Staff recommends that the City Council conduct a public hearing and approve the proposed resolution amending the water rate for the resale service class for FY25.

The water and wastewater fee and rate schedule was approved as a two-year incremental rate adjustment by Council on May 22, 2023. Since the adoption of these rates, the City has delayed construction of the west end reservoir to begin construction in FY25.  Additionally, construction of the west end water plant commenced later than previously anticipated and will not be substantially complete in FY25.  Both the west end reservoir and west end plant were previously incorporated in the FY25 revenue requirements for the water resale rate.  The County Water District of Billings Heights is the only customer in this 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 of $3.04 per 1,000 gallons (kGal) is a decrease from the previously calculated rate of $4.42 per 1,000 gallons (kGal).  Although the revised rate is a decrease from what was previously approved, it is an increase of 2.4% over the FY24 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, 2024.

City Council may:

• Approve the amended resolution; or,
• Not approve the amended resolution. If Council does not approve the amended resolution, the previously approved rate will be implemented as of July 1, 2024 and the city will not be in compliance with the Agreement the city has with the County Water District of Billings Heights.

The proposed rate adjustment will decrease water revenues from what was previously anticipated in FY25 by approximately $1,360,000.  However, the adjusted rate will increase water revenues from FY24 by about $69,000.