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HomeMy Public PortalAboutExhibit MSD 134 - Transcript of June 26, 2015 Prehearing Conference PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 1 1 2 3 4 5 6 THE METROPOLITAN ST. LOUIS SEWER DISTRICT 7 CAPITAL IMPROVEMENT & REPLACEMENT PROGRAM 8 PRE-HEARING CONFERENCE 9 JUNE 26, 2015 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 2 1 I N D E X 2 Roll Call. . . . . . . . . . . . . . 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 3 1 A P P E A R A N C E S 2 Commissioners: 3 Steven Chodes George Tomazi 4 Mark Schoedel Mike O'Connell, III 5 Russell Hawes Leonard Toenjes 6 Eric Schneider John L. Stein 7 Nancy Bowser Paul Brockmann 8 Chan Mahanta Steve Mahfood 9 Kennard Jones 10 Representing Metropolitan Sewer District: 11 Susan Myers 12 Representing Rate Commission: 13 John Fox Arnold Lisa O. Stump 14 Lashly & Baer 714 Locust Street 15 St. Louis, MO 63101 16 Representing Missouri Industrial Energy Consumers (MIEC): 17 Brandon Neuschafer Bryan Cave, LLP 18 One Metropolitan Square St. Louis, MO 63102 19 Representing Homebuilders' Association: 20 Brad Goss 21 Court Reporter: 22 Jeanne M. Pedrotty, CCR/CSR Missouri CCR #618 23 Illinois CSR #084-003893 Midwest Litigation Services 24 711 North Eleventh Street St. Louis, Missouri 63101 25 (314) 644-2191 PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 4 1 (Starting time of the hearing: 7:57) 2 MR. TOENJES: Let's go ahead and call the 3 meeting to order for the Metropolitan St. Louis Sewer 4 District Rate Commission. Let's start with the role 5 call, Mr. Schneider. Just a roll call of who is 6 present. 7 MR. SCHNEIDER: Ms. Bowser? Mr. Brockmann? 8 MR. BROCKMANN: Here. 9 MR. SCHNEIDER: Mr. Hawes. 10 MR. HAWES: Here. 11 MR. SCHNEIDER: Mr. Chodes? 12 MR. CHODES: Here. 13 MR. SCHNEIDER: Ms. Kelling? Mr. Stein? 14 MR. STEIN: Present. 15 MR. SCHNEIDER: Mr. Schneider, present. 16 Mr. Toenjes? 17 MR. TOENJES: Present. 18 MR. SCHNEIDER: Mr. Tomazi? 19 MR. TOMAZI: Here. 20 MR. SCHNEIDER: Mr. O'Connell? 21 MR. O'CONNELL: Here. 22 MR. SCHNEIDER: Mr. Schoedel? Mr. Jones? 23 MR. JONES: Here. 24 MR. SCHNEIDER: Mr. Mahfood? Mr. Williams? 25 Mr. Mahanta? We have a quorum. PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 5 1 MR. TOENJES: Thank you, Mr. Schneider. 2 The Chair would entertain a motion to go into closed 3 session to discussion legal matters pursuant to 4 Missouri Revised Statute number 621.021 (1). 5 UNIDENTIFIED SPEAKER: So moved. 6 UNIDENTIFIED SPEAKER: Second. 7 MR. TOENJES: Any discussion on the motion? 8 I'd like to take a roll call vote. 9 MR. SCHNEIDER: Ms. Bowser? Mr. Brockmann? 10 MR. BROCKMANN: Yes. 11 MR. SCHNEIDER: Mr. Hawes? 12 MR. HAWES: Yes. 13 MR. SCHNEIDER: Mr. Chodes? 14 MR. CHODES: Yes. 15 MR. SCHNEIDER: Mr. Stein? 16 MR. STEIN: Yes. 17 MR. SCHNEIDER: Mr. Schneider, yes. Mr. 18 Toenjes? 19 MR. TOENJES: Yes. 20 MR. SCHNEIDER: Mr. Tomazi? 21 MR. TOMAZI: Yes. 22 MR. SCHNEIDER: Mr. O'Connell. 23 MR. O'CONNELL: Yes. 24 MR. SCHNEIDER: Mr. Jones. 25 MR. JONES: Yes. PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 6 1 MR. TOENJES: Okay. We will now go into 2 closed session. 3 (Whereupon, closed session was entered at 4 8:01.) 5 MR. TOENJES: Good morning. My name is 6 Leonard Toenjes, and I am the Chairman of the Rate 7 Commission of Metropolitan St. Louis Sewer District 8 and I will serve as Chair of this proceeding. I would 9 like for each rate commissioner to announce their name 10 as being present, starting at my far left. 11 MR. CHODES: Steve Chodes. 12 MR. JONES: Kennard Jones. 13 MR. STEIN: John Stein. 14 MR. TOMAZI: George Tomazi. 15 MR. HAWES: Russ Hawes. 16 MR. SCHNEIDER: Eric Schneider. 17 MR. BROCKMANN: Paul Brockmann. 18 MS. BOWSER: Nanacy Bowser. 19 MR. MAHANTA: Chan Mahanta. 20 MR. MAHFOOD: Steve Mahfood. 21 MR. TOENJES: Thank you. These are all 22 delegates of the Rate Commission. The charter plan of 23 the District was approved by the voters of St. Louis 24 City and St. Louis County at a special election on 25 February 9th, 1954, and amended at a general election PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 7 1 on November 7th, 2000. The amendment to the charter 2 plan established the Rate Commission to review and 3 make recommendations to the District regarding changes 4 in waste water rates, storm water rates, and tax rates 5 proposed by the District. Upon receipt of a rate 6 change notice from the District, the Rate Commission 7 is to recommend to the Board of Trustees changes in 8 waste water, storm water, or tax rate necessary to 9 one, pay interest and principal falling due on bonds 10 issued to financed assets of the District. Two, the 11 cost of operation and maintenance. And three, such 12 amounts as may be required to cover emergencies and 13 anticipated delinquencies. 14 Further, any change in a rate recommended 15 to the Board of Trustees by the Rate Commission is to 16 be accompanied by a statement that the proposed rate 17 change, one, is consistent with constitutional, 18 statutory, or common law as amended from time to time. 19 Two, enhance the District's ability to provide 20 adequate sewer and drainage systems in facilities or 21 related services. Three, is consistent with and not 22 in violation of any covenant or provision relating to 23 any outstanding bonds or indebtedness of the District. 24 Four, does not impair the ability of the District to 25 comply with the applicable federal and state laws or PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 8 1 regulations as amended from time to time. And five, 2 impose as fair and reasonable burden on all classes of 3 rate payers. 4 The Rate Commission received a rate change 5 notice from the District on February 26th, 2015. Under 6 the procedural schedule adopted by the Rate 7 Commission, any person affected by the rate change 8 proposal had an opportunity to submit an application 9 to intervene in these proceedings. Applications to 10 intervene have been filed by the Home Builders 11 Association of St. Louis and Eastern Missouri and 12 Missouri Industrial Energy Consumers. These 13 applications have been granted. The Rate Commission 14 originally had until June 26, 2015, to issue its 15 report on the proposed rate change notice to the Board 16 of Trustees of the District. The Rate Commission 17 requested an additional 45 days to issue its report. 18 And on May 14th, 2015, the District's Board of 19 Trustees granted the Rate Commission's request. The 20 Rate Commission must now issue its report on or before 21 August 10th, 2015. 22 Since February 26, 2015, the MSD Rate 23 Commission has received testimony from MSD staff, the 24 interveners, and the rate consultants. The parties 25 have also engaged in discovery requests. Technical PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 9 1 conferences were held on April 8th, 2015, May 20th, 2 2015, and June 17th, 2015, where the participants and 3 Rate Commission were given an opportunity to ask 4 questions of those submitting testimony. The charter 5 plan of the Metropolitan St. Louis Sewer District and 6 operational rules and procedural schedule of Rate 7 Commission of the Metropolitan St. Louis Sewer 8 District provides for pre-hearing conference to 9 identify, define, resolve, or settle the issues raised 10 by the prepared testimony, and to ensure orderly and 11 expeditious proceeding. Each intervener may 12 participate in the pre-hearing conference conducted on 13 the record to permit counsel for the District, each of 14 the interveners, and the Rate Commission to briefly 15 describe the participant's position, if any, on each 16 of the criteria and factors identified in the charter 17 plan. 18 In the event participants are able to 19 resolve or settle any issue or issues raised in the 20 prepared testimony, such participants shall also 21 include as part of the pre-hearing conference report, 22 a joint recommendation describing each such issue, the 23 recommended resolution of the issue, and the rationale 24 therefore. The Rate Commission is interested in the 25 views of the participants on the extent to which the PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 10 1 District's rate change proposal and any alternative 2 proposed by the participants meets or fails to meet 3 the criteria or factors for recommendations contained 4 in the charter plan. 5 To that end, and without requiring any 6 participant to act in a particular manner, each 7 participant is requested to make an oral presentation 8 of the participants respective position. The parties 9 may also submit a short written summary of the 10 presentation, if desired. The Commission's procedural 11 schedule as amended provides that each participant in 12 the pre-hearing conference shall submit on or before 13 July 8th, 2015, a pre-hearing conference report 14 describing the issues raised by the prepared testimony 15 together with a brief description of such 16 participant's position, if any, on each issue and the 17 rationale therefore. 18 The Rate Commission has established a 19 public hearing session for the participants to be held 20 on July 10th, 2015 at nine a.m. at the District's 21 offices. The purpose of this public hearing session 22 will include, number one, permitting rate payers to 23 testify. Number two, receiving into evidence any 24 prepared testimony submitted to the Commission subject 25 to any valid objections together with discovery PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 11 1 requests -- I'm sorry -- together with discovery 2 responses and transcripts of the technical 3 conferences. Number three, permitting the Commission 4 members to ask questions regarding any issues 5 addressed by the prepared testimony or any other 6 elements of the proposed rate change. And four, 7 permitting closing statement by the District, the 8 interveners, and legal counsel of the Rate Commission. 9 In preparation for the July 10, 2015 hearing, the 10 District will distribute a current list of exhibits to 11 all parties by July 8th, 2015. 12 Are there any procedural matters at this 13 time, Mr. Arnold? 14 MR. ARNOLD: Mr. Chairman and members of 15 the Commission, I'm very embarrassed. When we were 16 last together, we spoke about the date by which 17 additional materials should be filed. And I very 18 carefully wrote down Wednesday. I was incorrect. The 19 date on which things should have been filed was 20 Monday. Nevertheless, on Wednesday, without knowing 21 my error, I filed with the District three exhibits; 22 some materials from the U.S. Census Bureau in the city 23 and county of St. Louis and Mr. Standard's testimony 24 in the 2011 proceeding. Ms. Myers very generously 25 directed them to assign exhibit numbers and they are PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 12 1 now contained in the exhibit list. But with 2 apologies, and unless there is an objection, I request 3 that they be considered part of the record. 4 MR. TOENJES: Are there any objections from 5 the District. 6 MS. MYERS: No, there is not. 7 MR. TOENJES: Any objection from 8 interveners? 9 MR. NEUSCHAFER: No. 10 MR. GOSS: No. 11 MR. ARNOLD: Thank you, Mr. Chairman. 12 MR. TOENJES: Don't let it happen again. 13 There being no further procedural matters, Ms. Myers, 14 would you like to address the Rate Commission on 15 behalf of the District? 16 MS. MYERS: I would. Thank you. 17 MR. TOENJES: Please proceed. 18 MS. MYERS: Tim is going to hand out a copy 19 of my statement that I'm going to make. I'll give him 20 a chance to do that and I'll get started. 21 Good morning. My name is Susan Myers, and 22 I am the general counsel for the Metropolitan St. 23 Louis Sewer District. I will provide the District a 24 summary statement regarding proceedings to date. The 25 District's rate change proposal submitted on February PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 13 1 26th, 2015, complies with all the required criteria 2 contained in section 7.270 of the MSD charter. This 3 has previously been demonstrated by testimony of the 4 District's witnesses and exhibits. There seems to be 5 little or no disagreement regarding criteria one 6 through four for both the storm water rate change and 7 the waste water rate change proposal. With that in 8 mind, I will address those criteria briefly and then 9 discuss criteria five in more detail. 10 Section 7.270 paragraph one of the charter 11 requires the proposed rate change to be consistent 12 with constitutional, statutory, or common law as 13 amended from time to time. The proposed storm water 14 rate change complies with this criterion and will be 15 taken to the voters to be voted on in FY2016. The 16 proposed waste water rate change complies with this 17 criterion and will follow the methodology approved by 18 the Missouri courts and procedures outlined in the MSD 19 charter. Section 7.270 paragraph two of the charter 20 states, "Will the proposed rate change enhance the 21 District's ability to provide adequate sewer and drain 22 and system and facility or related services?" Based 23 on the rate change proposal submitted by the District 24 and witness testimony, the answer to this question is 25 yes. PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 14 1 The main driver for MSD's rate proposal for 2 storm water is to provide a funding source via ten 3 cent ad valorem property tax for operation and 4 maintenance of public storm water system 5 district-wide. Any minimal funds that may be 6 available after accounting for O and M of the public 7 storm water system district-wide will be used for 8 capital projects to address storm water problems not 9 involving the infrastructure. Such as storm water 10 flooding or erosion. MSD's rate change proposal for 11 waste water is to provide a funding source financed 12 with a combination of cash financing and debt to 13 support the capital improvement and replacement 14 program, which will move the District's waste water 15 system towards environmental compliance. Section 16 7.270 paragraph three of the charter states, "Is the 17 proposed rate change consistent with and not in 18 violation of any covenant or provision relating to any 19 outstanding bonds or indebtedness of the District?" 20 The answer is "Yes." 21 Regarding the rate change proposal for 22 storm water, the district is not proposing the use of 23 bonds or other indebtedness. Therefore, the proposed 24 rate change will not violate any covenants or 25 provisions of the existing bonds or indebtedness. The PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 15 1 rate change proposal for waste water is consistent 2 with all outstanding bonds and indebtedness and will 3 not cause the District to violate any of those 4 provisions or covenants. Section 7.270 paragraph four 5 states, "The proposed the rate change must not impair 6 the ability of the District to comply with applicable 7 federal or state laws or regulations as amended from 8 time to time." The District's rate change proposal 9 for both storm water and waste water will not impair, 10 but rather will support the District's ability to 11 comply with federal and state laws and regulations. 12 The rate change proposal for waste water specifically 13 provides for the ability for the District to meet the 14 requirement outlined in the consent decree. The hot 15 topic during these rate proceedings has been does 16 MSD's rate change impose a fair and reasonable burden 17 on all classes of rate payers. MSD has determined 18 that it does. In section 7.270 paragraph five of the 19 charter, it states, "Does the proposed rate change 20 impose a fair and reasonable burden on all classes of 21 rate payers?" In my discussion below, I will address 22 how MSD's storm water rate change proposal meets the 23 criteria of this section, the disagreement between the 24 parties and MSD's position regarding the storm water 25 funding structure being proposed. Then I will discuss PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 16 1 how MSD's waste water rate change proposal meets 2 section 7.270 paragraph five of the charter. 3 As discussed in Brian Hoelscher's and 4 William Stannard's testimony, numerous discovery 5 responses, and supplemental information provided by 6 the District, the District has shown that the proposed 7 rate change consisting of a District-wide ten cent ad 8 valorem property tax to be used for operation and 9 maintenance of the public storm water system imposes a 10 fair and reasonable burden on all classes of rate 11 payers. Because of the proposal being made by some of 12 the interveners involved in this case, the discussion 13 of fair and reasonable has not centered on just 14 whether MSD's proposal is fair and reasonable as MSD 15 feels it has proven, but invariably has resulted in a 16 comparison between MSD's storm water proposal of ten 17 cent ad valorem property tax and the use of a voted on 18 impervious fee. MSD feels that discussion is 19 important in deciding what is fair and reasonable. 20 Specifically for the rate change proposal for storm 21 water, MSD believes that the use of a voted on 22 impervious fee would result in up to a 40 percent 23 increase in cost to MSD customers for the same level 24 of service and fewer customers participating in the 25 funding of the program due to current statutes and PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 17 1 possible future state legislation when compared to the 2 propose ten cent ad valorem tax for the same level of 3 services. This was for the District and should be for 4 the Rate Commission an important consideration in 5 determining a fair and reasonable burden. It appears 6 from the testimony and information provided during 7 these proceedings that there is a lack of 8 understanding of the proposal placed before the Rate 9 Commission for consideration. 10 Using the following information for 11 illustration purposes, MSD believes that the best 12 method to clear up any misunderstanding is to, again, 13 address each of the four statements made in both of 14 the supplemental supporting evidence provided with 15 Exhibit HBA 124 and the memorandum of considerations 16 filed as HBA Exhibit 124C. In statement number one, 17 the HBA states, "Reductions in runoff volume reduce 18 the amount of runoff requiring treatment." This is 19 not accurate. MSD does not currently treat storm 20 water runoff as part of our operation and maintenance 21 the public storm water system responsibility. 22 Therefore, we do not incur any cost for that activity. 23 By allowing a credit for this reason, cost for the 24 operation and maintenance of the public storm water 25 system would simply require other customers to pay the PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 18 1 difference with no change in operational cost to the 2 District. 3 In statement number two, the HBA states 4 that, "Increases in the quality of runoff allow the 5 District to more easily meet water quality standard 6 requirements." This is an accurate statement, 7 although, the rate proposal being considered by the 8 Rate Commission is only for operation and maintenance 9 of the public storm water system. Water quality issue 10 related to the storm water program are currently fully 11 funded by an existing two cent ad valorem property 12 tax. No proposed change in the rate or structure of 13 this two cent tax is being considered, and, therefore, 14 has not been presented to the Rate Commission for 15 consideration. 16 In statement three, the HBA states that, 17 "Reducing the need for drainage infrastructure by 18 reducing the cost to the District." This statement 19 seems to imply that a reduction in storm water 20 involving a reduction cost for O and M of public storm 21 water system because MSD's public storm water system 22 works almost exclusively on gravity and because MSD 23 does not treat storm water, reduction in flow does not 24 reduce the District's cost to operate and maintain the 25 infrastructure. Developers are required to provide PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 19 1 detention as part of their development to ensure that 2 they do not increase peak flows above existing 3 conditions to protect downstream property and streams. 4 They are also required to install best management 5 practices to mitigate the pollutant load caused by 6 these developments. However, again, allowing a credit 7 when there is no change in cost to the District for 8 the operation and maintenance of the public storm 9 water system would just transfer cost to other 10 customers with no change in operational cost to the 11 District. 12 In statement number four, the HBA claims 13 that the District could benefit from potentially 14 increasing tax revenues by encouraging best management 15 practice that in turn increase property values. MSD 16 has seen no evidence that this is the case. We have 17 experienced instances where property owners find green 18 infrastructure a plus and other occasions where 19 property owners find green infrastructure a detriment 20 to their property. 21 After a lengthy court battle over the 22 impervious storm water fee implemented in 2008, the 23 District is faced with an immediate need of getting a 24 storm water funding source in place. Upon evaluation 25 of the current funding source, it was determined that PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 20 1 the regulatory requirement or water quality issue 2 related to the storm water program are currently fully 3 funded by the existing two cent ad valorem property 4 tax. And capital work can continue in those areas of 5 the District that currently have OMCI funds. So the 6 operation and maintenance of the infrastructure 7 District-wide is what needs immediate funding. 8 Therefore, the rate change proposal for storm water 9 before you today is primarily for the operation and 10 maintenance of the public storm water system 11 District-wide. 12 During these proceedings there has been a 13 lot of confusion about why the District did not 14 propose an impervious fee similar to that implemented 15 in 2008, and why we did not propose a storm water 16 credit like we did in 2008. To try and clarify, I 17 will simply reiterate what has been provided many 18 times before in these proceedings. The storm water 19 tax being proposed is for operation and maintenance of 20 the infrastructure. The previous impervious fee was 21 funding for all storm water services which included 22 operation and maintenance , capital work, and 23 regulatory requirement. As stated previously, the 24 regulatory requirements for water quality issues 25 related to storm water programs are currently fully PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 21 1 funded by the existing two cent ad valorem property 2 tax, which at this time we are not proposing to 3 change. Capital work in certain areas of the District 4 will be funded with remaining OMCI funds. If in the 5 future there are additional regulatory requirements 6 placed on the District or our customers decide they 7 want to fund additional capital work District-wide, 8 then we will come back to the Rate Commission with a 9 proposal to meet those needs, but for now we are 10 proposing to fund operation and maintenance of the 11 infrastructure District-wide with an ad valorem tax. 12 When funding operation and maintenance there 13 is no equitable reason to apply a credit program. If 14 we did, it would simply cause our customers to pay the 15 difference for those receiving a credit with no 16 reduction in the operation and maintenance cost of the 17 public storm water system. For the proposed waste 18 water rate change, the District has shown that the 19 proposed rate change imposes fair and reasonable 20 burden on all classes of rate payers. MSD has 21 retained the same general methodology used in the 22 past. This rate structure has been in place since 23 1993 and has been upheld by the Missouri courts and 24 has been approved as fair and equitable in all prior 25 rate recommendation records and Board of Trustees PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 22 1 determinations. 2 During these rate proceedings, there have 3 been disagreements on several issues that affect 4 revenue requirement and cost allegation regarding the 5 proposed waste water rate change. I will summarize 6 the District's position on each of these issues. 7 Issue number one, revenues do tie to rates and cost of 8 service. It is common for utilities to perform cost 9 of service analysis every three to five years to 10 ensure their charges are equitable and apply uniform 11 percentage increases in between those years to meet 12 annual revenue needs. In the same manner, the 13 District's total revenue requirement for the test year 14 of FY2017 as presented in the financial plans, are 15 used to calculate fair and equitable rates according 16 to cost of service principals. The cost of service 17 process ensures that each customer class will be 18 charged an equitable portion of the total system cost. 19 It should be noted that rather than applying a 20 straight, across the board increase to each of the 21 components of the FY2017 rate schedule, as proposed by 22 the interveners, the District recognizes that future 23 years' cost related to compliance and the industrial 24 surcharge program would not increase at the same rate 25 as the overall revenue requirement, which is more PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 23 1 driven by the capital cost associated with financing 2 of the CIRP. Since a compliance charge and extra 3 strength surcharge are primarily related to operation 4 and maintenance expense, the proposed rates for these 5 two facets of the rate schedule have been increased at 6 the same rate as operation and maintenance expense. 7 Issue two, economic assumptions used in the 8 waste water rate analysis. The District had made 9 reasonable assumptions related to the future of 10 economic conditions and markets in the service area. 11 These assumptions were made while relying on existing 12 data, analytical data, and indices to make reasonable 13 predictions, which by the very nature of economic 14 forecast are uncertain. The District's assumptions 15 are supported by data and serve as the foundation 16 which allows the District to meet its known and 17 anticipated needs for the next four years. The 18 assumptions advanced thus far by interveners failed to 19 take into account the risk associated with the present 20 state of the economy and volatility of financial 21 markets. 22 As provided in testimony regarding the 23 interveners' proposed assumptions from the previous 24 rate case, if MSD had adopted these assumptions, it 25 would have underfunded the required CIRP in a broad PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 24 1 view given that no person can precisely predict future 2 economic trends. It is likely that some mixture of 3 conservative and optimistic economic assumptions, as 4 discussed during these proceedings, will represent 5 reality. 6 If in the aggregate, MSD collects revenue 7 in excess of its forecast, the District will move 8 forward and expedite the federal consent decree 9 compliance related work or continue the stated program 10 with reduced use of debt, which would then allow 11 additional debt to be available for other projects in 12 future years. On the other hand, if the assumptions 13 provide to have overstated availability of revenues in 14 the aggregate, the District may have revenue 15 shortfalls leading to inability to meet regulatory 16 requirements and subjecting the District to stipulated 17 penalties, fines, and other possible legal action. 18 Overall, the rate payer is better served if the 19 capital program is slightly over-funded as opposed to 20 underfunded. 21 Economic assumptions; waste hauler 22 revenues. During the previous rate period the 23 District experienced a decrease in hauled waste 24 revenue due to the opening of a private waste hauling 25 station within the St. Louis area and Bridgeton PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 25 1 landfill discharging directly to MSD's collection 2 system. In fiscal year 2013 through fiscal year 2014, 3 Bridgeton landfill hauled waste made up of -- the 4 Bridgeton landfill hauled waste made up approximately 5 30 to 88 percent of MSD hauled waste revenue. 6 Currently, during fiscal year 2015, the Bridgeton 7 landfill has put into place a leachate pre-treatment 8 facility and pumping facility and this pumping flows 9 directly to the District's collection system tributary 10 to the Bissell waste water treatment plant. Taking 11 all of this into account, the District feels its 12 projection for hauled waste revenue is appropriate. 13 Economic assumption utility expense escalator 14 and user volume. The intervener states that MSD's 15 utilities expense annual escalation factor should 16 generally coincide with outlooks by utilities' cost 17 the services they will provide. They state Ameren 18 Missouri projected growth in its cost of service is 19 largely tied to its rate-based investments which 20 Ameren projects to grow at a CAGR of 2.0 percent 21 through 2014 through 2019. However, the three percent 22 utilities expense escalation factor increases every 23 other year as proposed by the interveners' assumes 24 utilities cost will rise even more slowly than Ameren 25 is projecting its rate base to rise. PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 26 1 Data shows that the rates charged by Ameren 2 to MSD have increased by a much more significant 3 amount and average of more than four percent per year 4 or approximately double the rate of growth of Ameren's 5 rate base. There have been six Ameren Missouri rate 6 increases since the beginning of 2007, and the average 7 rate hike has exceeded six percent per occurrence. As 8 indicated in MSD's testimony, one cannot assume one 9 percent decline in sewer volumes would equate to a one 10 percent reduction in electricity usage. There are a 11 number of factors including infiltration and inflow, 12 electricity rate structure, and consent decree project 13 work that impact the relationship between MSD 14 customers' volume and electricity usage. MSD has 15 considered all of these factors when it assumed a 16 utility expense annual escalation factor of 5.5 17 percent. While electricity is the largest utility 18 cost for MSD, we also expect other utility costs will 19 also increase more than projected by the intervener. 20 In conclusion, the District continues to believe that 21 its recommendation of 5.5 percent annual utility 22 expense escalation factor is reasonable. 23 We also believe that the District's 24 proposal is better supported by the outlooks and 25 expectations of the utilities in question than the PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 27 1 alternative proposed by the interveners. Economic 2 assumptions, positive economic forecast versus change 3 in accounts or billed usage. The District does not 4 fine a correlation between positive economic forecast 5 and changes in accounts or billed usage. The 6 interveners are making the same assumption argument in 7 2015 that they made in 2011 regarding a positive 8 economic outlook as a reason to hold customer and 9 sales forecasts constant. 10 The data provided in this rate change 11 proposal makes it clear that customer accounts and 12 volume sales declined from fiscal year 2011 to fiscal 13 year 2014, despite the positive economic outlook. Had 14 the Rate Commission followed the intervener's 15 recommendation in 2011 to keep customer and sales 16 projection at the 2011 level. The District would have 17 secured a $7.3 million greater deficit than what's 18 actually experienced using the District's proposed 19 usage levels. The assumptions made by the District 20 using historical data and other factors from previous 21 rate case have proven to be much more accurate than 22 those recommended by the interveners. It is important 23 to realize that while the number of housing permits 24 increased year over year. In some instances, MSD 25 experienced declines in both the number of customers PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 28 1 and build volumes for those same years. This 2 indicates no direct correlation exists between housing 3 starts and MSD customers and volume movements over 4 that time period. 5 Economic assumption; usage per customer. 6 As part of this rate proposal, the District has 7 provided appropriate assumptions for the future billed 8 volume and water usage. The assumptions are based on 9 two factors first, it is well-documented that 10 national water consumption rates are decreasing. And 11 secondly, water conservation efforts for both 12 residential and nonresidential users is a major factor 13 which contributes to a steady decline in billed volume 14 for water usage at water and waste water utilities 15 nationwide. The Rate Commission should appropriately 16 consider this trend and adopt the assumption provided 17 by the District in its rate change proposal. The 18 intervener claim that MSD is significantly overstating 19 the decline in unmetered waste water volumes and 20 encourage Rate Commission to carefully consider the 21 accuracy of MSD's volume projections. A significant 22 amount of data was developed and was provided by the 23 District in appendix 7.1.3 of the rate change proposal 24 to support our volume projections. 25 The methodology presented provides PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 29 1 evaluation of the per fixture water usage volume 2 figures and results in proposed nine percent decrease 3 in the per fixture water usage volumes. This supports 4 the District's proposal. 5 Economic assumptions, bad debt, and late 6 charge revenues. The interveners recommend that the 7 District reduce forecasted bad debt provision from one 8 and a half percent of user charge to one percent of 9 user charge based upon the District's historical 10 average being one percent. The District's assumption 11 of 1.5 percent is based upon the fact that the 12 District made a one time credit adjustment. The 13 District also recognizes that through more robust 14 collection effort, the bad debt provision as 15 percentage of sewer service charge revenue is trending 16 downward. It is for this reason that the District 17 uses 1.5 percent in the rate modelling calculation 18 rather than a higher historical average. The 19 intervener's assumption is the District's projected 20 related charges should increase in accordance with the 21 increase in projected customer bills. The District's 22 assumption is based upon the general expectation that 23 late charges and bad debt provision as a percentage of 24 sewer service charges will move in the same direction. 25 This will not always hold true. However, it is not PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 30 1 logical to expect the bad debt provision as a 2 percentage of sewer service charges would decline, an 3 indication of improved collection efforts while 4 projecting late charges to increase, an indication of 5 declining collection results, at a rate of nearly 11 6 percent each year. Therefore, the two adjustments 7 recommended by the intervener related to bad debt 8 provision and late charges are contradictory. 9 Issue number three, avoiding a negative 10 credit rating. The rate proposal effect on the 11 District's bond rating and ability to maintain a 12 target of AA credit rating are of great concern to the 13 District. The District's position is that larger 14 amount of debt as supported by at least one of the in 15 interveners could increase the District's cost of 16 funding and/or restrict the District's access to 17 funding. This could translate to tens of millions of 18 dollars of extra debt service cost for the District 19 rate payers or threaten the District's capital plan 20 time line. Based on the positions taken by the credit 21 rating agency in the past, the District's experience 22 with rating agency actions, and consultation with 23 MSD's financial advisor, we believe that reductions to 24 the proposed revenue and/or increases in future debt 25 service cost could reasonably lead to lower credit PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 31 1 ratings. We have specifically chosen a mix of 2 debt/PAYGO financing and cash balance target that we 3 believe is consistent with maintenance of current 4 ratings. This concludes the District's official 5 summary statement. A copy of our statement will be 6 filed as Exhibit MSD 131 later today. Thank you. 7 MR. TOENJES: Thank you. Are there 8 questions from any of the rate commissioners for Ms. 9 Myers? 10 MR. BROCKMANN: On Page 3 of your testimony 11 in the first paragraph you say that storm water -- MSD 12 believes use of the impervious fee resulted in 40 13 percent increase in cost to users to same level, et 14 cetera. Can you give me some numbers to back that up? 15 MS. MYERS: I'll let Brian answer that. 16 MR. HOELSCHER: We had details in some 17 previous ones, but the numbers come from assured tax 18 deductibility for many of our customers on property 19 taxes from their bill. That's how it translates to 20 reduced cost to our customers. The cost of 21 maintaining our basis was the current pervious system 22 we proposed eight years ago. The cost of maintaining 23 primarily a lot of responding to customer issues and 24 questions regarding how that charge worked out for 25 them. So we submit annual cost of that of about a PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 32 1 million dollars per year. And right now, under the 2 current state legislation which restricts us from 3 collecting monies from residential customers -- let's 4 see, residential customers who are not waste water 5 customers and whose storm water doesn't go through the 6 public storm sewer system does not allow us to collect 7 a fee. Right now that's about one percent of the 8 anticipated folks that we would collect from. So that 9 cost would have been translated or made up for by the 10 rest of the paying customers. And I think we do make 11 a statement that we have every reason to believe there 12 is no reason that kind of logic could not be extended 13 by the state legislature and potential fewer customers 14 having participated in that. If you add those up, 15 that's where you come up with the 40 percent. It's 30 16 to 35 percent for tax deductibility on state and 17 federal tax, the cost of maintaining the system which 18 is about five percent, and right now one percent of 19 the customer base who would participate in the tax but 20 not participate in voted on impervious. We did have 21 those detailed in previous testimony. 22 MR. TOENJES: Does that answer your 23 question, Mr. Brockmann. 24 MR. BROCKMANN: Yes. 25 MR. JONES: The five percent annual PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 33 1 utilities expense escalation. That's an estimate or 2 outlook with regard to utilities expense. With regard 3 to utilities expense, MSD is estimating a 5.5 percent 4 increase. It's a two-part question. Is there any 5 recommendation for over or underestimation? For 6 instance, if you underestimate that increase do you 7 have a way to recover? And if you overestimate it, 8 either way is there a pass-thru between MSD and the 9 customer if you don't hit it on the mark? And have 10 you all considered simply passing through that cost 11 rather than even having to estimate what the cost 12 might be. 13 MR. HOELSCHER: Answering the second 14 question first. No, we cannot considered actually 15 passing on electrical cost as a specific line item on 16 our bill. We have not done that. With regard to the 17 first item, the way the process is set up, we will go 18 through four years of revenues and expenses, and as 19 you have done this year, and as the benefit was this 20 year, if there are additional monies left out of the 21 operating budget, revenues above our expenses, that 22 money goes into the pool that is the test year. So 23 the rate payers benefit from that in the future four 24 years. If there is ten million dollars left, that ten 25 million dollars gets available to fund service over PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 34 1 the next four years. We don't have stockholders. We 2 don't have profit margins. The money just simply 3 rolls over. And that is same with capital expense. I 4 think that's what, as you see, as trying to explain if 5 the revenues collected for capital expense while we 6 try to take advantage of prices and do these cheaper, 7 if available. Any of those revenues left over don't 8 get spent, anything else, they are in the pot for the 9 next four year period, and rate payers benefit from 10 decrease expenses because of the balance that starts 11 at the start of rate process. 12 MR. JONES: That raises another question. 13 When you say "do things cheaper" has MSD researched 14 any alternatives to electric needs like solar energy, 15 using storm water runoff to power facilities, anything 16 like that? 17 MR. HOELSCHER: I'll have John Sprenger, 18 Director of Operations. The answer is yes, not for us 19 directly, but everything we do. I think John can give 20 you some ideas that we looked at in the past and we're 21 looking at in the future. 22 MR. SPRENGER: John Sprenger, director of 23 operation. We've looked at -- I'll start with one of 24 the impeding factors to using alternative sources of 25 energy than just the electric company is Missouri has PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 35 1 cheap energy. Our average relative to the rest of the 2 country -- Our average kilowatt hour is roughly six to 3 seven cents. So there is no alternative energy 4 generation that we looked at that can provide energy 5 any cheaper than the electric company can provide to 6 us. And we look at solar, and because we run pumps 7 24/7 solar is more expensive, and the intermittent 8 nature doesn't provide us any advantage. We also 9 looked at running cost recovery -- looking at cost 10 recovery turbines like on discharge from treatment 11 plants, but by the time you put implement cost, the 12 operations and maintenance, it turns out to be cost 13 prohibitive. So we have looked at a number of 14 alternatives, and we haven't found them to be viable. 15 MR. JONES: Thank you. 16 MR. HOELSCHER: I'll add one other item we 17 are currently researching. There is always question 18 what we do with our solid waste. And there are 19 currently potentially regulatory changes occurring in 20 the country that will not allow the use of the fly ash 21 that's currently used in production of concrete. We 22 create ash off our incineration process and we 23 reviewed that in the past to see if there is 24 commercial use that's financially viable in the past, 25 but with that current change in the regulation we are PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 36 1 talking with some groups in cooperation with the city 2 of St. Louis, is there possibly a better use or better 3 way to dispose of ash that comes from incineration 4 that would save our cost on operating expense. It's 5 an example of something we're doing right now that 6 we're kind of insidiously reviewing that issue for 7 lower operating cost. 8 MR. SPRENGER: You know, I discussed 9 alternative energy uses. It doesn't mean we haven't 10 put an effort in the last number of years to be more 11 energy efficient in the District. Ameren has put a 12 number of credits and rebates in place. I'll cite a 13 number of examples. We almost in all our locations 14 put variable speed driver controllers for our motors. 15 Which variable speed drive is an efficient way to 16 allow to vary the speed of electric motors in a very 17 efficient fashion. So you're matching flows with 18 motor speed and operating efficiently. We've taken 19 advantage of rebates and put variable speed drives in. 20 We switched out lighting in most of our plants to more 21 energy efficient T8 fluorescent lighting instead of 22 the older T12, which our plants were built with. We 23 used Ameren energy credits in all those locations for 24 taking advantage of that. We've done a number of 25 different energy efficiency initiatives in that case. PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 37 1 Also putting in -- even in this building in our 2 conference rooms, automatic on/off lights, electronic 3 controllers, HVAC. So we've done a number of normal 4 things that any place would do to get energy efficient 5 and take advantage of energy credits where we can. 6 MR. TOENJES: Does that answer your 7 question, Mr. Jones. 8 MR. JONES: Thank you. 9 MR. TOMAZI: I have a few question, Ms. 10 Myers. On the top of Page 3, you indicate in your 11 testimony that the District-wide ten percent ad 12 valorem property tax imposes fair and reasonable 13 burden on all, and I underline "all", classes of 14 taxpayers. Does that include or exclude nonprofits 15 such as schools, hospitals, churches, et cetera. 16 MR. HOELSCHER: He is not here, I think 17 Bill Stannard would answer that, but I guess I'll let 18 you know I think our current assumption is based on 19 the last Supreme Court ruling is that those entities 20 would not participate in the funding of storm water 21 under either scenario; either voted on impervious fee 22 or property tax. And that's based on our risk 23 analysis of the decision that came from the Missouri 24 Supreme Court on evaluating previous impervious rate. 25 MR. TOMAZI: From a legal perspective, your PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 38 1 indication is that, including those nonprofits would 2 in fact still impose a fair and reasonable burden on 3 all of the rate payers; is that correct? 4 MS. MYERS: Yes, it is. 5 MR. TOMAZI: Jumping down a little bit 6 further on Page 3, you indicate that use of an 7 impervious fee would result in up to a 40 percent 8 increase in the cost of MSD customers for the same 9 level, and fewer customers participating in the 10 funding of the program, et cetera, et cetera. As I 11 recall, you instituted an impervious program about 12 four years ago and it lasted until about six months 13 more or less -- until, I guess, the state passed a law 14 and you couldn't do it. Well, in fact, I guess until 15 the case was filed is that 40 percent is a reasonable 16 number considering fact that you already, in fact, 17 done this once before. 18 MR. TOMAZI: I'll go in a little more depth 19 to, I think, the answer I answered to Mr. Brockmann, I 20 think. Let's think back to what we imposed for 21 impervious eight years ago where the specific service 22 we talked about are talking about now was about 30 23 percent of the revenue what we projected back then for 24 impervious fee. So, there were then still those costs 25 per year to maintain impervious system. Quite PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 39 1 honestly, responding to customer service component of 2 that billing to the customers was more than we 3 expected, but you add all that together that's where 4 we come up with the million dollars per year to run 5 the system. Running a million dollar system to 6 generate less than 25 million dollars of revenue is 7 different than a cost of a system of million dollars 8 per year to generate what ultimately would have been 9 80 million dollars a year for much different storm 10 water services. So that's five percent of that 40 11 percent number. I agree it didn't come up eight years 12 ago; the idea if you do storm water by a property tax 13 it is tax deductible as opposed to imposing impervious 14 fee. That is not an issue I recall coming up eight 15 years ago. It is now, and we feel it's significant 16 and it's an important thing to consider. You mention 17 state laws, there is the decision by the Supreme Court 18 about implementing impervious fees without a vote. 19 And some doubt as to what that means. But the other 20 part was after we implemented impervious fees, almost 21 nine months later is when state legislation started 22 going in place to take those individuals who we 23 thought would be in that paying pool and start 24 eliminating them by legislation. If they met certain 25 parameters, they don't have to pay the impervious fee. PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 40 1 It was originally -- we made the quote somewhere -- it 2 was House Bill 661 resulted in state statute that 3 eliminated over 3500 customers who originally in the 4 proposal did not have to pay. So we're adding all 5 those together and we compare those impacts to what we 6 believe is a reasonable assumption of what would 7 happen to voted on impervious fee. If you add those 8 together like I kind of broke down, you end up with 9 total cost to our customer base of 40 percent more to 10 fund the same storm water services if you're using 11 voted-on impervious fee than if you use a property 12 tax. And I think -- if you don't mind, I'll go on. 13 We make a lot of our things here. As Susan described, 14 we are specifically going after a small component of 15 when compared to the services we planned eight years 16 ago. We're going after just operation and maintenance 17 of the public storm sewer system. Especially that 18 portions that located mostly outside of 270 that has 19 no funding to operate and maintain. Hopefully, all 20 that together answers the question you asked. 21 MR. TOMAZI: It's getting close. As I 22 recall, I didn't put it up in front of me, if you 23 divided the storm water situation into three major 24 components; yellow, red, and blue or something like 25 this. And there was a different ad valorem tax PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 41 1 proposed for two of those Districts and one of them 2 you eliminated it all together; is that right? 3 MR. HOELSCHER: When you see yellow, red, 4 green map, you are seeing the results of various 5 individual taxing burdens that are based on residents 6 of different levels and covering different geographic 7 areas currently. So, if you're in the area, if you 8 recall the map which is red, which is outside 270, 9 there is a two cent District-wide tax that everybody 10 is paying for regulatory issues. So everybody is 11 still paying that. The difference in what everybody 12 is paying right now is because there are then other 13 taxes that are layered in more discreet areas of the 14 District that both is increase services and thus 15 increase the cost they pay. So what we're proposing 16 to change when it's all said and done, everybody would 17 pay two-cent property tax for storm water rate issue 18 and everybody would pay ten-cent property tax for 19 primarily the operation and maintenance of public 20 storm sewer system District-wide. And we have 21 mentioned we want to make sure there is a provision 22 that the additional dollars in O and M, we had 23 something designated to use. The rest of the 24 expenditures that you see in there are just the 25 spend-down of balances and current taxes that we put PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 42 1 in place. The seven-cent tax goes away. This 2 basically replace a seven-cent tax that currently pays 3 operation and maintenance for some operation and 4 maintenance inside 270. Without public input for 5 existing O and M tax, we are going to set at zero and 6 allow that for the rate proposal. So that's why you 7 see the changes how everybody is impacted. We are 8 taking what's in place and what's been in place since 9 and prior to 1980, and trying to find a way to level 10 that all out. 11 MR. TOMAZI: But that which is already in 12 place is not going to change; is that correct? 13 MR. HOELSCHER: There is a 24-cent per 14 month charge to all waste water customers that goes -- 15 that will go away, and seven-cent property tax for all 16 property within the original District boundary is 17 yellow and green area inside the map -- inside 270. 18 Those will be replaced by the ten-cent District-wide 19 property tax. That is the change we're proposing. 20 And two-cent tax would stay in place for now as we are 21 proposing the OMCI tax, the green area. We're not 22 proposing any change in structure. We are going to 23 set it as zero, and we informed all the cities what 24 we're going to do, and we won't be collecting the tax. 25 We are going to allow the District-wide tax to run for PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 43 1 the next four years. 2 MR. TOMAZI: In your testimony, Ms. Myers, 3 you indicated the proposed tax credits, credit 4 program, has sort of suggested or inferred by the 5 Homebuilders Association, would result in some costs 6 being shifted to other folks. I guess my question is 7 more along the fair and reasonable line. Would it be 8 -- is it fair and reasonable based upon your legal 9 assessment of our mission, that providing the 10 residential rates for new construction favors one 11 group of rate payers over another, or should such a 12 credit program in order to be, if you will, legal or 13 based upon our criteria, would it have to be offered 14 to all rate payers -- not just residential, but all 15 rate payers. 16 MS. MYERS: So you're asking me what would 17 make the credit program fair and reasonable? 18 MR. TOMAZI: Right. 19 MS. MYERS: In our proposal, I'd rather 20 answer that that our -- we feel like the proposed ad 21 valorem tax that we are recommending without a credit 22 program is more fair and reasonable to all of the -- 23 all of our customers. So we don't get into the fact 24 of whether who we would allow a credit to and who we 25 would not -- whether that affects the fair and PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 44 1 reasonableness of it. Bill Stannard in his testimony 2 has testified to the fair and reasonable necessary of 3 the proposed storm water funding source that we have 4 proposed. 5 MR. TOMAZI: That didn't quite fully answer 6 my question to my understanding. 7 MS. MYERS: Okay. 8 MR. TOMAZI: The question, again, is if a 9 credit was extended to new home buyers, would that be 10 fair and reasonable prima facia, or would it have to 11 be extended to all rate payers. This is just -- 12 MR. HOELSCHER: I will tell you the 13 District's position is a credit program for what we're 14 proposing -- the way we are proposing it would not be 15 fair and reasonable with what we're proposing. As far 16 as I'll extend that to other proposals we make in the 17 future for other types of services and other ways to 18 pay for those, a credit program may be. But for what 19 we're proposing, I think it's safe to say we don't 20 feel a credit program would be fair and reasonable. 21 MR. TOMAZI: Thank you. 22 MR. SCHNEIDER: Mr. Schneider? 23 MR. SCHNEIDER: You mention discussion 24 between impervious charges and ad valorem tax. 25 Previously, the District made impervious service fee. PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 45 1 What year was that proposal done? 2 MS. MYERS: I believe it was brought to the 3 Rate Commission in 2007. 4 MR. HOELSCHER: It's for 2008 to 2012 rate 5 cycle, so we brought it in 2007. 6 MR. SCHNEIDER: Will the District be 7 willing to provide an exhibit for this Rate Commission 8 proposed rate change proposal for 2008 to 2012 9 proposal as an exhibit? 10 MS. MYERS: Certainly, it's already been 11 supplied as an exhibit. I'll find out an exhibit 12 number for you. It's Exhibit MSD number 6. 13 MR. SCHNEIDER: Thank you. 14 MS. MYERS: I'm sorry. It's Exhibits 5 and 15 6. 16 MR. SCHNEIDER: Okay. I'll find that. 17 MR. TOENJES: All right. Mr. Mahfood? 18 MR. MAHFOOD: When talking about the whole 19 discussion between the impervious fee and what's being 20 proposed, one of the things looking at this and 21 looking out into the future, the ad valorem tax 22 approach, which is tried and proven, that's one that 23 doesn't go back and reopen the Court case and take us 24 back into that, but it doesn't provide any kind of a 25 foundation for kind of training the public or moving PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 46 1 the public towards a different attitude about storm 2 water unless it's accompanied by a fairly arduous 3 educational side. And that's why I speak for the 4 other commissioners that's why things like credits and 5 incentives, although maybe not quantifiably 6 justifiable in the short term and in this rate, it 7 would seem to have the ability to kind of train people 8 and move them in the direction that would be very 9 valuable for the District later on as you're trying to 10 comply with more regulations and more onerous kinds of 11 things. I don't know. I know that's more of a softer 12 question, but does that ever come into the thinking? 13 MR. HOELSCHER: That's a good opinion on 14 our strategic thinking that's all in the back of our 15 mind. I think rates is just one way to try to change 16 folks opinions. I will tell you right now in the 17 whole area of storm water impact or rain water run you 18 have impact on other ones in our world that's kind of 19 are dividing we take care of waste water rates every 20 where else we take care of storm water revenue. If 21 you use the example in the combined sewer system, 22 right now at no time types of benefits we are seeing 23 just yesterday was at the opening of the first roof 24 garden, roof farm in St. Louis. It's over 1335 25 Convention Center place, and that came through a grant PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 47 1 program, that comes out of a 100 million dollar green 2 program for combined sewer areas. We have seen a lot 3 of benefits from offering grants as well as doing our 4 own work where we're installing green infrastructure 5 throughout the city in order to reduce storm water 6 that's coming no and resulting in overflows in the 7 presiding sewer system. So we're seeing the combined 8 area a lot of progress and a lot of results from 9 offering those types of factors. Now, where we're at 10 on funding and where we're at on regulatory 11 perspective, we don't really have the ability for a 12 lot of reasons to do that in separate sewer area, but 13 that hasn't kept us from teaming with primarily 14 Botanical Garden and other areas where we're using 15 OMCI money for storm water issue. We are having them 16 assist, sometimes via grants or something like that, 17 where folks -- one of the biggest things about this 18 is putting -- you want to put it in places where 19 people want it. You don't want to put it in places 20 where people don't want it, and don't want to maintain 21 it. Working with Deer Creek Water shed group. That's 22 primarily. We're taking our storm water issues take 23 are mostly erosion and flooding issues with the money 24 in the grown areas we're depending those through our 25 assistance to outside funding to put green PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 48 1 infrastructure as part we're not using our funds to do 2 that we're making sure we say revenue neutral, but in 3 teaming with other folks where we're putting examples 4 out there and identify those who really find this 5 important. And I will tell you we don't have any 6 evidence we haven't submitted anything like that. We 7 are seeing a lot of positive impact from various, we 8 have steering committee groups that our capital 9 program to see what's going on with green 10 infrastructure and how folks are talking about it and 11 how it's funded, and more importantly how our 12 particular piece of what green infrastructure means, 13 and start matching up with our needs. I mention roof 14 farm, and got plenty of rain today. They are taking 15 care of heat island issues. They are taking care of 16 distribution of natural foods throughout area for 17 folks who don't have access to that either by donation 18 or by purchase. So we're finding that operating with 19 all those types of folks is a real benefit. One Of 20 the concerns, I guess, one of the items we brought up 21 when we were talking about impervious rate and let's 22 go outside credits. Let's talk about impervious 23 service. You would never -- the easiest way to 24 eliminate your impervious service, so let's say you 25 want to take a driveway, rip it out, and put a PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 49 1 pervious driveway in. That's a 100 percent credit for 2 impervious area. There is no way it would be a 3 financial driver for folks to do that unless they are 4 oriented to do it because a reduction in cost the 5 individual owner would in no way ever come close to 6 seeing the benefit of that. So I would put it to you, 7 -- our experience has been, yeah, that is one tool and 8 it is something at an appropriate time we would not be 9 opposed to. Let's say you start addressing water 10 quality issue of storm water runoff in the services, 11 those might be a component. Might be in the proposal 12 in 2007, but specifically for all the reasons we've 13 outlined in the testimony and document we submitted 14 where this particular piece of the funding, and those 15 particular issues that we're trying to address, which 16 we think of most immediate ones, this isn't the time 17 to have that discussion for this particular piece. 18 But we will continue all the similar past activities. 19 If that's good enough soft answer. 20 MR. MAHFOOD: That's good. I wanted to hear 21 your thinking and how it's working. Thank you. 22 MR. TOENJES: Mr. Mahanta? 23 MR. MAHANTA: Brian, I'm going to build on 24 what Steve touched upon, and I have a similar interest 25 on that. It is commendable that you are doing the PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 50 1 things you have been doing in that regard. But how 2 can we extend that to bigger areas or larger area of 3 your responsibility, not just areas where, the yellow 4 area is sort of combining storm and waste is combined 5 because it's positive thing and we would like to see 6 some efforts as far as to extend it farther. I don't 7 know how we are going to do that, but that's something 8 I would like to see, too. Now, come back on Page 3, 9 that 40 percent increase in cost, can you give us a 10 handle on the magnitude of, let's say, that you are -- 11 our commission decides to recommend that that the 12 impervious area is considered and it's obviously going 13 to cost you extra to keep the same amount of money 14 because of expense for administering all that. What 15 would be the order of magnitude increase that you will 16 have to earn or obtain to get the same amount. 17 MR. HOELSCHER: The second part I would 18 like to comment on first thing, but on the second item 19 in doing quick math in my head, so you can't hold me 20 to this. We're looking at about $25 million of 21 revenue that we want to collect under proposed tax 22 assuming what we've laid out is accurate we would be 23 asking rate payers to pay $35 million a year for some 24 areas or about ten million dollars more per year using 25 impervious rate. We feel that's significant, and as PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 51 1 we stated, a significant enough difference -- enough 2 of an extra amount it really needs to be considered 3 when you consider what is fair and reasonable versus 4 alternative that are all ton landfill. So it's about 5 $10 million. On the first item, MSD right now has not 6 attempted to do anything beyond current regulatory 7 requirement. If can you imagine, we get a lot of push 8 back about doing anything extra. We're being real 9 creative when we work with Deer creek Water Shed 10 that's within the green areas that's doing some things 11 with green infrastructure right now the current plan 12 we have in place, the program that the two cent tax is 13 funding is meeting storm water quality requirements. 14 MSD has not asked to do something to go beyond current 15 regulatory requirement. My opinion is it's not the 16 right time to ask people if they want to pay more than 17 what is the minimum regulatory requirement. All those 18 things we have to get some programs in place that will 19 do that, get people thinking about things. And very 20 specifically to that and I think in our testimony we 21 discussed this briefly about -- when the issue of 22 integrated planning came up, one of the arguments we 23 made in discussions with primarily MDNR and what we 24 need to do with our storm water program is that one of 25 the biggest, most immediate impacts on the quality of PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 52 1 local creeks and streams is proper execution of the 2 waste water program, the consent decree, the overflows 3 from the system, basement backups, those types of 4 things. We are seeing benefits of those in storm 5 water quality. We are seeing benefits in the creek 6 water quality from one program we have in place right 7 now to police and govern runoff on storm water. So 8 right now we're in a place where, and we've had folks 9 check up. They want to make sure we weren't over 10 reaching. We went through pretty arduous process. 11 Folks claim we were going past that. We're very 12 cognizant at this point if you think we're asking 13 folks to pay, not for us to pay -- not for us to 14 propose to do something what is beyond the regulatory 15 minimum. You need to do it in smart way and we need 16 to keep the future in mind and I think a lot of things 17 that are coming out of efforts to combine sewer 18 system, not just the city. There is 20 square miles 19 adjacent to that and some of the efforts as we do 20 storm water projects, I will tell you, for instance, 21 every time there is a development or storm water out 22 in the red area or green area, the first things our 23 folks talk is hey, you got may be a volume issue here. 24 Some green alternative take a look at information on 25 our web site, take a look at other source we have as PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 53 1 ways to resolve, make it green solution rather than 2 having big detention basis to hold water back, let's 3 think of the water quality a little bit. I don't 4 disagree that we eventually have got to think about 5 it, but I right now MSD isn't in a place to recommend 6 that. That goes beyond the regulatory requirement and 7 cost associated to that. 8 MR. TOENJES: Any of the other rate 9 commissioners have any questions for Ms. Myers or the 10 District at this point. I have one question -- two 11 questions. And maybe this is nothing your prepared to 12 answer right now, but you mentioned House bill 661, 13 and the changes that had in the folks that would be 14 subject to an impervious fee. Could you briefly 15 describe what House Bill 661 did and how that changed 16 from 2007 and 8 rate case to where we are today? 17 MR. HOELSCHER: So after the 2007 rate case 18 that we implemented the impervious fee structure that 19 went through the Rate Commission process, there was a 20 -- we view the situation as outcry -- however, you 21 connect these. From individuals who have always been 22 paying a storm water ad valorem property tax to us, 23 our property tax -- the two cent property tax being 24 such a small part of the property tax. Many of them 25 didn't realize they were paying that. And the PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 54 1 legislature response while we were implementing the 2 impervious fee was that any residential, this is HB. 3 661, which has a resulted in status that's referenced, 4 anybody who is a residential customer who doesn't 5 receive waste water service from MSD and whose runoff 6 does not enter part of the public storm system manhole 7 inlet pipe, does not have to pay a fee. The language 8 in that was they don't have to pay any fee rates or 9 taxes. So when that went in place and this is while 10 we're implementing it, we took those folks off the 11 rolls back when we had the original impervious rate 12 prior to the Ford action that caused us to stop 13 collecting that. That is still on the box. I think 14 we have testified in either Ms. Myers' testimony or 15 someone else, we feel there is constitutional 16 authority for us to -- regardless of that legislation 17 that allows us to collect property taxes because of 18 some constitutional guarantees, but it is pretty 19 obvious that any kind of fee, rate, however a Court or 20 somebody would interpret that, what we would have the 21 same impact that we wouldn't collect from those. I'm 22 saying at least 3500. It's like 3630 customers who 23 stopped paying the impervious fee after the rate case 24 when the courts -- our reaction to the court was to 25 stop the impervious fee and go back to taxes. We did PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 55 1 put them back on the tax rolls and they had to pay 2 property tax since then. So that is the last that's 3 in place. And now I'm just imaging, I don't know if 4 it's long leap for some legislature to believe that 5 even though in our testimony we found we think it's 6 important for those to use the public sewer system 7 whether there is one on the street or not to 8 participate with that infrastructure within the 9 boundaries. They can do that with folks that do 10 receive waste water service from and maybe all the 11 runoff on the back of their property to the creek or 12 somewhere else. So when we talk about over extending 13 that, based on our experience and discussions with 14 certain individuals and legislators you might see 15 something like that come in the future. We think this 16 issue is important enough for this particular piece 17 that we want to fund MSD, another reason to avoid 18 doing any kind of impervious fee -- if I answered 19 your question. 20 MR. TOENJES: The final legislation that's 21 passed is that part of the record? 22 MR. HOELSCHER: It is part of the record 23 and it is in one of our surveys, but at that time we 24 mention HB 661 and go and mention exact statute, give 25 the exact statutes that's currently in Missouri PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 56 1 statute. 2 MR. TOENJES: My last question has to do 3 with you talked about the difference in service levels 4 of storm water between prior rate case and this case. 5 And it's primarily capital improvements. 6 MR. HOELSCHER: It was -- in general it was 7 about 30 percent O and M, ten percent storm water 8 regulatory, and about 60 percent capital. That was 9 the scope of the previous proposal. 10 MR. TOENJES: Any other questions of the 11 rate commissioners for Ms Myers? Ms. Bowser? 12 MS. BOWSER: You're saying that the Court 13 case leads you to believe that the impervious fee 14 would be challenged again, am I correct. 15 MS. MYERS: What we're saying is that in 16 our opinion the Supreme Court did not give real clear 17 direction. What they did give us direction on was the 18 impervious fee that we were trying to implement at the 19 time it needed to be voted on. We don't feel that 20 they went as far to say that that actual fee was a 21 tax. 22 MS. BOWSER: But the impression you feel at 23 this time an ad valorem tax will not be challenged or 24 less likely to be challenged? 25 MS. MYERS: Correct. PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 57 1 MS. BOWSER: Is there a specific part of 2 the constitution that you are citing to make that 3 determination? 4 MS. MYERS: Yes, in one of my testimonies 5 or on maybe a discovery request, I went through what 6 we feel gives you authority to tax it has to do with 7 our charter. It has to do with the constitution, and 8 has to do with tax laws. And I believe one of the 9 rate commission's discovery request. I don't remember 10 which one. 11 MS. BOWSER: Thank you. 12 MR. TOENJES: Any further questions for Ms. 13 Myers? Thank you very much. Mr. Neuschafer, would 14 you like to address the Rate Commission on behalf of 15 Missouri Industrial Energy Consumers? 16 MR. NEUSCHAFER: I would. 17 MR. TOENJES: Please proceed. 18 MR. NEUSCHAFER: Thank you for the 19 opportunity to represent MIEC on the rate change 20 proposal. As you're aware I represent the Missouri 21 Industrial Energy Consumers, which is a group of large 22 industrial energy consumers of MSD waste water and 23 storm water service who will be impacted by the rate 24 change proposal. We appreciate the significant amount 25 of work put into this process by all parties and PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 58 1 recognize it's not always been an easy process. It's 2 also one that is filed with a lot of data and 3 information. However, we strongly believe that it has 4 been and continues to be a beneficial process for both 5 MSD and its customers. For example, in the last two 6 rate cases, the Rate Commission has consistently 7 recommended five to ten percent less than those 8 proposed by MSD. But you recall MSD reports its on 9 track and even below budget for meeting its obligation 10 under the consent decree. The net result is that 11 because of the careful review of MSD rate change 12 proposals, the Rate Commission has been able to reduce 13 the rate impact on consumers while still allowing MSD 14 to meet its operational needs and legal obligation. 15 We believe there is similar and significant 16 opportunities here to scrutinize the rate change 17 proposal in a manner that accomplishes the same dual 18 goals of reducing rate impact on consumers while still 19 providing the revenue necessary for MSD to meet its 20 operational needs and legal obligations. 21 In summary, MIEC has four main points. 22 Each will be outlined in more detail in pre-hearing 23 conference report to be filed by MIEC and which have 24 been discussed in the rebuttal testimony and discovery 25 responses filed by MIEC. First, MIEC believes MSD has PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 59 1 understated its forecasted revenue. MSD has taken 2 aggressive approach to projections about shrinking 3 customer base and waste water volumes and at the same 4 time has understated future revenue from other 5 service. This means MSD has requested a rate that is 6 higher than needed. The ultimate impact of 7 understating forecasted revenue is unnecessarily 8 increased rates imposed upon the customers. 9 Second, MSD has overstated concerns to O 10 and M, namely utility cost projections. If one uses 11 forecast based on utilities only projections and not 12 just based on historical rates, we see an opportunity 13 to further reduce the rate burden on users. 14 Third, MIEC supports MSD's efforts to fund 15 a significant portion of the capital improvement and 16 replacement program through the use of bonds and 17 proceeds from state revolving funds although we 18 believe there an ample opportunity to modify the bond 19 proposal to increase the amount of bonds issued and/or 20 extend the life the bonds issued. 21 Fourth, MIEC agrees that the storm water 22 rate increase proposed by MSD is not equitable and 23 balanced approach to charge customers for storm water 24 services. Putting these in terms of the charter plan 25 factor that the Rate Commission must consider, we PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 60 1 think these points are directly related to, one, the 2 District's ability to provide adequate sewer and 3 drainage systems and facility or related services; the 4 District's ability to comply with applicable federal 5 or state laws or regulations, and most significantly 6 whether the proposed rates impose a fair and 7 reasonable burden on all classes of rate payers. 8 I first want to dive into the 9 understatement of revenue in a bit more detail. As I 10 mentioned, MSD has understated forecasted revenue from 11 other sources. The first of these sources is waste 12 hauler user fees. MSD projects a decline in revenue 13 from waste hauler permits down to $670,000. However, 14 in its annual report for year ending in June 2014, MSD 15 indicated that quote licenses, permits, and other fees 16 increased 3.8 million or 140.3 percent due primarily 17 to increase in waste haul permits. This suggests that 18 recent data shows decrease in waste haul permit fees 19 is not likely. The total amount MSD projects to 20 collect over the four year course of rate proposal is 21 essentially equal to the same amount projected to be 22 collected in 2015 alone and only about 60 percent of 23 the amount collected in 2014. Accordingly, MIEC 24 recommends adjustment to other revenue associate with 25 waste hauler permits that approximately double MSD's PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 61 1 projections. And returns the revenue projects to 2 level more consistent with data over the last five 3 years. 4 With respect to bad debt, MSD has increased 5 it's bad debt provision from historical one percent to 6 1.5 percent. However, actual collections from fiscal 7 year '10 through '14 show that bad debt provision has 8 actually declined to one percent. Additionally, MSD 9 indicates that it has made investments in a program to 10 recover bad debt, which have been successful, and thus 11 customers should see the benefit of these investments 12 in recovering bad debt. MSD's projection has the 13 effect of significantly increasing its bad debt 14 provision, which is regarded as a negative against 15 other revenue. The net effect of modifying this 16 projection as proposed by MIEC is increases in other 17 revenue of approximately $2 million per year on 18 average. With respect to late charges or late penalty 19 fees, late payment charges are based on penalty 20 applied to unpaid bills. It's a logical conclusion 21 that as MSD rates increase, the dollar amount of 22 unpaid bills will increase a similar amount and late 23 payment charges will increase in line with the rate 24 increase, correcting MSD's projection of late charge 25 penalty revenues will increase over other revenue PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 62 1 sources about three and a half million dollars per 2 year on average during the forecast period. MIEC also 3 believes MSD's projection understated the number of 4 customers and volume of waste water treated. With 5 respect to the number of customers, we point the Rate 6 Commission to several factors, first the number of 7 connection permits issued annually is on the rise. In 8 2010 this number was 763. In 2014, it was 1764, an 9 increase of one thousands permits. MSD has attempted 10 to explain this increase away, but has provided no 11 real data showing this is anything other than two and 12 a half times increase in the number of permits issued 13 in four years. Taking into account the intervening 14 year, the data clearly shows the number of connection 15 permits is on the rise. Add into this, MSD data 16 indicating that the rate of decline in total number of 17 customers has slowed even to the point that total 18 number of customers actually increased in 2014, which 19 is the same year that MSD issued over 1700 new 20 connection permits. We believe that this data shows 21 that MIEC will at worst maintain flat level of 22 customers and, in fact, may be entering a period of 23 customer growth. This is consist with the Moody 24 analytical report that we have previously provided, 25 which indicates the number of new single family PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 63 1 housing permits is expected to more than double in 2 each of 2016 through 2019 over 2014 numbers. While 3 the geography covered by that report includes part of 4 southern Illinois, the vast majority of the population 5 and thus the expected housing construction is within 6 MSD coverage area. 7 Next MIEC does not disagree with MSD's 8 assumption of a modest decrease over time in waste 9 water volume received from metered users. However, 10 MSD's projection of volume received from unmetered 11 customers present an anomalous one time decrease in 12 unmetered volume in fiscal year -- in fiscal year '17 13 over fiscal year '16, an almost ten percent decrease 14 in one year. MSD's projections appear to be based on 15 assumptions without corresponding verification and 16 costs of other operating data that the volume used by 17 unmetered customers will decline in fiscal year '17 18 relative to fiscal year '16. However, considering 19 certain facts, the notion that this decrease will 20 occur is refuted. First, the level of pumped volume 21 as reported by MSD in its annual reports for fiscal 22 year '12 through '14 has not actually declined. 23 Second, MSD's projection for reduced volume sales to 24 unmetered customers is inconsistent with the St. Louis 25 Water District projections for water sales. Third, PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 64 1 MSD has not accounted for any expense offsets for 2 inputs like electricity cost or chemicals. Fourth, 3 there does not appear to have been any tests of actual 4 volume treatment, volume flow in the water treatment 5 process or water collection process. Operational data 6 to support the assumption is simply not there. And 7 finally, as discussed previously, the number of 8 customers may actually been increasing. 9 I want to turn to the next major point, 10 which is that MSD has overstated its future O and M 11 costs. MSD has proposed a five percent increase -- 12 approximately five percent increase in utility cost 13 where MIEC proposed three percent increase every other 14 year. MIEC's number is based on future projections by 15 the utilities themselves. Ameren's own projections 16 are for two percent growth per year during the term of 17 rate proposal, an amount very similar to MIEC's 18 proposed three percent increase every other year 19 during the term of rate proposal. MSD, on the other 20 hand, appears to have based its projection solely on 21 historical costs. A critical factor though is that 22 these historical costs occurred during a period of 23 significant capital expenditures by Ameren, which 24 period is winding down. As such, MIEC asserts that 25 the utilities' own projections are a much better PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 65 1 predictor of MSD's anticipated utility cost than past 2 cost. 3 So for its recommendation, MIEC has 4 proposed the following; in its last rate case, MSD 5 increased internal PAYGO from $20 million to $40 6 million. Now, MSD seeks an increase of up to $70 7 million to $114 million during the forecast period 8 fiscal year '17 through fiscal year '20. MSD's 9 proposal to more than triple internal PAYGO funding 10 will create unnecessary price pressures on its 11 customers. Starting in fiscal '20 MIEC recommends 12 that the amount of PAYGO funding be limited to $100 13 million per year and additional debt should be used to 14 fund the peak of MSD's capital program. We 15 acknowledge soon after fiscal year '20 the amount of 16 PAYGO funding is going to be by the need to meet that 17 service coverage requirement and target level of days 18 of cash on hand. 19 Taking all the above into account, MIEC has 20 proposed waste water rates that are approximately ten 21 percent lower than the rates sought by MSD. This 22 proposal is outlined in Mr. Gorman's rebuttal 23 testimony, and will again be outlined in MIEC's pre- 24 hearing conference report. Such reduction is 25 consistent with prior analyses of recommendations from PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 66 1 the Rate Commission on MSD's proposal, given MSD's 2 otherwise conservative revenue forecast will still 3 provide MSD necessary operational flexability to meet 4 its obligations. At the same time it will help 5 protect MSD's customers from the hardships and burdens 6 of utilities cost that increase at unnecessary and 7 unjustifiably high rate. 8 I would like to take a moment to respond 9 one point made by Ms. Myers in her presentation. It's 10 on page 7 of her written statement. She indicated 11 that if MSD collects revenue in excess of its 12 forecasted, the District will move forward and 13 expedite the consent decree compliance related work or 14 continue other work. And while that's fine, I would 15 like to note that this doesn't take into account the 16 impact on consumers of unnecessarily high rates at 17 this point in time. Instead, what that does is create 18 new base line for the next rate case. Rather than 19 giving consumers the benefit of having lower rates 20 than necessary for the next four year period, it 21 increases their current rates, create new baseline 22 which will serve as a base line for the next rate case 23 presumably will lead to increase rates at that point 24 in time. So the goal might be admirable, but we can't 25 disregard the impact that will have on rate payers in PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 67 1 the interim. 2 Although, most of our testimony has been 3 focused on waste water, we do -- I do want to make a 4 comment on storm water, but we will largely reserve 5 our comments on storm water for the testimony that's 6 already been introduced for pre-hearing conference 7 reporter. I do want to point out MIEC believes the 8 significant changes to storm water rates proposed by 9 MSD do not present a fair or reasonable burden on all 10 class of rate payers as evidenced by the testimony 11 introduced by the Rate Commission by the intervener 12 Home Builders Association and as supported by MSD's 13 own consulting firm a uniform tax based on property 14 value has no relation to cost causation and is not 15 equitable. MIEC recommends that the current storm 16 water rate system be retained. Although, we also 17 recognize even a rate system based on user fees 18 impervious area is more fair and equitable than MSD's 19 proposal which is linked solely to property values. 20 That concludes our prepared statement. As 21 I indicated, we will provide a pre-hearing conference 22 report, which will contain significantly more detail 23 than the brief statement we have provided today. 24 MR. TOENJES: I would ask any of the Rate 25 Commission if they have any questions for Mr. PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 68 1 Neuschafer at this time. Hearing none, thank you, Mr. 2 Neuschafer. 3 MR. NEUSCHAFER: Thank you. 4 MR. TOENJES: Mr. Goss, would you like to 5 address the Rate Commission on behalf of the Home 6 Builders Association? 7 MR. GOSS: I would, Mr. Chairman. Prior to 8 making our statement, I would ask also the 9 Commission's indulgence, as Mr. Arnold just asked for 10 their indulgence a little earlier. We were also 11 confused on the dead line, and we did submit two EPA 12 publications this week. The EPA funding storm water 13 program and EPA publication reducing storm water cost 14 through low impact development strategies and 15 practice. And ask if those could be admitted as 16 exhibits into the record as well. 17 MS. MYERS: Yes, I would like to object. 18 HBA provided information on Monday, which was the dead 19 line that the Rate Commission had given everyone to 20 submit supplemental information. So when the District 21 received HBA's additional information late yesterday 22 after we reached out to the Rate Commission's legal 23 counsel for guidance and had not gotten a response 24 back from them. So those two documents have got put 25 in the record as exhibits and I would object to them PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 69 1 being added now at this late date. Since the 2 Commission extended the date for supplemental 3 information to begin with to June 22, which was last 4 Monday. And all the other parties seemed to comply 5 with that date. Well, John asked for forgiveness. And 6 I would just object at this point. 7 MR. TOENJES: Mr. Arnold, Ms. Stump, any 8 comments? 9 MR. ARNOLD: Mr. Chairman, members of the 10 commission, I have no objection to admitting the 11 information which Mr. Goss has described. I am 12 informed on that decision by my service for the very 13 stock exchanges and FINRA and NASD, the one way you 14 can get your award overturned is by not permitting a 15 party to fully present their case. So I would suggest 16 to the Commission that this information be admitted. 17 And if Ms. Myers on behalf of the District wants to 18 respond, she may be permitted to do so. 19 MR. TOENJES: Mr. Neuschafer, any comments. 20 MR. NEUSCHAFER: No objection. 21 MR. TOENJES: Well, based on that, as 22 Chair, I think to be full and transparent in our 23 hearing, we will admit those and assign exhibit 24 numbers to those two. So, Mr. Goss, proceed. 25 MR. GOSS: Yes, sir. Thank you. PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 70 1 MS. MYERS: Can I ask a question? Did the 2 Rate Commission's counsel offer for us to be able to 3 respond to that? 4 MR. TOENJES: Yes. 5 MS. MYERS: What are the parameters on that 6 response? 7 MR. TOENJES: I would suggest and I will 8 open this for discussion that since our next public 9 hearing session is scheduled for July 10th, that I 10 would recommend that any response be received prior to 11 July 10. 12 MS. MYERS: And is that the District is the 13 only one that has the ability to respond or is all of 14 the parties have the ability to respond? 15 MR. TOENJES: All of the parties. 16 MR. GOSS: Mr. Chairman, just to clarify 17 all, we're doing is submitting two publications from 18 the Environmental Protection Agency that one dates 19 from 2007 and one dates from 2009 relating to storm 20 water program and strategies for funding. I'm not 21 quite sure what the response would be other than this 22 is what the EPA has put forward. 23 MR. HOELSCHER: The response would have to 24 be the proper application of that information and not 25 just throwing it out without context. We feel it's PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 71 1 appropriate for to us be able to respond. 2 MR. TOENJES: Okay. July 10 prior to 9 3 a.m. on July ten. Proceed, Mr. Goss. 4 MR. GOSS: Thank you, Mr. Toenjes, members 5 of the commission. The Home Builders Association of 6 St. Louis and Eastern Missouri thanks you for your 7 service and appreciates the opportunity to be able to 8 present testimony into evidence in connection with 9 these proceedings. We have intervened in this 2015 10 rate change proceeding not to make the District's 11 already difficult task more difficult, but to assist 12 in ensuring that the funding methodology satisfies the 13 charter requirement. In particular, there are two 14 requirement we think are really at issue with this 15 rate. One is the fairness and equitable nature of the 16 rate. And second is the ability of this rate to 17 enhance the ability of the District to provide 18 enhanced sewer and drainage systems and facility 19 related service to the rate payers of St. Louis. We 20 believe that the proposed ad valorem property tax is 21 deficient in these two areas, and we have approached 22 this rate looking at two primary concerns. The first 23 concern is over arching issue whether ad valorem 24 property tax can be implemented in a manner that's 25 fair and equitable when there is seemingly no nexus PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 72 1 between property value and storm water service 2 provided by the District. The same concern was in 3 fact articulated by the District in its -- during the 4 Zweig case. That is 2013 Missouri Supreme Court case 5 in which the District defined use of funding 6 methodology based on impervious area. At that time 7 the District insisted that quote "a tax based on the 8 assessed valuation of a property has no relation to 9 storm water services" close quote. In the two years 10 since the Zweig decision, the District has seemingly 11 done a 180 degree change in its position as it's now 12 arguing property based tax is fair and equitable, but 13 that there is a nexus between property value and 14 proposed tax because the tax is directed solely to the 15 operation and maintenance of public storm water 16 system. The District's new position is at odds with 17 its previous position, and with that of the United 18 States Environmental Protection Agency. The EPA has 19 consistently taken a position that the cost of storm 20 water service and management bears no relationship to 21 the assessed value of the property and, therefore, the 22 method is not equitable. In addition, the District 23 provided the Commission with testimony from William 24 Stannard. Mr. Stannard has testified that the use of 25 property tax funding cost of storm water system is a PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 73 1 common method used by cities and counties throughout 2 the United states, and alternative methods based on 3 impervious ground would be cost prohibitive. Mr. 4 Stannard's position are at odds with both the Black 5 and Veatch 2014 storm water utility survey produced by 6 the District and MSD 84G and opinions of George 7 Ratellus, the founder of the company. Mr. Stannard 8 works for and encourages the Commission to review the 9 Black and Veatch study that provides that only four 10 percent of utilities used ad valorem tax to funds 11 storm water. Hardly what I would call a common 12 methodology. I also encourage the Commission to 13 review the expert from water and waste water financing 14 pricing authored by George Ratellus that provides many 15 of the technical barriers to implementing storm water 16 has far and away making it more cost effective to 17 implement funding methods, for example, of cost 18 effective method. The commission can review the 19 funding storm water program published by the EPA 20 experts, from Mr. Ratellus's book and EPA publication 21 has have been provided by HBA for you review in 22 Exhibit HBA 124C. 23 We've also submitted as part of our 24 testimony a response to this notion that there would 25 be 40 percent increase in the fees for rate payers if PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 74 1 the inpervious surface were used for the calculation. 2 And in fact, that overstates and misstates what would 3 occur, in our opinion, given that what that 4 calculation is based important is individual 5 calculations of each parcel of property to determine 6 what the impervious surface is for each parcel of 7 property. That, in fact, is not what most District 8 use in order to determine what the impervious surface 9 really is and what the fee should be. Instead the 10 most common method used by utilities is calculation 11 single family home is a uniform flat fee structure 12 often referred to as equivalent residential unit or 13 equivalent service unit method. Under this method, 14 representative sample parcel is reviewed to determine 15 if this parcel with the average amount being used 16 residentially. Unless utilities charge flat rate 17 defined as based multi or one equivalent residential 18 unit alternative, some utilities have established a 19 tiered structure so they have served tiered rates 20 based on equivalent residential units. So the number 21 of utilities that are using an individual calculation 22 is very small, perhaps six percent of the utilities 23 that were surveyed. And if you use an individual 24 calculation of every parcel out there in this District 25 your costs are going to be very high to administer if PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 75 1 you use the equivalent residential unit, which is what 2 most utilities use, that's not the case. Most 3 utilities don't have ad valorem tax rate system for 4 storm water. They use imperious surface. If this 5 were so cost prohibitive, how are these other 6 utilities able to implement that kind of system. It 7 simply doesn't add up. And the reason they are able 8 to implement it is they use different methodology that 9 in fact works. 10 The second concern that the HBA has is 11 addressed in these proceedings has been lack of storm 12 water credit program and storm water rate change 13 proposal. HBA introduced item of continued storm 14 water credit program into the storm water proposal in 15 an effort to address the HBA's first concern. In 16 other words, credit program would provide possible 17 means implementing ad valorem property tax in matter 18 that's fair and more equitable. However, we also 19 introduced that credit because we believe the credit 20 system will enhance the District's ability to provide 21 adequate sewer and drain and system and facility or 22 relate service which is another one of the criteria 23 that the Rate Commission should examine under the 24 charter. Under the current proposed structure, 25 property owners are being charged twice for storm PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 76 1 water management once through ad valorem property tax 2 and once through maintain better management practice 3 on their property. For those property owners who have 4 installed some form of O and M such as rain guarding 5 or retention basins. HBA has illustrated various 6 options for storm water credit programs and 7 illustrating infact these storm water credit programs 8 work. And this in fact enhances the management of 9 storm water in those various areas. Storm water 10 credit progrmas are not a new concept to the District 11 and could offer several equitable and practical 12 advances over current structure. The District agreed 13 credit programs in past rate proposals and currently 14 offers a form of offsetting the cost of ENP 15 installation on small scale through MSD project clear 16 rainscaping small grants program. 17 None the less the District has responded to 18 HBA's suggestion by arguing essentially two points. 19 The first being BMP have no relation to impose talks 20 because water quality issues related to storm are 21 currently funded by regulatory tax. And second credit 22 program associated with installation of BMP to factor 23 costs to other customers because BMP address quality 24 and quantity of storm water runoff with no effect on 25 the District's operation and maintenance cost. Given PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 77 1 what we experience in last two weeks and articles that 2 have appeared in the Post Dispatch of MSD responding 3 to various problems in the area of customers and 4 addressing various problems with storm water over 5 flow. The idea that those costs are being paid for 6 from operation and maintenance belies belief. There 7 is impact on operation and maintenance by storm water 8 impact. I think we all know that, and by implementing 9 these kinds of credit programs to better address storm 10 water volume and reduce volume, we believe that will 11 also better reduce cost overall for the District. 12 It's true the primary BMP is reduce storm water runoff 13 and improve water quality while I hope the commission 14 wil encourage them to take an active role in reducing 15 storm water runoff and check check concerning that the 16 District is mandated to address those under EPA 17 consent decree. Existing storm water system thereby 18 reducing cost of storm water management. Storm water 19 credit guides produced by HBA along with publications 20 by the EPA will illustrate the connection between BMP 21 From reduce operation and maintenance cost while the 22 District continues to rely on and to discourage 23 inclusion of storm water credit program under storm 24 water rate change proposal. HBA encourages the 25 commission to review evidence as submitted, which is PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 78 1 benefits of such program creating fair and equitable 2 rate structure and and applicable such programs in 3 cost effectiveness while enhancing the services that 4 the District will prop with respect to storm water 5 management. That concludes our prepared remarks. We 6 will be submitted more detailed remarks into evidence 7 at the final pre-hearing conference. 8 MR. TOENJES: Thank you, Mr. Goss. 9 Questions from any of the Rate Commission? 10 MR. SCHNEIDER: Mr. Goss, you mention tax 11 credits may be a way to the equitability projection 12 you submitted as part of 124C a small grants program. 13 MSD small grants is similar, do you feel that's a 14 similar way to make more equitable, I would say, the 15 storm water usage fees and stuff? 16 MR. GOSS: I do think that's one way to do 17 that. We're not mandating any particular credit 18 program, but we do think that is an interesting 19 approach. We also like the idea of using third party 20 administrator to implement the credit programs is an 21 interesting program and can again help reduce cost for 22 the District and rate payers. 23 MR. TOENJES: Other questions for Mr. Goss? 24 Mr. Brockmann? 25 MR. BROCKMANN: Mr. Goss, do you feel the PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 79 1 requirement that MSD imposes -- imposes is not the 2 right word -- requires new construction sites 3 specifically residential to exceed storm water 4 requirements -- not exceed -- exceed the runoff 5 requirement that presently exist on undeveloped land. 6 A. Yes. That's one of the developers are 7 mandated to restore the property to its 8 pre-development condition. There are three things 9 that developers are required to do. They are required 10 to provide stream protection, water quality, and to 11 reduce the storm water runoff to its pre-development 12 condition. That's in MS4 permit. 13 MR. BROCKMANN: But what you just was to 14 not exceed. You said to meet existing storm water 15 runoff. 16 A. No pre-existing. We have to bring it back 17 to where it was before prior to development. So it's 18 not simply what MSD has said in their testimony is 19 that we only address peak flows. That's not accurate. 20 We're doing volume reduction. And so again for that 21 reason that would be a basis because we're improving 22 the condition to provide for that credit, but I'm not 23 limiting the idea of the credit to simply something 24 that a residential home builder or developer would be 25 providing. It seems this credit should be to your PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 80 1 question earlier, available to any customer, 2 homeowners association, goes in and puts in BMP and 3 storm water controls. We should be encouraging that. 4 I tried to drive through green trails subdivision last 5 night coming back from some friends house, I couldn't 6 get through it. It was flooded. The idea that we 7 would encourage that subdivision to go in and put in 8 BMP and controls through a credit program, I think is 9 good thing. I think it would help this District and 10 help us over all. I think that's something that would 11 enhance our ability to provide storm water services to 12 the overall area. 13 MR. BROCKMANN: Let me just say do you 14 feel MSD is asking you to exceed the pre-existing 15 condition requirement for runoff? 16 A. Yes, I do. 17 MR. BROCKMANN: And I guess I feel --not 18 addressing that, but all the rain that's happening 19 these last couple days, what they call storm events, 20 and whether that piece of property was improved or not 21 improved storm events exceed normal runoff conditions. 22 So all the talk that we have been having and 23 everything like that where excessive rain, whether the 24 property was developed or had best management practice 25 or not; correct? PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 81 1 A. I'm not sure I understand the question. I 2 apologize. 3 Q. Are you familiar with storm events, five 4 year storm, 100 year storm? 5 A. Yes I am. 6 Q. So my point is a pre-existing piece of 7 property that was not developed and has natural runoff 8 is also applicable to storm events, so you have 9 five-year storm or 100-year storm, there is going to 10 be flooding off that property whether you came in and 11 developed it and put best management practices in 12 place or not; correct? 13 A. There could be. Yes. 14 MR. SCHNEIDER: I want to go back to your 15 testimony, because I'm not sure I heard it correct. 16 Did you say US EPA said in a document that impervious 17 fees were better than ad valorem tax? 18 MR. GOSS: Yes. 19 MR. SCHNEIDER: Are you referring to 20 document -- funding storm water programs document that 21 you submitted, where did you find that statement? 22 MR. GOSS: That's part of one of the 23 documents we've already submitted. I will get you the 24 reference to that. 25 MR. SCHNEIDER: I'm looking at Exhibit 124C PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 82 1 that you submitted EPA funding storm water documents 2 and that document talks about funding alternatives. So 3 my question is was it in that document or another one. 4 MR. GOSS: I believe it is in that document 5 but I want to verify that. I don't want to tell you. 6 MR. SCHNEIDER: If you can tell us where in 7 the document it is, that would be helpful also. Thank 8 you. 9 MR. TOMAZI: I read through all 6 or 7 of 10 the supporting documents that you provided on 11 residential credits or residential incentive in 12 various communities. And five of the 6 the best I can 13 recall all dealt with impervious area matter. They 14 did not go into the level of detail in terms of 15 calculating actual runoff from every property but they 16 typical classify into three different levels and then 17 put a charge or an equivalent runoff unit on 18 particular property size in an amount. That probably 19 is an easier way to put together a program as compared 20 to the one that the District put together a number of 21 years ago which went down to calculation of individual 22 runoffs from individual properties. And from an 23 engineering standpoint, I liked that one. I question 24 whether any of these other incentives that have been 25 offered at any of the exhibits that you provided have PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 83 1 been challenged by people in Court as to whether or 2 not they were fair or an appropriate based upon there 3 actual or their perceived amount of runoff? 4 A. I'm not aware of any challenges to those 5 programs. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 84 1 CERTIFICATE OF REPORTER 2 STATE OF MISSOURI ) 3 ) ss. 4 CITY OF ST. LOUIS ) 5 I, Jeanne M. Pedrotty, a Certified Court Reporter (MO) 6 and Certified Shorthand Reporter (IL), do hereby 7 certify that the witness whose testimony appears in 8 the foregoing deposition was duly sworn by me; that 9 the testimony of said witness was taken by me to the 10 best of my ability and thereafter reduced to 11 typewriting under my direction; that I am neither 12 counsel for, related to, nor employed by any of the 13 parties to the action in which this deposition was 14 taken, and further that I am not a relative or 15 employee of any attorney or counsel employed by the 16 parties thereto, nor financially or otherwise 17 interested in the outcome of the action. 18 19 ____________________________ 20 Jeanne M. Pedrotty 21 22 23 24 25 PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES A AA 30:12 ability 7:19,24 13:21 15:6,10 15:13 30:11 46:7 47:11 60:2 60:4 70:13,14 71:16,17 75:20 80:11 84:10 able 9:18 58:12 70:2 71:1,7 75:6,7 access 30:16 48:17 accompanied 7:16 46:2 accomplishes 58:17 account 23:19 25:11 62:13 65:19 66:15 accounted 64:1 accounting 14:6 accounts 27:3,5 27:11 accuracy 28:21 accurate 17:19 18:6 27:21 50:22 79:19 acknowledge 65:15 act 10:6 action 24:17 54:12 84:13,17 actions 30:22 active 77:14 activities 49:18 activity 17:22 actual 56:20 61:6 64:3 82:15 83:3 ad 14:3 16:7,17 17:2 18:11 20:3 21:1,11 37:11 40:25 43:20 44:24 45:21 53:22 56:23 71:20,23 73:10 75:3,17 76:1 81:17 add 32:14 35:16 39:3 40:7 62:15 75:7 added 69:1 adding 40:4 addition 72:22 additional 8:17 11:17 21:5,7 24:11 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24:13 available 14:6 24:11 33:25 34:7 80:1 average 26:3,6 29:10,18 35:1,2 61:18 62:2 74:15 avoid 55:17 avoiding 30:9 award 69:14 aware 57:20 83:4 a.m 10:20 71:3 B back 21:8 31:14 38:20,23 45:23 45:24 46:14 50:8 51:8 53:2 54:11,25 55:1 55:11 68:24 79:16 80:5 81:14 backups 52:3 bad 29:5,7,14,23 30:1,7 61:4,5,7 61:10,12,13 Baer 3:14 balance 31:2 34:10 balanced 59:23 balances 41:25 barriers 73:15 base 25:25 26:5 32:19 40:9 59:3 66:18,22 based 13:22 28:8 29:9,11,22 30:20 37:18,22 41:5 43:8,13 55:13 59:11,12 61:19 63:14 64:14,20 67:13 67:17 69:21 72:6,7,12 73:2 74:4,17,20 83:2 baseline 66:21 basement 52:3 basically 42:2 basins 76:5 basis 31:21 53:2 79:21 battle 19:21 bears 72:20 beginning 26:6 behalf 12:15 57:14 68:5 69:17 belief 77:6 belies 77:6 believe 26:20,23 30:23 31:3 32:11 40:6 45:2 55:4 56:13 57:8 58:3,15 59:18 62:20 71:20 75:19 77:10 82:4 believes 16:21 17:11 31:12 58:25 62:3 67:7 beneficial 58:4 benefit 19:13 33:19,23 34:9 48:19 49:6 61:11 66:19 benefits 46:22 47:3 52:4,5 78:1 best 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67:9 burdens 41:5 66:5 Bureau 11:22 buyers 44:9 C C 3:1 CAGR 25:20 calculate 22:15 calculating 82:15 calculation 29:17 74:1,4,10,21,24 82:21 calculations 74:5 call 2:2 4:2,5,5 5:8 73:11 80:19 capital 1:7 14:8 14:13 20:4,22 21:3,7 23:1 24:19 30:19 34:3,5 48:8 56:5,8 59:15 64:23 65:14 care 46:19,20 48:15,15 careful 58:11 carefully 11:18 28:20 PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES case 16:12 19:16 23:24 27:21 36:25 38:15 45:23 53:16,17 54:23 56:4,4,13 65:4 66:18,22 69:15 72:4,4 75:2 cases 58:6 cash 14:12 31:2 65:18 causation 67:14 cause 15:3 21:14 caused 19:5 54:12 Cave 3:17 CCR 3:22 CCR/CSR 3:22 Census 11:22 cent 14:3 16:7,17 17:2 18:11,13 20:3 21:1 41:9 51:12 53:23 Center 46:25 centered 16:13 cents 35:3 certain 21:3 39:24 55:14 63:19 Certainly 45:10 CERTIFICATE 84:1 Certified 84:5,6 certify 84:7 cetera 31:14 37:15 38:10,10 Chair 5:2 6:8 69:22 Chairman 6:6 11:14 12:11 68:7 69:9 70:16 challenged 56:14 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16:16 compliance 14:15 22:23 23:2 24:9 66:13 complies 13:1,14 13:16 comply 7:25 15:6 15:11 46:10 60:4 69:4 component 39:1 40:14 49:11 components 22:21 40:24 concept 76:10 concern 30:12 71:23 72:2 75:10,15 concerning 77:15 concerns 48:20 59:9 71:22 concludes 31:4 67:20 78:5 conclusion 26:20 61:20 concrete 35:21 condition 79:8 79:12,22 80:15 conditions 19:3 23:10 80:21 conducted 9:12 conference 1:8 9:8,12,21 10:12 10:13 37:2 58:23 65:24 67:6,21 78:7 conferences 9:1 11:3 confused 68:11 confusion 20:13 PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES connect 53:21 connection 62:7 62:14,20 71:8 77:20 consent 15:14 24:8 26:12 52:2 58:10 66:13 77:17 conservation 28:11 conservative 24:3 66:2 consider 28:16 28:20 39:16 51:3 59:25 consideration 17:4,9 18:15 considerations 17:15 considered 12:3 18:7,13 26:15 33:10,14 50:12 51:2 considering 38:16 63:18 consist 62:23 consistent 7:17 7:21 13:11 14:17 15:1 31:3 61:2 65:25 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6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES green 19:17,19 41:4 42:17,21 47:1,4,25 48:9 48:12 51:10,11 52:22,24 53:1 80:4 ground 73:3 group 43:11 47:21 57:21 groups 36:1 48:8 grow 25:20 grown 47:24 growth 25:18 26:4 62:23 64:16 guarantees 54:18 guarding 76:4 guess 37:17 38:13,14 43:6 48:20 80:17 guidance 68:23 guides 77:19 H half 29:8 62:1,12 hand 12:18 24:12 64:20 65:18 handle 50:10 happen 12:12 40:7 happening 80:18 hardships 66:5 haul 60:17,18 hauled 24:23 25:3,4,5,12 hauler 24:21 60:12,13,25 hauling 24:24 Hawes 3:5 4:9,10 5:11,12 6:15,15 HB 54:2 55:24 HBA 17:15,16,17 18:3,16 19:12 68:18 73:21,22 75:10,13 76:5 77:19,24 HBA's 68:21 75:15 76:18 head 50:19 hear 49:20 heard 81:15 hearing 4:1 10:19,21 11:9 65:24 68:1 69:23 70:9 heat 48:15 held 9:1 10:19 help 66:4 78:21 80:9,10 helpful 82:7 hey 52:23 high 66:7,16 74:25 higher 29:18 59:6 hike 26:7 historical 27:20 29:9,18 59:12 61:5 64:21,22 hit 33:9 HOELSCHER 31:16 33:13 34:17 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8:9,10 intervened 71:9 intervener 9:11 25:14 26:19 28:18 30:7 67:11 interveners 8:24 9:14 11:8 12:8 16:12 22:22 23:18,23 25:23 27:1,6,22 29:6 30:15 intervener's 27:14 29:19 intervening 62:13 introduced 67:6 67:11 75:13,19 invariably 16:15 investments 25:19 61:9,11 involved 16:12 involving 14:9 18:20 island 48:15 issue 8:14,17,20 9:19,22,23 10:16 18:9 20:1 22:7 23:7 30:9 36:6 39:14 41:17 47:15 49:10 51:21 52:23 55:16 71:14,23 issued 7:10 59:19 59:20 62:7,12 62:19 issues 9:9,19 10:14 11:4 20:24 22:3,6 31:23 41:10 47:22,23 48:15 49:15 76:20 item 33:15,17 35:16 50:18 51:5 75:13 items 48:20 J Jeanne 3:22 84:5 84:20 John 3:6,13 6:13 34:17,19,22 69:5 joint 9:22 Jones 3:9 4:22,23 5:24,25 6:12,12 32:25 34:12 35:15 37:7,8 July 10:13,20 11:9,11 70:9,11 71:2,3 Jumping 38:5 June 1:9 8:14 9:2 60:14 69:3 justifiable 46:6 K keep 27:15 50:13 52:16 Kelling 4:13 Kennard 3:9 6:12 kept 47:13 kilowatt 35:2 kind 32:12 36:6 40:8 45:24,25 46:7,18 54:19 55:18 75:6 kinds 46:10 77:9 know 36:8 37:18 46:11,11 50:7 55:3 77:8 knowing 11:20 known 23:16 L L 3:6 lack 17:7 75:11 laid 50:22 land 79:5 landfill 25:1,3,4 25:7 51:4 language 54:7 large 57:21 largely 25:19 67:4 larger 30:13 50:2 largest 26:17 Lashly 3:14 lasted 38:12 late 29:5,23 30:4 30:8 61:18,18 61:19,22,24 68:21 69:1 law 7:18 13:12 38:13 laws 7:25 15:7,11 39:17 57:8 60:5 layered 41:13 leachate 25:7 lead 30:25 66:23 leading 24:15 leads 56:13 leap 55:4 left 6:10 33:20,24 34:7 legal 5:3 11:8 24:17 37:25 43:8,12 58:14 58:20 68:22 legislation 17:1 32:2 39:21,24 54:16 55:20 legislators 55:14 legislature 32:13 54:1 55:4 lengthy 19:21 Leonard 3:5 6:6 let's 4:2,4 32:3 38:20 48:21,22 48:24 49:9 50:10 53:2 level 16:23 17:2 27:16 31:13 38:9 42:9 61:2 62:21 63:20 65:17 82:14 levels 27:19 41:6 56:3 82:16 licenses 60:15 life 59:20 lighting 36:20,21 lights 37:2 liked 82:23 limited 65:12 limiting 79:23 line 30:20 33:15 43:7 61:23 66:18,22 68:11 68:19 linked 67:19 Lisa 3:13 list 11:10 12:1 Litigation 3:23 little 13:5 38:5,18 53:3 68:10 LLP 3:17 load 19:5 local 52:1 located 40:18 locations 36:13 36:23 Locust 3:14 logic 32:12 logical 30:1 61:20 long 55:4 look 35:6 52:24 52:25 looked 34:20,23 35:4,9,13 looking 34:21 35:9 45:20,21 PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 50:20 71:22 81:25 lot 20:13 31:23 40:13 47:2,8,8 47:12 48:7 51:7 52:16 58:2 Louis 1:6 3:15,18 3:24 4:3 6:7,23 6:24 8:11 9:5,7 11:23 12:23 24:25 36:2 46:24 63:24 71:6,19 84:4 low 68:14 lower 30:25 36:7 65:21 66:19 M M 3:22 14:6 18:20 41:22 42:5 56:7 59:10 64:10 76:4 84:5 84:20 magnitude 50:10 50:15 Mahanta 3:8 4:25 6:19,19 49:22,23 Mahfood 3:8 4:24 6:20,20 45:17,18 49:20 main 14:1 58:21 maintain 18:24 30:11 38:25 40:19 47:20 62:21 76:2 maintaining 31:21,22 32:17 maintenance 7:11 14:4 16:9 17:20,24 18:8 19:8 20:6,10,19 20:22 21:10,12 21:16 23:4,6 31:3 35:12 40:16 41:19 42:3,4 72:15 76:25 77:6,7,21 major 28:12 40:23 64:9 majority 63:4 making 27:6 48:2 68:8 73:16 management 19:4,14 72:20 76:1,2,8 77:18 78:5 80:24 81:11 mandated 77:16 79:7 mandating 78:17 manhole 54:6 manner 10:6 22:12 58:17 71:24 map 41:4,8 42:17 margins 34:2 mark 3:4 33:9 markets 23:10,21 matching 36:17 48:13 materials 11:17 11:22 math 50:19 matter 75:17 82:13 matters 5:3 11:12 12:13 MDNR 51:23 mean 36:9 means 39:19 48:12 59:5 75:17 meet 10:2 15:13 18:5 21:9 22:11 23:16 24:15 58:14,19 65:16 66:3 79:14 meeting 4:3 51:13 58:9 meets 10:2 15:22 16:1 members 11:4,14 69:9 71:4 memorandum 17:15 mention 39:16 44:23 48:13 55:24,24 78:10 mentioned 41:21 53:12 60:10 met 39:24 metered 63:9 method 17:12 72:22 73:1,18 74:10,13,13 methodology 13:17 21:21 28:25 71:12 72:6 73:12 75:8 methods 73:2,17 Metropolitan 1:6 3:10,18 4:3 6:7 9:5,7 12:22 Midwest 3:23 MIEC 3:16 57:19 58:21,23,25,25 59:14,21 60:23 61:16 62:2,21 63:7 64:13,24 65:3,11,19 67:7 67:15 MIEC's 64:14,17 65:23 Mike 3:4 miles 52:18 million 27:17 32:1 33:24,25 39:4,5,6,7,9 47:1 50:20,23 50:24 51:5 60:16 61:17 62:1 65:5,6,7,7 65:13 millions 30:17 mind 13:8 40:12 46:15 52:16 minimal 14:5 minimum 51:17 52:15 mission 43:9 Missouri 3:16,22 3:24 5:4 8:11 8:12 13:18 21:23 25:18 26:5 34:25 37:23 55:25 57:15,20 71:6 72:4 84:2 misstates 74:2 misunderstand... 17:12 mitigate 19:5 mix 31:1 mixture 24:2 MO 3:15,18 84:5 modelling 29:17 modest 63:8 modify 59:18 modifying 61:15 moment 66:8 Monday 11:20 68:18 69:4 money 33:22 34:2 47:15,23 50:13 monies 32:3 33:20 month 42:14 months 38:12 39:21 Moody 62:23 morning 6:5 12:21 motion 5:2,7 motor 36:18 motors 36:14,16 move 14:14 24:7 29:24 46:8 66:12 moved 5:5 movements 28:3 moving 45:25 MSD 8:22,23 13:2,18 15:17 16:14,18,21,23 17:11,19 18:22 19:15 21:20 23:24 24:6 25:5 26:2,13,14,18 27:24 28:3,18 31:6,11 33:3,8 34:13 38:8 45:12 51:5,14 53:5 54:5 55:17 57:22 58:5,8,8 58:11,13,19,25 59:1,5,9,22 60:10,12,14,19 61:4,8,21 62:9 62:15,19 63:6 63:21 64:1,10 64:11,19 65:4,6 65:21 66:3,11 67:9 73:6 76:15 77:2 78:13 79:1 79:18 80:14 MSD's 14:1,10 15:16,22,24 16:1,14,16 18:21 25:1,14 26:8 28:21 30:23 59:14 60:25 61:12,24 62:3 63:7,10,14 63:23 65:1,8,14 66:1,1,5 67:12 67:18 MS4 79:12 multi 74:17 Myers 3:11 11:24 12:6,13,16,18 12:21 31:9,15 37:10 38:4 43:2 43:16,19 44:7 45:2,10,14 53:9 54:14 56:11,15 56:25 57:4,13 66:9 68:17 69:17 70:1,5,12 N N 2:1 3:1 name 6:5,9 12:21 Nanacy 6:18 PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Nancy 3:7 NASD 69:13 national 28:10 nationwide 28:15 natural 48:16 81:7 nature 23:13 35:8 71:15 nearly 30:5 necessary 7:8 44:2 58:19 66:3 66:20 need 18:17 19:23 51:24 52:15,15 65:16 needed 56:19 59:6 needs 20:7 21:9 22:12 23:17 34:14 48:13 51:2 58:14,20 negative 30:9 61:14 neither 84:11 net 58:10 61:15 Neuschafer 3:17 12:9 57:13,16 57:18 68:1,2,3 69:19,20 neutral 48:2 never 48:23 Nevertheless 11:20 new 43:10 44:9 62:19,25 66:18 66:21 72:16 76:10 79:2 nexus 71:25 72:13 night 80:5 nine 10:20 29:2 39:21 nonprofits 37:14 38:1 nonresidential 28:12 normal 37:3 80:21 North 3:24 note 66:15 noted 22:19 notice 7:6 8:5,15 notion 63:19 73:24 November 7:1 number 5:4 10:22,23 11:3 17:16 18:3 19:12 22:7 26:11 27:23,25 30:9 35:13 36:10,12,13,24 37:3 38:16 39:11 45:12,12 62:3,5,6,8,12 62:14,16,18,25 64:7,14 74:20 82:20 numbers 11:25 31:14,17 63:2 69:24 numerous 16:4 O O 3:13 14:6 18:20 41:22 42:5 56:7 59:9 64:10 76:4 object 68:17,25 69:6 objection 12:2,7 69:10,20 objections 10:25 12:4 obligation 58:9 58:14 obligations 58:20 66:4 obtain 50:16 obvious 54:19 obviously 50:12 occasions 19:18 occur 63:20 74:3 occurred 64:22 occurrence 26:7 occurring 35:19 odds 72:16 73:4 offer 70:2 76:11 offered 43:13 82:25 offering 47:3,9 offers 76:14 offices 10:21 official 31:4 offsets 64:1 offsetting 76:14 Okay 6:1 44:7 45:16 71:2 older 36:22 OMCI 20:5 21:4 42:21 47:15 once 38:17 76:1,2 onerous 46:10 ones 31:17 46:18 49:16 on/off 37:2 open 70:8 opening 24:24 46:23 operate 18:24 40:19 operating 33:21 36:4,7,18 48:18 63:16 operation 7:11 14:3 16:8 17:20 17:24 18:8 19:8 20:6,9,19,22 21:10,12,16 23:3,6 34:23 40:16 41:19 42:3,3 72:15 76:25 77:6,7,21 operational 9:6 18:1 19:10 58:14,20 64:5 66:3 operations 34:18 35:12 opinion 46:13 51:15 56:16 74:3 opinions 46:16 73:6 opportunities 58:16 opportunity 8:8 9:3 57:19 59:12 59:18 71:7 opposed 24:19 39:13 49:9 optimistic 24:3 options 76:6 oral 10:7 order 4:3 43:12 47:5 50:15 74:8 orderly 9:10 oriented 49:4 original 42:16 54:11 originally 8:14 40:1,3 outcome 84:17 outcry 53:20 outlined 13:18 15:14 49:13 58:22 65:22,23 outlook 27:8,13 33:2 outlooks 25:16 26:24 outside 40:18 41:8 47:25 48:22 outstanding 7:23 14:19 15:2 overall 22:25 24:18 77:11 80:12 overestimate 33:7 overflows 47:6 52:2 overstated 24:13 59:9 64:10 overstates 74:2 overstating 28:18 overturned 69:14 over-funded 24:19 owner 49:5 owners 19:17,19 75:25 76:3 O'Connell 3:4 4:20,21 5:22,23 P P 3:1,1 page 31:10 37:10 38:6 50:8 66:10 paid 77:5 paragraph 13:10 13:19 14:16 15:4,18 16:2 31:11 parameters 39:25 70:5 parcel 74:5,6,14 74:15,24 part 9:21 12:3 17:20 19:1 28:6 39:20 48:1 50:17 53:24 54:6 55:21,22 57:1 63:3 73:23 78:12 81:22 participant 10:6 10:7,11 participants 9:2 9:18,20,25 10:2 10:8,19 participant's 9:15 10:16 participate 9:12 32:19,20 37:20 55:8 participated 32:14 participating 16:24 38:9 particular 10:6 48:12 49:14,15 49:17 55:16 PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 71:13 78:17 82:18 parties 8:24 10:8 11:11 15:24 57:25 69:4 70:14,15 84:13 84:16 party 69:15 78:19 passed 38:13 55:21 passing 33:10,15 pass-thru 33:8 Paul 3:7 6:17 pay 7:9 17:25 21:14 39:25 40:4 41:15,17 41:18 44:18 50:23 51:16 52:13,13 54:7,8 55:1 payer 24:18 payers 8:3 10:22 15:17,21 16:11 21:20 30:19 33:23 34:9 38:3 43:11,14,15 44:11 50:23 60:7 66:25 67:10 71:19 73:25 78:22 PAYGO 65:5,9 65:12,16 paying 32:10 39:23 41:10,11 41:12 53:22,25 54:23 payment 61:19 61:23 pays 42:2 peak 19:2 65:14 79:19 Pedrotty 3:22 84:5,20 penalties 24:17 penalty 61:18,19 61:25 people 46:7 47:19,20 51:16 51:19 83:1 perceived 83:3 percent 16:22 25:5,20,21 26:3 26:7,9,10,17,21 29:2,8,8,10,11 29:17 30:6 31:13 32:7,15 32:16,18,18,25 33:3 37:11 38:7 38:15,23 39:10 39:11 40:9 49:1 50:9 56:7,7,8 58:7 60:16,22 61:5,6,8 63:13 64:11,12,13,16 64:18 65:21 73:10,25 74:22 percentage 22:11 29:15,23 30:2 perform 22:8 period 24:22 28:4 34:9 62:2 62:22 64:22,24 65:7 66:20 permit 9:13 60:18 79:12 permits 27:23 60:13,15,17,25 62:7,9,12,15,20 63:1 permitted 69:18 permitting 10:22 11:3,7 69:14 person 8:7 24:1 perspective 37:25 47:11 pervious 31:21 49:1 piece 48:12 49:14 49:17 55:16 80:20 81:6 pipe 54:7 place 19:24 21:22 25:7 36:12 37:4 39:22 42:1,8,8 42:12,20 46:25 51:12,18 52:6,8 53:5 54:9 55:3 81:12 placed 17:8 21:6 places 47:18,19 plan 6:22 7:2 9:5 9:17 10:4 30:19 51:11 59:24 planned 40:15 planning 51:22 plans 22:14 plant 25:10 plants 35:11 36:20,22 Please 12:17 57:17 plenty 48:14 plus 19:18 point 52:12 53:10 62:5,17 64:9 66:9,17,23 67:7 69:6 81:6 points 58:21 60:1 76:18 police 52:7 pollutant 19:5 pool 33:22 39:23 population 63:4 portion 22:18 59:15 portions 40:18 position 9:15 10:8,16 15:24 22:6 30:13 44:13 72:11,16 72:17,19 73:4 positions 30:20 positive 27:2,4,7 27:13 48:7 50:5 possible 17:1 24:17 75:16 possibly 36:2 Post 77:2 pot 34:8 potential 32:13 potentially 19:13 35:19 power 34:15 practical 76:11 practice 19:15 68:15 76:2 80:24 practices 19:5 81:11 pre 65:23 precisely 24:1 predict 24:1 predictions 23:13 predictor 65:1 preparation 11:9 prepared 9:10,20 10:14,24 11:5 53:11 67:20 78:5 present 4:6,14,15 4:17 6:10 23:19 63:11 67:9 69:15 71:8 presentation 10:7,10 66:9 presented 18:14 22:14 28:25 presently 79:5 presiding 47:7 pressures 65:10 presumably 66:23 pretty 52:10 54:18 previous 20:20 23:23 24:22 27:20 31:17 32:21 37:24 56:9 72:17 previously 13:3 20:23 44:25 62:24 64:7 pre-development 79:8,11 pre-existing 79:16 80:14 81:6 pre-hearing 1:8 9:8,12,21 10:12 10:13 58:22 67:6,21 78:7 pre-treatment 25:7 price 65:10 prices 34:6 pricing 73:14 prima 44:10 primarily 20:9 23:3 31:23 41:19 47:13,22 51:23 56:5 60:16 primary 71:22 77:12 principal 7:9 principals 22:16 prior 21:24 42:9 54:12 56:4 65:25 68:7 70:10 71:2 79:17 private 24:24 probably 82:18 problems 14:8 77:3,4 procedural 8:6 9:6 10:10 11:12 12:13 procedures 13:18 proceed 12:17 57:17 69:24 71:3 proceeding 6:8 9:11 11:24 71:10 proceedings 8:9 12:24 15:15 17:7 20:12,18 22:2 24:4 71:9 75:11 proceeds 59:17 process 22:17 PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 33:17 34:11 35:22 52:10 53:19 57:25 58:1,4 64:5,5 produced 73:5 77:19 production 35:21 profit 34:2 program 1:7 14:14 16:25 18:10 20:2 21:13 22:24 24:9,19 38:10 38:11 43:4,12 43:17,22 44:13 44:18,20 47:1,2 48:9 51:12,24 52:2,6 59:16 61:9 65:14 68:13 70:20 73:19 75:12,14 75:16 76:16,22 77:23 78:1,12 78:18,21 80:8 82:19 programs 20:25 51:18 76:6,7,13 77:9 78:2,20 81:20 83:5 progress 47:8 progrmas 76:10 prohibitive 35:13 73:3 75:5 project 26:12 76:15 projected 25:18 26:19 29:19,21 38:23 60:21 projecting 25:25 30:4 projection 25:12 27:16 61:12,16 61:24 62:3 63:10,23 64:20 78:11 projections 28:21,24 59:2 59:10,11 61:1 63:14,25 64:14 64:15,25 projects 14:8 24:11 25:20 52:20 60:12,19 61:1 prop 78:4 proper 52:1 70:24 properties 82:22 property 14:3 16:8,17 18:11 19:3,15,17,19 19:20 20:3 21:1 31:18 37:12,22 39:12 40:11 41:17,18 42:15 42:16,19 53:22 53:23,23,24 54:17 55:2,11 67:13,19 71:20 71:24 72:1,8,12 72:13,21,25 74:5,7 75:17,25 76:1,3,3 79:7 80:20,24 81:7 81:10 82:15,18 proposal 8:8 10:1 12:25 13:7 13:23 14:1,10 14:21 15:1,8,12 15:22 16:1,11 16:14,16,20 17:8 18:7 20:8 21:9 26:24 27:11 28:6,17 28:23 29:4 30:10 40:4 42:6 43:19 45:1,8,9 49:11 56:9 57:20,24 58:17 59:19 60:20 64:17,19 65:9 65:22 66:1 67:19 75:13,14 77:24 proposals 44:16 58:12 76:13 propose 17:2 20:14,15 52:14 proposed 7:5,16 8:15 10:2 11:6 13:11,13,16,20 14:17,23 15:5 15:19,25 16:6 18:12 20:19 21:17,19 22:5 22:21 23:4,23 25:23 27:1,18 29:2 30:24 31:22 41:1 43:3 43:20 44:3,4 45:8,20 50:21 58:8 59:22 60:6 61:16 64:11,13 64:18 65:4,20 67:8 71:20 72:14 75:24 proposing 14:22 21:2,10 41:15 42:19,21,22 44:14,14,15,19 protect 19:3 66:5 protection 70:18 72:18 79:10 proven 16:15 27:21 45:22 provide 7:19 12:23 13:21 14:2,11 18:25 24:13 25:17 35:4,5,8 45:7 45:24 60:2 66:3 67:21 71:17 75:16,20 79:10 79:22 80:11 provided 16:5 17:6,14 20:17 23:22 27:10 28:7,16,22 62:10,24 67:23 68:18 72:2,23 73:21 82:10,25 provides 9:8 10:11 15:13 28:25 73:9,14 providing 43:9 58:19 79:25 provision 7:22 14:18 29:7,14 29:23 30:1,8 41:21 61:5,7,14 provisions 14:25 15:4 public 10:19,21 14:4,6 16:9 17:21,24 18:9 18:20,21 19:8 20:10 21:17 32:6 40:17 41:19 42:4 45:25 46:1 54:6 55:6 70:8 72:15 publication 68:13 73:20 publications 68:12 70:17 77:19 published 73:19 pumped 63:20 pumping 25:8,8 pumps 35:6 purchase 48:18 purpose 10:21 purposes 17:11 pursuant 5:3 push 51:7 put 25:7 35:11 36:10,11,14,19 40:22 41:25 47:18,19,25 48:25 49:6 55:1 57:25 68:24 70:22 80:7 81:11 82:17,19 82:20 puts 80:2 putting 37:1 47:18 48:3 59:24 Q quality 18:4,5,9 20:1,24 49:10 51:13,25 52:5,6 53:3 76:20,23 77:13 79:10 quantifiably 46:5 quantity 76:24 question 13:24 26:25 32:23 33:4,14 34:12 35:17 37:7,9 40:20 43:6 44:6 44:8 46:12 53:10 55:19 56:2 70:1 80:1 81:1 82:3,23 questions 9:4 11:4 31:8,24 53:9,11 56:10 57:12 67:25 78:9,23 quick 50:19 quite 38:25 44:5 70:21 quorum 4:25 quote 40:1 60:15 72:7,9 R R 3:1 rain 46:17 48:14 76:4 80:18,23 rainscaping 76:16 raised 9:9,19 10:14 raises 34:12 rate 3:12 4:4 6:6 6:9,22 7:2,5,6,8 7:14,15,16 8:3 8:4,4,6,7,13,15 8:16,19,20,22 8:24 9:3,6,14 9:24 10:1,18,22 11:6,8 12:14,25 13:6,7,11,14,16 PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 13:20,23 14:1 14:10,17,21,24 15:1,5,8,12,15 15:16,17,19,21 15:22 16:1,7,10 16:20 17:4,8 18:7,8,12,14 20:8 21:8,18,19 21:20,22,25 22:2,5,21,24 23:5,6,8,24 24:18,22 25:25 26:4,5,5,7,12 27:10,14,21 28:6,15,17,20 28:23 29:17 30:5,10,19 31:8 33:23 34:9,11 37:24 38:3 41:17 42:6 43:11,14,15 44:11 45:3,4,7 45:8 46:6 48:21 50:23,25 53:8 53:16,17,19 54:11,19,23 56:4,11 57:9,14 57:19,23 58:6,6 58:11,12,13,16 58:18 59:5,13 59:22,25 60:7 60:20 61:23 62:5,16 64:17 64:19 65:4 66:1 66:7,18,22,25 67:10,11,16,17 67:24 68:5,19 68:22 70:2 71:10,15,16,16 71:19,22 73:25 74:16 75:3,12 75:23 76:13 77:24 78:2,9,22 Ratellus 73:7,14 Ratellus's 73:20 rates 7:4,4,4 22:7 22:15 23:4 26:1 28:10 43:10 46:15,19 54:8 59:8,12 60:6 61:21 65:20,21 66:16,19,21,23 67:8 74:19 rate-based 25:19 rating 30:10,11 30:12,21,22 ratings 31:1,4 rationale 9:23 10:17 reached 68:22 reaching 52:10 reaction 54:24 read 82:9 real 48:19 51:8 56:16 62:11 reality 24:5 realize 27:23 53:25 really 47:11 48:4 51:2 71:14 74:9 reason 17:23 21:13 27:8 29:16 32:11,12 55:17 75:7 79:21 reasonable 8:2 15:16,20 16:10 16:13,14,19 17:5 21:19 23:9 23:12 26:22 37:12 38:2,15 40:6 43:7,8,17 43:22 44:2,10 44:15,20 51:3 60:7 67:9 reasonableness 44:1 reasonably 30:25 reasons 47:12 49:12 rebates 36:12,19 rebuttal 58:24 65:22 recall 38:11 39:14 40:22 41:8 58:8 82:13 receipt 7:5 receive 54:5 55:10 received 8:4,23 63:9,10 68:21 70:10 receiving 10:23 21:15 recognize 58:1 67:17 recognizes 22:22 29:13 recommend 7:7 29:6 50:11 53:5 70:10 recommendation 9:22 21:25 26:21 27:15 33:5 65:3 recommendati... 7:3 10:3 65:25 recommended 7:14 9:23 27:22 30:7 58:7 recommending 43:21 recommends 60:24 65:11 67:15 record 9:13 12:3 55:21,22 68:16 68:25 records 21:25 recover 33:7 61:10 recovering 61:12 recovery 35:9,10 red 40:24 41:3,8 52:22 reduce 17:17 18:24 29:7 47:5 58:12 59:13 77:10,11,12,21 78:21 79:11 reduced 24:10 31:20 63:23 84:10 reducing 18:17 18:18 58:18 68:13 77:14,18 reduction 18:19 18:20,23 21:16 26:10 49:4 65:24 79:20 reductions 17:17 30:23 reference 81:24 referenced 54:3 referred 74:12 referring 81:19 refuted 63:20 regard 33:2,2,16 50:1 regarded 61:14 regarding 7:3 11:4 12:24 13:5 14:21 15:24 22:4 23:22 27:7 31:24 regardless 54:16 regulation 35:25 regulations 8:1 15:7,11 46:10 60:5 regulatory 20:1 20:23,24 21:5 24:15 35:19 41:10 47:10 51:6,15,17 52:14 53:6 56:8 76:21 reiterate 20:17 relate 75:22 related 7:21 13:22 18:10 20:2,25 22:23 23:3,9 24:9 29:20 30:7 60:1 60:3 66:13 71:19 76:20 84:12 relating 7:22 14:18 70:19 relation 67:14 72:8 76:19 relationship 26:13 72:20 relative 35:1 63:18 84:14 rely 77:22 relying 23:11 remaining 21:4 remarks 78:5,6 remember 57:9 reopen 45:23 replace 42:2 replaced 42:18 replacement 1:7 14:13 59:16 report 8:15,17,20 9:21 10:13 58:23 60:14 62:24 63:3 65:24 67:22 reported 63:21 reporter 3:21 67:7 84:1,5,6 reports 58:8 63:21 represent 24:4 57:19,20 representative 74:14 Representing 3:10,12,16,19 request 8:19 12:2 57:5,9 requested 8:17 10:7 59:5 requests 8:25 11:1 require 17:25 required 7:12 13:1 18:25 19:4 23:25 79:9,9 requirement 15:14 20:1,23 22:4,13,25 51:7 51:15,17 53:6 PRE-HEARING CONFERENCE 6/26/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 65:17 71:13,14 79:1,5 80:15 requirements 18:6 20:24 21:5 24:16 51:13 79:4 requires 13:11 79:2 requiring 10:5 17:18 researched 34:13 researching 35:17 reserve 67:4 residential 28:12 32:3,4 43:10,14 54:2,4 74:12,17 74:20 75:1 79:3 79:24 82:11,11 residentially 74:16 residents 41:5 resolution 9:23 resolve 9:9,19 53:1 respect 61:4,18 62:5 78:4 respective 10:8 respond 66:8 69:18 70:3,13 70:14 71:1 responded 76:17 responding 31:23 39:1 77:2 response 54:1 68:23 70:6,10 70:21,23 73:24 responses 11:2 16:5 58:25 responsibility 17:21 50:3 rest 32:10 35:1 41:23 restore 79:7 restrict 30:16 restricts 32:2 result 16:22 38:7 43:5 58:10 resulted 16:15 31:12 40:2 54:3 resulting 47:6 results 29:2 30:5 41:4 47:8 retained 21:21 67:16 retention 76:5 returns 61:1 revenue 22:4,12 22:13,25 24:6 24:14,24 25:5 25:12 29:15 30:24 38:23 39:6 46:20 48:2 50:21 58:19 59:1,4,7 60:9 60:10,12,24 61:1,15,17,25 66:2,11 revenues 19:14 22:7 24:13,22 29:6 33:18,21 34:5,7 61:25 review 7:2 58:11 73:8,13,18,21 77:25 reviewed 35:23 74:14 reviewing 36:6 Revised 5:4 revolving 59:17 right 32:1,7,18 36:5 41:2,12 43:18 45:17 46:16,22 51:5 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