The MSD Bond Issue: Vote Yes Or No, But Blame The EPA

May 30, 2012

The MSD Bond Issue: Vote Yes Or No, But Blame The EPA

The Metropolitan St. Louis Sewer District (MSD) has an enormous bond issue on the ballot next week, for $945 million! Even in a post-bailout America, that is a lot of money.

I do not know how I am going to vote on this issue. The project is going to be done and rates are going to increase either way. If the bond issue passes, rates will increase slowly, but bond financing will have to be added to the total costs. If the bond issue fails, rates will increase more substantially right away, but we would not have to pay an estimated $200 million in bond financing costs. (My $200 million estimate comes from the bottom of page 7 here.) Pay more now or pay more later. I am probably leaning toward paying more now, but each voter is going to have to make that choice for himself or herself and their families, and I certainly understand those wanting to take a more long-term view.

I do not blame MSD for this. Kansas City is going through a very similar process, as are cities around the country. I blame unnecessarily strict EPA rules designed to prevent occasional releases of sewage during extremely heavy storms and to eliminate the use of combined sewers. I also blame time and the aging process.

Nobody wants sewage releases, and everyone wants safe water. The issue arises when federal regulators require local sewer authorities to spend billions of dollars for comparatively small increases in water quality. Perhaps cost should not matter because it is for the kids. But we do not live in fairyland, we do not spread magic dust, and costs do matter; as does regulatory overreach.

Could MSD have done a better job in recent decades updating the system to prepare for this? Almost certainly, but at some point it was going to be necessary to do a massive upgrade of an old sewer system; EPA regulations or not. The EPA regulations will do what the federal government usually does: take an issue and make it larger, more expensive, more litigious, and more intrusive. But that is our fault for allowing the federal government to grow to a size where it gets to dictate so much of our lives; it is not MSD’s fault.

People who are better able to comment on the technical, engineering aspect of the issue should feel free to chime in via the comments.

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4 Comments »

I called Lance LeComb who is listed at the bottom of the MSD report. He said for every $1 MSD borrows, the interest payment would be around $1 over the term of the bonds. You say your estimate comes from page 7, but the only statement I found was “The interest and issuance costs for this financing is projected to be $359 million between July 1, 2012, through June 30, 2016.” That’s a lot of money for 4 years, and the total interest amount will be closer to $945 million if Lance’s estimate is correct.

My question to those who support it is, why pay more? Even if it’s “less” now, eventually, it will be very high for us all, including the poor.

Comment by Ruth Carlson — May 30, 2012 @ 2:38 p.m.
Ruth, you are correct that I seem to have overlooked the 4-year period of that statement. So, yes, the interest costs are even higher, probably a lot higher. That puts me even more in the “pay more now” camp to avoid the bond financing charges. Still, though, I blame the EPA for putting us in the position.

Thanks for the comment.

Comment by David Stokes — May 30, 2012 @ 2:55 p.m.
No one is addressing the eight separate numbered MSD charter propositions that accompany Prop Y. I am suspicious that the sponsors are saying nothing about why they’re there. The usual suspects who can be counted on to support anything that costs money have endorsed Prop Y, but even they have ignored Props 1-8. What gives?

Comment by Tim Barnhart — May 31, 2012 @ 12:16 p.m.
Well the proposition passed. The “fear” factor won out. Seven and a half years from now, we the citizens of St.Louis will be paying four times as much for sewer/water service than we currently pay. If this proposition failed we would be paying three times that immediately. From the research I have done these bonds are going to be issued at slightly more than 20 percent interest. Since the other MSD propositions passed in conjunction with this Bond issue, we as citizens need to be proactive and appear at all the hearings regarding the use of the allocated funds and make our voices heard regarding the direction that this “progress” is going. I for one voted against this bond issue because we should not finance something at a higher interest rate to achieve short term gains. We should be conducting repairs and up-grades as needed and they should be paid for on an as needed basis, not an almost one billion dollar blanket bond issue that does not spell out specifically how the voters money will be used.

Comment by Anthony Farhner — June 6, 2012 @ 2:00 a.m.

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I called Lance LeComb who is listed at the bottom of the MSD report. He said for every $1 MSD borrows, the interest payment would be around $1 over the term of the bonds. You say your estimate comes from page 7, but the only statement I found was “The interest and issuance costs for this financing is projected to be $359 million between July 1, 2012, through June 30, 2016.” That’s a lot of money for 4 years, and the total interest amount will be closer to $945 million if Lance’s estimate is correct.

My question to those who support it is, why pay more? Even if it’s “less” now, eventually, it will be very high for us all, including the poor.

Comment by Ruth Carlson — May 30, 2012 @ 2:38 p.m.

Ruth, you are correct that I seem to have overlooked the 4-year period of that statement. So, yes, the interest costs are even higher, probably a lot higher. That puts me even more in the “pay more now” camp to avoid the bond financing charges. Still, though, I blame the EPA for putting us in the position.

Thanks for the comment.

Comment by David Stokes — May 30, 2012 @ 2:55 p.m.

No one is addressing the eight separate numbered MSD charter propositions that accompany Prop Y. I am suspicious that the sponsors are saying nothing about why they’re there. The usual suspects who can be counted on to support anything that costs money have endorsed Prop Y, but even they have ignored Props 1-8. What gives?

Comment by Tim Barnhart — May 31, 2012 @ 12:16 p.m.

Well the proposition passed. The “fear” factor won out. Seven and a half years from now, we the citizens of St.Louis will be paying four times as much for sewer/water service than we currently pay. If this proposition failed we would be paying three times that immediately. From the research I have done these bonds are going to be issued at slightly more than 20 percent interest. Since the other MSD propositions passed in conjunction with this Bond issue, we as citizens need to be proactive and appear at all the hearings regarding the use of the allocated funds and make our voices heard regarding the direction that this “progress” is going. I for one voted against this bond issue because we should not finance something at a higher interest rate to achieve short term gains. We should be conducting repairs and up-grades as needed and they should be paid for on an as needed basis, not an almost one billion dollar blanket bond issue that does not spell out specifically how the voters money will be used.

Comment by Anthony Farhner — June 6, 2012 @ 2:00 a.m.

May 30, 2012