The City Manager and FOP leadership have reached a deal to extend the current contract through the end of 2012, including a pay freeze. The City Council and the FOP rank and file must approve the extension.
I guess this is the easiest solution. The FOP gets to keep its rules that make it nearly impossible to fire bad cops, and other structural benefits. The City gets the pay freeze, which will take some future pressure off the budget, and marginally reduce the future need for police layoffs or other consessions.
This in no way solves the budget problem that will loom for the City at the end of this year for 2012, but it makes it a little better.