Plaintiff, Rural Water District No. 5 of Wagoner County, Oklahoma (“Wagoner–5”), filed suit, claiming that, as a debtor association under 7 U.S.C. § 1926(b), it had the exclusive right to provide water service to all customers within its service area. Wagoner–5 alleged that it acquired a loan from the USDA and that Wagoner–5 therefore has the exclusive right to serve four customers whose service is at issue in this action: Koweta Indian Clinic; Timber Ridge Crossing Subdivision; Celebration at the Woods Subdivision; and Cedar Creek Village (the “disputed customers”). The City of Coweta was providing water service to the disputed customers, and Wagoner–5 alleged that the City’s service to those customers violated § 1926(b).
The court disagreed with the City’s argument that the boundaries of Wagoner–5 were diminished by City’s annexation of the disputed customers, finding it inconsistent with the law construing § 1926(b) to prohibit municipalities from using their annexation of territory within a rural water district as a springboard for providing water service to residents within the district or to limit the water district’s services to the annexed area.
The Tenth Circuit previously had held that a rural water district may maintain claims against a municipality for curtailment after the district becomes indebted, even where the municipality began providing service to disputed properties prior to the district’s indebtedness.