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Government, Politics & Issues

St. Louis Region’s Sewer Utility Looks To Sell Bonds For Service Improvements

Contractors hired by the Metropolitan St. Louis Sewer District work inside the Deer Creek Tunnel , one of the biggest under Project Clear. The utility is looking for permission to sell $500 million in bonds to fund more Project Clear work, which is required by a 2012 Clean Water Act settlement.
Project Clear
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Metropolitan St. Louis Sewer District
Contractors hired by the Metropolitan St. Louis Sewer District work inside the Deer Creek Tunnel , one of the biggest under Project Clear. The utility is looking for permission to sell $500 million in bonds to fund more Project Clear work, which is required by a 2012 Clean Water Act settlement.

The Metropolitan St. Louis Sewer District is asking voters for permission to borrow $500 million to improve its wastewater service.

A 2012 settlement over Clean Water Act violations requires the utility to make billions of dollars' worth of upgrades to its system by 2039. If Proposition Y is approved April 6 by city and county voters, MSD will sell bonds for a portion of those upgrades, keeping rates lower in the near term. If Proposition Y fails, rates will go up quicker to cover the cost.

MSD is not taking a position on Proposition Y — it will have to do the work regardless. Len Toenjes, president of the Associated General Contractors of Missouri, said a yes vote makes payment more equitable.

“You’re looking at projects that will last 30, 40, 50, 60 years in many cases,” he said. “So spreading the cost of that improvement out over that length of time ensures that everyone who benefits from it will pay for it.”

Under Proposition Y, monthly rates would go from the current $56.40 to $62.59 by 2024. If the bonding measure does not pass, rates would be $86.12 in 2024, and according to a chart by MSD, could rise above $100 a month in 2035. But around 2036, the rates without borrowing would drop much faster than the rates with borrowing.

A group called CleanWaterSTL, with support from corporations like Centene and Anheuser-Busch, is spearheading the yes campaign. There is no organized opposition to the measure, but longtime MSD watchdog Tom Sullivan said the organization could have acted much sooner and saved ratepayers money.

“The federal government used to cover almost all the cost of projects needed to meet clean water standards,” Sullivan wrote in a St. Louis Post-Dispatch opinion page piece. “But while MSD continually delayed moving forward with the needed projects, federal funding continually declined to no funding at all.”

While the federal government is not providing direct funding, Hoelscher said MSD is taking advantage of a state loan program that includes federal participation.

Charter changes

MSD customers will also vote on a number of changes to the utility’s operating charter. There are five separate propositions.

  • Proposition 1: Removes a number of outdated references and titles and adds several protected classes, including sexual orientation and disability.
  • Proposition 2: Removes in certain instances the requirement that two trustees from the city and two trustees from the county vote for legislation.

A board of six trustees provides oversight of MSD. The St. Louis County executive appoints three members, and the mayor of St. Louis appoints the other three. Four yes votes are needed to pass legislation, and as the charter is currently written, two city and two county trustees must vote yes.

“Our board has proven to be so serious about conflict of interest, we have actually held up legislation,” Hoelscher said. “The most common ones are green infrastructure grants. If you’ve got two city trustees who have a conflict of interest because they feel they are somehow connected or familiar with one of the entities, we can’t pass that legislation even though all six trustees want to move forward.”

Under Proposition 2, if all six trustees agree, those four yes votes could come from anywhere. Ordinances would also take effect immediately.

Sullivan said the change would remove a basic safeguard that has existed “since the very beginning of MSD.”

  • Proposition 3: Gives the commission that sets MSD’s rates more time to complete its work and changes the criteria the commission must consider when setting those rates.
  • Proposition 4: Boosts the compensation of the Board of Trustees to $600 a year.

“They’ve been paid $300 a year since 1954,” Hoelscher said.

  • Proposition 5: Allows the same firm to sign a contract with MSD to do external audits for more than five years in a row, as long as the lead audit partner changes.

As written, MSD’s charter requires the utility to select a new firm every five years, even if it may not be the lowest bidder. Because the auditing needs are so complex, Hoelscher said, there’s not a lot of competition already.

Sullivan said he had no objection to updating outdated language, although he added that he did not think those changes would make the utility any better.

Follow Rachel on Twitter: @rlippmann

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