Las Vegas looking at layoffs, service cuts

City of Las Vegas officials warned Tuesday that layoffs and service cuts are likely without more concessions from labor unions.

They told the City Council, which approved a tentative budget for the next fiscal year, that a shortfall would almost double over the next five years.

Union leaders said later that they're willing to talk with the city, but they also want to verify any numbers the city puts forward to establish the need for help.

An expected $31 million shortfall for the upcoming 2010 budget year has materialized and can be covered by reserves, said Mark Vincent, the city's finance head.

But a worsening revenue picture will make that shortfall larger in future years, he said, and what was once expected to be a $150 million hole over five years now appears to be $270 million.

"We still haven't felt the bottom yet, and when we do feel the bottom our recovery might lag the national economy," Vincent said.

The size of the new shortfall surprised council members.

"So we made a $120 million mistake?" asked Mayor Oscar Goodman.

No, answered Vincent. He said the economy has continued to falter, cutting into the tax revenues the city uses to fund operations.

"It's just amazing," Goodman said. "I'm not faulting anybody. To be that far off ... it's unprecedented in our lifetime."

Mayor Pro Tem Gary Reese made the bleak observation that it can always get worse -- the city's Redevelopment Agency, which has pledged money for several downtown projects, could be thrown into disarray by a pending court challenge, and city leaders aren't sure if the state Legislature is going to take control of more local revenues.

"We have no idea where we're going to be tomorrow. Nada. Zip. Zilch," Reesse said. "We could be bankrupt a month from now."

On Tuesday, council members approved a tentative 2010 budget, a broad document that covers everything from road and flood control work to the city's detention center.

The pain is being felt in the general fund budget, which covers the city's operating costs, most of which come from personnel expenses.

General fund expenditures are projected to increase 4 percent to $533 million. The main component of the increase is $18.2 million to pay for contractually mandated wage and benefit increases, according to city budget documents.

Revenues, meanwhile, are expected to drop 2.5 percent from the current fiscal year to just under $497 million, driven by declines in the consolidated sales tax and property taxes.

The city has reserve funds and officials have created a $50 million "stabilization fund" that can be dipped into for future budgets -- but only up to a point.

"You can't use, as a long-term strategy, going to the savings account," said City Manager Betsy Fretwell. "Our costs are compounding."

She told council members that city staffers are looking for another $25 million to $50 million in cuts on top of 9 percent in cuts that have already been enacted.

"That's not easy," she said. "It would require additional discussions with our labor unions."

The city has laid off some employees during the economic downturn, but none of those have come from departments supported by its general fund. To help the bottom line, it has offered a buyout program and reduced staff by attrition.

Three of the city's four unions agreed to changes in their labor agreements with the city earlier this year.

Those included a reduction of about 1 percentage point in the cost-of-living increase employees are eligible for each year, but the rest of the cost-of-living increase -- 2 to 3 percentage points -- remains in place.

The changes did not touch annual "step" raises that many employees are in line for each year. Overall, 6 percent or 7 percent annual raises are not unusual for city employees.

The coming year's salary increases amount to about half the general fund shortfall, Fretwell said. While the concessions slowed the rate of salary growth, they did not eliminate it.

"We do have those discussions," Fretwell said. "It's not as if we get to start from scratch every time we sit down to negotiate."

Contract negotiations with the city's firefighters are under way.

Dean Fletcher, the head of the city's firefighters union, said he hadn't seen the latest numbers presented by the city and that he wouldn't comment on the ongoing negotiations.

The next meeting, the ninth on the new contract, is scheduled Thursday, he said.

"We're heading in not a real good direction, and we understand that," Fletcher said about the city's budget woes. He added that the talks are proceeding "with a very clear understanding of where we're at and that it might be getting worse."

"It's not contentious. It's not unfriendly," he said. "We're trying to be the good employees."

Tommy Ricketts, the head of the city's largest union, the Las Vegas City Employees Association, said his group is always willing to meet with city officials, but that the city has to prove that things really are as bad as they're saying.

"Our agreement basically says (that) for them to come to us, they have a bunch of hoops to jump through," Ricketts said in an interview.

He said he's waiting to see how the firefighter negotiations go, and that the city needs to be sure to treat all city employees, including nonpublic safety workers, equally.

"I'm willing to do what we have to do," Ricketts said. "I'm still a taxpayer no matter what."

Goodman ended the meeting with an upbeat assessment, saying that Vincent's prediction of further declines through 2012 was overly pessimistic.

"I am more optimistic," Goodman said. "I think we have bottomed out."

He admitted he was citing anecdotal evidence for this, such as finding crowds when going out for the evening on the Strip.

"You can't get a table. You can't get next to the bar to drink, and I would know that," he said.

"I think we're going to be back a lot sooner than people think."

Contact reporter Alan Choate at achoate@reviewjournal.com or 702-229-6435.