LA County Left ‘Holding The Bag’ For $1B In Vernon Bonds?
LOS ANGELES (CBS) — The speaker of the California Assembly vowed Friday to move ahead with plans to dissolve the city of Vernon despite its City Council approving a series of reforms aimed at shoring up the city’s finances.
John Vigna, spokesman for Speaker John Perez, told KNX 1070 there may not be many alternatives left beyond disincorporation for the cash-strapped city.
“Vernon made some really bad investments over the last four or five years specifically, and it’s cost them a ton of money,” said Vigna.
In an effort to satisfy business owners, Vernon artificially suppressed power rates to attract local investors for years, said Vigna, a plan that could backfire as the city moves to raise those same rates.
“Vernon is completely over-leveraged, they’ve got more than $1 billion worth of bonds that they’ve issued over the last 10 years,” he added.
In fact, Vigna said, if Los Angeles had the same bond level per capita of debt as Vernon, the debt level would be roughly equal to $56 trillion — a total that has forced the L.A. County Board of Supervisors to rethink its financial commitment to the city.
But Vigna warns the county could ultimately take on Vernon’s mounting liabilities regardless of if they want to or not.
“If Vernon does collapse in a couple of years from the weight of these bad dealings, the county’s going to be left holding the bag anyway,” he said.
The speaker’s efforts to dissolve Vernon come in the wake of a corruption scandal that led to the arrests of three top officials in July.
Recent reforms adopted by the city include doubling the number of privately-owned housing units and pledging to enforce a higher level of government transparency.