1.  The Committee may, upon the recommendation of the Executive Director pursuant to subsection 2 or at the request of a local government pursuant to subsection 3, conduct one or more hearings to determine whether a severe financial emergency exists in a local government.

2.  The Executive Director may, after giving consideration to the severity of each condition identified in paragraphs (a) to (aa), inclusive, which is found to exist in a local government, recommend that the Committee conduct one or more hearings to determine whether a severe financial emergency exists in a local government if the Department finds that one or more of the following conditions exist in the local government:

(a) Required financial reports have not been filed or are consistently late.

(b) The audit report reflects the unlawful expenditure of money in excess of the amount appropriated in violation of the provisions of NRS 354.626.

(c) The audit report shows funds with deficit fund balances.

(d) The local government has incurred debt beyond its ability to repay.

(e) The local government has not corrected violations of statutes or regulations adopted pursuant thereto as noted in the audit report.

(f) The local government has serious internal control problems noted in the audit report which have not been corrected.

(g) The local government has a record of being late in its payments for services and supplies.

(h) The local government has had insufficient cash to meet required payroll payments in a timely manner.

(i) The local government has borrowed money or entered into long-term lease arrangements without following the provisions of NRS or regulations adopted pursuant thereto.

(j) The governing body of the local government has failed to correct problems after it has been notified of such problems by the Department.

(k) The local government has not separately accounted for its individual funds as required by chapter 354 of NRS.

(l) The local government has invested its money in financial instruments in violation of the provisions of chapter 355 of NRS.

(m) The local government is in violation of any covenant in connection with any debt issued by the local government.

(n) The local government has not made bond and lease payments in accordance with the approved payment schedule.

(o) The local government has failed to control its assets such that large defalcations have occurred which have impaired the financial condition of the local government.

(p) The local government has recognized sizeable losses as a result of the imprudent investment of money.

(q) The local government has allowed its accounting system and recording of transactions to deteriorate to such an extent that it is not possible to measure accurately the results of operations or to ascertain the financial position of the local government without a reconstruction of transactions.

(r) The local government has consistently issued checks not covered by adequate deposits.

(s) The local government has loaned and borrowed money between funds without following the proper procedures.

(t) The local government has expended money in violation of the provisions governing the expenditure of that money.

(u) Money restricted for any specific use has been expended in violation of the terms and provisions relating to the receipt and expenditure of that money.

(v) Money has been withheld in accordance with the provisions of NRS 354.665.

(w) If the local government is a school district, a loan has been made from the State Permanent School Fund to the school district pursuant to NRS 387.526.

(x) An employer in the county that accounts for more than 15 percent of the employment in the county has closed or significantly reduced operations.

(y) The local government has experienced a cumulative decline of 10 percent in population or assessed valuation for the past 2 years.

(z) The ending balance in the general fund of the local government has declined for the past 2 years or is less than 4 percent of the actual expenditures from the general fund of the local government for the immediately preceding fiscal year.

(aa) The local government has failed to pay, in a timely manner, contributions to the Public Employees’ Retirement System, workers’ compensation or payroll taxes or fails to pay, at any time, a payment required pursuant to the Federal Insurance Contributions Act, 26 U.S.C. § 3101 et seq., or the Federal Unemployment Tax Act, 26 U.S.C. § 3301 et seq.

3.  If the governing body of a local government determines by the affirmative vote of a majority of its members that, because the local government is involved in litigation or threatened litigation, a severe financial emergency will exist in the local government, the governing body may submit a request to the Committee to conduct a hearing to determine whether a severe financial emergency exists in the local government.

4.  If the Committee conducts a hearing pursuant to subsection 2 or 3 and determines that a severe financial emergency exists, the Department, on behalf of the Committee, shall:

(a) Notify the local government about the determination;

(b) Request from the local government any information that the Department deems to be appropriate to determine the extent of the condition; and

(c) Require the local government to formulate a plan of corrective action to mitigate the possible financial emergency.

5.  Not later than 45 days after receiving notification pursuant to subsection 4, a local government shall submit to the Committee any information requested by the Department and a plan of corrective action.

6.  If the Committee determines that a severe financial emergency exists pursuant to subsection 4, the Committee shall:

(a) Review the plan of corrective action submitted by a local government pursuant to subsection 5;

(b) Provide observations and recommendations for the local government; and

(c) If the Committee deems necessary, periodically review the status of and conduct additional hearings to review the financial operations of the local government.

7.  In addition to any notice otherwise required, the Department shall give notice of any hearing held pursuant to this section to the governing body of each local government whose jurisdiction overlaps with, or in the case of a city, whose jurisdiction is contiguous to, the jurisdiction of the local government whose financial condition will be considered at least 10 days before the date on which the hearing will be held.

8.  If the Committee, following a hearing conducted pursuant to this section, determines that a severe financial emergency exists in a local government, the Committee shall, as soon as practicable, provide notice of its findings, including any recommendations of the Committee, to the Commission.

9.  The Commission shall, upon receiving a notice and any recommendations from the Committee pursuant to subsection 8, hold a hearing at which the Department and the Committee must recommend a course of action to mitigate the financial conditions that are the cause of the severe financial emergency which exists in the local government. The Commission shall afford the local government whose financial condition will be considered and each local government whose jurisdiction overlaps with, or in the case of a city, whose jurisdiction is contiguous to, the jurisdiction of the local government whose financial condition will be considered an opportunity to be heard. If, after the hearing, the Nevada Tax Commission determines that a severe financial emergency exists, the Commission shall issue an order requiring the local government to follow a remedial course of action and requiring the Department to take over the management of the local government as soon as practicable.