Moved by teary testimony from workers fearing job losses, the Los Angeles City Council on Wednesday asked staff to look into cutting the value of all city contracts by 10 percent and consider whether municipal employees could do some of that work.

"It's time for us to lay off private contractors and keep our city workers," Councilwoman Janice Hahn said on another day of emotional testimony about the prospect of laying off 4,000 workers over the next 18 months.

The job cuts and other cost-saving measures are being proposed to shrink a budget gap that is anticipated to swell to $484 million by next year. Delays in dealing with the budget crisis cost the city's credit rating this week when a Wall Street rating agency downgraded Los Angeles, which will now have to pay more interest when it sells new bonds.

Councilman Paul Koretz said the city has $2 billion in contracts - which officials said include service and construction contracts.

"A 10 percent return would give us $200 million," Koretz said. "I don't expect that, but we should be able to get $50 million for this year."

Meetings are under way in city departments to negotiate with the contractors, many of whom are willing to make some reductions, but others say they have already made the kind of cuts the city is contemplating.

Gary Moore, general manager of the Bureau of Engineering, said the city has asked contractors to report back by March 1 on their ability to reduce their contracts.

"We have told them we might have to cancel the contracts," Moore said. "They don't want to lose the city business."

Other council members questioned Koretz's figures.

"We need to speak the truth about what we are up against," Councilwoman Jan Perry said. "We need to be truthful without setting up false hopes."

An overflow group of city workers representing all the services provided by the city came to testify before the council, arguing that the city would end up paying more for vital city services and impacting employees and their families with the layoff plans.

Some warned there could be political repercussions.

"We have long memories," said Timothy Butcher, one of the orange-shirted workers who crammed into the City Council chambers, with a pointed barb at Mayor Antonio Villaraigosa.

"He claims to be from labor, but I think he forgot where he came from."

Councilman Bernard Parks, who chairs the Budget and Finance Committee, said the problems facing the city now might be too great to overcome without having layoffs.

"The issue is, what do we have to do to keep the city solvent," Parks said. "I am not sure there is a way to do it without having layoffs."

As far as the 10 percent reduction in contracts, Parks said he hopes any reductions that are to be made will come quickly.

"The longer we wait, the less we will get," Parks said. "And, if we rely on one-time solutions, the more pain we will create later. The one-time solution is over."