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Money sweepstakes: Concerns grow that state might take city’s unspent revenues
by Joshua H. Silavent
Jan 08, 2011 | 1490 views | 0 0 comments | 8 8 recommendations | email to a friend | print
SPARKS — The prospect of the state Legislature taking undedicated municipal funds for its own use is not without precedent, and there is growing concern among city officials that targeted efforts to do so have informally begun.

Two memos were sent this week from the Legislative Counsel Bureau to city managers and directors of the Truckee River Flood Project (TRFP) requesting 10-minute presentations about the ins and outs of Sparks government and detailed financial reports.

For months, city officials have feared that the state is coming after $2 million earmarked for Victorian Square plaza enhancements and $35 million sitting in a sewer improvement fund. And the concerns are not unfounded.

In 2007, about $450,000 in property tax revenues meant to fund capital improvement projects in the city were swept by the state.

In 2009, the state increased its collection rate on sales tax revenues by 1 percent, resulting in a loss of $175,000 to the city.

Now, city officials said, the requests rolling in are signs that the state is once again on the prowl.

“What else could it be?” Mayor Geno Martini asked rhetorically.

“On the surface, that’s what it appears to be,” said Councilman Ron Schmitt.

The request for city presentations to be given before the Government Affairs Committee (GAC) in February seeks, among other things, information about the structure of Sparks’ government, the services it provides, duties of each department and challenges it faces.

Similar requests were sent to officials in a number of municipalities across Nevada and come at the behest of Assemblywoman Marilyn Kirkpatrick, Democratic representative from District 1 in Clark County and chairwoman of the GAC.

City officials believe the request to be a “fishing expedition” for where undedicated dollars lie. Ending fund balances not obligated in debt repayment or tied up in committed expenditures are subject to the most scrutiny and susceptible to being swept by the Legislature in order to cover state budget deficits.

Officials said the city has no recourse to fight the state’s will and is subject to their “beck and call.”

The consequences of losing millions of dollars could be dire, officials warn.

“To me, it’s going to be devastating,” Martini said, adding that state money sweeps could result in city layoffs and significant depreciations in operating revenue.

Schmitt is worried that having funds redirected to state coffers could damage the city’s ability to borrow money for needed projects and expenses.

“By tinkering with cash flows and reserves,” he said, “this may set off a chain reaction in bond ratings.”

Borrowing costs could turn “astronomical,” Schmitt said, and defaults might result.

Kirkpatrick, however, said the request for city presentations is meant as an educational tool for legislators.

“There is no hidden agenda,” she said.

Meanwhile, some $20 million, generated from a 1/8th cent sales tax increase in Washoe County, lies in a flood fund operated by the TRFP.

The request for a financial report from the TRFP comes from an unknown source. Officials at the Legislative Counsel Bureau said they were prohibited from disclosing the names of legislators requesting the report.

“I have no idea who sent it or what the motivation or interest is,” said Naomi Duerr, TRFP project director, adding that she would respond with full transparency regardless.

Because much of the fund is committed to debt repayments, operating balance requirements and project expenditures, Duerr is skeptical that the state would target it.

“I don’t think we would be a likely source,” she said.

Nevertheless, the state’s budget deficit is pronounced. Estimates place the figure at more than $1 billion for the 2012 and 2013 fiscal years.

And if history is any indication, the state is likely to sweep money wherever it can find it in order to shore up the budget.

In December, a district court judge in Clark County ruled that the state could take $62 million from the Clean Water Coalition to support budget deficits. That money was originally acquired through a wastewater user fee and meant to fund sewer projects in the Las Vegas Valley.

“Once the feeding frenzy starts, look out,” Schmitt said.
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