H.F. _____ 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 2004YC (2) 85 aw/sc 1/ 7

H.F. _____ 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 2004YC (2) 85 aw/sc 2/ 7

H.F. _____ 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. NEW SECTION . 357A.4A Notice of intent to apply for 5 a federal loan —— requirements. 6 1. a. No later than ninety days prior to a rural water 7 district or rural water association filing an application for 8 a federal loan or a federal loan extension that directly or 9 indirectly creates an exclusive right, franchise, or privilege 10 or limits, curtails, or preempts rights or privileges of a 11 city to serve current or future water customers if the city 12 is within two miles of the proposed service area or estimated 13 growth area of the district or association, the district or 14 association shall send by certified mail a notice of intent to 15 apply for such a loan or loan extension to each such city. 16 b. The notice shall include the purpose of the loan or loan 17 extension, the amount of the requested loan or loan extension, 18 the estimated length of the loan or loan extension term, and 19 the estimated growth needs of the area that the rural water 20 district or rural water association intends to serve during 21 the estimated loan or loan extension term. A map of the 22 area shall be attached to the notice. The notice shall also 23 describe whether existing or future industrial, commercial, 24 or institutional water users within two miles of the proposed 25 service area or estimated growth area would be economically 26 and adequately served, as that phrase is defined in section 27 357A.16, by the district or association. 28 2. Any city within two miles of a proposed service area 29 or estimated growth area described in subsection 1 shall have 30 sixty days to respond to the rural water district or rural 31 water association and to state the city’s intent to provide 32 service within four years to an area within the proposed 33 service area or estimated growth area. Any area to be served 34 by a city, as well as any current or future customers located 35 -3- LSB 2004YC (2) 85 aw/sc 3/ 7

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

H.F. _____ the sufficient provision of water and infrastructure for fire 1 protection and fire suppression, and the ability to provide any 2 reasonably anticipated future water service needs as specified 3 by the owners of the real property. 4 Sec. 6. Section 357A.21, Code 2013, is amended to read as 5 follows: 6 357A.21 Annexation Condemnation of facilities and annexation 7 of land by a city —— arbitration. 8 1. A rural water district or rural water association, or 9 a water district organized under this chapter , chapter 357 , 10 499 , or 504 shall be fairly compensated for losses resulting 11 from annexation distribution facilities acquired by a city . 12 Where such distribution facilities located within the corporate 13 limits of a city are acquired by the city through condemnation, 14 compensation shall be based upon the original cost of the 15 distribution facilities less depreciation, but shall not be 16 less than the remaining portion of the original debt for the 17 distribution facilities being acquired nor more than the 18 original cost of the distribution facilities. A city may 19 provide compensation to a district or association for a service 20 that was proposed or intended to be provided by the district or 21 association at the time of the acquisition. 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 by 27 the water district or association and located within the city 28 shall be retained by the water district or association for the 29 purpose of transporting water to customers outside the city. 30 If an agreement is not reached within ninety days, the issues 31 may be submitted to arbitration. If submitted, an arbitrator 32 shall be selected by a committee which includes one member of 33 the governing body of the city or its designee, one member 34 of the water district’s or association’s governing board of 35 -5- LSB 2004YC (2) 85 aw/sc 5/ 7

H.F. _____ directors or trustees or its designee, and a disinterested 1 party selected by the other two members of the committee. A 2 list of qualified arbitrators may be obtained from the American 3 arbitration association or other recognized arbitration 4 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 takings. 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 -6- LSB 2004YC (2) 85 aw/sc 6/ 7

H.F. _____ 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 requires that a rural water district or rural water 4 association provide a city within two miles of a proposed 5 service area or estimated growth area with notice of an 6 application for a federal loan or federal loan extension. The 7 district or association is required to provide such notice no 8 later than 90 days prior to filing such an application. The 9 notice is required to include specified information regarding 10 the loan or loan extension, loan term, and certain information 11 pertaining to the proposed service area or estimated growth 12 area. The bill provides that any city within two miles of 13 the proposed service area or estimated growth area shall have 14 60 days to respond to the notice and state the city’s intent 15 to provide service within four years to an area within the 16 proposed service area or estimated growth area. The bill 17 requires that any area in which a city has stated an intent 18 to provide service shall not be included in the district’s or 19 association’s water plan or be used for any purposes related to 20 a federal loan or loan extension. 21 The bill provides a definition for the term “economically or 22 adequately served” related to the provision of water service 23 by a district or association. 24 Current law provides that a water district be compensated 25 for losses resulting from annexation. The bill strikes that 26 provision and provides that a district be compensated for 27 distribution facilities acquired by a city through condemnation 28 procedures and provides a formula for determining the amount 29 of compensation to be paid. The bill further provides that a 30 city may provide compensation to a district or association for 31 service that was proposed or intended to be provided by the 32 district or association at the time of acquisition. 33 -7- LSB 2004YC (2) 85 aw/sc 7/ 7