All but one school board member voiced support Tuesday night for a new multi-year teachers contract that will provide up to 16 percent in pay hikes over three years -- while debating how exactly competitive Palo Alto Unified School District is when it comes to teacher salaries, retainment and recruitment.

The board discussed tentative contracts with the teachers and classified employee unions, which each group ratified before Tuesday night, that would commit the district to its first-ever multi-year salary increases, starting with a 5 percent pay increase this year to apply retroactively to July 2015 given negotiations for the current year just ended. This would cost the district $7.3 million, almost the entirety of a $8 million surplus available in this year's budget.

In the 2016-17 school year, salaries would increase 4 percent, plus a 1 percent bonus called an "off-schedule" increase. Off-schedule bonuses don't bump up the salary base from which the next year's increases are calculated. In 2017-18, teacher salaries would increase by 3 percent, plus another 1 percent off-schedule bonus.

The off-schedule bonuses will be bumped up to 2 percent both years if property tax revenues exceed the district's projections by at least 1.5 percent, and they will be eliminated if revenues are below budget by 1.5 percent or more. If the 2016-17 property tax as determined by the County Assessor is either more or less than 1.5 percent of the adopted school district budget, then either party — the union or the district — can reopen negotiations on the 3 percent increase in the 2017-2018 school year, according to the new contract.

The contract also proposes that all non-union managers and supervisors, including senior administrators, receive the same increases as union members, a practice followed in previous years.

A majority of the board hailed the new contracts as a justified and needed compensation package for teachers dealing with an increasingly high cost of living in the area, long commutes and workload in a demanding district.

Several board members pointed to a decline in number of applications to district positions over the last few years as evidence of the fact that Palo Alto has not kept up as the "destination district" it likes to think it is. In 2013-14, for example, the district received 322 applications for kindergarten through fifth-grade teaching positions; 101 applications in 2015-16 and 148 this year, according to the district.

Special-education applications have dropped from 196 in 2013-14 to 81 last year and 44 this year. Applications in several teaching positions are up, though, from last year: for kindergarten through fifth grade; mathematics; social studies; and science, according to data provided by the district.

Some board members also commented that staff have said that the quality of applications is down, and many who apply are from out of state or brand new teachers.

As the other board members came to agreement, Trustee Ken Dauber took multiple turns speaking at the dais to oppose a contract that he believes forces the district to make an unnecessary "hard choice" between healthy raises for teachers and class-size reductions.

Smaller classes, he argued, make Palo Alto a better place not only for students to go to school, but for teachers to work, especially in light of two local parents' recent data analysis that indicates a large percentage of Palo Alto's middle and high school classes are not meeting the district's official class-size averages.

Dauber suggested that the district offer teachers instead 3 percent raises each year over the next three years, plus one-time bonuses, leaving an estimated $2.9 million this year and $4.4 million in the next two years — the equivalent of 35 teachers — to support smaller class sizes. Thirty-five teachers could reduce class sizes at the high schools by six students or by three at the elementary schools, he said.

"This is a historic opportunity," Dauber said. "The very strong property tax increases that we have this year, over 11 percent, allow us to do two things: to give very strong raises to our teachers (and) to enable us to retain and recruit excellent teachers, which are the bedrock of the work that we do here, and also to devote significant funds to reducing class sizes.

"The choice is not between healthy raises and class size reduction," he added. "We can do both. It's an extraordinary year in which we can do both."

According to Dauber, the district has remained competitive in terms of compensation and a 9 percent raise over the next three years would continue that tradition. Palo Alto Unified has highest average teacher salary of any unified district in the state with more than 4,800 students, he said, and its salary schedule consistently ranks in the top compared to local competitor districts, he said.

Dauber also provided district data that shows over the last five years, only 23 teachers have left Palo Alto for other positions — an average of four teachers per year. (Other board members, however, noted that employees might not always be upfront about their reasons for leaving the district or where they might be working next.)

"There's no necessity to over-invest in compensation and under-invest in class size reduction," he said.

Board member Camille Townsend called that a "false choice."

"Is class size more important than paying the rent or how much it costs to commute or where to send their kids to school or what their college tuition is?" Townsend asked. "I think that's kind of a false choice. I think we have to pay our teachers well."

Parent Todd Collins, who is running for a seat on the school board this fall, also emphasized the contract's impact on the district's ability to reduce class sizes to its own stated targets. He asked whether the district's teacher attrition and compensation data "justifies these increases, especially with the class-size issue we know we have" and urged the board to "take the time to share and discuss with the community, and get this critical decision right."

Parent Steven Schmidt pointed to other trade-offs — cuts made to previous requests to fund other programs in the district, from small-learning community programs at the two high schools to reading specialists at the elementary schools — and asked the board to "be trustees; be prudent."

Palo Alto High School's student board representative Emma Cole said that while she doesn't "want to undermine the impact that a small class can make," what's made the most difference to her is the quality of the teacher in the classroom.

Later in the evening, the board did approve $1.8 million in the budget to hire 12 new teachers over two years — six for the middle schools and six for the high schools — to help mitigate large class sizes. The additional staffing is on top of seven middle school teachers and three high school teachers already included in the 2016-17 budget.

Board Vice President Terry Godfrey said that she believes teachers understand the "trade-offs" the district made to provide the high pay increases, but asked them to share any feedback about class-size reduction with the board before it votes on the new contracts.

She also noted that the district's class-size reduction goals are "constrained" by the realities of hiring new, quality teachers and that it "might be a multi-year process to get where we need to be."

An official vote will come at the board's next meeting in two weeks rather than last night as Superintendent Max McGee initially requested. In his executive summary for Tuesday's board packet, he asked board members to waive a rule that requires them to discuss items publicly in two meetings before taking action and approve the contracts Tuesday to get teachers their paychecks sooner.

However, he said at the beginning of the meeting on Tuesday that he has decided to revoke this request, saying "I understand this is a historic document and it may take more than one night of deliberation."