Arrests won’t end city’s troubles

The arrests of most of Bell’s elected leaders Tuesday brought cheers and dancing in the streets in the small, working-class city, but added to the already deep uncertainty about its future.

With four of Bell’s five City Council members facing corruption charges, the Los Angeles County Board of Supervisors voted to push for a court order to seize authority from them and turn day-to-day management over to an appointed receiver.

Run for nearly two decades under the tight control of City Administrator Robert Rizzo, who was among those charged Tuesday, Bell now faces a possible recall election and an effort by state Atty. Gen. Jerry Brown to try to remove most of the city’s elected officials from office.

In addition, the long-term financial outlook for the city of 39,000 southeast of downtown Los Angeles is murky: The state controller’s office has found that Bell collected about $5.6 million in illegally imposed tax increases and business-license fees -- and now must refund an amount equal to more than one-third of its $13.5-million general fund. As city officials work on plans to refund the money, they also must find a way to balance the budget to adjust for the loss of the illegal tax revenue. That could mean cutting jobs or services, or raising revenue through bonds.

The latter option became less viable Tuesday when a Wall Street rating firm cast new doubt on Bell’s ability to pay its existing debts, including a $35-million bond repayment due Nov. 1. Fitch Ratings downgraded its outlook on $57 million of Bell bonds, citing “financial weakness” and fallout from the salary scandal and illegal property tax hikes. In August, Standard & Poor’s downgraded Bell’s bonds to junk status.

“It is really hard to see what their path out of this is at this point,” said Patrick Whitnell, general counsel for the League of California Cities.

Other area cities have dealt in the past with public corruption scandals, but it’s rare for so many members of a single council to be charged at one time -- and for alleged crimes that spanned so many years.

The management team that took office in July after Rizzo and other top officials resigned vowed Tuesday to continue operating day-to-day affairs at City Hall even with most of the council facing criminal charges. But how that would work remained unclear.

“Without a quorum, a city council can’t conduct any city business, and by default, the city manager runs the city without input from a democratically elected board, even if it’s an indicted one,” said Assemblyman Hector De La Torre (D-South Gate), whose district includes Bell and who praised prosecutors for bringing the charges. “People need to look at this closely.... It’s a no-win situation. There is no right answer to this at the end of the day.”

Amid the chaos, some see hope that, with Rizzo and others gone, a better form of government will emerge.

“The lid finally blew off and they’re starting to fall,” said Enrique Martinez, who watched the announcement of charges on a big-screen TV at Pacific Furniture, the store he has owned near City Hall for 34 years. “One by one, they’re going to fall until this city is clean again.”

In the meantime, who will govern the city remains uncertain. Unless the four charged council members are convicted of felonies, removed from office by recall, or resign, they will remain the elected leaders of Bell, officials said.

“Until then, we are still functioning with a five-member council,” said interim City Atty. Jamie Casso, who along with interim City Administrator Pedro Carrillo has been running the city while also investigating potential wrongdoing during the Rizzo era.

In a prepared statement, city officials said Tuesday that “residents of Bell expect and demand that their city continue providing much-needed public services” despite the current crisis.

“To that end, we are working around the clock to help ensure the reliable day-to-day operation of the city government, pursue all options for recovering taxpayer funds that were spent improperly, and implement best practices that will enable the city to emerge from this very difficult time with a more efficient, transparent and trusted government,” the statement reads.

Should the four council members step down or be removed, Casso said, the city probably would be put under the authority of Carrillo and Councilman Lorenzo Velez, who was not charged, and would then hold a special election to fill the vacant seats. Velez was the only one who did not receive the nearly $100,000 annual salary that Bell’s council members paid themselves.

The county Board of Supervisors’ proposal for a receiver, which endorsed an element of the lawsuit that Brown brought against Bell and its officials last week, would provide a different governmental structure. Under that plan, the receiver would have power to hire people and enter into contracts on the city’s behalf, acting in effect as the municipal equivalent of a court-appointed chief executive to run a bankrupt company.

Supervisor Gloria Molina, the motion’s author, said Bell’s leaders had proven themselves “unable to govern ethically, fairly or competently.” The receivership was made all the more urgent by Tuesday’s charges, she said later in an interview.

“We don’t know what will be left of governance in the city of Bell. So our issue is how do we bring some order to the city of Bell,” she said. “We’re not just trying to jump up and be a part of the political chaos that’s going on there. These are my constituents as well.... At least we can stop [the Bell City Council] from making more contracts, spending more money.”

But despite support by the attorney general and the supervisors for receivership, that step does not appear imminent. No hearings are scheduled yet in Brown’s lawsuit, said Jim Finefrock, a spokesman for the attorney general’s office.

“Our focus is on getting relief for Bell taxpayers, recovering the excess salaries that Bell officials paid to themselves and reducing their future benefit,” Finefrock said, outlining the lawsuit. “Among other remedies, we have asked for the appointment of a receiver. But our main goal is to obtain justice as quickly as possible through all legally available remedies.”

Municipal governance experts said Tuesday it is hard to predict what will happen in Bell because the city’s problems are so unusual.

Dave Mora, West Coast regional director of the International City/County Management Assn., who previously worked as a city manager in Salinas, Calif., said he’d never seen such a level of crisis in a city government.

“Bell needs to go back to square one,” he said, adding that the city should first conduct a comprehensive review of its revenue base and then make clear to residents what level of services it can continue to provide. “The residents really ought to be making the decision as to what their future is going to be,” he said.

Rick Cole, Ventura’s city manager and a longtime writer on Southern California cities, said the Bell scandal provides an opportunity to clean up government throughout the region.

He said he favors receivership not just for Bell, but for neighboring towns such as Maywood and Vernon, which The Times recently reported paid some of its top officials more than $1 million a year.

“Putting Bell, Vernon and Maywood into competent and honest joint receivership is the only way to spare 70,000 people a year or more of turmoil and a brutal showdown with a wounded political machine,” Cole said. “When the corruption and dysfunction have been expunged, the citizens can elect leaders of their own choosing to provide them the vital services they paid for, but were shamelessly shortchanged.”

kim.christensen@latimes.com

ron.lin@latimes.com

Times staff writers Sam Allen, Hector Becerra, Paloma Esquivel, Ruben Vives and Richard Winton contributed to this report.

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(BEGIN TEXT OF INFOBOX)

Key events

August 1993

Bell hires Robert Rizzo as city administrator at a salary of $72,000. “He’s probably the lowest-paid city manager in the area, probably in the county,” says then-Councilman George Cole.

November 2005

Bell becomes a charter city, clearing the way for council members to exempt themselves from state salary limits. Fewer than 400 people vote in the election.

March 2009

Council members Luis Artiga and Teresa Jacobo are reelected, beating reform candidates. A few months later, Councilman Victor Bello resigns and Lorenzo Velez is appointed to replace him, joining Oscar Hernandez and George Mirabal on the council.

June 2010

After losing its insurance, Maywood decides to lay off nearly all its city employees, disband its Police Department and turn operations over to Bell. “We want to help our neighbor,” says Bell Mayor Hernandez.

July 15, 2010

The Times reports that Rizzo is paid $787,637, Police Chief Randy Adams $457,000 and Assistant City Manager Angela Spaccia $376,288.

July 23, 2010

Rizzo, Spaccia and Adams resign. Rizzo stands to become the highest-paid retiree in the state pension system, entitled to $600,000 a year for the rest of his life.

July 26, 2010

Council members agree to cut their near-$100,000 salaries to match that of Velez, who makes $673 a month.

Aug. 8, 2010

The Times reports that Rizzo received a lucrative benefits package, including 28 weeks for vacation or sick leave, making his total compensation more than $1.5 million.

Aug. 18, 2010

The Times reports that the city of Bell gave nearly $900,000 in loans to Rizzo, Spaccia, Hernandez and Artiga over the last several years.

Aug. 24, 2010

Petitions to recall council members Artiga, Hernandez, Jacobo and Mirabal are submitted to the city clerk.

Sept. 9, 2010

The U.S. Department of Justice launches an inquiry into possible civil rights violations in Bell.

Sept. 15, 2010

State Atty. Gen. Jerry Brown files a suit accusing eight city officials of concealing their lucrative compensation and plotting to enrich themselves.

Sept. 16, 2010

State Controller John Chiang estimates that Bell wrongly collected more than $5.6 million in local taxes.

Sept. 21, 2010

Eight Bell officials are arrested on felony charges. All are jailed. Rizzo’s bail is set at $3.2 million.

Source: Times staff writer Corina Knoll