Maywood officials were put on notice last summer that the city would lose its insurance coverage unless they met a list of 20 conditions, which included hiring a permanent city manager.
Despite repeated warnings over the next 11 months, city leaders met few of the terms, said officials with the California Joint Powers Insurance Authority, even failing to hire a chief executive to run the city's day-to-day operations.
Left without insurance as of July 1, the Maywood City Council decided this week to lay off nearly all of its employees, disband its police force and pay neighboring Bell to run the city.
The insurance authority placed Maywood on a 20-point Performance Improvement Plan last August, the first California city subjected to such an action, said Bob May, a risk consultant for the organization. Included was an agreement to hire an experienced city manager by Dec. 31, 2009.
In addition, Maywood at the time owed the insurance authority $927,135. Last July 1, Maywood became the first city put on a payment plan by the insurance authority, May said. Maywood has been making interest-only payments since then.
Maywood officials said that a set of unlucky circumstances made it difficult to hire a city manager, and that the two candidates who were offered the job turned it down. Both candidates were offered $180,000 a year, Interim City Manager Angela Spaccia said.
Officials with groups and associations that track California cities say Maywood is the only municipality they can recall that has dismissed virtually all of its employees. Next week, the Los Angeles County Sheriff's Department will begin patrolling the working-class city southeast of downtown Los Angeles.
Though Maywood officials stopped short of filing for bankruptcy or even giving up the city's municipal status, the city faced daunting problems, given its history of lawsuits that mainly involved the Police Department, if it lost its insurance coverage.
Among the tasks that Maywood officials reportedly failed to complete were renegotiating its police contract with neighboring Cudahy, studying whether the city needed an assistant city manager or a human resources director, meeting quarterly with insurance authority staff, taking steps to prevent problems identified in a risk management evaluation and submitting to the authority's approval for disciplining employees to prevent lawsuits.
The city was warned Jan. 12 that the insurance authority's performance plan was not being followed.
On Jan. 27, the authority's executive committee notified Maywood that it would cancel insurance coverage March 1. The executive committee later extended the date to June 1 and then to July 1.
Spaccia said the city tried to find a city manager, a position that has not had a permanent employee since at least January 2009. She said the city hired Alliance Resource Consulting, a national recruiting firm in Long Beach, to find candidates.
In early February, she said, a candidate was offered the job. She would not identify the candidate.
The candidate turned down the job after being warned by residents about the city's history of corruption, Spaccia said.
The recruiting firm began its search three months later. By the time the city selected a candidate, Maywood was told its insurance coverage was being canceled, Spaccia said, scaring off the applicant.
Spaccia said that after checking with the nine major municipal insurance agencies, she learned that the city would have annual premium payments of $1.3 million and a deductible of $2 million.
Even if the Police Department were disbanded, Spaccia said, Maywood employees were considered such a risk that the insurance cost would remain the same.
As part of the insurance authority's performance plan, Maywood was supposed to renegotiate its police contract with Cudahy by Sept. 30, 2009. George Perez, Cudahy's city manager, said Maywood's "politics have been getting in the way."
An outside audit then found that Maywood was losing about $620,000 annually under the previous seven-year contract with Cudahy because it was not charging for administration, vehicle maintenance or insurance.
Perez said that he and then-acting Maywood City Manager Paul Philips would come to an agreement on the new contract, but the Maywood City Council would send Philips back to the table. Maywood officials complained that Cudahy never wanted to negotiate.
Perez said that negotiations fell apart in February after Philips resigned. Philips said that Maywood really wanted to cut a deal with Bell and that city leaders were stalling in negotiations.
"It became hopeless in my mind," he said. "It's so sad what's going on there."