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C The Corps started to provide drinking water to Arlington County and Falls Church in the late 's, when those communities were urbanizing and the economy of Fairfax County was still based on farming. Falls Church agreed to provide drinking water to nearby parcels located in Fairfax County. Fairfax County had 26 fragmented water systems in , rather than the centralized county-run Fairfax Water system of today.

Twenty were private, and six were publicly owned. Most landowners relied upon wells, but groundwater supplies were limited. One of the separate water systems meeting the needs of Fairfax residents was the municipal utility of the City of Falls Church, which was supplied from the Potomac River via the District of Columbia. The Town of Falls Church had become an independent "city" in Separating from Fairfax County meant local taxes could be directed to improve the local schools, rather than used to finance new facilities in other areas of Fairfax County far from Falls Church.

The independent city attempted to grow beyond its old town boundaries by annexing territory of Fairfax County, expanding the tax base of Falls Church while shrinking the county's revenue as well as the county's land. The county resisted changes in the boundaries of Falls Church, since annexation would transfer voters and tax-generating properties out of the county's jurisdiction. Virginia judges ruled in favor of Fairfax County, rejected the city's annexation proposals.

Their decision froze the size of Falls Church, but did not limit the ability of the city to expand its network of pipes further into Fairfax County to supply more customers with water. The goal was to improve the availability of water and to standardize rates. Centralizing control over the water supply also gave county officials more ability to shape the pattern and timing of new suburban subdivisions.

State court decisions limited Fairfax County's ability to downzone private land on the western side of the county, in order to steer growth to areas where public services could be provided at lower cost. Control over the water supply was another tool that could be used in the county's negotiations with developers. From the beginning, all members of the water utility's board have been appointed by the elected supervisors of Fairfax County.

In Fairfax County lacked a reliable water supply, and it lacked a system to distribute drinking water throughout the county. The Fairfax County Water Authority began operations by purchasing the private system that supplied Annandale. When the Federal government decided to build Dulles International Airport on the western edge of Fairfax County, the county and the City of Falls Church negotiated a deal that was beneficial to both political jurisdictions.

The best source of water for Dulles was the Potomac River, and the District of Columbia had a drinking water plant just across the river which could supply the airport. The cost of building a pipe underneath the river was high, but Falls Church was constructing one which would have excess capacity for the next decade. The county agreed to pay for use of the pipe and to purchase water from Falls Church. In , to address the county's concerns that Falls Church would expand its water system too far and compete with the Fairfax County Water Authority, the city signed a year agreement that defined a smaller area of the county to which it would supply water.

The county's water authority agreed that it would not provide service to customers within that area, ensuring that the City of Falls Church water utility would gain all the customers there. Under the service agreement between Fairfax and Falls Church, county residents and businesses near Falls Church were supplied with water that had been diverted from the Potomac River above Great Falls, piped to the Dalecarlia Reservoir on the edge of the District of Columbia, and then piped across the Potomac River to Falls Church.

New development on vacant land near Falls Church increased property tax revenues for Fairfax County, while the City of Falls Church got new customers willing to pay a premium price for its water. From an engineering perspective, it was easy for Falls Church to expand its existing distribution system to supply water to the new developments - though the judges responsible for boundary adjustments would not allow the city to annex that land.

Dark blue lines are Fairfax Water water mains. City of Falls Church January 9, Individual homeowners might drill a well and rely upon groundwater, but developers of large subdivisions and commercial properties in the 's and 's needed a more-reliable supply. Property owners outside the service area of the Falls Church utility, and equivalent areas in Fairfax County serviced by Vienna and the City of Fairfax, had to wait until the Fairfax County Water Authority built a new set of pipes to that particular undeveloped section of the county.

By , the City of Falls Church system covered 33 square miles and provided five billion gallons of water each year for , people. Statistics for the city's system included: City residents benefitted from the excess revenues generated by the city's water sales outside the city's boundaries. Each year, the city's utility profits were transferred to the city's General Fund, allowing the City Council to set lower tax rates.

The subsidy from the city's water utility reduced the property taxes that city residents otherwise would have had to pay, in order to operate the city's school system and provide other services inside Falls Church. As Fairfax County grew rapidly after , the county utility's infrastructure began to overlap the area being serviced by the Falls Church water utility.

The year agreement expired in , without generating any action. Falls Church officials appparently assumed the city would maintain exclusive rights to provide water to developing parcels in its traditional service area within Fairfax County, and no one proposed to define specific boundaries for the city's authorized service area outside the city's boundaries.

Falls Church water service area re-selling water from separate suppliers Source: Metropolitan Washington Council of Governments. Developers did not complain about the city's water charges, even though the Falls Church rates were higher than the rates charged by Fairfax Water. Different utilities increased rates at separate times after , but the difference in cost between jurisdictions remained significant.

Why were developers satisfied with the relatively high cost of water from Falls Church? First, for many years the city system was the only source of supply in that portion of eastern Fairfax County. Developers financing projects on borrowed money could eliminate delay by purchasing water directly from the city. Speculating that the county water system might someday expand to the parcel being developed could involve many years of waiting Also, developers recognized that Falls Church charged a low initial cost for hookups to its water system.

The low hookup fee reduced the construction costs of new buildings. Developers benefitted from the low up-front costs. In , Fairfax County decided to break the pattern. Fairfax Water offered to provide drinking water to developers in Merrifield, and near the Dunn Loring Metro station. That area was in the county, but also in the traditional water service district for Falls Church. Falls Church provided water to the area in green Source: Fairfax Water, Water Quality.

County officials apparently negotiated for proffers for new projects, and tried to commit developers to connect to the Fairfax Water system. In proffer negotiations in advance of a rezoning approval, Fairfax County officials had many opportunities to make concessions on transportation requirements, impact fees for new schools, or other elements that would offset the higher hookup costs to the Fairfax Water system.

Had Fairfax Water been a regional rather than a county-controlled utility, such tradeoffs would have been harder to arrange. The city objected to the county's efforts to "steal" potential customers and reduce the future profits of the city's water utility. In February, , Falls Church filed a Federal lawsuit. It claimed that arrangements with the US Army Corps of Engineers to purchase Washington Aqueduct water provided the city with an exclusive right to sell water within a portion of Fairfax County.

In May, , a Federal judge rejected the city's various claims to exclusive utility service rights. In April , an appeals court affirmed that decision. Then the water war escalated. Falls Church refused to allow the developer of the Halstead Project in Merrifield to move city water lines, in order to connect to Fairfax Water.

The county accused the city of violating the Virginia Antitrust Act, by blocking legitimate competition between two possible suppliers for water at the Halstead Project. On January 6, , Fairfax Water won a clear victory. A state judge ruled that Falls Church's transfer of water utility profits to the General Fund was an unconstitutional tax on people who lived outside the boundaries of the city. The decision blocked all future transfers, and called into question the legality of the October transfer.

Both parties agreed to allow competition for customers in Fairfax County; Falls Church would no longer object to its pipes being moved by customers seeking to connect to Fairfax Water. Falls Church appealed the ruling that blocked transfer of utility profits to its General Fund - and on September 1, the Virginia Supreme Court ruled against the city. By choosing to pick a legal fight over who could service customers in Fairfax County, in hopes of increasing future revenues, Falls Church lost its existing ability to impose an extra-territorial tax on Fairfax County customers.

The state court saw the dispute as Fairfax Water described the situation, in its objections to the city's appeal: This is a dispute about whether a city-run water system can inflate its water rates in order to divert surplus revenues to the general fund so as to reduce local property taxes. The answer was provided by the court system: Falls Church lost the water war with Fairfax.

To comply with the judge's ruling, city residents would have to pay a price: Falls Church officials resisted making that hard choice - no politician wants to raise taxes or reduce services. After contracting with a water rate consultant, the city claimed it had to establish new reserve funds and expand the water system infrastructure to service new customers at Tysons Corner. Since most of the city's water customers lived in Fairfax County, most of the increased revenues would come from county residents who could not vote in Falls Church elections.

Fairfax County decided to set water rates for all county residents, no matter who supplied the water, and to prohibit utilities other than Fairfax Water from servicing new customers in the county. The utility rate control ordinance said: Effective at This subsection does not apply to any rate, fee or charge by any city or town for public water service within the territorial limits of that city or town located within the boundaries of Fairfax County, Virginia.

This subsection also does not apply to any public water service provider whose rates, fees, and charges to users within Fairfax County are regulated by the State Corporation Commission. Opposition to the county monopoly came from Falls Church, of course. The city feared it would be unable to recover the investment to upgrade water facilities in anticipation of new demand as Tysons Corner redevelops, creating "stranded costs. In addition, the developer of Tysons 2 Center noted that the existing water pipes for that development had been sized for future connections with Falls Church, and the new policy could require the developer to fund costs for duplicative infrastructure.

Tysons Corner area serviced by Falls Church water system Source: In early , Falls Church decided to escape the legal fight with Fairfax County by auctioning the city's water distribution and sewer system to the highest bidder. Negotiations failed to arrange a direct sale to the Fairfax County Water Authority Fairfax Water , because the county would not commit to paying anything for the infrastructure.

Just 24 hours before the auction to privatize the utility, after nine potential bidders had responded to the city's Expression of Interest including Fairfax Water , the Army Corps of Engineers changed the legal interpretation of its contract. The Corps decided that it would be unable to provide water to an investor-owned utility, and could only service a government-owned water distribution system.

The water distribution system, and the rate for water sold in the county by utilities other than Fairfax Water, could be resolved only after a court ruled on the county's utility rate control ordinance - or Plan B. Mediation was successful. An agreement for Falls Church to sell its water sytem to Fairfax County was announced on November 20, City of Falls Church, Water.

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