Missoula Wins Right to Control Its Own Water in Victory Against Privatization

Missoula, Montana scored a major victory for community ownership of public resources when the state's supreme court ruled 5-2 on Tuesday that the city's use of its water system was "more necessary" than its use by a private company.

The city has been embroiled in a costly, years-long legal battle over control of its water supply. Missoula previously argued it has the right to use its powers of eminent domain to purchase Mountain Water Co. from then-owner the Carlyle Group--which has since sold the water company to Canada-based Liberty Utility--an argument which the Missoula County District Court agreed with last June.

Now, their argument has been vindicated, as the Montana Supreme Court on Tuesday found the lower court's "detailed factual findings" supported the eminent domain decision.

"The city desired to own the water system that serves its residents because city officials believe a community's water system is a public asset best owned and operated by the public," the judges wrote in their decision (pdf).

During the lower court hearing last spring, witnesses testified that Missoula is the only city in Montana that didn't control its own water supply. The utility has also been accused of charging customers unreasonably high rates.
"Long after people have forgotten any of our names, they won't have to worry about who owns their water."
--Mayor John Engen

Mayor John Engen said the city was ready to cut a check for $88.6 million to buy the utility out of private ownership.

The Missoulian reported Tuesday on some of the high court's notes on the previous decision:

* The District Court also looked at evidence about the condition of the water system and differences under public or private ownership. "Experts for the city also testified that 20 percent of the water system mains and 75 percent of the service lines have exceeded their useful life, but Mountain Water invested less than $1 million per year in replacing water distribution mains from 2004 to 2014." The court concluded that "no matter who owns the water system, significant capital expenditures will be required, but that under municipal ownership, long term maintenance planning and capital expenditures can occur under the management of a stable, long term owner."

* The Supreme Court also evaluated real and projected administrative expenses in the decision. A witness for the city testified at the spring 2015 trial that the administrative costs paid by Mountain Water "exceed every other Montana water system by $2 million, and that Mountain Water's administrative cost per customer is the highest in the state." The opinion cited $48,000 that goes to "travel and entertainment," a $103,000 "board of directors fee, and $1.3 million for salaries of staff in California." The Carlyle Group has since sold the Missoula water system to Liberty Utilities, the subsidiary of a Canadian company. At the trial, Liberty's president testified "Mountain Water would be required to make similar payments for corporate personnel and oversight to a home office in Canada," read the opinion.

* "The District Court recognized that...under either owner, significant capital expenditures will be required to replace and maintain key infrastructure. However, under private ownership, the cost of needed capital improvements will be increased by a rate of equity (currently 9.8 percent), whereas no such increase would be seen under municipal ownership."

Justice Patricia Cotter wrote the majority opinion with agreement from Justices Mike McGrath, James Shea, Beth Baker, and Michael Wheat. Justices Jim Rice and Laurie McKinnon dissented.

"We will begin working with attorneys first thing in the morning to finalize some work we've done around final order of condemnation, a motion to take possession, and we have to have a conversation with defendants about an orderly transition," Engen said.

Missoula now joins a growing number of communities around the world that are taking back their water.

The mayor also thanked Missoula residents for their patience with the process and said, "long after people have forgotten any of our names, they won't have to worry about who owns their water, and that has nothing to do with me. It has everything to do with this community and it has everything to do with what is right."