'We were at an impasse': Ames' rural water agreement could end statewide development hurdle

Danielle Gehr
Ames Tribune

A conflict between cities and rural water providers across Iowa that's been the subject of a lawsuit and some city officials say has hindered development has been raging for more than a decade.

As cities expand, local municipalities look to develop housing into territory serviced by rural water providers. But the projects are held back, city officials say, by rural water providers that refuse to give up territory, arguing the utilities don't offer infrastructure that meets cities' fire protection standards.

"It's been probably the biggest challenge that we've seen with development here in this community over the last decade," Nevada Mayor Brett Barker said.

Ames Assistant City Manager Brian Phillips agreed: The issue has stymied growth in the state's sixth-biggest city, the home to Iowa State University, for the last 15 years, he said.

Previous: As Ames grows, city faces negotiations with rural water providers over service territory

An agreement that's expected to be finalized by Ames city officials by the end of the year could signal the beginning of the end of the conflict, though.

It would mean an end to the growth of the city's water utility, too.

"Before this agreement, we were sort of at an impasse," Phillips said. "The bulk of this agreement lasts in perpetuity. So we are locked into this for life, essentially ... There are very few people who are our Ames residents today who are impacted by this agreement. This agreement really sets up the circumstances for how water service is going to work for people who haven't yet moved here."

Conflict with communities across Iowa

Territory serviced by the Xenia Rural Water District surrounds Ames water utility customers to the north, west and south. Central Iowa Rural Water Association territory lies to the east, and an existing buyout formula governs the city's expansion in that direction.

While Ames has outlined plans for developments in Xenia territory in its 2040 Plan, Phillips said Xenia now has the infrastructure to provide water closer to the city.

In November 2018, Xenia filed a lawsuit against the city of Johnston over whether the city could provide water service within two miles of its city limits. Johnston later filed a counterclaim, requesting declaratory judgment on the city and Xenia's legal rights.

The lawsuit resulted in a split decision by the Iowa Supreme Court in November 2020, and the entities continue to await a final decision.

Janet Wilwerding, a spokesperson for the city of Johnston, said the city couldn't comment on ongoing litigation.

More recently, Xenia filed a lawsuit in November alleging the city of Woodward infringed on its rights, according to the Iowa Capital Dispatch.

Barker described Nevada's dealing with the Iowa Regional Utilities Association as "almost extortion," saying residential projects have been delayed for years while officials discuss who would provide water service to the area.

"Housing is the number one need in Story County, county-wide, and you have water hold it up for five years," Barker said. "I can go on and on about the communities that are all hampered by the same issue."

One project, the South Glen Housing Division, was set back five years, he said, before ultimately being serviced by IRUA with a valve for added pressure during fire emergencies.

Iowa Rural Utilities CEO and Engineer Matt Mahler said he disagreed with Barker's characterization and that the utility's records show just 2-3 years of discussions related to that project — discussions he said consisted of both parties taking time to "review proposals and reevaluate positions."

"I think it's just a situation where there are two sides that have interests that somewhat overlap," Mahler said. "I think, by and large, we work with cities to find solutions that work for both parties."

He said he was surprised by Barker's comments, and noted a 2014 agreement ended with Nevada gaining the right to service part of IRUA territory.

"I understand both — rural water depends on connections in order to continue to serve their needs, (and as) Iowa transitions (to) where there are fewer rural connections, there are more urban residents — I understand that there's pressure there, as well," Barker said. "My ultimate responsibility is to the taxpayers in Nevada."

'If you're not growing, you're dying'

"For most of (the last 15 years), Xenia has been willing to sell the rights to that territory because it's simply not been economical for them to serve those areas directly," Phillips said. "But I think that pressure has increased in the last couple of years."

Xenia's agreement with Ames has already been signed by both parties and will be recorded with the county by the end of the year, Phillips said.

Through the agreement, Ames will be able to purchase property north and south of the city, though the agreement comes with a time limit of 10 years or five years depending on the area.

The agreement also includes a set price of $3,000 per acre for any buyout.

Other parts of the agreement outline the service Xenia will need to offer in areas that will ultimately be annexed by the city of Ames if Xenia is to provide service to the area. Current residents would not be affected by the agreement.

Xenia CEO General Manager Gary Benjamin said the agreement is relatively unique. The company has a similar but smaller agreement with Alden and is in the process of negotiating one with Johnston, as well.

Mahler said all previous and planned agreements between IRUA and municipalities are handled on a case-by-case basis.

"If you're not growing, you're dying," Benjamin said. "We really need to have some higher-density areas where we can get new customers."

Ames' agreement is the first to bring all the different pieces seen in other agreements together, Phillips said.

One of the hurdles the parties faced in coming to a compromise was the belief that rural water providers can't offer the same level of infrastructure that meets city standards, Benjamin said. He argues that while federal law exempts rural water providers from fire protection infrastructure, the utilities aren't necessarily unable to provide the infrastructure.

"If Xenia has the infrastructure in place that we can provide city-level services, then we are desirous to keep those areas and get kind of a return on the investment," Benjamin said. "When there are areas that we don't have infrastructure in place ... we are willing to go ahead and sell our service territories in those situations."

The company's agreement with Ames outlines the infrastructure necessary to meet the city's standards, Phillips said. But in Ames, where water is so highly regarded it spawned merchandise, giving up control was no easy choice.

More: Water so tasty it spawned a video and merchandise: How an Ames utility got online notoriety

"I think, historically, in Ames, our mindset has been that if you're an Ames resident, you will have access to Ames water," Phillips said. "Someday, our water utility is not going to grow very much anymore. Historically, it's grown as the community has grown and that that has not had a sunset on it.

"I think that's gonna challenge us, long-term, to think a little bit differently about how we plan for the utility."

Danielle Gehr is a politics and government reporter for the Ames Tribune. She can be reached by email at dgehr@gannett.com, phone at (515) 663-6925 or on Twitter at @Dani_Gehr.