Given the state of the economy and the city of Las Vegas' finances, the worst thing the city could do right now is lay off some employees to make ends meet as mandatory raises swell personnel costs for those who remain, an economic expert said Wednesday.
But that's exactly the course the city is taking.
Jeremy Aguero, an analyst with Applied Analysis, said that the approach would make people jobless while not addressing raises and benefits guaranteed to employees by labor contracts. Those costs are a huge part of the budget deficit facing the city.
"Don't add to the problem," Aguero said. "Keep as many people working as possible for as long as possible."
It's a fine idea, conceded city leaders who met Wednesday, but there's wrinkle: Those raises and benefits are embedded in collective bargaining agreements, and employees must ratify changes. So far, the employee unions have been unwilling to cut as much as the city wants.
"Unless our employees come to the table and recognize what we heard this morning ... we have no other choice but to lay people off," Mayor Oscar Goodman said. "That, as you say, contributes to the problem, and that's the dilemma."
Added Mayor Pro Tem Gary Reese: "We don't have the money to pay them. If they won't bargain with us, what can we do?"
The bargaining units dispute that stance, saying they've brought plans for cuts to the city.
The offers include such concessions as furlough days and canceling cost-of-living raises, but the city wanted all employees to give up all scheduled raises and take an 8 percent pay cut in each of the next two fiscal years.
Union members balked, and not only because of the size of the salary cuts. They wanted, but didn't get, guarantees that jobs would be saved if they made the 8 percent concession.
Las Vegas is implementing $50 million in cuts, including at least 161 layoffs, and is using $30 million in reserves and transfers to close an almost $81 million deficit expected in the 2011 fiscal year.
That deficit projection increased recently, and it was not clear Wednesday whether the 8 percent cut would be enough to cover the shortfall anymore.
Furthermore, local government shouldn't count on the return of boom times, Aguero said.
It's strange, he said, that after 29 months of recession, there's still a discussion over whether city employees should be getting cost-of-living raises or other increases that were routine in good times.
"Those conversations are not happening on the private sector side of the economy," Aguero said. "Our economy is smaller. This government is going to have to be smaller."
He was one speaker in a presentation that included several representatives from the private sector. They discussed the recession's effects and how businesses have responded, which has been different that what the city has been able to do.
Even after the steady drumbeat of bad economic news over the past two years, the numbers presented Wednesday were sobering. The Greater Las Vegas Association of Realtors has 4,600 fewer members. Median home prices have dropped by half. Home construction industry layoffs have hit 90 percent layoffs. The unemployment and underemployment rate is 20 percent.
Companies have cut employees, cut hours, cut salaries, cut benefits. And the speakers mostly said that the light at the end of the tunnel isn't visible yet.
"The worst is not behind us," said Steve Holloway, executive vice president of the Associated General Contractors of Southern Nevada. "We have overbuilt."
He estimated that there would be no demand for new warehouse, office or shopping mall space for several years, which means more pain for the construction industry.
It's probably the same scenario for homes, said Irene Porter, executive director of the Southern Nevada Homebuilders Association. The industry has been battered "from top to bottom," from construction workers to former company CEOs.
She sympathized with the City Council.
"We all know how heartbreaking it is to do layoffs," she said. "All of us who are sitting here today have been through that."
The only bright spot was in tourism and gaming. People aren't spending as much money, but visitor volume is up, and the Consumer Electronics Show, MAGIC Marketplace and National Association of Broadcasters convention all had increased attendance.
"It's a mixed bag," said Rossi Ralenkotter, president and CEO of the Las Vegas Convention and Visitors Bureau. "But we see fireflies of bright spots."
Contact reporter Alan Choate at firstname.lastname@example.org or 702-229-6435.