Henderson plans $28 million in budget cuts

By HENRY BREAN

The city of Henderson expects to be able to ride out the fiscal year without layoffs or changes to existing union contracts, but that could change if the economy continues to sputter, officials warn.

Nevada’s second largest city has imposed a hiring freeze and shelved several building projects as part of more than $28 million in budget cuts unveiled this week.

The package of spending cuts and fund transfers is designed to get Henderson through the current fiscal year, which ends June 30, without cutting jobs or freezing wages.

But City Manager Mary Kay Peck said Henderson might not be able to avoid such measures in the future.

Already, city officials are studying the possibility of a buyout program aimed at enticing employees to resign their posts in exchange for severance pay.

What happens next ultimately depends on the economy, Peck said. "This is really such a moving target."

For this year, at least, city employees are expected to receive their usual merit raises, step increases, and cost-of-living adjustments. However, Peck said, the city’s new five-year plan to balance the budget does not include any additional cost-of-living raises for employees.

Then again, it doesn’t include any layoffs either, at least not yet.

Asked if staff reductions were a possibility, Peck said, "We don’t know at this point."

The city should have a better idea of where it stands by mid-January, she said. By then, some cost-cutting measures will be in place and the proposed buyout likely will have been offered.

City spokeswoman Cindy Herman said talks are now under way between the city and its employee unions.

Peck said the two sides are discussing "what if scenarios" as in, "What if we’re not at the bottom yet?"

So far, Peck said, union representatives have been "very cooperative" and open to at least discussing some options, including renegotiating labor agreements that are not set to expire until 2010.

"We sure hope we don’t have to do that. No one wants to do that," Peck said.

The City Council was briefed on the budget cuts for this year and the new five-year financial plan earlier this week. On Thursday, Peck sent a memo to city staff outlining what would occur.

A pair of informational meetings will be held on Dec. 2 to provide employees with details about future budget cuts and the buyout, should one be offered.

In the meantime, a separate five-year plan is being drafted specifically for the city’s Development Services Center, Henderson’s central clearinghouse for construction-related plan reviews, inspections and permits.

The center, which opened in the expanded City Hall in late 2003, has seen a steep drop in business as growth and development have slowed in the city of more than 260,000 people.

"That’s the area that’s impacted the most of any city department," Peck said.

With the hiring freeze now in place, the city expects to save $7.25 million this year by leaving as many as 72 vacancies unfilled. Some staff members might be transferred to other departments to fill vacancies in vital areas.

Another $6.6 million was saved this week through cuts in discretionary spending by all city departments and to funds slated to be carried over to next year for new city initiatives.

Several building projects also have been placed on hold, including a new police training center, an addition to the city’s fire training facility, and a recreation center in west Henderson, where residential development has slowed to a crawl.

"If there’s no residents to serve, it’s not fiscally responsible for us to go forward with infrastructure projects," Herman said.

By placing those projects on hold, the city will earn about $8 million in interest income on the balance in its construction fund — money that can be applied to the budget shortfall.

Herman added that the new facilities will remain on hold "until the economy improves or there is a dire need" for them.

Henderson has about $12 million in its rainy day fund but only plans to tap about $2 million of it to help cover this year’s shortfall.

The remainder of the shortfall will be absorbed through efficiency improvements and money-saving policy changes, Herman said.

Many economists expect the downturn to continue, if not worsen, in the coming months. Peck prefers to look on the bright side.

"We have really smart people working on solutions, we’ve got great leadership from our elected officials, and we’ve got terrific employees," she said. "I am optimistic that we will come through this."

Contact reporter Henry Brean at hbrean@reviewjournal.com or 702-383-0350.