MSD officials elated over passage of Prop Y
Metropolitan St. Louis Sewer District officials are elated over the passage of Proposition Y, which authorizes the district to issue $500 million in revenue bonds to finance the first three years of the MSD's Capital Improvement and Replacement Program.
Proposition Y was approved last week by St. Louis County and St. Louis City voters by a more than 2-to-1-margin.
The MSD's Capital Improvement and Replacement Program is a projected 18-year, $3.7 billion plan designed to refurbish and increase the district's wastewater collection and treatment capabilities.
During heavy rainstorms the sanitary sewer system currently becomes overcharged, and sewage is discharged directly into area waterways and basements. By implementing the program, the district will be able to address these situations and ensure that the area's wastewater systems are in compliance with state and federal regulations, according to a news release.
Asked if the Feb. 3 vote was a mandate for the district, MSD Acting Executive Director Jeffrey Theerman stated in the release: "The approval of Proposition Y was a decision by district ratepayers on how best to finance the first $647 million in CIRP projects. By voting 'yes,' ratepayers have decided to use bonds to help spread out the cost of these improvements, rather than paying for them on a pay-as-you-go basis. Proposition Y was simply a financing question for ratepayers to decide — to read anything more into the ratepayers' 'yes' vote would be premature."
Asked what impact the issuance of the bonds would have on rates, Theerman stated: "With the bond issue, the average monthly residential rate will increase from its current $16.87 to $20.58 in July of 2004. In July of 2005 that rate will increase to $22.38. It will remain there until MSD's public Rate Commission decides on the funding structure for the remaining years of the CIRP.
"If ratepayers had voted 'no' on the bonds, a pay-as-you-go method would have financed the CIRP — a method where the CIRP's collection and treatment projects are paid for as their cost is incurred. Under that scenario, the average monthly residential rate would have increased from $16.87 to $23.96 immediately, and based on future staff projections, would have risen to above $37 at some point next year."
Theerman continued, "The bonds will play a vital role in the financing of the CIRP – a role that will keep rates lower for a longer period of time. The CIRP is a plan that has already been implemented and must be completed. A large part of the CIRP involves the $215 million Meramec program, which includes the $80.5 million Meramec Wastewater Treatment Plant. An administrative order from the Missouri Department of Natural Resources is already in place, ordering this work to be completed by 2006.
"If the work isn't completed by then, the administrative order calls for fines and penalties to be levied. The remaining part of the CIRP is designed to ensure compliance with the federal Clean Water Act. By having the CIRP in place and implemented, we will have put ourselves in a favorable position in dealing with state and federal regulatory concerns,'' he stated.
The $500 million in bonds authorized by Proposition Y will be issued in three stages.
A bond issue of $150 million will take place this spring, with a subsequent issue of $140 million slated for the summer. The remaining $210 million in bonds are scheduled for issuance in 2006.
The average bond maturity for the $500 million issue will be 25 years.