Consultants from Jackson Thornton presented results of a city-commissioned cost-of-service study for Gallatin’s water and sewer utilities, recommending phased volumetric rate increases and modest customer charge adjustments over two years to begin absorbing the debt service tied to roughly $100 million in planned capital projects.

The firm told the City Council Committee the water system needs about $16.2 million annually to cover operations, debt service and pay-as-you-go capital; current rate revenue covers roughly 80 cents on the dollar. Jackson Thornton recommended a two-year, volume-based increase for inside residential water customers — 15¢ per 100 cubic feet (CCF) in year one and 15¢ in year two (30¢ total), which the consultant said would add about $1.6 million based on 2024 usage and move overall cost recovery to about 90¢ on the dollar. Consultant Jim Marshall said a typical residential customer (about 6 CCF/month) would see about $1.80 per month in total at full implementation, roughly a 5.7% increase across two years.

On sewer, Jackson Thornton recommended a two-year change that raises the customer charge by $1.54 annually and increases the usage charge by 10¢ per CCF each year; that package would produce about $980,000 based on FY2024 billings and lift the system toward about 93¢ recovery on the dollar at full implementation. The sewer recommendations also included larger percentage moves for smaller, under-recovered classes such as civic-center and certain industrial accounts.

Consultants emphasized that debt service is a large driver: about 49% of current water revenue is projected to be dedicated to debt service as the city stages new borrowing to fund plant upgrades and other projects. Marshall noted $89 million of planned debt is not yet on Gallatin’s books; the study intentionally “leaned into” roughly $6.8 million a year of future debt service and recommended a multi-year glide path so rate adjustments are not concentrated in a single year.

Councilmembers pressed staff and consultants on equity and affordability. Councilman Pan asked how the changes would affect typical users; the consultant gave the 6-CCF illustration. Councilmembers also questioned irrigation/irrigation-meter pricing: consultants recommended larger volumetric increases for irrigation meters (50¢ per CCF each year) because irrigation demand drives summertime peak usage and capacity needs. The presentation noted irrigation meters in August and September moved as much water as two wholesale customers combined.

Public utilities leadership and Council members discussed mitigation options. Public Utilities Superintendent Kellogg proposed the council consider a senior-assistance program (eligibility suggestions included age and income thresholds such as 65+ and up to 200% of the poverty line) to partially offset rate impacts for low-income seniors; the council asked staff to draft language and return with a resolution. With consultant commitment to return for updates, staff said they would bring rate ordinances and a resolution creating an assistance program to the next council meeting for formal consideration.

Why it matters: Gallatin is preparing major water and sewer capital work that will materially raise debt service. The consultants’ two-year, phased approach aims to begin stabilizing funding now while leaving time for growth to absorb part of the future burden, and the council signaled a willingness to consider modest, targeted assistance to vulnerable residents.

What happens next: Staff will draft ordinance language to implement the two-year rate adjustments and produce an assistance-program resolution for council consideration at upcoming meetings. Consultants said they will return periodically (roughly every two years per the engagement) to update recommendations as actual borrowing and project schedules firm up.