State says it had right to take $62 million from water coalition

By Cy Ryan

Monday, May 2, 2011 | 4:48 p.m.

CARSON CITY – An attorney for the Nevada Legislature says lawmakers had the “sovereign control” to sweep $62 million from the Clean Water Coalition of Las Vegas last year in an effort to help solve the state's budget problems.

Kevin Powers, a lawyer for the Legislature, told the Nevada Supreme Court on Monday that the money was needed by the state to protect the poor, the elderly and to provide public safety. It was an “unprecedented” situation with the state facing an $800 million deficit, he said.

But Michael Kealy, an attorney for the coalition, argued the state “adopted a fiction” in passing the law and there was no extreme emergency to justify the sweep.

Jason Woodbury, an attorney representing several businesses in Clark County that paid fees to the coalition, including the M Resort, argued the state took the money from local ratepayers and put it into a fund to support all taxpayers, including those who didn't contribute to the fund.

Chief Justice Michael Douglas said this is a “special taking” and wondered if it was appropriate. Other justices also questioned whether the budget shortfall constituted an emergency. Justice James Hardesty said it wasn't a special circumstance for the state.

The Clean Water Coalition collected money in Clark County to design and build an $850 million system to carry treated sewage to Lake Mead. The construction project was suspended in December 2009 due to the economic decline and lack of growth.

The coalition is engaged in studies on how treated effluent might affect Lake Mead.

District Court Judge David Barker ruled in favor of the state. But the water coalition, which appealed the decision, has yet to send the money to the state -- money that is included in its upcoming budget.

Powers said the water coalition had “no constitutional protected interest to the money. The state may take the money.” He argued this was a utility surcharge and not a tax, and the Legislature had the right in 2010 to enact the law to take the surplus.

Powers said this case was unique because no other utility had an excess surplus. “This was not the average budget issue,” he said, referring to the deficit being faced by the state.

Kealy argued, however, that the state in the past has enacted special laws to benefit local governments that might be trying to recover from a disaster. There is no case where the state is taking money from a local government to supplement its budget, he said.

Kealy said there was no discussion at the special legislative session except from former Sen. Bob Coffin of Las Vegas who called it a “money grab.” Kealy agreed with Justice Hardesty that the law would have been OK had the Legislature enacted a law taking the surplus of every utility in the state.

Those joining the Clean Water Coalition included the Henderson Chamber of Commerce, the Sun City Summerlin Community Association, Jet Hangars, Ovation Development Corporation and PH Metro.

The court took the arguments under submission and the state is asking for a quick ruling to determine if the money will be available for its budget.