New lake lease contributes to significant savings for Canyon Lake

Canyon Lake’s contract of $1.5 million now – would only be about $3 million 36 years into the new contract and approximately $4 million annually in year 2066, not $68 million as with the previous eight percent example. Photo by Steve Libring.

Outstanding concerts are being hosted at the lodge, Fiesta Day was again a huge success, triple digit heat is bringing residents out to enjoy the lake and pool, and residents just celebrated the largest attended event in Canyon Lake – the annual 4th of July Fireworks show. Just another day in a “Bit of Paradise” as residents are now busy getting ready for their summer vacations.

One key issue, not to be overlooked, is the announcement that the Canyon Lake Property Owners Association (CLPOA) is amending the lake lease with Elsinore Valley Municipal Water District (EVMWD). This long-standing issue has finally reached a resolve that both sides could support, and many benefits were achieved in the process, including but not limited to:

At the eight percent former rate – the cumulative amount we would pay over 49 years is approx. $900,000,000. (an average of 18 million a year). At the example of two percent Consumer Price Index, the cumulative cost of 49 years’ worth of payments is $121,000,000. (an average of 2.4 million a year). The graph above shows the cumulative expense as the contract progresses to the year 2066. Photo by Steve Libring.

– EVMWD getting a guaranteed steady stream of revenue from this lease for another 49 years (to 2066).

– Provisions for CLPOA to extend the lease another 44 years beyond 2066 (to 2110).

– Both sides responsible for their own mistakes (instead of Canyon Lake being responsible for any fault).

– The lake north of the north causeway is now under the same rules/lease.

– Disputes will be resolved through an improved mediation process.

– New insurance requirements to help prevent future disputes.

– Annual increases are fixed to be no more than 4% in any one year.

– Lake lease payments will now be tied to the Consumer Price Index (CPI), not to the cost of water.

It is that last point that most significantly affects the community. The potential savings to each resident and the community cannot be understated. Simply put, the lake lease was approved many, many years ago, tying the annual increases to the cost of the Metropolitan Water District’s cost of water.

During the initial years of the former lease, this increase wasn’t as significant and could be absorbed by the CLPOA in their annual budget. But as the years went on, it became clear that the cost of water (especially since we live in a drought area) would become increasingly costly and reach numbers that would be out of our ability to pay.

Consider that during the last 10 years alone, the cost of water had averaged eight percent increase per year (with some years as high as a 19 percent increase). Even though there were many residents feeling the CLPOA Board of Directors should just finish out the existing contract, which still had over six years left at the time, the cost of the lake lease could increase by almost another million dollars a year – from $1.4 million to nearly $2.4 million during that six-year time frame. An average eight percent estimated rate of increase would lead to exorbitant costs down the line that the residents and CLPOA would no longer be able to afford.

To better help understand how increasing costs at eight percent can quickly compound, here’s an example: it only takes nine years to double the price of the lease under the former terms. So, in 2016, when faced with the prospect of extending a new lease for an additional 50 years to 2066, the numbers become absolutely staggering.

The lease was nearing $1.5 million a year, and with eight percent per year average, it would become $3 million per year in just nine years. Then that $3 million a year annual payment would double up again to $6 million during the next nine years. After 27 years, it would double to $12 million; after 36 years, it would be $24 million; after 45 years, it would reach $48 million: and at the end of the contract a staggering $68 million a year under this present formula, based on the last 10-year pattern we were seeing. This gives a glimpse of what the CLPOA Board of Directors were dealing with all these years and why they elected to try to negotiate for a better contract.

However, under the new contract, the annual increase is fixed to the Consumer Price Index (CPI). This indicator has been much, much lower over these last same 10 years (averaging approximately two percent). So it would take 36 years to finally double up if it continues to average two percent. Canyon Lake’s contract of $1.5 million now – would only be about $3 million 36 years into the new contract and approximately $4 million annually in year 2066, not $68 million as with the previous eight percent example (see chart on A4).

Keep in mind, these are only the current annual lease payments increased by the percent increase, and showing what the new payment would be the following year. But when you add up each year’s expenditures cumulatively over the next 49 years it has serious implications.

At the eight percent former rate – the cumulative amount we would pay over 49 years is approx. $900,000,000. (an average of 18 million a year). At the example of two percent Consumer Price Index, the cumulative cost of 49 years’ worth of payments is $121,000,000. (an average of 2.4 million a year).

A spokesperson for CLPOA said, “This truly is a monumental step forward. We are very pleased that the hard work from both sides, and the patience and participation of CLPOA’s members, has produced this durable and lasting agreement, which will preserve the special character of the Canyon Lake community for decades to come.”

The Board of Directors made the correct decision to renegotiate the contract, before it spiraled out of control. The cost to negotiate over these last six years (approx. $1,067,000) will be recaptured (saved) in less than four years and the returns beyond that for the remaining 45 more years are obviously well worth the investment of time, energy and funds expended.

The next time you see a past or current member of the CLPOA Board of Directors, thank them for the job they did to protect the assets and financial solvency of this community, for the responsible solution they achieved, for the endless hours they volunteered, for the criticism they endured and for their persistence to put the community first and do what was right for our community.

Thanks also go to the many CLPOA staff members over the years and to the volunteer members of the Lake Lease Advisory Committee who helped provide their expertise, input, community feedback and guidance to the CLPOA Board of Directors, staff and attorneys along the way since 2015. This was truly an example of the community pulling together when needed.

Editors note: Steve Libring is a volunteer member of the Canyon Lake Lake Lease Advisory Committee. He is a “behind the scenes” volunteer whose service in the community began when he moved to Canyon Lake in 1983.

Steve is a 34-year member of the Facilities Review Committee and a member of the Master Plan Survey Sub-Committee. He recently submitted an application to fill a vacancy on the Security Advisory Committee.

In the 80s, Steve was instrumental in getting a traffic signal installed at the intersection of Railroad Canyon Rd. and Canyon Lake Dr. South and, in 1983, helped to clean up Skippers Island, a project spearheaded by Dee Dee Davis.