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The “water war” is over: Fairfax County’s water utility, Fairfax Water, will purchase the neighboring water utility owned by the City of Falls Church.

The purchase agreement, achieved with the help of a federal mediator, brings an end to years of legal wrangling between the two jurisdictions about water rates and service areas.

“We are excited that we reached an understanding that will benefit all of the people served by these two water systems,” Fairfax Water Chairman Philip Allin said in a released statement. “Providing the highest quality water at the lowest rates continues to be our mission and we are delighted to add the 140,000 persons served by the Falls Church system to the nearly 1.7 million people in Northern Virginia we currently have the privilege of serving.”

The Falls Church City Council rejected a merger offer from Fairfax Water in August, saying that the proposal did not accurately value the city’s utility. The city was also suing the county regarding county legislation that caps water rates charged to county residents.

Falls Church’s water system already serves thousands of Fairfax County residents in the McLean, Merrifield and Tysons Corner areas, as well as all city residents.

According to released terms of the settlement, Fairfax Water will purchase the Falls Church water system for $40 million, but Falls Church will retain about $30 million in debt and pension obligations. Fairfax Water is guaranteeing employment for all of the city’s water system employees for at least three years, except for those terminated for cause.

It will take about a year to complete the merger but, once that process is complete, Fairfax Water is promising lower rates for current Falls Church customers. Falls Church’s current base rates are more than $1 more per 1,000 gallons than Fairfax Water, which charges $2.16 per 1,000 gallons.

Fairfax Water intends to have uniform rates across the system within two years, according to a press statement issued Tuesday afternoon. The systems are expected to become one legal entity by January 2014.

The merger will also bring an end to all litigation between the parties, although Falls Church’s most recent lawsuit will not be dismissed until the arrangement is final.