City holds hearing for phase two funding

Jennifer Sietsema, executive director for the  Black Hills Council of Local Governments and Joe Noble of city engineering firm AE2S joined the Hill City Common Council at a special meeting held Dec. 4 at the Hill City Center. This was a required meeting to apply for the next round of funding for the water and sewer infrastructure projects. 

Noble said funding for the project was divided into three funding phases to maximize potential grant and forgiveness possibilities, offsetting the cost of the $12-13 million project. This phase two request is for about $4.6 million.

The goal is to be “turning dirt” in 2026, with the past year having been spent on conceptual drawings, data collection and contract negotiations, Noble said.

The city received  $5,439,000 in funding in phase one.

It received about $2 million through the consolidated water facilities construction program toward that first phase.

“We’re hoping that we’ll receive something very similar to that amount in this next round,” Noble said. 

If Hill City had asked for the total project funding in one phase, the maximum it could have received in total  was $2 million. 

“By breaking up the request for the funding, we’re hopeful that the state will be able to have multiple opportunities to help support the project,” said Noble. 

The city also received an $82,000 water quality grant for phase one, which is a potential grant in this second phase. The remaining money for phase one was funded with an State Revolving Fund (SRF) loan with no principal forgiveness. 

The loan terms are 3.75 percent for 30 years. The loan repayment is slightly different in this phase, said Sietsema. 

“The cost estimate is  only eligible for 20 years” at the same 3.75 percent rate of interest, she said.

Sietsema outlined the “worst-case scenario,” based on receiving a loan only (without any grants), in which the city is responsible for a principal and interest payment of $27,622 per month. 

“You have to collect an extra 10 percent above that,” Sietsema said, bringing the total to $30,385 per month collected through a project surcharge. 

If that was assessed across the board, each of the 499 Hill City system customers would pay a $60.89 per-month increase.

However, aldermen have proposed a tier and usage system that city administrator Nate Anderson outlined. 

“We’re gonna see a significant rate increase in this year (2026), like 80 percent,” Anderson said, outlining another 60 percent in 2027 and increases each year until 2031 where “we’re healthy with our operation costs,” he said. 

He said the city has been behind on those operation costs for five or six years.

Alderman Dennis Siebert said, “None of us want to see the rates go up” and that the town is working to “minimize the effect and balance the fee so that nobody has to move out of their property because of the water rate.”

Anderson outlined the tier system, which began in 2025 with the city implementing a fixed fee for every single user based on tiers and what type of entity you are. 

“Residential has one fixed fee,” Anderson said. “Businesses and non-profits, anybody else that was non-residential, is based on the tier of their maximum water usage two months in a row.” 

He said Rapid City has a similar system. 

Alderman Ethan Walker said that the town “has enjoyed abnormally low rates for a lot of years,”  adding, “We were behind paying just for the stuff we had currently.”

Council president Lori Miner said the council is trying to work with city staff to “develop a fund so people can donate to help their neighbor.”

Mayor Tana Nichols says Hill City is very lucky to have a “compassionate and intelligent staff…please trust us.”

One resident had concerns about the potential smell from the new wastewater treatment plant. Noble said the current plant has no redundancy or secondary train built in, calling it an “unypical set up.” He said it’s been fortunate the city has operated thus far “without violations.”

The new plant will address these issues and allow for both increased necessary capacity and the ability to do long-term maintenance. 

The final funding request, phase three, will take place in 2026 and will be for rehabbing the existing equipment in the current wastewater treatment plant.

After public input required for a Community Development Block Grant associated with the project, aldermen passed a series of resolutions also pertaining to the project.