On Tuesday afternoon, the Montana Supreme Court upheld a district court decision forcing the sale of Mountain Water to the city of Missoula by eminent domain. It was the culmination of a fight that has lasted almost two years, beginning when the city offered multinational private equity fund The Carlyle Group $50 million for our water system in 2014. After Carlyle refused and Missoula started preparing its eminent-domain suit, the city estimated the total legal cost of condemnation at $400,000. As of this writing, we’ve spent $6 million, and we’ll likely be held liable for Carlyle’s $8 million in legal costs, too. But the important thing is we bought the water company—not for the $50 million we considered a fair price in 2014, but for $88.6 million. But we won, and Mountain Water is a good deal at any price, as the mayor expressed in this tweet yesterday:
And it will cost taxpayers, and ratepayers, less. Study before you tweet.
— John Engen (@EngenJohn) August 3, 2016
That’s kind of infuriating. At a City Club forum in January of last year, before the value of Mountain Water had been established by a district court, I asked city council members at what threshold the purchase price of the water company would no longer save ratepayers money over the life of a 20-year bond. They didn’t know. The city had not run the numbers to determine at what point Mountain Water stopped being a good deal. Fifty million was a good price, apparently, and $50 billion would be too much. But within that range, no one could say exactly where a smart investment would turn dumb. Then-Councilman Adam Hertz said no such detailed financial analysis was available.
Engen insists this deal will save ratepayers money, and he admonishes us to study before we tweet. But he did not study before he embarked on the largest purchase in Missoula’s history. His insistence that those who criticize him base their arguments on careful examination of the numbers ignores the fact that he committed to this plan without studying those numbers himself. It’s a bad look, and so is the lawsuit alleging that the $8 million Carlyle spent on legal defenses was excessive. The city is going over Carlyle’s expenses with a fine-toothed comb, looking out for taxpayer dollars in the matter of dinner at Hooters, for example, when it overshot its own estimated legal bill by 1400 percent. You can read all about it in this week’s column for the Missoula Independent.
I’m glad we won City of Missoula v. Mountain Water. It will be good for this town to own its water system. But I don’t know whether it will be good for ratepayers to have bought it for $89 million plus $14 million instead of $50 million. Apparently, neither does anyone in city government. That’s the problem. The city didn’t perform its due diligence on this deal, and now we have committed to a massive investment that may or may not save us money over the next two decades. It doesn’t matter. We just did it.