NATIONAL CITY, Calif. -- National City and its police department have reached an agreement that could save city taxpayers millions of dollars, 10News reported.

The National City Police Officers' Association has agreed to start paying two percent of their salary into their retirement fund. They've also agreed to a two-tier hiring system.

"These are the baby steps that we've got to take," said National City Mayor Ron Morrison. "They're not the solution but they are steps in the right direction."

National City, like many California cities, is facing major pension funding problems for retired city employees. For the first time, National City Police Department officers will pay two percent of their salary into their retirement. The retirement age is also adjusting under the new two-tier system. Everyone on staff now can begin pulling from their retirement after the age of 50. Anyone hired after Tuesday's city council meeting has to wait until they're 55.

Morrison said, "The retirement is not nearly as lucrative, shall we say, as the current retirement."

National City Police Officers' Association President Bill Phillips said the deal isn't the best, "but given the environment and the situation that the city's in, I certainly think it's the right thing."

National City is facing a $3 million budget deficit next fiscal year, and the agreement won't solve that problem but it will save taxpayers farther down the line.

"Does this fix our retirement problems that are statewide? No," said Morrison. "But are we at least making steps toward taking care of that? Yes."

Morrison also said 87 percent of all city employees are paying into their retirement -- that is up from zero two years ago.

It could be 100 percent once the firefighters union negotiates its next contract.