Staff recommends that the City Council conduct a public hearing and approve the proposed resolution amending the water rate Schedule I Resale Rates.

The water and wastewater fee and rate structure was approved as a two-year incremental rate adjustment by Council on May 24, 2021. Since adoption of those rates, the City has delayed construction of the west end water plant project which was previously incorporated in the FY23 revenue requirements for the water resale rate. The County Water District of Billings Heights is the only customer in this resale rate class. To account for the delay in capital projects, the City's water rate for the Resale class was recalculated. This is appropriate due to the significant impact the changes to the capital projects timing has on capital-related rate revenue requirements. Per the Agreement between the City and the County Water District of Billings Heights, an asset cannot be added to the rate base until the asset is substantially complete. The amended rate for the Resale class is a decrease from the previously calculated $3.68 per 1,000 gallons (kGal) to $2.97 per kGal. Although the revised rate is a decrease from what was previously approved, it is an increase of 5.7% over the FY22 rate.

The attached resolution specifies the amended water rate for the Resale class. A public hearing is required per MCA 69-7-111 and if the current proposed resolution is approved, the rate will be effective July 1, 2022.

City Council may:

• Approve the amended resolution; or,
• Not approve the amended resolution. If Council does not approve the amended resolution specifying the rates for Schedule I Resale Rates, the previously approved rate will be implemented as of July 1, 2022.

The proposed rate adjustment will decrease water revenues in FY23 by approximately $665,000.