FALLS CITY -- The city of Falls City looks like it may be getting out of the water sales business -- at least in the long term.The city is in the middle of a 20-year contract to sell water to the nonprofit Luckiamute Domestic Water Cooperative (LDWC) that LDWC was interested in extending.However, it looks like that relationship may end in just two or three years, as Falls City has found a number of issues that limit its ability to sell water."At this time, we are trying to find a solution for all parties that leaves them with the least amount of impact," said Amber Mathiesen, Falls City's city administrator.For the city that means its ability to pursue grant funding for planning necessary water treatment plant upgrades. The city will need to apply to the state's Infrastructure Finance Authority (IFA) to explore options for an upgrade. To qualify for the funding, the city's water system needs to serve a certain amount of low-income residents. LDWC's customer base skews those numbers to the point where Falls City may not qualify.Falls City is also in danger of violating its water rights if sales to LDWC continue to grow."We are looking out for Falls City," Mathiesen said. "We will offer to enter into a contract that will allow them (LDWC) to update their infrastructure in a way that causes the least amount of impact to their customer base."Danny Jaffer, LDWC board chairman, said the board understands Falls City's situation and is working with it to finalize an agreement to ease out of the contract over the next few years. The exact length of time is yet to be determined."Falls City is in a situation where it needs to upgrade its water system," Jaffer said last week. "Us buying water from them isn't helping out."The cooperative serves a little more than 1,000 connections in Polk County; about 20 to 25 percent of those are served by Falls City water.The contract stipulates that LDWC can purchase as much as 5 million gallons per month of treated, drinkable water from the city. Last year, LDWC approached the city about an extension and the possibly of having access to more water.City staff examined the contract and found a number of concerns. First was a change made after the contract was approved by the city council in 2003 that limited the city's ability to raise rates charged to Luckiamute. But the financing and water rights concerns have come to overshadow that issue.Jaffer said LDWC already had a series of improvements scheduled, including boosting its water pumping capacity, adding another well and perhaps building a storage tank to increase water pressure to customers currently served with water purchased from Falls City.He said those projects will have to be completed sooner."We will not be spending more money; we just may be spending money sooner than we thought," he said.He added that it's unfortunate that the grant requirements have forced such a sudden change in the contract."It's not something that they anticipated and it's not something we anticipated," he said. "It's not anyone's fault."