County Legal Dispute Brewing Over Land Sold To Lake Arrowhead CSD

Gail Fry
Staff Writer
Following a closed session on January 8, the San Bernardino County Board of Supervisors authorized its attorneys to initiate legal action against the Lake Arrowhead Community Services District with regard to a land transfer.
The dispute arose after it was discovered that Lake Arrowhead Community Services District (LACSD) and the chairman of the San Bernardino County Board of Supervisors had mistakenly signed a different agreement than was approved by the board of supervisors.
At issue is a reversionary clause that would allow the county of San Bernardino to retake the land if any of three events took place within a given period commencing with the recordation of the grant deed.  Those three events consisted of the 12.85 acres not being used for public purposes within ten years of the tranfer and/or LACSD attempting to sell or lease the 12.85 acres to a non-public entity or non-affiliate of LACSD within ten years of the transfer and/or the grantee not diligently pursuing commencement of construction of improvements no later than eighteen (18) months from the date of recordation of the grant deed to serve the interests of the LACSD and the public.
The disputed language between the parties involved the provision calling for LACSD to commence construction of its improvements no later than eighteen months from the date the grant deed was recorded.
The grant deed recorded with the county recorder’s office includes the eighteen-month reversionary clause while the grant deed executed by LACSD and the chairman of the board does not.
With the intent of the Lake Arrowhead Community Services District to construct its headquarters building on the property, the county of San Bernardino had sold the 12.85-acres of land located above Papoose Lake to the district for one dollar.
It appears that sometime before its October 4, 2011 meeting, the county of San Bernardino realized there was a problem with its purchase and sale agreement, escrow instructions and grant deed with LACSD, as item 31 on its agenda called for the chair to sign revised documents.
The recommendation made to the board of supervisors for its October 4, 2011 meeting was for it to delete the reversionary language with regard to the eighteen-month time period with which to commence construction in order to allow LACSD additional time to begin construction.
After discussion, the board of supervisors took the item off calendar for its October 4, 2011 meeting in order to reconsider the matter at a later date.
The issue was again before the board of supervisors at its February 28, 2012 meeting in order to again try to resolve the inconsistencies between the two documents.  Its recommendation indicates both the real estate services department and county counsel, “determined the inconsistencies between the two documents could and should be resolved.”  Again the board of supervisors took the matter off calendar.
The dispute between the county and the Lake Arrowhead Community Services District over the language in the purchase agreement, escrow instructions and grant deed is just the latest in a series of events occurring between the parties during the several-year negotiation over the land and its transfer.
LACSD had long planned to purchase the parcel from the county in order to build its headquarters office and maintenance yard, and had been under the impression that the county would sell it to the district for one dollar based on the fact that the Lake Arrowhead Community Services District and  County Service Area 70 D-1 (CSA 70 D-1) had the same ratepayers and it would benefit the community.
CSA 70 D-1 was formed by the voters of Lake Arrowhead on November 5, 1974, when they approved a $7 million bond measure to purchase land and construct Papoose Dam, that an assessment would be added to the property tax bill for properties within the improvement area and that  a county service area in order to maintain the flood protection works and facilities would be created.
LACSD was jolted into action when the county sold a parcel to San Bernardino Mountains Community Hospital (MCH) for $499,100 in January 2009.  The sale of the property to MCH at market prices gave LACSD reason to believe its purchase price would be  increased considerably.
In order to provide it with needed leverage, LACSD issued a press release dated June 10, 2009, where it announced its intention to take over CSA 70 D-1 through a consolidation action taken through the Local Agency Formation Commission (LAFCO).  The press release asserted that if LACSD were able to consolidate CSA 70 D-1 into LACSD then the land would be under its control and it would be able to own the land instead of buying it from the county.
On September 9, 2009, LACSD submitted its application to expand its authority to include park, recreation and flood control powers to LAFCO.  San Bernardino County Special Districts Department on behalf of CSA 70 D-1 opposed LACSD’s application.
On October 27, 2009, the district’s meeting agenda had a “closed” session item regarding negotiations between CSA 70 D-1 and LACSD over the price and terms for purchasing 12.85 acres for the district.
Representatives of the Lake Arrowhead Community Services District  attended the December 14, 2009 meeting of CSA 70 D-1, seeking its board’s expression that it would support a transfer of the land to LACSD for one dollar.
LACSD reasoned that since CSA 70 D-1 and LACSD have the same boundaries and the property was acquired with the same ratepayers’ money, the ratepayers should not have to pay market rates to again purchase the land.
At its December 14, 2009 meeting CSA 70 D-1 board member Bill Dickson characterized LACSD’s actions as “extortion” based on LACSD’s threat to take over the district by submitting its application to LACFO for expanded powers in order to absorb CSA 70 D-1 and take over management of Papoose Dam.
At the March 23, 2010, San Bernardino County Board of Supervisor’s meeting, the board approved a general plan amendment for LACSD allowing a 30,000-square foot building on 12.07 acres.
By September 28, 2010, LACSD withdrew its application for expanded park, recreation and flood control powers that it had submitted to LAFCO on September 9, 2009.  LAFCO had scheduled a hearing with regard to LACSD’s application for December 8, 2010.
At the time LACSD’s General Manager Jack Hoagland explained, “Because we did the acquisition with special districts for the land east of the hospital, we were no longer interested in pursuing the additional powers.”
Another factor entering the picture and impacting the district’s financial ability to pay for the construction of a new headquarters building was the fact that LACSD experienced a million dollar shortfall with regard to its water sales in fiscal year 2010/11 and found itself having to reduce staff and expenses in order to balance the budget.
By its July 27, 2011 meeting, LACSD discussed the fact that it was close to resolving thw dispute  with CSA 70 D-1 over the purchase of the 12.85 acres needed to build its new headquarters and maintenance yard, and approved two contracts in the amount of $368,174 for architectural and engineering services for the project.  Additionally, the district proposed a five-year capital improvement budget to include the costs of constructing the facility.
According to the recommendation at the July 27, 2011 meeting, the county of San Bernardino had already prepared and processed the appropriate entitlements, land use permits and environmental review documents the district needed to allow for the construction of the district facility.
By its September 13, 2011 meeting, LACSD’s plans to construct a new headquarters building hit the skids when it found that other property it was considering selling in order to pay for a portion of its construction costs had received a low appraisal amount.
Additionally, negotiations between LACSD and CSA 70 D-1 with regard to its utility easements and the relocation of a storm water basin had not gone smoothly.
At the time, LACSD General Manager John Hoagland expressed frustration with the county, in that all of its permits had gone through review and approval and they hadn’t “heard boo about this until we are down there trying to get the easements executed and now all of a sudden it’s a big problem.”
“In my mind we have resolved the 18-month 10-year issue and are working with special districts to get that codified,” Hoagland assured the public at its September 13, 2011 meeting, adding, “My recommendation [is] this clearly might not be the right time to just push this forward with such a small return on this facility and the issues associated with just trying to develop the site up there and the continuing surprises we get in dealing with the special districts department.”
At its February 14, 2012 meeting, LACSD was reviewing all of its options with the relocation of its headquarters building, and was even looking at other existing locations that could be leased until such time as they could afford to build a headquarters building and maintenance yard estimated to cost $5,937,750.
For now, LACSD is facing a potential lawsuit from the county over the land for its future headquarters and maintenance yard located above Papoose Dam while it continues to lease its current headquarters building at the Lake Arrowhead Village for $140,000 a year.

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