RAPID CITY - Despite angst over adding to the cost of a massive bond issue looming on the horizon, the Rapid City Council agreed Monday to spend $1 million to improve the water system for a project near St. Martin Drive.

The project includes building a booster station, water main and 750,000 gallon water reservoir near St. Martin Drive that will benefit a planned development of the Good Samaritan Society-St. Martin's Village, a senior living campus planned for about 200 acres of land being acquired from the St. Martin Monastery by the Evangelical Lutheran Good Samaritan Society.

The project is expected to also help improve water pressure for the Kingswood, Pinedale Heights and South Canyon areas in northwest Rapid City.

The city will pay for the St. Martin project using its .16 fund, a fund created from sales-tax revenue designed to be used as much as possible as a kind of revolving loan fund. To pay the fund back, the $1 million may be added to a future bond issue if and when the city proceeds with building a second water-treatment plant for the Jackson Springs water gallery and improving the existing water-treatment plant.

Considering how large the Jackson Springs bond issue might be, some council members are concerned about the impact to water rates if more expenses are added to that bond issue.

Alderman Ron Kroeger said no one has a clue what the Jackson Springs project will cost.

"We don't know if it's going to be $50 million, $75 million or even $40 million. I feel very uncomfortable sticking another million into the bonding cost to support this project," he said.

And the impact on rates could be staggering.

City staff calculated that every $1 million of a bond issue would add 15 cents per month to the average water bill. If accurate, that would mean a $50 million bond issue could result in a $7.50 per month increase for an average water customer, and a $60 million bond issue could mean a $9 increase in rates.

Dirk Jablonski, public works director, said not every water user would pay that much. He said the numbers were reached by dividing $1 million by the total number of customers, which includes diverse users including large industrial water consumers and low-use residential customers.

Determining the impact on residential rates would take a little more work than the council asked for, Jablonski said, but the 15-cents estimate provides a scope of what the rate increase could be.

"People who irrigate a lot, they're going to get hit. That $9 could be $18. It could be $27 a month when you're irrigating," he said.

Jablonski said the city expects a consultant's report about the Jackson Springs project's potential cost sometime next March or April. After the report is finished, he said the city will provide a better calculation of a potential bond issue's impact on rates, broken down by industrial, commercial and residential users.

Jackson Springs, located west of Canyon Lake near the Cleghorn Springs Fish Hatchery, was shut down after the state Department of Environment and Natural Resources determined that surface water was infiltrating the groundwater and could provide a way for pathogens to enter.

Though indications of infiltration were minimal, the city was told to treat the water before using it as a public water supply. Historically, Jackson Springs has provided nearly half of Rapid City's water supply and has proven to be a reliable source.

After several months of study, a task force this year recommended building a second water-treatment plant and upgrading or rebuilding the current water-treatment plant.

The estimated cost a year ago was about $42 million, but the city expects the final cost to be higher by the time the project is built. The potential bond issue is likely to grow if the city continues to adds projects.

Alderman Tom Johnson said the city is looking to solve its immediate water-supply problem and ensure all water customers have reasonable water service with adequate pressure and flows for fire protection.

"If we act in the best interest of the community, we will do a bond. We know we have to bond to get the water-treatment facilities up or the wells in, however we decide to move forward," he said. "What we should do is bond enough to fix our immediate problem with water, make sure we have adequate water. We should also bond enough so we get these crucial water-storage facilities put in."

Kroeger expects a lot of debate when the council finally starts talking about Jackson Springs.

"When we start talking about raising water rates $9, we're going to have a full house," he said.

Contact Scott Aust at 394-8415 or scott.aust@rapidcityjournal.com