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HomeMy Public PortalAboutExhibit MSD 96 - Transcript of First Technical Conference April 8, 2015 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 1 1 2 3 4 5 6 7 8 MEETING OF THE RATE COMMISSION 9 OF THE 10 METROPOLITAN ST. LOUIS SEWER DISTRICT 11 2015 WASTEWATER RATE CHANGE PROCEEDING 12 DIRECT TESTIMONY 13 14 15 TECHNICAL CONFERENCE - DAY 1 16 APRIL 8, 2015 17 18 19 20 21 22 23 24 25 Exhibit MSD 96 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 2 1 I N D E X 2 WITNESSES: PG. 3 Mr. Brian Hoelscher 15 4 Ms. Susan Myers 36 5 Mr. Richard Unverferth 46 6 Mr. Jonathan Sprague 70 7 Mr. Tim Snoke 72 8 Ms. Bethany Pugh 84 9 Ms. Theresa Bellville 91 10 Mr. William Stannard 99 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 TECHNICAL CONFERENCE 4/8/2015 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 2 The Chairman: Mr. Russell Hawes 3 The Rate Commission: Ms. Annette Slack, Mr. Steve Mahfood, 4 Mr. George Tomazi, Ms. Nancy Bowser, Mr. Eric 5 Schneider, Mr. Paul Brockman, Mr. Mark Schoedel, 6 Mr. John Stein 7 For MSD: Ms. Susan Myers 8 For The Commission: 9 Ms. Lisa O. Stump, Mr. John Fox Arnold 10 Lashly & Baer, P.C. 11 714 Locust Street 12 St. Louis, Missouri 63101 13 (314) 621-2939 14 For Missouri Industrial Energy Consumers: 15 Mr. Brandon Neuschafer 16 (314) 259-2317 17 211 North Broadway, Suite 3600 18 St. Louis, MO 63102 19 Bryan Cave, LLP 20 For the Home Builder's Association: 21 Mr. Nicholas Burkhart 22 (314) 719-3784 23 120 South Central Avenue, Suite 700 24 St. Louis, MO 63105 25 Smith Amundsen TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 4 1 MR. CHAIRMAN: I'd like to call the technical 2 conference of the Metropolitan St. Louis Rate Commission, Sewer 3 District Rate Commission to order. Do we have a roll call or 4 should I? 5 MS. STUMP: You can. 6 MR. CHAIRMAN: I will do it. Nancy Bowser. 7 MS. BOWSER: Here. 8 MR. CHAIRMAN: Paul Brockman. 9 MR. BROCKMAN: Here. 10 MR. CHAIRMAN: Steve Chodes. Lori Kelling, Jack 11 Stein. 12 MR. STEIN: Present. 13 MR. CHAIRMAN: Eric Schneider. 14 MR. SCHNEIDER: Present. 15 MR. CHAIRMAN: Leonard Toenjes. George Tomazi? 16 MR. TOMAZI: Here. 17 MR. CHAIRMAN: Mike O'Connell. Mark Schoedel. 18 MR. SCHOEDEL: Here. 19 MR. CHAIRMAN: Annette Slack. Steve Mahfood. Otis 20 Williams. Chan Mahanta. 21 We do not have a quorum at this time. 22 MS. STUMP: We don't need one for purposes of the 23 technical conference. 24 MR. CHAIRMAN: Very good, glad to know that, thank 25 you. All right, then I will open the technical conference by TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 5 1 reading a statement. My name is Russell Hawes I am the vice 2 chairman of the Rate Commission with the Metropolitan St. Louis 3 Sewer District and will serve as chair of this proceeding. 4 Present are Nancy Bowser, Paul Brockman, myself, Jack Stein, 5 Eric Schneider, George Tomazi and Mark Schoedel, delegates of 6 the Rate commission. 7 The charter plan of the district was approved by the 8 voters of St. Louis and St. Louis County in special election on 9 February 9, 1954 and amended at the general election on 10 November 7, 2000. The amendment to the charter plan established 11 a Rate Commission to review and make recommendations to the 12 district regarding changes in wastewater rate, storm water rate 13 and tax rate proposed by the district. 14 The charter plan requires the Board of Trustees of the 15 district to select organizations to name delegates to the Rate 16 Commission to ensure a fair representation of all users of the 17 district's services. The Rate Commission representative 18 organizations are to represent commercial industrial users, 19 residential users, and other organizations interested in the 20 operation of the district, including organizations focusing on 21 environmental issues, labor issues, socioeconomic issues, 22 community neighborhood organizations, and other nonprofit 23 organizations. 24 The Rate Commission currently consists of 25 representatives of Associated General Contractors of St. Louis, TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 6 1 St. Louis Regional Chamber and Growth Association, the Engineers 2 Club of St. Louis, the League of Women Voters, the Missouri 3 Botanical Garden, Education Plus, Missouri Industrial Energy 4 Consumers, Mound City Bar Association, St. Louis County 5 Municipal League, the St. Louis Council of Construction 6 Consumers, Lutheran Senior Services, West St. Louis County 7 Chamber of Commerce, North County Incorporated, Greater St. 8 Louis Labor Council, and Missouri Coalition for the Environment. 9 Upon receipt of a rate change notice from the 10 District, the Rate Commission is to recommend to the Board of 11 Trustees changes in wastewater, storm water or tax rates 12 necessary to pay interest and principal following due on bonds 13 issued to finance assets of the district, the costs of operation 14 and maintenance and such amounts as may be required to cover 15 emergencies anticipated delinquencies. 16 Further, any change in a rate recommended to the Board 17 of Trustees by the Rate Commission is to be accompanied by a 18 statement that the proposed rate change is, one, consistent with 19 statutory, constitutional, or common law as amended from time to 20 time. Two, enhances the district's ability to provide adequate 21 sewer and drainage systems and facilities or related services. 22 Three, is consistent with and not in violation of any covenant 23 or provision related to any outstanding bonds or indebtedness of 24 the District. Four, does not impair the ability of the District 25 to comply with applicable federal or state laws and regulations TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 7 1 as amended from time to time, and five, proposes a fair, and 2 reasonable burden on all classes of rate payers. 3 The Rate Commission received the rate change notice 4 from the District on February 26, 2013. The Rate Commission 5 must, on or before, June 26, 2013, issue its report on the 6 proposed rate change notice to the Board of Trustees of the 7 district, and unless the Board of Trustees, upon application of 8 the Rate Commission, extends the period of time for the issuance 9 of the Rate Commission report for an additional 45-day period. 10 Under procedural rules adopted by the Rate Commission 11 on March 4, 2013, any person affected by the rate change 12 proposal had an opportunity to submit an application to 13 intervene in these proceedings. Applications to intervene have 14 been filed by the Home Builders' Association of St. Louis in 15 Eastern Missouri, and Missouri Industrial Energy Consumers. 16 These applications have been granted. 17 On February 26, 2015 the district submitted to the 18 Rate Commission the prepared direct testimony of Brian 19 Hoelscher, Susan Myers, Richard Unverferth, Jonathan Sprague, 20 Tim Snoke, Bethany Pugh, Theresa Bellville and William Stannard. 21 On March 17, 2015, the Rate Commission submitted it's 22 first discovery request to the district. On March 27, 2015 the 23 district filed it's responses. On March 30, 2015 the Rate 24 Commission submitted second discovery request for the district 25 the district responded to on April 7, 2015. On April 3, 2015, TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 8 1 the Rate Commission submitted its third discovery request to the 2 district. 3 The technical conference will be held on the record 4 regarding the rate setting documents and the direct testimony 5 filed with the Rate Commission by the district. The purpose of 6 this technical conference is to provide the district with an 7 opportunity to answer questions propounded by members of the 8 Rate Commission, then by any intervener, and finally by Lashly 9 and Baer, legal counsel for the Rate Commission. Following this 10 technical conference, the interveners and Rate Commission 11 consultants may on or before April 17, 2015 submit prepared 12 rebuttal testimony and schedule. A technical conference will be 13 held on April 29 through May 1, 2015 regarding the rebuttal 14 testimony. At that technical conference, each person submitting 15 rebuttal testimony shall answer questions propounded by members 16 of the rate commission, the district, then the other interveners 17 and finally by our legal counsel. Following the technical 18 conference, the district, it's consultants, the interveners and 19 the Rate Commission consultants may on or before May 8, 2015 20 submit prepared surrebuttal testimony and schedule. 21 A technical conference will be held on the record May 22 20 through 22, 2015 regarding the surrebuttal testimony. At 23 that technical conference, each person submitting surrebuttal 24 testimony shall answer questions propounded by members of the 25 Rate Commission, then by the district, and the interveners and TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 9 1 finally by our legal counsel. 2 Rate payers who do not wish to intervene will be 3 permitted to participate in a series of on the record public 4 hearings conducted in nine sessions beginning on May 11, 2015, 5 and concluded on June 9, 2015. Who is here on behalf of the 6 Metropolitan St. Louis Sewer District? 7 MS. MYERS: Susan Myers, general counsel. 8 MR. CHAIRMAN: Who is here on behalf of the Home 9 Builder's Association? 10 MR. BURKHART: Nick Burkhart. 11 MR. CHAIRMAN: Who is here on behalf of the Missouri 12 Industrial Electrical Energy Consumers? 13 MR. NEUSCHAFER: Brandon Neuschafer. 14 Also present is Pamela Lemoine of Black and Veatch, 15 consultant to the Rate Commission and John Fox Arnold and Lisa 16 Stump of Lashly and Baer, legal counsel to the Rate Commission. 17 Under the rate commission's operational rules, no 18 person shall be required to answer questions for a total period 19 of more than three hours, and the time shall be evenly divided 20 among all the participants desiring to ask questions. Following 21 questions by members of the rate commission, I will attempt to 22 allocate the time equally among the participants and our legal 23 consul. To the extent the district, one of the interveners or 24 legal counsel has not completed the questions at the expiration 25 of that person's allotted time and to the extent that time TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 10 1 remains, such person will be permitted to propound additional 2 questions until the three hours has expired. Are there any 3 procedural matters? 4 MR. ARNOLD: Chairman? 5 MR. CHAIRMAN: Yes, sir. 6 MR. ARNOLD: John Arnold, Miss Myers has called to my 7 attention that the direct testimony filed by the district does 8 not include a document which is required by our operational 9 rules. She and I have discussed it, but the rules provide that 10 all testimony whether direct or in writing should be accompanied 11 by a notarized affidavit. The Commission has not required this 12 in it's prior proceedings, and I respectfully request that the 13 Commission waive the requirements of Section 3A requiring a 14 notarized affidavit. 15 MR. CHAIRMAN: Shall the Commission hear a motion to 16 that effect? 17 MR. BROCKMAN: So moved. 18 MS. BOWSER: Second. 19 MR. CHAIRMAN: All in favor? 20 RATE COMMISSION: Aye. 21 MR. CHAIRMAN: So done. Any other procedural matters 22 to come before us? There will be no further procedural matters. 23 Miss Myers, would you like to make an opening statement? 24 MS. MYERS: I would. Good afternoon. My name is 25 Susan Myers and I am the general counsel for the Metropolitan TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 11 1 St. Louis Sewer District. I'd like to thank all of you for 2 serving on the Rate Commission in this rate setting process and 3 allowing me the opportunity to provide an opening statement on 4 behalf of the district. 5 For the record, I would like to provide a brief 6 summary of the district's history. MSD is the fourth largest 7 sewer district in the county based on miles of pipe. With 8 responsibility for over 6,300 miles of sanitary and combined 9 sewers and over 3,000 miles of storm water pipe. Although being 10 the fourth largest sewer district in the country, MSDs rate 11 payer base is approximately half the size of other comparable 12 entities. MSD was formed pursuant to the Missouri Constitution 13 in 1954 and began operation in 1956. Over time, MSD has 14 absorbed 79 public and privately owned sewer systems, thereby 15 providing consolidated regional sewer treatment to the St. Louis 16 community. 17 Based on miles of pipe, the district is over two times 18 as large as Kansas City. The large size of the MSD system will 19 require a massive multi-decade reinvestment effort to maintain 20 and improve the community's wastewater sewer infrastructure and 21 a uniform storm water tax rate throughout the district to 22 provide an appropriate uniform level of storm water service. 23 As most of you are aware, in June 2007 the United 24 States and the state of Missouri filed a civil action against 25 the district for alleged violations of the clean water act. The TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 12 1 Missouri Coalition for the environment was allowed to intervene. 2 Following four years of negotiation, the consent decree was 3 lodged with the court on August 4, 2011. An extended public 4 comment period ended on October 10, 2011. On April 27, 2012, 5 the court entered the consent decree thus concluding the 6 litigation. The state of Missouri in spite of being involved in 7 these negotiations since 2007, chose not to sign the consent 8 decree. The court also entered an order on April 27, 2012 in 9 which the court realigned the state of Missouri as a defendant 10 and reaffirmed the 2009 decision by the 8th Circuit Court of 11 Appeals that the state had waived it's sovereign immunity. 12 The consent decree requires the district to spend 13 approximately $4.7 billion and $2,011 over a 23 year 14 implementation period. I'm happy to say today the consent 15 decree is available to the public and the district is in full 16 compliance with the consent decree. To date, the district has 17 implemented the consent decree on schedule and under budget. 18 The wastewater portion of our rate change proposal is based upon 19 the clear direction outlined in the consent decree in the form 20 of many improved plans, including the combined sewer overflow 21 long-term control plan, the sanitary sewer overflow master plan, 22 and the capacity management operations and maintenance plan and 23 reflects the capital project and related O and M needed over the 24 next four years to continue to comply with the consent decree. 25 The district has also taken advantage of many TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 13 1 efficiencies while successfully completing the work required by 2 the consent decree. These are identified in detail in the 3 direct testimony of Rich Unverferth and John Sprague. On the 4 storm water side, everyone is probably aware of Zweig versus MSD 5 lawsuit that concluded with the Missouri Supreme Court ruling 6 that MSD impervious based fee needed to be voted on by the 7 people. Based upon that ruling, the rate change proposal 8 proposes the use of a district wide assessed value property tax 9 structure to replace the flat rate charge and the multi-layer 10 taxes we currently have in place. 11 Throughout these technical conferences, the following 12 should be kept in mind, the program outlined in the consent 13 decree is a continuation of MSD's current wastewater capital 14 program and has been underway for the past several decades. The 15 capital program is a reinvestment in the St. Louis community to 16 maintain and improve it's wastewater infrastructure. 17 The storm water portion of the proposal addresses 18 several service level inequalities, maintaining funding for 19 storm water regulatory requirements, using a funding method 20 currently being used for MSD storm water service, and allows for 21 a district wide tax that will facilitate additional storm water 22 capital work district wide. 23 The rate being proposed to the Rate Commission is the 24 same wastewater rate method approved by this commission in the 25 past four rate change proceedings, and the same storm water TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 14 1 taxing structure that has been in place since the mid-1980's. It 2 is the district's opinion that the wastewater portion of the 3 rate change proposal imposes a fair and reasonable burden on all 4 classes of rate payers as the proposed rates were determined 5 using an industry accepted wastewater rate designed methodology, 6 a method that has been determined to be fair and equitable by 7 the Missouri Supreme Court in 1997. 8 The storm water addressed value property taxing 9 methodology has been used by MSD since the mid 1980s and is 10 allowed by the Missouri constitution and MSD's charter plan. 11 The district testimony today will provide a clarification 12 regarding the detailed aspects of the district's rate change 13 proposal, and demonstrate how the proposed rates are necessary 14 to MSD's future obligations, including compliance with consent 15 decree and storm water regulatory requirements. 16 The order of appearance of MSD's witnesses will be 17 Brian Hoelscher, MSD's executive director, myself MSD's general 18 counsel, Rich Unverferth, MSD's director of engineering, John 19 Sprague MSD's director of operations, Tim Snoke MSD's secretary 20 treasurer, Bethany Pugh of Public Financial Management serving 21 as the district's financial advisor, Theresa Bellville MSD's 22 assistant director of finance, and William Stannard of Raftelis 23 Financial Consultants, serving as the district's rate 24 consultant. 25 This concludes my opening remarks. I ask that my TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 15 1 opening remarks be accepted by the Rate Commission as Exhibit 2 MSD 87, thank you. 3 MR. CHAIRMAN: Thank you, Miss Myers. Let the record 4 show that Miss Annette Slack and Steve Mahfood have joined the 5 proceedings, so we now have quorum officially. 6 Any other parties wishing to make an opening 7 statement? 8 MR. TOMAZI: Just two quick questions, Miss Myers, you 9 mentioned that the consent decree was $4.7 billion over a 23 10 year period, is that equal annual amount or does it tend to be 11 front end loaded? 12 MS. MYERS: I think you'll get a better feel for that 13 through the direct testimony from Rich Unverferth or so about 14 our capital program, so if we can defer that question I think he 15 can probably answer it better than I can. 16 MR. CHAIRMAN: Any other parties wishing to make an 17 opening statement? Hearing none, Miss Myers, are you ready to 18 present those persons for whom you have filed testimony? 19 MS. MYERS: Yes, we are. I'll call Brian Hoelscher. 20 MR. CHAIRMAN: Mr. Hoelscher, is the testimony you're 21 about to give the truth, the whole truth and nothing but the 22 truth? 23 MR. HOELSCHER: Yes, sir. 24 MR. CHAIRMAN: Does any member of the Rate Commission 25 have any questions, or I guess we'll let your testimony go TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 16 1 and -- 2 MS. STUMP: It's really just for the Rate Commission 3 and the other interveners and that to ask any additional 4 questions they have of Brian based upon his direct testimony or 5 the discovery responses that the district has provided. 6 Mr. Hawes, if members of the Rate Commission do not 7 have any questions at this time, you can go ahead and proceed 8 with asking the interveners if they have any questions. 9 MR. CHAIRMAN: All right. Mr. Burkhart, do you have 10 any questions of Mr. Hoelscher? 11 MR. BURKHART: Yes. 12 WILLIAM BURKHART, having been duly sworn, 13 testified as follows: 14 QUESTIONS BY MR. BURKHART: 15 Q. (By Mr. Burkhart) Mr. Hoelscher, in your direct 16 testimony you testified that the rate increase under the rate 17 change proposal are required to generate the revenue needed to 18 perform operation maintenance and construction activities 19 required to maintain compliance with the Clean Water Act and to 20 address the area storm water needs. Based on this purpose, in 21 assuming that the purposes for the rate increase address these 22 regulatory compliance issues, why does the Rate Commission 23 proposal not include some sort of credit program for new 24 construction that meets or exceeds the current MSD state or 25 federal regulations and requirements? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 17 1 A. If you can -- I'm not sure I understand your question, 2 if you can give me an example of that? 3 Q. Sure, in the event that a new construction project 4 installs a BMP or similar, I guess, system that meets or exceeds 5 MSDs rules and regulations in the engineering design standards, 6 has MSD first considered a credit program, and second if they 7 have considered a credit program, why have that you not accepted 8 that? 9 A. For our proposal, we have not considered credit 10 program. Developers who meet MSD requirements that feed down 11 from the state and federal requirements are similar to building 12 permit requirements, and there's no change in cost to services 13 that MSD has to provide, therefore we haven't provided any kind 14 of credit. 15 MR. BURKHART: Okay. I believe that's the only 16 question I have, thank you. 17 MR. CHAIRMAN: Thank you, Mr. Burkhart. 18 Mr. Neuschafer, do you have questions of Mr. Hoelscher? 19 MR. NEUSCHAFER: Not at this time. 20 MR. CHAIRMAN: Mr. Arnold, do you have questions of 21 Mr. Hoelscher on behalf of the Rate Commission? 22 MR. ARNOLD: The Commission, I do. 23 QUESTIONS BY MR. ARNOLD: 24 Q. (By Mr. Arnold) Mr. Hoeslcher, we've met a few times, 25 we've done this before? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 18 1 A. Yes, we have. 2 Q. So you understand that the role of counsel to the 3 commission is simply to assist the commission in the preparation 4 of it's report, and if I may, I'd like to try to clarify some 5 things that to which you have testified. If I put to you a 6 question that ought to be responded by someone on your staff, 7 please let me know. 8 A. Yes, sir. 9 Q. Do you have your testimony available? 10 A. Yes, I do. 11 Q. And rate proposal? 12 A. Yes, sir. 13 Q. All right. Question 7 page 2, line 6 and 7, you 14 indicate at the tail end of that paragraph, got it? 15 A. Yes, sir. 16 Q. That this is the first step to address storm water 17 needs, precisely, what is included in that step? 18 A. What we're proposing is if you look at the rates, 19 proposal is to maintain a two cent district wide tax that 20 currently meets our regulatory needs for storm water and a ten 21 cent tax to address all of our operational maintenance 22 activities district wide that are required to maintain and 23 operate the storm water system, plus some additional dollars to 24 start addressing district wide capital programs, the need to fix 25 capital issues on the storm water side. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 19 1 The reason I say the first step is that funding 2 mechanism we set up is not producing sufficient funds in the 3 long-term to address every possible storm water issue we know of 4 it. It does provide sufficient funding again for regulatory and 5 new issues and maintenance of the system as the public system 6 exists now, and just barely starts touching on providing a 7 capital fund for district wide storm water projects. 8 I suspect in the future, we are going to be asked to 9 consider possibly providing additional storm water services 10 beyond the funding or the scope of services that we're proposing 11 to provide here, and that's the reason I kind of refer to it as 12 a first step. I think you find our proposal is to raise 13 somewhere in the neighborhood of $26 to $27 million per year for 14 storm water activities, impervious area that we discussed, two 15 rate cycles again were proposing to raise upwards of $80 million 16 eventually per year. So we view this as a first step to take 17 care of the first major issue that MSD believes it has, and that 18 is unfunded public storm sewers in annexed area of the district. 19 Q. Now when you refer to the two cents, that's .01987? 20 A. I believe yes, with Hancock adjustment, I think it's 21 0.01987 I believe that's the tax we're asking to charge. 22 Q. Now you use the term impervious area, in your rate 23 proposal, you've defined ad valorem as any tax based on assessed 24 evaluation on property, how would you define an impervious area? 25 A. An impervious area is an area which does not allow TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 20 1 water to soak into the area or to be, to act as a grass area or 2 natural surface, things such as concrete surfaces, asphalt 3 surfaces, rooftops, those types of things, those would be 4 impervious areas. 5 Q. Now with respect to storm water, when it rains, what 6 happens to rain in the natural environment, grass and dirt 7 hills, and whatever? 8 A. In general, it will go into the ground to the capacity 9 that the soil could do so, it would absorb some of that water, 10 the rest would flow over land until it reached some kind of 11 water course, an open ditch or stream and it will continuously 12 travel through that into other larger ditches and streams, and 13 in the St. Louis area, ultimately ending up in the Missouri 14 River. 15 Q. And so it would not enter the district storm water 16 facilities? 17 A. I think under that scenario, there would not be any 18 district public storm water in the facilities, that's correct. 19 Q. Question 11, page 3, lines 10 and 12, question was 20 whether or not the ad valorem taxes on real property is fair and 21 reasonable burden on all classes of taxpayers? 22 A. Yes. 23 Q. In your discovery response, I'm sorry, you don't have 24 that? Susan? 25 MS. MYERS: I have. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 21 1 Q. (By Mr. Arnold) Here's a stack of what I'm talking 2 about. When you try and describe fair and reasonable, and you 3 talk about cost, I refer your attention to page 4 in the 4 discovery response. 5 A. First discovery response? 6 Q. Yes, sir, these will all be the first. 7 A. Okay. 8 Q. You say three reasons, it's the most cost efficient 9 method to collect storm water revenues? 10 A. Yes, sir. 11 Q. Does the cost of collection have anything to do with 12 what you have to do to treat storm water? 13 A. No, but it does have to do with how much we have to 14 charge our rate payers and our taxpayers to provide that 15 service. 16 Q. And if the value of your house is greater than the 17 value of my house, but they're the same size, there will be a 18 differential in our storm water fee, tax, whatever, and yet it 19 has nothing to do with the role of the district in dealing with 20 storm water? 21 A. I guess I'm not sure I know what you mean by the role 22 of the district in dealing with storm water, I -- 23 Q. I've described an impervious area for you, and an 24 impervious area for me of the same size but if the volume of 25 your property is different, we will pay a different rate for TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 22 1 handling the same amount of storm water? 2 A. Correct. 3 Q. Is that fair? 4 A. I believe so, using that type of taxing methodology is 5 the kind that's been in place in the district for over 30 years, 6 as I mentioned in my testimony, many public entities have found 7 that the appropriate way is to collect taxes for services within 8 municipal boundaries. 9 Q. Storm water services? 10 A. Services to the public, not necessarily storm water 11 service, except in the case of MSD, I would have to check, I 12 believe there are some municipalities that also collect tax for 13 storm water, I would have to qualify for that. 14 Q. Well, I will give you that many governments that 15 provide storm water service pay for storm water service through 16 the general fund, my question is, if that's not the case, is ad 17 valorem tax fair and equitable, rather than using impervious 18 area? 19 A. For the particular services we are asking for, what 20 we're planning on paying for both regulatory and maintenance 21 storm sewer system, and considering all that in comparison with 22 the impervious area, to everything else within the impervious 23 area and what we anticipate may or may not, what impervious area 24 might mean both in collection mechanisms and in cost, I do 25 believe what we're proposing right now for these particular TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 23 1 services that is it fair and equitable. 2 Q. All right. And I believe it's fair to say the 3 districts response to request number 10, turn the page to your 4 response. 5 A. Okay. 6 Q. That's the basis upon which you say that ad valorem 7 tax is equitable because it costs a lot of money to compute 8 impervious? 9 A. When compared to impervious, that's one of the things 10 that I believe cost effectiveness is a part of that, yes. 11 MR. ARNOLD: Mr. Chairman, at the will of this 12 commission, I can have Mr. Hoelscher read this into the record 13 or you can read it at bedtime, leave it up to how you all want 14 to handle at this time. 15 MR. CHAIRMAN: Just this section from Q11, his 16 response or? 17 MR. ARNOLD: That's correct. 18 MR. CHAIRMAN: All right, let's have him read it into 19 the record. 20 Q. (By Mr. Arnold) Mr. Hoelscher, would you please? 21 A. So it would be the answer to question 10, correct? 22 Q. Yes, sir. 23 A. I should read the question first, I think before, or 24 just read the answer? 25 Q. Why don't you read the question, thank you? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 24 1 A. Brian L. Hoelscher states in direct testimony in his 2 opinion the Storm Water Tax Change imposes a fair and reasonable 3 burden on all classes of tax payers for three reasons, one of 4 which is the ad valorem tax method is the most cost-efficient 5 method to collect storm water revenues, and avoids annual costs 6 included in methods like voted impervious area fee, see MSD 7 Exhibit 3A. Please, A, describe the analysis that was performed 8 to reach this conclusion, my answer was A the cost associated 9 with acquiring impervious surface data set that is suitable for 10 billing purposes, requires one, aerial orthophotography of the 11 district and two planimetric delineation of the footprints of 12 impervious surface areas using aerial orthophotography. This 13 process will be repeated every other year. In addition, MSD 14 will incur costs to maintain this information responding to 15 customer request concerning it, the ongoing costs are identified 16 in MSD Exhibit 84 J. 17 B, provide copies of any memorandum, report, work 18 paper, summary analysis or schedule that supports this 19 conclusion. B, this response to discovery request was provided 20 by analysis. The budget and actual costs for administering the 21 impervious fee are part of the operating budget process. And 22 question C, describe the rationale for such conclusions, answer 23 the cost of calculating a storm water tax based on simple 24 property value calculation and adding it to the bill is minimal 25 compared to the cost of acquiring, processing and administering TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 25 1 an impervious area fee. Under the tax scenario, there are no 2 MSD costs associated generating the impervious area fee, nor are 3 there costs with resolving disputes based on disagreements with 4 area calculations or land ownership. 5 Q. Thank you, sir. A moment ago, we had a conversation 6 about the number of entities that would provide these kind of 7 services through tax, there are also a number of entities that 8 if in fact use the impervious area calculation; is that correct? 9 A. Yes, sir. 10 Q. And in response to discovery request number 8, you 11 provided, if you'd like to read it, a copy of the 2014 storm 12 water utility survey by Black and Veatch? 13 A. Yes. 14 Q. And the last line of your, the last sentence of your 15 response, I'll read it, if I may, according to the 2014 Black 16 and Veatch survey, 90 percent of the responders have a user fee 17 based on some form of parcel area such as gross and/or 18 impervious area? 19 A. Yes, sir. 20 Q. Now, to be fair, this is a survey, and not everyone 21 participated, is it fair to say that the better managed firms, 22 districts participate? 23 A. The only thing I know is what the firms who responded 24 or participated, I don't know all of that. 25 Q. And the district was one of them? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 26 1 A. I believe so, yes. 2 Q. As a matter of fact, you can correct me if I'm in 3 error, 90 percent of the respondents used only the impervious 4 area? 5 A. Some form of impervious area, yes. 6 Q. You add the other what do you call it, gross and/or 7 that was 7 percent, 90 percent just use impervious area; is that 8 correct? 9 A. Yes. 10 Q. Mr. Hoelscher, I'm going to ask, excuse me Susan, did 11 I give you, yeah, somebody needs to help me with exhibit number, 12 number to be declared later. Mr. Hoelscher, I represent to you 13 that this document Rate Commission exhibit whatever is an 14 extract of a charter plan and consists of article 3 the powers 15 of the district. Now, I'm going to ask that you read the 16 material which I've highlighted, and at the bottom near the 17 bottom of page 4, then all the way over to page 8, I'm going to 18 ask that you read the heading and only subparagraph 20? 19 A. Section 3.020 powers of the district. The district 20 established under the provisions of this plan shall have power, 21 number 20 to levy assess and collect taxes on all taxable 22 property within the district or subdistrict as the case may be, 23 providing that the rate of taxation and purposes of operation 24 and maintenance shall not exceed 10 cents on the 100 dollar 25 assessed valuation. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 27 1 Q. You already testified that the regulatory tax which 2 you've short handed as two cents, will be paying for regulatory 3 activities, and the 10 cents will be for operation and 4 maintenance? 5 A. Correct. 6 Q. And you or your colleagues have testified that you'll 7 seek voter approval for this ten cents? 8 A. Yes. 9 Q. Do you know assuming voter approval whether the 10 district will assess 10 cents rights away, or do 8 cents, wait a 11 year, do nine cents, do 10 cents is it going to be all or 12 incremental? 13 A. And again, exactly when that happens will be when the 14 vote happens and our time to file for tax when we do that we 15 plan on asking for a ten cent tax and at this point, assessing a 16 ten cent tax, how much is does it actually assess once we have 17 authority does require review and approval by our board of 18 trustees. 19 Q. Yes, sir, I understand that, and it's my understanding 20 that subject to approval of the district, you'll seek that 21 approval in 2016 to be implemented at the beginning of 2017, or 22 at the beginning of your fiscal year in 2016? 23 A. With the taxes that are collected at the end of 2016 24 or beginning of 2017, depending on when you pay your taxes. 25 Q. So you will collect in advance on the December 31, TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 28 1 2016 moving into the following? 2 A. We'll actually collect the arrears, the dollars we 3 collect either December 2016 or January, 2017 those tax monies 4 will be for the fiscal year starting July, 2016 through 5 June 2017, so we collect it right about in the middle of the 6 fiscal year. 7 Q. All right. But the rate proposal for which you are 8 seeking approval is for 2017? 9 A. Our fiscal 2017 which starts July, 2016. 10 Q. Got it, thank you, sir. All right, got the rate 11 change handy, how about schedule 5-1 on page 5-1, middle of the 12 page, existing and proposed storm water charges? 13 A. I have it, yes. 14 Q. Are you the one who would respond to some very general 15 questions? 16 A. Fairly general, yes. 17 Q. 30,000 feet? 18 A. That's a good elevation. 19 Q. You and me. The regulatory tax which you've mentioned 20 is the .0197 and that will carry over, there's a storm water O 21 and M tax referred to, OMCI specific subdistrict tax referred 22 to, two sets of fixed monthly charges, and then the district 23 storm water tax proposed, it's my understanding that only on 24 this schedule, the table rather, only the regulatory tax which 25 has already been approved, would continue and you would impose TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 29 1 the district wide storm water tax? 2 A. Yes, sir. 3 Q. Subject to voter approval? 4 A. Yes, sir. 5 Q. I call your attention again to the charter, where it 6 says this 10 cents, I'm sorry, you can only levy 10 cents for 7 operation? 8 A. Yes, sir. 9 Q. What if it costs more? 10 A. We would then either have to reduce services, or seek 11 a charter change, those would be our two options some time in 12 the future. 13 Q. What if the regulatory tax was insufficient? 14 A. We would have to ask for additional level of taxing 15 for the regulatory by a vote of the people. Well, now let me 16 say this, we would have to collect additional revenue somehow 17 for this proposal, we are looking for ad valorem property taxes, 18 future revenues to address issue, even if they are additional 19 cost to existing programs, I would put to you is probably wide 20 open in any kind of methodology, could be a voted on impervious 21 fee, could be any myriad of methods of collection, so my answer 22 was if we decide to use exactly the same method to collect 23 revenue, if we're going to do something else, we could assume or 24 consider many types of ways to collect. 25 Q. But any range of options would be subject to charter? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 30 1 A. And the specific section you read to me would be 2 subject to ad valorem taxes or operation and maintenance duties. 3 Q. Now, with permission of your counsel, I'm going to 4 shorthand some other provisions, section 14, which you've got 5 the preceding page? 6 A. Yes, sir. 7 Q. Section 14, tax anticipate notes, have you considered 8 any of those? 9 A. Not for storm water, future funding beyond this rate 10 proposal, or for the future funding meaning this rate. 11 Q. When you run out of dough? 12 A. When we run out of dough, those would be the options. 13 Q. Fifteen revenue bonds, if you're not doing at this 14 time? 15 A. Correct. 16 Q. And 21, special benefit assessments, any of those been 17 considered? 18 A. Not for this rate proposal, but they could all be 19 considered in the future. 20 Q. Has anyone suggested to you a method other than is 21 contained in the provisions to raise additional money, I guess 22 I'm asking, does the charter give you authority to do anything 23 else to raise additional funds? 24 A. I would say I may have to look through. 25 Q. Maybe Susan can answer the question, when it's your TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 31 1 turn. 2 A. You may have covered all the methodologies that are 3 available to us. 4 Q. All right. Wonder if we could, for a minute, talk 5 about major capital improvements, and again, this is on the 6 storm water side, the OMCI funds, provide funds for capital 7 improvement, and we are collecting those now, you will collect 8 those until the voters approve the ten percent of the thousand? 9 A. Yes, sir. Again, subject on the annual basis to our 10 board of approval, we have changed those, we would continue in 11 general. 12 Q. And if I read the schedules correctly, you're raising 13 about 70 million dollars from the 10 cents, with the 10 cents 14 per $100 to contribute to capital? 15 A. That's over a multi-year period. 16 Q. I understand. 17 A. Yes, over a multi-year period, yes. 18 Q. Let's define multi-year? 19 A. Okay. 20 Q. Seven years, 17, 18, 19, 20? 21 A. I think we're collecting for the new 10 cent tax, 22 about seven and a half billion dollars, from the 10 sent tax. 23 Q. Okay, all right. So, only the OMCI and the funds for 24 which you just described would be available? 25 A. Correct. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 32 1 Q. Unless you issued revenue bonds to deal with storm 2 water? 3 A. Correct. 4 Q. And it's my understanding you've determined not to do 5 that? 6 A. Yes. 7 Q. All right. I'll let that go, one moment. Sir, may I 8 put a question or two about wastewater, before we've been 9 dealing primarily with storm water, page 441, indicates what the 10 financing plan would be if the voters did not approve the bonds 11 which are included in the wastewater proposal; is that correct? 12 A. Correct. 13 Q. And can you shorthand for me what the impact would be 14 not to rate payers, but to the district, in terms of money lost 15 or money to be recovered? 16 A. To the district, both scenarios would be equivalent, 17 we would collect the same amount of revenues under either 18 scenario, so there would be no impact one way or the other to 19 the district operations. 20 Q. Now, is there an impact to the rate payers? 21 A. Yeah, in general, again, in general, the last year of 22 the current rate cycle fiscal '16, the average resident pays 23 about $40 per month for wastewater, with the bonding that's 24 going to be proposed in four years in 2020 that we go up to 25 about $60 per month, without bonding in 2020 that would go up to TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 33 1 about $96 per month. 2 Q. And the advantage of bonding is to spread the cost of 3 the new improvements over the life of the improvements which 4 might be twenty years rather than paying for it all in four 5 years? 6 A. Yes. 7 Q. And finally, has the district received any advice 8 whether or not section 20 that you read which says operation and 9 maintenance that, 10 cents, whether or not the 10 cents might be 10 raised to another figure if the funds were not used for 11 operation maintenance? 12 A. If we raised taxes solely for public operation of 13 maintenance in the public system, that's all we would spend it 14 for, our plan would be to raise the 10 sent tax to cover what 15 our operation and maintenance costs are with any additional 16 funding being eligible for capital improvement to the storm 17 water system. 18 Q. My question is, can you, has anyone advised the 19 district you can come back and raise an additional 5 cents if 20 you promise not to spend it on operation and maintenance? 21 A. No, I'm sorry, no one has advised us of that. 22 MR. ARNOLD: Thank you, sir, I have no further 23 questions. 24 MS. MYERS: Susan, I have an exhibit number for your 25 chart, the charter plan is exhibit Rate Commission 88, I will TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 34 1 write that on. 2 MR. CHAIRMAN: All right. Does any member of the 3 Commission have any further questions? 4 MS. BOWSER: I have some questions about what happens 5 if there is any money in various subdistricts, it is collected 6 with the present tax? 7 MR. HOELSCHER: Yes, we currently collect that now. 8 MS. BOWSER: What would happen to that money would it 9 go into, if there is, as I said would it go into a general pool 10 for the entire district? 11 MR. HOELSCHER: We have a separate fund for each 12 subdistrict and any balances that are left would be left with 13 that subdistrict for the purposes collected. 14 MS. BOWSER: Thank you. 15 MR. HOELSCHER: By ordinance. 16 MR. STEIN: John Stein, Mr. Hoelscher, just a point of 17 clarification, the proposed 10 cent storm water levy is that O 18 and M or is it OMCI? 19 MR. HOELSCHER: The way we plan on proposing it to the 20 voters is that is to address district wide storm water operation 21 and maintenance for public storm water system on an annual 22 basis, any monies not needed for that would be used for district 23 wide capital improvement to the storm water system. 24 MR. STEIN: Thank you. 25 MR. TOMAZI: Yeah, somewhere in your testimony I TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 35 1 thought you I -- I heard something about or elusion to the fact 2 that sometimes storm water does not actually get in your system 3 at all because it flows and goes to rivers like Mississippi and 4 Missouri, are you not in some fashion or another monitored by 5 the EPA or required to monitor for them in terms of the quality 6 of the water that is entering into those channels. 7 MR. HOELSCHER: Yeah, I had mentioned 0.197 property 8 tax, we use that as part of the areas storm water permit, which 9 is called an MS4 permit. MSD is tasked with reducing or 10 mitigating the impact of local creek and streams, that activity 11 right now is paid for through that approximately 2 cent property 12 tax, so we are taxed with doing that. 13 MR. TOMAZI: You are tasked with that? 14 MR. HOELSCHER: Yes, sir. 15 MR. CHAIRMAN: I have a question myself regarding the 16 impervious area versus the assessed value as a methodology for 17 collecting funds. Did you look at the nexus that has to be 18 reached between you know, the purpose of the improvement and 19 what drives that need? 20 MR. HOELSCHER: Yeah, some of the thoughts that we put 21 in again, if you consider the main driver being through a 22 property tax the maintenance of an infrastructure for storm 23 water, I would used today, everybody that drove here today, if 24 it's not raining, use -- benefitted from MSD's infrastructure, 25 we maintain the public storm water system on the roads, so with TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 36 1 the specific prime reason for raising the tax being maintenance 2 of the infrastructure that people use, whether there's a storm 3 sewer in there front yard or not, that drove us. There was 4 another one of the factors that drove us is that this is an 5 equitable way to pay for the infrastructure. I went through a 6 lot of the discussions about the equitability of impervious 7 rater for water issues, but I think in this particular case, and 8 especially based on partly the decision of Missouri Supreme 9 Court and what that means to what it might look like if we 10 decide to vote on impervious rate as far as who would have to 11 pay it or who would not have to pay it, there's even state 12 legislation that came out of the impervious area where certain 13 people wouldn't have to pay the rates in our mind, even if we 14 voted on impervious rate, like 3,600 customers, because of state 15 legislation during the impervious area that prevented them from 16 doing that. 17 So considering all those things and the fact that 18 we're looking at maintenance of municipal boundaries of public 19 infrastructure, while I'm sure there are exceptions, I'm sure 20 probably everybody uses and benefits from, this is the 21 appropriate way for this particular piece to address. I do 22 agree there's some extra dollar for district wide storm water 23 that is relatively insignificant to our operation and 24 maintenance cost. 25 MR. CHAIRMAN: Thank you. Any further questions from TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 37 1 the commission? Hearing none, do we have any other -- or Miss 2 Myers, do you have any further questions? 3 MS. MYERS: I do not. 4 MR. CHAIRMAN: Hearing none, we'll dismiss 5 Mr. Hoelscher. Thank you. Miss Myers, are you ready to present 6 another person for whom you filed district testimony? 7 MS. MYERS: Yes, I'll present myself. 8 MR. CHAIRMAN: Okay. Very good. That will work. 9 Is the testimony you're about to give the truth, the 10 whole truth, and nothing but the truth? 11 MS. MYERS: Yes, it is. 12 MR. CHAIRMAN: Thank you. Does any member of the Rate 13 Commission have any questions for Miss Myers? Mr. Burkhart, do 14 you have any questions? 15 MR. BURKHART: No. 16 MR. CHAIRMAN: Mr. Neuschafer, do you have any 17 questions? 18 MR. NEUSCHAFER: Yes. 19 MR. CHAIRMAN: Please, for the record you're 20 representing Missouri Industrial Electrical Consumers? 21 MR. NEUSCHAFER: That's correct. 22 SUSAN MYERS, having been duly sworn, testified as 23 follows: 24 QUESTIONS BY MR. NEUSCHAFER: 25 Q. (By Mr. Neuschafer ) Thank you. Miss Myers, I would TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 38 1 like to just talk about the consent decree a little bit and some 2 of the obligations under the EPA. 3 You mentioned that there's a 23 year implementation 4 period, when does that period begin and end? 5 A. That period began when the consent decree was entered, 6 I mean the entry of the consent decree in 2012 started the 7 clock. 8 Q. Was there work that you knew would be required under 9 the consent decree that started before the consent decree was 10 actually entered? 11 A. Yes, the consent decree was actually just solidified 12 the work that MSD had been doing for a very long time, so it 13 solidified our capital program, consent decree. 14 Q. Okay, so the 2 years begins with the consent decree, 15 not at the beginning of the work that's required to comply with 16 the consent decree? 17 A. Correct, we consider the entry of the consent decree 18 to be when the clock started for the 23 years, and the schedules 19 within the consent decree are built around that. 20 Q. That was my next question, the 23 years is based on 21 schedules, agreed upon schedules, that are in the consent 22 decree? 23 A. Correct. 24 Q. Now a calculation on how long you think it's going to 25 complete certain projects? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 39 1 A. Correct, the scheduling that came out of the consent 2 decree have been approved by the regulators, so in essence, the 3 consent decree required certain schedules, and then they were 4 approved. 5 Q. Okay. You mentioned $4.7 billion cost, is that in 6 2010 dollars or 2011? 7 A. 2011. 8 Q. Okay. And that is over the 23 year implementation 9 period, but includes projects that started prior to the consent 10 decree being finalized? 11 A. No, I believe the $4.7 billion dollars was an estimate 12 of the work being required by the consent decree, which would be 13 the schedule that came out of the consent decree. 14 Q. So the schedule only reflected work that remained to 15 be completed? 16 A. The schedules reflected work that in the regulators 17 eyes needed to be done for us to be -- to come into compliance, 18 yes. 19 Q. How did the district arrive at $4.7 billion cost, can 20 you give me some background on that? 21 A. That's probably a better question for either Brian 22 Hoelscher or Rich Unverferth. Brian was director of engineering 23 at the time we negotiated the consent decree. 24 Q. We'll ask Rich. 25 A. Rich is the current director, so he knows also. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 40 1 Q. And so be clear though, the consent decree requires 2 specific projects, it doesn't require a specific dollar amount 3 of spending; is that correct? 4 A. It requires a certain dollar amount of spending on 5 certain things, such as green infrastructure and things like 6 that, but the schedules that we're talking about, the sanitary 7 sewer, master, overflow master plan and the combined sewer 8 overflow long-term control plan, those schedules are not driven 9 by amount of dollars to be spent, but by projects, yes. 10 Q. So I understand that schedules are memorialized as 11 part of the consent decree, is there an opportunity to work with 12 EPA and MDNR if necessary to modify those time periods if 13 necessary? 14 A. Yes, the consent decree provides the avenues to do 15 that. 16 Q. Okay. That's all memorialized in the consent decree? 17 A. Yes. 18 Q. We can look at that for specific terms? 19 A. Correct, there's different types of modifications that 20 are allowed through the consent decree. 21 Q. The consent decree also includes penalties, maybe 22 perhaps stipulated penalties for failure to complete projects on 23 time? 24 A. Yes, there's a whole section on tip late penalties, 25 and I don't have the consent decree with me, but there are TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 41 1 different penalties for different types of noncompliance of the 2 consent decree. 3 Q. Would that include missing deadlines or -- that 4 includes missing deadlines? 5 A. Yes. 6 Q. Would that include repairs basically not operating to 7 design, you know, you complete the repairs, you did the work 8 that was anticipated, but for lack of the better terminology, 9 the repairs didn't work? 10 A. Yes. 11 Q. The -- you mentioned the CSO long-term control plan 12 and the SSO master plan, are those in the record, do you know? 13 A. I don't have the exhibit list with me. 14 Q. Nonetheless, we'll verify that. 15 A. They are public documents, and I believe they are 16 accessible on our MSD website. 17 MS. STUMP: Exhibits 47 and 48, 47A and B, sorry. 18 Q. (By Mr. Neuschafer) And those identify projects to be 19 completed, timelines to be completed? 20 A. Correct, the long-term control plan is the road map to 21 address our combined sewer overflow issues and the master plan 22 is the road map to address our sanitary sewer overflows. 23 Q. Right, I don't have these in front of me, so you may 24 not be able to answer the question, but these contain timelines 25 that are going to, and projects that are going to take the 23 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 42 1 years to complete, or is it front end loaded, or something that 2 would be done within 10 years, or additional 13 years as needed 3 for other purposes? 4 A. Rich Unverferth will give you a better understanding, 5 but our capital program that Rich will be talking about is based 6 on those plans, or those schedules. 7 MR. NEUSCHAFER: Okay. That's all I've got. 8 MR. CHAIRMAN: Thank you, Mr. Arnold do you have any 9 questions of Miss Myers on behalf of the Rate Commission? 10 MR. ARNOLD: Yes, sir. 11 QUESTIONS BY MR. ARNOLD: 12 Q. (By Mr. Arnold) I want the record to show that in 13 addition to being admitted to the bar, Miss Myers is an 14 engineer, geological engineer. Do you have your testimony 15 available? 16 A. Yes. 17 Q. Question 6, you state that it was your opinion that 18 the wastewater proposal was consistent with law and in response, 19 you discuss the Keller case, Beatty case and the Missouri Growth 20 case. As we both know, when the court considered the storm 21 water proposal, from last time around, it undertook to review 22 what it's predecessor have done with respect to these three 23 cases, do it you consider the Zweig case in response to this 24 question? 25 A. I did not in response to this question because this TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 43 1 question was about wastewater, and so, the history, the legal 2 history regarding the wastewater rate I felt was covered by the 3 basis that I have listed in my response. 4 Q. To be a little more specific then, in Zweig they took 5 the Keller criteria and not only examined them with respect to 6 wastewater, but commented generally on a utility, you consider 7 these ad hominems from the court? 8 A. We have not considered the Zweig decision in our 9 consideration of our wastewater rate. 10 Q. You've already dealt with my consent decree questions, 11 turning to storm water, I take it that you have not been asked 12 to provide the district with information on utility of either 13 tax anticipation notes or bonds or special assessments in order 14 to raise funds should the 10 cents be insufficient? 15 A. We have not, we have looked at what the, we feel the 16 charter allows us to do at this time, and that's what our 17 proposal is based on. 18 Q. Mr. Hoelscher told us that he would stop imposing the 19 O and R, OMCI and the flat rates upon voter approval of the 10 20 cents per hundred. Now, the storm water ad valorem levy was 21 adopted by the district in 1954, and that was pre-Hancock, so no 22 voter approval was required, I'm sorry, I'm taking this out of 23 the Zweig opinion. I've asked you for these ordinances, but 24 you've not had time to respond. 25 A. Use at your own risk then. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 44 1 Q. Yes, ma'am. The storm water surcharge levy visited in 2 1988 was by a vote of a people, those don't create for me any 3 difficulties, but the 23 separate subdistricts have levies 4 between 4 cents and 10 cents, and those likewise are going to 5 according to district, go away, with imposition of I'll call it 6 the flat ten percent, as has the district considered whether 7 those might be repealed simply by ordinance, or whether some 8 other mechanism might be required? 9 A. We have considered rolling the OMCI back to 0, by 10 ordinance. 11 Q. Okay. So you simply reduce the levy to 0, rather 12 than -- 13 A. Correct. 14 Q. Okay. 15 A. Correct. 16 Q. Same thing with the subdistrict? 17 A. That is the subdistricts that I'm talking about. 18 Q. Okay. All right, and then do you believe there's any 19 position to the proposition that after you spend the 10 cent 20 thrown in, you can ask for another 5 cents for some other 21 reason, and not be in violation of 3.02020? 22 A. The way you're reading the chart now is we have the 23 ability to ask for the 10 cents. 24 Q. Now, I want to follow up on Commissioner Bowser's 25 questions, if I may. As I understood whether it was your TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 45 1 response or Mr. Hoelscher response, the money raised in a 2 particular subdistrict may not be applied to activity outside of 3 that subdistrict; is that correct? 4 A. That's correct. 5 Q. And the district maintains separate accounts for each 6 of these subdistricts, so mechanically it's not too difficult to 7 make that work? 8 A. That's correct, and that is identified by ordinance. 9 Each subdistrict was set up by an individual ordinance, so you 10 know what area that subdistrict applies to. 11 Q. And just a moment ago, or perhaps it was Mr. Hoelscher 12 that was reference to, may I approach, to this amendment to the 13 statute, which affects the ability of the district to levy and 14 assessment or tax if the district does not provide sanitary 15 sewer services and if the storm water runoff does not flow or is 16 not otherwise conveyed to the sewer maintained by such district, 17 is the aim conjunctive or disjunctive, how do you read it? 18 A. We read this statute to say that if someone, if a 19 resident is not receiving MSD service for wastewater, then they 20 can not be assessed a fee, charge or a tax. 21 Q. I guess it was 2007, 2008, we spent a lot of time 22 worrying about levy districts, it will be either the regulatory 23 tax, the two cents or the overall 10 cents be levied on property 24 within levy districts? 25 A. That question is probably better answered by Rich TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 46 1 Unverferth, so I'll defer to him if you don't mind. 2 Q. Thank you. Will tax be levied on governmental 3 property, the storm water 10 cents? 4 A. It would not be levied on tax exempt property. 5 Q. That would include governmental property and 6 not-for-profit? 7 A. Yes, I believe so. 8 MR. ARNOLD: Thank you. I have no further questions. 9 MR. CHAIRMAN: Thank you, Mr. Arnold. Does any member 10 of the Commission have any further questions for Miss Myers? 11 Hearing none, thank you very much, I appreciate it. 12 All right, call another witness please, Miss Myers. 13 Are you ready to present those persons for whom you have filed 14 district testimony? 15 MS. MYERS: Yes, the district would like to call Rich 16 Unverferth. 17 MR. CHAIRMAN: Mr. Unverferth, is the testimony you're 18 about to give the truth, the whole truth, and nothing but the 19 truth? 20 MR. UNVERFERTH: Yes. 21 MR. CHAIRMAN: Thank you. Does any member of the Rate 22 Commission have questions for Mr. Unverferth? All right, 23 Mr. Burkhart do you have any questions on behalf of the Home 24 Builders Association? 25 MR. BURKHART: We do not. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 47 1 MR. CHAIRMAN: Mr. Neuschafer, do you have any 2 questions on behalf of Missouri Industrial Energy Consumers? 3 MR. NEUSCHAFER: We do. 4 MR. CHAIRMAN: Please come forward. 5 RICHARD UNVERFERTH, having been duly sworn, testified 6 as follows: 7 QUESTIONS BY MR. NEUSCHAFER: 8 Q. (By Mr. Neuschafer) Thank you again. Mr. Unverferth, 9 your testimony indicates that the current rate plan reflects one 10 and a half billion dollar capital plan for 2017 through 2020? 11 A. That's correct. 12 Q. And as we've discussed earlier with Miss Myers, the 13 consent decree requires MSD to spend approximately $4.7 billion 14 over the 23 year implementation period? 15 A. Yes, that is correct. 16 Q. In the last rate proceeding that's effective for the 17 fiscal years '13 through '16, that contained a capital program 18 of approximately $1 billion? 19 A. Yes, slightly under 971, I think. 20 Q. So using some rounding, between the two rate 21 proceedings, we're at about $2 and a half billion of the $4.7 22 billion? 23 A. That would be correct. 24 Q. I asked Miss Myers the question earlier, she 25 graciously deferred to you, about how $4.7 billion was TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 48 1 calculated, can you give us some background on how that number 2 was arrived at? 3 A. Generally, we were going through a planning effort at 4 the time of the negotiations and the schedules of the specific 5 work that has to be done to control sanitary sewer overflows and 6 the combined sewer overflows. The schedule to do those projects 7 really drove the length of the program, in other words, on the 8 sanitary sewer side, some of the projects took long-term 9 projects that would extend out over a long period of time, and 10 the combined sewer where the larger projects are, there was 11 going to be more upfront time in designing those, so really to 12 scheduled the project list for both the combined sewer and 13 sanitary drove the overall schedule, and then we had conceptual 14 cost estimates that are associated with them, that range over 15 the 23 years. 16 Q. Okay. And have those conceptual cost estimates been 17 included in your testimony as an exhibit to any testimony? 18 A. We've provided what I think we provided the four -- 19 the 8 year outlook of the capital. 20 Q. Covering the first 8 years? 21 A. Well, actually would be 12 year, we have the '13 22 through '16 we provided the next four years, $1.5 billion that 23 we've asked for, and I do believe we include the following four 24 years, I can't tell you what it is. 25 Q. Taking us -- TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 49 1 A. First four -- 2 Q. From '13 through '16, and next 8 years through '24? 3 A. Yes. 4 Q. So at the conclusion of the rate period, covered by 5 this proceeding, you've still got 15 years remaining, 6 approximately 15 years, and about half of the remaining capital 7 spent? 8 A. Correct. 9 Q. Excuse me, you've already answered some of these 10 questions, so I don't want to ask them multiple times, we talked 11 with -- I talked with Miss Myers just a bit about delays of 12 projects, there could obviously be stipulated penalties under 13 the consent decree, are there any other ramifications of delays? 14 A. The penalties are generally having to do with on the 15 sanitary side the removal of overflows, sanitary sewer overflows 16 based on what's set out in the consent decree. This happens to 17 be in 2020 through 85 percent of the sanitary sewer overflows 18 have to be removed on a combined sewer side, there's the 19 projects are laid out with specific dates for specific control 20 measures that have to be done over the 23 year period, and the 21 last 15 percent we mentioned 85 percent have to be out there in 22 remaining portion. 23 Q. Okay. So that the scheduled and the timing is based 24 on achievement of certain goals, like 85 percent reduction, not 25 project X has to be completed by 2017, project Y has to be TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 50 1 completed by 2018? 2 A. On the sanitary sewer side, we have a schedule where 3 you will of projects that we proposed in order to remove the 4 overflows, and we provide a schedule of when those projects are 5 planned to be completed by, and of course the result of the 6 project is having the overflow removed, there's a little bit 7 different guidance on how the overflows in other words, 85 8 percent by a certain time. 9 Q. And so those -- the goals are part of the consent 10 decree, are the schedules the specific projects to reach the 11 goals, do you know if those have become part of the consent 12 decree as well? 13 A. The SSO, sanitary sewer overflow master plan was 14 submitted the end of 2013 and it was approved in July of 2014 15 and then became an enforcement part of the consent. 16 Q. So that was SSO master plan? 17 A. Yes. 18 Q. Was there a similar process for the CSO long-term 19 plan? 20 A. Yes, that's actually in the consent decree now, 21 there's an appendix in the consent decree there that says 22 specific control measures that have to be completed, and by when 23 they have to be completed. 24 Q. Okay. The SSO programs, can you describe the programs 25 included in the budget that's part of the fiscal year '17 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 51 1 through '20 relative to those for fiscal years '13 through '16, 2 what types of projects? 3 A. They'll actually be very similar, in '13 through '16 4 there's probably more emphasis on actually designing the jobs, 5 and the next fiscal year will still be designing jobs, that will 6 probably be doing slightly more construction. There are several 7 different types, there's actually construction of release sewer 8 projects where actually building new sewers to replace the 9 sewers that lack capacity, there's what we call removal of 10 inflow and infiltration from the system. That's two components 11 of that, the district lining our sewers and doing a program to 12 eliminate flow or flows getting into our system, and then 13 there's a removal of illegal flows, inflow into the system from 14 downspouts from private connections in the sanitary. Those are 15 probably the three mayor components, although we do have as part 16 of the relief, there will be some storage, in other words, some 17 cases you don't have the ability to build a larger downstream 18 pipe, so we will divert that, store that and then go back into 19 the same system in order for us to treat. 20 Q. So can you give me an idea of the number of projects 21 maybe design you know versus construction phase, let's say for 22 you know, '16 verse '17, I don't know? 23 A. I don't know if it breaks that out, we just did our 24 budget presentation on '16 and there was about 100 projects in 25 fiscal year '16 on the sanitary sewer side, and I can't tell you TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 52 1 exactly what the breakdown in design versus construction is, but 2 I know at least for the next, first couple years of the next 3 rate cycle, we are very similar to that, in '17 and '18. 4 As you go beyond that, then the sanitary sewer 5 overflow those projects we still have those projects, but we'll 6 be starting some of the larger combined sewer projects. 7 Q. You mentioned that you just went through the budget 8 proposals for '16, so of these approximately 100 projects on the 9 SSO side, what is the cost associated with it, for fiscal year 10 '16? 11 A. I think the total capital improvement budget is about 12 $300 million, and I think probably $200 or three quarters of 13 that is the sanitary, or the wastewater capital improvement 14 budget, but we do have some combined sewer work, I'd rather not 15 guess, but the majority of it is sanitary sewer overflow 16 projects. 17 Q. Okay. I believe it's page four of your testimony, you 18 discuss how you arrived at the estimated cost for the wastewater 19 programs; is that correct? Looks like question 11. 20 A. Yes. 21 Q. You indicate that the cost estimates are based on 22 historical district bid prices using conceptual and preliminary 23 design information, that's correct? 24 A. Correct. 25 Q. And that you estimate facility work based on technical TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 53 1 expertise and consulting on similar projects? 2 A. Correct. 3 Q. Have you, so when you were preparing your estimates, 4 did you take into account for example changes in concrete 5 prices, relative to prices from historical bids? 6 A. Generally what we'll do, we monitor annually, we have 7 a full list of unit prices for the work the district performs, 8 and it's on a basis of how we pay for it, and what we do, every 9 year we analyze all the gamut of bid prices that we get for all 10 the bids on the previous year and we monitor any kind of 11 trending with that, all the way down to specific item, and we do 12 that over a period of time and we've generally run pretty 13 steady, and then during our annual review, if we see something 14 with that, we'll go ahead and make an adjustments to that unit 15 price, but the overall from a conceptual level we used what we 16 knew at the time. 17 Q. So I guess for using concrete as an example again, the 18 estimates, the budget estimates that you prepare are not 19 necessarily based on the market as it existed in February of 20 2015, but perhaps based on bids that you received or what you 21 were paying in, you would have used 2013 maybe? 22 A. Correct, and most of ours are based on installed 23 prices, not necessarily commodity itself. In other words, we 24 base on installed type so those costs aren't just material 25 costs, the material and the labor involved. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 54 1 Q. So the same, I guess the same approach in looking at 2 historical contracts and historical bids that would be the same 3 as far as any commodity like steel or gasoline or fuel prices? 4 A. Now, we will, if it's a project that involves that, we 5 look at that individually, by the basis of, like I said, under 6 engineering judgment, by basis of means when you get into 7 building construction things like that, that's not -- we utilize 8 our method for standard, most of the sewer construction when you 9 get into specialized construction such as building or true 10 construction, that's when you actually start looking at the 11 actual cost of some of the models. 12 Q. So would there be opportunities for estimated costs to 13 be reduced if prices such as commodities were analyzed more 14 closely based on current markets, as opposed to historical bids? 15 A. Yeah, we adjust what we put into our budget is based 16 on the latest estimate we have. We have conceptual which is we 17 have the project, this is what we intend to do, and then as we 18 define the problem, in other words, defined at a certain level, 19 we define the next level and we create a preliminary cost 20 estimate and then there's actually the engineering cost 21 estimate, that's going out to bid, and again, it's kind of the 22 morphing of it. 23 Q. In your estimates, have you taken into account other 24 economic factors, like the availability of contract workers or 25 contractors who can complete the projects that you need? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 55 1 A. Again, the bids that we're actually receiving back 2 actually kind of derive that. We do monitor it, and as of right 3 now, we're not seeing any escalation, I think if that's what 4 you're asking, I'm not sure. 5 Q. So I guess the concept would be there's a lot of work 6 that you're proposing to do in the coming years, and certainly, 7 to the extent that you're pulling bids from nationally based 8 contractors, this type of work is happening in a lot of areas 9 around the country, and wondering if there's been any analysis 10 of you know, the potential strain on contractors who are 11 qualified to do this work, or employees, their employees that 12 are qualified to do this work? 13 A. We have not done any additional analysis. 14 Q. Have you done any analysis on the district's ability 15 or needs associated with the increased capital expenditure? 16 A. When we put the program in place, the resources the 17 district supplemented resources both on the engineering and 18 construction management side, in order to do that, and 19 obviously, any new facilities that come in as part of it, are 20 part of the annual operation budget and are accommodated through 21 an annual budget process. But yes, that's taken into 22 consideration particularly on the operation side. 23 Q. Would you agree that the relative size of your program 24 planned for the four year period is you know, like a good 50 to 25 100 percent larger than what's been funded over the last years? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 56 1 A. Correct. 2 Q. So, I guess to some extent, asking the same question, 3 maybe a little more simple, do you need more personnel, do you 4 have the personnel to manage that? 5 A. We are confident that we have the staff supplement in 6 place in order to deliver that program, based on what we've 7 asked for. 8 Q. Has a full analysis been conducted? 9 A. Nothing other than us knowing what resources we have 10 in place to supplement our staff and resources in place from a 11 construction management side to manage that work. 12 Q. So to be clear, that is with respect to design and 13 construction management? 14 A. Correct. 15 Q. Okay. Do you have, are there adequate qualified 16 inspectors to make sure the programs are designed consistent 17 with design specifications and codes to ensure the plan 18 specifications are met? 19 A. Yes, we have the resources to properly inspect the 20 projects that will be under construction, and those are included 21 in the program. 22 Q. The current spent is I think around $250 million in 23 fiscal year '14 up to about $450 in fiscal calendar year '20? 24 A. Correct, it ramps up. 25 Q. There that's the spin, what's the number of projects? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 57 1 A. What you'll see, the peak of the number of projects 2 will be in the '16, '17 and '18, those are the sanitary sewer 3 overflow, you'll tend to see more projects as you get into '18, 4 '19 you'll see less projects, more large projects, that have 5 higher spend, those are the large tunnel projects that will be 6 underway the second half of this rate cycle, I don't know those 7 numbers off top of my head. 8 Q. Do you have a specific plan for identifying qualified 9 contractors? 10 A. We have an annual pre-qualification process with 11 regard to all of your contractors, with regard to their ability 12 to do deep sewer construction, five categories, with respect to 13 the deep sewer tunnel work, that would be -- we would ask for a 14 pre-qualification as part of the bid package, or the contractor 15 or the team of contractors that will do that work, that will be 16 part of the process. 17 Q. Okay. So that is, that's your pre-qualification 18 process for assuring that they can do the work, have the 19 capabilities to do the work? 20 A. Correct. 21 Q. I guess what sort of procedures or process do you have 22 in place to assure that you're getting a fair price for the 23 contract services? 24 A. I mean, that's where we have our consultants that have 25 provided us with the estimates of the work that are taking into TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 58 1 account, other work that's not just going on in our area, but 2 across the nation, what people are paying. Now obviously, 3 conditions are different in every place but they're taking into 4 consideration what's happening around the country with regard, 5 particularly with the tunneling operations. 6 Q. So for the projects that are being completed pursuant 7 to the consent decree as part of this rate proposal, what's the 8 expected life of the investments, the equipment that you're 9 installing, the tunnels? 10 A. If you're looking at rule of thumb, obviously some of 11 those are assets in the ground today are providing sewer that 12 has lasted over 100 years, so if you're looking at rule of 13 thumb, sewer assets or collection systems assets such as pipes 14 or tunnels, you would hope that you're getting somewhere around 15 100 year life. When you're talking about facilities, such as 16 pump stations or treatment facilities, you're looking at 17 somewhere between 25 to 30 year life, again, they're different 18 components that have longer lives, and that's rule of thumb. 19 MR. NEUSCHAFER: Okay. I think I've got what I need, 20 thank you. 21 MR. CHAIRMAN: Mr. Arnold, do you have any questions 22 of Mr. -- 23 MR. ARNOLD: Yes, sir, I do. 24 MR. CHAIRMAN: On behalf of the Rate Commission. 25 Q. (By Mr. Arnold) Mr. Unverferth, were you in the room TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 59 1 when I spoke with Mr. Hoelscher? 2 A. Yes. 3 Q. And you know who I am? 4 A. Yes. 5 Q. Okay. Couple of questions on wastewater to follow up 6 with Mr. Neuschafer. In your direct testimony, questions four 7 and five you identified that $1.5 billion, and in question five, 8 you indicate that this activity was required to comply with 9 consent decree, but then on page 2 line 19 of your testimony you 10 refer to some asset management projects, what's an asset 11 management project? 12 A. Asset management is actually managing assets to get 13 the longest useful life of the asset. 14 Q. You got to fix it? 15 A. You got to fix it, in other words, if an asset lasts 16 100 years, and it's getting to be 100 years old, again, that's a 17 rule of thumb, at some point that asset is going to reach a life 18 where you have to extend it. 19 Q. So this is to maintain or extend useful life and 20 that's why you included asset management agreements in the 21 schedule, because they're not required by the consent decree? 22 A. Not required by the consent decree, but if that asset 23 fails, then we would be in violation, yes. 24 Q. All right. With respect to the storm water regulatory 25 service and this is what Mr. Hoelscher described as 2 cent tax TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 60 1 that's the, as I understand it, the only source for this 2 regulatory service? 3 A. Correct. 4 Q. Okay. And in your testimony you used the term 5 co-permittee, and we asked you one, what is a co-permittee, and 6 two, how many of them are there, and in the discovery response, 7 you said essentially it's everybody within every municipality 8 within the district? 9 A. Of a certain size, it does not include, I don't know 10 the exact criteria off top of my head, we listed in discovery. 11 Q. Right. 12 A. Does not include all municipalities within the 13 boundaries, but does include the entire St. Louis County. 14 Q. Okay. 15 A. Within the district boundaries. 16 Q. The next question is, the levy, help me out a little 17 bit, in your direct testimony you refer to an agreement with the 18 levy district, then when we asked for agreements, the district 19 response was, there are no current agreements with levy 20 districts. So my question is, are there levy districts within 21 the district's boundaries? 22 A. Yes. 23 Q. Do you know who they are? 24 A. There are, I think there's seven separate levy 25 districts, I could provide the list, Chesterfield, Monarch, TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 61 1 Earth City and I think there's two components of the Earth City. 2 There is the -- yeah, we could provide that, but there's seven 3 is what I know because of the previous agreements that we have. 4 Q. Okay. Now, will the district perform any operational 5 maintenance within the levy district for storm water? 6 A. Under the proposal, it's our intent that the levy 7 district have the authority and ability to provide operation and 8 maintenance within their levy districts as they exist today. It 9 is our intent is that we would allow them to continue to operate 10 and maintain the sewer, public sewer, and their levy district 11 asset. 12 Q. So they're going to operate and maintain not only the 13 infrastructure which you build, but infrastructure which they 14 build? 15 A. Correct. 16 Q. And the district will have no obligation? 17 A. Correct. 18 Q. Will the district perform any regulatory services 19 within the levy district? 20 A. Yes, the district is still responsible again to 21 perform the regulatory or oversee the regulatory services for 22 entire boundary, which include the levy district. 23 Q. How you going to get paid for that? 24 A. It's our intention that 2 cent tax or 0.197 tax is 25 currently being assessed and being paid for the levy district. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 62 1 Q. So that tax will be paid by property owners within the 2 levy district? 3 A. Correct. 4 Q. And the district has determined that will be 5 sufficient to provide for the regulatory requirements? 6 A. Within the next rate cycle. 7 Q. Will the district have any obligation for capital 8 improvements in the levy district? 9 A. Under this scenario, we would not. 10 Q. Now, on the storm water CIRP in your testimony was 11 question 25, page 9, line 22, you observe that you are required 12 to plan, design and construct? 13 A. I'm sorry, 25, sorry, I was in the wrong spot. 14 Q. There's no rush. 15 A. Okay. 16 Q. You're required to plan, design and construct within 17 annual revenue? 18 A. Correct. 19 Q. Are you also required to plan, design and construct 20 within the four year term of this rate proposal? 21 A. There will be projects that are planned and designed 22 within this rate period that will be actually product 23 constructed beyond this rate period. 24 Q. Does the capital request include the construction cost 25 of those projects? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 63 1 A. No, it would only include the design. 2 Q. Now, you spoke with Mr. Neuschafer about relative 3 size, and capacity with which the district has to deal with this 4 in a consent decree, this is a much more accelerated program 5 than one in which the district has been involved in the past; is 6 that correct? 7 A. Yes, it is. 8 Q. What if the funds from a 10 cents per 100 assessed 9 valuation is not sufficient year by year by year to plan, design 10 and construct storm water CIRP, do you delay or do you take 11 other steps? 12 A. Could you repeat the question, I didn't catch the very 13 first part. 14 Q. All right. What if the 10 percent per $100 is going 15 to operation phase, some of it is going to your capital 16 improvement, but it's insufficient to permit you to plan, design 17 and construct within the four year period? 18 A. We would simply design to the available funds that 19 we've outlined in the rate, still not sure if it's insufficient, 20 in other words, we don't design, plan, design or construct 21 anymore than the money that's available, I'm not sure -- 22 Q. No, you're responsive to my question. 23 A. Okay. 24 MR. ARNOLD: Which is my last question. 25 MR. CHAIRMAN: All right, thank you Mr. Arnold. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 64 1 Questions from commission members? Mr. Schneider. 2 MR. SCHNEIDER: Mr. Unverferth, I'd like to call your 3 attention to your testimony on question 13, the question talks 4 about the budgeting process and that you were able to bring the 5 FY '13, '16 capital project under budget and under schedule; is 6 that correct? 7 MR. UNVERFERTH: Yes, that's correct. 8 MR. SCHNEIDER: How much were you under budget during 9 the FY '13 '16? 10 MR. UNVERFERTH: There was, the number of projects 11 that we had planned, I think the dollar amount that was 12 available for the rate commission was 971 for the capital 13 programs. We're projecting to be at about 6 percent less than 14 that, with the projects that we're doing, and we've still 15 completed the project that is we had planned during that time 16 period. 17 Now, granted there are projects that move back and 18 forth during that amount of the time that we were able to meet 19 all the requirements of the consent decree during that time with 20 the removal that we had planned. 21 MR. SCHNEIDER: Again, so that's 6 percent, $971 22 million dollars? 23 MR. UNVERFERTH: Yes, I don't have that sitting right 24 in front of me. That's a projected on the next fiscal years. 25 MR. SCHNEIDER: Then your answer went on to say if you TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 65 1 were able to use some of the excess money for construction 2 improvements of the district incinerator facilities and then 3 number of contingency projects approve by the board of trustees. 4 Can you tell me the contingency projects, were they part of the 5 consent decree going forward? 6 MR. UNVERFERTH: Incinerator project was not, that was 7 another regulatory issue that came up during this rate cycle. 8 Any other projects that we brought up were part of the consent 9 decree, generally it's projects that are planned where we have 10 everything in place to move that project up, and likewise, you 11 know, you have some projects that get delayed to some extent. 12 MR. SCHNEIDER: Thank you the Commission, I have no 13 further questions. 14 MR. CHAIRMAN: George. 15 MR. TOMAZI: Yeah, I have two questions Miss Myers 16 skillfully ducked earlier, so I'll direct them to you. First 17 question about is the consent decree basically front end loaded, 18 in other words if 23 years is 60 percent would be expended 19 and/or committed say within the first ten years or approximately 20 what percentage. 21 MR. UNVERFERTH: Of the $4.7 billion and again, 22 without seeing how we've got it aligned, the majority of the 23 sanitary sewer overflow program is intended to be performed in 24 this first 8 to 10 years of a program. In other words, that's 25 based on our schedule agreed to get 85 percent. At that point, TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 66 1 some of the larger combined sewer overflow program kicks in with 2 some of the larger CSO channels capture combined sewer overflow 3 and reduce runoff. 4 The largest in other words, where we see the largest 5 is in this next 8 years, I don't think there's a drastic drop 6 off, but it's a gradual drop off to the end of the program, end 7 of 23 years, so I don't know that I would consider front loaded, 8 we're at a peak right now. We're ramped up, we're at the peak 9 probably, so to say it's front loaded, you have a big peak at 8 10 years is kind of in the middle. 11 MR. TOMAZI: Of your foreseeable CIRP program, 12 approximately what percentage of that is driven by the consent 13 decree, 100 percent or 80 percent or? 14 MR. UNVERFERTH: If I was guessing, I'd say closer to 15 95 percent. 16 MR. TOMAZI: That's all I have. 17 MR. CHAIRMAN: I have a quick question for you, when 18 you complete a project, do you test the results of the impact of 19 the project upon it's completion, and if so, do you reprioritize 20 your other projects as a result? 21 MR. UNVERFERTH: Yes, we have the program particularly 22 with the sanitary sewer overflow program, with our emphasis on 23 getting the excess flow or the storm water flow out of the 24 sanitary system in order to get all the capacity we can just for 25 wastewater, there in some in particularly the private side, that TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 67 1 we monitor them the results of getting that storm water out of 2 the system, and the results of that monitoring then, does two 3 things, one it would allow us then to say we no longer need the 4 overflow to protect anything or any other facility, so it allows 5 to us remove the overflow, but it can also tell us that we have 6 additional capacity in the system that would could prevent us 7 from having to build some larger relief sewer at some later 8 date. So in other words, getting the flow out that's why we 9 designed the program in that manner. 10 MR. CHAIRMAN: Do you foresee a scenario of where you 11 review and it didn't have the impact that you thought and you 12 may have to add projects and actually add to the cost of the 13 overall program? 14 MR. UNVERFERTH: Those projects are in there. We 15 couldn't not develop a plan for the EPA without those projects 16 in there. In other words, we make an assumption based on having 17 to do a relief project, and then if we get better results with 18 the removal, then we take the overflow out and we don't have to 19 do the additional project, but we had to plan that into the 20 program. 21 MR. CHAIRMAN: So to ascertain from that, the CIRP is 22 kind of a worst case scenario of projects and that's kind of one 23 of the ways you can come in under budget? 24 MR. UNVERFERTH: On the sanitary sewer overflow side, 25 if we're successful with the approach, there could be savings in TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 68 1 there, I can't say for sure that there would be, but we have to 2 assume to a certain level of removal. 3 MR. CHAIRMAN: Thank you, any other questions? Mr. 4 Stein. 5 MR. STEIN: Mr. Unverferth, just a question looking 6 forward into the four year planning period, are there any 7 upcoming EPA regulations that could trigger some additional 8 capital expenditure above and beyond what you're doing as part 9 of the consent decree, improvements to treatment plans, 10 additional treatment et cetera that would cause you to -- 11 MR. UNVERFERTH: The only one that's outstanding right 12 now is that they're looking at the ammonia criteria in receiving 13 waters for the state of Missouri. The district in order to 14 preempt that, we're taking a look at all of our treatment 15 facilities right now in the next fiscal year, in fiscal '16 to 16 look at our plan of what that new ammonia criteria and they're 17 also looking at future criteria for phosphorus and nitrogen. 18 Those could impact, that could impact all of our treatment 19 plans. We're taking a look at that right now to determine what 20 that impact really looks like, in other words we really need to 21 know what that number could be. Conceptually, it could be, you 22 know, millions of dollars, hundreds of millions of dollars in 23 order to get our treatment plants to meet this new criteria. 24 That's the only thing that sits there now, but what we're 25 hearing is that it wouldn't necessarily happen in this next rate TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 69 1 cycle, the next rate cycle is when the criteria to be set forth, 2 and generally, you have one or two permit cycles which run on 3 five years in order to make those improvements. So more apt we 4 would know within the next four years what that looks like, and 5 how it would impact us going forward. 6 MR. STEIN: Thank you. 7 MR. CHAIRMAN: Any further questions from the 8 commission? Yes, sir. Mr. Arnold. 9 MR. ARNOLD: John Arnold, if I may with respect to 10 Commissioner's Stein question if I can refresh Mr. Unverferth's 11 memory, we put that question in the discovery request, and it's 12 number 18, and you just identified ammonia, but he also 13 identified three others that are potential. 14 MR. UNVERFERTH: Thank you very much, the district is, 15 as I mentioned earlier, we're performing some improvements on 16 our sanitary sewer incinerator that's impacting us in the 17 current rate cycle, I think to the tune of around $17 million 18 impact to the current rate cycle. There are new sludge 19 incinerator regulations that are out there, in other words 20 incinerators that we operate have been reclassified and next to 21 some other incinerators, which makes their discharge more 22 stringent, the regulations, but right now, we're able to stay 23 within those regulations by making improvements, and I kind of 24 use a description of a house. If you do so much work on an 25 incinerator or do so much work on your house, then you got to TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 70 1 bring that up to the new regulations, and right now we're not at 2 that thresh hold. If something should come about, then we would 3 have to invest entirely into new incinerators, that's another 4 one, I apologize, I couldn't quite remember all of them. 5 And there are there's one other one I mentioned, if 6 you read there, there's other criteria that EPA is looking at 7 with regard to viruses, particularly with the recent outbreak of 8 Ebola, what impact, whether there's any of that that comes 9 through the treatment plants, things like that, those are things 10 being studied, we think they're farther out, but we know the 11 ammonia and the new criteria is a little closer in to where 12 we're at right now. 13 THE COMMISSIONER: Any questions? Miss Myers, do you 14 have any further questions? 15 MS. MYERS: I do not, no. 16 MR. CHAIRMAN: All right. Thank you, sir. Without 17 objection, if we could break maybe about 6 minutes, just recess. 18 (Whereupon, a break was taken) 19 (Back on the record) 20 MR. CHAIRMAN: I think we're ready to go here, we're 21 going to reconvene. Miss Myers, are you ready to present those 22 persons for whom you filed district testimony? 23 MS. MYERS: Yes. Our next witness is Jon Sprague. 24 MR. CHAIRMAN: Thank you, Mr. Sprague. Is this 25 testimony you're about to give the truth, the whole truth and TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 71 1 nothing but the truth? 2 MR. SPRAGUE: Yes, it is. 3 MR. CHAIRMAN: Thank you. Does any member of the Rate 4 Commission have questions for Mr. Sprague at this point? Okay, 5 Mr. Burkhart, do you have any questions of Mr. Sprague on behalf 6 of the Homebuilder's Association? 7 MR. BURKHART: I do not. 8 MR. CHAIRMAN: Mr. Neuschafer, do you have any 9 questions on behalf of the Missouri Industrial Economic 10 Consumers? 11 MR. NEUSCHAFER: I do not. 12 MR. CHAIRMAN: Mr. Arnold, do you have questions on 13 behalf of the Rate Commission? 14 MR. ARNOLD: I should be very brief. 15 MR. CHAIRMAN: Very good. 16 JON SPRAUGE, having been duly sworn, testified as 17 follows: 18 QUESTIONS BY ARNOLD: 19 Q. (By Mr. Arnold) Hello again. 20 A. Hello. 21 Q. Good to see you. Question 12, in your direct 22 testimony, you refer to page 4 line 6, as you're discussing the 23 district as meeting service level expectations of the customers, 24 that there were some 2014 customer surveys? 25 A. Yes. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 72 1 Q. And page 6 line 20, you refer to a, I'm sorry? 2 A. I'm not sure that our numbers match up. 3 MS. MYERS: I think our pages might be lined a little 4 differently. If you can just reference the question, he can 5 find the like. 6 Q. (By Mr. Arnold) The question is you refer to customer 7 service surveys which indicated dissatisfaction with storm water 8 service in the red area? 9 A. Yes. 10 Q. Those two surveys, all of the surveys refer to in 11 those two, you're willing to share those with us? 12 A. Yes, I don't see why not. 13 Q. Then we shall make a discovery request for those 14 surveys. Thank you the Commission. 15 MR. CHAIRMAN: Thank you, Mr. Arnold. Does any member 16 of the Commission have any questions for this witness? Hearing 17 none, Miss Myers, do you have any further questions? 18 MS. MYERS: I do not. 19 MR. CHAIRMAN: Miss Myers, are you ready to present 20 the next person? 21 MS. MYERS: Yes, the districts next witness is Tim 22 Snoke. 23 MR. CHAIRMAN: Mr. Snoke, is the testimony you're about 24 to give the truth, the whole truth, and nothing but the truth? 25 MR. SNOKE: Yes, it is. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 73 1 MR. CHAIRMAN: Does any member of the Rate Commission 2 have a question at the time? Mr. Burkhart, do you have any 3 questions on behalf of the Home Builders Association? 4 MR. BURKHART: I do not. 5 MR. CHAIRMAN: Mr. Neuschafer, any questions on behalf 6 of the Missouri Industrial Energy Consumers? 7 MR. NEUSCHAFER: Nope. 8 MR. CHAIRMAN: Mr. Arnold, on behalf of the Rate 9 Commission, do you have any questions? 10 MR. ARNOLD: Yes, sir, I do. 11 MR. CHAIRMAN: Very good. 12 TIM SNOKE, having been duly sworn, testified as 13 follows: 14 QUESTIONS BY MR. ARNOLD: 15 Q. (By Mr. Arnold) Good afternoon, sir? 16 A. Good afternoon. 17 Q. Question 7? 18 A. Okay. 19 Q. Now I've got to tell you, I'm no good at math, but I 20 want to walk through these numbers in your testimony, if I may, 21 you're going the use $288 million additional debt under the 22 current $945 -- 23 A. Correct. 24 Q. -- authorization. Okay, and then up to $800 million 25 of additional debt under the $900 million authorization you're TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 74 1 seeking in this proposal? 2 A. Correct. 3 Q. And $360 million in cash or PAYGO? 4 A. Yes. 5 Q. My math, tells me that 19.8 percent would come from 6 the prior authorization, 55.2 percent from this authorization, 7 and 24.8 percent would be PAYGO, help me out, because everyone 8 keeps saying that this proposal is 70 percent debt and 30 9 percent cash? 10 A. So 70/30 total amount of debt that is, you know, what 11 I think is, no, it's not, it's not missing in here. So the 12 70/30 number comes I think from table 4.8, on page 416 of the 13 rate change proposal, this is the capital improvement and 14 placement program financing, so some of the numbers come out of 15 that table, but the 360 PAYGO approximately billion dollars of 16 debt, from the, this would be $918 million of new senior revenue 17 bonds, $100 million of the State Revolving Fund, also includes 18 the premium I think when we combine all those is how we came to 19 the 70/30, approximately, and I think that it was a little bit 20 different presentation in my question, but I think the numbers. 21 Q. The district's proposal is 70 percent debt, 30 22 percent -- 23 A. Approximately 70/30. 24 Q. Okay. And the 70 percent debt is going to consist of 25 what I'll call senior debt, that's the revenue bond issue, and TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 75 1 subordinate debt, which is from the State Revolving Fund? 2 A. Correct. 3 Q. Now, the district is requesting an additional 900, or 4 will request from the -- 5 A. Voters. 6 Q. Voters, an additional $900 million dollars in bond 7 authorizations. As you may have guessed from my questions to 8 your colleagues, that seems a little aggressive, because this 9 will be a spend rate well over what's been going on in the past. 10 Now, we all understand that if you don't issue the bonds, you 11 don't start paying for them, it doesn't cost the rate payers 12 anything, so that if you have something left over for which 13 you've not issued bonds, the rate payer is not penalized, but it 14 does appear that the rate of spending bond proceeds will be 15 dramatically increased? 16 A. Well, I think the amount of bonds that we're 17 requesting is based on the size of the program, so the increase 18 in the size of the program is what will drive, would be driving 19 the bond funding, I think those should go pretty well in line. 20 Q. Well, it seems to me there are two drivers, there is 21 one driver what you're requested, required to do under the 22 consent decree, and what you can actually perform, 23 Mr. Unverferth has talked about what you can actually perform, 24 and the other driver really is the market, I'm going to talk 25 about the market in a minute, if I may, but I'm handing you and TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 76 1 Miss Myers, you've already got your copy, if you want to look at 2 the folder in which I gave you. 3 MS. MYERS: Okay. 4 Q. (By Mr. Arnold) Let's take MSD Exhibit 48 which 5 purports to be a rating on the 213 B bond issue? 6 A. Okay. 7 Q. For which the district received a triple A rating. 8 Now, I want to call your attention to page 4 outlook, and I'd 9 like for you to read that first paragraph into the record for 10 me? 11 A. Sure. The stable outlook reflects Standard and Poor's 12 expectation that MAS will adjust rates as necessary to maintain 13 strong debt service coverage as it issues additional debt, as 14 well as to generate at least good net revenues to support its 15 large capital program. The strength of the district's service 16 area provides additional rating stability, as does the 17 district's ability to adjust rates as needed. While not 18 expected during the current two-year outlook period, we could 19 lower the rating if the district is not able to maintain at 20 least it's good financial position, particularly as it begins to 21 address its' capital needs with additional debt. Beyond the 22 outlook period, any trend of deteriorating finances could 23 pressure the rating. 24 Q. Did they reduce the rating? 25 A. They did not. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 77 1 Q. Exhibit 49, which is the again, this was the 2013 2 obligations, again a stable outlook. I'd like to call your 3 attention to the bottom of the first page, the top of the second 4 page which I've marked, I've wondered if you could read that 5 into the record? 6 A. Challenges, debt levels expected to double over the 7 next two decades due to capital improvements needed to address 8 CSOs, SSOs and other regulatory requirements and infrastructure 9 needs. Recent declines in debt service coverage. The 10 substantial rate increases instituted to finance the $1.01 11 billion in approved capital requirements could impair voter 12 support of future needed borrowing requests. 13 Q. Exhibit 50, which is the Fitch rating for the November 14 15, bond issue that was double A rating, stable outlook. On the 15 first page, we've got the paragraph escalating debt, would you 16 read that into the record please? 17 A. Absolutely. Leverage ratios currently are moderately 18 high with debt per customer at approximately $2,200, debt will 19 likely more than double over the next five years based on Fitch 20 estimates as a result of additional borrowing needs to address 21 regulatory requirements. Furthermore, debt amortization is 22 below average with principal payout at 29% and 67% in 10 to 20 23 years, respectively. 24 Q. If you would please, rating sensitivity at the bottom 25 of the page, if you could read into the record the first couple TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 78 1 of lines at the top of page two? 2 A. Sure. Reduced flexibility, increased debt, long-term 3 projections which forecast debt levels and/or financial margins 4 inconsistent with the AA+ rating median levels would likely 5 result in negative rating action. 6 Q. Your proposal in this rate change, question 15, you 7 indicate the senior debt coverage would be 2.8 times the 2.5 8 times from fiscal year '17 through fiscal year '20, and the 9 total debt 1.8 times to 1.9 times, that's table 410. 10 A. Right. 11 Q. Is it your opinion as secretary treasurer that those 12 ratings in the face of concerns which the debt rating agencies 13 have reflected will permit you to get a double A rating this 14 time? 15 A. There are no guarantees, but I believe that the 16 proposal as set forth does give us a legitimate chance of 17 maintaining our current ratings. 18 Q. But if those ratings fall below 2.4 times to 2.9 19 times, senior debt, 1.6 to 1.8? 20 A. If they fall below those ratings, it increases the 21 likelihood that is more expensive to fund the capital programs. 22 Q. When you say more expensive, what you really mean the 23 rating will change and what happens? 24 A. When the rating changes, the cost to acquire debt goes 25 up. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 79 1 Q. The interest rate? 2 A. The interest rate goes up. 3 Q. Now, having painted this gloomy picture, I want to put 4 to you the question whether or not bonds should be included in 5 the storm water rate change, in part to permit 70 and half 6 million dollars over the four year period to be used to cover 7 any increase in operation or maintenance of other expenses? 8 A. We did not consider bonds on the storm water program, 9 any borrowing that we wanted to do to fund the storm water 10 program would require obviously revenue to support the debt 11 service on the bonds. We did not evaluate at what level, what 12 would be required for that. I think in part because the storm 13 water program as proposed is not a large dollar amount that 14 we've had in the past, and the district has supported the 15 current program and it's current spending level, so if we were 16 to anticipate any increase or large increase in spending, we 17 didn't even consider bonds, in the proposal for storm water, 18 wasn't part of the analysis. 19 Q. You've got 70 and a half million from the 10 cents per 20 hundred, and you've got somewhere in the neighborhood of $15 to 21 $16 million from the MCI that is either on now or will be 22 available in 2015 and 2016, and your proposal is to spend those 23 funds on pay as you go, you did not consider what $85 million 24 over four years would pay for, plus another 15 years, in terms 25 of funding beyond that? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 80 1 A. We did not consider it as part of this proposal. 2 Q. I may have one more question, yes. Your testimony of 3 question 12 and the answer or the question is municipal debt 4 financing or major capital improvements a practical way of 5 obtaining funds, would you read your response into the record? 6 A. My response was yes, historically the use of bonds to 7 finance municipal capital improvements has been an equitable, 8 cost justified and widely-used method of funding available to 9 governments worldwide. Utilizing a combination of bonding and 10 PAYGO provides several benefits, versus a PAYGO only approach. 11 A combined approach allows projects to be built and put into 12 service more quickly and/or with less significant rate impact. 13 Users of the project receive the public benefit sooner and the 14 actual users of the project pay for it's use. In a PAYGO only 15 approach, current and prior constituents pay for the entire 16 project, but future constituents receive benefit. A combined 17 approach is also considered to be the prudent financial practice 18 by rating agencies and within the business and finance 19 communities. 20 MR. ARNOLD: Thank you, sir, I have no further 21 questions. 22 MR. CHAIRMAN: Thank you, Mr. Arnold. Members of the 23 Commission any questions, Mr. Tomazi. 24 MR. TOMAZI: I'm a little bit concerned about where 25 we're going to get pushed to on our maximum bonding level to TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 81 1 support all of this, so I think it's required in the consent 2 decree, in the executive summary and it's a number that's been 3 thrown about, in the executive summary we are given on the rate 4 proposal, page 3, item 6, you have 3.2, says the bond asked to 5 authorize $900 million of additional wastewater revenue bonds, 6 okay. 7 MR. SNOKE: Okay. 8 MR. TOMAZI: As part of the other information there 9 that was given to us, but was not necessarily a part of direct 10 testimony, is your adopted budget as of June 12, 2014? 11 MR. SNOKE: Okay. 12 MR. TOMAZI: In that adopted budget on page 37, it 13 says issued revenue bonds and estimated debt capacity, and they 14 estimated the total debt capacity of district revenue bonds 15 issued through fiscal '15 and it says estimated remaining debt 16 capacity is $462 million. I recognize that there's probably 17 some bonds that have probably been paid off in the interim, but 18 that seems like a big difference in those two numbers, could you 19 give us a brief explanation? 20 MR. SNOKE: Yeah, I was not with the district when 21 that number but calculated, so I have not even seen that 22 analysis. My guess is that number may have been calculated 23 based on the current revenue level there, so with increased 24 revenue, that capacity increases. 25 MR. TOMAZI: Well, actually what it's based on is TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 82 1 January 2010 census district population of 1.3 million and debt 2 capacity for MSDs co-financial advisers of $1,400 per person, 3 and that comes up 1.820. So if I recognize this all took place 4 before you were here, but I think perhaps we ought to get some 5 kind of an explanation, I would certainly like one, why there's 6 such a big difference between those, I would expect some things 7 that have been paid off, and others, but I would like to 8 understand that. 9 MR. SNOKE: There has definitely been some amount paid 10 off, I can't speak to that number since I didn't calculate it. 11 MR. TOMAZI: I understand it, that's all I have. 12 MR. CHAIRMAN: Mr. Stein? 13 MR. STEIN: Mr. Snoke, I want the talk about the storm 14 water capital financing again. Am I correct that up to this 15 point in time there has been a certain element of cost sharing 16 with municipalities and maybe other agencies for storm water 17 capital improvements. 18 MR. CHAIRMAN: I'm not sure what kind of cost sharing 19 there might have been, Brian or rich would probably be the best 20 one to answer that. 21 MR. STEIN: Okay. My question would be just what the 22 districts policy is with respect to cost sharing, currently, and 23 how that might change going forward, if the 10 cent tax levy 24 were to be enacted? 25 MR. SNOKE: I'm sorry, I don't have that. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 83 1 MR. STEIN: Thank you. 2 MR. CHAIRMAN: Any further questions? 3 MR. NEUSCHAFER: The Commission, sorry to interject. 4 If the Rate Commission is done, can I ask for a minute to ask 5 just a couple of questions that have come up, based on what has 6 been discussed to date, three or four questions. 7 MR. CHAIRMAN: Yeah, I think that's fine. We've asked 8 our questions, so come on up. 9 MR. NEUSCHAFER: Thank you. 10 Q. (By Mr. Neuschafer) Thank you for allowing a few 11 questions here. 12 What are the interest rates for your senior SRF bonds? 13 A. Projected or currently? 14 Q. Both. 15 A. They range because they depend on market conditions at 16 the time of issuance, actually, you know the coupon rate on the 17 senior bond currently ranges from average of low fours to high 18 fives. That's on the senior debt, on the subordinate debt, they 19 range from roughly one and a half to almost two percent, that's 20 just the coupon on those bonds. There are additional costs are 21 sometimes or premiums that would serve to lower the cost on the 22 projects, we're assuming five to five and a half percent coupon 23 rates on the senior bonds. If you look at the proposal, there 24 are premiums built in those true interest costs would be lower 25 than that. On the subordinated bonds, I believe it's two to two TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 84 1 and a half percent coupon rate is what we're projecting, those 2 are subsidized by the state. 3 Q. Did the district consider hedging any or all of it's 4 future interest rate exposure through forward rate agreements or 5 under contracts? 6 A. We have not, hedging in the municipal world is not a 7 widely accepted practice. 8 Q. What is the amortization period for the senior SRF? 9 A. A senior bond is 30 years, and the SRF bond is 20 10 years. 11 Q. Were you in the room earlier when I asked 12 Mr. Unverferth about the use of viable assets? 13 A. Yes. 14 Q. It's 100 years for pipes, maybe 25 to 30 years for 15 facilities. So to the extent that senior bonds are amortized 16 for 30 years or, if it happens less, would you agree that it 17 would be fair and equitable to use funding that's in line with 18 the life of the assets? 19 A. Potentially, there's additional costs, I believe our 20 policy currently limit us to 30 years as well, proposal was 21 prepared with our policies as well. 22 MR. NEUSCHAFER: Thank you. Miss Myers, do you have 23 any questions? 24 MS. MYERS: I do not have any questions. 25 MR. CHAIRMAN: Thank you, I appreciate your time. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 85 1 MS. MYERS: The district will call our next witness, 2 Bethany Pugh. 3 MR. CHAIRMAN: Miss Pugh, is the testimony you're 4 about to give the truth, the whole truth and nothing but the 5 truth? 6 MS. PUGH: Yes, it is. 7 MR. CHAIRMAN: Any questions from the Rate Commission 8 to start? Mr. Burkhart, do you have any questions on behalf of 9 the home builders association? 10 MR. BURKHART: I do not. 11 MR. CHAIRMAN: Mr. Neuschafer? 12 MR. NEUSCHAFER: Yes, on behalf of Missouri Industrial 13 Consumers. 14 BETHANY PUGH, having been duly sworn, testified as 15 follows: 16 QUESTIONS BY MR. NEUSCHAFER: 17 Q. (By Mr. Neuschafer) Thank you, Miss Pugh, beginning 18 on page 4 line 21 of your testimony, through page 5 line 2, you 19 discuss assumed interest rates and yield spreads to be added on 20 to current market rates commensurate with an AA rated utility 21 revenue for future SRF borrowing; is that right? 22 A. Correct. 23 Q. And you state that the additional spread range from 24 0.4 percent in fiscal year '16 to 1.25 percent to fiscal year 25 '20, correct? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 86 1 A. Correct. 2 Q. Can you describe how those yield spreads were 3 developed as well as what the yield spreads were assumed to be 4 for fiscal year '17 through '19? 5 A. And so the current year spread, those projections for 6 example, for debt issued this year was based upon our target 7 scale written based upon current market conditions and yields 8 for comparable rated and or comparable type of security, in this 9 case sewer revenue type credits or utility revenue type credits, 10 and then just in terms of the additional spread add on for 11 future years, that was an attempt to mitigate some of the 12 interest rate, whereas obviously the further you go out in terms 13 of your projections, the more likelihood that rate rises to 14 where you were today, so that's the rationale for the increased 15 cushion for the later projected bond issuances. 16 Q. Did you -- do you have the numbers which you assume 17 the yield spreads to be for '17 through '19? 18 A. Right, so for each of these scales, we literally have 19 a different interest rate yield for each maturity, so we're 20 talking for each series of bonds, 30 then we just add a cushion, 21 I believe it's straight line, 40 basis points for example, in 22 the early years across the scale. So the average true interest 23 cost probably be better indicator to what you're trying to get 24 out of what that looked like, and I think Tim talked about that. 25 Q. Were the same yields and yield spread used for future TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 87 1 senior revenue bond issuances? 2 A. I'm not sure I understand the question. 3 Q. So, the yields and yield spreads that we just went 4 through, were those same yields yield spreads used for future 5 senior issuances? 6 A. Well, yes, because we assume the same kind of double A 7 credit rating, so the yields themselves were the same, and then 8 we added cushions to mitigate interest rate risk, does that 9 answer your question? 10 Q. I think so. 11 A. Okay. 12 MR. NEUSCHAFER: That's all I have. Thank you. 13 MR. CHAIRMAN: Mr. Arnold, any questions for Miss 14 Pugh? 15 MR. ARNOLD: If I may, sir. 16 Q. (By Mr. Arnold) In your testimony just a few moments 17 ago you talked about yield spreads going forward, did you or the 18 district take into account any potential action by the federal 19 reserve board with respect to ratings? 20 A. Well, that's the rationale for the cushion, so for 21 example, as referenced in response to what the gentleman was 22 just asking me about earlier years we assume 40 basis points. 23 Q. Forty basis points. 24 A. Right, and increments increasing to 125 basis points. 25 Q. I spoke with Mr. Snoke about the 3 ratings which the TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 88 1 district received for the 2013 obligations, I think you 2 indicated that you started working with the district in 2012? 3 A. Myself personally, but PFM has worked for the district 4 for -- 5 Q. Since you were a little girl, I'm sorry. 6 A. That's one way to say it, yes. 7 Q. Were you involved in the 2013 -- 8 A. Yes, I was. 9 Q. And it's my understanding that Fitch downgraded the 10 district on account of the consent decree? 11 A. I think it was in 2011, if I'm not mistaken. 12 Q. All right. Now in addition to the ratings, of the 13 credit rating agencies provide guidelines for score cards as 14 someone would call them, and I'm going to hand you what purports 15 to be a Moodys Investor Service Rating methodology dated in 16 December of 2014, we at 89? Rate Commission 89? Yes. A lot of 17 paper, I would like to refer you to, I'll skip through this as 18 quickly as I can, there's a factor called system 19 characteristics, there's a factor called financial strength, 20 there's a factor called management, legal provisions, and we get 21 all the way back to appendix A I can't -- page 21, it's in the 22 left hand appendix A is municipal utility revenue bonds score 23 board, and they have a column for triple A, double A, A, triple 24 B, double B, B? 25 A. Correct. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 89 1 Q. It's my understanding that the district is seeking a 2 double A rating? 3 A. Maintenance of their current ratings, which two of the 4 three are double A. 5 Q. So if you would look at the double A column, going 6 through all these categories, we would expect that the 7 instruments which would create this obligation satisfy these 8 requirements? 9 A. Correct, but I do want to say that ratings are a mix 10 of quantitative and quality assessments, but these financial 11 plans and the revenue requirements were incorporated into the 12 proposal. 13 Q. But generally if you were within these guidelines, a 14 credit agency will give you a double A rating? 15 A. Generally, yes. 16 Q. Generally. 17 A. But they will take into account specific 18 consideration, so there's no guarantees, but generally, yes. 19 Q. Then I hand you what I will mark as Rate Commission 20 90, which is the Fitch Water and Sewer Medians, go through the 21 whole enterprise again, they become a bit more complicated, on 22 page 10, they identify the district as a double A with stable? 23 A. Correct. 24 Q. And then we get to the medians relative to rating 25 category, it's appendix F, which is page 15, same question, for TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 90 1 the double A rating, the district would need to be within the 2 guidelines denominated in that column? 3 A. As a general. 4 Q. Right. Now, I've explained my difficulty with math, 5 on question 11, you were talking about a minimum of 550 days 6 cash on hand, and we have references to 45 days and 65 days in 7 other testimony, that's all part of the 550? 8 A. Correct. 9 Q. Okay. I believe the first revenue obligation issued 10 by the time the Rate Commission arrived was in April of 2004, 11 that, in any event, is the date of the master ordinance, all 12 right, since that time, the district has issued 14 supplemental 13 ordinances, not all new issues, some of them are funds, some of 14 them are mixed, but we get to in the rate change proposal, page 15 418, 4.4 and this is a chart of upstanding and projected debt 16 principal from 2015, through 2020, the last year of the current 17 rate change proposal, and the material in blue identifies the 18 existing indebtedness, the material in red, and these are all 19 columns, proposed indebtedness, and then there's this black line 20 which is the purported amortization of future revenue bond 21 issues determined by your firm, based on current market 22 conditions and certain assumptions, what does the black line 23 mean? 24 A. Well, on this graft the black line is based upon an 25 assumed authorization to do requested levels, if I'm answering TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 91 1 your question correctly. 2 Q. I'm sorry, try it again, in addition to everything 3 else. 4 A. No worries. So, in the context of this graph, the 5 black line represents available bond authorizations, so in the 6 context of the requested increase in the authorization, assuming 7 that takes place in fiscal '17, this is the basis to which that 8 authorization will be utilized, given the current or proposed 9 debt issued in the schedule. 10 Q. Are you suggesting that this is a limitation on bond 11 authorization? 12 A. No, I think this is just attempting to reflect how 13 quickly the authorization if approved would be utilized. I'm 14 not sure I'm understanding your question. 15 Q. You answered my question. 16 A. Okay. 17 Q. So, and finally, the district did not ask your firm to 18 consider any debt amortization for the storm water funding? 19 A. Correct. 20 MR. ARNOLD: Thank you Miss Pugh. 21 MS. PUGH: Thank you. 22 MR. CHAIRMAN: Any questions from the Rate 23 Commissioners of this witness? Thank you, Miss Pugh. 24 MS. PUGH: Thank you. 25 MR. CHAIRMAN: Ms. Myers? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 92 1 MS. MYERS: No, I don't have any. 2 MR. CHAIRMAN: Very good, Ms. Myers? 3 MS. MYERS: The district would now like to call 4 Theresa Bellville. 5 MR. CHAIRMAN: Miss Bellville, is the testimony you're 6 about to give the truth, the whole truth and nothing but the 7 truth? 8 MS. Bellville: Yes, it is. 9 MR. CHAIRMAN: Any questions for the Rate Commission 10 at this time of Miss Bellville? Mr. Burkhart, do you have any 11 questions on behalf of the Home Builders Association? 12 MR. BURKHART: We do not. 13 MR. CHAIRMAN: Mr. Neuschafer, on behalf of Missouri 14 Industrial Energy Consumers? 15 MR. NEUSCHAFER: Yeah, just a few. 16 THERESA BELLVILLE, having been duly sworn, testified 17 as follows: 18 QUESTIONS BY MR. NEUSCHAFER: 19 Q. (By Mr. Neuschafer) Thank you, Miss Bellville for 20 your time. We understand from testimony today that during the 21 last rate case, MSD built in more projected capital expenditure 22 than it actually spent, is that your understanding? Was under 23 budget, in other words? 24 A. Yes. 25 Q. So, what is MSD's current cash position? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 93 1 A. I don't know that. 2 Q. Do you know about the projections for the end of 3 fiscal year '16 cash positions expected? 4 A. Our ending fund balance for FY '16 budget is 5 approximately $260 million. 6 Q. And can that be used to impact or I guess reduce the 7 impact of the rates that are being proposed? 8 A. Those balances were part of the rate proposal, and the 9 rate model. 10 Q. So looking forward, if the projections for the capital 11 projections expenditure are planned that we're discussing are 12 greater than the actual spend, in other words, if MSD comes in 13 under budget for the fiscal years '17 through '20, what happens 14 with that, with that amount MSD is under budget, what happens 15 with that? 16 A. It remains in a fund balance for future expenditures. 17 Q. We understand from the testimony earlier that some 18 portion of the savings, approximately 6 percent savings was used 19 for regulatory needs and the rest was used to accelerate 20 projects, am I correct there? 21 A. Yes. 22 Q. Are those the same types of projects to which future 23 savings would be applied, regulatory needs or accelerating 24 consent decree required projects? 25 A. If there's available cash then, Rich Unverferth the TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 94 1 director, based on his projected needs, would then get his needs 2 and move them projects up or back. They provide us a budget 3 based on the available revenue. 4 Q. Is there anything requiring MSD to use a savings to 5 accelerate consent decree protects or on other consent decree 6 projects, or could those savings be used for any other project 7 MSD wishes? 8 A. Certain funds are restricted depending on where the 9 fund balance is, if it's within the waste water capital, than it 10 has to be spent on capital projects, I think that's the answer 11 to your question. 12 MR. NEUSCHAFER: That's all I got, thank you. 13 MR. CHAIRMAN: Mr. Arnold? 14 Q. (By Mr. Arnold) Thank you, the Commission. We've 15 done this before, haven't we? 16 A. No. 17 Q. We haven't? Do you know why I'm here? 18 A. Yes. 19 Q. In your testimony question 10, you refer to inflation 20 allowances? 21 A. Yes. 22 Q. And the page next to we'll call it 7.1, there's a 23 sheet that looks like this, inflation? 24 A. Yes. 25 Q. And if I could shorthand that and stop me if I'm TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 95 1 misrepresenting anything, the district communicated with vice 2 president of federal reserve who in general suggested a two 3 percent inflation rate for goods and services, and referred to 4 the federal reserve bank, social security, and congressional 5 budget office sources, and the district chose to use the budget 6 and economic outlook 2014 to 2024 published by the CBA? 7 A. Correct. 8 Q. Is that correct? 9 A. Yes, that is correct. 10 Q. Did that information have a schedule related to the 11 St. Louis metropolitan area or did you simply -- I'm trying to 12 figure out what you used? 13 A. It had a schedule that was in the our -- not just 14 necessarily St. Louis, but in our area. 15 Q. Right, and sometimes defined differently, statistic 16 metropolitan area or urban zone, but is it fair to say that they 17 use that schedule as opposed to all urban consumers? 18 A. Correct. 19 MR. ARNOLD: 91? 20 MS. MYERS: Yes. 21 Q. (By Mr. Arnold) I've marked for identification 22 Exhibits 91A, B, C, D, E and F which are inflation reports from 23 the bureau of labor standards, which frankly are very close to 24 those which you described, so I'm not going to ask you any 25 questions on that. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 96 1 The next, however, I do have a question or two, the 2 assessed property valuation which would be the basis on which 3 the spill water levy was assessed, you have assumed in question 4 25 will increase by point 5 percent each year; is that correct? 5 A. Yes, that is correct. 6 Q. And you've done that for the years within the study 7 period, or for 2015, 2016, and the study period, I believe your 8 testimony is study period? 9 A. Study period. 10 Q. I'm introducing as Rate Commission Exhibit 92, a 11 business record affidavit of the St. Louis County collector of 12 revenue, and this one I do have a question or two about, ask you 13 to turn to the first page, and Miss Myers, I acknowledge that 14 this is one of 8 pages, and I'm only going to use the beginning, 15 if you want the rest of it, I will by happy to provide it, but 16 these three pages are the summaries of those other schedules. 17 Miss Bellville, could you please look at the grand 18 total column on the first page, and this is the assessment goal 19 for December 31, 2012, county general, which is the second 20 number, and that number is $22 billion, 573 thousand, 369, 879 21 dollars? 22 A. Yes. 23 Q. Now turn the page, tell me for county general whether 24 the number is the same, higher or lower? 25 A. It is lower. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 97 1 Q. All right. And that's the assessment role for 2 December 31, 2013, $21,906,804,629, all right. Now let's turn 3 the page and get to 2014, county general, the number is higher 4 than 2013, but lower than 2012; is that correct? 5 A. Yes, that is correct. 6 Q. So at least for these three years, year on year, going 7 from '12 to '13, '12 to '14, the assessments did not increase by 8 half a point? 9 A. That is correct. 10 Q. I'm going to offer you Rate Commission Exhibit 93, 11 which is the same record from the office of the assessor of the 12 City of St. Louis, and that summary is contained in one page, 13 the page following the, after the affidavit, and if you look at 14 total taxable real property, 2012 was $3,403,588,629 and 2013 is 15 lower $3,223,496,948, again in '14 made some progress but didn't 16 get back to 2012? 17 A. That's correct. 18 Q. So for the City of St. Louis, and County of St. Louis, 19 during this period, the inflation rate did not increase half a 20 point, from 2012, to 2013 or from 2013 to 2014? 21 A. That is correct. 22 Q. Now, not all of St. Louis County is in the district? 23 A. That is correct. 24 Q. So to the extent that there are some outlying areas 25 that could affect the county figure, I'm sorry, let me back up, TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 98 1 the assessed rate of property in the county, may not be affected 2 as correctly, for the district as it is in this report, because 3 the property is not within the district? 4 A. That is correct. 5 Q. Your testimony question 30, which I have a page 8, 6 lines 21 and 23, it's the impact on customers? 7 A. Yes. 8 Q. Okay. Miss Bellville, you have described in your 9 response beginning at the bottom or beginning of your answer, 10 through your answer, the increases from the rates over the years 11 residential and nonresidential, and you say those are annual 12 increases, does the rate increase annually have to be paid every 13 month? 14 A. This is in reference to storm water, so taxes are paid 15 annually. 16 Q. So that the only increase for residents in your first 17 example is $3.60 annually? 18 A. That is correct. 19 Q. And then I want to try to deal with a question that we 20 got just a few moments ago, the district has debt amortization 21 obligation year by year by year, does the district have a 22 schedule of that debt amortization requirement for years beyond 23 2014, I'm sorry, between now and 2014? 24 A. We have debt amortization for all our bonds. 25 Q. Year by year? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 99 1 A. Yes. 2 Q. And go through 2014, and beyond? 3 A. I believe so, I think I would defer that to Tim Snook. 4 Q. You know what I'm going to ask you all for the 5 schedule, and not drag Mr. Snook back up to the table. 6 Now, the annual increases for residential go from 7 $3.60, some are $3.60, some are $19.75, and some were $50.08, 8 and those are annual expenditure? 9 A. Correct, but for the $19.75 that's actually an annual 10 fee. 11 Q. Thank you. So, has the district considered the impact 12 of this tax on low income property owners? 13 A. Yes, we did. 14 Q. And to what result? 15 A. It's in the page ES10 in the executive summary in the 16 rate change proposal, ES11, each category has an impact on the 17 low income customer. 18 MR. ARNOLD: Thank you, the Commission, I have no 19 further questions. 20 MR. CHAIRMAN: Thank you, Mr. Arnold. Questions from 21 members of the Commission? Miss Myers, do you have any 22 questions? 23 MS. MYERS: I do not. 24 MR. CHAIRMAN: Miss Bellville, thank you very much. 25 MS. MYERS: The district calls our last witness, Bill TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 100 1 Stannard. 2 MR. CHAIRMAN: Mr. Stannard, is the testimony you're 3 about to give the truth, the whole truth and nothing but the 4 truth? 5 MR. STANNARD: It is. 6 MR. CHAIRMAN: Any questions from the Rate Commission? 7 Mr. Burkhart, do you have any questions on behalf of Home 8 Builders Association of Mr. Stannard? 9 MR. BURKHART: I do not. 10 MR. CHAIRMAN: Mr. Neuschafer? 11 MR. NEUSCHAFER: Yes. 12 WILLIAM STANNARD, having been duly sworn, testified as 13 follows: 14 QUESTIONS BY MR. NEUSCHAFER: 15 Q. (By Mr. Neuschafer) Thank you, Mr. Stannard. Page 6 16 of your testimony, you state that the proposed wastewater 17 revenue increase is about 10.75 percent annually from fiscal 18 years '18 and '20, in reviewing different rate options for MSD 19 did you explore other rate change scenarios? 20 A. No, we really focused on really two components, one is 21 the level of revenue that's needed on an annual basis relative 22 to the forecasted operation maintenance expense as well as the 23 capital financing plan for the CIRP that set forth the level of 24 annual revenues that we need to adjust and then the rate 25 schedule itself and the rate impacts we really focused on the TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 101 1 same similar cost service methodology that had been accrued by 2 this Rate Commission in prior cases, and maintained that same 3 and similar methodology with some adjustments for some of the 4 assumptions and relative to the components of the units of 5 service, for the unmetered customers as well as the low inflow 6 in the system. 7 Q. So you didn't consider things like revenue increase 8 less than 0.75 percent or lower capital expenditure program, 9 period, or different projections, different levels of PAYGO 10 revenues, anything like that? 11 A. It's the entire financial planning process for the 12 rate change proposal was a collaborative approach with the staff 13 of MSD and other consultants, including PFM regarding the 14 capital financing component, but how we would finance those 15 capital improvements, so once the CRP was established and 16 determined this is the expenditure that will be necessary for 17 the district to undertake, then we examine the operating and 18 maintenance expenses and information with regard to again, 19 assumptions based on inflationary impact, on future expenses 20 during this period, we roll those things together and did not 21 adjust then assuming the lower levels of expenditure or CIRP 22 pushing out projects or accelerated projects. 23 Q. Okay. On page 7 of your testimony, you state that 24 wastewater sales during the forecast period were based on 25 projections made by the Vertex group? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 102 1 A. That's correct. 2 Q. And that you use their analysis to project the number 3 of customers and contribute volume over the years '17 through 4 '20? 5 A. Yes, we relied on the work that they had done to 6 examine changes and impacts of the local economy and how that 7 would affect changes in the number of customers, not just what 8 has it been over the last five years, following that same trend 9 line, but reflecting their analysis in the annual adjustments. 10 Q. Okay. One kind of a procedural question, you 11 reference in question 20 appendices 8.1.2 and 8.1.3 of the rate 12 change proposal, I believe those appendices and the actual rate 13 change proposal are 7.1.2 and 7.1.3, I've got them here, if you 14 can verify this is 7.1.2 right there, verify that those are the 15 two analysis that you referencing? 16 A. Yes, that is correct, that's incorrect. 17 Q. I just want to make sure we're talking about the same 18 thing. 19 A. Yes. 20 Q. Are these complete copies of the analysis that you 21 considered or of the Vertex analysis? 22 A. Yes, this is the result of the analysis that they 23 provided for us, that we analyzed in our -- in the creation of 24 the model. 25 Q. So these are your summaries? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 103 1 A. No, this is theirs. 2 Q. This is the Vertex analysis? 3 A. Yes. 4 Q. Was there more to these analysis, 7.1.2 and 7.1.3 than 5 what's provided here? 6 A. I'm not sure I can answer that, I'd have to confirm, I 7 wouldn't -- it's possible that there are underlying pieces of 8 information they -- they utilized, that go behind and feed into 9 these summaries, that I've not seen. 10 Q. Like supporting data? 11 A. Supporting documents, but we have to confirm that. 12 Q. Okay. We will request that, we can go through the 13 formal channels to do that. 14 On page 8 of your testimony, lines 12 through 15, your 15 state your past experience with the district and your experience 16 with other urban utilities throughout the United States and 17 general trends in wastewater flows throughout the United States, 18 based on that, you believe that MSD's forecast, those forecasts 19 are reasonable; is that correct? 20 A. The forecast and revenues appear reasonable to me 21 based on the trends that I've seen and experienced with other 22 clients throughout the United States. 23 Q. Can you identify your experience with other urban 24 utilities throughout the United States that you rely on to 25 support these conclusions? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 104 1 A. Philadelphia, Baltimore, Northeast Ohio Regional Sewer 2 District, the Denver Water, then a number of utilities out in 3 west, San Diego and some other of the districts that provide in 4 the district in southern California water and sewer districts. 5 Q. And is this based on your past provision of consulting 6 services, or what exactly is your connection to these urban 7 areas and their analysis? 8 A. Those particular urban areas are current clients of my 9 firm. In addition to that, we also perform a national water and 10 waste water rate survey in collaboration with the American Water 11 Works Association, and that is published every two years, and 12 that has about 300 some-odd participants throughout the United 13 States in various sizes of utilities, both water and wastewater, 14 and examining the information from that showing the declining 15 per capita water consumption that we experience nationwide in 16 the over the last 15 to 20 years, the changes that were 17 reflected in this analysis were consistent with the same kinds 18 of trends that we're seeing in other places. 19 Q. Do you have the national survey that you just 20 referenced, did you include that in any part of your record or 21 your testimony? 22 A. No, I didn't, and actually, the 2014 survey was just 23 published last couple weeks, it is available now. 24 Q. Okay. Page 9 of your testimony you outline some 25 escalator for inflation rates, various cost category? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 105 1 A. Yes, sir. 2 Q. And I'll show you your appendix 7.1.1, which is key 3 proposal assumptions related to inflation, have you seen that 4 before? 5 A. I've seen this document. 6 Q. So is the support for each of the line item expense 7 categories that you mentioned, is that included in this 8 analysis, or did you rely on additional information? 9 A. I'd say this process in this rate change proposal is 10 more collaborative with the district staffer than prior rate 11 change proposal there that have been sought by the district, in 12 this case the district staff took on the responsibility for 13 examining and gathering information with regard to potential 14 assumptions for inflation, and provided us that, the results of 15 that analysis, which was included in this appendix, and this is 16 the numbers that were provided as input into the model. 17 Q. So are you aware then that if the district staff 18 considered those escalators when they prepared this appendix 19 7.1.1? 20 A. That's my understanding. 21 Q. You discuss the class cost of service study which was 22 relied on to produce the district produced changes and rates? 23 A. Yes. 24 Q. Can you explain the cost rationale for changes and 25 extra strength surcharges as proposed in the filing? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 106 1 A. The cost that the district incurs for treatment of all 2 waste in terms of normal domestic waste, as well as high string 3 surcharges, those treatment plan costs were allocated to various 4 components, volume, capacity and then strength components of 5 biochemical oxygen demand and suspended solvents or total 6 suspended solvents, and based on the criteria and the results of 7 the changes in their cost structure, based on recent data, or to 8 the functionalization of the cost and how their costs are 9 incurred at the wastewater treatment plant, that impacted the 10 allocation of cost and then the units of service was based on 11 the total balance of pollutants that they are treating at the 12 treatment plant. 13 One change that we made in this rate change proposal 14 going forward was that in the past, the test year was the base 15 year for the rates, in the cost of service study, and then the 16 projected annual changes and revenue needed for the entire 17 system was applied across the board to the various components of 18 the rates, so in our case, about ten percent adjustment for the 19 surcharge element we determine that principal components of the 20 cost for surcharge, high string surcharge was operation 21 maintenance expenses with some capital components, those capital 22 costs with treatment plan capital costs that we don't have 23 substantial investments we need treatment plans at this point, 24 so we you reduce those annual changes on surcharges probably 3 25 percent per year after the test year. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 107 1 Q. So we talked a lot about treatment costs? 2 A. Yes. 3 Q. And so to be clear, the surcharge relates to changes 4 in treatment cost, not the collection cost? 5 A. That is correct, the surcharges are the costs incurred 6 by the district for removing the pollutants that are in the 7 wastewater discharge by domestic strength customers as well as 8 not residential and nonresidential customers, and high string 9 surcharge is applied to more significant dischargers industrial 10 dischargers, where it's prudent to sample and analyze the 11 strength of the waste that they're discharging. 12 Q. Okay. You also projected MSD storm water cost of 13 service, proposed rate changes; is that right? 14 A. That's correct. 15 Q. Are there any common costs between MSD wastewater and 16 storm water cost of service? 17 A. There are, when we talk about the cost of the district 18 operation, part of the process is to split those costs between 19 wastewater and storm water. Some administrative, engineering 20 general functions that are potentially provide service to both 21 wastewater and storm water, and there's within the operation 22 maintenance activities, there are -- an allocation has to be 23 made to distribute those costs between wastewater and storm 24 water. 25 Q. And so how are those costs distributed, how are they TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 108 1 allocated? 2 A. Again, that's customers rely on district staff and are 3 provided detailed information with regard to the 4 functionalization of those costs and the split between 5 wastewater activities and storm water, but then on the 6 administrative and general portion, that is more of a higher 7 level adjustment, based on relative costs, then allocated 8 between the two, and overhead costs, in a sense. 9 Q. Okay. You're proposing to produce property tax rates 10 to boost revenues that pass through MSD through taxing 11 authorities? 12 A. The district would be -- it's a district tax, so, I 13 think I'm not exactly sure how that's reflected and recovered by 14 the taxing authority, but it is tax that would be the tax 15 proposed by the district of the placed on those tax bills, and 16 that they would, the taxing authority recover that money and be 17 transferred to the district. 18 Q. So are there customers that receive storm water 19 service but don't pay municipal property taxes? 20 A. There are. 21 Q. And so how does MSD attempt to cure the revenue 22 shortfall from those customers that receive services but don't 23 pay taxes? 24 A. When you think about the tax exempt property, 25 governmental entities, governmental properties, as well as tax TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 109 1 exempt properties, churches, school, universities, they do not 2 pay tax, they do not -- they would not pay for those storm water 3 services, so under the taxing process, the standpoint of there's 4 not -- reflected in the determination of how much money we will 5 have available to provide operation and maintenance, regulatory 6 support, for the storm water activities, and that reflects the 7 taxing value of the property that would be taxed. So that -- 8 not that we start off saying here's how much money we need, 9 here's how big the pie has to be, but here's a certain percent 10 that wouldn't pay at all, start off with how much can we collect 11 from this tax and is that adequate to fund these activities 12 during the rate period. 13 MR. NEUSCHAFER: Okay. That's everything for me, 14 thank you. 15 MR. CHAIRMAN: Mr. Arnold? 16 Q. (By Mr. Arnold) How are you this afternoon? 17 A. I'm well, thank you. 18 Q. The last three times we've done this, you've been at 19 my side, and now you're at Ms. Myers side. Why'd you go to the 20 dark side? Withdrawn. 21 MS. MYERS: That's on the record. 22 A. Remember we're all on the same side. 23 Q. (By Mr. Arnold) I understand, we're taking two sides 24 of the same side. 25 A. That's correct. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 110 1 Q. Mr. Stannard, question 17, do you believe the rate 2 change proposal meets these criteria, and you responded, yes, 3 well, the criteria start with question 11 on page 4, and that's 4 the first of the criteria consistent with constitutional 5 statutory common law, you say in the past legal counsel has 6 advised you not receive any specific legal advice with respect 7 to this proposal? 8 A. Only discussions with Miss Myers as part of the rate 9 change proposal and presentations at the meetings, and then in 10 my prior role by your side, we had also discussed the criteria 11 that were established in the charter, which included this 12 criteria as well, I guess includes you as legal counsel. 13 Q. Question 12, the ability to provide adequate sewer and 14 drainage systems and facilities, and your response, you do this 15 by examining the districts submittal as well as the testimony 16 filed in support of the rate change proposal, the rate 17 commissions rate consultant testimony, and advice as well as the 18 testimony provided by the interveners, most of that hasn't 19 happened yet? 20 A. And that is correct, as far as the process, we'll 21 start with the direct testimony and the rate change proposal 22 that we have submitted, the district has submitted, our review 23 of the CRP and operating budget, and the operations of the 24 district, but then the next steps we'll have some other 25 perspectives provided by the rate consultant and Rate Commission TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 111 1 as well as interveners consultants. 2 Q. So if I ask you about questions 13, 14 and 15 I'd get 3 the same response, some of that hasn't happened yet? 4 A. I expect it to. 5 Q. Question 25, is the projection of expenses over the 6 period of rate change proposal, and we also had trouble finding 7 8.1.1, we -- we did find 7.1.1, I wanted to deal specifically 8 with two items one the general inflation rate and pension rate, 9 I believe you testified you received the information on which 10 you based this response from the district? 11 A. That is correct. 12 Q. So do you know whether -- what the rationale is for no 13 inflationary increase in the pension fund? 14 A. My recollection of our discussion about this is based 15 on their assessment of where their pension fund is, and what 16 contributions would be required in 2016, that if I'm not 17 expecting additional contributions to be necessary in the future 18 years, but. 19 Q. So they were anticipating that a combination of 20 current contributions and market activity would cover their 21 future expenses? 22 A. I did not get into that detail with them, they would 23 be able to answer that question. 24 Q. All right. Now, I thought I understood Mr. Hoelscher, 25 I got back to my desk and I don't, I want to talk about tax TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 112 1 recovery. If the district submits a proposal to the voters in 2 2016, which is I understand the proposal, that can be voted on 3 and Ms. Myers, stop my if I'm incorrect, that can be voted on in 4 February, April, June, August, or November, those are the only 5 election days in Missouri, they can't do April, and they can't 6 do February, I don't know whether they can do June but they can 7 clearly do August or November. Now, it's my understanding that 8 the district proposes that the tax revenues be collected by the 9 respective assessors and collectors in the city and County of 10 St. Louis, is that your understanding? 11 A. That's my understanding. 12 Q. Those tax rates are set as of January 1, so that in 13 2016, the district will not have voted on, I'm sorry, the voters 14 will not have considered the proposed tax increase by the time 15 the assessor sets the books, or by the March or 16 April reassessment process, so that the levy could not be 17 collected until January 1 of 2017, I'm sorry would not be due 18 until January 1, 2017? 19 A. Which is at midpoint of the fiscal year ending 20 June 30, 2017. 21 Q. Okay. 22 A. So that would be the first payments would be, those 23 payments would be due at that point, during fiscal '17. 24 Q. Okay. So that the proposal which we have on fiscal 25 '17, assumes the collection of -- can't assume the collection of TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 113 1 January 1, because they're not due until December 31, how have I 2 fallen off the track here? 3 A. May need to draw a flowchart, I'm not sure, we need to 4 look at that some more. 5 Q. I will pursue that a little further. 6 A. You're correct, payment due in December of 2017 would 7 be reflected in 2018, fiscal 2018, operations of the district. 8 Q. I think that's where we are, all right. And then 9 we're talking about tax recovery of the reserve for storm water 10 was 240 days, you said? 11 A. Yes. 12 Q. And that's because you don't expect people to pay 13 their taxes on time? 14 A. Well, and the timing they pay you know, twice per year 15 and the -- we start, it's not July 1, so we need to have some 16 reserve, so that we can get the end of the year, have some money 17 until the next tax payments are received. 18 Q. So the 240 is determined only by the collection of the 19 tax revenues? 20 A. Correct. 21 Q. And that's storm water, on wastewater, Miss Pugh 22 indicated that it was her judgment or her understanding that the 23 550 day minimum reserve level included both the 60 days, 45 24 days, to which reference was made by other witnesses? 25 A. Yes, and includes the working capital reserves. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 114 1 Q. I'm sorry, that's right, both working capital. Thank 2 you. 3 A. And then there's also a capital reserved, capital 4 expenditure too, to get us from year one. 5 Q. So the 60 days actual operating, and 45 is going from 6 the bond? 7 A. Yes. 8 Q. And they are overlapping, all right. Question 30, 9 wastewater financial plan, about halfway through, you've got it 10 on page 11 at line 14, based on this? 11 A. Yes. 12 Q. And the desire to provide a smooth method program or 13 rate increases over the Range Change Proposal period, it was 14 determined that an annual average revenue increase of 15 approximately 10 percent would be necessary to meet the 16 forecasted revenue requirements, we're talking about waste 17 water? 18 A. Yes. 19 Q. Okay. I ask you to take a look at Exhibit MSD 50 20 which is the Fitch rating, and I've highlighted, reduced 21 affordability, second to last page, and I wonder if you'd read 22 that into the record, that paragraph? 23 A. Reduced affordability, to support the additional 24 planned debt, the board approved annual rate increases averaging 25 9.8 percent for fiscals 2013 through 2016. The current average TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 115 1 monthly wastewater bill of $31 after implementation of the 2 fiscal 2013 adjustment is considered affordable at 0.7 percent 3 of median household income, but the planned rate hikes will 4 reduce overall affordability. 5 Q. What will 10 percent do to MHI, median household 6 income? 7 A. Probably won't impact the median household income, 8 because that's depending upon income. 9 Q. I'm sorry, the rate upon? 10 A. Yes, median household income stays flat, then 11 the wastewater bill, monthly wastewater bill as percentage of 12 median household income will become a higher percentage. 13 Q. Right, do districts discuss it at all with you the use 14 of revenue bond funding for storm water capital? 15 A. We were looking at the storm water funding, we 16 discussed generally what was needed with regard to capital 17 improvements and at this point, during this rate period, that 18 didn't appear that that was an option that we wanted to examine, 19 so it was put to the side, so it was a very brief discussion. 20 Q. Did the district discuss with you at any time in 21 preparation for the rate change proposal, steps that might be 22 taken in the event that 10 cents per hundred and the two cents 23 were insufficient to meet the revenue requirements? 24 A. No. 25 MR. ARNOLD: May I have just a moment? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 116 1 MR. CHAIRMAN: Uh-huh. 2 MR. ARNOLD: Thank you the Commission, thank you 3 Mr. Stannard. 4 MR. STANNARD: You're welcome. 5 MR. CHAIRMAN: Members of the Commission, any 6 questions for Mr. Stannard. 7 MR. SCHNEIDER: I have one, Mr. Stannard, I'd like to 8 go back to question number 29, you mentioned the question 9 regarding the amount of reserve target, the whole 60 days for 10 the annual operating expenses, you said the bond covenant 11 required the district to maintain a minimum balance of 45 days 12 expense. In your experience working with other districts, is it 13 typical to maintain a balance over an existing bond covenant to 14 this degree? 15 MR. STANNARD: Yes, it is, and actually, many 16 utilities are trying to achieve a higher level of reserve funds 17 to mitigate their risk that they have, a little bit on 18 wastewater, a big chunk of our revenue in most wastewater 19 systems is dependent upon the volume of water consumed by 20 customers, so that can vary by a little bit. For the district, 21 we don't need quite as much because we have all the residential 22 customers within the system are flat, you pay a flat rate, that 23 doesn't vary in ranges in water consumption, so that helps 24 mitigate that risk. But the 60 days is not an unusually high 25 level of reserves, in fact, in any clients that do 90 or more TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 117 1 days of -- of rating reserve, because of some of that 2 variability in the revenue stream. 3 MR. SCHNEIDER: Thank you. 4 MR. CHAIRMAN: Mr. Brockman. 5 MR. BROCKMAN: Yes, Mr. Stannard, can you provide me 6 again with what are the different impervious property taxes, 7 general revenue and what other methods are there? 8 MR. STANNARD: Yeah, when you think about ways storm 9 water years ago, before it became much more of a regulatory, an 10 environmental regulatory drive by the Environmental Protection 11 Agency, Clean Water Acts, most storm water system were part of 12 street departments of cities, and counties, so just because 13 they -- as there were street improvements made, they would take 14 care of storm drainage issues. 15 So in those instances, there's still a large 16 percentage of communities around the county that still by the 17 majority still use the general fund of the community to fund 18 storm water activities. The trend has been though with the need 19 to put more emphasis on both quantity of storm water runoff and 20 the quality of that run off, the impact on the environment to 21 move it to more of a utility type operation. So, how do we 22 recover those costs, and in the Black and Veatch survey which 23 provides a lot of information with regards to property based 24 rate structures. When I say impervious area is one of those 25 property based structures, looking at each parcel of property in TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 118 1 it's system, and then examining how we should recover, how do we 2 recognize responsibility or benefit received, because of the 3 storm water system, so in some cases, they will use impervious 4 area, some cases they will take impervious area and put it on an 5 equivalent residential unit basis, so medial residential single 6 familiar residential would be a factor of one and then all 7 nonresidential parcels would be some multiple of one based on 8 their total area. 9 Another factor that sometimes is used is intensity of 10 development, which is the more than individual partial 11 information, something looking at the zoning of an area, so it's 12 an area that's zoned commercial, then that would have an 13 intention development factor, different than residential, or if 14 it was industrial, have a third intention for that component. 15 That basis is losing favor as we have better data available now 16 for things like determining impervious area. 17 There are still systems that use property taxes, New 18 Orleans sewage and water board funds their drainage operations 19 through an ad valorem tax, somewhat similar to MSD. They have 20 the state authority to assess taxes, and just approved a tax 21 rate increase, but you didn't have to take it to the voters, 22 board of trustees for New Orleans Sewage and Water Board could 23 determine that. 24 MR. BROCKMAN: So this is trend now days to go toward 25 impervious or property taxes? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 119 1 MR. STANNARD: The trend across the country is to move 2 towards using impervious area or partial based data. 3 MR. BROCKMAN: When people use impervious, do they 4 have independent agencies that determine the imperviousness for 5 the calculations for the charges, so for example, correct me if 6 I'm wrong, MSD was doing in the past rate proposal, MSD was 7 doing those calculations in-house and making those 8 determinations, but in other municipalities, do they have an 9 independent agency that's making that determination as far as 10 impervious or not? 11 MR. STANNARD: Those that do have, use impervious 12 area, generally do it within their own forces, and in-house, 13 where they have using GIS geographic information system data, 14 and proven in the data in the ability to use the data, has 15 helped utilities be able to train and employ their own forces if 16 not using outside parties to do that, but then they'll also have 17 a process. So if someone questions that calculation, there's a 18 process to confirm that determination or impervious area. 19 MR. BROCKMAN: Why not when you met with MSD staff 20 make recommendations, just go back to the way we've done it 21 before and just go to the voters for impervious? 22 MR. STANNARD: That was really a policy decision by 23 MSD, we did discuss what the options were, and there's even some 24 lack of clarity of whether if we went back to the voters, and 25 took an impervious area charge to the voter, and they approved TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 120 1 it, if we'd even be able to apply that to taxes exempt 2 properties. So, the decision was made at that point, really not 3 off the table forever more, but that we just make this first 4 transition from the existing, varying subdistrict OMCI taxes to 5 a more overall general district tax along with the 2 cent tax or 6 0.197. 7 MR. BROCKMAN: So in the municipalities where they do 8 have the property tax, how they address the issue of exempt 9 parties such as governments or not-for-profits or things like 10 that? 11 MR. STANNARD: If they don't pay taxes, then they 12 don't pay things for -- they don't generate money for this 13 activity. 14 MR. BROCKMAN: One more question, did I understand 15 correct earlier that you were saying that levy districts will 16 still be assessed the 10 cents, people that are within the levy 17 districts? 18 MR. STANNARD: It's my understanding that properties, 19 tax paying properties within the levy district will pay the 2 20 cent tax. 21 MR. BROCKMAN: But not the ten? 22 MR. STANNARD: Not the 10 cent tax. 23 MR. BROCKMAN: Okay. 24 MR. STANNARD: Because they pay their own fees and 25 charges for that activity within the district. TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 121 1 MR. CHAIRMAN: Mr. Schoedel. 2 MR. SCHOEDEL: Mr. Stannard, is it correct that you 3 helped develop the rate model for the last proposal? 4 MR. STANNARD: No, that was done by another firm, and 5 so we, the last rate proposal, I was the rate consultant to the 6 Rate Commission, then we proposed and were retained to create a 7 new model. The new model is different from the model that was 8 used in the past. 9 MR. SCHOEDEL: Were you able to get any of the 10 information that they used to develop their model? 11 MR. STANNARD: We did not get anymore information than 12 we had at the time of the last rate change proposal, which was 13 the hard copy printout of every worksheet, Excel and every form. 14 MR. SCHOEDEL: It's a very complex model, I was 15 curious if you learned anything from the last rate model to 16 determine did it impact or were you able to achieve it's results 17 and have you used any of that data to look at this rate model? 18 MR. STANNARD: Well, the general process for 19 establishing financial planning and cost of service, and then 20 rate design is pretty consistent. Certainly the process used 21 for the district and by the district is one that is supported by 22 national standards, only the wastewater industry as well as the 23 Environmental Protection Agency, so while the model itself and 24 certainly the last model was pretty complex, so more so complex 25 when you're not able to look at it on-line but just have to look TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 122 1 at pieces of paper, there's a flow of information there that 2 they give you from the beginning all the way through, with a 3 little bit of effort. 4 MR. SCHOEDEL: Thank you. 5 MR. CHAIRMAN: Any further questions from the 6 commission? Ms. Myers? 7 MS. MYERS: I don't have any. 8 MR. CHAIRMAN: All right, that I believe completes the 9 calling of the witnesses. Do we -- we have a meeting scheduled 10 to reconvene this technical conference at 9 a.m. tomorrow 11 morning, is there a need to do that. 12 MS. STUMP: No, I do not believe there's anything. 13 MR. CHAIRMAN: So we've completed the technical 14 conference and will be adjourned today. 15 MS. STUMP: Right. Just for your information though, 16 the next technical conference, the next time you will meet is 17 right now scheduled for April 29. Again, at that time, we have 18 three days scheduled, well the April 30 is scheduled from 9 to 19 noon and then May 1 is a if needed day, April 29 would be all 20 day, if needed. 21 MR. CHAIRMAN: Very good. Do we have a motion to 22 adjourn? 23 MR. SCHOEDEL: So moved. 24 MS. BOWSER: Second. 25 MR. CHAIRMAN: All in favor? TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 123 1 RATE COMMISSION: Aye. 2 MR. CHAIRMAN: Adjourned. 3 (Whereupon, the hearing adjourned at 5:06 p.m.) 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES Page 124 1 CERTIFICATE OF REPORTER 2 I, ANGIE R. KELLY, an Illinois Certified Shorthand 3 Reporter (IL CSR# 084-004498) and Missouri Certified Court 4 Reporter (MO CCR# 1010) do hereby certify that the witness 5 whose testimony appears in the foregoing deposition 6 transcript was duly sworn by me; that the testimony of said 7 witness was taken by me to the best of my ability, and 8 thereafter reduced to typewriting under my direction; that 9 I am neither counsel for, related to, nor employed by any 10 of the parties to the action in which this deposition was 11 taken; and further, that I am not a relative or employee of 12 any attorney or counsel employed by the parties hereto; nor 13 financially or otherwise interested in the outcome of this 14 action. 15 IN WITNESS WHEREOF, I have hereunto set my hand and 16 seal this 10th day of April, 2015. 17 18 19 20 _________________________ 21 Notary Public 22 23 24 25 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 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3:20 9:9 building 17:11 51:8 54:7,9 built 38:19 80:11 83:24 92:21 burden 7:2 14:3 20:21 24:3 bureau 95:23 Burkhart 3:21 9:10,10 16:9,11 16:12,14,15 17:15,17 37:13 37:15 46:23,25 71:5,7 73:2,4 85:8,10 92:10 92:12 100:7,9 business 80:18 96:11 C C 3:1 24:22 95:22 calculate 82:10 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES calculated 48:1 81:21,22 calculating 24:23 calculation 24:24 25:8 38:24 119:17 calculations 25:4 119:5,7 calendar 56:23 California 104:4 call 4:1,3 15:19 26:6 29:5 44:5 46:12,15 51:9 64:2 74:25 76:8 77:2 85:1 88:14 92:3 94:22 called 10:6 35:9 88:18,19,20 calling 122:9 calls 99:25 capabilities 57:19 capacity 12:22 20:8 51:9 63:3 66:24 67:6 81:13,14,16,24 82:2 106:4 capita 104:15 capital 12:23 13:13,15,22 15:14 18:24,25 19:7 31:5,6,14 33:16 34:23 38:13 42:5 47:10,17 48:19 49:6 52:11,13 55:15 62:7,24 63:15 64:5,12 68:8 74:13 76:15,21 77:7 77:11 78:21 80:4,7 82:14,17 92:21 93:10 94:9,10 100:23 101:8,14,15 106:21,21,22 113:25 114:1,3 114:3 115:14 115:16 capture 66:2 cards 88:13 care 19:17 117:14 carry 28:20 case 22:11,16 26:22 36:7 42:19,19,20,23 67:22 86:9 92:21 105:12 106:18 cases 42:23 51:17 101:2 118:3,4 cash 74:3,9 90:6 92:25 93:3,25 catch 63:12 categories 57:12 89:6 105:7 category 89:25 99:16 104:25 cause 68:10 Cave 3:19 CBA 95:6 CCR 124:4 census 82:1 cent 18:19,21 27:15,16 31:21 34:17 35:11 44:19 59:25 61:24 82:23 120:5,20,22 Central 3:23 cents 19:19 26:24 27:2,3,7,10,10 27:11,11 29:6,6 31:13,13 33:9,9 33:19 43:14,20 44:4,4,20,23 45:23,23 46:3 63:8 79:19 115:22,22 120:16 certain 36:12 38:25 39:3 40:4 40:5 49:24 50:8 54:18 60:9 68:2 82:15 90:22 94:8 109:9 certainly 55:6 82:5 121:20,24 CERTIFICATE 124:1 Certified 124:2,3 certify 124:4 cetera 68:10 chair 5:3 chairman 3:2 4:1 4:6,8,10,13,15 4:17,19,24 5:2 9:8,11 10:4,5 10:15,19,21 15:3,16,20,24 16:9 17:17,20 23:11,15,18 34:2 35:15 36:25 37:4,8,12 37:16,19 42:8 46:9,17,21 47:1 47:4 58:21,24 63:25 65:14 66:17 67:10,21 68:3 69:7 70:16 70:20,24 71:3,8 71:12,15 72:15 72:19,23 73:1,5 73:8,11 80:22 82:12,18 83:2,7 84:25 85:3,7,11 87:13 91:22,25 92:2,5,9,13 94:13 99:20,24 100:2,6,10 109:15 116:1,5 117:4 121:1 122:5,8,13,21 122:25 123:2 Challenges 77:6 Chamber 6:1,7 Chan 4:20 chance 78:16 change 1:11 6:9 6:16,18 7:3,6 7:11 12:18 13:7 13:25 14:3,12 16:17 17:12 24:2 28:11 29:11 74:13 78:6,23 79:5 82:23 90:14,17 99:16 100:19 101:12 102:12 102:13 105:9 105:11 106:13 106:13 110:2,9 110:16,21 111:6 114:13 115:21 121:12 changed 31:10 changes 5:12 6:11 53:4 78:24 102:6,7 104:16 105:22,24 106:7,16,24 107:3,13 channels 35:6 66:2 103:13 characteristics 88:19 charge 13:9 19:21 21:14 45:20 119:25 charges 28:12,22 119:5 120:25 chart 33:25 44:22 90:15 charter 5:7,10,14 14:10 26:14 29:5,11,25 30:22 33:25 43:16 110:11 check 22:11 Chesterfield 60:25 Chodes 4:10 chose 12:7 95:5 chunk 116:18 churches 109:1 Circuit 12:10 CIRP 62:10 63:10 66:11 67:21 100:23 101:21 cities 117:12 city 6:4 11:18 61:1,1 97:12,18 112:9 civil 11:24 clarification 14:11 34:17 clarify 18:4 clarity 119:24 class 105:21 classes 7:2 14:4 20:21 24:3 clean 11:25 16:19 117:11 clear 12:19 40:1 56:12 107:3 clearly 112:7 clients 103:22 104:8 116:25 clock 38:7,18 close 95:23 closely 54:14 closer 66:14 70:11 Club 6:2 Coalition 6:8 12:1 codes 56:17 collaboration 104:10 collaborative 101:12 105:10 colleagues 27:6 75:8 collect 21:9 22:7 22:12 24:5 26:21 27:25 28:2,3,5 29:16 29:22,24 31:7 32:17 34:7 109:10 collected 27:23 34:5,13 112:8 112:17 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES collecting 31:7 31:21 35:17 collection 21:11 22:24 29:21 58:13 107:4 112:25,25 113:18 collector 96:11 collectors 112:9 column 88:23 89:5 90:2 96:18 columns 90:19 combination 80:9 111:19 combine 74:18 combined 11:8 12:20 40:7 41:21 48:6,10 48:12 49:18 52:6,14 66:1,2 80:11,16 come 10:22 33:19 39:17 47:4 55:19 67:23 70:2 74:5,14 83:5,8 comes 70:8 74:12 82:3 93:12 coming 55:6 commensurate 85:20 comment 12:4 commented 43:6 Commerce 6:7 commercial 5:18 118:12 commission 1:8 3:3,8 4:2,3 5:2 5:6,11,16,17,24 6:10,17 7:3,4,8 7:9,10,18,21,24 8:1,5,8,9,10,16 8:19,25 9:15,16 9:21 10:11,13 10:15,20 11:2 13:23,24 15:1 15:24 16:2,6,22 17:21,22 18:3,3 23:12 26:13 33:25 34:3 37:1 37:13 42:9 46:10,22 58:24 64:1,12 65:12 69:8 71:4,13 72:14,16 73:1,9 80:23 83:3,4 85:7 88:16 89:19 90:10 92:9 94:14 96:10 97:10 99:18,21 100:6 101:2 110:25 116:2,5 121:6 122:6 123:1 Commissioner 44:24 70:13 Commissioners 91:23 Commissioner's 69:10 commissions 110:17 commission's 9:17 committed 65:19 commodities 54:13 commodity 53:23 54:3 common 6:19 107:15 110:5 communicated 95:1 communities 80:19 117:16 community 5:22 11:16 13:15 117:17 community's 11:20 comparable 11:11 86:8,8 compared 23:9 24:25 comparison 22:21 complete 38:25 40:22 41:7 42:1 54:25 66:18 102:20 completed 9:24 39:15 41:19,19 49:25 50:1,5,22 50:23 58:6 64:15 122:13 completes 122:8 completing 13:1 completion 66:19 complex 121:14 121:24,24 compliance 12:16 14:14 16:19,22 39:17 complicated 89:21 comply 6:25 12:24 38:15 59:8 component 101:14 118:14 components 51:10,15 58:18 61:1 100:20 101:4 106:4,4 106:17,19,21 compute 23:7 concept 55:5 conceptual 48:13 48:16 52:22 53:15 54:16 Conceptually 68:21 concerned 80:24 concerning 24:15 concerns 78:12 concluded 9:5 13:5 concludes 14:25 concluding 12:5 conclusion 24:8 24:19 49:4 conclusions 24:22 103:25 concrete 20:2 53:4,17 conditions 58:3 83:15 86:7 90:22 conducted 9:4 56:8 conference 1:15 4:2,23,25 8:3,6 8:10,12,14,18 8:21,23 122:10 122:14,16 conferences 13:11 confident 56:5 confirm 103:6,11 119:18 congressional 95:4 conjunctive 45:17 connection 104:6 connections 51:14 consent 12:2,5,7 12:12,14,16,17 12:19,24 13:2 13:12 14:14 15:9 38:1,5,6,9 38:9,11,13,14 38:16,17,19,21 39:1,3,9,12,13 39:23 40:1,11 40:14,16,20,21 40:25 41:2 43:10 47:13 49:13,16 50:9 50:11,15,20,21 58:7 59:9,21,22 63:4 64:19 65:5 65:8,17 66:12 68:9 75:22 81:1 88:10 93:24 94:5,5 consider 19:9 29:24 35:21 38:17 42:23 43:6 66:7 79:8 79:17,23 80:1 84:3 91:18 101:7 consideration 43:9 55:22 58:4 89:18 considered 17:6 17:7,9 30:7,17 30:19 42:20 43:8 44:6,9 80:17 99:11 102:21 105:18 112:14 115:2 considering 22:21 36:17 consist 74:24 consistent 6:18 6:22 42:18 56:16 104:17 110:4 121:20 consists 5:24 26:14 consolidated 11:15 constituents 80:15,16 constitution 11:12 14:10 constitutional 6:19 110:4 construct 62:12 62:16,19 63:10 63:17,20 constructed 62:23 construction 6:5 16:18,24 17:3 51:6,7,21 52:1 54:7,8,9,10 55:18 56:11,13 56:20 57:12 62:24 65:1 consul 9:23 consultant 9:15 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 14:24 110:17 110:25 121:5 consultants 8:11 8:18,19 14:23 57:24 101:13 111:1 consulting 53:1 104:5 consumed 116:19 consumers 3:14 6:4,6 7:15 9:12 37:20 47:2 71:10 73:6 85:13 92:14 95:17 consumption 104:15 116:23 contain 41:24 contained 30:21 47:17 97:12 context 91:4,6 contingency 65:3 65:4 continuation 13:13 continue 12:24 28:25 31:10 61:9 continuously 20:11 contract 54:24 57:23 contractor 57:14 contractors 5:25 54:25 55:8,10 57:9,11,15 contracts 54:2 84:5 contribute 31:14 102:3 contributions 111:16,17,20 control 12:21 40:8 41:11,20 48:5 49:19 50:22 conversation 25:5 conveyed 45:16 copies 24:17 102:20 copy 25:11 76:1 121:13 correct 20:18 22:2 23:17,21 25:8 26:2,8 27:5 30:15 31:25 32:3,11 32:12 37:21 38:17,23 39:1 40:3,19 41:20 44:13,15 45:3,4 45:8 47:11,15 47:23 49:8 52:19,23,24 53:2,22 56:1,14 56:24 57:20 60:3 61:15,17 62:3,18 63:6 64:6,7 73:23 74:2 75:2 82:14 85:22,25 86:1 88:25 89:9,23 90:8 91:19 93:20 95:7,8,9 95:18 96:4,5 97:4,5,9,17,21 97:23 98:4,18 99:9 102:1,16 103:19 107:5 107:14 109:25 110:20 111:11 113:6,20 119:5 120:15 121:2 correctly 31:12 91:1 98:2 cost 17:12 21:3,8 21:11 22:24 23:10 24:8,23 24:25 29:19 33:2 36:24 39:5 39:19 48:14,16 52:9,18,21 54:11,19,20 62:24 67:12 75:11 78:24 80:8 82:15,18 82:22 83:21 86:23 101:1 104:25 105:21 105:24 106:1,7 106:8,10,15,20 107:4,4,12,16 107:17 121:19 costs 6:13 23:7 24:5,14,15,20 25:2,3 29:9 33:15 53:24,25 54:12 83:20,24 84:19 106:3,8 106:22,22 107:1,5,15,18 107:23,25 108:4,7,8 117:22 cost-efficient 24:4 Council 6:5,8 counsel 8:9,17 9:1,7,16,24 10:25 14:18 18:2 30:3 110:5 110:12 124:9 124:12 counties 117:12 country 11:10 55:9 58:4 119:1 county 5:8 6:4,6 6:7 11:7 60:13 96:11,19,23 97:3,18,22,25 98:1 112:9 117:16 couple 52:2 59:5 77:25 83:5 104:23 coupon 83:16,20 83:22 84:1 course 20:11 50:5 court 12:3,5,8,9 12:10 13:5 14:7 36:9 42:20 43:7 124:3 covenant 6:22 116:10,13 cover 6:14 33:14 79:6 111:20 coverage 76:13 77:9 78:7 covered 31:2 43:2 49:4 Covering 48:20 co-financial 82:2 co-permittee 60:5,5 create 44:2 54:19 89:7 121:6 creation 102:23 credit 16:23 17:6 17:7,9,14 87:7 88:13 89:14 credits 86:9,9 creek 35:10 criteria 43:5 60:10 68:12,16 68:17,23 69:1 70:6,11 106:6 110:2,3,4,10,12 CRP 101:15 110:23 CSO 41:11 50:18 66:2 CSOs 77:8 CSR 124:3 cure 108:21 curious 121:15 current 13:13 16:24 32:22 39:25 47:9 54:14 56:22 60:19 69:17,18 73:22 76:18 78:17 79:15,15 80:15 81:23 85:20 86:5,7 89:3 90:16,21 91:8 92:25 104:8 111:20 114:25 currently 5:24 13:10,20 18:20 34:7 61:25 77:17 82:22 83:13,17 84:20 cushion 86:15,20 87:20 cushions 87:8 customer 24:15 71:24 72:6 77:18 99:17 customers 36:14 71:23 98:6 101:5 102:3,7 107:7,8 108:2 108:18,22 116:20,22 cycle 32:22 52:3 57:6 62:6 65:7 69:1,1,17,18 cycles 19:15 69:2 D D 2:1 95:22 dark 109:20 data 24:9 103:10 106:7 118:15 119:2,13,14,14 121:17 date 12:16 67:8 83:6 90:11 dated 88:15 dates 49:19 day 1:15 113:23 122:19,20 124:16 days 90:5,6,6 112:5 113:10 113:23,24 114:5 116:9,11 116:24 117:1 118:24 122:18 deadlines 41:3,4 deal 32:1 63:3 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 98:19 111:7 dealing 21:19,22 32:9 dealt 43:10 debt 73:21,25 74:8,10,16,21 74:24,25 75:1 76:13,13,21 77:6,9,15,18,18 77:21 78:2,3,7 78:9,12,19,24 79:10 80:3 81:13,14,15 82:1 83:18,18 86:6 90:15 91:9 91:18 98:20,22 98:24 114:24 decades 13:14 77:7 December 27:25 28:3 88:16 96:19 97:2 113:1,6 decide 29:22 36:10 decision 12:10 36:8 43:8 119:22 120:2 declared 26:12 declines 77:9 declining 104:14 decree 12:2,5,8 12:12,15,16,17 12:19,24 13:2 13:13 14:15 15:9 38:1,5,6,9 38:9,11,13,14 38:16,17,19,22 39:2,3,10,12,13 39:23 40:1,11 40:14,16,20,21 40:25 41:2 43:10 47:13 49:13,16 50:10 50:12,20,21 58:7 59:9,21,22 63:4 64:19 65:5 65:9,17 66:13 68:9 75:22 81:2 88:10 93:24 94:5,5 deep 57:12,13 defendant 12:9 defer 15:14 46:1 99:3 deferred 47:25 define 19:24 31:18 54:18,19 defined 19:23 54:18 95:15 definitely 82:9 degree 116:14 delay 63:10 delayed 65:11 delays 49:11,13 delegates 5:5,15 delineation 24:11 delinquencies 6:15 deliver 56:6 demand 106:5 demonstrate 14:13 denominated 90:2 Denver 104:2 departments 117:12 depend 83:15 dependent 116:19 depending 27:24 94:8 115:8 deposition 124:5 124:10 derive 55:2 describe 21:2 24:7,22 50:24 86:2 described 21:23 31:24 59:25 95:24 98:8 description 69:24 design 17:5 41:7 51:21 52:1,23 56:12,17 62:12 62:16,19 63:1,9 63:16,18,20,20 121:20 designed 14:5 56:16 62:21 67:9 designing 48:11 51:4,5 desire 114:12 desiring 9:20 desk 111:25 detail 13:2 111:22 detailed 14:12 108:3 deteriorating 76:22 determination 109:4 119:9,18 determinations 119:8 determine 68:19 106:19 118:23 119:4 121:16 determined 14:4 14:6 32:4 62:4 90:21 101:16 113:18 114:14 determining 118:16 develop 67:15 121:3,10 developed 86:3 Developers 17:10 development 118:10,13 Diego 104:3 difference 81:18 82:6 different 21:25 21:25 40:19 41:1,1 50:7 51:7 58:3,17 74:20 86:19 100:18 101:9,9 117:6 118:13 121:7 differential 21:18 differently 72:4 95:15 difficult 45:6 difficulties 44:3 difficulty 90:4 direct 1:12 7:18 8:4 10:7,10 13:3 15:13 16:4 16:15 24:1 59:6 60:17 65:16 71:21 81:9 110:21 direction 12:19 124:8 director 14:17,18 14:19,22 39:22 39:25 94:1 dirt 20:6 disagreements 25:3 discharge 69:21 107:7 dischargers 107:9,10 discharging 107:11 discovery 7:22 7:24 8:1 16:5 20:23 21:4,5 24:19 25:10 60:6,10 69:11 72:13 discuss 42:19 52:18 85:19 105:21 115:13 115:20 119:23 discussed 10:9 19:14 47:12 83:6 110:10 115:16 discussing 71:22 93:11 discussion 111:14 115:19 discussions 36:6 110:8 disjunctive 45:17 dismiss 37:4 disputes 25:3 dissatisfaction 72:7 distribute 107:23 distributed 107:25 district 1:10 4:3 5:3,7,12,13,15 5:20 6:10,13,24 6:24 7:4,7,17 7:22,23,24,25 8:2,5,6,16,18 8:25 9:6,23 10:7 11:1,4,7 11:10,17,21,25 12:12,15,16,25 13:8,21,22 14:11 16:5 18:19,22,24 19:7,18 20:15 20:18 21:19,22 22:5 24:11 25:25 26:15,19 26:19,22 27:10 27:20 28:22 29:1 32:14,16 32:19 33:7,19 34:10,20,22 36:22 37:6 39:19 43:12,21 44:5,6 45:5,13 45:14,16 46:14 46:15 51:11 52:22 53:7 55:17 60:8,15 60:18,18 61:4,5 61:7,10,16,18 61:19,20,22,25 62:2,4,7,8 63:3 63:5 65:2 68:13 69:14 70:22 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 71:23 75:3 76:7 76:19 79:14 81:14,20 82:1 84:3 85:1 87:18 88:1,2,3,10 89:1,22 90:1,12 91:17 92:3 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entire 34:10 60:13 61:22 80:15 101:11 106:16 entirely 70:3 entities 11:12 22:6 25:6,7 108:25 entry 38:6,17 environment 6:8 12:1 20:6 117:20 environmental 5:21 117:10,10 121:23 EPA 35:5 38:2 40:12 67:15 68:7 70:6 equal 15:10 equally 9:22 equipment 58:8 equitability 36:6 equitable 14:6 22:17 23:1,7 36:5 80:7 84:17 equivalent 32:16 118:5 Eric 3:4 4:13 5:5 error 26:3 escalating 77:15 escalation 55:3 escalator 104:25 escalators 105:18 especially 36:8 essence 39:2 essentially 60:7 established 5:10 26:20 101:15 110:11 establishing 121:19 estimate 39:11 52:25 54:16,20 54:21 estimated 52:18 54:12 81:13,14 81:15 estimates 48:14 48:16 52:21 53:3,18,18 54:23 57:25 77:20 ES10 99:15 ES11 99:16 et 68:10 evaluate 79:11 evaluation 19:24 evenly 9:19 event 17:3 90:11 115:22 eventually 19:16 everybody 35:23 36:20 60:7 exact 60:10 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES exactly 27:13 29:22 52:1 104:6 108:13 examine 101:17 102:6 115:18 examined 43:5 examining 104:14 105:13 110:15 118:1 example 17:2 53:4,17 86:6,21 87:21 98:17 119:5 exceed 26:24 exceeds 16:24 17:4 Excel 121:13 exceptions 36:19 excess 65:1 66:23 excuse 26:10 49:9 executive 14:17 81:2,3 99:15 exempt 46:4 108:24 109:1 120:1,8 exhibit 15:1 24:7 24:16 26:11,13 33:24,25 41:13 48:17 76:4 77:1 77:13 96:10 97:10 114:19 Exhibits 41:17 95:22 exist 61:8 existed 53:19 existing 28:12 29:19 90:18 116:13 120:4 exists 19:6 expect 82:6 89:6 111:4 113:12 expectation 76:12 expectations 71:23 expected 58:8 76:18 77:6 93:3 expecting 111:17 expended 65:18 expenditure 55:15 68:8 92:21 93:11 99:8 101:8,16 101:21 114:4 expenditures 93:16 expense 100:22 105:6 116:12 expenses 79:7 101:18,19 106:21 111:5 111:21 116:10 expensive 78:21 78:22 experience 103:15,15,23 104:15 116:12 experienced 103:21 expertise 53:1 expiration 9:24 expired 10:2 explain 105:24 explained 90:4 explanation 81:19 82:5 explore 100:19 exposure 84:4 extend 48:9 59:18,19 extended 12:3 extends 7:8 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www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 85:15 92:17 100:13 footprints 24:11 forces 119:12,15 forecast 78:3 101:24 103:18 103:20 forecasted 100:22 114:16 forecasts 103:18 foregoing 124:5 foresee 67:10 foreseeable 66:11 forever 120:3 form 12:19 25:17 26:5 121:13 formal 103:13 formed 11:12 forth 64:18 69:1 78:16 100:23 Forty 87:23 forward 47:4 65:5 68:6 69:5 82:23 84:4 87:17 93:10 106:14 found 22:6 four 6:24 12:2,24 13:25 32:24 33:4 48:18,22 48:23 49:1 52:17 55:24 59:6 62:20 63:17 68:6 69:4 79:6,24 83:6 fours 83:17 fourth 11:6,10 Fox 3:9 9:15 frankly 95:23 front 15:11 36:3 41:23 42:1 64:24 65:17 66:7,9 fuel 54:3 full 12:15 53:7 56:8 functionalizati... 106:8 108:4 functions 107:20 fund 19:7 22:16 34:11 74:17 75:1 78:21 79:9 93:4,16 94:9 109:11 111:13 111:15 117:17 117:17 funded 55:25 funding 13:18,19 19:1,4,10 30:9 30:10 33:16 75:19 79:25 80:8 84:17 91:18 115:14 115:15 funds 19:2 30:23 31:6,6,23 33:10 35:17 43:14 63:8,18 79:23 80:5 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71:9 73:6 85:12 92:14 107:9 118:14 industry 14:5 121:22 inequalities 13:18 infiltration 51:10 inflation 94:19 94:23 95:3,22 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 97:19 104:25 105:3,14 111:8 inflationary 101:19 111:13 inflow 51:10,13 101:5 information 24:14 43:12 52:23 81:8 95:10 101:18 103:8 104:14 105:8,13 108:3 111:9 117:23 118:11 119:13 121:10,11 122:1,15 infrastructure 11:20 13:16 35:22,24 36:2,5 36:19 40:5 61:13,13 77:8 input 105:16 insignificant 36:23 inspect 56:19 inspectors 56:16 installed 53:22 53:24 installing 58:9 installs 17:4 instances 117:15 instituted 77:10 instruments 89:7 insufficient 29:13 43:14 63:16,19 115:23 intend 54:17 intended 65:23 intensity 118:9 intent 61:6,9 intention 61:24 118:13,14 interest 6:12 79:1 79:2 83:12,24 84:4 85:19 86:12,19,22 87:8 interested 5:19 124:13 interim 81:17 interject 83:3 intervene 7:13,13 9:2 12:1 intervener 8:8 interveners 8:10 8:16,18,25 9:23 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29:20 35:16 88:15 101:1,3 methods 24:6 29:21 117:7 metropolitan 1:10 4:2 5:2 9:6 10:25 95:11,16 MHI 115:5 mid 14:9 middle 28:5,11 66:10 midpoint 112:19 mid-1980's 14:1 Mike 4:17 miles 11:7,8,9,17 million 19:13,15 31:13 52:12 56:22 64:22 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 69:17 73:21,24 73:25 74:3,16 74:17 75:6 79:6 79:19,21,23 81:5,16 82:1 93:5 millions 68:22,22 mind 13:12 36:13 46:1 minimal 24:24 minimum 90:5 113:23 116:11 minute 31:4 75:25 83:4 minutes 70:17 misrepresenting 95:1 missing 41:3,4 74:11 Mississippi 35:3 Missouri 3:12,14 6:2,3,8 7:15,15 9:11 11:12,24 12:1,6,9 13:5 14:7,10 20:13 35:4 36:8 37:20 42:19 47:2 68:13 71:9 73:6 85:12 92:13 112:5 124:3 mistaken 88:11 mitigate 86:11 87:8 116:17,24 mitigating 35:10 mix 89:9 mixed 90:14 MO 3:18,24 124:4 model 93:9 102:24 105:16 121:3,7,7,7,10 121:14,15,17 121:23,24 models 54:11 moderately 77:17 modifications 40:19 modify 40:12 moment 25:5 32:7 45:11 115:25 moments 87:16 98:20 Monarch 60:25 money 23:7 30:21 32:14,15 34:5,8 45:1 63:21 65:1 108:16 109:4,8 113:16 120:12 monies 28:3 34:22 monitor 35:5 53:6,10 55:2 67:1 monitored 35:4 monitoring 67:2 month 32:23,25 33:1 98:13 monthly 28:22 115:1,11 Moodys 88:15 morning 122:11 morphing 54:22 motion 10:15 122:21 Mound 6:4 move 64:17 65:10 94:2 117:21 119:1 moved 10:17 122:23 moving 28:1 MSD 3:7 11:6,12 11:13,18 13:4,6 13:20 14:9 15:2 16:24 17:6,10 17:13 19:17 22:11 24:6,13 24:16 25:2 35:9 38:12 41:16 45:19 47:13 76:4 92:21 93:12,14 94:4,7 100:18 101:13 107:12,15 108:10,21 114:19 118:19 119:6,6,19,23 MSDs 11:10 17:5 82:2 MSD's 13:13 14:10,14,16,17 14:17,18,19,19 14:21 35:24 92:25 103:18 MS4 35:9 multiple 49:10 118:7 multi-decade 11:19 multi-layer 13:9 multi-year 31:15 31:17,18 municipal 6:5 22:8 36:18 80:3 80:7 84:6 88:22 108:19 municipalities 22:12 60:12 82:16 119:8 120:7 municipality 60:7 Myers 2:4 3:7 7:19 9:7,7 10:6 10:23,24,25 15:3,8,12,17,19 20:25 33:24 37:2,3,5,7,11 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87:12 92:13,15 92:18,19 94:12 100:10,11,14 100:15 109:13 new 16:23 17:3 19:5 31:21 33:3 51:8 55:19 68:16,23 69:18 70:1,3,11 74:16 90:13 118:17 118:22 121:7,7 nexus 35:17 Nicholas 3:21 Nick 9:10 nine 9:4 27:11 nitrogen 68:17 noncompliance 41:1 nonprofit 5:22 nonresidential 98:11 107:8 118:7 noon 122:19 Nope 73:7 normal 106:2 North 3:17 6:7 Northeast 104:1 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES notarized 10:11 10:14 Notary 124:21 notes 30:7 43:13 notice 6:9 7:3,6 not-for-profit 46:6 not-for-profits 120:9 November 5:10 77:13 112:4,7 number 23:3 25:6,7,10 26:11 26:12,21 33:24 48:1 51:20 56:25 57:1 64:10 65:3 68:21 69:12 74:12 81:2,21 81:22 82:10 96:20,20,24 97:3 102:2,7 104:2 116:8 numbers 57:7 72:2 73:20 74:14,20 81:18 86:16 105:16 O O 3:9 12:23 28:20 34:17 43:19 objection 70:17 obligation 61:16 62:7 89:7 90:9 98:21 obligations 14:14 38:2 77:2 88:1 observe 62:11 obtaining 80:5 obviously 49:12 55:19 58:2,10 79:10 86:12 October 12:4 offer 97:10 office 95:5 97:11 officially 15:5 Ohio 104:1 okay 17:15 21:7 23:5 31:19,23 37:8 38:14 39:5 39:8 40:16 42:7 44:11,14,18 48:16 49:23 50:24 52:17 56:15 57:17 58:19 59:5 60:4 60:14 61:4 62:15 63:23 71:4 73:18,24 74:24 76:3,6 81:6,7,11 82:21 87:11 90:9 91:16 98:8 101:23 102:10 103:12 104:24 107:12 108:9 109:13 112:21 112:24 114:19 120:23 old 59:16 OMCI 28:21 31:6,23 34:18 43:19 44:9 120:4 once 27:16 101:15 ongoing 24:15 on-line 121:25 open 4:25 20:11 29:20 opening 10:23 11:3 14:25 15:1 15:6,17 operate 18:23 61:9,12 69:20 operating 24:21 41:6 101:17 110:23 114:5 116:10 operation 5:20 6:13 11:13 16:18 26:23 27:3 29:7 30:2 33:8,11,12,15 33:20 34:20 36:23 55:20,22 61:7 63:15 79:7 100:22 106:20 107:18,21 109:5 117:21 operational 9:17 10:8 18:21 61:4 operations 12:22 14:19 32:19 58:5 110:23 113:7 118:18 opinion 14:2 24:2 42:17 43:23 78:11 opportunities 54:12 opportunity 7:12 8:7 11:3 40:11 opposed 54:14 95:17 option 115:18 options 29:11,25 30:12 100:18 119:23 order 4:3 12:8 14:16 43:13 50:3 51:19 55:18 56:6 66:24 68:13,23 69:3 ordinance 34:15 44:7,10 45:8,9 90:11 ordinances 43:23 90:13 organizations 5:15,18,19,20 5:22,23 Orleans 118:18 118:22 orthophotogra... 24:10,12 Otis 4:19 ought 18:6 82:4 outbreak 70:7 outcome 124:13 outline 104:24 outlined 12:19 13:12 63:19 outlook 48:19 76:8,11,18,22 77:2,14 95:6 outlying 97:24 outside 45:2 119:16 outstanding 6:23 68:11 overall 45:23 48:13 53:15 67:13 115:4 120:5 overflow 12:20 12:21 40:7,8 41:21 50:6,13 52:5,15 57:3 65:23 66:1,2,22 67:4,5,18,24 overflows 41:22 48:5,6 49:15,15 49:17 50:4,7 overhead 108:8 overlapping 114:8 oversee 61:21 owned 11:14 owners 62:1 99:12 ownership 25:4 oxygen 106:5 O'Connell 4:17 P P 3:1,1 package 57:14 page 18:13 20:19 21:3 23:3 26:17 26:17 28:11,12 30:5 32:9 52:17 59:9 62:11 71:22 72:1 74:12 76:8 77:3 77:4,15,25 78:1 81:4,12 85:18 85:18 88:21 89:22,25 90:14 94:22 96:13,18 96:23 97:3,12 97:13 98:5 99:15 100:15 101:23 103:14 104:24 110:3 114:10,21 pages 72:3 96:14 96:16 paid 35:11 61:23 61:25 62:1 81:17 82:7,9 98:12,14 painted 79:3 Pamela 9:14 paper 24:18 88:17 122:1 paragraph 18:14 76:9 77:15 114:22 parcel 25:17 117:25 parcels 118:7 part 23:10 24:21 35:8 40:11 50:9 50:11,15,25 51:15 55:19,20 57:14,16 58:7 63:13 65:4,8 68:8 79:5,12,18 80:1 81:8,9 90:7 93:8 104:20 107:18 110:8 117:11 partial 118:10 119:2 participants 9:20 9:22 104:12 participate 9:3 25:22 participated 25:21,24 particular 22:19 22:25 36:7,21 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 45:2 104:8 particularly 55:22 58:5 66:21,25 70:7 76:20 parties 15:6,16 119:16 120:9 124:10,12 partly 36:8 pass 108:10 Paul 3:5 4:8 5:4 pay 6:12 21:25 22:15 27:24 36:5,11,11,13 53:8 79:23,24 80:14,15 108:19,23 109:2,2,10 113:12,14 116:22 120:11 120:12,19,24 payer 11:11 75:13 payers 7:2 9:2 14:4 21:14 24:3 32:14,20 75:11 PAYGO 74:3,7 74:15 80:10,10 80:14 101:9 paying 22:20 27:2 33:4 53:21 58:2 75:11 120:19 payment 113:6 payments 112:22 112:23 113:17 payout 77:22 pays 32:22 peak 57:1 66:8,8 66:9 penalized 75:13 penalties 40:21 40:22,24 41:1 49:12,14 pension 111:8,13 111:15 people 13:7 29:15 36:2,13 44:2 58:2 113:12 119:3 120:16 percent 25:16 26:3,7,7 31:8 44:6 49:17,21 49:21,24 50:8 55:25 63:14 64:13,21 65:18 65:25 66:13,13 66:15 74:5,6,7 74:8,9,21,22,24 83:19,22 84:1 85:24,24 93:18 95:3 96:4 100:17 101:8 106:18,25 109:9 114:15 114:25 115:2,5 percentage 65:20 66:12 115:11 115:12 117:16 perform 16:18 61:4,18,21 75:22,23 104:9 performed 24:7 65:23 performing 69:15 performs 53:7 period 7:8,9 9:18 12:4,14 15:10 31:15,17 38:4,4 38:5 39:9 47:14 48:9 49:4,20 53:12 55:24 62:22,23 63:17 64:16 68:6 76:18,22 79:6 84:8 96:7,7,8,9 97:19 101:9,20 101:24 109:12 111:6 114:13 115:17 periods 40:12 permission 30:3 permit 17:12 35:8,9 63:16 69:2 78:13 79:5 permitted 9:3 10:1 person 7:11 8:14 8:23 9:18 10:1 37:6 72:20 82:2 personally 88:3 personnel 56:3,4 persons 15:18 46:13 70:22 person's 9:25 perspectives 110:25 PFM 88:3 101:13 PG 2:2 phase 51:21 63:15 Philadelphia 104:1 phosphorus 68:17 picture 79:3 pie 109:9 piece 36:21 pieces 103:7 122:1 pipe 11:7,9,17 51:18 pipes 58:13 84:14 place 13:10 14:1 22:5 55:16 56:6 56:10,10 57:22 58:3 65:10 82:3 91:7 placed 108:15 placement 74:14 places 104:18 plan 5:7,10,14 12:21,21,22 14:10 26:14,20 27:15 32:10 33:14,25 34:19 40:7,8 41:11,12 41:20,21 47:9 47:10 50:13,16 50:19 56:17 57:8 62:12,16 62:19 63:9,16 63:20 67:15,19 68:16 100:23 106:3,22 114:9 planimetric 24:11 planned 50:5 55:24 62:21 64:11,15,20 65:9 93:11 114:24 115:3 planning 22:20 48:3 68:6 101:11 121:19 plans 12:20 42:6 68:9,19 89:11 106:23 plant 106:9,12 plants 68:23 70:9 please 18:7 23:20 24:7 37:19 46:12 47:4 77:16,24 96:17 plus 6:3 18:23 79:24 point 27:15 34:16 59:17 65:25 71:4 82:15 96:4 97:8 97:20 106:23 112:23 115:17 120:2 points 86:21 87:22,23,24 policies 84:21 policy 82:22 84:20 119:22 pollutants 106:11 107:6 pool 34:9 Poor's 76:11 population 82:1 portion 12:18 13:17 14:2 49:22 93:18 108:6 position 44:19 76:20 92:25 positions 93:3 possible 19:3 103:7 possibly 19:9 potential 55:10 69:13 87:18 105:13 potentially 84:19 107:20 power 26:20 powers 26:14,19 practical 80:4 practice 80:17 84:7 preceding 30:5 precisely 18:17 predecessor 42:22 preempt 68:14 preliminary 52:22 54:19 premium 74:18 premiums 83:21 83:24 preparation 18:3 115:21 prepare 53:18 prepared 7:18 8:11,20 84:21 105:18 preparing 53:3 present 4:12,14 5:4 9:14 15:18 34:6 37:5,7 46:13 70:21 72:19 presentation 51:24 74:20 presentations 110:9 president 95:2 pressure 76:23 pretty 53:12 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 75:19 121:20 121:24 prevent 67:6 prevented 36:15 previous 53:10 61:3 pre-Hancock 43:21 pre-qualification 57:10,14,17 price 53:15 57:22 prices 52:22 53:5 53:5,7,9,23 54:3,13 primarily 32:9 prime 36:1 principal 6:12 77:22 90:16 106:19 printout 121:13 prior 10:12 39:9 74:6 80:15 101:2 105:10 110:10 private 51:14 66:25 privately 11:14 probably 13:4 15:15 29:19 36:20 39:21 45:25 51:4,6,15 52:12 66:9 81:16,17 82:19 86:23 106:24 115:7 problem 54:18 procedural 7:10 10:3,21,22 102:10 procedures 57:21 proceed 16:7 proceeding 1:11 5:3 47:16 49:5 proceedings 7:13 10:12 13:25 15:5 47:21 proceeds 75:14 process 11:2 24:13,21 50:18 55:21 57:10,16 57:18,21 64:4 101:11 105:9 107:18 109:3 110:20 112:16 119:17,18 121:18,20 processing 24:25 produce 105:22 108:9 produced 105:22 producing 19:2 product 62:22 program 13:12 13:14,15 15:14 16:23 17:6,7,10 38:13 42:5 47:17 48:7 51:11 55:16,23 56:6,21 63:4 65:23,24 66:1,6 66:11,21,22 67:9,13,20 74:14 75:17,18 76:15 79:8,10 79:13,15 101:8 114:12 programs 18:24 29:19 50:24,24 52:19 56:16 64:13 78:21 progress 97:15 project 12:23 17:3 48:12 49:25,25 50:6 54:4,17 59:11 64:5,15 65:6,10 66:18,19 67:17 67:19 80:13,14 80:16 94:6 102:2 projected 64:24 83:13 86:15 90:15 92:21 94:1 106:16 107:12 projecting 64:13 84:1 projection 111:5 projections 78:3 86:5,13 93:2,10 93:11 101:9,25 projects 19:7 38:25 39:9 40:2 40:9,22 41:18 41:25 48:6,8,9 48:10 49:12,19 50:3,4,10 51:2 51:8,20,24 52:5 52:5,6,8,16 53:1 54:25 56:20,25 57:1,3 57:4,4,5 58:6 59:10 62:21,25 64:10,14,17 65:3,4,8,9,11 66:20 67:12,14 67:15,22 80:11 83:22 93:20,22 93:24 94:2,6,10 101:22,22 promise 33:20 properly 56:19 properties 108:25 109:1 120:2,18,19 property 13:8 14:8 19:24 20:20 21:25 24:24 26:22 29:17 35:7,11 35:22 45:23 46:3,4,5 62:1 96:2 97:14 98:1 98:3 99:12 108:9,19,24 109:7 117:6,23 117:25,25 118:17,25 120:8 proposal 7:12 12:18 13:7,17 14:3,13 16:17 16:23 17:9 18:11,19 19:12 19:23 28:7 29:17 30:10,18 32:11 42:18,21 43:17 58:7 61:6 62:20 74:1,8,13 74:21 78:6,16 79:17,22 80:1 81:4 83:23 84:20 89:12 90:14,17 93:8 99:16 101:12 102:12,13 105:3,9,11 106:13 110:2,7 110:9,16,21 111:6 112:1,2 112:24 114:13 115:21 119:6 121:3,5,12 proposals 52:8 proposed 5:13 6:18 7:6 13:23 14:4,13 28:12 28:23 32:24 34:17 50:3 79:13 90:19 91:8 93:7 100:16 105:25 107:13 108:15 112:14 121:6 proposes 7:1 13:8 112:8 proposing 18:18 19:10,15 22:25 34:19 55:6 108:9 proposition 44:19 propound 10:1 propounded 8:7 8:15,24 protect 67:4 Protection 117:10 121:23 protects 94:5 proven 119:14 provide 6:20 8:6 10:9 11:3,5,22 14:11 17:13 19:4,11 21:14 22:15 24:17 25:6 31:6 43:12 45:14 50:4 60:25 61:2,7 62:5 88:13 94:2 96:15 104:3 107:20 109:5 110:13 114:12 117:5 provided 16:5 17:13 24:19 25:11 48:18,18 48:22 57:25 102:23 103:5 105:14,16 108:3 110:18 110:25 provides 40:14 76:16 80:10 117:23 providing 11:15 19:6,9 26:23 58:11 provision 6:23 104:5 provisions 26:20 30:4,21 88:20 prudent 80:17 107:10 public 9:3 11:14 12:3,15 14:20 19:5,18 20:18 22:6,10 33:12 33:13 34:21 35:25 36:18 41:15 61:10 80:13 124:21 published 95:6 104:11,23 Pugh 2:8 7:20 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 14:20 85:2,3,6 85:14,17 87:14 91:20,21,23,24 113:21 pulling 55:7 pump 58:16 purported 90:20 purports 76:5 88:14 purpose 8:5 16:20 35:18 purposes 4:22 16:21 24:10 26:23 34:13 42:3 pursuant 11:12 58:6 pursue 113:5 pushed 80:25 pushing 101:22 put 18:5 29:19 32:8 35:20 54:15 55:16 69:11 79:3 80:11 115:19 117:19 118:4 P.C 3:10 p.m 123:3 Q qualified 55:11 55:12 56:15 57:8 qualify 22:13 quality 35:5 89:10 117:20 quantitative 89:10 quantity 117:19 quarters 52:12 question 15:14 17:1,16 18:6,13 20:19,19 22:16 23:21,23,25 24:22 30:25 32:8 33:18 35:15 38:20 39:21 41:24 42:17,24,25 43:1 45:25 47:24 52:19 56:2 59:7 60:16 60:20 62:11 63:12,22,24 64:3,3 65:17 66:17 68:5 69:10,11 71:21 72:4,6 73:2,17 74:20 78:6 79:4 80:2,3,3 82:21 87:2,9 89:25 90:5 91:1,14,15 94:11,19 96:1,3 96:12 98:5,19 102:10,11 110:1,3,13 111:5,23 114:8 116:8,8 120:14 questions 8:7,15 8:24 9:18,20,21 9:24 10:2 15:8 15:25 16:4,7,8 16:10,14 17:18 17:20,23 28:15 33:23 34:3,4 36:25 37:2,13 37:14,17,24 42:9,11 43:10 44:25 46:8,10 46:22,23 47:2,7 49:10 58:21 59:5,6 64:1 65:13,15 68:3 69:7 70:13,14 71:4,5,9,12,18 72:16,17 73:3,5 73:9,14 75:7 80:21,23 83:2,5 83:6,8,11 84:23 84:24 85:7,8,16 87:13 91:22 92:9,11,18 95:25 99:19,20 99:22 100:6,7 100:14 111:2 116:6 119:17 122:5 quick 15:8 66:17 quickly 80:12 88:18 91:13 quite 70:4 116:21 quorum 4:21 15:5 Q11 23:15 R R 3:1 43:19 124:2 Raftelis 14:22 rain 20:6 raining 35:24 rains 20:5 raise 19:12,15 30:21,23 33:14 33:19 43:14 raised 33:10,12 45:1 raising 31:12 36:1 ramifications 49:13 ramped 66:8 ramps 56:24 range 29:25 48:14 83:15,19 85:23 114:13 ranges 83:17 116:23 rate 1:8,11 3:3 4:2,3 5:2,6,11 5:12,12,13,15 5:17,24 6:9,10 6:16,17,18 7:2 7:3,3,4,6,8,9,10 7:11,18,21,23 8:1,4,5,8,9,10 8:16,19,25 9:2 9:15,16,17,21 10:20 11:2,2,10 11:21 12:18 13:7,9,23,23,24 13:25 14:3,4,5 14:12,23 15:1 15:24 16:2,6,16 16:16,21,22 17:21 18:11 19:15,22 21:14 21:25 26:13,23 28:7,10 30:9,10 30:18 32:14,20 32:22 33:25 36:10,14 37:12 42:9 43:2,9 46:21 47:9,16 47:20 49:4 52:3 57:6 58:7,24 62:6,20,22,23 63:19 64:12 65:7 68:25 69:1 69:17,18 71:3 71:13 73:1,8 74:13 75:9,11 75:13,14 77:10 78:6 79:1,2,5 80:12 81:3 83:4 83:16 84:1,4,4 85:7 86:12,13 86:19 87:8 88:16 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11:13 16:7 17:19 23:14 27:14 29:11 30:14 38:12 39:23 40:12,23 42:21 43:16,24 45:21 48:4,9,11 50:8 53:12,16 64:15 64:18,19 73:2 78:14 82:15 83:16 84:25 90:10,12 92:10 92:20 112:14 113:13 115:20 121:12 122:16 122:17 timelines 41:19 41:24 times 11:17 17:24 49:10 78:7,8,9,9,18 78:19 109:18 timing 49:23 113:14 tip 40:24 today 12:14 14:11 35:23,23 58:11 61:8 86:14 92:20 122:14 Toenjes 4:15 told 43:18 Tomazi 3:4 4:15 4:16 5:5 15:8 34:25 35:13 65:15 66:11,16 80:23,24 81:8 81:12,25 82:11 tomorrow 122:10 top 57:7 60:10 77:3 78:1 total 9:18 52:11 74:10 78:9 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 81:14 96:18 97:14 106:5,11 118:8 touching 19:6 track 113:2 train 119:15 transcript 124:6 transferred 108:17 transition 120:4 travel 20:12 treasurer 14:20 78:11 treat 21:12 51:19 treating 106:11 treatment 11:15 58:16 68:9,10 68:14,18,23 70:9 106:1,3,9 106:12,22,23 107:1,4 trend 76:22 102:8 117:18 118:24 119:1 trending 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24:24 35:16 109:7 variability 117:2 various 34:5 104:13,25 106:3,17 vary 116:20,23 varying 120:4 Veatch 9:14 25:12,16 117:22 verify 41:14 102:14,14 verse 51:22 versus 13:4 35:16 51:21 52:1 80:10 Vertex 101:25 102:21 103:2 viable 84:12 vice 5:1 95:1 view 19:16 violation 6:22 44:21 59:23 violations 11:25 viruses 70:7 visited 44:1 volume 21:24 102:3 106:4 116:19 vote 27:14 29:15 36:10 44:2 voted 13:6 24:6 29:20 36:14 112:2,3,13 voter 27:7,9 29:3 43:19,22 77:11 119:25 voters 5:8 6:2 31:8 32:10 34:20 75:5,6 112:1,13 118:21 119:21 119:24 W wait 27:10 waive 10:13 waived 12:11 walk 73:20 want 23:13 42:12 44:24 49:10 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 73:20 76:1,8 79:3 82:13 89:9 96:15 98:19 102:17 111:25 wanted 79:9 111:7 115:18 wasn't 79:18 waste 94:9 104:10 106:2,2 107:11 114:16 wastewater 1:11 5:12 6:11 11:20 12:18 13:13,16 13:24 14:2,5 32:8,11,23 42:18 43:1,2,6 43:9 45:19 52:13,18 59:5 66:25 81:5 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12:4,8 38:6 88:2 96:19 97:4 97:14,16,20 2013 7:4,5,11 50:14 53:21 77:1 88:1,7 97:2,4,14,20,20 114:25 115:2 2014 25:11,15 50:14 71:24 81:10 88:16 95:6 97:3,20 98:23,23 99:2 104:22 2015 1:11,16 7:17,21,22,23 7:25,25 8:11,13 8:19,22 9:4,5 53:20 79:22 90:16 96:7 124:16 2016 27:21,22,23 28:1,3,4,9 79:22 96:7 111:16 112:2 112:13 114:25 2017 27:21,24 28:3,5,8,9 47:10 49:25 112:17,18,20 113:6 2018 50:1 113:7 113:7 2020 32:24,25 47:10 49:17 90:16 2024 95:6 21 30:16 85:18 88:21 98:6 211 3:17 213 76:5 22 8:22 62:11 23 12:13 15:9 38:3,18,20 39:8 41:25 44:3 47:14 48:15 49:20 65:18 66:7 98:6 TECHNICAL CONFERENCE 4/8/2015 www.midwestlitigation.com Phone: 1.800.280.3376 Fax: 314.644.1334 MIDWEST LITIGATION SERVICES 24 49:2 24.8 74:7 240 113:10,18 25 58:17 62:11 62:13 84:14 96:4 111:5 259-2317 3:16 26 7:4,5,17 27 7:22 12:4,8 29 8:13 116:8 122:17,19 29%77:22 3 3 7:25 20:19 26:14 81:4 87:25 106:24 3A 10:13 24:7 3,000 11:9 3,600 36:14 3.020 26:19 3.02020 44:21 3.2 81:4 30 7:23 22:5 58:17 74:8,21 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