After failed negotiations over the terms of a lease agreement between the Canyon Lake POA and the City of Canyon Lake. the POA accepted an offer from the city to purchase the fire station property, located at 28730 Vacation Dr.
The property houses the city’s lone fire station. The parking lot and launch ramp to the north ski area will be severed from the property and will remain the property of the POA.
In 2019, the POA and the city entered into a two-year lease with a 60-day termination clause, and either the cost of the annual property taxes or $1, whichever is greater, as annual consideration.
In January 2021, the lease expired and negotiations for a new lease began. Meanwhile, the terms of the expired lease continued on a month-to-month basis.
In March 2021, the POA offered the city a lease with terms similar to the 2019 lease, but with a five-year term. However, the city was seeking a true long-term lease, rather than a short-term lease that included a 60-day termination clause. Therefore, the proposed lease was not executed and the city continued under the terms of the previous lease on a month-to-month basis.
In January 2023, after failed negotiations, the POA informed the city that it was no longer willing to lease the fire station to the city for $1 per year or to provide the city with a long-term lease. The POA Board sought “market rent” in the amount of $115,944 per year and the ability to terminate the lease with a 60-day notice.
These terms were unacceptable to the city since Station 1 is the only fire station within city limits, and it would take significantly longer than 60 days to relocate its operations if the POA terminated the lease. The city was seeking long-term stability to ensure the continuation of operations and to justify the expenditure of public funds for maintenance and future upgrades to the facility.
The city said it was also concerned that the POA’s calculation for “market rent” was based on rents paid by commercial businesses and not by public agencies using an existing facility built by the community to provide that public service.
In lieu of a lease, the city also explored the possibility of a donation or sale of the fire station by the POA to the city.
According to the city, the POA general manager informed the city that the POA’s rules prohibited the sale or donation of property valued at more than $200,000 without a vote of the POA members (i.e., the residents of Canyon Lake), even though the POA rules and bylaws do not state that. There is no POA rule or bylaw that prohibits the POA from selling or donating its property valued at more than $200,000.
Unable to negotiate a sale, donation, or come to acceptable terms on a lease, the city began exploring the possibility of obtaining ownership through eminent domain. The process included a survey of the area containing the fire station and an appraisal. The appraisal determined the value of the property at $1,390,000.
Although the POA had informed the city that the POA Board would be unable to approve the sale of the property without a vote of the POA members, the city was legally required to make an offer to purchase the property at the price determined through appraisal prior to moving forward with the eminent domain process.
On January 20, 2023, the city offered the POA $1,390,000 to purchase the portion of the property that houses the station.
The POA Board met in executive session and voted to accept the city’s offer despite previously advising the city that they did not have the legal authority to do so. On January 30, 2023, the POA notified the city of its acceptance of the city’s offer to purchase the fire station property.
Based on this new representation of the POA Board, the city determined that eminent domain would not be necessary and directed the city attorney to prepare a Purchase and Sale Agreement for consideration by the city council. The agreement would be to purchase the fire station for $1,390,000 with additional terms related to due diligence inspections and the ability of the POA to convey good title.
At the February 8, 2023, council meeting, the council unanimously approved to authorize the city manager to negotiate and enter into a Purchase and Sale Agreement on the terms that the city offered the POA.
Some of the benefits of the city owning the fire station include utilizing the station as its needs change, avoiding future cost increases to taxpayers in the form of rising lease rates, ensuring the continued stability of emergency operations, and being able to receive FEMA Public Assistance grant funds in the event of a disaster. The city can also apply for special state, government, and private grants.
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