Thursday, April 14, 2011

The Bell doth toll: another California corruption scandal

The city of Vernon, California was incorporated in 1905 by a rancher and a merchant. In the last 100 years, the city's assessed property tax base has grown to $4.1 billion. Compare this with next door Bell, infamous for last year's city corruption scandal, who has an assessed property tax base of $1.1 billion. There are between 1,800-2,500 businesses in Vernon, according to different sources. The city has 55 police officers in its force, while Bell has only 38. Bell has approximately 40,000 residents.

Vernon's population? 96.

Vernon uses low taxes to lure business and factories to the city. With such a large industrial base and a huge metropolitan area to supply workers, Vernon has never really encouraged residential growth. Within the city's administration, power has been passed from one generation of family members to another. Some city council members have served for more than 50 years while receiving large paychecks. According to one southern California city manager,

"Bruce V. Malkenhorst at one time served simultaneously as Vernon's city manager, finance director, city clerk, redevelopment director, treasurer and chief of light and power, drawing the highest salary of any public official in California. After 33 years as city administrator, he passed the job to his son, Bruce V. Malkenhorst Jr. His annual pension payout of $509,664.60 remains the highest in the state."

Another city official, Eric Fresch, "has raked in $7.5 million in salary and fees in the last five years."

Some local and state officials are understandably upset about Vernon's family business. State Assemblyman John Perez is leading a fight to revoke Vernon's state incorporation by introducing a bill in the assembly that would eliminate all charters for cities with fewer than 150 inhabitants. Given the recent scandal in Bell, both state and local officials are eager in lending their support.

The businesses in Vernon, however, fear the bill's passage. Losing incorporation would mean transferring administrative authority to L.A. County and higher property tax rates. Currently these businesses enjoy preferred tax benefits for headquartering their businesses in Vernon. Business leaders are threatening to leave the state if Vernon is disincorporated.

It gets worse. Perez' bill could prove disastrous for the local economy. While the businesses and factories are located in Vernon, the workers come from surrounding communities, such as Bell. Both the workers and their home cities are, to one degree or another, dependent on the industry that Vernon provides within its small borders. What will happen to all those jobs and the economies of neighboring cities when Vernon loses its charter?

Ethics, taxes, or jobs. What should win out? Or can they find a balance?


David P. Owen said...

I lived out there for awhile, and the "City" of Vernon is basically a convenient way for a few people to skim a living from an intensely active cluster of businesses. There are no residents in Vernon, and no elections, but they do have a $250 billion gdp.

The argument isn't so clear-cut, though. LA County has wanted to get their hands on Vernon's tax base for years. If this happens, tax and utility rates will go through the roof and the job market there will go downhill. You have to be really careful about destabilizing the low-income job market in East and South Los Angeles. unemployment goes up and all kinds of bad stuff happens.

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