State officials have reviewed a preliminary application from the Public Service District, county officials said.
Jefferson County Public Service general manager William Stine said that the project would serve 565 homes and more than 1,000 residents.
Some of the homes already have water service, but the water systems servicing them need upgraded to a more modern system, he said.
Other homes would be added onto the water project, giving them public water service for the first time, he said.
Some of the residents in the area have to boil their water before drinking it, Stine said.
Jefferson County Commissioners voted unanimously on Thursday to support the Public Service District Project, but said they could not provide any funding to help pay for it at this time.
County commissioners said the county does not have sufficient funds to help out financially.
County Commissioner James Ruland said that the county could make a "token" financial gesture, but other county commissioners said that would not help the Public Service District in their attempt to obtain funds for the project.
County commissioners said providing money at a later time under the condition it be paid back when grants and loans are obtained could help speed the project along.
The next step in the process is to design the water system, according to the Public Service District letter to County Commissioner President James Knode.
The estimated cost of the design phase is $399,890.
It was unknown when work could begin on the project.