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Elise Amendola, Associated Press
In this Dec. 16, 2011, Rinus Oosthock, executive director of the Salem Chamber of Commerce, speaks in his office in Salem, Mass., where he talks about the impending loss of the city's 50-year-old waterfront power plant. More than 32 mostly coal-fired power plants in a dozen states will be forced to shut down and an additional 36 might have to close because of new federal air pollution regulations, according to an Associated Press survey.

SALEM, Mass. — Salem officials are scrambling to find alternative sources of revenue as the city's coal- and oil-fired power station gradually shuts down because of new federal air pollution regulations, a move that will eliminate the historic town's largest single taxpayer.

More than 32 mostly coal-fired power plants in a dozen states will be forced to shut down and an additional 36 might have to close because of a rule that curbs air pollution in states downwind from dirty power plants and another regulation that would set the first standards for mercury and other toxic pollutants from power plant smokestacks, according to an Associated Press survey.

The Salem Harbor Station's closure also comes largely as a result of regulations environmental groups fought hard to install in Massachusetts beginning in 1999 together with the fact that the power station is old, inefficient and less profitable, said Seth Kaplan of the Conservation Law Foundation.

Although tourism is the economic engine in Salem, notorious for its 1692 witch trials, the decommissioning of the local power plant will likely have a profound effect. With the closing, the city will lose $4.75 million of its $70 million in annual tax revenues.

Mayor Kimberley Driscoll said the effort to replace the money without raising property and business taxes is the most serious challenge she has faced in her six years in office.

"When you take a large chunk of tax revenues like that out of the revenue stream coming into the city, it has an impact if we have to make it up on the backs of other taxpayers," Driscoll said. "And 85 percent of our taxpayers are residents, so you are talking mostly residential home owners who are feeling struggles and strapped already in meeting their tax obligations."

The mayor said the other alternative is to make significant cuts, whether those be in public education, public safety, public works projects or other services.

"And frankly, we are pretty strapped on the city side as well," she said. "With lots of cut backs in state local aid, we've made some tough decisions and had a lot of cuts over the years."

The looming loss of tax revenue will be made worse with the loss of jobs. The power plant employs more than 100 workers, many of whom live in Salem. The power station is also a key customer for numerous businesses in Salem and neighboring communities, said Salem Chamber of Commerce Executive Director Rinus Oosthoek.

"The power plant has been a really good neighbor. They donate a lot of money to an enormous amount of good causes in and around Salem," Oosthoek said.

The Salem power station will begin its gradual shut down at the end of this year when two generators will be decommissioned, eliminating 19 positions, said Dan Genest, spokesman for plant owner Dominion Resources Inc.

The rest of the plant, including the larger coal and oil generators, will go offline at the end of May 2014, he said.

The plant is closing because it is so small that the high costs of upgrading it to comply with federal rules do not make economic sense, Genest said.

James Simpson of Local 326 of the International Brotherhood of Electrical Workers, that represents workers at the power plant, declined to comment.

ISO New England, the regional power grid operator, has previously said the grid would be able to handle Salem Harbor's retirement.

Driscoll said Salem residents are worried that losing the plant might destabilize city finances and cause their taxes to go up while others see it as an opportunity to redevelop the plant's 62 acres.

Marilyn Faust, a speech language pathologist living in Salem, said she is willing to pay higher property taxes to ensure better air quality.

"I'm thrilled. I'm absolutely thrilled we are getting rid of a major source of pollution in Salem. When I open my windows ... we get black soot on the window sills," Faust said.

Others are not so sure.

Melissa Casey, a mother, said pollution in Salem is not as bad as in Los Angeles.

"In these economic times, people are trying to save money, obviously. And people who own houses, things go up and if it goes up, that's just one more cost to your living," she said.

Driscoll said Salem will not immediately feel the pain after the closing. That's because the state has guaranteed that the city will continue to receive the current tax revenues for five years, giving city officials time to find alternative resources to plug the financial hole, she said.

She said, meanwhile, city officials will try to attract businesses that can use the plant site and its existing transmission lines for an alternative energy plant or one powered by natural gas. She said the city also will try to boost its tourism revenues.

Rodrique Ngowi can be reached at www.twitter.com/ngowi