Irwindale, Vernon, City of Industry : The Little Cities That Make Big Bucks

When tiny Irwindale made its bid to snare the Raiders from Los Angeles, there were a lot of raised eyebrows over the audacity of this puny David in its struggle against Goliath.

Imagine a city of 1,040 trying to make an end run around the hulking megalopolis of Los Angeles, population 3.1 million.

“Just 12 years ago, the city couldn’t pay its debts or pave its streets,” said Irwindale city spokesman Xavier Hermosillo.

But now, some say, perhaps it is Irwindale that should be cast as an economic Goliath.

Over the past decade, Irwindale, along with a handful of other tiny industrial cities, such as the City of Industry, has grown into an economic powerhouse.

Critics contend that such growth has been fueled by millions of dollars in state redevelopment funds that should have gone to communities that have more need for them.

Questions are being raised about whether such cities have stretched the legal requirements necessary to receive redevelopment funds.

With few, if any, slums to redevelop and few residents on whom to spend the money, critics say, the industrial cities have used redevelopment funds to lure more taxpaying businesses to their boundaries, adding still more money to their coffers.

“I don’t think they (these cities) should exist,” said Ralph Shaffer, a history professor at Cal Poly Pomona who specializes in California history. “I have to admire their shrewdness, but I think we’d all be better off without them.”

Shaffer’s view, which was highlighted in the January issue of California Journal, a magazine about state politics and government, is shared by others who have become disgruntled over the increasing wealth of the sparsely populated industrial cities.

Los Angeles City Councilman Ernani Bernardi, who has filed suit to block Irwindale’s proposed use of public funds to lure the Raiders, said it is unfair that so much tax revenue is going to help such a small group of residents.

“They’re not city governments to benefit people,” he said. “They don’t have any people.”

Some county officials also complain that the industrial cities have siphoned badly needed revenue that could be used by the county to help the entire region.

“What it boils down to is those cities are using property taxes to attract business. The county could use those same dollars to operate jails or care for the needy and sick,” said Lloyd Halstead, chief of the county’s finance division. “They aren’t directly helping us, but they are directly hurting us.”

Industry and Irwindale received a total of $30 million in redevelopment funds in fiscal 1986, or 13% of the $227 million that went to cities in the county, according to county figures.

Industry received $23.3 million, the third-highest total in the state, trailing only Los Angeles and San Jose.

But Irwindale officials call such complaints jealous backbiting at best and cite the advantages the industrial cities provide.

Irwindale Vice Mayor Sal Castellanos said his city provides 35,000 jobs to workers from around the region.

And Industry, a 12-square-mile sliver of a city with a population of only 710, swells to about 55,000 on weekdays, city statistics show.

“People may not want us to operate,” Castellanos said, “but we provide an awful lot of jobs.”

However, Shaffer says the industrial cities have done little more than than shuffle businesses and jobs from one part of the county to another.

“Those business would still be in Los Angeles. It’s just a matter of where,” Shaffer said. “Irwindale isn’t providing us with the Raiders. They were already here.”

But Hermosillo said many companies might have relocated outside the Los Angeles area if they hadn’t been offered attractive deals by cities such as Irwindale.

He cited as an example the Miller Brewing Co., which was considering leaving the area in 1979 because there was no room to expand its 40-acre Azusa plant.

Irwindale provided the company with 242 acres for $1 as an incentive to move across the Foothill Freeway.

“We saved 1,100 jobs,” Hermosillo said, adding that the city has received $24 million in tax revenue from the company over the last eight years.

‘We Save Jobs’

“Companies could easily flee to Ventura, Santa Barbara or San Diego,” he said. “Not only do we create jobs, we save jobs.”

To an outsider, the industrial cities seem to have little to recommend them.

Factories dot the landscape, noxious smells drift through some parts of town and heavy trucks stream steadily over the streets. The homes that do exist are often next to industrial parks or factories.

In some cases, residents do reap special benefits to compensate for the disadvantages.

Irwindale, for example, offers every homeowner a $10,000 grant to make home improvements and pays for residents’ optical expenses. The city also is considering paying for major medical, dental and prescription costs.

Local businesses have donated money to start a scholarship program that covers the full cost of college for any student in the city with at least a C average, Castellanos said.

Businesses Benefit

But the major beneficiaries in these cities are businesses.

For example, Irwindale spent $10 million to buy the 242 acres it later sold to Miller Brewing Co. for $1.

The city has now proposed financing a $115-million loan to the Raiders, partly with redevelopment funds. The deal includes $10 million in up-front money that the Raiders will get whether or not the deal is completed.

Industry has helped private developers in other ways, such as spending millions of dollars on streets and improving sewage systems for projects such as the Puente Hills Mall and the Industry Hills Convention Center.

The sugar daddy behind this economic growth is redevelopment funds.

Industry’s Redevelopment Agency reported last year that it had $449.4 million in holdings, which includes cash, funds reserved for long-term debts, investments and land, according to the state controller’s office. Irwindale’s Redevelopment Agency had holdings of $43.6 million. By comparison, Pasadena, a city with 126,600 people, reported its Redeveloment Agency fund equity at $16 million.

Redevelopment is a powerful tool that allows cities to keep property tax revenues that would otherwise go to the county. The money is used to pay for new streets, upgraded utilities and low-cost land to help lure developers.

Property taxes are collected by the county, which returns about 20% to cities, according to the county auditor-controller’s office. The rest is split between the county, school districts and special districts, such as flood control districts.

Taxes Increase

But by establishing a redevelopment zone, a city can keep nearly all of the property taxes generated from that zone to pay for improvements.

Initially, revenue can be small, but as an area develops, property taxes increase and can be built into a sizable source of revenue.

The major legal restriction on placing land in a redevelopment zone is that a city must first declare the area blighted.

But the term “blight” has not been precisely defined in state law, and its definition has been the subject of numerous lawsuits.

Under state law, a blighted area must be a “serious physical, social or economic burden on the community which cannot reasonably be expected to be reversed or alleviated by private enterprise acting alone.”

Must be 80% Urban

The state Legislature tightened the legal definition in 1984 by generally requiring that new redevelopment zones be 80% urban, which makes it tougher for cities such as Irwindale and Industry to establish new zones now. But the two cities continue to receive millions of dollars from zones established before the law was changed.

“They aren’t redeveloping anything,” Shaffer said. “There wasn’t anything developed there in the first place.”

Officials from Industry and Irwindale point out that until the law was changed in 1984, they could place vacant land in a redevelopment zone.

Irwindale’s Castellanos said land in the zones meets the letter and spirit of redevelopment regulations. An example would be the gravel pits that are included in some of the city’s redevelopment zones, he said.

“Now that’s blight,” he said. “We’ve got 19 of them, and they have to be used some way. You can’t just leave them there.”

Already in Zones

Nearly 80% of Industry is already in redevelopment zones, and the city is proposing to add another 695 acres, said John Radecki, acting executive director of the Industry Urban Development Agency. A corporate headquarters and business park is being built on about 95 acres of the proposed redevelopment area. The remaining 600 acres is undeveloped land.

The proposal has been criticized by some county officials who say the land does not fit the definition of blight. If the city is allowed to place the land in a redevelopment zone, the county could lose millions of dollars in property taxes.

The city claims that the land meets the legal definition of blight because the Redevelopment Agency has built up debts of $40.3 million by buying it in 1983 and financing it since then. The proposal is still being discussed by the Industry City Council.

Besides their extensive use of redevelopment money, cities such as Irwindale and Industry also have an advantage in attracting businesses because they have so few people to provide for.

No Need for Services

Critics say the cities, free from the need to provide such services as schools, libraries and parks, can spend their money making businesses happy.

The San Gabriel Valley is not the only area of the county with cities such as Irwindale and Industry.

Another example is the city of Vernon, the least populated city in the state with just 80 people, Shaffer said. Vernon, on the eastern border of Los Angeles, receives no redevelopment money but has still managed to attract more than 1,200 businesses, including Aluminum Co. of America and Oscar Mayer Food Corp.

Most of Vernon’s residents are city employees who rent city-owned houses and apartments for between $29 and $69 a month. The city owns 85% of the homes and apartments.

The city, which owns its own power company, offers electricity to local businesses at rates 20% to 30% lower than private companies in surrounding areas and actively supports “dirty” industries such as slaughterhouses and factories, said City Administrator Bruce Malkenhorst.

But some of Vernon’s neighbors complain that the city has reaped the benefits of industrial development while inadequately sharing the burden of providing services for workers who live elsewhere.

“All the money that’s generated, who does it serve?” said Bell City Councilman George Cole, whose city borders Vernon. “Who has to provide for the people who work in those factories? Who has to provide the recreation and social services to those people? We do.”

Malkenhorst countered that besides providing an estimated 55,000 jobs for the region, Vernon generated property taxes last year that provided $4.5 million to the Los Angeles Unified School District. The city is part of the district although it has only 15 students.

Critics also complain about the inequity of a small number of people deciding issues that could affect the life styles of large numbers of people just outside the city.

“The outside residents in surrounding cities have no voice in what happens,” Shaffer said.

One example is a proposal to build a hazardous-waste incinerator in Vernon, which has been protested by some residents and officials from neighboring communities worried about fumes from the plant.

Los Angeles City Councilwoman Gloria Molina said it has been a frustrating fight because outsiders can do little to affect Vernon’s decision even though they will be directly affected by it.

“It’s unfair they can get away with this without any political accountability,” Molina said.

Shaffer contends that the region would be better served if the small industrial cities were split up among their poorer neighbors so that a greater number of people would enjoy the benefits of their tax bases.

But he conceded that the idea has little chance of adoption. Disbanding a city requires a petition signed by 25% of the city’s residents, approval by a state agency called the Local Area Formation Commission, and a citywide election.

Some critics, including Bernardi, suggest that instead of disbanding the cities, the state should impose limits on the amount of redevelopment funds a city can receive. Others have urged the creation of a state agency to regulate redevelopment funds.

But Sandra Baldonado, a Claremont lawyer, said the issue of these small industrial cities and their impact on the region is so complicated that most people neither understand it nor “get riled about it.”

Baldonado questioned the effect of Industry’s industries on surrounding communities during her unsuccessful bids in 1976 and 1978 for the 62nd Assembly seat, which represents an area of the east San Gabriel Valley that borders Industry, but found little response from the voters.

“The educational task is so enormous that most people just throw up their hands,” she said. “It riles me up, it’s so unfair and undemocratic, but I don’t think anything will ever happen. These cities will just continue to exist and flourish.”

WHERE THE MONEY GOES The top 20 recipients of redevelopment funds in the state

Amount of Population Renewal Funds (1985) (fiscal 1985-86) 1. Los Angeles $59.1 million 3,144,800 2. San Jose 43.8 million 696,000 3. Industry 23.3 million 710 4. Oakland 14.9 million 351,100 5. Anaheim 13.5 million 234,700 6. Santa Ana 10.7 million 221,600 7. Long Beach 10.7 million 381,800 8. Cerritos 10.2 million 55,600 9. Culver City 9.8 million 38,900 10. Sacramento 9.4 million 309,400 11. Milpitas 9.4 million 41,850 12. Brea 9.2 million 32,050 13. San Bernardino 8.7 million 134,700 14. Santa Clara 7.7 million 89,000 15. Burbank 7.4 million 87,400 16. San Diego 7.1 million 971,600 17. Compton 7.0 million 87,400 18. Irwindale 6.7 million 1,040 19. Pasadena 6.4 million 126,600 20. Concord 6.2 million 105,200

Population figures are from the state Department of Finance. Redevelopment figures are from the state controller’s office.