New report: Child care programs recover their costs | August 9, 2006 | Almanac | Almanac Online |


News - August 9, 2006

New report: Child care programs recover their costs

by Rory Brown

Although Menlo Park is currently reviewing proposals to privatize its city-run child care programs under the assumption the programs now operate at a $444,000 deficit, a recent report says the programs nearly cover their costs.

A report compiled by the city staff members who operate the existing child care programs says the programs recover nearly all of their costs — an argument previously made by parents with children in the programs.

The city's child care staff is one of three parties that responded to a city-issued request for proposals to operate the preschool and school-age programs based in the new Menlo Children's Center.

The other bidders are Pacifica-based Building Kidz, and Redwood City-based Learning Adventures, a child care startup company that currently has no facility.

The city issued the request for proposals after the council — led by Mickie Winkler and Lee Duboc and supported by Nicholas Jellins — directed staff to explore privatizing the programs.

Ms. Winkler and Ms. Duboc cited the city's subsidy of the programs — pegged at the time at $444,000 a year by city staff — as motivation to consider turning their operation over to a private operator.

Estimated costs

But the programs' estimated cost has wavered for several months, and the city's finance director and other staff members have been unable to publicly confirm what the city would save if the programs were privatized.

The city's report says the programs' tuition fees — which were raised in May — will cover all but about $4,500 of the estimated cost for the current fiscal year.

Michael Taylor, the city's acting community services director, said the city is expected to pull about $200,000 from the general fund for the child care programs, but that figure includes expenses for administrative overhead and general liability — costs that the city would still pay if the programs were privatized.

Finance Director Carol Augustine said she has yet to study the child care proposals in depth. She didn't confirm the accuracy of the new estimates, but acknowledged the majority of child care costs for the current fiscal year would remain if the programs were privatized.

She noted that health care costs are expected to increase, potentially increasing long-term costs for maintaining city-run programs.

Minimal savings?

If the new estimate holds, savings associated with privatizing the child care programs would be substantially less than previously thought, calling into question the basis of privatizing the programs.

"This is what we've been fighting to say the whole time," said parent Mike Gardner. "We knew these programs didn't run at this enormous deficit, and we knew they're pretty darn close to cost-recovery. But certain council members wouldn't even take that into consideration."

Mr. Gardner is also a member of the Child Care RFP Committee, a city-sponsored task force that will ultimately recommend to the council which bidder should operate the programs.

Council members Kelly Fergusson and Andy Cohen urged the council to halt the privatization process until child care costs were better defined, but council members Winkler, Duboc and Jellins reaffirmed that the city should explore privatization to cut the city's costs.

"I felt from the beginning that $444,000 was not a credible figure to justify going out to bid and to justify the privatization process," said Councilwoman Fergusson. "For all intents and purposes, these are nearly full-cost-recovery programs."

Other bidders

The Child Care RFP Committee is scheduled to discuss the three bids — the two from the private companies and the city's bid —at its August 23 meeting.

Vineeta Bhandari, administrator and president of Building Kidz, is proposing that her company pay Menlo Park $9,000 a month to rent the children's center.

She said the tuition rates would remain unchanged for at least three years, about half of the current staff members would be retained and her company could take over operation of the programs by January 1.

Teresa Brown, executive director and president of Learning Adventures, is proposing that her company take over the programs in October.

Ms. Brown said that because her business is a startup company, Learning Adventures would require some financial assistance from the city.

Her bid does not include plans to pay rent for use of the children's center.


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