Kansas Case Contains Caution to Water Districts

By Elizabeth M. Dietzmann, Attorney at law, Rolla, Missouri.

A recent decision out of the 10^th Circuit Court of Appeals, Rural Water District No. 1, Ellsworth County, Kansas v. City of Wilson, __ F. 3d__, 2001 WL 282353 (10^th Cir.(Kan.)), may carry an important warning to water districts concerning connection costs. For the first time, a court has looked at the actual cost to the customer to connect as part of the test of whether or not a district made service available under 7 U.S. C. 1926(b) Prior to this, the "pipes in the ground test" basically stated that a water district made service available if it had adequate "pipes in the ground" with which it could serve customers within a reasonable time. Under Ellsworth, the water district will have to go back and prove that its connection charges are not unreasonable, excessive or confiscatory under a four factor state law test before it can obtain federal protection.

The court examined the water district’s policy on new service closely, and seemed to go out of its way to outline a procedure for the city to follow on the re-trial of the case. The policy stated that a new customer had to pay the entire cost of the service including line extensions and all infrastructure improvements such as pumping stations. Even though the water district could use the new line for future customers, it would not reimburse the customer on a pro rata basis if additional customers were added.

While I agree that water districts do not have to provide service at no cost to the customer, the water district’s policy did impose a substantial burden on the customers in question.

The water district will have to survive an analysis of its specific assessment for that customer based on the following factors:

1. whether the challenged practice allows the district to yield more than a fair profit;
2. whether the practice establishes a rate that is disproportionate to the services rendered;
3. whether other, similarly situated districts do not follow the practice; and
4. whether the practice establishes an arbitrary classification between various users.

This case clearly creates a new weapon that can be used against water districts seeking federal protection. It may not be enough to be able to provide service within a reasonable period of time. Now water districts need to look closely at their policy on new customers. Does it treat some customers more fairly than others? Does it impose such high costs that individual customers may not be able to afford to connect? Do other water districts have similar policies? Courts may now examine at these factors more closely than they have in the past. Water districts need to review their policies and make sure they are consistently applied and do not have any hidden impact on new customers.

Water districts will continue to remain under attack and municipalities will continue to try to chip away at 1926(b) protection. Water districts have to continuously keep an eye on the future and be prepared to defend themselves.

One final note on the bright side. The court did uphold an award of attorneys fees and wrote an indepth analysis of why the district should be able to collect them if it prevails at the new trial. This is consistent with the recent Iowa case that made the same finding.

Please contact the author at 573-364-1660 or emd@rollanet.org with questions or comments.