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Supporters of a group of South Pasadena Caltrans tenants implored city council members last week not to abandon a faltering lawsuit the City undertook in support of the tenants’ long-frustrated dreams of purchasing their multi-family home at 626 Prospect Ave. The tenants’ urgency came after the City, without informing tenants, filed a notice of settlement in the case prompting the judge to set a June 28 hearing on why the case should not be dismissed.
Tenants said the City should not be intimidated by informal arguments Caltrans made that the City’s case is unwinnable due to recent developments—including Caltrans’ quiet insertion of a provision in a new set of “emergency” rules they say is aimed at sabotaging the case.
The rules, approved April 7, were adopted pursuant to last year’s passage of SB 381, the City-sponsored Roberti Law amendments aimed at broadening South Pasadena’s ability to acquire and manage the 68 remaining properties in town Caltrans acquired decades ago for the terminated SR 710 extension.
“Caltrans carefully crafted these regulations to put the case in trouble,” said Daniel Shapiro, an attorney for Heritage Housing Partners (HHP), which is working with the tenants on the purchase.
Tenants also worry the City is spooked by a March 23, 2022 appellate decision in Flores vs Caltrans, a separate lawsuit initiated by Caltrans tenants in El Sereno over how much they must pay Caltrans for their homes. The ruling means in cases like 626 Prospect, the court must apply the rules in effect at the time of the decision, not those when the lawsuit was begun. The 626 tenants’ case is predicated on the rules in effect before April 7, so even if the City wins its case, the new rules control.
Although it lost the appellate ruling, “we understand Caltrans is attempting to use the Flores decision as a way to discourage continuing with the [626 Prospect] lawsuit,” Roberto Flores, father of appellant Angela Flores and member of United Caltrans Tenants (UCT), told the city council. “We want to encourage you to stay on.”
“Caltrans has a reputation for taking its losses and trying to turn them into wins in a kind of retaliatory way,” added 626 Prospect advocate Tim Ivison, also a UCT member.
Flores and Ivison insisted that despite these developments, the Roberti Law and SB 381 amendments “can still be used to defend the tenants’ purchase” of 626 Prospect and to point to other tenants rights violations by Caltrans. They said UCT would be filing a brief with the court articulating these points.
“I know that the urge to move for dismissal of the case is tempting,” added tenant supporter Mark Gallatin, president of the South Pasadena Preservation Foundation (SPPF) and member of the City’s Cultural Heritage Commission. But he wanted to know if council members have “done all you can to preserve and defend the city’s rights” under the Roberti Law and SB 381 amendments.
Gallatin, Ivison and Flores made their comments just ahead of a hastily scheduled, closed meeting of the city council on April 20 during which council members were set to discuss the lawsuit.
The action comes as Caltrans and the City are ramping up to implement SB 381’s provisions. Now that the new rules are ready, Caltrans is set to offer the City a first tranche of 20 unoccupied surplus properties by June 30. The City of South Pasadena will have 45 days to respond to the offer, though last week its consultant, Adam Eliason of CivicStone LLC, admitted the City is “already behind schedule” in doing the inspection, financing and analytical work it will need to determine which properties to purchase.
Gallatin also asked whether the 626 tenants and other real-parties-of-interest, such as HHP, should have gotten advance warning of the settlement and dismissal notice. Some observers of the case noted it would have been a nice gesture, as the tenants could have better “understood the legal corner that Caltrans put the City in.”
Gallatin wanted to know if instead of dismissal, the City of South Pasadena considered the merits of a “global” stipulated settlement to address 626 Prospect, the City’s prospective bid on the 20 vacant homes and the 47 occupied surplus properties in town that Caltrans is also slated to offer for sale in the coming months under the SB 381 amendments.
The SPPF president, who’s made several presentations to the council advocating a global settlement, has said there is precedent for such a deal and described its benefits, including a nonregulatory solution offering greater flexibility and control over terms of Caltrans sales program, litigation cost savings, and a speedier return of the properties to the City’s tax rolls.
Does dismissal “really serve the best interests” of the tenants and community at large, he asked.
Later, during the public session, City Attorney Andrew Jared reported the results of the closed discussion on the 626 lawsuit. Council unanimously voted to have legal staff “present a letter” to the city manager “regarding communications with Caltrans regarding certain aspects of the discussion.”
A week later, the City of South Pasadena still had not responded to a request for a copy of the letter, but the structure of city attorney’s report seemed to echo a recommendation Gallatin made April 6, under which the council would vote to have the city attorney “work out a citywide settlement covering all the Caltrans properties.”
The case began in 2019, when the city agreed to bid on 626 Prospect as part of a detailed financing and management package the tenants put together with help from HHP. The offer leveraged the City’s priority to purchase surplus Caltrans properties under Roberti.
But Caltrans awarded the property instead to a private non-profit run by Friendship Pasadena Baptist Church, which wants it to develop affordable housing.
At the behest of the tenants, the City of South Pasadena sued, claiming Caltrans acted illegally because under Roberti, the City’s non-profit public housing entity has priority over Friendship’s private nonprofit. The following month, LA Superior Court Judge Mary H. Strobel enjoined the sale and set trial for May 2022, which meant Caltrans could not close escrow on its deal with Friendship Pasadena.
The docket was silent for eight months until April 13, when the City filed the settlement notice. Strobel then set the June 28 hearing for argument on why the case should not be dismissed.
That’s when the tenants also learned about the provision Caltrans inserted in the new emergency SB 381 rules on properties “offered but not sold under the previous regulations” and which did not close escrow. The provision, which exactly fits the status of 626 Prospect, calls for such properties to be offered to the buyer in the previous escrow. In this case, that would mean Pasadena Friendship.
In addition, SB 381 provides that multi-family structures can only be used for low- or moderate-income rentals, which precludes the 626 Prospect residents’ plan that calls for the tenants to become owners.
