HomeMy Public PortalAboutExhibit RC 77- Anna White Rebuttal Testimony1
Exhibit No:
Issue: Stormwater and Wastewater
Rate Change Proceeding
Witness: Anna White
Type of Exhibit: Rebuttal Testimony
Sponsoring Party: Rate Commission
Date Testimony Prepared: May 12, 2023
Table of Contents
Witness Background and Experience ............................................................................................ 2
General Matters .............................................................................................................................. 5
Stormwater Capital Funding Proposal ........................................................................................... 8
Lashly & Baer, P.C.
714 Locust Street
St. Louis, Missouri 63101
Exhibit RC77
2
WITNESS BACKGROUND AND EXPERIENCE 1
Q1. Please state your name and business address. 2
A. My name is Ms. Anna White. My business address is 14011 Lamar Avenue, Overland 3
Park, Kansas 66211. 4
Q2. By whom are you employed, and in what capacity? 5
A. I am a Principal Consultant with Black & Veatch Management Consulting, LLC. 6
Q3. Please describe the firm of Black & Veatch Management Consulting, LLC. 7
A. Black & Veatch Management Consulting, LLC (“Black & Veatch”) is a wholly-owned 8
subsidiary of Black & Veatch Holding Company. It brings together over 250 professionals, 9
including experienced industry executives; senior analysts; and technology experts from 10
across the electric, water, oil, natural gas, and technology industries. In the water sector, 11
Black & Veatch delivers a variety of services for municipalities, special districts; and 12
companies involved in the supply, treatment, and distribution of drinking water; as well as 13
the collection, treatment, and disposal of wastewater and management of stormwater. More 14
specifically, Black & Veatch assists utilities with utility financial planning, cost-of-service 15
analyses, rate studies, bond feasibility studies, affordability analyses, system valuation, 16
utility business efficiency and transformation services, operations technology planning and 17
integration services, customer engagement and advanced metering/billing solutions 18
implementation, expert testimony during rate proceedings, litigation support, and 19
regulatory review. 20
Q4. Please summarize your educational background and professional experience. 21
A. I received a Bachelor of General Studies in Economics from the University of Kansas in 22
1994 and a Master of Business Administration from the University of Kansas in 1998. I 23
3
joined Black & Veatch in 1998 as an analyst in Black & Veatch’s Management Consulting 1
group in Kansas City, Missouri. During this time, I conducted various analyses related to 2
water and wastewater cost of service and rate design studies. I was promoted to Principal 3
Consultant in 2013, primarily serving customers in the eastern two-thirds of the United 4
States. I specialize in managing water and wastewater financial planning and cost of service 5
rate studies. As a project manager, I also lead the evaluation of the feasibility of stormwater 6
utilities, including policy development, financial planning, and rate and credit program 7
design. In the past decade, I have been involved in studies regarding water, wastewater, 8
and stormwater rates and related matters for clients, including strategic financial planning 9
studies, cost of service and rate design studies, and bond feasibility studies. In the past 10
decade, I have provided water, wastewater, and stormwater utility consultant services to 11
various municipal clients, including the City of Topeka, Kansas; Unified Government of 12
Wyandotte County, Kansas; Board of Public Utilities Kansas City, Kansas; City of 13
Leavenworth, Kansas; City of Olathe, Kansas; City of Blue Springs, Missouri; City of 14
Lee’s Summit; Missouri; City of Kansas City, Missouri; City of Lincoln, Nebraska; City 15
of Grand Island, Nebraska; City of Norfolk, Nebraska; Broken Arrow Municipal Authority, 16
Oklahoma; Tulsa Metropolitan Utility Authority, Oklahoma; City of Tulsa, Oklahoma; 17
City of Fayetteville, Arkansas; Sewerage and Water Board of New Orleans, Louisiana; 18
City-Parish of Baton Rouge, Louisiana; Charleston Water System, South Carolina; City of 19
Newark, New Jersey; City of Newark, Delaware; Springfield, Ohio; Metropolitan 20
Sewerage District of Greater Cincinnati, Ohio; and City of Minneapolis, Minnesota. 21
I am a member of the Water Environment Federation (“WEF”) and the American Water 22
Works Association (“AWWA”). I served as a co-author for the chapter on Wet Weather 23
4
Financing and Cost Recovery in the Wastewater Financing and Charges, Manual of 1
Practice 27 (“WEF MoP 27”), 2nd edition, published by WEF in 2018. Since 1999, I have 2
conducted the Black & Veatch Stormwater Utility Survey Report which is issued every 3
three years and I have served as a co-author since 2009. 4
Q5. Have you previously testified before the Rate Commission of the St. Louis 5
Metropolitan Sewer District or any other Rate Commission? 6
A. I have not testified before the Rate Commission of the St. Louis Metropolitan Sewer 7
District, but I have testified before the Kansas City, Kansas Board of Public Utilities. 8
Q6. Please describe your role in this proceeding. 9
A. The scope of my assignment in this proceeding includes the review of the St. Louis 10
Metropolitan St. Louis Sewer District’s (the “District”) 2023 Wastewater and Stormwater 11
Rate Change Proposal (“Rate Proposal”); to assist the Rate Commission in gaining a better 12
understanding of the Rate Proposal; to provide insights to the Rate Commission on industry 13
accepted cost of service and rate setting financial best practices and methodologies, to 14
assist legal counsel in the examination of witnesses, and to prepare testimony and exhibits 15
setting forth my findings. 16
I believe it is my responsibility to advise the Rate Commission on the Proposed Stormwater 17
Capital Funding, including the proposed funding methods to determine the extent to which 18
all funding sources allow for the recovery of the costs anticipated to be incurred by the 19
District’s stormwater utility over the Proposed Stormwater Capital Funding period 20
FY 2025 – FY 2028. In addition, my role is to advise the Rate Commission on the proposed 21
stormwater fee methodology and rate structure. 22
5
Q7. Has Black & Veatch provided any information to the Rate Commission prior to this 1
testimony? 2
A. Yes. Based upon a request of a Rate Commission member, Black & Veatch provided an 3
analysis of inflated costs related to the Consent Decree. 4
GENERAL MATTERS 5
Q8. What is the role of the Rate Commission in this proceeding? 6
A. Pursuant to Section 7.040 of the Charter Plan of the District, the role of the Rate 7
Commission is to review and make recommendations to the District’s Board of Trustees 8
regarding the proposed changes in wastewater charges, stormwater charges, or tax rates 9
necessary to pay: (i) interest and principal due on bonds issued or to be issued to finance 10
assets of the District; (ii) the costs of operation and maintenance; and (iii) such other 11
amounts as may be required to cover emergencies and anticipated delinquencies. For the 12
Stormwater Utility, this Rate Proposal is limited to a proposed Stormwater Capital Rate. 13
Q9. How should the Rate Commission determine whether the District’s Rate Proposal is 14
necessary? 15
A. The Rate Commission should examine the record in this proceeding, including the 16
District’s projected revenue requirements, to determine that such revenue requirements are 17
necessary and reasonable to meet the District’s near-term financial needs, that such revenue 18
requirements do not overstate the District’s near term financial needs, and that such 19
revenue requirements are being recovered in a fair and equitable manner. 20
Q10. Upon what criteria must the Rate Commission base its recommendations? 21
A. In accordance with Section 7.270 of the Charter Plan of the District, any proposed rate 22
change, and all portions thereof, recommended by the Rate Commission must: 23
6
(1) be consistent with constitutional, statutory or common law as amended from time 1
to time; 2
(2) enhance the District’s ability to provide sewer and drainage system and facilities, 3
or related services; 4
(3) be consistent with and not in violation of any covenant or provision relating to any 5
outstanding bonds or indebtedness of the District; 6
(4) not impair the ability of the District to comply with applicable Federal or State laws 7
or regulations as amended from time to time; and 8
(5) considers the financial impact on all classes of ratepayers in determining a fair and 9
reasonable burden. 10
Q11. How should the Rate Commission determine if the Rate Proposal is consistent with 11
constitutional, statutory, or common law as amended from time to time? 12
A. The Rate Commission should evaluate Charter Plan authority, environmental improvement 13
agency regulations, constitutional and statutory provisions and applicable case law. 14
Q12. How should the Rate Commission determine whether the Rate Proposal enhances the 15
District’s ability to provide sewer and drainage systems and facilities, or related 16
services? 17
A. The Rate Commission should consider the record in this proceeding, including the 18
District’s submittal as well as the testimony of its staff and any other intervenors, to 19
determine if the District’s proposal enhances its ability to provide adequate sewer and 20
drainage systems and facilities, and/or capital program related services. 21
7
Q13. How should the Rate Commission determine if the Rate Proposal is consistent with 1
and not in violation with any covenant or provision relating to any outstanding bonds 2
or indebtedness of the District? 3
A. Such a determination requires an analysis of the record in this proceeding, including the 4
covenants or provisions contained in the resolutions or ordinances and bond documents or 5
other documents issuing any such obligations. The Rate Commission can determine that 6
this condition is met by examining the District’s submittal as well as the testimony of its 7
staff. 8
Q14. How should the Rate Commission determine whether the Rate Proposal impairs the 9
ability of the District to comply with applicable Federal and State laws or regulations 10
as amended from time to time? 11
A. The Rate Commission should consider the record in this proceeding, including the 12
testimony provided by District staff and others, including any intervenors, to determine 13
whether the capital rate proposal impairs the ability of the District to comply with 14
applicable Federal or State Laws or regulations. This is accomplished by evaluating the 15
proposal to determine whether the proposed capital rates provide the funding capacity 16
needed to address issues including flooding mitigation and erosion control – which are 17
critical to achieving compliance with applicable Federal or State laws or regulations and to 18
provide sufficient revenue to allow completion of capital projects necessar y to meet 19
Consent Decree obligations while maintaining current assets. 20
Q15. How should the Rate Commission determine if the Rate Proposal considers the 21
financial impact on all classes of rate payers in determining a fair and reasonable 22
burden? 23
8
A. The Rate Commission should determine whether the Rate Proposal considers the financial 1
impact on all classes of rate payers in determining whether the Rate Proposal imposes a 2
fair and reasonable burden by considering the record in this proceeding, including the 3
District’s submittal and the testimony of its staff and any intervenors; evaluating the 4
affordability of the rate by rate class; considering all classes of rates when determining the 5
level of requested funding; and establishing that the method of revenue recovery took into 6
consideration what was fair and reasonable for each class. 7
STORMWATER CAPITAL FUNDING PROPOSAL 8
Q16. What is the basis of the Stormwater Capital Funding Proposal contained in the Rate 9
Proposal? 10
A. The Stormwater Capital Funding Proposal proposes stormwater an ad valorem tax for 11
residential customers and a stormwater capital charge based on impervious area for non-12
residential customers. The revenue generated would fund the Capital Improvement and 13
Replacement Program (“CIRP”) expenditures associated with flooding and erosion. The 14
new ad valorem tax on residential property is projected to recover approximately $19 15
million per year, and the new capital charge on non-residential property is projected to 16
recover approximately $15 million per year, for a total of $34 million of new annual 17
revenue. The District will receive the full amount from both new revenue sources starting 18
in FY 2026. 19
Q17. What other funding sources does this District have? 20
A. The existing 2-cent stormwater regulatory tax will remain in place to fund the District ’s 21
current regulatory obligations. This revenue source is projected to generate approximately 22
$6 million per year. The existing 10-cent District-wide tax will remain in place to fund the 23
9
stormwater operations and maintenance (“O&M”) expenditures. This revenue source is 1
projected to generate approximately $31 million per year. In addition, the District collects 2
ad valorem tax revenue from specific areas with the District to fund project s within those 3
areas. These operation, maintenance and construction improvement (“OMCI”) property tax 4
rates are currently set to zero at the request of the OMCI communities. 5
The proposed capital tax for residential customers is 7.45 cents per $100 of assessed 6
valuation. The proposed capital charge for non-residential customers is $1.05 per $100 7
square feet of impervious area per month. The capital charge will only apply to non -8
residential customers with actual impervious area. 9
Q18. Does the District’s proposal consider the financial impact on all classes of ratepayers 10
in determining a fair and reasonable burden? 11
A. Yes, I believe that the District’s proposal does consider the financial impact on each class 12
of ratepayers in determining a fair and reasonable burden for the following reasons: 13
The proposed rate structure recognizes distinct customer classes, where the 14
customers are grouped into residential and non-residential classes based on the 15
classifications provided by the City and County Assessor’s Offices. 16
The District considered feedback provided by the pubic regarding the amount that 17
customers would be willing to support based on According to the District (See Ex. 18
MSD 74, p. 78, ll. 24-25; p. 79 ll. 1-5), most voters are willing to spend $2.00 19
monthly for a stormwater charge. The Association of St. Louis Realtors has issued 20
its March 2023 MARIS1 Housing Report2 which indicates that the median single-21
family residential sales price for real estate in the combined St. Louis City and 22
1 Mid America Regional Information Systems
2 https://www.stlrealtors.com/pages/housingreport/
10
County area was $262,000. Based on the proposed capital tax rate, the median 1
single-family residential property would pay a monthly stormwater bill of $3.09. It 2
is my opinion that a typical cost of $3.09 per month, as a component of the total 3
cost to customers for providing all stormwater services, is a fair and reasonable 4
burden. 5
The 2021 Stormwater Utility Survey Report prepared by Black & Veatch (“BV 6
Survey”) provides the average monthly single-family residential charge for 73 7
stormwater user fee-funded programs in the United States. The median average in 8
2021 was $6.08. A potential typical monthly cost of $2.00 or $3.00 as proposed by 9
the District seems a fair and reasonable burden based on the survey results. 10
In developing the non-residential stormwater capital charge, the District considered 11
the amount of impervious area for residential and non-residential parcels within the 12
District’s service area. Using the ratio of the total impervious area of non-residential 13
parcels divided by the total impervious area of residential parcels, the District 14
determined a proportionate amount of revenue to recover from non-residential 15
customers. This method allows revenue to be recovered fairly from each customer 16
class. Therefore, the non-residential customers are not subsidizing the residential 17
class, which would directly increase the burden on non-residential customers. 18
Capital Financing 19
Q19. How much has the District proposed to be expensed on stormwater capital 20
improvements in its Rate Proposal? 21
A. The District has identified three major categories of stormwater CIRP: (1) OMCI Funded 22
projects; (2) District-wide Tax Funded projects; and (3) Stormwater Capital Rate Funded 23
11
projects. The District states that there will be $1711.8M (See Ex. MSD 1, p. 5-2, Table 5-1
1) in total CIRP needs for the stormwater system for FY 2025 through FY 2028. 2
Q20. How has the District proposed to fund the stormwater capital improvements? 3
A. The Stormwater Capital Funding Proposal proposes new stormwater capital charges for 4
residential and non-residential customers to fund the CIRP expenditures associated with 5
flooding and erosion. As described under Q17, the District is proposing a new capital tax 6
for residential customers and a new capital charge for non-residential customers based on 7
impervious area. The new capital tax for residential customers is projected to recover 8
approximately $19 million per year, and the new capital charge for non-residential 9
customers is projected to recover about $15 million per year, for a total of $34 million of 10
new annual revenue starting in FY 2026. 11
The District’s Rate Proposal indicates that revenue from the proposed stormwater capital 12
funding will fund approximately $76.8 million of capital expenses from FY 2025 through 13
FY 2028. The existing 2-cent stormwater regulatory tax will remain in place to support the 14
District’s current regulatory obligations. A total of approximately $1.5 million will be used 15
to fund capital projects from FY 2025 through FY 2028. The existing 10-cent District-wide 16
tax will remain in place to fund expenditures. Approximately $76.9 million will be spent 17
during the 4-year period. In addition, the District collects ad valorem tax revenue from 18
specific areas with the District to fund projects within those areas. Approximately $15.6 19
million will fund capital projects from FY 2025 through FY 2028. 20
Q21. Does the District’s proposed funding of the stormwater capital program contribute 21
to sufficient stormwater revenues for the stormwater utility over the Rate Proposal 22
Period? 23
12
A. Typically, a utility will determine the program goals, needs, priorities and financial 1
requirements. The program plan will reflect these elements and the estimated costs will be 2
developed. The necessary funding mechanism will be determined, and the user fee will be 3
developed to recover the identified program costs. The Rate Proposal set forth by the 4
District uses a different approach whereby it first determined the funding level and then 5
will establish the projects. The District has indicated that it determined the annual cost 6
residential customers are willing to pay, and then calculated the revenue to be recovered 7
from the proposed Stormwater capital charge and capital tax. The District then developed 8
the Stormwater CIRP based on the annual projected revenues. The proposed funding is 9
therefore sufficient because the District is designing it’s CIRP based on the available 10
funding. The District intends to expand the CIRP in the future if the new stormwater charge 11
and tax are approved. 12
While the existing funding sources for providing regulatory services and district -wide 13
operations and maintenance of the Public Stormwater Sewer System (“PSSS”) are not part 14
of this Rate Proposal, the District provided a summary of the projection of revenues and 15
costs associated with providing such services. Based on a review of that separate analysis, 16
it appears that those funding sources will provide adequate revenue to provide such services 17
over the Rate Proposal Period. 18
Q22. Do you think the District should consider debt financing a portion of the stormwater 19
CIRP to execute projects quicker? 20
A. Mr. Gee testified that debt financing of stormwater capital was not considered and would 21
not be feasible for the stormwater program (See Ex. MSD 74, p. 216, ll. 20-21). The District 22
raised concerns regarding the debt ceiling and the need to request additional authorization 23
13
of $750 million in April 2024 to fund the proposed wastewater CIRP. Using debt financing 1
for stormwater would likely reduce the amount available for wastewater and potentially 2
impact District’s ability to fund the proposed wastewater CIRP fully. Given those 3
circumstances, it seems reasonable to cash finance the stormwater CIRP. 4
Stormwater Revenue Requirements 5
Q23. Did you examine the District’s proposed O&M expense escalation factors? 6
A. Yes. The District has utilized a series of cost escalation factors in the Rate Model, as 7
described in Section 8.1.1 of the District’s Rate Proposal (See Ex. MSD 1, p. 8-2). The 8
escalation factors used appear to be reasonable. As the District established a multi-year rate 9
schedule, it is important to carefully select cost escalation factors to reflect current and 10
anticipated future conditions. If the costs do not escalate at the projected levels, the charge 11
and tax rate adopted would provide additional cash to improve liquidity (cash on hand), 12
which would help maintain the District’s financial health and/or provide additional cash 13
funding for capital projects. If costs escalate higher than projected levels, the District would 14
either have to engage in cost reduction measures or face a potential shortfall in projected 15
fund balances. 16
Q24. On what basis has the District projected O&M expenses? 17
A. The District has projected future O&M expenses based on the FY 2023 budget. In making 18
projections of future costs, the District has assumed the expenditure of 100% of the 19
FY 2023 budget. 20
Q25. On March 9, 2023, the District provided its preliminary FY 2024 budget to the Board 21
of Trustees (See Ex. MSD 11). What impact, if any, will the preliminary FY 2024 22
budget have on the Rate Proposal? 23
14
A. The District’s preliminary Stormwater Regulatory Fund FY 2024 budget is approximately 1
$775,000 (11%) higher than the FY 2023 budget and approximately $1.7 million higher 2
than the FY 2024 expenses projected in the Rate Proposal. The District’s preliminary 3
District-wide Stormwater Fund FY 2024 budget is approximately $9.1 million (24%) lower 4
than the FY 2023 budget and approximately $940,900 higher than the FY 2024 expenses 5
projected in the Rate Proposal. 6
Q26. Will the proposed stormwater revenue outlined in the District ’s Rate Proposal help 7
achieve adequate fund balances for the District during the Rate Proposal period? 8
A. Yes. Available cash balances are an important element of a utility’s financial plan, as they 9
are necessary to ensure adequate working capital and funds for unanticipated events. The 10
District’s Stormwater Model (See Ex. MSD 60) projects that at the end of FY 2028, there 11
will be a balance of $12.5 million in the combined Regulatory, District-wide Stormwater, 12
and Stormwater Capital fund combined, equating to over 500 days of O&M expenses. 13
Q27. The District has not established a minimum fund balance for the Stormwater Capital 14
Fund. Do you agree with this policy? 15
A. I agree that the Stormwater Capital Fund is slightly different than the other Stormwater 16
Utility Funds in that a portion of the revenue source is a rate that will be collected monthly 17
from Non-Residential customers versus annually as is the case with the tax-based funds. In 18
addition, from an expense standpoint, the District has stated that it will adjust the timing of 19
projects as necessary and only complete projects for which funds are available. However, 20
as a practical matter, I believe a minimum fund balance is appropriate to allow the ability 21
to accommodate unforeseen circumstances with projects underway without relying on 22
borrowing from other Stormwater or Wastewater funds. In reviewing the District ’s Rate 23
15
Proposal, the District’s model’s forecast of reserves (See Ex. MSD 60) targets an end of 1
year fund balance in the Districtwide Stormwater Fund of 240 days of the following years 2
Operation & Maintenance expense. The model indicates that the Districtwide Stormwater 3
Fund will maintain a minimum of 227 days (FY 2027) and an average of 271 days f rom 4
FY 2025 through FY 2028. The model also forecasts that the Stormwater Capital Fund will 5
maintain a minimum of 148 days of capital expenses (FY 2025) and an average of 182 days 6
from FY 2025 through FY 2028. 7
To “weather” through the ups and downs of capital spending, I would suggest the District 8
consider a minimum fund balance of 3-6 months. 9
Q28. The District has a goal to spend 30% of the revenues to the municipalities and the 10
county in the service area in the form of grants (See Ex. MSD 1, p. 5-9). Should the 11
District apply a different method to allocate the municipal grants versus based solely 12
on population? 13
A. As a policy matter, it seems fine to allocate this portion of the funding based on population. 14
However, it raises a potential issue for heavily industrial/commercial municipalities versus 15
“bedroom” communities. The District should consider a methodology based on a blend of 16
both population and impervious area for allocating grant funding to municipalities. 17
Proposed Capital Charge and Capital Tax 18
Q29. What is the District’s Rate Proposal? 19
A. The District’s Rate Proposal is limited to a new Stormwater Capital Tax and Stormwater 20
Capital Charge for funding projects to relieve flooding and erosion throughout the District. 21
Based on the Rate Proposal, the proposed funding method is intended to generate sufficient 22
16
revenue to fund the District’s projected stormwater capital costs at the level of spending 1
indicated in its Rate Proposal. 2
In the Rate Proposal (See Ex. MSD 1, Section 5), the District states that the proposed 3
Stormwater Capital Tax is based on community feedback regarding the monthly expense 4
level at which they would be willing to support the stormwater capital program. At the 5
Technical Conference for Direct Testimony on April 26, 2023, Mr. Hoelscher indicates 6
that the District “backed in for a median price in the St. Louis area of $175 million home 7
in order to get to that $25 per year or $2 per month….” See Ex. MSD 74, p. 79, ll. 6-10. 8
Emphasis added. It is assumed that Mr. Hoelscher meant to refer to a median price of $175 9
thousand; however, the source for this median amount and whether Mr. Hoelscher meant 10
to say “price” versus “appraised value” is unclear. 11
The District determined that a property tax of 7.45 cents per $100 assessed valuation will 12
result in a typical charge of $2.00 for residential properties ($25/year), which the District 13
indicates is “acceptable based on public outreach.” (See Ex. MSD 74, pages 78-79). The 14
estimated appraised value of residential property with a Stormwater Capital Tax charge of 15
$25.00/year would be about $176,600. It is unclear from the rate proposal whether 7.45 16
cents was determined based on an appraised value of $176,600, or if the appraised value 17
water determine based on the tax rate of 7.45 cents. As an example, if the ad valorem 18
property tax rate was $0.10, a property with an appraised value of $131,600 would pay 19
$25/year. Therefore, it is unclear, given the information available, how the tax rate and 20
median appraised value were determined. 21
Based on the historical tax levies and assumed residential change in tax assessed valuation, 22
the stormwater capital tax of 7.45 cents will generate approximately $19.3 million per year. 23
17
Exhibit MSD 68F indicates that 57% of the impervious area is associated with Residential 1
properties. Therefore, the District assumed that 57% of revenue should be generated from 2
Residential properties and 43% from Non-Residential. Thus, approximately $14.8 million 3
in revenue would be recovered through the proposed Stormwater Capital Charge based on 4
Non-Residential impervious areas. 5
The total revenue to be generated from the proposed Capital Tax and Capital Charge is 6
about $34.1 million. 7
Q30. Appendix 8.9 of the District’s Rate Proposal describes the Impervious Area 8
Determination process, which provides the basis for the proportion of revenue 9
collected from the residential and non-residential customer classes. Are you 10
concerned with the approach used in determining billable impervious area? 11
A. Per the description provided in Appendix 8.9 of the Rate Proposal, the District appears to 12
have determined the impervious area by utilizing the Aerial Photography that was available 13
at the time to develop the non-residential stormwater user charge. This imagery would 14
provide the various delineations of improvements found in a property. The District has 15
indicated that the impervious area will be updated with the aerial photography flown in 16
2022 before implementing the user charge. The District indicates that Artificial 17
Intelligence, or machine learning, can be used to identify areas of pervious and impervious 18
land cover and extract features from the imagery. The use of machine learning can be 19
problematic; for example, aerial imagery of dirt and pavement can appear similar. 20
However, dirt is typically considered a pervious land cover that absorbs water and 21
pavement is an impervious land cover that leads to runoff, and therefore, manual clean-up 22
18
would be necessary in this instance. Therefore, the District must have a quality 1
assurance/quality control (“QAQC”) process in place. 2
It also appears that the District has determined the impervious area strictly based on the 3
various delineations of improvements found in a property. 4
Based on this approach of determining impervious area, the District has only included 5
parcels that have visible improvements (referred to it as “classified impervious surfaces”) 6
and excluded parcels that do not have any impervious area features but may have surfaces 7
including compacted dirt, that restrict infiltration and therefore still contribute stormwater 8
runoff. Excluding these types of improved vacant land parcels completely from stormwater 9
billing could potentially impact equity of cost recovery, as these types of improved vacant 10
land also contribute some level of stormwater runoff, especially during high-intensity wet 11
weather events. Rather than completely exclude such parcels from impervious area 12
determination, the District could have considered estimating an effective impervious area 13
by applying a reasonable low runoff factor to the parcel lot size. 14
Q31. Is impervious area commonly used to determine stormwater rates? 15
A. Yes. Impervious surfaces include areas such as paved driveways, patios, sidewalks, parking 16
lots, and rooftops. These types of surfaces do not allow water to filter into the ground. 17
Instead, rainfall runs over these surfaces, and picks up and carries contaminants to local 18
waterbodies. Appendix 8.9 of the District’s Rate Proposal indicates that the District 19
delineated impervious area features, including building main structure footprints, paved 20
roads, driveways, sidewalks, and other features which is reasonable. Based on the most 21
recent Black & Veatch Stormwater Survey, 87% of the 73 respondents indicated the basis 22
for calculating the user fee is impervious area. 23
19
Q32. How does the District’s user charge methodology for the proposed Stormwater 1
Capital Charge compare to other utilities that charge an impervious area-based 2
stormwater rate? 3
A. The District’s proposal to charge a rate per 1,000 square feet of impervious area is 4
reasonable and consistent with other utilities in the US. 44% of the respondents to the BV 5
Survey indicated that non-residential parcels are billed on an individual basis, meaning the 6
user fee is individually calculated for each parcel based on the non-residential rate applied 7
to the parcel’s impervious area measurement. This approach provides the most equity 8
among non-residential parcels. 9
The District has only included parcels with visual improvements. It excluded parcels with 10
no impervious area features that may have surfaces such as compacted dirt that restrict 11
infiltration and therefore, still contribute stormwater runoff. Excluding these types of 12
improved vacant land parcels completely from stormwater billing could potentially impact 13
the equity of cost recovery, as these types of improved vacant land also contribute some 14
level of stormwater runoff, especially during high intensity wet weather events. Rather than 15
completely exclude such parcels from impervious area determination, the District could 16
have considered estimating an effective impervious area by applying a reasonably low 17
runoff factor to the parcel lot size. Based on the BV Survey, 42% of the 73 respondents 18
indicated that undeveloped land is exempt from the stormwater user charge. 19
Q33. In Question 18, you indicated that you believe the District’s stormwater proposal is 20
“fair and reasonable.” Do you believe that it is also equitable? 21
A. I don’t believe it is equitable for two reasons. First, the proposed Stormwater Capital Tax 22
will charge customers based on their property’s value, which is not related to the property’s 23
20
burden on the stormwater system. Under the proposed Stormwater Capital Tax, two single-1
family properties with the amount of square footage of impervious area and lot size in 2
different parts of the service area will pay a different amount for stormwater service, due 3
only to a difference in property value and not due to the level of service received. 4
Second, there is the potential for a residential and non-residential property not being treated 5
consistently and similarly. For example, two properties (one residential and one non-6
residential) with the same amount of impervious will pay a different amount; or a non-7
residential parcel with no impervious area will not pay any stormwater capital charge, 8
while a residential parcel with no impervious area will pay the stormwater capital tax. 9
Q34. Do you recommend the District consider implementing a stormwater credit program 10
to help mitigate the business impact on large non-residential customers? 11
A. Yes. A credit program can be a component of the non-residential stormwater charge as 12
proposed in the 2018 stormwater proposal. The program would offer non-residential 13
customers an opportunity to reduce their stormwater fee by implementing an onside best 14
management practice (“BMP”) structure to control volume and peak flow reduction of 15
stormwater and water quality. Over 50% of the respondents to the BV Survey indicated 16
that their utility has a stormwater credit program. 17
Q35. Are the matters contained herein true, correct, and complete to the best of your 18
knowledge and belief? 19
A. Yes. 20
Q36. Does this conclude your testimony? 21
A. Yes. 22
21
Respectfully submitted,
/s/ Brian J. Malone
Lisa O. Stump
Brian J. Malone
LASHLY & BAER, P.C.
714 Locust Street
St. Louis, Missouri 63101
Tel: (314) 621-2939
Fax: (314) 621-6844
lostump@lashlybaer.com
bmalone@lashlybaer.com
CERTIFICATE OF SERVICE
The undersigned certifies that a copy of the foregoing was sent by electronic transmission
to Stephanie DeJarnette, Office Associate Senior, Metropolitan St. Louis Sewer District; Susan
Myers, Counsel for the Metropolitan St. Louis Sewer District, on this 12th day of May, 2023.
Ms. Stephanie DeJarnette
Office Associate Senior
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103
sdejarnette@stlmsd.com
Ms. Susan Myers
General Counsel
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103
smyers@stlmsd.com
/s/ Brian J. Malone
Brian J. Malone