For the past 36 months, the city of Missoula has been involved in a seemingly never-ending back-and-forth legal battle with global investment firm the Carlyle Group over who should own the system that provides local residents with drinking water.
Here is a timeline of events that led to the eminent domain trial set to begin this week in Missoula County District Court:
December 2010 – The Carlyle Group, a global investment firm with $194 billion in assets, announced plans to buy California-based Park Water Co., the parent company of Mountain Water Co., from the Wheeler family. Henry “Sam” Wheeler bought the city’s water system in 1979 from Montana Power Co. for $8 million. Because of what was reported to be “bad blood,” Wheeler refused every offer from the city of Missoula to purchase the water system.
Mayor John Engen, who wants the city to own the water system, said he will ask the Montana Public Service Commission to place conditions on the proposed sale to Carlyle. He floats the idea of a $50 million price tag as a fair deal.
"Because all evidence suggests that there is no chance of municipal ownership under Park's watch and because there is a chance at municipal ownership under Carlyle's watch, the city supports the transaction," Engen said in testimony.
August 2011 – In what turns out to be a prescient warning, an expert for the Montana Consumer Counsel told the Public Service Commission that he believes The Carlyle Group has future plans to sell Missoula’s water system after building up its value, and that could spell trouble for local taxpayers.
John Wilson, a consultant hired by the MCC, also says a memo from Carlyle casts doubt on earlier indications that the city of Missoula would get the first shot at buying Mountain Water Co. in the future. A financial expert hired by the Clark Fork Coalition, a Missoula-based conservation group, expresses a similar concern.
Charles Rial of Stevensville says the PSC should require that the city has an option to buy the utility when the Carlyle Group decides to sell it.
September 2011 – The city of Missoula reaches an agreement with the prospective buyer of Mountain Water Co., the global investment firm The Carlyle Group.
The agreement gives Missoula a chance to buy the water system in the future, and in exchange, the city agrees to support the proposal by Carlyle to buy Mountain Water’s parent company, Park Water of California. Missoula Mayor Engen and Clark Fork Coalition executive director Karen Knudsen both throw their support behind Carlyle’s bid to buy the city’s water system.
Engen says he has been “bugging” Carlyle since the day they said they were going to buy the company to consider selling it to the city someday, saying that a city takeover would ensure public, local control of water and rates, make it directly accountable to voters and remove any profit motive.
“This is difficult for a number of my constituents to believe, but I trust (Carlyle managing director) Robert Dove in this matter,” says Engen. “I trust that what we have is an agreement he will honor, that Carlyle will honor.”
During a hearing before the PSC, several citizens speak out against the deal.
December 2011 – The Montana Public Service Commission approves the $102 million sale of Mountain Water, along with its parent company Park Water Co., to global equity firm The Carlyle Group after a lengthy proceeding. Carlyle is one of the largest international investment firms in the world, but this is its first foray into the world of water utilities.
The PSC includes a stipulation in their approval that Carlyle give the city of Missoula a chance to buy the water system if it was sold as a single entity in the future.
February 2013 – According to court documents, city and Carlyle officials agree on a target sale date of February 2013, “which would comport with Mr. Wheeler’s departure from the Park Water Company Board of Directors." Sam Wheeler, the former owner, despised the idea of ownership by the city.
February 2013 – The city of Missoula twice offers to buy Mountain Water Co. from Carlyle for $65 million, which Carlyle rejects. Mayor Engen is upset, saying the city had a “good faith” agreement to buy the system from Carlyle. Engen says the city may eventually consider filing a condemnation lawsuit.
July 2013 – Mountain Water asks the PSC to approve a 5.09 percent rate increase, which would provide the company with an extra $500,000 per year in revenue.
January 2014 – The city council authorizes Mayor Engen to make a formal written offer to buy Mountain Water Co. for $50 million.
January 2014 – Carlyle CEO Robert Dove sends a letter to Engen declining the city’s offer.
April 2014 – The city of Missoula files for condemnation of Mountain Water Co. in Missoula County District Court. The lawsuit is an attempt to force Carlyle to sell Mountain Water to the city under Montana’s eminent domain statute. Carlyle pledges to fight condemnation. The city’s amended lawsuit contends that Carlyle pulled a “bait and switch” and used false promises to secure the city’s political support.
July 2014 – Missoula County District Judge Karen Townsend denies Carlyle’s motion to be dropped from the eminent domain lawsuit. Carlyle claims that it is an “upstream” owner and doesn’t actually own the city’s water system.
September 2014 – Carlyle announces an agreement to sell Mountain Water Co. and two California utilities – together called Western Water Holdings – to a Canadian company, Algonquin Power and Utilities Corp for $327 million, including $77 million in debt. The plan would mean that Mountain Water Co. would be operated by Algonquin’s subsidiary, Liberty Utilities.
Liberty Utilities files a petition to intervene in Missoula’s takeover bid, describing itself as the “de facto owner of Mountain Water" and arguing that it has “a substantial financial interest in defending against the effort by the city of Missoula.”
Mayor Engen says that “as Carlyle owns this company, Carlyle is embroiled in this lawsuit with us, and Carlyle is the company from whom we intend to purchase this in a court order.”
Carlyle spokesman Chris Ullman says, “We are confident we are going to prevail in court against this unjust government attempt to seize private property.”
October 2014 – Mountain Water employees ask Mayor Engen to abandon the takeover effort.
December 2014 – Judge Townsend denies Mountain Water Co.'s request to postpone the trial.
March 2015 – The city’s legal bill for the condemnation case hits $1.9 million.