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MSD Exhibit No. MSD 3A
2023 Stormwater Rate Change Proceeding
BRIAN L. HOELSCHER
Direct Testimony
Metropolitan St. Louis Sewer District
March 24, 2023
Table of Contents
Page
Witness Background and Experience ........................................................................................... 1
Composition of the Stormwater Capital Proposal ........................................................................ 2
Direct Testimony of Brian L. Hoelscher, MSD March 24, 2023
2023 Stormwater Rate Proceeding 1 MSD Exhibit No. MSD 3A
Witness Background and Experience 1
Q1. Please state your name, business address, and telephone number. 2
A. Brian L. Hoelscher, 2350 Market Street, St. Louis, MO 63101-2555, (314) 768-6245, 3
blhoel@stlmsd.com 4
Q2. What is your occupation? 5
A. I am the Executive Director for The Metropolitan St. Louis Sewer District (District or 6
MSD). 7
Q3. How long have you been associated with the District? 8
A. I have been with the District continuously since 1995. 9
Q4. What is your professional experience? 10
A. During my tenure with the District, I have held various senior management level positions 11
related to the execution of the District’s Capital program and overall operation of the 12
District, including Manager and Assistant Director of the Construction Management 13
Department, Assistant Director and Director of the Engineering Department, and, since 14
March 2013, Executive Director. Prior to joining the District, I was the St. Louis Office 15
Manager for the consulting engineering company of Consoer, Townsend, Envirodyne 16
(CTE, now AECOM). 17
Q5. What is your educational background? 18
A. I am a graduate of Washington University in St. Louis with an undergraduate degree in 19
Civil Engineering. 20
Q6. Are you registered as a Professional Engineer? 21
A. Yes, I am a registered Professional Engineer in the States of Missouri and Illinois. 22
23
Direct Testimony of Brian L. Hoelscher, MSD March 24, 2023
2023 Stormwater Rate Proceeding 2 MSD Exhibit No. MSD 3A
Composition of the Stormwater Capital Proposal 1
Q7. What is the focus of the Stormwater Capital Proposal? 2
A. The focus of the Stormwater Capital Proposal is to provide a revenue source for MSD to 3
fund an additional Districtwide stormwater service in the form of capital improvements. 4
In general, these capital improvements are intended to mitigate the impacts of flooding and 5
erosion on MSD customers. 6
Q8. How is this Stormwater Capital Proposal different from what was approved by voters 7
in April 2016 under Proposition S? 8
A. The primary purpose of Proposition S was to provide a consistent Districtwide revenue 9
source for the operation and maintenance of the Public Storm Sewer System for which 10
MSD is responsible. Prior to Proposition S, there was a tax for O&M in the original 11
boundaries of the District, but there were no revenues for MSD to operate and maintain the 12
Public Storm Sewer System in that part of the District annexed in 1977. With the passage 13
of Prop S in 2016, the District now collects the ten-cent property tax throughout the entire 14
District that is sufficient to fund the operation and maintenance of the entire Public Storm 15
Sewer System. 16
The primary purpose of this Stormwater Capital Proposal is to provide such a Districtwide 17
revenue source to make capital improvements to address flooding and erosion issues not 18
involving the existing Public Storm Sewer System. In addition, MSD has the opportunity 19
with this proposal to support Stormwater capital improvements in Environmental Justice 20
(EJ) municipalities. 21
Direct Testimony of Brian L. Hoelscher, MSD March 24, 2023
2023 Stormwater Rate Proceeding 3 MSD Exhibit No. MSD 3A
To fund these capital improvements, MSD is proposing the use of ad valorem property 1
taxes for residential customers and an impervious area-based rate for non-residential 2
customers. 3
Q9. Are current stormwater funding sources adequate in relation to the District’s Charter 4
provisions? 5
A. No. MSD currently has sufficient revenue sources to provide only Stormwater Regulatory 6
Services and Stormwater O&M Services throughout the entire District. However, under 7
the District’s Charter, MSD is empowered also to provide the flooding and erosion type of 8
services being proposed. In the 2018 Stormwater Rate Commission proceedings, the 9
District proposed funding stormwater capital improvements with an impervious area-based 10
charge on all customers, which was presented to the voters as Proposition S. Following 11
the rejection of Prop S in 2019, the District has regularly received input from its customers 12
and other stakeholders that they would like another opportunity to vote on a proposition 13
like the current Stormwater Capital Proposal. As a result of public requests regarding 14
flooding and erosion issues as well as other public input, we have concluded that our 15
customers should have the opportunity to vote on whether MSD should provide this 16
additional service. 17
Q10. What did the District determine from this public engagement? 18
A. We determined that MSD customers are willing to pay $2/month (or $25/year) for a 19
stormwater capital improvement program, which equates to approximately a 7.5 cent ad 20
valorem property tax for residential customers. 21
Q11. How does this Stormwater Capital Proposal support Stormwater affordability and 22
Environmental Justice (EJ)? 23
Direct Testimony of Brian L. Hoelscher, MSD March 24, 2023
2023 Stormwater Rate Proceeding 4 MSD Exhibit No. MSD 3A
A. MSD is proposing the use of property taxes for residential customers. This method will 1
have a built-in affordability component in that residential customers with lower property 2
values, and less ability to pay, would pay less than those individuals with higher property 3
values. There will also be a portion of the capital program and the municipal grant program 4
targeted towards the EJ areas. 5
Q12. What are the benefits of using property taxes for residential customers? 6
A. Property taxes result in fewer delinquencies, and the cost to run the program is $500,000 - 7
$1,000,000 per year less than a Districtwide impervious area program. The voting 8
residential customers are also accustomed to paying for their other stormwater services 9
through property taxes. 10
Q13. Why charge an impervious area-based rate to non-residential customers? 11
A. For non-residential customers, who unlike residential customers can have widely varying 12
amounts of impervious area, an impervious area rate better reflects their impact on the 13
stormwater system. Moreover, those that generate stormwater issues, be they private, 14
public, or non-profit should participate in funding the solution. Thus, the use of an 15
impervious area rate for non-residential customers provides equity amongst MSD 16
customers paying for a stormwater capital program. 17
Q14. How does the amount of the non-residential impervious area-based rate correspond 18
to the residential ad valorem property tax rate? 19
The impervious area rate for non-residential customers will be calculated to be equitable 20
with the ad valorem property tax rate for residential customers. Residential customers 21
represent 57% of the impervious area within District boundaries, and an approximate 7.5 22
cent ad valorem property tax will generate approximately $19 million per year in revenue. 23
Direct Testimony of Brian L. Hoelscher, MSD March 24, 2023
2023 Stormwater Rate Proceeding 5 MSD Exhibit No. MSD 3A
The revenue generated annually from the impervious area rate for non-residential 1
customers will be set to be proportional to the residential ad valorem property tax annual 2
revenue. The following formula was used to determine the amount of impervious area rate 3
annual revenue: 43% divided by 57% multiplied by $19 million per year, or approximately 4
$15 million per year. The impervious area rate needed to generate $15 million per year in 5
revenue is $1.05 per 1000 square feet of billable impervious area, or Equivalent Service 6
Unit. 7
Q15. Does that conclude your proposed direct testimony in this matter? 8
A. Yes, it does. 9