The Somerset Town Board will hold a public hearing Tuesday on its proposed town budget that slashes spending 21 percent and cuts its tax rate nearly in half.

The cuts are in response to decreasing revenue from the former AES power plant.

The public hearing will be held at 6 p.m. in Town Hall, 8700 Haight Rd.

The proposed 2013 budget includes a tax rate of 88 cents per $1,000 of assessed valuation – down 81 cents from the current $1.69. That’s a 48 percent drop.

Appropriations are down from $3.6 million to $2,863,273, a decrease of 21 percent, according to Town Supervisor Daniel M. Engert.

He added that projected revenues are up 6 percent from the current $933,327 to a projected $985,041 next year.

“These figures are based on actual numbers we are seeing coming in,” he said. “They have been underestimated the past couple of years.”

Engert said the Town Board is proposing reducing the tax levy 20 percent, from the current $775,180 to $624,686.

The Town Board is also eliminating the highway tax – it was 8 cents per $1,000 of assessed valuation in 2012 – but it will be a wash because fire protection will rise 8 cents to 44 cents per $1,000 in the proposed budget. This is despite the fact that the fire protection budget will be reduced from the current $225,000 to $209,500. The special tax for the lighting district will be reduced 15 cents to 45 cents per $1,000 of assessed valuation.

Engert said residents will also realize a nearly $54 savings per unit in the garbage/refuse district, with a rate of $111 per unit in 2013 in the town’s proposed plan.

“We asked our department heads to look at 15 to 20 percent cuts in spending, and they really stepped up,” Engert said. “This includes a salary freeze for all employees and elected officials. We’re all hurting a little to maintain our level of services this year. We’ll be looking for feedback in years to come on what services our residents want.”

He said he feels the town’s proposal is “a very reasonable, balanced and safe budget that draws down from some reserves and fairly projects revenues.”

But he said it is also important to note that it does not diminish services.

The town is in the third year of a modified five-year payment-in-lieu-of-taxes (PILOT) agreement with the Somerset operating facility of Upstate New York Power Producers, formerly AES Somerset.

The town, the Barker School District and Niagara County share in the PILOT agreement with Upstate New York. The agreement was modified in May after the sale of the power plant to the new owners.

The new agreement reduces the company’s payments to the town, school district and county from the current $14.3 million a year to just under $10.5 million in 2013, $6.7 million in 2014 and $5.12 million in 2015.

Engert said the town’s diminishing returns from the PILOT agreement spurred the 15 to 20 percent spending cuts in its proposed 2013 town budget.

“Our PILOT payments will be reduced 44 percent in 2013 from the current agreement, and we’re looking at a 34 percent cut from 2013 to 2014 and then another 4 percent drop in 2015,” said Engert.

“We’re entering the tunnel, and we need to weather these cuts before we see the light, so we hope for the plant to be profitable. We needed the 2013 budget to be a good foundation to build off of in 2014 and 2015, when we will see further cuts.”

“I think the taxpayers will be very pleased with this – it’s a practical budget,” he said. “It draws on some reserves, but that’s what they’re there for, and it doesn’t decimate them. It just gives us a stable foundation for the next couple of years.”

The budget must be adopted by Nov. 20.