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Gillette City Council receives recommendations to increase utility rates

A third-party study presented to the City Council last week recommended the city consider increasing its utility rates to keep up with rising inflation.

An eagle statue outside of Campbell County City Hall.

The front entrance of City Hall in Campbell County.

GILLETTE, Wyo. – City utility bills could be going up, but precisely how much depends on future discussions by the Gillette City Council. 

During a council meeting on Feb. 14, the council received recommendations from FCS Group, a firm hired by the city for a utility rate study last November, to consider increasing utility rates to keep up with inflation. 

The recommendations were based on a number of assumptions, primarily a 6.5% general cost inflation rate and a 6% construction rate during the current fiscal year, both of which will taper off to 3.5% in the long run, according to Project Manager Melanie Hobart. 

According to the presentation, the city would need to consider increasing rates within its sewer enterprise fund, where projections show the city could be facing a $5 million shortfall in the upcoming fiscal year, Hobart said. 

She presented two options for the council to consider: either pursue a short-term solution that would involve hiking up sewer rates by 20% every year for the next three fiscal years or choose a long-term option of spreading out rate increases gradually over the next several fiscal years. 

The short-term option would immediately rectify the shortfall, but it would have a profound impact on utility customers, according to Hobart, who recommended the city pursue the long-term option. 

But with the long-term option comes a stipulation. The city would need to take $4.8 million from its General Fund and infuse it into the sewer enterprise fund to pay off a loan granted years ago to the city from the clean water state revolving fund, Hobart said. 

Paying off the loan, she said, would save the city millions of dollars in interest and would result in lower rate increases, per Hobart. 

“Infusion clears the books, takes it off, it’s gone, and it really just reduces the pressure on your rates,” Hobart said, thereby reducing the impact on its customers. 

With the long-term option, the city could get away with increasing rates by 10% each year through Fiscal Year 2027, 5% for Fiscal Years 2028 through 2031, and then 3% each year through 2033.

In addition to sewer, the study recommended the city consider increasing its wholesale and distribution rates in its water enterprise fund by 10%, which would decrease the city water fund reserves from a projected $20 million to $14 million with the city still meeting minimum reserve requirements of maintaining 90 days in operational funding, according to Hobart. 

“You can still take your foot off the gas a little bit in terms of rate increases in the meantime,” Hobart said.

When it comes to power rates, the study recommended the city implement a 5% increase in 2024 and then increase the rate by 2.5% annually each year after that, according to Hobart, who said the city would be able to meet its target fund balance in the next couple of years if it did so. 

For solid waste, the study recommended the city have no rate increases in the upcoming fiscal year, but then implement a 3.5% rate increase each year after that to account for inflation. 

Hobart also recommended the city consider increasing rates on government leases in its fiber enterprise fund, which is currently not self-sustaining, but those rates would not have an impact on city utility customers.  

City Administrator Hyun Kim said that the next steps for the council will be starting the arduous process of deciding whether they want to keep FCS on board to expand the scope of their project from recommendations to actual rate design. 

If the city were to follow all of FCS’s recommendations, the average residential customer would have a utility bill of around $263 per month by Fisdal Year 2028, according to the projections. 

“I think the takeaway for anyone here, or is watching this meeting, is that this council today is committed based on this review, based on all of this information, on any and all options to provide the most accommodating rate structure that is sustainable as well as explaining the why,” Kim said. 

The council is slated for a rate increase discussion in the coming months, Kim said, adding that the process will be fast and furious. 

Correction Feb. 23, 2023: A previous version of this article incorrectly indicated that sewer and water were part of the same enterprise fund. This article has been updated to reflect that sewer and water are two separate enterprise funds and that the $4.8 million would be infused into the sewer fund.