SAN DIEGO -- The city of San Diego's payroll costs were down 2.5 percent this fiscal year, or about $18 million from fiscal year 2008, Mayor Jerry Sanders announced Thursday.

The city spent $694.5 million on payroll in fiscal year 2009, which ends on Wednesday, compared to $712.5 million the previous fiscal year.

Payroll costs in fiscal year 2008 were 7.13 percent, or about $47.5 million, higher than in fiscal year 2007.

In fiscal year 2007, the city's payroll was $665 million, compared to $702 million in 2006 and $699 million in 2005.

Sanders touted the recent payroll savings as evidence of the "significant progress" he has made in getting San Diego's finances "under control" since taking office in 2006.

"There have been fluctuations in payroll for various reasons over the past several years," Sanders said. "Those include pay raises and natural disasters like the wildfires, both of which impacted the fiscal year 2008 budget.

"But this year's budget, we have locked in the size of our payroll going forward," he said. "With next year's budget you can expect the cost of our payroll to drop even further as we realize $43 million in savings in payroll and benefits due to the 6 percent compensation reductions our employees are taking."

Three of the city's labor unions recently agreed to a 6 percent pay and benefits decrease. Two others -- the San Diego Police Officers Association and AFSCME Local 127 -- had the cuts imposed on them.