Rehearing Denied January 15, 2020
FROM THE BENTON COUNTY CIRCUIT COURT [NO. 04CV-17-1852],
HONORABLE DOUG SCHRANTZ, JUDGE
& Co., PLLC, by: Tim Cullen, for appellant.
Miller, Kieklak, Eichmann & Brown, P.A., by: Morgan S.
Doughty, Bentonville, Thomas N. Kieklak, Springdale, and R.
Justin Eichmann, for appellees.
Appellant City of Gravette appeals from the October 1, 2018
Benton County Circuit Courts order granting appellees City
of Centerton and Centerton Waterworks and Sewer Commissions
motion for summary judgment. On appeal, the City of Gravette
argues that the circuit court erred as a matter of law in
holding that federal law prevents it from acquiring Centerton
water facilities within the annexed area. We affirm.
April 2005, the City of Centerton and Centerton Waterworks
and Sewer Commission (Centerton) entered into a
water-system-acquisition agreement with the Benton County
Rural Development Authority. As a result, Centerton began
providing water services to an area located within the City
of Gravette (Gravette). By entering into the agreement,
Centerton assumed liability for an outstanding
rural-development loan that Benton County had through the
United States Department of Agriculture (USDA). In June 2005,
Centerton borrowed additional funds directly from the USDA to
finance the water system. Centertons debt to the USDA is
secured by Centertons water- and sewer-department revenues,
which consist of the rates that the water customers pay.
26, 2017, Gravette notified Centerton that it intended to
acquire Centertons water-service properties, facilities, and
customers within the city limits of Gravette pursuant to
Arkansas Code Annotated section 14-208-102 (Supp. 2017). This
statute provides in pertinent part that
(a)(1)(A) Unless otherwise agreed between a municipality that
owns or operates a water service and a rural water service,
the inclusion by annexation of any part of the assigned
service area of a rural water service within the boundaries
of any Arkansas municipality shall not in any respect impair
or affect the rights of the rural water service to continue
operations and extend water service throughout any part of
its assigned service area unless a municipality that owns or
operates a water service elects to purchase from the rural
water service all customers, distribution properties, and
facilities located within the municipality reasonably
utilized or reasonably necessary to serve customers of the
rural water service within the annexed areas under this
chapter, excluding water sources, treatment plants, and
storage serving customers outside the annexed areas.
(d) This chapter shall not limit applicable federal law,
including without limitation 7 U.S.C. § 1926(b).
the statute, Gravettes notice to Centerton included a
request to engage in good-faith negotiations about the
acquisition. Centerton responded that it did not desire to
enter into negotiations. It acknowledged the Arkansas statute
but claimed that it was inapplicable because Centertons
water system was indebted to the USDA entitling it to 7
U.S.C. § 1926(b) protection. This ...