Construction workers have begun work on phase I of the Southern Delivery System, which will install a 62-mile pipeline that will connect to the Pueblo Reservoir Dam and will carry water north to Colorado Springs, Fountain, Security and Pueblo West.

A big party at the Pueblo Dam last month marked the start of construction of the Southern Delivery System

But not everyone is celebrating.

Government leaders in Pueblo are holding their breath, hoping that the controversy that plagued the project is gone for good.

“But we’ll have to wait and see,” said John Cordova, chairman of the Pueblo County Board of Commissioners. “It’s going pretty smoothly, now that the issues with some of the landowners have been resolved.”

SDS is now in its first phase, with water delivery expected by 2016. Phase two will expand the capacity and add two reservoirs, and isn’t expected to start until 2020.

The first phase will transport water from the Pueblo Reservoir to Colorado Springs, Fountain, security and Pueblo West, using about 62 miles of pipeline. It will cost $880 million.

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Getting to construction of the pipeline was fraught with bureaucratic delays and protests from Pueblo, already upset over pollution in Fountain Creek and flooding resulting from development in the Springs.

Even now, Colorado Springs Utilities is negotiating with property owners to pay for the right-of-way for the pipeline. According to John Fredell, Colorado Springs Utilities manager for SDS, utilities still needs agreements with about 180 landowners.

Some of those negotiations have been tense, with property owners asking for more money that CSU wanted to pay. In those cases, a judge was asked to decide the fair price for the land.

“We can use eminent domain,” Fredell said. “But we don’t like to do that. We understand that some people want an independent third party — in the court system — to confirm that we are paying the fair market price. We’re not opposed to that process at all.”

Currently, the project has completed a piece of pipeline at Mark Sheffield Road, taking advantage of a county repaving project. Fredell said CSU saved $1 million by doing that piece early.

Right now, there are two pipeline projects underway — construction companies are digging two miles of trenches and evening out the gradient. The second project is nine miles of pipeline that is currently being laid.

“These are significant projects,” Fredell said. “And we’re not starting south and working our way north. That’s not the way it’s done. We’re working on different segments as the land becomes available.”

Despite the debate that continues to rage if SDS is actually needed — the cost will raise water rates for CSU customers considerably during the next decade — CSU believes it is essential. Not only for promised population growth, but also as a way to maintain its current water pipelines from the western slope.

“Those lines are 50 years old,” Fredell said. “Having the new pipeline will allow us to take parts of the other pipelines offline for repairs and maintenance. It’s dangerous to depend on the water pipes we have now, without backup.”

At first, CSU promoted SDS as a necessary means to get water to Banning Lewis Ranch, a huge planned development in eastern El Paso County. When fully built out, Banning Lewis was supposed to have 200,000 residents. But the recession struck and the land ended up in foreclosure.

But that doesn’t mean the Southern Delivery System isn’t needed.

“The census showed us that we’re growing,” Fredell said. “And half of that growth comes from people already here — our children and grandchildren. We needed to prepare.”

Census figures show the county growing 1.9 percent a year during the next 30 years.

None of the debate is new to CSU, which launched a publicity campaign for SDS earlier this year. And the utilities has no shortage of stats on the project. The project is currently coming in under budget, for instance, thanks to lower interest rates.

The municipal utilities not only touts the necessity of assuring water for the Springs, it also says the massive project is providing local jobs at a time when the county’s unemployment rate is hovering around 9 percent.

“We could have just contracted out to one company,” Fredell said. “But we didn’t want to do that — we wanted to spread it out, give smaller companies a chance, employ more people.”

The project will create an annual average of up to 766 jobs in the 2011-2015 timeframe, with as many as 13,175 jobs created by the “growing certainty of the water supply,” according to Utilities literature.

“Over the life of the project, about $127.6 million in earnings will be paid to El Paso County residents and about $35.5 million to Pueblo County residents,” said Janet Rummel, communications director for SDS.

That’s a lot of jobs and a lot of money coming down the pipeline. But, Pueblo County officials are still concerned about the future — and of future flooding.

When the county signed the 1041 inter-county agreement, Colorado Springs had a storm water enterprise fee to pay to mitigate possible floods. That fee — criticized as a tax by many — ended in the 2008 elections.

“We had no idea, no conception, at the time that the residents of Colorado Springs would vote that out,” Cordova said. “The 1041 agreement doesn’t have anything about storm water in it, because they had the fee in place. It’s concerning, and right now, we hope that the utilities will find a way to combat the storm water issues.”

Increased development in the Springs means increased run off in Fountain Creek, and potential flooding problems in Pueblo, he said.

Still, the county supports the SDS construction.

“We’ve agreed to the construction, and now it’s under way — that’s a good thing,” Cordova said.