7USC '1926(b) Legal Materials and Analysis

Materials prepared by: Steve M. Harris -- Doyle & Harris
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Copr. 8 West 1998 No Claim to Orig. U.S. Govt. Works

To secure protections of federal statute protecting federally-indebted water associations from municipal expansion, rural water supply company had to establish that it had continuing indebtedness to Farmer's Home Association (FmHA) and that city had encroached on area to which company made service available, in company's action against city, alleging that company had exclusive right to provide water service to certain residential subdivisions in and near city to which city was providing water service. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Rural water supply company, which was indebted to Farmer's Home Association (FmHA), had "made service available" to disputed residential subdivisions in company's certificated area and, thus, city violated statute protecting federally-indebted water associations from municipal expansion by providing water service to subdivisions; company's state law duty to provide service was legal equivalent to company's making service available under statute, and company had factually made service available to disputed areas, as it had provided water service to adjacent subdivisions, had lines and adequate facilities to provide service to disputed areas, and had not refused service to anyone requesting it within certificated area. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); V.T.C.A., Water Code '' 13.001(b)(1, 2), 13.250(a).

Rural water supply company, which was indebted to Farmer's Home Association (FmHA), had "made service available" to disputed residential subdivisions in company's certificated area and, thus, city violated statute protecting federally-indebted water associations from municipal expansion by providing water service to subdivisions; company's state law duty to provide service was legal equivalent to company's making service available under statute, and company had factually made service available to disputed areas, as it had provided water service to adjacent subdivisions, had lines and adequate facilities to provide service to disputed areas, and had not refused service to anyone requesting it within certificated area. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); V.T.C.A., Water Code '' 13.001(b)(1, 2), 13.250(a).

Extraordinary circumstances did not exist and, thus, Court of Appeals would decline to consider issue, raised by city for first time on appeal, as to whether statute protecting federally-indebted water associations from municipal expansion violated Tenth Amendment and constitutional spending clause, in rural water supply company's action against city, alleging that company had exclusive right to provide water service to certain residential subdivisions in and near city to which city was providing water service. U.S.C.A. Const. Art. 1, ' 8, cl. 1; Amend. 10; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Permanent injunction was appropriate relief for city's violation of statute, protecting federally-indebted water associations from municipal expansion, by providing water service to residential subdivisions located in rural water supply company's certificated area, where, unless city was prevented from violating statute, company would lose $365,000 in annual revenue. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); V.T.C.A., Water Code '' 13.001(b)(1, 2), 13.250(a).

Permanent injunction forbidding city to provide or offer to provide water service within rural water supply company's entire certificated area, albeit broad, was not abuse of district court's discretion in action in which court found that city violated statute protecting federally-indebted water associations from municipal expansion by providing water service to residential subdivisions in company's certificated area, although it would have been more prudent to limit injunction to disputed areas, where company had satisfied requirements of statute with respect to entire certificated area. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); V.T.C.A., Water Code '' 13.001(b)(1, 2), 13.250(a).

Permanent injunction forbidding city to provide water service within rural water supply company's certificated area was sufficiently specific in company's action against city, alleging that company had exclusive right to provide water service to certain residential subdivisions in and near city to which city was providing water service; injunction was sufficiently and reasonably detailed and specific to permit transfer of water service from city to company, and specified end results expected and allowed parties flexibility to accomplish those results. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); V.T.C.A., Water Code '' 13.001(b)(1, 2), 13.250(a); Fed.Rules Civ.Proc.Rule 65(d), 28 U.S.C.A.

District court did not abuse its discretion when it ordered city to relinquish subject water service distribution infrastructures to rural water supply company, despite contention that relief was unrequested and if granted would prejudice city, in company's action against city, alleging that company had exclusive right to provide water service to certain residential subdivisions in and near city to which city was providing water service; unless infrastructures were transferred, company would not be able to provide efficient and economical water service, and rights of company that were validated in action would be useless. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); V.T.C.A., Water Code '' 13.001(b)(1, 2), 13.250(a); Fed.Rules Civ.Proc.Rule 54(c), 28 U.S.C.A.

Issues raised on appeal, as to whether district court's permanent injunction, enjoining city from pursuing its applications with Public Utility Commission (PUC) to decertify portions of rural water supply company's certificated area and to recertify them in city's name, impermissibly interfered with State's exercise of regulatory powers, were rendered moot by subsequent Commission order ruling, congruently with district court, that company had exclusive right to provide water service to disputed areas. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); V.T.C.A., Water Code '' 13.001(b)(1, 2), 13.250(a).

In December 1993, the Utility brought this action under 7 U.S.C. ' 1926(b) to enjoin the City from providing water service within the Certificated Area. In July 1994, the City filed applications (Applications) under '' 13.254 [FN4] and 13.255, [FN5] seeking to decertify portions of the Certificated Area and to recertify them in the City's name. On August *914 18, 1994, before the Commission reached a decision on the Applications, the district court entered an Agreed Preliminary Injunction, enjoining the City from servicing any additional customers within the Certificated Area and ordering the City to contact the Commission and request that it take no further action on the Applications until the expiration of the Agreed Preliminary Injunction. [FN6]

FN4. Tex.Water Code Ann. ' 13.254 ("The commissioner at any time after notice and hearing may revoke or amend any certification of public convenience and necessity ... if it finds that the certificate holder has never provided, is no longer providing, or has failed to provide continuous and adequate service in the area, or part of the area, covered by the certificate.").

FN5. Id. ' 13.255 (addressing single certification in an annexed or incorporated area).

FN6. This preliminary injunction has not been challenged in this appeal.

On December 15, 1994, the district court entered final judgment (Original Judgment) in favor of the Utility and against the City. After noting that under Texas law the Utility had a legal duty to provide continuous and adequate service to residents in the Certificated Area, the district court held that the Utility had, as a matter of law, "made service available" as required by ' 1926(b). In the alternative, the district court held that because the Utility had water service lines adjacent to the disputed areas, it had, as a factual matter, "made service available" as required by ' 1926(b). The district court concluded that the City had encroached on the service area of a federally indebted water association and thus violated ' 1926(b).

2. The Statute: 7 U.S.C. ' 1926(b)

FN10. 7 U.S.C. ' 1926(b).

The service provided or made available through any such [indebted water] association shall not be curtailed or limited by the inclusion of the area 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 said loan.... [FN11]

FN11. Id. (emphasis added).

The service area of a federally indebted water association is sacrosanct. Every federal court to have interpreted ' 1926(b) has concluded that the statute should be liberally interpreted to protect FmHA-indebted rural water associations from municipal encroachment. [FN12]

In City of Madison, Miss. v. Bear Creek Water Ass'n Inc., [FN13] we held that ' 1926(b) "indicates a congressional mandate that local governments not encroach upon the services provided by such [water] associations, be that encroachment in the form of competing franchises, new or additional permit requirements, or similar means." We explained that the history behind this section indicates two congressional purposes: (1) to encourage rural water development by expanding the number of potential users of such systems, thereby decreasing the per-user cost, and (2) to safeguard the viability and financial security of such associations (and FmHA's loans) by protecting them from the expansion of nearby cities and towns. With this background, we turn to the violation issue. [FN14]

3. Did the City Violate ' 1926(b)?

[4][5] To secure the protections of ' 1926(b) the Utility must establish that (1) it has a continuing indebtedness to the FmHA, and (2) the City has encroached on an area to which the Utility "made service available." [FN15] As of the end of 1993, the Utility owed the FmHA approximately $12,000,000. The City does not contest that the first, "indebtedness" element is satisfied. Instead, it contends that the Utility failed to establish the second, "made service available" element. We disagree.

FN15. See 7 U.S.C. ' 1926(b); see also City of Madison 816 F.2d at 1059; Glenpool, 861 F.2d at 1214.

Under Texas law, the Certificate gives the Utility the exclusive right to serve the area within its CCN and obligates it "to serve every consumer within its certified area and *916 ... render continuous and adequate service within the area or areas." [FN16] We hold that the Utility's state law duty to provide service is the legal equivalent to the Utility's "making service available" under ' 1926(b). [FN17] When confronted with a similar issue, other courts have reached the same result, holding that when state law obligates a utility to provide water service, that utility has, for the purposes of ' 1926(b), "made service available." [FN18]

FN16. See Tex.Water Code Ann. ' 13.001(b)(1), (2) & ' 13.250(a) (West 1988 & Supp.1995); see also Commission's Order ("[The Utility] holds the CCN for the five [disputed] subdivisions ... and has the legal right to solely serve those subdivisions.").

FN17. See Tex.Water Code Ann. 13.250(a) (Vernon 1988 & Supp.1995) ( "[A]ny retail public utility that possesses a ... certificate of public convenience and necessity shall serve every consumer within its certificated area and shall render continuous and adequate service within the area or areas.") (emphasis added).

FN18. Glenpool, 861 F.2d at 1214 ("made service available" requirement satisfied if state law requires utility to provide service within a certified area).

In the alternative, the district court found as a factual matter that the Utility had "made service available." [FN19] Specifically, the district court made three findings of fact relevant to this conclusion: (1) The Utility currently provides water service to subdivisions adjacent to the disputed areas; (2) the Utility has lines and adequate facilities to provide service to the disputed areas; (3) the Utility has not refused service to anyone who has requested service within the Certificated Area. These findings of fact are not clearly erroneous. Accordingly, on the strength of these alternative legal and factual determinations, we affirm the district court's conclusion that the Utility had "made services available" to the disputed areas. As a result, we also agree with the holding of the district court that the City violated ' 1926(b).

4. Does ' 1926(b) Violate the Tenth Amendment?

[6][7] Before turning to the issues of remedy, we pause to address the City's constitutional challenge to ' 1926(b). For the first time on appeal, the City insists that ' 1926(b) represents an illegitimate exercise of the Congress' power under the Spending Clause. [FN20] We will not consider an issue that a party fails to raise in the district court, absent extraordinary circumstances. [FN21] Extraordinary circumstances exist when the issue involved is a pure question of law and a miscarriage of justice would result from our failure to consider it. [FN22] Such extraordinary circumstances do not exist here. As this court has previously addressed a similar constitutional challenge (and resolved it contrary to the City's position), [FN23] we follow our general forfeiture rule and decline to consider the issue.

[10] The City urges that the district court's conclusions that the Utility would have suffered irreparable harm and had no adequate legal remedy were "clearly erroneous." The City asserts that the record contains no factual basis for such a conclusions. We disagree. The record reflects the following facts: (1) the Utility is indebted to the FmHA; (2) in the disputed areas the City has encroached on the Utility's service area; and, (3) as a result, the Utility would lose revenue exceeding $365,000 a year if the City's encroachment went unabated. The district court held (and we have now affirmed) that, as a legal and factual matter, the Utility had "made service available" to the disputed areas. In other words, unless the City is prevented from violating ' 1926(b), the Utility will lose $365,000 in annual revenue.

FN26. See, e.g., City of Madison, 816 F.2d at 1059 (enjoining a city from annexing subdivisions within a utility's certificated area after finding violation of ' 1926(b)); see also Jennings Water, 895 F.2d at 315 (a violation of ' 1926(b) provided sufficient basis for the issuance of an injunction).

FN27. The district court's injunction has forbidden the City to provide or offer to provide water service within the entire Certificated Area. This injunction, albeit broad, does not constitute an abuse of discretion. The Utility, by virtue of its indebtedness to the FmHA and state law duty to provide "continuous and adequate" service to the Certificated Area, Tex.Water Code Ann. 13.250(a), has satisfied the requirements of ' 1926(b) with respect to the entire Certificated Area. Thus, ' 1926(b) protects the entire Certificated Area from encroachment by the City.

Nevertheless, it would have been more prudent to limit the injunction to the disputed areas, the particular portion of the Utility's service area at the heart of this litigation. As the Commission was not a party to this litigation, we assume the district court intended this injunction to apply only to these parties and not to limit the Commissions' power to regulate or redraw the Certificated Area. Such an injunction, purporting to control the actions of the Commission, a state regulatory body, would create a considerably more difficult federalism question: Namely, does ' 1926(b) also preclude a state regulatory agency from modifying the service area of a federally indebted utility. But, we leave that issue for another day.

6. Are The Applications Preempted by ' 1926(b)?

As discussed above, ' 1926(b) grants broad protection to federally indebted utilities. In this case, we need not probe the outer limits of that grant. Instead, we decide only the issues presented in this appeal: (1) whether the City, by providing water service to the disputed areas, has violated ' 1926(b); and (2) if so, what is the appropriate remedy in response to that particular violation. The district court held, as both a factual and legal matter, that the Utility has the exclusive right to provide water service to the disputed areas. The Commission, in a ruling congruent with that of the district court, declared that the Utility had the exclusive right to provide water service to the disputed areas. With that order, the Applications--which sought a ruling from the *920 Commission that the Utility did not have the exclusive right to provide water service to the disputed areas--became moot. Accordingly, we need not address that issue here.

We affirm the district court's judgment that the City violated ' 1926(b). We also affirm that court's injunction except as to that part which omits a determination of possible repayment of costs and expenses, if any, incurred by the City in acquiring or improving the infrastructures. In that limited respect only, we remand for the district court to consider and, if necessary, to modify its injunction consistent with this opinion. AFFIRMED, in part, and REMANDED, in part.

Copr. 8 West 1998 No Claim to Orig. U.S. Govt. Works

City was precluded from condemning water association's facilities located within city limits and association's certificate of public convenience and necessity during term of association's indebtedness to Farmers Home Administration. Consolidated Farm and Rural Development Act, ' 306(b), 7 U.S.C.A. ' 1926(b).

Under Consolidated Farm and Rural Development Act, local government may not encroach upon services provided by water association indebted to Farmers Home Administration, be that encroachment in form of competing franchises, new or additional permit requirements, or similar means, such as condemnation of association's facilities or certificate of public convenience and necessity. Consolidated Farm and Rural Development Act, ' 306(b), 7 U.S.C.A. ' 1926(b).

Section of Consolidated Farm and Rural Development Act, prohibiting cities from curtailing services of water associations indebted to Farmers Home Administration by granting competing franchises or annexing areas served by association, serves two congressional purposes: to encourage rural water development by expanding number of potential users of such systems, thereby decreasing per-user cost, and to safeguard viability and financial security of such associations and loans by Farmers Home Administration to such associations by protecting those associations from expansion of nearby cities and towns. Consolidated Farm and Rural Development Act, ' 306(b), 7 U.S.C.A. ' 1926(b).

Section of Consolidated Farm and Rural Development Act, proscribing cities from curtailing or limiting services provided by water association indebted to Farmers Home Administration by granting competing franchises or by annexing areas served by association, did not violate Tenth Amendment; statute curtailed city's authority in regard to provision of water service only while association was indebted to Administration and was enacted to protect Administration's subsidy of rural water authorities. Consolidated Farm and Rural Development Act, ' 306(b), 7 U.S.C.A. ' 1926(b); U.S.C.A. Const.Amend. 10.

The City of Madison, Mississippi ("Madison"), appeals from the district court's grant of summary judgment in favor of Bear Creek Water Association, Inc. ("Bear Creek"), and the Farmers Home Administration ("FmHA"). Because we agree with the district court that 7 U.S.C. ' 1926(b) precludes municipal condemnation of a water association's facilities during the term of its indebtedness to the FmHA, we affirm.

However, during this time the City of Madison has grown substantially, and its boundaries now include a part of the area served by Bear Creek. In 1985, the city instituted eminent domain proceedings to condemn Bear Creek's facilities located within city limits as well as Bear Creek's certificate to operate in that area. This area includes approximately 40% of Bear Creek's customers, and 60% of Bear Creek's water supply facilities, including its water plant, wells, and feeder mains. FmHA subsequently intervened and the case was removed to federal court pursuant to 28 U.S.C. '' 1444 and 2410.

In July 1986, the district court granted Bear Creek's motion for summary judgment on the ground that because Bear Creek was indebted to FmHA, 7 U.S.C. ' 1926(b) applied and precluded the city's condemnation action. The city now appeals.

A. 7 U.S.C. ' 1926(b)

Regarding water associations indebted to FmHA, 7 U.S.C. ' 1926(b) provides:

The district court held that this provision prohibits cities such as Madison from curtailing the services of funded water associations, be it through annexation, franchise, or condemnation. Madison argues that because the statute does not expressly prohibit condemnation, ' 1926(b) only protects such associations from competition from municipalities, and thus does not preclude such entities from exercising their right of eminent domain.

[2][3] We disagree. The statute unambiguously prohibits any curtailment or limitation of an FmHA-indebted water association's services resulting from municipal annexation or inclusion. This language indicates a congressional mandate that local governments not encroach upon the services provided by such associations, be that encroachment in the form of competing franchises, new or additional permit requirements, or similar means. To read a loophole into this absolute prohibition, as Madison would have us do, and allow a city to do via condemnation what it is forbidden by other means, would render nugatory the clear purpose of ' 1926(b). See Moore Bayou Water Association, Inc. v. Town of Jonestown, 628 F.Supp. 1367 (N.D.Miss.1986) (holding municipal condemnation of water association's facilities and certificate violative of ' 1926(b)).

Madison contends that this construction of the statute is untenable because it leads to the "plainly absurd" result that FmHA-financed water authority could avoid condemnation even if it owed only $1.00 on its government loan. However, it was Congress, and not this Court, that literally proscribed interference by competing facilities with the rural water authority "during the term of said loan." The city's logic also assumes ' 1926(b) must somehow be construed to effectuate the local condemnation power. Pursuing such logic, we might decide that so long as the condemnation does not "unduly interfere" with the water authority's payment obligations to FmHA, or with its ability to service rural water users, the condemnation may proceed. Such a result, however, would have a perverse impact upon both the rural water authority and the would-be condemnor. In each case, the contending parties could raise and seek adjudication of the fact issue concerning the extent of interference that would result from condemnation. A condemnation case impinging on a rural water authority could easily involve both state and federal court litigation, high legal fees and considerable delay, to the ultimate detriment of the municipality, the rural water authority, and the consumers of water service. A bright-line rule which prohibits condemnation throughout the FmHA loan term at least creates certainty for the municipal planner and the rural water authority, even if it limits the municipality's options.

[4][5] Madison, however, argues that our interpretation of ' 1926(b) is contrary to the legislative history of that provision. While we need not resort to legislative history where, as here, the statutory language is unambiguous and yields no absurd results, see Steere Tank Lines, Inc. v. I.C.C., 724 F.2d 472, 477 (5th Cir.1984), we note that our interpretation of ' 1926(b) *1060 comports with the purposes found in its legislative history:

S.Rep. No. 566, 87th Cong., 1st Sess., reprinted in 1961 U.S.Code Cong. & Admin.News 2243, 2309. This history indicates two congressional purposes behind ' 1926: 1) to encourage rural water development by expanding the number of potential users of such systems, thereby decreasing the per-user cost, and 2) to safeguard the viability and financial security of such associations (and FmHA's loans) by protecting them from the expansion of nearby cities and towns.

Our interpretation of ' 1926(b) is also inferentially supported by FmHA regulations regarding the transfer of water facilities subject to FmHA liens. These regulations require that any transfer must be approved by FmHA to insure that services will not be curtailed and that repayment of the FmHA loans is not jeopardized. 7 C.F.R. 1951.209, 1951.214 (1986). [FN2] The regulations also suggest an alternate means by which the city might acquire the facilities it desires, in the context of a consensual sale.

[6] The city urges that if ' 1926(b) limits the city's sovereign condemnation power, it violates the Tenth Amendment to the Constitution. We are not unsympathetic to enforcing the legitimate Tenth Amendment-based claims of state authorities against federal government infringement. Our natural ardor to preserve that critical division of power between the federal and state governments, a bulwark of protecting our individual liberties, is necessarily dampened, however, by the Supreme Court's decision in Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528, 105 S.Ct. 1005, 83 L.Ed.2d 1016 (1985). Inasmuch *1061 as Garcia upheld the application of the Fair Labor Standards Act against a city entity as a valid execution of congressional power under the commerce clause, it may or may not be directly controlling in this case. The City of Madison would not prevail even under a broader vision of the Tenth Amendment than the Court propounded in Garcia, however, for we perceive no significant limitation on the city's powers by virtue of a statute enacted to protect FmHA's subsidy of rural water authorities. FmHA's characterization of ' 1926(b) as resting on Congress's undoubtedly broad powers under the spending clause seems more appropriate to this case than any commerce clause-based argument. Constitution Art. I, Section 8, clause 1. See Helvering v. Davis, 301 U.S. 619, 645, 57 S.Ct. 904, 910, 81 L.Ed. 1307 (1936) ("When money is spent to promote the general welfare, the concept of welfare or the opposite is shaped by Congress, not the states. So the concept be not arbitrary, the locality must yield.")

Because ' 1926(b) forbids, as a matter of law, municipal condemnation of an FmHA-indebted water association's assets, there was no genuine issue of material fact before the district court. Summary judgment was therefore correctly granted.

Copr. 8 West 1998 No Claim to Orig. U.S. Govt. Works

*2 Pitt-7 commenced this action on March 26, 1997 and amended its complaint on June 2, 1997, to allege violations of 7 U.S.C. ' 1926(b) as enforced through 42 U.S.C. ' 1983 and an impermissible invasion of its service area. Pitt-7 also alleged violations of various Oklahoma state laws for fixing high water rates, breach of contract, acting contrary to public policy, and breach of good faith. Pitt-7 alleges violations of federal anti-trust laws by the City. Pitt-7's claims against those designated as the Additional Defendants relate exclusively to the attempt to deannex the Park from Pitt-7's service territory. Pitt-7 seeks declaratory, injunctive and monetary relief.

Through its pending Motion, the City contends that Pitt-7's claims should be dismissed on the following bases: (1) as a political subdivision, Pitt-7 cannot challenge the actions of another political subdivision through the vehicle of ' 1983; (2) Pitt-7 did not file its ' 1983 claim until 16 years after development of the Park by the City and therefore its claims are barred by the applicable two year statute of limitations; (3) the Park has been removed by the Board from the Pitt-7 area and therefore the City's actions in providing service to the Park cannot be considered an encroachment upon Pitt-7's territory; (4) the City has surrendered all other customers it had previously served within Pitt-7's territory except for the Park; (5) Pitt-7's actions violate the Tenth Amendment to the United States Constitution [FN4]; (6) ' 1926(b) only protects Pitt-7's territory while it was indebted to the federal government and since that indebtedness was satisfied, the protections no longer exist; (7) Pitt-7 has failed to meet the requirements of ' 1926(b) because it cannot make sufficient water available to meet the needs of the Park's customers; and (8) Pitt-7's anti-trust claim fails because the City is protected by the doctrine of state-action immunity. By separate Motion, the City also requests dismissal of Pitt-7's state law claims since all federal claims should be dismissed and this Court should decline exercising supplemental jurisdiction.

*3 For its part, Pitt-7 disputes the City's legal conclusions on the issues raised in the Motion. Further, through its own request for summary judgment, Pitt-7 seeks a favorable judgment on its ' 1983/ ' 1926(b) claim.

The primary issue in this case surrounds whether Pitt-7 enjoys the statutory protections afforded under 7 U.S.C. ' 1926(b) which is part of the Consolidated Farm and Rural Development Act (the "Act"). Section 1926(b) provides in pertinent part:

Thus, the protections of the territories of rural water districts become effective when the district in question qualifies as an "association" as that term is intended in the legislation, that the district has a continuing indebtedness to the FmHA, and that the City has encroached upon or invaded an area to which Pitt-7 "made service available." Through ' 1926(b), the Act was enacted to "encourage rural water development by expanding the number of potential users and to safeguard the financial viability of rural associations and Farmers Home Administration loans." Lexington-South Elkhorn Water Dist. v. City of Wilmore, Kentucky, 93 F.3d 230, 233 (6th Cir.1996).

*4 As preliminary matters, the City challenges Pitt-7's use of ' 1983 on three fronts: (1) Pitt-7 as a political subdivision cannot sue the City, also a political subdivision under ' 1983; (2) ' 1983 is not intended to protect the rights conferred by ' 1926(b); and (3) Pitt-7's claim under ' 1983 is barred by the applicable statute of limitations. It is apparent from the terms of ' 1926(b) that it does not contain an enforcement provision should its protections be violated and certainly does not authorize a private right of action to insure compliance. As a result, the courts addressing the issue have found that enforcement of ' 1926(b)'s protections lies in ' 1983 since ' 1926(b) itself does not provide for an exclusive remedy for the violation of its terms. Rural Water System # 1 v. City of Sioux Center, 967 F.Supp. 1483, 1503-05 (N.D.Iowa 1997). As stated in the Sioux Center case, the claim remains one for a violation of the terms of ' 1926(b) and not a violation of ' 1983. Section 1983 is merely a vehicle through which ' 1926(b) is judicially enforced. Id . at 1504. Consequently, Pitt-7 has employed the correct statutory foundation for its claims under ' 1926(b). Similarly, the City's contention that Pitt-7's claim asserted through ' 1983 should be barred since it is brought between two political subdivisions is without merit. Again, the violation asserted is not of ' 1983 but rather of ' 1926(b) and therefore the case authority cited by the City on this issue is distinguishable and inapposite to the rather unique circumstance presented by this case.

Additionally, Pitt-7 has commenced this action in a timely fashion. Since ' 1983 itself contains no statute of limitations, it is borrowed from each state's personal injury statutes. In Oklahoma, the appropriate statute of limitations is two years. Okla. Stat. tit. 12 ' 95. The City argues that since the building of the original lines and the commencement of service to the Park occurred more than 16 years ago, Pitt-7 has not commenced its action within the applicable statute of limitations. In so arguing, the City ignores the recognized exception to the statute of limitations known as the "continuing violations" doctrine. Under this theory, if a continuing violation of a federal law actionable under ' 1983 is proven, the statute of limitations runs from the last occurrence of wrongful conduct. Sioux Center, 967 F.Supp. at 1508 citing Varner v. National Super Mis., Inc., 94 F.3d 1209, 1214 (8th Cir.1996). In this case, Pitt-7 has alleged that the violation of ' 1926(b) as enforced through ' 1983 occurs so long as the City continues to supply water service to the Park. If Pitt-7 is entitled to the protections of ' 1926(b), the City is indeed violating the territorial area established for Pitt-7 to serve. Since it is admitted in this case that the City continues to supply water to the Park, a "continuing violation" is occurring which would extend the statute of limitations and make this action timely, if Pitt-7 is entitled to and the City is violating ' 1926(b)'s protections.

*5 This Court next addresses whether Pitt-7 has established the elements necessary to confer ' 1926(b) protections to it. The City does not contend that Pitt-7 is not an "association" qualified for ' 1926(b) protections. Thus, this element is deemed satisfied. Next, Pitt-7 must prove that it has been continuously indebted to the FmHA during all times relevant to this action. In this regard, Pitt-7's arguments are flawed. As related in the facts set forth herein above, Pitt-7 took advantage of a buy out program sponsored by the FmHA in 1989 and was no longer indebted to the federal government. At that point in time, any protections enjoyed by Pitt-7 under ' 1926(b) ceased and no action taken by the City prior to that time is actionable in this case. Cases addressing this same issue have found similarly. See, Scioto County Regional Water Dist. No. 1 v. Sioto Water, Inc., 103 F.3d 38, 40-41 (6th Cir.1996); Bell Arthur Water Corp. v. Greenville Utilities Comm., 972 F.Supp. 951, 957-58 (E.D.N.C.1997); Sioux Center, 967 F.Supp. at 1523. However, this does not end the analysis because Pitt-7 became indebted to the FmHA once again in 1994. While the City attempts to maintain that only the events of establishing the lines and initial service to the Park are the only actionable events, its arguments in this regard are not persuasive. Continuing to provide service to a protected area may also form the basis for a violation of ' 1926(b) since it may represent an encroachment upon a protected territory. Consequently, while Pitt-7's claims prior to 1994 are no longer actionable, those arising after 1994 remain viable.

With some claims remaining in this action, this Court turns to the third required element under ' 1926(b) that Pitt-7 have made service available to the Park. Nothing in the Act defines the terms "service provided" or service "made available." As a result, this Court will look to the various case authorities which discuss these terms. In the case of North Alamo Water Supply Corp. v. City of San Juan, Texas, 90 F.3d 910 (5th Cir.1996), the court determined that a state law duty to provide service "is the legal equivalent to" making service available under ' 1926(b). In this case, Pitt-7 contends that it has a duty to provide service to its designated territory under Okla. Stat. tit. 82 ' 1324.12 which provides for the establishment and subscription of benefit units. The water district provides for a specified number of benefit units and each landowner in the territory subscribes to a number of units. The section outlines the logistics for this process and the benefits which flow therefrom. Conspicuously absent from this statute is any obligation or duty on the part of the district to provide service. Pitt-7 has failed to provide this Court with any compelling authority which establishes any such duty. Therefore, absent a state law duty, alternative tests for determining whether Pitt-7 made service available must be employed.

*6 An association covered by ' 1926(b) may also make service available by demonstrating that it has a legal right to serve a particular area coupled with a physical ability to do so, otherwise designated as the "pipes-in-the- ground" test. Sioux Center, 967 F.Supp. at 1525-26. This test turns on the proximity of existing facilities to the disputed territory. Lexington- South, 93 F.3d at 237. In this case, the City has not argued that Pitt-7 lacked the legal right to provide service to the Park. [FN5] Also, Pitt-7 had an existing six inch line running adjacent to the Park which is insufficient to service the water needs of the customers in the Park. However, simply possessing facilities near or within the proximity of the area in dispute cannot be sufficient to end the inquiry. If the quality of the lines and the ability of those existing lines to adequately service the disputed area are not also crucial to establishing whether an association makes service available, an absurd result can easily be contemplated. An association could merely demonstrate that it has in place a line of an obviously insufficient capacity and still be afforded the protection of ' 1926(b). In the meantime while the association may or may not build its lines to accomodate the demands of the disputed territory, the customers are left with inadequate water service to maintain their businesses with no assurance that adequate service will be restored. This Court must conclude that not only must a line be in place, but also that line must be capable of delivering water in sufficient quantities to service the disputed territory. This position is not without precedent. In the Bell Arthur case, the court found that the association in that case had a six inch line in place which was insufficient to meet the needs of the area to be serviced. The court concluded that the association could not provide an improved line within a reasonable time. The association was found to not have made service available. Id. at 962-63.

Also, in the Sioux Center case, the court found that a dispute existed in the facts surrounding the nature of the line in place. At issue was whether the association's line was a "transmission" line or a "service" line. Thus, the quality of the line became determinative as to whether the association in that case enjoyed the protections of ' 1926(b).

Given the fact that Pitt-7 does not have adequate lines in place to service the Park, this Court finds that it has not made service available as that term is intended under ' 1926(b). Pitt-7's argument that it should be permitted to take over the City's lines currently servicing the Park is specifically rejected. Pitt-7 relies upon the North Alamo case in support of its position. In North Alamo, the court found that the association should be permitted to take over the lines in place with compensation to the municipality for the cost of putting the lines in place. Quite simply, no legal foundation or authority exists for the position espoused in the North Alamo case in this regard. The Fifth Circuit in affirming the core holding in the district court's opinion found that the district court was empowered with broad discretion to fashion a remedy under Rule 54(c) of the Federal Rules of Civil Procedure. This Court declines to repeat such a drastic and draconian remedy in this case. To do so would endorse Pitt-7's inaction in enforcing its asserted rights to service the Park, which this Court is loathe to do. [FN6]

However, should a municipality engage in an activity deemed to be proprietary in nature rather than governmental, it cannot reap the benefits of Parker state-action immunity unless it can be shown that the municipality acted to further a state policy. City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 413, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978). This Court need not address whether the City acted as a sovereign or as an entity merely engaged in a business activity since by subsequent legislation, Congress excluded governmental entities, including cities, from civil liability under federal antitrust laws. Specifically, the Local Government Antitrust Act of 1984 provides at 15 U.S.C. ' 35, in pertinent part:

Consequently, Pitt-7 may not pursue any of the civil remedies under the federal antitrust laws since the City falls within the definition of a "local government." 15 U.S.C. ' 34(1)(A).

Pitt-7 also contends that the City cannot discriminate in providing service under Oklahoma law as a "public business", citing Okla. Stat. tit. 79 ' 4. However, Pitt-7 has only asserted a claim for violation of federal antitrust law in this action. Whether the City may or may not be in violation of Oklahoma law should it actually terminate the sale of water to Pitt-7 is left to another day and another lawsuit when and if it ripens into a justiciable claim.

The only remaining claim based in federal law is the request by Pitt-7 that the City and the Additional Defendants be enjoined from taking further action on the pending deannexation petitions, declaratory relief finding the orders already entered by the Board are null and void and/or damages resulting from the deannexation. [FN7] The City's Motion on this issue essentially raises the deannexation of the Park as a defense to Pitt-7's ' 1926(b) claim, asserting that since the Park was removed from Pitt-7's territory by application of state law, it cannot be considered an "encroachment" or "curtailment," prohibited by ' 1926(b). The City contends that in seeking deannexation, it was acting as a landowner in the Park and not as a competitor to Pitt-7.

*8 Pitt-7 responds that the deannexation from its territory violates public policy. Additionally, Pitt-7 contends that the state statute allowing landowners to deannex property from its territory is preempted by the federal protection afforded by ' 1926(b). Even if the City, Additional Defendants and the Board could pursue the procedure for deannexation under Okla. Stat. tit. 82 ' 1324.21, Pitt-7 asserts that the Board were improperly granted because the resultant deannexation was not in the best interest of Pitt-7 as required by the Oklahoma statute.

This Court is not willing to draw the fine distinction between the two roles the City urges. It would appear that deannexation represents precisely the type of curtailment of water service and reduction of income of Pitt-7 which 1926(b) was intended to prevent. Consequently, federal preemption may preclude the use of the state statute providing for deannexation so long as the association qualifies for the protections of ' 1926(b), which this Court has previously discussed in this Order. See, e.g., Sioux Center, 967 F.Supp. at 1528-29. However, before this issue can be addressed, this Court is concerned with a more fundamental problem. Since this Court has found that Pitt-7 is not entitled to the protections of ' 1926(b) in relation to the Park, it follows that it may not now challenge the deannexation of the Park from its territory. The parties have not addressed this issue in any of the pleadings coming before this Court and therefore a further Pretrial Conference shall be conducted to discuss whether the deannexation claim is now academic.

*9 The remaining claims in this action are the various state law claims. Should the final federal claim be dismissed as moot, this Court will decline to exercise supplemental jurisdiction as urged by the City in its Motion to Dismiss. 28 U.S.C. ' 1367(c)(3). However, should the deannexation claim remain, these state law claims will continue to be viable in this Court.

IT IS THEREFORE ORDERED that the Motion for Partial Summary Judgment filed by Defendants City of McAlester and the McAlester Public Works Authority filed June 27, 1997 (Docket Entry # 67) is hereby GRANTED, in that Pitt-7 is not entitled to the protections of 7 U.S.C. ' 1926(b) in relation to the Park. Accordingly, Pitt-7's ' 1926(b) claim as asserted through ' 1983 is hereby DISMISSED. Due to this ruling, Pitt-7's Motion for Partial Summary Judgment filed May 5, 1997 (Docket Entry # 15) is hereby DENIED, since it only relates to the ' 1983 claim.

Copr. 8 West 1998 No Claim to Orig. U.S. Govt. Works

Federally-indebted water association brought action against city utilities commission, city, and developer, alleging violation of Consolidated Farm and Rural Development Act provision protecting federally-indebted water associations against municipal encroachment and ' 1983, seeking declaratory judgment, permanent injunction, and attorney fees, arising from, inter alia, city's extension of water service to newly-annexed development area. Association, city, and commission moved for summary judgment. The District Court, Malcolm J. Howard, J., held that: (1) association lost any protections of Consolidated Farm and Rural Development Act provision when it paid off its Farmers Home Administration (FmHA) loan pursuant to Agricultural Credit Act of 1987; (2) association's reborrowing of federal funds for construction of certain water system project did not render it protected by provision against city's extension of water service to development area located approximately one mile from project; (3) association had not "provided" or "made service available" to development area as required for protection under provision, despite association's existing water line running through or adjacent to development area; and (4) association's claim alleging violation of provision pertaining to separate area in which city provided only sewer service was premature and not ripe for adjudication.

Water association lost any protections of Consolidated Farm and Rural Development Act provision protecting federally-indebted water associations against municipal encroachment when it paid off its Farmers Home Administration (FmHA) loan pursuant to Agricultural Credit Act of 1987, despite contention that it would have been irrational for association to pay off its loan and lose protections under provision, as association saved substantial sum of money when it paid off its loan. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(f, g), as amended, 7 U.S.C.A. ' 1929a note.

Water association's reborrowing of federal funds after it had previously paid off its Farmers Home Administration (FmHA) loan pursuant to Agricultural Credit Act of 1987 did not result in retroactive protection of association relating back to period of its prior federal debt under Consolidated Farm and Rural Development Act provision protecting federally-indebted water associations against municipal encroachment. Agricultural Act of 1961, '' 301(b) et seq., 306(b), 7 U.S.C.A. '' 1921 et seq., 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(f, g), as amended, 7 U.S.C.A. ' 1929a note.

Purpose of Consolidated Farm and Rural Development Act provision protecting federally-indebted water associations against municipal encroachment is twofold: to encourage rural water development by increasing number of users, thereby decreasing per-user cost; and to safeguard financial viability of rural associations and Farmers Home Administration (FmHA) loans. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

There are three requisite elements to prove violation of Consolidated Farm and Rural Development Act provision protecting federally-indebted water associations against municipal encroachment: plaintiff must be indebted association pursuant to Act, plaintiff must show that it has provided or made service available to contested area, and competing utility must curtail or limit service in area to which plaintiff is making service available. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Service area of water association protected under Consolidated Farm and Rural Development Act provision protecting federally-indebted water associations against municipal encroachment is sacrosanct. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Water association which reborrowed federal funds after it had previously paid off its Farmers Home Administration (FmHA) loan pursuant to Agricultural Credit Act of 1987 would be entitled to protection in city's newly-annexed development area under Consolidated Farm and Rural Development Act provision protecting federally-indebted water associations against municipal encroachment only if association's entire water system was pledged as security for its reborrowing loan, which it obtained to construct separate project located approximately one mile from development area. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(f, g), as amended, 7 U.S.C.A. ' 1929a note.

Water association's borrowing of federal funds for construction of certain water system project did not render association protected against city's extension of water service to newly-annexed area located approximately one mile from project under Consolidated Farm and Rural Development Act provision protecting federally-indebted water associations against municipal encroachment, despite contention that loan project was dependent upon portion of association's water system in annexed area, where association applied for loan from Farmers Home Administration (FmHA) for specific project and used money expressly for that project, FmHA never received request from association for permission to use any loan funds to expand association's existing facilities to serve annexed area, and loan documents did not indicate that any loan funds were to be used for water service to annexed area. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Water association's incremental enlargement of its water system under federal loan is not perpetually indivisible from remainder of association's water system for purposes of determining extent of protection under Consolidated Farm and Rural Development Act provision protecting federally-indebted water associations against municipal encroachment. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Having pipes in the ground, standing alone, is not invariably a sufficient basis to prove that water association has "made service available" in area as required for protection under Consolidated Farm and Rural Development Act provision protecting federally-indebted water associations against municipal encroachment. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Federally-indebted water association had not "provided" or "made service available" to newly-annexed development area to which city extended water service as required for protection under Consolidated Farm and Rural Development Act provision protecting federally-indebted water associations against municipal encroachment, despite association's existing water line running through or adjacent to development area, where customers which association had previously served in area had not received service from association for over ten years, association's water line was insufficient to provide water service to area after development, and association was not capable of providing requisite service within reasonable time after application for service and would not be able to do so with only minor adjustments to existing system. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Section 1983 was appropriate vehicle for federally-indebted water association to bring before court its claim for violation of Consolidated Farm and Rural Development Act provision protecting federally-indebted water associations against municipal encroachment. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 42 U.S.C.A. ' 1983.

To state claim under ' 1983, plaintiff must allege and prove that defendant has deprived plaintiff of right secured by Constitution or laws of United States and that defendant who deprived plaintiff of this right acted under color of state law. 42 U.S.C.A. ' 1983.

Federally-indebted water association could not claim any protection under Consolidated Farm and Rural Development Act provision protecting federally- indebted water associations against municipal encroachment for area in which city provided only sewer service, as any Farmers Home Administration (FmHA) debt association had was exclusively for its water facilities. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Federally-indebted water association's claim against city under Consolidated Farm and Rural Development Act provision protecting federally-indebted water associations against municipal encroachment for area in which city provided only sewer service was premature and not ripe for adjudication by district court, as any alleged water service curtailment by city in area was, at most, only threatened. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

This matter is before the court on several motions: (1) Plaintiff Bell Arthur Water Corporation's motion for summary judgment; (2) Defendant Greenville Utilities Commission's motion for summary judgment; (3) Defendant City of Greenville's motion for summary judgment; (4) Plaintiff Daniel R. Glickman's motion on behalf of the United States Dept. of Agriculture to dismiss it as a party; (5) Plaintiff Bell Arthur's motion to file an overlength brief supplementing its opposition to Glickman's motion to dismiss; and (6) Plaintiff Bell Arthur's motion for a more definite statement. BAWC seeks a declaratory judgment and permanent injunction based on defendants' alleged violation of 7 U.S.C. ' 1926(b). BAWC also seeks redress pursuant to 42 U.S.C. ' 1983 and attorney's fees pursuant to 42 U.S.C. ' 1988. All issues have been thoroughly briefed by the parties. In addition, the court held a summary judgment hearing in this matter on April 30, 1997. Therefore, this matter is ripe for adjudication.

FN1. The court notes that the Farmers Home Administration, an agency of the United States Department of Agriculture ("USDA"), is now known as the USDA Rural Development. It is the USDA Rural Development that is responsible for processing and administering Rural Utility Service loans for water service. See GUC's Summ. J. Ex. E ' 12. For ease of discussion, however, the court will refer only to the Farmers Home Administration.

BAWC contends that the Ironwood area was annexed by the City as part of an agreement with Developer. The City purportedly agreed to annex the Ironwood area and provide water and sewer service to the area in exchange for Developer's conveyance of a public golf course to the City. Compl. '' 15-16. BAWC alleges it has made service available to an area called the "Bruce- Renston" area, which includes Ironwood, since 1979 when the Pitt County Board of Commissioners (the "Board") reaffirmed by resolution the Board's prior approval of BAWC's plan to extend water service to the area. Because BAWC is a non-profit corporation funded by the FmHA, BAWC asserts the City's actions in annexing the Ironwood area and requiring Developer to obtain water and sewer service from GUC violate 7 U.S.C. ' 1926(b). BAWC also alleges that GUC is competing with it by providing water service to Ironwood in violation of ' 1926(b).

On April 30, 1997, the court held a summary judgment hearing at the United States Courthouse in Greenville. All parties were represented and were afforded the opportunity to present their respective positions on the ' 1926(b) claim.

Section 1926(b) is part of the Consolidated Farm and Rural Development Act, 7 U.S.C. ' 1921, et seq. ("the Act"). The Act authorizes the Secretary of Agriculture to make and insure loans to non-profit corporations for a variety of enumerated purposes, including the "conservation, development, use, and control of water." 7 U.S.C. ' 1926(a)(1). Title 7 U.S.C. ' 1926(b) of the Act provides, in pertinent part,

BAWC contends it is an association protected by ' 1926(b). BAWC further alleges that defendants' actions in annexing the Ironwood area and requiring Developer to obtain water and sewer from GUC are a violation of ' 1926(b) that entitles it to relief.

As an initial matter, defendants contend that the protection afforded by ' 1926(b) does not extend to the disputed Ironwood area because BAWC paid off its loan to the FmHA in 1987. BAWC agrees that in order for it to secure protection under the statute, its indebtedness to the FmHA must be continuous. However, BAWC argues that it participated in a congressionally authorized "buy- out" program which, in effect, continued its protections even though the FmHA debt may technically have been "satisfied" or "paid in full."

BAWC states that at the time it was established in 1970 pursuant to N.C. Gen.Stat. Ch. 55A, it borrowed money from the FmHA to fund its water system. In 1979, BAWC sought FmHA funds for its proposed Bruce-Renston Extension, a portion of which included water lines along North Carolina Highway 43. This water line lies within and adjacent to the present Ironwood area. As discussed below, BAWC paid off its entire indebtedness to the FmHA in 1989. In 1993, BAWC initiated a new loan with FmHA by borrowing $1,797,000 to fund its "Otter Creek" project. In October of 1995, GUC completed installation of its water lines that run parallel to BAWC's water lines along Highway 43 through which GUC plans to provide water to the residents of the Ironwood area. This competing water line by GUC forms the basis of BAWC's ' 1926(b) action.

Sometime in early 1989, BAWC participated in what it terms "the Congressionally mandated Buy-Out pursuant to the 1987 ACA, ' 1001(f) [Right of First Refusal] and ' 1001(g) [Extension of 7 U.S.C. ' 1926(b) protection] which subsections amended 1986 OBRA." Pl.'s Prologue to Statement of Undisputed Material Facts, p. 7. BAWC supports this argument in its "Legislative Folio on 1986 Omnibus Reconciliation Budget Act ('OBRA'), Section 1001, as amended by Agricultural Credit Act of 1987 ('ACA')" [hereinafter Folio], an extensive review of the legislative history surrounding both OBRA and ACA amendments as it pertains to Section 1001 Sale of Rural Development Notes.

The Omnibus Budget Reconciliation Act of 1986 ("OBRA") required the FmHA to sell some of its notes and other obligations as part of a Congressional attempt to reduce the federal deficit. Pub.L. 99-509, ' 1001, 100 Stat. 1874, as amended Pub.L. 100-233, Title VIII, ' 803, 101 Stat. 1714 (1988). In *957 1987, Congress amended OBRA by enacting the Agriculture Credit Act ("ACA"). ACA amended section 1001 of OBRA by adding subsections (f) and (g), which state, in relevant part:

(f)(1) In general.--Before conducting a sale of a portfolio of notes or other obligations under this section, the Secretary of Agriculture shall--

(a) determine whether the issuer of any unsold note or other obligation desires to purchase the note or other obligation; and

(B) if so, hold open for 30 days, an offer to sell the note or other obligation to the issuer at a price to be determined under paragraph (2).

(g) Applicability of prohibition on curtailment or limitation of service.-- Section 306(b) of the Consolidated Farm and Rural Development Act (7 U.S.C. ' 1926(b)) shall be applicable to all notes or other obligations sold or intended to be sold under this section.

BAWC argues that the protections afforded under ' 1926(b) continued to apply to it in full force and effect, even after it paid off its initial 1973 loan to FmHA. Moreover, BAWC claims that if any protection was extinguished as a result of the 1989 pay off of the 1973 loan, new protection was resurrected and should be applied retroactively when BAWC again borrowed government money in 1993 to finance the Otter Creek project. Defendants counter that by paying off the FmHA in 1989, BAWC lost any protection afforded it under ' 1926(b). In addition, defendants contend that any protection to which BAWC is entitled as a result of its 1993 loan is limited solely to the prevention of any curtailment of activity in the Otter Creek project. Therefore, as an initial matter the court must first address what protection, if any, BAWC is afforded both before and after its 1993 FmHA loan.

Subsequent to the summary judgment hearing before this court, another district court was faced with a similar factual scenario to that of the instant matter. In Rural Water System # 1 v. City of Sioux Center (N.D.Iowa 1997), the plaintiff, Rural Water System # 1 ("RWS"), sued the City of Sioux Center ("the City"), alleging that the City violated ' 1926(b) by annexing and providing water to portions of RWS's asserted service area. The City claimed that RWS could not assert the protections of ' 1926(b) because when RWS paid off its FmHA loan, the protection of its service area lapsed. Since the annexation occurred during a period when RWS owed no money to the FmHA, the City moved for summary judgment on this issue.

After an intensive, exhaustive review of the parties, pleadings, the legislative history and statutory construction of ' 1926(b), and the amendments under OBRA and ACA, the Northern District of Iowa, in a well- reasoned opinion, found that RWS lost the protection of ' 1926(b) when it participated in the Buy-Out option in 1988. RWS did not dispute that it was not indebted to the United States between September 22, 1988, and July 1, 1992. In 1992 and again in 1995, RWS borrowed from the FmHA, securing the loans with liens on its water facilities. The City annexed the disputed area in 1989 and included areas that RWS had either previously supplied water to or had "laid pipes in the ground" within or adjacent to. Subsequent to RWS's later loans, the City then annexed additional property in 1995.

RWS contended that it was still entitled to the protection of ' 1926(b) during the period from 1988 to 1992, despite having paid off its FmHA loans, by virtue of OBRA and ACA amendments. Specifically, RWS argued, as does BAWC, that "if the note is selected, the note is protected." In other words, RWS submitted that the same protection which would have continued had the Secretary sold a protected note or bond to a third party or issuer, likewise continued if the association itself were the debtor, rather than some third party, who repurchased and paid off its own note. The district court disagreed with RWS's proposition and concluded that:

the protection of ' 1926(b) through subsection (g) does not extend to a party such as RWS # 1 who bought back its notes pursuant to subsection (f), and thereby extinguished them. Consequently, RWS # 1 lost the protections of ' 1926(b) when it bought back its notes in 1988 and did not *958 regain any protection of ' 1926(b) until RWS # 1 again became indebted to the United States in 1992.

The RWS # 1 decision is consistent with the only other federal decision to address the issue. In Scioto County Reg'l Water Dist. No. 1 v. Scioto Water, Inc., 103 F.3d 38 (6th Cir.1996), cert. denied, --- U.S. ----, 117 S.Ct. 2497, 138 L.Ed.2d 1003 (1997), the Sixth Circuit affirmed the district court, stating that "when an issuer buys back its own bond and cancels the debt, however, it no longer qualifies as a debtor for ' 1926(b) protection. This statutory interpretation is also faithful to one of the main legislative purposes in enacting ' 1926(b)--safeguarding Farmers Home Administration loans." Id. at 42.

[2] BAWC argues that the Scioto decision was incorrectly decided and urges the court to follow the reasoning of City of Grand Junction v. Ute Water Conservancy District, 900 P.2d 81 (Colo.1995). In the Grand Junction decision, the Colorado Supreme Court found that subsection (g) extended the protection of ' 1926(b) to all notes and bonds sold by the FmHA, including those reacquired by the issuer with no intent to discharge the instrument. Id. at 92. While recognizing the requirement that a water association must be "continually indebted" to be entitled to ' 1926(b) protection, the Colorado Supreme Court nonetheless held that this continuing indebtedness need not be to the federal government. The court stated that the language in OBRA, and its subsequent amendments under ACA,

make it clear that the protection provided for rural water districts under ' 1926(b) remains even when the FmHA sells a note or bond in its possession to an entity other than the federal government.... Although we agree with the City that the District is no longer obligated to the FmHA under the 1981 revenue bond, we do not agree with the City that the bond is no longer outstanding

Id. at 95 n. 24 (citations omitted). As a result, the Colorado Supreme Court found that the water district did not discharge the bond when it reacquired the bond from the FmHA and therefore, was entitled to continual protection under ' 1926(b).

This court has thoroughly evaluated the reasoning in Scioto, City of Sioux Center, and Grand Junction and is persuaded that the reasoning espoused in the federal decisions reviewing ' 1926(b) reflects the most appropriate interpretation of the statute. Initially, Scioto and City of Sioux Center are factually similar to the case sub judice. In both of those cases, as in this one, the original loan to the FmHA was "paid in full." The Grand Junction court explained in some detail that although the issuer repurchased its bond, the evidence, which included uncontradicted expert testimony, indicated that the water district's intent was to reacquire the bond without discharging the underlying debt so that the district could resell the bond in the future. Grand Junction, 900 P.2d at 93.

The plaintiffs in City of Sioux Center argued, as BAWC argues, that it would have been irrational for them to pay off their FmHA loan and lose the protections under ' 1926(b). BAWC asserts that by participating in the buy- out provision of ACA in 1987, it was patriotically doing its duty in "coming to the rescue of the federal government by providing funds to 'purchase' their notes." BAWC's Combined Response p. 34. In yet another of BAWC's many colorfully exaggerated retorts, it contends that it would have been "madness" to forfeit valuable federal protection merely to secure a discount on its debt. Moreover, "[i]t would parallel the 'Jacob and Esau Story' whereby Jacob feed [sic] Esau in exchange for Esau's birthright." Id.

As was the court in City of Sioux Center, this court is unimpressed with BAWC's post hoc rationalizations concerning why it paid off its FmHA loans. The evidence before the court establishes that, in addition to performing a valuable "patriotic" duty to the government, BAWC fortuitously received the added benefit of saving a substantial sum of money when it paid off its loan. In the minutes of its annual meeting held on April 17, 1989, BAWC acknowledged that by refinancing with Wachovia Bank and having "paid in full" the FmHA loan at a substantially discounted *959 rate, it reduced its debt by $603,855.11 and saved approximately $500,000. GUC's Summ. J. Ex. I p. 349. The district court in City of Sioux Center reasoned that in offering this money-saving incentive for debtors to purchase their own loans, "there is a rational basis for extending the protection of ' 1926(b) to obligations sold by the FmHA to third parties, but not to those purchased by debtors through the buy-out program." City of Sioux Center, 967 F.Supp. at 1514 (emphasis added). In like vein, this court disagrees with BAWC that it would have been "mad" for BAWC to pay off its FmHA loan and forfeit federal protection when confronted with the opportunity to reduce its debt load by such a considerable amount. Accordingly, the court finds that any protection afforded to BAWC pursuant to ' 1926(b) was extinguished when it paid off its FmHA loans in 1987.

[3] This does not, however, end the court's inquiry since BAWC reborrowed from the FmHA in 1993 to finance its "Otter Creek" project. Although the court disagrees with BAWC's contention that it had continual protection under ' 1926(b) from 1987 through 1993, or that some type of "retroactive" protection magically emerged when it reborrowed federal funds which would resurrect protection relating back to 1987, BAWC was an "indebted association" again beginning in 1993. Therefore, the court must discern to what extent, if any, BAWC has a protectable interest pursuant to ' 1926(b) in the disputed Ironwood area in light of its 1993 loan.

[4][5][6] The purpose of ' 1926(b) is twofold: (1) to encourage rural water development by increasing the number of users, thereby decreasing the per-user cost; and (2) to "safeguard the financial viability of rural associations and FmHA loans." CSL Utilities, Inc. v. Jennings Water, Inc., 16 F.3d 130, 134 (7th Cir.1993). There are three requisite elements to prove a violation of ' 1926(b): (1) Plaintiff must be an indebted association pursuant to 7 U.S.C. ' 1921, et seq.; (2) plaintiff must show that it has provided or made service available to the contested area; and, (3) a competing utility must curtail or limit service in the area to which claimant is making service available. North Alamo Water Supply Corp. v. City of San Juan, 90 F.3d 910, 915 (5th Cir.1996); Glenpool Util. Services Auth. v. Creek County Rural Water Dist., 861 F.2d 1211, 1214 (10th Cir.1988). The service area of a water association protected under ' 1926(b) is sacrosanct. All of the courts that have reviewed ' 1926(b) acknowledge that its provisions should be given a liberal interpretation that protects water associations indebted to the FmHA from municipal encroachment. See North Alamo Water Supply Corp. v. City of San Juan, 90 F.3d 910, 915 (5th Cir.1996); Lexington-South Elkhorn Water Dist. v. City of Wilmore, 93 F.3d 230, 235 (6th Cir.1996); Jennings Water, Inc. v. City of North Vernon, 895 F.2d 311, 315 (7th Cir.1989); Glenpool Util. Services Auth. v. Creek County Rural Water Dist., 861 F.2d 1211, 1214 (10th Cir.1988); Rural Water System # 1 v. City of Sioux Center, 967 F.Supp. at 1511-12 (N.D.Iowa 1997); Pinehurst Enter., Inc. v. Town of Southern Pines, 690 F.Supp. 444, 451 (M.D.N.C.1988), aff'd, 887 F.2d 1080 (4th Cir.1989).

The defendants admit that, at least as a result of the 1993 FmHA loan, BAWC is an indebted association under ' 1926(b). Moreover, the court's discussion supra indicates that BAWC is entitled to ' 1926(b) protection covering an as yet undetermined area. However, defendants argue that the proceeds from the 1993 loan, which is the only indebtedness BAWC currently has with FmHA, were used solely to finance the Otter Creek project and were not used to construct any water lines or facilities connected with Ironwood. Because the Otter Creek project is located at least one mile away from Ironwood, defendants suggest that at most, BAWC is "indebted" and entitled to FmHA protection only for the area encompassed by the Otter Creek project. In sum, defendants ask the court to find that the 1993 loan extends protection only to the Otter Creek project, and not to BAWC's water system as a whole.

[7] BAWC counters that its Otter Creek facilities are not "stand alone" facilities capable *960 of generating their own revenue stream. BAWC states that without the connection of the Otter Creek facilities to the rest of BAWC's system, including the pipes running through the Ironwood area, no water could reach the Otter Creek project since the Otter Creek project is but a part of an entire water "system." In addition, BAWC argues that it would be "foolhardy" for either FmHA to make a loan or for BAWC to borrow almost $2 million to construct facilities from which no revenue could be generated to repay the debt. Therefore, before the court may address whether BAWC has satisfied the three requirements under ' 1926(b), the court must determine whether the 1993 FmHA loan offers ' 1926(b) protection solely to the Otter Creek Project. At the point in 1987 when BAWC paid off its FmHA loan, ' 1926(b) protection ceased to apply to any of its water facilities. Thus, only if BAWC's entire water system was pledged as security for its 1993 loan could it successfully claim that protection against curtailment applied to the Ironwood area.

[8][9] This court must accord considerable deference to an agency's reasonable interpretation of a statute that it is charged with administering. Wayne v. Village of Sebring, 36 F.3d 517, 527 (6th Cir.1994) citing, Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844, 104 S.Ct. 2778, 2782-83, 81 L.Ed.2d 694 (1984). During the summary judgment hearing, a representative from the USDA presented the government's interpretation of ' 1926(b) and addressed whether the statute protected more than BAWC's Otter Creek project. When asked by the court whether, in addition to the Otter Creek facilities, the new loan to BAWC was also secured by facilities located in the Ironwood area, Stephen West, Assistant United States Attorney appearing for the USDA, stated that:

West Tr. at 5. BAWC's application for the Otter Creek project appears to fall squarely within this parameter. BAWC applied for money from FmHA for a specific project, Otter Creek, and used the money expressly for that project. In fact, BAWC was specifically directed to use the loan proceeds solely for construction of the new facilities at Otter *961 Creek. [FN2] The FmHA has never received a request from BAWC for permission to use any of the funds to expand its existing facilities along Highway 43 to serve the Ironwood area. Finally, there is no indication in any of the loan documents pertaining to the Otter Creek project that any of the funds were to be used by BAWC for water service to Ironwood. [FN3] Defs.' Summ. J. Ex. 7 ' 17.

FN2. FmHA loan funds may only be used for the project for which the loan was granted. See Defs.' Summ. J. Ex. E ' 32.

FN3. It has also been admitted that none of the real property described in the deed of trust dated January 27, 1993, is located within the Ironwood area. Defs.' Summ. J. Ex. E.

[10] Although the court agrees that the Otter Creek project was never intended to be a "stand alone island without the larger BAWC system," this court cannot, even under the most liberal interpretation of ' 1926(b), accept BAWC's argument that a water association's increment enlargement is perpetually indivisible for purposes of applying ' 1926(b). Accordingly, defendants' motion for summary judgment as to BAWC's claim for violation of 7 U.S.C. ' 1926 is hereby GRANTED.

However, even if the court agreed that viewing BAWC's water system as a singular unit encompassing the Ironwood area triggers the potential applicability of ' 1926(b) to the area, the court finds that BAWC has not "provided" or "made service available" in the Ironwood area and, therefore, is not entitled to ' 1926(b) protection. Thus, the court considers, in the alternative, whether the Ironwood area is a protected service area in which BAWC has provided or made service available and in which area defendants have curtailed service by annexing the property and installing competing water lines.

Section 1926(b) neither defines "service area," nor when a water association has "provided" or "made service available." Federal regulations require an association "[t]o provide adequate service to all persons within the service area who can feasibly and legally be served." 7 C.F.R. ' 1942.17(n)(2)(vii) (emphasis added). The regulations further provide that a service area is the area "reasonably expected to be served by the facility being financed by FmHA ..." 7 C.F.R. ' 1942.17(f)(6). Several federal courts have addressed the issue of whether an association has "provided" or "made service available." In North Shelby Water Co. v. Shelbyville Mun. Water and Sewer Comm'n, 803 F.Supp. 15 (E.D.Ky.1992), the court, focusing on the physical location of the water distribution lines, recognized what has been termed "the pipe-in-the-ground" test for determining whether a water association has "made service available." Although the water association in North Shelby had never actually "provided" water service to the disputed area, the court found that it had "made service available" to potential customers by virtue of the proximity of the water association's distribution lines to the disputed area. Id. at 22. Additionally, the court held that even though the water association's distribution lines were simply "adjacent to," but not "within" that property, the water association had still *962 made service available. [FN4] Moreover, the water association in North Shelby was capable of providing such service within a "reasonable" time after application was made for the service. Id.; See also Lexington-South Elkhorn Water District, 93 F.3d 230, 237 (6th Cir.1996) (holding that whether an association has made service available is "determined based on the existence of facilities on, or in the proximity of, the location to be served"); Glenpool Util. Services Authority v. Creek County Rural Water Dist. No. 2, 861 F.2d 1211, 1214 (10th Cir.1988) (stating that water association made service available "by virtue of its line adjacent to the property and its responsibilities to applicants within its territory").

[11] The parties do not dispute that BAWC had pipes running through or adjacent to the Ironwood area. The pipes had been in place since the 1979 Bruce-Renston project. However, the court is not persuaded that having pipes in the ground, standing alone, is invariably a sufficient basis to prove that a water association has made service available. See Rural Water System # 1, 967 F.Supp. at 1525-26. BAWC argues that it would be improper for the court to consider, and is irrelevant under ' 1926(b), whether it had the "capacity" or the physical ability to provide the water requirements to the Ironwood area in deciding if it had provided or made service available. BAWC contends that the only appropriate judicial consideration is the proximity of the water association's lines to the disputed area. However, a review of the undisputed facts sheds light on why the court rejects BAWC's strict interpretation of the statute and relevant cases.

FN5. BAWC states that it "has been providing service to 20 pre-existing customers" around the Ironwood area and some of these customers were actually located within what is now Ironwood. BAWC's Response to Defs.' Mot. for Summ. J. p. 15 ' 6.05. Defendants do not dispute that in 1979 or shortly thereafter, BAWC provided service to eight customers in the disputed area. City's Resp. to Pl.'s Mot. for Summ. J. p. 7.

Since BAWC presented insufficient evidence to satisfy the second criterion that it has provided or made service available to the contested area, the court need not decide whether its service in the Ironwood area was "curtailed" by defendants. In addition, the court need not address defendants' arguments that BAWC had no "legal right" to service the Ironwood area since BAWC (1) never received a Certificate of Public Convenience as required under state law, or (2) does not operate as a water or service district as those terms are defined by North Carolina statutes. Because BAWC's ' 1926(b) protection extends only to its Otter Creek project and, alternatively, because BAWC has failed to show as a matter of law that it provided or made service available, as those terms have been interpreted, to the Ironwood area, defendants' motion for summary judgment as to BAWC's ' 1926(b) claim is hereby GRANTED.

[13][14] BAWC also seeks relief under 42 U.S.C. ' 1983 to recover for the alleged violation of ' 1926(b) by defendants. In order to state a claim under ' 1983, a plaintiff must allege and prove that (1) the defendant has deprived plaintiff of a right secured by the Constitution or laws of the United States and (2) the defendant who deprived plaintiff of this right acted under color of state law. Avery v. County of Burke, 660 F.2d 111, 115 (4th Cir.1981) (citations omitted). BAWC alleges in its complaint that defendants violated ' 1926(b), which entitles it to recover damages under ' 1983. As indicated by the court in City of Sioux Center, ' 1983 is an appropriate "vehicle" for BAWC to bring before the court its claim for violation of ' 1926(b). Rural Water System # 1 v. City of Sioux Center, 967 F.Supp. at 1504 (citation omitted). However, since the court has concluded that BAWC failed to show a violation of a federal right, i.e. a violation of ' 1926(b), defendants' motion for summary judgment as to BAWC's ' 1983 claims is hereby GRANTED. Accordingly, BAWC's request for attorney's fees pursuant to 42 U.S.C. ' 1988 is DENIED.

The last substantive issue the court must address involves an area known as Frog Level. BAWC currently provides water service to the residents of this area. As part of its initial claim that defendants violated ' 1926(b), BAWC included Frog Level as a service area that had been curtailed by defendants' proposal to provide water and sewer to that area. BAWC made application for a preliminary injunction to prevent defendants from providing water service to Frog Level residents. In seeking this injunction, BAWC basically contended that Frog Level was threatened with the same type of encroachment as that visited by defendants on the Ironwood area, and that a preliminary injunction was needed to preserve the status quo while this court decided the rights and liabilities concerning the Ironwood area.

[15][16] BAWC was chartered and continues to operate for the purposes of supplying water, not sewer service, to rural sections of Pitt and surrounding counties. Any FmHA indebtedness BAWC presently has, or previously had, was exclusively for its water facilities. Therefore, BAWC cannot claim any protection under ' 1926(b) for the Frog Level area since defendants are only providing sewer service to Frog Level. Because any alleged curtailment by defendants in Frog Level is, at most, only threatened, BAWC's claim under ' 1926(b) for Frog Level is premature and not ripe for this court's adjudication. Accordingly, defendants' motion for summary judgment as to any of BAWC's claims under ' 1926(b) based on defendants' supplying sewer service to the Frog Level area is GRANTED.

Accordingly, for the reasons stated herein, defendants' motions for summary judgment as to plaintiff's ' 1926(b) claims involving Ironwood and Frog Level and plaintiff's ' 1983 claims are hereby GRANTED. BAWC's request for attorney's fees pursuant to 42 U.S.C. ' 1988 is DENIED. Plaintiff Daniel R. Glickman's motion to dismiss it as a party is DENIED as moot, as is BAWC's motion to file an overlength brief supplementing its opposition to Glickman's motion to dismiss. Finally, both BAWC's request for judicial notice and its motion for a more definite statement are DENIED as moot. The clerk is directed to close this case.

Copr. 8 West 1998 No Claim to Orig. U.S. Govt. Works

Rural water association brought action against city, alleging violations of Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment, ' 1983 violation, tortious interference with customers, tortious interference with prospective business advantage, and conversion of property, arising from city's annexation of and provision of water service to association's asserted service area, and seeking injunctive, declaratory, equitable, and monetary relief. Parties cross-moved for summary judgment. The District Court, Bennett, J., held that: (1) association could properly assert two different claims against city founded on alleged violations of subsection, one under ' 1983, and the other under Declaratory Judgment Act; (2) fact issue, as to whether there had been continuing episodes of wrongful acts by city that formed series or pattern of violations of subsection for purposes of continuing violation exception to two-year statute of limitations bar, precluded summary judgment for city on limitations grounds as to association's ' 1983 claims; (3) association's declaratory judgment claim satisfied constitutional Article III case-or- controversy requirement and, thus, claim was timely; (4) it would exercise its discretion to hear claims under Declaratory Judgment Act; (5) association lost protections of subsection when it bought back its notes from Farmers Home Administration (FmHA) and did not regain protection of subsection until it again became indebted to government and, thus, city was not liable to association as to claims asserting violation of subsection arising from city's annexation during period association was not indebted to government; (6) state law defining service area of federally-indebted rural water association is not preempted by subsection; (7) subsection does not revivify an association's right to serve in area lost by operation of state law during period when association was not indebted to FmHA; (8) two-mile service restriction of Iowa statute governing provision of service by rural water districts did not apply to association and, thus, statute did not define or limit association's service area to area more than two miles outside of city limits; and (9) fact issues, as to association's physical ability to serve disputed area as of date association became indebted again to government, precluded summary judgment on question of whether city encroached upon association's protected service area for purposes of subsection.

Counsel for rural water association should have included in association's opening brief in support of its summary judgment motion noncontrolling Court of Appeals decision in separate case, handed down three weeks before filing of motion, which considered directly one of questions presented, in association's action against city, alleging violations of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment, despite fact that rules of professional conduct required only disclosure of controlling authority, where counsel was also counsel for parties in Court of Appeals case, and cross- motions for summary judgment of city and association were filed on same day and, thus, counsel had no assurance that city's counsel would bring Court of Appeals decision to attention of court in present action. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Iowa Code of Prof.Resp., DR 7- 106(B)(1), 40 I.C.A. Ch. 602 App.

Rural water association did not have claim for "violation" of ' 1983 on basis of alleged "predicate" violation of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment, in association's action against city, arising from city's annexation of and provision of water service to association's asserted service area, as ' 1983 provided no substantive rights. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 42 U.S.C.A. ' 1983.

One does not "violate" ' 1983. 42 U.S.C.A. ' 1983.

Section 1983 was designed to provide broad remedy for violations of federally-protected civil rights. 42 U.S.C.A. ' 1983.

Section 1983 provides no substantive rights. 42 U.S.C.A. ' 1983.

One cannot go into court and claim "violation of ' 1983," for ' 1983 by itself does not protect anyone against anything rather, ' 1983 provides remedy for violations of all rights, privileges, or immunities secured by Constitution and laws of United States. 42 U.S.C.A. ' 1983.

Cause of action pursuant to ' 1983 to address violation of federal statute is not available where governing statute provides exclusive remedy for violations of its terms. 42 U.S.C.A. ' 1983.

Rural water association had no cause of action created by Consolidated Farm and Rural Development Act Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment for violation of subsection's terms, as subsection created enforceable right, but provided no mechanism for its enforcement. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

One means to enforce rights created by Consolidated Farm and Rural Development Act Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment is cause of action pursuant to, but not for "violation" of, ' 1983. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 42 U.S.C.A. ' 1983.

Section 1983 provides private cause of action to obtain injunctive relief for violations of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 42 U.S.C.A. ' 1983.

Declaratory Judgment Act provisions governing creation of remedy and further relief provided means for rural water association to obtain not only declaratory relief as to alleged violations of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment, but also such further relief as was necessary and appropriate, such as injunctive relief, in association's action against city, arising from city's annexation of and provision of water service to association's asserted service area. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 28 U.S.C.A. '' 2201(a), 2202.

Rural water association could properly assert two different claims against city founded on alleged violations of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment, one under ' 1983, and the other under Declaratory Judgment Act, in action arising from city's annexation of and provision of water service to association's asserted service area. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 28 U.S.C.A. '' 2201(a), 2202; 42 U.S.C.A. ' 1983.

Rural water association could properly assert two different claims against city founded on alleged violations of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment, one under ' 1983, and the other under Declaratory Judgment Act, in action arising from city's annexation of and provision of water service to association's asserted service area. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 28 U.S.C.A. '' 2201(a), 2202; 42 U.S.C.A. ' 1983.

Vehicle afforded by Declaratory Judgment Act of enforcing Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment is alternative to that provided by ' 1983. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 28 U.S.C.A. '' 2201(a), 2202; 42 U.S.C.A. ' 1983.

Vehicle afforded by Declaratory Judgment Act of enforcing Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment is alternative to that provided by ' 1983. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 28 U.S.C.A. '' 2201(a), 2202; 42 U.S.C.A. ' 1983.

Alternative vehicles afforded by Declaratory Judgment Act and ' 1983 for enforcing Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment are not mutually exclusive. Agricultural Act of 1961, ' 306, 7 U.S.C.A. ' 1926(b); 28 U.S.C.A. '' 2201(a), 2202; 42 U.S.C.A. ' 1983.

Alternative vehicles afforded by Declaratory Judgment Act and ' 1983 for enforcing Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment are not mutually exclusive. Agricultural Act of 1961, ' 306, 7 U.S.C.A. ' 1926(b); 28 U.S.C.A. '' 2201(a), 2202; 42 U.S.C.A. ' 1983.

Iowa two-year personal injury statute of limitations governed rural water association's claim against city pursuant to ' 1983 alleging violations of Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment, in association's action brought in federal district court sitting in Iowa. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 42 U.S.C.A. ' 1983; I.C.A. ' 614.1(2).

Continuing violation exception to statute of limitations bar is applicable to ' 1983 claims for continuing violations of federal law or Constitution. 42 U.S.C.A. ' 1983.

Genuine issue of material fact existed as to whether there had been continuing episodes of wrongful acts by city that formed series or pattern of violations of Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment for purposes of continuing violation exception to two-year statute of limitations bar, precluding summary judgment for city on limitations grounds as to rural water association's ' 1983 claims asserting violation of subsection, arising from city's annexation of and provision of water service to association's asserted service area. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 42 U.S.C.A. ' 1983; I.C.A. ' 614.1(2); Fed.Rules Civ.Proc.Rule 56, 28 U.S.C.A.

Case-or-controversy requirement of constitutional Article III applies with equal force to actions for declaratory judgment as it does to actions seeking traditional relief. U.S.C.A. Const. Art. 3, ' 2, cl. 1; 28 U.S.C.A. '' 2201(a), 2202.

Test for determining whether there is actual case or controversy for action under Declaratory Judgment Act for purposes of constitutional Article III case-or-controversy requirement is whether there is substantial controversy between parties having adverse legal interests, of sufficient immediacy and reality to warrant issuance of declaratory judgment. U.S.C.A. Const. Art. 3, ' 2, cl. 1; 28 U.S.C.A. '' 2201(a), 2202.

For purposes of determining whether action under Declaratory Judgment Act satisfies constitutional Article III case-or-controversy requirement, decision of whether "substantial controversy" exists is to be made upon facts on case-by-case basis. U.S.C.A. Const. Art. 3, ' 2, cl. 1; 28 U.S.C.A. '' 2201(a), 2202.

For purposes of determining whether action under Declaratory Judgment Act satisfies constitutional Article III case-or-controversy requirement, to be "substantial," controversy must be live throughout course of litigation and must exist at time of district court's hearing of matter and not simply when case is filed. U.S.C.A. Const. Art. 3, ' 2, cl. 1; 28 U.S.C.A. '' 2201(a), 2202.

Rural water association's action under Declaratory Judgment Act against city, alleging violations of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment, arising from city's annexation of and provision of water service to association's asserted service area, satisfied constitutional Article III case-or-controversy requirement and, thus, action was timely; there was "live" or "substantial controversy" over whether city's actions had violated or might in future violate subsection, controversy was between parties having adverse legal interests who were properly aligned and present before court to argue controversy, controversy remained of sufficient immediacy and reality to warrant issuance of declaratory judgment, and there had been, and for the foreseeable future were likely to be, disputes over which customers "belonged" to which entity desiring to provide water services. U.S.C.A. Const. Art. 3, ' 2, cl. 1; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 28 U.S.C.A. '' 2201(a), 2202.

District court would exercise its discretion to hear rural water association's claims under Declaratory Judgment Act against city in association's action alleging violations of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment, arising from city's annexation of and provision of water service to association's asserted service area; misuses of Declaratory Judgment Act were not present in action but, instead, action was legitimate action, arising from controversy over proper interpretation of federal law, and parties asked court to provide relief afforded by Declaratory Judgment Act, that is, to declare rights and other legal relations of any interested party. U.S.C.A. Const. Art. 3, ' 2, cl. 1; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 28 U.S.C.A. ' 2201(a).

Declaratory Judgment Act confers unique and substantial discretion upon federal courts, including discretion whether to entertain, stay, or dismiss action. 28 U.S.C.A. '' 2201, 2202.

Declaratory Judgment Act is not to be used to bring to federal courts affirmative defense which can be asserted in pending state action. 28 U.S.C.A. '' 2201, 2202.

Declaratory Judgment Act is not meant to expand federal jurisdiction. 28 U.S.C.A. '' 2201, 2202.

Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment protects borrowing association, and consequently federal government as secured party on loans to association, from curtailment of association's service area, which is association's financial base. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations from municipal curtailment of associations' service should be given liberal interpretation that protects rural water associations indebted to Farmers Home Administration (FmHA) from municipal encroachment. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Farmers Home Administration's (FmHA) sale of bond back to bond's issuer under Agricultural Credit Act of 1987 subsection governing federally-indebted rural water association's bonds is not "sale under this section" within meaning of that subsection, which requires Secretary of Agriculture to offer bonds to issuer before conducting "sale of a portfolio of notes or other obligations under this section"; if sale to issuer pursuant to subsection is consummated during 30-day "hold open" period provided for issuer to accept offer to buy back its obligations, no "sale under this section" ever takes place. Omnibus Budget Reconciliation Act of 1986, ' 1001(a-f), 100 Stat. 1874 as amended.

District court would conduct its own analysis of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment and Agricultural Credit Act of 1987 subsections governing Farmers Home Administration's (FmHA) sale of bonds issued by rural water associations, without reference to any administrative agency review, as court had doubt that any adequate expression of agency interpretation had been presented by informal letter from Office of General Counsel for Department of Agriculture, in rural water association's action against city, alleging violation of Consolidated Farm and Rural Development Act subsection. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(a-g), 100 Stat. 1874 as amended.

For purposes of Agricultural Credit Act of 1987 subsection, providing that Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment "shall be applicable to all notes or other obligations sold or intended to be sold under this section," "notes intended to be sold under this section" means notes of federally-indebted rural water associations offered by Farmers Home Administration (FmHA) for sale to third parties but not yet purchased, or notes offered for sale to third parties but never purchased at all and, thus, still in hands of FmHA. Omnibus Budget Reconciliation Act of 1986, ' 1001(a-g), 100 Stat. 1874 as amended.

Object of Agricultural Credit Act of 1987 subsection, providing that Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against curtailment shall be applicable to all notes or other obligations sold or intended to be sold by federal government, was to make applicable the protections of Consolidated Farm and Rural Development Act subsection to certain notes sold by FmHA pursuant to Omnibus Budget Reconciliation Act of 1986 (OBRA) sell-off program for notes including those of rural water associations. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(a-g), 100 Stat. 1874 as amended.

Policy behind Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment is to encourage rural water development by expanding number of potential users of such systems, thereby decreasing per-user cost, and to safeguard viability and financial security of such associations, and Farmers Home Administration's (FmHA) loans, by protecting them from expansion of nearby cities and towns. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

One policy of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment is to protect federal government as holder of note issued by rural water association. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Purpose of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment is not to protect rural water association at all costs; rather, it is, under terms of subsection itself, to protect rural water association indebted to federal government and federal government as its creditor, or, by virtue of Agricultural Credit Act of 1987, to protect rural water association indebted to one standing directly in shoes of federal government as purchaser of notes of an association and that new creditor. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(a-g), 100 Stat. 1874 as amended.

Rural water association lost protections of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment when it bought back its notes from Farmers Home Administration (FmHA) and did not regain any protection of subsection until it again became indebted to federal government and, thus, city was not liable to association on claims asserting violation of subsection arising from city's annexation of portions of association's asserted service area during period association was not indebted to government. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(f, g), 100 Stat. 1874 as amended; 28 U.S.C.A. '' 2201(a), 2202; 42 U.S.C.A. ' 1983.

Agricultural Credit Act of 1987 subsection, providing that Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment "shall be applicable to all notes or other obligations sold or intended to be sold under this section," does not extend protection of Consolidated Farm and Rural Development Act subsection to rural water association that bought back its notes from Farmers Home Administration (FmHA) pursuant to separate subsection of Agricultural Credit Act and thereby extinguished them. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(a-g), 100 Stat. 1874 as amended.

Language of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment indicates congressional mandate that local governments not encroach upon services provided by such associations, be that encroachment in form of competing franchises, new or additional permit requirements, or similar terms. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

For purposes of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment, service area of federally-indebted water association is sacrosanct. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

To prevail on claim that municipality or other entity has violated Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment, rural water association must establish the following elements: it is an "association" within meaning of Act, it has qualifying outstanding Farmers Home Administration (FmHA) loan obligation, and it has provided or made service available in disputed area. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Question of whether rural water association has "made service available" in disputed area as required to prevail on claim asserting violation of Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment involves both whether service is physically available, by virtue of association's line adjacent to property, under pipe-in-the-ground test, and whether association has legal rights and responsibilities to provide such service, as determined by applicable law. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 7 C.F.R. ' 1942.17(n)(2)(vii).

For purposes of determining whether rural water association has "made service available" in disputed area as required to prevail on claim asserting violation of Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment, when state law prohibits association from providing service in disputed area, association cannot rely upon its actual provision of service, or physical ability to provide service, as overcoming its lack of legal authority to provide service, absent showing of estoppel or some other impediment to assertion of state-law prohibition. U.S.C.A. Const.Amends. 5, 10; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 7 C.F.R. ' 1942.17(n)(2)(vii).

For purposes of determining whether rural water association has "made service available" in disputed area as required to prevail on claim asserting violation of Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment, legal right and responsibility to serve area may stand alone as fulfilling "made service available" requirement of subsection, but having pipes in ground, standing alone, does not. U.S.C.A. Const.Amends. 5, 10; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); C.F.R. ' 1942.17(n)(2)(vii).

For purposes of determining whether rural water association has "made service available" in disputed area as required to prevail on claim asserting violation of Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment, when association relies on its physical ability to serve, having pipes in ground, it must also have legal right and responsibility to serve. U.S.C.A. Const.Amends. 5, 10; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 7 C.F.R. ' 1942.17(n)(2)(vii).

For purposes of determining whether rural water association has "made service available" in disputed area as required to prevail on claim asserting violation of Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment, "pipe-in-the- ground" test is not exclusive test for determining indebted association's protected service area. U.S.C.A. Const.Amends. 5, 10; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 7 C.F.R. ' 1942.17(n)(2)(vii).

Legal right and duty to serve is sufficient to fulfill requirements of Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment that indebted association have "made service available." Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 7 C.F.R. ' 1942.17(n)(2)(vii).

Physical ability to serve area is not sufficient to satisfy statutory requirement of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment that association have "made service available," where there is legal impediment to providing such service. U.S.C.A. Const.Amends. 5, 10; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 7 C.F.R. ' 1942.17(n)(2)(vii).

For purposes of requirement of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment that association must have "made service available," providing actual service does not extend protections of subsection to indebted association's service of disputed territory in which association has no legal right to provide service. U.S.C.A. Const.Amends. 5, 10; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); 7 C.F.R. ' 1942.17(n)(2)(vii).

State law defining service area of federally-indebted rural water association is not preempted by Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

State law defining service area of federally-indebted rural water association is not preempted by Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Through express and conflict preemption, Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment preempts any state law that purports to take away from indebted association any territory in which association has both legal and physical ability to provide service at time association is first entitled to invoke protection of subsection. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Through express and conflict preemption, Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment preempts any state law that purports to take away from indebted association any territory in which association has both legal and physical ability to provide service at time association is first entitled to invoke protection of subsection. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Scope of preemptive effect of Consolidated Farm and Rural Development Act subsection, which protects federally-indebted rural water associations against municipal encroachment, on state law permitting encroachment upon association's service area is specifically limited to periods when association is indebted to federal government. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Scope of preemptive effect of Consolidated Farm and Rural Development Act subsection, which protects federally-indebted rural water associations against municipal encroachment, on state law permitting encroachment upon association's service area is specifically limited to periods when association is indebted to federal government. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment creates merely "window" of federal preemption of any state law permitting encroachment of municipality on existing service area of association; that window opens when association becomes indebted to federal government, and closes when association ceases to be indebted to government or to third party standing precisely in shoes of government by virtue of purchase of association's notes under Omnibus Budget Reconciliation Act of 1986 (OBRA) note sell-off provisions. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(a-e), 100 Stat. 1874 as amended.

Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment creates merely "window" of federal preemption of any state law permitting encroachment of municipality on existing service area of association; that window opens when association becomes indebted to federal government, and closes when association ceases to be indebted to government or to third party standing precisely in shoes of government by virtue of purchase of association's notes under Omnibus Budget Reconciliation Act of 1986 (OBRA) note sell-off provisions. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(a-e), 100 Stat. 1874 as amended.

Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment does not expressly preempt state law that defines service area of association at moment association becomes indebted to federal government and is thereby entitled to protection of subsection; subsection expressly prohibits only curtailment or limitation of existing service area of association by some action of municipality to include association's existing service area within municipality's boundaries, and subsection does not expressly prohibit state-law definition of existing service area of association at moment association can invoke protections of subsection by becoming indebted to government. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment does not expressly preempt state law that defines service area of association at moment association becomes indebted to federal government and is thereby entitled to protection of subsection; subsection expressly prohibits only curtailment or limitation of existing service area of association by some action of municipality to include association's existing service area within municipality's boundaries, and subsection does not expressly prohibit state-law definition of existing service area of association at moment association can invoke protections of subsection by becoming indebted to government. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment does not preempt, through conflict preemption, state-law definition of existing service area of association at moment association can invoke protections of subsection by becoming indebted to federal government; subsection does not prohibit definition of association's service area by state law prior to association becoming indebted but, rather, state law that defines association's service area prior to or at time it becomes indebted stands outside window of preemption by subsection and also can reasonably coexist with federal law. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment does not preempt, through conflict preemption, state-law definition of existing service area of association at moment association can invoke protections of subsection by becoming indebted to federal government; subsection does not prohibit definition of association's service area by state law prior to association becoming indebted but, rather, state law that defines association's service area prior to or at time it becomes indebted stands outside window of preemption by subsection and also can reasonably coexist with federal law. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

Question of where rural water association "made service available," as required for protection under Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment, had to be determined by coincidence of association's legal right or authority to serve, a matter of state law, and association's physical ability to serve, a matter of fact determined by "pipe-in-the-ground" test, in association's action against city, asserting violation of subsection, arising from city's annexation of and provision of water service to association's asserted service area. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(f), 100 Stat. 1874 as amended; 28 U.S.C.A. '' 2201(a), 2202; 42 U.S.C.A. ' 1983.

Question of where rural water association "made service available," as required for protection under Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment, had to be determined by coincidence of association's legal right or authority to serve, a matter of state law, and association's physical ability to serve, a matter of fact determined by "pipe-in-the-ground" test, in association's action against city, asserting violation of subsection, arising from city's annexation of and provision of water service to association's asserted service area. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(f), 100 Stat. 1874 as amended; 28 U.S.C.A. '' 2201(a), 2202; 42 U.S.C.A. ' 1983.

State-law and "pipe-in-the-ground" tests are not independent tests but, rather, are prongs of single test for determining whether rural water association has "made service available" as required for protection under Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

State-law and "pipe-in-the-ground" tests are not independent tests but, rather, are prongs of single test for determining whether rural water association has "made service available" as required for protection under Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

"Pipe-in-the-ground" prong of test for determining whether rural water association has "made service available" as required for protection under Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment does not result in conflict between subsection and state law that defines existing service area of association at moment association can invoke protections of subsection by becoming indebted to federal government and, thus, subsection does not preempt, through conflict preemption, such state law, as subsection does not revivify, via "pipe-in-the-ground" test, association's right to serve area lost by operation of state law during period association was not indebted to Farmers Home Administration (FmHA). U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(f), 100 Stat. 1874 as amended.

"Pipe-in-the-ground" prong of test for determining whether rural water association has "made service available" as required for protection under Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment does not result in conflict between subsection and state law that defines existing service area of association at moment association can invoke protections of subsection by becoming indebted to federal government and, thus, subsection does not preempt, through conflict preemption, such state law, as subsection does not revivify, via "pipe-in-the-ground" test, association's right to serve area lost by operation of state law during period association was not indebted to Farmers Home Administration (FmHA). U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(f), 100 Stat. 1874 as amended.

For purposes of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment, protected service area of indebted association is defined by looking to state and federal law. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b).

If federally-indebted rural water association ceases to be indebted to Farmers Home Administration (FmHA) or to third party who has purchased association's notes under Omnibus Budget Reconciliation Act of 1986 (OBRA) note sell-off provisions, association loses its protection as a matter of federal law under Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment, and only state law then defines municipality's right to annex portions of association's service area and otherwise defines where association can legally initiate or continue to provide service; if association again becomes indebted to FmHA, association's protected service area is defined by state law as of date of renewed indebtedness. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(a-f), 100 Stat. 1874 as amended.

If federally-indebted rural water association ceases to be indebted to Farmers Home Administration (FmHA) or to third party who has purchased association's notes under Omnibus Budget Reconciliation Act of 1986 (OBRA) note sell-off provisions, association loses its protection as a matter of federal law under Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment, and only state law then defines municipality's right to annex portions of association's service area and otherwise defines where association can legally initiate or continue to provide service; if association again becomes indebted to FmHA, association's protected service area is defined by state law as of date of renewed indebtedness. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(a-f), 100 Stat. 1874 as amended.

If rural water association, which had ceased to be indebted to Farmers Home Administration (FmHA) or to third party who bought association's notes under Omnibus Budget Reconciliation Act of 1986 (OBRA), subsequently becomes indebted again to FmHA, association's protected service area for purposes of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment would consist of territory in which association has legal right to serve, as defined by state law, as well as territory in which it has both legal right and physical ability to serve; however, association cannot claim protection of subsection in territory properly annexed by municipality while association was not federally indebted, even if association still has pipes in ground, because in such area association would not have legal right to serve or both physical ability and legal right to serve. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(a-f), 100 Stat. 1874 as amended.

If rural water association, which had ceased to be indebted to Farmers Home Administration (FmHA) or to third party who bought association's notes under Omnibus Budget Reconciliation Act of 1986 (OBRA), subsequently becomes indebted again to FmHA, association's protected service area for purposes of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment would consist of territory in which association has legal right to serve, as defined by state law, as well as territory in which it has both legal right and physical ability to serve; however, association cannot claim protection of subsection in territory properly annexed by municipality while association was not federally indebted, even if association still has pipes in ground, because in such area association would not have legal right to serve or both physical ability and legal right to serve. U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(a-f), 100 Stat. 1874 as amended.

Consolidated Farm and Rural Development Act subsection protecting federally- indebted rural water associations against municipal encroachment does not revivify association's right to serve in area lost by operation of state law during period when association was not indebted to Farmers Home Administration (FmHA). U.S.C.A. Const. Art. 6, cl. 2; Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(f), 100 Stat. 1874 as amended.

For purposes of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment, determination of where rural water association, that had ceased to be indebted to Farmers Home Administration (FmHA) due to association's repurchase of its notes under Agricultural Credit Act of 1987 subsection, had legal right to serve upon becoming indebted again to FmHA depended entirely upon applicable state law. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(f), 100 Stat. 1874 as amended.

Two-mile service restriction of Iowa statute governing provision of service by rural water districts did not apply to rural water association, which was nonprofit corporation that had not reincorporated as water district, and, thus, statute did not define or limit association's service area to area more than two miles outside of city limits, for purposes of association's action against city, alleging violation of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment, arising from city's annexation of and provision of water service to association's asserted service area. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(f), 100 Stat. 1874 as amended; 28 U.S.C.A. '' 2201(a), 2202; 42 U.S.C.A. ' 1983; I.C.A. '' 357A.1 et seq., 357A.2, 504A.1 et seq.; Acts 1987 (72 G.A.) ch. 109, ' 2; Acts 1992 (74 G.A.) ch. 1015, '' 3, 4.

Both before and after its amendment in 1992, Iowa statute governing provision of service by rural water districts did not apply rule restricting provision of service within two miles of city to every sort of association providing water services; rather, statute established two-mile rule as applicable only to rural water district incorporated under statutory chapter governing rural water districts or under Iowa Nonprofit Corporation Act. I.C.A. '' 357A.1 et seq., 357A.2, 504A.1 et seq.; Acts 1987 (72 G.A.) ch. 109, ' 2; Acts 1992 (74 G.A.) ch. 1015, '' 3, 4.

Iowa statute governing provision of service by rural water districts does not make applicable its rule restricting provision of service within two miles of city to every nonprofit water service corporation incorporated under Iowa Nonprofit Corporation Act but, rather, only to Act corporations that have reincorporated as water districts under statute governing alternate operation by nonprofit corporation. I.C.A. '' 357A.1 et seq., 357A.2, 504A.1 et seq.; Acts 1987 (72 G.A.) ch. 109, ' 2; Acts 1992 (74 G.A.) ch. 1015, '' 3, 4.

Genuine issues of material fact existed as to rural water association's physical ability to serve disputed area as of date association became indebted again to federal government after previously buying back its notes from government, precluding summary judgment on question of whether city encroached upon association's protected service area, in association's action against city, asserting violation of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment, arising from city's provision of water service to association's asserted service area. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(f), 100 Stat. 1874 as amended; 28 U.S.C.A. '' 2201(a), 2202; 42 U.S.C.A. ' 1983; Fed.Rules Civ.Proc.Rules 56, 56(e), 28 U.S.C.A.

Documentation city produced in opposition to rural water association's summary judgment motion as evidence of agreement concerning limitation on use of association's water line as transmission line was sufficient to meet city's burden, as nonmovant for summary judgment, to go beyond pleadings and designate specific facts showing that there was genuine issue for trial, despite fact that documents were all generated by persons on city's side of question, in association's action against city, asserting violation of Consolidated Farm and Rural Development Act subsection protecting federally-indebted rural water associations against municipal encroachment, arising from city's provision of water service to association's asserted service area. Agricultural Act of 1961, ' 306(b), 7 U.S.C.A. ' 1926(b); Omnibus Budget Reconciliation Act of 1986, ' 1001(f), 100 Stat. 1874 as amended; 28 U.S.C.A. '' 2201(a), 2202; 42 U.S.C.A. ' 1983; Fed.Rules Civ.Proc.Rules 56, 56(e), 28 U.S.C.A.

          1.   A cause of action for a "violation" of ' 1983 ............. 1503

          2.   Other ways to enforce ' 1926(b) ........................... 1505

          1.   The timeliness of the ' 1983 action ....................... 1507

          1.   Is RWS # 1 entitled to the protections of ' 1926(b)? ...... 1511

               e. RWS # 1's entitlement to ' 1926(b) protection .......... 1523

          2.   Has the City violated or threatened to violate ' 1926(b)? . 1524

               a. Elements of a claim for violation of ' 1926(b) ......... 1524

Plaintiff Rural Water System # 1 (RWS # 1), a non-profit corporation, filed the original complaint in this lawsuit on November 2, 1995, against defendant City of Sioux Center, Iowa (the City), alleging generally violations of 7 U.S.C. ' 1926(b), which protects rural water associations indebted to the United States from encroachment on their service areas by adjacent municipalities. RWS # 1 filed an amended complaint on October 22, 1996, in which its claims are clarified somewhat. In the amended complaint, RWS # 1's claims are alleged to arise pursuant to the Declaratory Judgment Act, 28 U.S.C. '' 2201 and 2202, the Civil Rights Act, 42 U.S.C. ' 1983, the Attorney's Fees Act, 42 U.S.C. ' 1988, and state law. RWS # 1's federal claims are premised on alleged violations of 7 U.S.C. ' 1926(b) and "willful blindness resulting in bad faith" violation of ' 1926(b). Its state-law claims assert tortious interference with customers, tortious interference with prospective business advantage, and conversion of property.

Rather more specifically, the statute RWS # 1 contends the City has violated or is threatening to violate, 7 U.S.C. ' 1926(b), prohibits "curtailment" or "limitation" of the service area of a rural water service association that is indebted to the United States by inclusion of any portion of that service area within the boundaries of a municipal corporation. 7 U.S.C. ' 1926(b). RWS # 1's federal claims, as well as its state-law claims, allegedly arise from the City's annexation of portions of RWS # 1's asserted service area, the City's demands that it, not RWS # 1, supply the water needs of customers in the annexed areas and within two miles of the City's new boundaries, and the City's actual service to some of the customers in the disputed area, allegedly resulting in "curtailment" or "limitation" of RWS # 1's service area.

As relief, RWS # 1 requests preliminary and permanent injunctions prohibiting the City's alleged curtailment of RWS # 1's service area in violation of 7 U.S.C. ' 1926(b); declaratory judgment concerning the rights of the parties to serve the disputed area and alleged violations of state and federal law; equitable relief; damages, both compensatory and punitive; and attorney's fees and costs.

[1][2][3] The first of the cross-motions for summary judgment now before the court was filed by the City on January 10, 1997. [FN1] In that motion, the City asserts that RWS # 1 can no longer assert the protections of 7 *1498 U.S.C. ' 1926(b), because it was not indebted to the United States at the time of the annexation of disputed areas by the City. It contends, citing a recent decision of the Sixth Circuit Court of Appeals, that RWS # 1's pay-off of its loans from the Farm Home Administration (FmHA) caused its protection under ' 1926(b) to lapse. [FN2] The City contends further that the annexed area is not part of RWS # 1's service area, nor is any area within two miles of the City's current city limits, by operation of Iowa law, which the City contends is not preempted by federal law. Finally, the City argues that RWS # 1's interpretation of ' 1926(b) as revivifying protection of its service area into the area *1499 properly annexed by the City and into the two-mile zone beyond those city limits violates the Tenth Amendment to the United States Constitution and expropriates public property for a private purpose in further violation of the Tenth Amendment. In further briefing, the City has also asserted that RWS # 1's only claim is one brought pursuant to 42 U.S.C. ' 1983, as 7 U.S.C. ' 1926(b) authorizes no separate cause of action, and that any ' 1983 claim is barred by the applicable statute of limitations, Iowa's two-year statute of limitations for personal injuries. Iowa Code ' 614.1(2).

FN1. The City's motion for summary judgment was first only by hours. All of the cross-motions for summary judgment were filed on the same day, which, not surprisingly, was the deadline for dispositive motions.

FN2. The decision upon which the City principally relies, now published, is Scioto County Regional Water Dist. No. 1 v. Scioto Water, Inc., 103 F.3d 38 (6th Cir.1996) ("Scioto Water"). Although Scioto Water is the only published decision of a federal circuit court of appeals either this court or the parties have found that considers directly one of the questions presented here-whether a party that has paid off or bought out its loans from the FmHA can still assert the protections of ' 1926(b)-it is not even mentioned in RWS # 1's opening briefs in support of RWS # 1's motions for summary judgment. This omission is all the more odd, because not only was the decision of the Sixth Circuit Court of Appeals handed down on December 18, 1996, approximately three weeks before the present cross- motions for summary judgment were filed, but counsel for RWS # 1 here was counsel for the defendants-appellees in the Scioto Water case. Nor can RWS # 1's counsel's omission of the decision in Scioto Water be excused on the basis that the City had already brought the decision to this court's attention, because the City's and RWS # 1's cross-motions for summary judgment were filed the same day. RWS # 1's counsel thus had no assurance that the City's counsel would bring the Scioto Water decision to the court's attention.

The same day the City filed its motion for summary judgment, RWS # 1 filed its own separate motions for summary judgment on liability for violation of 7 U.S.C. ' 1926(b) and for liability on its claim under 42 U.S.C. ' 1983. The motion for summary judgment on liability on the claim brought pursuant to ' 1983 clarifies somewhat the nature of that claim, at least as RWS # 1 sees it: the summary judgment motion indicates that the ' 1983 claim is that the City violated ' 1926(b) under color of Iowa statutes that the City asserted justified its actions.

On April 8, 1997, the Iowa Rural Water Association filed a request to appear as amicus curiae by filing a brief and participating in the oral arguments on the pending dispositive motions. Amicus curiae seek to bolster the position of RWS # 1, one of its members, that ' 1926(b) is constitutional and would be violated by the City's actions. Over the City's objections, this court has permitted the participation of amicus curiae in both the briefing and arguments concerning ' 1926(b), concluding that the interests of justice will be served by permitting amicus curiae to file a brief and to participate at oral arguments.

FN4. RWS # 1 contends that it is a membership-based association and has never converted from a non-profit corporation to a "special water district" within the meaning of Iowa Code ' 357A.20. The significance or insignificance of a conversion to a "special water district" under Iowa law will be considered infra.

RWS # 1 has never applied to the City, pursuant to Iowa Code ' 357A.2, to serve water customers in the disputed area, but RWS # 1 disputes here, as a matter of law, whether it was ever required to do so. RWS # 1 does not have a franchise or any easements from the City to provide water services to customers in the disputed territory. Furthermore, RWS # 1 has at times advised the City of requests for connection to the rural water system from customers within two miles of the City's 1989 city limits and has asked the City to advise RWS # 1 whether the City or RWS # 1 should supply the customer. RWS # 1 continues to supply water to some customers now inside the City's 1989 city limits. Since the 1989 annexation, the City has laid some new water service lines that parallel existing water lines of RWS # 1.

RWS # 1 disputes that it ever converted to, or was ever required to convert from a non-profit corporation to, a "special water district" within the meaning of Iowa ' 357A.20, which is a factual matter. Consequently, it also disputes whether it was ever required to apply to the City, pursuant to Iowa Code ' 357A.2, to serve water customers in the disputed area, which is either a question of law or a mixed question of law and fact. Finally, the parties dispute whether RWS # 1's pay-off of its federal loans in 1988 was pursuant to the Omnibus Budget Reconciliation Act (OBRA) of 1986 and the Agricultural Credit Act of 1987(ACA), which amended the 1986 OBRA by providing for a "Buy Out Program" of FmHA loans.

In their oral arguments, the parties and amicus focused on the scope of the protection provided by 7 U.S.C. ' 1926(b), continuation of protection of the statute during the FmHA "Buy Out Program," as provided in 7 U.S.C. ' 1929a note, subsections (f) and (g), and the inter play between ' 1926(b) and certain Iowa statutes upon which the City principally relies. Nonetheless, before the court can consider the merits of the parties' arguments for summary judgment on RWS # 1's claim or claims, the court finds that it must first determine what, exactly, is the nature of RWS # 1's claim or claims and how RWS # 1's claim or claims can be brought before the court. The court must then determine whether RWS # 1's action is time-barred, as the City contends. Only if RWS # 1's action is properly before the court will it be necessary for the court to consider any other arguments of the parties.

In its combined resistance to RWS # 1's separate motions for summary judgment on liability under ' 1926(b) and ' 1983, the City contends that RWS # 1 is mistaken in its assertion that it has two separate claims, one for violation of ' 1926(b) itself and another under ' 1983 to vindicate rights under ' 1926(b). The City contends that such a mistaken notion should have been corrected by reading the decision of the Sixth Circuit Court of Appeals in Wayne v. Sebring, 36 F.3d 517 (6th Cir.1994), cert. denied, 514 U.S. 1127, 115 S.Ct. 2000, 131 L.Ed.2d 1001 (1995), which RWS # 1 itself cites for the proposition that ' 1926(b) includes no enforcement provisions. Thus, the City contends, RWS # 1 has but one cause of action, an action pursuant to ' 1983 for alleged violation of rights under ' 1926(b). [FN6]

RWS # 1 responds that courts have enforced the provisions of ' 1926(b) and that the legislative history of that provision suggests an intent to create enforceable obligations or prohibitions. This argument, of course, merely begs the question of how the prohibitions of ' 1926(b) are to be enforced, because the statute plainly does not contain express language authorizing a private cause of action to enforce its terms. However, RWS # 1 also contends that, not only can it enforce its rights by bringing a cause of action for a "violation" of ' 1983, which is in turn predicated on a violation of ' 1926(b), but it can also bring an action under the Declaratory Judgment Act, 28 U.S.C. '' 2201 and 2202, which provides an independent vehicle to obtain not only a declaration of rights under ' 1926(b), but further relief for a violation of the statute.

1. A cause of action for a "violation" of ' 1983

[4][5] In its motion for summary judgment on liability under ' 1983, RWS # 1 asserts that it has proved a "violation" of ' 1983, because it has proved a "predicate" violation of ' 1926(b). Rural Water System No. 1's Memorandum In Support Of Motion For 42 U.S.C. Sec.1983 Summary Judgment On Liability Pursuant To Fed.R.Civ.P. 56(a) (hereinafter "RWS # 1's Brief On ' 1983 Liability"), pp. 2-3. However, as this court has explained on more than one occasion, one does not "violate" ' 1983. See Laird v. Ramirez, *1504 884 F.Supp. 1265, 1282 n. 11 (N.D.Iowa 1995); DePugh v. Smith, 880 F.Supp. 651, 661 (N.D.Iowa 1995); Mummelthie v. City of Mason City, Iowa, 873 F.Supp. 1293, 1315 n. 10 (N.D.Iowa 1995), aff'd, 78 F.3d 589 (8th Cir.1996) (table opinion).

Title 42 U.S.C. ' 1983 provides that

Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress....

Section 1983 was designed to provide a "broad remedy for violations of federally protected civil rights." Monell v. New York City Dept. of Soc. Serv., 436 U.S. 658, 685, 98 S.Ct. 2018, 2033, 56 L.Ed.2d 611 (1978). However, ' 1983 provides no substantive rights. Chapman v. Houston Welfare Rights Org., 441 U.S. 600, 617, 99 S.Ct. 1905, 1916, 60 L.Ed.2d 508 (1979). "[O]ne cannot go into court and claim a 'violation of section 1983--for section 1983 by itself does not protect anyone against anything. ' Id. Rather, ' 1983 provides a remedy for violations of all 'rights, privileges, or immunities' secured by the Constitution and laws [of the United States]." 42 U.S.C. ' 1983 (emphasis added); Maine v. Thiboutot, 448 U.S. 1, 3, 100 S.Ct. 2502, 2503, 65 L.Ed.2d 555 (1980) ( "Constitution and laws" means that ' 1983 provides remedies for violations of rights created by federal statute, as well as those created by the Constitution).

Laird, 884 F.Supp. at 1282 n. 11 (emphasis added); DePugh, 880 F.Supp. at 661; Mummelthie, 873 F.Supp. at 1315 n. 10. Therefore, RWS # 1 has no claim for a "violation" of ' 1983.

[9] Although RWS # 1 is incorrect to assert a "violation" of ' 1983, ' 1983 may nonetheless provide a vehicle whereby RWS # 1 may bring before this court its claim of a violation of ' 1926(b), a law of the United States. See Blessing v. Freestone, --- U.S. ----, ----, 117 S.Ct. 1353, 1359, 137 L.Ed.2d 569, ---- (1997) ("Section 1983 imposes liability on anyone who, under color of state law, deprives a person 'of any rights, privileges, or immunities secured by the Constitution and laws.' We have held that this provision safeguards certain rights conferred by federal statutes," citing Thiboutot, infra); Maine v. Thiboutot, 448 U.S. 1, 3, 100 S.Ct. 2502, 2503-04, 65 L.Ed.2d 555 (1980) (the language "Constitution and laws" in ' 1983 means that ' 1983 provides remedies for violations of rights created by a federal statute, as well as those created by the Constitution). However, resort to a cause of action pursuant to ' 1983 to address a violation of a federal statute is not available "where the 'governing statute provides an exclusive remedy for violations of its terms.' " Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 28, 101 S.Ct. 1531, 1545, 67 L.Ed.2d 694 (1981); accord Blessing, --- U.S. at ----, 117 S.Ct. at 1360 ("Even if a plaintiff demonstrates that a federal statute creates an individual right, there is only a rebuttable presumption that the right is enforceable under ' 1983. Because our inquiry focuses on congressional intent, dismissal is proper if Congress 'specifically foreclosed a remedy under ' 1983.... ' Congress may do so expressly, by forbidding recourse to ' 1983 in the statute itself, or impliedly, by creating a comprehensive enforcement scheme that is incompatible with individual enforcement under ' 1983''; citations omitted); Foster v. Wyrick, 823 F.2d 218, 221 (8th Cir.1987) (citing Pennhurst). Several courts have concluded that ' 1926(b) provides no such exclusive remedy for violations of its terms.

Most recently, the Fifth Circuit Court of Appeals has noted that "[s]ection 1926(b) does not create or specify a remedy for the enforcement of violations." North Alamo Water Supply Corp. v. City of San Juan, Tex., 90 F.3d 910, 917 (5th Cir.1996), cert. denied, --- U.S. ----, 117 S.Ct. 586, 136 L.Ed.2d 515 (1996). In a more thorough analysis of the issue, the Sixth Circuit Court of Appeals considered whether ' 1926(b) itself*1505 created a private right of action, or whether a private right of action was available for a violation of ' 1926(b) via ' 1983. See Wayne v. Village of Sebring, 36 F.3d 517, 528-29 (6th Cir.1994), cert. denied, 514 U.S. 1127, 115 S.Ct. 2000, 131 L.Ed.2d 1001 (1995). [FN7] The court noted that ' 1983 permits suits for violation of federal statutes unless "(1) 'the statute does not create enforceable rights, privileges, or immunities within the meaning of ' 1983,' or (2) 'Congress has foreclosed such enforcement of the statute in the enactment itself.' " Id. (quoting Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 508, 110 S.Ct. 2510, 2517, 110 L.Ed.2d 455 (1990), in turn quoting Wright v. Roanoke Redevelopment and Hous. Auth., 479 U.S. 418, 423, 107 S.Ct. 766, 770, 93 L.Ed.2d 781 (1987)).

FN7. RWS # 1 misconstrues the question and conclusion in the Wayne decision. RWS # 1 states that "the issue [in Wayne] was actually whether the Code of Federal Regulations ('C.F.R.') could create a private right of action (which the court found to be the case)." Rural Water System No. 1's Reply To Defendant City of Sioux Center's Combined Resistance To Plaintiff's Motions For Summary Judgment Under 7 U.S.C. Sec.1926(b) and 42 U.S.C. Sec.1983 (hereinafter "Plaintiff's Reply Brief"), p. 3. RWS # 1's formulation of the question in Wayne suggests that the question there was not whether ' 1926(b) created a right enforceable via a private cause of action. Contrary to RWS # 1's characterization of the issues and conclusions of the court in Wayne, however, the Sixth Circuit Court of Appeals was actually presented with the question of whether a federal regulation could create a cause of action, and the court actually held that it was not the federal regulation, but an ordinance enacted to fulfill the requirements of the regulation, that created a private cause of action. Wayne, 36 F.3d at 528. Specifically, the federal regulation in question required applicants for FmHA funding to agree that a person within the service area who can feasibly and legally receive water service has a private right of action against the recipient of the FmHA funding if the recipient fails to make adequate service available. Id. The court held that the private right of action was not created by the regulation, but by the municipal body itself, when the municipal body passed an ordinance creating the cause of action to fulfill the requirements of the federal regulation. Id.

More to the point, however, as is discussed in the body of this ruling, the court in Wayne did find that, in the alternative, ' 1983 provided a private cause of action to enforce rights created by ' 1926(b). Id. at 528.

The court found that neither of these two exceptions applied. First, the court found that ' 1926(b) created a right that was "judicially enforceable." Id. at 529. Next, the court found that the second exception required " 'a comprehensive enforcement mechanism for protection of a federal right' " that was not satisfied by "[m]ere availability of administrative protections." Id. (quoting Golden State Transit Corp. v. City of Los Angeles, 493 U.S. 103, 106, 110 S.Ct. 444, 448, 107 L.Ed.2d 420 (1989)). The court found that Congress had provided "no enforcement mechanism for protecting the right that ' 1926(b) creates." Id. Therefore, the court found that "pursuant to ' 1983, ' 1926(b) gives rise to a private right of action on the part of rural water service users." Id.

[10] This court has employed the same analysis of whether ' 1983 provides a cause of action for enforcement of federal statutory rights in other contexts. Laird, 884 F.Supp. at 1276-78 (considering whether an action pursuant to ' 1983 to enforce rights under the Social Security Act (SSA) was precluded by enforcement mechanisms under the SSA); Mummelthie, 873 F.Supp. at 1314 (determining whether the ADEA provided the exclusive remedy for age discrimination or whether a cause of action pursuant to ' 1983 was also available). Furthermore, this court finds that the reasoning by which the Sixth Circuit Court of Appeals in Wayne concluded that ' 1983 provided the enforcement mechanism for ' 1926(b) "on the part of rural water service users," Wayne, 36 F.3d at 529, applies with equal force to the question of whether associations indebted to the FmHA may enforce rights under ' 1926(b) against allegedly encroaching municipalities.

[11] This court therefore holds, first, that ' 1926(b) creates an enforceable right, but provides no mechanism for its enforcement. Thus, RWS # 1 has no cause of action created by ' 1926(b) for violation of its terms. Second, this court holds that one means to enforce the rights created by ' 1926(b) is a cause of action pursuant to, but not for "violation" of, ' 1983.

2. Other ways to enforce ' 1926(b)

However, the court also concludes that ' 1983 does not necessarily provide the exclusive *1506 vehicle for enforcing rights under ' 1926(b), as the City seems to suggest. Thus, there may be other causes of action for a "violation" of ' 1926(b) that justify RWS # 1's assertion of a second cause of action, besides its claim pursuant to ' 1983, and may further justify RWS # 1's separate motion for summary judgment on liability for violation of ' 1926(b).

For example, the Fifth Circuit Court of Appeals noted in North Alamo Water Supply Corp., a decision cited above, that "an injunction has been the principal tool employed by the courts with which to enforce the statute and prevent violations." North Alamo Water Supply Corp., 90 F.3d at 917 (citing City of Madison, Miss. v. Bear Creek Water Ass'n, Inc., 816 F.2d 1057, 1059 (5th Cir.1987), and Jennings Water, Inc. v. City of North Vernon, Ind., 895 F.2d 311, 315 (7th Cir.1989)). Therefore, where other requirements for injunctive relief were met, such as ample evidence in the record to support an injunction and sufficient specificity of the injunction, the court in the North Alamo Water Supply Corp. case upheld injunctive relief as a means to "enforce" ' 1926(b). Id. at 917. In addition to the decisions cited by the Fifth Circuit Court of Appeals in North Alamo Water Supply Corp., and that decision itself, injunctive relief has been sought or granted in other cases. See, e.g., Scioto Water, 103 F.3d at 41 (denying injunctive relief sought for an alleged violation of ' 1926(b), not because such relief was unavailable to enforce the statute, but because the plaintiff was not entitled to the protections of ' 1926(b)); Wayne, 36 F.3d at 531 (injunctive relief granted for a violation of ' 1926(b)).

[12] The willingness of courts to grant injunctive relief for violations of ' 1926(b), however, does not necessarily answer the question of what authority creates a private cause of action to seek such relief. Certainly, ' 1983 would provide the vehicle to obtain such relief. 42 U.S.C. ' 1983 (authorizing a private right of action "at law, suit in equity, or other proper proceeding for redress" for persons injured by a violation of the Constitution or laws of the United States). Thus, a claim for injunctive relief from violations of ' 1926(b) would seem to fall within the ambit of a ' 1983 claim.

[13][14][15][16] As RWS # 1 suggests, in addition to actions for injunctive relief, courts have entertained declaratory judgment actions to determine whether violations of ' 1926(b) have or could occur. See, e.g., Scioto Water, 103 F.3d at 41 (declaratory judgment action alleging a violation of ' 1926(b) and seeking injunctive relief); Lexington-South Elkhorn Water Dist. v. City of Wilmore, Ky., 93 F.3d 230, 232 (6th Cir.1996) (declaratory judgment action by water district seeking protection from encroachment on its service area by a municipality in violation of ' 1926(b)); see also CSL Utilities, Inc. v. Jennings Water, Inc., 16 F.3d 130 (7th Cir.1994) (declaratory judgment action by a private, non-profit water utility against a rural water association indebted to FmHA seeking a declaration that the utility's building of water facility did not violate ' 1926(b)), cert. denied, 513 U.S. 812, 115 S.Ct. 65, 130 L.Ed.2d 22 (1994). Congress has provided for declaratory judgments by the federal courts through two provisions of the Declaratory Judgment Act, which state, in pertinent part, the following:

' 2201. Creation of remedy

(a) In a case of actual controversy within its jurisdiction, ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such. * * *

' 2202. Further relief

Further necessary or proper relief based on a declaratory judgment or decree may be granted, after reasonable notice and hearing, against any adverse party whose rights have been determined by such judgment.

28 U.S.C. '' 2201(a), 2202. These two provisions establish the means whereby RWS # 1 can obtain not only the declaratory relief it seeks, 28 U.S.C. ' 2201, but also such "further" relief as is "necessary and appropriate." *1507 28 U.S.C. ' 2202. The vehicle of enforcing ' 1926(b) afforded by the Declaratory Judgment Act is therefore an alternative to that provided by ' 1983. [FN8]

FN8. These two vehicles, a cause of action under ' 1983 and a declaratory judgment action, may be substantially overlapping, and a ' 1983 action might provide all of the relief also available from a declaratory judgment action, but the two vehicles of enforcement are not mutually exclusive.

Furthermore, the federal Declaratory Judgment Act "is a procedural statute, not a jurisdictional statute." State ex rel Missouri Highway Transp. Comm'n v. Cuffley, 112 F.3d 1332, 1334-35 (8th Cir.1997). Therefore, there must be some basis for federal jurisdiction other than the Declaratory Judgment Act. Id. The basis for federal jurisdiction over the Declaratory Judgment Act claim here is federal question jurisdiction, 28 U.S.C. ' 1331, based on an alleged violation or threatened violation of 7 U.S.C. ' 1926(b).

Because ' 1983 is not the only vehicle for enforcement of ' 1926(b), RWS # 1 has properly asserted two different claims founded on alleged violations of ' 1926(b).

1. The timeliness of the ' 1983 action

The City contends that RWS # 1's ' 1983 claim is time-barred by the applicable statute of limitations for such actions, Iowa's two-year statute of limitations for personal injuries, Iowa Code ' 614.1(2). The City contends that RWS # 1 is complaining of actions taken more than two years before suit was filed November 2, 1995. Specifically, RWS # 1 complains of actions taken by the City as early as 1987, with the heart of their complaint being that the City improperly annexed disputed territory in 1989. However, the complaint in this matter was not filed until nearly six years later and a ' 1983 claim was not specifically asserted until September 30, 1996, almost seven years later. Thus, the City contends the original complaint and amended complaint asserting a ' 1983 claim were filed well after the limitations period had run. RWS # 1 responds that it has asserted a "continuing violation" of ' 192(b), because of the City's pattern and practice of continuing to assert its right to serve water customers in the disputed area, beginning in 1987 and continuing to the present.

Section 1983 contains no statute of limitations. Wilson v. Garcia, 471 U.S. 261, 280, 105 S.Ct. 1938, 1949, 85 L.Ed.2d 254 (1985). When such a void in federal statutory law occurs, federal courts have repeatedly "borrowed" the state laws governing an analogous cause of action. Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 95 S.Ct. 1716, 44 L.Ed.2d 295 (1975); O'Sullivan v. Felix, 233 U.S. 318, 34 S.Ct. 596, 58 L.Ed. 980 (1914); Kansas Pub. Emps. Retirement Sys. v. Reimer & Koger Assocs., Inc., 61 F.3d 608, 611 (8th Cir.1995) (in a federal question case, where there is no federal statute of limitations, the federal court will borrow the forum state's limitations laws, if not inconsistent with federal law or policy), cert. denied, --- U.S. ----, 116 S.Ct. 915, 133 L.Ed.2d 845 (1996). For ' 1983 claims, courts have "borrowed" the personal injury statute of limitations of the state in which the court sits, identifying that statute in Iowa cases to be Iowa Code ' 614.1(2). Owens v. Okure, 488 U.S. 235, 236, 109 S.Ct. 573, 574, 102 L.Ed.2d 594 (1989); Wilson v. Garcia, 471 U.S. at 280, 105 S.Ct. at 1949; Schanou v. Lancaster County Sch. Dist. No. 160, 62 F.3d 1040, 1043 (8th Cir.1995) (parties and court agreed that Nebraska's four-year statute of limitations for personal injuries applied to action pursuant to ' 1983); Sanchez v. United States, 49 F.3d 1329, 1330 (8th Cir.1995) (holding that both Bivens claims and ' 1983 claims are governed by the statute of limitations for personal injuries of the forum state, and noting that the applicable statute, Iowa's personal injury statute of limitations, Iowa Code ' 614.1(2), provides for a limitations period of two years); Penn v. Iowa State Bd. of Regents, 999 F.2d 305, 307 (8th Cir.1993) (applying Iowa's two-year personal injury statute, citing Wilson); Davis v. Ross, 995 F.2d 137, 138 (8th Cir.1993) (per curiam ) (applying Iowa's two-year personal injury statute of limitations, citing Wycoff v. Menke, 773 F.2d 983, 984 (8th Cir.1985), cert. denied, 475 U.S. 1028, 106 S.Ct. 1230, 89 L.Ed.2d 339 (1986)); Kaster v. State of Iowa, 975 F.2d 1381, 1382 (8th Cir.1992) (Iowa's *1508 two-year personal injury statute of limitations applies to a ' 1983 action); Carr v. Aubuchon, 969 F.2d 714, 716 (8th Cir.1992) (applying Missouri's five-year personal injury statute); Lown v. Brimeyer, 956 F.2d 780, 781 (8th Cir.) (Iowa's two-year personal injury statute applies to ' 1983 claims, citing Wycoff), cert. denied, 506 U.S. 860, 113 S.Ct. 176, 121 L.Ed.2d 122 (1992); Bridgeman v. Nebraska State Penitentiary, 849 F.2d 1076, 1077 (8th Cir.1988) (applying Nebraska's four-year personal injury statute to ' 1983 claim, thus applying Wilson retroactively); Chandler v. Presiding Judge, Callaway County, 838 F.2d 977, 978-79 (8th Cir.1988) (applying Missouri's five-year personal injury statute of limitations); Hughes v. Sheriff of Fall River County Jail, 814 F.2d 532, 533 (8th Cir.) (applying South Dakota's three-year personal injury statute to ' 1983 claim), appeal dismissed and cert. denied, 484 U.S. 802, 108 S.Ct. 46, 98 L.Ed.2d 10 (1987); Wycoff, 773 F.2d at 984.

[17] Therefore, in this case, RWS # 1's claim pursuant to ' 1983 is governed by the personal injury statute of the state of Iowa. The applicable statute of limitations is Iowa Code ' 614.1(2). That statute provides, in pertinent part:

Iowa Code ' 614.1(2). Certainly, much of the conduct by the City of which RWS # 1 complains occurred more than two years before the original complaint in this matter was filed. The question is, when did RWS # 1's ' 1983 cause of action accrue?

[18][19][20][21] A "continuing violation" is an exception to the bar posed by a statute of limitations to claims based on actions that occurred before the statute of limitations period. Varner v. National Super Markets, Inc., 94 F.3d 1209, 1214 (8th Cir.1996) (stating this principle in a Title VII "hostile environment" case), cert. denied, --- U.S. ----, 117 S.Ct. 946, 136 L.Ed.2d 835 (1997); Ashley v. Boyle's Famous Corned Beef Co., 66 F.3d 164, 167 (8th Cir.1995) (en banc ) (Title VII case). Although the "continuing violation" theory is most often encountered in discrimination cases, it is also applicable to ' 1983 claims for continuing violations of a federal law or the Constitution. See, e.g., Kuhnle Bros., Inc. v. County of Geauga, 103 F.3d 516, 520 (6th Cir.1997). When a "continuing violation" is shown, the limitations period runs from the "last occurrence" of wrongful conduct. Varner, 94 F.3d at 1214; Gipson v. KAS Snacktime Co., 83 F.3d 225, 229 (8th Cir.1996). Furthermore, the entire course of conduct creating the continuing violation is actionable. Varner, 94 F.3d at 1214.

[22] RWS # 1 has alleged a series or pattern of wrongful actions by the City, encroachments upon RWS # 1's service area, all stemming from the expansion of the City to its current city limits in 1989. Actions that are alleged to be part of this series or pattern of wrongful acts have continued to occur until well within the limitations period, including attempts by the City to serve customers within the disputed territory in 1994, 1995, and, in the case of the "Byl subdivision," 1996. RWS # 1 has supported its allegations of a "continuing violation" with documentary evidence sufficient, at a minimum, to establish a genuine issue of material fact as to whether there have in fact been continuing episodes that form a series or pattern of violations of ' 1926(b).

Therefore, there is, at a minimum, a genuine issue of material fact concerning whether RWS # 1's claims asserted pursuant to ' 1983 are time-barred. The City is not entitled to summary judgment on this ground, and the court may properly consider the cross-motions for summary judgment on the merits of the ' 1983 claim.

[27] Here, the court finds that the three requirements for prosecution of the present declaratory judgment action have been met. First, there is indeed a "live" or "substantial controversy" over whether the actions of the City have violated or may in the future violate ' 1926(b). Id. Second, that controversy is between parties having adverse legal interests who are properly aligned and present before the court to argue the controversy. Id. Third, the controversy remains of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. Id. There have been, and for the foreseeable future are likely to be, disputes over which customers "belong" to which entity desiring to provide water services. Thus, the declaratory judgment action is timely.

Angoff, 58 F.3d at 1270. The court finds none of these misuses of the Declaratory Judgment Act here. Instead, the court finds a legitimate action, arising from a controversy over the proper interpretation of federal law, and the parties ask the court to provide the relief afforded by the Declaratory Judgment Act, that is, "to declare the rights and other legal relations of any interested party." 28 U.S.C. ' 2201(a).

Therefore, the declaratory judgment claim, like the ' 1983 claim, is properly before the court. With these preliminary questions resolved, the court may consider the portions of the cross-motions for summary judgment concerning the merits of RWS # 1's claims.

The questions upon which the parties and amicus focused their attentions are the following: Is RWS # 1 entitled to the protections of ' 1926(b) and does the City's conduct violate or potentially violate the protections afforded to RWS # 1 by the statute? These two questions, at the heart of this litigation, are contentious indeed. Not only have these questions been argued tooth and nail by the parties, but they have drawn amicus curiae, who also see much at stake in how these questions are resolved, into the concrete controversy between the parties. Although the answer to the first question involves primarily interpretation of federal statutes, the answer to the second question involves a rather complicated interplay between federal law and state law, with the companion question of whether the state law is preempted by the federal. Furthermore, if the first and second questions are answered favorably to RWS # 1, the City contends that it is nonetheless entitled to judgment in its favor, because the scope of the ' 1926(b) protection asserted by RWS # 1 is a violation of the Tenth Amendment, thus rendering ' 1926(b) unconstitutional. This Gordian knot can be untangled only one strand at a time; [FN10] therefore, the court addresses *1511 first the question of whether RWS # 1 is entitled to whatever protections ' 1926(b) might afford under the circumstances.

1. Is RWS # 1 entitled to the protections of ' 1926(b)?

Section 1926 of Title 7, enacted as part of the Consolidated Farm and Rural Development Act (CFRDA), governs federal loans made to water and waste facilities. 7 U.S.C. ' 1926(b); Scioto Water, 103 F.3d at 40. It authorizes the Secretary of Agriculture to make or insure loans to associations, for example, for water conservation, use, development, and control projects. Id.; Scioto Water, 103 F.3d at 40.

[33] Subdivision (a) of ' 1926 governs the terms of loans made or insured by the Secretary of Agriculture. 7 U.S.C. ' 1926(a). The specific subdivision of ' 1926 in question here, however, is subsection (b), which provides as follows:

7 U.S.C. ' 1926(b) (emphasis added). Courts have identified two purposes behind ' 1926(b): "(1) to encourage rural water development by expanding the number of potential users of such systems, thereby decreasing the per-user cost, and (2) to safeguard the viability and financial security of such associations (and [Farmers Home Administration's] loans) by protecting them from the expansion of nearby cities and towns." City of Madison, Miss. v. Bear Creek Water Ass'n, 816 F.2d 1057, 1060 (5th Cir.1987) (citing S.REP. NO. 566, 87th Cong., 1st Sess., reprinted in 1961 U.S.CODE CONG. & ADMIN. NEWS 2243, 2309); accord Scioto Water, 103 F.3d at 40 (quoting Bear Creek); Lexington-South Elkhorn Water Dist., 93 F.3d at 233 ("In order to encourage rural water development by expanding the number of potential users and to safeguard the financial viability of rural associations and Farmers Home Administration loans, 7 U.S.C. ' 1926(b) was enacted," citing Bear Creek); North Alamo Water Supply Corp., 90 F.3d at 915 (also citing that Circuit Court of Appeals' prior decision in Bear Creek for the purposes of the statute); CSL Utils., Inc., 16 F.3d at 137 ("Section ' 1926(b) is, of course, aimed at suppressing competition with a supplier endowed with public funds."). Thus, ' 1926(b) protects a borrowing association, and consequently the United States government as a secured party on loans to the association, from curtailment of the association's service area, which is the association's financial base.

[34] In order to fulfill these purposes, the provision " 'should be given a liberal interpretation that protects rural water associations indebted to the FmHA from municipal encroachment.' " Lexington-South Elkhorn Water Dist., 93 F.3d at 235 (quoting Wayne, 36 F.3d at 527, in turn quoting Jennings Water, Inc., 895 F.2d at 315); North Alamo Water Supply Corp., 90 F.3d at 915 ("Every federal court to have interpreted ' 1926(b) has concluded that the statute should be liberally interpreted to protect FmHA-indebted rural water associations from municipal encroachment."); Jennings Water, 895 F.2d at 315 ("All five federal courts that have reviewed section 1926(b) have concluded that the provision should be given a liberal interpretation that protects rural water associations indebted to the FmHA from municipal encroachment.").

Courts have also consistently noted the requirement of ' 1926(b) that an association be indebted to the United States in order to obtain the protections of that subdivision. Scioto Water, 103 F.3d at 42; Lexington-South Elkhorn Water Dist., 93 F.3d at 235 (describing indebtedness to the FmHA as *1512 one of the "threshold requirements" for protection under ' 1926(b), along with "having 'made service available' in the area"); CSL Utils., Inc., 16 F.3d at 133 (recognizing that the protection of ' 1926(b) exists only "during the term of such loan."). RWS # 1 does not dispute that it was not indebted to the United States between September 22, 1988, and July 1, 1992. The City contends that RWS # 1 lost the protections of ' 1926(b) during the period it was not indebted to the FmHA. However, RWS # 1 contends that it was still entitled to the protection of ' 1926(b) during that period by virtue of statutes governing the sell-off by the FmHA of the obligations of water associations held by FmHA. RWS # 1 contends further that its protection under ' 1926(b) was renewed when it again became indebted to the United States in 1992.

As part of the Omnibus Budget Reconciliation Act of 1986 (1986 OBRA), the FmHA was required to sell-off some of the bonds and notes it had acquired under ' 1926(a). Pub.L. 99-509, ' 1001; see also Scioto Water, 103 F.3d at 40; Wayne, 36 F.3d at 526-27. The provisions of the sell-off were codified in what is now identified as 7 U.S.C. ' 1929a note, entitled "Sale of Rural Development Notes and Other Obligations." A year later, in the Agricultural Credit Act of 1987 (1987 ACA), Congress modified the terms of the sell-off program established in the 1986 OBRA by requiring the FmHA to offer to the issuer of bonds or notes subject to sale the right to buy them back before the FmHA sold them to a third party. Scioto Water, 103 F.3d at 40 (citing Pub.L. 99-509, ' 1001, 100 Stat. 1874, as amended by Pub.L. 100-233, ' 803, 101 Stat. 1714 (1988), 7 U.S.C. ' 1929a note, subsection (f)). This requirement is found in a provision referred to by courts as "subsection (f)," because it was codified at 7 U.S.C. ' 1929a note, subsection (f), and also sometimes as the "right of first refusal" provision. Scioto Water, 103 F.3d at 40-41. Subsection (f) provides as follows:

(f)(1) In general.--Before conducting a sale of a portfolio of notes or other obligations under this section [Pub.L. 99-509, ' 1001, amending this section and enacting provisions set out as notes under this section], the Secretary of Agriculture shall--

(A) determine whether the issuer of any unsold note or other obligation desires to purchase the note or other obligation; and

(B) if so, hold open for 30 days, an offer to sell the note or other obligation to the issuer at a price to be determined under paragraph (2) [entitled "Determination of offering price"].

7 U.S.C. ' 1929a note, subsection (f). Paragraph (2) of subsection (f) provides for the sale of bonds to the issuer at a discount. 7 U.S.C. ' 1929a note, subsection (f)(2).

A further modification of the sell-off program instituted by the 1987 ACA was the enactment of so-called "subsection (g)," codified at 7 U.S.C. ' 1929a note, subsection ( ). Subsection (g) provides as follows:

Section 306(b) of the Consolidated Farm and Rural Development Act (7 U.S.C. ' 1926(b)) shall be applicable to all notes or other obligations sold or intended to be sold under this section [Pub.L. 99-509, ' 1001, amending this section and enacting provisions set out as notes under this section].

7 U.S.C. ' 1929a note, subsection (g); Scioto Water, 103 F.3d at 40. RWS # 1 contends that it is entitled to the continued protection of ' 1926(b) by virtue of "subsection (g)," because its repurchase of its notes under "subsection (f)" was a purchase of "obligations sold or intended to be sold" under 7 U.S.C. ' 1929a note. The City disagrees, arguing that a sale of bonds or notes to the issuer under "subsection (f)" in which the issuer's debt to the United States is extinguished does not qualify the issuer for the continued protection of ' 1926(b) under "subsection (g)."

i. Scioto Water. In the only federal decision to consider the question of whether a bond issuer who buys back its own bonds from the FmHA, thereby extinguishing those obligations to the United States, is entitled to the continued protection of ' 1926(b), the Sixth Circuit Court of Appeals held that the issuer could no longer invoke the protection *1513 of the statute. See Scioto Water, 103 F.3d at 41-42. In Scioto Water, the Sixth Circuit Court of Appeals first considered the holding of the Colorado Supreme Court in City of Grand Junction v. Ute Water Conservancy Dist., 900 P.2d 81 (Colo.1995) (en banc), which was the only judicial decision it found, apart from the decision below, to consider the continued protection for a bond issuer under ' 1926(b), where the bond issuer bought back its bonds pursuant to the 1986 OBRA. Scioto Water, 103 F.3d at 41. The Sixth Circuit Court of Appeals noted that the Colorado Supreme Court had found the bonds in the case before it had not been extinguished by the issuer's repurchase. Id. The Sixth Circuit Court of Appeals characterized the reasoning and holding of the Colorado court as follows:

Because subsection (g) extended ' 1926(b) protection to "all notes and other obligations sold or intended to be sold" under the Agricultural Credit Act, the court concluded that ' 1926(b) protection should continue even if the bond issuer purchased its own bonds. [Grand Junction, 900 P.2d] at 92. The court believed that because subsection (f) gave bond issuers the "right of first refusal" before the Farmers Home Administration sold the bonds, and was placed in the same act with subsection (g), that Congress meant to create a "comprehensive scheme" that allowed bond issuers to maintain ' 1926(b) protection even after they purchased their own bonds. Id. In reaching this conclusion, however, the court carefully observed that state law permitted a bond issuer to reacquire its own bonds without extinguishing the debt. Id. at 93.

Scioto Water, 103 F.3d at 41. The court in Scioto Water, however, found that when the bond issuer in the case before it bought back its bonds from the FmHA, the FmHA had marked the notes "paid in full." Id. at 42. The court found that the issuer's debt to the United States was discharged, not sold. Id. The court consequently found that the issuer was no longer indebted to the United States, and thus had lost the protections of ' 1926(b), because it no longer qualified as a debtor for ' 1926(b) protection. Id. The court wrote,

This statutory interpretation is also faithful to one of the main legislative purposes in enacting ' 1926(b)--safeguarding Farmers Home Administration loans. Although the government maintains an interest in providing affordable rural water service, its interest in protecting against competition diminishes as its loans are repaid. We also note that Water 1's reliance on the common law "right of first refusal" does not alter this outcome, which must be gleaned from the federal statutes themselves rather than from such sources as Texas common law.

Accepting the reasoning of the district court below, the Sixth Circuit Court of Appeals held that subsection (g) of ' 1929a note applies only to obligations sold by the FmHA to third parties. Id. The Sixth Circuit Court of Appeals therefore affirmed the district court's dismissal of the plaintiff's action, holding that "having repurchased its own bonds, [the plaintiff] was no longer entitled to the protection provided by ' 1926(b) and had failed to state a claim for relief under that section of Title 7." Id.

Upon a careful reading of all the pertinent statutory provisions, the Court concludes that subsection (g) does not apply to obligations which a debtor has purchased from the FmHA under the debtor buy-out program. The applicable loan [sic] provisions recognize two types of obligations: (1) those to be sold by the FmHA to third parties under ' 1929a note, and (2) those to be offered to issuers for purchase under ' 1929a note, as amended. Section 1929a note, as amended, subsection (f) differentiates between "a sale of a portfolio of notes or other obligations under this section" (referring to 1929a note, which provides only for the sale of FmHA notes to third parties), and an offer to sell to the purchaser [sic], the latter being an alternative which the Secretary must offer before conducting a sale "under this section". Provision (*1514 g) employs similar language, referring to "notes or other obligations sold or intended to be sold under this section." (emphasis added). Attributing the same meaning to the phrase under both provisions, the obligations to which (g) refers are those sold to third parties under ' 1929a note, as distinguished from those offered for sale back to debtors. Thus construed, ' 1929a note, as amended, extends the protections of ' 1926(b) only to those obligations sold by the FmHA to third parties pursuant to the dictates of OBRA.

This interpretation of ' 1929a note is consistent with the purpose of the statutory scheme. OBRA mandated that the Secretary generate specified net proceeds by selling notes and other obligations held by it. The extension of loan protections to third-party purchasers would assist the Secretary in satisfying the OBRA requirements by offering an inducement for third parties to purchase FmHA obligations. On the other hand, offering the same incentive to debtors who might wish to participate in the buy-out program would not necessarily further assist the Secretary in fulfilling the statutory mandates. This is so because the buy-out program offers another type of incentive for debtors to purchase their own loans; i.e., a reduction in the amount of debt owed to the FmHA. Accordingly, there is a rational basis for extending the protection of ' 1926(b) to obligations sold by the FmHA to third parties, but not to those purchased by debtors through the buy-out program.

In addition, a debtor whose loan is sold by the FmHA to a third party has no control over the transaction and cannot be said to have voluntarily relinquished the benefits conferred by ' 1926(b). It is reasonable that Congress desired to extend to a debtor in this situation the same protections the debtor would have received had the FmHA continued to own the debtor's obligation. In contrast, a debtor who opts to purchase its own loan at a discount acts of its own volition and can be said to have voluntarily relinquished any rights bestowed by FmHA ownership of the obligation, including the protection afforded by ' 1926(b). These differences afford a rational basis for distinguishing between obligations sold to third parties and those bought back by debtors.

Based on the foregoing, the court finds that ' 1929a note, subsection (g), applies only to obligations sold by the FmHA to third parties. Accordingly, accepting Water 1's allegations as true, its bonds were not "sold or intended to be sold" within the meaning of ' 1929a note, subsection (g), so as to entitle Water 1 to the protection against curtailment provided by ' 1926(b). Because Water 1 is no longer indebted to the FmHA within the meaning of the pertinent statutory provisions, Water 1 has failed to state a claim for relief under ' 1926(b).

ii. Grand Junction. In the Grand Junction decision, the Colorado Supreme Court first held that ' 1926(b) expressly preempts state law governing the authority of a public entity to provide domestic water service and held further that ' 1926(b) and other applicable federal statutes implicitly preempt state law regulating the discharge of debt evidenced by a bond. Grand Junction, 900 P.2d at 87. This court will return to these holdings as necessary below. Turning to the question of more immediate interest here, of whether an issuer who repurchases its obligations from the FmHA is entitled to the continued protection of ' 1926(b), the Colorado Supreme Court found that ' 803(g) of the 1987 ACA, 7 U.S.C. ' 1929a note, subsection (*1515 g), referred to here as "subsection (g)," "extends the protection of section 1926(b) to 'all notes or other obligations sold or intended to be sold under this section.' " Id. at 91. The court defined its task and forecast its conclusion as follows:

The court found further support for its conclusion in the fact that Congress had provided a comprehensive scheme for selling bonds back to issuers, and the purpose of ' 1926(b), which the court identified as protecting the territory served by an association against expansion of municipalities and other public bodies. Id. One of the primary purposes of the 1987 ACA, the court found, was to "create an improved secondary market for FmHA loans," which was a purpose also served by extending the protection of ' 1926(b) to bonds repurchased by an issuer with the intent not to discharge the instrument. Id.

This court observes that the factual circumstances underlying the decision in Grand Junction are readily distinguishable from the circumstances in either Scioto Water or the present case, and consequently the Grand Junction decision may provide little guidance in the factual circumstances presented here. That factual difference is that the issuer in Grand Junction did not discharge its debt by repurchasing its notes from the FmHA. The holding of the Colorado Supreme Court in Grand Junction revolved around this factual distinction, because the court framed the question before it as whether bonds repurchased by the issuer, but not discharged, continued the issuer's protection under *1516 ' 1926(b) through subsection (g). Id. at 91 ("We must determine whether Congress intended that 'all ... obligations sold ... under this section' include reacquisition by an issuer of a bond held by the FmHA, where the parties intended not to discharge the bond"; emphasis added). That question was not presented in Scioto Water, because the court found that the obligation in question was discharged. Scioto Water, 103 F.3d at 42. Similarly, the undisputed record in this case is that RWS # 1 in fact extinguished its bonds with FmHA when it bought them back.

Clearly, however, there is a split in authority between the Grand Junction and Scioto Water decisions on the legal question of whether subsection (g) extends the protections of ' 1926(b) to "all" bonds sold by the FmHA, including bonds sold back to issuers, as the Colorado Supreme Court held, or whether the protections of ' 1926(b) do not extend to bonds repurchased by the issuer, as the Sixth Circuit Court of Appeals held. Therefore, this court must first consider the proper interpretation of whether subsection (g) continues an issuer's protection under ' 1926(b) only where a third party purchases an issuer's obligations from the FmHA or whether it also continues the issuer's protection when the issuer repurchases its obligation under subsection (f).

In addition to favoring the analysis and conclusions of the Colorado Supreme Court in Grand Junction based on what that court found the plain meaning of subsections (f) and (g) of ' 1929a note to be, RWS # 1 contends that the district and appellate courts in Scioto Water erred by failing to consider the legislative history of ' 1929a note, which RWS # 1 asserts supports the conclusion that ' 1926(b) protection was meant to continue whether obligations were resold to the issuer or to a third party. The City counters that, whatever individual members of Congress may have intended, the intent of Congress in enacting ' 1926(b) and ' 1929a note is apparent from the plain language of those statutes, which the City contends plainly states that ' 1929a note does not extend the protection of ' 1926(b) to any obligor who repurchases its notes from the FmHA pursuant to subsection (f), whether or not the obligor thereby extinguishes its debt to the FmHA. The court must decide whether the meaning of ' 1929a note, as amended, is plain.

ii. Plain meaning of subsection (f). Section 1929a note originally provided for the sale of notes and other obligations by the Secretary of Agriculture, pursuant to the 1986 OBRA. 7 U.S.C. ' 1929a note, subsections (a)-(e). Subsection (f), added by later amendment, provides for the offer of bonds to an issuer "[b]efore conducting a sale of a portfolio of notes or other obligations under this section." 7 U.S.C. ' 1929a note, subsection (f). The word "before" clearly indicates that a sale to the issuer under subsection (f) is a sale separate from and preliminary to a sale to a third party under subsections (a)-(e). Thus, the plain meaning of subsection (f) is that the offer to the issuer is a prerequisite to a "sale ... under this section," meaning a sale authorized and conducted as stated in subsections (a)-(e); a sale under subsection (f), however, is not a "sale ... under this section," because it is not a sale under subsections (a)-(e).

The applicable [statutory] provisions recognize two types of obligations: (1) those to be sold by the FmHA to third parties under ' 1929a note, and (2) those to be offered to issuers for purchase under ' 1929a note, as amended. Section 1929a note, as amended, subsection (f) differentiates between "a sale of a portfolio of notes or other obligations under this section" (referring to ' 1929a note, which provides only for the sale of FmHA notes to third parties), and an offer to sell to the [issuer], the latter being an alternative which the Secretary must offer before conducting a sale "under this section".

Scioto County Regional Water Dist. No. 1, Auth., No. C-1-95-204, slip op. at 14-15. This court holds, based on the plain meaning of the statute, that a sale under subsection (f) is not a "sale under this section [' 1929a note, subsections (a)-(e) ]," but a prerequisite to such a sale. If a sale to the issuer pursuant to subsection (f) is consummated during the thirty day "hold open" period provided for the issuer to accept the offer to buy back its obligations under subsection (f)(1)(B), no "sale under this section," that is, no sale *1518 under ' 1929a note, subsections (a)-(e), ever takes place.

iii. Ambiguity of subsection (g). The next question is whether subsection (g) extends the protection of ' 1926(b) to both kinds of sales, a sale to a third party under ' 1929a note, subsections (a)-(e), and a sale to the issuer under subsection (f). Subsection (g), like subsection (f), refers to a sale "under this section." 7 U.S.C. ' 1929a note, subsection (g). Use of the same terms in subsections adopted at the same time does, indeed, suggest that those terms were intended to have the same meaning in each subsection, which would be that subsection (g) applies only to a sale to a third party under subsections (a)-(e).

However, subsection (g) refers to "all notes or obligations sold or intended to be sold under this section." 7 U.S.C. ' 1929a note, subsection (g). RWS # 1 argues strenuously that notes sold to issuers under subsection (f) are notes "intended to be sold" under ' 1929a, subsections (a)-(e), even though the obligations are instead sold to the issuer under subsection (f). In short, RWS # 1 contends that "if the note is selected, the note is protected." Rural Water System No. 1's Response To Defendant City of Sioux Center's Motion For Summary Judgment (hereinafter, "RWS # 1 Brief In Resistance To Summary Judgment") at 9. The City responds that the "intended to be sold" language simply doesn't apply to debts paid off by the issuer, citing the Scioto Water decisions for interpretations that hold subsection (g) doesn't apply to sales to debtors under subsection (f). The City contends further that RWS # 1's argument strains logic and the language, because if Congress wanted the protections of ' 1926(b) to extend to water associations that are no longer indebted to the United States, it could have found a less obscure way to say so than by implication from "intended to be sold." What the City contends is a "natural rendition" of the language, therefore, is that "intended to be sold" is simply a statement that putting a note up for sale does not impact the quality of the note or security. The City describes RWS # 1's interpretation as giving a "magical afterlife" to debts that have been paid off by allowing them to continue the protections of ' 1926(b). Defendant's Memorandum Of Law In Support Of Combined Resistance To Plaintiff's Motion For Summary Judgment Under 7 U.S.C. ' 1926(b) And 42 U.S.C. ' 1983 (hereinafter, "Defendant's Combined Resistance Brief"), p. 9.

FN11. The Eighth Circuit Court of Appeals has observed that " '[t]he plain meaning of a statute controls, if there is one, regardless of an agency's interpretation.' " Pelofsky v. Wallace, 102 F.3d 350, 353 (8th Cir.1996) (quoting Hennepin County Med. Ctr. v. Shalala, 81 F.3d 743, 748 (8th Cir.1996)). In this case, the City contends that the Department of Agriculture has taken the position that rural water districts that pay off notes are not protected by ' 1926(b), citing the district court's decision in Scioto Water. However, in that district court opinion, in a footnote, the court expressed some doubt that it should defer to an agency opinion expressed in an informal letter from the Office of General Counsel for the Department of Agriculture to counsel for one of the parties before the court. Scioto Water, slip op. at 14 n. 8. The district court simply noted that its own independent analysis was in conformity with the Department of Agriculture's informal interpretation. Id. This court has the same doubt that any adequate expression of an agency interpretation has been presented, and will therefore conduct its own analysis of the statutes in question without further reference to any agency view.

"Ambiguity is a creature not of definitional possibilities but of statutory context." Brown v. Gardner, 513 U.S. 115, 118, 115 S.Ct. 552, 555, 130 L.Ed.2d 462 (1994). In other words, "the meaning of statutory *1519 language, plain or not, depends on context." Id. (internal quotation omitted). As the parties remind us, "we must not be guided by a single sentence or member of a sentence, but look to the provisions of the whole law, and to its object and policy." Hennepin County Med. Ctr. [v. Shalala], 81 F.3d [743,] 748 [ (8th Cir.1996) ] (internal quotation omitted). At the same time, we must "seek to interpret the statute in a way that includes every word and clause." Id.