By Steve Bittenbender

LOUISVILLE, Ky (Reuters) - Louisville, Kentucky officials on Thursday approved an increase to the city's minimum wage, boosting it from the federal rate of $7.25 to $9 an hour by 2017, becoming the 12th city to approve a hike this year.

The increase, which came after a series of contentious debates in the weeks leading up to and even during Thursday's Louisville Metro Council meeting, came down to a party-line vote. All 16 Democrats in attendance supported the measure, while all nine Republicans voted against it.

Louisville Mayor Greg Fischer had said earlier he would veto the council's original proposal, which would have raised pay to $10.10 an hour over a three-year period. However, Fischer said in a statement released after the vote he was pleased with the amended ordinance.

After 2017, the wage will be adjusted according to the Consumer Price Index.

With the vote, Louisville became the 12th U.S. city to increase the minimum wage this year, and the first city in southern states to do so, according to Paul Sonn, general counsel with the National Employment Law Project.

Earlier this month, the Chicago City Council voted to increase the wage to $13 an hour by 2019. On Election Day, voters in Arkansas backed an initiative to increase the state's minimum wage to $8.50 by 2016, and Nebraska voters passed a referendum to make it $9 by 2016.

Other states, including Florida, Missouri and Ohio, base their minimum wages on consumer price or cost of living indices.

Democratic Louisville Councilman David Yates said local leaders routinely approve incentives for companies to locate and expand in the city. "This is the first time we've done something for the workers," he said.

Both Republicans and Democrats agree the increase will face a challenge in the courts, with detractors arguing that the local council does not have the authority to raise the wage.

Opponents said companies with lower-paying jobs will seek to move elsewhere in the Louisville region to take advantage of the city's benefits while not having to pay the higher wages.

"If we're going to have Louisville compete, we have to compete on a level playing field," Republican Councilman Kevin Kramer said.

(Editing by Fiona Ortiz, Curtis Skinner and Dan Whitcomb)