One for the history books: Missoula will buy its water system

Missoula’s water has always been in private ownership; all other Montana cities own their water system. (Martin Kidston/Missoula Current)

By Sherry Devlin/Missoula Current

In an historic vote Monday night, the Missoula City Council unanimously approved the purchase of Mountain Water Co., forever ensuring the city’s “access to clean, affordable and reliable water.”

“This is a big deal tonight, it’s a big deal tomorrow, it is a big deal for many, many years to come for all Missoulians,” said Mayor John Engen, who since 2011 has led the effort to pursue condemnation proceedings against the privately owned water utility.

Throughout the recent effort, and decades of unsuccessful attempts by previous mayors and councils, the goal has been to place Missoula’s drinking water system into public ownership.

That now could happen by the end of March.

With Monday’s vote, the local water system will be free from an increasingly distant and disaffected roster of corporate owners, most recently The Carlyle Group, a global investment fund, and the Canadian utility Algonquin Liberty.

“The echoes in this chamber tonight are the applause of past mayors and city councils,” said Bruce Bender, retired after a long career as Missoula’s public works director and chief administrative officer. Missoula’s water has always been in private ownership; all other Montana cities own their water system.

Missoula will be better served “when the interests of the water utility and the community are aligned,” said City Councilman Bryan von Lossberg, who said the interests of Carlyle and Algonquin “were never the interests of Missoulians.”

In fact, Bender said, Mountain Water Co.’s purchase by an international hedge fund – The Carlyle Group – imperiled every future generation.

The city’s purchase of its drinking water system will benefit those future generations the most, Bender said. “Those generations will have ownership of and control over their drinking water, not some global hedge fund. Ownership of their water will no longer be in a global market, amid global issues of climate change.”

Monday night’s action came in the form of two resolutions, both unanimously approved. The first simply approved the city’s acquisition of the water system – transforming Mountain Water into the newly christened Missoula Water. The resolution also expressly supported “commitments and representations made throughout the condemnation proceedings to ensure access to clean, affordable and reliable water.”

In addition, council members authorized the mayor to enter into the necessary contracts to hire existing Mountain Water Co. employees. Later in the meeting, Councilwoman Julie Armstrong apologized to the water company’s employees “for what they’ve gone through in the past few years” – not knowing if or when they would lose their jobs, caught in the middle of an increasingly bitter debate.

Dale Bickell, the city’s chief administrative officer, right, answers questions from the City Council’s Committee of the Whole. Also pictured are Chris Roberts representing Barclays (center), and David MacGillivray, a financial analyst with Springsted. (Martin Kidston/Missoula Current)

The second resolution provided the financing needed to close the sale.

Because several issues await court rulings, including the dollar amount of fees the city must pay attorneys who represented Mountain Water and its owners in the condemnation proceedings, the city will first purchase $140.4 million in short-term bond anticipation notes.

“This is the short-term financing which will enable us to purchase Mountain Water Co. and will set us up for the eventual long-term financing plan,” Engen explained before the council’s vote. “The short-term financing eliminates some of the speculation.”

Engen said the courts will continue moving forward on the few remaining issues – Missoula has already won approval to condemn and purchase the water system. In the meantime, the city will purchase and begin operating the utility.

The $140.4 million will purchase the water system, pay the city’s and the water company’s legal fees, finance an initial list of system improvements and provide a cash reserve for unforeseen expenses.

Mountain Water’s purchase price accounts for $88.6 million of the costs.

These bonds will have no effect on local property taxes, the mayor said, and are no threat to the general credit rating of the city of Missoula.

Missoula Mayor John Engen

“You are paving the way for us to acquire Mountain Water,” Engen told city council members, all 12 of whom were in attendance for Monday night’s history making. “You are making a motion for possession of the water system.”

Following the meeting, Engen said he will execute the contract from Barclays for the short-term notes. He will then place the money in escrow with the court of Missoula District Judge Karen Townsend, who presided over the condemnation case, ruling in the city’s behalf.

Then the city can file its motion to take possession of the utility – a dream of city officials since Missoula’s earliest days.

Engen said interest rates are low on the short-term market, another advantage to the financing plan approved Monday night. The current rate is 2.65 percent and will reset weekly under the deal.

The low rates will suppress the city’s initial debt payments, enabling it to accumulate cash by operating the water system, build up reserves and begin a capital improvement program.

In 18 to 36 months, once all legal issues are resolved, the city will move to long-term bonds to pay off the remainder of the debt.

City Council members thanked the mayor for his vision and persistence in comments prior to Monday’s vote – and thanked one another and previous councils for staying the course and doing the intensive research needed to thoroughly investigate the condemnation.

Councilwoman Marilyn Marler added her thanks to Missoula citizens. “There were several concerted efforts to undermine public support and the public stayed with us and understood the importance of this effort,” she said.

Councilman Jon Wilkins said he heard the same mantra time and again from residents of his ward: “We need to own our water.”

“This is a really big deal,” said Councilman Jordan Hess. “I’m proud of my council colleagues, proud of our mayor, and proud of our community.”

Sherry Devlin is a longtime Missoula journalist. She can be reached at info@missoulacurrent.com.