ESCONDIDO -- Aiming to balance the city's budget without dramatically cutting services or making mass layoffs, city officials on Wednesday persuaded the leaders of three labor unions to consider higher pension contributions by the employees they represent.

City officials got such a concession, which would save roughly $1.5 million per year, by agreeing to spend $10 million in accumulated reserves over the next four years to soften cuts and reduce layoffs.

The city is facing annual deficits of more than $5 million during each of the next four years, so the reserves would cover less than half of the $22 million in projected gaps over that time.

City officials also agreed Wednesday to explore a union proposal that would automatically restore employee compensation cuts when city revenue rebounds to specific levels that would be set in advance.

Union leaders and city officials verbally agreed to the concessions during a special mediation session Wednesday morning at City Hall.

The mediation session comes one week after the City Council's budget subcommittee agreed to boost the city's dwindling general reserves from $3.6 million to more than $11 million by augmenting those reserves with about $8 million previously earmarked for a new downtown library.

The subcommittee, which is composed of Mayor Lori Holt Pfeiler and Councilman Dick Daniels, said they agreed to use the library money in order to persuade labor leaders that the city "would meet them halfway."

The proposed pension change would require virtually all of the city's roughly 800 employees to begin paying half of their state pension contributions. That change would come just a few months after the city ended longevity pay increases and stopped contributing to 401(k) plans for employees.

The three labor leaders who agreed Wednesday to consider higher pension contributions were: Michael Guerrero, president of the 149-member police officers union; Mike Diaz, president of the 85-member firefighters union; and Chester Mordacino, president of the 157-member Teamsters local.

Leaders of the city's fourth labor union, the 187-member Escondido City Employees Association, would not commit to considering the increased contributions.

Ralph Ginese, the union's vice president, said he had received a lot of member e-mails in recent days opposed to the change. He said union members are also frustrated that the City Council recently revived a controversial deal that would provide nearly $19 million in city reserves to the developer of a seven-story Marriott hotel in downtown Escondido.

But Russ Lane, the union's president, said it was possible that the members would agree to the pension concessions.

Wednesday's mediation session also served as a brainstorming session about how to reduce city expenses and generate additional city revenue.

Union leaders suggested the city use fewer outside consultants for work that city employees could do and revamp how the city buys and replaces vehicles. They also said a few dozen older employees would voluntarily retire immediately if the city agreed to cover their health insurance until they turn 65.

For extra revenue, they said the city could sell advertising space on city vehicles, sell the naming rights to city facilities and take over the towing and impounding of vehicles, which is now a roughly $2 million-per-year business for private towing companies.

Much of Wednesday's session focused on automatically restoring cuts when the economy improves. Union leaders said the hardest part of recent employee compensation cuts was the possibility they would never be restored.

"Give the employees some light at the end of the tunnel," Lane said. "They feel like they are looking at another long battle to get it all back."

City and union leaders also agreed they should present a united front to the public, instead of the bickering in the media that has characterized this spring.

"We can't have all the dirty laundry out there," Mordacino said.

Contact staff writer David Garrick at (760) 740-5468 or dgarrick@nctimes.com.

CLARIFICATION: Meeting between city, labor unions clarified

An April 30 story about the budget crisis at Escondido City Hall referred to a public meeting between city officials and labor leaders as a mediation session, but no official mediation took place. The meeting was led by a facilitator and labor leaders agreed to consider changes to city pension contributions by employees, but no concessions were approved.