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MSD Exhibit No. MSD 115B
2015 Rate Change Proceeding
RICHARD L. UNVERFERTH
Surrebuttal Testimony
Metropolitan St. Louis Sewer District
June 5, 2015
Page
Waste Hauler Revenues 2
Impervious Fees 3
Stormwater Projects 5
Surrebuttal Testimony of Richard L. Unverferth, MSD June 5, 2015
1 WASTE HAULER REVENUES
2 Q1. Mr. Unverferth, there seems to be a significant difference in the Waste Hauler
3 Revenues projected for FY2017- FY2020 versus the actual revenues received during
4 the FY2010 — FY2015 time -frame. Can you explain why the District is projecting
5 this reduction?
6 A. During the previous period of FY2010 and FY2011 the District was receiving
7 approximately $1.4 million annual revenue. In FY2012 the District experienced an
8 approximate 30% decrease in revenue due to the opening of a private Waste Hauling
9 Station within the St. Louis area. In FY2013 the District saw an additional 40% drop in
10 revenue with the full year of operation of the private Station to approximately $660,000.
11 Also during 2013 the District ceased accepting leachate flow from the Bridgeton Landfill
12 directly to the collection system due to flow characteristics causing violations at the
13 District's Missouri River WWTP. This forced the landfill to haul leachate from the
14 landfill to the Bissell WWTP Hauled Waste Station where the leachate could be treated
15 effectively. This flow made up approximately 30% of revenue received in FY2013. In
16 FY 2014 approximately 88% of hauled waste revenue was from the Bridgeton Landfill,
17 with 12% or approximately $550,000 being from other sources. Currently during FY
18 2015, the Bridgeton Landfill has put into place a leachate pre-treatment facility and
19 pumping facilities and is pumping flows to the District's collection system tributary to
20 the Bissell WWTP. During the first half of FY2015 and intermittently during the start-up
21 of the Bridgeton facilities the District continues to received hauled flows from the
22 landfill, these flows have accounted for approximately 78% of revenues received. This
23 would project FY 2015 revenues from other sources at approximately $650,000.
24 Reviewing the last three fiscal years since the opening of the private Waste Station and
2015 Rate Change Proceeding 2 Exhibit No. MSD 115B
Surrebuttal Testimony of Richard L. Unverferth. MSD June 5, 2015
1 removing outside anomalies created by the Bridgeton Landfill, revenues average
2 approximately $620,000. Therefore the District's feels its projection of $675,000
3 annually for the period FY2017- FY2020 is appropriate.
4
5 IMPERVIOUS FEES
6 Q2. As part of previous discovery MSD provided MSD Exhibit 84J — Incremental for
7 Impervious Fee Type, can you please give a brief description and explanation of
8 those costs and the tasks associated with these costs.
9 A. The cost to maintain and charge an impervious fee involves Engineering and Finance
10 Department functions. In Engineering, the impervious area of each customer's parcel
11 must be maintained in the District's GIS (Geographic Information System). The
12 "Professional Services" involves the periodic collection of orthographic aerial
13 photography, and processing the photography to translate the image into a pervious and
14 impervious area designation. The cost for aerial photos involves collection from a vendor
15 and may involve potential collaboration with other entities interested in the same photos,
16 which could reduce the cost to MSD if an arrangement can be worked out. Processing
17 this broadly classified impervious area into Parcels that are residential or commercial in
18 use and are billable for an Impervious Fee is described in MSD Exhibit 84H. This work
19 is performed entirely by MSD staff and requires numerous manual adjustments to ensure
20 that billing entities are not charged for impervious surface area that is not billable, such as
21 sidewalks or portions of driveways that are in the public Right -of -Way.
22
23 In addition to the labor processing the aerial photography, a significant amount of labor is
24 expended to first assign, and then maintain the impervious area for all approximately
2015 Rate Change Proceeding
3 SD Exhibit No. MSD 115B
Surrebuttal Testimony of Richard L. Unverferth, MSD June 5, 2015
1 500,000 stormwater accounts. Some customers need assistance understanding their
2 impervious area, and some disagree with the value used as the basis for billing. MSD
3 makes adjustments to the customer impervious information for billing purposes based on
4 customer petitions. This customer service includes phone calls, field visits as needed to
5 measure by hand the impervious area on parcels, and GIS updates to the impervious
6 layer. As well, staff must handle unique situations for parcels, such as state laws
7 exempting certain parcels/areas from impervious charges. MSD estimated two additional
8 Engineering staff to process aerial photos, respond to customer requests, resolve disputes,
9 and maintain the impervious area data.
10
11 Likewise, the Finance Department incurs costs to handle the increased billing volume.
12 Additional Accounts Receivable staff is required to prepare bills related to impervious
13 area, which increases the number of bills processed by approximately 10 percent. In
14 addition to bill preparation, customer service calls increase due to impervious area
15 charges. Finally, maintenance of impervious area data in the billing system requires a
16 significant effort.
17
18 In addition to the costs related to the extra staff required to bill for impervious, other
19 costs increase. A large programming cost would be incurred by the District in order to
20 get the new billing system set up to bill for impervious area. Furthermore, the annual fee
21 the District pays to maintain the billing system would increase. Finally, the expenses for
22 bill printing and mailing for the 10 percent increase in accounts would be significant, and
23 the collections costs would also increase.
24
2015 Rate Change Proceeding
4 SD Exhibit No. MSD 115B
Surrebuttal Testimony of Richard L. Unverferth, MSD June 5, 2015
In summary the total incremental costs for the implementation and maintenance of an
2 Impervious Fee to pay for stormwater services is estimated to be just slightly under $1.1
3 million annually for the rate period FY 2017-20.
4
5 STORMWATER PROJECTS
6 Q3. The District has provided a six year list of Stormwater projects, see Appendix 7.5.2,
7 intended to be completed if the proposed Stormwater 0 & M tax is passed by the
8 voters and implemented. To provide clarification, please provide details regarding
9 the funding sources for these projects.
10 A. In that portion of the District covered by existing OMCI taxing districts (the "Green
11 Area"), taxing revenue from the OMCIs (both existing balances and revenue to be
12 collected in FY16) shall be used to fund the capital improvements noted in the project
13 list. Tax revenue generated in a given OMCI, must be spent only on work in that OMCI.
14 Of the total project list, 64 projects constituting $24 Million in capital work is to be
15 funded in the Green Area from existing OMCI taxing district revenue during the rate
16 period.
17 In the original area of the District (the "Yellow Area"), taxing revenue from the existing
18 stormwater 0 & M tax (both existing balance and revenue to be collected in FY16) shall
19 be used for 0 & M (which includes infrastructure repairs) in the original area, over the
20 rate period. This revenue, which has been collected in the original area, must be spent
21 only in the original area, and spent only for 0 & M purposes. This spending during this
22 period will offset the 0 & M spending in the original area allocated to the new District-
23 wide Stormwater Tax revenue, thereby freeing up a portion of the new District -wide
24 Stormwater Tax (which would have paid these 0 & M expenses) to pay for capital
2015 Rate Change Proceeding 5 SD Exhibit No. MSD 115B
Surrebuttal Testimony of Richard L. Unverferth, MSD June 5, 2015
improvements in the original area. This benefit of capital projects in the original area is
2 only possible, because of the area -specific revenue previously generated by the existing
3 stormwater 0 & M tax, prior to the start of the new District -wide Stormwater Tax. Once
4 the balance of the existing tax in the original area is exhausted, no more offset will be
5 possible, and this benefit will cease. Of the total project list, 47 projects constituting $17
6 million in capital work is to be funded in the Yellow Area from this offset during the rate
7 period.
8
9 In the annexed area of the District (the "Red Area"), where no funding has previously
10 been available, a small portion of the new District -wide Stormwater Tax will be made
11 available for capital projects. Because of the past lack of funding, there is a backlog of
12 capital needs to address ongoing stormwater problems in the Red Area. Of the total
13 project list, 59 projects constituting $7 million in capital work is to be funded in the Red
14 Area from the new District -wide Stormwater Tax during the rate period. MSD prioritizes
15 stormwater projects on a cost -benefit basis. Because there are existing funds in the yellow
16 and green areas to address the highest priority projects in those areas, the red area
17 projects generally have the highest remaining priority thus resulting in all new revenues
18 available for capital projects being spent in the red area for FY 2017-2020. In the future,
19 the entire District will be considered for projects funded from any remaining revenues
20 available to be used for capital projects.
21
22 Q4. Does this conclude your surrebuttal testimony?
23 A. Yes it does.
24
2015 Rate Change Proceeding 6 SD Exhibit No. MSD 115B