Declaring contract talks were truly at an "impasse," Carlsbad's City Council terminated negotiations Tuesday with the city's Firefighters' Association and voted to impose a contract that contains a two-tiered retirement system with lower benefits for new employees.

The Carlsbad City Council held a special session Tuesday to consider the employment contract for the Carlsbad Firefighters Association. (Photo by Jamie Scott Lytle - Staff photographer)

The city's mayor said the decision was a long-term necessity to keep Carlsbad in good fiscal health. Carlsbad firefighter representatives said it was a sad move that would put the city in a place it doesn't want to be.

"We tried to extend an olive branch," Firefighters' Association Vice President Chris Lawrence said moments after the vote, as he discussed the final contract offer firefighters made as talks entered the impasse stage.

Lawrence said the council's decision would disappoint the city's firefighters, but would not affect the high quality of care they provide.

The hefty size of some government pensions has been a hot-button issue since the nation's economy began souring. Carlsbad is the first in the San Diego region, some observers said Tuesday night, and perhaps even the first in the state to back away from the current 3-percent-at-50 retirement system, which many communities began offering to firefighters and police officers early in the decade when stock market conditions were rosy.

"We did it during the good days when money was flush .... that was a mistake, and we're trying to make a correction," Mayor Bud Lewis said moments after the council's 4-1 vote.

Councilman Keith Blackburn opposed the decision, arguing that Carlsbad should be cautious and not be the first community to take such a drastic step. If all the other cities in the region have much better retirement plans, then Carlsbad is going to be the "last resort" employment option for any new firefighter, he said.

"When every other city has rejected him, then he'll come to Carlsbad," he said.

The mayor responded that he didn't think young people pick jobs based on the retirement plan options, saying it sure wasn't an issue for him decades ago when he was a new teacher.

Under the current 3-percent-at-50 plan, firefighters who retire at age 50 can get 3 percent of their highest salary times the number of years they have worked for the city. City officials have said that in Carlsbad, the average firefighter or police officer typically retires at age 55 and has 28 years of service with the city. Using the 3 percent salary calculation, that person would receive an annual city pension of $76,440.

The new retirement plan calls for a 2-percent-at-50 arrangement for firefighters hired on or after Oct. 4, 2010. Under state law, the council can only change benefits for new hires ---- it can't remove benefits from existing employees.

The council also will put a measure on the November ballot amending the city's charter so that the 2 percent plan cannot be increased without voter approval. That measure would require a simple majority to pass.

In addition to the pension plan changes, the contract approved Tuesday contains provisions that increase the annual contributions that firefighters make into the state pension system. Currently, the firefighters pay 1 percent of their salaries into the system each year, and the city picks up remainder of the 9 percent "employee" portion of the costs. The new contract calls for firefighters to pay the full 9 percent.

The contract also calls for no salary increases in 2010.

The changes are expected to save the city $780,000 a year initially. That figure doesn't include the eventual 2-percent-at-50 retirement plan savings, which will occur as the new firefighters retire decades from now.

In the "olive branch" offer that firefighters made in late April, they proposed two alternatives. The first called for a two-year contract with both the 2-percent-at-50 pension proposal and the requirement that the firefighters pay the full 9 percent annual contribution to state retirement plan. That proposal also included a 5 percent raise for firefighters and a provision that the council would not place the pension issue on the November ballot.

The second proposal called for a one-year contract. It didn't ban the ballot measure, but declared that it would apply to all city employees and would restrict both increases and decreases in various benefits without voter approval.

As the city embarks on a new relationship with its firefighters, the association that represents them is going through some changes of its own. The group's President Rick Fisher resigned Sunday, and Vice President Ken Sugahara has taken the job. Fisher couldn't be reached for comment Tuesday. Lawrence, the new vice president, said Fisher decided on his own to resign and was not removed from the office by a vote of the members.