California Apparel News

On the heels of the Bell, Calif., salary scandal, neighboring Vernon has found itself a target of investigations and demands from local politicians that the small Los Angeles County city be disbanded.

Clocking in at just over 5 square miles, Vernon is home to approximately 1,800 businesses that altogether employ more than 50,000 people. The city is home to less than 100 residents but boasts an annual operating budget of almost $300 million. Businesses—including apparel biggies L’Koral, True Religion, James Perse and BCBG Max Azria Group—have been drawn to the city thanks in part to its comparatively low utility prices and minimal city taxes and fees, including no utility taxes and low business-license fees. Denim brands, washhouses and contractors—including Current/Elliott, J Brand, !iT Jeans, Kasil, Rich & Skinny, Naem and Genetic Denim—have also clustered in Vernon, which, thanks to its private light and power department, is able to offer rates that, at times, have been approximately 40 percent less than the utilities serving Los Angeles city proper.

It isn’t clear how disbanding Vernon would affect local businesses. The Vernon Chamber of Commerce has called the disincorporation effort a “disconcerting issue that would cause a direct threat to the hellip; businesses that operate” in Vernon. The Los Angeles Economic Development Corp., which in 2008 voted Vernon one of the county’s most business-friendly cities, said if the city were to be absorbed by another jurisdiction, then businesses would be subject to the taxation and utility rates that apply there. “California is not a business-friendly state,” said Carrie Rogers, the LAEDC’s vice president of business assistance and development. Vernon, she said, is the rare exception.

Lonnie Kane moved his company, Karen Kane, to Vernon 17 years ago from Los Angeles to save on the cost of doing business and is watching the fray warily. Kane, who owns the 100,000-square-foot Karen Kane headquarters building and three other industrial buildings within the Vernon city limits, said his concern isn’t for the alleged corruption among city leaders but the possibility of losing the city’s business environment.

“Vernon is a utility that calls itself a city. We all know that, but I much prefer to do business in Vernon versus L.A. I have no desire to go back to Los Angeles,” he said. Not only does he save money on utilities, he said, but city services are efficient. “The city is set up to deal with businesses, and it doesn’t give you the runaround. They don’t waste time, and time is money.”

Kane said he isn’t losing sleep yet over the noises being made about disbanding the city. “It seems far-fetched right now, but it would certainly be a negative for us. I’d hate to see it occur.”

While Kane said he isn’t concerned with the city officials’ high wages or exorbitant perks, he, like others, believes property owners should be given the right to vote. “They run a hell of a good city. But a number of business and property owners in Vernon think that maybe property owners should get the vote.” The Vernon Property Association has similarly called for Vernon to allow business and property owners to vote in all elections. Dogged by controversy

The city has been labeled a “fiefdom” by Los Angeles lawmakers. Now, thanks to the Oct. 19 indictment of former City Administrator Donal O’Callaghan on three felony counts and an investigation by the California attorney general’s office into the high salaries and benefits Vernon pays to its officials (Eric Fresch, a former city administrator and city attorney now working as a legal consultant for the city at a rate of $525 per hour, was paid $1.6 million in 2008), there are two separate movements to disband the city and annex Vernon as part of the city of Los Angeles.

On Oct. 27, Janice Hahn, a Los Angeles city councilmember, introduced a motion calling for Los Angeles to annex Vernon. Her motion was referred to the city’s Planning and Land Use Management Committee, where it awaits a vote.

Bearing more teeth is the renewed call to arms from the district attorney’s office. In 2006, after then-Mayor Leonis Malburg and his wife were convicted of voter fraud, prosecutors proposed legislation to disband the city. That attempt fizzled, but now L.A. County District Attorney Steve Cooley is calling for that plan to be revived. “I think it’s time to dust off that proposal for Vernon. I think there’s an atmosphere there where people get into that city and take advantage of that setup. And the fact is, there is so much money there,” Cooley told the Los Angeles Times after O’Callaghan’s indictment. He also hinted that the state legislature should take up the issue during its next legislative session.

Disincorporating Vernon poses a big challenge, prosecutors have acknowledged. While a handful of cities have been disincorporated around the country, no California city has been involuntarily disbanded, and to do so would require new legislation. Ultimately, the Supreme Court would rule on a disincorporation proposal filed by the attorney general.—Erin Barajas