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With the Carlyle Group rejecting Missoula's 50-million dollar offer to buy Mountain Water,
the city will try acquisition through condemnation. Missoula tried that in the 1980s, only to
lose at the Supreme Court. However, now the city believes its position is stronger to
prove municipal possession is a greater need, since Mountain Water is no longer locally-owned...
RAY KOEGEN/MISSOULA BOND COUNSEL "Right now the citizens of Missoula don't
have any assurance on who's going to own your system in 6-months, 12-months, 3-years. But
there's a history of these firms, a clear history of these firms buying at one price,
selling at another price."
JOHN ENGEN/MISSOULA MAYOR "But fundamentally we are talking about the
fact that clean, safe drinking water is critical to the health and welfare of all human beings.
The management of that resource shouldn't be the province of a private corporation that
is beholden to distant investors."
Missoula's attorneys believe the city can convince the court and an arbitration panel
Mountain Water is worth 50-million, using water revenue bonds, not new taxes or general
revenues to cover the purchase. And they've built in money for system upgrades...
DAVID MACGILLIVRAY/FINANCIAL ANALYST "We've put into the model 4-million dollars
a year of spending on the system for capitol replacement. At least in the initial years
that would be funded. You would build up cash over time and you could probably switch to
a cash basis over a certain number of years."
ENGEN "And all of these costs will be rolled into
debt service. They will be part of the larger package. And they will be born by the water
utility and rate payers as part of the business model."
Missoula has faulted Carlyle for not investing in Mountain Water. The company proudly points
to a 40-percent jump in system upgrades, also to the same 4-million the city would spend.
That includes recent construction of a new Hilltop Reservoir, replacing water mains and
fixing leaks city leaders have worried about.
Carlyle also doubts the city can cover the purchase through "debt financing", saying
it places a heavy burden on Mountain Water's financial health. Carlyle questions whether
a changeover would save ratepayers money.
The city estimates condemnation will cost nearly 5-million dollars (4.7), and even if
Missoula loses legal fees could hit nearly a million (800,000).
There have been warnings those expenses could even be higher.
Attorney John Alke, who's represented Mountain Water before, says the Montana Constitution
allows Carlyle to recover legal costs if a settlement is lower than 50-million...
JOHN ALKE/MISSOULA ATTORNEY "The only way. The only way and the only time
the City of Missoula will escape paying our cost of the condemnation case is if the offer
you make is greater than what is the award of the commissioners."
Still, Engen and his advisors believe the stakes are worth the investment...
HARRY SCHNEIDER/MISSOULA LEGAL COUNSEL "And are you going to be held hostage for
a price that's higher than what it's really worth? Or are you going to be given something
that's fair and reasonable and just?"
On Special Assignment, Dennis Bragg, MTN News.