June 26, 2012

Spending Drives North Las Vegas to Declare State of Emergency

Unaffordable union contract at root.

The blossoming battle over unsustainable levels of compensation for government union workers has shifted to Nevada. On June 1st, the North Las Vegas City Council granted the city manager special authority to suspend parts of union contracts in order to deal with crushing budget shortfalls in that city. The unanimous vote allows City Manager Tim Hacker to mandate concessions by police and fire unions, including an end to pay raises. Yet the basis of the decision is a novel one. North Las Vegas has declared a “state of emergency” based on a relatively obscure law enacted to protect municipalities from “unforeseen disasters.”

Unforeseen or not, there is little question North Las Vegas is in disastrous condition. One in every 195 homes is in foreclosure, constituting the highest rate in Nevada. The city that once led the nation in growth has endured a loss of more than 3,000 businesses, three years after the 2007 recession began taking its toll. And despite its residents paying the highest taxes in southern Nevada for the last two years, the city has remained on the verge of insolvency, with total revenue precipitously declining from $817 million in 2009, to $298 million this year.

Today’s reality stands in stark contrast to the “good times.” From 2000 to 2010, the population in North Las Vegas almost doubled from 115,488 to 223,394. Commensurate with that increase, the city doubled its staff, built new parks each year, and spent $130 million building a new City Hall beginning in 2009. As the recession took hold, the city responded by laying off hundreds of workers. Yet it remains saddled with a $30 million budget gap and a “BBB” city bond rating, following a Fitch Ratings downgrade last month that included a “negative watch” going forward.

City Council member Wade Wagner illuminates the obvious. “We are in a fiscal emergency,” he said. “North Las Vegas is ground zero basically for foreclosures in the nation. There are only a handful of places that have been hit as hard as North Las Vegas. So because our property taxes have declined so much, we really had to invoke this,” he added.

“This” is a reference to a law that gives local governments the ability to take “whatever actions may be necessary to carry out its responsibilities in situations such as riot, military action, natural disaster or civil disorder.” Whether or not such a law can be extended to include the suspension of union contracts remains unclear. An article published in the California Public Employee Relations journal explained the criteria necessary to enact such a law, as in proving an actual emergency exists, taking reasonable steps to address the issue before declaring an emergency, and demonstrating that the moves serve an important public purpose, as well as being tailored to deal with that specific emergency.

Yet the article also illuminated an obvious reality facing many municipalities around the nation. “Since cities and counties are service providers, 75 to 80 percent of their general-fund operating costs typically are labor-related,” it states. “Because of rapidly escalating benefit costs and declining revenues, services are being cut at an alarming pace.”

City officials in North Las Vegas, which faces a state-mandated deadline to present a balanced budget for the coming fiscal year, have argued that the alternative to suspending union contracts would be 217 additional layoffs, mostly within the already strapped police and fire departments, a move they contend would jeopardize public safety. The ratio of public safety workers to residents in North Las Vegas is already among the lowest in Southern Nevada, the city said.

Residents of North Las Vegas were turned off by the unions last year after some of their leaders erected billboards that read: “Warning: Due to recent police layoffs, we can no longer guarantee your safety!” North Las Vegans have since urged the city to keep its libraries and recreation centers open and sacrifice public safety–which accounts for 66 percent of the city’s budget. As a result, the city aims to reduce the 1,000 public safety employees in 2011 to 721 in 2013. Last Wednesday night, the City Council also voted to turn its jail services over to the city of Las Vegas to save $16 million annually.

Yet all of it is not enough to close the budget gap. Thus, the city is attempting to temporarily suspend its collective bargaining agreements with the North Las Vegas Police Officers Association, the North Las Vegas Police Supervisors Association and the International Association of Fire Fighters Local 1607. The suspensions include pay raises, holiday sell-back pay, and uniform allowances.

Union officials accuse the city of mismanagement and fabricating the numbers regarding both the 217 layoffs and the $30 million budget gap. "We need to have state officials step in,“ said Capt. Jeff Hurley, president of North Las Vegas Firefighters Local 1607. "It is clear, there is no one running North Las Vegas City Hall. (City Manager) Tim Hacker is in way over his head. This is not the guy who is going to be able to steer this city through this time of need.” According to the Las Vegas Review-Journal, the state Department of Taxation is already monitoring the city’s finances and could step in and impose its own rules, including raising taxes. Mr. Hacker contends the Council dismissed that idea because it still wouldn’t raise enough money.

The North Las Vegas Police Officers Association opted to file a grievance against the city. Union president Mike Yarter said it would most likely end in arbitration, where an arbitrator will decide if the city’s actions are legal. If either side chooses to appeal the decision, the process could last as long as two years.

On the other hand, the union representing police supervisors became the first to file suit against the city on June 14th. The union contends that “the city’s attempt to use its financial mismanagement to declare an emergency…is an unlawful attempt at breaching the NLVPSA’s labor agreement through a mechanism of statutory misinterpretation when the city could not obtain its desired results through good faith bargaining.” They want the court to force the city to "completely honor" its agreements with the union. In addition, they want damages representing any losses incurred by union members, plus interest, and attorney’s fees.

“Everybody in the city is basically using all their time and all their effort to try to break the unions,” said Sgt. Leonard Cardinale, president of the NLVPSA.

Perhaps it’s a worthwhile effort. This chart, courtesy of transparentnevada.com, reveals the staggering level of compensation provided to North Las Vegas employees. For example, Sgt. Cardinale currently receives a whopping $213,140.24 in total compensation for 2011. That represents an increase of $80,674.65 in compensation–since 2009.

Yet Sgt. Cardinale is hardly an isolated case. 393 city employees received a total of more than $150,000 in pay and benefits, while a full 1,920 workers received compensation above $100,000 per annum in 2011. Topping the list is Corrections Lieutenant Ricardo A. Bonvicin at a mind-boggling $525,223.90. Rae Ann McNeilly, Director of Outreach for Taxpayers United of America, contends that Mr. Bonvicin “will collect an estimated annual pension of $335,456,” further noting that his “estimated lifetime pension payout is a staggering $15,961,017.”

And while Mr. Bonvicin is the top of the food chain, the fact remains that North Las Vegas government union workers have long been among the highest compensated government employees in southern Nevada. The average salary and benefits for a North Las Vegas Police Officers Association member totals $136,000. Supervisors receive $186,000 in total compensation. An International Association of Firefighters Local 1607 member gets salary and benefits that total $139,000. Topping it all off, the city covers 100 percent of healthcare insurance premium costs and 100 percent for all union members’ retirement contributions.

Unsurprisingly, Mayor Shari Buck characterized the invocation of a fiscal emergency as one necessary to “rescue our city from financial ruin.” The resolution is scheduled to take effect on July 1st. Whether it does or not may be up to the courts, or the state, which could decide to step in and run its fourth largest city. In the meantime, two realities cannot be ignored. First, legal definitions notwithstanding, North Las Vegas is indeed a “disaster area.” Second, union intransigence in the face of fiscal calamity is unseemly. It is an unseemliness based on another immutable reality:

You can’t get blood from a stone.

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