SEPTA and its largest union began contract negotiations yesterday, hoping to avert a repeat of a seven-day strike that crippled bus and subway service in 2005.

The current contract, affecting about 4,700 operators and mechanics in the City Transit Division, expires March 15. It will set the pattern for negotiations with SEPTA's other unions.

SEPTA general manager Joseph Casey and Transport Workers Union Local 234 president Willie Brown exchanged proposals during a brief meeting, and negotiations will begin in earnest after the holidays.

Neither side discussed specifics after the meeting, but SEPTA's proposed budget for the next fiscal year assumes a 3 percent increase in labor costs and a nearly 8 percent increase in fringe benefits.

Casey said the weak economy and new uncertainties in state funding would affect SEPTA's ability to meet labor's requests. He said the chief issues would be wages, pensions, and health-care benefits.

He said the value of SEPTA's pension fund for its employees has dropped from $800 million to $478 million in the past year. And he said a decline in state sales-tax receipts and the state's failure to toll I-80 or lease the Pennsylvania Turnpike jeopardizes SEPTA's funding from the state, which provides about half of the agency's $1.1 billion operating budget.

"I'm still confident we can negotiate a fair contract," Casey said.

Brown urged SEPTA to "move away from the tired old confrontational tactics of past talks" and work with the union to reach a contract. He said in a statement that as ridership has increased and state funding has improved, "it is clear that we are entering negotiations at a time when the authority is positioned to expand and improve service to the riding public."

Brown said his members want greater "dignity and respect" from SEPTA, and he said he hoped the union could forge a partnership with the transit authority.

SEPTA bus, subway and trolley operators earn from $14.54 to $24.24 per hour, reaching the top rate after four years. Mechanics earn $14.40 to $27.59 an hour.

TWU members currently contribute 1 percent of their pay to their medical-insurance coverage.

Contracts expire in early April for about 720 SEPTA employees in the Suburban Transit Division.

SEPTA unions have gone on strike 11 times in the last 33 years.