TRENTON - Police and firefighter salary increases reached through arbitration would be capped at 2 percent, under an agreement announced Thursday by Gov. Christie and legislative leaders.

Republican and Democratic officials said the changes they are proposing would make the arbitration process more fair and help municipalities keep property taxes down.

"New Jerseyans have waited a long time to see real reform happen in Trenton, which is why they deserve nothing less," said Christie, who announced the agreement in an afternoon news conference flanked by Senate President Stephen Sweeney (D., Gloucester) and Assembly Speaker Sheila Oliver (D., Essex). "Today's agreement is a positive step in that direction, but we still have more work to do before the end of the year."

Police and firefighter unions have said the current process is fine, but arbitration reform has been at the top of Christie's wish list. An Assembly committee on Thursday also advanced a civil service reform bill, another of Christie's priorities.

Christie has been crisscrossing the state holding town hall meetings in recent months, urging the Legislature to take action on his property tax reform "tool kit." He has been traveling with a clock counting down the number of days left in the legislative session this year and in recent weeks has mocked Democratic lawmakers for taking action on bills he deemed insignificant, instead of tackling the "tool kit" issues.

With a two percent cap on property tax levies set to take effect Jan. 1, Christie and municipal leaders have been calling on the Legislature to pass laws that would help towns remain under the cap without laying off large numbers of people.

Under the arbitration legislation, which was released by committees in both houses of the Legislature Thursday, the 2 percent cap would not apply to negotiated contracts, only those that go to arbitration.

Although a relatively small number of the police and firefighter contracts in New Jersey go to arbitration, municipal leaders say the arbitration process is so heavily weighted in favor of the unions that fear of the arbitration process pushes towns to settle.

Police in New Jersey are among the highest paid in the nation.

The cap, which would take effect in 2011 and sunset on April 1, 2014, would apply to all salary items, including cost of living increases, longevity, and step increments, but would exclude health care and pensions. Salary increases in individual years could exceed 2 percent but would have to average 2 percent over the term of the award.

Christie had originally called for a cap including health care and pensions, but police and firefighter unions said that with those costs soaring, a 2 percent cap would mean pay cuts.

Under the legislation, arbitrators would not be permitted to award any new economic items that were not already in the previous contract.

The proposal would also make significant changes to the arbitration process itself. The bill sets a 45-day limit from the date a request for arbitration is first filed to the date of the award, with no extensions. Appeals must be decided within 30 days.

Arbitrator pay would also be restricted to $1,000 a day and $7,500 per case. Arbitrators would be chosen randomly; under the current system, towns and unions typically agree on an arbitrator, although they can also opt to ask for one to be assigned randomly.

The agreement also calls for a task force to evaluate the impact of the legislation and the effectiveness of the cap.

Legislative leaders on both sides of the aisle lauded the agreement Thursday.

"This is truly historic reform for New Jersey," Sweeney said.

Sweeney said he, Oliver and Christie shared the same goal, "to revolutionize the system of binding arbitration, and for the first time, to ensure taxpayers stand on a level playing field with the police and fire unions. By putting aside partisanship, we did it."

Assembly Republican Leader Alex DeCroce (R., Morris), who was also at the news conference, called the agreement historic and said it "represents another victory in the effort to control government spending."

In South Jersey, Joseph Chila, mayor of Woolwich Township, said the proposal was a good first step. But said to truly rein in property taxes, he said, the state would need to find a better way to fund the education system.

"It's a start . . .. But when you talk about, is it going to save us with property taxes, absolutely not," Chila said.

In Cherry Hill, Dan Keashen, spokesman for Mayor Bernie Platt, said the current binding arbitration system is totally broken.

"The new legislation that is proposed is an excellent resource for municipalities," Keashen said. "It certainly has no bearing on the critical nature of the work the police and firefighters do . . .. but because the old system was so broken, the reform will make a correction in how that system has operated over the last 50 years."

Police and firefighter unions, who gave input to legislative leaders during the negotiations, were not exactly happy with the results.

Steven Demofonte, chairman of the legislative committee for the state Fraternal Order of Police, said the FOP supported the compromise legislation only because it was less damaging than the governor's proposal.

"It's unfortunate the governor decided to attack public safety in his tool kit," Demofonte said. "In doing so, he created an adversarial relationship that was unnecessary."

"We believe the governor should have spoken with us instead of vilifying all the police and firefighters in New Jersey," he added. "He's been doing it by claiming that we are the reason that taxes and specifically property taxes are high, because of the unwarranted salaries."

Staff writer Jan Hefler contributed to this article.
Contact staff writer Adrienne Lu at 609-989-8990 or alu@phillynews.com