Judge rules against CL in lake lease litigation

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[pullquote]In this community, the lake is the figurative ‘pot of gold’ at the end of the rainbow, and anything that seems to threaten it is cause for alarm.[/pullquote]

Many residents have indicated that the one thing they fear most about any loss in the lake lease litigation between the Canyon Lake Property Owners Association and the Elsinore Valley Municipal Water District is the loss of recreational privileges on the lake. That fear is unfounded, according to CLPOA Corporate Counsel Scott Levine.

In this community, the lake is the figurative “pot of gold” at the end of the rainbow, and anything that seems to threaten it is cause for alarm. That’s why Levine was quick to clarify the Association’s position after the CLPOA vs. EVMWD court loss on Monday, February 1, when he stated,

“Today’s ruling was not unexpected as we have always anticipated that the complicated Constitutional issues raised by our case would eventually need to be reviewed by a higher court. In fact, the judge noted there is no existing case law to support or negate our position, and he also said that we have teed up our case perfectly for the Court of Appeal, which typically decides complex Constitutional interpretations.”

Levine continued, “I will be meeting with the CLPOA Board of Directors to discuss our legal options, including appealing the case, to meet the goal of securing a long-term lease that is fair and reasonable for all CLPOA members. It’s important to note that today’s ruling has no impact on the existing lease, which remains valid through December 31, 2022 – and the CLPOA still has the right to unilaterally extend the terms of that lease for another 44 years through 2066, if it so chooses.”

At Tuesday’s POA Board meeting, Levine further explained what took place at Monday’s court hearing and said that a transcript of the hearing will be posted on the POA website as soon as it’s available.

He opened his comments on the lake lease litigation by saying, “While I wanted and tried very hard to win this motion, we lost. I didn’t lose; Canyon Lake lost.”

But he explained that he knew from the beginning – and sought to explain to members – that this Constitutional issue wasn’t likely to be decided in a trial court. If Canyon Lake won the motion, EVMWD would have taken it to the Court of Appeal, he said.

[pullquote]’Monday’s ruling has no impact on the existing lease, which remains valid through December 31, 2022 – and the CLPOA still has the right to unilaterally extend the terms of that lease for another 44 years through 2066, if it so chooses.’ [/pullquote]

He cited the example of the Howard Jarvis Taxpayer Foundation, whose request was denied in both the trial court and appeals court but passed by the California Supreme Court in 2001.

With this loss, the Board will have to decide whether to move forward with an appeal. Levine said his objective at Monday’s hearing was to create the record for an appeal, and the judge indicated he had done a good job of that. The matter was scheduled to be heard by the POA Litigation Committee last night, followed by an executive session of the Board.

The actual litigation began last February when the CLPOA filed a lawsuit stating that the Association’s payment to EVMWD, under the “Lake Lease,” is an unconstitutional “tax” as defined in Article 13C of the California Constitution.

The complaint noted that the unconstitutional tax has been imposed and collected by EVMWD since Article 13C was enacted in 2010 by a vote of California citizens to enact Proposition 26. Therefore, all lease payments collected since September 2010 qualify as an unconstitutional tax.

The premise (explained in detail in the “Lake Lease” link at canyonlakepoa.com) is that, as a government entity, EVMWD is not entitled to charge more than what is necessary to cover the reasonable cost of its governmental activity.

The Association compiled budget figures showing that the amount Canyon Lake pays to lease the surface rights of the lake far exceeds what EVMWD spends to operate the lake.

The Lake Lease website explains the Association’s position by stating, “Under California’s constitution, government entities such as EVMWD must prove that lease fees are not a tax AND that the amount charged is ‘no more than necessary to cover the reasonable costs of the governmental activity.’ In this case EVMWD’s actual costs range from about $20,000 to $185,000 per year, a drop in the bucket compared to the $1.44 million it charges Canyon Lake property owners.”

Why did the CLPOA pursue this case to begin with? The Association contends, “Under the current lake lease, which expires at the end of 2022, the annual fee paid by each Canyon Lake property owner would climb from $303 per year now to as much as $519 by 2022. EVMWD also wants to delete its current promise to keep the lake water level at 1,372 feet – and force CLPOA to defend and indemnify EVMWD if a homeowner sues over water level drops.”

The Association further states (under Myths vs. Facts on the Lake Lease website), “The myth that Canyon Lake residents might lose access to the lake is a scare tactic promoted by EVMWD. In reality, EVMWD cannot revoke the lease until 2067 – and even then would face severe legal hurdles.”

The document continues, “It’s important to keep in mind that this is a long-term issue. What we do today will affect residents and their children for the next 50 years. The lease terms offered by EVMWD could eventually raise the annual fee paid by Canyon Lake property owners from $303 to nearly $3,000 (per lot) per year. The CLPOA is working to negotiate a fair lease agreement that protects residents from being gouged.”

As President Bruce Yarbrough and Director Eric Spitzer noted at Tuesday night’s meeting, the easiest thing for the Board would be to do nothing – to sweep it under the rug and let the next Board deal with it.

“We’ve heard Board after Board talk about this lake lease. We’re trying to do something with this lake lease and, yes, it is risky,” said Bruce. “But if we do nothing, we won’t be able to afford this lake lease going forward the way it’s written . . . We’re the community, too. We’re taking a tough stand here. We’re trying to do what’s best for the community.”

It should be noted that not everyone is satisfied with these explanations. Two independent attorneys spoke at Tuesday’s meeting. Attorney Brenda Yanoschik and Attorney Chris Williams spoke separately, as did Brenda’s husband James.

James Yanoschik asked the Board to state how much this lawsuit is costing members and suggested, if Levine is so confident about an appeal, to have him take it on contingency. “There is no justification to keep this going except self-promotion,” he said.

Brenda, who attended Monday’s court hearing, said her impression of what took place at the hearing was different from how Levine described it. On Facebook and to The Friday Flyer, she commented, in part, “EVMWD WON and CLPOA LOST in court today: The Court remarked that this case is ‘dead in the water.’ CLPOA’s ‘Don’t make us pay our bill because it’s a tax’ lake lease litigation case is over, unless the CLPOA Board decides to throw more good money after bad and pay an attorney to appeal.”

Chris Williams’ main point was that the lake lease litigation is risky for Canyon Lake, especially considering the amount of money EVMWD has at its disposal to pay attorney fees.