The Kalispell City Council held a lengthy work session last week to discuss proposed increases in city utility rates.

A preliminary proposal includes a $30 annual increase over a five-year period for city water. Sewer fees would increase $11 a month, or $132 for the first year, then would drop to a $30 annual increase for the next four years.

The Kalispell Public Works Department is in the process of studying water and sewer rates. To meet the city’s determined reserve requirements, consultant Shawn Koorn, associate vice president of HDR Engineering, said they anticipate an average residential water bill to increase about $2.50 per month for the first five years. For sewer service, they expect a monthly bill increase of about $11 in the first year, 2021, but after that rates would likely settle around a $2.50 monthly increase.

The city’s new utility rates could encompass updates to the utility meters, various capital improvement projects and maintaining 90-day reserve levels, per the industry standard. Koorn emphasized there would be no change to service levels.

“That first year is a challenge, given where we are at current revenues,” Koorn said. He explained there would initially be considerable new debt due to a number of large capital projects, and he added, “a key driver is the impact on the collection side of the system.”

For most of the work session, Koorn focused on the revenue requirements for the city’s utilities. He explained the revenue requirement, “really is just a comparison on an annual basis of revenue versus expenses.”

With that information they “then determine how those costs should be collected from different customers.”

He also provided an overview of the cost-of-service analysis, which looks at the different rates applied to various classes of utility users, such as residential versus commercial water customers. Koorn said the analysis is intended to create an “equitable allocation of costs between different customer types.”

Mayor Mark Johnson and the council asked numerous questions about the rate study and the proposed updates throughout the three-hour meeting. The biggest piece of feedback council members offered was a desire for more information from the Public Works Department about the various factors in the rate-setting process. Public Works Director Susie Turner told the Inter Lake they hope to receive additional feedback from the public.

The council also discussed an update to Tax Increment Finance District policies. The council had discussed the policies at an earlier work session in June.

“We talked about really refining the project selection process,” Senior Planner Jarod Nygren explained.

The most significant change to the policies would be the requirement of a third-party analysis for projects requiring more than $100,000 in tax-increment funding.

Another addition would be staff reports on new TIF projects by the Urban Renewal Agency. These would be similar to the Planning Board staff reports for new city developments.

Nygren said the new policies “get rid of some of the subjectivity” in TIF funding, and City Manager Doug Russell noted the changes are “a bit more aggressive” than the current policies.

Nygren clarified the projects would not necessarily need to meet all of the criteria to receive TIF funding, and he said he feels the proposed changes, “creat[e] what I think’s a pretty clear process” for approving these projects.

Council members raised questions about the cost of a third-party analysis, who might perform this analysis and whether this additional requirement might dissuade potential developers from submitting proposals. Nygren said there are a number of groups that could perform the analysis and they don’t expect the cost — approximately $5,000 for a $100,000 project — to deter would-be developers.

They received no public comment on the policy changes and Russell said “it’s basically looking like we’re ready for action.”

Reporter Bret Anne Serbin may be reached at bserbin@dailyinterlake.com or 758-4459.