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, 2021.

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, Exxon Refinery, and Phillips 66 Billings Refinery, as well as calculate the System Development Fees (SDFs) for water and wastewater. The study also addressed converting usage from Ccf to gallons, revising the residential tier levels, and bulk water reseller classification. 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 FY22 and FY23:

1. Increase the water minimum monthly fees for all water customers by an average of 1.8% in both FY22 and FY23.
2. Increase the volumetric rate for residential water customers by an average of 3.0% in FY22 and 2.8% in FY23.
3. Increase the volumetric fee for inside non-residential water customers by 4.2% in FY 22 and 2.8% in FY 23. Outside non-residential water customers will see an increase of 4.0% in FY22 and 3.3% in FY23.
4. Increase the seasonal water volumetric fee by an average of 5.9% in FY22 and 2.0% in FY23.
5. Increase the multi-family water users volumetric rate by 2.8% in FY22 and 3.0% in FY23.
6. Increase the resale rate for the County Water District of Billings Heights by 0.7% in FY22 and 31.0% in FY 23.
7. Increase private fire protection charges to reflect the current costs of services by increasing the fee an average of 6.0% in FY22 and in FY23.
8. Increase the wastewater minimum monthly fees by an average of 1% in FY22 and 1.8% in FY23.
9. Increase the wastewater volumetric charge by an average of 2.8% in FY22 and 2.7% in FY23.
10. Adjust the volume charge, fixed monthly fee, and SDF for Lockwood Water and Sewer District, Exxon Refinery, and Phillips 66 Billings Refinery to reflect the current costs of services.
11. Create a new class of users for bulk water resellers and calculate rates similarly to other contract customers using a 15% rate of return. Currently, bulk water resellers are being charged the same rate as inside non-residential customers.  This new class will establish rates that are $.97 per 1,000 gallons more than the non-residential rate in FY22 and $1.91 more than the non-residential rate in FY23.
12. Increase the water SDF for residential connections by 1.5%, non-residential connections by 4.5%, and irrigation connections by 7.4%
13. Increase the wastewater SDF connection by 18.5%.
14. 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 current proposed resolution is approved, rates will be effective July 1, 2021 and July 1, 2022 as indicated.

City Council 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 FY22 and FY23, 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. 

The proposed rate and fee adjustments will generate approximately $1,030,000 in water revenues in FY22 and an additional $1,570,000 in FY23, as well as an additional $774,000 in wastewater revenues in FY22 and an additional $487,0000 in FY23.