Fire Station Property Purchase Resolution

The Canyon Lake POA currently owns the property where the City of Canyon Lake's fire station is located and has been leasing such property to the City of Canyon Lake. Following negotiations regarding a possible extension of the lease, the City issued the Canyon Lake POA an offer to purchase the property for $1,390,000. On January 30, 2023, the Canyon Lake POA's Board accepted the City's offer.

Note that the Canyon Lake POA parking lot and launch ramp to the North Ski Area will be severed from the property the City purchases, so such parking lot and launch ramp will remain the Canyon Lake POA's property, and otherwise be used for the same purposes as before.

The Board will be discussing this issue in further detail during their regularly scheduled open session Board Meeting on February 7, 2023 at 6 p.m. As always, the membership is invited and encouraged to attend.

Questions & Answers

Who owns the Fire Station now?

After months of working closely together, the Canyon Lake Property Owners Association (Canyon Lake POA) and City of Canyon Lake (City) are pleased to announce they have reached an agreement on the final terms of the Purchase and Sale Agreement (PSA) for the Canyon Lake Fire Department Station 1.

Why can't the lease simply be renewed?

The Canyon Lake POA and the City have been in negotiations regarding a possible extension of the lease, and following such negotiations, instead of renewing the lease, the parties agreed for Canyon Lake POA to sell the property to the City for $1,390,000.00.

Is the City going to be purchasing the entire lot (28730 Vacation Drive), including the North Ski Area launch ramp and parking lot?

No. The lot will be officially subdivided into two new lots, the way it appears on the ground right now. One lot will consist of the Fire Station, which the City will purchase. The other lot will consist of the North Ski Area launch ramp and parking lot, which the Canyon Lake POA will retain. There will be no change to the members’ use of the North Ski Area launch ramp and parking lot as a result of the City’s purchase of the Fire Station.

Why was the cost of the lease so low?

In recognition of financial constraints the City was facing at the time the lease was entered into (July 1, 2015), and to help keep a local fire department in Canyon Lake, for the benefit of Canyon Lake POA’s members, the Canyon Lake POA leased the Fire Station to the City for $1 per year for a limited period of time. The Canyon Lake POA understands the City’s financial condition has improved dramatically since that time, and both parties agree this new arrangement in the ownership of the Fire Station is in the best interests of the Canyon Lake community. It will give control of the Fire Station to the City who runs it, and it will compensate the Canyon Lake POA a fair market value for this asset the Canyon Lake POA will be selling.

How are we so sure $1,390,000.00 is a fair price for the City to purchase the Fire Station?

Both the City and Canyon Lake POA, each conducted separate property appraisals of the Fire Station. The City’s appraisal of the property was $1,390,000.00, and this is consistent with Canyon Lake POA’s independent appraisal of the property.

Could the Canyon Lake POA just give the Fire Station to the City for free, or some other nominal amount?

The Canyon Lake POA’s Board Members owe fiduciary duties to Canyon Lake POA. As part of their fiduciary duties, they must do what they reasonably can to safeguard Canyon Lake POA’s assets, and they owe an undivided duty of loyalty to Canyon Lake POA itself. If the Board decided to gift the Fire Station to the City, or sell it for a nominal amount, doing so could be construed as being inconsistent with those duties.

Does the membership need to approval this sale?

No, nothing in Canyon Lake POA’s Governing Documents require membership approval for this transaction.

Is there anything Canyon Lake POA could do to keep ownership of the Fire Station?

No – not really. The City, as a governmental entity, has eminent domain powers, and the City began the process of exercising those powers as part of the negotiations that culminated in the City’s offer to purchase the Fire Station. If the Canyon Lake POA were to have rejected the City’s offer to purchase, the City would have initiated an eminent domain action in California Superior Court. Very generally speaking, to prevail in an eminent domain action, the government simply needs to prove (1) the proposed “taking” is necessary for the public benefit, and (2) fair market value will be paid to the party whose property is being taken.

In this case, the City would have no problem proving the taking is necessary for the public benefit – the property is being used as a Fire Station, after all. Additionally, the City offered to purchase the property at fair market value, according to the Canyon Lake POA’s own independent appraisal.

So if the Canyon Lake POA were to reject the City’s offer to purchase the Fire Station, we expect the City would have filed an eminent domain action, where it would be a near certainty they would have acquired the property, for the same amount, anyway. Rather than spend more resources and time over a foregone conclusion, the parties recognized the opportunity they had for a mutually desirable outcome.