Cash-strapped North Las Vegas dips into rainy day fund

North Las Vegas took a one-year, $2 million dip into its rainy day funds Wednesday, knocking weeks off the city’s already threadbare cushion of emergency cash reserves.

This week’s council-approved draw on the city’s ending fund balance comes as part of a last-minute fundraising push aimed at inking a long-awaited settlement with city bargaining groups.

It counts as the first of several steps expected to help end the two-year, $25 million legal battle over public safety employee pay raises first suspended in June 2012. A District Court judge in January ruled the city had no right to suspend the raises.

City staff have been directed to dig up roughly $5 million in layoff savings, transfers and draws on the city’s More Cops sales tax fund to help make up the rest of a proposed $7.7 million settlement deal with four city public safety and employee unions.

Wednesday’s unanimous City Council vote takes care of a little under a third of that total through a 2 percent cut on the city’s once statutorily mandated tally of reserves.

Support for the move — which leaves the city with only a month’s worth of cash on hand — easily won the supermajority needed to override recently enacted bylaws aimed at protecting the city’s cash cushion.

That’s for good reason, according to Mayor John Lee.

“There’s no law that says the ending fund balance has to be at 8 percent,” Lee said. “That was a rule put in place a few years ago, before my time.

“What’s important now is these (union) negotiations. They’re so important we’re willing to look at everything.”

City Finance Director Darren Adair expects the move will make life a little harder for city accountants stretched thin by years of belt tightening and continued declines in city property tax revenues.

Adair doesn’t doubt his staff while be able to handle the newly complicated cash flow balancing act but made sure to reiterate his concerns over the city’s ever-thinning margin for financial error.

“I wouldn’t have recommended it if we couldn’t do it,” Adair said. “My one receivables person is going to have to make sure things come in on time and my payables person is going to have to make sure things are going out, but we’ve gone as low as 5.2 percent in the ending fund balance in the past and survived.

“The problem that arises is when anything unexpected happens. That’s what makes me concerned.”

He is far from the only one with doubts about the plan.

The state Committee on Local Government Finance — which has kept an eye on North Las Vegas’ books since even before the city’s first brush with insolvency in 2012 — has recommended the city maintain an 8 percent balance in its rainy day fund.

Wednesday’s decision to defy that recommendation comes less than two weeks after committee members warned the city could face state receivership if leaders can’t come up with a cost reduction plan before submitting a tentative budget on April 15.

Committee Chairman Marvin Leavitt said North Las Vegas leaders’ decision to cut into the ending fund balance won’t quash their hopes of getting into the board’s good graces.

He’s just not sure it does much to help the city’s bottom line.

“They’re already working with limited resources,” Leavitt said. “If you go in and reduce your ending fund balance, that makes you more financially insecure.”

City officials are set to report back to Leavitt and 10 other municipal finance oversight board members sometime before May 1.

Contact reporter James DeHaven at jdehaven@reviewjournal.com or 702-477-3839. Follow him on Twitter @JamesDeHaven.