When IBP opened up its Waterloo plant in May 1990, the company and the city of Waterloo could not have envisioned some of the problems that arose from it. One of the major problems that IBP and the city would become involved in was the sewer rates that IBP would have to pay. In 1996 IBP filed suit against the city of Waterloo, claiming that it was being singled out to pay for a new industrial wastewater treatment plant. The city claimed that IBP owed them about $7 million for improvements and costs because the city needed to meet new "ammonia nitrogen" standards imposed by state and federal environmental agencies. The plant acknowledged that the company’s sewer agreement of 1989 required them to pay for unexpected changes in treatment standards; however, IBP argued that ammonia nitrogen was an already known problem. According to IBP attorney Dennis Ogden, the treatment problem was one that was "grandfathered into the agreement" and that "everybody knew that the ammonia standards were going to change." He also argued that "they were getting insurances from the city they could treat waste, they were sure of it, because they wanted IBP to come to the city so bad they could taste it." In response to Ogden, City Attorney Jim Walsh argued the city could not have "grandfathered in" ammonia standards in 1989 because they did not learn about the standards until 1990. Walsh went on to say, "They could have put a clause in that said 'except ammonia'. It isn't there." In August of 1998, Federal Magistrate Judge John A. Jarvey said he was siding with the city in its lawsuit ,claiming IBP bears some of the financial responsibility for the wastewater treatment plant. Jarvey went on to say that IBP and Waterloo should settle the suit themselves because they would have to work together on other issues as long as they were in town.

    On October 29, 1998, Waterloo city council members voted unanimously to settle the lawsuit by accepting a $3 million cash payment over the next three years and an increase in the plant's sewer rates, totaling $3.1 million through 2014. The plant was forced to pay $1 million right away and on the memo of the check it was written for "good working relations." It is the hope of current Waterloo Mayor John Rooff that the city and IBP can put the dispute behind and have a good working relationship. IBP officials were also relieved to have the matter put behind them and were pleased with the terms of the agreement. IBP assistant vice president in Waterloo, Jim Schmitz, said, "While this agreement will add to our expense, it is reasonable and should not significantly detract from our efforts to keep this plant competitive."