Another Bankrupt City Can’t Afford Its Unions

It isn’t just Detroit or Stockton, California. It is happening everywhere.

The Las Vegas Sun reports, “North Las Vegas mayor asks for more time to fix city’s finances.”

North Las Vegas has a little more than a month to solve an $18 million budget deficit it’s facing or risk intervention from the state to help fix its finances.

During a hearing today, members of the Committee on Local Government Finance told city officials they wanted to see a clear plan for closing the city’s deficit when it submits its tentative budget next month.

North Las Vegas Mayor John Lee blamed “poor leadership in the past” for the city’s financial dilemma.

“We need to produce more revenue,” he said. “Give me more time.”

City officials, including Lee and acting Director of Finance Darren Adair, said they were confident North Las Vegas would be able to balance its budget but that doing so would require cooperation and concessions from the city’s unions.

So the city has borrowed money it can’t pay back, the people who borrowed the money have moved on to enjoy the rewards of their time spent in office borrowing the money, and now they need to raise taxes and cut spending. But they can’t cut spending unless the unions let them.

In fact, the unions are the ones who have pushed them to this point.

The city is negotiating with its public safety unions to settle a lawsuit stemming from the suspension of pay raises during a fiscal emergency declared in 2012.

As the result of a recent District Court ruling in their favor, union members are owed about $25 million for pay raises the city froze. But North Las Vegas only has about $7.7 million available to settle the dispute.

Future historians are not going to understand how any society could be so stupid. Of course, if the unions have virtual control over what the city pays, then how could it not end up bankrupt? You have all the elements working together. The unions can demand pay and also offer votes. The city government can go into debt rather than raise taxes and, again, gain votes for doing people favors that don’t have to be paid for at the time. The officers in the city government can move on up in their political careers or into a plump retirement without having to face the long-run consequences of their decision.

Naturally, the tax payers are ultimately the collateral for all the borrowing.

If the city can’t strike a deal with the unions and balance its budget, it faces intervention from the State Department of Taxation through a declaration of a “severe financial emergency,” a measure that could worsen the city’s financial standing in the long run.

If the state were to take over the city’s finances, it could raise property taxes beyond what the city is allowed to impose.

That would allow the city to raise more revenues, but it would also mean pain for property owners, who already pay the highest tax rate in the valley. Any increase in property taxes would be limited to a maximum of five years.

More than likely the “pain” wouldn’t just be the taxes. It might well make people try to leave the city. That might result in lower property values.

No system of government, that permits temporary office holders to make decisions about debts that they will never be personally held responsible for, can possibly work. Yet those are the governments we have in the United States at all levels.