California lawmakers rejected a bill on Monday that would have disincorporated Vernon, a small city near Los Angeles where excessive salaries of some officials attracted the attention of investigators.
The state Senate rejected Assembly Speaker John Perez's bill on a 17-13 vote, with many of his fellow Democrats, who control the Senate, abstaining.
By contrast, the Assembly had approved Perez's bill in April by a 62-7 vote.
Vernon, an industrial city with about 100 residents, has been rocked by financial scandals in recent years, including one that led to the conviction of three of its former officials on corruption charges. According to the Los Angeles Times, the Internal Revenue Service is auditing more than $400 million in tax-exempt debt issued in 2009 by the city.
The disincorporation bill had been a top priority from Perez, who is from the Los Angeles area. In a statement he criticized the Senate, saying the chamber chose to ignore decades of corruption in Vernon.