News, Announcements, Information

 

  1. Feb, 2010 1926(b) News – Larry with TN rural water asks if we should build alliances with other small community and rural associations in reaction to the recently adopted resolution by the National League of Cities opposing 1926(b).  Thank you Larry, and we will immediately initiate a dialogue with NLC to better understand the reason for their resolution.  A similar initiative was advanced with NLC in the 90s, which we were able to handle through dialogue with NLC – our longtime ally.  We will update you on the dialogue.  Also this week, the Rural Water Alliance released this video on 1926(b).
  2. Feb, 2010 1926(b) News – Oklahoma Rural Water initiatives campaign to opposed National League of Cities’ recently adopted policy to change 1926(b) in Congress (see ORWA’s letters).  Attorney Steve Harris said that he hopes other state associations send a similar letter.  Steve also commented that he has pending cases in Missouri and Oklahoma where the issue relates to sewer service provided by the "water district" - which has statutory authority to provide both water and sewer service. We are considering how to address this issue at the national level.
  3. 1926(b) Under Attack, Again - The OK Municipal League (OML) resolution proposing legislation that would remove the monopoly enjoyed by rural water districts was adopted by the National League of Cities in their meeting held in November in San Antonio.  The resolution seeks to amend federal law to enable OML members to compete with rural water districts abutting the municipality (see statement from OML).

4.      Lead 1926(b) Attorney Urges Rural Water Systems – to take action to thwart OML’s 1926(b) initiative (see statement).

  1. November 2006, Community in Oklahoma Sues USDA to stop loan from being made to rural water supply – citing harm because loan would provide their neighbor with 1926(b) protection.  Case currently before judge.
  2. This article on Oklahoma Municipal’ League’s homepage is being called “distorted and untruthful” by expert attorney Steve Harris.  Harris says that, for example, the City of Holdenville sells the water to Hughes-5 that Hughes-5 in turn sells to the prison (referenced in the article) and Holdenville receives the same revenue it would have received if it was selling the water directly to the prison.  In the case of Pitt-7 and McAlester - McAlester has always provided fire protection water for the
  3. Sept, 2009 1926(b) Cases in Ohio To Test the Seminole Le-Ax Ruling - two cases moving through the courts in Ohio have the potential to challenge the (2-1 decided) Le-Ax Circuit Ruling that made a fundamental change in the historical and consistent legal interpretation in 1926(b) jurisprudence.  Both cases are being lawyered by Dennis O’Toole’s firm.   The newest one being Southwest Licking Community Water and Sewer District v. Reynoldsburg. The other is Ross County Water v. Chillicothe.  Both still pending but preliminary injunction has been granted to Ross in that case.  Ross County filed a motion for summary judgment, which has been countered by Chillicothe's brief in opposition, and followed by Ross’s reply (see filings).  According to Matt Dooley, attorney working the cases on behalf of the rural water districts, “attorney Garry Hunter (who represented the City of Athens in Le-Ax) represents the City of Chillicothe, and his argument here is essentially to extend Le-Ax to apply to indebted non-profit water associations that do not have a court-defined service territory by looking only at existing customers to determine service area. The countless flaws with this theory are addressed in RCWC's Motion for Summary Judgment.  Chillicothe's position is afoul of the Sixth Circuit's express limitation of Le-Ax. We also take care to point out that Le-Ax's boundaries are clearly defined by state law; we do not consider here a case where the state has not defined the boundaries of its water districts or associations."  Any comments from Chillicothe’s representatives will be promptly posted in full.
  4. Kansas 1926(b) Case Relevance – (full news article), the following are comments from the rural water district’s attorney, Steve Harris.  Any comments provided by the City of Eudora (a KRWA member) will be posted.  “Douglas County RWD No. 4 v. City of Eudora, Kansas case, is significant for the reason that Eudora hired Lathrop and Gage (one of the mid-west's largest law firms, comprising nearly 300 lawyers according to the firm's website (www.lathropgage.com) to wage war on 1926(b) on every conceivable front, including filing tort counterclaims against the water district. (The tort counterclaims were later dismissed on Eudora's own motion, while the water district's motion for summary judgment was pending challenging those tort counterclaims).  Without doubt, this was the most intense and hardest fought 1926(b) case I have been involved in.  The Court's recent injunction order follows a jury verdict where the water district prevailed on 100% of the issues presented to the jury, including the jury answering every special interrogatory submitted by the Court to the jury, in favor of the water district and awarding damages to Douglas-4 as to each property at issue.  Evidence at trial showed that water service to the properties in controversy would yield the service provider, net revenue of $4,900,000 (present day discounted value of the "net" future revenue stream for water service).  Thus Eudora had much to gain by annexing water district territory and attempting a forced acquisition of water district assets. Correspondingly, if the district did nothing, it would lose the benefit of that same amount of money. The high value of the territory in dispute was specifically recognized by the district court in its recent order.  Eudora's attempted "take-over" of water district territory ended abruptly with the entry of the injunction by the federal district court forbidding further efforts by the city to compete with the water district.”
  5. Kansas 1926(b) Case Continues – federal district court grants injunction to order city to refrain from competing for customers with rural water district and prevents the city from providing water to any of the property involved in previous decision in which the city was found guilty of limiting the district's ability to serve.  Earlier this summer the rural water district filed a motion asking for  $743,904.72 in attorney fees (full article).
  6. Aug, 2009 1926(b) Challenge to USDA Water Program in Oklahoma – in the continuing controversy in Oklahoma over 1926(b), the federal circuit court has made a ruling – asking the state supreme court if Oklahoma Constitution prohibits the USDA rural water loan program from operating in Oklahoma (see ruling).  This strategy has been tried before in Oklahoma in the Beckham County case.
  7. Feb, 2009 Sec 1926(b) Update – check out this recent ruling in the federal court for the Southern District of Ohio, which granted Ross County Water’s Motion for Preliminary Judgment against Chillicothe.  The judge’s twenty-one page opinion, affirmed the rights of Ross as a private not-for-profit water association to 1926(b) protection. There is some great language in the opinion that should be a benefit in other cases.  The rural water district was represented by Dennis O’Toole, a frequent speaker at rural water conferences.
  8. South Carolina Legislature Proposes Law to Transfer Water Districts to Their Neighbors – see state bill that provides, “the General Assembly, by special or local law, may abolish a special or public service district… and transfer its assets and liabilities to an assuming service provider.”  This has proponents of 1926(b) questioning if the law is intended to circumvent 1926(b) protection.  This document that seems to implement the bill was provided to our reporters, however it is unclear how it relates to this bill and the SC Constitution.
  9. 1926(b) Cases in Ohio To Test the Seminole Le-Ax Ruling - two cases moving through the courts in Ohio have the potential to challenge the (2-1 decided) Le-Ax Circuit Ruling that made a fundamental change in the historical and consistent legal interpretation in 1926(b) jurisprudence.  Both cases are being lawyered by Dennis O’Toole’s firm.   The newest one being Southwest Licking Community Water and Sewer District v. Reynoldsburg. The other is Ross County Water v. Chillicothe.  Both still pending but preliminary injunction has been granted to Ross in that case.  Ross County filed a motion for summary judgment, which has been countered by Chillicothe's brief in opposition, and followed by Ross’s reply (see filings).  According to Matt Dooley, attorney working the cases on behalf of the rural water districts, “attorney Garry Hunter (who represented the City of Athens in Le-Ax) represents the City of Chillicothe, and his argument here is essentially to extend Le-Ax to apply to indebted non-profit water associations that do not have a court-defined service territory by looking only at existing customers to determine service area. The countless flaws with this theory are addressed in RCWC's Motion for Summary Judgment.  Chillicothe's position is afoul of the Sixth Circuit's express limitation of Le-Ax. We also take care to point out that Le-Ax's boundaries are clearly defined by state law; we do not consider here a case where the state has not defined the boundaries of its water districts or associations."  Any comments from Chillicothe’s representatives will be promptly posted in full.
  10. Kansas 1926(b) Case Relevance – (full news article), the following are comments from the rural water district’s attorney, Steve Harris.  Any comments provided by the City of Eudora (a KRWA member) will be posted.  “Douglas County RWD No. 4 v. City of Eudora, Kansas case, is significant for the reason that Eudora hired Lathrop and Gage (one of the mid-west's largest law firms, comprising nearly 300 lawyers according to the firm's website (www.lathropgage.com) to wage war on 1926(b) on every conceivable front, including filing tort counterclaims against the water district. (The tort counterclaims were later dismissed on Eudora's own motion, while the water district's motion for summary judgment was pending challenging those tort counterclaims).  Without doubt, this was the most intense and hardest fought 1926(b) case I have been involved in.  The Court's recent injunction order follows a jury verdict where the water district prevailed on 100% of the issues presented to the jury, including the jury answering every special interrogatory submitted by the Court to the jury, in favor of the water district and awarding damages to Douglas-4 as to each property at issue.  Evidence at trial showed that water service to the properties in controversy would yield the service provider, net revenue of $4,900,000 (present day discounted value of the "net" future revenue stream for water service).  Thus Eudora had much to gain by annexing water district territory and attempting a forced acquisition of water district assets. Correspondingly, if the district did nothing, it would lose the benefit of that same amount of money. The high value of the territory in dispute was specifically recognized by the district court in its recent order.  Eudora's attempted "take-over" of water district territory ended abruptly with the entry of the injunction by the federal district court forbidding further efforts by the city to compete with the water district.”
  11. Kansas 1926(b) Case Continues – federal district court grants injunction to order city to refrain from competing for customers with rural water district and prevents the city from providing water to any of the property involved in previous decision in which the city was found guilty of limiting the district's ability to serve.  Earlier this summer the rural water district filed a motion asking for  $743,904.72 in attorney fees (full article).
  12. Aug, 2008 1926(b) Challenge to USDA Water Program in Oklahoma – in the continuing controversy in Oklahoma over 1926(b), the federal circuit court has made a ruling – asking the state supreme court if Oklahoma Constitution prohibits the USDA rural water loan program from operating in Oklahoma (see ruling).  This strategy has been tried before in Oklahoma in the Beckham County case.
  13. Sec 1926(b) Update – check out this recent ruling in the federal court for the Southern District of Ohio, which granted Ross County Water’s Motion for Preliminary Judgment against Chillicothe.  The judge’s twenty-one page opinion, affirmed the rights of Ross as a private not-for-profit water association to 1926(b) protection. There is some great language in the opinion that should be a benefit in other cases.  The rural water district was represented by Dennis O’Toole, a frequent speaker at rural water conferences.
  14. 1926(b) Update – KS state legislation looks at two bills (1 & 2) to reform 1926(b) and this one just carted in Mississippi to address a specific court case.
  15. 1926b Oz Acrimony – Update on the active controversy in rural Kansas now in federal court.  Both sides continue to escalate the legal case, and the legal bills continue to mount.  In the end, one side may end up loosing and paying the other’s bills.  First initial motion gets answered by the Federal district ruling in favor of the rural water district.  Some locals say this may not be an indicator of the final outcome – other say it is.
  16. Rural Water Exclusive – an early release of the stimulus report – 12 Weeks & 1 Day.  Embargoed for the press and Congress until November 20th.  Early release for ruralwater.org readers only.
  17. 1926(b) Update from Oz – Federal district ruling upholds clear 1926(b) precedents and extends them to guaranteed loans.  Court says, “when a water district is obligated on a federally guaranteed loan, 7 U.S.C. § 1926(b) applies, preempts the state statute.”  City says USDA loans are “unnecessary” and therefore can be undone by state law.  Court disagrees, “imposing such a requirement of ‘necessity’ would contravene the federal statute, for there is no such limitation in 7 U.S.C. § 1926.”
  18. 1926(b) Coverage Review – 1) system refinances utilizes the right of first refusal and – NO 1926(b) 2) system's bonds are sold by USDA (GMACC) – YES 1926(b) 3) USDA requires "graduation" – NO 1926(b)
  19. Oct, 2008 1926(b) Explored in Reno – many sessions focused on 1926(b) – partially and exclusively.  Here is a summary: some participating community refinanced their USDA debt and lost their 1926(b) protection and are now being victimized by their neighbors; one such community is going after the bond lawyer who sold them the deal; Kansas’ magazine will publish an article critical of USDA on their alacrity in graduating systems’ debt; USDA does not look at (or tell a community) if their graduation will leave the system vulnerable after losing their 1926(b) protection; USDA’s guaranteed loans do provide 1926(b) protection; that the criteria for the direct loan and the guaranteed loan are substantially different; that 1926(b) protects sewer systems in a similar fashion as water; and that the electric coops were successful in including a provision in the recently passed Farm Bill that allow their members to keep their 1926(b) protection after refinancing (wow).
  20. 1926(b) Happenings – a new case going to court in Ohio may challenge the core principles included in LeAx that changed the way some circuits define service area.  Motions filed this week.  Here is the USDA indebted system’s motion.
  21. 1926b Evolution – Steve Harris says the issue of annexations and 1926(b) is quite topical as he as recently seen handling cases in Kansas, Missouri, New Mexico, Oklahoma and South Dakota.  Depending on state law, an annexation can have a very significant impact on a water district (as occurs in Kansas) or virtually no impact at all (such as in Oklahoma). (In Kansas, an annexation will function to extinguish the legal right of the water district to sell water to new customers in the annexed area, and extinguishes its legal right to sell water to existing customers after the annexation/acquisition process is concluded.) The issue gets even more complicated when considered in the context of whether the effort to annex/deannex is subject to removal to federal court.  An alternative to removal is an "England Reservation" when removal is unsuccessful (a somewhat esoteric legal principal that serves as an end-run against the binding effect of any decision impacting federal rights in a state court proceeding when issue or claim preclusion might otherwise apply).
  22. Ohio’s 1926(b) Hotbed – there is a hot dispute in southern Ohio; Ross County Water v. the City of Chillicothe.  The attorney with Chillicothe is the same from Le-Ax case.  Hearing briefs will be filed tomorrow.  Our 1926(b) reporter believes that Le-Ax is most consequential case since Beer Creek and it was a 2-1 ruling with a strikingly clear dissent.  Could a ruling in this case impact the standing precedent that is being adopted in other circuits?  A ruling is likely before NRWA’s conference.  (local coverage)
  23. Hot 1926b Case in Oz About to Go to Trial (coverage) – discussions in KS indicate a growing resentment of 1926(b) and its protection of growth areas for rural water districts.
  24. 1926(b) Under Review by USDA – we have heard that USDA is reviewing the merit and appropriateness of the current 1926(b) authorities with regard to new growth in and around rural water supplies and their neighboring water supplies.  This apparently is a result of the City of
  25. Guthrie’s (Oklahoma) concerns about 1926(b) that were presented to USDA.  We will provide comment to USDA on this issue and offer to work with any community or organization that is concerned about the merit of 1926(b) – as we have done in the past.  Here is the federal district court ruling in a case in Mississippi (the home of the Bear Creek) that went in favor of the rural water district, and was argued by the same attorney who won the initial Bear Creek case – Bluefield Water vs. Starkville.  And this active case in Ohio (Ross County Rural Water) which is being handled by expert 1926(b) attorney Dennis O’Toole.
  26. Pittsburg County Exposition Center - and the water district never objected to this nor could it.   Pitt-7 only sought exclusivity for domestic water service not fire protection service.  Also important to the understanding of the issue, according to Harris, is that Holdenville sued the City of Wewoka recently in federal court to block Wewoka from closing on its USDA loan.  Holdenville expressly alleges that it does not want Wewoka to achieve exclusive rights status as it may interfere with Holdenville's arrangement to sell water to Hughes-5 which Hughes-5 in turn sells to the prison.  In fact, Holdenville wants (as stated in its federal suit) to enforce an Oklahoma state statute which Holdenville claims grants Holdenville the exclusive right to sell water to Hughes-5.
  27. 2 big cases have been raging in MS and SC (Windsor Plantation, LLC vs. USDA, Hinds Water Assn and others - Marlboro County Vs. Marlboro Water Company) – the cases will be post soon on the 1926b page.  Also, in Oklahoma, cities have been on the cutting edge of a new trend - trying new and innovative legal strategies for overturning or circumventing 1926(b) precedents - including arguing that every USDA loan in that state is unconstitutional and must be cancelled – and challenging the USDA loan contracts.  However, recent rulings have gone in favor of the USDA borrowers in these OK cases.  See Elk City v. Beckham-3, where the city was attempting to keep that case in states court, but a federal court claimed the case.  The rural water DC legal staff has been in discussions with attorneys and interested parties over the question of - the need and desire to have USDA brought in on specific 1926(b) cases with district’s lawyers - and the question of strategies to have all 1926(b) cases heard in federal court, even when one party is suing in state court.  We should have some assistance on this effort in the coming weeks.  Also, Steve Harris who is representing 6 of the most controversial cases in Oklahoma has drafted a report on these cases for your review.
  28. Courts rules in favor of rural water supply in the case calling all USDA loans in Oklahoma Unconstitutional.
  29. Cities have been suing in Oklahoma to have the USDA grant & loan program ruled unconstitutional in the state – negating all loans and future loans.  HOWEVER, today the first rural water district to be sued in this strategy (rural water Beckham-3) has won round one in the litigation – and these rulings tend to suggest where the Court is going…. unlikely that the District Court would overturn the Owasso and Glenpool decisions.
  30. OK threatens to make all USDA loans "void."  Elk City v. Beckham-3 challenges the legal right of Oklahoma Water Districts to borrow money from the federal government.  Elk City seeks to "void" all federal loans obtained by Beckham-3 which in turn would defeat Beckham-3's 1926(b) protection.  If Elk City's constitutional challenge to the borrowing authority of an Oklahoma Water District were successful, this would impact every federal loan and pending federal loan application as to every Oklahoma Water District. See rural water 1926(b) homepage for details
  31. A new suit was filed in OK by Elk City against Beckham County Rural Water District #3.  After Elk City's encroachment into the district's service area - Elk City filed this "strike suit", which represents a continuing trend by municipalities to go on the offensive by suing a water district (or encouraging land owners/developers to bring suits of their own) before the water district brings suit in federal court to enforce its 1926(b) rights.   This happened in the recent Missouri cases where the cities encouraged landowners to file state actions in an attempt to disrupt a water district's 1926(b) protection.  Although this suit addresses issues that have been resolved before by the 10th Circuit, it is a new attempt to declare the borrowing authority for every water district in Oklahoma unconstitutional for loans, which would invoke 1926(b) protection.  The suit asks the Oklahoma State Court to resolve indirectly what is essentially a federal question.  If the suit remains in state court, an "England Reservation" may be filed to preserve an opportunity to revisit the issues in federal court.  All water districts in Oklahoma are invited to intervene in the action since the case impacts the present and future borrowing authority of all Oklahoma water districts.
  32. Massive Reversal favoring little rural water district in Missouri.  This district had lost all the way up to the state courts.  Developers were having individual homeowners detach from the district to allow neighboring systems to capture new coveted developments.  Big law firm soaked the district for hundreds of thousands in legal fees to loose all the initial cases.  A year ago, as the district was teetering on bankruptcy, the district found Steve Harris who represented the system with very limited fees and, over the course of months, won an appeal, which resulted in a reversal. On remand, the circuit ruled in favor of the water district. The Circuit Court ruled that 1926(b) protection precludes detachment (see ruling).   Also, settlement of the case included payment of money over time for each residential lot in the development as taps are added.  The ruling will likely domino the other cases in Missouri - enabling the district to make some very good settlements to get their legal expenses back. (Google search on issue).
  33. Recent 6th Circuit Ruling provides 1926(b) protection to district that only had guaranteed loan.  Dennis O’Toole says the court did not distinguish between guaranteed loan and direct loan in determining the application of 1926(b) protection.  Elizabeth Dietzmann offers some caution on the ruling.
  34. PPT presentations at in-service and Biloxi conference
  35. 4th Circuit Relies on Le-Ax to rule against USDA indebted system in Maryland
  36. New Steve Harris article details the malfeasance of some cities and developers discovered by a Appeals Court Judge in Missouri
  37. Steve Harris announces settlement of landmark case (Pitt#7 in Oklahoma and City of McAlester).  City agrees no further expansion of service, will pay $175,000, will deliver 355,000,000 gallons of water at "no charge", some customers transitioned back in 60 days, and 20 year contract for supply.
  38. Louis Rosenberg announced the 2nd Bell Arthur case settled 12-3-05 with Bell Arthur receiving monetary settlement, defined boundary, and protection through a U.S. District Court Consent Decree
  39. Jeremiah Finnegan explains that two decisions of the Missouri Court of Appeals (Horn and Robertson) on 1/21/05 reversing two decisions of the Circuit Court issued a mandate on 2/14/05 directing the lower court that if 1926(b) is raised as a defense to a detachment, it is necessary for the trial court to first determine if the District has 1926(b) protection and, if so, then the trial court  must enter judgment in favor of the District.
  40. Northern Rural Water district looses in District Court (Jan 2005)
  41. Clay County Missouri situation (2004)
  42. Articles in OK NLC newsletters and papers over state controversy over 1926(b)
  43. Recent Case in Iowa recovering legal fees, Nov. 2000
  44. Recent USDA correspondence clarifying system coverage
  45. Recent Wall Street Journal Article
  46. Newspaper article in KS about various 1926(b) conflicts
  47. Bell Arthur, NC recent unfavorable court case
  48. August 97, National League of Cities Survey on 1926(b)
  49. 1996, Fact Sheet by National League of Cities
  50. USDA’s policy on the sell of systems to private companies and calculating repayment to USDA
  51. Memo from USDA explaining policy in an actual system.
  52. The DOJ guidance that the federal government uses for appraisal
  53. EPA guidance on selling of waste water systems
  54. Example of how EPA sold off Cranston RI wastewater utility

 

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