Official: State close to taking control of North Las Vegas’ finances

By David McGrath Schwartz

Published Friday, July 8, 2011 | 1:39 p.m.

Updated Friday, July 8, 2011 | 2:46 p.m.

Financially troubled North Las Vegas is in danger of having its finances taken over by the state, according to the Senate chairman of the Legislature's Government Affairs Committee.

State Sen. John Lee, D-North Las Vegas, said, "No one wants to say 'receivership,' but it might be the only way to save my community."

State law allows the Department of Taxation to take over local government finances in the case of a "severe financial emergency." Lee called the state's taking control of the city's purse a "last resort."

"I think the City Council wants it to be a last resort," Lee said. "I think they're trying to make a last final ditch attempt at preserving their autonomy."

The city of North Las Vegas is losing $165,000 a week after a judge issued a temporary restraining order preventing the layoff of public safety employees.

In a fiscal emergency, the state's taxation director could force cuts or tax increases, according to sources. It's unclear whether the state would assume any debt or have to pay for city services, with one observer noting that this was largely "uncharted territory."

North Las Vegas spokeswoman Juliet Casey said that the City Council on Wednesday was presented with six options to cut costs, including privatizing services, making further layoffs to non-public safety employees and raising property taxes. The council will be presented with a list of recommendations, including additional layoffs, at a meeting currently scheduled for July 20.

If none of those steps are taken, Casey said, the state could come in for "technical assistance" on the city finances, at least initially. The city could request technical assistance from the state, but still retain control of the decision making.

Al Noyola, acting finance director for North Las Vegas, said giving the state control of the city's finances would be a last option. "We do have some serious financial problems. ... We have a series of options we're exploring. It's in no one's best interest for the state to come in. The best option is for the city of North Las Vegas to work hand-in-hand with the state."

Noyola noted that the state could not undo current city contracts with employee unions.

North Las Vegas has seen steep declines in tax revenues during the recession, while the city has seen costs escalate as it pays for big projects planned in anticipation of continued growth. Casey said the city is on pace to come up short on payroll in the financial quarter starting in October.

"The financial crisis taking place in the city of North Las Vegas is not exaggerated," Lee said. He said the state could take over financial responsibility, and force union contracts to be renegotiated or taxes to be raised. The City Council and city manager would have to enact the changes, he said.

Lee added, "I don’t blame any single person for what happened to them. They had the sanitation district, new city hall, the economy. It was a perfect storm."

While local governments have been financially strapped and forced to make big cuts in recent years, this would be the first time a Southern Nevada municipality has been taken over by the state. In 2006, the state took control of White Pine County's finances because of financial defaults.

Dale Erquiaga, senior adviser to Gov. Brian Sandoval, said the governor's office is monitoring the North Las Vegas situation and waiting to see what action the City Council takes. "The decisions are still in North Las Vegas' hands," he said.