Tough times reach Vernon

For generations, the city of Vernon has been the eccentric, rich uncle of southeast Los Angeles.

With roughly 100 residents, the tiny city owns its own electric company and generates millions of dollars by powering local industry. A former city administrator earned more than $600,000 and commuted to work in a limousine. Even now, during the worst recession since the Great Depression, Vernon is sitting on more than $100 million in reserves.

So it was a surprise last week when the City Council voted to eliminate health and life insurance coverage for the spouses and children of city workers. They also voted to stop paying the employees’ portion of their pension contribution.

“I thought they were loaded,” South Gate Councilman Henry Gonzalez exclaimed.

“Gosh darn. I’m flabbergasted.”

For a municipality whose leaders and residents are loath to discuss problems in public -- most residents live in city-subsidized homes -- Monday’s cuts managed to shatter a long-standing cone of silence.

The problem, officials said, was that Vernon’s revenues had flat-lined because of the economic downturn, and the cost of operating the city -- from employee benefits to interest rates being paid on bonds -- was fast approaching the money coming in. Unlike many other cities in Los Angeles County, Vernon has not yet fallen into deficit.

The cuts, which will affect about 260 workers, will save the city $4.5 million, officials said.

“We have to find a way to keep our heads above water,” Councilman Daniel Newmire told the assembled employees.

“Life has given us a bullet to bite. . . . Nobody is trying to put money in some bank account. We’re trying to go on.”

City employees and their family members, who filled the normally empty council chambers, insisted that the cuts were too deep and urged the council to reconsider.

“I’m a little disappointed the resolutions considered today are being done without consulting with employees who will be affected the most,” said one young firefighter who said he would have to sell his house to pay for insurance for his wife and three children. “Please vote no on this resolution.”

Tonya Coster, 37, the wife of another city firefighter, told city leaders she was an emergency room nurse and knew all too well the consequences of being without insurance.

“It’s not pretty,” she said. “I urge you to avoid cutting healthcare coverage to city employees’ family members. You gentlemen are in a position to do what’s right.”

“I’m concerned. Very concerned,” her husband Steve, 42, said later as he held their 19-month-old son, who sucked on a pacifier.

City administrator Donal O’Callaghan explained that Vernon had joined other cities buffeted by the recession and that things might not improve much for two or three years. Yes, the city has significantly more than $100 million in reserves; but spending those reserves, which are meant to pay for Vernon’s considerable debt, would be fiscally irresponsible, he said.

“The bottom line is that Vernon is in solid financial shape because we take tough actions like today,” O’Callaghan said in an interview.

“Fiscal responsibility means that you manage your costs. You see something escalating above your revenue, you take action to correct it.”

The cuts will also affect City Council members, who earn $68,000 a year. City firefighters average about $130,000. Administrators will also be affected. O’Callaghan said he makes about $380,000 a year.

Despite their frustrations over cuts, city employees gave O’Callaghan credit for meeting with insurance carriers to find affordable plans for them.

Although Vernon has the population of a small village, about 50,000 people work there. O’Callaghan said raising rates for the city’s utility customers is problematic because Vernon needs the companies to be profitable so they don’t shed jobs.

He said that in some ways, the city was better positioned than others to weather the economic malaise, but not without making hard decisions.

“We are not different from any other city. We’re as vulnerable as anyone else,” O’Callaghan said.

But to Gonzalez, 74, the South Gate councilman, Vernon has always been different from any other city. Last year, South Gate struggled with a $6.5-million deficit but averted layoffs by negotiating salary cuts with city employees. This year, the city is confronting another deficit.

He said he always figured that Vernon was nearly recession-proof because of its power plant.

“They got money galore. I was talking to our city manager, telling him, ‘You know, think where we’d be today if we had our own power company,’ ” Gonzalez said. “He said, ‘We’d have more money than we’d know what to do with.’ ”

Or, apparently, not.

hector.becerra

@latimes.com