A San Francisco bay area city, San Carlos, is studying a proposal to hire other government agencies to provide its police and fire services, a cost-cutting move to close a big budget gap.
The San Carlos city council decided last week to consider “outsourcing” police, fire and parks maintenance as an alternative to making a 20 percent cut throughout the budget.
City Manager Mark Weiss estimates that the switch could save 20 to 30 percent on police costs and 15 to 25 percent on fire costs, enough to close a $3.5 million deficit in the budget for the new fiscal year beginning in July.
Public employee pensions are only one of the reasons for cuts in the San Carlos budget each year during the past decade. But a budget plan last year said pension costs are “extremely high” and could grow at a rate of 10 to 12 percent in the future.
Outsourcing is not a new concept in the bay area. A number of cities, including Cupertino and Woodside, get police services from sheriff departments. Several counties get fire service in unincorporated areas from a state agency, Cal Fire.
But as cities struggle with deficits during a deep economic recession, the San Carlos move to cuts costs by outsourcing is being watched — notably by bankrupt Vallejo on the other side of the bay.
Two of the three Vallejo council members who opposed a new firefighter contract, approved on a 4-to-3 vote last week, suggested that outsourcing should have been considered as an alternative.
Vallejo City Manager Robert Adams, responding to a question from Councilwoman Marti Brown, said he did “initiate contact” with Cal Fire several weeks earlier but had “not received any indication one way or the other at this point.”
Vice Mayor Stephanie Gomes said Vallejo was spending roughly 75 percent of its general fund on police and fire as bankruptcy was declared two years ago. She said about 70 percent of the general fund is still being spent on the two public safety programs.
Gomes said that when the San Carlos city council voted on outsourcing last month, one of the members complained that police and fire costs were 60 percent of the San Carlos general fund.
“Sixty percent!” said Gomes. “That would be great, that would be great. But we are not out of the 70s yet.”
The San Carlos council was told by staff last month that police and fire costs were 51 percent of the general fund four years ago, $1 million less than the revenue from property and sales taxes.
Now spending on police and fire is 60 percent of the San Carlos general fund, $3 million more than revenue from the property and sales taxes that are the city’s main sources of revenue.
The total San Carlos revenue from a dozen sources four years ago was $23 million. The projected revenue from the same sources next fiscal year is $22.4 million, down 2.8 percent.
San Carlos, population 28,000, is midway between San Francisco and San Jose in the northern end of Silicon Valley. The residents are 85 percent white, half have college degrees, the median household income is $88,000, and the crime rate is low.
A city news release says the San Jose Mercury-News once called San Carlos “The Perfect City.” The city seal calls San Carlos “The City of Good Living,” a motto adopted in the early days.
San Carlos shared in the high-tech boom a decade ago and like most cities raised pay and retirement benefits for employees. But unlike similar cities in San Mateo County, San Carlos has not raised revenue. Tax increases failed four times in a row.
Now the San Carlos budget will be cut for the 11th year in a row. A report to the council last month lists previous staff reductions, salary freezes, lower health and retirement benefits, and cuts in parks, recreation, landscaping, street repair and other programs.
“San Carlos has become one of the leanest public organizations in California,” said the report.
The police department has eliminated five sworn officer positions during the past decade. A $9 million budget pays for 23 sworn officers, six sergeants, two commanders, one chief, eight non-sworn employees and five part-time employees.
Weiss, the city manager, said outsourcing would produce savings by sharing command and the pool of officers needed to keep the proper number of officers on duty, as well as by better prices on equipment and supplies because of larger purchases.
The San Mateo County sheriff has made an informal proposal to provide police services for San Carlos. Neighboring Redwood City also is said to be interested in providing police services.
About 11 positions have been eliminated in the fire department jointly operated by San Carlos with a special district in neighboring Belmont. San Carlos has two fire stations, budgeted for $6.3 million this year.
Cal Fire, currently serving unincorporated areas in San Mateo County, has made an informal proposal to include San Carlos. There also have been talks with Redwood City and the city of San Mateo about providing fire service.
Outsourcing fire would yield savings through shared management and purchasing. But Cal Fire has lower salaries than San Carlos and longer work shifts, allowing different staffing ratios.
Weiss said an outsourcing agreement could give firefighters the current San Carlos salary, frozen until Cal Fire salaries catch up, or switch the firefighters to lower Cal Fire pay, saving about $800,000 a year.
Two years ago San Carlos began switching new hires to lower pensions. The pensions of current employees are protected by law and cannot be cut, without providing something of equal value.
Police and fire pensions for new hires are 3 percent of final pay for each year served at age 55, a cut from 3 percent at 50. The budget last year said city pension contributions for new police dropped to 17.38 percent of payroll, down from 38.19 percent.
City pension contributions for new firefighters are 17.6 percent. But contributions for current firefighters are much higher, 52.25 percent of pay, because of a shrinking employee base and a quicker payment of future obligations.
There has been friction between San Carlos and the Belmont district, including a threat of dissolution several years ago. Under an agreement then, San Carlos now pays 54 percent of the joint costs, $769,000 more than the Belmont district that also has two fire stations.
San Carlos pays more because of more service calls, more population and more assessed value, said Thomas Sil, controller for the Belmont-San Carlos Fire Department. The agreement also requires an 18-month notice for pulling out.
“We would expect that provision to be honored,” said Sil, who also is the city of Belmont finance director.
Weiss said he thinks outsourcing could be done in four to six months, in time to help balance the new San Carlos budget. “I have never bought into the theory that government can’t perform quickly,” he said.
Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at http://calpensions.com