City of San Bernardino, Calif., Mayor Patrick Morris in his State of the City address presented a 10-year financial recovery plan that aims to solve the City’s projected $360 million deficit. His main recommendation is to contract services — including police, fire, public works, community development, and parks and recreation. This, he said, would reduce the workforce by 80%.

The mayor’s office blames the high cost of labor and pensions as one factor that led to the bankruptcy. The cost of labor accounts for 74% of the General Fund Budget, and the City reduced its workforce so much, it became “service insolvent.” The only solution now, he said, is not to cut more workers, but to contract out the work entirely. Contracting out fire and police would save the City $8 million annually, while contracting out public works, community development, and parks and recreation would save the City $2 million annually. For non-safety services, he says the private sector may have different cost structures and/or benefit from economies of scale, resulting in reduced costs.

The mayor’s plan also points to a neighboring City of Highland, which successfully contracts out all its municipal services, and, functioning with a City staff of 34, has a “healthy reserve of $85 million.”

Within the estimated $360 million deficit is an already-accrued $18 million fleet deficit — the mayor said the City had reduced its vehicle purchases for the last 15 years. The current vehicles are so old, the City must invest that much just to continue delivering basic services. By contracting out the above services, the need to repair and replace about 85-90% of the fleet will be eliminated. This, according to the report, would translate to annual savings of approximately $1.6 million.

The fleet management division falls within the Public Works department. However, since fleet maintenance is an internal service, it may be one of the last services to be considered if this plan goes through, Jim Morris, the mayor’s son and chief of staff, told GF. The City needs to decide what services to keep in house, and determine what vehicles are left, before making decisions about fleet. If the City keeps its fire department, for example, there may be fewer options for outsourced maintenance work of the specialized equipment than if that service was outsourced, he explained.

“Whether it’s more beneficial to keep [fleet services] in house or to contract that out really depends on what kind of proposals we receive,” Chief of Staff Morris further stated. City staffers may also be able to reevaluate their service to lower costs.

If contracting out does not work out or does not achieve the estimated savings, the City will have to reduce salaries, benefits, and pension costs through negotiations with City employee unions.

The City declared bankruptcy in August 2012. The California Public Employee Retirement System (CALPERS) objected, but in August of this year, the court found the City eligible for bankruptcy protection, Mayor Morris stated in his speech.

Chief of Staff Morris said the plan will go to City Council, and council members will decide whether to consider it and what parts to move ahead with. He added that at an Oct. 7 meeting, the day before the mayor’s speech, the City Council tabled a motion to solicit proposals for contracting out fire services to Cal Fire and San Bernardino County.

Click here for a PDF of the full recovery plan.

By Thi Dao