North Las Vegas council needs to keep city out of court

If the city of North Las Vegas is ever going to return its government to a stable fiscal footing, it needs to stay out of court and limit taxpayer exposure to lawsuits.

But the city’s legal woes are only getting worse. Last week, the city was sued over its foolish plan to seize underwater mortgages through eminent domain. Opponents of the plan warned such an action would be brought against the city last month, when the council entered an agreement with Mortgage Resolution Partners. Under the deal, the city would grab qualifying notes, write down the principal and sell them to new investors, and MRP would collect thousands of dollars in fees for each transaction.

Only one year ago, North Las Vegas declared a fiscal emergency and suspended about $12 million in pay raises for public employees. Unions sued, claiming the action was illegal because state law allows such emergency declarations only in cases of natural disaster or civil unrest. The city-imposed pay freezes have rolled into the new fiscal year, adding to the unions’ multimillion-dollar claims.

As with the emergency declaration, the city’s eminent domain plan assumes the council has far more power than it actually does. In his federal lawsuit against the city, North Las Vegas resident Gregory Smith says the risky housing intervention violates due process and equal protection guarantees in the U.S. Constitution as well as restrictions on the use of eminent domain in the Nevada Constitution. This deal is about private benefit, not public good.

In its disputes with unions as well as the MRP deal, North Las Vegas officials hoped to stop the city’s fiscal bleeding. Its finances are in awful shape because tax collections and city home values haven’t fully recovered from the Great Recession. But these actions have put the government — meaning taxpayers — at risk of even steeper losses.

The city has a way out of both messes. Last month, the Legislature and Gov. Brian Sandoval authorized the city to use its sewer maintenance fund as a bailout account, to restore services and settle its union lawsuits. And the agreement with MRP is, at this point, only a study of how many homeowners might benefit and what it would cost.

On Monday, new Mayor John Lee and new Councilman Isaac Barron were sworn into office. They should work to unwind the city’s disputes with its unions and settle the related claims. And when the MRP proposal comes back before the council in August, they should help kill this eminent domain scheme before it can even start.

They do not want to take more chances with the city’s fragile finances — or worse, leave them to a judge and jury.