COPENHAGEN — After four years of planning, village officials now have $3 million in state funding to develop a new water source and upgrade the distribution system.

However, they still must secure the proposed well site — possibly through eminent domain — before work can commence next year.

Matthew J. Millea, acting president of the state Environmental Facilities Corp., on Thursday formally awarded the village a $2 million grant and a $1 million no-interest loan from the Drinking Water State Revolving Fund. The funding is projected to save $4.48 million in principal and interest.

"When it's all said and done, we're going to have what we've waited a long time for — a good source of drinking water," Mayor Kenneth R. Clarke said.

Mr. Millea congratulated village officials for "passing an important threshold" in the project. "We look forward to working with you as you start construction," he said.

The project should be ready to go out to bid in January, tentatively allowing construction to begin next spring and end in the fall, said Matthew J. Cooper, an associate with Watertown engineering firm Bernier, Carr & Associates.

"It's great to see this come to fruition," said Mr. Cooper, a village resident. "It's been a long road — and a bumpy road, at times."

Since 2004, the village has been seeking new water sources for its oft-taxed system, which serves about 460 customers.

The village began eminent domain proceedings in late April to acquire 9 acres off Stoddard Road owned by Kevin A. and Teresa J. Terrillion after the two sides were unable to agree on a purchase price.

While the matter still could be settled outside the courtroom, no agreement has been reached, Mr. Clarke said. "I talk to our lawyer on a regular basis," he said.

The village's present system pumps water from two wells into a 450,000-gallon tower, from which it is distributed to customers. The village also has a shore well that pumps water from the Deer River into the system when the wells aren't providing a sufficient supply.

"The water supplied from the wells has decreased over time, and the river water is untreatable because of low flows in the summer and high turbidity levels from spring runoff and rainstorms," states an Environmental Facilities Corp. release.

While the two wells initially produced a combined 138 gallons per minute, their current combined production is about 50 gallons per minute, according to a project determination and findings sheet adopted by village trustees. Meanwhile, the maximum daily demand is about 85 gallons per minute.

Test wells were drilled at seven sites before an adequate water source was found on the Terrillion property. The village also looked into several other options — buying water or an abandoned water source from the village of West Carthage, rehabilitating the current wells and buying an existing private well — that ultimately were deemed nonviable.

Two test wells on the Terrillion property yielded 300 and 45 gallons per minute.

The $3 million project cost includes $650,000 — most of it for potential water source testing — that already has been borrowed.

Michael R. Shew, who stepped down in May after nine years as mayor, also participated in Thursday's presentation.