A panel of three arbitrators is poised to hand down a decision on police salaries that could halt what some have described as a retention and recruiting crisis within the ranks of the police department.

The decision to update the latest labor contract for police officers, a pact that Commissioner Raymond Kelly has said pays rookie officers an unlivable wage of $25,100 and is the primary reason the police department is falling far short of its recruitment goals, will likely damage an already strained relationship between the city and the union that represents police officers, the Patrolmen’s Benevolent Association, several police department insiders said.

The PBA is the only uniformed union in the city that has not accepted a raise offered by the city. Under the reported proposed contract, the starting salary for police officers would rise to about $37,800 during the first year.

The union’s leadership has argued that the pay hike tendered by the city would keep the salaries of its members substantially lower than those of neighboring police departments, which in recent years have become refuges for city officers seeking better circumstances.

An analysis of the raise proposed by the city and the current wages of officers with the Port Authority Police Department, a force that the PBA leadership has said is appealing to potential city recruits, shows that novice officers would receive better salaries by signing with the New York City Police Department if the raise is approved.

Starting salaries for city police officers would reach $40,884 under the city’s proposed contract, compared to the $32,363 annual wage presently earned by Port Authority rookies, according to the analysis, conducted by the Citizens Budget Commission.

While the PBA has criticized the current starting salary for rookies, it has argued that the key to retaining police officers is a competitive salary for veteran officers. Under the raise offered by the city, the analysis shows that police officers would reach a salary of $68,475, a figure that is about $7,000 less than the top pay at the Port Authority.

Still, salaries at the Port Authority are considerably lower than those of some other neighboring jurisdictions that the PBA has used to measure how city police officers should be paid.

The city has stowed away enough money in its labor reserve to pay police officers the raise, budget experts said. If the three-person arbitration panel, made up of one intermediary chosen by the PBA, another by the city, and a third agreed upon by both parties, substantially raises police salaries, the city could be sent scrambling to come up with hundreds of millions of dollars in funds.