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GIVEN the wash of red ink over the state's fiscal accounts, Buffalo City Hall can make only one rational response to the newest proposal for settling the drawn-out Hurd overtaxation case:

Take it. It's the best we can do.

Fortunately, top city officials, including Mayor Griffin and City Comptroller Joel A. Giambra, see it that way.

Griffin is even expressing public thanks to Gov. Cuomo for a "fair solution" to an inherited problem that has vexed his city administration since its beginning nearly 13 years ago. In the past, mayoral brickbats for Cuomo have been more common.

The arrangement involves a state bond issue that would raise $23 million so Buffalo can pay 57,600 taxpayers 61 percent of what they were overtaxed in four city fiscal years beginning in 1974-75.

The state would kick in $1 million a year toward principal and interest payments, getting the funds from various Hurd loans and advances returning from other local governments.

That would leave Buffalo's city government with the responsibility to pay $1.6 million a year if the bonds have a 15-year life and $1.1 million a year if they are strung out over 25 years.

At one time, Griffin and other city officials were looking for an outright state grant, but that becomes unrealistic at a time when Albany is running deep deficits. Another approach was a complicated state loan, but that too seems out of the question now.

What is important is that the newest deal indicates proper state recognition that it bears a goodly measure of responsibility for the overtaxation not only by Buffalo, but also by Rochester and a group of small city school districts.

Two state laws permitted the local governments to levy property taxes outside constitutional limits for pension and Social Security costs. The first law was struck down by the courts without refunds, but refunds were ordered the second time.

Without state help, Buffalo would be left to choose between an onerous direct one-year budget appropriation for refunds, an answer no one has ever supported, and a city bond sale, which has been proposed with little enthusiasm as a backup if the state were to cop out.

City Hall would benefit from the newest proposal because the state bonds ought to carry a more favorable interest rate than a city issue.

Also, it should improve Buffalo's credit standing because a cloud over city finances would be removed. For years, each city bond prospectus has carried a long-winded explanation of the Hurd liability that must have turned off rating agencies.

Proponents are hoping the deal can get before the Legislature in a special session this month, though some reluctance from Rochester politicians is presenting an obstruction.

If action in this session fails, the local delegation in Albany should make passage early in 1991 a primary goal.

By an unofficial calculation, the owner of a Buffalo home with an average mid-1970s assessment who paid full taxes in all four years would get a refund of roughly $420. It's not a lottery winning, but it's an amount not to be sneezed at either.

Furthermore, it's long overdue.

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