North Las Vegas officials paint grim picture of city’s finances

By Andrew Doughman

Published Wednesday, Jan. 8, 2014 | 2 a.m.

Updated Wednesday, Jan. 8, 2014 | 9:55 a.m.

North Las Vegas faces financial ruin if a multimillion dollar structural deficit isn’t fixed, officials said Tuesday at a special City Council meeting.

If nothing changes in city revenues and expenses, North Las Vegas could run out of money by late this year or early 2015, said Darren Adair, the city’s chief financial officer.

That would mean bankruptcy, and the state Department of Taxation would take control of the city’s finances.

North Las Vegas Mayor John Lee acknowledged the dire situation but said bankruptcy was not an option.

“This is where we’re at, and the first order of business is that we’ll stay in business,” he said.

Adair presented the grim seven-year financial forecast the same day Lee wrote a commentary in the Las Vegas Sun highlighting “significant problems with past financial representations and accounting practices engaged in by the city.”

“These misguided financial practices included hiding the facts from policymakers, concealing rates in financial models, taxing without properly informing ratepayers and dishonestly representing our financial condition.”

Lee said the city’s municipal water and wastewater accounts have been dangerously depleted over the years of tens of millions of dollars to pay for other municipal bills, including for public safety and parks.

North Las Vegas residents pay water and sewer upkeep surcharges, and the city has been using a lot of that money — about $32 million this year alone — to subsidize general operations.

But starting in 2021, a state law mandates that cities stop shifting money out of special water and sewer accounts to pay for general city expenses.

With that money unavailable, the city plunges off a fiscal cliff.

Without changes, the city's expenses would exceed revenue by $150 million to $300 million through 2021, officials said.

While acknowledging Adair’s presentation was sobering, council members said they would find solutions to the financial problems.

“The ship has not sunk,” said Councilman Isaac Barron. “This is not the Titanic. We may have a hole in the hull, but we can plug it.”

The news that North Las Vegas is in a dire financial situation is not new. The recession hammered the city, and questionable spending decisions forced the city to cut costs and declare multiple fiscal emergencies.

The meeting was in part designed to get city stakeholders agreeing on the same financial data.

At Tuesday’s meeting, Lee and new top-level staffers watched Adair deliver his presentation to an audience that included high-level government representatives and business executives, including Clark County Commissioner Tom Collins, state Assembly Speaker Marilyn Kirkpatrick, Las Vegas Metro Chamber of Commerce CEO Kristin McMillan and Las Vegas City Manager Betsy Fretwell.

Collins said he appreciated the mayor’s candor.

“They’re trying to be very open with what the situation is and what they’re doing to fix it,” he said.

Collins said Lee’s team has been encouraging the county to pass a sales tax increase to inject more money into police and public safety budgets countywide.

Lee said he’s focused on cutting costs, selling or leasing city real estate, favorably concluding contract negotiations and litigation with labor unions and attracting businesses. The city is also considering combining some services with the city of Las Vegas.

“We’ve heard a little bit of the ideas, the low-hanging fruit,” said Brian McAnallen, vice president of government affairs with the Las Vegas Metro Chamber of Commerce.

North Las Vegas Councilwoman Anita Wood said that “part of the solution is sometimes reaching out for help” from groups like the Chamber of Commerce, state and county government, and neighboring cities.

Barron put it more bluntly.

“This is a regional problem,” he said. “If anything happens to our city, I dare say the rest of the county and the state will feel it.”