CA State Water Authority Implicated by HOA for Improper Levying of Over $6 Million in Taxes

SAN DIEGO, March 11, 2015 /PRNewswire/ -- On February 18, 2015, Canyon Lake Property Owners Association ("CLPOA") notified Elsinore Valley Municipal Water District ("EVMWD") that it was making a claim for the return of $6,231,134 plus interest, which was paid under a lease agreement between the parties.  CLPOA makes this claim on the grounds that this sum is the result of illegal tax collection under the California Constitution Article 13C (as amended in 2010 by Proposition 26).

According to CLPOA Board President Dave Eilers, "In prior years, CLPOA has pleaded with EVMWD to explain why CLPOA should be paying close to $1.5 [million] each year (escalating about 8% per year compounded). EVMWD represented that it would prepare an education series to the membership of CLPOA [to this regard]. This education series never materialized. CLPOA asked EVMWD to justify the charges yet the only thing that CLPOA got was an extension agreement [to the lease] that seals the minimum cost to $1,455,000.00 escalating upwards at a compound rate."

When asked in a meeting to discuss the proposed Amendment to the lease agreement, EVMWD's response was basically: take it or leave it.

Currently, EVMWD Board President, Phil Williams has indicated that EVMWD is in "negotiations" with CLPOA, has made an offer regarding the lease to CLPOA, and is awaiting a response. While EVMWD believes it is negotiating, CLPOA believes that there are no negotiations occurring. Board President Eilers said, "EVMWD was dictating the terms of the agreement and coupling it with an extension for an additional 44 years, taking the term to December 31, 2066.  Given an 8% compounded increase per year, [this] amounts to a total cost of over $833,000,000 to the members of Canyon Lake.  Even at an increase of 5%, the total cost to the members of Canyon Lake will exceed $300,000,000 if the current lease is extended.  Under the current rate and scheduled increases, the cost per year will exceed $3,000,000 per year in less than 10 years and over $6,700,000 per year in less than 20 years.  It is not possible for CLPOA to continue to pay this amount of money to EVMWD given the minimum cost that EVMWD incurs as a result of CLPOA's use of the lake."

EVMWD's total cost to maintain the lake, according to EVMWD's own public records, is less than $20,000 per year.  Even if it were assumed that EVMWD's costs will also increase at 8% per year, the total costs in 10 years would be just over $43,000.00 compared to an annual charge of over $3,000,000 possibly making this the single largest tax levy in the state of California.

In addition, EVMWD made a promise to maintain the lake level at 1375 feet. EVMWD, however, has denied that such an agreement exists. Regardless of any agreements made, under California law, EVMWD is penalized 1/365 of the annual charge imposed on CLPOA for each day (following initial period 10 days of no maintenance) that the lake is not maintained at 1372 feet.

Due to an indemnity provision within the lease that EVMWD is unwilling to amend or remove, if a homeowner were to sue EVMWD including for failure to maintain the lake level, CLPOA would be held financially responsible for the defense of EVMWD.  EVMWD essentially insulates itself from any liability related to the lake while taking in annual payment imposed upon CLPOA in the multiple of millions of dollars per year.

Silldorf & Levine provides legal representation to Canyon Lake Property Owners Association.

SOURCE Silldorf & Levine, LLP

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