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Mayor, City Council officially end legal saga between Missoula and former water owner

Missoula Mayor John Engen plans to sign a global settlement agreement with the Carlyle Group, ending more than eight years of litigation over the city’s drinking water system. (Martin Kidston/Missoula Current)

On a unanimous vote, the City Council on Monday night officially closed the book on the decade-long fight over Missoula’s water system and will now turn its focus from courtroom battles to long-term maintenance and further investment in the utility.

While the city lost its bad faith claim against the system’s former owner, perhaps spoiling what otherwise would have been a perfect ending, the system now lies in public ownership and will be handed down to future generations, which will now own their own drinking water.

“The City of Missoula owns its water and will forever,” said Mayor John Engen, who spearheaded the acquisition effort back in 2014. “The benefits to this community are fairly monumental and many of those benefits will play out over time. It was an enormous team effort involved in acquiring this system.”

The City Council’s vote on Monday night authorizes the mayor to sign a global settlement agreement and release with the Carlyle Group, which formerly owned Mountain Water Co. The agreement resolves all outstanding claims that were still pending before the court.

After the city successfully won its fight to acquire the water utility in 2017, it filed a bad faith claim against Carlyle, citing its behavior and “deceit” both before and during the water trial. The case was sent to arbitration and Carlyle prevailed.

The agreement reached with Carlyle to settle all outstanding claims will cost the city around $4.1 million. The city could have pushed the remaining matters in court, though it would have exposed itself to potentially greater losses in doing so.

“This negotiates settlement with Carlyle and ends all other claims in District Court that are pending, some of which we could win or lose, but all of which pose a risk,” Engen said. “This agreement allows us to settle all of those claims.”

The city intends to finance the cost of the settlement agreement and service the debt over roughly 20 years at a cost of around $318,000 annually. Engen said it will not impact water rates or taxes and will do little to slow the city’s ongoing investment to improve what once was a poorly maintained utility.

“We are investing millions of dollars in improving the infrastructure and maintaining the system,” Engen said. “That bill doesn’t stop us from doing the work we promised to do and continue to do to improve that system.”

City Council President Gwen Jones

“This is a huge accomplishment for the City of Missoula. As I look back over the last 10 to 12 years with the administration, with the councilors and the legal team, a lot of hard work went into this and good judgment to navigate the really difficult situation as best as possible.

“I too wish there was a different outcome from the bad faith arbitration, but it is what it is. In the big scheme of things, to have a global settlement agreement where we wrap it all up and know that we have acquired the water system, that’s the important thing.”

Jordan Hess, Ward 2

“I’m not one to resort to hyperbole, but I will say in all honesty that being part of this process to acquire our water supply for Missoula ownership in perpetuity for future generations may be the most important work I’ll ever have the privilege of working on for the city of Missoula.

“The thing that matters is that today and tomorrow and into the future, we’ve secured a resource that is precious, that is scarce and that is dwindling for future generations of Missoulians. We could count water not being pumped by Olympic swimming pools per hour. That’s how much water was being wasted that is now not being wasted. It’s extremely important for our community’s future.”

Amber Sherrill, Ward 4

“Water is a dwindling resource and it’s even more so in the West. The most important thing is that we own our water system, and I’m really thankful to everyone who was involved in that.

“The swimming pools full of water that was leaking, we were still pumping that around and it’s leaking out of the system. As we strive to become carbon neutral, we’re not going to be able to do that when we’re wasting that much water in an old system. I’m thankful for all the work we’re doing on the system.”

Mirtha Becerra, Ward 2

Mirtha Becerra, Ward 2

“This was not an easy or inexpensive endeavor, but like most things in life that are worth pursuing, those things are oftentimes complex. But the effort is worth it. We can see that already by the fact that we’ve done an incredible amount of infrastructure maintenance and replacement, and all of that without raising our rates.

“That speaks to the excellent and dedicated management that we have at our water enterprise. This will be the greatest gift we can give to future generations.”

Mike Nugent, Ward 4

“I want to say thanks to you (mayor) and those council members who made the initial votes to move forward, even when there was some push-back or the costs came in higher than first thought. That foresight showed some vision and knowledge.

“If this acquisition were looked at as a business decision and you added up the cost to acquire it, and you look at the operating revenue every month and you’re generating revenue and putting it back into capital projects, all that pencils. I think that’s really important to say out loud. This isn’t tax dollars. This water system is funded and supported by the rate payers of the water system.”