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.  The rates allow the Public Works Department to adequately recover costs in proportion to the cost of providing service to each customer class.  The following is a summary of the rates and fees proposed for FY 18 and FY 19:

1. Increase the minimum monthly fees for FY 18 for all meter sizes and increase the fee for meter sizes 3" and up for FY 19 for water.  Customers with a 3/4" meter would increase by 2% in FY 18 and 0% in FY 19.
2. Increase the volumetric charge for city residential water customers by an average of 3% in FY 18 and 2% in FY 19 and for non-resident residential water customers by an average of 4% in FY 18 and 2% in FY 19.
3. Increase both the inside and outside non-residential volumetric fee for water customers by approximately 3% in FY 18 and 2% in FY 19.  
4. Increase the seasonal volumetric fee by approximately 3% in FY 18 and 4% in FY 19.
5. Increase the multi-family water users volumetric rate by about 3% in FY 18 and 2% in FY 19.
6. Decrease the resale rate for County Water District of Billings Heights by 8% in FY 18 and increase it by 5% in FY 19.
7. Increase the private fire protection charges to reflect the current costs of services by increasing the fee by an average of 4% in FY 18 with no increase in FY 19.
8. Increase the wastewater volumetric fee by approximately 3% in FY 18 and 2% in FY 19.
9. Increase the minimum monthly fees by an average of 2% in FY 18 and 3% in FY 19 for wastewater.
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. Increase the SDF for residential, non-residential, and irrigation water connections and for wastewater connections.
12. Adjust water and wastewater fees and charges for various permits and miscellaneous special fees, as well as implementing an additional trip fee, an NSF fee, and administrative service charge which would decrease the fee charged for delinquent services.

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, 2017.

 

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 18 and FY 19, 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, 2015.  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 $500,000 in water revenues in FY 18 and an additional $300,000 in FY 19, as well as an additional $300,000 wastewater revenues in FY 18 and an additional $380,000 in FY 19.  In addition, the increases in franchise fees and surcharges for the general fund will be approximately $32,000 in FY 18 and $27,000 in FY 19.

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, 2017.