The Port Authority and Local 85, Amalgamated Transit Union, annnounced a tentative three-year labor contract this morning, averting a scheduled strike vote tomorrow.

Instead, the union's 2,300 bus and trolley operators, mechanics and other hourly workers, will hold ratification meetings tomorrow on a new pact that includes 3 percent wage increases each year.

The agreement would call for employee contributions toward health care costs of 1 percent of annual salary -- a contribution that will also be made by management workers at the transit agency.

The agreement will also set the stage for badly needed $25.5 million in deficit reduction for the financially-strapped authority.

Both Port Authority and labor negotiators credited the participation of Gov. Ed Rendell and Allegheny County Chief Executive Dan Onorato for helping the parties reach the tentative accord.

In announcing the parties' agreement this morning at the State Office Building, Downtown, Gov. Rendell's first comment was "The good news is that we've avoided a strike."

A work stoppage by the transit employees would have interrupted the agency's momentum in gaining ridership in a period of increasing gasoline costs. The governor said both parties had to agree to some painful concessions and over all "I think they did a great job."

Mr. Onorato said the stability of the agreement and its impact on the agency's deficit was a marked contrast to the looming possibility of a strike, noting that after a strike in the early 1990s, it took the agency almost a decade to recover.

"Everyone would have lost if there had been a strike," Mr. Onorato said, including commuters, employers and retailers.

Mr. Onorato said a $25.5 million reduction in the agency's deficit would come from the following sources: $7.5 million in savings in health care costs over the life of the proposed contract; $6 million in updated actuarial assumptions for pension plans and an anticipation of $3 million in savings available as part of the new Medicare prescription drug plan Part D. In addition, Gov. Rendell committed to an additional $9 million in state subsidy payments to the agency over the life of the agreement.

Local 85 President-Business Manager Patrick McMahon said he would present the full terms of the proposal to the union's executive board early tomorrow and that the group's recommendation to the members would set the stage for ratification votes later in the day. Transit union members will get a comprehensive review of the contract's details at those meetings, scheduled for 10 a.m. and 8 p.m. at Soldiers and Sailors Hall in Oakland.

Acknowledging that the health care contribution would be a first for the membership, Mr. McMahon said "We think the members can live with it. We think it's a responsible contract."

The agreement, if accepted by the Port Authority board and the union members, will not spell any increase in transit fares, said Port Authority Acting Chief Executive Officer Dennis Veraldi, who also credited the governor and the county chief executive for helping to shape the final proposed agreement.

One reason is the deficit reduction realized for agency operations in the course of the negotiations because of state and county involvement, he said.

Mr. Veraldi echoed the statements of many of the others at this morning's news conference, suggesting the bargaining parties were also focused on the larger legislative initiative to obtain stable state funding for mass transit.

The deficit reduction also puts transit agency in a better position to argue for dedicated state funding before the Legislature next year, they said.

The deficit progress "has strengthened our hand" in pursuing dedicated funding, Gov.Rendell said. "It's a real plus when the Legislature looks at this."

Up until this morning's tentative agreement the threat of a work stoppage was very real, Mr. McMahon said.

Gov. Rendell flew into Pittsburgh from Philadelphia last night at the request of the negotiators. The parties spent more than 47 straight hours with one brief interruption in the sessions ending in this morning's announcement.

The direct participation of the governor and county chief executive and their staffs was critical to helping the parties stay on course, Mr. McMahon said.

"Without them, I don't think we'd be here this morning."