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Auditor says Maywood's 'weak governance' may hinder the town's ability to overcome its $15-million debt

Auditor says Maywood's 'weak governance' may hinder the town's ability to overcome its $15-million debt
A tower in mostly industrial Vernon looms over a leafy neighborhood in Maywood. (Brian van der Brug / Los Angeles Times)

A scathing state audit released Monday said Maywood's "weak governance" made it unable to wrestle with a more than $15-million debt that was twice the small city's operating costs.

The 51-page report listed a series of problems that stood between the 1.2 square-mile city and financial health, including political infighting, wasteful spending, questionable hiring decisions, repeated violations of the state's open meeting laws and poor administrative controls.

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"Maywood's city council has failed to oversee the city's operations adequately and violated its fiduciary duty — its responsibility to act with the utmost good faith for the benefit of the city," the report read.

Auditors say the City Council did not adequately monitor the performance of the former city manager during her five-year tenure, which "allowed many significant financial and operation problems to remain uncorrected."

The report is the latest black eye for a city that, like several other towns in southeast L.A. County, has been beset by political feuding and head-scratching decisions for years. Maywood was on the edge of bankruptcy in 2010, when officials laid off much of the City Hall staff, contracted policing to the L.A. County Sheriff's Department and turned many administrative functions over to neighboring Bell.

But Maywood's agreement with that city fell apart after The Times revealed huge salaries paid to top Bell officials, which led to criminal charges.

Since then Maywood has owed $10.3 million to the California Joint Powers Insurance Authority, which provided the city with general liability and worker's compensation insurance. The city has no plans on how it will pay it off. It also allowed business tenants to remain delinquent in paying the city more than $60,000 in rent and related late fees, the audit found.

Last year, the city’s fiscal problems became the focus of the state auditor’s local high-risk audit program, which examines local governments, including special districts, to determine whether they are at risk of fraud, waste or mismanagement. The program was the result of a Bell-related measure that state. Sen. Ricardo Lara (D-Bell Gardens) pushed through when he served on the state Assembly in 2011.

On Monday, Lara, whose district includes Maywood, said he was deeply troubled by the findings and urged city leaders to correct its course before it was too late.

"Through inadequate oversight of city operations, a ballooning deficit, questionable hiring practices, and apparent violations of the Brown Act, leaders have abused the trust of Maywood residents," Lara said.

Though allegations of malfeasance and mismanagement are not unique to this part of the county, some experts have said the problems are especially acute here because governments in these cities typically serve populations where many people live on meager means. And because many of the residents in these Southeast L.A. cities are immigrants who cannot vote, elections tend to be won with a relatively small number of ballots cast.

Maywood acting City Administrator Reuben Martinez said the audit "lays the primary blame for the city's financial situation on the former city manager and the former City Council." But he said that the report "found some basic accounting practices that were weak or nonexistent and we are working to correct that situation immediately."

"With the support from the City Council and advice from a professional financial expert," Martinez added, "we're moving forward to adopt and implement sound accounting and operational procedures that will bring the city back from the brink of financial ruin."

According to the report, under a previous city manager's watch, the city violated competitive bidding requirements and exposed the town to fraud or errors that would be difficult to detect because of inadequate accounting and financial reports. She also missed opportunities to increase business license and parking citation revenue, and did little to address the city's growing debt, which had grown to about $15 million by 2015.

Despite the lack of progress, the City Council "continued to extend her contract while also adopting amendments restricting its own ability to dismiss her," auditors said.

Even with the recent election of a new council, auditors said the current governing body had continued to "exhibit poor stewardship."

"The city council has made hasty hiring decisions, changing the city manager twice in the span of four months and hiring a new city attorney only to replace him one month later, all while violating the state open meeting law," the report read.

So far this year the City Council hired a laid-off Boeing project manager, Martinez, whom the mayor had met as a customer at his auto shop, to be its city manager, even though he had no municipal experience. Maywood also granted its council members, city clerk and treasurer $250 monthly mileage stipends to drive in and around L.A. County's second-smallest city, at just over one square mile. Using the Internal Revenue Service's suggested reimbursement rate for business travel of 54 cents a mile, city officials would need to drive 463 miles a month to reach the $250 mark.

"The city council has made wasteful spending decisions that advanced the council members' personal interests to the detriment of Maywood's residents," state auditors noted in their report, which dinged Maywood for the mileage stipends.

Last month all five council members, along with the city clerk, were served with recall papers.

"The city is going down the drain," said Monica Unzueta, 35, a Maywood resident, after hearing about the report. "I don't think the city will recover at all. I think it's just going to get worse."

For more Southern California news, follow @latvives on Twitter.

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UPDATES:

3:55 p.m.: This article was updated with additional details from the audit report and Maywood's debt.

This article was originally published at 1:55 p.m.

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