FLUSHING CARLYLE: Privatization Is Drowning Missoulians in an Ocean of Leaks, Bills, and Propaganda

WATER YOU THINKING?

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.

worldGabrielle Lafayette is a journalist, writer, and executive producer for the Outer Limits Radio Show.
Catch the cloudcast at mixcloud.com/outerlimitsradioshow
Check out the more frequently updated tumblr page at outerlimitsradioshow.tumblr.com
Contact the research team at outerlimitsradioshow@fastmail.fm

Water Is NOT The “New Oil”

????????????????????????????????????????THE BIG SQUEEZE

The great Mountain Water debate is on in Missoula County District Court as the City of Missoula takes its eminent domain case for public ownership against Mountain Water Company and its new owner, the infamous global equity firm, the Carlyle Group. The trial comes as a consequence of Carlyle reneging on its promise to sell Mountain Water to the City of Missoula after Carlyle acquired Mountain’s parent company, California based Park Water.

This trial also comes as another step in the age-old fight for Missoulians to gain control of their water system. Missoula is the only city in Montana that does not own its own water, and never has, dating back to 1905-06 when the Water Works diversion became privately owned.

In fact, this all goes back to the 1870’s When Frank Worden, C.P. Higgins and David Pattee constructed the reservoir and infrastructure from Rattlesnake Creek to Water Works Hill and the reservoir that was bought by Missoula Mercantile Company, naming it Missoula Water Company. Then a dam was constructed in 1901-02 to divert the waters. By 1905 Senator and copper-king William A. Clark plaid $900,000 for the system, and a year later changed the name to the Missoula Light and Water Company.

the Diversion dam on Water Works Hill was reconstructed with concrete in 1924, at which point Mayor William Beacom suggested that the public purchase the water, offering $600,000 for the system. But the roaring 20’s being what they were, Missoulians didn’t bite, and the utility remained under private ownership.

By 1930, Missoula’s population had grown to 14,657. The Montana Light and Water Company had also grown to provide a central heating system for the city as well as the trolley system, in addition to the utilities of water and electricity. It was at this point that the Montana Power Company bought the system. Established in 1912, Montana Power was a private firm founded by John Ryan, President of the Anaconda Copper Mining Company. Shortly thereafter it was determined that that Water Works Infrastructure was insufficient to provide water to the demands of an ever expanding population, inspiring the addition of five wells into the system.

Jump forward to 1979 when Montana Power sold our water system outright to a California based firm in the creation of Mountain Water as a subsidiary utility service to provide water to some 4,000 Missoulians residing outside of the city limits. Mountain Water was and still is owned by Park Water, a California based company owned by a man named Sam Wheeler. Following the Public Service Commission’s approval of the deal, the city missed its chance to buy the utility in 1979. The vice chairman of Montana Power, Jack Burke, was determined to confirm whether the city of Missoula was interested in purchasing the utility, and went out of his way to do so. Montana Power contacted Mayor Bill Cregg to inform him that the utility was available, but before the city council could even consider the proposal, Montana Power announced their sale to Sam Wheeler for $8 million. Wheeler claimed that the city missed its chance to purchase the system because the delays associated with municipal financing took too long, stating that the city didn’t have the money and lacked the time and resources to raise it, whereas Wheeler who had the cash in hand was able to bypass the bureaucracy of city decision making.

By 1983, 40,000 people called the Missoula valley their home, whereupon the Water Works system was abandoned completely for the utilization of Missoula’s Aquifer. Water Works was to remain an emergency back-up, but nothing more. Though Water Works was providing nearly half of the city’s water (45%) a giardia outbreak that infected the digestive systems of thousands of residents led to the realization that Water Works required millions of dollars of additional improvements for more sophisticated filtering and improvement costs. The following year the city again attempted to purchase Mountain Water, valued at $11million in 1984. The city proposed a bond, but Mountain Water’s general manager Lee Magone appraised the system’s worth at $16 million.

The city announced that the salaries of Mountain Water employees would be cut in the event of the sale, resulting in employees accusing the City of failing to account for the impact on their lives. Thus a handful successfully opposed the popular majority of Missoulians who wanted to see the water owned locally, obtaining a voter initiative to block the sale to the City. After the city’s failed litigation against those individuals, Mayor John H. Toole began eminent domain proceedings against Mountain Water with tremendous support from Missoula residents. That trial ensued in March of 1986, and ended dismally in August of that same year when the court determined that the city had, “failed to prove that the condemnation was necessary.” The battle created bad blood and hard feelings on both sides, turning the relationship between the City and Mountain Water from civil to hostile. The city had to pay for Mountain Water’s massive legal fees, and Sam Wheeler vowed that he would never allow the City that tried to wrestle his property away from him, any opportunity to purchase it.

Though attempts to bury the hatchet have been made, it appears as though Wheeler kept his word.

In 2011 Sam Wheeler sold Park Water (and in-turn Mountain Water) to the Carlyle Group. Carlyle knew Wheeler wouldn’t sell to Missoula, but also understood Missoula’s desire to gain control of the utility. So Carlyle had to assure Mayor Engen that while Wheeler wouldn’t sell to Missoula, they would, but they needed to buy it from Wheeler first. Enter the notorious Robert Dove who swooped in to convince Mayor Engen to back the transfer, promising to consider “in good faith” any offer Missoula made to purchase the system from Carlyle later on.

Carlyle has since rejected at least two offers that we know of (one of $50 million and one of $65 million) leading the city to accuse Carlyle of ‘bait and switch’ techniques, subsequently taking Carlyle to court. In April of 2014, filing eminent domain proceedings which remained on track for trial in the spring of 2015.

Carlyle is arguing that with regards to the wording of their written agreement with Mayor Engen, that all they actually promised was that they would consider selling Mountain Water to Missoula; not that they would actually do so.

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SO WHERE ARE WE NOW?

Liberty Utilities, a subsidiary of Canadian Algonquin Power, desires to purchase the system from Carlyle, and it looks as though Missoula is getting left out of the loop once again. So Missoula is on course for another attempt at condemnation in yet another effort to place the utility in the hands of the people. But Algonquin really wants it. In fact, since the city has already racked up $1.9 million in legal fees as of March 2015, Algonquin officer and Liberty President David Pasieka actually offered $2.5 million to Mayor Engen, aiming to convince him to pass up the eminent domain proceedings.

Despite Pasieka’s efforts, the condemnation trial began on 18 March thus embarking a long list of witnesses and experts upon the arduous cross-examination voyage to shed light on this whole story. The trial continues every business day until 2 April whereupon Judge Karen Townsend will determine whether condemnation is necessary.

After the 2nd of April, it’s entirely Judge Townsend’s prerogative whether to condemn the system and give ownership to the City, or not, and she can take as long as she deems necessary to arrive at that final decision. If she decides condemnation is necessary, Carlyle will no doubt appeal the decision and Missoula’s eminent domain proceedings will move to the Montana Supreme Court, which is a very different place than it was the last time this happened in the 1980’s.

But the competition is fierce and insidious. Liberty has shoveled advertising dollars all over the city in such a fierce marketing campaign that Judge Townsend called for them to halt the ads because they were unfairly affecting public perception and influencing her own objectivity.

But the ads are merely a symptomatic accompaniment of the presence of the major corporate players.

Managing director of infrastructure Robert Dove is back in Missoula on behalf of Carlyle, and is certainly no stranger to the business of water rights. When he worked for Bechtel he was a member of the board of directors for International Waters on behalf of Bechtel, sealing the deal to gain control over the water systems in Bolivia. After monopolizing water resources, immediately hiking rates by 50%, and lobbying to create laws in Bolivia that actually made it illegal for residents to collect rain water, the Cochabamba Water Wars ensued. You might remember seeing footage of thousands of women marching in the streets clanging pots and pans to draw attention toward Bechtel’s inhuman policies. The Bolivian government cancelled its contract with Bechtel, and Bechtel actually sued Bolivia for lost earnings. Robert Dove was present for those hearings as well.

Representing Carlyle is Bill Mercer of Billings based Holland & Hart, and Mercer’s history is as interesting as Bobby Dove’s. He was asked to resign his post as U.S. Attorney by Montana Senator Jon Tester after a report accused Mercer of changing federal law so he could live outside his district and hold a separate post in Washington D.C. In 2006 Mercer got himself into hot water when U.S. District Judge Donald Molloy accused Mercer of acting overly zealous with regards to imposing federal charges in state matters, asking Mercer, “Do you ever concern yourself with justice?”

Also on the defense, representing Mountain Water is Joe Connor of Baker Donelson, who is apparently notorious for getting his clients a lot more money than they originally demanded. Responding to the City’s declaration that public ownership is in the best interest of Missoulians, Connor said: “This is our property, and you can’t prove we don’t deserve to keep it.”

On the opening day of the trial, Connor brandished a segment of bent, rusty pipe and dramatically declaring it to be the primary evidence that private ownership is necessary if our leaky infrastructure is to ever recover; that the entire leaky system is in such a state of disrepair, private ownership is the only way to restore the infrastructure.

Unfortunately his argument doesn’t hold water, since the condition of that pipe is the direct result of private ownership which seeks profits over structural reinvestment. We have to ask ourselves if the infrastructure would be in the state of decay that it is if it were under city management. If it were, the city council would be directly responsible for reinvesting funds garnered from ratepayers back into the system instead of hording them. Private owners have no incentive to reinvest into the system, instead providing profits to shareholders, CEO’s and other corporate beneficiaries with large financial dividends.

With more than 22,000 customers paying an average of $47.35 a month, rate payers are contributing to an enterprise that amounts to more than a million dollars a month ($1,041,700). Those rates are guaranteed to rise according to Carlyle’s own estimates of projected earnings. And given what previous private owners have allowed our infrastructure to become, we’re not only guaranteed rate hikes, but proliferating system failures as the system continues to crumble.

So if the system is making a million-dollars-a-month, where is that money going? We know that 42 employees at Mountain Water’s parent company rake in a cumulative $6.1 million annually, one third of which is provided for by Missoulians. And our rates, which are already among the highest in the region (that includes surrounding states) are guaranteed to skyrocket year after year if private ownership continues.

Bruce Bender helps to provide some context for this claim. On Thursday, 19 March 2015, Bender who serves as Missoula’s Chief Administrative Officer, explained the significance of a chart that showed plans for rapid rate increases that Carlyle’s lawyers insisted be kept out of the public record. Much to their chagrin, Judge Townsend allowed the documents to be submitted for public record as evidence, and as a result Missoulians have been made aware of Carlyle’s 6-year plan for a 50% increase in rates, from $39 million to $59 million.

The following day on 20 March, Missoula’s director of Central Services Dale Bickell, announced that Missoula could operate Mountain Water for nearly $7 million less annually than Carlyle, further demonstrating how absurd Missoula’s rates are already.

Perhaps most alarming of all, the Public Service Commission appears to have a rather cozy relationship with Mountain Water and Carlyle. According a brief filed by the City in August of 2014, “unlawful ex parte communications” took place between the agency and the private firms concerning whether the PSC planned to intervene in Missoula’s eminent domain proceedings, illustrating “evidence of the agency’s coordination against the public interest.”

Money talks, while everything else walks, and corporate money is talking very loudly is Missoula, Montana right now. They’ve bought airtime and newspaper space, they’ve offered millions to our elected representatives, and they’ve established relationships with all the major players. Though our owners are already fabulously wealthy, the speculation for more profits at the hands of Missoulians has blinded them from decency, and further transformed this entire Mountain Water situation into the circus of corruption that it is. This water deal represents a tremendous profit potential for private equity firms like Carlyle and Algonquin, and with unpolluted water resources dwindling world wide, multinationals are aggressively swooping in to gain control of systems like Mountain Water. Either Missoula gains control of the resource, or our rates go through the roof – or worse, Nestle will lobby to open a bottling plant here and begin shipping Missoula’s water around the world in plastic bottles. If history is any guide at all, we could then be subjected to laws prohibiting the collection of rainwater, and Robert Dove would gladly smile over those proceedings just as he has in the past over similar circumstances. Unless Missoula can somehow gain control of the system, we will be rendered utterly helpless in determining its future.

drought-water-scarcity-15Gabrielle Lafayette is a journalist, writer, and executive producer for the Outer Limits Radio Show.
Catch the cloudcast at mixcloud.com/outerlimitsradioshow
Check out the more frequently updated tumblr page at outerlimitsradioshow.tumblr.com
Contact the research team at outerlimitsradioshow@fastmail.fm