Section 1926b
The National League of Cities has recently send the following issue page and survey to municipalities on Sec. 1926(b).
The Department of Agriculture through its Rural Utilities Service, formerly the FmHA (Farmers Home Administration), makes loans to associations to provide community services to rural areas. The loans have traditionally been given to rural water districts, but now include fire districts.
Many cities and towns have become concerned that a provision of the federal statute which authorizes this program is a barrier to economic development and logical municipal growth. As a means of reducing repayment risk to the federal treasury, the statute provides that the service provided or made available by an association with an outstanding federal loan shall not be diminished by actions, such as granting a franchise or inclusion of its territory in a municipality. Annexation is not prohibited, but the city would not be allowed to provide services that might compete with the association. Because the wording of the statute must be read so carefully, the provision of the law is quoted below in its entirety.
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 occurrence of such event. 7 U.S.C. Section 1926(b)
The law has created a number of problems for municipalities. The federal government has intervened in court and other processes on behalf of rural water and other associations when a municipality has attempted to extend "competing services" to new areas either through annexation or extraterritorial extension of services. In some cases the association has no utility connections or infrastructure within the area in question. Instead the courts have broadly interpreted the statute's "made available" language to allow the association to self-define its "area served."
The statute can be a barrier to economic development by giving an association with limited capacity a veto over an industrial prospect being served by a full service municipality. It also prevents the orderly extension of municipal infrastructure by protecting the service area of an association which typically does not install infrastructure which is of adequate size for fire protection of future growth.
Action Requested:
In order for NLC to develop an action plan for a legislative remedy, we must access the nationwide impact of this statute. Please answer the following questions and return this survey to NLC as soon as possible.
Municipality:
State:
Name of Municipal Official Contact:
Tel:
Fax:
E-Mail:
Does your municipality have annexation powers?
Are there state limitations on your ability to serve an annexed area?
Has your
municipality's ability to provide municipal services been limited by federal statute and
regulations such as explained above?
If your answers to the above questions are positive, please provide below a brief summary of the problem(s) and information on the federal statutes and regulations which have affected your municipality's ability to provide municipal services.
Please return this survey to:
Frank Shafroth
Director of Policy and Federal Relations
National League of Cities
1301 Pennsylvania Ave., NW
Washington, DC 20004
Fax to: 202/626-3043
or E-mail to shafroth@nlc.org