ELR Citation: ELR 20061
No(s). 04-1205 (4th Cir. Mar 16, 2005)

The Fourth Circuit held that §1926(b) of the Consolidated Farm and Rural Development Act does not bar a county from providing water service to two new commercial developments presently under construction adjacent to a water association's service area. The water association is an "association" within the meaning of the Act and it has a qualifying federal loan outstanding. Yet, it has not provided water service or made it available to the disputed area as required by §1926(b). In reaching this conclusion, the court applied the test articulated by the Sixth Circuit, which requires a water association to demonstrate that (1) it is physically capable of serving the area, (2) it has the legal right under state law to do so, and (3) the disputed area is already within the geographic boundaries of the association's franchise area. Here, the new developments were not within the geographic boundaries of the association's existing franchise area. Thus, §1926(b) does not give the association the exclusive privilege of serving the new developments.