The Coos Bay City Council, budget-strapped since 2001, approved raises for approximately two-thirds of city employees Tuesday night, revising the current year's budget and committing to a one-year contract extension with the Police Officers Association.

The unanimous decision came following a late executive session, when the council approved a contract that guarantees police a minimum 2-percent raise in 2004. The contract was developed in informal negotiations between city managers and union representatives over the past several months and was unveiled for the first time publicly Tuesday night. It indicates the raise will be based on the consumer price index of a month to be determined later but caps the increase at 3.5 percent.

"This is the first time I can remember that staff sat down with police and worked on (the contract)" without lawyers involved, Mayor Joe Benetti said.

"I think this is a positive step," he said later. "We're coming to something that's reasonable."

In same action, the council approved raises for non-represented employees, mostly department managers, granting them a 2.5 percent increase in pay retroactive to July 1 and another 2.5 percent increase that will take effect on July 1, 2004. The city has offered the same contract to employees represented by the Association of Federal, State, County and Municipal Employees, although that union has not yet approved the terms.

The raises will increase the current budget by approximately $21,200, if AFSCME employees accept the offer including retroactive pay increases.

Finance Director Janell Howard said the cost will be covered by the current budget. Howard said she is projecting the city will have approximately $50,000 in additional revenue this year and attributed the increase to the restructuring of several departments as well as retirements and changes in staff. Several city employees have retired from the city and returned to work on a contracted basis, saving the city Public Employee Retirement System payments.

Former Police Chief Chuck Knight is one of those employees. He became city manager on a contract basis after Bill Grile resigned his position, a move that Howard said saved the city approximately $21,000 in salary and retirement benefits. His former position was filled by current Chief Eura Washburn but her former position as captain was left vacant. Meanwhile, three high-ranking police officers, all at the top of their pay scale, also retired.

Councilor Roger Gould, who has led budget sessions through some of the city's most difficult financial years, said he felt confident the decision to spend the additional funds on raises was the best move for the city.

"Without a question that's the best way to spend this freed up revenue," Gould said. "The money needs to go back."

The city financial problems have resulted in three rounds of layoffs since 2001. In the most recent cuts, which took effect in January, the city eliminated five positions from the police department. Those cuts were the end result of a bitter legal battle during which the police union lost a lawsuit that would have prevented the city from dissolving a charter amendment guaranteeing minimum police staffing levels.

AFSCME employees voluntarily deferred their guaranteed pay increases this year due to the severity of the budget problems and while the city had hoped other departments would follow suit, none did.

Howard said the retroactive increase for AFSCME-represented employees has a minimal impact on the general fund - costing approximately $2,300 - because those workers are paid from various budget line items. Howard said nine of the approximately 20 employees are library workers, paid entirely from that fund. Wages for others also come from streets and parks funds.

For the 2004-2005 fiscal year, the raises will mean a $73,727 increase in the budget. Police will account for about $48,900 in increases while non-represented employees will account for about $19,400. AFSCME-represented employees will account for a $2,400 increase.

While the city typically enters into three-year contracts with each of its unions, the action taken by the city Tuesday guarantees increases only for the current and upcoming fiscal years.

Knight said the upcoming consolidation vote - which proposes to merge the cities of Coos Bay and North Bend - was not the reason for entering into a one-year contract. But, Knight said consolidation was a consideration since long-term contracts could complicate a union between the cities.

"One year gets us beyond the question of consolidation," he said.

Still undetermined is what increases will be allotted to the Fire Department.

City Attorney Nate McClintock said the Fire Department's union, which represents approximately 17 people, has requested formal negotiations and was not included in the wage increases approved by the council.

The city employs approximately 80 people in various departments.

Meanwhile, Benetti said the city still plans to hire two new police officers in the spring and added that the raises would not alter those plans.

"We're hiring two new police officers," Benetti said. "That's not going to be impacted."