HomeMy Public PortalAboutExhibit MSD 71A- MSD's Response to Rate Commission's Third Discovery RequestExhibit MSD71A
BEFORE THE RATE COMMISSION OF THE
METROPOLITAN ST. LOUIS SEWER DISTRICT
MSD’S RESPONSE TO THE THIRD DISCOVERY REQUEST OF
THE RATE COMMISSION
DATE PREPARED:
ISSUE:2023 STORMWATER & WASTEWATER RATE
CHANGE PROCEEDING
WITNESS:METROPOLITAN ST. LOUIS SEWER DISTRICT
SPONSORING PARTY:RATE COMMISSION
APRIL 20, 2023
Exhibit MSD71A
BEFORE THE RATE COMMISSION
OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT
For Consideration of a Stormwater & )
Wastewater Rate Change Proposal )
by the Rate Commission of the )
Metropolitan St. Louis Sewer District )
THIRD DISCOVERY REQUEST
OF THE RATE COMMISSION
Pursuant to §§ 7.280 and 7.290 of the Charter Plan of the Metropolitan St. Louis Sewer
District (the “Charter Plan”), Restated Operational Rule § 3(7) and Procedural Schedule §§16
and 17 of the Rate Commission of the Metropolitan St. Louis Sewer District (the “Rate
Commission”), The Metropolitan St. Louis Sewer District (the “District”) hereby responds to the
April 14, 2023 Third Discovery Request of the Rate Commission for additional information and
answers regarding the Rate Change Proposal dated March 24, 2023 (the “Rate Change
Proposal”).
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Exhibit MSD71A
BEFORE THE RATE COMMISSION
OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT
For Consideration of a Stormwater & )
Wastewater Rate Change Proposal )
by the Rate Commission of the )
Metropolitan St. Louis Sewer District )
THIRD DISCOVERY REQUEST
OF THE RATE COMMISSION
Pursuant to §§ 7.280 and 7.290 of the Charter Plan of the Metropolitan St. Louis Sewer
District (the “Charter Plan”), Restated Operational Rule § 3(7) and Procedural Schedule §§16 and
17 of the Rate Commission of the Metropolitan St. Louis Sewer District (the “Rate Commission”),
the Rate Commission requests additional information and answers from the Metropolitan St. Louis
Sewer District (the “District”) regarding the Rate Change Proposal dated March 24, 2023 (the
“Rate Change Proposal”).
The District is requested to amend or supplement the responses to this Discovery Request,
if the District obtains information upon the basis of which (a) the District knows that a response
was incorrect when made, or (b) the District knows that the response, though correct when made,
is no longer correct.
The following Discovery Requests are deemed continuing so as to require the District to
serve timely supplemental answers if the District obtains further information pertinent thereto
between the time the answers are served and the time of the Prehearing Conference.
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Exhibit MSD71A
DISCOVERY REQUEST
1. Please state whether the District has a formula that it uses to determine the amount
of stormwater that will be generated from a parcel of property. If yes, please describe the formula
or methodology in detail. If yes, please also state whether the District assesses stormwater
generation pre-development and post-development.
RESPONSE: The District does not use a formula to determine the amount of stormwater
generated fi-om a parcel of property. The District does use an approach to address stormwater
impacts pre-development and post-development. MSD’s Rules and Regulations and Engineering
Design Requirements contain storm drainage facilities design requirements in Chapter 4. The key
components of the stormwater criteria include water quality volume, channel protection storage
volume andflood protection volume. These design criteria calculate stormwater mitigation facility
sizing and discharge flow criteria based on a specific approach defined in Section 4.060.02.
https://msdprojectclear.org/doing-business/development-review/rides-regulations-design-
requirements/
2. Is the District capable of accurately determining the stormwater runoff generated
from any particular parcel through remote or on-site inspection and application of the formula
referenced in Request No. 1?
RESPONSE: No.
3. Does the District use any formula to uniformly assess the stormwater impact of a
proposed development? If yes, please describe such formula in detail.
RESPONSE: Refer to the response to question 1.
4. Please explain the basis for forecasted wastewater customer accounts and volume
for FY 2024 - FY 2028 for each customer class and volume charge basis (metered and unmetered).
See Ex. MSD 1, Table 4-2; p. 4-4. Please include an explanation for the different assumptions for
FY 2024 Forecast and the FY 2025 - FY 2028 forecast.
RESPONSE: The demand growth rates for wastewater customer accounts and volume can be
found in Ex. MSD 60 (rate model) in the tab labeled Demand beginning with row 148. These
growth rates were applied to the FY23 budget and used to prepare the forecastfor FY24 thru FY28
(see Ex. MSD 60, Demand tab, starting at row 7). The calculation of the growth rates can be found
in Exhibit MSD 7 IB. FY21 data was not used in the calculation due to the impact of COVID which
created an outlier.
5. Please provide documentation supporting the statement that actual wastewater
CIRP appropriations during FY 2018 - FY 2022 averaged 93% of the annual budget
appropriations. See Ex. MSD 1, p. 8-8.
RESPONSE: Please see the chart below.
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Exhibit MSD71A
FY Wastewater CIRP Carryover Percentage Carryover:
2022 329,232,000 7,300,000 2.2%
2021 342,836,000 23,900,000 7.0%
2020 315,063,000 20,000,000 6.3%
2019 323,040,000 32,600,000 10.1%
2018 298,777,000 30,441,000 10.2%
5 Year average:7.2%
6. Please provide documentation supporting the statement that 9.28% of a CIRP
project’s appropriation is liquidated at the end of the project. See Ex. MSD 1, p. 8-8.
RESPONSE: Please see the chart below.
Expense Type LdJ Sum of Budget Sum of Available Balance Sum of Available for Liquidation Average of Percent Liquidated
Operating
Non-recurring
Capital
136,220,292 7,204,305 7,204,305 5.29%
65,569,136 12,880,705 12,880,705 19.64%
1,588,985,584 146,047,622 146,047,622 9.19%
Grand Total 1,790,775,012 166,132,632 166,132,632 (978?)
7. Please provide the breakdown of the sources for the FY 2022 beginning fund
balance of $285,537,380 (cash, bonds, loans, etc.).
RESPONSE: Please see the chart below. Fuads 5590 and 5591 are Wastewater OMCI’s.
METROPOLITAN ST. LOUIS SEWER DISTRICT
Fund Balance Report
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Beginning
Fund Balance
5590 5590 5590 Mo River Bonfil Subd #448 OMCI Fund 1,658,788.08
5591 5591 5591 Meramec River Basin Subd #449 OMCI Fund 260,701.53
6660 6660 6660 Sanitary Replacement Fund 37,867,295.63
6827 6827 6827 2018A WIFIA Project Bond Fund 47,460,724.14
6828 6828 6828 2018B SRF Project Bond Fund 964,087.63
6829 6829 6829 2019A SRF Project Bond Fund 1,940,314.27
6830 6830 6830 2019B Project Bond Fund -
6832 6832 6832 2020 SRF Project Bond Fund 12,016,581.96
6833 6833 6833 2020B Project Bond Fund 92,660,509.68
6834 6834 6834 2021A SRF Project Bond Fund 57,767,935.26
6835 6835 6835 2021B SRF Project Bond Fund 32,940,442.08
Fund Balance Total 285,537,380.26
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Exhibit MSD71A
8. How were the projected State Revolving Fund loan amounts determined in FY
2026, FY 2027 and FY 2028? See Ex. MSD 1, p. 4-17.
RESPONSE: See Direct Testimony of Tim Snoke - Exhibit MSD 3H, Q25
9. What is the targeted end-of-year balance in the capital financing plan?
RESPONSE: The District’s Charter requires that “In no event shall the total amount of proposed
expenditures for the budget year from any fund exceed the estimated revenues to be actually
received plus any unencumbered balance or less any deficit estimated for the beginning of the
budget year ” The District has no targeted end-of-year balance in the capital financing plan
besides ensuring that the balance is positive As reflected in Exhibit MSD 60 (Rate Model), tab
labeled CIRP, the end-of-year balance may fluctuate significantly from year to year. The District
monitors the fund balance on at least a monthly basis and makes necessary adjustments to ensure
that the sources of funds are enough to cover projected capital outlays
10. Please explain why the financial plan assumed a debt to equity ratio of 60%/40%
when the historical ratio had been approximately 70%/30% since FY 2004.
RESPONSE: See Direct Testimony of Bethany Pugh - Exhibit MSD 31, Q6 The historical ratio
of70%o/30%> is an average, not a norm Funding for previous proposals has rangedfrom 90%/l 0%
to 60%/40% As MSD’s debt burden has grown, the revenues necessary to provide for the required
debt service coverage in order to maintain AA-category ratings has increased The debt to equity
ratio in the Rate Proposal is a function of the amount of cash generated from coverage
11. In its 2018 report to the District’s Board of Trustees regarding the proposed
stormwater rate increase, the Rate Commission included a statement on third-party funding. See
Ex. MSD 6, pgs. 15-51. This statement included a 5-year scenario prepared by the Rate Consultant
in which eveiy municipality with a Parks and Stormwater Sales tax (authorized by § 644.032,
RSMo) contributed 50% of the funds for their projects. Has the District modified its position
regarding third-party funding as a result of this study, or any other study performed by the Distiict?
Explain why or why not. Does the District intend to incentivize communities within its service
area to contribute funding to projects within theii jurisdiction? Explain why or why not. Describe
any steps taken by the Board of Trustees to respond to this statement on third-party funding.
RESPONSE: a The District has not modified its opinion All municipalities should equally
experience the benefit of MSD’s District-wide program whether they are capable of providing
additional funding or not.
b Yes, by providing a grant program to all municipalities that can be used on its own or combined
with local funds to complete a larger initiative. See MSD Exhibit 1, Section 5 5(5)
c Please see Attachment A which is a November 8, 2018 response to the Rate Commission’s 2018
Recommendation from the Board of Trustees regarding the third-party funding issue from the 2018
Rate Proposal
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Exhibit MSD71A
12. During the 2018 Rate Change Proposal, the District expressed concern that
incentivizing third-party funding would adversely affect less affluent communities. See Ex. MSD
6, pgs. 19-20. Has the District considered any changes to its prioritization of stormwater projects
that would permit third-party contributions and that would include additional inputs to aid less
affluent communities in getting projects approved and prioritized? Explain why or why not.
RESPONSE: The District has not considered any changes to its prioritization of District-wide
stormwater projects, but by providing a grant program to all municipalities that can be used on
its own or combined with local funds to complete a larger initiative, the municipalities have the
ability to address problems using their own priority system See MSD Exhibit 1, Section 5 5(5).
13. Provides copies of any meeting minutes in which the District’s Board of Trustees
discussed the third-party funding issue from the 2018 Rate Change Proposal, and any internal
District reports or studies regarding third-party funding for prioritization in the Stormwater CIRP.
RESPONSE: No such documents exist. Please see Attachment A which is a November 8, 2018
response to the Rate Commission’s 2018 Recommendation from the Board of Trustees regarding
the third-party funding issue from the 2018 Rate Proposal The current proposal to offer
stormwater grants to each municipality is a feature that came out of the stakeholder OMCI
discussions that were described in the November 8, 2018 response
14. The Rate Change Proposal acknowledges that, with respect to OMCI Funds, “taxes
have been collected in seven districts at the request of the communities they serve.” See Ex. MSD
1, p. 5-4. Under the Rate Change Proposal, the OMCI will turn off after year 2024. Please describe
if the Rate Change Proposal contemplates any means for a community to request or provide
contributions to projects within their community after such district no longer levies taxes. Please
explain why or why not.
RESPONSE: While the OMCI tax rates are greater than $0 00 and being collected, MSDplans
to maintain the local municipality grant program to all municipalities that can be used on its own
or combined with local funds to complete a larger initiative using their own priority system If the
OMCI tax rates are set at $0 00 or if the OMCI taxing districts are eliminated, the only revenue
would come from the proposed 2023 Rate Proposal and the answer to question 12 in this Third
Discovery Request would apply
15. Please provide a summary of all pending litigation against the District, in which the
prayer for damages exceeds $100,000.00, including estimated exposure risk to the District for each
case. Please identify any lawsuit in which an adverse ruling would impact the Rate Change
Proposal.
RESPONSE: There is no pending litigation against the District in which the prayer for damages
exceeds $100,000 00 and there is no pending litigation whereby an adverse ruling would impact
the Rate Change Proposal.
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Exhibit MSD71A
16. Please explain the anticipated impact on borrowing costs if the District’s bond
rating is upgraded or downgraded.
RESPONSE: While PFM cannot predict how the market will react to a change to the District’s
ratings, we expect there would be minimal impact to borrowing costs with an upgrade The District
currently has the highest rating from S&P and is only one notch removed from the highest rating
from Moody’s and Fitch In order to estimate the increased borrowing cost associated with a
potential downgrade, PFManalyzed the industry benchmark 20year spot rate since 2000 During
this time the average difference between a AA and A rated bond has been approximately 33 basis
points (0 33%) If we added 33 basis points to the borrowing rates of a typical issuance of the
District for $100 million in projects, this would equate to an additional present value cost of
$3,016,000 Furthermore, in times of market stress and volatility, lower rated issues have the
potential to realize greater credit spreads and issuers could struggle to gain market access, as
certain credits experienced during the last financial crisis and the more recent COVID-associated
economic downturn
17. Please explain how the District establishes insurance requirements for projects.
Please provide examples of insurance requirements for CIRP projects of varying sizes.
RESPONSE: MSD establishes Insurance Requirements on projects based on size and complexity
of project See Exhibit MSD Exhibit 71.
18. Please state the total number of projects the District is required to complete for the
Consent Decree.
RESPONSE: The Consent Decree does not define a set number ofprojects to be completed for
compliance. The components of the Consent Decree include Sanitary Sewer Overflow elimination,
reduction and control of Combined Sewer Overflows, investment in Green Infrastructure,
Cityshed, Supplemental Environmental Projects, and Capacity Management Operations and
Maintenance (CMOM), each of which will require a variable number of projects to meet
compliance To date we are less than halfway through the Consent Decree duration So far 870
distinct project numbers have been used for past project appropriations or identified for future
budgeting of projects
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Exhibit MSD 71A
Respectfully submitted,
Saa- /W
Susan M. Myers '
Brian Stone
THE METROPOLITAN ST. LOUIS
SEWER DISTRICT
2350 Market Street
St. Louis, Missouri 63103
Tel: (314) 768-6366
smyers@stlmsd.com
bstone@stlmsd.com
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Exhibit MSD71A
CERTIFICATE OF SERVICE
The undersigned certifies that a copy of the foregoing was sent by electronic transmission
to Lisa O. Stump and Brian J. Malone, Lashly & Baer, on this 20th day of April, 2023.
Lisa O. Stump
Lashly & Baer, P.C.
714 Locust Street
St. Louis, Missouri 63101
lostump@lashlybaer.com
Brian J. Malone
Lashly & Baer, P.C.
714 Locust Street
St. Louis, Missouri 63101
bmalone@lashlybaer. com
■usan"Susan M. Myers /
Brian Stone
THE METROPOLITAN ST. LOUIS
SEWER DISTRICT
2350 Market Street
St. Louis, Missouri 63103
Tel: (314)768-6366
smyers@stlmsd.com
bstone@stlmsd.com
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Metropolitan
St. Louis Sewer
District
2350 Market Street
St. Louis, MO 63103-2555
(314) 768-6200
Attachment A
November 8, 2018
To: The Rate Commission of the Metropolitan St. Louis Sewer District
Re: August 9, 2018 Rate Recommendation Report, Statement of Rate Commission On Third-
Party Contributions
Dear Rate Commission,
The Board of Trustees has reviewed the above document. As included in the conclusion stated
at the bottom of page 21 of your report, we understand that the Rate Commission wishes to
increase funding of the Stormwater Capital Program while still being fair and equitable to all
ratepayers.
The Board of Trustees has reviewed the specific example contained in your statement. There
are two considerations that the Board of Trustees feels makes implementation of the example
problematic-
1. MSD does not have a source of funds to participate in a 50% match with local communities
without negatively impacting the relative priority and the programing of projects for
communities unable to provide the 50% match.
2. All communities, as they have done in the past and we assume will continue to do, have the
ability to fully fund their own stormwater projects within their own priority system and
schedule.
That being said, the Board of Trustees wants to assure the Rate Commission that they
understand and agree with the intent of the Rate Commission to identify additional funding for
Stormwater Capital Work. The Board of Trustees has directed staff to continue pursuing the
following additional sources of funding-
1. Self-Funding of Stormwater Projects by Municipalities- MSD staff will continue to enable
municipalities to self-fund stormwater projects they feel are appropriate. This allows those
communities to program the date these projects are completed within their own priority
system. MSD estimates that about $4 million/year in this type of work is currently being
completed.
2. State Stormwater Grants- MSD has continuously pushed for the full expenditure of this
program by the State of Missouri. $8 million/year for the next 8 years are potentially available
to MSD. These grant monies would be distributed by a population formula that would need to
be approved by the State. While this program has not been in place for about 10 years now, the
Governor's Office has agreed to meet with MSD staff on November 1 to discuss putting this
program into the State of Missouri's budget.
Attachment A
3 Future Rate Increases- As committed during the Rate Commission hearings, staff will
continue to monitor the rate payers willingness to pay more for Stormwater capital work. Every
$l/month in rate generates about $13 million/year in revenue.
4 Operation, Maintenance, and Construction Improvement (OMCI) Sub-Districts- MSD
committed to discussing the status of these sub-districts with the 57 municipalities and the
portions of St Louis County that are located within these areas after the Stormwater Rate
Proposal vote in April 2019. These property tax rates were set at $0.00 by the Board of Trustees
as promised to the voters as part of the Proposition S campaign in April 2016 If these taxes
were fully assessed, they would generate over $9 million/year in additional revenue for
Stormwater Capital Projects to be performed within the boundaries of the sub-districts. MSD
committed to form advisory groups in each sub-district to develop recommendations to the
Board of Trustees as to what rules would be used in the allocation of these funds towards
Stormwater Capital work.
MSD believes that these initiatives can address the Rate Commission's desire to provide more
funding for the Stormwater Capital Program. The Board of Trustees greatly appreciates all of
the effort the Rate Commission put into its review of the Stormwater Rate Proposal.
Please contact Executive Director Brian Hoelscher at 314-768-6245 if you have any questions
Respectfully,
Jim Faul, Chairman