The Santa Ana City Council Monday night appointed interim City Manager Paul Walters permanently as the city’s top administrator, thus ending a year of council debate on the issue.

“He [Walters] has been a true scholar, a gentleman and a devoted city employee,” said Mayor Miguel Pulido after the appointment was made official.

The 66-year-old Walters — who has also been the city’s longtime police chief — was simultaneously made the city’s first police commissioner, a newly created position that allows Walters to keep his peace officer status.

As police commissioner, Walters will maintain relationships with various regional, state and federal law enforcement agencies and task forces. It also allows him to keep a secret FBI clearance that gives him access to information on “everything from terrorism threats to international drug trafficking organizations,” he said.

Walters was moved to tears as he accepted the position with friends and family looking on. His son, Orange County Sheriff’s Deputy Mike Walters, gave a brief speech. “To have your family sitting in the audience, to have them come up and be a part of it, it’s really nice,” Walters said.

Walters was appointed interim city manager after longtime City Manager Dave Ream retired a year ago. In the months following Ream’s retirement, council members battled over whether to complete a national search for Ream’s successor.

The search was suspended twice, once without some council members’ knowledge, with city officials saying they had to focus on the city’s budget crisis.

Walters’ appointment can be seen as a victory for Pulido, who all along pushed for Walters while other council members — most notably Michele Martinez and David Benavides — expressed their desire to finish a national search.

Walters’ three-year contract with two additional one-year renewal options gives him a $265,000 base annual salary. He is also to receive other benefits, such as medical and life insurance. Walters said he didn’t know the value of the additional benefits.

However, Walters’ contract does not contain the lucrative provisions that made Ream’s contract controversial. Ream, for example, had a golden parachute clause that guaranteed him between $500,000 and $800,000 if he was fired. Another provision gave him the ability to cash out unlimited accrual of vacation hours.

Ream cashed out $230,366 in unused time off when he retired. Just months before, City Attorney Joe Fletcher cashed out $191,699 in unused vacation and sick leave because of a provision that went further, backdating Fletcher’s accrual of unpaid time off to 13 years before he was hired.

Walters’ severance package would be a lump-sum payout equal to one year of base salary, contract documents show. He is, however, also given other options in lieu of severance pay, including reassuming his position as chief of police and three years and eight months of military service credits under the state’s public employees retirement system.

Walters’ appointment was debated across the business community, with support from many business owners on heavily Latino Fourth Street who are also strong Alvarez supporters. Many at the Santa Ana Chamber of Commerce, however, backed a national search, saying that it was time to bring fresh blood and new ideas to the city.

“If somebody could take this city and make things better, it would be Walters,” said Adolfo Lopez, whose wife runs Mina’s Bridal on Fourth Street.

Residents were also divided on the appointment. Some argued that Walters is too closely linked to Pulido, marking the continuation of a political era that rewards the mayor’s friends at the expense of city residents.

“Miguel [Pulido] and Walters have been sleeping with each other for too long,” said Debbie McEwen, a resident with sharp criticisms about the management of the city. “You have to break the chain.”

The city manager appointment happened on the same night that council members approved a balanced budget, an achievement that six months ago appeared to be a daunting challenge. Walters is credited with facing down a looming bankruptcy and pulling the city out of a $30-million budget deficit, a fact that swayed council members in their decision.

Council members also said Walters’ approach to the budget was different and much better than his predecessor’s. Some council members have pointed fingers at Ream for misleading them into the budget crisis, keeping veiled for years the truth about the city’s budget health.

“Finally, someone has been listening. So thank you, Paul,” said Martinez at a previous council meeting.

Even with Walters’ appointment, there remain vacancies atop the city’s bureaucracy. Last year, Deputy City Manager Cindy Nelson announced her retirement. In 2009, Assistant City Manager Catherine Standiford retired.

Walters said that he might be appointing two deputy city managers. Their responsibilities have yet to be specified.

Walters said he’ll appoint an acting police chief within days. It is not yet clear how the city will go about installing a permanent police chief. Sources close to the police department say there is talk of conducting a national search.

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