Vernon agreed to pay $60 million to avoid disincorporation

During the final weeks of the legislative session this summer, a team of attorneys and lobbyists from Vernon were desperately trying to kill a bill that would disincorporate the scandal-tainted city when state Sen. Kevin De Leon (D-Los Angeles) came to them with a highly unusual offer.

De Leon, an early supporter of the bid to disband Vernon, told them he would help defeat the legislation if the city set aside $60 million to fund community projects in the small, working-class cities that surround Vernon and agreed to a series of government reforms.

Vernon accepted the deal, and De Leon came out against disincorporation. Officials in neighboring Huntington Park, which stands to receive some of the Vernon grant money, also switched positions and showed support for Vernon. The legislation was defeated the next week.

Three months later, Vernon is still figuring out how it will pay the hefty sum. The city has struggled financially in recent years, and some within its business community are questioning whether Vernon can afford to provide generous handouts to other cities.

“I don’t know where we’re going to get the money because we don’t have it,” said Peter Corselli, a member of a new city advisory committee and manager of a large cold-storage company in Vernon. “From a business standpoint we’re very concerned.”

Experts said there are few examples for Vernon to emulate.

“There’s no precedent that I know of,” said Michael Coleman, a local government finance expert and advisor to the League of California Cities. “It’s highly unusual. But Vernon is highly unusual.”

De Leon argues that the reform pact is far superior to disincorporating Vernon, in part because it brings tangible benefits to the residents who live around the largely industrial city.

The fund, he said, will help mitigate years of pollution, traffic and other problems caused by Vernon’s factories and the “predatory” policies of its top officials. The 5.2-square-mile city, located south of downtown Los Angeles, has about 1,800 businesses but only 112 residents. It is surrounded by the densely populated Latino communities of Bell, East Los Angeles, Maywood and Huntington Park.

Critics have long argued that Vernon’s heavy concentration of businesses robs neighboring cities of tax dollars.

“It’s no secret that for decades the city of Vernon has run roughshod over its neighbors,” De Leon said. “This is an opportunity for them to step up and do the right thing.”

Three Vernon officials have been convicted of public corruption in recent years, prompting Los Angeles County Dist. Atty. Steve Cooley and others to say that the only way to clean up the city was to essentially close down City Hall and make Vernon an unincorporated part of Los Angeles County.

Nearly all of Vernon’s residents live in city-owned housing and have received subsidized rents that range from $120 to $360 per month. Many of the tenants are friends or family of leaders at City Hall.

It remains unclear whether Vernon will issue additional bonds to make the grants, or if the payments will come from its general fund or Light and Power department. A Times analysis of Vernon’s finances earlier this year showed the city is already carrying about $500 million in bond debt and has suffered a significant decline in net assets.

A recent report by the Los Angeles County auditor-controller noted that the city’s general fund expenditures have exceeded revenues in each of the last five years by totals as large as $33 million. To cover the shortfalls, Vernon was forced to make large transfers from other funds and sell real estate, the county report said.

Vernon officials were expected to release more information on the so-called Environmental and Community Benefit Fund at a City Council meeting Dec. 6, but no such announcement was made. City spokesman Fred MacFarlane said that the discussions are still in a preliminary stage and that Vernon remains committed to following through on all components of the De Leon plan.

“City officials in Vernon view this as an opportunity to create a new dialogue with its municipal neighbors,” MacFarlane said.

Under the plan, the grants would be administrated by a special nine-member committee appointed by state lawmakers and officials in surrounding cities. Vernon would have only one representative.

MacFarlane said the city is working on a system that would prevent conflicts of interest between members of the committee and the organizations that ultimately receive funding.

The first grants will go to two projects selected by De Leon: improvements to the Salt Lake Park in Huntington Park and Legacy LA, a nonprofit group based in Boyle Heights that offers youth counseling and gang-prevention programs.

Maria Calanche, the executive director of Legacy LA, said she was at first uncertain about partnering with Vernon, but ultimately supported De Leon’s plan because of the assistance it would provide her organization and others. The $5-million grant will help renovate the Hazard Park Federal Armory, a facility owned by the city of Los Angeles and leased to Legacy LA.

“At first I was, like, do I really want to be connected to the city of Vernon?” she said. “But I also see the value. If the money does come and we can renovate the center, I know how many lives we can change.”

The deal came after a series of discussions between De Leon’s office and the large team that Vernon had assembled to block disincorporation.

De Leon said he initially pressed for a “world-class” recreational facility with pools and soccer fields to be built within Vernon. But city officials said there was not enough space, and preferred to help pay for a park or other projects in other cities.

Dan Reeves, De Leon’s chief of staff, said the size of the fund was determined through an analysis of other cities’ expenditures on parks and recreation programs. The payments will be spread out over 10 years, with Vernon paying $5 million a year, along with the two upfront $5-million grants to Huntington Park and Legacy LA.

De Leon said he’s heard no indication that Vernon can’t afford the $60 million, but would be willing to rework the plan if Vernon can’t pay the full sum.

“I’m not going to push the city over a financial cliff,” he said. “….This isn’t ‘Chinatown,’ there’s nothing nefarious here.”

Jaime Regalado, a veteran Los Angeles political observer and emeritus professor of political science at Cal State L.A., said the deal was a “big win” for De Leon and a clever way to extract a penalty from Vernon.

“It’s always good for Californians to see that if somebody isn’t playing fair they’re going to be made to pay,” he said.

sam.allen@latimes.com