that costs are even less manageable in the future because this is a 23 year program that is full of construction for all 23 years. So we are certainly mindful of the level of clarity in the rate case and making sure that are assumptions are reasonable assumptions but we don't want to delay getting going because it has the effect of sort of compressing that schedule and putting it off for tomorrow is somewhat the reason we are in the situation we are in today. MR. KOENEN: I might point out the Consent 46 Decree includes penalties if MSD doesn't get certain 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 jobs done by certain times. UNIDENTFIED SPEAKER: Who is going to pay it? MR. KOENEN: That is a huge incentive to get it done. Verlene Mullen? MR. VERLENE MULLEN: Thank you and good evening everyone. Most of my concerns have been addressed but one thing I want to mention is it cost me more to flush my doggone toilet then it does for me to take a bath and I think that is just plain old irresponsible on your part. It took you three years to have a sewer backup that was behind my house. I had to call the health department, I had to call our municipality, I called the sewer department, I finally called Channel Four, after calling Channel Four your people came out. And that is absolutely ridiculous and irresponsible. There was a time when I first started, when I first bought a home it cost me $11 and something every three months, now it is costing me almost $30 a month and you want to charge me a $100 -- when you get through it is going to wind up $100 a month. And I personally cannot afford it. I am retired, I am on a fixed income, my medication cost -- I am just so angry right now I could spit and this job 47 you all are talking about doesn't even make good sense 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 to me. Now, one thing one woman said is cut your salaries, I had to take a freeze in pay, my insurances were hiked, hike your own, pay your own debt. Excuse me, I am so sorry. Pay your own insurance, you know, don't dig in my doggone pocket to do what you should have done years ago. And that's all I have to say because I'm too mad to keep talking and if I keep talking I'm going to say something I might be put in jail for. UNIDENTFIED SPEAKER: Your response, your response? MR. THEERMAN: My response is MSD is doing its very best to operate efficiently, you waited too long for us to take care of your issue. MR. VERLENE MULLEN: I did not -- it took my three years for you all to -- MR. THEERMAN: No, no, you misunderstand. I'm taking that on, that is our responsibility, you shouldn't have had to wait that long. MR. VERLENE MULLEN: At all. MR. THEERMAN: You had to wait too long. MR. VERLENE MULLEN: I had to call the health department. MR. THEERMAN: Obviously, I don't know the 48 circumstances of your particular situation. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. VERLENE MULLEN: I didn't know your name. MR. THEERMAN: But three years is too long to wait. But MSD has been making adjustments in how we operate and our costs. And, you know, the same things that happens in private sector companies has been happening at MSD. We changed our pension, that's a big deal right now. Defined benefit pension plans, we changed that at the beginning of this year for new employees. They have more of a private sector style pension. We are trying to reduce costs by controlling our staff and making sure our staffs don't get too big. So our treatment plants operate in a highly automated and highly effective manner with low costs. The collection system is a tough thing to crack. I mean, it takes a lot of people and a lot of effort to improve these sewers and to stop basement backups and for overflows. The very same things you see happening in private sector and probably in the places you work, are happening at MSD trying to control costs. MR. VERLENE MULLEN: Can you address the fact that I flush my toilet and it costs me more to do that than it does to take a bath? MR. THEERMAN: Well, I can tell you that 49 water rates and sewer rates are going to track 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 together and be lower, there will be another increase. Water providers go through a rate increase similar to what we do. (audience talking over one another) MR. KOENEN: Folks, folks. MR. THEERMAN: I can tell you that maintaining sewers is often more costly and providing sewage treatment services is often times more costly for a couple of reasons. We tend to be the deepest infrastructure. When we walk into a sewer we have to get everybody else out of the way to get into it. Everything flows by gravity through these pipes. We tend to operate on the treatment side with a product coming from you that requires a lot further to go to be treated and released back into the environment than the water side, who is taking water out of a river and treating it to make it ready for public use. So, I mean, there is a lot of differences and over time you will see water bills rise above sewer and vice versa and there is lots of reasons why. MR. VERLENE MULLEN: I am afraid I have never seen my water bill rise above my sewer. But, sir, may I have your personal phone number to your office when this is over with because I have another complaint, the same one that you all did three years 50 ago is still not rectified. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. THEERMAN: I would be glad to talk with you after the meeting. MR. VERLENE MULLEN: I would appreciate it. MR. KOENEN: We are going to go by order of the cards. I am sorry if I mispronounce this name, Tamm Buzzetta. MR. TAMM BUZZETTA: Yeah, I want to address the fact that I have been to a number of meetings like this with Ameren, with various other utilities and I am also glad to see KMOX here it looks like, maybe they will talk to me after this meeting because I have a news story that they continually try to ignore, any way we will get into that, it's what I'm talking about here. Basically, I think most of us have been to meetings like this, where you have a commission that is supposed to decide whether or not a rate increase is worthy of, you know, passing and I think most of us also can relate to the fact we feel very powerless at these meetings because we know that whatever comments we make, will be duly ignored and the rate increase will be going through. UNIDENTFIED SPEAKER: Absolutely. MR. TAMM BUZZETTA: So that being the case, I just wanted to inform people of another way you can 51 actually get some action done, it's something me and 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 my sister have been working on and it's called Missouri Utility Consumer Relief Act. This is some proposed legislation that is on the desk of several Missouri legislators and it would basically do what the title says, it would give Missouri utility consumers some much needed relief from these unending rate increases, these multiple rate increases that never seem to end, regardless of what the economic conditions in the country are. So if anyone here would like to take a look at this Missouri Utility Relief Act, it is currently on the internet, you can find it by going to petitiononline.com, forward slash the word W-E-D-D-L-E, seven, the number seven and that should bring it directly up into the internet window you're looking at give. UNIDENTFIED SPEAKER: Give it again. MR. TAMM BUZZETTA: Www.petitiononline.com., forward slash W-E-D-D-L-E, the number seven, that should bring it up. And we are looking for as many signatures as possible, as a matter of fact, I put this up on the internet today, so there is only one signature, mine. And I am hoping we get much more because currently we need some legislation because these meetings are basically a joke and I think 52 everybody here knows they are. So I just wanted to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 pass that on, maybe KMOX will take a listen and maybe do a news story on us, I hope so. MR. KOENEN: I would like to point out there are 14 Rate Commissioners, all of the ones who are not here tonight will have access to the transcript of these proceedings and I believe we are recording them as well. We are listening to you, folks. And again, we pay sewer bills too. UNIDENTFIED SPEAKER: Show us by not taking the bill, show us you're listening. (inaudible, audience speaking over each other) UNIDENTFIED SPEAKER: Where is the other commissioners? MR. KOENEN: There are 14 commissioners, we can't all be in the same place at once because of other obligations, we are all volunteers. We are not like the Public Service Commission where they get paid. We are volunteers. So, Mr. Richard Williams? MR. RICHARD WILLIAMS: Good evening, everyone. Every couple of minutes I say collect your money and the reason I say that, I bought a house in Florissant about nine months ago and I called all the utilities and had everything changed and everything taken care of and nine months later MSD won't send me 53 a bill. So I called them again to come get my money. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 And the thing about it is that when I called them the people there were like well, that is not what I do or that is that guy's fault or something like that but you were able to send a collection notice. You were able to have collection people call my house and beat me down about not paying this bill and I have several times called to pay my bill. Now you'll probably walk up and want it all at once and I will need an armored car or have to take out another loan to get -- this is ridiculous. Thank you -- collect your money. Thank you. I hate to admit it but it's the truth. MR. THEERMAN: I'll make sure you get a bill. MR. RICHARD WILLIAMS: I don't want it all at once. MR. THEERMAN: I understand. MR. RICHARD WILLIAMS: You know, 1,200 bucks. MR. THEERMAN: Our Director of Finance is in the back, Jan, raise your hand. She can talk to you about making sure you get your bill. MR. RICHARD WILLIAMS: The attorney tried to get you to do it, you got a whole lot of other people other than me, collect your money. (audience talking 54 over each other) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. KOENEN: Folks, can we get back to the cards. We have people who have been waiting in line. Willie James? UNIDENTFIED SPEAKER: Cut some of those salaries. UNIDENTFIED SPEAKER: Amen. MR. WILLIE JAMES: Good evening. What I would like to know from you all that are here today is that, what will the proposed improvements do for those areas out in the county that use the septic tank and when it rains stormwater comes and they are constantly having to replace their septic pumps and flooding out their basements? MR. THEERMAN: You've covered a fair amount -- a little bit of territory there, so let me try and be specific. If you're on septic tanks, than you would not be getting a wastewater bill from MSD. We're not providing you a service and that septic tank is there instead of our service. MR. WILLIE JAMES: Okay. MR. THEERMAN: If you're in an area that has storm sewers and you're on a septic tank than storm sewers are a service we provide but it is not part of this proposal, that again, is part of litigation that 55 is going on and we're not doing anything with the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 stormwater rate right now. If you are on a septic tank and that septic tank is failing and you need to be connected to the public sewer, part of the Consent Decree settlement is a program for -- it is for low income customers that qualify to get them off of their septic tanks because that can be a pretty expensive proposition on to public sewers. So that is an aspect of the Consent Decree for those who qualify for it. So, I hope I answered you question. Septic tank owners don't get wastewater service and should not be getting a bill from us. If you have a septic tank and you're getting a wastewater bill from us, then by all means talk to us and we'll make sure we get that corrected. MR. KOENEN: William Kirk? MR. WILLIAM KIRK: I am William Kirk and I have a couple of questions for you. It would help me understand better if you would, given some of the past funding and how you broke it down and what kind of money you spent, you talked about how there is $600 million that we still owe on or we're paying interest on that; is that correct? MR. THEERMAN: There is about 628 million in outstanding revenue bonds. 56 MR. WILLIAM KIRK: Okay. So my question to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 you is, in the proposed rates that we have got for the future, how much am I paying on the 628 million and how much am I paying on the 945 as far as interest and that? And you probably don't have the figure here in front of you and I'm not expecting you to do math, in public, okay. But that, I hope, would be something that the Rate Commission could look at and help them appreciate what is going on. MR. THEERMAN: It is certainly broken down in the rate case in the documentation and we can make that available to you. MR. WILLIAM KIRK: The real question, at the end of the day in 2016 -- in 2012 I got 945 million and hopefully the 600 million is gone in 2016. MR. THEERMAN: There is about 16 years remaining on -- MR. RICHARD WILLIAMS: Sixteen years, okay. So then on the 945 in 2016, how much is left on that? MR. THEERMAN: That would be 30 year debt, so it will be stretching out far into the future. MR. RICHARD WILLIAMS: Thirty years, okay. All right. Just concerned, just like we are here in the country, we got a big debt problem and you're no different and I understand you're a utility and we're 57 going to live and die by what we do. That is all, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 thank you. MR. THEERMAN: I think that is the dilemma about the use of debt. I mean, when you use debt you pay interest and, you know, but the flip side, that is what I tried to show you in the last slide, if you don't use debt than you really get a whopping increase to try and get to the same level of capital investments. But all that is a discussion going on with the Rate Commission and all that is available to the public. MR. KOENEN: Mr. Jule Zach? MR. JULE ZACH: Here I am. Yeah, I got a comment. I guess all of the people here are all homeowners, we own property. So we pay these bills but some of us who are maybe lucky enough to have another house that we rent out, then I have to I get these MSD bills that keep going up. I keep beating these bills the best that I can but there is a point where I got to pass these bills, this cost, onto my renters. And I tried to have the renters in my house they are senior citizens, they are usually ladies who are retired and they are on a fixed income, social security and they don't like to be hassled with the increases of rent, so I maintain their rent for them. 58 One lady for seven years she has never had a rent 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 increase. So I can only eat some of this stuff so long then I have to pass it along. That gives me something to think about, it's just not the homeowners using wastewater but there is a lot of renters out there and there is a lot of other people in the senior homes and retirement homes. They all use the wastewater, you know, they don't go down to the river and do their business, they have to use the regular system. But my thought is this, is there anyway to take the money or the bills and spread it out over a greater amount of people because people that do rent in bigger communities, let's say a hundred unit apartments, the guy who gets the bill for that, he raises their rent periodically because people except it. So I don't know if he gets a hundred times the bill I would get for my rental property, I don't know what the ratio is but I have a harder time pressing -- you know, passing on to these retired people. So that is where I'm coming from, I'm not bragging that I own property, it's just my retirement plan is to buy a house here or there and to rent it out. But being a homeowner until those houses are paid for, that is not a great investment. So the other comment I want to make is about the bond issue, I seen that you were 59 raising a billion dollars in bonds and the way I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 understand bonds is like my little stock broker that calls me every once in awhile, he says well, A.G. Edwards or Edward Jones has got a bond issue here. Okay, what's it for, well you buy a $1,000 bond here and you're going to get that 4 percent for your bond and so all the people go and buy $10,000 bond, some people buy $100,000 bonds, bigger pension plans, so all that money that they are collecting when I buy that $1,000 bond, I send a 1,000 bucks to A.G. Edwards and then they have to -- what do they do with that money? So see, if MSD is raising a billion dollars and A.G. Edwards collects a billion dollars and they send it to you and you have to pay the interest on it, so why aren't you using that billion dollars right then that you have collected to put all these funds in the thing without -- by private investment, instead of making all of these people cough up all of the time? MR. THEERMAN: Let's stop for a second because we are recording and it is time to switch the disk and I can respond to some of your questions, if that is all right. MR. JULE ZACH: Okay. MSD SPEAKER: We have a website that has all the documents, everything that was referenced here on 60 our homepage, stlmsd.com, there is a link right on our 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 homepage that takes you to the Rate Commission information. It's a big link but all of the documents are there. Thank you. MR. KOENEN: I might point out the Rate commission is governed by the Sunshine Law, so we have to make sure this is a public hearing, that we are getting a good and accurate recording of it. MR. THEERMAN: Thank you for your patience we are back on. MR. JULE ZACH: Okay. MR. THEERMAN: So I will try and cover everything on your question but if I miss something please let me know and I will try again. MSD is recommending $945 million debt authorization. We would not issue all of those bonds at once. It would probably be done in a series of bond issues. When MSD gets debt, it does it typically in one of two ways, either a direct sale of revenue bonds and that gets sold to large institutional investors, as well as A.G. Edwards and others who then sell to clients or through low interest loans through State of Missouri called the state revolving fund and that is a revolving pool of money that is used to build wastewater projects throughout the state. That is federally funded and 61 applies to all the states and there is a pool of about 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 $30 million a year available in the SRF statewide. So there are times that MSD is a larger borrower in that and there are times when we don't borrow anything. So, in essence, you time the issuance of the debt with the projects because there are laws about how long it takes to spend that bond proceed on capital projects. You have to do that in a relatively short period of time, a few years. So what has happened in the past, MSD gets the bond authorization to a vote and then they will time the issuance of the debt in terms of authorizing the bonds to coincide with the capital improvements going on. Did I cover what you're asking or did I miss? MR. JULE ZACH: I don't understand. MR. THEERMAN: Well, think of it this way. You can take out a loan for a billion dollars but you don't have to take it all at once. And so you know you're going to build a quarter of billion dollars of work every year in the plan we have given, so you might issue $250 million of revenue in year one or of revenue bonds in year one, take those proceeds and use that to pay contractors to build the improvements and then pay it back with interest over time. Typically, long bonds, 30 years. And the next year you do 62 another bond issue, another $250 million to fund that 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 year's project list, same things happen. Maybe year three is a little bit bigger, so you're issuing $300 million of bonds and then the remaining is issued to year four to build projects. So you're trying to time the sale of the bonds that create the money to build projects, with the construction project's schedule. MR. JULE ZACH: I understand that part. But what I don't understand is that when A.G. Edwards collects their money for this -- from the guys buying the bonds, the issued bonds, is that if you do collect that $250 million for that calendar year, you have collected -- you have made up the project expenditure for that, so that money is going to go right to paying that project off. So the bond length is timed by whoever sets that timing, so that you can retire that debt over a period of years. So the 30 year bond or whatever, 10 year or whatever the issue length is, is that you pay interest to whoever that bond holder is -- MR. THEERMAN: That's right. MR. JULE ZACH: -- over that length of time. So are all of those things figured into this rate increase? Obviously, you got to pay the interest, so 63 it has got to come from some place, isn't the revenue 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 collected enough to do that? MR. THEERMAN: Right. MR. JULE ZACH: Or you have to keep raising it all the time? MR. THEERMAN: The revenue, the rate proposal includes the cost of the retirement of the bonds that are included in the rate proposal. So that is included, the interest payments -- there was a slide earlier and you may not have been here when it was up but we have calculated what we believe the debt service and principle payments will be in the rate case. MR. JULE ZACH: Well, I think we are all the victims of the cheap rates many years ago and we're paying the piper now. The chickens are coming home to roost and it is unfortunate that we have more senior citizens than ever before that have to pay that piper now. So when they were younger and working they could have paid more money at that time but now they have trouble paying it. MR. THEERMAN: That is one of the positive sides about using debt because we are building long-lived assets. Sewers last 75 to 100 years and the idea of using debt stretches the payments for that 64 asset out amongst not only today's customers but 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 future customers. MR. JULE ZACH: Thank you. MR. KOENEN: Bert Atkins? MR. BERT ATKINS: My name is Bert Atkins, I am state representative for this 75th district, which we are in right now. My question in regards to your debt proposal and the cash proposal and I understand the philosophy of trying to mitigate the shock of the rate increase, yet we are going to be, under your proposal, we are going to be spending $359 million over that four year period in debt service. Which would, in itself, probably provide a lot of construction relief for the various projects. And I get the 155 percent increase on the cash only basis. How much has been looked into more of a mix lean toward cash as opposed to debt, so we could -- that billion dollars you plan on using over the next four years, more of it would actually go into the construction projects rather than having to pay for the cost of debt? MR. THEERMAN: We run a number of scenarios but you can and there will certainly be the opportunity to do more as the Rate Commission process continues. In 2007 MSD brought a rate case that was a 65 cash funded approach, it was a much smaller rate case. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 We didn't have the Consent Decree final, we didn't know a lot of things that we know today. And that cash only approach was intended to save debt issuance for later when we really got hit with more and more to do. And so, in that particular rate case, we are talking about moving rates from the middle 20s up to middle 30's on a cash basis, no debt. And there was a significant outcry by the public in that case that caused us to go back to the drawing board and reexamine the use of debt to try and keep rates down. And that resulted instead of being a $35 a month rate with no interest payments, on that particular rate case, to a $28 rate with $275 million of debt associated with the case. So, you know, it really is a matter of how you look at it. The slide I showed in the beginning and it is in your proposals, right at the end, it shows you the two differences. There is all kinds of middle ground where you use a little more cash a little less debt and that can all be calculated and determined. MR. JULE ZACH: And the other thing, I mean, I think it was a couple of years ago, MSD was going around with forms similar to that but it had nothing to do with rates, it was more of explaining what the 66 EPA was looking for from MSD, in regards to the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 overflows, the combined sewers and the storm sewers only and a lot of those issues were then being discussed and it was also being explained that here's our options, neither of which are good from a rate payers perspective but one is certainly worse than the other and this is not really optional. We can choose, I believe, to not do anything voluntarily in this Decree but then the problem we have we are going to have EPA down here, the federal government saying this is what you're doing, this is how you're going to pay for and this is what it is going to cost. Because I know also in the last session we finally renewed the authorization for you to actually do the regulation of new construction for retention ponds and what not and collect the fees necessary to do that. So that's in addressing our comment about new construction, that was in place until the end of last year, for you to do that. Thank you. MR. KOENEN: I might point out we have had several people at other hearings who have wanted to see everything floated on bonds to lower the average monthly cost even though that adds greatly to the total cost. MR. THEERMAN: I guess I'll just say about 67 the issue with the EPA is, you're accurate in your 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 statements, they sued us and this is a settlement agreement. And we viewed this settlement as a better situation then litigating to the finale because litigating with the federal government, they have got a lot of lawyers and they don't mind paying them. And so, I think we found a program we can do but it is hard. And not doing it and telling, you know, the federal government we are not going to do it, will make it an entirely different situation. UNIDENTFIED SPEAKER: Why doesn't somebody challenge, somebody -- this has come up, it comes up all the time. Somebody -- 10th amendment issue, the EPA is not in the constitution, it is not mentioned in the formation of the constitution, in the Bill of Rights, okay. We stop sending money to the federal government for these unfunded mandates. They keep telling us what to do and we keep doing what they tell us to do. Is there somebody with the, I'm sorry, the balls to challenge this, constitutionally, because they are going to keep telling us we are not doing stuff good enough for them. You think that this isn't going to happen in the future again, we are going to have to be raising our rates again and again and again. So this is happening more with the IM240 68 program and at that time there was Attorney General 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Jay Nixon and we got on him about this, challenged him to take that to court. Unfortunately, he wrote us a letter saying he took it to the wrong court and it pretty much died. Let me tell you what federal regulations are getting me. We are all in the same boat here, folks, I have no money to spend on this and neither do you probably. MR. KOENEN: Ma'am, if we could go back to the people with blue cards who have already asked to speak. The other thing to, this is not the first Consent Decree. I have to believe that if somebody else thought they could run it by the federal government, they would have tried. UNIDENTFIED SPEAKER: They're not trying hard enough. MR. KOENEN: Thomas Chatman? MR. THOMAS CHATMAN: My question, concerns are more personal, everybody kind of, you know, well, anyway, I will start. First of all, I was looking at this low income eligibility and I don't know many people that could own a house and only make $10,000 a year, that is just -- I am not real sure but I don't think so. MR. THEERMAN: Let me real quick. We have 69 recently changed our low income assistance program. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 It used to based on homeownership, that has changed. The beginning of this year we are now offering that program to tenants, which is something we have been trying to get done, we have that available now. So I think your point is well taken. There are an awful lot of people that are low income rent and didn't have that afforded to them. MR. KOENEN: Will you hold the microphone closer? MR. THOMAS CHATMAN: Oh, I'm sorry. Well, I mean, I feel like I'm low income but I own a home but I make more than that, so I wouldn't get any help. But my concern was my basement flooded and I am not sure how you determine which is raw sewage and which is flood water, I'm not really sure, I mean, if you look at them they both look about the same and smell about the same, you're now saying that you are being sued, you were sued -- you're being sued because the system was messed up and you need to fix it. Well, when I sent my letter in saying my basement flooded and it has got sewage and overflow whatever, it came back and said well, it wasn't our fault. So now I am paying -- you're asking me to pay to fix something that was already broke and, I mean, in my opinion, I 70 am not -- you know, I am paying again because 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 everything in my basement, my water heater, radiator, because I have radiator steam, all had to be fixed and replaced. So, I mean, you know, to me, you know, I don't know. I truly don't have any sympathy for it, personally. MR. THEERMAN: I don't know about your specific situation and what rain event we are talking about but in general, rain events can cause sewer backups. Rain events can also cause overland flooding, which can flood homes depending on where they sit. MSD has insurance programs for basement backups related to rain events. We do not insure for overland flooding. And, so, I am assuming what happened in your particular case is we made a determination that your situation was an overland flooding situation and we denied any claims. You're nodding, so I am guessing that may be what it was. If it's -- if we have a difference of opinion in that determination, we also have the ability for you to let us know that and appeal that decision and let us look at it again. And it is not a foregone conclusion that we are always right, we are going to deny your appeal. We try and get it right but if, you know, you feel strongly that it was a backup through the floor drain 71 in your basement and not coming through the windows 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and doors as an example, that is a water backup, that is something we try and cover with insurance to the limits of our coverage. Overland flooding, we do not insure, we can't insure. MR. KOENEN: Mr. James Robinson? MR. JAMES ROBINSON: Hello, everyone. My concern is about odor that is omitted during certain times at night during the week, is that something that MSD is responsible for, sewer odor? MR. THEERMAN: Depends on the source but it could be us, sure. MR. JAMES ROBINSON: Is that hazardous material that you're treating? MR. THEERMAN: No. MR. JAMES ROBINSON: It is not hazardous material? MR. THEERMAN: Now, understand we are treating sewage and there can lots of things coming to our treatment plants from the sewage. MR. JAMES ROBINSON: Is that not a safety concern for people to have to inhale that on a regular basis? MR. THEERMAN: Typically not. Odors -- all of us are sensitive enough to odors that you can smell 72 them at concentrations that are far below what is 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 typically a health concern. Now, I don't know about -- I don't know where you were, I don't know what you were smelling, I am speaking just in generalities now. MR. JAMES ROBINSON: Well, if it is coming from MSD I am sure you have heard this before because there has been several complaints about it. MR. THEERMAN: We from time to time have problems and odor problems at our sewage treatment plants, there can also be times when the collection system has odors. MR. JAMES ROBINSON: Sewer treatment plants, is that something that you can correct or that you're considering correcting in the near future? MR. THEERMAN: We continue to install odor control equipment in our treatment plants in an effort to get at that, we know we have neighbors that are close by and we also know that we work in a smelly business and from time to time there are odors form our plants. We are doing our level best to improve are facilities so they aren't a nuisance to the neighbors nearby. I don't know where you are but we can talk if you like after the meeting, talk about where you are and what you're experiencing. We can tell you what improvements we're trying to make. 73 MR. JAMES ROBINSON: Just what you said, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 different situation at times. MR. THEERMAN: It can be. MR. JAMES ROBINSON: Yes, okay. Inopportune times, I might say. Sometimes people are entering their guests outside in the evening, here come MSD, stinking up the place. You raising our rates but you're not addressing anything like that. MR. THEERMAN: Well, no, we are. We are adding odor control facilities in our treatment plants and trying to address odors that can be a nuisance there, yeah. MR. JAMES ROBINSON: Are you doing it as we speak or is it something you are going to do in the future? MR. THEERMAN: We have been doing it as we do plant expansions and plant modifications. But again, we can talk more about your specific case if you like, before we leave. MR. JAMES ROBINSON: Okay. That will be fine. Thank you. MR. KOENEN: Ramona Burden? Going, going. Rich Krueger? Rich Krueger? Going twice, third time. Tim Jones or Jonas? MR. TIM JONES: Jones. How is everybody 74 doing tonight, it's good to see everyone here because 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I know if we all come out and speak in numbers people take a look at us more serious. The questions I have, are we going to let out-of-town shotty contractors come into work on this stuff? Another good point I would like to make, which is a fact, we have a very educated work force here in the St. Louis area. And I hope that our money that were paying in is coming back into the St. Louis area. I hope we do take a look at the educated people in the construction industry and we have a lot of people that have went through apprenticeship programs for this reason. So when we do a job, we do it once because we do it right. Not get these shotty contractors from out-of-town with uneducated people come do these jobs and then have to re-bid it out again because they was the low number. I hope we are taking a look at that and like I said it is very important you guys, we are paying these bills that money should come back to our people. Not these out-of-town contractors that come in with these low bids. Thank you very much. MR. THEERMAN: You bring up an excellent point. MSD prequalifies contractors, so we want to make sure the contractors that work on our construction are qualified to do that work. 75 MR. TIM JONES: And that would be by 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 apprenticeship programs, correct? A lot of them come in and say that are educated but we have papers saying we have went through an apprenticeship program and we are educated. That is a very smart way, it keeps the numbers down, makes the jobs go faster and it keeps the money short, it's the best way to go. MR. THEERMAN: I can tell you we are working with the same contractors, St. Louis regional contractors all the time. It is rare that an outside contractor comes in and does our work. MR. TIM JONES: I do see it because I pay attention, right up in Florissant. I see them come through and they do do shotty jobs. I stop by and see what's happening. MR. THEERMAN: You may occasionally see outside contractors coming on our work on projects that are sort of unique where maybe there is only one or none contractors in town do that specific kind of work. But we have looked at this and we believe that this program can be locally designed and locally constructed. There is adequate capacity, both on the engineering side and the construction side, to build this program. There is probably a few exceptions. There are some very large tunnel, storage tunnels in 76 this program and those tend to be specialty 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 contractors that are not all sitting here in St. Louis. So when those contractors come to town they typically higher local labor to do that kind of work, they're not bringing a whole, huge work force with them. So, again, we believe the program can be built locally and should be built locally. The Associated General Contractors has given us a figure that for every billion dollars you spend in labor, you produce 28,000 jobs. So, that's not a billion dollars in program but a billion dollars in labor. So a significant amount of money getting spent and a significant amount of money being recycled through the economy and creating jobs. UNIDENTFIED SPEAKER: That is not always true because I just worked on a project out here off of Telegraph Road, the big project you guys had, MSD, it was court ordered, it was supposed to be done in '82 I think it was and most of those contractors were from out-of-town. MR. THEERMAN: Well, the contractor you're talking about on -- where on Telegraph? UNIDENTFIED SPEAKER: On Telegraph Road. MR. THEERMAN: Lower Meramec treatment plant? 77 UNIDENTFIED SPEAKER: There you go. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. THEERMAN: That was Goodwin Brothers and they hired local union labor for their construction. UNIDENTFIED SPEAKER: That was just one side of it. The other side was done by the out-of-own contractors. MR. THEERMAN: The other side of that was KCI, they are also a local contractor with union labor, to my understanding. UNIDENTFIED SPEAKER: Not all of them, I think the tunneling. MR. THEERMAN: Oh, the tunneling. Now that's the example I gave earlier. The tunneling contract on that site, that boarded tunnel five miles long -- UNIDENTFIED SPEAKER: Right. MR. THEERMAN: They were out-of-town contractors. And at the time, I don't believe there was a St. Louis tunneling contractor that could do that work or there may have been one. UNIDENTFIED SPEAKER: There is two. MR. THEERMAN: Well, of course, that has improved. And now that was a 5 mile long, 10 foot diameter tunnel. We are talking about a 9 mile long, 30 foot diameter tunnel in this, one of these program 78 tunnels. So significant amount of tunneling expertise 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and large tunnels needed for that one. MSD SPEAKER: In that case, the out-of-town firm did team with the (inaudible, speaker has no mic.) in St. Louis. MR. THEERMAN: That is pretty typical. UNIDENTFIED SPEAKER: Well, they weren't the only ones, there was others. MR. KOENEN: If we could get back to the blue cards. Emma James? MS. EMMA JAMES: Good evening. I have two questions and a comment. My comment is, I know there is a lot, I hope I don't offend anybody, older adults who are also worried about the rate increases but I just also wanted to put out there, there are a lot of new homeowners and a lot of people who are just starting to get families just from talking to some of my coworkers, we are all concerned about it too. So I just didn't want it to have the face of just all -- no offense anybody, but the over 35 crowd, you people that are in your late, you know, but seriously, you know, there is a lot of young families that are starting off. We are trying to get acclimated and looking at the proposed budget and looking at how we budgeted things out and looking at the increases that 79 are coming, not just from MSD, but from all the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 utilities and the trash and the food and the gas and the mortgage. People are starting to reconsider that, okay, maybe I don't want a home no more or maybe I don't want this. I just want to put that other face out there that it is not just older adults, it is also affecting younger families and people that are just starting to purchase homes. Because I had a lady that just told me she had already went to house and they had already went to go to closing and then after all these things came up, they just went to their officer and told them they just can't do it, they will just stay in an apartment. I just want to put that comment out there, so that way you have another faucet to look at, facet, excuse me. My one question is, I have heard comments about previous rates and how you said they were into litigation and you couldn't raise these rates and so now the rates are going up, with this proposed rate, will there be some type of oversight to make sure that the funds are actually be appropriated to actually do the jobs and some type of quality control or some type of oversight to make sure that the funds are actually being used for the jobs and the jobs are actually being completed. And my other question is, you have elaborated earlier about certain 80 lines that are responsible for MSD and some for the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 communities people live in or the homeowners, is there somewhere I can find that information at? MR. THEERMAN: If you do -- let me do the last one first. MS. EMMA JAMES: Okay. MR. THEERMAN: Why don't you touch base with this fellow over here, his name is Brian Hoelscher. He can explain the issue of stormwater retention basins, that is what I was talking about. If you're in a subdivision with a stormwater retention basin they are typically the responsibility of the homeowner's association. MS. EMMA JAMES: Okay. MR. THEERMAN: If you want to learn more about that, he can assign someone to get back in touch with you about your specific case. MS. EMMA JAMES: What if you actually own the actual home, I am not in a community home, I live in an actual house? MR. THEERMAN: Typically, subdivisions were built, lots of homes, retention basins were built along with them, depending on how old the home is. MS. EMMA JAMES: Okay. MR. THEERMAN: The homeowner's association, 81 all those homes share the responsibility of dealing 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 with that stormwater retention basin. This again, is stormwater, not wastewater, okay. MS. EMMA JAMES: Okay. MR. THEERMAN: Litigation that is going on is about our stormwater rate. And so that is different than what we are talking about in this rate proposal. We are purposely not trying to do anything with that rate while it proceeds in courts, so that is a separate issue than what we are talking about with these overflows in sewer systems. And then finally I wanted to touch base, we have a track record and it is a good one. We deliver our capital programs under budget and on schedule. And we can prove that up in the rate cases that occurred in 2004 and 2008. We are coming to you with a very specific list of projects. Our projects, yeah, there are some projects that have cost overruns but when you look at the program in total, it gets built the way we said it would be built and for slightly under the cost of what we estimate. So we will stand by our ability to deliver capital programs that are the right projects and the right costs. MS. EMMA JAMES: Now, if there are funds left over from any of these projects, where would 82 those funds go back into? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. THEERMAN: Well, there is a whole continuum of projects, remember we have a 23 year EPA settlement. So hopefully we can do it smarter and cheaper and if we do, that is money that can go to other projects that need to be built for these very same purposes. And then we won't be coming to you with quite as much of an increase the next time if were able to save along the way. MS. EMMA JAMES: Now, can I go to your website and pull the information, as far as the other projects that are going on. You said I can go back and look at your track record? MSD SPEAKER: Let me talk with her Jeff and figure out the best way possible. MR. THEERMAN: I don't know that we have that in a way that is easy to decipher. MR. KOENEN: The annual report. MR. THEERMAN: The annual report -- our annual report has some of that. You can see our capital program on the web and all the projects associated with it but to actually get behind what each project came in cost-wise, is a conversation we should have with you. MS. EMMA JAMES: Okay, thank you. 83 MR. KOENEN: Gary Sargent? If anybody else 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 would like to submit a blue card, please do so. MR. GARY SARGENT: My name is Gary Sargent. I guess one of the things, I think I understood you to say the Commission was appointed, then later you said you guys all volunteered? MR. KOENEN: Let me clarify. Different organizations applied to have seats on the Commission. For example I represent the West St. Louis County Chamber of Commerce. When organizations apply and we get a seat and then the organization appoints somebody to fill that seat when there is a rate case. MR. GARY SARGENT: So you guys are uncompensated for your times and efforts and -- MR. KOENEN: Yes. We don't even get mileage. MR. GARY SARGENT: Okay. And so is like the AARP representative of the organization that could sit on that committee? MR. KOENEN: They could apply the next time there are openings on the commission, yes. And they are an intervenor in this case. They asked to intervene and they were allowed to be one of the intervenors, which means they are at all the technical hearings and other things downtown and their lawyer 84 has a right to ask questions and so on. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. GARY SARGENT: I guess it is kind of double-edged sword because, you know, let's say I could be appointed to that Commission, I don't feel qualified to determine if rate increases are, you know, would be effective or just or called for. You know, in other words, you're presenting information to me that is not in my field of expertise. And I guess it would be, you know, would help a lot of people feel more at ease if we knew the qualifications of everybody on the committee. MR. KOENEN: We have different backgrounds. We have lawyers who work for us, we have rate consultants who work for us, we have the ability to get information from MSD and other places that we all absorb. For example, we have three different committees. We have a committee handling the meetings like this with a technical committee and so on. It's not that we are experts but we have become experts because of all the information we have available to us. And if you go on to that website you will see about, probably about two or three thousand pages of data already received. MR. GARY SARGENT: Another thing I would like to say, this is a 61 percent increase, you know, 85 actually, it is actually boosting the base of another 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 increase following in the fifth year right, possibly, right? So this is quite a substantial increase for -- could this be possibly spread out over a longer period of time? MR. THEERMAN: It is the base of a future increase, there will be undoubtedly be more to get the program constructed. As I said earlier, we are anticipating $80 a month size bills by the end of the decade, so that is the answer to that. Spreading it has with it the problem of pushing programs and projects into the future where there are already programs and projects that need to get done. So one of the things we want to be careful about is not putting off and stacking more and more up in years '15 to '23 as an example, because there is a lot of heavy lifting construction-wise in those years and cost-wise, so we negotiated a 23 year compliance schedule and putting off tends to shorten that schedule. MR. GARY SARGENT: Okay. Thank you very much. MR. KOENEN: Do we have any other blue cards? MR. JOHN TURNER: I had a blue card. I am 86 still John Turner. And I guess this question I am 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 asking is for the Commission and since we have a lawyer in the house I would like him to listen in too. But as I understand it the prior rate increase that apparently was pushed down Missouri residents' throats and turned out it with unconstitutional because it had to be brought to a vote to be, you know, made to law and that is the nature as I understand it of the suit. This current one, is there -- is it structured in a way to specifically avoid going to a voter requirement on it? Second question, can it be changed in such a way that it has to be brought before voters before it is passed? MR. KOENEN: Well, first of all nothing has been decided. The Rate Commission has not begun their deliberations on the actual rate increase. We are still gathering information, we are still getting information from MSD and our consultants that process comes after the public hearing. If, as it looks like it could, there is a bond issue that will have to go to a vote. If we would go with the all paid system, we could theoretically avoid a vote but I don't think any one of us wants to see $76 sewer bill. We have still not yet reached the point where we are actually deliberating and talking about how the numbers are 87 going to fit together. At this point we are still 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 gathering information and that will be a part of our deliberations after that September 26th final public meeting. I have another blue card. Stan Ebersohl? MR. STAN EBERSOHL: I only have a couple of little comments and questions. First, it is obvious to me you don't have the full details of the plans yet, what's going to be constructed in this, you're still grasping at exactly what you're going to do to control the stormwater outflows and I would like to see public meetings along the way as you're doing this to keep us advised of what you're doing. Obviously, you're going to do this, the court's mandated it, it's going to happen one way or the other. I would like to see more coordination with the local governments. We have areas now that are becoming blighted in St. Louis County. We are going to be like we were 20 years ago in St. Louis City. Let's starting looking at maybe using some of those blighted areas for retention areas, so we don't have to build as many tunnels. Let's work it together with the problems we have socially with some of our neighborhoods. I would also like to see less tunneling and more retention ponds, more areas to attract recreational use in the county. Maybe that would help keep some of the people from 88 moving out and reduce urban sprawl in this community. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I think we need to think this through a little bit better than just building pipes and putting in concrete. I think we need to think a little bit more about how we are going to fit this into our social structure and our culture. Thank you. MR. THEERMAN: You made an excellent point. And part of our settlement with EPA is what is called a green infrastructure alternative in parts of the combined sewer system and that is, in fact, what you are getting. Holding water back and keeping it from getting in the sewer system and therefore not blowing out an overflow. There is opportunities for that to happen. We did develop and present, at numerous public meetings, our combined sewer overflow plan. In 2009 we spent an entire eight week period doing public meetings all around the community and really vetting with people like yourselves what this program needs to look like and what are those costs. And quite frankly, through true public input, that program size didn't get as big as it possibly could have gotten. And so, you know, it is always tough, public meetings there is a lot of them, it is hard to get to them all and you don't feel like you have a really big say. But I can tell you, $2 billion of the this program, $2 89 billion of this settlement agreement has been vetted 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 publicly and it is half the cost it could have been because the public was available to talk to us about it and we reasoned through the issues of let's do programs that help the urban streams and deal with the Mississippi River a little differently. And that way sewage in people's backyards and in park areas and community areas gets addressed and that ultimately helps the Mississippi in the long run. And so there is always opportunities for more of that. I completely agree with you. Looking for synergies with communities and municipalities and redevelopment, that has to been a part of the this equation. I just want to point out that we have been doing some of that, there obviously needs to be more. MR. KOENEN: Joan Heise? I'm sorry if I mispronounced you name. MS. JOAN HEISE: No, your perfect. I live in Spanish Lake, and I have owned my house for 38 years and you were talking earlier about the insurance that you have like for backups and things like that. Well we have had probably at least six or seven backups in our basement and every time other than one time and I called MSD and they didn't take responsibility for it. They said it was our 90 responsibility, so I have had to put sewage backup on 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 my homeowners, which made my homeowners go up because MSD is not taking, you know, responsibility for the backups. And then so and lately too, so when it starts raining they will say it just rained too much. Well, now when it rains, starts to rain or something, I hear it in the middle of the night and I fly out of bed and try to figure out something to put over my drain so we don't have 3 inches of water in our basement again. And then now they have been doing some kind of things in our area where it will just spew up out of the sewer all of a sudden and I will go down in my basement and I will have black stink all over my basement floor from when they have been putting air through the line or something. But we don't know that, so then I'm freaking out because we have all this smell in the basement again. MR. THEERMAN: Before you leave I would like for you to talk to this guy in the purple shirt. He is our Director of Operations and his staff is involved with investigating sewer backups and so we'd like to understand a little better about where you live and what you've experienced. Let me just say, statistically, about 60, 70 percent of basement backups are a result of a problem at the home lateral. 91 And the way we determine that is we will come out and 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I know your shanking your head, now I'm not talking about when there is a gullywasher out there, just statistically, 60, 70 percent are related to lateral problems. And our sewer is not flooded in surcharge but the person has a backup. If you're encountering wet weather sewer backups, we need to take a good close look at what your situation is. You may have downspouts inappropriately connected and you may have some other problem in the plumbing of the lateral or it may be us and we have gotten it wrong and that certainly happens to. But before you leave let's talk with you a little bit about what you experienced, okay. MR. KOENEN: I have no more blue cards, we have a couple of comments. Gentlemen in the back you haven't said anything yet. Keep your comments brief, please. If you could complete a blue card before you leave, so we have you for our records. MR. JOHN ELEK: I just have a couple of comments. Unfortunately, I think we all have a problem with budgeting money. I am a senior citizen, I may not look that way but I am and I am having a problem with making ends meet. I don't see the government changing anything or doing anything to help 92 because they don't have any money either. We don't 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 have any money. You know, nobody is going to raise my social security 60 something percent, so I have a problem with this whole issue. I understand that things are going up, I understand that rate increases are normal but when you look at MSD, you look at the electricity, you look at Laclede Gas, you look at all utilities, everybody wants to raise their rates. Somewhere, somehow, this is going to have to stop. Because the people who are older and the people who are younger, the people who are trying to raise families, they're not going to have this money, so somewhere, somehow, somebody is going to have to take a close look at this and see what can be done to mitigate these increases. There is no way that this can continue down the road for 10, 20, 30 years because it is not going to happen, people can't pay their bills now. Now my situation is somewhat unique but the issue that I have is not going to go away. I have to budget very closely every month. Somewhere or another there is not 61 percent or whatever it is left in my budget, so I don't know what I am going to do. But I have a home in South St. Louis it is very, very close to Oak Hill and Utah, I see some really unique examples of MSD construction. They have been 93 constructing in the same area for almost six to eight 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 months now. They haven't gotten anywhere, it is just more and more and more. And I go down to my house down there and I see people standing around, two people working and three or four people standing around. I find that amazing. And I am sorry but all I have is a complaint, I don't have anything good to say. I just think somebody needs to take a look at these rates and I will leave with one other statement. In retail, there is an idea of beat yesterday. If I sold a $100 yesterday, I am supposed to sell $110 tomorrow, you extrapolate that out and pretty soon it becomes an unattainable goal. That is what we are looking at right now, an unattainable goal. That is all I have to say. MR. KOENEN: Sir, can you give us your name? MR. JOHN ELEK: John Elek. MR. KOENEN: Thank you. And please fill out a blue card. And ma'am in the back? MR. VERLENE MULLEN: Yeah, I just wanted to -- MR. KOENEN: Can you wait for the microphone, so we can get it the on the record. And can you repeat your name, please? MR. VERLENE MULLEN: Verlene Mullen. The 94 question I have is you say you advertise in the Post 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Dispatch on such and such date, such and such date, most people don't even buy the Post Dispatch any more. You know, the only way I heard about it was on the five o'clock news. And I got up, put my shoes on and came out here. If I don't hear it on the news or if it is not -- I'm sorry, people are not reading the papers anymore, they're going to their internet, if they have internet. I have internet but I don't read the paper on the internet. I do watch the news and if it's advertised on the new or advertised in advertisement because I know you spend money for advertisement for MSD, put it up there that you have got these town hall meetings, so that more people will be alerted to it, so that more people could come. And that is my comment for now. MR. THEERMAN: We have advertised these public meetings substantially more than any other time in our history. We have done it on the radio, we have done it in the newspapers and a broad variety of newspapers and we have done it with billboards like what is sitting out here in front of the building. Every interstate highway in St. Louis has a billboard on it about these public hearings, so it is substantially more. And I understand what you're 95 saying about not reading the paper but specifically, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 we are required by charter to advertise in a paper of general circulation. And the only paper that fits that definition is the Post Dispatch. MR. VERLENE MULLEN: I mean, I am not really trying be funny but I don't listen to the radio that often, I don't drive the highways that much because I can't afford the gas to be absolutely honest about it, so the way, like I said, I heard it on the news today. And I made myself get up and come out here and let you people know I am not happy with the situation and that is, you know, what word did you use today, we can try to bring St. Louis people into our work force. The word can doesn't satisfy me I want to hear you say we will. MR. THEERMAN: All right. We will. MR. VERLENE MULLEN: Thank you. MR. KOENEN: Folks, that is going to conclude our hearing, unless we have any comments from any of the Rate Commissioners. Thank you all for coming. If you have any questions the MSD staff will be around for a few minutes. Our next hearing will be this Wednesday evening at 6:00 p.m. at the Herbert Hoover Boys' Club on North Grand in St. Louis. There will be a meeting on September 26th, at the MSD 96 office, basically at Jefferson and Market in St. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Louis. Thank you all for coming and please have a safe drive home. (Hearing concluded at 8:09 p.m.) 97 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CERTIFICATE OF REPORTER I, Suzanne M. Zes, Certified Court Reporter, Notary Public within and for the State of Missouri, do hereby certify that the witness whose testimony appears in the foregoing deposition was duly sworn by me; the testimony of said witness was taken by me to the best of my ability and thereafter reduced to typewriting under my direction; that I am neither counsel for, related to, nor employed by any of the parties to the action in which this deposition was taken, and further that I am not a relative or employee of any attorney or counsel employed by the parties thereto, nor financially or otherwise interested in the outcome of the action. ______________________________ Certified Court Reporter