The Public Works Department regularly undertakes water and wastewater rate studies.  MCA 7-6-1602 requires a review of system development fees every two years and it is necessary to complete this review to calculate fees for fiscal year 2018 and again for fiscal year 2020 to be compliant with state law.  This rate study will cover two two-year periods, the first to set rates for fiscal years 2018 and 2019 and the second to set rates for fiscal years 2020 and 2021 to coincide with the system development fee review requirements.  A cost of service rate study is needed to review and recommend appropriate rates for System Development Fees, water and wastewater user rates, resale water rates for the County Water District of Billings Heights, and wholesale rates for the Lockwood Water and Sewer District and Phillips 66 Billings Refinery, as well as calculate the system development fee and rates for Exxon Mobil Refinery when they connect to the City's wastewater system.  In order to comply with state law and meet projected operation and maintenance costs, as well as fund major capital project needs, adjustments are needed for both the system development fees and user rates.  

A Request for Proposals (RFP) was mailed to three firms from a list of prequalified firms.  One proposal was received from Advanced Engineering and Environmental Services, Inc.(AE2S).  AE2S has conducted the previous two water and wastewater rate studies and staff has been pleased with their services. 

The City Council may:

• Approve the award of the professional service agreement; or
• Not approve the agreement.  If the City does not approve this agreement, it will be unable to adjust these fees without violating State and case law.

The scope of the agreement is divided into three phases of work tasks which will commit funds to be spent in fiscal years 2017, 2018, and 2019.  The amount of the Phase 1 tasks is $107,272 and this has been budgeted for in the FY 2017 budget in the water and wastewater funds.  The amount of Phase 2 work which will commence in FY 2018 is $31,831 and the amount of FY 2019 Phase 3 work is $113,928 for a total agreement amount of $253,031.  

Staff recommends the City Council approve the Agreement with Advanced Engineering and Environmental Services, Inc. in the amount of $253,031 for the water and wastewater rate studies.