The city of Polson is installing a new well on the east side of town to meet increased drinking water demand.

A loan from the Montana State Revolving Fund is funding the project. Polson received $463,000 for the project, with $231,000 of the loan eligible for forgiveness. The remainder will be paid back to the state over 20 years from rate fees and charges.

The state Revolving Fund is administered by the Department of Natural Resources and Conservation, and was created to help the state comply with provisions of the federal Clean Water and Safe Drinking Water Act. Through the fund, the federal government provides grants to the states, which must provide matching funds of 20 percent. Grants are then disbursed to communities making improvements on their water and wastewater systems.

“In Polson’s case, they’re not under an administrative order, but they’re being proactive in making upgrades to their drinking water systems,” department Financial Bureau Chief Anna Miller said.

Last year Gov. Steve Bullock reduced interest rates in the program after the state’s borrowing costs went down. Interest rates for long-term construction loans — such as those awarded to for Polson’s new well — were dropped from 3 to 2.5 percent, while the short-term interest rate was reduced to from 3 to 1.5 percent. The changes were made as part of the governor’s Main Street Montana Project, and will save Polson $77,820.

“This project is building and implementing a business plan for the state of Montana that helps businesses grow, supports job creation and increases wages,” the press release stated. “One of the goals of the project is to ensure Montana business and communities have an efficient and reliable infrastructure.”

Miller said the cities of Pablo and Eureka also have received revolving fund grants recently, worth $1.11 million and $902,000, respectively.