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Vernon seeks more tax hikes to avoid cuts

April 08, 2013|By Adolfo Flores and Hector Becerra
  • The city of Vernon
The city of Vernon (Los Angeles Times )

Vernon officials will be asking voters Tuesday to approve three taxes that they said are crucial to closing a large budget gap caused by bad investments.

Officials are threatening deep cuts to Vernon’s police and fire departments if the taxes, expected to net $8 million annually, don’t pass. The city currently faces an $8-million General Fund deficit.

A shift from years before when the city’s 1,800 businesses benefited from low taxes and cheap electricity. But a series of bad investments made through its Light and Power Department, made worse by the recession, has caused the city to boost its electric rates by about 40% in recent years and move to increase taxes.

Vernon has gone through a number of cost-saving and revenue-generating measures. Including a buyout of 35 employees, saving $8 million over five years, and the sale of 500 acre-feet of the city’s water rights to Norwalk’s Municipal Water System for $6 million.

The city’s legal costs have also decreased now that it's no longer fighting disincorporation, said Fred MacFarlane, Vernon's spokesman. It won the fight against the 2011 state Senate bill, only after spending thousands of dollars and agreeing to a set of ongoing reforms.

Public safety was hardly touched by recent budget cuts that hit the rest of the city, MacFarlane said. The General Fund for the 2013 fiscal year was about $49 million, it was approved with an estimated $12-million deficit, which is now at $8 million.

“But there’s touching and then there’s beheading,” MacFarlane said. “These two departments would be the first in line to be slashed because other departments have already taken a substantial hit.”

Vernon’s 70 registered voters will weigh in on the three measures that will mostly hit the business community.

Measure K would increase the city’s business license tax based on the number of employees by up to $28,450 starting in 2014. It will bring in $4.5 million a year in revenue.

Measure L is a special parcel tax on non-residential lots that will garner $1.9 million annually starting in the 2014 fiscal year and sunset in the 2023 fiscal year.

The tax that would affect residents, Measure M, would levy a 1% utility users tax on electricity, gas and water, among others. It will generate $1.6 million annually. It would exempt residents who are blind, disabled or are low-income.

Some 50,000 people are employed by Vernon’s 1,800 businesses, which bring in about $1.1 billion in taxable sales annually, according to a city-commissioned report.

The city accounted for 15.3% of Los Angeles County’s food industry employment, 10.7% of its apparel-related employment and 5.5% of furniture industry employment.

During a September 2012 special election, a utility users tax on all utilities was defeated 24 to 16 after it was strongly opposed by Vernon’s Chamber of Commerce. It would’ve had a collective cap of $250,000 for electricity, water and gas.

The Chamber of Commerce declined to comment on the 2013 measures, as did Gavina Coffee and Owens Illinois, two of Vernon’s biggest businesses.

Peter Corselli, a manager at a large Vernon cold storage business who traveled to Sacramento in 2011 to lobby legislators against disincorporating the city, said he was resigned that the latest round of taxes would pass.

“You can’t keep crying over and over and over again,” he said, adding that at least the proposed taxes were less “onerous” than initially planned.

“I know some of the other businesses looked at it in a different way than I did. I looked at it as it’s going to cost us $100,000 a year, and that’s a lot better than $200,000 a year,” Corselli said.

The business community took a neutral stance on the 2013 taxes, said John Van De Kamp, the city's independent reform monitor and a former state attorney general, because the measures didn't strike them as hard as before and Vernon officials made it clear they were necessary.

“The business community, Chamber of Commerce and the city sat down and wrestled the tax proposal that's on the ballot to the ground,” Van De Kamp said. “On the surface it appears to be fair and will generate the income that is needed to close the budget gap.”

For years, Vernon's industry turned a blind eye to what was happening at City Hall in terms of taxes and rates, he said.

“City government sort of ran amok and during the recession, for better or worse, decided not to raise rates,” Van De Kamp said, “and so we're paying the price right now.”

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