The city suddenly did a 180-degree turn Wednesday on a controversial plan that had local merchants groups raising the roof.

The Department of Transportation had proposed charging merchants associations and business improvement districts - already hurting from high taxes, overzealous meter maids and a sagging economy - thousands of dollars for hanging promotional banners.

The DOT wanted to charge $50 per block every 90 days for the associations and BIDs to hang the banners and signs from telephone and traffic poles to advertise the name of the merchant corridor and alert pedestrians to shopping options.

But after a Daily News inquiry, the DOT did a sudden about-face and canceled plans for the new fee and a Jan. 20 public hearing.

"It was ridiculous - another of King Michael's taxes," groused John Bonizio, president of the Westchester Square Merchants Association, referring to the mayor.

"It was going to undo a lot of good that small businesses have done for themselves," he said.

In Westchester Square, dozens of large green and white signs hang from the telephone and traffic poles throughout the area proclaiming the "Westchester Square Business District."

Bonizio estimated the new fee would have run his association $2,000 annually.

"We would have had to look at this very carefully," said Bonizio, "but off the top of my head, I'd say that we were taking the banners down. Where are we going to get the money?"

John Cerini, president of the Throggs Neck Merchant Association, estimated the fee for its 28-block stretch would cost $5,600 - almost half of its yearly operating budget.

"It didn't make sense," he said. "We have 120 members, from whom we collect $100 annually as dues. That makes $12,000. Now the city wants half our income for the year just to put up banners."

The Throgs Neck group recently contracted an outside company to design and create 120 banners.

But Cerini said he would have had to discuss the plan with local merchants if the new fee had gone into effect.

Wednesday afternoon, the DOT issued a short statement, reading, "There is no banner permit fee proposal at this time. A public hearing on the issue has been canceled."

"Wow, that's cool," exclaimed Wilma Alsono, executive director of the Fordham Road BID, which hangs new signs every 3 months after learning that DOT had canceled the fee.

"We're so glad to hear that we were able to make the city realize their mistake."