valley special utility district versus city of table of texas mr terri here on behalf of brain valley rushing to the district this case and his on the interpretation of the federal statute governing loans to rural utilities that statute is seven u s c one nine hundred twenty six b section one thousand twenty six b provides in mandatory language that the service provider made it available by the federally indebted utility in this case its green valley shall not be curtailed or limited by the encroachment of the city this court has called that protected service area sacrosanct and said that nine hundred twenty six b must be liberally construed to protect both the borrowing utility and the federal government as lender the district court below took the opposite approach the district court narrowly control construed the statute and did so in a way that harmed the borrower and effectively ceded service area saying if the phrase of a service is ambiguous then we should construed in favor of the utility under north alamo that's the argument that was what the district courts and that's what an eighth circuit court now we're not the answer my question was yes that's your argument and it's extreme you're saying it's not ambiguous and you win ok but if it is ambiguous you still win and that your argument is correct that's what liberal construed we don't need liberal construction of the statutes clear we don't need any construction we just read it liberal street construction comes up and we don't know what it means piney concerned with the borders i don't i'm sorry i think i'm just i'm finding it strange that you're arguing a point that you should agree with so that makes me think i'm missing something here i was not attempting to ok i do agree with you that the statute should be construed liberally to try to talk about in you of talking is that your position but i don't think that's what you mean to do let me give you a few basic facts about green valley in the situation before turning directly to the statute in cases green valley is a governmental utility provider under chapter sixty five of the texas work green valley operates as an integrated utility that has both a water and a waste water c c and from the public utility commission that's the state agency that regulates water utilities the waste water c c n was issued in two thousand and five the significance of that is under chapter thirteen of the water cabinet specifically thirteen hundred fifty the holder of the c c and has an exclusive right to one is that service under texas law which this court has held that making service available under a c c and is equivalent to making service available under nineteen twenty six very simple terms so what are we going to garbage in clean water what water comes to the faucet until it comes out of the faucet it's part of the water system it comes out of the water system drops down into the drain collected and then ultimately either disposed of the septic system or a conventional waste water treatment system so it's the integration of the water side and then the collection of the waste water and then in had some territory that's within green valleys c c n and the city doesn't serve any customers but is in attempting to buy a process called single certification green valley soup under nineteen twenty six b to stop this process and what services if the city seeking to provide to provide waste water it is not seeking to provide water the city's argument alone is only for the water that's correct that's correct and this gets to the basic interpretation is she the district court below said well water was all that was funded by the and so forth so it's the only service that's protected by a loan the problem with that there are several problems actually that the first one is that's just not what the statute says the statute doesn't object of course and obviously we look first to what the statute says which and you're entitled to spend whatever time you want arguing that but let's move on just to ask what walk why would it make sense for the statute to be read to keep the city from encroaching on services that are covered right along it's all about the purpose of nine hundred twenty six b so let me just say one word about the point language which is there's no limitation on the protection in one nine hundred twenty six b tying it to the funding but let me go directly to the purpose which is that's to protect the federally indebted borrower the federally indebted borrow has a service area that service area has customers the federal government as the lender wants to promote rural water development and knows that losing those customers for example if i own two houses and i have a mortgage on house a but not on house be but the mortgage on a house and a is protected by the value of house a why should we care about house be made so here why should the government and why should we construe a statute to have the government concerned about the whole utility when the utility is the loan is protected by the utilities proceeds from the water  reasons one is congress didn't limit consideration of what's protected to a court analyzing for instance whether there's adequate security it just the service it didn't issue and says well just because the because there was an organ from the city saying well you're adequately secured and you used the assets or scuse me the loan proceeds to fund this project but we're not dealing with that we're dealing with this project over here so we ought to be able to take this service territory over here the fourth circuit said no you don't look at how the proceeds of the loan were used what you look at is the policy underlying it which is protection i think i yeah but again the importance for this case wasn't the made available the service made available part it was can you look to the use of the loan proceeds to figure out whether some of the service areas protected same in a city you're not arguing that what's important about how that force circuit reached its determination is the policy question again the policy question is just critical to determining how to construe let me turn to that real quickly because i want to mention how this court has looked at that specific issue in the past mentioned two cases one of them is north alamo and i'm going to quote  directly the service area of a federal federally indebted water so ca she is sacrosanct and that the statute should be liberally interpreted to protect the federally indebted rural water associations from municipal encroachments now in bear creek which is another facility case this court clearly identified and i'm quoting now directly congressional mandate that local governments not encroach upon the service prohibit condemnation done it's been explicitly prohibit condemnation this court and in judge jones opinion she looks at this question well the statute doesn't explicitly address a city condemning in the city course was arguing well it's not the statute so we ought to be allowed to do it judge jones said no that's creating the you're trying to skim the cream you're trying to take the best customers from this rule utility take that best service area that hurts the poor and that's who's protected by the statute and ask a question what do we have any guidance somewhat similar service similar service if you read in the context of the statute all it means is it's just talking about the service that's being protected by the statute day and i'm saying no no i didn't touch it goes forward so that talks about the protection the city of lebanon matter short answers don't follow it but i'll give you several reasons why you shouldn't follow it and i do want to circle back to the policies but the the short answer to why you don't follow it is they just stand at the statutory purpose of nine hundred twenty six b on its head nine hundred twenty six b is about protecting the federally indebted borrower let me just read a couple of comments a city of eleven on may first of all they said that protecting that borrowers customers is irrelevant to maintaining the necessary economies of scale that's just nonsense i mean the more customers the more users the greater the economies of scale the more revenues per customer the lower cost per user that's exactly the purpose of nineteen twenty six b another thing that courts is that a city might be perhaps better situated to provide service that's not the congressional policy that's that's the court essentially saying we're looking at this policy and we don't agree with it and the circuit just went off the rails on that that's  versus the city of san in the district court below us applied the correct rules of statutory construction looking at this that it was the federal funding of the service that was required definition following the that if the service is an unclear phrase we've already said it should be liberally construed in liberal construction to me means you know you go in the favor of whoever they're in their liberty construed in favor of which is the utility so if we if the service is ambiguous even though you're probably didn't want to accept this to me it makes sense if the service is ambiguous and we've said liberal construction then we have to give it a kind structure and it favors  the statement ins and one of these other cases about liberal construction to protect the rural water association makes perfect sense but every case that uses that language including san juan dealt with a single funded service sam one was water some of these cases very few of them involve sewer at all almost all of the water cases one of the cases does involve sewer service and it's the city of live in the case where that was the protective service that was the one that had the low the answer to that question is when the statues looked just like the different court below say the article the service means something it means the singular service that comes also from the city of lebanon case that same paragraph that says these service also talks about a similar service respectfully it's not a similar service that you have a sewer system that is separate than the on that the loan was issued for in the revenues from the water service in this green valley special utility district are pledged to repay that loan the requirements of the statute and the sound reasons that congress set the system of are protected by limiting those anti competitive effects to the one sort of what do you do with the reference in the bear creek case to the word services which is plur i think it was unfortunate that it said that because it doesn't come from the stature and more importantly if the court  looks at the regulatory god lines which they make a passing reference to and the district court below in our brief cover the regulatory framework that talks about how the loans are created and how they are funded and it makes it very clear that it's the finance system that is subject to those in the tastings we think it's appropriate to look at that that sound sets torrie construction and that is the proper way to construct it it doesn't make any sense like you're on earth question to put apply these protections to something hilts one of the reasons that we follow of the appendix materials in this case was is that the argument being made in their brief sounded like well there's two systems here and they're saying listen they're integrated in they're running and we're billing everybody the no necessary summary judgment proof you heard doesn't thing we believe on the face of their amended complaint the fact that the funded service is only the water service is determined secondarily their reply brief concedes that they have a permit pending they have bought some property for a potential waste water system and they have a plan for sewer service i'm merely saying that those things that are in the breeze and are properly before this court is a matter of judicial notice in our view under the cases that we cite merely say that were congress authorized protections for a funded system and they have a proposed system that they want to bring online that is not funded this statute can't reasonably be construed to protect that there's nothing in the statute that leads to that conclusion so we don't need to address the question of the end greatest system because we don't have that's correct i think that that's right but i think that on the face of there may be complaint the fact that it's not funded is house even if your house is worth two hundred thousand dollars only mocking a hundred thousand they still want to know your other debts and this that the other because if you go to in the tank on other stuff it's going to affect the house so why isn't that true here let's put aside the issue of the extra record if evidence about whether they're in business or not if there's sewer system goes goes to tank sorry no pun intended if that happens then aren't you overall going to affect  the financial stability of this you tell any potential it put it out of business there boy harming the purpose of this whole federal funding i think that the courts answer there also lies in the regulatory framework that makes that clear the federal government doesn't fund these loans without an analysis of their viability the whole purpose of this system was is that funding is not generally available in the private sector lending market and so these rural associations need protection from competition because they're not highly favorable you know economic propositions and they get favorable loans but the federal government makes that choice there's nothing that prevents them from seeking a loan for the sewer service and then if they got one and they met the statutory criteria get to piggyback the protections against encroachment by the city a symbol oh on my sewer system that i play in the building the future and who knows whether or not they would qualify with only a proposed system for a loan but the congress set up a protection for loans in this course san juan decision makes it very clear that it is indeed hand in glove i'm protecting the association so they're viable in and doing it so that my loan gets repaid au or do you plan to stall the city's application to the p c in texas who would allow the city to be the sewer service provider they would continue to be the water service provider their loan which was issued and funniest on that basis those high and mighty pronouncements about congressional purpose had to do with either of water system or a sewer system in we don't contest them at all like i said as i started san juan the same one case north alamo versus they said that you said that you say the city proposed to put a sewer system and but the city sewer if you stop without a source and some of the drainage program but you're talking about a sewer system that also includes  you describe as a reclamation of water it is indeed why isn't that a summer system to water water because we believe that the word similar system used in the same thing about similar to the one that was funded by the but they have the obligation and the right to have a system in the middle of it in the so for this moment it's been many years since they got that it's occurred in the brief moment of the year i think it was maybe zero five zero six so it's been quite a while and but north alamo up with the c c in texas you have service but then they also said let's look and see what the service really is and they found that there were facilities they were accustomed to it was adequate nobody had ever asked for service and didn't get it and they were capable of extending service considerations from san juan even though it only dealt with the water system support the view that it's intended to be protecting the federally funded system what is incentive of the city to do want to propose to the op they want to do this  for good reasons when cities and personnel into their communities they intend to store them they want to serve them they want to have the sewer system they want to have the sewer revenue and as cities and areas grow and become more so that we believe that with the factual concessions that are in their brief about the proposed system that to the extent that this court thought was important that this additional revenue the support the federal lo that's not present in this case we don't think it's necessary we think since it's not overly funded it doesn't matter but there's not some attempt by the city to steal the currying off of the customer base and take advantage of that the statutory purpose that on recognizes and holes you know up as a high principle is still intact that these districts once they get federal funding can carry out their activities and cities can't come in and cherry pick their customer base that's what the bell author case was talking about in a little bit different context once again even though they're arguing that it solves this problem it was only about the water system in that area it wasn't about a combined system and what they said was when you have a federally funded loan and you have a water system we're not going to let the city come in and say well you only spent that money over here so we can come in on the other side of your area and put our water over there the elements come right straight out of your sand one case you have a federal loan and you have a service under that federal loan to provide those customers so the city stays away that's what will happen in the city of civil law in the green valley especially to build the district under what we think is the correct construction of the statute their water system remains intact for the full term of the federal loan and in the meantime if the public utility commission decides that the better service provider under its legal considerations would be the city of civil oh then the city provides the sewer service because we're not interfering with their federal long argument green valley would continue to be as it has been since two thousand and five under a state law blog ation to provide continuous inadequate service to those areas there was case that you would provide the same services that they want to provide or not yes and there's a good and be crystal clear on this they are absolutely cherry picking what they proposing would be you'd have john smith's house that would be getting water service for green valley and then wastewater service from the city they are absolutely cherry picking they're willing to take those best subdivisions as it became clear to green valley that there were subdivisions coming in it wasn't just going to be isolated farmhouses with with rural service green valley when in secure this wastewater c c m back in two thousand  which gave it an absolute mandatory duty under state law officer and i want to point this out because it's not really serving them right now they don't want septic tanks which is fine and i mean they're able to use or toilets and everything that's great but that's not really a sewer service understand we're to answer this question i'm going outside of the record evidence that because of the way that they've framed this on appeal and to answer your question i'll do that if you go back to the two thousand and six master plan and the green valley did they waited over a decade before coming to cherry pick again just some of the very nibble around the edges to skim the cream or cherry pick whatever analogy you want to use to take those best areas which is completely contrary to the being septimus yes with density more users more revenues more cities do when they act right and that's why congress said no you can't take the service area that's why the the providing wastewater services yes and your case in north alamo speaks directly to this point on i'm asking about a factor in your case i'm not talking about some other case is is your utility providing wastewater services now in the in the area in question ok the answer is yes state law duty to provide service is legal equivalent to making service available on the job getting sewer service or not ok where from your company not not by some case law that you are quote providing but if i'm john defterios living anywhere in any of this green