Saturday 23 June 2012

Collapse in Las Vegas; Budget cuts in California

Financially-strapped Nevada city declared disaster
There are no signs of rioters, wind-damaged homes or flooding. The brand new City Hall features gleaming marble floors and the public recreation centers offer Zumba, karate and Pilates classes

22 June, 2012

Despite all of its suburban trimmings, North Las Vegas is officially a disaster area.
After five years of declining property taxes, massive layoffs and questionable spending, leaders of the blue-collar, family-oriented city outside Las Vegas declared a state of emergency, invoking a rarely used state law crafted for unforeseen disasters.

No matter that the statute, which allows municipalities to suspend union contracts and avoid paying scheduled salary increases, doesn't actually include fiscal emergencies among the list of potential disasters.

"It says, in case of 'emergency such as.' You can't list how many different types of emergencies there are in the world," City Council member Wade Wagner said of the move, which will save the city $9 million.

There are many cities across the nation grappling with declining property values and growing expenses like North Las Vegas, but few, if any, have declared financial emergency.

Stockton, Calif., and Los Angeles explored similar emergency declarations and were met with legal challenges. In Buffalo, N.Y., court officials upheld a wage freeze in 2006 that allowed the city to address its four-year $127 million deficit and avoid financial disaster.

North Las Vegas is among Nevada's hardest-hit cities, at a time when the state is dealing with the nation's highest unemployment rate and an unrelenting tide of foreclosures and bankruptcies. Every few months, the state threatens to take over the city.

Even so, the financial disaster declaration is unprecedented in Nevada, raising questions about whether North Las Vegas is overreaching at the expense of its employees and reputation.

"It makes it sound like our buildings are all on fire and they don't have water to put it out or something," said Jennifer Meyers, who moved to the city before the housing collapse so her kids could play in the street without worrying about crime.
"It doesn't sound like a place you would want to move to," she said.

Union workers, long among the highest compensated government employees in southern Nevada, claim the city won't be able to defend the emergency designation in court. The police union filed a lawsuit Friday claiming the city was misusing the law.

"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 North Las Vegas Police Supervisors Association.

Public perception turned against the city's public safety workers after some union leaders put up billboards last year that read: "Warning: Due to recent police layoffs, we can no longer guarantee your safety!"

It isn't hard to make the case that North Las Vegas, Nevada's fourth-largest city, is in trouble.

As its population more than doubled to 223,394 in 2010 from 115,488 in 2000, the city doubled its staff, built a new park each year and, in 2009, started construction on a sparkling $130 million City Hall.

For nearly two years, the city, where residents have long paid the highest tax rate in southern Nevada, has teetered on the edge of insolvency.

One in every 195 homes is in foreclosure, the state's highest rate. Once the nation's fastest growing city, it lost more than 3,000 businesses in three years after the recession hit in 2007. Its total revenue has plunged from $817 million in 2009 to $298 million this year.

Hundreds of municipal workers have received pink slips and still the city struggled to close a $30 million budget gap. As a final body blow, Fitch Ratings downgraded the city's bond rating last month to a "BBB" with a negative watch.

By 2013, the city will have shed more than 800 employees since the recession began.

City officials concede they are far from the urban disasters brought on by Hurricane Katrina or the Los Angeles riots, but argue all the same that North Las Vegas' fiscal crisis shouldn't be downplayed.

Without the emergency declaration, the city claims it would have to lay off 217 public safety workers to afford the salary increases required under its police and fire union contracts. Libraries would close and recreation centers would no longer offer swimming and Spanish classes.

"We are in a fiscal emergency," Wagner 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," Wagner said.

Since then, residents have urged City Hall to keep its libraries and recreation centers and sacrifice public safety, which accounts for 66 percent of the city's budget. In all, the city expects to go from 1,000 public safety employees in 2011 to 721 in 2013. The City Council voted Wednesday night to turn its jail services over to the city of Las Vegas in a move expected to save $16 million annually.

Residents like Bob Borgersen are fed up with the unions and the council for not being able to compromise as the city continues to struggle. He blamed the council for not saving when its property tax income was flush.

"It's bad. The property values have gone down to nothing," he said. "They didn't think ahead, unfortunately."

Approving Billions in Cuts to Social Services, California Reaches a Budget Deal

Just 10 days before the start of the new fiscal year, Gov. Jerry Brown and the Democratic-controlled Legislature reached a budget deal on Thursday to close a nearly $16 billion budget gap. 
22 June, 2012

The agreement came after days of negotiations, with legislative leaders reluctant to make the cuts that Governor Brown said were urgently needed.

That the budget met its deadline for only the third time in the last two decades was seen as a cause for celebration, though the spending plan hardly contained good news.

And even more cuts loom on the horizon if voters do not approve Governor Brown’s proposed tax increase, which will be placed before them in November. Besides an array of immediate cuts, the budget includes $6 billion in trigger cuts, coming primarily from the state’s education system, if voters do not back the tax measure.

The cuts already in the deal rely on limiting eligibility for welfare and other changes to social services programs. The deal will put a 24-month limit on the state’s welfare program, although it allows for some exceptions in counties with high unemployment. It also cuts the number of spaces available in state-subsidized child-care programs.

This agreement strongly positions the state to withstand the economic challenges and uncertainties ahead,” Governor Brown said in a statement. “We have restructured and downsized our prison system, moved government closer to the people, made billions in difficult cuts, and now the Legislature is poised to make even more difficult cuts and permanently reform welfare.”

The Legislature is expected to vote on the deal next week.

Under the governor’s tax proposal, the state would receive $6.9 billion in taxes from an increase in sales tax to 7.75 percent, up from 7.5 percent, and a surcharge on income tax for those earning more than $250,000 a year. If voters reject the plan, an additional $6 billion will be carved out of the budget next January, primarily from the state’s primary schools and higher education system.

But Mr. Brown’s tax plan will have to compete with a rival tax increase proposal backed by the state’s Parent Teacher Association, which would use the revenue to send more money to public schools.

Last year, the Legislature passed an optimistic budget plan and later had to cut nearly $1 billion when the revenue did not come in as expected. Then, in May, Governor Brown announced that the state’s budget gap had grown to $16 billion, rather than the $9 billion his administration had projected in January.

Optimistic revenue projections have troubled the Legislature for the last several years, as the state has grappled with a financial crisis of a seriousness not seen since the Great Depression. When Mr. Brown took office last year, he pledged not to rely on gimmicks that many had criticized the Legislature for using in the past.

As always, the negotiations were tough,” Darrell Steinberg, the State Senate leader, said in a statement. “But we move forward together with a state budget that’s structurally balanced, setting us on the path to putting this nagging deficit behind us.”

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