NEW YORK, May 25 (Reuters) - Fresh from huge property tax increases and a rash of bad news, residents of Newburgh, New York, took to the streets on Wednesday with "SOS" signs, urging state officials to take financial control of their city.

But the state, which this year closed a $10 billion budget gap with harsh cuts to education and healthcare spending, is unlikely to rescue the city of 28,000, which sits 60 miles north of Manhattan on the banks of the Hudson River.

"I would love it," Newburgh Mayor Nicholas Valentine said of state receivership. "The problem is, you're dealing with a state that doesn't have any money."

At the center of the protests here are rising property taxes, a problem facing many municipalities across the country as towns and cities struggle under the weight of high debt, anemic tax revenues and increasing labor costs.

In Newburgh, those tax hikes have been extreme by any measure. Last year, the city's budget included a 41 percent property tax increase. Because it followed a reassessment of property values, many residents saw taxes rise 70 percent.

"We're marching to send a message to the state and City Hall that we're fed up," said Brenda McPhail, 47, a leader of Community Voices Heard, which organized Wednesday's rally.

"Business owners are moving because they can't afford to pay their tax and if you look around the city you'll see a lot of abandoned buildings, and ... people are moving out," said McPhail, who said she has been out of work since 2008.

Once an economic hub, the city was named one of the state's most distressed towns in 2004. One-quarter of its population lives below the poverty line, according to the U.S. Census.

Last January, as the Obama administration considered finding a location other than lower Manhattan to prosecute the accused September 11 attack plotters, Valentine volunteered the city to host the Khalid Sheikh Mohammed trial.

He was hoping to get the millions of federal dollars that would come with such a trial. Even though it did not happen, Valentine said one good thing came of the offer.

"It put Newburgh on the map for something good," he said.

State-appointed fiscal monitors or managers have helped distressed municipalities across the country get back on track.

New York's Nassau County has been under state oversight since 2000, and in January the state seized greater oversight powers. The Rhode Island city of Central Falls has effectively been run by a state-appointed receiver since last July.

But New York has rejected a Newburgh takeover previously.

Instead, the state passed the City of Newburgh Fiscal Recovery Act last year. It established a Special Debt Service Fund, controlled by the state comptroller, which restored Newburgh's access to the $2.9 trillion municipal debt market.

(Reporting by Edith Honan)