Consolidated Farm and Rural Development Act

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7^th Circuit Court of Appeals

Case Name: Washington County Water Company, Inc. v. City of Sparta

Case No.: 22-2942

Officials: Flaum, Brennan, and St. Eve, Circuit Judges.

Focus: Consolidated Farm and Rural Development Act

The Agriculture Act enacted in 1961 granted authorization to the USDA for extending loans to rural water associations. In concurrence, 7 U.S.C. 1926(b) imposes restrictions on municipalities and other entities, preventing them from vending water in areas where a rural water association indebted to the USDA has already “provided or made available” their services. For a rural water association to qualify for protection under section 1926(b), it must possess both the physical capacity to deliver service to the disputed locality and a legal entitlement to do so under state jurisdiction.

Washington County Water Company (WCWC), identified as a rural water association, engages in the sale of water to various southern Illinois counties adjacent to Coulterville. In 2019, facing a deteriorating state of its water treatment facility, Coulterville deliberated over procuring water from either WCWC or the City of Sparta. Subsequently, Coulterville opted to source water from Sparta due to its uncertainty regarding WCWC’s ability to meet the water demands of its residents adequately.

WCWC initiated legal action, asserting that the provisions within section 1926(b) prevented Sparta from vending water to Coulterville since WCWC had already extended its services to the latter. Nonetheless, the district court ruled in favor of Sparta, granting summary judgment. The court contended that WCWC was not eligible for section 1926(b) protection because it lacked the legal authority under Illinois state law to furnish water to Coulterville. The Seventh Circuit highlighted that WCWC’s contractual capacity fell short of meeting the required state law standard of its maximum average daily demand plus the obligatory 20% reserve. Moreover, WCWC failed to provide admissible evidence substantiating its capability to enhance its water supply capacities.

Affirmed

Decided 08/08/23

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