Staff recommends that the City Council conduct a public hearing and approve the proposed resolution adopting the water and wastewater rate and fee schedule effective July 1, 2023.

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, Phillips 66 Billings Refinery, and Exxon 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 for each customer class. The rates also reflect the addition of $1 million of water funds and $1 million of wastewater funds to set aside for pipe extensions in both FY24 and FY25.  The following is a summary of the rates and fees proposed for FY24 and FY25:

1. Increase the water minimum monthly fees for all water customers by 2% in both FY24 and FY25.
2. Increase the volumetric rate for residential, seasonal and multi-family water customers by 12% in both FY24 and FY25.
3. Increase the volumetric rate for non-residential water customers and bulk water resellers by 12% in FY24 and 8% in FY25.
4. The resale rate for the County Water District of Billings Heights will not increase in FY24. However, the FY25 rate will increase by approximately 48.8%.
5. Increase private fire protection charges to reflect the current costs of services by increasing the fee by 6% in FY24 and FY25.
6. Increase the wastewater minimum monthly fees by an average of 4.6% in FY24 and 6.2% in FY25.
7. Increase the wastewater volumetric rate by 6.6% in FY24 and 6.2% in FY25.
8. Adjust the volume charge, fixed monthly fee, and SDF for Lockwood Water and Sewer District, Exxon Refinery, and Phillips 66 Billings Refinery to reflect the current costs of services.
9. Change the residential water SDF methodology to reflect the nexus between lot sizes and impact to the water system.  This change results in a flat rate per unit, up to 4 units, for the indoor component and a tier rate structure for the outdoor component based on lot size.
10. There will be no change to the non-residential water SDF and the irrigation SDF will increase minimally by 0.4%.
11. Decrease the Billings wastewater SDF by an average of 10.2% and the Lockwood SDF by 11.2%.
12. Increase various miscellaneous waster and wastewater fees to reflect current cost of services.

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 current proposed resolution is approved, rates will be effective July 1, 2023 and July 1, 2024 as indicated.

City Council 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 FY24 and FY25, the rates and fees will continue at current levels, leaving insufficient revenues in the water and wastewater funds to pay for planned debt service for the west end project or sustain the adopted capital improvement program.

The proposed rate and fee adjustments will generate approximately $2.4 million in water revenues in FY24 and an additional $3.7 million in FY25, as well as $2.2 million in wastewater revenues in FY24 and an additional $2 million in FY25.