By Martin Kidston/MISSOULA CURRENT

The city of Missoula called a series of newspaper ads paid for by Liberty Utilities Co. little more than propaganda on Wednesday, and vowed to push back with what it described as facts in the ongoing battle over ownership of Mountain Water Co.

The full-page ads in the Missoulian make a number of claims, suggesting that public ownership of Mountain Water would result in a “mountain of debt” incurred by taxpayers.

“This is paid advertising,” Mayor John Engen told the City Council. “If we were to buy this at our contract rate with the Missoulian today, these ads would cost about $3,000 a piece. We can't afford it. We wouldn't spend public money that way.”

In the ads, Liberty claims that public ownership of the local drinking water system would result in $134 million in additional financing costs to the city. Engen called the figure “rank speculation,” saying the financing models remain unknown, as do future interest rates and other factors.

“Liberty is presenting a worse-case scenario as a given fact,” Engen said. “It's a theme that runs throughout the propaganda that's appearing in the newspaper.”

Liberty also claims the city would pay $14 million in interest and dividends upon taking ownership of the water system, along with $7.3 million in legal fees – figures Engen called legally tenuous. The company also claims the city would incur $60 million in debt to repair and expand the water system's infrastructure.

The condition of the water system played a central theme in last year's valuation hearing, where a leakage rate of 4 billion gallons a year was commonly cited. Engen said the city would invest to improve the system's infrastructure.

“These capital expenditures won't be financed by debt, they'll be financed by revenue, including the water utility revenue that has previously gone to executives in California, Washington, D.C., and now, Toronto,” Engen said.

Engen also questioned Liberty's claim that it would operate the water system for the public good. He said Liberty's corporate mission was to earn high profits for shareholders by reducing expenditures and increasing rates.

When The Carlyle Group marketed Mountain Water to Liberty, the mayor added, it predicted a 50 percent increase in the rate base by 2019.

Liberty's paid advertisement also claims that the price established for the water utility is “far higher” than what city officials ever claimed it would be. Engen called the suggestion false, saying the city originally offered Carlyle $65 million for the system.

Last November, a three-panel water commission placed a fair-market value of $88.6 million on the water system. Engen said the figure is higher than the city's original offer due to the estimated $24 million Mountain Water still owes local developers who fronted the cost of expanding the system.

“When it's all said and done, Mountain Water's corporate owners will get about what the city originally offered,” Engen said.

Engen said the city maintains its AA credit rating with Standard & Poors. The rating prompted Ward 1 council member Bryan von Lossberg to note that S&P downgraded Liberty's parent company, Algonquin Power and Utilities Corp., after it purchased Empire District Electric Co. in the Midwest.

“That has resulted in S&P revising their outlook for the company to a negative outlook because of the impacts to the company's cash flow and operating margins,” von Lossberg said. “It's a bit ironic and frankly pathetic to be lectured in a propaganda piece about debt by Liberty, when this is a company with $528 million-plus balance-sheet deficit on its books.”

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