Fairlee — The town has won approval for $3.7 million in federal grants and loans to fix its municipal water system, the U.S. Department of Agriculture announced this week.

Of that total from the USDA’s Rural Development program, $1.64 million is a grant and the balance is a loan, which is in line with the expectations of town voters who approved the project in February.

“We are still in the throes of working with the USDA to make sure we meet all the preliminary design requirements,” Town Administrator Tad Nunez said Thursday. “They give you a list of things they would like to see to make sure their monies are going to be spent wisely.”

Without the federal funding, it is unlikely that the community would have moved forward with needed repairs to a faulty 256,000-gallon water tank off Bald Top Road, or the installation of a filtration system to address potential health concerns about the level of manganese in the municipal drinking supply.

“The cost of providing or restoring clean water for a community of only a few hundred citizens can be upwards of hundreds of thousands to millions of dollars,” members of a presidential task force wrote in a USDA report about the best ways to help rural communities. “Without the financial assistance of the federal government, these projects would be impossible to afford.”

The report said safe drinking water is “vital for achieving a high quality of life.”

The money also will go to replacing some water mains in the distribution system, and installing individual meter systems, which Nunez said would allow for more equitable billing for those who use less water.

“We’re always talking about what’s not working. Well this one is working,” he said. “This small little town is getting what we need.”

A lawsuit filed in December by the town to recoup the cost of the crumbling concrete water tank is ongoing; Nunez said he and Selectboard members continue to receive updates from their lawyer, and that no resolution is expected until at least next year. The tank, built in 2004, was meant to last for 100 years.

Town officials hope to draft a timeline next month, but Nunez said he hopes to be reviewing requests for proposals by the end of the summer for repairing the water tank, which would allow work to move forward this fall.

The USDA’s stringent requirements will prevent the town from buying another inadequate tank, said Nunez.

“We cannot have this mistake again,” he said, referring to the faulty water tank. “We’re using someone else’s money.”

He said the USDA also will establish a maximum timeline for the work. “It can’t lag on for two to three years,” he said.

Earlier this month, the Selectboard discussed the possibility of repurposing the tank’s concrete roof to serve as the roof of a salt shed, or a storage facility for highway equipment department.

The Fairlee water system is one of 81 projects in 35 states that were approved for a total of $256 million in USDA funding to improve wastewater and water systems of rural communities.

Elsewhere in the Twin States, Stewartstown, N.H., received $878,000 in funding to replace two wastewater pump stations, and Bellows Falls Village Corporation in Vermont got $1.4 million to replace components of its sewer system infrastructure.

Matt Hongoltz-Hetling can be reached at mhonghet@vnews.com or 603-727-3211.