OAKLAND -- The city has reached a tentative deal with its two largest unions that will guarantee 3,500 city workers their first cost-of-living raises in six years, but will also increase the risk of future budget shortfalls.

The two-year contracts with SEIU Local 1021 and IFPTE Local 21, who represent most civilian city employees, would provide a 2 percent raise beginning this month and a 1 percent raise next July, according to a memo from Local 21 released late Friday. The labor pacts won't be finalized until the City Council votes on them Tuesday.

Neither union agreed to new concessions sought by the city, according to the memo. Mayor Jean Quan had said earlier this year that workers at both unions would have to begin paying for health insurance and pay more toward their pensions.

City taxpayers are paying an additional $13.8 million this year to fund employee pensions, the costs of which are rising as the state pension system factors in money lost during the recession. Quan, who could not be reached for comment late Friday, had wanted the unions to cover half of future pension hikes as well as pay at least 10 percent toward their health insurance.

The raises appear to blow a hole in the city budget passed just two weeks ago. The council had set aside $6 million over the next two years for future pay increases, but the raises are projected to cost the city roughly double that amount.

Also the $6 million was a one-time set-aside, but the raises are permanent, which means the council will have to account for them when adopting its next budget in two years. That budget is already forecast to have a shortfall.

"I will be interested in the administration's analysis as to whether we can afford the deal," Councilwoman Libby Schaaf said.

For workers, who staged a one-day strike this month, the contract ends years of givebacks that helped the city remain solvent during the financial crisis.

The union memo said the contract was possible "because we stood together, maintained unity with SEIU 1021, bargained hard and fair with the city, and demonstrated with the strike on July 1 that we meant business."