WALDOBORO – The town’s nearly $4 million water system upgrade is running smoothly, but completion is still a year away.

The first phase, which involved the installation of a 500,000-gallon storage tank, has been finished, Town Manager Lee Smith said Thursday.

The tank, located on Friendship Street, will provide five times as much water as the old storage unit. The old storage will be for emergency and fire protection. The cost of the tank and installation was $512,000, which will be paid for by the 400 users on the town’s system.

The town bought the Waldoboro Water Co. four years ago from a private owner. The system has relied on surface water, which today is against federal regulations, Smith said.

The second phase of the upgrade is a water main project, which is 90 percent complete. That portion of the job has a price tag of $677,818 for mains that run from Route 1 near the town office down Friendship Street to the new water tank and to Kaler’s Corner near Miller School.

There is one 800-foot section on Main Street to finish this spring, Smith said.

The final phase – finding a new water source – could prove a bit tougher to accomplish, Smith said, but consultants are 95 percent certain the Winslow’s Mills area will be a suitable spot for bedrock wells. The site is located a couple of miles north on Depot Street. The other obstacle might be land acquisitions for the wells.

A special town meeting will be called sometime this winter for land purchases, Smith said.

The $2.7 million well will be funded by a 75 percent federal grant through the state’s safe drinking water program.

Waldoboro is second on the state’s eligibility list, Smith said, and is in line for a 30-year, zero-percent-interest loan for the share to be paid for by users.

The first two phases are funded by a $1,341,900 federal loan and a $880,000 grant.