- Associated Press - Friday, April 22, 2016

MISSOULA, Mont. (AP) - A court ruling that would allow the city of Missoula to purchase the water utility that serves its residents violated Mountain Water Co.’s property rights, an attorney argued before the Montana Supreme Court on Friday.

Brad Luck, appearing on behalf of The Carlyle Group investment firm, also argued the same issues were addressed when Missoula tried to buy the water system in the 1980s. He argued the condemnation decision should be reversed and the case sent back to District Judge Karen Townsend with an order to dismiss.

“I believe the city of Missoula wants the Mountain Water Company, but the city does not need the Mountain Water Company,” Luck said.

Last June, Townsend found that city proved its plan for a city-owned water system was “more necessary” than its current use as a private, for-profit enterprise. In November, a three-member commission set the market value at $88.6 million.

The Montana Supreme Court heard arguments on the appeal of the condemnation decision at the University of Montana in Missoula. The court said it would take the arguments under advisement.

Attorney Gary Zadick argued Friday that Townsend’s ruling didn’t take into account that the sale would lead to reduced pay and benefits for Mountain Water employees. He said the city acknowledged it could not match Mountain Water’s pay scale and would not commit to matching the company’s current benefits or keep in place its cost-of-living and merit raises.

“When government takes a private business by force, the law should not allow the employees to be harmed,” Zadick said

Attorney Harry Schneider spoke for the city. He said after the lengthy trial Townsend had ample evidence to find the city should be allowed to buy the water utility and that it had the bonding capacity to raise enough money for the purchase price, closing costs and running the utility.

All parties acknowledged that there had been no complaints about Mountain Water’s service to its customers, but Schneider argued that wasn’t necessary to file a condemnation case. He said Mountain Water only had to reject the city’s offer to purchase. Carlyle had rejected a $65 million offer from the city, saying it was too low.

The city has argued that if it ran the water system it would not pay property taxes, the salaries of out-of-state corporate managers or dividends to investors, thus reducing operating costs. Luck noted that the schools receive $1.2 million of the $4 million in property taxes Mountain Water pays.

While the case was pending The Carlyle Group sold Park Water Co. - which owns Mountain Water and two other utilities in California - to Liberty Utilities, without the approval of the state regulators. The Public Service Commission in January said it planned to file a lawsuit against The Carlyle Group.

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