Fiscal forecast gloomy for North Las Vegas

North Las Vegas’ fiscal forecast remains decidedly cloudy, with at least an outside chance of a state takeover.

That is according to a seven-year fiscal outlook co-authored by more than a dozen municipal department heads and presented Tuesday at a special City Council meeting.

The state-mandated report — required under the terms of a $32 million state cash injection used to pay off the city’s growing debt, including a $19 million budget deficit for fiscal 2013 — highlights a need for millions in additional revenue to keep the city afloat.

It also underscores the city’s over-reliance on state-administered utility transfer funds — about $200 million dollars meant for sewer maintenance — cash-strapped city officials have siphoned off to prop up city services and pay public safety workers.

The state Committee on Local Government Finance requires city officials to form a plan to pay off this year’s transfer subsidy by 2021.

Interim city Finance Director Darren Adair expects that will be a tall order.

Adair, who presented this week’s forecast, predicts North Las Vegas will need an additional $21 million in annual revenue to keep pace with its projected long-term deficit.

The former private-sector chief financial officer said the city’s municipal water and wastewater reserves, while not yet exhausted, remain dangerously vulnerable to infrastructure emergencies. Borrowing at current rates could result in citywide utility rate increases by 2019, he said.

“The state doesn’t have the tools needed to fix this deficit alone,” Adair said. “Collective bargaining groups couldn’t take sufficient pay cuts to solve the deficit, and it can’t be fixed with tax increases.

“What it’s going to take is contributions from residents, creditors, employees, business owners and every other city stakeholder — they’re all going to have to chip in.”

Before Tuesday’s presentation, Mayor John Lee said he is working on a plan to address projected shortfalls.

Lee didn’t offer a definitive outline of service cuts or tax increases that might help wean the city off state subsidies but said he remains optimistic that some combination of property tax gains and cost savings from a proposed shared services agreement with Las Vegas can help dig the city out of its fiscal slump.

The first-term mayor, who likened his predecessors’ reliance on transfer funds to “looting,” also conceded that the city is unlikely to break away from state subsidies anytime soon.

For at least the next seven years, he said, all options for paying down deficits have to remain on the table.

“It’s time now to let the Wall Street people know that we know where we’re at, that we know the state can’t come in and repair us,” Lee said. “The situation right now is not one we can do a 180 (degree turn) to fix, but revenue streams will increase, property tax (revenue) will go up.

“I don’t go to sleep at night thinking tomorrow’s going to be the last day North Las Vegas is in existence.”

Both Lee and Adair expect any plan to bridge North Las Vegas’ structural deficit will have to include concessions from the city’s public safety bargaining groups.

A trio of union officials representing the city’s police officers, police supervisors and firefighters have taken the city to court seeking an estimated $25 million in pay raises frozen during a city-declared “fiscal emergency” in July 2012. Discussions to settle the smallest of the three lawsuits fizzled out in August.

Adair estimates that the city is a scant $4 million away from entering state receivership and could run out of general fund dollars by the end of the year. A court decision favoring city unions could, he said, “hand bargaining groups the keys to the city.”

That doesn’t mean there is no room left for optimism.

“We have people who are willing to invest in this city, large projects that are coming in right now,” Ward 1 City Councilman Isaac Barron said. “I think we have a good outlook here despite what we’re seeing.

“We’re not the Titanic. We may have a hole in the boat, but we can plug it.”

Contact reporter James DeHaven at jdehaven@viewnews.com or 702-477-3839. Review-Journal writer Laura Myers contributed to this report.