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A newly minted tax cut giving the Town of Tonawanda's troubled Huntley Station a second lease on life has left some local leaders, especially in the schools, scrambling to find ways to replace the millions of dollars soon to be lost.

Though they praise the deal as guaranteeing Huntley's future viability -- and note that they could have ended up worse off -- officials acknowledged that the huge break for Erie County's largest taxpayer might mean tax increases for others.

"It could happen," said David A. Paciencia, superintendent for the Kenmore-Town of Tonawanda School District, which relies on Huntley for one-sixth of all property taxes collected.

Other alternatives being discussed are a state bailout, belt-tightening and digging into budget surpluses.

"It will test our intestinal fortitude," said Town of Tonawanda Supervisor Ronald H. Moline.

The Huntley agreement, unveiled during a news conference Tuesday, cuts the plant's property tax bill by more than one-quarter over five years, from the current $14.8 million to $11 million in the 2004-05 fiscal year. It remains at that level through 2008.

In return, Huntley's new owner, NRG Energy, agrees to pump $50 million into the aging power plant for an upgrade to meet tougher state and federal anti-pollution requirements. As an incentive, the Erie County Industrial Development Agency is exempting the improvements from property and sales taxes.

NRG is also promising to put Huntley on the short list for a $250 million natural gas and steam turbine project.

Both sides also agree to stop the long legal battle over Huntley's assessment, which could have resulted in a 40 percent cut in the plant's taxes and a bill to local governments from Huntley for as much as $62 million in past payments.

Hardest-hit by the new Huntley tax cut is Ken-Ton, which sees the almost $9.5 million it received in taxes from the plant this year drop to $7 million in the next few years.

But it also comes at an awkward time for the district, which has been pushing for a proposed $66.3 million renovation bond that would eventually raise taxes by about $40 a year for the average homeowner.

On Monday, the School Board was poised to vote on whether to hold a special Nov. 14 election on the bond. Instead, it delayed action.

"We wanted to make sure we have all the answers" about the tax cut's impact, Paciencia said.

Paciencia said he and town and county officials will lobby for rescue aid from Albany, noting that the state was the savior recently in a similar situation in Oswego.

The city's school district there faced a significant tax loss after a local power plant privatized, said Matt Plunkett, an aide to State Sen. Mary Lou Rath, R-Williamsville.

He said a budget bill last year provided the aid needed to help close the fiscal gap.

"There is a precedent for this," he said.

The Town of Tonawanda is also hoping for the state's help, though its shortfall is much less than Ken-Ton's. The town's share of Huntley's bounty this year was $3.2 million, about 20 percent of Huntley's total bill.

But Huntley makes up one-third of its industrial tax base, and losing almost $852,000 in the next few years will sting, Moline said.

Moline said homeowners will not feel a thing in the first three years, thanks partly to $600,000
in contingency funds that can be used. For businesses, Moline said, there will no impact in 2001 but an estimated 1.6 percent tax increase in 2002.

No increase is expected for 2003, Moline said. For the final two years, the town is looking to Albany for help to avert an increase in town taxes, he said.

Without the state, the residential rate will rise by 1.4 percent in 2004 and 1.25 percent in 2005, Moline said.

The business tax would increase by 1.04 percent in 2004 and 1.24 percent in 2005, Moline said.

Erie County will also lose revenue, but not much by comparison. The county's share of Huntley tax dollars drops by $600,000, and County Executive Joel A. Giambra said he will not raise taxes to close the gap.

Giambra urged town and school officials to avoid tax increases and said the county will help lobby for rescue aid. But he also urged the town and the school district to economize by collaborating with each other.

"The last thing we need to do in this county is raise taxes," Giambra said.

Still, all the parties involved in the pact were overwhelmingly optimistic about the plant's future.

That was especially so because so many of alternative solutions were bleak.

Huntley could have won the legal battle against its taxes, hitting local coffers even harder, officials said. Worse, Huntley could have shut down altogether.

Now "it's a win-win," Moline said.

News Northtowns Bureau Reporter Michael Levy contributed to this report.

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