Sighs of relief were sometimes audible Monday night in Lackawanna, where city and school leaders unanimously approved a settlement in the years-long challenge of property assessments for the former Bethlehem Steel property.

All that is left is for a State Supreme Court justice to sign off on the agreement today.

Under the settlement, the assessments for 2001 through 2007 were revised to 0, but neither the city nor the school district must refund tax revenues they collected. Throughout the challenge, the site's current owner, Mittal Steel Co., made annual payments of approximately $1 million to the city and hundreds of thousand of dollars to the school district.

"There was a possibility that we could have been paying up to $20 million in paybacks and interest if we lost the case," said Council President Charles Jaworski.

The school district was looking at a worst-case scenario of having to refund a little more than $9.2 million, according to figures released Monday night by Sameh Masry, school business official.

The assessment for 2008 has been set at $30 million. It will be reduced to $19 million in 2009; $13 million for 2010 and 2011; and $10 million for 2012.

The city's share of tax revenue will drop to just under $1 million the first year, Jaworski said.

"After the first year or two, I think you're going to see development on that Bethlehem property," Jaworski said. "Anything that's developed . . . the property gets reassessed."

Meanwhile, the school district had built a reserve of more than $1.3 million toward refunds, if necessary.

"This will actually go to help in the future to offset the reduction and make the transition . . . easier," Masry said.

In addition, the school district will ask the state to recalculate its aid ratio because of the significant change expected in property tax revenue.

The settlement was approved first by the City Council, with some School Board members present, and then the School Board, with councilmen present.

"I hope this is the best deal for our city. History is being made tonight," said Councilwoman Andrea Haxton of the 1st Ward.

"I also . . . agree this is a historic day," added Council Geoffrey Szymanski of the 2nd Ward.

In other business Monday night, the City Council approved a payment-in-lieu-of- taxes agreement for Steel Winds II, the second phase of the wind energy development on the former Bethlehem site.

The agreement covers each of the proposed 13 turbines for 15 years, beginning when each is put into place. The payment will be based on $10,000 per megawatt for the 32.5 megawatts expected to be produced.

Each turbine is expected to generate 2.5 megawatts of power and $25,000 of revenue. The city will receive 50 percent; the school district, 40 percent; and Erie County 10 percent.

Under a voluntary agreement for Steel Winds I, only eight of 10 proposed turbines were erected on the site. The city receives $100,000 annually for those, which amounts to the same $12,500 per turbine they will receive under the new agreement.

A significant change in the new agreement is the inclusion of the school district and Erie County in the disbursement of PILOT monies. Neither was included in the original agreement, and the School District had explored options to stake a claim to money from the project.

School Board member Ronald Miller was among those who attended the City Council meeting. Referring to the PILOT for Steel Winds II, he said: "I hope that this fosters a closer communication and working relationship."