FREMONT -- With projections showing soaring pension costs taking an even bigger bite out of city coffers, city leaders and public safety unions continue to disagree over givebacks needed to balance this year's budget.

Fremont police officers and firefighters unions so far have rejected the city's request for givebacks that would amount to 1.8 percent of their annual salaries.

The givebacks already are factored into this year's budget, meaning if no deal is reached, the city could have to make additional cuts, officials said.

Non-sworn employee unions have agreed to the giveback, which will result in six furlough days, keeping City Hall dark the last two weeks of the year.

Meanwhile, credit rating agency Standard & Poor's earlier this month downgraded Fremont's outlook from "stable" to "negative," which could result in the city paying higher interest rates on bonds, Finance Director Harriet Commons said Tuesday during a City Council budget update.

The city's budgetary reserve fund, which three years ago stood at $21 million, is projected to be exhausted in 2011 or 2012.

City leaders said they would consider asking voters to pass a tax in 2012, noting the success of a utility tax in Newark.

For now, the city's ongoing budget crunch will require either additional spending cuts or employee givebacks, City Manager Fred Diaz said.

"The good news is it doesn't look like we're falling off the end of the Earth," he said. "I don't think we'll see another huge draconian drop in services."

Like almost all cities, Fremont has slashed hundreds of positions and laid off employees in recent years trying to reign in expenses as revenue dried up during the recession.

Fremont also has stopped trimming most street trees, staffing all fire stations and providing 24-hour front-desk support at the police department.

The city also heard some good news. Its operating deficit was about $3 million lower than anticipated last fiscal year, as sales tax revenue exceeded estimates and the city held many jobs vacant.

However, the California Public Employees Retirement System recently alerted Fremont officials that the city's pension contribution rates will climb considerably next fiscal year, primarily the result of investment losses from the 2008 stock market crash.

Fremont, which barely had to contribute to its employee pension fund in 2000, will go from paying an additional 30 percent for police and firefighter salaries this fiscal year to 36.5 percent next fiscal year.

That means that for every $100,000 earned by a public safety officer, Fremont next year will pay $36,500 extra to help fund that employee's pension.

Rates for non-sworn city employees, who receive less-generous pensions, are slated to rise from 18.4 percent to 22.9 percent, city officials say.

Overall, the city's pension burden is slated to jump $3.5 million next fiscal year from $15.7 million to $19.2 million

With Fremont forecasting a $140 million general fund budget next fiscal year, that means nearly one out of every seven dollars spent by the city will go to fund employee pensions.

City leaders said they don't expect the pension burden to ease in upcoming years.

"You obviously have to absorb the (pension) hits and find the revenue from some place, Diaz said.

The public safety unions note that members contribute 9 percent of their salaries toward their pensions and that they gave up raises to get the more generous benefit nearly a decade ago.

They also say that they are open to givebacks, but furloughs aren't as simple for them as for non-sworn employees.

"Not only have we been very creative, we've been more proactive in getting them to the table," said Jim Martin, president of the firefighter's union.

Police union President Greg Pipp said his members were concerned that they would grant a concession this year only to have the city demand further concessions when their contract expires next year.

As for rising pension rates, Pipp said, "We'll do our part as city employees to make sure the city will be viable. We don't have any interest in bankrupting the city."

All city employees are in the middle of two-year contracts that provide no cost-of-living raises.

Contact Matthew Artz at 510-353-7002. For more Fremont news, read his blog at www.ibabuzz.com/tricitybeat.