EDITORIAL: North Las Vegas rains on eminent domain

New leadership in North Las Vegas has given the financially troubled city one less problem.

A controversial eminent domain proposal purportedly aimed at helping underwater homeowners was voted down 5-0 Tuesday by the City Council. As reported by the Review-Journal’s James DeHaven, the plan would have allowed the city to seize underwater mortgages, with San Francisco-based Mortgage Resolution Partners funding the city’s efforts to buy them at each home’s current value. The city then would have attempted to sell the loans to new investors at terms that benefit city homeowners. MRP would have collected a $4,500 fee on each transaction, and the city could have picked up a percentage of the proceeds on the successful resale of as many as 4,200 qualifying loans.

But the whole idea was plainly unconstitutional, as it ran counter to the People’s Initiative to Stop the Taking of Our Land, approved by Nevada voters in 2006 and 2008. The amendment to the Nevada Constitution clearly prohibits the use of eminent domain powers to benefit a private party. The city seriously considered the idea anyway.

Former Mayor Shari Buck, former City Manager Tim Hacker and former City Attorney Jeff Barr all worked in support of the proposal. But Ms. Buck lost her re-election bid this year to John Lee — term-limited Councilman Robert Eliason also exited at that point, replaced by Isaac Barron — and Messrs. Hacker and Barr resigned within hours of each other Aug. 14, allowing interim replacements to take charge. With those changes, support for the plan rightly disappeared. “The home foreclosure crisis hit our town particularly hard, and although I believe government has a role in helping, it is important the cure does not become worse than the disease,” Mayor Lee said in Mr. DeHaven’s report.

That very likely would have been the case. City taxpayers would have assumed the costs and risks of acquiring and holding mortgages that might not perform. The proposal already faced one lawsuit, with the potential for many more, and federal loan officials warned that mortgage giants would cease doing business in communities that adopted MRP’s proposal. The plan could have crushed the valley’s robust housing recovery.

The city could have been more transparent through this process, having solicited opinions from attorneys on the constitutionality of the proposal, then refusing to release those opinions, citing attorney-client privilege. An insolvent municipality owes it to taxpayers to make the public’s business public. The public is the client here, not City Hall.

But the council deserves praise for the unanimous vote, less than three months after the Buck-led council tentatively approved it with a 4-1 vote. The rejection gives North Las Vegas residents some hope that their leaders can turn things around and get the recession-battered city off the ropes.