(FORTUNE Magazine) – When layoffs hit a company town, it's not only the employees who suffer. More than most cities, Rochester, New York, has basked in the paternalistic glow of its corporate citizens. Monuments to largess from years past include the international museum of photography and film at the George Eastman House, the Eastman Theater, and the Eastman School of Music at the University of Rochester. These days, Bausch & Lomb sponsors a rowing regatta every October on the Genesee River. And local retailers greet the day Kodak hands out employee bonus checks with the advertising frenzy accorded a major holiday. Corporate sponsors still underwrite culture, but downsizing has jolted this self-proclaimed imaging center of the world. Total wages paid to area residents dropped 2% last year, despite the creation of some 7,100 net jobs -- new ones in the service sector don't match the generous pay and benefits of those lost at the imaging giants. Homebuilding permits were down 18%. Even churches are feeling the pain. Kent Gardner, assistant treasurer of All Saints Episcopal, says donations are off 8% from 1993. Rochester's corporate, political, and educational leaders are aggressively trying to blunt the effects. Says newly elected mayor William A. Johnson Jr.: ''We're developing programs for retraining displaced workers, but we also have to make this an attractive place for smaller, growing businesses -- you need to have jobs at the other end of the training.'' Political leaders are making low-interest loans available to small businesses that promise to create manufacturing jobs. Rocco DiGiovanni, director of planning and development for Monroe County, which includes the city, says the county has helped secure $272 million from local banks and state and federal agencies for 41 companies since the program began two years ago. Jim Condon, co-founder of Photikon Corp., is one recipient. ''We explained some of the deals we were getting from other states to relocate,'' he says. ''Within about 90 days the county came back with $150,000 in low- interest loan money.'' Photikon will stay in the county, and Condon hopes to add as many as 30 new jobs over the next two years. Local schools are responding to the new demands. Monroe Community College is planning to add short-term, intense courses in entrepreneurship for unemployed executives who don't have time for the standard 15-week ones. Rochester Institute of Technology found an upside to the downsizing: To head its School of Printing Management and Science, it hired a Kodak senior executive who had taken early retirement. There's also help for the laid-off. The Church of the Transfiguration (see story) has aided some 250 people in job searches over the past three years; nearly 80% were successful. An auto dealer named John Holtz even converted a vacant showroom into a free employment resource center for ten weeks -- stocking it with phones, computers, and other equipment lent by local firms -- until he could lease the space. Summing up a common attitude in the community, RIT President Albert Simone says he's optimistic about the future of Rochester's big employers. ''These companies are finally doing what needs to be done,'' he says, ''and they will emerge stronger and better able to compete worldwide.'' The same may be said of the employees who have had to bear the pain.