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Home My Public Portal AboutExhibit MSD 3D - Direct Testimony.Gee.22SW MSD Exhibit No. MSD 3D 2023 Stormwater Rate Change Proceeding MARION M. GEE Direct Testimony Metropolitan St. Louis Sewer District March 24, 2023 Table of Contents Page Witness Background and Experience ........................................................................................... 1 Budget Development .................................................................................................................... 1 Stormwater Financing ................................................................................................................... 4 Direct Testimony of Marion M. Gee, MSD March 24, 2023 2023 Stormwater Rate Proceeding 1 MSD Exhibit No. MSD 3D Witness Background and Experience 1 Q1. Please state your name, business address, and telephone number. 2 A. Marion M. Gee, 2350 Market Street, St. Louis, Missouri 63103-2555, (314) 768-6299; 3 mgee@stlmsd.com. 4 Q2. What is your occupation? 5 A. I am the Director of Finance 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 since September 8, 2015. 9 Q4. What is your professional experience? 10 A. Prior to joining the District, I was an Assistant Director of Finance for the City of San 11 Antonio, Texas. One of my responsibilities was to review all rate proposals and debt 12 issuances of the City’s publicly owned utilities which included a water/sewer utility as well 13 as a gas/electric utility. Prior to my time in San Antonio, I was the Finance Director at the 14 Louisville & Jefferson County KY Metropolitan Sewer District for approximately eleven 15 years. I was also employed in various financial positions with the Louisville Water 16 Company for approximately 8 years. I have also been a certified public accountant since 17 1992. 18 Q5. What is your educational background? 19 A. I hold a Bachelors in Business Administration and a Masters of Business Administration 20 from the University of Louisville. 21 Budget Development 22 Direct Testimony of Marion M. Gee, MSD March 24, 2023 2023 Stormwater Rate Proceeding 2 MSD Exhibit No. MSD 3D Q6. How is it determined whether the District’s Stormwater Capital Proposal 1 is necessary? 2 A. This determination began with the District’s interactions with customers. The lack of 3 funding to construct stormwater capital projects has had a detrimental impact on many of 4 the District’s customers and they have expressed a need for this service. Based on customer 5 feedback, the District assembled a list of potential projects and determined the amount of 6 funding needed to construct the projects and to provide administrative support for the 7 program. A comprehensive financial plan was then developed that allows for the projects 8 to be constructed without imposing a significant financial burden on customers. The 9 forecasts identified in the Rate Change Proposal identify the revenues and expenditures 10 needed to adequately provide this service. If voters authorize the District to initiate the 11 stormwater capital program, the annual revenues and expenditures will be included in the 12 District’s annual operating and capital budgets. 13 Q7. How is the District’s budget developed? 14 A. The District’s budget is developed annually using a zero based budget approach. Each 15 District Director develops the budget for his/her area of responsibility based on current and 16 historical expenditure trends and knowledge of upcoming needs. Each Department 17 prepares a base budget that covers funding for its day-to-day operations and an incremental 18 budget for strategic activities tied to the District’s Strategic Operating Plan to be 19 implemented throughout the upcoming budget year. Each Director’s components are 20 compiled into a comprehensive, balanced preliminary operating budget which is presented 21 to the District’s Board by March 15 of each year as required by Charter. 22 Simultaneously, the District’s Engineering Department updates and develops the District’s 23 Direct Testimony of Marion M. Gee, MSD March 24, 2023 2023 Stormwater Rate Proceeding 3 MSD Exhibit No. MSD 3D five-year Capital Improvement and Replacement Program (CIRP) Supplemental Budget 1 document. This document, lists the various capital projects anticipated over the next 5 2 years, is reviewed by the District’s Executive Director prior to presentation to the District’s 3 Board and modifications are made accordingly. 4 The MSD Board of Trustees (“Board”) Finance Committee meets in April to review, in 5 detail, operating expenses, the CIRP and revenues projected for the budgeted year. During 6 these meetings, District Trustees ask questions and provide direction for modifications. 7 These modifications are incorporated into the budget, which is then presented at a public 8 hearing prior to formal introduction by the Board as required by Charter. This public 9 hearing is normally held immediately following the May Board meeting at which the 10 budget’s formal introduction is held. Final adoption of the District’s budget occurs at the 11 June Board meeting. 12 Q8. What percentage of the total operating budget does the District actually spend? 13 A. A two year average (FY21 and FY22) of actual to budget expenditures reflects that the 14 District spent 95.4% of its operating budget. 15 Q9. When was the current fiscal year 2023 budget approved by the District Board? 16 A. The District’s Board adopted the current fiscal year 2023 budget on June 9, 2022 by 17 Ordinance 15905 (Exhibit MSD 9). 18 Q10. In your opinion, are the inflation allowances used in the Stormwater Capital Proposal 19 reasonable? 20 A. Yes. Please see Section 8.1.1 of the Rate Change Proposal (Exhibit MSD 1) for additional 21 information regarding the inflation allowances used in the Stormwater Capital Proposal. 22 Q11. When will the fiscal year 2024 budget be approved by the Board and available for 23 Direct Testimony of Marion M. Gee, MSD March 24, 2023 2023 Stormwater Rate Proceeding 4 MSD Exhibit No. MSD 3D distribution? 1 A. The fiscal year 2024 budget is expected to be approved by the District Board in June 2023 2 and be available for distribution shortly thereafter. 3 Q12. Is the 2024 preliminary budget available for review? 4 A. Yes. The 2024 preliminary budget was provided to the Board on March 9, 2023 (see 5 Exhibit MSD 11). 6 Stormwater Financing 7 Q13. What percentage of the new stormwater revenue is estimated to be charged to Bad 8 Debt? 9 A. The District expects that the bad debt percentage relating to the new stormwater revenue 10 from the impervious charge will be approximately 4%. No bad debt percentage was 11 applied to the expected ad valorem tax receipts. 12 Q14. Are additional (incremental) expenses included in the Stormwater Capital Proposal 13 related to the implementation of the stormwater capital program? 14 A. Yes, incremental expenses relating to the new stormwater program are included in the 15 Stormwater Capital Proposal (See MSD Exhibit 1, Table 5-1). In order to fund the 16 projected stormwater capital expenditures, the District intends to levy approximately a 7.5 17 cent ad valorem property tax on residential customers and charge non-residential customers 18 a charge of $1.05 per thousand square feet of impervious surface area. 19 Q15. Will this Stormwater Capital Proposal result in any District charges or taxes being 20 eliminated or reduced? 21 A. Yes. Under this proposal the OMCI stormwater taxes will be set to zero after the tax 22 assessment in calendar year 2024. 23 Direct Testimony of Marion M. Gee, MSD March 24, 2023 2023 Stormwater Rate Proceeding 5 MSD Exhibit No. MSD 3D Q16. Are the impervious area-based charge and ad valorem property tax proposed in the 1 Stormwater Capital Proposal contingent upon voter approval? 2 A. Yes. 3 Q17. When will the voters have an opportunity to consider the charges proposed in the 4 Stormwater Capital Proposal? 5 A. The Stormwater Capital Proposal contemplates an election in April 2024. 6 Q18. Has the District previously requested voter approval for stormwater funding? 7 A. Yes. On April 5, 2016, an election was held in which 62% of voters in the District’s service 8 area approved the ten-cent Stormwater O&M property tax. 9 In 2019, voters disapproved by a margin of 53% to 47% a District proposal to charge a 10 Districtwide stormwater capital rate based on impervious surface area to all customers. 11 Q19. Does the proposed election impact the implementation date of the Stormwater Capital 12 Proposal? 13 A. Yes, the District is assuming that the election will take place in April 2024. Only after a 14 favorable election result would the District make the necessary changes to its billing and 15 other systems to implement the new charges. 16 Q20. When will the charges proposed in the Stormwater Capital Proposal be implemented? 17 A. If approved by voters, the monthly charge of $1.05 per thousand square feet of impervious 18 surface area would be charged to non-residential customers effective in January 2025 and 19 approximately a 7.5 cent ad valorem property tax would be levied on residential customers’ 20 properties owned as of January 1, 2025. 21 Q21. What will the typical customer pay under this Stormwater Capital Proposal? 22 A. The annual property tax assessment for the median single-family home will be 23 Direct Testimony of Marion M. Gee, MSD March 24, 2023 2023 Stormwater Rate Proceeding 6 MSD Exhibit No. MSD 3D approximately $25 or approximately $2.08 per month. The average non-residential 1 customer is expected to pay approximately $36.00 per month or approximately $432.00 2 annually. Additional information regarding customer impacts can be found in Sections 3 3 and 5 of the Stormwater Capital Proposal. 4 Q22. Will this Stormwater Capital Proposal have any impact on the District’s debt? 5 A. No, the proposed stormwater program will be funded without the use of debt. 6 Q23. Does this conclude your prepared direct testimony in this matter? 7 A. Yes, it does. 8 9