Sewer User Rate IncreasePUBLIC HEARING

Report to Council, November 3, 2008

Sewer User Rate IncreaseOctober 6, 2008 City council set a public

hearing to consider adopting a resolution amending the sewer user rates.

October 17, 2008 a notice announcing the rate increase and date of the public hearing was mailed to all sewer users.

Sewer User Rate IncreaseThe increase will be the first in 8

years:

Mailed Public

Hearing Notice

Customer ClassEffective

01/01/2009Effective

01/01/2010Effective

01/01/2011Effective

01/01/2012Single Family Residential:

Semi-Annual Billing Increase $3.44 $3.64 $3.77 $4.03Percentage Increase 5% 5% 5% 5%

Multiple Family Residential 5% 5% 5% 5%Commercial 5% 5% 5% 5%Restaurants 5% 5% 5% 5%Hospitals 5% 5% 5% 5%Schools 5% 5% 5% 5%Industrial 5% 5% 5% 5%

At the end of 4-years, the total residential rate increase will equal $14.88

Current rate = $68.99 every 6-monthsFuture rate = $83.87 every 6-months

Sewer User Rate IncreaseMontana Monthly Rate Comparison

Source: 2007 AE2SNorth Central Utility Rate Survey

Sidney

Missoula

Butte-Silver Bow

Billings

Havre

Great Falls

Belgrade

Helena

Llivingston

Bozeman

Kalispell

$- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00

$6.58

$11.50

$13.50

$18.85

$21.07

$21.30

$21.73

$23.54

$24.15

$28.92

$31.70

$13.99

MONTANA

With IncreaseCurrent Charge

Sewer User Rate Increase

60%

40%

Basis of Increase

Headworks $6.7MCollection System Completion (Volun-tary Nutrient Re-duction Program Commitment) $4.4M

$4.4 M

$6.7M

Sewer User Rate Increase2008 Facility Plan Update Established 20-

year Capital Improvements Recommendations:Council heard a presentation about these on April

30, 2008.Headworks Replacement:

Aging equipment replacement.Technology upgrade to improve downstream plant

operations and maintenance.Cost-effective odor control improvements.Hydraulic capacity increase for 20+ years.Montana Department of Environmental Quality

required influent flow metering.Replacement now is more cost effective than

upgrades followed by replacement in 8-12 years.

Sewer User Rate IncreaseCollector Systems:

Rattlesnake Neighborhood collectors (only remaining neighborhood without sewer under the Voluntary Nutrient Reduction Program)

OpportunityTwo (2) sewer revenue bonds sunset in 2012.2012 increase may not become necessary.Will know before 2012 if increase can be

dropped.

Headworks Upgrade Project

Existing Headworks

Existing Headworks 25 year old

technologyLimited expansion

capabilitiesExpensive to

manage odors

Existing Headworks Equipment

age and corrosion must be addressed

Open channels and bins complicate odor control

New Headworks New HeadworksLocation

FEATURESTechnology upgrade to

improve downstream plant operations and maintenance.

Cost-effective odor control improvements.

Hydraulic capacity increase for 20+ years.

Montana Department of Environmental Quality required Influent flow metering.

$ 6.7 million budget.

Sewer User Rate Increase Q&AQ – What are the sewer user rates used for?

What happens to our dollars?A – Operations and maintenance (O&M) of the

entire facility, replacement and depreciation (R&D) and bonded debt coverage (Debt).

51%

11%

21%

17%

Comparison

O&M $3.7M

R&D $.8M

Debt $1.5M

Increased Debt $1.2M

Sewer User Rate Increase Q&AQ –Why 5% per year? That's too much. A – There hasn't been a rate increase for 8 years

due to annual growth of new customers. Missoula has one of the lowest user rates in Montana.

Sidney

Missoula

Butte-Silver Bow

Billings

Havre

Great Falls

Belgrade

Helena

Llivingston

Bozeman

Kalispell

$- $10.00 $20.00 $30.00 $40.00

$6.58

$11.50

$13.50

$18.85

$21.07

$21.30

$21.73

$23.54

$24.15

$28.92

$31.70

$13.99

MONTANA

With IncreaseCurrent Charge

Sewer User Rate Increase Q&AQ - Developers should pay costs to install new

sewer lines.

A – New development pays 100% to extend new sewer lines that serve the new development. Additionally new connections to the sewer line pay the sewer development fee. This sewer development fee is the fair share contribution of using the existing sewer facility. The City uses this fee revenue to help pay for expansion of the treatment plant and sewer collection system.

Sewer User Rate Increase Q&AQ – Why wasn't this done with the last upgrade?A – The Facility Plan identified multiple

headwork's projects to be done after the upgrade. These projects were to be done over 10-years. The City is reducing costs by bundling the projects. One of the projects is the influent flow monitoring, which is required in our 2006 discharge permit. Another project is the odor control that has become a forefront issue as development gets closer to the treatment plant. A further project was identified after operating the new plant for a few years. It was discovered there is a need to increase removal of incoming debris to optimize treatment and protect the plant equipment.

Sewer User Rate IncreaseCity Clerk's report about written

comments received from citizens.