For Release Sunday, August 29, 2010
Citiwire.net
The scandal of grossly inflated city council and top manager salaries in Bell, Calif. — and a similar story about its neighbor Vernon, Calif. — has touched a nerve. It’s being used as the poster child for public sector excess and arrogance.
What’s missing from the outrage, though, is a focus on the underlying causes — or the real cost. We’ve always known that unchecked power is prone to abuse, whether in the private or public sector — even in sacred institutions of faith. But why was such blatant abuse allowed to bloom — and why was it so long ignored? Who really pays the price for official corruption? Most urgently of all, what sensible steps should be take to ensure it is not repeated?
Without that, we may see misguided “reforms” duck the specific solutions to the real problem. Corruption is like cancer — it comes in different forms and is best curbed with specific treatments. Arbitrary new rules aimed at “reforming” every city government would be a ridiculous over-reaction. It would only further hamstring the effectiveness of local government at a time when we need more efficiency, not less. The same goes for generic and toothless reforms that simply sound good.
Lots of causes have been pinpointed. There was a genuine failure of essentially all of the gatekeepers of public integrity. The professional managers, meant to be insulated from political corruption, were instead the source of it. The elected officials, meant to keep an eye on the administrators, co-conspired with them so everyone could participate in the plunder. The city attorney, sworn to uphold the law, signed off on its evasion. Local law enforcement was part of the game. The media, the county grand jury, the district attorney and community leaders and residents were asleep at the wheel.
There are specific, clear-cut and fixable causes for the why these gatekeepers failed — and these risk being lost in the babble and finger pointing.
Bell is one of a dozen inner ring suburbs that prospered on Southern California’s great post-war industrial boom. When others think of Los Angeles, the images evoked are beaches, palm trees, freeways and movies, with perhaps some dark urban dystopia thrown in. Forgotten is that beginning with the shipyards of World War II, the vast tract of flat land between the port and downtown became the second largest industrial concentration in the world, behind the bombed-out German Ruhr. Aerospace, tires, steel, cars, industrial tools, electronics and the other booming industries of postwar America provided opportunity and jobs to the children of the Oakies and Arkies that had streamed into California during the Depression.
Fifty years later, the big plants are closed. The white working class has moved up and on. What remains is a landscape of struggling industries and a half million largely immigrant workers in the remaining manufacturing and service industries at the heart of Southern California, divided up into a dozen municipal jurisdictions that are ripe for corruption.
Three adjacent towns illustrate the problem. Vernon is a 2.5 square mile commercial powerhouse of factories and warehouses. It has a population of just 96 residents. There are no houses or apartments to buy or rent — all the residential real estate is occupied by members of the city council or city employees and their families. It is essentially a financial printing press disguised as a municipality. It’s gusher of tax and utility revenue allows it to support a police force of 54 officers for 96 residents, while it’s next door neighbor struggles with just 38 officers for a population of 40,000. Vernon’s tax base allowed it to pay Bruce Malkenhorst Sr. the highest salary for a city manager in California. But it didn’t keep him from stealing at least another $60,000 to pay for personal massages, golf trips and lavish meals, for which he was eventually indicted. Unconvicted, to this day he collects the highest public pension in the state — more than half a million dollars a year.
On the other side of Bell is Maywood, which is virtually bereft of industry or commerce. Thirty thousand people live there. After years of scandal and political wrangling, It recently found itself in such a fiscal hole that it took the unprecedented step of firing its entire workforce, including disbanding its police force. The county sheriffs took over policing the city (and the adjacent community of Cudahy) and City Hall and other municipal functions were turned over to … Bell.
Three cities. All systematically victimized by corruption. But its not the water, its not the dark side of human nature — it’s the artificial boundaries that determine their common fate.
None of the three cities should be organized as a separate city. The only sensible solution is to consolidate them through receivership, probably as part of a larger redrawing of lines of the dozen cities in the area. New borders should reflect today’s economic and demographic realities, not arbitrary lines drawn by real estate speculators a century ago. A half a million low-income residents are systematically short-changed from getting honest, effective local government and the services it provides because they live in a patchwork of artificial “cities” that hamstring effective governance.
Receivership and re-organization are systematic solutions to the problems in Southeast Los Angeles. “Feel good” statewide legislation is just knee-jerk reaction. Yes, posting city salaries on websites is good for every town in California — or America. But it won’t fix the problem in Bell, Vernon, Maywood and the nearby communities. Having the California state legislature turn its attention from passing a budget to establishing formulas for management pay in every California town is problematic — and also won’t solve the problem in Bell, Vernon, Maywood and the nearby communities.
Tip O’Neill famously observed: “All politics is local.” In this case, the problem in Southeast Los Angeles is also local. It is not confined to a single city, but its cure lies in redrawing lines to create cities that make sense. Then the people there can have a shot at ensuring they get the government they deserve — and the shot at the American dream they strive for.
Rick Cole is City Manager of Ventura, Calif.
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6 Comments
The solution is not bigger cities. The solution is found in the elephant in the living room, citizen disinfranchisement.
In the old days the citizens of a town taxed themselves and used the money to run the town. Now, in
California, the tax money from cities in California is exported to Sacramento and is doled back to the cities. The City administration is no longer beholden to the citizens as a sourse of money, it is the State which is the locus of the cash. The citizens are out of the loop. The purse strings are no longer held by the citizens of the city. In the old days the City council had to actually ASK the citizens of the city for the cash to run the city. Now a days the city administrators get the cash from Sacramento, and most citizens don’t even know the amount.
The solution is to stop transfering the tax money out of the cities and let the citizens decide how it is to be spent. Then the citizens will keep a close eye on how the money is spent and the city administrators will be under closer scrutiny.
Joe:
There is no magic to size. But in the case of the Southeast Los Angeles, artificial cities are a major source of “citizen disenfranchisement.” How exactly would you “enfranchise” the 96 citizens of Vernon — who control a reserve of $164 million? They are pretty enfranchised as it is — they have a license to steal? And how do you give local citizens the right to taxation in Maywood, population 30,000 in one square mile bereft of industry or commerce?
California has statewide challenges. But the outrageous scandals in southeast Los Angeles have specific causes and cures.
I would think, being in the current financial crisis, California needs a system where it is able to catch these problems before they become big issues. It is embarrassing that a Los Angeles Times investigation found something that California should have.
I would advise taking a page out of North Carolina’s book. Even Rhode Island is trending that way after Central Falls.
http://www.wpri.com/dpp/money/gov-signs-bill-prohibiting-cities-from-seeking-receivership
Bill prohibits receivership for cities
This is a tiny step in the North Carolina direction of monitoring local finances
I would add that my advice would also help the confidence loss in municipal bonds. Iit would demonstrate the state is on top of things not behind the event.
California issuers will not benefit from the trend discussed in the Reuters article.
Consider this:
http://www.reuters.com/article/idUSTRE66754W20100708
More investors saying “no thanks” to muni bonds
Mr Cole’s suggestions have merit and should be considered. But they don’t address the entire issue. In the first place, annexation and incorporation law for municipalities in California are virtually bereft of substantive requirements that an area to be included in a municipality have urban characteristics. They are very legalistic and procedural almost without exception. The result has been the creation of a mess worse than a hodge-podge of boundaries that bear little relationship to a community of interest. And they are a tangle that impede efficient and effective provision of public safety and other services. Citizens’ ability to identify with their local government is seriously confusing. The US Postal Service and public school district boundaries are also arbitrary but not in the same ways. Postal service districts often don’t follow municipal boundaries and the boundaries of school districts are as arbitrary as city boundaries in many cases. A citizen might live within the boundaries of city “A”, of school district “B” and have a postal address of “C”. Talk about citizen empowerment. How about citizen confusion?
Another issue that results in dysfunctional local government is the power of local public sector unions under California’s collective bargaining statutes. The State of California has, in effect, given the keys to the city treasury to one local interest group – public employees. I used to argue that if the State of California is going to give any interest group a privileged place to make claims on the city treasury, at least there ought to be a requirement that the group selected be the most needy. This, of course, was never done and it would be impossible to show that the most needy group is the public employees.
This public sector collective bargaining system is copied after the National Labor Relations Act (NLRA) adopted by the Federal Government in the ’30′s as a measure to correct power imbalances in the work place in the private sector. Management had all the power and workers had none. The NLRA was designed to apply to the private sector. From a labor relations viewpoint the only commonalities between the public and private sectors are superficial. That is, there are employers and there are employees. There is no entity in the public sector even remotely equivalent to the ownership interest of a private company or corporation. The only thing close, and it’s not very close, is the elected governing body. But the members of that body have no comparable personal interest in the city or county they govern. Not nearly the personal interest that their employees have – this is their principle source of income. If the electeds govern poorly the most they can lose is an elected post that is usually secondary as a source of income and does not represent any personal financial interest at all. So with the amount of power that has been given local unions by the State of California (and most other states as well) they have been successful at pushing their local employers to give more and more and ever more. (Samuel Gompers pointed out that that is what unions wanted a long time ago.) Now we’re at the point that local governments have given more than they have to give and can’t say yes anymore. Plus new imbalances have been created because now compensation is heavily influenced by how strong an individual union is in the competition. Successful governance requires that the political leadership needs to be able to say no to any interest group before the time arrives that they have given so much that they can’t say yes anymore. They do it fairly well with all other interest groups but not with the local labor unions. Thus we have employee compensation and benefit programs that go way beyond where they need to be to enable a city to recruit and retain competent employees. We have created a financial elite who’s elite status is guaranteed by private sector taxpayers. The problems ensuing from this failed system have now become obvious and can no longer be hidden. They could and were foreseen by some in the past. The participants in the system, both employees and politicians, are not per se evil or misguided people. They just find themselves in a system that is poorly conceived and badly administered. They do simply what most of us do – seek to improve our own economic condition.
The system needs to be changed to the benefit of all the citizens in the state. Bankruptcy and reorganization could do wonders for the specific problems that have surfaced in south east Los Angeles County and in other parts of the State of California. But without an overhaul of local government labor and pension law and rules, reform efforts will produce little improvement in governance in California.
Mr. Pederson’s comments are thoughtful and bear on a critical challenge facing local governments. But they don’t bear specifically on the acute crisis in Bell. There are plenty of reforms that would improve governance in California. But no amount of general reform, however well conceived, will address the deeply rooted and chronically infected corruption in a handful of vulnerable adjacent municipal entities in Southeast Los Angeles. That remains my argument and I think the facts bear it out. Everyone wants to use Bell as their poster child for whatever reform they’d like to impose on California. But the problem in Bell isn’t that it is just like California, only more so. It is not. It and a handful of surrounding jurisdictions are fatally flawed.