NEWPORT — The City Council last night approved a new contract for City Manager Edward F. Lavallee despite the objections of several members who thought it was too generous given the ailing economy and the concessions being sought from city employees.

While council members uniformly heaped praise on Lavallee, the contract vote barely won passage by a 4-to-3 margin. The labor pact provides a 3-percent raise retroactive to December, boosting Lavallee’s salary to $137,248. It leaves future salary increases up to annual performance reviews, the first of which would come in December.

The contract also offers a new opportunity for Lavallee to sell to the city up to 100 hours of the five weeks of vacation time he receives. The benefit would make him eligible for a payment of about $6,500 at the end of next year.

Council members opposed to the contract said that it’s not the 3-percent raise alone that troubles them but how it fits into the other raises Lavallee has received and the possibility he would get another in just four months.

Lavallee started at $125,000 in October 2005 and received a 4-percent increase one year later following his first review. Nine months later, in July 2007, he got a 2½-percent cost-of-living increase given to all non-union city staff. That was followed five months later, in December 2007, by a 3-percent increase from another performance review.

Councilman Justin S. McLaughlin noted that the annual raises amounted to 4.65 percent the first year and 4.41 percent the second year. If Lavallee were to get the retroactive 3-percent raise, another 3-percent raise in December and the vacation buyback, his pay would increase another 8 percent by late next year. Such a boost in pay, McLaughlin said, is “not consistent” with what union employees in the city are being asked to accept nor the incrementally declining state property tax levy cap.

Councilwoman Kathryn E. Leonard agreed, saying, “We have told the unions that we were strapped for money. We have told the residents the same. … In these economic times, I think this municipality, like the feds and the state, can’t be so generous.”

“It’s very difficult to ask city employees to sacrifice and taxpayers to sacrifice and not expect it from the administration of the city,” said Councilwoman Jeanne-Marie Napolitano.

The three councilors voted against the agreement, while Mayor Stephen Waluk, Mary Connolly, Charles Duncan and Stephen Coyne supported it.

Waluk vigorously defended the contract, arguing that it contains elements unmatched by other labor agreements in the city. Lavallee must pay 15 percent of the cost of his health-insurance premiums, a figure no other union pays. Nor, he said, is the manager allowed to accrue sick or vacation time from year to year like other employees, who may upon termination or retirement be paid for that time in costly severance packages.

“I think it’s a great example,” said Waluk. “This contract is the model.”

He then lavished compliments on Lavallee, who usually attends council meetings but last night was at a city managers conference in Virginia. Lavallee, 61, replaced James Smith, who the council ousted after members criticized his performance.

“The guy we have now is the best we’ve had in a long time and we’re not going to do any better,” he said. “We’re talking about a 3-percent increase. … I think it’s a fair deal.”

Waluk, however, said he would be reluctant to give Lavallee another raise come December.

Councilwoman Mary Connolly credited Lavallee with resolving unsettled labor contracts, negotiating a lucrative deal with the company that acquired Navy housing, reorganizing city departments and boosting morale among city employees.

“You cannot put a price on Mr. Lavallee,” she said.

Kevin Sullivan was the only resident to address the council and he urged the council to delay a vote to allow time to revise the agreement.

“This is not about Ed Lavallee,” he said. “It’s really about fiscal responsibility. … I think it will hurt the taxpayers of Newport.”

rsalit@projo.com