Staff recommends that the City Council approve the First Amendment to the Water Carriage Agreement with Billings Bench Water Association (BBWA). 

The Public Works Department recommends approval of an amendment to the Water Carriage Agreement between the City of Billings and the Billings Bench Water Association (BBWA) to provide additional water conveyance capacity and establish funding arrangements for the replacement of the Canyon Creek Flume.

The proposed improvements will increase the flume's capacity from approximately 430 to 550 cubic feet per second (cfs), addressing a critical bottleneck in the BBWA canal system and improving the City's ability to convey its full 74 cfs Yellowstone River water right. The additional capacity will allow greater operational flexibility by enabling the City to supply the new West End Water Treatment Plant while simultaneously filling its reservoirs, improving long-term water supply reliability.

The estimated project cost is $2.87 million, with approximately $1 million funded through federal Congressional Directed Spending. The remaining $1.87 million will be shared equally between the City and BBWA. Under the amendment, the City will initially finance BBWA's estimated $935,000 share, which will be repaid through a 50% reduction in annual water carriage fees. The City's net contribution is estimated at $935,000, and the total upfront expenditure is within the $3 million previously budgeted for BBWA infrastructure improvements.

In May 2023, the City entered into a Water Carriage Agreement with the Billings Bench Water Association (BBWA) to convey water from the City's Yellowstone River water right through the BBWA canal system to the new West End Water Treatment Plant and reservoirs. Under the original agreement, BBWA committed to conveying up to 30 cubic feet per second (cfs), or approximately 19 million gallons per day (MGD), during the irrigation season. While this amount is roughly equivalent to the capacity of the new treatment plant, it is substantially less than the City's 74 cfs water right. The 30 cfs limitation reflected BBWA's available conveyance capacity and its unwillingness at that time to commit to additional capacity.

Utilizing the existing BBWA canal system rather than constructing a separate City-owned river intake, pump station, and approximately four miles of pipeline avoided an estimated $35 million in construction costs. This approach also substantially reduced anticipated operations and maintenance (O&M) expenses by eliminating the need to operate and maintain additional City-owned infrastructure. However, the City recognized that relying on the BBWA system would introduce operational limitations and require investments in infrastructure owned by BBWA. These considerations were identified when the original agreement was approved.

At the time, the City was aware that the approximately 100-year-old Canyon Creek Flume would require significant maintenance or replacement, although the cost had not yet been determined. The May 2023 Council memo specifically identified the need for improvements to the Canyon Creek Flume and other portions of the BBWA canal.  Accordingly, the City included $3 million in the FY24 budget for anticipated infrastructure improvements. The original agreement also contemplated that the City would fund improvements necessary to meet its water conveyance needs, with costs allocated based on the benefits received by each party.

The Canyon Creek Flume is the primary constraint on the canal system's ability to convey additional water for the City. The proposed replacement will increase the flume's capacity by approximately 120 cfs, from 430 cfs to 550 cfs.  This improvement will significantly enhance the City's ability to convey its full 74 cfs water right through the BBWA system, subject to the priority and operational provisions of the agreement. The additional capacity is important because it will allow the City to supply the new water treatment plant while simultaneously filling its reservoirs, providing greater operational flexibility and improving long-term water supply reliability.

The proposed amendment to the Water Carriage Agreement addresses the original 30 cfs irrigation-season limitation, establishes provisions for additional conveyance capacity, and defines the City's financial participation in the Canyon Creek Flume replacement. 

The estimated cost of the flume replacement  is $2.87 million, based on the 30% engineering design. Approximately $1 million in federal Congressional Directed Spending will offset the project cost, leaving an estimated $1.87 million to be shared equally between the City and BBWA. Each party's estimated share is $935,000.  To facilitate construction and secure the additional conveyance capacity, the City will initially finance BBWA's $935,000 share through an interest-free arrangement. BBWA will repay this amount through a 50% reduction in the annual water carriage fees otherwise payable by the City. Full repayment is anticipated within approximately 11 to 13 years, depending on annual adjustments to the carriage fees. This arrangement allows the improvements to proceed while ensuring BBWA ultimately funds its share of the project costs.

The City has $3 million budgeted for improvements to the BBWA canal system under the original Water Carriage Agreement. The estimated cost of the Canyon Creek Flume replacement is $2.87 million, of which approximately $1 million will be funded through federal Congressional Directed Spending. The remaining $1.87 million will be shared equally between the City and BBWA, resulting in an estimated contribution of $935,000 from each party.

Under the proposed amendment, the City will initially fund both parties' shares, resulting in a total anticipated upfront expenditure of approximately $1.87 million. BBWA will repay its $935,000 share through an interest-free financing arrangement, whereby the City's annual water carriage fees will be reduced by 50% until the financed amount is fully repaid, in accordance with the terms of the amendment. The original annual carriage fee was $150,000, subject to annual Consumer Price Index (CPI) adjustments. Repayment is anticipated to take approximately 11 to 13 years, depending on annual fee adjustments.

The City's net financial contribution to the project is estimated at $935,000, with the remaining $935,000 recovered through future reductions in carriage fees. The total upfront expenditure is within the $3 million previously budgeted for BBWA infrastructure improvements, and no additional budget appropriation is anticipated.

Billings Bench Water Association
Citizens of the City of Billings

The City Council may:

• Approve the First Amendment to Water Carriage Agreement with the BBWA expanding the City's ability to convey up to 74 cfs during the irrigation season and establishing the cost-sharing and financing arrangements for the Canyon Creek Flume Project, or
• Disapprove the First Amendment to the Water Carriage Agreement, retaining the existing conveyance limitations and leaving the cost-sharing arrangements for the flume improvements unresolved.