California Forum

Why company towns are bad for people

Industrial development in the city of Industry abuts a residential area in the neighboring community of La Puente.
Industrial development in the city of Industry abuts a residential area in the neighboring community of La Puente. Los Angeles Times

“This place is built on a co-dependency of interests. Worries me you talking so stupid.”

– Frank Semyon, “True Detective,” second season

Think of voting in a place where 52 percent of the voters rent government-owned housing at steeply reduced prices; another 32 percent rent from the wealthiest resident family. The remaining 14 percent either hold office in that government’s highest positions or own some of its biggest businesses. Other people living in this place work for this government and its wealthiest family. The ruling family’s biggest customer is the government.

You might wonder if this as an allegory of a government-run society that has swallowed up what remains of its private sector. But this is no fable; this story is about an actual place: the city of Industry, in the San Gabriel Valley.

The city of Industry is a great and quintessential California story, the municipal embodiment of California’s tendency to hand over public institutions to private enterprise – everything from prisons to police, from universities to the military, from transportation to trash pickup.

Industry’s manticore-shaped boundaries include about 2,500 businesses, a daytime workforce of 50,000 and a resident population of no more than 200. The election I asked you to imagine occurred on June 2. On that day voters there returned a City Council majority controlled by its dominant family, and former mayor, David Perez, to power.

Seen from the air, tightly packed warehouse and factory rooftops look like the scales of a giant creature formed by the rail corridor that gives the city its shape. The Industry Hills Expo Center’s dual golf courses, swimming pools, tennis courts, equestrian trails and conference center fill the 600-acre property that hover like a pair of wings over the creature’s torso.

Industry’s privatization saga began in 1954 when James M. Stafford, a landowner and grain mill operator on the Los Angeles County regional planning commission, embarked on an effort to prevent the nearby blue-collar suburb of La Puente from putting his property inside the boundaries of its proposed city. With the county government’s backing, Stafford organized landowners inside the La Puente Valley’s industrial corridor to submit their own cityhood petition. The new city would include freeways, railroad lines and industrially zoned property – and exclude its homeowners. This elimination of Industry’s electoral opposition came to be known as the “zero population growth” policy.

Restricting the proposed city’s population to its land-owning class left Industry with too few people to meet the legal minimum for incorporation. To get around those rules, the city performed its own special math: The founders counted the El Encanto Sanitarium’s 131 patients and 31 employees to meet the residential requirements for cityhood.

That was not the end of the fight. Walter Pyne, a property owner, challenged Industry’s incorporation, alleging that Stafford, Industry’s second-largest property owner, abused his position for personal gain. The Southern Pacific Railroad, the city’s biggest landowner, sent real estate buyers to persuade Pyne to sell an option on his property. The railroad needed Industry’s incorporation to protect its rail switching yard and its development plans from residential encroachment. The railroad succeeded. The amount of the payment is lost to history. But reflecting the cozy relationship among Industry’s insiders, Southern Pacific used Glenn R. Watson, who was Stafford’s lawyer in Pyne’s lawsuit, to notarize the deal.

Industry incorporated in 1957, with Watson as its first city attorney. Stafford didn’t need to be elected to decide which of his pals got the sweet service contracts or lucrative real estate development deals, which were bankrolled with state redevelopment funds.

Industry’s incorporation story, however, was no outlier. It simply wedded two powerful definitions of municipal purpose from its neighbors: the city of Vernon’s 1920s-era industry-only model and the city of Lakewood’s contracting out of its public services to private contractors. Over the years, Stafford bent California’s redevelopment laws to his benefit, regularly using his Capitol lobbyists to get special exemptions for his corner of California. Virtually the entire city had been placed in a redevelopment zone.

Stafford’s personal empire collapsed in 1984 when he was convicted of bid-rigging and skimming. But his legacy lives on through the Perez family, which inherited the city’s administrative apparatus from Stafford.

In 2011, the Legislature, at Gov. Jerry Brown’s urging, complicated Industry’s situation by shutting off the source of much of Industry’s wealth – redevelopment funds. But those reforms went only so far in Industry. The city and its business owners have continued to hold power by carefully crafting an indentured electorate that continues to this day. Eighty-four percent of Industry’s voters rent homes from City Hall or from the Perez family. Leases for homes there can require as little as $675 a month.

It has been a lucrative arrangement. A city audit in May concluded that Industry had paid former Mayor Dave Perez and his family’s other businesses more than $326 million during a 20-year period.

Mayor Perez suddenly stepped down in 2012, citing health issues. But one of his family-owned firms had allegedly used a 19-acre parcel of city-owned land for free without the city’s permission, a revelation that was a byproduct of Brown’s effort to end redevelopment. The state created an inventory of real estate controlled by Industry’s redevelopment agencies. The city would have to sell off that property and explain why the former mayor had used the parcel since 2001 without paying rent. The City Council filed a lawsuit against Perez in 2012 when it couldn’t settle its differences with him.

This conflict prompted the City Council majority critical of his dealings to cancel its trash-hauling contract with the Perez operation. Eventually, the Los Angeles district attorney and state controller opened investigations into these contracting practices. The stage was set for one of the rarest events in Industry’s history: a contested election.

The Perez clan ran a slate of its candidates to oust council members who had dared challenge the Perezes. The campaign was anti-climactic. No debates about the cost of letting Industry hollow out the democratic principles of city government or how to mitigate the huge carbon footprint generated by the trucks and trains that haul goods to its warehouses and factories. Instead, anti-Perez candidate Mayor Tim Spohn assured the news media that there were actually no issues to debate.

The contest came down to which faction would best represent the interests of its property- and business-owning “citizens.” The anti-Perez faction claimed it would serve businesses by making the principles of fiscal prudency part of its ethic. The Perez clan promised to restore Industry’s “former glory.” The Perez-backed slate won – a disappointment but not a surprise.

Don’t expect much from the investigations. There have been about nine of them over the years. Although Stafford went to prison, the city of Industry’s structure has proven to be resilient. And business interests there find the city’s present configuration too good to give up.

To change the city of Industry, California would need to dismantle those specific technologies that have transformed governmental functions into property and that have, as a result, made so many California cities immune to meaningful reform. Industry’s most important strains of governmental DNA include its industrial-only purpose; creative boundary drawing that keeps out the meddling rabble; media narratives that code its recurring “corruption” scandals as breaches of individual morality; a model of city management that outsources municipal services to private contractors; the old California redevelopment laws and financing mechanisms that paid for its industrial development; and city charter laws that guarantee Industry its sovereignty in the face of repeated scandals.

The best way to address our city of Industry problem, in other words, is to change how we think about government. We need to shift our focus from blaming all systemic corruption on the moral failings of individuals, and look for the specific technologies that have made the privatization of government, from City Hall to the White House, seem natural and necessary.

Victor Valle, an emeritus professor in ethnic studies at Cal Poly San Luis Obispo, is author of “City of Industry: Genealogies of Power In Southern California.”