Water District is an independent municipal water-supply district incorporated under the applicable laws of the state of Green. The district was created solely to supply water to an entirely new community in a recently developed area of Green. That new community is racially, ethnically, and socioeconomically diverse, and the community has never engaged in any discrimination against members of minority groups. The five-member, elected governing board of the newly created Water District contains two persons who are members of racial minority groups. At its first meeting, the governing board of Water District adopted a rule unqualifiedly setting aside 25% of all positions on the staff of the District and 25% of all contracts to be awarded by the District to members of racial minority groups. The purpose of the rule was "to help redress the historical discrimination against these groups in this country and to help them achieve economic parity with other groups in our society." Assume that no federal statute applies. A suit by appropriate parties challenges the constitutionality of these set-asides. In this suit, the most appropriate ruling on the basis of applicable United States Supreme Court precedent would be that the set-asides are 
unconstitutional, because they would deny other potential employees or potential contractors the equal protection of the laws.  unconstitutional, because they would impermissibly impair the right to contract of other potential employees or potential contractors.  constitutional, because they would assure members of racial minority groups the equal protection of the laws.  constitutional, because the function and activities of Water District are of a proprietary nature rather than a governmental nature and, therefore, are not subject to the usual requirements of the Fourteenth Amendment.