City Looks at Possible Cuts to Services, Programs and Employee Benefits

In an effort to bridge a structural deficit of $11 million, the Milpitas City Council had a special study session Tuesday to discuss the specific recommendations of the . The report outlines cost-saving proposals that could save the city several million dollars, as well as ways to boost revenue.

No actions were taken. The proposals are being explored early in the budget cycle, unlike past years. The budget hearing is March 15.

“We really need to look at our core services” and consider suspending or eliminating other programs in these economic times, Councilwoman Althea Polanski said.

In his opening remarks, City Manager Tom Williams said, “We're here to review, discuss and seek guidance and direction.”

Some of the recommendations included the following: 

• Determine estimated savings to city based on outsourcing services, including police and fire.  
• Explore privatizing the city's preschool.
• Hire a consultant to conduct a "total compensation" study on city salaries, benefits and retirement. 

Most of the cost-cutting recommendations would require the city to negotiate with each of the unions, said Williams. The option would be to reopen existing contracts for negotiation or to hold off on negotiating until the next contract.

Over a period of six months, the Citizens Budget Task Force put together a final report that was updated by city staff for the council's study session. This revised list of recommended cuts and caps in city employee benefits in the staff report could save between $10-12 million, estimated Joseph Weinstein, chair of the task force. 

Finance Director Emma Karlen presented specific proposals, which included the following:

• Implement a salary freeze.

• Cap the city's contributions for employee medical insurance and have the employees cover future increases. 

• Cap benefits to 35 percent of base salary for non-public safety employees and 40 percent for public safety employees.

Karlen continued with the list of recommendations by the Citizen's Budget Task Force that could generate $5 million:  

• All city programs should be cost-neutral except senior services, DARE, crossing guards and volunteer services.

• Eliminate the city's youth competitive swim team and program, Tidal Waves, which the task force estimates costs the city $850 per swimmer.

• Bill Santa Clara County for reimbursement of police calls to the .

• Improve the net increase in the city's sales tax by $70,000 if expands in size. (The number is an estimate provided by Walmart.)

• A 2 percent utility tax (that would need to be approved by voters).

Union officers attended the study session, which was open to the public and televised on public access.

Milpitas Employees Association president, Paul Mullett said, “I'm willing to work with the council and have open communications with the council.”

Steve Smith, president of the Milpitas Supervisors Association, said, “We recognize that there are budget issues that need to be solved.”

Another group, the , was mentioned by council members as receiving a subsidy from the city. A discussion on whether the money could be used for other programs, such as Milpitas Family Literacy Project, which serves 40 families, but has the potential to serve more.

Vice Mayor Pete McHugh said he wanted to save the literacy program, which supplies books and curriculum to preschoolers in ethnic families.

"Make the reading program self sustainable. Cut the chamber subsidy, and use the money for the city's share,” said Councilman Armando Gomez. 

Asked later to comment, the chamber's executive director, Carol Kassab, said, “We are under contract for services provided to the city. The cost to the city is certainly justified, and these services are a value to the city.”

When comments from the public were heard, Rob Means, Milpitas resident and former candidate for mayor, said he was “glad the task force looked at both cuts and revenue increases.”

He recommended the city consider a 1 percent sales tax on gas, diesel and fructose corn syrup. 

Come this June, he said, "we'll have opportunity to put things on the ballot."

Karlen calculated that a sales tax at 1 percent could generate $16 million, more or less. She said an extra quarter percent could generate an additional $4 million.

Citizens' Budget Task Force member Dan Manassau said he didn't consider the recommendations in the report to be drastic, but "low hanging fruit." 

The city was spending money on things that "should have been eliminated 10 years ago," he said.

Task force chairman Joseph Weinstein thanked the council and added, “I feared this report would get buried" after the city council elections.  

"The spirit of our report was not to tell anyone what to do," he said, but to present a menu of options.

Weinstein explained the 2 percent utility tax was recommended over a sales tax or a gas tax as the least harmful choice, where businesses would share the pain.

Gomez said, “We would have to do a poll to see if the voters would support a utility tax. I don't think the taxpayers are going to give us any money until we put our house in order."

Councilwoman Debbie Giordano did not attend the meeting.

*The city's retirement contributions to PERS have increased since November 2010 from 24 to 29 percent for public safety and 15 percent to 18 for other employees. Because of the increase, the total savings from capping benefits is now about $800,000 more than the original figures calculated by the Citizens Budget Task Force.