Staff recommends the City Council approve the Agreement with Advanced Engineering and Environmental Services, Inc. in the amount of $305,048 for the water and wastewater rate studies.

The Public Works Department regularly conducts water and wastewater rate studies.  This upcoming study will cover two consecutive two-year periods, the first to establish rates for fiscal years 2026 and 2027, and the second to set rates for fiscal years 2028 and 2029.  A cost of service rate study is necessary to review and recommend appropriate rates for System Development Fees, water and wastewater user rates, resale water rates for the County Water District of Billings Heights, and wholesale rates for the Lockwood Water and Sewer District, Phillips 66 Billings Refinery, and Par Pacific Refinery.  To comply with state law and ensure adequate funding for projected operation and maintenance costs, as well as major capital projects, adjustments are required for both system development fees and user rates. 

In addition to the standard scope of work for such studies, staff has included the following additional components:

• Evaluating separate water rates for the west end zone to account for the increased capital investments required to serve the area due to higher per capita water consumption (phase 1);
• Conducting a comprehensive affordability analysis of water and wastewater rates, with a particular focus on residential customers (phase 1);
• Analyzing the residential water tier structure and providing alternative rate options (phase 1);
• Completing a sensitivity analysis of water SDFs pertaining to small meter versus large meter costs (phase 1);
• Analyzing rates for Lockwood service area expansion if needed (phase 2.).

A Request for Proposals (RFP) was mailed to four firms from a list of prequalified firms.  Three firms chose not to submit a proposal and one proposal was received from Advanced Engineering and Environmental Services (AE2S) Nexus.  AE2S Nexus has conducted the previous six water and wastewater rate studies and staff has been pleased with their services.   As specified in state law, once the firm was selected, the price was negotiated at a rate that staff determined to be fair and reasonable. In making its determination, staff took into account the estimated value of the services to be rendered, as well as the scope, complexity, and professional nature of the services.   

The City Council may:

• Approve the award of the professional service agreement; or
• Not approve the agreement.  If the City does not approve this agreement, it will be unable to adjust these fees without violating State and case law.

The scope of the agreement is divided into two phases of work tasks which will commit funds to be spent in fiscal years 2025 and 2027.  The amount of the Phase 1 tasks is $170,087 and this has been budgeted for in the FY25 budget in the water and wastewater funds.  The amount of Phase 2 work which will commence in FY27 is $134,961 for a total agreement amount of $305,048.