by Tony Chavira
In 2010, the city of Vernon was home to fewer than 100 people and more than 1,800 businesses. Being the commerce-friendly city that it is, agenda topics that favored business (including tax breaks and infrastructural improvements) were maintained for years by a guy named Bruce V. Malkenhorst, who served as (1) the city’s finance director, (2) the city manager, (3) the city clerk, (4) the redevelopment director, (5) the city treasurer and (6) the city’s chief of light and power. These jobs required him, and other city officials, to receive next-to-free housing, to conduct fully-paid-for trade missions all over the world, to receive all meals expensed by the city, and to build future business relationships with the occasional golf trip and vacation here and there. And their friends and family deserved that stuff too. Malkenhorst was paid six full-time salaries at the same time. After about 33 years, he finally called it a career and handed most of his titles down to his son, Bruce V. Malkenhorst Jr. He now receives an annual pension of $509,664.60.
Now, he’s awaiting trial for corruption charges. Another city administrator, Donal O'Callaghan, decided to give all of the city’s construction work to his wife, a contractor. Full disclosure, our office tried more than once to contact the Vernon Redevelopment Agency to see if they had any potential architectural and engineering work and we were flatly told “no.” I guess we should’ve opened conversation with a bribe. O'Callaghan’s since pleaded guilty of corruption too.
The city of Vernon has 55 cops patrolling the city, more than one cop for every two Vernon citizens. How have the police allowed this kind of corruption, you ask? Because the police serve as enforcers for corrupt officials. And boy oh boy, are they corrupt! Since the residents consist almost entirely of family and friends of the city officials (who are all descendents of the city’s founders), no one usually questions the authority of city management. Those who have, including a few factory owners, tried to approach change the legitimate way: through city council elections. And that might’ve worked had the city government not fought tooth and nail to keep them from becoming registered citizens of Vernon. Oh, and cancelled elections. Eventually, a court order forcibly granted them citizenship and required elections, but when eligible voters are all cronies, who do you expect will win?
With so much money sliding from one greasy hand to another, one might think that the city of Vernon was ripe for unincorporation. Such a wildly crooked little municipality in the midst of the Southern Californian landscape surely deserved to lose its cityhood immediately. I’m sure the county could find much better ways to allocate funds that would otherwise go into those corrupt pockets.
In fact, this blatant display of corruption caused California State Assembly Speaker John Perez (D-Los Angeles) to put forth a bill to disincorporate Vernon and suck it into Los Angeles County. Seeing as Vernon was wealthy as heck and had revenues exceeding its operating costs, a vote to disband the immensely corrupt city seemed like a win for the county and the only responsible option for local governance.
But lo and behold, in killing their cash cow for the meat, the greedy denizens of Vernon have halted the disincorporation proceedings with two mighty tribulations. First, investigators discovered a frightening amount of money tied up in interest-rate swap agreements hidden deep in Vernon’s books. In essence, the city of Vernon traded payments they’d receive from interest on their bonds for someone else’s cash flow. The city’s on the hook for a ton of money they borrowed, but instead of moving with the ebb and flow of the normal market, Vernon officials are being paid in cash. The state has no idea how many interest-rate swap agreements are on Vernon’s books, but if the debt ends up being wilder than they expect, disincorporating Vernon would put L.A. County on the hook for all of it.
Second (and you’ll love this one), Vernon has actually been receiving advances on natural gas and other utilities. That’s right: they were being advanced utilities instead of money. Why? Likely, so they could leverage whatever credit they had at the value of the utility (i.e. not pay interest) and pocket the cold, hard cash. To officials, the city of Vernon was a gigantic no-interest, no-limit credit card, and they just assumed it would never max out.
The books show that Vernon has about 95 citizens along with the 55 police officers, and spends three times as much as it’s taking in. City housing is still subsidized, and just about every agency is leveraged to the point of being inoperable. Ultimately, the risk for the county was just too great, and the bill for disincorporation was pushed back to next year.
But businesses still love paying low taxes, and the business community demanded Vernon’s continued autonomy in exchange for changes in how its city government operates. Giving in to pressure from the state, the county, investigations, indictments and the business community, the Vernon city council had no choice but to adopt some reform measures, including limiting salaries for officials, increasing the amount of housing in the city, and hiring employees full-time instead of “at will” (which had subjected all employees to the whim of city council members). Most important, Vernon voted to stop their practice of appointing people to vacant city council seats instead of holding elections.
How well this moves forward depends on two factors. The first is the development of accountability in the Vernon political system. Until now, business leaders who wanted low taxes with minimal regulation simply bribed a city official or two, health and environmental codes be damned.
Second, and most vital, the city of Vernon should dramatically increase its community’s access to affordable housing. The city of Bell (with its own outlandish corruption), with 40,000 residents, most of whom work in Vernon, and a tax base of $1.1 billion. Vernon has fewer than a hundred residents and a tax base of $4.1 billion. This means that Vernon has been dumping the responsibilities of housing and social services for its workers onto Bell, which can’t afford them.
Worse, poor workers travel from underfunded communities in Bell to make money for underfunded communities in Vernon. This is a classic example of uncoordinated regional resource management. The coordination of communities, environments and tax bases should be determined by some sort of influential group that has something at stake. Schools should be near transit and jobs near homes, with everything funded by taxes. As everyone makes money, everyone’s community gets better.
But Vernon never provided housing or communities. It was a fringe area that decided to lower its taxes and limit its population. All city resources went to maintaining the business friendly status quo and all tax money was seen as profit.
Now they have no choice. Either Vernon builds a community, or it dissolves into unincorporated Los Angeles County. What happens afterward is anyone’s call, but one thing is for sure: the only winners here should be the working poor who need to live closer to work. They are the economic engine that fuels industry in Vernon, and if they leave, the city is an indebted dead zone.
In another reality, one with less corrupt officials, Vernon could have been the wealthiest, most beautiful industrial city in the world. Excess income could have been spent on resources, and citizens would have lived the ideal life of a hard-working American factory worker. Instead, corruption brought the city to the brink of nonexistence, and its inheritors will take on its massive debts as a new population of citizens trying to build a community where there was once none. All that’s left to do is build the homes, parks and communities Vernon has always deserved, throw the bums in jail, and pay back the city’s debt one installment at a time.