$4 billion in local revenue might play in state budget game

By David McGrath Schwartz

Saturday, Jan. 30, 2010 | 2 a.m.

As the governor and lawmakers look for ways to fill a $900 million hole in the state budget, giant pots of money sitting in bank accounts of Southern Nevada governments and agencies might prove too tempting to overlook.

Clark County, the Southern Nevada Water Authority, Clark County School District, Regional Transportation Commission and Southern Nevada’s cities are holding a total of $4 billion collected during the boom to construct roads, schools and other public works projects.

With growth stalled, and the need for new schools and roads diminished, some officials are quietly pointing to the money as a way to mitigate steep state budget cuts, which could include teacher layoffs and cuts in education, social services and public safety.

Southern Nevada capital project fund balances stood at $4 billion as of June 30, according to the financial firm Applied Analysis. Northern Nevada government capital reserves would add about $300 million to the total.

During the boom years, Nevada’s tax structure evolved to keep pace with growth by funding flood control projects, streets, parks and water projects. With growth on hiatus, there appears to be less need for such spending.

Meanwhile, governments statewide are struggling to fund their operations with falling tax revenue.

Not all of the $4 billion could be tapped for operating expenses. Much of it has been committed to bond payments or was set aside by voters for specific purposes — making it difficult, if not impossible, to alter.

The Greater Las Vegas Chamber of Commerce, which has led the charge to cut public employee pay and benefits, is preparing a study on the capital accounts. Steve Hill, past chamber chairman, said there are two questions the business group wants to answer:

• Do the funds have more money than they need to pay off bonds and maintain bond ratings?

• Now that growth has slowed, do plans for schools, parks, roads and buildings need to be revised?

Brian Sandoval, a Republican candidate for governor, broached the idea of tapping capital funds this month.

He estimated the Clark County School District could use about $100 million of its $1.1 billion school construction and repair fund on operating costs, freeing an equal amount for the state to reduce its general fund shortfall.

“These are all tough decisions,” Sandoval said. “The reality of a $900 million deficit is there are no easy answers left. I think taxpayers would prefer this plan to raising taxes, mass teacher layoffs, deficit spending or cuts that may affect the classroom.”

Regardless of the dire need, any proposal to bail out the state with Southern Nevada’s tax dollars would certainly meet resistance.

One danger of taking money from capital funds is that it could lead to fewer public works projects at time when unemployment in the construction industry is at a historic high.

“I would want to be very careful looking at capital funds, because any time you do, there’s the potential to eliminate jobs in the construction industry, where we already have such a crisis,” Assemblywoman Debbie Smith, D-Reno, said.

Jeremy Aguero, principal of Applied Analysis, is preparing a report on the capital funds on behalf of the Associated General Contractors. The contractors, who will present the report to the Legislature’s Interim Finance Committee on Wednesday, strongly oppose taking the money.

Terri Janison, president of the Clark County School Board, said it’s not clear whether Sandoval’s plan is legal. She said she has not received an answer from the district’s legal staff.

But even if it could be done legally, it’s a bad idea on principle, she said.

The district may not be growing as it once was and may not immediately need new schools, but the money has also been allocated to rehab aging buildings. “We have buildings that are 30, 40, 50 years old that are literally falling apart,” Janison said.

Asked whether it would be preferable to use the capital funds to avoid teacher layoffs or pay cuts, she said: “That’s the unfortunate situation people have put us in. Those are terribly, terribly tough choices. One is not better than the other.”

Janison also raised the question of fairness — that taxes levied on Clark County residents for local needs would be spent throughout the state.

“Obviously, we want to play fair in the sand box,” she said. “But Clark County already gets less than every other county in Nevada. I don’t think it’s right to take our bond fund money to cover the rest of the state, yet again.”

Assemblywoman Marilyn Kirkpatrick, D-North Las Vegas, said, “It’s Clark County voters’ dollars. Clark County residents should make that determination where it should go.”

Taking money from local governments to prop up the state budget is not a new tactic.

Last session, as the Legislature was considering taking some of Clark County’s property tax revenue, county officials suggested looking to the capital funds. The Legislature ended up taking both sources of money.

Since December 2008, the state has taken $235 million in revenue from counties, according to the Nevada Association of Counties.

On Monday, mayors from throughout the state will meet with Gov. Jim Gibbons to ask that their governments’ coffers be left alone.