SAN FRANCISCO -- Muni operators overwhelmingly rejected a proposed contract Wednesday that management said would have saved the agency tens of millions of dollars over three years and made the transit system more reliable.

The tentative agreement - backed by the executive team of the operators union - was shot down on a vote of 994 to 488, according to management and Transport Workers Union Local 250-A.

It was the third time in 1 1/2 years that the union rank and file has snubbed its leadership and management's requests for cost-saving concessions.

The labor dispute now goes before an independent arbitrator, who will set the terms for the new contract, which is set to go into effect July 1. The arbitrator's decision is binding. Under the voter-approved rules, the arbitrator must take into account the contract's effects on fares and service, which could favor management.

'I didn't see that coming'

The rejected deal would have frozen wages for three years, allowed the use of part-time drivers to help rein in overtime costs, and given management more say over day-to-day operations.

Tom Nolan, chairman of the Municipal Transportation Agency governing board, said he was shocked at the overwhelming vote in opposition.

"Boy, oh boy, oh boy. I didn't see that coming," Nolan said. "Now it's in the hands of the arbitrator."

In the days since the tentative agreement was reached, union leaders have worked to sell the plan to the 2,200 men and women who operate San Francisco's buses, streetcars and cable cars. In a statement after Wednesday's vote, the union blamed the contract rejection in part on what it called inaccurate descriptions of the contract by a management spokesman shortly after the tentative pact was reached.

"The actions by management's spokesman created a sense of mistrust and confusion that was hard to overcome," said Rafael Cabrera, president of Local 250-A.

The outcome was closely watched by city officials and labor leaders inside and outside the transport union, the only public employees union in San Francisco that has spurned the city's requests for givebacks, wage freezes and other measures to help close gaping budget deficits.

"I am mightily proud of every union in San Francisco that has engaged in that effort," said Tim Paulson, executive director of the San Francisco Labor Council.

Paulson said he had hoped Local 250-A's rank and file would have supported its union leadership and approved the contract. Now, he said, the Labor Council will have to assess what happened, but it will stand with the operators through the arbitration process.

The contract negotiations are the first under Proposition G, the initiative passed by San Francisco voters last fall, which gave management considerably more leverage in negotiations by eliminating the decades-old formula in the city charter that guaranteed Muni operators the second-highest pay in the country, resulting in regular raises.

Strengthening management

By making pay negotiable, Supervisor Sean Elsbernd and others who crafted Prop. G hoped to give management more power to revamp rules governing overtime, use of part-time operators, scheduling, assignments, discipline and grievance procedures, and premium pay.

"What it has provided for is the ability to enact a number of new efficiencies in the work rules that will lead to a better Muni and open up dollars for service instead of payroll," Elsbernd said.

The Transport Workers Union, which campaigned against Prop. G, complained that the initiative unfairly scapegoated drivers for Muni's inability to provide reliable service for its 700,000 daily riders. They say the blame rests with poor management and years of deep funding cuts from the state.

The union filed suit in Superior Court to stop implementation of Prop. G, and it has asked federal labor and transportation officials to find a provision requiring the arbitrator to consider the effect on transit service in violation of transit funding laws. Union officials have said their challenges of Prop. G will continue.

Management representatives said that after crunching the numbers over the past week, they have calculated an estimated $38 million in savings over the duration of the contract. They refused Wednesday to provide details on which of the anticipated savings are take-to-the-bank solid and which are squishier because they rely on adept management by Muni managers and a relatively short time frame to put all the reforms in place.

For example, agency officials estimate that more than $6 million can be saved over the next three years by giving management sole discretion in determining whether operators are at fault in accidents, with another $13 million coming from taking the union out of the scheduling process. Management hopes that using part-timers will net more than $6 million in savings, once the new hires to fill those positions are trained.