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DOR: Mountain Water responsible for taxes during eminent domain proceedings

DOR: Mountain Water responsible for taxes during eminent domain proceedings

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Mayor John Engen led the discussion in City Council Chambers in February and laid out different aspects of attempting to acquire Mountain Water.

The tax bill is still going to Mountain Water Co.

On Friday, the Montana Department of Revenue issued a letter saying that Mountain Water didn’t show enough evidence to convince state officials that “ownership interest” in the company had transferred to the city of Missoula.

Mountain Water pays an estimated $1.2 million a year in property taxes, and the company had argued that the city should take over payments since it filed an eminent domain case to take possession of the water utility.

“The opinions of the parties engaged in litigation, while persuasive, do not rise to the level necessary to require the department to record a change in ownership interest,” wrote deputy chief legal counsel Daniel Whyte for the DOR. “As a result, department records will remain unchanged at this time.”

That means when the state sends Missoula County information on who to bill for property taxes, it will name Mountain Water Co.

Mountain believes the city of Missoula should pay as the “condemnor” per state statute, but Mayor John Engen said Friday he’s glad the state disagreed.

“We are clearly pleased with the Department of Revenue recognizing that Mountain Water continues to have a tax obligation,” Engen said. “The city made a commitment long ago in this process to make sure that other taxing jurisdictions don’t suffer as a cause of this public acquisition. And that commitment remains.”


In late 2011, the global investment firm The Carlyle Group bought Mountain Water, and since then, the city of Missoula made several offers to buy the company. Carlyle rejected them, however, and in April, the city filed an eminent domain case in an attempt to force a sale in Missoula County District Court.

On Friday, neither Carlyle spokesman Christopher Ullman or Mountain Water lawyer John Alke could be reached for comment on whether the company will continue to pay its taxes – or pay them under protest.

In his letter to the DOR, Alke had said Montana’s “proration of taxes” statute puts the responsibility on the city to pay Mountain’s taxes starting on April 2, the date the city filed in court. By his estimates, that meant the city’s bill come November would amount to $293,045 for a portion of taxes due the first part of 2014.

The statute reads as follows: “The condemnor must be assessed the condemnor’s pro rata share of taxes for the land being taken as of the date of possession or summons, whichever occurs first. The condemnor must be assessed for all taxes accruing after the date of possession or summons, whichever occurs first.”

In the letter from the DOR, Whyte said the legislative history of the statute “is very limited.” However, he said the available comment from the legislator who testified shows the intent of the amendment was straightforward.

“It simply prevents taxes from being assessed on condemned land twice and makes the plaintiff responsible for all taxes assessed on the land after the date of possession,” Whyte wrote, citing testimony from the legislator.

In the letter, he acknowledged that “on its face, 70-30-305 MCA appears to indicate that a property owner whose land is being condemned is no longer required to pay taxes from either the issuance of summons or possession, whichever of these events occurs earlier.” He directly stated that a transfer of ownership had not taken place; however, the letter did not directly address whether Mountain should continue to pay.

“I purposefully didn’t opine on that particular issue, but that would be, I suppose, the logical conclusion,” Whyte said in a telephone interview.


As far as Engen is concerned, the ordeal illustrates Carlyle was willing to take advantage of the community. “I end up a little concerned when Carlyle touts its interest in corporate citizenship, but at the first opportunity, thinks it wants to shed its obligation to pay taxes to support these jurisdictions – while still making all the money that they make as a for-profit business.”

The city intends to follow the law, and it will pay due taxes when the time comes – as well as future payments in lieu of taxes, he said. Every year the case drags on will add to the overall cost, but Engen said he would have to do more analyses to determine how many years the city could pursue eminent domain and still afford the purchase based on current water rates.

However, he said Mountain Water continues to send profits to the mothership, and those dollars could stay at home. “What I know for sure is I’ve got at least $2.5 million a year in the business that can go to funding all sorts of things, and if funding that tax liability is one of the things that has to go for, we could certainly manage to pay that back.”

The city hasn’t determined how long it would make payments in lieu of taxes to the schools, the county and other jurisdictions, he said. However, Engen said he is interested in working with other parties, and he’s certain they would save money in the long run.

“Ultimately, the other taxing jurisdictions will save money as a function of the publicly owned utility not raising rates the way Carlyle would raise rates,” Engen said.

Reach Keila Szpaller at @keilaszpaller, at or at (406) 523-5262.

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Related to this story

  • Updated

Mountain Water Company is for sale – but the city of Missoula isn’t going to put in an offer for the water utility. The Carlyle Group gave notice Wednesday to the city of Missoula that it intends to put Western Water Holdings on the market. Carlyle infrastructure fund managing director Robert Dove said the global investment firm plans to sell the three water companies by the end of 2014 pending regulatory approval.

  • Updated

Missoula Mayor John Engen anticipates moving to condemn Mountain Water Co. as one step toward public ownership. On Monday in a unanimous vote, the Missoula City Council authorized Engen to make a $50 million offer to purchase Mountain Water from the Carlyle Group, a global hedge fund.

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