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Just Compensation? City of Commerce Paid $9.8 Million to Commerce-Based Justman Packaging For Building They Still Occupy

 


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Justman sign in front of the building the City of Commerce bought for $9.8 million.

 

Monthly rent on the building has not been raised in five years.

By Brian Hews

A Hews Media Group-Community News investigation has found that Morley Justman and Russel Justman, owners of Commerce-based Justman Packaging, and a family that has donated tens of thousands of dollars each to the campaigns of current Commerce Mayor Tina Baca Del Rio, Mayor pro tem Lilia Leon, and Councilman Ivan Altamirano, received $9.8 million in City redevelopment funds in 2010, $4.4 million more than they were offered in 2006, for their building and property located at 5918 Telegraph Rd. in Commerce.

In 2006, the City authorized an eminent domain action on the property and building, at the height of the real estate bubble,  depositing $4.442 million as “just compensation” for the building.

 

Justman Deposit1

 

The law says “just compensation,” is the fair market value for a property; the highest price an informed buyer would pay.

Four years later, after the real estate market had imploded and the country was still deep in recession, the city agreed to more than double the original price, paying a total of $9.8 million to acquire the building.

 

 

Justman Deposit2

 

The Feb. 2010 agreement was between the Commerce Community Development Commission (Commission) and the Justmans, signed by then Commerce Mayor Tina Baca Del Rio and City Attorney Eddie Olivo.

A previous investigation by HMG-CN revealed that Mayor Baca Del Rio and the Justman family have close ties.

After violating campaign finance laws, Baca Del Rio was recalled from the Commerce City Council in November 20, 2008, but was surprisingly re-elected in 2009. Many residents cited the heavy financial support from the Justman family and Steve Craig, owner of Citadel Outlets, as reasons she won back the council seat.

See story click here.

Buying the building for $9.8 million was “ludicrous” according to one local realtor. “Just compensation is the fair market value of the property, which, in 2006, they established at $4.442 million. They did not recognize that 2006 property values were at their peak of the real estate bubble and failed to adjust them downward in 2010 when they reached the agreement.”

NEVER EVICTED

In addition, the agreement stipulated that the Justman family had to vacate the building by Dec 31, 2010.

But the investigation found that the company remains in the building to this day.

Further, the agreement called for a monthly rent payment of $11,755 from the time the document was signed in Feb. 2010 to the vacate date of Dec. 2010 with a clause that the Commission could raise the rent to $15,637 in Jan. 2011.

But checks written to the City of Commerce, obtained by HMG-CN via the Freedom of Information Act, show that the Justmans’ rent has not increased since 2010 even though the City had stipulated twice the rent would be raised.

 

 

 

2015 Justman rent2

“MISSED” CHANCES TO RAISE THE RENT

The initial agreement contained a clause that if the Justmans did not move out by Dec 31, 2010, the City could raise the rent.

But the City did not raise the rent.

A second stipulation was drafted extending the move out date to Jun. 30, 2011, once again stating that the City could raise the rent to $15,637 July 1, 2011.

The Justmans claimed “because of the price of regular business activities and other unavoidable delays encountered, the Justmans requested the Commission extend the date of possession to June 30, 2011, 16 months after the initial agreement.

The Commission agreed but added the clause “the Justmans acknowledge and agree that the Commission is entitled to possession on July 1, 2011 without any further notice or process.

Once again, the City did not raise the rent.

Further, the company remains in the building to this day, costing Commerce taxpayers and the City over $232,920.

($15,637-$11,755 = $3,882 multiplied by 60 months (Jan. 2011-Jan 2016) = $232,920.)

THE TELEGRAPH CORRIDOR URBAN ENTERTAINMENT CENTER SHAM 

The original 2006 eminent domain agreement was part of the proposed Telegraph Corridor Urban Entertainment Center, which would have built a pedestrian-friendly retail and entertainment district between the Citadel Outlet Mall and the Commerce Casino.

The goal of the project was to bring more revenue and jobs to Commerce, while removing urban blight and revitalizing the Telegraph Road area.

Just one month after the Commission adopted a resolution to acquire the Justman building, the city made the original payment of more than $4.4 million.

After three years of legal back and forth, the city would eventually pay a total of $9.8 million for the property.

In all that time, the Telegraph Corridor project discussions have remained in closed session City Council meetings, keeping the now nine year old “project” strictly out of the public eye.

TWO ADDITIONAL MAJOR CONCERNS

When contacted by HMG-CN, a real estate consultant who chose to remain anonymous slammed the city by saying, “the Commission failed to condition their eminent domain action on confirmation that the proposed [Telegraph Corridor] project was still viable four years after they started.” The consultant added, “A bigger concern is that the city has failed to evict the Justmans, who now have a reasonable case against the city for adverse possession.”

An adverse possession claim can allow a company to seize ownership of a building or property if certain conditions are met. Most importantly, an adverse possession claim in California depends on at least five years of residency and proof that the residents have paid taxes on the property.

The theory of adverse possession is that by not disputing the use of the City’s property through a lawsuit, the City, as the actual owner, have abandoned their rights to the property.

Adverse possession can give the Justmans the right to take the building back from the City.

Per the eminent domain agreement, the city gained ownership of the building in July 2011, but the Justman Company remains in residence at the site today, five years later.

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