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Sponsor seeks statutory fix after North Dakota Supreme Court ruling threatens decades‑old rural water agreements
Summary
House Bill 15‑37, introduced by Representative Emily O’Brien, would clarify North Dakota law to protect long‑standing water service agreements between cities and rural water districts after a Supreme Court decision found certain contracts void when state financing agencies were not parties.
Representative Emily O’Brien (sponsor) urged the Political Subdivisions Committee to adopt House Bill 15‑37 to resolve legal uncertainty created by a recent North Dakota Supreme Court ruling. The ruling held that, under North Dakota Century Code section 6‑09.4‑22, agreements addressing service and territory may be "invalid and unenforceable" when the public finance authority or other state agency that provided loan financing was not a party. The decision potentially voided long‑standing agreements that communities and rural water districts have relied on for decades.
Sponsor’s framing and case history
Representative O’Brien described protracted negotiations, executed resolutions and longstanding performance by the parties in a case involving the City of Grand Forks and a rural water entity (later merged into East Central Regional Water District). Contracts executed in 1999 and earlier involved negotiated payments and shared expectations for existing and future customers; loans backed by USDA and the Bank of North Dakota were repaid for years while the parties performed under the agreement. In a 2024 decision, however, the North Dakota Supreme Court interpreted the statute to mean an agreement lacking state agency participation is void ab initio — effectively treating executed, performed agreements as if they never existed.
Why it matters: Representative O’Brien and city counsel warned that the Supreme Court interpretation threatens multiple long‑standing intergovernmental agreements statewide, could jeopardize grant and loan security, and has produced active litigation seeking damages and transfer of water infrastructure. The Grand Forks case named in committee materials alleges more than $62 million in damages and requests transfer of pipes, meters and related infrastructure.
Amendment and sponsor goals
O’Brien presented a drafting amendment that would (a) remove a narrow reference to drinking water law, (b) allow long‑standing agreements to stand so long as they contain adequate safeguards for repayment of bonds issued by the Public Finance Authority or other state financing entities, (c) specify that only the Public Finance Authority or the state agency financing the loan may enforce the statute’s protections (preventing a third party political subdivision from using the statute to invalidate an agreement), and (d) make the section retroactive to the statute’s 1997 enactment date to avoid reopening decades of settled agreements.
Supporters and opposition
The City of Grand Forks’ attorney described the long negotiations, the executed agreements, the $260,000 payment the city made under the 1999 agreement and the city’s reliance on the contract for twenty years. Grand Forks argued the Supreme Court’s reading of the statute produces inequitable results for municipalities that negotiated and performed in good faith.
The Public Finance Authority (PFA) submitted written testimony opposing the proposed changes. Diane Amant, PFA executive director, told the committee that removing the current requirement that the PFA (or the state lender) be a party to agreements could jeopardize bond security and the state’s bond rating if protections for timely payment of outstanding bonds are not preserved. The PFA’s attorneys recommended no changes to the statute.
North Dakota Rural Water opposed the bill as introduced; its executive director warned that the changes could remove a water district’s ability to enforce protections for its service territory (subsection 3 in the introduced draft would have limited enforcement to the state lender). Rural Water also urged caution on retroactive legislation and said the statutory language was designed to protect loans, not to change retroactively what parties negotiated.
Where it stands: Committee testimony revealed sharp disagreement about whether the amendment preserves lenders’ security while protecting cities and rural water districts that negotiated and performed under written agreements. No final committee vote was recorded in the transcript; the committee recessed and planned to reconvene for further consideration.
Ending: The committee left the hearing open for additional discussion; sponsor and stakeholders were asked to work on language to protect state financing interests while avoiding the unintended consequence of making long‑term agreements void.
