MSD wants August vote on proposed bond issue

Measure would reduce rate increase

By BURKE WASSON

While Metropolitan St. Louis Sewer District customers’ bills will rise this year, district officials are planning to ask voters in August to approve a $275 million bond issue that would reduce that rate increase.

MSD officials last week presented its newly proposed rate increase to the district’s Rate Commission and hope to get the proposed bond issue on the Aug. 5 ballot, which has a May 27 filing deadline. Because of this, district officials recommend that the Rate Commission develop its findings by May 1.

Under the bond-issue proposal, MSD officials estimate that monthly wastewater charges for the “average residential customer” would be roughly $3 cheaper than the originally proposed rate plan by September and $8 cheaper by July 2011.

The MSD Board of Trustees already has raised wastewater rates by 15 percent in 2008 and upped stormwater rates from a flat 24-cent monthly fee to a new system based on a customer’s impervious — or non-absorbent— property effective March 1.

While those rate increases will provide additional funding for needed projects, MSD officials would like to ask voters to approve the $275 million bond issue to reduce monthly wastewater rates from now to fiscal 2012.

The proposed less-severe rate increase comes after such organizations as the Association of Community Organizations for Reform Now, or ACORN, the American Association of Retired Persons, or AARP, and several local neighborhood groups publicly opposed the district’s originally planned rate increases in 2007.

The sewer district also received a request to modify the originally planned rate increases from the two men who appoint members to the MSD Board of Trustees — County Executive Charlie Dooley and St. Louis Mayor Francis Slay.

In MSD officials’ initial presentation of those revised rate increases last week to the Rate Commission, commission members questioned whether a rate modification of up to $8 less per month for average residential wastewater service would make enough of a difference.

“We had heard that groups like ACORN and AARP were the ones that were outraged,” Rate Commission member Mike Schoedel said. “And if they’re the ones that are outraged and this process is trying to address their concerns, at the end of the day is $5, $8 going to alleviate their outrage?”

MSD Executive Director Jeff Theerman said district officials heard at the end of last year that an $8 monthly wastewater-rate difference by 2011 “was significant to the constituency of groups like ACORN and AARP.”

MSD Director of Finance Jan Zimmerman also reminded the Rate Commission that the district’s low-income assistance program, which currently includes roughly 2,500 accounts, cuts those customers’ bills in half.

The newly proposed bond issue that would reduce rate increases would be in addition to existing MSD bonds of $500 million for a total of $775 million in bonds. The district’s bonding capacity is $1.4 billion.

Theerman said that because the district likely will use its full bonding capacity of $1.4 billion at some point in the future, the proposed bond issue for this year simply is to reduce rates now.

“If you operate under the assumption that we would have used our debt capacity sooner or later, it really is changing when that utilization occurs to attempt to make the rate increase less dramatic today,” Theerman said. “So, we originally advocated pay-go with the belief that we would use the debt later. This proposal uses the debt earlier. But in the long run in both situations, we would have used all the capacity.”

Voter approval of a $275 million bond issue would go toward the $660 million that the district would spend for sewer-system construction and also for higher operating costs.

Under the original rate proposal approved in 2007 by the Rate Commission, the average residential customer would be paying $28.89 per month by July. If voters approve the bond issue, that average monthly bill would be $25.74 per month — the average residential cost approved by the Board of Trustees in December, which will be first seen in February on residents’ bills.

The average residential wastewater bill currently is $22.38.

A successful bond measure also would result in the following monthly wastewater rate changes for the average residential customer: $26.26 by July 2009 compared to $32.06; $27.56 by July 2010 compared to $34.97; and $28.73 by July 2011 compared to $36.79.

As for stormwater rates, the district’s proposal would soften the initial increase until 2012, when stormwater rates would be greater than originally proposed to make up for that initial reduction of rates.

A successful bond issue would result in the following monthly stormwater charges for the average residential customer: $3.50 in 2009 compared to $4.25; $4.25 in 2010 compared to $3.50; $5.50 in 2011 compared to $5.75; $6.50 in 2012 compared to $6.25; $7.00 in 2013 compared to $6.75; and $7.25 in 2014 regardless of whether the bond issue is successful.

Instead of the district’s current 24-cent monthly flat fee paid by all district customers for stormwater service, customers will begin paying March 1 based on the amount of impervious area on an owner’s property. Impervious property includes such non-absorbent areas as driveways, roofs, garages and parking lots.

District officials will this year charge 12 cents for each 100 square feet of impervious property and estimate that the average single-family residential customer will pay roughly $3 per month for stormwater service in 2008.

If the Rate Commission recommends MSD’s new rate proposal and it is voted down in August, rates will return to the levels originally approved in 2007 by the Rate Com-mission and the average residential wastewater bill would be $28.89 per month.

The Rate Commission is faced with the bond-issue proposal less than a year after recommending last summer that the district not pursue any bonding or debt financing to reduce those rates for customers.

The commission voted 7-4 against pursuing debt financing to reduce the rate hikes and also voted 8-3 in opposition to letting voters decide no later than November whether they would like the district to use debt financing to reduce those rates.

But largely because of concern over the originally proposed rate increases last fall from a number of local citizens groups, the district has elected to pursue a bond issue to reduce those rates.

As originally proposed last year, sewer district customers would have seen a 64-percent increase in wastewater-service rates.

That 64-percent rate hike was slated to be done in incremental increases from 2008 through 2012.

But the district’s modified rate plans would drop that increase in wastewater rates to 28 percent by 2011. If bonds are not approved by voters, the original proposal in 2007 of a 64-percent increase will go into effect.

Regarding the district’s rate calculations based on the average residential customer, Rate Commission member Richard Ward questioned whether the district should also be gathering estimates of “low-income” customers if the proposed rate relief is to truly benefit them.

“Is that average of $8 (monthly rate decrease from the proposed bond issue by July 2011), is that really going to affect ACORN’s constituents?” Ward said.

“I don’t know that we have a reason to believe that average doesn’t apply uniformly,” Theerman said. “But we may be able to take a look at our data.”

“If you were to compare the same estimates that are used here, there isn’t any reason to assume that low-income households with the same number of people may necessarily be using less water,” Zimmerman said. “But you’ve got to have some constant when you compare.”