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MSD pushes passage of bond issue to defray costs of EPA settlement

This article first appeared in the St. Louis Beacon, May 22, 2012 - Customers of the Metropolitan Sewer District can expect their bills to go up -- no matter how St. Louis and St. Louis County residents vote Tuesday. The only question is whether rates will go up gradually or increase sharply right away.

Supporters of a $945 million bond issue – known as Proposition Y – are framing the June 5 vote as a way to spread out costs for the average consumer as the agency is on the hook to pay for a multi-billion settlement with the Environmental Protection Agency. The election is one way to pay for the improvements mandated by a $4.7 billion settlement over a 23 years to address wastewater overflows throughout the system serving St. Louis and St. Louis County. That agreement was approved by a federal judge earlier this year.

Start of update: MSD spokesman Lance LeComb said that the election needs to occur in June to coincide with the start of the agency’s fiscal year on July 1. This is the only matter on the ballot.

“Come July 1, we either have to know we’re going to have the bonds or we have to have the [rate increase] to fund our operations,” LeComb said. “Literally after July 1, we start running out of cash to fund our operations in our construction program.”

He added that MSD is paying for the cost of the election, which he said is estimated to cost about $1.3 million. End update.

In an election primer sent by LeComb, the agency noted the bond proceeds will be used “to construct sewers, deep tunnels for storage, surface storage tanks, high rate treatment facilities, pump stations, green infrastructure, and other improvements required to meet regulatory requirements.” Issuing bonds is a way to pay for those projects over time.

“When complete – and aside from sustaining or creating tens of thousands of local jobs – this work will help protect our natural environment and local population from a combination of rainwater and sewage that is discharged into area waterways during moderate to heavy rains – a discharge that can annually measure in the billions of gallons,” the primer states.

If the bond issue is approved, MSD estimates that an average single-family home’s wastewater bill will increase from the current $28.73 a month to $43.67 by July 2015 -- a 52 percent increase. But that doesn’t mean that rates won’t increase past 2015, LeComb said.

“If we go the bond route, we project that rates will exceed $80 a month by the end of this decade or the beginning of the 2020s,” LeComb said. “After that, rates level off and future increases would generally be tied to inflation. However, even after the bonds are retired – most of them will have a 30-year term – rates will not decrease. This is the level of funding that is needed to continue reinvestment in our system so that we do not find ourselves in a similar situation again.”

If the bond issue doesn’t pass, the monthly estimated bill will jump from $28.73 to $64.15 on July 1. The rate will climb to $65.15 by July 2015, a roughly 126.4 percent increase.

“If bonds are not utilized, rates would climb to the mid-$60 a month range, and similar to the above, generally remain level except for inflationary increases,” LeComb said. “Again the rates would not decrease in 23 years, due to the need for reinvestment.”

While no organized group has emerged to oppose the bond issue, Clean Water STL was set up to gather support for the initiative. Since the organization was established with the Missouri Ethics Commission on April 16, it’s received seven donations over $10,000. That includes a $75,000 from Utah-based Covidien, $50,000 from Crystal City-based Goodwin Brothers, $25,000 from O’Fallon-based SAK Construction and $10,000 from BJC Health Care.

Michael Kelley, a political consultant working on the campaign, said the measure's failure would have a decidedly negative short-term impact on some of the region’s larger businesses. That includes, he said, Barnes Jewish-Hospital or Washington University.

“So this is a major issue as a community that we have to address. If there’s any solace in it, we are not the only community that’s having to deal with this,” said Kelley, noting that other large communities are also dealing with similar EPA settlements. “And we believe that this $945 million bond issue provides us with the most fair and equitable way to make these upgrades rather than dumping these huge cost-increases on the end consumer.”

Environmental and economic impact

Beyond the question of how to pay for the settlement is the impact new construction will have on the environment, said Missouri Coalition for the Environment director Kathleen Logan Smith. Smith's group was involved in the lawsuit that sparked the decree.

Improving MSD's infrastructure, Smith said, could help local creeks and streams.

“The streams will have a chance to recover,” Smith said. The water will "be safer to be exposed to. But you’ll also see fish come back. And when fish come back, wildlife comes back. We’ve heard people tell us stories about catching smallmouth bass in [a local creek]. We’ve heard people tell us stories about how these creeks used to be healthy and used to be populated with fish and used to be swimming holes.”

Improving the infrastructure, Smith said, will also help forestall basement backups,  a common problem in the region. Both Smith and Kelley added that the repairs are not surprising, considering that some sewers date back to the 1800s.

“This is the least painful way to fix a problem that’s been neglected for 40 years,” Smith said. “And just like you didn’t work on your house or car for 40 years, when you finally get around to doing it, it’s going to cost a lot more than if you were paying for it all along. So that’s problems with our sewers and water supply. We have a bill to pay. We might as well get it done, because it ain’t getting cheaper.”

The work is also expected to provide a steady stream of construction work over the next couple of decades. That's prompted MSD to deliberate recently over its minority and women hiring and contracting policies. The agency's Board of Trustees voted earlier this year to adopt interim goals while a disparity study was being conducted.

Charter amendments

MSD is also asking voters to make eight revisions to its charter. Among the amendments are:

  • Taking boundaries of the sewer district out of the charter since those borders change whenever a new sewer is built.
  • Changing the process of funding sub-districts to fund subdivisions that want to go from septic tanks to sewer lines.
  • Providing language to give MSD responsibility for stormwater management.
  • Altering MSD’s budget process.
  • Authorizing MSD to use a design-build approach, similar to what MoDOT used for the Highway 40 project. That combines both the design and construction phases into one contract.
  • Setting a 2019 dedline to appoint a commission to review MSD’s charter.
Jason is the politics correspondent for St. Louis Public Radio.