Property rights advocates and fiscal conservatives predict the city of Missoula’s complaint filed in district court last week seeking to forcibly acquire Mountain Water Company from one of the world’s largest private equity companies will fail, and fail expensively.
“I really do think we’re going to lose millions of dollars,” says Missoula City Councilman Adam Hertz.
Hertz is the only council member to publicly oppose Mayor John Engen’s push to acquire the Garden City’s municipal water system from Carlyle Group through eminent domain, a proceeding the city initiated on April 2. The city estimates legal costs associated with the battle will run $800,000. Engen acknowledges, however, that the expenses could reach the millions. “It really is a rough number,” he says.
Missoula officials put Mountain Water’s value at $50 million. Acquisition costs, they say, could tack an additional $4 million onto the deal.
For the city to succeed in court, it must show that municipal ownership is in the public’s best interest. When arguing that point, attorneys for the city note that since the Carlyle Group purchased Mountain Water and its parent company Park Water in 2011, annual investments into local water infrastructure declined from $4.7 million annually to $3.5 million. Profit, the city says in its complaint, is already trumping the needs of local water users. “Defendants are directly responsive to, and influenced by, investors’ demands and expectations, as opposed to the needs and interests of the citizens of Missoula,” the city argues.
One day after Missoula filed its complaint, Detroit attorney Alan Ackerman opined on his “National Eminent Domain Blog” that, while Missoula invested a significant amount of ink in the complaint demonizing Carlyle for its vast resources, he doesn’t believe the city sufficiently demonstrated that it’s best equipped to oversee the utility, as will be required by the court.
“I’m not so sure they can justify a real reason other than the fact they want it and the other guy’s got it,” says Ackerman, who told the Independent that he has represented roughly 2,500 private landowners in eminent domain cases.
Engen says despite concerns and criticisms brought forward by Hertz and Ackerman, he sees the city positioned on strong legal footing. He also believes that eminent domain supporters far outnumber opponents. “I got about 25 positive emails (this past week),” he says, “and one that says I should be thrown out of office.”