The Board of Aldermen Monday night heard a sobering report from Chief Financial Officer Maureen Lemieux, who reported a potential $8 million deficit in fiscal 2012 if current budget plans do not change.

"We cannot continue on the path that we are on," Lemieux said. "We have to come up with a viable, sustainable, balanced budget."

With the input from community members, city officials will have the next six months to work out solutions for the shortfall. 

The presentation was part of a five-year plan, Lemieux pointed out, not an official presentation for the fiscal 2012 budget.

The $8 million shortfall is sill in the forecast even with the use of $4.8 million stabilization funds and $1.5 million in free cash.

If the trend continues, the city could be looking at deficits around $25 million in fiscal 2015.

Despite the traditional 2 ½ percent increase to property tax each year, the city has had a structural deficit for several years, Lemieux said, and the main factors contributing to the debt are rising health insurance and retirement costs as well as dwindling state aid and poor interest rates.

"There is no reason to believe anytime in the near future our revenue from interst is going to be back to the way it was years ago," Lemieux said.

In fiscal 2010, the city budgeted $1.1 million in revenue from interest rates, but only received $887,000.

Additionally, the revenue from licenses and permits has dropped from $6.5 million in fiscal 2010 to $4 million in fiscal 2010.

The current projections also show the city without capital stabilization by fiscal 2015, Lemieux said.

Part of the solution, Lemieux said, is to hold expenditures at a 2.6 percent increase.

"It's a tremendous amount of work, but it needs to be done," Lemieux said. "We don't have a choice."

Mayor Setti Warren, who introduced and closed the presentation, underlined the seriousness of the budget situation while sharing optimism for the work ahead.

"This is going to be a challenge I know we can face," Warren said.

Warren said working with a zero-based budget, performance-based management, collective bargaining, infrastructure assessment and economic development will help the city through the tough process in the coming months.

Town Hall meetings will be held in all eight city wards throughout the month of November to bring in feedback from the community and keep the process "open and transparent," Warren said.

"We have to prioritize what our needs are and make very tough decisions together," Warren said.

Aldermen also heard a capital improvement plan last night, which was also outlined by Lemieux. It included a basic outline of important projects needed throughout the city's streets and public buildings.