Public Works engaged AE2S Nexus to conduct a cost of service rate study to review and recommend appropriate water and wastewater user rates, the resale rate for the County Water District of Billings Heights, and wholesale rates for Lockwood Water and Sewer District, Exxon Refinery, and Phillips 66 Billings Refinery, as well as calculate the System Development Fees (SDFs) for water and wastewater. The methodology used in the study follows industry standard approaches and recommends rates for each class of customer. The rates allow the Public Works Department to adequately recover costs in proportion to the cost of providing service to each customer class. The following is a summary of the rates and fees proposed for FY 20 and FY 21:

1. Increase the water minimum monthly fees by an average of 2.7% in FY 20 and 2.8% in FY 21 for meter sizes 1 ½” and larger. Customers with a 3/4" or 1” meter will have no increase in the minimum monthly fee.
2. Increase the volumetric charge for residential water customers by an average of 8.5% in FY 20 and 5% in FY 21.
3. Increase the inside Billings non-residential volumetric fee for water customers by approximately 5.2 % in FY 20 and 4.1 % in FY 21 and increase the outside Billings non-residential volumetric fee for water customers by 4.9% in FY 20 and by 3.8% in FY 21.
4. Increase the seasonal volumetric fee by approximately 5.9% in FY 20 and 5% in FY 21.
5. Increase the multi-family water user volumetric rate by about 6.1% in FY 20 and 3.9% in FY 21.
6. Maintain the resale volumetric rate for County Water District of Billings Heights at the current amount in FY 20 and increase by 15.5% in FY 21.
7. Increase the private fire protection charges to reflect the current costs of services by increasing the fee an average of 7% in FY 20 and an average of 6% in FY 21.
8. Increase the wastewater volumetric fee by approximately 3.9% in FY 20 and 2.9% in FY 21 with the exception of high strength commercial, which will see an increase of 27.6% in FY 20 and 8.2% in FY 21.
9. Increase the wastewater minimum monthly fees by an average of .5% in both FY 20 and FY 21 for wastewater customers with  meter sizes 1” and larger.  Customers with ¾” meters will have no increase in the minimum monthly fee in FY 20 and a .7% increase in FY 21.  
10. Adjust the volume charge, fixed monthly fee, and SDF for Lockwood Sewer District, as well as the volume charge and fixed monthly fee for Phillips 66 and Exxon Refineries to reflect the current costs of services.
11. Increase the SDF for residential, non-residential, and irrigation water and wastewater connections to more accurately reflect the current costs of services.
12. Adjust water and wastewater fees and charges for various permits and miscellaneous special fees.

The attached resolution specifies the proposed rates and fees.  A comparison of current versus proposed rates is also attached. A public hearing is required per MCA 69-7-111 and if the proposed resolution is approved, rates will be effective July 1, 2019.

The City Council must hold a public hearing and then may

• approve the recommended resolution
• approve an amended resolution; or
• not approve a resolution. If Council does not approve a resolution specifying rates and fees for FY 20 and FY 21, the rates and fees will continue at current levels, leaving insufficient revenues in the water and wastewater funds to sustain the adopted capital improvement program.  System Development Fees (SDFs) must be updated at least every two years to be in compliance with MCA, Section 69-7-1602 and they were last updated July 1, 2017. Thus, a resolution would need to be considered at a future City Council meeting to adjust SDFs.

The proposed rate and fee adjustments will generate approximately $1,400,000 in water revenues in FY 20 and an additional $1,450,000 in FY 21, as well as $575,000 in wastewater revenues in FY 20 and an additional $700,000 in FY 21.