I have city water and only my hot water is brown with settlements in it.

Has this just started, or has it always been this way? This can happen because the water often sits in the water heater for some time and minerals can precipitate out of the water while it sits.

The first thing I would try is to drain the water heater and see if it is full of sediment. There is a drain valve on the bottom of the heater for this purpose. Fill the water heater up again, and drain it again until the water runs clear. This will probably take care of it.

On the other hand, if it is just started, and continues after you have cleared the built-up sediment from the water heater, it might indicate a source of rust in the system - either in the water heater itself, or if you have metal piping in the hot water piping system. While rare, water heaters can fail catastrophically (ie. All at once with no forwarning of a leak) from an internal crack in the interior lining and then the body starts to rust from the inside.

Leifweaver had the right idea but you don't "drain" a water heater you "flush" them out.

For long life and fewer troubles you should keep your heater clear of mineral build-up by FLUSHING NOT DRAINING on a regular schedule. Attach a hose to the boiler drain at the bottom of the tank. With the pressure on, open the boiler drain and let it run until the water runs clear. You will see a spurt of red,(rust) followed by white or yellow grains,(lime or calcium carbonate). This shouldn't take more then a few minutes. Do this monthly to keep it clear. Now flush out your hot water lines on ALL fixtures that are affected . Now pull each aerator and clean the screens. Be sure you put them back together the same way you took them out. Don't forget to flush it out every month. Your heater will thank you for it. Hope this helps and thank you for rating my answer, Tom