WAYNE, N.J. - Gov. Christie signed a bill Tuesday that caps increases to police and firefighter pay awarded through arbitration, a measure he called the most important of the proposals in his so-called tool kit to help towns control costs.

With Democratic Senate President Stephen Sweeney of Gloucester County looking on, Christie hailed the passage of the bill as a testament to bipartisan cooperation.

"We've proven over the last year that Republicans and Democrats can get things done together," he said. "Mayors have been yelling and screaming for these kinds of reforms for years."

The bill caps salary awards, including longevity pay and automatic step increases, for police and firefighters at 2 percent when their unions engage arbitrators to settle contracts.

It also fast-tracks the arbitration process by giving arbitrators a 45-day window to rule on disputes and limiting the appeal process to 30 days. In addition, arbitrators' pay will be capped at $1,000 per day or $7,500 per case, whichever is lower.

Christie said Tuesday that some cases in arbitration have dragged on for years, and that fear of excessive arbitration awards has hampered some towns' ability to conduct effective contract negotiations.

"Arbitration works when it's balanced," said Sweeney, an organizer for the International Association of Ironworkers. "But the system has gotten out of whack over the last 20 years."

Pension and health care costs are not included in the cap. Christie said the cap will lapse in April 2014, at which time lawmakers will review its effects and consider modifications.

"This is the most significant individual bill in the tool kit," Christie said.

Municipalities have been clamoring for ways to control costs since the Legislature approved - and Christie signed - a 2 percent cap on annual property tax increases that goes into effect Jan. 1.

Christie said residents could see a difference in their tax bills by August, but that the effect likely would not be seen until the end of 2011 or beginning of 2012.

"It's one of the major issues we're dealing with," Hoboken Mayor Dawn Zimmer said after the signing. "This gives us the tools going forward to make sure it's fair for the residents of the city of Hoboken and of New Jersey."

The governor said another primary target is sick leave policies for public employees, some of whom get tens of thousands of dollars in unused sick time when they retire. Christie noted a case in Parsippany in which four police officers reportedly were due a total of $900,000 upon retirement.

Christie signed a bill this year that limits state employees to receiving $15,000, and he said Tuesday that a similar measure in the Legislature for school, government, and public safety workers needs to be toughened.