With city officials declaring that "bankruptcy is not an option," Mayor Antonio Villaraigosa released a long-term plan for the city's finances Thursday, including several billion dollars in potential savings and possible layoffs of 1,000 workers.

In a letter to City Administrative Officer Miguel Santana, the mayor and City Council leaders called for the start of steps needed to make layoffs and perform studies on dealing with this year's continuing shortfall of $200 million and the projected $400 million deficit for next year.

"This mayor has no interest in going down the road to bankruptcy," said Deputy Mayor Matt Szabo, who has been assigned the task of developing the overall financial strategy for the city.

The five-page letter from Villaraigosa, also signed by Council President Eric Garcetti and council members Bernard Parks, Jan Perry, Greig Smith and Dennis Zine, sets the stage for a series of decisions to reduce spending in the city's $7.01 billion budget.

There are no plans to ask voters for a tax increase, but the mayor is looking at whether a ballot proposal will be needed to reform the city's pension system.

"We are looking at a three-year series of recommendations that will try to end the structural deficit the city has had for years," said Benjamin Ceja, the mayor's budget director.

Santana's office also released a report showing the city's revenues continue to decline, particularly in consumer-sensitive areas such as hotel and sales tax. Also, holiday season sales were much less than expected.

Part of the problem for the city is that although there is general consensus that the economy has begun to improve, local government is the last area to see any benefit.

Szabo said the mayor was trying to change the cycle in which the budget is presented - normally on April 20 - and include the council earlier in decisions because of the city's financial problems.

Parks, who chairs the Budget and Finance Committee, is planning a series of public hearings around the city, with the first scheduled for 6p.m. Monday at Van Nuys City Hall. The city also has been conducting an Internet survey on what the public would prefer to see cut.

Proposals for between now and July 1 call for layoffs and cuts in nonessential services.

"We will consider the elimination, consolidation or outsourcing of city assets and services, furloughs and layoffs where permissible," the letter said.

The city already has had layoffs for some workers but avoided additional layoffs this year with an Early Retirement Incentive Program made available to 2,400 workers. The letter asked that ERIP be extended to an additional 363 workers.

Cuts in service and outsourcing being considered could be for services like cleaning restrooms at parks, Szabo said.

"We are focusing our attention on what services must be performed by a city worker," Szabo said. "No one is going to argue that police and fire services should be contracted out. That is a core city service. Other services the public demands, we might be able to provide cheaper."

Options looked at for the long term include either the sale or private operation of assets such as parking facilities, golf courses, the Los Angeles Zoo, Animal Services and the Van Nuys and Ontario airports.

The city also is looking at eliminating some departments and consolidating others.

"But we are not looking to public-private partnerships to be a one-time benefit," Szabo said. "It would have to be a long-term benefit to the city. We have seen Sacramento do that and it is a downward death spiral."

Some of these proposals were advanced more than a decade ago by former Mayor Richard Riordan but were blocked by opposition from the public, unions and the City Council.

This year, however, Szabo said he believes there is a different dynamic.

"Gridlock and partisanship is not an issue here like it is in Sacramento," Szabo said. "This mayor and this City Council are working together to address our problems."

The reduction in employees will involve either laying off workers or transferring them to a city agency that is not financed through the general fund.

For example, the Bureau of Sanitation is funded through the trash fee and has a number of vacancies, Szabo said. The city will try to transfer workers from a different city agency to Sanitation to continue a basic service with no cost to the general fund, Szabo said.

Also, he said, the mayor remains committed to the growth of the Los Angeles Police Department.

"The mayor's goal is to protect the gains made by the police," Szabo said."

The plan also calls on city unions to reopen contract talks.

The Coalition of City Unions, which agreed to the ERIP program this year and forgoing cost of living increases for two years, said it was reviewing the letters and believes the city has not done enough to implement the retirement program or other savings.

"We found a way to take people off the payroll and the city has not done what it has to do," said Victor Gordo, an official with the Coalition of City Unions. "If the city had acted when we first suggested it, they wouldn't have the problems they face."