EDITORIAL: Risky LVCVA deal bad precedent

The Great Recession provided many enduring lessons for local governments. Foremost among them: Long-term contracts that provide guaranteed annual pay raises to employees are a bad deal for taxpayers.

When tax revenues tanked four years ago, governments were on the hook for contracted salary increases they couldn’t afford. Across the valley, management had to plead with unions to agree to accept smaller pay increases in exchange for other considerations. Some units refused to come to the table. There was no flexibility, letting scores of public employees pile up pay raises while taxpayers lost their jobs and their homes. Services were sacrificed.

Hence, upon the expiration of those fat four-year deals, governments responded by offering one-year contracts as insurance against another economic slowdown.

And yet, at a time when businesses can’t project where they’ll be one year from now, the Las Vegas Convention and Visitors Authority wants to give its unionized workers a five-year contract with guaranteed annual pay raises that, when compounded, total almost 14 percent. Not surprisingly, those workers, represented by the Service Employees International Union, ratified the deal June 11 with 95 percent in favor.

Thankfully, the private sector has representation on the authority board’s compensation committee. On Wednesday, by a 3-2 vote, that committee decided against recommending the contract and its $2.75 million worth of guarantees for 316 workers. The votes against the contract were from Chuck Bowling, president and COO of Mandalay Bay; Scott Nielson, executive vice president and chief development officer for Station Casinos; and Kristin McMillan, president and CEO of the Las Vegas Metro Chamber of Commerce. The votes in favor of the contract were from Clark County Commissioner Tom Collins and Henderson Mayor Andy Hafen.

“I guess I’m looking for something that can be tied to empirical numbers as to why these numbers were chosen,” Mr. Nielson said. He won’t find any. Recently, the Las Vegas-Clark County Library District foolishly settled on a contract with its unionized workers that provides 3 percent annual pay raises for three years. But this deal goes two years longer. The raises aren’t tied to inflation or to performance standards, or to authority revenues. They aren’t tied to GDP growth. They’re just giveaways, plain and simple — 3 percent raises in fiscal years 2014 and 2015, 2.5 percent raises in 2016 and 2017, and a 2 percent raise in 2018.

The contract goes to the authority’s full board of directors July 9. If rejected, the contract likely would head to binding arbitration. The board should follow the recommendation of the compensation committee and, at a minimum, shorten the contract. “The right public policy should not be driven by a fear of the outcome of arbitration, but be driven by what’s the right thing to do,” Ms. McMillan said Wednesday.

Exactly. None of our local governments is out of the fiscal woods yet. Most are balancing their budgets by tapping reserves. Employee wage and benefit growth remains the greatest threat to local government sustainability, and unions already are pushing for longer deals with bigger raises to “catch up” after years of less-generous contracts — never mind that private-sector workers aren’t seeing such largess, and likely won’t for some time. If the LVCVA board ratifies this deal, it will open the floodgates for risky, inflexible long-term contracts at all local governments.

Don’t our elected officials remember how that worked out just four years ago?