Staff recommends that the City Council conduct a public hearing and approve the proposed Alternative 2 Resolution setting annual street maintenance district assessments for FY25.

Street Maintenance District (SMD) assessments are set annually by resolution. There are currently two SMDs in Billings. SMD 1 encompasses primarily the downtown area. SMD 2 is the entire City. Properties in SMD 1 are also in SMD 2. The existing rates for street maintenance funding are not adequate to provide for the operation and maintenance and capital investment necessary to continue providing service at the current level.

Staff is proposing an increase of 1.6% for SMD 1 to maintain the current service level in FY25.  For SMD 2, two alternative rates have been proposed:

• Alternative 1: a 6.6% increase in SMD 2 rates.  This proposal was initially presented at the May 20, 2024, Council work session and reflected the amount needed to maintain the current service level. However, at the June 10 Council meeting, the proposed FY25 budget was amended, reducing Public Works' entitlement share by $300,000 and allocating $100,000 for planning efforts on Skyway Drive.  This results in a $400,000 decrease in entitlement funding for street maintenance activities.  If Council approves Alternative 1, Public Works will need to cut its PAVER program (overlays and chip seals) budget by $400,000 in FY25. 
• Alternative 2: a 9.2% increase in SMD 2 rates.  This rate increase would compensate for the $400,000 loss in entitlement funds in FY25.  If Council approves Alternative 2, there will be no budget cuts for the PAVER program.  Staff recommends this alternative because the PAVER program already faces a funding gap and needs additional resources to support overlays and chip seals according to the recommended cycles.

City Council must hold a public hearing and then may:

• Approve the recommended Alternative 2 Resolution,
• Approve the Alternative 1 Resolution,
• Approve an amended resolution, or:
• Not approve a resolution.  If Council does not approve a resolution, an amended resolution to establish street maintenance district assessments will need to be considered at a future City Council meeting to be in accordance with state statutes.

SMD 1 revenues will increase by $5,000 or 1.6% for both proposed alternatives.

If the Alternative 1 Resolution is approved, an average 9,691 square foot residential lot in SMD2 will be assessed $211.11 annually, an increase of $13.07 from FY24.  Approximately $1,020,000 of additional revenue will be generated in FY25. 

If the recommended Alternative 2 Resolution is approved, an average 9,691 square foot residential lot in SMD2 will be assessed $216.25 annually, an increase of $18.21 from FY24.  Alternative 2 will cost the average residential property $5.14 more per year than Alternative 1 and will generate approximately $1,420,000 of additional revenue in FY25.