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The city is facing a financial catastrophe after discovering $750,000 must be paid to the state pension system by the end of the year, leaving a large budget gap that will likely be closed through layoffs, increased taxes, or both.

The city, which makes regular payments into the state pension system, was told by State Comptroller Alan Hevesi over the summer that localities could defer payments to the system into 2005. The city was scheduled to pay $1.25 million this year but spent about $750,000 originally allotted for a pension payment under the assumption the payment could be delayed.

However, the Governmental Accounting Standards Board, which sets accounting standards for governments in the United States, recently reversed Hevesi and said localities cannot push off payments to the pension system.

The city must now make a payment, leaving it $750,000 short for next year. City Accountant David Jakubaszek dropped the bombshell on the Common Council Wednesday during a workshop session and outlined three possible options for the city:

Adding another 7 percent to property taxes, which are already scheduled to rise 9.8 percent next year.

Laying off 20 to 25 city workers.

Adding a separate special assessment line to property tax bills for the cost of lighting the city, which would save the city some money.

City officials offered bleak assessments of the situation, regardless of what option they choose.

"Nobody on this Council wants to lay 25 people off, but nobody wants to add 7 percent to an already hefty (tax) increase," said Council President Brett Sommer.

"To take city employees down by 20 to 25 is devastating," said Mayor David J. Burgio.

Burgio and two Council members plan to ask city department heads this week for a list of possible job cuts. The city laid off nine workers under the 2004 budget.

Burgio said he doesn't see any city jobs that could be cut easily, especially in the Police and Fire departments.

The Council, along with Burgio, will meet again Wednesday to further discuss the options and possibly make a decision.

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