Financial Fiasco Bruises Montebello’s Upbeat Spirit : Debt: Stung in Orange County debacle, city works out emergency plan. It has weathered money trouble before.


If Orange County’s bankruptcy is a financial train wreck, then modest Montebello--for years a suburban steppingstone into the middle class of Southern California--is one of the most badly injured passengers.

The ethnically mixed community of 60,000, which some locals call the “Beverly Hills of East Los Angeles,” now is struggling to sidestep its own fiscal disaster.

Late Thursday, anxious officials won the go-ahead from seven lenders for an emergency plan, engineered in hundreds of hours of discussions, that gives the city more time to make a $25.6-million loan payment that was due today.

Though it has averted default for now, the aftereffects of Montebello’s misadventure in high finance will linger for years, from the tonier hillside neighborhoods in the north of town to the hardscrabble industrial landscape near the Santa Ana Freeway.


Tax hikes and service cuts are long-term possibilities. Meanwhile, more debt payments will be coming due.

“It’s really going to be difficult,” said Kathy Salazar, a longtime resident who served on the City Council from 1987 to 1991. Still, said Salazar in the spirit of a town that has endured other financial ups and downs in recent years, “We will survive.”

The city, whose name means “beautiful mountain” in Italian, conforms to few stereotypes of the Los Angeles area.

Its main boulevards are lined with unpretentious businesses such as Stevenson Hardware (72 years old) and Sid’s Camera Shop (48), rather than chichi boutiques or trend-setting restaurants. (To be fair, some style-conscious clothing shops have popped up of late, with names like Cool Jerk and Green Envy.)


Still, the local flavor is, well, local. “There are a lot of old family businesses in town,” observes Gene Neer, board chairman of the Chamber of Commerce. “Whoever started them, their son or daughter is running them now.”

Ask folks about Montebello’s high points and they may mention the Town Center mall, which opened in 1985 on the north border with Rosemead, or a new complex of 10 AMC movie theaters, bringing movies back to the city for the first time in 20 years.

The down-at-the-heels Taylor Ranch community center remains a hub of cultural activity, even though citizens have been known to share the space with a family of squirrels. “People say the only reason it’s still standing is because all the termites are holding hands,” Salazar jokes.

Yet Montebello is neither all humble nor all provincial. City officials have dished out millions of dollars on public safety and education, at one time bankrolling their schools so generously that they offered the highest teacher salaries in Los Angeles County.

Montebello is a “firmly grounded, middle-class, conservative community,” maintains City Administrator Richard Torres, 39. “We have two or three generations of many families living here. My parents still live here, I live here and my children are going to the same elementary school that I attended.”

Yet for all its middle-class normalcy, embarrassing financial crises have been the source of media attention for Montebello since the mid-1980s.

First came a bond fiasco in 1984, which has some superficial parallels to the current crisis.

The city invested in something called “stripped U.S. Treasury bonds” that proved startlingly volatile and ultimately cost the public $4.4 million. Local government was temporarily paralyzed as 16% of its budget went down the drain. Ultimately, Treasurer Thomas C. Wong was defeated for reelection.


Then, in the early 1990s, the Montebello Unified School District suffered a harrowing brush with bankruptcy.


The district had supported a range of top-notch services, from librarians and registered nurses to programs in bilingual education and nutrition that became increasingly unaffordable as the economy dipped. It took $9 million in spending cuts and a public bond issue to dodge that bullet.

Today’s controversy has its roots in investments dating back to September, 1991, when Montebello first plunked down $7.8 million in Orange County’s high-flying investment fund. City officials kept adding more and more, until the stake soared to $47 million--the most deposited by any community outside Orange County.

All the money was borrowed in what now appears a risky game of chance, betting that the fund would pay more interest than the city was paying on its loans. But city leaders were pleased with the strong returns and incorporated the investment income into their budget plans.

And then the bottom fell out of Orange County Treasurer Robert L. Citron’s pool.

Like others tangled up in the county’s bankruptcy, Montebello officials are quick to point out that professional advisers described the fund as safe. And the officials get very touchy if one tries to find some underlying element linking the three recent bouts of financial woe.

Why not emphasize some of the positive things going on in Montebello, they ask, such as its expanded police force and Fire Department? “There’s a lot of good things happening here, but we don’t get noticed until we have financial problems,” complains Torres.


Indeed, Montebello has been a beacon for blue-collar households striving to scale the economic ladder.

The city long has been home to an Armenian immigrant community and has drawn upwardly mobile workers from neighboring unincorporated territory. Many of the less well-heeled are clustered in the working-class neighborhoods south of Whittier Boulevard, while the more affluent tend to live in newer communities in the northern half of the city.

Marketing consultant Larry Salazar, originally from neighboring unincorporated territory, explains his move to Montebello in down-to-earth terms: “It was just that I was finally able to afford a house, and I didn’t want to go too far away from my family.”

Longtime residents such as Shirley Stearns, who has lived in the city for 46 years, have watched Montebello transform from “a sleepy little town” of avocado and orange groves, run by a governing elite, into a busy, ethnically varied city where people have few compunctions about speaking their minds on public issues.

As for the current fiscal mess, Stearns isn’t losing sleep: “Montebello has been in financial binds before; I’m sure they’re going to come out of it all right.”

But the problems are not likely to vanish soon. Even with the emergency rescue plan, Montebello faces deadlines for payments of at least $11.5 million in June and another $6 million in September that are unrelated to the $25.6 million due now.

For now, officials say they can pay the city’s bills through next year. But what happens in 1996 and beyond is anyone’s guess. The city will explore the possibility of selling some of its assets--primarily small, scattered parcels of land. In addition, service cuts or tax hikes will be considered.

For his part, administrator Torres characterizes the city more as a victim than a participant in the financial debacle.

“I like to think of us as passengers on a bus,” he said. “We made the decision to get on the bus, but none of us knew the driver--in this case (Robert L.) Citron--was reckless. We ran an intersection, and Wall Street crushed us.”