CHAMBERLAIN -- The Mitchell Rapid City Rail Authority agreed Thursday to support a plan that accepts a $3.5 million loan from the state to refurbish a rail line west of the Missouri River into Lyman County.

The entire project, discussed Thursday at a meeting at Chamberlain's Anchor Grille, will cost an estimated $28 million and will help replace the existing 41.6 miles of railroad track that runs from Chamberlain to Presho. Currently, the railroad west of the Missouri River is not being used.

"Basically, this gives us the funding mechanism to finish off the project," said Todd Yeaton, a Kimball resident and member of the South Dakota State Railroad Board. "We've applied (for grants) three times and haven't had the funding to do it."

Bruce Lindholm, state Department of Transportation railroad project manager, said the state rail board has offered to spend $3.5 million and the state Legislature committed $7.2 million on March 12, $1.2 million of which will go toward refurbishing the railroad bridge over the Missouri River in Chamberlain.

The $3.5 million loan that was agreed to Thursday, is separate from the $3.5 state rail board contribution and it brings the total amount committed to the project at $14.2 million. It is a no interest loan to be paid back to the state Department of Transportation with a $50 per rail car surcharge, meaning if a 10-car train uses the tracks that train pays a $500 fee that will help repay the loan.

Now, the state Department of Transportation is trying to come up with $14 million by applying for a federal grant, which is due at the end of April.

Lindholm said the project will make a positive impact on businesses and the economy of the central South Dakota. The state's grant application has been turned down in each of the last three tries.

"People from D.C. have no idea," Lindholm said, adding that when he receives government visitors, he makes sure to take them out into the western part of the state to show them South Dakota's needs are real. "We have to make sure to show our need to get this done."

Earlier this month, Wheat Growers indicated a strong interest in building a $38.9 million grain shuttle loader facility in Lyman County, if rail improvements are made to the line. The actual construction of the project would include new ties and heavy gauge track, replacing wood elements along the Chamberlain bridge and fixing culverts and bridges.

Because the approval of the loan money was not on the agenda prior to the meeting, the Mitchell Rapid City Rail Authority board will meet via teleconference at a time yet to be determined to formally approve the loan. On Thursday, the board agreed to write a letter of support regarding the project that will be included with the state's federal grant applicant to help fund the remainder of the project.

For now, Lindholm said he would like the public to write letters of support regarding the project that would put in heavy-gauge rail into place and be able to hold 115-car trains.

"The letters are really the most important part of this grant application because we need the public to show the federal government why this project means so much to the farmers in our state," Lindholm said.

The Mitchell Rapid City Rail Authority is hoping a federal Transportation Investment Generating Economic Recovery (TIGER) grant will pay for the final $14 million. The TIGER grant is is similar to the program that allowed the state to upgrade the line between Mitchell and Chamberlain in recent years.

The 61-mile stretch between Mitchell and Chamberlain was finished in 2012 and cost $29 million, $16 million of which was covered by federal grant money.