HomeMy Public PortalAboutExhibit MSD 84A - Surrebuttal Testimony Rich Unverferth
MSD Exhibit No. MSD 84A____
2023 Rate Change Proceeding
RICHARD L. UNVERFERTH
Surrebuttal Testimony
Metropolitan St. Louis Sewer District
June 21, 2023
Table of Contents
Page
Municipal stormwater grant allocation ......................................................................................... 1
Effective Impervious on vacant non-residential properties .......................................................... 2
Stormwater Credit Program .......................................................................................................... 4
Surrebuttal Testimony of Richard L. Unverferth, MSD June 21, 2023
2023 Rate Change Proceeding 1 MSD Exhibit No. MSD 84A
Municipal Stormwater Grant Allocation 1
Q1. Why is population the District’s preferred methodology for distributing stormwater 2
grants? 3
A. The District has a goal to spend 30% of the stormwater revenues in the form of 4
stormwater grants to the municipalities and the County in the District service area. The 5
amount of grant disbursed will be based on a municipality’s population, placed in ranges 6
of population. 7
The stormwater grants are proposed to facilitate local stormwater priorities being 8
addressed at the local level. This grant program is modeled on the successful OMCI 9
taxing district grant program for municipalities that has been implemented by the District 10
over the last few years. A policy decision was made to allocate grants for the OMCI 11
areas based on 50% of the tax revenue generated within the OMCI and based on assessed 12
valuation within each municipality. This was done because the OMCI boundaries do not 13
follow municipal boundaries and there are often multiple municipalities within the OMCI 14
taxing district. 15
During the development of the current stormwater proposal and the decision to allocate 16
30% of the Districtwide generated revenues for municipal grants, a policy decision was 17
made to allocate grants by population. This method provides for a more simplistic and 18
commonly used approach to the grant allocation. We found that population and income 19
level are common models for government grant allocation (when funding is available, for 20
example, State of Missouri Stormwater Grants are allocated by population). 21
Additionally, population information for each municipality is readily available and tends 22
not to fluctuate widely over time. Distribution by population plus impervious area as 23
Surrebuttal Testimony of Richard L. Unverferth, MSD June 21, 2023
2023 Rate Change Proceeding 2 MSD Exhibit No. MSD 84A
suggested by the Rate Commission’s consultant was never considered. This type of 1
allocation would require considerable and sometimes complex calculation for 89 2
municipalities, St. Louis County and the City of St. Louis. Impervious areas can cross 3
municipal boundaries, and potential challenges to calculations could be foreseen. This 4
would all be exacerbated by a regular re-calculation at every new aerial update (typically 5
every two years). Therefore, MSD believes that grant distribution by population provides 6
for the most economically appropriate methodology. 7
Effective Impervious on Vacant Non-residential Properties 8
Q2. In Anna White’s written testimony (Exhibit RC 77, questions 32 & 33) and oral 9
testimony she recommends the District consider charging non-residential customers 10
with vacant parcels an “effective impervious area” rate by applying a runoff factor 11
from the parcel. Did the District consider this approach and what are the potential 12
implications of implementing such an approach? 13
The District did not consider such an approach expressly for this proposal. However, in 14
developing the stormwater user charge that was the subject of the 2007 and 2008 Rate 15
Commission proceedings, the District considered several different types of stormwater 16
charges or combinations of charges based on many different factors, including 17
impervious area, gross lot sizes, relative amounts of pervious and impervious areas, and 18
the like. For many reasons – including cost to administer and implement, simplicity and 19
objectivity, ability for our customers to better understand, and because additional runoff 20
beyond that occurring naturally is a direct function of impervious area – the District 21
decided then to base the stormwater user charge solely on the amount of impervious area 22
on a property. That approach was also used in the 2018 stormwater proposal. In both 23
2007/08 and 2018, the Rate Commission approved stormwater charges based solely on 24
Surrebuttal Testimony of Richard L. Unverferth, MSD June 21, 2023
2023 Rate Change Proceeding 3 MSD Exhibit No. MSD 84A
impervious area. Indeed, impervious area methodology is used by approximately 87% of 1
respondents in the Black & Veatch 2021 Stormwater Survey referenced in Ms. White’s 2
testimony. Proposing a rate to charge non-residential parcels with no impervious area 3
could be problematic for several reasons. 4
• First, calculating an effective impervious area rate only for vacant non-residential 5
parcels and not all non-residential parcels would arguably create unequal 6
treatment within the non-residential customer class in that only completely vacant 7
properties would be charged based on their pervious area. Effectively you could 8
have a vacant parcel with an effective impervious area higher than a similarly 9
sized parcel with limited billable impervious area. This proposed modification 10
would also impact the overall impervious area ratio between the residential and 11
non-residential classes that was used to determine the appropriate impervious area 12
rate. Ms. White’s recommendation was based in part on vacant residential parcels 13
still being taxed while vacant non-residential parcels were not being billed. 14
However, the Black & Veatch survey references numerous instances where 15
residential customers (tiers, flat rates, etc.) are dealt with somewhat differently 16
than non-residential customers. So long as customers within the same class are 17
treated the same, and all customers on the whole are treated fairly, then we 18
believe the charge is appropriate. 19
• Second, while an “effective impervious area” can be determined and justified, it is 20
a matter of degree and it would be more subject to dispute, depending on the level 21
of validation made for each parcel. An application of a runoff factor can make a 22
calculation complicated to the point of not being an effective administrative or 23
billing mechanism. For example, a runoff factor calculation can include variables 24
Surrebuttal Testimony of Richard L. Unverferth, MSD June 21, 2023
2023 Rate Change Proceeding 4 MSD Exhibit No. MSD 84A
for soil type, soil slope and topography, vegetative cover, flow path, curve 1
numbers, etc., and then applying a percentage of the rate to the overall or partial 2
parcel size. This could potentially create two levels of dispute within a single 3
parcel (effective impervious area and impervious measurement). This again 4
would all be exacerbated by a regular re-calculation at every new aerial update 5
(typically every two years). 6
• Third, implementing an “effective impervious area” rate on vacant non-residential 7
customers would come at a significant administrative cost. There are 8
approximately 32,000 non-residential parcels, of which approximately 4,400 9
(~13%) are vacant. The anticipated revenue for such vacant parcels is estimated to 10
be approximately $360,000 annually (based on a 10% universal runoff factor). 11
Performing effective impervious area calculations, along with the potential for 12
customer appeals and on-site validations on 4,400 or possibly 32,000 parcels 13
would be unduly burdensome and add disproportionate cost to the administration 14
of the program. It is estimated to require a minimum of 2-3 FTEs to coordinate, 15
validate, and effectively manage this implementation. We believe that challenges 16
and disputes would add additional costs that would effectively offset this potential 17
increased revenue. Additionally, we anticipate difficulties in identifying and 18
tracking ownership and billing information for these vacant parcels, as these 19
parcels are not receiving current billing from the District. In sum, we believe the 20
cost to implement this approach would exceed the value of any overall benefit. 21
• Finally, another factor to consider would be our ability to effectively 22
communicate this hybrid billing methodology to the general voting public. We 23
Surrebuttal Testimony of Richard L. Unverferth, MSD June 21, 2023
2023 Rate Change Proceeding 5 MSD Exhibit No. MSD 84A
have found that even explaining impervious area measurements to be challenging, 1
and this is far more technical to address with customers. 2
In conclusion, the rate methodology proposed is commonly used, treats customers within 3
each class equally, and allows for efficient administration of the program. 4
Stormwater Credit Program 5
Q3. In Anna White’s written testimony (Exhibit RC 77, question 34) and verbal 6
testimony, she recommends a credit program for non-residential customers. Why 7
wasn’t a credit program proposed by the District? 8
A. The District chose not to propose credits for stormwater BMP’s with its program for several 9
reasons. With the proposed rate structure being a combined property tax (residential) and 10
impervious area-based charge (non-residential), and the inability to provide for partial or 11
full “tax credits”, the District would be unable to equitably allow for stormwater credits for 12
both classes of customers. Furthermore, the implementation of a credit program is costly 13
in terms of lost revenue. Also, each of these creditable practices are an operational cost to 14
the District to ensure they are designed and constructed to provide the purported benefits 15
as well as continually maintained to properly function and provide the benefits. Staff labor 16
and systems, with associated costs would need to be put in place to ensure this happens. 17
These added costs simply lower the capital available for existing problems, which simply 18
does not make sense. Finally, among the District’s 500 plus identified solutions to address 19
problems of erosion and flooding, stormwater BMPs are very rarely the solution of choice, 20
particularly for a watershed of any significant size. While BMPs, both water quality and 21
water quantity, may be beneficial to a community, they are simply not the complete 22
solution to address most existing problems. They would not reduce the cost of the CIRP 23
Surrebuttal Testimony of Richard L. Unverferth, MSD June 21, 2023
2023 Rate Change Proceeding 6 MSD Exhibit No. MSD 84A
required to address problems, and therefore provide insignificant cost savings to the 1
program as proposed. Note that these practices are typically installed to mitigate the 2
creation of additional problems in the community from new development, as required by 3
regulation and to avoid existing problems from getting worse. Despite the installation of 4
over 5,000 of these facilities in the community from 2006 to date, the MSD list of 5
stormwater problem areas continues to grow. 6
However, MSD realizes that public support for these practices as an approach to introduce 7
nature into the built environment may justify the implementation of a credit program for 8
stormwater BMPs, when not otherwise required by regulations. And based on the data 9
from the Black and Veatch study it is not uncommon to have credit programs just for non-10
residential customers. Therefore, MSD would support implementation of a 50% credit 11
program of captured impervious area for detention basins managing stormwater quantity 12
when sized for the MSD regulatory volume criteria (Stormwater shall be detained on site 13
and released at a rate not to exceed the allowable release rates for the 2-year and 100-year 14
24-hour events, as determined by the District for the watershed in question. MSD Rules 15
and Regulations, February 1, 2018). This program would apply to non-residential 16
customers only. 17
Q4. Does this conclude your prepared direct testimony in this matter? 18
A. Yes, it does. 19