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MSD Exhibit No. MSD 3G
2023 Wastewater 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 .................................................................................................................... 2
Wastewater Financing ................................................................................................................... 4
Current Projections Compared to 2019 Rate Proposal Forecasts ................................................. 6
Direct Testimony of Marion M. Gee, MSD ____March 24, 2023
2023 Wastewater Rate Proceeding 1 MSD Exhibit No. MSD 3G
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, (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
Q6. What is the focus of the Rate Change Proposal? 22
Direct Testimony of Marion M. Gee, MSD ____March 24, 2023
2023 Wastewater Rate Proceeding 2 MSD Exhibit No. MSD 3G
A. The Rate Change Proposal recommends wastewater rate increases for the period of FY25 1
through FY28. These increases are necessary to provide the revenue to perform operations, 2
maintenance, and construction activities required to comply with the Clean Water Act 3
(CWA), including the Consent Decree, as well as other regulatory requirements. 4
Budget Development 5
Q7. How is the District’s budget developed? 6
A. The District’s budget is developed annually using a zero based budget approach. Each 7
District Director develops the budget for his/her area of responsibility based on current and 8
historical expenditure trends and knowledge of upcoming needs. Each Department 9
prepares a base budget that covers funding for its day-to-day operations and an incremental 10
budget for strategic activities tied to the District’s Strategic Operating Plan to be 11
implemented throughout the upcoming budget year. Each Director’s components are 12
compiled into a comprehensive, balanced preliminary operating budget, which is presented 13
to the District’s Board by March 15 of each year as required by the Charter. 14
Simultaneously, the District’s Engineering Department updates and develops the District’s 15
five year CIRP Supplemental Budget document. This document, which lists the various 16
capital projects anticipated over the next 5 years, is reviewed by the District’s Executive 17
Director prior to presentation to the District’s Board of Trustees (Board) and modifications 18
are made accordingly. 19
The Board Finance Committee meets in April to review, in detail, operating expenses, the 20
CIRP, and revenues projected for the budgeted year. During these meetings, District 21
Trustees ask questions and provide direction for modifications. These modifications are 22
incorporated into the budget, which is then presented at a public hearing prior to formal 23
Direct Testimony of Marion M. Gee, MSD ____March 24, 2023
2023 Wastewater Rate Proceeding 3 MSD Exhibit No. MSD 3G
introduction by the Board as required by the Charter. This public hearing is held 1
immediately following the May Board meeting at which the budget’s formal introduction 2
is held. Final adoption of the District’s budget occurs at the June Board meeting. 3
Q8. What percentage of the total operating budget does the District actually spend? 4
A. A two-year average (FY21 and FY22) of actual to budget expenditures reflects that the 5
District spent 95.4% of its operating budget. 6
Q9. When was the current fiscal year 2023 budget approved by the District’s Board? 7
A. The District’s Board adopted the current fiscal year 2023 budget (Exhibit MSD 9) on June 8
9, 2022 by Ordinance 15905. 9
Q10. Do the budgeted costs for fiscal year 2023 match the 2023 costs shown in the Rate 10
Change Proposal? 11
A. Yes. 12
Q11. In your opinion, are the inflation allowances used in the Rate Change Proposal 13
reasonable? 14
A. Yes. Please see Section 8.1.1 of the appendix for additional information regarding the 15
inflation allowances used in the Rate Change Proposal (Exhibit MSD 1). 16
Q12. When will the fiscal year 2024 budget be approved by the Board and available for 17
distribution? 18
A. The fiscal year 2024 budget is expected to be approved by the District Board in June 2023 19
and will be available for distribution shortly thereafter. 20
Q13. Is the 2024 preliminary budget available for review? 21
A. Yes. The 2024 preliminary budget was provided to the Board on March 9, 2023 (see 22
Exhibit MSD 11). 23
Direct Testimony of Marion M. Gee, MSD ____March 24, 2023
2023 Wastewater Rate Proceeding 4 MSD Exhibit No. MSD 3G
Wastewater Financing 1
Q14. Has customer impact data been factored into the Rate Change Proposal? 2
A. Yes. The Rate Proposal attempts to balance the use of debt financing and current 3
wastewater user charge revenue to simultaneously fund a wastewater improvement and 4
replacement program needed to meet anticipated regulatory requirements and minimize the 5
impact on customer monthly bills to the extent possible. Also, the District commissioned 6
two studies to assess how costs are recovered from customers. An attribute study (see 7
Exhibit MSD 65) was conducted which reviewed the water usage of non-metered 8
customers. This information was used to calculate the proposed rates to be charged to these 9
customers which resulted in the proposed FY 2025 rates for each billing attribute (rooms, 10
water closets, baths, and showers) being lower than those charged in FY 2024 due to a 14% 11
decrease in contributed water volume assigned to this customer class. Also, per the Rate 12
Commission’s recommendation, a study was conducted that further examined the 13
allocation and recovery of costs related to infiltration and inflow (I/I) between customer 14
and volumetric charges (see Exhibit MSD 66). Additional information regarding the I/I 15
study can also be found in the testimony of Mr. William Zieburtz (see Exhibit MSD 3L). 16
Q15. Will ad valorem tax revenues be used to finance any of the Wastewater program 17
expenditures shown in Table 4-7 of the Rate Change Proposal? 18
A. No. While the District’s current ad valorem tax structure includes two Wastewater OMCI 19
subdistricts, Lower Meramec River Basin and Missouri River, no ad valorem taxes have 20
been levied in either subdistrict since 2008. The CIRP includes projects associated with 21
the Missouri River subdistrict, but this work is currently scheduled to be financed by 22
existing OMCI fund balances. 23
Direct Testimony of Marion M. Gee, MSD ____March 24, 2023
2023 Wastewater Rate Proceeding 5 MSD Exhibit No. MSD 3G
Q16. Was a customer bad debt provision factored into the Rate Proposal to compensate for 1
a potential decrease in the collection rate due to rate increases? 2
A. Yes. A bad debt provision equal to projected base charge and volume charge revenue 3
growth from FY25 to FY28 has been applied to the FY23 bad debt expense budget. The 4
percentages applied to each fiscal year are as follows: FY24 (3.6%), FY25 (7.5%), FY26 5
(7.5%), FY27 (7.5%), and FY28 (6.5%). These percentages are equal to the actual rate 6
adjustment for FY24 and the proposed rate adjustments for FY25 thru FY28. 7
Q17. What are the projected wastewater expenditures for FY25 thru FY28? 8
A. Wastewater expenditures are projected to be approximately $2.3 billion which consists of 9
the following components: operating expenses of $906.7 million, debt service of $727.4 10
million, and cash funded capital expenditures (PAYGO) of $632.5 million (see Exhibit 11
MSD 1, Table 4-10). 12
Q18. How are the District’s wastewater O&M services funded? 13
A. Wastewater O&M expenses are primarily funded through wastewater user charges. Other 14
sources of funding used for wastewater O&M expenses include engineering fees, waste 15
hauler permits, connection fees, interest income and other miscellaneous revenues. 16
Q19. Besides wastewater O&M, what do the wastewater user charges fund? 17
A. In addition to O&M expenses, wastewater user charges also fund debt service expenses, a 18
portion of the CIRP, and necessary reserves. 19
Q20. What is the impact of the proposed wastewater rate change for the monthly bill for 20
the various typical customer types assuming the District is authorized to issue bonds? 21
A. The monthly bill for the typical metered single family residential customer based on 22
monthly usage of 5 Ccf will increase by $18.19 from the FY24 projected amount of $57.04 23
Direct Testimony of Marion M. Gee, MSD ____March 24, 2023
2023 Wastewater Rate Proceeding 6 MSD Exhibit No. MSD 3G
to $75.23 in FY28. 1
The monthly bill for the typical unmetered single family residential customer based on 2
attributes of five rooms, one water closet, and one bath (i.e., approximately 6.0 Ccf) will 3
increase by $15.22 from the FY24 projected amount of $68.17 to $83.39 in FY28. 4
The monthly bill for the typical metered multi-family residential customer based on 5
monthly usage of 40 Ccf will increase by $90.64 from the FY24 projected amount of 6
$251.29 to $341.93 in FY28. 7
The monthly bill for the typical metered non-residential customer (normal Strength) based 8
on monthly usage of 100 Ccf will increase by $218.21 from the FY24 projected amount of 9
$589.14 to $807.35 in FY28. 10
The monthly bill for the typical metered non-residential customer (excess Strength) based 11
on monthly usage of 100 Ccf and excess strength of 200 mg/l will increase by $422.44 12
from the FY24 projected amount of $850.69 to $1,273.13 in FY28. 13
Additional detail on rate impacts can be found in Section 6, Customer Impact, in the Rate 14
Change Proposal (Exhibit MSD 1). 15
Current Projections Compared to 2019 Rate Proposal Forecasts 16
Q21. How do the Wastewater user charge revenues currently projected for FY21 to FY24 17
compare to the amounts forecasted for these fiscal years in the rate model used in the 18
2019 Rate Proposal? 19
A. Wastewater user charge revenues for FY21 to FY24 are currently projected to be lower 20
than what was forecasted by the 2019 rate model by $105.2 million or 5.5%. Additional 21
detail can be found in appendix 8.8 of the Rate Change Proposal. 22
Q22. How does the other revenue currently projected for FY21 to FY24 compare to the 23
Direct Testimony of Marion M. Gee, MSD ____March 24, 2023
2023 Wastewater Rate Proceeding 7 MSD Exhibit No. MSD 3G
amounts forecasted for these fiscal years in the rate model used in the 2019 Rate 1
Proposal? 2
A. Other revenue for FY21 to FY24 is currently projected to be higher than what was 3
forecasted in the 2019 rate model by $171.5 thousand or 0.5%. Additional detail can be 4
found in appendix 8.8 of the Rate Change Proposal. 5
Q23. How do the total operating expenses currently projected for FY21 to FY24 compare 6
to the amounts forecasted for these fiscal years in the rate model used in the 2019 Rate 7
Proposal? 8
A. Total operating expenses for FY21 to FY24 are currently projected to be lower than what 9
was forecasted by the 2019 rate model by $15.4 million or 1.9%. Additional detail can be 10
found in appendix 8.8 of the Rate Change Proposal. 11
Q24. How do the Total Debt Service Expenses currently projected for FY21 to FY24 12
compare to the amounts forecasted for these fiscal years in the rate model used in the 13
2019 Rate Proposal? 14
A. Total debt service expenses for FY21 to FY24 are currently projected to be lower than what 15
was forecasted by the 2019 rate model by $91.4 million or 15.0%. Additional detail can 16
be found in appendix 8.8 of the Rate Change Proposal. 17
Q25. Does this conclude your prepared direct testimony in this matter? 18
A. Yes. 19