City Commissioners are considering a substantial increase to water, sewer and stormwater fees for the upcoming budget year.

Commissioners have set a public hearing for June 3 on the proposed rates that, if approved, would be effective July 1.

The action to set the public hearing was on the May 6 consent agenda and no commissioner commented on the utilities rates. There was no public comment on the item.

In April, city staff had recommended 10 percent increases, similar to increases of years past, but told commissioners that those increases wouldn’t allow for expansion to support potential development.

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Staff annually review the water, sewer and stormwater rates to determine if they need adjusting.

During their April 1 work session, staff told commissioners that revenues aren’t meeting expenses for the water, sewer and stormwater divisions.

Staff said that if expenses were to remain the same, they’d need a 30 percent rate increase for water to cover expenses.

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To account for expected cost increases in the water system, the city would need to raise the water rate by 36 percent, staff said.

That rate increase within one year is “unrealistic,” Public Works Director Chris Gaub said in April, and it “will take time to dig out of this.”

During their regular April 1 meeting, commissioners were scheduled to set a public hearing on the utility rates for May 6, but opted to pull that item from the agenda.

Mayor Cory Reeves said during that meeting that they’d had a good discussion but thought they have some significant capital needs and potential future development so they needed to have further discussion.

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He said they’d probably need to set a special meeting to keep that process moving.

Other commissioners nodded or said that was fine but offered no further comment on the delay.

No special meeting was held, nor were the water, sewer or stormwater rate proposals further discussed in public meetings.

In April, City Manager Greg Doyon told The Electric that he thought commissioners paused after the April 1 work session when they realized that “the city is not well-positioned to facilitate growth and development initiatives when new infrastructure is required.”

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He said in April that staff would review the rate structure again to see if there are options available that commissioners may want to consider when addressing future development such as what options are available and reasonable when setting utility rates; how can the city maintain affordable rates while encouraging development of new infrastructure to grow the community’s tax base; how can the city be better at attracting new commercial development, manufacturing and industry.

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Doyon said that attracting new development is difficult when infrastructure isn’t readily available and in most cases, new infrastructure has been driven by private development.

Doyon said the answer to slow growth in the city may be the city’s tactics and investment in water, sewer, stormwater and streets.

In April, staff proposed 10 percent rate increases for residential and commercial users for each water, sewer and stormwater, which would be a monthly increase of $6.04 on the average residential utility bill.

That increase would generate about $1.7 million in additional revenue for those three divisions and would allow for continued operations, about $5.3 million of the required $11.1 million of sustaining capital improvements, about $5.8 million additional debt or deferred capital and cover employee salaries and benefits.

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It would also mean less sewer main lining, less water main replacement, less storm drain infrastructure added and doesn’t subsidize development, plus defers capital improvements.

In an April 2 Facebook post, Reeves wrote, “Great Falls is at a crossroads. We can continue with modest increases—about 73 cents per month—to maintain our water and sewer systems as they are. Or, we can invest in real growth, improving our infrastructure to support development and opportunity. That would mean an increase of about $10 per month, bringing the total to $36.”

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As part of the city’s growth policy process, a community survey asked if the city should “help make it easier for people to build new homes, businesses or neighborhoods” to which 91 percent of the 2,308 total responses collected over 70 days this winter said yes.

Those who answered yes were asked how the city should make it easier from three options.

One response option was “helping pay for things like roads, water pipes, sewer, and other infrastructure,” which 49 percent selected.

Another option was “making new developments pay for the things they need over time: builders would pay the city back later for the cost of new roads, pipes, or other services their buildings need,” which 54 percent selected.

The third option was “making approval processes faster and simpler,” which 77 percent selected.

The following question was “when planning for the future, what should Great Falls focus on the most?”

Of the three options, the responses were:

• 20 percent: taking care of what we already have: fixing and improving the roads, water pipes and sewer pipes
  already in place, so everything works well and stays in good condition
• 3 percent: building new things: adding new roads, water pipes, and sewer pipes to help build new houses, businesses and neighborhoods in the city
• 76 percent: doing both: fixing the old things and building new things at the same time

Half of the survey respondents selected aging infrastructure as one of the biggest challenges facing the city over the next 20 years among their top five from a list of 16.

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The 10 percent across the board increases proposed by city staff for water, sewer and infrastructure, would actually be $6.04 for the average residential utility bill, according to figures presented by city staff during the April 1 work session. That would bring the total average monthly utility bill to $66.46.

The proposed 10 percent increase for stormwater alone is 83 cents monthly. A 30 percent increase on stormwater only would be about $2.50, bringing the monthly stormwater fee to about $10.84.

A 30 percent increase, which staff said would be necessary to cover the cost of existing expenses, on all water, sewer and stormwater, would be about $18 per month, bringing the average residential monthly utility bill to about $78.58, based on simple math using figures presented by the city.

Staff is now returning to commissioners with two options to consider.

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“The rate projections to meet future revenue requirements and gradually address cost of service for the various user classes have changed the way in which the proposed rates are being presented,” according to the staff report.

The first is to stick with their initial 10 percent proposed increase.

For the other, staff wrote they are “factoring in capital improvement investments for new public infrastructure to facilitate growth in the city’s tax base,”that they are offering, “by commission request to explore alternative rate structures to expand public utility systems.”

That proposal, which can be amended, is:

• water: 21.17 percent increase
• sewer: 26.26 percent increase
• storm drain: 57.6 percent increase

That option, staff wrote, creates a “capital improvement fund for new public infrastructure to support community wide growth and development.”

The staff report does not include details about how those funds would be directed, how long those funds could be held, what areas might be prioritized for new public infrastructure, whether any specific potential development has been identified, how those costs would be shared with developers and criteria by which public funds would be used to support infrastructure for private development.

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The second proposal to increase rates would increase the average monthly residential utility bill by $17.61, or 27 percent, according to city staff.

It would raise the average commercial utility bill by $46.82, or 27 percent, monthly.

The second fee proposal option would generate an estimated $6 million in additional revenue annually for the city to use to “mitigate upfront costs for expansion of public utility infrastructure that could potentially facilitate increased private development within the city,” according to staff, and it would take a year for that full fund amount to be available.

Staff said the water rate increase is needed due to the roughly $61.4 million in capital improvements needed over the next five fiscal years, including the following significant projects:

• ongoing water main replacements for $19.8 million
• water treatment plant upgrades for $24.6 million, including corrosion control implementation 
• plant operations are projected to increase over the next decade from $6.2 million to $9.8 million due to increased costs to maintain aging infrastructure, labor costs, chemicals, general inflation, utilities and other market factors

The sewer rate increase is needed for the estimated $166 million in capital improvements needed over the next five fiscal years, including:

• ongoing sewer rehabilitation phases 23-32 for $9 million
• wastewater treatment plant projects totaling $141 million
• lift station rehabilitation totaling $13 million
• wastewater plant biological nutrient removal upgrades may total up to $100 million depending on outcome of potential new regulatory requirements

The city contracts with Veolia Water North America Operating Services to operate and maintain the wastewater treatment plant and over the next decade, expenses are expected to increase from $5.9 million to $8.6 million, according to staff.

The stormwater increase is, according to staff, due to the maintaining the current system and about $29 million in capital improvements needed over the next five fiscal years, including:

• South Great Falls storm drainage improvement projects totaling $8.9 million
• Central Avenue and 3rd Street South drainage improvement projects phase 2-4 totaling $9.2 million