Why the city of Maywood is facing a state audit and a probe by the district attorney

Six years ago, the small city of Maywood was struggling to stay afloat financially. So it turned to its larger neighbor, Bell, for help, essentially handing over day-to-day operations to that city.

The arrangement ultimately helped expose massive corruption in Bell, leading to top city officials being charged and convicted in a scandal that garnered national attention.

Today, Maywood is back on the brink of financial collapse and struggling to find any kind of rescue plan. The 1.2-square-mile municipality — one of the smallest in Los Angeles County — has amassed $16 million in debt that it cannot repay, according to a state report reviewed by The Times.

State auditors who examined the situation at City Hall found that city staff have been late with payments and failed to alleviate the crisis for years.

The revelations come as Maywood is facing political and legal problems as well. The Los Angeles County district attorney is investigating allegations that Maywood repeatedly violated state open meeting laws when hiring and firing top city officials and amending zoning changes, according to documents.

Councilman Ricardo Villarreal, who until this week served as the mayor, said he was giving up that title in protest over what he described as mismanagement and other problems in the city.

Maywood's problems are the latest in a series of municipal woes facing the predominantly Latino working-class cities along the 710 Freeway in southeast Los Angeles County. The cities have been plagued for decades by City Hall scandals and financial mismanagement.

Maywood was on the edge of bankruptcy in 2010, when officials proposed laying off much of the City Hall staff, contracting out policing to the L.A. County Sheriff's Department and having Bell handle many administrative functions.

But those plans were scuttled after The Times revealed huge salaries paid to top Bell officials, which eventually led to criminal charges.

Maywood has yet to recover, according to the California state auditor, which has deemed the city a potential "high-risk entity" and is conducting an extensive review of its finances and operations.

The review is designed to assess Maywood's financial health and its "potential for waste, fraud, abuse and mismanagement."

"Using publicly available information, the state auditor identified Maywood as an agency that is facing fiscal challenges that may affect its ability to continue providing services to its residents," State Auditor Elaine Howle wrote in an audit proposal analysis in January.

The roughly $16 million that Maywood owes includes civil lawsuits and unpaid pension obligations. The city has failed to adequately address its problems, the state said.

The city still contracts out for most public services, the auditor said, noting that the 11 city employees primarily perform accounting, revenue-collection and code-enforcement functions.

In addition to its inability to meet its long-term debt obligations, the city also "has a history of making accounting mistakes and incurring late fees," including $49,000 in 2014 because of late payments to its largest contractor, the Sheriff's Department. It also has relied on non-operating revenue, such as legal settlements, to finance its operations.

The audit proposal also noted that Maywood's elected officials had "failed to adequately oversee" a city manager, who was fired in December after two new council members were elected.

City leaders said they recognize the seriousness of Maywood's financial woes and vowed to take steps to fix them.

"I knew we were in a precarious financial position. I knew we owed money, but I also understood we had taken measures to make sure we stayed in the black [rather] than operating in a deficit," Councilman Eduardo De La Riva said this week.

De La Riva also expressed alarm at how Maywood had gotten to this point.

"It seems like we're repeating history, making the same mistakes that we made in the past," he said. "It's disheartening what's become of our city."

The financial pressure comes during a tumultuous period at City Hall. Last year, the council hired an interim administrator after dismissing the city manager. But in April, he also was let go and officials replaced him with another interim city manager.

"It's a tragedy," said Pedro Carrillo, the interim city manager who was let go in April.

At council meetings, there has been much rancor and finger-pointing among leaders.

Villarreal said he gave up his mayor's title to protest what he saw as violations in open meeting laws, among other things.

The district attorney sent a letter to the city citing several examples of situations in which the meeting law was not followed.

"The actions taken were not in compliance with the Brown Act because there was no adequate notice to the public on the posted agenda for the meeting that the matters acted upon would be discussed, and there was no finding of fact made by the Maywood City Council that urgent action was necessary on a matter unforeseen at the time the agenda was posted," the letter read in part.

A spokeswoman for the district attorney said the investigation is still open.

Some in Maywood look with sadness at the spectacle and what it says about the city's leadership. Neighboring cities such as Bell, Vernon and Cudahy have had to enact reforms in the face of criminal investigations, recalls and threats of disincorporation from the state Legislature, but Maywood has not faced a similar reckoning.

"The reality is Maywood has always been forgotten," said City Clerk Gerardo Mayagoitia. "No one ever wants to look at Maywood because we're such a small community, and yet there's so much corruption here that never stops. No one puts a stop to it."

ruben.vives@latimes.com

kim.christensen@latimes.com

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A version of this article appeared in print on May 13, 2016, in the News section of the Los Angeles Times with the headline "A city back on the edge of crisis - With $16 million in debt, Maywood is under scrutiny by state auditors and the district attorney." — Today's paperToday's paper | Subscribe
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