A $7.2 million endowment to fund water supply work for the new state prison in Bledsoe County marks Pikeville's largest-ever capital investment and could eliminate city customer rate hikes well into the future.

Money from the Tennessee Building Commission will fund an 8.6-mile chunk of the connection between Pikeville and the Bledsoe County Correctional Complex on state Highway 101, Pikeville Mayor Greg Johnson said. The city doesn't have to put up matching funds.

"Right now, we're taking care of the property easements that the line will have to be constructed on," he said.

Johnson said $800,000 to $1 million will pay for treatment plant improvements. The rest will go to install a 12-inch iron water line from Pikeville's treatment plant to the base of the mountain at Big Springs Gap Road, where it will connect to the prison's supply line.

"That includes engineering [and] it includes inspection," he said. He predicted the work will begin in July or August.

"It's the largest capital investment that the city of Pikeville has ever done," the mayor said.

The endowment and other grant-funded improvements mean Pikeville water customers might not see a rate hike for years, he said.

Initially, Spring City was going to supply the prison's water, but plans were switched to Pikeville to save money, Tennessee Department of Correction spokeswoman Dorinda Carter stated in an email. She said the switch will save more than $11 million over 25 years.

The state also will save with a lower water rate - $2.11 per 1,000 gallons compared to Spring City's $4 per 1,000 gallons - and will save an additional $4 million because the water line is shorter, Carter said.

The new prison is on the same plot as the Southeastern Tennessee State Regional Correctional Facility and Taft Youth Center. Together, they use about 380,000 gallons of water daily, Carter said.

Carter said the prison completion date is September 2012, with the first inmates taking up residence in January 2013.