SAN JOSE -- The battle over San Jose's signature pension reform measure is headed back to court in a case that figures to have statewide implications.

The San Jose City Council on Tuesday voted 8-3 to appeal a lower-court's ruling from December that struck down key parts of the Measure B pension measure after unions sued to block it.

There had been some settlement interest brewing between both sides in the last few months, and the city recently backed down slightly on its disability retirement rules in an attempt to please unions. But it wasn't enough to garner a deal, at least not yet.

Measure B has hung over San Jose as City Hall's definitive issue since voters overwhelmingly approved it in June 2012.

On one hand, the city sees pension cuts as a key area to save hundreds of millions of taxpayer dollars after retirement deals handed out last decade caused pension costs to skyrocket. But the changes have angered employees, particularly police officers who have responded by quitting for cities that offer better compensation packages.

It's not clear when the appeals court will hear the case, though their decision will likely not come before the November election. Measure B is a key part of the mayor's race, with Supervisor Dave Cortese wanting to end the court war and find pension savings at the bargaining table, while Councilman Sam Liccardo would keep fighting to defend the measure in court. Pension reform is also a key topic in the three City Council races on the November ballot.

Mayor Chuck Reed, who has championed pension reform, has repeatedly said he wants the California Supreme Court to hear the case. That would enshrine a decision with statewide impact to guide other cities dealing with similar pension problems. A new mayor and four council members who take office at the start of 2015 would have to make that decision, however.

Both the city and the unions are looking for a better outcome in the appeals court. The biggest war -- over whether cities could force existing employees to pay more toward their pensions, as Measure B called for -- was won by the unions the first time around. The judge still did side with the city on 10 of the other 14 provisions of the measure, which combined would still allow San Jose to save tens of millions of dollars per year. That has unions signaling an interest in an appeal, as well.

Council members Ash Kalra, Xavier Campos and Kansen Chu, who typically vote with union interests, were against an appeal.

Contact Mike Rosenberg at 408-920-5705. Follow him at Twitter.com/rosenbergmerc.