Thursday, Oct. 6, 2011 | 5:21 p.m.
The North Las Vegas City Council voted Wednesday to “refinance” the city in order to stay afloat.
Two justice facility bonds and the city hall bond will be refinanced starting Nov. 1 to create a reserve in the cash-strapped city. The restructuring will drop the city’s debt payments on the bonds on average $3.6 million a year for the next five years.
“It allows us some more cash upfront in the next five years to be able to continue operations and maintenance without having to do layoffs and those kinds of things,” said acting Finance Director Al Noyola. “The downside is that in the future we have higher debt payments we have to make to that bond.”
Currently the city pays $8.9 million a year in bond debt. Although the refinance would reduce the payment for five years, the city will eventually have to pay more than $11 million a year starting in 2017 for 19 years to pay off the debt.
Noyola said the measure had to be taken for the city to pay its bills.
“Right now the city does not have enough cash reserves to be able to meet all the financial obligations it has when payments come due,” Noyola said.
Councilwoman Anita Wood, who along with Robert Eliason did not vote in favor of the item, said it was wrong to place a burden on future council members and citizens.
“We are now passing on this debt to our taxpayers,” Wood said. “We are asking them, for the next 19 years, to pay this bill. It is because — and only because — the council here has been unable to gain the concessions that we have needed and now our residents are going to pay the price for that. We’ve backed ourselves into a corner and we don’t have any other way to get out.”
Mayor Shari Buck said the city is hard-pressed for cash because it does not collect adequate consolidated taxes from the state.
“The economy in the United States, the economy in this valley and C-Tax, all of those things that come to bear in the city of North Las Vegas,” Buck said, referring to consolidated tax revenue. “I want this city to survive and I’m willing to refinance to get our bond rating up.”
Consolidated taxes are actually up 5 percent for the city this year, according to Noyola, and that, along with a hopeful reconfiguration of the tax formula that may bring in more tax dollars, is what the mayor plans to use to pay back the loans.
In the end, Noyola said refinancing will cost the city $22 million, roughly $4 million more than the original $18 million in debt. The city still expects a budget deficit in the next fiscal year.
Noyola said he hopes once the city has a safe amount of cash it can begin to keep a steady reserve, about enough to pay its bills for a full month, so a similar situation won’t occur again.