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HomeMy Public PortalAboutExhibit MSD 139 - MSD's Response to Evidence Submitted after June 22, 2015EXHIBIT MSD 139 BEFORE THE RATE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT MSD'S RESPONSE TO EVIDENCE SUBMITTED AFTER JUNE 22, 2015 ISSUE: WASTEWATER AND STORMWATER RATE CHANGE PROCEEDING WITNESS: METROPOLITAN ST. LOUIS SEWER DISTRICT SPONSORING PARTY: RATE COMMISSION DATE PREPARED: JULY 9, 2015 Metropolitan St. Louis Sewer District 2350 Market Street St. Louis, Missouri 63103 On June 26, 2015 the Rate Commission allowed all parties the opportunity to respond in writing to evidence, including documents and testimony, submitted after June 22, 2015. MSD appreciates this opportunity and will first respond to documents submitted and then respond to some of the testimony provided regarding MSD's Stormwater Rate Change Proposal. 1. See Exhibit RC 129, St. Louis County Quickfacts From The United States Census Bureau- Note that this exhibit includes information about all of St. Louis County and is not representative of MSD's municipal boundaries. Specifically, it includes about 15% of the County that is not within MSD's municipal boundaries. This 15% of the County is possibly the fastest growing population area in St. Louis County. Exhibit RC 130 is the same information about the City of St. Louis. All of the City of St. Louis is in MSD's municipal boundaries and the population decrease as shown is appropriate. 2. See Exhibit HBA 133, Low Impact Development- The purpose of the document can be summarized in the first sentence of the Forward. The last part of the sentence reads "... to help protect and restore water quality." While MSD is in agreement with the conclusions of these practices and uses them as appropriate, this document addresses an issue that is NOT part of MSD's Stormwater Rate Change Proposal. These practices would have no impact on the Operation and Maintenance of the Public Stormwater System. If credits were applied as was proposed in testimony, costs would be transferred to other customers to address an additional regulatory need that does not currently exist and does not address the cost to Operate and Maintain the Public Stormwater System. MSD does not believe that it would be fair and equitable for some rate payers to pay a higher portion of the cost of the Operation and Maintenance of the Public Stormwater System for an additional regulatory requirement that does not exist and is not part of the service being paid for. Based on the logic of the intervener, it would be just as appropriate to apply the credit to a customer's wastewater bill. 3. See Exhibit HBA 132, Funding Stormwater Programs- Looking at the second paragraph of the Executive Summary of this document, it again becomes apparent that the concentration of this document is on "... preventing pollutant runoff from happening". MSD again agrees with the tenants of this document when addressing Stormwater Programs as a whole. However, tenants need to be applied appropriately when addressing only a portion of a Stormwater Program, in this case the Operation and Maintenance of a Public Stormwater System, when the balance of the Stormwater Program is already funded through other funding sources. The Rate Commission also needs to consider the differences in this document versus the actual situation in St. Louis. In Newton, Massachusetts (Exhibit HBA 132, page 2), the Board of 1 Alderman considered the cost of revenue systems in choosing an appropriate method. MSD has noted similar types of considerations in determining an appropriate method of collecting revenues (cost of system, inability to include tax-exempt entities, state legislation reducing the number of customers eligible to participate in providing revenue, deductibility of ad valorem property tax). MSD will now respond to statements made after June 22 as documented in Exhibit MSD 134, the transcript from the Pre -Hearing Conference on June 26, 2015. 1. See Exhibit MSD 134, page 71, line 25, "...seemingly no nexus between property value and storm water service..."- Exhibit MSD 115F, the Surrebuttal Testimony of William Stannard, provides the nexus in his answer to question 1. Note that Mr. Stannard's answer is crafted specifically towards the exact services, Operation and Maintenance of the Public Stormwater System, that are being addressed in MSD's Stormwater Rate Change Proposal. The HBA's assertion that "Mr. Stannard's positions are at odds with both the Black and Veatch 2014 Storm Water Utility Survey (Exhibit MSD 84G) and opinions of George Raftelis, the founder of the company" are inaccurate. The survey referenced included stormwater systems that are an enterprise fund based operation of a municipality. It did not include the majority of stormwater systems across the United States that are not separate enterprise funded programs and are funded through the taxing authority of a government entity. The intervener's continued discussion on page 72 again does not recognize the difference in the services being proposed 8 years ago and those being proposed now. The intervener then continues on about generalities of Storm Water Utilities without again considering the exact circumstances related to MSD's Stormwater Rate Change Proposal. 2. See Exhibit MSD 134, page 73, Line 23, "... 40 percent increase in fees"- MSD agrees that it has been using the cost of the previously proposed impervious fee system. We used it because it is what is currently available and what we included for comparison purposes in the Rate Change Proposal. MSD is well aware that there are many systems available that would be less costly to implement. As presented in Rich Unverferth's Surrebuttal testimony (Exhibit MSD 115B) the estimated additional cost to annually manage the previously proposed impervious fee structure versus MSD's proposed ad valorem tax is $1 million, or approximately 4% of proposed revenues. Assuming there is no difference in cost in managing these systems, the difference in costs to MSD's customers would still be 40% less 4%, or approximately 36%. 3. See Exhibit MSD 134, page 75, line 10 thru page 78, line 7, "...lack of stormwater credit program"- A properly crafted stormwater fee credit program attempts to align 2 credits with a reduction in cost incurred by the stormwater program due to the Best Management Practices or other related things a customer of the stormwater system implements. The proposed credit program by the interveners will not do this. We want to again reiterate three points regarding statements made by the interveners. First, MSD will never recommend that new development receive a credit for meeting regulatory requirements that mitigate peak stormwater run-off and the impact of stormwater pollutant run-off caused by those redevelopments. Second, the intervener has claimed that credits are appropriate because they will enhance the District's ability to provide service and reduce cost, yet the intervener has provided no evidence of what that enhancement would be or what costs would be saved. MSD has rightly testified that there would be no change in cost to the Operation and Maintenance of the Public Stormwater System. Keep in mind that green infrastructure is designed for less than a one year storm whereas impactful rain events in the St. Louis area consist of storms in the 15-25 year range minimum. Green infrastructure would not have a measurable effect on the impact of these rain events. Finally, the misunderstanding of the intervener is further shown by referencing grant programs related to our wastewater system, not stormwater system, and recent storm flooding events reported in the Post -Dispatch which was caused by a failure of the wastewater system. The Rate Commission needs to be mindful that the service being addressed is the Operation and Maintenance of the Stormwater System, nothing else. Also, the proposed stormwater services have no impact or relationship to our Consent Decree obligations. 4. See Exhibit MSD 134, page 90, line 6, "The EPA considers a water and sewer bill in excess of two percent of median household income as a threshold beyond which a utility is described as heavily burdened"- MSD cautions the Rate Commission to assume that statements such as these are accurate. Based on recent Framework information provided by the EPA, water costs have never been included in the calculation for costs compared to median household income and are not now. Also, the Rate Commission should consider that past guidance from EPA has indicated that some communities with costs over 2% of MHI are actually only medium burdened. The lines are not nearly as clearly drawn as this testimony would have you believe. All factors concerning costs compared to Median Household Income were considered and discussed during Consent Decree negotiations with the EPA. Regarding the information and documents provided MSD believes it is extremely important that the Rate Commission keep in mind what service is being provided for in the proposed Stormwater Rate Change Proposal, the Operation and Maintenance of the Public Stormwater System. We also strongly urge the rate Commission to consider whether credit 3 programs with no relation to the service being provided would result in a system that is fair and reasonable for all classes of rate payers. If MSD were again submitting a Stormwater Rate Change Proposal that addressed all of the services we proposed in 2007, we did in the past and would again in the future consider many of the ideas that have been presented. However, that is not where we currently are. In conclusion, the MSD Charter standard is not for MSD to have the most fair and reasonable proposed rate structure, just one that is fair and reasonable. All evidence and testimony provided by MSD, including the expert testimony by Mr. William Stannard and the policy information provided by Mr. Brian Hoelscher, demonstrates that MSD's proposed Stormwater Rate Change Proposal consisting of a District -wide 10 cent ad valorem property tax to fund the Operation and Maintenance of the Public Stormwater System is fair and reasonable. MSD believes that considering all of the information, MSD's proposal is the correct one to be recommended to the MSD Board of Trustees. 4