Riot-Area Firm Says City Fees Threaten Jobs

In the heart of riot-torn South-Central Los Angeles, a commercial laundry that employs more than 100 low-income workers is fighting for its life in a bureaucratic struggle that involves a clash of priorities--inner-city economic development versus citywide environmental quality.

The dispute, which has been simmering for more than three years, started over a $3.6-million fee to upgrade the city’s sewer system charged to a company that stone-washes jeans. In the aftermath of the rioting, however, it has taken on a new significance because of the special emphasis being placed on the economic revival of the city’s most depressed neighborhoods.

With the mayor’s office pushing to keep the company open, the controversy could test the city’s costly commitment to clean air and water. It also could refocus attention on the city’s often criticized regulatory practices.

The laundry, Garment Industries, on 58th Street just west of the Harbor Freeway, faces the threat that its permit to operate will be revoked at a June 26 hearing. The hearing would cap a lengthy dispute over sewer maintenance and treatment fees that the company says would bankrupt it.

The case has aroused bitter feelings on both sides.

“This is a display of incredible insensitivity by government bureaucrats at a time when a lot of sensitivity is required,” said the laundry’s lawyer, Barry C. Groveman, a former top prosecutor of environmental crimes for both the city and the district attorney’s office.

“Why is the city so hungry to kill a company and put a lot of people, many of them poor, out of work?” Groveman asked.

Meanwhile, Assistant City Atty. Chris Westhoff, who is representing the Board of Public Works, accused Groveman of “pandering to what happened in South-Central, trying to use the problems we had down there to rip off the citizens of L.A.

“Either Garment Industry pays what it owes, or everyone in L.A. pays for Garment, including their competitors, including a lot of other businesses in South-Central.”

The dispute has its roots in an arcane municipal fee known as the sewage facilities charge, which rose astronomically during the past decade. It is one of a number of commercial fees that the city began raising to pay for environmental improvements to the sewer system after Proposition 13 limited property tax increases. A company discharging the same amount of waste water as Garment Industries would have paid a start-up sewage facilities charge of $85,000 in 1985, according to city Bureau of Engineering calculations. Under today’s rates, the start-up fee for the same company would be $1.6 million.

Criticism of the fee hikes was muted during the 1980s because business was good and because there was widespread public support for cleaning up the Santa Monica Bay, where proliferating pollution was blamed on the inadequacies of the city sewer system.

But the combined impact of recession and riot has put new pressure on city officials to rethink the emphasis on fees and regulatory practices that weigh heavily on businesses, especially those in poor parts of town.

In the view of Linda Griego, deputy mayor for economic development, the $3.6-million sewage facilities charge imposed on Garment Industries is “an extreme example” of what can go wrong when the bureaucracy lowers the boom on small business.

The bill the city sent to Garment reflected a giant increase in waste water discharged by the company as it expanded its operations in the ‘80s, and the huge rise in sewer facilities charges during the same decade. The company never reported the increased volume and the city argued that it had shirked its legal responsibility to do so. Garment insisted it had no such obligation and contended that the city had no right to use its latest and highest fee rate to calculate charges for past water discharge.

After three years of negotiations, the Board of Public Works last winter agreed to reduce Garment’s bill to $51,000. City Atty. Westhoff and other officials conceded that the city had gone overboard in applying new rates to old discharges.

“It did seem unfair to charge the current rate,” Westhoff said.

But the dispute with Garment did not end there. During the years of negotiations, another sewer-related fee, one for treating waste water, was going unpaid by Garment and reaching business-busting proportions--just over $800,000 to date.

Garment says it is ready to pay about $250,000, the amount of the treatment charges due when negotiations began in 1989. But company officials say that in 1989 they were in the process of acquiring in-house treatment equipment that would have eliminated the effluent and their obligation to pay subsequent treatment fees to the city. But they said that with a $3.6-million obligation hanging over their heads, they postponed purchasing the equipment.

“If we (Garment) had been forced to pay the whole $3 million, we would have been out of business,” Groveman said. “So it made no sense at that time to invest in new equipment.”

Now that the city has admitted it erred in assessing the multimillion-dollar sewage facilities charges, Groveman argues, it should waive the other fee because the city took so long to fess up to its flawed calculations.

Deputy Mayor Griego said she has arranged to meet with officials of the Board of Public Works to try to head off the crisis before the June 26 hearing at which Garment could lose its permit.

“I see their point,” Griego said of Garment’s argument. “If someone handed me a $3-million bill, and I realized it might put me out of business, I might react the same way they did.”

Griego also faulted the city for taking three years to resolve the dispute and said the whole affair reflects a bureaucratic insensitivity she is trying to change at City Hall. “When our notices of compliance go out, they are very harsh,” she said. “You get 30 days to comply and then penalties apply. They’re not sensitive. At the very least, they need to spell out appeal rights and include phone numbers of people who will actually answer.”

At the same time, Griego said the city “may not be able to make the deal they want under the City Charter.” The charter, she said, may not allow the Board of Public Works to waive the penalties that contribute substantially to the $800,000 outstanding debt.

Assistant City Atty. Westhoff made it clear he is in no mood to waive any portion of Garment’s bill to the city. He said the city’s overcharging on sewer facility fees should have no bearing on the firm’s obligation to treatment costs.

“If the IRS makes a mistake on your federal income tax it doesn’t mean you don’t pay your state income tax. They are trying to create linkage where it doesn’t exist.”

City officials acknowledge that Garment is not putting toxic materials into the sewer. Nevertheless, they argue, what is going in--dyes and sand from the stone washing and bleaching processes--requires expensive treatment.

“They are dumping 250,000 gallons (a day) of high-strength waste water,” Westhoff said, “and that’s the same as you or I flushing one million gallons of domestic-strength waste water down the toilet.”

A public works official, who asked not to be named, put it another way:

“Just remember, this is not Mother Teresa putting holy water into the sewer.”