MIDWEST LITIGATION SERVICES

Transcription

1 1 METROPOLITAN ST. LOUIS SEWER DISTRICT Page 1 2 PUBLIC HEARING 3 MAY 12, POINTE AT BALLWIN COMMONS 6 ONE BALLWIN COMMONS CIRCLE 7 BALLWIN, MISSOURI (Hearing start time, 6:00 p.m.)

2 1 I N D E X Page 2 2 PAGE 3 Introduction by Ms. Kelling 5 4 Presentation by Mr. Hoelscher 9 5 Public Hearing Session 6 Jeannie Hilton 35 7 Charles Allison 35 8 Paul Caster 37, 60 9 Lea Ann Ravens Conclusion (No exhibits marked.)

3 1 PUBLIC HEARING FOR THE METROPOLITAN ST. LOUIS Page 3 2 SEWER DISTRICT, produced and examined on May 12, , between the hours of 6:00 in the evening and 4 7:17 in the evening of that day, at the Pointe at 5 Ballwin Commons, One Ballwin Commons Circle, 6 Ballwin, Missouri, before Suzanne M. Zes, a 7 Certified Court Reporter of the State of Missouri

4 1 A P P E A R A N C E S 2 For the MSD Rate Commission: 3 Lori A. Kelling West St. Louis County Chamber of Commerce 4 John L. Stein 5 Missouri Industrial Energy Consumers Russell Hawes 6 St. Louis County Municipal League Page 4 7 Mark Schoedel Lutheran Senior Services 8 9 Also Present: Brian Hoelscher 10 Executive Director

5 1 P R O C E E D I N G S Page 5 2 MS. KELLING: Good evening, everyone. 3 We're going to begin. My name is Lori Kelling and 4 I'm a member of the Metropolitan St. Louis Sewer 5 District Rate Commission and I will be presiding 6 over the Public Hearing this evening. 7 Tonight with me we have Mr. John Stein and 8 Mr. Russell Hawes. Did I say that right? 9 MR. HAWES: Yes. 10 MS. KELLING: All right. The Charter 11 Plan of the District was amended at the general 12 election on November 7, 2000, and established the 13 Rate Commission to review and make recommendations 14 to the District regarding changes in wastewater 15 rates, stormwater rates and tax rates proposed by 16 the District. 17 The Charter Plan requires the MSD Board of 18 Trustees to select organizations to ensure a fair 19 representation of all users of the District's 20 services on the Rate Commission. The Rate 21 Commission representative organizations are to 22 represent commercial-industrial users, residential 23 users and other organizations interested in the 24 operation of the District, including organizations 25 focusing on environment issues, labor issues,

6 1 socioeconomic issues, community-neighborhood Page 6 2 organizations and other nonprofit organizations. 3 The MSD Rate Commission currently consists of 15 4 members from organizations and institutions 5 throughout St. Louis County and City. 6 On February 26, 2015, the Rate Commission 7 received a Rate Change Notice proposing changes to 8 the District's wastewater rates and stormwater 9 revenues. The Rate Commission adopted Operational 10 Rules and a Procedural Schedule to govern the 11 proceedings on March 4, Under the current Procedural Schedule adopted 13 by the Rate Commission the MSD Rate Commission has 14 until June 26, 2015 to review and make a 15 recommendation to the MSD Board of Trustees as to 16 whether the proposed rates should be approved, not 17 by approving or modified with suggested changes and 18 then approved. The Commission has, however, 19 requested an extension from the MSD Board of 20 Trustees until August 10, 2015, which has not yet 21 been acted upon. 22 The MSD Rate Commission has engaged legal 23 counsel and a rate consultant independent of those 24 used by the MSD staff. 25 Under procedural rules adopted by the Rate

7 1 Commission, as amended, any person affected by the Page 7 2 Rate Change Proposal had an opportunity to submit an 3 application to intervene in these proceedings. 4 Applications to intervene have been filed by the 5 Home Builders Association of St. Louis and Missouri 6 Industrial Energy Consumers. These applications 7 have been granted. 8 Since February 26, 2015, the MSD Rate 9 Commission has received testimony from MSD staff. 10 The parties have also engaged in discovery requests. 11 Additional testimony from the Intervenors and the 12 Rate Consultant will be filed. 13 A Prehearing Conference for the purpose of 14 identifying any issues raised by the Rate Setting 15 Documents and the prepared testimony previously 16 submitted will be conducted on the record. All 17 persons submitting testimony may participate in the 18 Prehearing Conference and each participant in the 19 Prehearing Conference shall submit a Prehearing 20 Conference Report describing the issues raised by 21 the Rate Setting Documents and the prepared 22 testimony, together with a brief description of such 23 participant's position, if any, on each issue and 24 the rationale therefor. 25 Ratepayers who do not wish to intervene are

8 1 permitted to participate in these on-the-record Page 8 2 public hearings conducted in nine sessions beginning 3 on May 11, 2015 and concluding on June 9, The Rate Commission public -- I'm sorry -- 5 the Rate Commission published a Public Notice 6 regarding these proceedings in the St. Louis 7 Post-Dispatch and in the St. Louis American. These 8 Notices contained the time, dates and location of 9 each of the conferences and hearings. 10 The Public Hearing session tonight is for the 11 purpose of permitting the District to present its 12 Wastewater and Stormwater Rate Change Proposal, and 13 to permit any ratepayer an opportunity to comment. 14 We will begin with a presentation by the District 15 followed by a public comment period. 16 Those wishing to speak should sign in on the 17 sheet provided and will be called on in the order of 18 the names listed thereon. Each ratepayer should 19 identify themselves and any organizations 20 represented by such ratepayer. 21 Several housekeeping rules before we begin 22 are: 23 If you wish to present testimony please sign 24 in on the clipboard by Libby in the back. Speakers 25 will be recognized in the order in which they are

9 1 signed up. Several groups wrote in advance Page 9 2 requesting time to speak and they will be allowed to 3 speak first, if applicable. 4 Each ratepayer may have a maximum of ten 5 minutes to speak regarding the proposed rate change. 6 As the presiding officer I can limit or expand the 7 time, should I deem it necessary. 8 The restrooms are located outside both the 9 exit doors right in the center. And other specific 10 site instructions, refreshments are in the back. 11 Are there any questions regarding the 12 procedure this evening? (No response.) 13 And is the District ready to proceed? 14 MR. HOELSCHER: Yes, we are. 15 MS. KELLING: Okay. 16 MR. HOELSCHER: Good evening, my name is 17 Brian Hoelscher. I'm the executive director with 18 the St. Louis Metropolitan Sewer District. Tonight 19 we're going to go over a proposal that was submitted 20 by MSD to the Rate Commission for their 21 consideration. 22 As previously stated, at the end of my 23 presentation there will be a period for comments if 24 anyone in the public would like to comment on the 25 presentation they saw. In addition, MSD staff is

10 1 here to answer questions you have about the Page 10 2 presentation or any other MSD issue after these 3 proceedings are over and we will stay as long as 4 necessary in order to accommodate all the questions. 5 Two things to keep in mind before I start the 6 presentation. One, the wastewater rates are driven 7 by a Consent Decree that MSD signed based on a 8 lawsuit filed by the Department of Justice and the 9 EPA. The wastewater rates are driven by the 10 requirements to meet the conditions of that Consent 11 Decree. 12 Second, I will also be going over a proposed 13 change in the way MSD collects stormwater taxes. 14 Two reasons MSD is proposing something. One is to 15 equalize the service levels throughout the area and 16 also to provide funding for one half of the storm 17 sewer system which currently receives absolutely no 18 funding for operation and maintenance of that 19 system. 20 So the first page. Good thing to keep in 21 mind, MSD is actually two utilities. We provide 22 wastewater service, in that vein, we collect and 23 treat water that goes down drains, sinks, toilets, 24 showers, washing machines. It goes through miles of 25 pipe, gets to one of our treatment plants, we treat

11 1 that according to our permits and discharge it to Page 11 2 the rivers in the area, in the Missouri River, the 3 Mississippi River or the Meramec River. 4 The wastewater service is currently funded 5 through a monthly bill that our wastewater 6 service -- or our wastewater customers receive. 7 That bill currently, for an average person, is 8 somewhere in the neighborhood of $36 per month. 9 Again, the revenues there are that monthly bill, if 10 you're a wastewater customer, that you receive from 11 MSD. 12 MSD is also a stormwater service provider. 13 Any of the rain that falls on the ground that 14 doesn't go directly to creeks and streams or soaked 15 in the ground can go through our public storm sewer 16 system, which would be inlets, manholes, concrete 17 pipes and concrete channels that are located 18 throughout our boundaries. 19 We are also required to address regulatory 20 concerns having to do with the pollutants that are 21 in stormwater runoff that enter our creeks and 22 streams. Those services are paid by a small monthly 23 fee of 24 cents per month that's on your wastewater 24 bill but mostly it's on your property tax. So when 25 you pay your property tax at the end of the year

12 1 almost all the monies that MSD collects for Page 12 2 stormwater are on that annual property tax bill. 3 A little more on MSD's Rate Commission, going 4 over some of the information we had previously, it 5 was established in 2000 to provide public input to 6 how MSD sets its rates. Fifteen organizations 7 represent a broad cross-section of the community. 8 Each one of those organizations appoint one person 9 to serve as a rate commissioner. 10 We have three of them here with us -- four of 11 them, somebody snuck in, four of them here with us 12 this evening. 13 So the way the process works, MSD submits MSD staff submits a proposed Rate Change to the Rate 15 Commission. The Rate Commission reviews that and 16 makes a recommendation to MSD's Board of Trustees. 17 They in turn review that recommendation and we move 18 forward. 19 The Rate Proposal that MSD has put in front 20 of the Rate Commission is for rates from the period 21 July 1, 2016 to June 30, First of all, I want to go over the current 23 wastewater rates. In our current cycle, which ends 24 on June 30, 2016, MSD proposed to start $971 million 25 of capital improvements during a four-year period.

13 1 Right now it appears we will appropriate Page 13 2 approximately $890 million of work. 3 The work that is needed has all been 4 completed. We are under budget and not having spent 5 all of those dollars is just reflective of some of 6 the efficiencies and low prices we've been getting 7 in doing our capital program. Any of that 8 additional monies that were collected for the 9 capital program are simply rolled over into the next 10 rate cycle. They're not used for any other 11 purposes. 12 As far as operation, there was $716 million 13 worth of revenue that was included in our Rate 14 Proposal for that four-year period. Right now we're 15 projecting we will spend $700 million on operation 16 and maintenance of the wastewater system, putting us we're projecting to be about $16 million under 18 budget. 19 During that time we inspected 62, manholes, rehabilitated 6600 manholes, inspected miles of sewers and based on an analysis of two 22 equivalent rains that happened in the north part of 23 our service area we're estimating that the work to 24 date has resulted in a two-thirds reduction in the 25 overflow volumes and basement backups that we see in

14 1 the St. Louis area. Page 14 2 What MSD's proposed rates look like. Slide 3 7, what drives those rates, the biggest one is part 4 of Project Clear, is get the rain out. The main 5 issue MSD is dealing with is inappropriate or too 6 much stormwater getting into the sanitary sewer 7 system. 8 If it's in the separate sanitary sewer 9 system, out in the county mostly, no stormwater is 10 supposed to get in there. Stormwater getting in 11 causes the pipes to surcharge resulting in either 12 overflows or basement backups. 13 Same way in the combined system in the city 14 and the near northwest and south counties, we have 15 combined sewer systems. Although discharges are 16 still allowed, we do have to mitigate their impact 17 on the environment and reduce the amount of overflow 18 volumes. All of that we do by getting the 19 stormwater out of the system first. It's the most 20 cost-effective way to solve other issues. 21 We do have a regular schedule of repair and 22 maintenance of the existing system so they can 23 continue functioning properly and in some instances 24 we build system improvements. 25 Understand that all of these concerns have to

15 1 do with wet weather. When it is not raining, unless Page 15 2 a grease has built up in a line from somebody who is 3 throwing grease down the drain or if a pipe fails, 4 except for that, during dry weather all of our 5 flows, all of our wastewater flows go to treatment 6 plants, get properly treated and discharged into the 7 environment. This is a wet weather issue when it 8 rains. 9 Another thing we consider is to maintain our 10 financial stability and be responsible financially 11 for how we do this work. We're doing that primarily 12 by setting up a program to make sure that the 13 targets for a AA bond rating are maintained. 14 Currently MSD has a AAA bond rating with S&P and a 15 AA1 and AA Plus with Fitch and Moody's. That allows 16 us to borrow monies at very favorable rates. 17 The plan we have in place here is to make 18 sure we try and maintain that level of bond rates. 19 Slide 8 is the capital program. Where we're 20 planning on starting is $1.5 billion worth of 21 capital work over the next four years. You see on 22 those years when those projects will start, 23 culminating in a total of $1.5 billion worth of 24 work. 25 We're also planning on requesting

16 1 $736 million of revenue for operation and Page 16 2 maintenance of the wastewater system. It would be 3 treatment plants, pump stations and the pipes 4 themselves. And also the payment of $477 million of 5 debt service. This will be both from past bonds 6 that have been sold, as well as bonds we're 7 recommending to sell during this next four-year 8 period. 9 Slide 9, the additional use of debt, what MSD 10 is proposing. Over the next four years we're 11 proposing to fund with two mechanisms. One is 12 $415 million worth of cash. That is directly taking 13 the rates that get paid to us and applying them to 14 the program. The other is for bond financing. 15 We're borrowing money in the tune of $1.1 billion of 16 borrowing over the next four years. 17 We currently have $200 million of bond 18 authority left from the previous vote. MSD will be 19 looking to the ratepayers to decide whether or not 20 to authorize it to issue an additional $900 million 21 worth of bonds. That will bring our total debt 22 authorization to 2.62 billion. 23 Keep in mind, whenever MSD borrows money 24 through bonds all the money is used to pay for 25 capital work. It's not used to pay for any

17 1 operating expenses. Page 17 2 The work that will be completed in the 3 capital program. There will be approximately projects that will be started. 230 of those will be 5 construction projects. We anticipate removing an 6 additional 39 overflows from the separate sanitary 7 sewer system and we'll start the design of 24 miles 8 of storage conveyance tunnels. Where we can't get 9 stormwater out of the system to prevent the 10 overflow, we will put tunnels in place to capture 11 that flow so we can treat the overflows after the 12 storm event is over. 13 Slide 11 is where all the capital projects 14 are. And if you have a magnifying glass you can see 15 what those little numbers are inside the blue dots. 16 This is a map that is in our Rate Proposal. If you 17 look at the bottom right of the slide it says 18 "Appendix " That's referencing our Rate 19 Proposal that's on our website if you want to see 20 the details. 21 What you will find is each one of these blue 22 dots has a number. That is a project and each one 23 of those projects will have a description of the 24 problem, a description of the solution, the cost to 25 solve the problem and the year we plan on starting

18 1 the project. Page 18 2 We have provided tonight on these boards -- 3 this is a board that's identical to what you see in 4 the proposal. We've also brought along, which is 5 also in our rate proposal, a spreadsheet. So if 6 you're interested in what exactly a certain project 7 is on this list, after the presentation is done this 8 evening you can come up, take a look and you can see 9 the details about any of those projects. 10 What we're proposing to accomplish with 11 the -- for wastewater operation and maintenance: 12 inspection of 60,000 manholes, rehabilitation of 13 6,000 manholes, closed-circuit TV or TV inspection 14 of the sewers, 1600 miles of that, cleaning miles of sewers and rehabilitating 360 miles of 16 sewers. 17 What is it we will be asking the ratepayers? 18 These are the two options that we will be providing 19 for a vote probably in Calendar On the 20 left-hand side MSD, again, is going to propose the 21 ratepayers authorize $900 million more in bond 22 authorization to help pay for the capital program 23 over the next four years. That will result in us 24 doing starting $1.5 billion of capital work. 25 Almost all of that work is required by the Consent

19 1 Decree we signed with the Department of Justice. Page 19 2 And below that you see the average single 3 family bill. 2016, that would be June 30th, 2016, 4 the bill will go to, for the average ratepayer, 5 $40.72 per month. That's based on the last rate 6 proposal. We're proposing an increase of 7 approximately 10 percent per year resulting in of a monthly wastewater charge of $60.86 per 9 year for the -- per month for the average customer. 10 The voters also have the option of not 11 authorizing any additional bonding authority. 12 That's what's on the right-hand side. It says 13 "Option B." Again, if we do this there will be zero 14 bonds. Everything will be paid for by the cash, the 15 direct rates that are paid to us. We still have to 16 do the -- start the $1.5 billion worth of work as 17 mandated by our Consent Decree with the Department 18 of Justice and the EPA and you see the resulting 19 impact on the average single-family bills. Fiscal , again, Without bonding you're paying 21 straight cash, the rates will be higher. They will 22 go up to about $96 in Fiscal Year Next I want to discuss stormwater. First of 24 all, I'm going to go over what the current 25 stormwater funding mechanism looks like. This is a

20 1 map of the District. To the north is the Missouri Page 20 2 River. To the east is the Mississippi River. And 3 in that blue line, the City of St. Louis. To the 4 south, the Meramec River that wiggles in and out of 5 the District boundaries. To the west is 6 approximately Highway 109 in Wildwood. Those are 7 the limits of the District's boundaries. 8 If you live in the red area, right now you 9 pay MSD a -- the average customer pays MSD 24 cents 10 per month for stormwater. They also pay a 2 cent 11 property tax. For that amount of money we're able 12 to meet all the local, state and federal stormwater 13 requirements, regulatory requirements. We're able 14 to do data collection and tracking and, if 15 necessary, respond to emergencies, such as erosion 16 potentially causing a garage or a house to fall in 17 the creek. 18 We do not maintain the storm sewers that are 19 MSD's. We do not maintain the public storm sewers 20 in this area. There's no funding for that. We also 21 do no projects to address stormwater issues. 22 If you live in the yellow area you pay the cent fee, 2 cent property tax, you pay an additional 24 7 cent property tax. That allows us to do all the 25 stuff that was in the red area, such as the

21 1 regulatory issues and collecting data. It also Page 21 2 allows us to maintain the public storm sewer system 3 in the yellow area. However, there are insufficient 4 funds to do any kind of projects to resolve 5 stormwater issues. 6 If you live in the green area there's a 24 7 cent per month charge, 2 cent property tax, a 7 cent 8 property tax and up to another 10 cent property tax 9 that is being paid to MSD for stormwater. That 10 allows us to do all the regulatory work such as we 11 did in the red area, allows us to maintain the 12 public storm sewer system as we did in the yellow 13 area. It also provides monies to do projects to 14 address other stormwater problems such as erosion or 15 flooding. 16 What do those taxes all mean to the average 17 payer? So if you live in the red area, paying the cent fee and the 2 cent property tax, our average 19 taxpayer is paying us $8 a year for the stormwater 20 service they receive and all they get is primarily 21 addressing regulatory issues. 22 If you live in the yellow area, paying the cent fee, the 2 cent property tax and the 7 cent 24 property tax, the average person is paying us $26 a 25 year for stormwater. That takes care of all the

22 1 regulatory issues and also allows us to maintain the Page 22 2 public storm sewer system. 3 If you live in the green area you're paying 4 the 24 cent fee, 2 cent property tax, 7 cent 5 property tax, and up to another 10 cent property 6 tax. The average customer pays us -- in that area 7 pays us $53 a year for stormwater. That allows us 8 to do all the regulatory work, allows us to maintain 9 the public storm sewer system and allows us to do 10 projects to address things such as flooding and 11 erosion. 12 Quick discussion about the issues staff is 13 proposing to address with this rate proposal. If 14 you notice, the 2 cent property tax is charged 15 throughout the District. You see the little map on 16 the upper right-hand of the presentation. That 17 ensures we have compliance with all local, state and 18 federal stormwater regulations primarily having to 19 do with water volume, such as the basins you would 20 see when somebody develops and a flood floats 21 downstream but also the quality of stormwater runoff 22 as properties are developed. It pays for our plan 23 review and permitting costs, complaint investigation 24 and, again, emergency response. 25 What does that service look like? If you

23 1 look on Slide 18 up here that gray area is where the Page 23 2 yellow and green was. So what we're looking at 3 right now is just the red area with any kind of 4 graphics in it. 5 The lines, the little blue lines are creeks. 6 In that area there is approximately 1,154 miles of 7 creeks. MSD is responsible for policing those 8 creeks, determining water quality and trying to 9 prevent degradation through pollutants that come 10 from stormwater runoff into those creeks. 11 Each one of the little green dots, and 12 there's 2,638 of them, are facilities. These may be 13 large retention basins. They may be small rain 14 gardens. Something that is put in place in order to 15 hold back stormwater for either water quality or 16 water quantity issues. 17 MSD has policing responsibility for these. 18 We watch them, we police them, and we make sure once 19 they're constructed those who own those facilities 20 maintain them appropriately. That work is all 21 currently funded through the 2 cent property tax. 22 The next slide is a representation of what is 23 not currently funded. Those lines are the public 24 storm sewer system that's located in the county 25 outside of the yellow and green area we showed you

24 1 previously. Represents 1,363 miles of storm sewers, Page 24 2 approximately one half of the public storm sewer 3 system that MSD is responsible for. 4 The work -- there is no operation and 5 maintenance being done in any of the system. If an 6 inlet is in bad shape MSD does not have funds to fix 7 it. If a pipe has a joint problem that's causing a 8 sinkhole in somebody's backyard we don't have the 9 ability to fix that. If the outlet is causing 10 erosion in a creek we don't have any monies to fix 11 that. The system is simply unfunded for operation 12 and maintenance. 13 And another issue I think -- what we're 14 looking at is the entire storm sewer system 15 throughout our entire service area, those folks who 16 live in this red area are currently not paying for 17 its use. Probably the most important thing the 18 public storm sewer system does is manage stormwater 19 running off streets and roads that everybody uses 20 within our service area. 21 So where are we planning on going with that? 22 MSD is proposing a District-wide 10 cent stormwater 23 tax to replace some of the taxes that are in place 24 in order to provide an equal level of service for 25 the operation and maintenance for the public storm

25 1 sewer system throughout our District. Page 25 2 The result is four years of operation and 3 maintenance cost of $90.8 million and will allow us 4 to do almost $100 million worth of capital work over 5 the next six years starting this year, ending in Again, the drivers as I explained before is 8 the necessary maintenance and operation and 9 maintenance of the public storm sewer system, 10 especially that part that's in the currently 11 unfunded area and it will initiate limited funding 12 District-wide for projects to solve stormwater 13 problems, something which we don't currently have 14 the ability to do. 15 Slide 23 is what those operating costs look 16 like. Right now MSD in 2016 is estimating 17 $16 million worth of costs to operate the public 18 storm -- operate and maintain the public storm sewer 19 system. In its current area if we were to provide 20 funding for the entire area that would double the 21 amount of system we would have to operate and 22 maintain and that results in approximately a percent increase to about $24 million a year in 24 order to operate and maintain the entire public 25 storm sewer system.

26 1 Slide 24, the stormwater projects that we are Page 26 2 proposing through I'll go down each of one of 3 these separately. Before I do, the rules on this 4 map are the same as the rules you saw in the other 5 map. There are numbers inside each one of these 6 circles. There's a spreadsheet in our Rate 7 Proposal. We also have a copy here that you can 8 look at after the presentation. It describes what 9 the project is, what problem it's solving, how much 10 it costs and when it's scheduled to be completed. 11 I'll start from the top of the slide. If 12 you're in the green area, right now there are projects, whereabout $25 million that are planned. 14 Most of these projects will move forward without any 15 action on MSD's Rate Proposal. This is from the set 16 of taxes, that extra tax that folks pay in the green 17 area. There is a slight increase in that some of 18 those funds were previously used for the operation 19 and maintenance of the public storm sewer system. 20 Those funds all will now be released for projects. 21 In the yellow area we're proposing projects for a cost of seventeen and a half million 23 dollars over those next four years. The yellow area 24 received no funding for projects in the past. What 25 happens is if we do have a positive vote for the 10

27 1 cent District-wide property tax it addresses an Page 27 2 accounting issue we have with the various areas 3 where we collect taxes and what they can be spent 4 on. That allows us to then do approximately 5 seventeen and a half million dollars worth of work. 6 Half of that -- about half of that is in the City of 7 St. Louis. The other half is in near northwest and 8 South County as shown on the map. 9 And if you live in the red area there are projects identified for a total cost of 11 approximately $7.5 million. Again, no projects have 12 been done there in the past. That money comes from 13 the portion of the 10 cent tax that is not 14 immediately required for operation and maintenance 15 of the public storm sewer system. 16 If there's any gap left in a given year 17 between the 10 cents we want to collect and the 18 amount we want to spend, that will go towards 19 capital work throughout the District until inflation 20 finally leads to there not being any funds available 21 for capital out of that 10 cent tax. 22 So a quick review as to what happens to all 23 of those taxes we talked -- and charges we talked 24 about earlier. You're on Slide 25. If you look at 25 the top in that green area, the OMCI subdistricts,

28 1 there's a 5 cent to 10 cent charge depending on Page 28 2 which one of the 21 areas you're in, in that green 3 area. MSD will set those taxes at zero. We will 4 stop collecting them. 5 Stormwater O & M tax, the 7 cent property 6 tax, this is the tax that's being collected right 7 now in the green and yellow area. It's used 8 primarily for the operation and maintenance of storm 9 sewers in those areas. That tax will be replaced by 10 the proposed 10 cent tax. 11 There's also a 2 cent property tax that's 12 paid District-wide that we use for regulatory 13 issues. Right now the revenues that MSD collects 14 from that tax are sufficient to meet almost exactly 15 our current regulatory requirements District-wide 16 for stormwater. MSD is not proposing any change to 17 that 2 cent tax. 18 And then, finally, on the fourth line, is the cent District-wide property tax that MSD will be 20 proposing. Also, the per month charge on the 21 wastewater bill of 24 cents or in the case of 22 multifamily units, 18 cents per month, that also 23 will be replaced by the 10 cent property tax. 24 What will be the impact? Various 25 ratepayers -- you're on Slide 26, we'll start first

29 1 with the green area. If the 10 cent property tax is Page 29 2 approved folks in that green area currently, based 3 on an average value of $184,500 per home, are paying 4 about $62 per year on their annual property tax 5 bill. That property tax bill will go down about $20 6 a month to about $42 -- will go down, I'm sorry, $20 7 per year resulting in an average annual property tax 8 bill of approximately $42 per year or a change in 9 your total property tax bill of approximately a 10 decrease of one half of 1 percent. 11 If you live in the yellow area, the average 12 property value in the yellow area is $70,800. Based 13 on that, the average person is paying $12.50 per 14 year on their property tax bill to MSD for 15 stormwater. The proposal will increase that by 16 $3.60 per year resulting in an average annual cost 17 in their property tax bill of $ We compare it to the overall property tax 19 bill that the average property owner pays, that will 20 be an increase of three-tenths of 1 percent. So for 21 every thousand dollars that you pay on your property 22 tax bill there will be an increase of $3. 23 And, finally, in the red area, if you recall, 24 very little being paid there right now and that's 25 very little services. This is where there's the

30 1 biggest impact. Right now based on the 2 cent Page 30 2 property tax the average property value in this area 3 is $266,700. The average person is paying us $ per year for stormwater services if you live in this 5 red area. 6 The proposed tax would increase that to the 7 average person about $50 per year resulting in an 8 average annual property tax charge to MSD of $60 per 9 year. That will be a total change in the overall 10 property tax bill of the average customer of percent increase in their property tax bill. 12 What we've done on the next slide is kind of 13 roll together the impact of what we've proposed. If 14 you take a look at the left-hand column, first I'll 15 go over that. This is assuming the ratepayers 16 decide to allow MSD an additional $900 million of 17 bonding authority. 18 Fiscal 16, which will be somewhere around 19 June 2016, based on the current rate structure the 20 average person is paying MSD $522 per year for all 21 the services that MSD is providing. 22 The average increase would be 10 percent per 23 year, so by 2020 the average ratepayer, the average 24 taxpayer would be paying MSD $770 per year for all 25 the services that MSD provides.

31 1 Right-hand column is assuming that the voters Page 31 2 decide not to authorize additional bonding capacity 3 for MSD. Again, current annual cost for the average 4 person is $522 per year. That will go up much more 5 and end up resulting in a cost of just under $ per year for all the services that MSD provides and 7 that cost is an annual cost. 8 Slide 31 is the impact on low-income 9 customers. MSD does have a low income program for 10 those who qualify. It results in a charge of 11 approximately one half of the cost everyone else 12 pays. If you take a look at this chart, same rules, 13 left-hand column is assuming $900 million of 14 additional bonding authority. Right-hand column is 15 assuming no approval for additional bonding 16 authority. 17 You will find that those numbers are about 18 one half of the chart that you saw in the previous. 19 That accounts for the District's low income program. 20 Slide 32, what does the process look like? 21 Again, MSD submitted its Rate Proposal -- MSD staff 22 submitted its proposal to the Rate Commission on 23 February 26th, There will be a final 24 wastewater increase on July 1, 2015 to bring us to 25 that final amount that I showed previously for

32 1 Fiscal 16 that was approved at a previous Rate Page 32 2 Commission hearing. 3 The Rate Commission recommendations are going 4 to be due to our board on August 10th, MSD's 5 board will review the recommendations of the Rate 6 Commission between August and December That 7 will result in two votes in Calendar On the wastewater side the residents and our 9 ratepayers will be asked whether or not to authorize 10 MSD an additional $900 million in bonding authority. 11 If the answer is yes, you have the lower rates that 12 I showed previously with bonds that top out about 13 $60 per month for the average person. 14 If you say no, the rates will top out at 15 about $96 per month in 2020 for the average payer. 16 It's the same kind of question you have to address 17 when you're buying a house or when you're buying a 18 car. If you pay cash now -- if you decide to borrow 19 money, authorize bonds, rates are lower now but for 20 every dollar you borrow you will have to pay $3 back 21 sometime in the future. 22 If you decide not to have MSD borrow money, 23 the rates go higher now but later on in the future 24 when the program peaks at around 2023 and starts 25 going down there's more opportunity to decrease

33 1 rates in the future because you don't have the Page 33 2 interest payments that you have to make on the bond. 3 That is a question we'll be putting towards 4 the voters. It's up to them as to which way they 5 decide to vote. 6 The second vote will have to do with 7 stormwater. It will be fairly simple. We will ask 8 folks whether or not they want to approve a 9 District-wide 10 cent stormwater tax. If the answer 10 is yes, we will have that new program that you saw 11 near the end of the presentation, doing the projects 12 and we would provide operation and maintenance for 13 the entire public storm sewer system. 14 If the answer is no, MSD will continue the 15 despair of service level and the despair of revenues 16 it collects right now in that red, yellow, green map 17 that you saw previously. We will simply maintain 18 that system until another attempt is possibly made 19 to try and address issues in a different way. 20 If you have any comments for the Rate 21 Commission you can make them this evening. If you'd 22 like, you can them to the address that's 23 shown on the screen. You can mail them to our 24 office as well, to Annette Slack. She's secretary 25 to the Rate Commission. All comments MSD receives

34 1 with regard to the Rate Proposal will be forwarded Page 34 2 to the Rate Commission for their consideration. 3 There are two separate sheets that were 4 handed out earlier, just want to point out what 5 those are. There's one that says "Rate Commission 6 Process." It's kind of a summation on the rate side 7 of what's going on. If you look down in the middle 8 there's all the different meetings that we're 9 attending and that blue bar on the left-hand -- on 10 the right-hand side is all the Rate Commission 11 organizations and their representatives. This is 12 the rate process. 13 The second document, something entitled " MSD Rate Proposal." One side is wastewater. It's a 15 summation of what those rates potentially look like 16 depending on the results of the vote by the people. 17 And the backside is stormwater. You will see that 18 red, yellow, green map and it will go over all the 19 options as to whether or not the voters approve an 20 additional 10 cent tax for MSD to provide 21 District-wide operation and maintenance of its 22 public storm sewer system. 23 So we're at the point of the presentation for 24 public comment. The Rate Commission would like to 25 open the floor to any public comments. We do have a

35 1 court reporter here, if you could again announce -- Page 35 2 indicate your name and your address and your 3 comments will be recorded. Thank you. 4 MS. KELLING: I do not have the 5 clipboard. 6 Jeannie Hilton? 7 MS. HILTON: I choose not to comment at 8 this time. 9 MS. KELLING: Charles Allison? 10 MR. ALLISON: My only question is if it 11 doesn't pass for Year 2018, that 65 percent, why 12 can't that be spread out more within that time 13 frame? 14 MR. HOELSCHER: Would you like us to 15 respond? 16 MS. KELLING: Yeah, would you like to? 17 MR. HOELSCHER: I believe you're 18 responding to the wastewater rates, correct? 19 MR. ALLISON: You are correct. 20 MR. HOELSCHER: Yeah, the capital 21 program that MSD is doing, its work, again, to 22 resolve overflows. MSD has been working on those 23 types of issues since it was created in The 24 lawsuit with the federal government essentially set 25 a schedule for how quickly this has to be done. It

36 1 is the kind of strategy the Department of Justice Page 36 2 and EPA is using with all the cities located 3 throughout the country who have overflow issues. So 4 the ability to spread this out further is part of 5 the negotiations with the Consent Decree. 6 We did get the ability to do this work over a 7 total of 23 years. At the time we signed the 8 Consent Decree it was the longest Consent Decree 9 that was agreed to in the country. 10 So the cost and the ability to make movement 11 is pretty well restricted by the conditions of the year Consent Decree. It's not just getting 13 everything done in 23 years, there are intermediate 14 milestones and the need to get that work done is 15 what's reflected in the rates. 16 MR. ALLISON: Well, you're saying that, 17 and I understand what you're saying, but you're not 18 answering my question. My question was: Why is 19 that 65 percent not spread out more throughout that 20 time frame? 21 MR. HOELSCHER: Go to that chart would 22 you, just back up, keep going, keep going, get to 23 the wastewater side. There you go, back one. 24 Okay. Those increases -- those increases 25 occur because of the capital work we have to start

37 1 in Fiscal Year 18. Because we're not borrowing Page 37 2 money and you're not depressing the rates, the 3 monies we have to do the work are based solely on 4 the fees we receive, the charges we receive. So 5 $73.80 of fees in Fiscal Year 18 is what we need to 6 charge the customers in order to pay for the work we 7 have to start in Fiscal Year 2018 and that would be 8 the same for Fiscal Year 19, Fiscal Year MS. KELLING: Paul Caster? 10 MR. CASTER: Yeah, Lori, I'm going to 11 need more than 10 minutes. If I could borrow this 12 young lady's 10 minutes that will give me plenty or, 13 if you want, I can stay when everybody leaves. I'll 14 go last. You're not going to turn the lights out, 15 are you? 16 MS. KELLING: Commissioners? Yes, 17 that's fine. 18 MR. CASTER: You want me to go last? 19 MS. KELLING: No, go ahead and -- you 20 can go now. 21 MR. CASTER: Okay. A lot of numbers, 22 I'm not sure I really understand it. I'm here for 23 two reasons. One, I'm representing my homeowners 24 association, that's the Governor Court -- Governor 25 Drive's Homeowners Association here in Ballwin,

38 1 which is about one mile east of here. That's -- Page 38 2 that's number one. So I have to come away from this 3 meeting and go back to the members of our 4 association to let them know what has transpired and 5 give them an indication of how they can vote on the 6 proposal that you're making. 7 The second part of it is to understand 8 exactly what was presented today or this evening. A 9 lot of questions. First of all, as I understand 10 your proposal, there are no projects for stormwater 11 runoff west of 270, would that be correct? 12 MR. HOELSCHER: Under the current 13 funding there are no funds collected for any 14 projects. 15 MR. CASTER: Well, thank you. That's a 16 starting point, sir. Since 2007 our homeowners 17 association has desperately tried to get MSD to 18 respond to stormwater runoff. We have written to 19 you, sir, a couple times and you haven't responded. 20 I'm not here to embarrass you, I'm just giving you 21 facts. 22 The facts are that we have a health/safety 23 issue here with a creek running through our 24 subdivision called Fishpot Creek. It's about a 25 hundred yards of stormwater comes out of MSD's

39 1 6-inch diameter tunnel, if you will, into a creek Page 39 2 and through a culvert that is maintained by the City 3 of Ballwin. 4 A long story short is we are in desperate 5 need, we have an emergency situation because of the 6 erosion of the banks because of the sediment that's 7 in that creek, the mosquitoes, and, in fact, for the 8 children that are running through that particular 9 area. There's a real health/safety issue here. 10 I think I can best sum it up if I read a 11 letter from the City of Ballwin to you. I will just 12 read part of that to give you an idea of what we are 13 faced with and why I'm here not only to address the 14 increase here but to address our immediate need for 15 emergency assistance from MSD. 16 By the way, we have two advocates that are 17 working with us. One is the City of Ballwin, Tim 18 Pogue is the mayor. He is assisting us in this 19 process. The other one is the Missouri Coalition 20 for the Environment. I have a report to read in 21 part to you this evening. 22 The letter here is dated May the 7th, It's from Gary Kramer, who's a city engineer, 24 Ballwin Public Works. 25 "Dear, Mr. Hoelscher, we met on May 6th with

40 1 the residents in Governor Court regarding the Page 40 2 adjacent -- the adjacent creek condition. Their 3 concerns pertain to creek bank erosion and 4 stormwater sewer pipe that discharges into the 5 creek." The next sentence is pretty important. 6 "The creek has severely eroded and the pipes 7 suspended above the creek bed. In addition, 8 discharge from this pipe has created a deep stagnant 9 pool of water great for mosquito breeding." 10 Now, let me read the second more recent 11 report that we have from the Missouri Coalition for 12 the Environment, which is more alarming. I'm going 13 to skip down to the third paragraph in the interest 14 of saving time. 15 "In researching" -- again, this is a letter 16 from the Missouri Coalition for the Environment 17 dated April the 16th, 2015 and is addressed to me 18 after a visit with these folks. 19 Third paragraph, "In researching Fishpot 20 Creek I learned that it is listed on Missouri's 21 impaired waters list for bacteria contaminants, 22 specifically E. coli." That is serious to the 23 extent that we have children wandering in and out. 24 And, also, when it's low enough they're down in 25 there playing in the creek. Okay. I hope that

41 1 impacts you. Page 41 2 The Missouri Department of Natural Resources 3 Total Maximum Daily Load Implementation Plan for 4 addressing the impairment and they gave a website. 5 I have copies of these for you, sir, if you want 6 them. I can leave them when I leave. 7 MR. HOELSCHER: Sure. 8 MR. CASTER: All of this is interrelated 9 to what you're proposing here, in our opinion, 10 meaning increase, more burden on us. 11 We are attempting to get some emergency 12 relief for various reasons. I also have some photos 13 for you to show you the sediment and the conditions 14 of your drainage pipe and what Fishpot Creek really 15 is all about. 16 The problem is that the bonds that you are 17 raising or propose to raise here I would consider 18 and I'll ask you: Are they restrictive bonds, sir, 19 for specific projects? 20 MR. HOELSCHER: I'm writing everything 21 down. You want me to answer that one? 22 MR. CASTER: Specific capital projects. 23 Yes. 24 MR. HOELSCHER: Right now we have a 25 predicted project list for those projects that are

42 1 listed for those four years on this map as to what Page 42 2 those bonds would go towards. 3 MR. CASTER: Okay. So they are 4 restricted for projects? 5 MR. HOELSCHER: They're not restricted 6 in that sometimes projects don't have to be done and 7 we're willing to save the money on those. Sometimes 8 new projects that we have to do can come up in the 9 four years or sometimes it's possible that some 10 projects get ready ahead of time and budgets in the 11 future might be brought up. All for the same 12 purpose, so I don't want to leave you with the idea 13 that there's an exact list of these costs can only 14 be spent on those projects. 15 MR. CASTER: So they can be used for 16 general funds? 17 MR. HOELSCHER: No, sir. Capital 18 program only and if they're unused in that four-year 19 period the monies are left in the capital fund and 20 are a starting point for the capital program in the 21 next four years. They cannot be used MR. CASTER: I'm sorry, again, if 23 they're not used what happens? 24 MR. HOELSCHER: If they're not used 25 they're left in that capital fund and when we would

43 1 come back here four years later, as we did this Page 43 2 year, any unused funds stay in the capital fund. 3 They are a starting point and they immediately lower 4 the need of revenues because they're available for 5 capital projects in the future. 6 MR. CASTER: But according to your 7 financial statements you have raised about billon to date? 9 MR. HOELSCHER: Yes, it's about billion, yes, sir. 11 MR. CASTER: Okay. And of that amount 12 you spent approximately 1 billion plus? 13 MR. HOELSCHER: Yes. Yes, I think 14 that's correct. 15 MR. CASTER: So you still have, if you 16 only spent a half a billion, 500 million, you still 17 have a billion? 18 MR. HOELSCHER: No, we spent somewhere 19 in the neighborhood of just over a billion dollars 20 of bonding I believe to date. Any unused bonding is 21 already assigned to work that will be done starting 22 through Calendar Year There's already 23 projects identified to spend the remaining bonding. 24 MR. CASTER: Your financial statements 25 indicate you are investing approximately

44 1 $390 million. Page 44 2 MR. HOELSCHER: Yes, any cash we have on 3 hand to cover things such as bond ratio, operating 4 reserves, those are left on hand and instead of just 5 letting them sit, we invest those funds to get a 6 return and those monies are also available for use 7 in the future. 8 MR. CASTER: But your financial 9 statements indicate that return on those investments 10 are less than the debt service. 11 MR. HOELSCHER: I would not be 12 surprised. Yes. 13 MR. CASTER: Well, that makes me 14 question how are you investing the excess funds. 15 Why would you be losing money on funds that you 16 aren't really funding the projects, the capital 17 projects? In other words, you got $390 million of 18 bond funding, which voters approved, sitting in an 19 investment fund, I presume equities. 20 MR. HOELSCHER: That's not exactly that is not true. We have additional bonding 22 authority. We have not sold all the bonds that we 23 have been authorized to sell. There are bonds we 24 have sold and within a given fiscal year there are 25 projects planned to spend the bond proceeds that we

45 1 collect on an annual basis. Page 45 2 MR. CASTER: I don't mean to be 3 argumentative with you but maybe my 4 misunderstanding -- 5 MR. HOELSCHER: I think -- we can have 6 after this meeting -- is Tim here -- we can take a 7 look, we can show you where that is on those. 8 MR. CASTER: Well, I'm just reading from 9 you financial statement here. 10 MR. HOELSCHER: Okay. 11 MR. CASTER: And it reads outstanding 12 revenue bonds and estimated debt service. This 13 matrix here, we have the original amount of the 14 issuance of bonds. And, by the way, some of these 15 bonds go back to MR. HOELSCHER: They're usually 20- to year bonds. 18 MR. CASTER: Some of them we haven't 19 made any payments at all. For example, Series 2006, 20 60,000 issuance in the year November Balance 21 on that outstanding is 60,000 and that's repetitive 22 of the number series of the bonds. 23 MR. HOELSCHER: I think we need to have 24 somebody -- it is not reflective of us saving the 25 money. Any bonds we purchase we spend the money. I

46 1 think I am probably the wrong person to go through Page 46 2 the details of that to show you in the financials 3 exactly how that lays out. 4 MR. CASTER: Okay, Mr. Hoelscher. 5 MR. HOELSCHER: MSD is not selling bonds 6 and then investing them to gain money. We are 7 purchasing bonds to build capital projects. 8 MR. CASTER: The interest payable here 9 on the bonds outstanding, according to your records, 10 are $47 million. 11 MR. HOELSCHER: Yes, sir. 12 MR. CASTER: That's astonishing, to me 13 anyhow. And now we're going to raise another, what, 14 one billion? 15 MR. HOELSCHER: Well, we have 16 $4.7 billion worth of work that needs to be 17 completed according to the agreement with the 18 federal government. 19 MR. CASTER: I'm sorry, how much? 20 MR. HOELSCHER: $4.7 billion in dollars of work that needs to be completed in years. 23 MR. CASTER: Okay. 24 MR. HOELSCHER: And we're working our 25 way through that project list according to the