North Las Vegas had no choice
I have watched the North Las Vegas economy deteriorate over the past five years to a point that now warrants emergency action, and I have also reviewed firsthand the cities finances as a volunteer member of its 2010 Strategic Budget Priorities Process Committee. The fact is this recession has inalterably changed the economic and fiscal landscape of our state, and North Las Vegas is the first - but won't be the last - local government to confront this new reality.
As we are reminded too often, Clark County continues to lead the nation in home foreclosures and is at the top in unemployment - two critical factors that have had a devastating effect on the Valley's economy. I would submit that North Las Vegas has suffered the most. When the housing bubble burst, North Las Vegas felt it exponentially harder than the rest of the Valley as it rested on top of a relatively narrow economic-base.
As the city recently reported, the total assessed taxable value of land in North Las Vegas is projected to plunge by more than 56 percent from a peak of more than $9 billion in 2009 to $3.9 billion in fiscal year 2012-2013. The city has also noted that the assessed taxable value of land in North Las Vegas is projected to decline by 10.1 percent between fiscal years 2011-2012 and 2012-2013.
Additionally, the city has acknowledged that its combined property tax revenue (general fund and public safety tax fund) fell by more than 37 percent from a peak of $62 million in 2009 to approximately $39 million in 2012.
Finally, the city's consolidated tax revenue dropped by 28.5 percent between 2006 and 2012, from a peak of $53.7 million to an estimated $38.4 million.
As far back as 2010, anyone who paid close enough attention knew this day was coming. And on June 1, North Las Vegas officials acted responsibly and appropriately.
In the committee's 2010 report to the City Council, we came to a number of recommendations and findings, including:
- The city's recurring revenues are below fiscal year 2005 levels.
- Special revenue funds heavily dependent on property taxes will face deficits (e.g., public safety tax, library, police and Safekey).
- City salaries are unsustainable.
- Salary reductions will avoid layoffs and service cuts.
- The public needs to be educated about the city's salaries and benefits (i.e., more disclosure of public employee salaries).
- Employee compensation is the heart of the problem.
- Wages and benefits have outpaced inflation and cuts could be absorbed, while still offering city employees a more-than-competitive wage.
By the time the council passed its emergency resolution on June 1, it had already taken fiscally responsible steps to address the budget deficit projected to be in excess of $30 million for fiscal year 2012-2013.
In the past eight months, the council implemented across-the-board cuts, combined departments, reduced hours of operation and restructured various bonds and long-term debts to reduce its financial burden. This was the responsible thing to do.
The council also took critical steps to refinance the new City Hall, significantly reducing the expense to the city's annual general fund for upcoming fiscal years, and it reduced the city's work force by more than 600 people. These were tough decisions, but the right decisions under the circumstances.
Arguably the biggest issue is salaries and benefits. In this area the council was forced to suspend limited provisions of its existing collective bargaining agreements with three of the public safety unions. The suspensions, however, involve only cost-of-living increases and other additional pay provisions, such as merit pay, holiday sell back pay and uniform pay for fiscal year 2012-2013.
As a result, the council avoided laying off a larger share of critical public safety personnel. Considering the depth and breadth of the recession, in my view, these are more than justifiable suspensions.
What astounds me most is that some are accusing the North Las Vegas City Council of blatant mismanagement, hiding money or lying about the financial emergency it finds itself in. These accusations are simply not supported by the facts. To suggest that the city has lied about its current fiscal situation is to suggest North Las Vegas has been immune to the worst economic crisis this country has seen since the Great Depression.
The numbers tell the story, and North Las Vegas had no other choice. The resolution passed on June 1 is designed to avoid critical public safety layoffs and address the gap the city needs to fill in order to produce a balanced budget. It is time for the citizens of North Las Vegas to begin working toward a long-term solution that began June 1.
John Restrepo is the principal of RCG Economics in Las Vegas where he directs the firm's economic and financial consulting activities. He was a volunteer member of the North Las Vegas 2010 Strategic Budget Priorities Process Committee, and the former chairman of the Nevada Economic Forum.
