Mountain Water says, “Be afraid, be very afraid”

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Mountain Water Co. has been spending big bucks on an advertising campaign vilifying Missoula’s efforts to purchase the city’s water supply.

Some not-so-subtle threats are included in the ads:

As the owners of the system, we intend to exhaust every legal avenue to protect our property and rights.

In other words, we’re going to string this out as long as possible to screw you, the citizens of Missoula.  That will teach you to mess with multi-national utility companies and equity firms.

The ads also decry the huge amount of money the city has spent on attorney fees, something like $5 million.  Why so much?  Please re-read the block quote above.

And do you think the ploy of the international equity firm, The Carlyle Group, to sell the water company to Liberty Utilities (the new owner of Mountain Water) without PSC oversight was some half-baked scheme?  Of course it wasn’t.  This will just keep the sale in the courts that much longer, this time with Montanans living outside Missoula picking up the tab for extraneous PSC and court costs as the suits and counter suits wend their way through the system.

Some other scare tactics include estimates for massive infrastructure improvements, to the tune of about $6 million, the city will have to undertake.  But wouldn’t Liberty Utilities have to make these same improvements?  Maybe it would and maybe it wouldn’t.  It’s not like Mountain Water has been on top of maintenance during its ownership.  One expert pegs the system’s water loss at 4.6 billion gallons a year.  That is not a typo.

If the improvements are to be made, it could affect rate-payer fees, whether the system is owned by the city or Mountain/Liberty.  Do you believe Mountain/Liberty is going to pass these costs on to its shareholders?  Hah! The repairs and upgrades need to be done.  But what Missoula water users won’t have to pay for, if we eventually end up owning the system, are the profits Liberty has to make to keep the shareholders happy.

Here’s a link to one of the full page ads that have appeared in the Missoulian and Missoula Independent.  There could be radio and TV advertising, too, but I don’t visit those media often.  I think I saw a billboard the other day, though.

I’m thinking about making March “Don’t Pay Your Water Bill” month.  Not if a portion of it is going to a marketing campaign telling me that, as a citizen of Missoula, I shouldn’t own my own water supply — that I should be at the mercy of a subsidiary of a Canadian utility conglomerate for one of the most precious resources on this planet.

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About the author

Pete Talbot

'Papa’ Pete Talbot is first and foremost a grandfather to five wonderful grandchildren. Like many Montanans, he has held numerous jobs over the years: film and video producer, a partner in a marketing and advertising firm, a builder and a property manager. He’s served on local and statewide Democratic Party boards. Pete has also been blogging at various sites for over a decade. Ping-pong and skiing are his favorite diversions. He enjoys bourbon.

27 Comments

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  • I don’t have a water bill. Why should a regular, 9-to-5, barely-getting-by renter in Missoula, be concerned about this?

    If you have some numbers backing up the claim that my rent will go up, I’d like to see ’em. That’s the main argument I hear from property owners on this one as to why I should be concerned.

    What do you think?

    • It’s possible that the world has issues that don’t just affect you, Greg.

      And it seems quite logical to assume that owners will pass on additional costs to renters rather than absorbing them. I’d say the burden of proof rests more heavily on the person making the claim that seems unlikely to be true.

    • With all respect Greg, I can fully understand why you would think you are immune from any impact of increased water rates as a renter if your landlord is footing the bill as part of your rent. However, as a landlord, I can assure you that all increased costs of operating a rental property eventually get passed onto the renter. Your rental agreement may protect you from rent increases for a specific contractual period of time, usually either for 6 or 12 months from the date of signing depending on the terms. At some point, however, your landlord has the ability to increase your rent. I suggest you talk to your landlord and try to get a sense of what his/her plans are for rent increases in the future. Sometimes you can negotiate no rent increases for a more extended period of time if you opt for a longer lease. It doesn’t hurt to ask.

      If the property’s water, sewer or garbage rates increase, eventually you will proportionally absorb all or part of that increase. If voters approve city or county bond issues that increase property taxes, expect your rent to eventually increase. If the appraised property value increases, expect your rent to eventually increase because the tax on your rental property increases proportionately. Considering that the City passed several large bond issues and has new bond issues scheduled for the ballot in 2016, expect your landlord to raise your rent at some time. Expect another bond issue at some point to pay the $100+ million to cover the Mountain Water acquisition. As a double (triple?) whammy, expect another large appraised property value increase in 2017. I won’t even get into zoning and land use issues at this time

      Unfortunately, is getting very expensive for the average person to afford non-subsidized housing in Missoula.

      • My rent went up by $10 a month this year.

        Why should I be concerned about that? After all, it isn’t that much.

        I’d like to add that before all this water lawsuit stuff started, my rent/water bill probably wouldn’t have gone up at all.

        • I doubt that your $10/mo. rent increase was related to Mtn. Water lawsuits, Greg. Mtn. Water or its new owner, Liberty Utilities, haven’t requested any rate hikes (yet).

    • Hi Greg, I understand your point of view. Since you don’t own you do not see changes in a black and white way. But consider that your landlord has an investment in the property you occupy. Managing renters is a job, sometimes not an easy one. So, your landlord (or lady) needs to see a return on his/her investment that exceeds the interest earned in other investments that require no time or energy. Otherwise selling the property to someone else becomes the best option. When a rental property is sold, a number of possibilities exist for the tenant: 1) The new owner wants to renovate the property so you are looking for a new home 2) The new owner has taken on debt and has increased costs so your rent goes up, probably a lot. 3) The new owner has bought the property for his/her own residence so you need to find a place to live. Please rethink your attitude about civic issues and about your position as someone who does not own property. Renters have as much of a stake as anyone.

      • So let’s say my rent goes up by $20 a month. That’s now $240 a year I have to pay extra.

        Hm, doesn’t really seem that much, not at $20 a month. But I suppose that’s the same argument property tax payers make when they have to pay an extra $12.33 for some bond.

        In the Missoulian comments, for instance, I see lots of people complain about property taxes. I rarely see anyone complain about rent.

        Renters don’t complain – who would care? Is their rent going to be lowered? No. We have no power.

        One way we do have power is to raise property taxes through voting, however. My, lots of people hate that.

        They can do nothing about it, however…except raise my rent.

        So we have a vicious cycle, don’t we? I don’t see it ending anytime soon.

        Besides, I can just move to Darby or Frenchtown. Gas prices are low. I’d probably save some money.

        See how the burden for change falls on the property taxpayer, not the renter?

        Again, why should I care about an extra $20 a month?

  • The profits any privately held utility earns are approved by the Montana Public Service Commission, therefore the PSC decides what profits the Liberty shareholders will be happy with. There may be a jillion reasons why the City or the private company should own the local water distribution system. Inflated, unwarranted costs, however, are not going to be inflicted on ratepayers without the approval of the Public Service Commission, a group of state officials elected by the people of Montana. Regardless of one’s position on the acquisition, it seems fair to keep this in mind.

    • My point, Geoff, is that the city doesn’t need to make ANY profit. Also, it seems like the PSC grants increases on a pretty regular basis. I suppose it matters who makes up the commission. These days, it seems quite industry friendly.

      • The city can just increase taxes or annex more people unto the system, like the city did under Mike Kadas. Missoula needed more money to pay for the wastewater lawsuit it had lost and one way to do that was to annex more people unto Missoula to pay for that lawsuit.

    • And if the PSC doesn’t approve rate increases…then what?

      I’m willing to bet a tax increase. That’s why they don’t need to turn a profit – the taxpayers are always there to bail them out.

      Look at our roads. The city can’t adequately take care of those now. How is it going to fix our water loss and pipe issue?

      Through bonds, that’s how.

      Where are people on fixed incomes supposed to get that extra money? Remember, many didn’t have a problem with their water or their water bill. The city changed that.

      Personally, I think Missoula is driving itself into the ground. The tax base is eroding, most new jobs are service oriented, and there’s a massive real estate bubble. I feel especially sorry for those working two jobs and trying to get by. More and more have to move to places like Darby or Frenchtown because Missoula is too expensive.

      I don’t see that changing under our current “leadership.”

      $42 million for parks and trails
      $16 million for the mall expansion
      $3 million for a 1-way street study

      Are you starting to get the idea? Those are all things we’ve approved. There’s our money for the water company right there, and without enriching all the lawyers and consultants.

      But just getting the water company wasn’t the idea, was it? No, we have to keep doing our tax and spend procedures.

      Who benefits from that?

      I don’t see any benefits, myself, unless having a harder time finding affordable housing and a good job is counted as a benefit.

      The way Missoula is currently set up, I suppose that is. We know that people that don’t want to work are given a free place to live.

      There’s no incentive to work hard here anymore. It’s clear that everything will be given to you.

      That’s a recipe for failure.

      • What a convoluted comment, Greg. I’ll start with this: the PSC doesn’t regulate publicly-held utilities. It’s up to the city, if it owns the water system, to set the rates. Since it doesn’t have to make a profit, one would guess that those rates would be lower than a privately-held utility.

        You say, “But just getting the water company wasn’t the idea, was it? No, we have to keep doing our tax and spend procedures.”

        The purchase of the water company by the city has nothing to do our “tax and spend procedures.” The reason the city wants to own the water system is to have some control over this most precious resource. In the last few years, it has been in the hands of a privately held California company, an international equity firm and now a Canadian utility conglomerate. Who do you think will be more accountable to the the citizens of Missoula, our local government, or a multi-national utility or equity firm?

        “Look at our roads. The city can’t adequately take care of those now. How is it going to fix our water loss and pipe issue?” Greg asks. The rate payers fund repairs and maintenance and will undoubtably have more say in the process than they’d have with a multi-national. The past owners have obviously been neglecting this responsibility.

        Finally, “There’s no incentive to work hard here anymore. It’s clear that everything will be given to you,” says Greg. What the hell does that mean? Did I miss out on the dole? Where’s my free lunch? You must know something I don’t.

        Anyway, Greg, if you and enough other people are fed up with the way the city is run, you can always vote the rascals out. Or even run for a seat on council.

        • I know from my experiences at the Missoula City Council that the city isn’t accountable to anyone.

          Rate payers are taxpayers, or will be if the city gets the water company. I’m sure those rate payers/taxpayers want their roads fixed now, but it’s not being done.

          Personally, I don’t believe the city will be able to fix either the roads or the water system…unless it raises taxes a lot.

          In terms of the dole, I guess I’m talking about all the free housing that developers and landlords are complaining about. Wasn’t there a new one just set up recently? Maybe it was in 2012. The Missoulian reported at that time that 52% of renters were burdened.

          Why is that?

          Well, I guess we get back to those tax increases that trickle down to my rent, huh? Now we have to have the city/state/feds (it all comes from the same pocket on my pants) come in and subsidize those renters.

          Perhaps if we had better paying jobs we wouldn’t need to do that. But we don’t, and as far as I can tell, there is no plan to get those jobs.

          So again, we’re in this vicious cycle.

          • No, Rate payers are rate payers, Greg.

            And please tell me about all the developers and landlords complaining about “free housing.” First, if there’s all this free housing, there must be a glut of rentals on the market, which means that there’s competition for renters, i.e.: lower rents. I don’t believe this to be the case. BTW, the developers build the “free housing” along with their private developments, so I imagine they aren’t complaining.

            You seem to be fixated on roads. Having just finished a tour around the state, Missoula roads don’t seem to be in any worse shape than roads in most of the major cities I visited. It’s part of the charm of living in Montana.

            And you’re right, we could use higher paying jobs in Missoula. I’m not sure you’d qualify for any of them, though. Maybe you could score some of that “free housing.” Would that make you happy?

            • I guess this discussion is over. Personally, I feel the belittling comments from the writers of this site turns people off. That’s just me.

              In regard to the developers, I’ve heard it in the Missoulian, I heard it at the Missoula Gianforte meeting this week.

              6 days ago we had an article talking about new affordable housing downtown after a donation.

              Back in 2012 a 115-unit complex opened up.

              These are funded by the Missoula Housing Authority.

              In April of 2015 that organization got $4 million in federal tax credits.

              Great. Let’s forget the running of the national debt for now and focus on that $4 million coming to our community.

              That means the MHA can effectively charge lower rents than private landlords. Those landlords, now losing money, have to charge higher rents.

              All of this because our jobs don’t pay enough for people to pay the rent that is/was charged.

              Of course, people could move out of Missoula, but many don’t. They choose to stay and tough it out.

              Long-term, I don’t feel this is sustainable.

              Max rents are dictated by the Montana Board of Housing when it comes to those subsidized rentals. It gets pretty complicated from there and I don’t have all the information.

              I do know that wages aren’t enough here for me to ever become a property owner. Since I wouldn’t qualify for any of the jobs here anyways, as you suggest, what does it matter?

              I’ll get back to that $10 or $20 increase in rent each month.

              Why should I care about that?

              • Yeah, my final comment about jobs was probably a cheap shot. You’re pissing me off, though, Strandberg. It’s a simple question: should Missoula own its water supply or should it be the multi-nationals, trading it off willy-nilly to the highest bidder?

                The purchase by the city penciled out. That might not be the case now that Mountain Water/Carlyle/Liberty/Algonquin keeps dragging the sale through the courts. But still, isn’t it worth it? Maybe not for us but for our kids and grandkids.

                I hope that answers your oft asked question,
                “Why should I care about that?”

                And you say, “I feel the belittling comments from the writers of this site turns people off.”
                Man, you haven’t participated in the blogs very long. This stuff is mild.

                • Of course Missoula should own its own water supply.

                  We’d have had the money to buy it outright and not do the shady route we chose.

                  I put those totals up there.

                  $42 million for parks, $16 million for the mall. There’s tons of other small things that add up.

                  We could have done it right. We chose not to.

                  We have no honor on our current path.

  • Hello Pete,

    I was born, raised and educated in Missoula. For over 25 years I have been able to work for Mountain Water, a consciousness employer that has always worked to provide good, safe, clean water to this community.

    I feel it’s important to address some of the points you bring up here, in hopes that we can all engage on this complex issue in a fully informed way.

    • In no way are we intending to threaten our community. We are pointing out what it is going to cost for the city to take our system. City officials have not been forthcoming with this information, and until recently we were prevented by the court from discussing it. Regardless of a person’s viewpoint on condemnation, we believe this is critical information for the community to understand.

    • As the owners of private property we’re not threatening the community by defending that property. We’re exercising our constitution right to keep or be compensated fairly for our property. Surely if the city wanted to condemn your home against your interests, you’d exercise every avenue at your disposal as well.

    • We do not gain from dragging out the battle — only the attorneys do — but we have no choice. Only the city can back out of the lawsuit and stop all the future legal fees this community will need to pay.

    • In a similar sense, we did not want to have to disengage from the Public Service Commission process to review the purchase of Western Water Holdings by Liberty Utilities. However, the city involved itself in that process to the point it took the PSC to court, which put into question the whole ability for that process to move forward in a timely fashion. The Montana Legislature has refused at least three times to give the PSC statutory authority over transactions of this type, so once the city decided to take the process out of the PSC’s control, a business decision was made to finalize the transaction and get Mountain Water back under the PSC’s regulation of rates and service. Nothing has changed for the Mountain water users or for our regulatory commitments due to this upstream stock transaction. Nothing will change, other than we now have a committed long-term owner with deep experience in regulated utilities.

    • You are correct that Mountain Water will need to continue to put funds into the system to maintain it as a reliable part of our community’s infrastructure. In fact, we have continued and will continue to invest back into the system in a way that balances system needs with community concerns about rate impacts.

    • The significant difference is that Liberty’s investment will not impact public debt or bonding capacity. Every dollar the city puts into buying and maintaining the system will be borrowed, which creates more cost (as interest) and debt. It also hurts the city’s ability to bond for other community needs. That’s much different than having a regulated water utility as this community always has had. This community has never had to leverage its borrowing capacity for its water infrastructure. Leaving more flexibility to bond for other needs.

    • Under the city’s plan, make no mistake, there are investment returns, now and into the future. Those returns go to the investors of the bonds. And, under condemnation law, bond investor returns will be higher for Missoula’s ratepayers because the returns are based on the fair market value of the water system. As a regulated utility our returns on investment have and will only be based on the original cost of our investment — not the fair market value of those assets today.

    • Unlike our investors who must get approval by the PSC for future rate increases, the city will need to raise water rates automatically if the system’s net revenues can’t meet the investors’ returns. So, for example, any reductions in local water use through conservation would result in an automatic rate increase to make up the lost revenues.

    • As for leakage, the number that you’re using includes hundreds of miles of pipe Mountain Water doesn’t own. We only own the distribution mains. The lines that run from the distribution mains to Missoula homes and businesses are owned by the property owners. Same as will be the case under city ownership, as is with sewer lines. Studies show at least half of the leakage comes from those pipes. We can’t force people to replace those pipes, nor can the city. We are working to reduce leakage on our system and have improved significantly over the past five years through new detection technology and infrastructure. But as long as there is leakage from the pipes we don’t own, the system will leak water.

    • In Missoula’s case we’re really fortunate. Water leaked from service lines or mains filters back through the gravel and rock and goes back to the aquifer, just like rain would. So water is not wasted. It comes down to what is the most cost effective decision for main replacement. Just because a main is leaking, doesn’t mean it will fail. It could still have years of cost effective life ahead for the community. We are committed to replacing all the main that needs to be replaced to ensure continued reliable service.

    • Speaking of the aquifer, one last point: You own it already. You mention that our campaign is telling you that you shouldn’t own your own water supply — but you already do and always will under the Montana Constitution. Mountain Water simply owns and maintains the infrastructure to bring that water supply into your home or business.

    I assure you that as all this continues to play through, Mountain Water and its local, long-serving employees will continue to provide reliable, safe water service to our community. Our record of service is impeccable through the decades and our ability to serve through these last few years of distractions continues to show our commitment to serve our community in a local, responsive, caring way.

    Liberty has committed to allow us as employees of Mountain to stay together to continue that type of local service into the future. The city has been the exact opposite. Even though the city says they are working to take on all the employees, their continued actions show different. If this highly trained and knowledge group is lost because of all this, it would be the highest cost of condemnation to our community.

    All of this said, I understand why some citizens believe in municipal ownership. However, getting there through condemnation equates to significant public debt. In our minds this isn’t the community against a corporation. It’s about community priorities: where to take on new debt, and whether the city would run the water system better than the people who have run it reliably, efficiently and affordably for decades.

    We believe the community needs to understand both sides, so we’re running some newspaper ads. We have more information at mountainwaterfacts.com and I am more than willing to discuss further. I can be reached by calling our customer service number at 406-721-5570.

    John A. Kappes
    President -Mountain Water Company

    • No one’s pockets are limitless.

      Can your company and those backing it financially hold out until the, what is it, 2017 mayoral elections?

      If so you could fund a candidate that would reverse this lawsuit.

      That’s the only leverage you’ve got, or am I wrong on that?

      Take out Engen and you’ve got this problem solved, don’t you? Put a successor in that doesn’t follow his crusade.

      How much would that cost you?

      You’ve run the numbers already, haven’t you? Someone has.

      I bet there’s a list of names, too.

      You wouldn’t have run those Indy ads this week if you were’t set to play hardball. And I’m sorry, but hardball isn’t in the courts. Besides, with puppet Townsend there, how are you going to prevail?

      This is a political problem, always has been, and it’ll be solved with a political solution.

      I look forward to seeing your strategy and tactics unfold.

      • This has taken longer than I like, John, but I’ve been doing some research and playing phone tag with city officials in an effort to respond accurately to your comment. I appreciate your weighing in, though, and you’ll always have a platform here for rebuttal. However, I couldn’t disagree more with most of your assertions.

        My first question is, what did the Carlyle Group pay for Mountain Water? It was about five years ago, right? I know Carlyle bought three water companies at the time, two in California and Mountain Water in Missoula but I haven’t been able to find the price tag, anywhere. I’m guessing Carlyle paid considerably less for Mountain Water than the $88 million price an impartial, three-member panel arrived at recently. Correct me if I’m wrong but I believe that calls into question your comment, “We’re exercising our constitution(al) right to keep or be compensated fairly for our property.” What do you consider “compensated fairly?”

        During the negotiations between Park Water Co. and the Carlyle Group, the city was told it would have first right of refusal if Carlyle were to resell the business. Nothing on paper – a big mistake in my opinion – but that’s what I believe transpired. Again, correct me if I’m wrong.

        “We do not gain from dragging out the battle — only the attorneys do — but we have no choice. Only the city can back out of the lawsuit and stop all the future legal fees this community will need to pay.” I haven’t received an answer back from the city yet on this statement but if a negotiated settlement could be reached, wouldn’t that be the end of the suit?

        I didn’t quite follow your rational for bypassing the PSC when selling Mountain Water to Liberty. Obviously, the PSC didn’t like it much, either, and the commissioners are pissed off. The sale probably would have been endorsed by the commissioners, since they’re pretty pro-industry, so my only conclusion is it was done to continue dragging out the process. I did notice that when Park Water Co. was sold to Carlyle, the sale went through the PSC and got its blessing.

        Concern about Mountain Water employees being retained by the city is legitimate. I would imagine there isn’t a lot of redundancy in Mountain Water staff and city employees. I would hope the city would pay similar wages and offer substantial benefits to former Mountain Water employees. Note to the city: that should be a part of the deal.

        As to water leakage, you’re blaming the privately-owned lines that go from the mains to homes and businesses: “Studies show at least half of the leakage comes from those pipes. We can’t force people to replace those pipes, nor can the city.” So only 2.3 billion gallons are being lost through Mountain Water lines? That’s not acceptable. And perhaps the city can be more proactive in working with home and business owners to mitigate their water leaks.

        Plus, the justification that most of the leaked water drains back into the aquifer seems like strange way to run a distribution system.

        There was a great letter in the paper the other day asking, basically, do Missoulians want to own their water or just rent it. I think that says it all:

        http://missoulian.com/news/opinion/mailbag/mountain-water-company-missoulians-should-stop-paying-rent/article_ae98c040-22b3-598c-b0eb-e0746ebf4622.html

        • Thanks for the thoughtful response. Some of what you’ve brought up here goes outside the realm of what was discussed in your original post, so I wanted to follow up once more with clarifications. In order to most clearly respond to the points you raised, I’ve put together a post that you can read at this link: http://www.mountainwaterfacts.com/the-debt-is-in-the-details-key-facts-behind-our-public-information-campaign/

          My responses to your follow-up questions can be found by scrolling down to the section titled, “Additional Comments Discussion.” I hope this brings additional clarity to this important discussion for our community.

          Sincerely,
          John K-

  • If Missoula owned the water system we’d see rates or tax increases or both. When Butte Silver Bow purchased it water system, it’s first order of business was to raise rates. The situation in Flint is one reason against city owned water systems.

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