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 and Phillips 66 Billings 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 that allows the Public Works Department to adequately recover costs in proportion to the cost of providing service to each class of customer.  The following is a summary of the rates and fees proposed for FY 16 and FY 17:

1. Maintain the minimum monthly fees for FY 16 and FY 17 at the current rate for both water and wastewater.
2. Maintain the volumetric charge for inside residential water customers at the current rate for both FY 16 and FY 17.
3. Increase the inside non-residential volumetric fee for water customers by approximately 17% in FY 16 with no increase in FY 17.  
4. Increase the seasonal volumetric fee by approximately 11% in FY 16 with no increase in FY 17.
5. Establish a new customer class for multi-family water users which are defined as residences with four or more units.  These customers are currently classified as non-residential.  The proposed volumetric fee, which reflects the unique peaking factors of this customer class, would increase by about 27% in FY 16 and 6% in FY 17.
6. Establish a separate volumetric rate for water users outside of the City of Billings.  Currently, outside users are charged a higher fixed charge, but the same volumetric charge as inside users.  A cost of service volumetric rate was calculated for this customer class and the proposed fee would be maintained in FY 16 for outside residential customers, but increase by approximately 4% in FY 17 and increase by 17% for outside non-residential customers in FY 16 and by 6% in FY 17.
7. Increase the resale rate for County Water District of Billings Heights by 2% in FY 16 and 4.5% in FY 17.
8. Increase the private fire protection charges to reflect the current costs of services.
9. Increase the wastewater volumetric fee by approximately 3% in both FY 16 and FY 17 for all classes of customers except commercial high strength which is proposed to increase by 19% in FY 16 and 5% in FY 17.
10. Adjust the volume charge, fixed monthly fee, and SDF for Lockwood Sewer District, as well as the volume charge and fixed monthly fee for Phillips 66 Refinery to reflect the current costs of services.
11. Decrease the SDF for residential and non-residential water connections and increase the SDF for irrigation and wastewater connections.
12. Adjust water and wastewater fees and charges for various permits and miscellaneous special fees.  

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 proposed resolution is approved, rates will be effective July 1, 2015.

 

The City Council must hold a public hearing and then 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 FY 16 and FY 17, the rates and fees will continue at current levels, leaving insufficient revenues in the water and wastewater funds to sustain the adopted capital improvement program. System Development Fees (SDFs) must be updated  at least every two years to be in compliance with MCA 69-7-1602 and they were last updated July 1, 2013.  Thus, a resolution would need to be considered at a future City Council meeting to adjust SDFs.   

The proposed rate and fee adjustments will generate approximately $1,075,000 in water revenues in FY 16 and an additiona $260,000 in FY 17, as well as an additional $650,000 wastewater revenues in FY 16 and an additional $730,000 in FY 17.  In addition, the increases in franchise fees and surcharges for the general fund will be approximately $197,000 in FY 16 and FY 17 combined.

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, 2015.