North Las Vegas’ financial woes sink deeper with $4 million judgment

North Las Vegas took another big financial hit Friday, losing millions of dollars on a long pending appeal rejected by the Nevada Supreme Court.

It remains unclear if the recession-ravaged city can afford its latest legal defeat, one that saw the state’s high court uphold a lower court ruling awarding $4.25 million in damages to 5th & Centennial LLC, owner of nearly two dozen undeveloped acres targeted for condemnation in 2004 as part of the city’s now stalled $135 million North Fifth Street overhaul.

Company representatives lost $18.75 million in a commercial land deal that went south as a result of the threatened condemnation, prompting a successful bid for damages and attorneys fees first awarded by a district judge in January 2010.

Friday’s ruling comes two months to the day after a District Court ruled North Las Vegas had no right to freeze some $25 million in union employee pay raises first suspended under a city-declared “fiscal emergency” in June 2012.

Tacking more than $4 million onto that legal tab — and a projected $18 million budget deficit — might prove too much for the revenue-starved city to bear.

City Attorney Sandra Douglass-Morgan declined to comment on whether the city plans to appeal the ruling.

She said she didn’t know where the city might find funds to cover Friday’s court-ordered damages and declined any further comment on the ruling’s fiscal ramifications.

“We’re still reviewing it, but I consider it pending litigation,” Morgan said Monday. “We’re looking at other options, but I can’t comment on that without consulting my client.”

City officials haven’t articulated a plan that would cover the court-ordered damages and close next year’s projected eight-digit budget gap.

Marvin Leavitt, chairman of the Committee on Local Government Finance, has a few ideas on how to do it, including drawing on funds set aside for capital improvement projects.

Leavitt, who heads the board responsible for advising state tax officials on North Las Vegas’ financial future, said the city hadn’t reached out to him to discuss Friday’s ruling.

He said they will want to draft a plan for addressing the decision before reconvening with the financial oversight board sometime in the next month.

“It’s not clear to me whether they have additional dollars to set aside for this,” Leavitt said Tuesday. “I would expect they would want to address it when they present their financial plan to the committee.”

City Finance Director Darren Adair did not return requests for comment.

Deputy State Tax Director Terry Rubald reports Adair and other city officials haven’t yet contacted her office to discuss the ruling’s financial implications.

The decision also came as news to North Las Vegas Police Officers Association President Mike Yarter, who said city officials hadn’t raised the possibility of a looming multimillion-dollar legal liability at the bargaining table on March 19.

Yarter wasn’t sure how the city plans to come up with money to cover the legal damages. Both he and Police Supervisors Association President Leonard Cardinale hope they won’t look to take them out of a proposed $7.7 million union settlement drawn up by officials early this month.

“We’re hoping they find a pocket of money big enough to pay everything,” Cardinale said. “That would be the best thing for the citizens, is just to settle all of this litigation and get it over with.”

In the Supreme Court case, officials argued the city never went beyond the early stages of planning to seize Centennial’s property and shouldn’t be held liable for the botched land deal.

Six of seven Supreme Court justices disagreed, noting officials could have been more transparent about their plans for the property and should be held accountable for the city’s “oppressive and unreasonable conduct” in exercising its powers of eminent domain. Justice Ron Parraguirre voluntarily recused himself from last week’s decision.

Justices opted to throw out an additional $1 million in attorney’s fees sought by company representatives, who did not return requests for comment. They also remanded nearly $500,000 in prejudgment interest awards to a lower court.

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