Council rejects water reservoir bid

At the Hill City Common Council meeting April 24 the council needed to take some form of action on the water reservoir bid results presented at the last meeting. 

RCS Construction of Rapid City was the only company to bid on the 250,000-gallon water reservoir that would share an easement with the 1880 Train. 

“This project’s important for us because we do have a capacity need here in town for water storage,” said city administrator Brett McMacken. 

The bid came in at $3,393,673.98. After speaking with the city engineer, Kale McNaboe, saving approximately $100,000 through a few changes was deemed possible. The biggest change was extending the deadline for the project. 

With the $100,000 deducted, McMacken added a 10 percent change order cost since projects realistically come with unexpected changes. This placed the project cost at an estimated $3,623,041.38. 

A certain amount of funding for this project could come from Rural Development, which offered a low-interest loan of $931,000. Other associated water funds include the Water Savings Account, Water Improvement Fund and American Rescue Plan Funds. With all of these funds, the available total is $1,895,819.64. 

Since this amount was not enough to pay for the project outright, McMacken and finance officer Stacia Tallon examined the budget and other funds within the city government and did an internal analysis of whether or not the city could afford the project at this time. 

Looking at the city’s cash totals, McMacken said the city has enough money for the project. However, taking from these other funds would require a lot of discussion. 

“The realization also is once you loan or grant this money from one fund to another fund, you’re not going to have those funds for a while because it takes time for money to re-accumulate,” said McMacken. “Once the water fund would incur a debt, that debt needs to show up on an annualized basis within our operating budget.”

 It was estimated this would be a 20-year internal loan at 2 percent. The larger the loan, the larger the approximate yearly payment. In order to offset the debt service on these loans, the city would be looking at a sizable increase to water rates. 

“Running a water system up in the Hills is inherently very expensive, and we’ve always been kind of in the upper tier of cost for our water system. We’ve tried to keep the rates as low as we can,” said McMacken. 

McMacken said “the more we looked at it, the more we came to the realization that this probably isn’t a feasible thing due to the price that it came in from RCS. The bid is, in my opinion, a solid one million dollars more than what we felt was reasonable.” 

Additionally, in the bid the tank itself was estimated at $2.3 million. 

“I just don’t think it’s worth it at this time,” said McMacken.

“I’m in total agreement with the final assessment that we can’t afford this project at this time,” alderman Dale Householder said. “It doesn’t mean we’re going to give up on it. There may be some funding out there if we start exploring.” 

For now though Householder could not see justifying spending that kind of money out of the city’s reserves. Alderman Gary Auch agreed as did alderman Carl Doaty. 

Doaty said the residents of Hill City have already taken a tax hit due to property taxes. 

“I’m not about to raise water rates for this project that has been in the process for many years,” said Doaty. “The numbers aren’t there.” 

However, now that the council has a valid project on the table, Doaty would like to look for grants to move it forward. Another thing he suggested is turning the project into phases if possible to spread out the cost. 

Alderman Jason Gillaspie also agreed saying, “The capacity issues whether it’s this, the sewer plant or various other things are not an issue for most of the year anyway, just a few months out of the year. I just don’t think it is necessary right at this point.”

Thus, the council unanimously voted to reject the water reservoir bid as submitted. 

The next meeting of the Hill City Common Council is Monday, May 8 at 5:30 p.m. at city hall.