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Councilman: Condemnation threat in possible water negotiations could pay off

By Scott Zoltan, KECI Reporter, szoltan@keci.com
Published On: Sep 26 2013 07:24:52 PM MDT
Updated On: Sep 26 2013 08:37:24 PM MDT
MISSOULA, Mont. -

Missoula City Councilman Bob Jaffe tells NBC Montana that a threat of condemnation during negotiations for a possible purchase of Mountain Water could create a better negotiating environment for both the city, and the Mountain Water’s owner, the Carlyle Group.

Mayor John Engen is pushing for the purchase, although there have been no announcements that the utility company is up for sale. Engen is hoping the city could try to exert eminent domain (condemnation) to force a purchase of the water system if negotiations fail.  

Montana law defines eminent domain (condemnation) as “the right of the state to take private property for public use.”

Under Montana law, it appears the city could purchase a water system if the involved parties agree on the terms, but if that doesn’t happen, the city can try to use eminent domain to get the system, and if the court signs off, pay for it within six months.

According to an email Jaffe sent out to his constituents, if a deal is made under the formal threat of condemnation, Carlyle is relieved of provisions that would have required the company to pay interest to bondholders. That would, according to Jaffe, lower the sale price, and give wiggle room of nearly $10 million.

There would also be a tax incentive, according to Jaffe, because the company would have more time (two additional years) to reinvest its money in a similar investment property without paying capital gains taxes.

Currently, the city council has given a preliminary approval of Engen’s efforts to enter negotiations for a possible purchase, and a draft ordinance is expected to be officially instated at a later meeting.

Engen has discussed several reasons he feels the city should own Mountain Water. In a memo, Engen states that a resource like water shouldn’t be controlled by a private corporation with allegiances to stockholders and far-away investors.

If the city controlled the water system, Engen says, the city could work to boost conservation and speed up repairs. He admits rates would eventually go up, but those hikes would be approved by City Council, and the money would get reinvested in the system.