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Some businesses feel 'suckered' for backing Vernon during scandal

June 27, 2012 |  8:06 am

Vernon workers and employers rally at Los Angeles City Hall in March 2011 against state legislation aimed at disincorporating the city.

Some businesses say Vernon, an industrial city known for being "business friendly," isn't much of a friend anymore.

Hit by the recession and a series of ill-fated investments that have cost the city millions, Vernon has moved to raise taxes and has jacked up its historically low electricity rates by about 40% in recent years, bringing them much closer to what utilities across the region charge.

Vernon's biggest businesses, including Farmer John, Gavina Coffee and Owens Illinois, have in recent weeks slammed the city and issued dire warnings. Some business leaders are threatening to move their operations out of the city because they say the costs of doing business there have become too high. Others have called on city leaders to consider declaring bankruptcy to get out of Vernon's bad investments.

Just a year ago, many of these same businesses were rising to Vernon's defense when the state Legislature considered disincorporating the city of just 100 residents after a series of public corruption scandals. Back then, the companies argued disincorportion would ruin the local economy and that Vernon City Hall — while tainted —was good for business.

Now, business leaders say they feel betrayed.

"John Pérez has to be laughing," said Doug Rawson, chief executive at a local printing company, referring to the Assembly speaker who sought to dissolve Vernon last year. "In retrospect, I think he was right. I think the city is poorly run.... I think we made a big mistake."

Peter Corselli, manager at a large Vernon cold storage business, traveled to Sacramento last year, lobbied legislators and even appeared in a television advertisement promoting Vernon as "a place where business works."

"It's a very ugly feeling," Corselli said in an interview. "I feel like I was suckered. I feel like I wasted my time.... At the rate they're going with these increases, this is just not a sustainable city."

The outcome of the dispute could reverberate well beyond Vernon's borders.

The 1,800 businesses there employ 50,000 people and generate about $1 billion in taxable sales annually, according to a report commissioned by the city. Vernon also accounted for 15.3% of Los Angeles County's food industry employment, 10.7% of its apparel-related jobs and 5.5% of furniture employment, the report said.

Some of the businesses threatening to reduce operations in Vernon said they might do more of their work out of state. Farmer John, for example, has suggested it could move some of its production to the Midwest.

Vernon officials reject the idea of bankruptcy but say they have no choice but to seek more revenue. In addition to rate increases, the city has placed a utility user tax on the November ballot to help balance the budget. Officials said the once-sizable reserve the city for years tapped to keep rates low is largely depleted.

"I know it's painful," said Michael Ybarra, a newly elected member of Vernon's council. "But we need to work on it, and in the short term I don't know if we have much of a choice."


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Photo: Vernon workers and employers rally at Los Angeles City Hall in March 2011 against state legislation aimed at disincorporating the city. Credit: Wally Skalij / Los Angeles Times