Owed Millions, Missoula Developers Looking for Payment in Water Case

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By Martin Kidston/MISSOULA CURRENT

Attorney’s representing Missoula developers who are owed millions of dollars in contract obligations by Mountain Water Co. are asking District Court to ensure their clients aren’t left in the cold when the utility changes hands.

The city of Missoula is also keeping a close eye on the outcome of the developers’ petition with the court seeking declaratory relief in the case.

“We believe it’s very clear that whoever the owner of Mountain Water is today gets $88.6 million and is responsible for carving out a chunk of that for local developers,” Missoula Mayor John Engen said. “If that chunk isn’t carved out, I think developers have themselves one hell of a lawsuit, and we’d be happy to assist them.”

Robert Bell, an attorney representing 23 clients owed more than $11 million, brought the issue before District Judge Karen Townsend in December.

At the time, the city had offered to honor the obligations once it took ownership of Mountain Water, so long as the amount was deducted off the $88.6 million valuation figure placed on the utility.

But in January, Townsend ruled against it. The city has taken the ruling to suggest that Mountain Water will retain the responsibility of paying the developers, but Bell sees it differently.

“I don’t fully agree that the judge has resolved the question on whether those obligations remain with Mountain Water,” Bell said. “We filed a separate petition seeking declaratory judgment on behalf of the developers we represent. We’re asking District Judge (Leslie Halligan) to decide these various issues.”

Bell said the scenario could play out in several ways. Among them, he said, the court could opt to hold back funds from the condemnation award to pay the developers, or it could require the city to pay the obligations as the new owner.

That later scenario could mean the city would pay the $88.6 million valuation price for the water system, and still have to honor the obligations owed to local developers, Bell said.

“The nuclear option is that the judge doesn’t agree with either scenario and allows money to be paid for Mountain Water, and now you have a company with no income and no assets and it still has an obligation to pay our people,” Bell said.

Over the years, area developers have fronted millions of dollars to Mountain Water, enabling the utility to extend services to new residential and commercial projects.

In each instance, developers signed a contract with Mountain Water, which agreed to refund the advances over time. The petition filed by Bell on behalf of developers last month said the company has entered into nearly 400 contracts with obligations exceeding $22 million.

The list of parties owed refunds by Mountain Water includes Bob Ward and Sons and St. Patrick Hospital. It also includes local businesses like Edgell Construction, along with Missoula County.

Dale Bickell, the city’s chief financial officer, said this week that the city is owed roughly $1.5 million. Engen said the court will determine the flow of money.

“We have made extraordinary efforts to ensure those developers will be considered in this process,” Engen said. “We’ll do everything we can to help. We know where the responsibility lies, and all Carlyle has to do is step up to that responsibility.”

The Carlyle Group owns Mountain Water, though that too is now in dispute. Earlier this week, Liberty Utility Co., a subsidiary of Algonquin Power and Utilies Corp. based in Canada, announced that it had quietly purchased the utility.

That matter is now before the Montana Public Service Commission. City officials don’t believe Liberty is the owner.

“The judge ruled on Jan. 4 that (Carlyle and Mountain Water) are responsible for what is somewhere between $11 million and $22 million, depending on the accounting,” Engen said. “We believe that liability is to be paid from the proceeds of the $88.6 million the city owes.”