H.F. 516 Section 1. Section 357A.1, Code 2013, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 6A. “Rural water association” or 3 “association” means a rural water association organized and 4 incorporated as a cooperative association under chapter 499 or 5 as a nonprofit corporation under chapter 504. 6 Sec. 2. Section 357A.2, subsections 3 and 4, Code 2013, are 7 amended to read as follows: 8 3. a. Water services, other than water services provided as 9 of April 1, 1987, shall not be provided within two miles of the 10 limits of a city by a rural water district incorporated under 11 this chapter or chapter 504 except as provided in this section . 12 b. Water services, other than water services provided as 13 of July 1, 2013, shall not be provided within two miles of 14 the limits of a city by a rural water association, except as 15 otherwise provided for in this section. 16 4. a. A rural water district incorporated under this 17 chapter or chapter 504 may or rural water association shall 18 give notice of intent to provide water service to a new area 19 within two miles of a city or to replace or substantially 20 increase the capacity of existing facilities or infrastructure 21 within two miles of a city by submitting a water plan to the 22 city. If city water service is governed by a board of trustees 23 established under chapter 388, the water plan shall be filed 24 with the board of trustees. 25 b. The plan is only required to shall indicate the area 26 within two miles of the city which the rural water district or 27 rural water association intends to serve within four years of 28 the date the plan is filed . 29 c. The plan shall describe whether federal financing of the 30 rural water district or rural water association may directly or 31 indirectly create an exclusive right, franchise, or privilege. 32 The plan shall also describe whether such financing may limit, 33 curtail, or preempt rights or privileges of a city to serve 34 current or future customers. The plan shall further describe 35 -1- LSB 2004HV (2) 85 aw/sc 1/ 6

H.F. 516 whether the district or association facilities will provide 1 sufficient capacity for fire protection services to be provided 2 in the area within two miles of a city. The plan shall include 3 the number of customers that existing facilities are meant to 4 serve or, in the case of notification of intent to replace or 5 substantially increase capacity, the number of new customers to 6 be served by replaced or expanded facilities. 7 d. If the city fails to respond to the rural water 8 district’s such a plan within ninety days of receipt of the 9 plan, the rural water district or rural water association may 10 provide service in the area designated in the plan. The city 11 may inform the rural water district or association within 12 ninety days of receipt of the plan that the city requires 13 additional time or information to study the question of 14 providing water service outside the limits of the city. If 15 additional time or information is required, the city shall 16 respond to the rural water district’s plan within one hundred 17 eighty days of receipt of the plan. 18 e. In responding to the plan, the city may waive its right 19 to provide water service within the areas designated for 20 service by the rural water district or rural water association , 21 or the city may reserve the right to provide water service in 22 some or all of the areas which the rural water district or 23 association intends to serve. If the city reserves the right 24 to provide water service within some or all of the areas which 25 the rural water district or association intends to serve, the 26 city shall provide service within four years of receipt of the 27 plan. The city may rescind a waiver after four years from the 28 date the plan is filed for any area in which the district or 29 association has not provided service. 30 f. This section does not preclude a city from providing 31 water service in an area which is annexed by the city 32 accordance with section 357A.21 . 33 Sec. 3. Section 357A.2, Code 2013, is amended by adding the 34 following new subsection: 35 -2- LSB 2004HV (2) 85 aw/sc 2/ 6

H.F. 516 NEW SUBSECTION . 5. A city shall compensate a rural 1 water district or rural water association for any existing 2 facilities displaced by the city’s provision of water service 3 in accordance with section 357A.21. 4 Sec. 4. Section 357A.16, Code 2013, is amended to read as 5 follows: 6 357A.16 Detaching real property from a district or 7 association . 8 1. If it becomes apparent that any real property included 9 within a rural water district or a rural water association 10 cannot economically or adequately be served by the facilities 11 of the district or association , the owners of the real property 12 may file with the auditor a petition to the supervisors 13 requesting that the real property be detached from the district 14 or association . The petition shall: 15 1. a. Describe by section, or fraction thereof, and by 16 township and range, the real property which it is proposed 17 to detach from the rural water district or rural water 18 association . 19 2. b. State that the real property cannot economically 20 or adequately be served by the facilities of the rural water 21 district or rural water association , and that it is not 22 feasible for the district or association to enlarge or extend 23 its facilities so as to economically and adequately serve the 24 real property. 25 3. c. Be signed by the owners of all the real property 26 which it is desired to detach from the rural water district or 27 rural water association . 28 2. For the purposes of this section, “economically or 29 adequately served” means that the facilities of the rural water 30 district or rural water association do not create an impediment 31 to economic development and includes but is not limited 32 to the district or association offering reasonable water 33 service rates to the owners of real property, the sufficient 34 provision of water and infrastructure for fire protection and 35 -3- LSB 2004HV (2) 85 aw/sc 3/ 6

H.F. 516 fire suppression, and the ability to provide any reasonably 1 anticipated future water service needs as specified by the 2 owners of the real property. 3 Sec. 5. Section 357A.21, Code 2013, is amended to read as 4 follows: 5 357A.21 Annexation Buyout of facilities and annexation of 6 land by a city —— arbitration. 7 1. A rural water district or rural water association, or 8 a water district organized under this chapter , chapter 357 , 9 499 , or chapter 504 shall be fairly compensated for losses 10 resulting from annexation distribution facilities acquired by 11 a city . Where such distribution facilities located within 12 the corporate limits of a city are acquired by the city 13 through a buyout, fair compensation shall be the original 14 cost of the distribution facilities plus an amount not to 15 exceed the expected losses to net revenue of the district or 16 association over a ten-year period based upon the district’s 17 or association’s most recent audit preceding such a buyout. 18 For the purposes of this subsection, expected losses to net 19 revenue shall be based upon revenue received by the district or 20 association from the sale of water to customers served by the 21 district or association that are included in such a buyout. 22 2. The If a city annexes territory containing facilities 23 owned by a district or association, the governing body of a 24 the city or the city’s water utility and the governing board 25 of directors or trustees of the water district or association 26 may agree to terms which provide that the facilities owned 27 by the water district or association and located within the 28 city shall be retained by the water district or association 29 for the purpose of transporting water to customers outside the 30 city. If an agreement is not reached within ninety days, the 31 issues may be submitted to mediation under chapter 679C or to 32 arbitration. If submitted, an arbitrator shall be selected by 33 a committee which includes one member of the governing body of 34 the city or its designee, one member of the water district’s or 35 -4- LSB 2004HV (2) 85 aw/sc 4/ 6

H.F. 516 association’s governing board of directors or trustees or its 1 designee, and a disinterested party selected by the other two 2 members of the committee. A list of qualified arbitrators may 3 be obtained from the American arbitration association or other 4 recognized arbitration organization or association. 5 EXPLANATION 6 This bill relates to rural water providers by making 7 changes to water service requirements and changes related to 8 compensation for certain facilities acquisitions. 9 The bill defines “rural water association”. 10 The bill places certain limitations on the provision of 11 water services by rural water associations to areas that are 12 within two miles of a city after July 1, 2013. 13 Current law provides that a rural water district may provide 14 notice of intent to provide water service to a new area within 15 two miles of a city. The bill requires that rural water 16 associations also provide such notice. The bill requires that 17 notice also be provided by a district or association intending 18 to replace or substantially increase the capacity of existing 19 facilities within two miles of a city. The bill further 20 requires that if a city’s water service is governed by a board 21 of trustees that the notice shall be filed with the board. 22 Current law requires that a water plan submitted by a 23 rural water district only include an indication of the new 24 area that the district intends to serve. The bill requires 25 that a district or association indicate any such area that 26 the district or association intends to serve within four 27 years following the date that the plan is filed with a city. 28 Additionally, the plan is also required to provide information 29 relating to federal financing, fire protection service 30 capacity, and information related to the number of customers 31 served or intended to be served. 32 Current law provides that a city may waive its right to 33 provide water service within the areas designated in a water 34 plan. The bill provides that a city may rescind such a waiver 35 -5- LSB 2004HV (2) 85 aw/sc 5/ 6

H.F. 516 after four years following the date the water plan is filed 1 with the city, provided that the district or association has 2 not provided service to the area. 3 The bill provides a definition for the term “economically or 4 adequately served” related to the provision of water service 5 by a district or association. 6 The bill provides that a district be compensated for 7 distribution facilities acquired by a city through buyout 8 procedures and provides a formula for determining the amount 9 of compensation to be paid. The bill further provides that a 10 city may provide compensation to a district or association for 11 service that was proposed or intended to be provided by the 12 district or association at the time of acquisition. 13 The bill further provides that if the city or city utility 14 cannot reach an agreement for the retention of certain rights 15 by a district or association, that the issues may be submitted 16 to mediation. 17 -6- LSB 2004HV (2) 85 aw/sc 6/ 6