3 April 2015 concluded the third and final week of Missoula’s District Court Battle with the Carlyle Group and Mountain Water, anticipating closing statements from both sides on Monday, April 6th after which Judge Karen Townsend will determine whether it is necessary to condemn the Water System through eminent domain.
The final days of Missoula’s trial curiously coincided with a related event in California making national headlines this past Wednesday, as California Governor Jerry Brown ushered in unprecedented state-wide water restrictions. Standing in a patch of brown grass in the Sierra Nevada Mountains, the Governor called attention to the fact that there should be a minimum of 6 feet of snow where he stood, estimating California’s 2015 snow pack at 6% of normal.
“People should realize we are in a new era,” he said at press time on Wednesday. “The idea of your nice little green lawn getting watered every day, those days are past.”
California’s water restrictions will dramatically affect the citizens, and while I agree wholeheartedly that watering lawns is a waste of time, money and resources it is doubtful if water restriction enforcement will pertain to Nestle’s water bottling facilities, or even restrict the number of gallons Nestle are permitted to bottle from the millions they currently do.
The fact that our very own Mountain Water Company’s previous parent company Park Water is based in California establishes a very real connection between the healthy abundance of our water system, and the ongoing drought currently underway in California. The water deficit in California signals two possibilities for us here: a sudden influx of climate refugees from California inland toward places like Montana, and the export of Missoula’s water resources into increasingly thirsty regions such as California.
It appears that that California Gold Rush has given way to a new kind of rush away from California for the so-called Blue Gold of water resources seen by investors looking to capitalize on the worldwide drought situation by privatizing the resource and selling it to thirsty communities.
Beings as Missoula’s Water System has been privatized for nearly a hundred-fifty years, the implications of this past month’s eminent domain proceedings are so immense it’s difficult to appreciate the severity of this situation for what it really is. But I will nevertheless do my best to convey the seriousness of the circumstances.
THE LATEST ON THE MOUNTAIN WATER TRIAL
Mountain’s current owner Carlyle, has signed a proposal to sell Mountain to Liberty Utilities, a subsidiary of Canadian-based Algonquin Power and utilities Corp.
While Algonquin’s CEO Ian Robertson has refused to testify in Missoula County District Court, an executive representing Algonquin’s subsidiary Liberty Utilities took the stand on Wednesday, April 1st. This is the same firm that offered Mayor Engen $2.5 million to forget about this trial, as it stands directly in the way of their desired purchase.
Greg Sorenson, a division president of Liberty Utilities could not confirm that ownership by Liberty would result in faster fixes. Under cross-examination by lawyer Harry Schneider, Sorensen also could not promise the subsidiary of a Canadian conglomerate would even make an attempt to do “a little better than the current owner.” This isn’t promising considering the fact that even Mountain Water Co. admits it is not fixing pipes at a rate that is adequate to avoid main failures.
Sorenson also said Liberty has no plans to bottle tap water in Missoula, and has promised to state regulators that it will adhere to the conservation clauses in the same agreement signed by Carlyle, the city of Missoula, and the Clark Fork Coalition in 2011. However, Liberty never signed an agreement, so that statement by Liberty that it will adhere to the clause prohibiting the bottling of Missoula water is not legally binding, as the clause only applies to Carlyle’s use of the water. Liberty wouldn’t be legally liable if they decided to reverse their verbal pledge to adhere to the pledge not to bottle Missoula water. For the pledge to be anything more than empty promises, we’d need it in writing. And under cross-examination, Sorensen admitted Liberty itself has no written agreement with the city or the Clark Fork Coalition.
When Missoula’s utility was sold to the Carlyle group by Sam Wheeler’s Park Water in 2011, the agreement signed by Carlyle’s Bobby Dove prohibited Carlyle from setting up a bottling plant in Missoula. But now Carlyle wants to do exactly that, according to Clark Fork Coalition director Karen Knudsen who testified on 27 March, revealing that Mountain Water’s president John Kappes invited her out for coffee to explain Carlyle’s desire to bottle Missoula’s water for export and sale throughout the world.
INTO THE GARDEN A SERPENT DID CRAWL
Then on Thursday, April 2nd, Carlyle’s very own, Robert Dove took the stand, rebutting the claim that his firm failed to consider any offer made by the city of Missoula to purchase the Water System “in good faith.” He said that the City’s offer of $65 million in 2013 was unreasonable, estimating the appraised value of the system at nearly double that. From Carlyle’s corporate perspective, this probably seems reasonable.
The three water companies Carlyle own are together referred to as Western Water Holdings, the total estimated value of which floats around the vicinity of $220 million (considerably more than when they purchased them four years ago for $157 million). Algonquin’s offer to Carlyle for Western Water Holdings is $327 million, and is not contingent upon the result of Missoula’s condemnation hearing, meaning that Carlyle gets paid the same amount even if the sale does not include Mountain Water Company. Obviously, Carlyle stands to profit immensely regardless of what happens.
At Carlyle’s request following their 2011 purchase of Mountain Water, Mayor John Engen waited until 2013 to present an offer to purchase the system. But in an email to Dove early that same year, another Carlyle executive said the firm would lose $2.1 million in revenue every year if it sold the utility; that money is paid by Mountain to its new parent company Western Water Holdings, also based in California.
After agreeing to consider “in good faith” any offers by the city to buy Mountain Water Company, Carlyle refused both offers by the city, and declined to negotiate, offering no counter to Missoula’s proposed $65 million and $50 million deals. Dove stated that sale to the city would be “An optimal outcome” but that the offers had been much too low.
Dove also admitted Carlyle never estimated the value of Mountain as a standalone asset despite being aware of the city’s ongoing interest in its purchase. He also acknowledged Carlyle had earned $11 million in profit from those water companies since the firm took ownership in late 2011, turning eleven million dollars in four years.
Dove also agreed that his firm did not put any additional capital into infrastructure in Missoula, saying:
“There was not a need to do so.”
AN EXERCISE IN FUTILITY
One of the City’s arguments in favor of municipal ownership of the water system this past week, pertained to the City operated Waste-water treatment plant the city referred to as “world class.” So in an attempt to challenge this assertion, Carlyle called an engineering expert Wednesday to testify that the city plant was not “world class,” pointing to photos of spilled grease, a “sludge island” in a basin and rust on equipment in an effort to illustrate the facility is “inadequate” in some areas. When asked how a world-class facility would stack up he said such facilities will go years without any violations.
However, upon cross examination he admitted that the city run plant is generally meeting its permit requirements, and doing so at customer rates that are well below average. He also admitted that his assessment of the facility found it “clean with minimal odors” and gave it an “excellent” rating in multiple areas.
Bill Mercer and Joe Connor have done an exemplary job of attempting to instil doubt in our minds through their efforts in court, and with the help of Mountain’s President John Kappes and Liberty Utilities, the private firms have done an excellent job of propagandizing condemnation for something it isn’t with exorbitant advertising campaigns designed to influence public perception away from its best interests.
But regardless of what we think “condemnation” means, this isn’t some kind of government takeover. Local government represents the constituency far better than Federal institutions ever can. The citizens have a voice in the chambers of their locally elected representatives, and a say in what happens to their community.
If people don’t trust the government, that’s perfectly understandable, but can they honestly say they have more trust in private equity firms like the infamous war profiteers at the Carlyle Group? Even if the city has to increase rates, it’s highly unlikely that they would do so at 13% annually, which has thus far been Carlyle’s modus operandi revealed in projected earnings documents they fought hard to keep out of the public eye in the initial days of this trial.
To really drive the point home is Bobby Dove’s assertion that Carlyle has not put any additional capital into Missoula’s infrastructure because “There was not a need to do so,” is an outright lie that in and of itself should be enough of a head turner to get some light bulbs flickering above our heads. They’re quick to raise rates and stuff their pockets from the sweat of our brows, but when it comes to our health and well-being, all we’ll ever get from them are excuses. How could we expect it to be otherwise – they’re not accountable to us because nowhere in the equation can elected representatives enforce responsibility or ethical practices. This is the true face of privatization.
SPEAKING OF RATE INCREASES
Yesterday was the final day of the trial, and City Attorney Jim Nugent took the stand. Nugent was questioned at length concerning the details of Mountain Water Company proceedings in municipal court over the last 11 years. Nugent said several times that “Mountain Water Company has petitioned to raise rates every single year, and that city officials have almost always intervened. So the accusation that city control will result in rate hikes is directly contradicted by countless instances to the contrary. Nevertheless, the corporate-sponsored rumor that city control is bad for Missoulians perpetuates, thanks to their concerted advertising campaigns.
Carlyle’s attorney Bill Mercer also asked several times if the city ever called witnesses to testify on rates/operations of Mountain Water Company. Nugent said that such witnesses had been called in District Court, and also in municipal court by the Public Service Commission.
On cross examination from the City Nugent was asked “do you agree that the sale of Mountain Water Company to yet another for-profit out-of-state enterprise would not be in the city’s interest?”
Carlyle’s Bill Mercer stood and shouted, “Objection!”
Judge Karen Townsend responded, “Overruled.”
The city asked again, “Do you agree that the sale of Mountain Water Company to yet another for-profit out-of-state enterprise would not be in the city’s interest?”
Nugent responded by saying, “Absolutely.”
IS THIS THE END?
So where are we now? Our system leaks. It needs repaired. Private owners have proven repeatedly to the point of tedium that pocketing profits is more important to them than making necessary improvements. The repairs are estimated at nearly $100 million on the high end. But beings as the city has a AA credit rating, and beings as rate payers pay more than twelve-and-a-half million dollars annually, it doesn’t take a PhD in mathematics to figure out that we have options to purchase this thing, fix it, pay for it, and enjoy the fruits of our labor in under ten years.
Then again, I wish to express enthusiastic solidarity with Dan Brook’s article in Number 13 of the Missoula Independents’ 26th Volume. Brooks makes the case that Missoula should absolutely have control over its own water system (after all, 128 other cities and towns in the state already do), but that we shouldn’t buy it. It’s ours. Why can’t we tell these private firms to grow up and quit exploiting the people? Would they sue us as they did Bolivia? Probably they would. But this is Montana, and even personalities like Bobby Dove would do well to remember where they are. American Imperialism ends here, starting with the Corrupt Practices Act.
I fear that many Missoulian’s who either don’t have time to be informed about this or simply don’t care are in for a rude awakening when the world’s water woes come here to roost. It’s easy to care when its too late to matter; during rate spikes and amid bottling deals, sinkholes and catastrophic failures won’t matter to our owners as the drought spreads. If Missoula fails to take control now, no one will hear our protests when its too late to matter.
Missoula’s privatizations woes began shortly after Missoula became a colonized settlement a century and a half ago whereupon Higgins and Pattee constructed the Rattlesnake and Waterworks infrastructure. That system was bought by the Missoula Mercantile Company, who promptly thereafter named it the Missoula Water Company. Then copper baron William Clark bought it and changed the name to the Missoula Light and Water Company. Montana Power bought the system in 1930. Nearly four decades later in 1979 Sam Wheeler’s Park Water bought the system thus creating Mountain Water. Three decades after that, the Carlyle Group purchased multiple water systems from Sam Wheeler, including Mountain Water, and consolidated them together into what is now Western Water Holdings. Now Liberty Utilities, a subsidiary of Canadian-based Algonquin power, wishes to purchase Western Water Holdings from Carlyle.
Are Missoulian’s tired yet of this endless for-profit, out-of-state, corporate privatization of our most vital resource?
Are Missoulians jaded by decades of high rates and leaky pipes?
Have Missoulians had enough of this game of Hot-Potato constantly tossing our
Water System into the hands of a new owner every few years?
Aren’t Missoulians weary of the consequences of continued privatization amid the ongoing climate crisis currently drying up water resources worldwide?
To pull control of our water system away from corporations, the City has to prove that municipal ownership of the drinking water system is “more necessary” than private ownership. What defines what is “necessary” might be a subjective statement.
But given the fact that Missoula’s water system is among the leakiest in the nation, leaking more than 4 billion gallons of water per year; given that Mounain Water’s answer to leaky infrastructure has been to construct additional pumps to pump more water through increasingly leaky pipes; given that Missoulians are paying $600,000 a year to power those pumps; beings as Missoulian’s have what are among the highest rates in the region; given that there is no monetary incentive for a private firm to reinvest profits into repairing the leaky infrastructure; and beings as the city could likely run the utility for nearly $7 million less per year, I would say the case for condemnation couldn’t be more clear.
Gabrielle Lafayette is a journalist, writer, and executive producer for the Outer Limits Radio Show.
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