MELISSA -- Bryan Lavery's lifeline flows through a six-inch pipe. Hundreds of thousands of gallons of water pass through it each month, fueling growth of more than a million greenhouse plants shipped to stores in a seven-state area. These days, however, it's growth of a different kind on the nursery owner's mind.
He and about 2,000 of his neighbors are fighting to prevent a hostile takeover of their rural water cooperative by a group of adjacent cities. Officials in those cities are critical of the corporation's capacity to handle development in one of Texas' fastest-growing counties.
"It's the age-old story of pressure by cities and developers, and them steamrolling everything that gets in their path, including a little old rural water district," says Duke Monson, a computer programmer with EDS and chairman of the water corporation's board.
At issue is an attempt by the cities of Melissa and McKinney to block a $1.42 million U.S. Department of Agriculture loan intended for the rural North Collin Water Supply Corporation. The cities have challenged the loan in federal court, saying it could effectively prevent their ability to take over the territory they need to grow for the next 40 years. Either the nonprofit water corporation or the USDA could deny any land acquisition attempt if the loan is approved. A separate attempt to decertify the water utility has been filed with the Texas Commission on Environmental Quality.
Like thirsty impatiens wilting under the hot Texas sun, cities fear their development dreams will wither on the 48,500 acres of blackland prairie the rural corporation controls.
"Water today is the most precious commodity on earth, more precious than oil. You have to be able to supply water to grow, nourish your body, and to bring industry and jobs," says Melissa Mayor David Dorman, presiding over a town expecting tenfold growth in coming years. "Economically, this could be disastrous for all of Collin County. You're setting the precedent for the U.S. government to control [local] growth."
Under Texas law, a city that annexes land served by a rural water supply company can take over water service by paying fair market value, which is determined through a process similar to the condemnation of land. But if the 40-year federal loan is approved, any land acquisition attempt could be denied. Testimony from both sides wrapped up Friday in Sherman, and a federal judge is expected to rule on the case at the end of this month.
"Once the loan is there, we could be stuck for 40 years," says McKinney City Attorney Mark Houser. "It can change population projections, density and growth. We're not making this up."
In addition to the loan, the USDA has approved an $850,000 grant for the rural corporation -- money that corporation officials say is needed to upgrade infrastructure for existing and anticipated customers. Unlike most cities, the rural water corporation provides no sewer service -- effectively limiting developers to one-acre or larger lots that can accommodate septic systems.
Federal officials, however, say they're dubious of city claims of injury. They say money, not growth, is the issue as cities try to take over the rural land at a bargain price. And if they're successful, some worry a diminished customer base for the rural supply corporation could force cuts in service or an increase in rates, affecting customers like Mr. Lavery.
Moreover, some say that if cities are allowed to sue the government to stop the rural loans, a program that has pumped tens of millions of dollars into rural economies could be jeopardized. "If the cities are right, and if they can sue us and stop the loan, we will have a much more difficult time making these rural water loans anywhere in the state. They're jeopardizing the program," says Assistant U.S. Attorney Christine Biederman, representing the USDA.
The USDA loan program is intended to help rural areas and towns with populations of less than 10,000 create reliable, safe water systems. "Texas is a state that's rapidly urbanizing, but there are huge portions that are still rural and will be for the foreseeable future," Ms. Biederman said. "These cities want to be able to provide water because that's how they make their money ... but they admit in court they're not ready to serve all these people. In the meantime, you would have rural people who can't take a decent shower because they don't have adequate water pressure."
Now on the frontiers of sprawl, these cities were the hinterlands back when the North Collin rural water corporation started in 1970. It was one of hundreds of rural water corporations spread throughout the state to provide safe, adequate water to isolated areas. And as similar utility programs like rural electric cooperatives were largely killed off by deregulation, the water districts have remained in a regulated environment.
The North Collin Water Supply Corporation now includes five employees, a handful of elevated storage tanks, one water tower and 185 miles of pipe buried beneath land becoming ripe for development. The corporation can't levy taxes or sell bonds, so its ability to upgrade infrastructure is largely dependent on income from water, programs like the USDA loans and developer-financed work.
Cities contend they can provide better, more efficient service to the territory when it becomes something more than rural. Farmers and ranchers now share much of the land in dispute with convenience stores and businesses. Melissa City Hall still gets its water from the rural district.
"This is a battle that will become more and more prevalent in the state as it becomes more urban. This one can set some precedence," says Douglass Box, Melissa city administrator. "As we become more urban, their part [the role of the rural corporation] becomes smaller and smaller until they become a non-player."
Last year, the cities and water corporation reached what they thought was a final settlement to the dispute. Cities agreed to pay $95 per acre of raw land for the rural territory with an increased price for land where existing customers and infrastructure exist, according to a copy of the settlement.
The USDA, however, refused to back the agreement. The agency says it would render the water supply corporation ineligible for the loan. "We need that loan real bad to hold the cost down for service to our customers," says Allen Knight, system manager for the water corporation.
Financial stakes are high for the cities as well. Melissa and McKinney have already spent hundreds of thousands of dollars fighting the case, city officials say. Both cities have also begun delivering water to developments in the rural water district's territory -- leaving them potentially vulnerable to an unfavorable decision from the court or the TCEQ.
"All I can tell you is that the cities will prevail," said Mr. Dorman, the Melissa mayor. "We will continue to fight even if have to go all the way to the Supreme Court."