North Las Vegas faces a series of financial and political challenges, including a projected $32 million budget shortfall, threatening its ability to perform basic municipal services.

In the latest issue brief from The Lincy Institute at UNLV, executive director Robert Lang explores how Nevada's third largest city reached the edge of insolvency, what happens if it fails, and how North Las Vegas can move forward in the face of unprecedented economic and political turmoil. A summary of the report is below.

Reaching the Edge of Insolvency

North Las Vegas maintains a scale and demographic composition that makes it essentially urban in character. Though it faces urban challenges, it lacks urban assets - like a large commercial sector - to help mitigate its fiscal challenges.

The city, which already suffers from a weak fiscal capacity, also faces disparities between its lower income neighborhoods east of Interstate 15 and new growth areas west of I-15. North Las Vegas' east neighborhoods lack homeowner's associations and tend to cost the city more in code enforcement, municipal services and employees, all of which lead to higher taxes.

Booming growth in the past decade was once viewed as a possible solution, but the subsequent recession set North Las Vegas up as ground zero for the home foreclosure crisis.

"North Las Vegas could fail, and in a highly visible way," says Lang. "The damage, however, would not be confined solely to that city. The collateral damage to Las Vegas, Henderson and the Strip could be significant and lasting."

Though the local economy is showing signs of recovery, he says, the failure of North Las Vegas would be a visible reminder that the fallout from the Great Recession continues and a public relations disaster for the state.

Avoiding Public Failure

According to Lang, state and city officials should take action to prevent North Las Vegas from financial failure and reneging on any of its fiscal obligations.

Possible steps include union concessions, merging of municipal services and massive layoffs to public employees and cash assistance from the state.

Nevada will also receive close to $60 million as part of a $25 billion, 49-state settlement with major banks in a lawsuit from unlawful foreclosures. North Las Vegas is eligible for funding, provided it applies the funds in specific areas.

"Nevada political leaders from both parties could support a plan to designate a portion of the funds noted for municipalities affected by the foreclosure crisis," says Lang. "The bottom line is that Nevada's leaders need to think creatively and determine the best use of this windfall resource in order to protect any locality from long-term economic failure."