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Mayor John Engen led the discussion in City Council Chambers in February and laid out different aspects of attempting to acquire Mountain Water.

Mayor John Engen has made his final argument that the Carlyle Group should accept the city of Missoula’s offer to negotiate a purchase of Mountain Water Co.

“I believe that we offer a solution that meets Carlyle’s interests,” Engen said in the March 17 letter. “We purchase an asset you are actively charged with selling at a reasonable return, and we are ready to come to the table to negotiate that reasonable price at any time.”

The city sent the correspondence even as lawyers on the mayor’s acquisition team review draft legal documents seeking court approval to use powers of eminent domain to purchase Mountain Water.

Carlyle bought the local water company and its parent Park Water for $102 million in 2011, and the city of Missoula has offered as much as $65 million since then to buy the water utility.

In a strongly worded rejection dated Jan. 31, Carlyle managing director of infrastructure Robert Dove declined the city’s formal $50 million offer. He also said the global investment firm would defend its ownership of Mountain Water, and he lauded Carlyle’s track record of improving the water system since it took control of the company.

“I reiterate that Carlyle Infrastructure and Mountain Water will vigorously defend our legal rights in event of condemnation, and we urge you and the City Council to carefully ... weigh the cost and benefit of a condemnation,” Dove said. “Mountain Water under private ownership has been a great partner in the Missoula community so we believe it is in the best interests of the people of Missoula to keep it that way.”

In his written response, Engen said he wanted to address points Dove made in his rejection of the city’s offer. “Fundamentally, private ownership demands a profit and public ownership does not, which means Mountain Water, operated as a public utility, will only charge what it needs to operate and maintain the system.”

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• The 14 percent appreciation Carlyle “boasts” in all its funds “should stay in Missoula rather than benefit national or international investors,” Engen said.

• “I note that Missoula ratepayers pay about $2,000,000 for Park Water Management in California,” he wrote. “That money should also stay in Missoula.”

• The city will make payments in lieu of taxes through the utility, Engen said.

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• The mayor also said the legal costs the city of Missoula may have to pay for Carlyle’s defense, “if the fair market value of the system is ultimately determined to be in excess of our ‘final offer,’ ... are billed at rates prevalent in the local community (Missoula and not California or New York) and must be reasonable (in time spent) as determined by a judge.” Carlyle has estimated its defense costs alone at more than $1 million for a case lasting four or five years; Engen has estimated some $800,000 in legal fees for both parties.

“While condemnation could be costly, those costs pale in comparison to the long-term cost of continued private ownership,” Engen wrote.

Barring any additional information from Dove, the letter to Carlyle is the last communication Engen will have with the firm prior to taking court action, he said Tuesday.

Carlyle declined to comment further.

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Reach Keila Szpaller at @keilaszpaller, at keila.szpaller@missoulian.com or at (406) 523-5262.

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