Spearfish officials want to improve the city's water storage capacity to keep pace with population growth estimates.
The city council was presented an engineer's report on Monday that recommends a new 2 million gallon tank to meet the city's water demands over the next 20 years.
The total project cost is estimated at $2.75 million. The city plans to secure a 20-year loan from the state to pay for the project. Officials say an increase in water rates may be needed to pay for the project.