Metro growth promises opportunity, conflicts for rural water utility
Xenia Rural Water System is trying to hold onto service territory as the Des Moines metro expands. (Photo via Canva)
The expansion of Des Moines’ suburbs and nearby communities has provided a rich opportunity for the Xenia Rural Water District to add new, densely clustered customers.
The water utility serves about 10,700 customers in parts of 11 counties west and north of Des Moines. That includes those in sparsely populated areas and, more recently, suburban residents. It’s less costly to provide water to thick residential areas than to isolated farmhouses.
But the growth of those cities into Xenia’s service area have prompted territorial disputes and two federal lawsuits.
“They just assume that as they grow and expand their borders and annex territory that they get the right to serve those customers with all of their own utilities,” said Royce Hammitt, Xenia’s chief executive. “And in fact, that’s not usually the case.”
By state law, rural water utilities are generally precluded from providing service within two miles of cities, unless those cities agree to it.
But Xenia has used rural development loans from the U.S. Department of Agriculture — and still owes money on them — to install its service lines in rural areas. That has given the utility a measure of protection against losing its territory as cites begin to gobble up those properties.
“If you have indebtedness to the federal government, particularly rural water, rural development, your assets are protected from being taken, essentially,” Hammitt said.
That depends on whether the rural utilities had already installed pipes or other infrastructure in the disputed areas. If there is no existing infrastructure, cities are entitled to serve customers within two miles of their boundaries, the Iowa Supreme Court decided in 2021.
That clash between Xenia and metro-area cities has played out twice in court, most recently resulting in a settlement with Johnston in December.
That lawsuit was filed by Xenia in 2018 after Johnston said it would annex about 550 acres of land and provide its own water service to an area that Xenia claimed as its own. The lawsuit resulted in a partitioning of the disputed area and a $600,000 payment by Johnston to Xenia.
“The City of Johnston and Xenia Rural Water District look forward to a cooperative future and a collaborative approach to assuring continued economic growth and development for the Johnston community,” the city said in a press release.
Also last year, Xenia settled a lawsuit with Woodward over who would serve water to the city’s undeveloped business park near Iowa Highway 141. As part of a May agreement, the city has the option to buy the right to serve water to that 300-acre area for $2,000 per acre, and Xenia will supply water to the Woodward Resource Center, which houses children and adults with severe intellectual disabilities and behavioral disorders and lies within city limits.
Hammitt said Xenia has an agreement with Granger to sell part of Xenia’s territory to the city, and the utility is in talks with Dallas Center over service boundaries.
“The reason that we want to fight for some territories is because it has a high value, a high number of customers per mile of pipe,” Hammitt said. “Whereas out in the rural areas, you have a low number of customers per mile of pipe. And so we don’t want to burden our rural customers by giving up the high value high dollar areas where we don’t have to.”
He said the result of retaining higher-density areas will be lower water costs for the rural residents.
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