Chief Executive Officer Steve Bland says the tentative labor agreement recently forged in Washington, D.C., goes a long way toward achieving the Port Authority's goal of reducing long-term legacy costs.

"If the authority had done this 15 or 20 years ago, we'd be sitting pretty," he said, explaining how early retirements and generous benefits that have ended for nonunion personnel but continued for 10 times as many union workers have posed a growing threat to the authority's survival.

"The contract is still only one piece of the financial puzzle, but it's a big piece," he said. "The tough decisions being made today will pay dividends over the next 15 to 20 years."

Consequently, Mr. Bland will recommend that the authority board approve the new contract at a special meeting being scheduled for a week from today.

"Neither side got everything it wanted, so that suggests a fair deal," Mr. Bland said in an interview. "By no means is the new contract a panacea, but it goes a long way toward reducing and containing future growth in costs that concerned us the most, primarily pensions and health care."

Even with the new contract, he suggested, riders may face a fare increase, probably late next year, as well as limited, incremental service cuts, because of stagnant state transit funding.

Local 85, Amalgamated Transit Union, ratified the proposed contract at meetings held yesterday for its 2,300 drivers, mechanics, other hourly workers and first-level supervisors.

After expected approval from the authority board, the pact that runs through June 30, 2012, will result in a number of milestones:

• An end to more than a year of negotiations, squabbling and bitter feelings.

• No disruption of bus-trolley service for the community in general and the people who account for 240,000 rides a day.

• Lifting a freeze imposed by Allegheny County Executive Dan Onorato on $27.7 million in county subsidies generated by a controversial 10 percent drink tax and a $2-a-day car rental tax.

"The union's last offer would have increased our costs over the term of the contract by $214 million," Mr. Bland said, "so, to its credit, the union moved by almost $300 million at the end of the day," reduced demands which enabled the two sides to reach agreement during four days of intense and precedent-setting bargaining managed by top labor leaders at the International AFL-CIO headquarters.

In the new contract, savings on operating expenses over the next four years are virtually negligible -- an estimated $100,000 total.

But the authority estimated the savings from post-employment benefits -- pensions and health care -- at $92.7 million, just slightly below the $96 million the authority would have achieved had Local 85 accepted a contract recommended in August by a state-appointed fact-finder. While the authority board approved the fact-finder's report, the union's 20-member executive board did not, thereby negating it.

The major difference ironed out in Washington involved 220 employees near retirement who, in essence, would have been caught in the middle and lost fully-paid health care insurance that they had come to expect.

Authority negotiators agreed to a "bridge," or special provision, that will retain their eligibility for the benefits through the end of the new contract.

Mr. Bland said, however, the new "normal" retirement age will be raised from the current 55 to 60, with 30 years of service required in order to receive fully paid health care. Meanwhile, a tiered structure will be in place for workers who retire earlier; they'll have to pay part of future insurance premiums.

He described a "carrot-and-stick" approach to the retirement-pension issue that generated the most contention in the protracted negotiations.

"Carrots to make staying to 30/60 more attractive and sticks to make leaving early unattractive," Mr. Bland said.

In a private memorandum distributed to authority board members Friday, and obtained by the Pittsburgh Post-Gazette, he said a "final and best" offer that the board voted to impose on Dec. 1 -- and later deferred in view of the new agreement -- would have provided greater reductions in legacy costs.

"However, such a victory may very well have been pyrrhic for a number of reasons," he wrote, including a "very real threat" of a work stoppage by Local 85; a loss of ridership; negative impact on the community; expensive, drawn-out litigation; and requiring staff time that can better be used for other pressing issues such as restructuring service and implementing a new, automated "smart card" fare collection system.

Mr. Bland said the authority's ongoing sustainability is more complex than a single cure-all, whether it be the new collective bargaining agreement or future state funding.

"Our budgets will continue to be stretched very thin," he said. "Over the past few months, we can add deteriorating marketing conditions that have significantly reduced pension assets, as well as declining state sales tax revenue (a primary source of state transit funding) to the list of 'storm clouds' on the horizon."