Years of alleged fraud and questionable business deals have left South Gate's finances in shambles, officials said, prompting the small working-class city to lay off workers, and to consider raising taxes and selling off property.
City officials said the actions of former Treasurer Albert Robles, who was indicted last week on charges of fraud, money laundering and public corruption, have left South Gate with a dwindling reserve fund and limited prospects for recouping the lost money.
Federal authorities allege that Robles masterminded a kickback scheme with several city contracts that cost South Gate $12 million. City officials said that fees from attorneys whom Robles and his allies hired before being recalled from office last year and other contracts cost the city several million dollars more, though they do not have an exact number.
South Gate faces a deficit of as much as $6 million next year. It has laid off 200 employees and significantly scaled back city services, including graffiti cleanup, street repairs and street sweeping.
City employees, including police officers and secretaries, have agreed to forgo raises for two years and have waived sick leave payouts for one year.
The city is $900,000 over budget in legal fees from costly lawsuits and expects more. It has paid $250,000 so far defending itself against the lawsuits of two police captains, a lieutenant and the chief, who allege that they were mistreated when Robles and his allies were in office, City Atty. Raul Salinas said.
South Gate this week put a utility tax on the March ballot to help bridge next year's expected deficit. The water rates have been raised. Building safety, planning and other fees that have remained stable for a decade may also be increased. The city has frozen hiring and is changing its employee retirement program to save money.
The city has attempted to block some of the contracts Robles issued, with limited success.
Last month, a judge ruled that the law firm of Sheppard, Mullin, Richter & Hampton must repay the city $517,000 in legal fees charged to represent Robles before grand juries in 2001 and 2002.
In August, a judge voided a controversial deal to sell a city-owned 11-acre site to a nursery belonging to a former Robles partner for a below-market price. The judge also ordered the company's owner, George Garrido, to repay the city $2.5 million in loans and grants given to him to pay for the deal.
