HomeMy Public PortalAboutExhibit MSD 3A - Direct Testimony, Brian Hoelscher, MSDMSD Exhibit No. MSD 3A
2015 Rate Change Proceeding
BRIAN L. HOELSCHER
Direct Testimony
Metropolitan St. Louis Sewer District
February 26, 2015
Table of Contents
Page
Witness Background and Experience ........................................................................................... 1
Composition of Rate Change Notice ............................................................................................ 2
Wastewater Debt Financing .......................................................................................................... 2
Criteria Governing The Stormwater Tax Change ......................................................................... 3
Direct Testimony of Brian L. Hoelscher, MSD February 26, 2015
Witness Background and Experience 1
Q1. Please state your name, business address, and telephone number. 2
A. Brian L. Hoelscher, 2350 Market Street, St. Louis, MO 63101-2555, (314) 768-6245, 3
blhoel@stlmsd.com 4
Q2. What is your occupation? 5
A. I am the Executive Director for the Metropolitan St. Louis Sewer District (District). 6
Q3. How long have you been associated with the District? 7
A. I have been with the District continuously since 1995. 8
Q4. What is your professional experience? 9
A. During my tenure with the District, I held various senior management level positions 10
related to the execution of the District’s Capital program and overall operation of the 11
District including Manager and Assistant Director of the Construction Management 12
Department, Assistant Director and Director of the Engineering Department, and since 13
March 2013 have served as the Executive Director. Prior to joining the District I was the 14
St. Louis Office Manager for the consulting engineering company of Consoer, Townsend, 15
Envirodyne (CTE, now AECOM). 16
Q5. What is your educational background? 17
A. I am a graduate of Washington University in St. Louis with an undergraduate degree in 18
Civil Engineering. 19
Q6. Are you registered as a Professional Engineer? 20
A. Yes, I am a registered Professional Engineer in the States of Missouri and Illinois. 21
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2015 Rate Change Proceeding 1 MSD Exhibit No. MSD 3A
Direct Testimony of Brian L. Hoelscher, MSD February 26, 2015
Composition of the Rate Change Notice 1
Q7. What is the focus of the Rate Change Proposal? 2
A. The Rate Change Proposal recommends necessary wastewater rate increases for the 3
period of FY17 through FY20. These increases are necessary to provide the revenue 4
needed to perform operations, maintenance, and construction activities required to 5
comply with the Clean Water Act (CWA). It also includes a proposed change to the 6
stormwater taxes collected throughout the District as the first step to address the area’s 7
stormwater needs. 8
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Wastewater Debt Financing 10
Q8. Why is the District seeking additional debt authorization from the voters to support 11
the wastewater CIRP in its wastewater rate proposal? 12
A. The need to dramatically raise rates places a considerable burden on MSD’s customers. 13
The use of debt financing to mitigate the rate impact is an important feature of this rate 14
change proposal. In order to raise rates in a more gradual fashion, additional debt will 15
have to be authorized by the voters. An alternative approach that utilizes only cash is 16
included in the wastewater Rate Change Proposal. This description shows the necessary 17
rate impact should a bond election fail. Funding the necessary program on a cash basis 18
requires substantially higher rates to be implemented immediately. 19
Q9. When will the voters have an opportunity to consider additional debt authority for 20
the District? 21
A. During an election period in calendar year 2016. 22
2015 Rate Change Proceeding 2 MSD Exhibit No. MSD 3A
Direct Testimony of Brian L. Hoelscher, MSD February 26, 2015
Q10. Does the proposed bond election impact the implementation date of proposed 1
wastewater charges? 2
A. The proposed rate change would occur in July 2016. The outcome of the bond election 3
will influence the required rate, with lower rates starting in July 2017 with bond approval 4
or higher rates starting in July 2017 if the election fails. 5
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Criteria Governing The Stormwater Tax Change 7
Q11. In your opinion, does the Stormwater Tax Change impose a fair and reasonable 8
burden on all classes of ratepayers? 9
A. Yes, for three main reasons. First, the ad valorem taxing method is the most cost efficient 10
method to collect stormwater revenues and avoids annual costs included in methods like 11
a voted impervious area fee. Second, it is the method whereby MSD has been providing 12
stormwater services to its customers and is successfully used by many public entities in 13
our service area to provide services of all kinds. This method has a built-in low income 14
program component in that a taxpayer’s share of the program is tied to the value of the 15
taxable property. Finally, the amount of the tax addresses a consistent level of operation 16
and maintenance of the public stormwater system throughout the District with some 17
additional funds for stormwater improvements. The method for collecting any future 18
stormwater revenues for additional services can be any method that seems appropriate 19
with the voters deciding whether the service costs should be implemented. 20
Under the current stormwater taxing structure, different portions of the service area 21
receive a vastly different level of service based on the amount of taxes they pay. Many of 22
these taxing areas are remnants stemming from the original formation of the District in 23
2015 Rate Change Proceeding 3 MSD Exhibit No. MSD 3A
Direct Testimony of Brian L. Hoelscher, MSD February 26, 2015
1954. In general, the City of St. Louis and areas of near North and South County receive 1
adequate stormwater regulatory services and operation and maintenance of the public 2
stormwater systems, but no funds are available for improvements to the stormwater 3
system. In general, the portions of the District outside of this area but east of Interstate 4
270/Lindbergh receive adequate stormwater regulatory services, operation and 5
maintenance of the public stormwater systems, and funds for improvements to the 6
stormwater system. In general, the remaining areas to the south, west, and north of this 7
area within the District’s boundaries receive adequate stormwater regulatory services, but 8
no funds are available for the operation and maintenance of the public stormwater system 9
or for improvements to the stormwater system. After the MSD impervious rate was found 10
to require a vote of the public, MSD conducted a series of public meetings to help 11
educate the public on these varying levels of taxes and services. 12
As a first step towards addressing these issues, the District is proposing to stop collecting 13
all taxes and fees currently used for the operation and maintenance of the public 14
stormwater systems and for improvements to the stormwater system and replace them 15
with a District-wide 10 cent ad valorem property tax. This will allow for a consistent 16
level of service throughout the District consisting of adequate operation and maintenance 17
of the public stormwater system and some improvements to the stormwater system. 18
Balances in the current tax funds will be used for improvements to the public stormwater 19
system in the areas where these taxes are collected. The District wide tax used for 20
providing adequate stormwater regulatory services will remain in place. 21
The immediate impact over the next four years will be that tax payers living in the yellow 22
area, as indicated on Figure ES-1, will see a very slight increase in stormwater costs 23
2015 Rate Change Proceeding 4 MSD Exhibit No. MSD 3A
Direct Testimony of Brian L. Hoelscher, MSD February 26, 2015
while adding over $20 million in stormwater improvements to their service level, tax 1
payers living in the green area on the attached map will see a reduction in their 2
stormwater costs while receiving the same level of service, and tax payers living in the 3
red area on the map will see a significant increase in their stormwater costs and an 4
equally significant increase in their stormwater services to include the operation and 5
maintenance of the public stormwater system as well as funds for improvements to the 6
stormwater system. 7
Q12. Does that conclude your proposed direct testimony in this matter? 8
A. Yes it does. 9
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2015 Rate Change Proceeding 5 MSD Exhibit No. MSD 3A