Troubled city of Vernon survives Calif Senate vote

SACRAMENTO, Calif. – The California Senate voted on Monday against dissolving the troubled Los Angeles-area city of Vernon, hours after the Internal Revenue Service notified city officials that it was auditing a $419 million tax-exempt bond deal.

The bill by Assembly Speaker John Perez, D-Los Angeles, failed the Senate on a 17-13 vote. Perez said the city of fewer than 100 residents is too corrupt to function properly, even if it makes major reforms.

Vernon is one of several small Los Angeles suburbs, including Bell and Temple City, where top officials have been accused of using their positions to line their own pockets. Three top Vernon officials have been convicted of corruption charges for misusing public funds, and some employees and contractors have taken home nearly $1 million a year.

Democrats were torn between the speaker's legislation and a counter-proposal by Sen. Kevin de Leon, another Los Angeles Democrat who last week proposed a laundry list of reforms the city should make in order to stave off disincorporation. City officials approved many of those plans at a special council meeting last week.

De Leon and other city supporters worried about the loss of as many as 55,000 jobs in the industrial haven near downtown Los Angeles.

De Leon called his proposal a moderate and balanced approach to addressing corruption in the city. It would require Vernon officials to sell off city-owned housing, establish an environmental mitigation fund and adopt a host of reforms.

"The saga of Vernon will not be complete until the city follows through on its commitment to implement the aggressive reforms I proposed. I am seeking permanent and lasting reform in that city," de Leon said after the vote.

Perez has argued that the city has had ample time over the last months to make meaningful reforms, and could have signaled its good intentions by selling its housing, which has been rented for years to family members and friends of local officials for far below-market rates.

Under his bill, Vernon would have merged with unincorporated Los Angeles County.

Senate President Pro Tem Darrell Steinberg, D-Sacramento, praised Perez for drawing attention to the problems in Vernon, which came to light in the wake of a scandal over misuse of taxpayer money in the neighboring city of Bell.

Also Monday, the IRS told the city it was concerned the issuance of the bonds in 2009 may have failed one or more tax provisions, the Los Angeles Times reported Monday. The IRS won't comment on the investigation.

If the bonds are deemed taxable, the federal government could demand millions of dollars in unpaid taxes.