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HomeMy Public PortalAboutExhibit MSD 3B - Direct Testimony, Susan Myers, MSDMSD Exhibit No. MSD 3B 2015 Rate Change Proceeding SUSAN M. MYERS Direct Testimony Metropolitan St. Louis Sewer District February 26, 2015 Table of Contents Page Witness Background and Experience ........................................................................................... 1 Criteria Governing Rate Change - Wastewater ............................................................................ 1 Past Litigation Regarding Wastewater.......................................................................................... 4 Criteria Governing Rate Change - Stormwater ............................................................................. 5 Past Litigation Regarding Stormwater Rates ................................................................................ 7 Direct Testimony of Susan M. Myers, MSD February 26, 2015 Witness Background and Experience 1 Q1. Please state your name, business address, and telephone number. 2 A. Susan M. Myers, 2350 Market Street, St. Louis, Missouri 63103-2555, (314) 768-6209, 3 smyers@stlmsd.com 4 Q2. What is your occupation? 5 A. I am the General Counsel 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 August 6, 2001. 8 Q4. What is your professional experience? 9 A. I have been employed by the District as in-house counsel since 2001 and was promoted 10 to General Counsel in April 2011. I have a unique combination of environmental 11 engineering and legal experience. Prior to joining MSD, I served as an environmental 12 engineer for two years with EPA Region VII in Resource Conservation and Recovery Act 13 (RCRA) Permitting and for nine years on a billion dollar DOE Superfund Clean-up 14 project. 15 Q5. What is your educational background? 16 A. I am a graduate of the Missouri University of Science and Technology, formerly known 17 as the University of Missouri – Rolla, with a B.S. in Geological Engineering. I received 18 my Juris Doctorate Degree from St. Louis University School of Law. 19 20 Criteria Governing Rate Change - Wastewater 21 Q6. Is the Proposed Wastewater Rate Change consistent with constitutional, statutory 22 or common law as amended from time to time? 23 A. Yes, The following is a general chronology of the past wastewater rate litigation and 24 2015 Rate Change Proceeding 1 MSD Exhibit No. MSD 3B Direct Testimony of Susan M. Myers, MSD February 26, 2015 court findings supporting the Rate Change Proposal as being consistent with 1 constitutional, statutory and common law. Article X, § 22(a) of the Missouri Constitution 2 (The Hancock Amendment) prohibits a political subdivision of Missouri from "increasing 3 the current levy of an existing tax, license, or fee, above that current levy authorized by 4 law or charter…without the approval of the required majority of the qualified voters of 5 that political subdivision voting thereon." The Supreme Court of Missouri subsequently 6 interpreted the above-cited section of the Hancock Amendment to mean that “user fees” 7 are not subject to said section, and do not require a vote to be increased; but taxes are 8 subject to it, and do require a vote to be increased. Keller v. Marion County Ambulance 9 District, 820 S.W. 2d 301 (Mo. Banc 1991). To determine whether a particular charge is 10 a user charge or a tax, the Keller Court established a five-pronged analysis. In 1992, the 11 District increased sewer service charges in the belief that the sewer service charges were 12 user fees in the purview of the Keller decision, and that no vote would be required to 13 implement the increase. Suit was brought by Richard Beatty, alleging that the sewer 14 service charge increases violated the Hancock Amendment insofar as no vote was taken. 15 The Supreme Court of Missouri in Beatty v. The Metropolitan St. Louis Sewer District, 16 867 S.W. 2d 216 (Mo. Banc 1993) held that the District’s sewer service charges did not 17 comply with the five-pronged test of the Keller decision, and were indeed taxes rather 18 than user fees, so as to require a vote for an increase. In 1993, the District again 19 increased sewer service charges. However, prior to this increase the District’s billing 20 procedures had been changed in an attempt to comply with the five-pronged Keller test. 21 In a challenge to the 1993 increase, the Missouri Court of Appeals in Missouri Growth 22 Association v. Metropolitan St. Louis Sewer District, 941 S.W. 2d 615 (Mo. App. E.D. 23 1997) held that the District’s sewer service charges satisfied the five-pronged Keller 24 2015 Rate Change Proceeding 2 MSD Exhibit No. MSD 3B Direct Testimony of Susan M. Myers, MSD February 26, 2015 analysis, were user fees, and as such did not require a vote. In 2000 the Charter Plan of 1 MSD was amended and approved by the voters, it outlines the Rate Change Procedure to 2 be used by the District. 3 Q7. Does the Proposed Rate Change enhance the District’s ability to provide adequate 4 sewer and drainage systems and facilities, or related services? 5 A. See Rich Unverferth and Jon Sprague’s direct testimony. 6 Q8. Is the Proposed Rate Change consistent with and not in violation of any covenant or 7 provision relating to any outstanding bonds or indebtedness of the District? 8 A. See Tim Snoke’s direct testimony. 9 Q9. Does the Proposed Rate Change impair the ability of the District to comply with 10 applicable Federal or State laws or regulations as amended from time to time? 11 A. No, The District is regulated by an array of Federal and State environmental laws 12 concerning such things as discharge and effluent levels, each of which carry with them 13 the imposition of financial fines of various amounts. Administration of the Federal Clean 14 Water Act has been delegated to the Missouri Department of Natural Resources 15 (“MDNR”) by the Environmental Protection Agency (“EPA”). The District is regulated 16 by the MDNR to ensure the requirements established under the Clean Water Act are met. 17 It is critical to note the proposed rate change is needed to provide the District with the 18 necessary funds to address the aging wastewater system and resulting wet weather 19 ramifications. The Clean Water Act provides for penalties up to $32,500 per violation 20 per day. Failure to meet the requirements imposed at the Federal and State level would 21 be extremely financially burdensome and would directly hamper or at differing levels, 22 even thwart the efforts of the District. In addition, Section XI of the CD outlines the 23 stipulated penalties that MSD may be liable for if we do not comply with the CD. They 24 2015 Rate Change Proceeding 3 MSD Exhibit No. MSD 3B Direct Testimony of Susan M. Myers, MSD February 26, 2015 range from $500 per day to $4,000 per day depending upon the type of noncompliance 1 and the period of noncompliance. As such, a large proportion of the proposed rate 2 change is necessary to meet legal requirements in that the failure to construct mandated 3 projects or properly maintain existing lines and facilities bring with them immediate and 4 direct legal and financial repercussions. 5 Q10. Does the Proposed Rate Change impose a fair and reasonable burden on all classes 6 of ratepayers? 7 A. Yes, The Rate Change Proposal retains the same general methodology used in the past 8 with respect to the wastewater rate structure. This rate structure has been in place since 9 1993 and has been approved as fair and equitable in a number of Rate Commission and 10 Board of Trustee determinations since 2000. 11 12 Past Litigation Regarding Wastewater 13 Q11. What was the basis and outcome of the case United States and State Of Missouri v. 14 Metropolitan St. Louis Sewer District; Case No. 07-1120? 15 A. This case was filed in the United States District Court for The Eastern District of 16 Missouri. The US and the State of Missouri jointly filed a complaint against MSD on 17 June 11, 2007 seeking injunctive relief and civil penalties pursuant to the Clean Water 18 Act. The complaint alleged that MSD allows the discharge of untreated sewage from its 19 Combined Sewer Overflows, Sanitary Sewer Overflows, Basement Backups and violates 20 conditions of its National Pollutant Discharge Elimination System (NPDES) permits. 21 The Missouri Coalition for the Environment Foundation (MCE) filed a motion to 22 intervene and its motion was granted by the Court on August 29, 2007. The District had 23 been working on these issues for several decades and as required by its Charter, the 24 2015 Rate Change Proceeding 4 MSD Exhibit No. MSD 3B Direct Testimony of Susan M. Myers, MSD February 26, 2015 District had increased rates to fund the improvements sought by the EPA and the DNR. 1 In September 2008, the Judge put in place a Stay while the parties mediated the issues. 2 Pursuant to MSD Ordinance No. 13277, MSD executed the CD on July 15, 2011. The 3 CD was lodged with the court on August 4, 2011. On December 23, 2011, the Plaintiffs, 4 excluding the State of Missouri, filed a Motion to Enter the Proposed CD. That same day 5 the State of Missouri filed a Motion to Dismiss their Claims without Prejudice. On 6 January 17, 2012, MSD filed a Motion to Support the State of Missouri’s Motion only if 7 conditions were imposed. On February 9, 2012, the State filed a Motion opposing the 8 conditions proposed by MSD. On April 27, 2012, the Court entered the decree, thus 9 concluding the litigation of this lawsuit. On that same day the Court entered a 10 Memorandum and Order regarding the State of Missouri’s Motion to Dismiss its Claims. 11 The Court realigned the State of Missouri as a defendant and reaffirmed the August 3, 12 2009, decision by the Eighth Circuit Court of Appeals that the State had waived its 13 sovereign immunity. The CD requires the District to spend approximately $4.7 billion, in 14 2010 dollars, over a 23-year implementation period. Throughout this period 15 improvements will be made to the District’s separate sewer system, combined sewer 16 system, and wastewater treatment plants. The MDNR approved MSD’s CSO Long Term 17 Control Plan on June 1, 2011. In compliance with the CD, the District submitted its SSO 18 Master Plan which was then approved by the EPA on June 24, 2014. 19 20 Criteria Governing Rate Change - Stormwater 21 Q12. Is the Proposed Stormwater Rate Change consistent with constitutional, statutory 22 or common law as amended from time to time? 23 A. Yes, Article X, § 22(a) of the Missouri Constitution (The Hancock Amendment) 24 2015 Rate Change Proceeding 5 MSD Exhibit No. MSD 3B Direct Testimony of Susan M. Myers, MSD February 26, 2015 prohibits a political subdivision of Missouri from "increasing the current levy of an 1 existing tax, license, or fee, above that current levy authorized by law or charter…without 2 the approval of the required majority of the qualified voters of that political subdivision 3 voting thereon. The proposed stormwater rate change will be taken to the voters to be 4 voted on. 5 Q13. Does the Proposed Stormwater Rate Change enhance the District’s ability to 6 provide adequate sewer and drainage systems and facilities, or related services? 7 A. See Rich Unverferth and Jon Sprague’s direct testimony. 8 Q14. Is the Proposed Stormwater Rate Change consistent with and not in violation of any 9 covenant or provision relating to any outstanding bonds or indebtedness of the 10 District? 11 A. See Tim Snoke’s direct testimony. 12 Q15. Does the Proposed Stormwater Rate Change impair the ability of the District to 13 comply with applicable Federal or State laws or regulations as amended from time 14 to time? 15 A. No. The District is regulated by an array of Federal and State environmental laws 16 concerning stormwater. Administration of the Federal Clean Water Act has been 17 delegated to the MDNR by the EPA. The District is regulated by the MDNR to ensure the 18 requirements established under the Clean Water Act are met. It is critical to note the 19 proposed rate change is needed to provide the District with the necessary funds to address 20 the aging stormwater system. The Clean Water Act provides for penalties up to $32,500 21 per violation per day. Failure to meet the requirements imposed at the Federal and State 22 level would be extremely financially burdensome and would directly hamper or at 23 differing levels, even thwart the efforts of the District. As such, the proposed stormwater 24 2015 Rate Change Proceeding 6 MSD Exhibit No. MSD 3B Direct Testimony of Susan M. Myers, MSD February 26, 2015 rate change is necessary to meet legal requirements in that the failure to meet the 1 regulatory needs may result in legal repercussions. 2 Q16. Does the Proposed Stormwater Rate Change impose a fair and reasonable burden 3 on all classes of ratepayers? 4 A. See Brian Hoelscher’s direct testimony 5 6 Past Litigation Regarding Stormwater Rates 7 Q17. What was the outcome of William Zweig et al. v. Metropolitan Sewer District, Appeal 8 No. ED96110 (Consolidated with Nos. ED96165 and ED96393)? 9 A. This case was filed on July 18, 2008 and, as amended, contended that Metropolitan 10 Sewer District Ordinances No. 12560 and No. 12789, which enacted increases in the 11 District’s stormwater user charge based on the amount of impervious area on the 12 customer’s property, were unconstitutional. The lawsuit claimed the ordinances violated 13 the so-called Hancock Amendment, Mo. Const. art. X, § 22(a), because the stormwater 14 user charge was in reality a tax that required voter approval. The District’s Board of 15 Trustees passed the ordinances in December 2007 and December 2008, respectively, 16 without submitting them to the voters. The District contended the stormwater user charge 17 was not a tax and, thus, not subject to voter approval. The original plaintiff was a District 18 stormwater customer who sought to represent a class of all the District stormwater 19 customers. In July 2009, two more plaintiff class representatives were added to the 20 lawsuit. The lawsuit sought (1) a declaration that the stormwater user charge was 21 unconstitutional, (2) a refund of all stormwater user charges collected, and (3) payment of 22 the plaintiffs’ costs, including attorneys’ fees. Trial was held April 13, 2010 through 23 April 16, 2010. On July 9, 2010, the court handed down Findings of Fact, Conclusions of 24 2015 Rate Change Proceeding 7 MSD Exhibit No. MSD 3B Direct Testimony of Susan M. Myers, MSD February 26, 2015 Law, Judgment and Decree in the first phase of the bifurcated trial. The Court declared 1 the Stormwater User Charge was a tax under the Hancock Amendment. The second 2 phase of the trial was heard on October 6, 2010, to determine the amount, if any, to be 3 refunded. The amount of a full refund would have been approximately $87 million; a 4 partial refund for the additional amount collected under the user charge would amount to 5 approximately $35 million. The judge ruled on November 29, 2010, that no refund 6 would be issued by MSD. The third phase, to determine the amount of Plaintiffs’ 7 counsel’s attorneys’ fees, to be paid by MSD, was heard on January 18, 2011. On 8 February 4, 2011, the judge awarded Plaintiff’s counsel $4.8 million in attorney’s fees 9 and expenses. The record on appeal was filed July 20, 2011, with the Court of Appeals, 10 Eastern District of Missouri. The attorney’s fees and expenses were paid into escrow on 11 September 9, 2011, and remained in escrow pending finality of the litigation. The Court 12 of Appeals heard oral argument on March 6, 2012. On March 27, 2012, the Appellate 13 Court Ruling upheld the Trial Court’s decision that the stormwater fee was a tax and that 14 no refund was due, and reversed the application of a multiplier on attorney’s fees. On 15 April 11, 2012, MSD filed a Motion for Rehearing by the Appellate Court and an 16 Application for Transfer to the Missouri Supreme Court. The Appellate Court denied 17 both. On May 29, 2012, MSD filed its Application directly to the Missouri Supreme 18 Court requesting a transfer. On June 1, 2012, the National Association of Clean Water 19 Agencies was allowed to file suggestions in support of our Application for Transfer. On 20 May 21, 2013 the Missouri Supreme Court heard oral arguments. On November 12, 21 2013 the Missouri Supreme Court handed down their decision which included that the 22 impervious area-based stormwater charge was not a user fee and required voter approval; 23 no refund was due, allowed a multiplier on attorney’s fees, and remanded the Appellate 24 2015 Rate Change Proceeding 8 MSD Exhibit No. MSD 3B Direct Testimony of Susan M. Myers, MSD February 26, 2015 fees back to the Trial Court. On December 4, 2013 MSD satisfied the judgment by 1 paying $5,259,192.84 to Plaintiffs for their attorney’s fees. 2 Q18. Does this conclude your prepared direct testimony in this matter? 3 A. Yes, it does. 4 5 2015 Rate Change Proceeding 9 MSD Exhibit No. MSD 3B