With a bit of abracadabra - imagining savings that did not really exist, counting on tax revenues that never arrived, depending on one-time revenues - the now deceased council-manager form of government somehow managed to avoid property tax increases in New London for several years.

As they say, some things are too good to be true.

We recall the lead to this budget story from June 2011: "The City Council passed the $81.9 million budget for 2011-12 Tuesday night. The budget calls for nearly $1 million more in spending than the current budget but there will be no increase in the tax rate."

Quite a trick, increasing spending by a million bucks but not raising taxes.

The jig is up. It has fallen to Mayor Daryl Justin Finizio to be the bearer of exceedingly bad news. He finds himself at the end of the road to whence the can has been kicked.

This newspaper long campaigned to change the governance in New London from a city manager to a mayoral-led form of government. Among the problems we cited with the council-manager system was a lack of accountability. This is not to say that council-manager systems cannot work well. Carried out in textbook fashion they work fine. The council sets policy, the manager carries it out. When hard truths need to be dealt with, the manager so informs the council, which reacts with hard decisions.

It appears that is not how things worked in the dying days of the council-manager system in New London. Councils desperately wanted to hold down taxes and, why not, property owners in New London are already subjugated to the highest property taxes in the region. Intensifying this desire was a prior council on which three of the seven members were running for the new position of mayor. The managers helped make it happen. Now we see how, the old-fashioned way, overestimating revenues and low-balling expenses.

As the table accompanying this editorial shows, the city has for the past few years based its budget on tax revenue estimates that proved unrealistic.

When those revenues fell $445,703 short in fiscal year 2010, it suggested the need for an adjustment. But an adjustment would have almost certainly required tax increases. And so in the succeeding fiscal years the gap only grew larger.

And, as the table also shows, expenditures are overshooting those revenues at an alarming rate. The outcome, as seen in the middle column, has been the depletion of the Fund Balance, meant to serve as a safety cushion to assure the city meets its loan obligations if unexpected expenses arise or an unanticipated drop in revenues occurs.

Some more examples of how the city got here:

• From fiscal years 2009 through 2011, revenue from investment income fell $752,448 short of the budget estimates at a time when interest rates have been unusually stagnant and so easy to predict.

• In fiscal year 2011, revenue from city services, a number tied to building and economic activity, fell $939,586 short of the $3.9 million budget expectation. Why was anyone expecting a burst of activity that year?

• In 2010, the fire department finished $463,461 in the red, an outcome Chief Ron Samul blamed on fixed overtime costs attributable to contractual staffing obligations. Without a budgetary adjustment, the department finished $569,562 in the red the following year.

Granted, mayors can be guilty of practicing budgetary magic as well. But to his credit, Mayor Finizio appears to be confronting the situation forthrightly. He has pegged the budget hole at $12 million, including dealing with a shortfall for fiscal year 2011 of about $1.3 million; confronting a looming deficit of $4.5 million this year; rebuilding the Fund Balance; and paying for services in the coming fiscal year.

Whatever the number, the problem appears real and serious. "We have driven our city government to the brink," Mayor Finizio told us. He promises to present to the council "an honest budget that acknowledges realities."

Those realities should prove painful and the remedies controversial. Cutting spending in a city already guilty of deferring maintenance of its buildings, which has gutted its social service and development offices, will not be easy. Likewise, proposing a sizeable tax increase will invite a taxpayer revolt.

A mayor who fancied himself a progressive crusader, could find himself instead cutting programs.

Mayor Finizio and the council did not get off to a good start, largely due to missteps by the rookie mayor, but the challenge they now collectively confront is too serious to let any hurt feelings get in the way. This is going to be tough.