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Public Water Supply Dist. No. 3 v. Lebanon, City of

Citation: 40 ELR 20141
No. No. 09-2006, (8th Cir., 05/14/2010)

The Eight Circuit affirmed in part and reversed in part a lower court decision granting summary judgment in favor of a city accused of illegally providing water and sewer services to customers within a nearby water district's boundaries. In 2007, the USDA granted the water district a $2 million loan under 7 U.S.C. §1926(a) for the purpose of extending and improving the district's sewer system. As a federally indebted rural water association, the district became insulated from competition under 7 U.S.C. §1926(b), which protects a rural water association's service area from certain incursions by nearby cities. Because the city was providing sewer and water services to certain customers within the district's boundaries, the district filed suit. The city, however, may continue to provide service to customers it began serving before the district obtained the USDA loan. The city may also provide water service to customers within the district's boundaries since the USDA loan was secured to expand the district's sewer system and was secured only by its sewer revenues. And the city may provide sewer service to customers at six tracts of properties that the city did not begin serving until after the district closed on the USDA loan because the district did not have the physical ability to service those properties. As for a seventh property, the case was remanded for consideration of whether the district had "made service available."