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Mayor says bills won’t increase after Mountain Water purchase – at least initially

By Martin Kidston

Missoula Mayor John Engen on Wednesday maintained his stance that public ownership of the city’s drinking water system is better than private ownership under Mountain Water Co.

And with most of the legal issues nearly settled, the city is gearing up to take control of the utility.

“Municipal ownership is about constantly improving the system, and bringing it up to industry standards,” Engen said. “The money invested in that infrastructure will stay in this community, and continue to serve this community for a very long time.”

Addressing the City Council’s Committee of the Whole, Engen said negotiations with Mountain Water’s current employees continue to move forward. He said he remains committed to bringing the employees on with the city when the utility changes ownership.

While portions of the negotiations remain private, Engen added, Mountain Water’s current officers would be given an employment guarantee of one year with the city. Other employees are guaranteed five years of work.

“We have a responsibility to those employees to keep those conversations confidential for the time being,” Engen said. “We have committed to compensation and benefits as comparable (to the city) as law allows us to provide.”

City leaders broached other issues surrounding the city’s acquisition of mountain water, but offered few financial projections. Among them, the city’s bond rating for the water purchase won’t be publicly released, with one financial advisor saying it must remain private as part of the rating agency’s strategy.

Engen said that Mountain Water, as a private company, currently pays city property taxes while the city generally does not. After acquiring the utility, however, the city will commit to payment in lieu of taxes for the first five years, giving other taxing jurisdictions time to plan for future changes.

“We don’t want to leave other taxing jurisdictions holding the bag, certainly when they’ve budgeted for those tax revenues today,” Engen said. “We’ve committed to continuing to pay those. We’ll have discussions over this five-year phase so they’ll have capacity to make plans around that.”

Engen said the city will maintain rates as they currently exist for Mountain Water customers. But at some point in the future, he said, the rates will go up.

The mayor didn’t say when or by how much, but called it an inevitable part of operating a utility.

“Our expenses for operating the system will rise,” he said. “When that happens, those rate increases will become the purview of this (City Council). In the meantime, we believe that based on rates today, we have the ability to run the system, pay the bills, pay the employees, pay municipal improvements and pay debt services, all without raising rates in the near term.”

In 2014, Engen estimated the city would pay roughly $800,000 total in legal fees to condemn the water system. At the time, the city estimated the total cost, including transaction costs and legal fees, at $4.2 million.

As presented on Wednesday, the legal fees alone stand at roughly $13.9 million.

“A long time ago, I presented to you what we thought the potential cost of this acquisition would be,” Engen said. “Clearly, things have changed and I have zero problem owning that. We’ve had lengthy discussions about the circumstances that have led us to these numbers, and they are what they are. I would argue even with these numbers, we’re still in a very favorable place for the future of the community.”

Contact reporter Martin Kidston at info@missoulacurrent.com