1926(b) Mike Keegan, Analyst, Rural Water www.ruralwater.org

Basics of 1926(b) Homepage Key Legal Principles Recent Cases Growth is the Future Fights Staying Out of Court

Basics I 7 USC Sec.1926(b) The service provided or made available through any such association shall not be curtailed or limited by inclusion of the area served by such association within the boundaries of any municipal corporation or other public body, or by the granting of any private franchise for similar service within such area during the term of such loan; nor shall the happening of any such event be the basis of requiring such association to secure any franchise, license, or permit as a condition to continuing to serve the area served by the association at the time of the occurrence of such event. NOTE: “provide service or made available” -- leaves unclear the definition of “service area”

Basics II Who Has the Protection 1) System that is indebted to USDA 2) System who is making “service available”

Basics III Why Do We Have It Protect the government investment (repay-ability) Growth is Good -- Allows advancement of mission – more hook-ups means more and cheaper water in the county Clear protection to avoid legal cost on small supplies

www.ruralwater.org/sec1926b

Key Legal Principles I Service Area is Sacrosanct “The service area of a federally indebted water association is sacrosanct." North Alamo Water Supply, 5th Circuit. “Every” federal court has concluded 1926(b)\ should be “liberally interpreted” to protect indebted systems from encroachment. Doubts” in the case are to be determined in Favor Rural Water District.

Key Legal Principles II Making Service to Growth* (10th, 4th , etc.) “inherent in the concept of providing service or making service available is the capability of providing service or at a minimum, of providing service within a reasonable time”. Proximate and adequate “pipes in the ground” with which it has served or can serve the disputed customers within a reasonable time. (Steve Harris)

Key Legal Principles III Growth Continued How big, how close, and how soon, must the water be to the area in dispute? Answer is not scientific (reasonableness). It is not comparing who can provide service the cheapest, but simply whether the water district can provide service for reasonable charges. (Harris) Capacity? Fire, Sewer, Cheaper? Service Does Not Have to Be Free - charges can be significantly larger than city and still satisfy §1926(b) standards. (Harris)

Key Legal Principles IV Ellsworth, Kansas-10th (2003) Connection charges are not unreasonable, excessive or confiscatory under a four factor state law test before it can obtain federal protection. yield more than a fair profit; rate is proportionate to the services; similarly situated districts; and doesn’t establish arbitrary classifications between users.

Key Legal Principles V Le-Ax, Ohio – 6th (2003)* No Offensive Use 1926… “when a district’s boundaries are geographically determined by the state, it cannot use § 1926(b) to obtain new customers outside that … we do not consider here a case where the state has not defined the boundaries of its water districts or associations” Dissent: “The flaw in the majority is that it conflates a political boundary with a service boundary... the majority has not cited any case where a court found that a water district’s political boundary, as opposed to its service boundary, is relevant to defining the area protected by § 1926(b)..... the water district’s state-defined political boundaries to be irrelevant.

Big Cases (6 Circuits) 4th Circuit, Chesapeake MD 10th Pittsburg County #7 v. McAlester 2003 6th Le-Ax v. City of Athens, 2003 10th Ellsworth County v. City of Wilson, 2003 4th James Island PSD v. Charleston 2001 8th Rural Water #1 v. Sioux Center 2000 *4th Bell Arthur v. Greenville 1999 *10th Glenpool v. Creek County 1998 5th City of Madison v. Bear Creek 1987 6th Lex-South Elkhorn v. Willmore 1996 *5th North Alamo v. City of San Juan 1996 7th CSL Utilities v. Jennings Water 1993

The Bizarre

Staying Out of Court If you intend on serving outside their political boundary, you need to annex the area - particularly in the 6th Circuit. Steve Harris emphasis on planning ahead to: (1) expand district boundaries to the max, (2) expand lines to satisfy the adjacency test, (3) expand water lines to have ability to serve, (4) establish a fair rate structure (not “confiscatory”)

Staying Out of Court Elizabeth Dietzmann, KRWA Lifeline Expensive $250-500K Exhaustive – up to 3 years Rarely Ready to Deal with Courts Need all Documents (Mins, Meets, Elects, I&Ts) Maps, contracts, financing Political Backlash of your board (recalls etc) Plan for Growth

Getting Along (Steve Harris) The simple solution to these somewhat vague standards, is to plan far ahead. Water districts must plan and anticipate the needs of residential developers and industrial customers. Water districts must make their presence known and play an active role in community development, just as other utilities do, such as providers of electricity, gas or sewer. Water districts must invest in themselves by extending their lines as far as practicable, and securing the maximum water available for long term future needs. This also requires planning for delivery. Having lines in the ground is not enough - water districts must have an adequate water supply coupled with lines of sufficient size to deliver required volumes at requisite pressure. Doing so will readily satisfy the burden of proof of making service available. It must be remembered that federally indebted water districts have an affirmative duty to make service available to all applicants in there service area who can be legally and feasibly served. (Steve Harris, Esq.)

How to Get Along I Stayed Outta Court by……. I Coulda Stayed Outta of Court by…… I Worked it Out with My Neighbors by……

More Participation Question the Experts? Anything failed to Mention?

Misc. Items “Le-Ax also has the option of changing its boundaries pursuant to the procedures specified in Ohio Code ” we agree with the district court that Bell Arthur was not entitled to protection for the Ironwood area because it did not have the capacity to serve that area, nor did it have the capacity to provide such service within a reasonable time after the request for service was made. Chesapeake Ranch, MD contesting curtailment of ground water in current case before the 4th Circuit.

Who is in the HOUSE? -The Experts Among Us -USDA Officials -Attorneys -Celebrity Cases -Municipality -Rural Water Districts